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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-03-10 · 1161 added, 1064 removed, 874 unchanged (72% of the section changed)

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INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Consolidated Balance Sheets at December 31, 2021 and 2020

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Notes to Consolidated Financial Statements

The accompanying audited consolidated financial statements of Bally’s Corporation (and together with its subsidiaries, the “Company” or “Bally’s”)) have been prepared in accordance with the instructions to Form 10-K and Regulation S-X and include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the U.S.

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of

Bally’s Corporation

To the shareholders and the Board of Directors of Bally’s Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bally’s Corporation and subsidiaries (the "Company") as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive (loss) income, statement of changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2020 and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Bally’s Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, effective January 1, 2019, the Company adopted FASB Accounting Standards Update 2016-02, Leases, using the modified retrospective approach.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill — All Reporting Units — Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

As of December 31, 2020, the carrying value of the Goodwill is $187.0 million.

During the year, the Company impaired $5.4 million of Goodwill associated with the Black Hawk Reporting Unit.

The determination of the fair values requires management to make significant estimates using both the market approach, applying a multiple of earnings based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit.

The determination of fair value under the discounted cash flows method involves the use of significant estimates and assumptions, including the weighted average cost of capital, future revenue, profitability and cash flows.

Changes in these assumptions could have a significant impact on either a reporting unit’s fair value, the amount of any goodwill impairment charge, or both.

Given the significant judgments made by management to estimate the fair value of each reporting unit’s goodwill and the difference between its fair value and carry value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the weighted average cost of capital, future revenue, profitability, cash flows and selection of guideline public companies and related valuation multiples, required a high degree of auditor judgment and increased extent of effort, including the need to involve our fair value specialist.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the weighted average cost of capital, future revenue, profitability, cash flows, and selection of guideline public companies and related valuation multiples, used by management to estimate the fair value of goodwill included the following, among others:

• We evaluated management’s ability to accurately project future revenues, profitability, and cash flows by comparing actual results to management’s historical projections.

• We evaluated the reasonableness of management’s projections of future revenues, profitability and cash flows by:

– Comparing management’s projections with:

▪ Historical revenues, profitability and cash flows

▪ Internal communications to management and the Board of Directors

▪ Projected information included in Company press releases, as well as analyst and industry reports of the Company and selected companies in its peer group

– Evaluated the impact of changes in the regulatory environment on management’s projections

– Evaluated the projected revenue mix based on the historical total revenue mix and the Company’s strategic plans

– Evaluated actual results for the period ended December 31, 2020 as compared to management’s projection for that same period, as well as any changes in management’s projection that may have occurred subsequent to the Company’s analysis.

• With the assistance of our fair value specialists, we evaluated the selection of guideline companies and valuation multiples, as well as reasonableness of the discount rates by:

– Testing the source information underlying the determination of the valuation multiples and discount rate including the mathematical accuracy of these calculations

– Evaluated the comparability of the guideline companies using the industry classification system

– Evaluated the selection of valuation multiples through comparison of historical and projected growth and profitability

– Independently estimating the weighted average cost of capital (a component of the discount rate)

– Evaluated the basis and rationale for each discount rate input

– Developing a range of independent estimates and comparing those to the discount rate selected by management.

Acquisitions – Black Hawk Casinos, Casino KC and Casino Vicksburg, Bally’s Atlantic City & Eldorado Resort Casino Shreveport – Acquired Intangible Assets — Refer to Note 2 and Note 5 to the financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Acquisition of Gamesys Group, Plc.

– Refer to Notes 1 and 5 to the financial statements

Critical Audit Matter Description

The Company completed the acquisitions of the Black Hawk Casinos, Casino KC and Casino Vicksburg, Bally’s Atlantic City, and Eldorado Resort Casino Shreveport, through asset purchase agreements during the year.

The Company accounted for each of these acquisitions using the acquisition method of accounting, which requires the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values.

In determining the estimated fair value for acquired intangible assets, such as, trademarks, rated player relationships, gaming licenses, and other contracts, management utilized an income approach, which discounts the projected future net cash flow using a discount rate that reflects the risks associated with the projected future cash flows.

Given the fair value determination of these intangibles requires management to make significant estimates and assumptions related to projected future net cash flows and the selection of the discount rate, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

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

for a purchase price of $2.6 billion.

The Company accounted for this acquisition using the acquisition method of accounting, which requires the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including customer relationships, developed technology, and trade names.

In determining the estimated fair value for acquired customer relationships, management utilized the multi period excess earnings method.

In determining the estimated fair value for acquired developed technology and trade names, management utilized the relief from royalty income approach.

Goodwill was recognized as the excess of the purchase price over the identifiable assets acquired and liabilities assumed.

The fair value determination of these intangible assets requires management to make significant estimates and assumptions related to expected cash flows and projected financial results, including forecasted revenues (collectively the “forecasts”), and the selection of the discount rate.

Changes to these assumptions could result in a significant impact on the recognition of the acquired customer relationships, developed technology, and trade name intangible assets and the determination of goodwill.

Therefore, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the projected future net cash flows and the selection of the discount rate for the acquired intangible assets included the following, among others:

• We assessed the reasonableness of management’s projected future net cash flows by comparing the projections to historical results and certain peer companies.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation

Our audit procedures related to the forecasts and the selection of the discount rate used by management to determine the fair value of the acquired intangible assets and the assigned goodwill included the following, among others:

• We tested the effectiveness of controls over the valuation of the customer relationship, developed technology and trade name intangible assets, including management’s controls over the forecasts and the selection of the discount rate used.

• We evaluated the assumptions and estimates included in the forecasts by:

◦ Comparing the forecasts to information included in the Company’s communications to the Board of Directors, gaming industry reports, and analyst reports for the Company and certain of its peer companies;

◦ Comparing the forecasts to historical financial results;

◦ Conducting inquiries with management;

◦ Evaluating whether the forecasts were consistent with evidence obtained in other areas of the audit.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by:

◦ Testing the inputs underlying the determination of the discount rate and testing the mathematical accuracy of the calculation.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by management.

• We evaluated whether the estimated projected future net cash flows were consistent with evidence obtained in other areas of the audit.

Sinclair Agreement – Refer to Note 9 to the financial statements

Critical Audit Matter Description

The Company entered into a long-term strategic relationship with Sinclair Broadcast Group, 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.

We identified the accounting for the Sinclair agreement as a critical audit matter due to the complexity involved and the management judgment necessary to determine the appropriate accounting treatment for the various aspects of the agreement.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve professionals having expertise in business combinations, financial instruments and income taxes, when performing audit procedures to evaluate management’s judgments and conclusions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s application GAAP to the Sinclair agreement included the following, among others:

• We read and analyzed the asset purchase agreement to evaluate the accounting treatment for the naming rights, warrants, options and agreement to share in certain tax benefits.

• With the assistance of professionals having expertise in business combinations, financial instruments and income tax accounting, we evaluated management’s conclusions.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey

Stamford, Connecticut

March 1, 2022

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Tax receivable 128,217 84,483

Prepaid expenses and other assets 53,823 28,439

Prepaid expenses and other current assets 104,463 53,823

Total current assets 567,187 288,955

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Intangible assets, net 2,477,952 663,395

Deferred tax asset 11,922 —

Other assets 27,009 5,385

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Current portion of long-term debt $ 19,450 $ 5,750

Current portion of lease obligations 1,520 1,014

Current portion of lease liabilities 24,506 1,520

Accounts payable 87,540 15,869

Accrued income taxes 37,208 —

Accrued liabilities 401,428 120,055

Total current liabilities 570,132 143,194

Lease obligations, net of current portion 62,025 16,214

Long-term debt, net of current portion 1,094,105 680,601

Long-term debt, net 3,426,777 1,094,105

Long-term portion of lease liabilities 506,475 62,025

Pension benefit obligations 4,647 9,215

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Naming rights liabilities 168,929 243,965

Contingent consideration payable 34,931 —

Other long-term liabilities 11,057 13,770

Total liabilities 4,937,415 1,603,257

Commitments and contingencies

Commitments and contingencies (Note 18)

Stockholders’ equity:

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200,000,000 shares authorized;

30,685,938 and 41,193,018 shares issued as of December 31, 2020 and 2019, respectively;

30,685,938 and 32,113,328 shares outstanding as of December 31, 2020 and 2019, respectively

53,050,055 and 30,685,938 shares issued;

52,254,477 and 30,685,938 shares outstanding

Preferred stock ($0.01 par value;

10,000,000 shares authorized;

no shares outstanding)

Additional paid-in-capital 1,849,068 294,643

Treasury Stock, at cost, 795,578 and 0 shares as of December 31, 2021 and 2020, respectively

— ( 223,075 )

Retained earnings 34,792 250,418

Retained (deficit) earnings ( 138,683 ) 34,792

Accumulated other comprehensive loss ( 69,707 ) ( 3,144 )

Total Bally’s Corporation stockholders’ equity 1,612,042 326,598

Non-controlling interest 3,760 —

Total stockholders’ equity 1,615,802 326,598

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CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

(In thousands, except per share data)

Years Ended December 31,

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Gaming $ 1,053,492 $ 298,070 $ 381,062

Racing 6,412 13,114 13,158

Hotel 95,356 24,742 38,988

Food and beverage 92,906 32,132 69,904

Other 17,848 33,623 26,920

Retail, entertainment and other 80,689 17,848 33,623

Total revenue 1,322,443 372,792 523,577

Operating costs and expenses:

Operating (income) costs and expenses:

Gaming 407,032 95,901 103,557

Racing 6,446 9,592 9,031

Hotel 30,511 10,144 14,841

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Expansion and pre-opening 1,772 921 —

Acquisition, integration and restructuring expense 13,257 12,168 6,844

Newport Grand disposal loss — — 6,514

Storm related losses, net of insurance recoveries 14,095 ( 1,181 ) —

Acquisition, integration and restructuring 71,288 13,257 12,168

Gain from insurance recoveries, net of losses ( 19,313 ) 14,095 ( 1,181 )

Rebranding 2,530 792 —

Gain on sale-leaseback ( 53,425 ) — —

Contract termination 30,000 — —

Depreciation and amortization 144,786 37,842 32,392

Total operating costs and expenses 1,229,061 391,178 408,951

(Loss) income from operations ( 18,386 ) 114,626 120,649

Income (loss) from operations 93,382 ( 18,386 ) 114,626

Other income (expense):

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Gain on bargain purchases 22,841 63,871 —

Loss on extinguishment and modification of debt — ( 1,703 ) —

Loss on extinguishment of debt ( 103,007 ) — ( 1,703 )

Other, net 11,503 — 183

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Net (loss) income $ ( 71,799 ) $ ( 5,487 ) $ 55,130

Deemed dividends related to changes in fair value of common stock subject to possible redemption — — 640

Net (loss) income applicable to common stockholders $ ( 5,487 ) $ 55,130 $ 72,078

Net (loss) income per share, basic $ ( 0.18 ) $ 1.46 $ 1.95

Basic (loss) income per share $ ( 1.45 ) $ ( 0.18 ) $ 1.46

Weighted average common shares outstanding - basic 49,643,991 31,315,151 37,705,179

Net (loss) income per share, diluted $ ( 0.18 ) $ 1.46 $ 1.87

Diluted (loss) income per share $ ( 1.45 ) $ ( 0.18 ) $ 1.46

Weighted average common shares outstanding - diluted 49,643,991 31,315,151 37,819,617

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Years Ended December 31,

2021 2020 2019

Net (loss) income $ ( 71,799 ) $ ( 5,487 ) $ 55,130

Other comprehensive loss (income):

Foreign currency translation adjustments ( 68,731 ) — —

Defined benefit pension plan:

Losses arising during the period ( 1,844 ) ( 2,740 )

Gains (losses) arising during the period 3,040 ( 1,844 ) ( 2,740 )

Reclassification adjustments 104 — —

Tax effect ( 976 ) 588 852

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Total comprehensive (loss) income $ ( 138,362 ) $ ( 6,743 ) $ 53,242

____________________________________________

Net income equals comprehensive income for the year ended December 31, 2018.

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(In thousands, except shares)

Common Stock Additional

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Comprehensive

Loss Total Stockholders’

Loss Non-controlling Interest Total Stockholders’

Shares Outstanding Amount

Balance as of December 31, 2018 37,989,376 $ 380 $ 125,629 $ ( 30,233 ) $ 202,884 $ — $ — $ 298,660

Release of restricted stock 25,136 — — — — — —

Stock options exercised via repayment of non-recourse notes 1,771,096 18 44,739 — — — 44,757

Share-based compensation - equity awards — — 1,692 — — — 1,692

Share repurchases ( 338,648 ) ( 3 ) 3 ( 7,958 ) — — ( 7,958 )

Common stock subject to possible redemption ( 25,136 ) — ( 685 ) — — — ( 685 )

Common stock no longer subject to possible redemption due to extinguishment of Puts 357,224 3 9,095 — — — 9,098

Fair value of vested stock options converted from liability to equity awards — — 2,875 — — — 2,875

Deemed dividends related to changes in fair value of common stock subject to possible redemption — — — — 640 — 640

Net income — — — — 71,438 — 71,438

Balance as of December 31, 2018 37,989,376 380 125,629 ( 30,233 ) 202,884 — 298,660

Release of restricted stock, net 226,817 2 ( 428 ) — — — — ( 426 )

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— — — — ( 7,596 ) — — ( 7,596 )

Share-based compensation - equity awards — — 3,826 — — — 3,826

Share-based compensation — — 3,826 — — — — 3,826

Retirement of treasury shares — — ( 30,233 ) 30,233 — — — —

Stock issued for purchase of Dover Downs 2,976,825 30 86,750 — — — 86,780

Stock issued for purchase of Bally’s Dover 2,976,825 30 86,750 — — — — 86,780

Share repurchases (including tender offer) ( 9,079,690 ) — — ( 223,075 ) — — — ( 223,075 )

Other comprehensive loss — — — — — ( 1,888 ) ( 1,888 )

Other comprehensive income — — — — — ( 1,888 ) — ( 1,888 )

Net income — — — — 55,130 — — 55,130

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— — — — ( 3,174 ) — — ( 3,174 )

Share-based compensation - equity awards — — 17,706 — — — 17,706

Share-based compensation — — 17,706 — — — — 17,706

Retirement of treasury shares — ( 109 ) ( 49,351 ) 256,367 ( 206,907 ) — — —

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Balance as of December 31, 2020 30,685,938 307 294,643 — 34,792 ( 3,144 ) — 326,598

Release of restricted stock and other stock awards, net 121,379 1 ( 3,260 ) ( 116 ) — — — ( 3,375 )

Share-based compensation — — 20,143 — — — — 20,143

Retirement of treasury shares — ( 35 ) ( 71,574 ) 173,285 ( 101,676 ) — — —

Share repurchases ( 2,188,532 ) — — ( 87,024 ) — — — ( 87,024 )

Stock options exercised 70,000 — 301 — — — — 301

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

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

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

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

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

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

Bally’s Interactive equity issuance 2,074,723 21 121,479 ( 585 ) — — — 120,915

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

Shares issued for purchase of Gamesys 9,773,537 98 518,681 — — — — 518,779

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

Other comprehensive loss — — — — — ( 66,563 ) — ( 66,563 )

Net loss — — — — ( 71,799 ) — — ( 71,799 )

Balance as of December 31, 2021 52,254,477 $ 530 $ 1,849,068 $ ( 29,166 ) $ ( 138,683 ) $ ( 69,707 ) $ 3,760 $ 1,615,802

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

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Net (loss) income $ ( 71,799 ) $ ( 5,487 ) $ 55,130

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 144,786 37,842 32,392

Amortization of operating lease right of use assets 804 1,215 —

Share-based compensation - liability awards — — ( 3,166 )

Share-based compensation - equity awards 17,706 3,826 1,692

Amortization of debt financial costs and discounts on debt 4,636 2,684 3,267

Loss on extinguishment and modification of debt — 1,703 —

Bad debt expense 353 239 202

Net pension and other post-retirement benefit income — ( 39 ) —

Deferred income taxes 1,191 8,995 5,880

Non-cash lease expense 14,924 804 1,215

Share-based compensation 20,143 17,706 3,826

Goodwill and asset impairment 4,675 8,659 —

Amortization of debt issuance costs and debt discounts

7,557 4,636 2,684

Loss on extinguishment of debt 103,007 — 1,703

Gain from insurance recoveries ( 18,660 ) — —

Storm related losses — 14,408 —

Newport Grand disposal loss — — 6,514

Loss on disposal of property and equipment 35 98 11

Accretion of trade name liability and naming rights 594 — —

Gain on sale-leaseback ( 53,425 ) — —

Contract termination 30,000 — —

Deferred income taxes ( 5,217 ) 1,191 8,995

Loss on assets and liabilities measured at fair value 21,440 — —

Change in value of naming rights liabilities ( 17,029 ) 57,660 —

Change in contingent consideration payable ( 23,503 ) — —

Gain on bargain purchases ( 22,841 ) ( 63,871 ) —

Changes in operating assets and liabilities:

Accounts receivable 11,622 5,211 ( 4,857 )

Inventory 125 ( 89 ) 842

Prepaid expenses and other assets ( 76,099 ) ( 14,172 ) ( 1,778 )

Accounts payable ( 4,976 ) ( 3,860 ) ( 4,078 )

Accrued liabilities 14,300 767 10,945

Other operating activities 10,275 982 298

Change in current operating assets and liabilities ( 61,579 ) ( 55,028 ) ( 12,143 )

Net cash provided by operating activities 82,754 19,502 94,100

Cash flows from investing activities:

Deposit paid — — ( 981 )

Repayment of loans from officers and directors — — 5,360

Cash paid for acquisitions, net of cash acquired ( 2,274,221 ) ( 425,063 ) ( 9,606 )

Deposit for pending acquisition of Jumer’s Casino & Hotel ( 4,000 ) — —

Proceeds from sale of land and building for Newport Grand disposal — — 7,108

Proceeds from sale of property and equipment — 10 11

Proceeds from sale-leaseback 144,000 — —

Deposit for acquisition of Bally’s Quad Cities Casino & Hotel — ( 4,000 ) —

Foreign exchange forward contract premiums ( 22,592 ) — —

Capital expenditures ( 97,525 ) ( 15,283 ) ( 28,237 )

Payments associated with licenses and market access fees ( 500 ) ( 1,092 ) ( 208 )

Insurance proceeds from hurricane damage 18,660 — —

Cash paid for internally developed software ( 15,891 ) — —

Acquisition of gaming licenses ( 30,159 ) — —

Other intangible asset acquisitions ( 19,157 ) — —

Other investing activities ( 19 ) ( 500 ) ( 1,082 )

Net cash used in investing activities ( 2,296,904 ) ( 444,846 ) ( 38,925 )

Cash flows from financing activities:

Revolver borrowings 285,000 25,000 41,000

Revolver repayments ( 250,000 ) ( 80,000 ) ( 6,000 )

Term loan proceeds, net of fees of $ 13,820 , $ 10,655 and $ — , respectively

261,180 289,345 —

Term loan repayments ( 4,375 ) ( 343,939 ) ( 34,527 )

Senior note proceeds, net of fees of $ 2,500 , $ 6,130 and $ — , respectively

122,500 393,870 —

Issuance of long-term debt 3,787,553 668,680 708,215

Repayments of long-term debt ( 1,877,575 ) ( 254,375 ) ( 423,939 )

Payment of financing fees ( 65,297 ) ( 1,734 ) ( 4,340 )

Payment of redemption premium on debt extinguishment ( 67,857 ) — —

Share repurchases ( 87,024 ) ( 33,292 ) ( 223,075 )

Stock options exercised via repayment of non-recourse notes — — 4,277

Stock options exercised 84 — —

Issuance of common stock, net 667,872 — —

Issuance of Sinclair penny warrants 50,000 — —

Payment of shareholder dividends — ( 3,204 ) ( 7,539 )

Share redemption for tax withholdings - restricted stock ( 9,762 ) ( 426 ) —

Net cash provided by (used in) financing activities 366,397 48,896 ( 3,429 )

Other financing activities ( 3,074 ) ( 9,678 ) ( 426 )

Net cash provided by financing activities 2,404,598 366,397 48,896

Effect of foreign currency on cash and cash equivalents ( 42,163 ) — —

Net change in cash and cash equivalents and restricted cash 148,285 ( 58,947 ) 104,071

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Deposit applied to fixed asset purchases — — 981

Deemed dividends related to changes in fair value of common stock subject to possible redemption — — ( 640 )

Intrinsic value of stock options exercised via repayment of non-recourse note — — 40,480

Termination of operating leases via purchase of underlying assets — — 1,665

Common stock no longer subject to possible redemption due to extinguishment of Puts — — 9,098

Fair value of vested stock options converted from liability to equity awards — — 2,875

Stock issued for acquisition of Dover Downs Gaming & Entertainment, Inc.

Stock issued for acquisition of Bally’s Dover Casino Resort — — 86,780

Stock and equity instruments issued for acquisitions of SportCaller, Monkey Knife Fight, Bally’s Interactive and Gamesys 716,162 — —

Acquisitions in exchange for contingent liability 58,685 — —

Deferred purchase price payable 14,071 — —

Deposit applied to acquisition purchase price 4,000 — —

Non-controlling interest 3,760 — —

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

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Description of Business

Bally’s Corporation (the “Company”, “Bally’s”), formerly known as Twin River Worldwide Holdings, Inc., was formed on March 1, 2004.

Twin River Management Group, Inc.

(“TRMG”), is a wholly owned subsidiary of the Company and is the parent company of UTGR, Inc.

(“Twin River Casino Hotel”), Premier Entertainment Biloxi LLC and subsidiaries (“Hard Rock Biloxi”), Premier Entertainment II, LLC (“Newport Grand”), Mile High USA, Inc.

and subsidiaries (“Mile High USA”), Twin River-Tiverton, LLC (“Tiverton Casino Hotel”), Premier Entertainment III, LLC and subsidiaries, (“Dover Downs”), Premier Entertainment Black Hawk LLC (“Black Hawk Casinos”), IOC-Kansas City, Inc.

(“Casino KC”), Premier Entertainment Vicksburg, LLC (“Casino Vicksburg”), Premier Entertainment AC, LLC (“Bally’s Atlantic City”) and Premier Entertainment Louisiana I, LLC (“Eldorado Resort Casino Shreveport” or “Shreveport”), all of which are wholly owned subsidiaries of TRMG.

Twin River Casino Hotel is located in Lincoln, Rhode Island and is authorized to house a maximum of 4,752 Video Lottery Terminals (“VLTs”) and traditional casino table games on behalf of the State of Rhode Island.

As of December 31, 2020, the property had 4,067 VLTs, 90 traditional table games, 23 poker tables, and 36 stadium gaming positions in addition to simulcast racing, and live and mobile sports wagering.

The property also has various food and beverage venues, a multi-purpose event center and a 136 -room hotel.

Hard Rock Biloxi’s operations consist of a casino and hotel located in Biloxi, Mississippi.

As of December 31, 2020, the property includes 1,015 slot machines, 55 table games, and two hotel towers containing 479 guest rooms and suites, a pool with swim up bar and a spa.

The property also features a variety of restaurants and nightlife options.

TRMG formed Premier Entertainment II LLC which acquired substantially all of the assets of Newport Grand Casino located in Newport, Rhode Island on July 14, 2015.

Newport Grand housed approximately 1,100 VLTs on behalf of the State of Rhode Island and also offered simulcast wagering as well as a restaurant and bar.

Until Newport Grand closed on August 28, 2018, Newport Grand was entitled to a 28.0 % share of VLT revenue.

The Company has included the results of Newport Grand in its consolidated financial statements from the date of acquisition until the date Newport Grand vacated the building after closing.

Refer to Note 6 “Sale of Newport Grand”.

On February 3, 2015, TRMG formed Border Investments LLC for the purpose of acquiring the rights to land located in Tiverton, Rhode Island and subsequently proposed a relocation of the existing Newport Grand gaming license to a new casino to be developed in that town.

On November 9, 2015, TRMG formed Twin River-Tiverton, LLC to develop and house the new casino.

The Tiverton casino was approved by a majority vote in both the State of Rhode Island and the Town of Tiverton on November 8, 2016.

During 2017, the land acquired by Border Investments LLC was transferred to Twin River-Tiverton, LLC and Border Investments LLC was dissolved.

On September 1, 2018, the casino and hotel located in Tiverton, Rhode Island (“Tiverton Casino Hotel”) began operations.

As of December 31, 2020, the property houses approximately 1,000 VLTs, 32 table games and 18 stadium gaming positions on behalf of the State of Rhode Island.

The Tiverton Casino Hotel also offers live and mobile sports wagering and has an 83 -room hotel.

On March 28, 2019, the Company, through its wholly owned subsidiary Premier Entertainment III, LLC acquired Dover Downs Gaming & Entertainment, Inc.

(“Dover Downs”).

In the transaction, each share of Dover Downs common stock and class A common stock was converted into the right to receive 0.0899 shares of the Company’s common stock.

Dover Downs common stock, which previously traded under the ticker symbol “DDE” on the New York Stock Exchange (the “NYSE”), ceased trading on, and was delisted from, the NYSE on March 28, 2019.

On March 29, 2019, the Company’s common stock was listed on the NYSE and began trading under the ticker symbol “TRWH.” Effective November 9, 2020, the Company changed its name to Bally’s Corporation and, reflecting this change, the Company’s common stock commenced trading on the NYSE under the new ticker symbol “BALY.”

The Dover Downs operations consist of a casino, a hotel and conference center and a harness racing track located in Dover, Delaware.

As of December 31, 2020, the property includes approximately 2,060 slot machines, 33 traditional table games and 4 poker tables, in addition to a harness racing track with pari-mutuel wagering on live and simulcast horse races, online gaming, various food and beverage venues, a full-service spa/salon and a multi-purpose event center.

Dover Downs also offers sports wagering.

The Dover Downs Hotel and Conference Center has a 500 room hotel.

Mile High USA’s operations consist of a horse racing track and simulcast wagering at Arapahoe Park Racetrack in Aurora, Colorado, as well as simulcast horse and dog wagering at up to 13 licensed off-track betting (“OTB”) sites in Colorado.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Black Hawk Casinos properties, Golden Gates, Golden Gulch and Mardi Gras are located in close proximity to one another along a half mile strip of casino and casino-hotel properties in the historic mining town of Black Hawk, Colorado.

Together the properties contain a combined 34,632 square feet of gaming space featuring 16 table games, 569 slots and a poker parlor with 17 tables.

The properties also offer four restaurants and 24/7 bars, and one of the only parking garages in the market, with 700 spaces.

Casino KC is located in Kansas City, Missouri overlooking the Missouri River and is in close proximity to downtown Kansas City and the Berkeley Riverfront.

As of December 31, 2020, the property consists of 39,788 square feet of casino space, 887 slot machines, 13 table games and two dining venues.

It is located at a premier location on the riverfront near downtown and is readily accessible to suburban traffic.

The Company expects to substantially reposition the casino with a transformational redevelopment plan with spending of approximately $ 40 million.

Casino Vicksburg is located along the Mississippi River in Vicksburg, Mississippi.

As of December 31, 2020, the property features 32,608 square feet of casino space, 499 slot machines, eight electronic table games, three dining venues and an 89 -room hotel.

Bally’s Atlantic City is located in Atlantic City, New Jersey, is situated prominently in the center of the Atlantic City boardwalk.

As of December 31, 2020, this iconic 83,569 square foot property includes 1,481 slots, 93 tables, four dining venues and one bar, lounge and nightclub facilities.

The property also houses a hotel with 1,214 guest rooms and suites, a spa and indoor fitness facilities and 80,000 square feet of meeting space with 28 meeting rooms, including the 12,000 square foot Ocean Ballroom.

The Company expects to invest approximately $ 90 million in the Bally’s Atlantic City property over a span of five years to refurbish and upgrade its facilities and expand its amenities.

Eldorado Resort Casino Shreveport is located in Shreveport, Louisiana, and is situated right on the banks of the Red River.

As of December 31, 2020, this premier property consists of 49,916 square feet of casino space, 1,382 slots, 46 table games and eight poker tables, four dining venues and two bars, 403 hotel rooms, and 6,000 square feet of convention space.

The Company has four reportable segments which are operated and managed as follows:

1) Rhode Island, 2) Mid-Atlantic, 3) Southeast and 4) West.

Refer to Note 18 “Segment Reporting”.

Strategic Partnership - Sinclair Broadcast Group

On November 18, 2020, the Company and Sinclair Broadcast Group, Inc.

(“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.

Refer to Note 9 “Sinclair Agreement” for further information.

On November 18, 2020, the Company and Bet.Works Corp.

(“Bet.Works”) entered into a definitive agreement pursuant to which the Company will acquire Bet.Works (the “Bet.Works Acquisition”).

At closing, the Company will pay the shareholders of Bet.Works $ 62.5 million in cash and 2,528,194 Company common shares, subject in each case to customary adjustments.

Refer to Note 5 “Acquisitions” for further information.

Centre County, Pennsylvania

On December 31, 2020, the Company signed a framework agreement with an established developer to jointly design, develop, construct and manage a Category 4 licensed casino in Centre County, Pennsylvania.

Construction of the casino is expected to begin the first half of 2021 and will take approximately one year to complete.

Subject to receipt of all applicable regulatory approvals, it will house up to 750 slot machines and 30 table games.

The casino will also provide, subject to receipt of separate licenses and certificates, retail sports betting, online sports betting and online gaming.

The Company estimates the total cost of the project, including construction, licensing and sports betting/iGaming operations, to be approximately $ 120 million.

Bally’s will acquire a majority equity interest in the partnership, including 100 % of the economic interests of all retail sports betting, online sports betting and iGaming activities associated with the project.

Bally’s Corporation (the “Company,” or “Bally’s”), formerly known as Twin River Worldwide Holdings, Inc., was formed on March 1, 2004.

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 (1)

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

Bally’s Dover Casino Resort (“Bally’s Dover”) (3)

Dover, Delaware Casino, Resort and Raceway 2019

Bally’s Black Hawk (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 Evansville Casino & Hotel (“Bally’s Evansville”) (3)

Evansville, Indiana Casino and Hotel 2021

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

Rock Island, Illinois Casino and Hotel 2021

__________________________________

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

Refer to Note 19 “ Segment Reporting ” for further information.

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

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

(“GLPI”) under the Master Lease agreement.

Refer to Note 13 “ Leases ” for further information.

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

• Bally’s Interactive, a B2B2C sportsbook and iCasino 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 gaming platform and daily fantasy sports 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;

• 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, Plc.

(“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.

Gamesys Acquisition

On October 1, 2021, the Company completed its acquisition of Gamesys for 9,773,537 shares of Bally’s common stock and approximately £ 1.537 billion in cash (the “Acquisition”).

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 2.60 billion.

Consideration paid includes $ 518.8 million in shares and $ 2.08 billion in cash.

See Note 5 “ Acquisitions ” for further information.

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 12 “ Long-Term Debt ” and Note 15 “ Stockholders ’ Equity ” for further information.

COVID-19 Pandemic

The novel coronavirus (“COVID-19”) pandemic has caused significant disruption to the US and global economy as well as financial markets around the world and has impacted, and is likely to continue to impact, the Company’s business in a material manner.

As of March 16, 2020 all of the Company’s properties at the time were temporarily closed as a result of the COVID-19 pandemic and as of March 17, 2020, all of the properties the Company had entered into agreements to acquire were also temporarily closed.

As of June 17, 2020, all of the Company’s properties, including the subsequently acquired Casino KC and Casino Vicksburg had reopened operated in some capacity for the remainder of the year, with the exception of Twin River Casino Hotel and Tiverton Casino Hotel which closed again from November 29 through December 20, 2020.

The following is an update of re-openings and current operations by property.

• Twi n River Casino Hotel and Tiverton Casino Hotel - The Rhode Island properties pre-opened on June 8, 2020 with very limited invitation-only guests allowed.

Beginning June 30, 2020, the Company was able to open to the general public, at approximately 65 % capacity, with half of VLTs and a limited number of table games (with a three -player limit).

The properties were closed again from November 29 through December 20, 2020 due to a state mandated pause to slow the spread of COVID-19.

Currently, the properties are open to the general public and are operating at 65 % capacity with about half of VLTs and all table games (with a three -player limit) available.

The hotels at the Rhode Island properties remain closed.

• Hard Rock Biloxi - The Biloxi property re-opened to the general public on May 21, 2021 at 50 % capacity with 41 % of VLTs, all table games (with a three -player limit) available and 75 % of the hotel rooms available to guests.

Currently, Hard Rock Biloxi is operating at 50 % capacity with over 63 % of VLTs and all table games (with a three -player limit) available, and the hotel is currently operating with all rooms available to guests.

• Dover Downs Casino Hotel - The Delaware property re-opened on June 1, 2020 at 30 % capacity with 45 % of VLTs.

Table games (with a two -player limit) became available to guests on June 17, 2020 and the hotel, at 60 % room capacity, became available on June 18, 2020.

Currently, the property is operating at approximately 60 % capacity with 52 % of VLTs and 89 % of table games (with a four -player limit) available, and all hotel rooms available to guests.

• Casino KC - Casino KC re-opened on June 1, 2020 at 50 % capacity with 70 % of VLTs and 30 % of table games (with a three -player limit) available.

Casino KC is currently operating at 50 % capacity with all VLTs and table games (with a three -player limit) available.

• Casino Vicksburg - Casino Vicksburg re-opened on May 21, 2020 at 50 % capacity with 48 % of VLTs and 50 % of hotel rooms available to guests.

Currently, Casino Vicksburg is still operating at 50 % capacity;

however, 70 % of VLTs are available and all table games (with a three -player limit) are available, and the hotel is currently operating with all rooms available to guests.

• Black Hawk Casinos - The Black Hawk Casinos re-opened on June 17, 2020 at 50 % capacity with 55 % of VLTs available to guests.

Currently, the property is still operating at 50 % capacity;

however, 83 % of VLTs are now available to guests.

As of November 11, 2020, the table games remain closed.

• Bally’s Atlantic City - Bally’s Atlantic City is operating at 25 % capacity with 58 % of VLTs and all table games (with a four -player limit) available, and the hotel is currently operating with all rooms available to guests.

• Shreveport - Shreveport is operating at 50 % capacity with 56 % of VLTs and about half of table games (with a four -player limit) available, and the hotel is currently operating with all rooms available to guests.

The Company remains committed to compliance with all state and local operating restrictions as well as and meeting or exceeding all guidelines established by the Centers for Disease Control and Prevention.

The Company has implemented property-specific comprehensive health and safety protocols for each of its properties, developed in close consultation with applicable state regulators and public health officials in local jurisdictions.

The Company’s operations are expected to continue to be negatively impacted by the COVID-19 pandemic and that impact could be material.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The COVID-19 pandemic has 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 December 31, 2021, the Company’s properties have returned to full capacity 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary TRMG and its subsidiaries.

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

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and 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 balances and transactions have been eliminated in consolidation.

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

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 (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support (ii) equity holders, as a group, lack the characteristics of a controlling financial interest or (iii) 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 has 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 December 31, 2021, on a consolidated basis, Breckenridge Curacao B.V.

had total assets of $ 85.4 million, total liabilities of $ 75.2 million and revenues of $ 79.6 million for the year ended December 31, 2021.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.

GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and revenues and expenses and related disclosures of contingent assets and liabilities.

On an ongoing basis, the Company evaluates its estimates and judgments including those related to contingent value rights, the allowance for doubtful accounts, valuation of goodwill and intangible assets, recoverability and useful lives of tangible and intangible long-lived assets, accruals for players club card incentives and for potential liabilities related to any lawsuits or claims brought against the Company, fair value of financial instruments, stock compensation and valuation allowances for deferred tax assets.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and revenues and expenses and related disclosures of contingent assets and liabilities.

On an ongoing basis, the Company evaluates its estimates and judgments including those related to contingent value rights, the allowance for doubtful accounts, valuation of goodwill and intangible assets, recoverability and useful lives of tangible and intangible long-lived assets, accruals for players club card incentives and for potential liabilities related to any lawsuits or claims brought against the Company, fair value of financial instruments, capitalized software development costs, stock compensation and valuation allowances for deferred tax assets.

The Company bases its estimates and judgments on historical experience and other relevant factors impacting the carrying value of assets and liabilities.

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

As of December 31, 2020 and 2019, restricted cash of $ 3.1 million and $ 2.9 million, respectively, was comprised of VLT and table games cash payable to the State of Rhode Island and certain cash accounts at Dover Downs and Mile High USA, which is unavailable for the Company’s use.

Restricted cash as of December 31, 2021 and 2020 was $ 68.6 million and $ 3.1 million, respectively.

As of December 31, 2021, restricted cash consisted primarily of player deposits and payment service provider deposits in connection with the Company’s Gamesys’ operations.

Restricted cash also includes Video Lottery Terminals (“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 consolidated balance sheets to the total shown on the consolidated statements of cash flows.

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For the years ended December 31, 2021, 2020 and 2019, gaming revenue from the State of Rhode Island accounted for 19 %, 30 % and 46 % of total revenues, respectively.

Based on the Master Video Lottery Terminal Contract (the “Contract”) with the State of Rhode Island and historical experience, the Company’s management believes any credit risk related to amounts owed to the Company by the State of Rhode Island to be minimal.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the Master Video Lottery Terminal Contract with the State of Rhode Island and historical experience, the Company’s management believes any credit risk related to amounts owed to the Company by the State of Rhode Island to be minimal.

Accounts Receivable, Net

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Accounts receivable, net $ 48,178 $ 14,798

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

__________________________________

(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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value.

The allowance is estimated based on historical collection experience, current economic and business conditions and forecasts that affect the collectability, review of individual customer accounts, and any other known information.

Historically, the Company has not incurred any significant credit-related losses.

The allowance is estimated based on historical collection experience, current economic and business conditions and forecasts that affect the collectability and review of individual customer accounts and any other known information.

The activity for the allowance for doubtful accounts is as follows:

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Balance at end of year $ 4,454 $ 3,067 $ 1,296

(1) Adjustment of $ 58 thousand resulting from Adoption of ASU 2016-13.

__________________________________

(1) Adjustment resulting from adoption of Accounting Standard Update (“ASU”) 2016-13.

Inventory is stated at the lower of cost or net realizable value on a first-in, first-out basis and consists primarily of food, beverage, promotional items and other supplies.

Prepaid Expenses and Other Assets

As of December 31, 2021 and 2020, prepaid expenses and other assets was comprised of the following:

(in thousands) 2021 2020

Services and license agreements $ 21,496 $ 5,825

Sales tax 18,308 —

Due from payment service providers 15,984 —

Prepaid marketing 10,066 641

Prepaid insurance 9,637 5,654

Deposits 8,748 4,674

Purse funds 8,286 5,667

Unbilled revenue 7,759 —

Contingent consideration receivable — 27,909

Other 4,179 3,453

Total prepaid expenses and other current assets $ 104,463 $ 53,823

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

The Company applied “fresh start accounting” upon emergence from Chapter 11 reorganization, in accordance with the guidance of Accounting Standards Codification (“ASC”) 805, Business Combinations and ASC 852, Reorganizations .

As a result of “fresh start accounting”, the Company adjusted property and equipment to reflect its fair value on November 5, 2010 (the “Emergence Date”).

Additions subsequent to that date have been 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.

Property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if applicable.

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 consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets or the released lease term, if any, as follows:

Land improvements 3 - 40

Building and improvements 3 - 40

Equipment 2 - 10

Furniture and fixtures 2 - 10

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.

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

During the years ended December 31, 2020 and 2019, there was no capitalized interest.

During the year ended December 31, 2021 there was $ 0.2 million of capitalized interest.

There was no capitalized interest in the year ended December 31, 2020.

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

(in years) December 31,

Land $ 75,328 $ 78,506

Land improvements 34,704 29,965

29,965 24,372

Building and improvements 650,837 635,145

635,145 458,111

Equipment 182,006 125,667

125,667 104,245

Furniture and fixtures 47,258 30,277

30,277 22,764

Construction in process 53,715 8,799

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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 December 31, 2020 included costs associated with various capital projects in process, primarily at Hard Rock Biloxi and Dover Downs.

The construction in process balance at December 31, 2021 included $ 33.8 million, primarily attributable to projects at Bally’s Atlantic City, Bally’s Twin River and Bally’s Kansas City.

Depreciation expense relating to property and equipment was $ 53.7 million, $ 33.0 million and $ 26.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Control over the use of the identified asset means the lessee has both (i) the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use and (ii) the right to direct the use of the identified asset.

Upon adoption of ASC 842, Leases , the Company elected to account for lease and non-lease components as a single component for all classes of underlying assets.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Upon adoption of Accounting Standard Codification (“ASC”) 842, Leases , (“ASC 842”) the Company elected to account for lease and non-lease components as a single component for all classes of underlying assets.

Additionally, the Company elected to not recognize short-term leases (defined as leases that are less than 12 months and do not contain purchase options) within the consolidated balance sheets.

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renewal options are included in the calculation of the lease liabilities and right of use assets when the Company determines it is reasonably certain to exercise the options.

Variable expenses generally represent the Company’s share of the landlord’s operating expenses and CPI increases.

Variable expenses generally represent the Company’s share of the landlord’s operating expenses and consumer price index (“CPI”) increases.

The Company does not have any leases classified as financing leases.

Rent expense associated with the Company’s long and short term leases and their associated variable expenses are reported in total operating costs and expenses within the consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill represents the excess of reorganization value over the fair market value of Twin River Casino Hotel net assets on the Emergence Date and the excess of the purchase prices over the fair values of tangible and identifiable assets acquired and liabilities assumed for all other reporting units.

Goodwill is not amortized, but is reviewed for impairment annually, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value, by comparing the fair value of each reporting unit to its carrying value, including goodwill.

Goodwill consists of the excess of acquisition costs over the fair value of net assets acquired in business combinations.

Goodwill is not amortized, but is reviewed for impairment annually as of October 1st, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value, by comparing the fair value of each reporting unit to its carrying value, including goodwill.

When assessing goodwill for impairment, first, qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

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macroeconomic conditions, industry and market conditions and overall financial performance.

If the results of the qualitative assessment are not conclusive, or if the Company elects to bypass the qualitative assessment, a quantitative goodwill test is performed.

If the results of the qualitative assessment indicate it is more likely than not that a reporting units carrying value exceeds its fair value, or if the Company elects to bypass the qualitative assessment, a quantitative goodwill test is performed.

The quantitative goodwill test compares the estimated fair value of each reporting unit with its estimated net book value (including goodwill and identifiable intangible assets).

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Intangible Assets

As a result of “fresh start accounting”, the Company adjusted Twin River Casino Hotel’s intangible assets to reflect their fair values on the Emergence Date.

Intangible assets consist of a Rhode Island VLT license, the Contract with the Division of Lotteries for the State of Rhode Island and the State of Rhode Island Department of Transportation, as amended, the Twin River trade name and the Twin River Casino Hotel rated player relationships.

The Rhode Island VLT license has an indefinite life and therefore is not being amortized.

The Contract for the VLTs, the Twin River Casino Hotel rated player relationships and the Twin River trade name are being amortized using the straight-line method based on their estimated useful lives from the Emergence Date.

The Company’s other intangible assets primarily consist of gaming licenses, trademarks, rated player relationships, and hotel and conference pre-bookings, which have all been obtained through acquisition, as well as a Naming rights intangible asset obtained through the Sinclair Agreement.

The Company considers its gaming licenses, VLT licenses and the Bally’s trade name to be indefinite lived based on future expectations of operating its gaming properties indefinitely and continuing to brand its corporate name and certain properties under the Bally’s trade name indefinitely.

The Company’s intangible assets primarily consist of customer relationships, developed technology, internally developed software, gaming licenses and trade names.

The Company also has a Naming rights intangible asset obtained through the Sinclair Agreement (as defined herein).

Refer to Note 10 “ Sinclair Agree ment ” for further information regarding the Sinclair Broadcast Group (“Sinclair”) naming rights.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For its finite-lived intangible assets, the Company establishes a useful life upon initial recognition based on the period over which the asset is expected to contribute to the future cash flows of the Company and periodically evaluates the remaining useful lives to determine whether events and circumstances warrant a revision to the remaining amortization period.

Finite-lived intangible assets are amortized over their remaining useful lives in a pattern in which the economic benefits of the intangible asset are consumed, which is generally on a straight-line basis.

Customer Relationships - The Company considers customer relationships to be finite-lived intangible assets, which are amortized over their estimated useful lives, and are recognized as the result of a business combination.

Developed Technology - Developed technology relates to the design and development of sports betting and casino gaming software and online gaming products acquired through the Company’s acquisitions of the businesses within the North America Interactive and International Interactive segments.

Developed technology is considered to be a finite-lived intangible asset, which are amortized over their estimated useful lives, which is generally between three to 10 years.

Internally Developed Software - Software that is developed for internal use is accounted for pursuant to ASC 350-40, Intangibles, Goodwill and Other - Internal-Use Software .

Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended.

These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal use software.

Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose.

Once placed into service, internally developed software is amortized on a straight-line basis over its estimated useful life, which is generally five years.

All other expenditures, including those incurred in order to maintain an intangible asset’s current level of performance, are expensed as incurred.

Gaming Licenses and Trade Names - Certain gaming licenses and trade names classified as finite-lived are amortized over their estimated useful lives.

The Company also has certain gaming licenses, including its VLT licenses, and trade names, which are considered to be indefinite lived based on future expectations of operating its gaming properties indefinitely, continuing to brand its corporate name and certain properties under Bally’s trade name indefinitely and continuing to indefinitely brand its online casino offerings within the International Interactive segment with the trade names acquired through the Gamesys acquisition.

Intangible assets not subject to amortization are reviewed for impairment annually as of October 1 and between annual test dates whenever events or changes in circumstances may indicate that the carrying amount of the related asset may not be recoverable.

The Company establishes a useful life upon initial recognition of its finite-lived intangible assets based on the period over which the asset is expected to contribute to the future cash flows of the Company and periodically evaluates the remaining useful lives to determine whether events and circumstances warrant a revision to the remaining amortization period.

Finite-lived intangible assets are amortized over their remaining useful lives on a straight-line basis.

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

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Debt issuance costs and debt discounts incurred by the Company in connection with obtaining and amending financing have been included as a component of the carrying amount of debt in the consolidated balance sheets.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt issuance costs and debt discounts are amortized over the contractual term of the debt to interest expense.

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Amortization of debt issuance costs and debt discounts included in interest expense was $ 7.6 million, $ 4.6 million and $ 2.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Self-Insurance Reserves

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The Company accounts for its share-based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”).

The Company has two share-based employee compensation plans, which are described more fully in Note 13 “Equity Plans”.

Share-based compensation consists of stock options, time-based restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and performance-based restricted stock units (“PSUs”).

The Company has two share-based employee compensation plans, which are described more fully in Note 14 “ Equity Plans .” Share-based compensation consists of stock options, time-based restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and performance-based restricted stock units (“PSUs”).

The grant date closing price per share of the Company’s stock is used to estimate the fair value of RSUs and RSAs.

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Forfeitures are recognized as reductions to share-based compensation when they occur.

In the second quarter of 2019, the Company changed its accounting principle for reporting share-based compensation expense in the consolidated statements of operations.

The new principle is to record compensation expense for share-based compensation awards which contain only a service condition, i.e.

time-based awards, using the straight-line method of accounting recognizing compensation expense over the requisite service period and treating all tranches as one award.

The Company previously recorded share-based compensation expense for awards with graded vesting over the requisite service period on an accelerated basis, as if each tranche were a separate award.

The straight-line method of accounting was adopted to better align the Company’s recognition of share-based compensation expense with its peers and to expense RSUs in a consistent manner that is representative of the requisite service period.

This change in accounting principle was retrospectively applied, but had an immaterial effect on the consolidated balance sheets, consolidated statements of operations, consolidated statements of stockholders’ equity, and consolidated statements of cash flows.

As a result of this change in accounting principle, share-based compensation expense was reduced by $ 0.5 million for the year ended December 31, 2019.

Net income for the year ended December 31, 2019 increased by approximately $ 0.4 million, or $ 0.01 per diluted share.

Warrant/Option Liabilities

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The Performance Warrants and Options were classified as liabilities as of December 31, 2020 because they could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval.

The warrants and options were initially recorded at their fair values on the date of issuance, and the Performance Warrants and Options are marked to market each reporting period, with changes in fair value recorded in “Other income (expense)” in the consolidated statement of operations.

The warrants and options were initially recorded at their fair values on the date of issuance and the Performance Warrants and Options are marked to market each reporting period, with changes in fair value recorded in “Change in value of naming rights liabilities” in the consolidated statements of operations.

Refer to Note 10 “ Sinclair Agreement ” for further information.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sequencing Policy

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Under this policy, the Company has elected to allocate available shares to contracts based on the order in which they become exercisable.

The Company accounts for revenue earned from contracts with customers under ASU No.

2014-09, Revenue from Contracts with Customers (“ASC 606”).

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

The Company generates revenue from five principal sources:

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

gaming services, which also includes racing, hotel, food and beverage and other.

Refer to Note 4 “ Revenue Recognition ” for further information.

Gaming Expenses

Racing Expenses

Racing expenses include payroll costs, OTB commissions and other expenses associated with the operation of live racing and simulcasting.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising Expense

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For the years ended December 31, 2021, 2020 and 2019, advertising expense was $ 68.3 million, $ 4.5 million and $ 7.6 million, respectively.

Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the year ended December 31, 2021 was $ 61.4 million .

Expansion and Pre-opening Expenses

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There were no expansion and pre-opening costs for the year ended December 31, 2019.

Storm Related Losses, Net of Insurance Recoveries

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

During the year ended December 31, 2020, the Company recorded storm related losses, net of insurance recoveries of $ 14.1 million primarily attributable 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.

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 years ended December 31, 2021 and 2020, the Company recorded a gain from insurance recoveries of $ 19.3 million compared to storm related losses of $ 14.1 million, res pectively, primarily attributable 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 year ended December 31, 2019, the Company recorded a g ain on insurance recoveries of $ 1.2 million for proceeds received on a dam aged roof at the Company’s Arapahoe Park racetrack in Aurora, Colorado.

Interest Expense

Interest expense is comprised of interest costs for the Company’s debt, amortization of deferred financing fees and original issue discount, net of amounts capitalized for construction projects.

Interest expense is comprised of interest costs for the Company’s debt and amortization of debt issuance costs and debt discounts, net of amounts capitalized for construction projects.

Interest expense recorded in the consolidated statements of operations totaled $ 120.2 million, $ 63.2 million and $ 39.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The increase in interest expense for the year ended December 31, 2020 compared to 2019 is primarily due to increased borrowings and higher interest rates year-over-year.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company prepares its income tax provision in accordance with ASC 740, Income Taxes .

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The consolidated financial statements reflect expected future tax consequences of uncertain tax positions presuming the taxing authorities’ full knowledge of the position and all relevant facts.

Comprehensive (Loss) Income

Comprehensive (loss) income includes changes in equity that result from transactions and economic events from non-owner sources.

Comprehensive (loss) income consists of net (loss) income and changes in defined benefit pension plan, net of tax.

Earnings (Loss) Per Share

Basic (loss) earnings per common share is calculated in accordance with ASC 260, Earnings Per Share, which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic (loss) earnings per common share.

The two-class method is an earnings allocation method under which basic (loss) earnings per common share is calculated for each class of common stock and participating security as if all such earnings had been distributed during the period.

To calculate basic (loss) earnings per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants, and RSUs, RSAs, and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).

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.

Years Ended December 31,

2020 2019 2018

Net (loss) income applicable to common stockholders $ ( 5,487 ) $ 55,130 $ 72,078

Weighted average shares outstanding, basic 31,315,151 37,705,179 36,938,943

Weighted average effect of dilutive securities — 114,438 1,612,765

Weighted average shares outstanding, diluted 31,315,151 37,819,617 38,551,708

Per share data

Basic $ ( 0.18 ) $ 1.46 $ 1.95

Diluted $ ( 0.18 ) $ 1.46 $ 1.87

Anti-dilutive shares excluded from the calculation of diluted earnings per share 4,919,326 3,251 —

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.

In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method.

The warrants and options do not participate in net losses.

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 year ended December 31, 2020, the Company reported a net loss, and as a result, all of the shares underlying the performance warrants and options were anti-dilutive.

Refer to Note 9 “Sinclair Agreement” for further information.

Foreign Currency

The Company’s functional currency is the US Dollar (“USD”).

Foreign subsidiaries with a functional currency other than USD translate assets and liabilities at current exchange rates at the end of the reporting periods, while income and expense accounts are translated at average exchange rates for the respective periods.

Translation adjustments resulting from this process are recorded to other comprehensive income (loss).

Gains or losses from foreign currency remeasurements that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in “Other, net” on the consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive (Loss) Income

Comprehensive (loss) income includes changes in equity that result from transactions and economic events from non-owner sources.

Comprehensive (loss) income consists of net (loss) income, changes in defined benefit pension plan, net of tax and the effect of fluctuations in foreign currency rates on the values of the Company’s foreign investments.

Treasury Stock

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Refer to Note 5 “ Acquisitions ” and Note 11 “ Acquisition, Integration and Restructuring Expense ” for further information.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

Certain operating segments are aggregated into reportable segments.

Operating segments are identified as components of an enterprise that engage in business activities from which it recognizes revenues and expenses, and for which discrete financial information is available and regularly reviewed by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

During the fourth quarter of 2021, the Company updated its reportable segments .

Refer to Note 19 “ Segment Reporting ” for further information.

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Unobservable inputs.

The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to the short-term nature of these instruments.

The carrying value of the Company’s term loans and revolving credit facilities, including the current portion, approximate fair value as the terms and conditions of these loans are consistent with comparable market debt issuances.

These measurements fall with Level 3 of the fair value hierarchy.

The inputs used to measure the fair value of an asset or a liability are categorized within levels of the fair value hierarchy.

The fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the measurement.

There were no transfers made among the three levels in the fair value hierarchy for the years ended December 31, 2020 and 2019.

Refer to Note 8 “ Fair Value Measur ements ” for further information.

BALLY’S CORPORATION

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Standards implemented

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous United States Generally Accepted Accounting Principles (“US GAAP”).

For public companies, ASU 2016-02 was effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods, which for the Company was the first quarter of 2019) using a modified retrospective approach and early adoption is permitted.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carry-forward accounting conclusions under previous US GAAP.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provides entities an optional transition method to apply the guidance under ASC 842 as of the adoption date, rather than as of the earliest period presented.

The Company adopted ASC 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the entire package of practical expedients described above.

Based on the analysis, on January 1, 2019, the Company recorded right of use assets and a corresponding lease liability of approximately $ 18.8 million.

There was no impact to opening retained earnings.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities, which changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line item as the hedged item.

The ASU also provides new alternatives for applying hedge accounting to additional hedging strategies, measuring the hedged item in fair value hedges of interest rate risk, reducing the cost and complexity of applying hedge accounting by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method and reducing the risk of a material error correction if a company applies the shortcut method inappropriately.

This ASU is effective for public companies in fiscal years beginning after December 15, 2018, which for the Company was the first quarter of 2019.

The Company adopted this ASU in the first quarter of 2019, with no impact to its consolidated financial statements.

In June 2016, the FASB issued ASU No.

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In November 2018, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments–Credit Losses , to clarify that receivables arising from operating leases are not within the scope of ASC 326 and should instead, be accounted for in accordance with ASC 842, Leases .

The standard is effective for annual and interim periods beginning after December 15, 2019.

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The Company adopted this ASU in the first quarter of 2020, with no impact to its consolidated financial statements.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Standards to be implemented

In August 2018, the FASB issued ASU No.

2018-14, Compensation–Retirement Benefits–Defined Benefit Plans–General .

This amendment improves disclosures over defined benefit plans and is effective for interim and annual periods ending after December 15, 2020, with early adoption allowed.

The Company anticipates adopting this amendment during the first quarter of 2021 and does not expect it to have a significant impact on the consolidated financial statements.

This amendment improves disclosures over defined benefit plans and is effective for interim and annual periods ending 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 consolidated financial statements.

In December 2019, the FASB issued ASU No.

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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 for periods for which financial statements have not yet been issued.

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

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40).

ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features.

ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivatives scope exception, which will permit more equity contracts to qualify for it.

ASU 2020-06 also simplifies the diluted net income per share calculation in certain areas.

The amendments in ASU 2020-06 are effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted.

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 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 consolidated financial statements.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUE RECOGNITION

The Company accounts for revenue earned from contracts with customers under ASU No.

2014-09, Revenue from Contracts with Customers (“ASC 606”).

The Company generates revenue from five principal sources:

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

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

Twin River Casino Hotel 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.

Tiverton Casino Hotel is, and Newport Grand was, entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Twin River Casino Hotel.

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

Twin River Casino Hotel and Tiverton Casino Hotel each were entitled to an 83.5 % share of table games revenue generated as of December 31, 2020 and 2019.

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 Rhode Island operations on a net basis which is the percentage share of VLT 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.

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 December 31, 2020 and 2019, Dover Downs 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 the 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.

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 CONSOLIDATED FINANCIAL STATEMENTS

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, the Black Hawk Casinos, Casino KC and Casino Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, and Shreveport, beginning December 23, 2020, 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.

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.

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 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 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 application to 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 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.

Bally’s Tiverton is entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Bally’s Twin River.

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 December 31, 2021 and 2020.

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 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.

As of December 31, 2021 and 2020, 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.

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.

Sports betting

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 year ended December 31, 2021.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 6.8 million and $ 2.0 million as of December 31, 2021 and 2020, respectively, and is included in “Accrued liabilities” and “Other long-term liabilities” in the consolidated balance sheets.

No significant agreements were entered into in 2021.

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 reduction 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 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, 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 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.

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 years ended December 31, 2021, 2020 and 2019:

3 unchanged sentences

Food and beverage 61,038 18,548 31,569

Other 3,031 7,594 5,772

Retail, entertainment and other 7,556 3,031 7,594

$ 124,376 $ 36,678 $ 59,102

During 2020, the Company has 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 revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement.

During the second quarter of 2020, operations related to certain agreements in the state of Colorado commenced, resulting in the recognition of $ 2.0 million of gaming revenue for the year ended December 31, 2020.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 2.0 million as of December 31, 2020.

Racing revenue includes Twin River Casino Hotel’s, Tiverton Casino Hotel’s (upon its opening on September 1, 2018), Newport Grand’s (until its closing on August 28, 2018), Mile High USA’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 functions as an agent to the pari-mutuel pool.

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.

All other revenues 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Refer to Note 19 “ Segment Reporting ” for further information.

The following table provides a disaggregation of total revenue by segment (in thousands):

Years Ended December 31, Rhode

Island Mid-Atlantic Southeast West Other Total

Years Ended December 31, Casinos & Resorts North America Interactive International Interactive Total

Gaming $ 803,940 $ 10,442 $ 239,110 $ 1,053,492

Racing 811 872 — — 4,729 6,412

Hotel 95,356 — — 95,356

Food and beverage 92,906 — — 92,906

Other 10,127 3,041 3,523 1,002 155 17,848

Retail, entertainment and other 40,626 27,910 12,153 80,689

Total revenue $ 1,032,828 $ 38,352 $ 251,263 $ 1,322,443

Gaming $ 239,836 $ 43,865 $ 84,247 n/a $ — $ 367,948

Racing 3,536 931 — n/a 8,647 13,114

Hotel 6,675 12,228 20,085 n/a — 38,988

Food and beverage 33,124 19,799 16,886 n/a 95 69,904

Other 23,135 3,983 6,214 n/a 291 33,623

Total revenue $ 306,306 $ 80,806 $ 127,432 n/a $ 9,033 $ 523,577

Gaming $ 246,126 n/a $ 81,614 n/a $ — $ 327,740

Racing 3,796 n/a — n/a 9,362 13,158

Hotel 1,361 n/a 19,978 n/a — 21,339

Food and beverage 29,922 n/a 18,342 n/a 116 48,380

Other 21,447 n/a 5,203 n/a 270 26,920

Total revenue $ 302,652 n/a $ 125,137 n/a $ 9,748 $ 437,537

Revenue included in operations from Dover Downs from the date of its acquisition, March 28, 2019, through December 31, 2020, and Bally’s Atlantic City from the date of its acquisition, November 18, 2020, through December 31, 2020, is reported in the “Mid-Atlantic” segment.

Revenue included in operations from the Black Hawk Casinos, from the date of their acquisition, January 23, 2020, through December 31, 2020, and Casino KC from the date of its acquisition, July 1, 2020, through December 31, 2020, is reported in the “West” segment.

Revenue included in operations of Casino Vicksburg, from the date of its acquisition, July 1, 2020, through December 31, 2020, and Shreveport from the date of its acquisition, December 23, 2020, through December 31, 2020, is reported in the “Southeast” segment.

Refer to Note 5 “Acquisitions” for further information.

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.

Gaming $ 298,070 $ — $ — $ 298,070

Hotel 24,742 — — 24,742

Food and beverage 32,132 — — 32,132

Retail, entertainment and other 17,848 — — 17,848

Total revenue $ 372,792 $ — $ — $ 372,792

Gaming $ 381,062 $ — $ — $ 381,062

Hotel 38,988 — — 38,988

Food and beverage 69,904 — — 69,904

Retail, entertainment and other 33,623 — — 33,623

Total revenue $ 523,577 $ — $ — $ 523,577

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, through December 31, 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, each through December 31, 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.

“ Acquisitions ” for further information.

Contract Assets and Contract Related Liabilities

The Company’s receivables related to contracts with customers were $ 35.5 million and $ 12.0 million as of December 31, 2021 and December 31, 2020, respectively.

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

liabilities for loyalty programs, deposits made in advance for goods and services yet to be provided, unpaid wagers, and deferred revenue associated with third-party operators for online sports betting and iGaming market access.

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 twelve months;

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

The Company’s contract liabilities related to loyalty programs were $ 15.5 million, and $ 12.4 million as of December 31, 2020 and December 31, 2019, respectively, and are included in “Accrued liabilities” in the consolidated balance sheets.

The Company recognized $ 5.5 million, $ 10.0 million and $ 8.2 million of revenue related to loyalty program redemptions for the years ended December 31, 2020, 2019 and 2018, respectively.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 2.0 million as of December 31, 2020, the short and long-term portions of which are included in “Accrued liabilities” and “Other long-term liabilities” in the consolidated balance sheets, respectively.

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 and are included in “Accrued liabilities” in the 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 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advance deposits are typically for future banquet events and to reserve hotel rooms.

These deposits are usually received weeks or months in advance of the event or hotel stay.

The Company’s contract liabilities related to deposits from customers were $ 1.0 million and $ 1.4 million as of December 31, 2020 and 2019, respectively, and are included in "”Accrued liabilities” in the consolidated balance sheets.

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

The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay.

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

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

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

The Company’s contract liabilities related to unpaid tickets were $ 0.9 million and $ 1.1 million as of December 31, 2020 and 2019, respectively, and are included in “Accrued liabilities” in the consolidated balance sheets.

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

Liabilities related to contracts with customers as of December 31, 2021 and 2020 were as follows:

Loyalty programs $ 19,099 $ 15,468

Advanced deposits from customers 29,168 991

Unpaid wagers 1,656 899

Total $ 49,923 $ 17,358

The Company recognized $ 20.1 million, $ 5.5 million and $ 10.0 million of revenue related to loyalty program redemptions for the years ended December 31, 2021, 2020 and 2019, respectively.

Recent Acquisitions

Dover Downs Gaming & Entertainment, Inc.

On July 22, 2018, the Company entered into a merger agreement with Dover Downs pursuant to which, among other things, on March 28, 2019, a subsidiary of the Company merged with and into Dover Downs with Dover Downs becoming an indirect wholly-owned subsidiary of the Company.

The merger resulted in Dover Downs’ shareholders exchanging their Dover Downs stock for Company common shares representing 7.225 % of the outstanding shares of common stock in the combined company at closing.

A total of 2,976,825 shares of common stock were issued at the transaction closing on March 28, 2019 and the valuation of those shares was based on the closing price of Dover Downs’ common stock on March 27, 2019.

(in thousands, except share and per share data) March 28, 2019

Dover Downs shares outstanding 33,125,997

Closing Dover Downs share price on March 27, 2019 $ 2.62

Total fair value of Dover Downs stock purchased * $ 86,790

Cash paid by the Company at closing, including amounts to retire Dover Downs debt, inclusive of accrued interest $ 29,096

Consideration transferred $ 115,886

*Shares issued at approximately $ 29.15 per share when considering the fair value of stock purchased and number of Company shares issued in conjunction with the acquisition.

The total consideration paid by the Company in connection with the Dover Downs merger was approximately $ 115.9 million, or $ 96.4 million, net of cash acquired of $ 19.5 million.

This purchase price excludes transaction costs.

During the year ended December 31, 2020, the Company incurred $ 0.1 million of transaction costs related to the merger and becoming a publicly traded company, compared to $ 7.9 million during the year ended December 31, 2019.

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

The identifiable intangible assets recorded in connection with the closing of the merger based on final valuations include trademarks of $ 3.9 million, rated player relationships of $ 0.8 million and hotel and conference pre-bookings of $ 0.4 million, which are being amortized on a straight-line basis over estimated useful lives of approximately ten years , eight years , and three years , respectively.

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.

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

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 Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, Gamesys and 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.

The Company recorded transaction costs related to its recent and pending acquisitions of $ 70.1 million , $ 13.2 million and $ 10.9 million during the years ended December 31, 2021, 2020 and 2019, respectively.

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

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

Bally’s Black Hawk

On January 23, 2020, the Company acquired a subsidiary of Affinity Gaming that owns three casino properties located in Black Hawk, Colorado:

Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino (the “Bally’s Black Hawk”).

The total cash consideration paid by the Company in connection wit h Bally’s Black Hawk ac quisition was approximately $ 53.8 million, or $ 50.5 million net of cash acquired, excluding transaction costs.

The identifiable assets recorded in connection with the closing of Bally’s Black Hawk acquisition include trademarks of $ 2.1 million and rated player relationships of $ 0.6 million, which are being amortized on a straight-line basis over estimated useful lives of approximately 10 years and 6 years, respectively.

The Company also recorded an intangible asset related to gaming licenses of approximately $ 3.3 million, with an indefinite life.

However, in connection with the impairment testing discussed in Note 6 “ Goodwill and Intangible Assets ,” the asset was deemed fully impaired and its value was written down to zero as of March 31, 2020.

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

Significant assumptions utilized in the income approach were 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 Company accounted for the acquisition as a business combination using the acquisition method with Bally’s as the accounting acquirer in accordance with FASB Codification Topic 805, Business Combinations (“ASC 805”).

Under this method of accounting the purchase price has been allocated to Dover Downs’ assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

Goodwill recognized is deductible for local tax purposes.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed based on final valuations as of December 31, 2019.

(in thousands) As of March 28, 2019

Bally’s Kansas City Casino and Bally’s Vicksburg Casino

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 cash 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 in connection with the acquisition:

As of July 1, 2020

Preliminary as of December 31, 2020 Year to Date Adjustments Final

Cash $ 4,362 $ — $ 4,362

Accounts receivable 5,674

Due from State of Delaware 2,535

Accounts receivable, net 582 — 582

Inventory 164 — 164

Prepaid expenses and other assets 2,479

Prepaid expenses and other current assets 686 ( 256 ) 430

Property and equipment 60,865 — 60,865

Right of use asset 10,315 — 10,315

Intangible assets 5,110

Deferred income tax assets 11,879

Intangible assets, net 138,160 — 138,160

Other assets 117 — 117

1 unchanged sentence

Accounts payable ( 614 ) — ( 614 )

Purses due to horseman ( 2,613 )

Accrued and other current liabilities ( 13,513 )

Lease obligations ( 1,333 )

Pension benefit obligations ( 6,613 )

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

Dover Downs’ revenue and net income for the year ended December 31, 2020 was $ 65.0 million and $ 3.3 million, respectively, and $ 80.8 million and $ 6.0 million for the year ended December 31, 2019, respectively.

The following table represents unaudited supplemental pro forma consolidated revenue and net income based on Dover Downs’ historical reporting periods as if the acquisition had occurred as of January 1, 2018:

(in thousands, except per share data) December 31, 2019 December 31, 2018

Revenue $ 546,634 $ 534,140

Net income $ 61,945 $ 62,792

Net income applicable to common stockholders $ 61,945 $ 63,432

Net income per share, basic $ 1.64 $ 1.59

Net income per share, diluted $ 1.64 $ 1.53

Black Hawk Casinos

On January 23, 2020, the Company acquired a subsidiary of Affinity Gaming (“Affinity”) that owns three casino properties located in Black Hawk, Colorado:

Golden Gates, Golden Gulch and Mardi Gras (the “Black Hawk Casinos”).

The total consideration paid by the Company in connection with the Black Hawk Casinos acquisition was approximately $ 53.8 million, or $ 50.5 million net of cash acquired, excluding transaction costs.

The Company incurred $ 1.0 million and $ 1.7 million of transaction costs during the years ended December 31, 2020 and 2019, respectively.

These cost s are included in “Acquisition, integration and restructuring expense” in the consolidated statements of operations.

The Company accounted for the acquisition of the Black Hawk Casinos as a business combination using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price has been allocated to Black Hawk Casinos’ assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

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 units 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 properties into the Company’s casino portfolio and future development of its omni-channel strategy.

Bally’s Atlantic City Casino Resort

On November 18, 2020, the Company completed its acquisition of Bally’s Atlantic City from Caesars and Vici Properties, Inc.

In connection with Bally’s Atlantic City acquisition, the Company 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 for a net working capital adjustment which is reflected in “Accrued liabilities’ in the consolidated balance sheets as of December 31, 2020, and 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 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 from Caesars to the Company 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 represented consideration due back from the seller in connection with a business combination and was included in “Prepaid expenses and other assets” in the consolidated balance sheet.

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

In the fourth quarter of 2021, in lieu of settlement in cash, the contingent consideration asset was settled with Caesars through the early termination of certain agreements between Caesars and the Company at other properties.

The early termination of these contracts allows the Company to retain rights to operate online gaming in certain jurisdictions.

The derecognition of the contingent consideration asset for non-cash consideration resulted in a contract termination expense of $ 30.0 million recorded during the fourth quarter of 2021.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The identifiable assets recorded in connection with the closing of the Black Hawk Casinos acquisition include trademarks of $ 2.1 million and rated player relationships of $ 0.6 million, which are being amortized on a straight-line basis over estimated useful lives of approximately 10 years and 6 years, respectively.

The Company also recorded an intangible asset related to gaming licenses of approximately $ 3.3 million, with an indefinite life.

However, in connection with the impairment testing discussed in Note 7 “Goodwill and Intangible Assets”, the asset was deemed fully impaired and its value was written down to zero as of March 31, 2020.

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 Atlantic City.

There were no purchase accounting adjustments recorded during the year ended December 31, 2021.

Final As of November 18, 2020

Accounts receivable 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 liability ( 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 Bally’s Atlantic City acquisition 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 and intangible asset related to gaming licenses was de minimus, primarily due to the previously mentioned capital expenditure commitment required to obtain the license.

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

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 year ended December 31, 2020 included within “Gain on bargain purchases” in the consolidated statements of operations.

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.

Bally’s Shreveport Casino & Hotel

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

Cash paid by the Company, net of $ 5.0 million 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 Bally’s Shreveport include gaming licenses of $ 57.7 million with an indefinite life and rated player relationships of $ 0.4 million, which is being amortized on a straight-line basis over estimated useful lives of approximately eight years .

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

Revenue included in operations from the Black Hawk Casinos, from the date of their acquisition, January 23, 2020, through December 31, 2020 was $ 17.8 million.

Casino KC and Casino Vicksburg

On July 1, 2020, the Company completed its acquisition of the operations and real estate of Casino KC and Casino Vicksburg from affiliates of Eldorado.

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 Company recorded acquisition costs related to the acquisition of Casino KC and Casino Vicksburg of $ 1.8 million duri ng the year ended December 31, 2020.

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

The Company accounted for the acquisition of Casino KC and Casino Vicksburg as a business combination using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price has been allocated to Casino KC’s and Casino Vicksburg’s assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition.

Due to the fact that the transaction only recently closed, the purchase price allocation is 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.

As of July 1, 2020

Preliminary as of July 1, 2020 Year to Date Adjustments Preliminary as of December 31, 2020

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Shreveport:

As of December 23, 2020

Preliminary as of December 31, 2020 Year to Date Adjustments Final

Cash $ 4,980 $ — $ 4,980

Accounts receivable 594 ( 12 ) 582

Accounts receivable, net 1,936 ( 143 ) 1,793

Inventory 495 103 598

Prepaid expenses and other assets 709 ( 23 ) 686

Property and equipment 60,574 291 60,865

Prepaid expenses and other current assets 245 — 245

Property and equipment, net 125,822 — 125,822

Right of use asset 9,260 — 9,260

Intangible assets 139,760 ( 1,600 ) 138,160

Intangible assets, net 58,140 — 58,140

Other assets 403 — 403

Goodwill 52,285 1,611 53,896

Accounts payable ( 614 ) — ( 614 )

Accrued and other current liabilities ( 4,003 ) 91 ( 3,912 )

Lease obligations ( 65,381 ) 30,929 ( 34,452 )

Deferred income tax liabilities ( 233 ) 233 —

Accounts payable and Accrued liabilities ( 6,138 ) 79 ( 6,059 )

Lease liability ( 14,540 ) — ( 14,540 )

Deferred tax liability ( 11,457 ) — ( 11,457 )

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

Net assets acquired 168,466 39 168,505

Bargain purchase gain ( 31,276 ) ( 39 ) ( 31,315 )

Total purchase price $ 137,190 $ — $ 137,190

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 year ended December 31, 2020 within “Gain on bargain purchases” in the consolidated statements of operations.

During the fourth quarter of 2021, the Company recorded an adjustment to the bargain purchase gain of $ 39 thousand resulting from final purchase accounting procedures.

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 the seller, Eldorado Resorts, Inc., was required by the Federal Trade Commission to divest the Shreveport property prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of industry wide COVID-19 related shutdowns of all casinos in the US.

Bally’s Lake Tahoe Casino Resort

On April 6, 2021, the Company acquired Bally’s Lake Tahoe in Lake Tahoe, Nevada from Eldorado and certain of its affiliates for $ 14.2 million, payable in cash one year from the closing date.

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

The identifiable intangible assets recorded in connection with the closing of Bally’s Lake Tahoe acquisition based on preliminary valuations include gaming licenses of $ 5.2 million with an indefinite life and a trade name 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue and net income included in operations from Casino KC and Casino Vicksburg from the date of acquisition, July 1, 2020, through December 31, 2020 was $ 40.1 million and $ 8.5 million, respectively.

Bally’s Atlantic City

On November 18, 2020, the Company completed its acquisition of Bally’s Atlantic City from Caesars Entertainment, Inc.

(“Caesars”) and Vici Properties, Inc.

In connection with the Bally’s Atlantic City acquisition, the Company 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 for a net working capital adjustment which is reflected in “Accrued liabilities’ in the consolidated balance sheets as of December 31, 2020.

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 million in capital expenditures over a span of five years to refurbish and upgrade the property’s facilities and expand its amenities.

This commitment from Caesars to the Company 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 consolidated balance sheets.

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

The Company incurred $ 4.4 million of transaction costs related to Bally’s Atlantic City during the year ended December 31, 2020.

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

The Company accounted for the acquisition of Bally’s Atlantic City as a business combination using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price has been allocated to Bally’s Atlantic City’s assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

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 8 years and 3 years, respectively.

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

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 Lake Tahoe:

As of April 6, 2021

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

Total current assets $ 5,089 $ ( 406 ) $ 4,683

Property and equipment, net 6,361 — 6,361

Right of use assets, net 57,017 — 57,017

Intangible assets, net 5,430 — 5,430

Accounts payable and accrued liabilities ( 3,095 ) ( 307 ) ( 3,402 )

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

Other long-term liabilities ( 1,127 ) 186 ( 941 )

Net assets acquired 16,748 ( 527 ) 16,221

Bargain purchase gain ( 2,576 ) 527 ( 2,049 )

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 resulting in a bargain purchase gain of $ 2.0 million recorded during the year ended December 31, 2021.

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 prior to Eldorado’s merger by Caesars, as noted above.

Revenue and net loss included in operations from Bally’s Lake Tahoe for the year ended December 31, 2021 was $ 28.9 million and $ 0.1 million, respectively.

Bally’s Evansville Casino & Hotel

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

The total purchase price was $ 139.7 million.

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

In connection with the acquisition of 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.

The identifiable intangible assets recorded in connection with the closing of Bally’s Evansville acquisition based on preliminary valuations include gaming licenses of $ 153.6 million with an indefinite life and rated player relationships of $ 0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years .

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preliminary as of November 18, 2020

Accounts receivable 1,122

Inventory 721

Prepaid expenses and other assets 1,402

Property and equipment 40,898

Intangible assets 1,120

Accounts payable ( 3,131 )

Accrued and other current liabilities ( 7,983 )

Deferred income tax liabilities ( 11,132 )

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 Evansville:

As of June 3, 2021

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

Cash and cash equivalents $ 9,355 $ — $ 9,355

Accounts receivable, net 1,492 ( 18 ) 1,474

Inventory and prepaid expenses and other current assets 1,212 ( 10 ) 1,202

Property and equipment, net 12,325 — 12,325

Right of use assets, net 285,772 — 285,772

Intangible assets, net 154,210 — 154,210

Other assets 468 — 468

Accounts payable and accrued liabilities ( 10,568 ) ( 359 ) ( 10,927 )

Lease liabilities ( 285,772 ) — ( 285,772 )

Deferred tax liability ( 7,469 ) 236 ( 7,233 )

Other long-term liabilities ( 310 ) — ( 310 )

Net assets acquired 160,715 ( 151 ) 160,564

1 unchanged sentence

Total purchase price $ 139,178 $ 530 $ 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 $ 32.6 million was recorded during the three months ended December 31, 2020.

This gain is included in “Gain on bargain purchases” in the consolidated statements of operations.

Revenue included in operations from Bally’s Atlantic City from the date of their acquisition, November 18, 2020, through December 31, 2020 was $ 8.7 million.

Eldorado Resort Casino Shreveport

On December 23, 2020, the Company completed its acquisition of Eldorado Resort Casino Shreveport in Shreveport, Louisiana (“Shreveport”).

The total purchase price was approximately $ 137.2 million.

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

The Company recorded acquisition costs related to the acquisition of Shr eveport of $ 3.1 million during the year ended December 31, 2020.

These costs are included in “Acquisition, integration and restructuring expense” in the consolidated statements of operations for the year ended December 31, 2020.

The Company accounted for the acquisition of Shreveport as a business combination using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.

Under this method of accounting, the purchase price has been allocated to Shreveport’s assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

The identifiable intangible assets recorded in connection with the closing of the 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 is being amortized on a straight-line basis over estimated useful lives of approximately 8 years.

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 $ 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 and net income included in operations from Bally’s Evansville for the year ended December 31, 2021 was $ 91.0 million and $ 8.0 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, 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 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 trade name 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.

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 Shreveport on December 23, 2020.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Preliminary as of December 23, 2020

Accounts receivable 1,936

Inventory 495

Prepaid expenses and other assets 245

Property and equipment 125,822

Right of use asset 9,260

Intangible assets 58,140

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 Quad Cities:

As of June 14, 2021

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

Cash and cash equivalents $ 3,241 $ ( 308 ) $ 2,933

Accounts receivable, net 2,855 131 2,986

Inventory and Prepaid expenses and other current assets 844 ( 46 ) 798

Property and equipment, net 73,135 — 73,135

Intangible assets, net 31,180 — 31,180

Goodwill 14,191 402 14,593

Total current liabilities ( 6,244 ) ( 453 ) ( 6,697 )

Total purchase price $ 119,202 $ ( 274 ) $ 118,928

Revenue included in operations from Bally’s Quad Cities for the year ended December 31, 2021 was $ 26.8 million.

Bally’s 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, 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 ).

Monkey Knife Fight - On March 23, 2021, the Company acquired Fantasy Sports Shark, LLC d/b/a/ Monkey Knife Fight for total consideration of $ 118.6 million including (1) immediately exercisable penny warrants to purchase up to 984,446 of the Company’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additional Company common shares, half of which are issuable on each of the first and second anniversary of closing.

The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing at future dates.

The Company paid cash of $ 22.4 million, net of cash acquired, for SportCaller and MKF.

Total non-cash consideration transferred for SportCaller and MKF was $ 135.3 million, which included $ 58.7 million of the fair value of contingent consideration as of the SportCaller and MKF acquisition dates.

Refer to Note 8 “ Fair Value Measurements ” for further information.

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.

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.

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 $ 25.9 million in cash, net of cash acquired.

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 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 CONSOLIDATED FINANCIAL STATEMENTS

The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally’s Interactive, AVP, Telescope, and Degree 53 (collectively the “Bally’s 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 trade names of $ 3.1 million, which are being amortized over their estimated useful lives between ten and 15 years.

Total goodwill recorded in connection with Bally’s Interactive Acquisitions was $ 250.5 million, of which $ 102.9 million is deductible for local tax purposes.

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 preliminary fair values of the assets acquired and liabilities assumed in connection with the Bally’s Interactive Acquisitions as of their respective dates of acquisition, as noted above:

(in thousands) Preliminary as of December 31, 2021

Cash and cash equivalents $ 8,689

Accounts receivable, net 4,498

Prepaid expenses and other current assets

Property and equipment, net 596

Intangible assets, net 167,075

Total current liabilities

Deferred tax liability ( 15,811 )

Acquired non-controlling interest ( 3,760 )

Net investment in Bally’s Interactive Acquisitions

During the year ended December 31, 2021, the Company recorded purchase accounting adjustments which increased intangible assets by $ 0.5 million and reduced goodwill and current liabilities by $ 0.4 million and $ 1.1 million, respectively.

Revenue included in operations from the Bally’s Interactive Acquisitions from their respective dates of acquisition, each noted above, for the year ended December 31, 2021 was $ 23.6 million.

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-combination 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 $ 1.65 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 CONSOLIDATED FINANCIAL STATEMENTS

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 pre-combination service to purchase consideration, with the remainder allocated to non-recurring post-combination expense.

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

In the fourth quarter of 2021, the fair value of $ 10.3 million, attributable to post combination 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

Cash and cash equivalents and restricted cash $ 183,306

Accounts receivable, net 35,851

Prepaid expenses and other current assets

Property and equipment, net 15,230

Right of use assets, net 14,185

Intangible assets, net 1,513,023

Other assets 17,668

Accounts payable ( 47,881 )

Accrued and other current liabilities ( 5,207 )

Lease obligations ( 14,540 )

Deferred income tax liabilities ( 11,457 )

Accrued income taxes ( 40,250 )

Accrued liabilities ( 177,109 )

Long-term debt, net ( 456,469 )

Lease liabilities ( 14,185 )

Deferred tax liability ( 143,924 )

Other long-term liabilities ( 6,680 )

Net assets acquired 168,466

Bargain purchase gain ( 31,276 )

Total purchase price

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 three months ended December 31, 2020.

The Company believes that it was able to acquire the net assets of 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 Shreveport property prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of industry wide COVID related shutdowns of all casinos in the United States.

This gain is presented in “Gain on bargain purchases” in the consolidated statements of operations for the year ended December 31, 2020.

Revenue and net income included in operations from Shreveport from the date of acquisition, December 23, 2020, through December 31, 2020 was $ 2.5 million and $ 1.9 million, respectively.

Supplemental Proforma Consolidated Information

The following table represents unaudited supplemental proforma consolidated revenue and net (loss) income based on Casino KC, Casino Vicksburg and Shreveport’s historical reporting periods as if the acquisitions had occurred as of January 1, 2019:

(in thousands, except per share data) December 31, 2020 December 31, 2019

Revenue and net income included in operations from Gamesys reported in the Company’s International Interactive and North America Interactive reportable segments for the year ended December 31, 2021 was $ 257.1 million and $ 18.2 million, respectively.

Supplemental Pro Forma Consolidated Information

The following unaudited pro forma consolidated financial information for the twelve months ended December 31, 2021 combines the results of the Company for the year ended December 31, 2021 and the unaudited results of Bally’s Lake Tahoe, Bally’s Evansville and Gamesys for each period subsequent to their respective acquisition dates through December 31, 2021.

The following unaudited pro forma consolidated financial information for the twelve months ended December 31, 2020 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 Acquisition, 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

(in thousands, except per share data) 2021 2020

Revenue $ 2,221,870 $ 1,529,369

Net income (loss) $ 46,048 $ ( 129,374 )

Net income (loss) per share, basic $ 0.93 $ ( 2.37 )

Net income (loss) per share, diluted $ 0.92 $ ( 2.37 )

The following unaudited pro forma consolidated financial information for the year ended December 31, 2020 combines the results of the Company for the year ended December 31, 2020 and the unaudited results of Bally’s Kansas City, Bally’s Vicksburg and Bally’s Shreveport for each period subsequent to their respective acquisition dates through December 31, 2020.

The unaudited pro forma consolidated financial information assumes that the acquisitions of Bally’s Kansas City, Bally’s Vicksburg and Bally’s Shreveport had occurred as of January 1, 2019.

Years Ended December 31,

(in thousands, except per share data) 2020 2019

Revenue $ 465,685 $ 722,136

Net (loss) income $ ( 7,450 ) $ 92,713

2 unchanged sentences

Pending Acquisitions

The Company entered into an agreement with Eldorado and certain of its affiliates to purchase MontBleu Resort Casino & Spa in Lake Tahoe, Nevada (“MontBleu”) for an aggregate purchase price of $ 15.0 million, payable one year form the closing date and subject to customary post-closing adjustments.

The acquisition is subject to receipt of required state regulatory approvals and satisfaction of other customary closing conditions.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded acquisition costs related to the pending acquisition of MontBleu of $ 1.1 million during the year ended December 31, 2020.

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

Jumer’s Casino & Hotel

On September 30, 2020, the Company entered into an agreement with Delaware North Companies Gaming & Entertainment, Inc.

to acquire Jumer’s Casino & Hotel (“Jumer’s”) in Rock Island, Illinois for a purchase price of $ 120.0 million in cash, subject to customary post-closing adjustments.

The transaction is subject to receipt of required state regulatory approvals and satisfaction of other customary closing conditions.

The Company paid a deposit of $ 4.0 million related to this transaction during the third quarter of 2020, $ 2.0 million of which is nonrefundable.

The Company recorded acquisition costs related to the pending acquisition of Jumer’s of $ 1.0 million during the year ended December 31, 2020.

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

Tropicana Evansville

On October 27, 2020, the Company and certain affiliates entered into an agreement with Caesars and certain of its affiliates to acquire the operations of Tropicana Evansville casino for $ 140.0 million, subject to customary post-closing adjustments.

The transaction is subject to receipt of required state regulatory approvals and satisfaction of other customary closing conditions.

The Company recorded acquisition costs related to the pending acquisition of Tropicana Evansville of $ 0.7 million during the year ended December 31, 2020.

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

In connection with the acquisition of the Tropicana Evansville casino operations, an affiliate of Gaming & Leisure Properties, Inc.

(“GLPI”) agreed to acquire the real estate associated with the Tropicana Evansville Casino for $ 340.0 million and lease it back to the Company for $ 28.0 million per year, subject to escalation.

GLPI also agreed to acquire the real estate associated with the Company’s Dover Downs casino for $ 144.0 million and lease it back to the Company for $ 12.0 million per year, subject to escalation.

Both leases are governed by a master lease agreement with GLPI which has an initial term of 15 years with four , five-year renewal options.

Consummation of the Company’s proposed acquisition of the Tropicana Evansville is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals for the purchase of the casino by the Company.

The Company’s obligation to sell the Dover Downs real estate to GLPI is conditioned on, among other things, satisfaction of the conditions to the Company’s obligation to close on its acquisition of the Tropicana Evansville.

The Company’s obligation to consummate the acquisition of the Tropicana Evansville is not conditioned on the closing of the sale of the Dover Downs real estate to GLPI.

On November 18, 2020, the Company and Bet.works Corp.

(“Bet.Works”) entered into a definitive agreement pursuant to which the Company will acquire Bet.Works (the “Bet.Works Acquisition”) for $ 62.5 million in cash and 2,528,194 of the Company’s common shares, subject in each case to customary adjustments.

The shareholders of Bet.Works will not transfer any shares of Company common stock received in the Bet.Works Acquisition prior to the one-year anniversary of the closing and, for the next year thereafter, may transfer only up to 1% of the Company’s common stock per quarter.

Consummation of the Bet.Works Acquisition is subject to customary conditions, including receipt of required regulatory approvals.

Subsequent Events

Monkey Knife Fight

On January 22, 2021, the Company entered into an agreement to acquire Monkey Knife Fight (“MKF”) for (1) immediately exercisable penny warrants to purchase up to 984,450 of the Company’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,550 additional common shares half of which is issuable on each of the first and second anniversary of closing.

The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing.

Tropicana Las Vegas Hotel and Casino

On April 13, 2021, the Company agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada (“Tropicana Las Vegas”) from GLPI valued at approximately $ 300 million.

The purchase price for the Tropicana Las Vegas property’s non-land assets is $ 150.0 million.

In addition, the Company agreed to lease the land underlying the Tropicana Las Vegas 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 Bally’s Black Hawk properties and 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 CONSOLIDATED FINANCIAL STATEMENTS

On February 5, 2021, the Company acquired Horses Mouth Limited (“SportCaller”) for $ 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 an exchange ratio of 0.8334 ).

The Company will account for the this acquisition as a business combination under the acquisition method of accounting.

As such, the purchase price will be allocated to the net assets acquired, inclusive of intangible assets, with any excess fair value recorded to goodwill.

Since the closing date of the acquisition occurred subsequent to the end of the reporting period, the allocation of purchase price to the underlying net assets has not yet been completed.

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

SALE OF NEWPORT GRAND

On January 17, 2018, Newport Grand entered into a Purchase and Sale Agreement (the “Sale Agreement”) with a third party (the “Buyer”), pursuant to which the Buyer acquired the land and building relating to the Newport Grand Casino for $ 10.2 million in a transaction that closed on May 1, 2018.

The Company leased back the Newport Grand Casino from May 1, 2018 until November 1, 2018 at which time it vacated the property.

This lease is accounted for as an operating lease.

On August 28, 2018, Newport Grand was closed, and Tiverton Casino Hotel was opened on September 1, 2018.

As of January 17, 2018, Newport Grand met the accounting guidance for assets held for sale, thus the Company recorded impairment losses of $ 4.2 million for the difference between the fair value and the carrying value of the land, building and building improvements included in the Sale Agreement.

The Company also recorded an expense of $ 2.4 million, in accordance with ASC 450, Contingencies , as the amount due for certain brokerage fees associated with the sale of Newport Grand became probable and reasonably estimable on this date.

The move from Newport Grand to Tiverton Casino Hotel occurred on September 1, 2018.

The following sets forth the calculation of the Newport Grand disposal loss for the year ended December 31, 2018:

Sale price $ 10,150

Land, building and improvement costs sold or written off ( 12,993 )

Transaction costs ( 669 )

Impairment loss ( 3,512 )

Participation fees ( 2,373 )

Land, building and improvement disposal loss ( 5,885 )

Equipment written-off upon facility closure ( 629 )

Newport Grand disposal loss $ ( 6,514 )

The sale of the Newport Grand assets did not qualify as a discontinued operation as the sale was not a strategic shift that had a major effect on the Company’s operations and financial results.

GOODWILL AND INTANGIBLE ASSETS

2019 Annual Impairment Assessments

As of October 1, 2019, the Company performed a qualitative analysis for the annual assessment of goodwill (commonly referred to as “Step Zero”) for all of its reporting units, which did not result in any impairment charges to goodwill or other intangible assets.

2020 Interim Impairment Assessments

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 its 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’ fair value and performed an interim quantitative impairment test of goodwill.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company estimated the fair values of all reporting units using both the market approach, applying a multiple of earnings based on guidelines for publicly traded companies, and the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit.

The calculation of the impairment charge includes substantial fact-based determinations and estimates including weighted average cost of capital, future revenue, profitability, cash flows and fair values of assets and liabilities.

The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital in the range of 10% to 15%, which considered guidelines for publicly traded companies, capital structure and risk premiums, including those reflected in the current market capitalization.

The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization.

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 $ 8.7 million for the year ended December 31, 2020, which is included in the Company’s “West” reportable segment, and was allocated between goodwill and intangible assets with charges of $ 5.4 million and $ 3.3 million, respectively.

The goodwill impairment charge adjustment recorded in the second quarter of 2020 was attributable to changes in the preliminary fair value of net assets, which affected the initial goodwill resulting from the Black Hawk Casinos acquisition.

The goodwill impairment charge is reflected in goodwill and asset impairment (adjustment) in the consolidated statements of operations and comprehensive income.

The goodwill impairment charge reflects all of the Black Hawk Casinos reporting unit goodwill, based on the preliminary acquisition date assigned fair values.

2020 Annual Impairment Assessments

As of October 1, 2020, the Company performed a qualitative analysis for the annual assessment of goodwill (commonly referred to as “Step Zero”) for all reporting units with the exception of its Twin River Casino Hotel and Tiverton Casino Hotel reporting units which together comprise the “Rhode Island” reportable segment.

2021 Trade Name Impairment

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

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

As a result of the analysis, the Company recorded an impairment charge of $ 4.7 million during the three months ended June 30, 2021 recorded within “ Goodwill and asset impairment” on the consolidated statements of operations.

Bally’s Dover and Bally’s Black Hawk are reported in the Casinos & Resorts reportable segment.

2021 Annual Impairment Assessment

As of October 1, 2021, the Company performed a qualitative analysis for the annual assessment of goodwill (commonly referred to as “Step Zero”) for all reporting units.

From a qualitative perspective, in evaluating whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, relevant events and circumstances are taken into account, with greater weight assigned to events and circumstances that most affect the fair value or the carrying amounts of its assets.

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macroeconomic conditions, industry and market conditions and overall financial performance.

After assessing these and other factors, the Company determined that it was more likely than not that the fair value of each reporting unit exceed their carrying amounts as of October 1, 2020.

After assessing these and other factors, the Company determined that it was more likely than not that the fair value of all reporting units exceed their carrying amounts as of October 1, 2021 and therefore no impairment charges to goodwill or other intangible assets were recorded during the year ended December 31, 2021.

If future results vary significantly from current estimates and related projections, the Company may be required to record impairment charges.

As of October 1, 2020, the Company bypassed its option to perform a qualitative analysis for the annual assessment of goodwill for its Rhode Island reportable segment, and instead performed a quantitative analysis.

The Company estimated the fair values of each reporting unit using both the income approach, discounting projected future cash flows based on management’s expectations of the current and future operating environment for each reporting unit.

2020 Annual Impairment Assessment

The rates used to discount projected future cash flows under the income approach reflect a weighted average cost of capital of 10 %, which considered guidelines for publicly traded companies, capital structure and risk premiums, including those reflected in the current market capitalization.

Based on this analysis, the Company determined that the fair values of the Twin River Casino Hotel and Tiverton Casino Hotel exceeded their carrying values by significant margins and that impairment did not exist.

If future results vary significantly from current estimates and related projections, the Company may be required to record impairment charges.

The Company corroborated the reasonableness of the estimated reporting unit fair values by reconciling to its enterprise value and market capitalization.

Based on this analysis, the Company determined that only the carrying value of its Bally’s Black Hawk 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 $ 8.7 million recorded within “Goodwill and asset impairment” of the consolidated statements of operations for the year ended December 31, 2020, which is included in the Casinos & Resorts reportable segment, and was allocated between goodwill and intangible assets with charges of $ 5.4 million and $ 3.3 million, respectively.

The annual impairment test performed as of October 1, 2020 did not result in additional impairment charges to goodwill or other intangible assets.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The change in carrying value of goodwill by reportable segment for the years ended December 31, 2021 and 2020 is as follows:

Rhode Island Mid-Atlantic Southeast West Total

Casinos & Resorts North America Interactive International Interactive Total

Goodwill as of December 31, 2019 $ 133,082 $ — $ — $ 133,082

Goodwill from current year business combinations 59,257 — — 59,257

Impairment charges ( 5,360 ) — — ( 5,360 )

Goodwill as of December 31, 2020 (1)

$ 186,979 $ — $ — $ 186,979

Goodwill from current year business combinations 14,593 283,767 1,645,200 1,943,560

Impairment charges — — — ( 5,360 ) ( 5,360 )

Effect of foreign exchange — ( 409 ) ( 7,857 ) ( 8,266 )

Purchase accounting adjustments on prior year business combinations 380 — — 380

Goodwill as of December 31, 2021 (1)

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

__________________________________

(1) Casinos & Resorts amounts are net of accumulated goodwill impairment charges of $ 5.4 million for 2020 and 2021.

The change in intangible assets, net for the years ended December 31, 2021 and 2020 is as follows:

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Other intangibles acquired (1)

Impairment charges ( 3,299 )

Accumulated amortization ( 4,852 )

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Intangible assets from current year business combinations 1,870,918

Other intangibles acquired (1)

Change in TRA with Sinclair (2)

Effect of foreign exchange ( 12,538 )

Impairment charges ( 4,675 )

Internally developed software 20,952

Other intangibles acquired

Accumulated amortization ( 90,801 )

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

__________________________________

(1) Includes Naming rights and Bally’s trade name.

(2) Refer to Note 10 “ S inclair Agreement .”

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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9.2 $ 337,391 $ ( 25,721 ) $ 311,670

Rhode Island contract for VLT’s 0.0 29,300 ( 29,300 ) —

Trade names 10.6 28,439 ( 17,481 ) 10,958

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

Rated 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

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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

(1) Amortization will begin upon the commencement date of the re-branded Sinclair regional sports networks which had not occurred as of December 31, 2020.

As such, there was no amortization expense for the year ended December 31, 2020.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________________________________

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

Refer to Note 10 “ Sinclair Agreement ” for further information.

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

remaining life

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Amortizable intangible assets:

Rhode Island contract for VLT’s 0.6 $ 29,300 $ ( 27,629 ) $ 1,671

Naming rights - Sinclair (2)

10.0 $ 338,241 $ — $ 338,241

Rhode Island contract for VLTs 0.0 $ 29,300 $ ( 29,300 ) $ —

Trade names 8.6 21,600 ( 16,475 ) 5,125

Hard Rock license 26.5 8,000 ( 1,576 ) 6,424

Rated player relationships 5.1 7,765 ( 4,660 ) 3,105

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

Other 3.7 1,950 ( 750 ) 1,200

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Rhode Island VLT license Indefinite 287,108 — 287,108

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

Novelty game licenses Indefinite 1,213 — 1,213

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Total intangible assets, net $ 716,979 $ ( 53,584 ) $ 663,395

__________________________________

(2) See note (1) above.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amortization of intangible assets was approximately $ 91.1 million, $ 4.9 million and $ 5.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Thereafter 529,596

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 British Pound Sterling (“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.

On October 1, 2021, the above mentioned foreign exchange forward contracts were discontinued as part of the acquisition of Gamesys.

The Company received $ 0.1 million at closing, which was reported within “Other, net” on the consolidated statements of operations.

The Company’s foreign exchange forward contracts were not designated as hedging instruments under ASC 815, Derivatives and Hedging (“ASC 815”).

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

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

Sinclair Agreement

As noted in Note 10 “ S inclair A greement ,” 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 CONSOLIDATED FINANCIAL STATEMENTS

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 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 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 consolidated statements of operations.

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

(in thousands) Balance Sheet Location 2021 2020

Sinclair Performance Warrants Naming rights liabilities $ 69,564 $ 88,119

Sinclair Options Naming rights liabilities — 58,198

Total Liabilities $ 69,564 $ 146,317

The gains (losses) recognized in the consolidated statements of operations for derivatives not designated as hedging instruments during the years ended December 31, 2021 and 2020 are as follows:

Consolidated Statements of Operations Location Year Ended December 31,

(in thousands) 2021 2020

Foreign exchange forward contracts Other, net $ ( 20,882 ) $ —

Sinclair Performance Warrants Change in value of naming rights liabilities 18,555 ( 32,878 )

Sinclair Options Change in value of naming rights liabilities ( 1,526 ) ( 24,782 )

FAIR VALUE MEASUREMENTS

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis.

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

December 31, 2021

(in thousands) Level 1 Level 2 Level 3

Other current assets $ 176 $ — $ —

Other assets — — 2,025

Total $ 176 $ — $ 2,025

Sinclair Performance Warrants $ — $ — $ 69,564

Contingent consideration — — 34,931

Total $ — $ — $ 104,495

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(in thousands) Level 1 Level 2 Level 3

Contingent consideration $ — $ 27,909 $ —

Sinclair Performance Warrants $ — $ — $ 88,119

Sinclair Options — 58,198 —

Total $ — $ 58,198 $ 88,119

There were no transfers made among the three levels in the fair value hierarchy for the years ended December 31, 2021 and 2020.

The Performance Warrants, acquisition related contingent consideration payable and certain other assets are Level 3 fair value measurements.

A summary of the Level 3 activity is as follows:

( in thousands) Performance Warrants Contingent Consideration Other Assets Total

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

Additions in the period (acquisition fair value) — 58,623 2,025 60,648

Change in fair value ( 18,555 ) ( 23,692 ) — ( 42,247 )

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

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.

Sinclair Performance Warrants

Sinclair Performance Warrants are accounted for as a derivative instrument classified as a liability within Level 3 of the hierarchy as the warrants are not traded in active markets and are subject to certain assumptions and estimates made by management related to the probability of meeting performance milestones.

These assumptions and the probability of meeting performance targets may have a significant impact on the value of the warrant.

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.

Contingent consideration

As of December 31, 2021, the Company’s contingent consideration payable related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

In connection with the acquisitions of SportCaller and MKF on February 5, 2021 and March 23, 2021, respectively, the Company recorded contingent consideration at fair value of $ 58.6 million as of the acquisition dates.

After the acquisition dates and until the contingencies are resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to management’s estimate and the Company’s stock price.

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

As of December 31, 2020, the Company recorded a contingent consideration asset under ASC 805 in connection with its acquisition of Bally’s Atlantic City whereby the seller would reimburse the Company for a capital expenditure commitment by December 31, 2021.

This commitment was recognized at its present value of $ 27.7 million as of the acquisition date using inputs observable for the asset directly which represents a Level 2 measurement within the fair value hierarchy.

Refer to Note 5 “ Acquisitions ” for further information.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Other current assets

The Company has agreements with certain third-party sports betting operators for online sports betting and related iGaming market access.

Pursuant to one of these agreements, the Company has a present right to payment for a fixed number of equity securities in exchange for market access.

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 consolidated statements of operations.

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

Pursuant to one of these agreements, the Company has issued a loan to its vendor and has an option to convert the loan to shares of the vendor, exercisable within a specified time period.

The Company recorded these instruments as “Other Assets” at their fair value based on unobservable inputs and classified within Level 3 of the hierarchy.

Long-term debt

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

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.

December 31, 2021 December 31, 2020

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

Term Loan Facility $ 1,897,030 $ 1,945,000 $ 548,891 $ 569,125

6.75 % Senior Notes due 2027

— — 515,964 563,147

5.625 % Senior Notes due 2029

732,660 746,250 — —

5.875 % Senior Notes due 2031

731,537 754,223 — —

ACCRUED LIABILITIES

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Compensation 49,764 21,708

Bally's trade name accrual, current portion 9,475 —

Insurance reserve 7,188 —

Transaction services and net working capital accrual 7,174 —

Purses due to horsemen 5,726 7,868

Property taxes 3,486 2,920

Interest payable 46,292 3,076

Construction accruals 18,931 2,151

Legal 1,761 833

Transaction services and net working capital accrual 18,516 7,174

Insurance reserve 10,766 7,188

Bally’s trade name accrual, current portion 9,713 9,475

Other 76,938 35,488

Total accrued liabilities $ 401,428 $ 120,055

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SINCLAIR AGREEMENT

On November 18, 2020, the Company entered into 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 Transactions with Sinclair (the “TRA”).

On November 18, 2020, the Company and 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 10 years from the commencement of 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.

Naming Rights Intangible Asset

Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $ 88.0 million over the 10-year term of the agreement beginning April 1, 2021.

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

The Company acquired a Naming rights intangible asset, the value of which was determined to be $ 332.3 million on the November 18, 2020 acquisition date, representing the consideration transferred on the acquisition date which was comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the TRA payments, as discussed in further detail below.

The Naming rights intangible asset will be amortized on a straight-line basis over a useful life of 10 years, which has been determined to be the period of anticipated benefit and is consistent with the term of the Sinclair Agreement.

Amortization will begin upon the commencement date of the re-branded Sinclair regional sports networks which had not occurred as of December 31, 2020.

As such, there was no amortization expense for the year ended December 31, 2020.

Annual Naming Rights Fees

Under the terms of the Sinclair Agreement, the Company will be required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $ 88.0 million over the ten-year term of the agreement and begin on the commencement date of the re-branded Sinclair regional sports networks.

The present value of the annual naming rights fees was recorded as a liability and will be accreted through interest expense over the life of the agreement.

The value of the liability as of December 31, 2020 was $ 56.6 million, of which $ 54.6 million and $ 2.0 million is presented as “Naming rights liabilities” and “Accrued liabilities” in the consolidated balance sheets, respectively.

Accretion expense for the year ended December 31, 2020 was $ 0.5 million and was reported in “Interest expense, net of amounts capitalized” in the consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $ 337.4 million and $ 338.2 million as of December 31, 2021 and 2020, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 25.7 million for the year ended December 31, 2021.

Refer to Note 6 “ 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 December 31, 2021 and 2020 was $ 58.9 million and $ 56.6 million, respectively.

The short-term portion of the liability, which was $ 2.0 million as of December 31, 2021 and 2020, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 56.9 million and $ 54.6 million as of December 31, 2021 and 2020, respectively, is recorded within “Naming rights liabilities” in the consolidated balance sheets.

Accretion expense for the years ended December 31, 2021 and 2020 was $ 4.3 million and $ 0.5 million, respectively, and was reported in “Interest expense, net of amounts capitalized” in the consolidated statements of operations.

Warrants and Options

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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”) as of December 31, 2020, and prior to stockholder approval the Company would have been required to pay cash to Sinclair in lieu of Sinclair being permitted to purchase, pursuant to the exercise of warrants or options, greater than 19.9 % of the Company’s outstanding common shares.

The Company formally obtained stockholder approval on January 27, 2021.

As of both November 18, 2020 and December 31, 2020, the Company evaluated the classification of the Penny Warrants, Options and Performance Warrants under ASC 815-40 to determine whether equity classification was precluded for one or more of the warrants and options as a result of the requirement to net cash settle any option of the contracts that result in the delivery of shares in excess of the 19.9 % threshold prior to obtaining stockholder approval.

Since a portion of the warrants and options could be settled in shares below this threshold, the Company adopted a sequencing policy as prescribed in ASC 815-40-35 whereby it would allocate available shares under the 19.9 % cap to contracts based on the order in which they become exercisable.

This resulted in the allocation of available shares to the immediately exercisable Penny Warrants first, the Performance Warrants second and the Options, which contain a four-year vesting period, third.

This policy results in there being a sufficient number of shares below the 19.9 % cap to settle the Penny Warrants, but an insufficient number of shares to settle the Performance Warrants and Options.

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

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, recorded to “Additional paid-in-capital” in the consolidated balance sheets, with an offset to the Naming rights intangible asset.

The Performance Warrants were 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 values of the Performance Warrants as of November 18, 2020 and December 31, 2020 were $ 55.2 million and $ 88.1 million, respectively, and were calculated 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 between 55 % and 60 %, risk free rates between 0.34 % and 0.52 %, the Company’s common stock price of $ 30.61 and $ 50.23 , and expected terms between 4.4 and 6.0 years.

The initial fair value as of November 18, 2020 was recorded as a liability with an offset to the Naming rights intangible asset.

The fair value as of December 31, 2020 was reported in “Naming rights liabilities” in the consolidated balance sheets The increase in fair value of the Performance Warrants from November 18, 2020 through December 31, 2020 was $ 32.9 million and resulted in a mark to market loss, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations.

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.

Until stockholder approval is obtained, the Options will be recorded at their fair value with changes in fair value recognized in the statement of operations.

The fair value of the options was initially measured as a liability on November 18, 2020 upon issuance with an offset to the Naming rights intangible asset.

The fair values were based on Black-Scholes models using Level 2 inputs, including volatility of 60 % and 55 %, a risk free rate of 0.95 % and 0.99 %, the Company’s common stock price of $ 30.61 and $ 50.23 and the term of 11.0 years and 10.9 years, which resulted in total values of $ 33.4 million and $ 58.2 million as of November 18, 2020 and December 31, 2020, respectively.

The fair value of the Options was reported in “Naming rights liabilities” in the consolidated balance sheets as of December 31, 2020.

The increase in fair value of the Options from November 18, 2020 through December 31, 2020 was $ 24.8 million and resulted in a mark to market loss, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations.

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.

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 consolidated balance sheets, with an offset to the naming rights intangible asset.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Options met the criteria to be classified as equity upon stockholder approval on January 27, 2021, 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 consolidated balance sheet.

The Performance Warrants are expected to continue to be classified as liability awards, with changes in fair value reported in earnings.

The fair value as of December 31, 2021 and 2020 was $ 69.6 million and $ 88.1 million, respectively, and was calculated 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 between 55 % and 60 %, risk free rates between 0.34 % and 0.52 %, the Company’s common stock price for each period and expected terms between 4.4 and 6.0 years.

The fair value is recorded within “Naming Rights liabilities” of the consolidated balance sheets.

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 consolidated balance sheet.

The change in fair value of the Options from November 18, 2020 through December 31, 2020 was $ 24.8 million and was $ 1.5 million for December 31, 2020 through January 27, 2021, resulting in mark to market losses in the years ended December 31, 2021 and 2020, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations.

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

Tax Receivable Agreement

The Company entered into the TRA with Sinclair as an additional form of consideration for the acquisition of the Naming Rights Intangible Asset.

Under the TRA, the Company is required to share 60 % of the tax benefit the Company receives from the Penny Warrants, the Options, the Performance Warrants and payments under the TRA, which are payable to Sinclair over the remaining term of the agreement once the tax benefit amounts become finalized through the filing of the Company’s annual tax returns.

The Company accounted for the obligations due under the TRA as contingent consideration in the acquisition of the Naming Rights intangible asset pursuant to ASC 805 and has recorded a liability of $ 37.1 million as of the acquisition date of November 18, 2020.

Subsequent to the acquisition date, changes in the TRA liability due to estimates of the tax benefits to be realized as well as tax rates in effect at the time among other changes are treated as an adjustment of the acquired Naming Rights intangible asset.

As of December 31, 2020, the estimate of the TRA liability was $ 43.0 million, reflecting an increase of as of $ 5.9 million from the acquisition date, which was recorded as an increase to the Naming rights intangible asset.

The ending Naming rights intangible asset as of December 31, 2020 was $ 338.2 million.

The TRA liability is reported in “Naming rights liabilities” in the consolidated balance sheets.

ACQUISITION, INTEGRATION AND RESTRUCTURING EXPENSE

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 December 31, 2021 and 2020, the estimate of the TRA liability was $ 42.2 million and $ 43.0 million, respectively, and was included in “Naming rights liabilities” in the consolidated balance sheets.

The change in value of the TRA liability, in the amount of $( 0.8 ) million and $ 5.9 million for the years ended December 31, 2021 and 2020, respectively, is included in “Change in value of naming rights liabilities” in the consolidated statements of operations.

The ending Naming rights intangible asset as of December 31, 2021 and 2020 was $ 337.4 million and $ 338.2 million, respectively.

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITION, INTEGRATION AND RESTRUCTURING

The following table reflects acquisition, integration and restructuring expense the Company recorded during the years ended December 31, 2021, 2020 and 2019:

2 unchanged sentences

Acquisition and integration costs:

Gamesys $ 43,495 $ — $ —

Bally’s Evansville 6,702 661 —

North America Interactive acquisitions (1)

Bally’s Quad Cities 2,026 1,003 —

Richmond, Virginia (2)

Bally’s Atlantic City 1,191 4,373 —

Eldorado Resort Casino Shreveport 3,108 — —

Casino KC and Casino Vicksburg 1,828 1,293 —

MontBleu 1,052 — —

Black Hawk Casinos 1,021 1,724 208

Jumer’s Hotel & Casino 1,003 — —

Tropicana Evansville 661 — —

Centre County, PA 132 — —

Dover Downs merger and going public expenses 59 7,883 6,636

Bally’s Shreveport 1,023 3,108 —

Bally’s Lake Tahoe 966 1,052 —

Bally’s Kansas City and Bally’s Vicksburg 108 1,828 1,293

Bally’s Dover merger and going public expenses — 59 7,883

7,371 1,153 1,724

Total 70,129 13,237 10,900

1 unchanged sentence

Total acquisition, integration and restructuring expense $ 71,288 $ 13,257 $ 12,168

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________________________________

(1) Includes costs associated with the acquisitions of Bally’s Interactive, SportCaller, MKF, AVP, Telescope and Degree 53, which are included within the North America Interactive segment.

(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 Bally’s Black Hawk and Bally’s Dover, the pending acquisition of Tropicana Las Vegas and other pending and closed transactions.

Restructuring Expense

During the year ended December 31, 2019, the Company incurred restructuring expenses of $ 0.8 million related to severance costs incurred attributable to the acquisition of Dover Downs in the first quarter of 2019, as well as $ 0.4 million related to severance costs incurred at the Company’s Twin River Casino Hotel property.

The following table summarizes the restructuring liability accrual activity during the years ended December 31, 2020 and 2019 related to the Rhode Island and Mid-Atlantic reportable segments.

(in thousands) Rhode Island Mid-Atlantic Total

During the year ended December 31, 2021, the Company incurred restructuring expense of $ 1.2 million attributable to severance costs incurred.

The following table summarizes the restructuring liability accrual activity by segment during the years ended December 31, 2021 and 2020:

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

Restructuring liability as of December 31, 2019 $ 23 $ — $ — $ 23

5 unchanged sentences

Restructuring liability as of December 31, 2021 $ — $ 142 $ 264 $ 406

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LONG-TERM DEBT

4 unchanged sentences

6.75 % Senior Notes due 2027

525,000 400,000

5.625 % Senior Notes due 2029

5.875 % Senior Notes due 2031

Unamortized original issue discount ( 31,425 ) ( 11,771 )

5 unchanged sentences

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, (the “Agent”), and the lenders party thereto (the “Credit Facility”), consisting of a $ 300 million Term B Loan facility (the “Term Loan Facility”) and a $ 250 million revolving credit facility (the “Revolving Credit Facility”).

The Company’s obligations under the Revolving Credit Facility will mature on May 10, 2024.

The Company’s obligations under the Term Loan Facility will mature on May 10, 2026.

Beginning September 30, 2019, the Company is required to make quarterly principal payments of $ 750,000 on the Term Loan Facility on the last business day of each fiscal quarter.

In addition, the Company is required to make mandatory payments of amounts outstanding under the Credit Facility with the proceeds of certain casualty events, debt issuances, and asset sales and, commencing with the fiscal year beginning January 1, 2020, the Company is required to apply a portion of its excess cash flow to repay amounts outstanding under the Credit Facility.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the Credit Facility 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 0.00 % or (2) a base rate determined by reference to the greatest of the federal funds rate plus 0.50 %, the prime rate as determined by the Agent, the one-month LIBOR rate plus 1.00 %, and subject to a floor of 1.00 %, in each case plus an applicable margin.

In the event that the LIBOR rate is no longer available or no longer used to determine the interest rate of loans, the Company and the Agent will amend the Credit Agreement to replace LIBOR with an alternate benchmark rate that has been broadly accepted by the syndicated loan market in the United States in lieu of LIBOR and until such amendment has become effective, loans will be based on the base rate.

In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.50 % commitment fee, in respect of commitments under the Revolving Credit Facility, which may be subject to one or more step-downs based on the Company’s total net leverage ratio.

As of December 31, 2020, the interest rate for the Term Loan Facility was 3.00 %.

The Credit Facility allows the Company to (1) establish additional Term B Loans and/or establish one or more new tranches of term loans and/or (2) increase commitments under the Revolving Credit Facility and/or add one or more new tranches of revolving facilities, in an aggregate amount not to exceed the greater of (x) $ 195 million and (y) 100 % of 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 Company’s obligations under the Credit Facility are guaranteed by each of the Company’s existing and future wholly owned domestic restricted subsidiaries, subject to certain exceptions, and are secured by a first priority lien on substantially all of the Company’s and each of the guarantors’ existing and future property and assets, subject to certain exceptions.

On March 16, 2020, the Company borrowed under its Revolving Credit Facility the full available amount of $ 250 million to increase its cash position and liquidity to facilitate financial flexibility in light of the then uncertainty in the global markets and the Company’s business resulting from the COVID-19 pandemic.

These borrowings were repaid as part of the increase in the Term Loan Facility mentioned below.

As of December 31, 2020, there were $ 35 million of outstanding borrowings under the Revolving Credit Facility.

On March 9, 2021, the Company amended its Credit Agreement to increase the aggregate principal amount of the Revolving Credit Facility to $ 325 million, an increase of $ 75 million pursuant to an incremental revolving facility.

Borrowings under the new incremental revolving facility will be subject to the same terms and conditions of the existing Revolving Credit Facility under the Credit Agreement.

May 2020 Term Loan

On May 11, 2020, the Company closed on an amendment to its Credit Facility to increase its Term Loan Facility by $ 275 million.

Borrowings under the increased portion of the Term Loan Facility will bear interest at LIBOR + 8.00 % per annum with a 1.00 % LIBOR floor through the May 10, 2026 maturity date.

Following the amendment, the Company repaid the full $ 250 million outstanding under its Revolving Credit Facility.

This new term loan satisfied the financing contingency in the purchase agreement to acquire Shreveport and MontBleu from affiliates of Eldorado.

On May 10, 2019, the Company entered into a credit agreement with Citizens Bank, N.A., as administrative agent, and the lenders party thereto, consisting of a $ 300 million term loan B facility and a $ 250 million 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.

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 Credit Facility on October 1, 2021 as described below.

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 (the “Senior Notes”).

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

The Additional Notes, other than with respect to the date of issuance and issue price, are identical to the Initial Notes, and are treated as a single class with the Initial Notes for all purposes under the indenture governing the Senior Notes (the “Indenture”).

Immediately after giving effect to the issuance and sale of the Additional Notes, the Company had $ 525 million in aggregate principal amount of Senior Notes outstanding.

Interest on the Senior Notes is paid semi-annually in arrears on June 1 and December 1.

The Company used a portion of the net proceeds from the Initial Notes, together with a portion of the proceeds from its Term Loan Facility, to repay borrowings under the Company’s prior credit agreement (the “Former Credit Facility”).

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 “2027 Notes”).

On September 7, 2021, the Company redeemed $ 210 million aggregate principal amount of the 2027 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.

On October 5, 2021, the Company redeemed the remaining $ 315 million aggregate principal amount of the 2027 Notes at a redemption price of 109.074 % of the principal amount using a portion of the proceeds of its Term Loan Facility.

As of December 31, 2021, no amounts pertaining to these 2027 Notes remained outstanding.

In connection with the termination of the prior credit agreement and the 2027 Notes, the Company recorded a loss on extinguishment of debt of $ 103.0 million during the year ended December 31, 2021.

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 “Senior Notes”).

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Facility and the Indenture each contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, enter into certain transactions with affiliates, sell or otherwise dispose of assets, create or incur liens, and merge, consolidate or sell all or substantially all of the Company’s assets, in each case, subject to certain exceptions and qualifications.

In addition, if more than 30 % of the capacity of the Revolving Credit Facility is utilized, as was the case at March 31, 2020 (but not June 30, 2020, September 30, 2020 or December 31, 2020), the Company must comply with a maximum total net leverage ratio, which is currently set at 5.50 :1.00.

These covenants are subject to exceptions and qualifications set forth in the Credit Facility and the Indenture, and as described below under “Financial Covenant Relief”, were modified as of April 24, 2020.

The Company was in compliance with all such covenants as of December 31, 2020.

On February 4, 2021, the Company announced that it had obtained the consent of the Senior Notes holders to amend the indenture governing the Senior Notes.

The amendment to the Indenture amended the “Incurrence of Indebtedness and Issuance of Subsidiary Preferred Stock” covenant contained in Section 4.09 of the Indenture to increase the fixed dollar prong of the credit facility basket from “$ 745.0 million” to “$ 975.0 million.”Except for this amendment, all the existing terms of the Senior Notes remain unchanged.

The Company may redeem some or all of the Senior Notes at any time prior to June 1, 2022 at a redemption price equal to 100 % of the aggregate principal amount of the Senior Notes to be redeemed plus a “make-whole” premium and accrued and unpaid interest.

In addition, prior to June 1, 2022, the Company may redeem up to 40 % of the original principal amount of the Senior Notes with proceeds of certain equity offerings at a redemption price equal to 106.75 % of the aggregate principal amount of such Senior Notes plus accrued and unpaid interest.

On or after June 1, 2022, the Company may redeem some or all of the Senior Notes at the redemption prices set forth in the Indenture plus accrued and unpaid interest.

The Senior Notes are subject to disposition and redemption requirements imposed by gaming laws and regulations of applicable gaming regulatory authorities.

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

Former Credit Agreements

The Credit Facility replaced the Former Credit Facility, which was entered into on July 10, 2014, and included a term loan (“Former Term Loan”) in the principal amount of $ 480 million and an original issue discount of 1 %, payable in quarterly installments of $ 1.2 million with the balance payable upon maturity on July 10, 2020 and a revolving credit facility (“Former Revolving Credit Facility”) with an original capacity of $ 40 million and a capacity on March 31, 2019 of $ 150 million as a result of several amendments, the last of which occurred on March 26, 2019 and increased the capacity from $ 100 million to $ 150 million to, among other things, help retire debt of Dover Downs at the closing of the acquisition on March 28, 2019.

The interest rate for the Former Term Loan and the Former Revolving Credit Facility was based on LIBOR, with a LIBOR floor of 1.00 % on the Former Term Loan, plus a 3.50 % interest rate margin per annum in the case of both the Former Term Loan and Former Revolving Credit Facility.

Both the Former Term Loan and the Former Revolving Credit Facility were pre-payable at any time, provided notice was given.

The Company repaid the Former Revolving Credit Facility and the Former Term Loan during the second quarter of 2019 with a portion of the proceeds from the Term Loan Facility and the Initial Notes.

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.

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 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 Credit Agreement.

The 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 December 31, 2021, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply.

BALLY’S CORPORATION

3 unchanged sentences

(in thousands)

2022 $ 19,450

Thereafter 3,347,750

Financial Covenant Relief

On April 24, 2020, the Company and its lenders amended the financial covenants and certain other terms of the Company’s Credit Facility to provide financial covenant relief from the effects of the COVID-19 pandemic.

Until the date on which the Company is required to deliver its compliance certificate and financial statements for the three months ending March 31, 2021 (the “Leverage Ratio Covenant Relief Period”) (unless the Company elects to terminate the covenant relief period earlier), the Company will not be required to comply with the maximum total net leverage ratio covenant applicable under the Credit Facility, but instead will be required to comply with a minimum liquidity covenant tested at the last day of each month during the Leverage Ratio Covenant Relief Period.

Under the minimum liquidity requirement, the Company will be required to have unrestricted cash on hand at the end of each month in the following amounts:

(1) $ 75.0 million at April 30, 2020 and May 31, 2020, (2) $ 65.0 million at June 30, 2020, (3) $ 55.0 million at July 31, 2020, and (4) $ 50.0 million at each month-end thereafter through March 31, 2021.

The Company is not permitted to declare or pay dividends on its common stock or make other restricted payments (including repurchases of shares of its common stock), complete investments or acquisitions (other than those previously announced) during the Leverage Ratio Covenant Relief Period, and the interest rate on the Revolving Credit Facility borrowings is LIBOR + 2.75 % during the Leverage Ratio Covenant Relief Period.

Additionally, the amendment permanently changed the minimum LIBOR on revolver borrowings from 0.00 % to 0.75 %.

The Company was in compliance with all debt covenants, as amended, as of December 31, 2020.

On March 5, 2021, the Company and its lenders amended the financial covenants and certain other terms of its Credit Agreement to provide deemed consolidated EBITDA numbers for certain fiscal quarters of 2021 and to permit the annualization of consolidated EBITDA for the 2021 fiscal year for purposes of calculating compliance with the consolidated total net leverage ratio, to the extent we are required to comply with it.

In accordance with the terms of the previous amendment to the Company’s Credit Facility, restrictions on the Company’s ability to declare or pay dividends on its common stock or make other restricted payments (including repurchases of shares of its common stock), and complete investments or acquisitions (other than those previously announced) ends upon the expiration of the leverage covenant relief period which occurs on March 31, 2021.

GLPI Master Lease

In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI 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 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 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.

This gain is reflected as “Gain on sale-leaseback” in the 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 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.

Operating Leases

The Company is committed under various operating lease agreements primarily related to submerged tidelands, property and equipment.

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.

Hard Rock Biloxi has an agreement with the State of Mississippi for the lease and use of approximately five acres of submerged tidelands for a primary term of thirty years , expiring September 30, 2037.

Upon expiration of the primary term, Hard Rock Biloxi will have an option to extend the lease for a renewal term of thirty years ;

the renewal option has not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the option.

Annual rent for the lease, as of December 31, 2020, is approximately $ 1.2 million and adjusts annually by the increase in the consumer price index (“CPI”).

Future changes to the CPI are treated as variable lease payments and are recognized in the period in which the obligation for those payments is incurred.

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.

Certain of these leases include percentage rent payments based on property revenues and/or rent escalation provisions determined by increases in the CPI.

These percentage rent and escalation provisions are treated as variable lease payments and recognized as lease expense in the period in which the obligation for those payments are incurred.

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 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.

The renewal options have not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the options.

The fixed rent due under the lease can escalate each year based on changes in CPI.

Additionally, the Company is obligated to pay an annual percentage rent based on property net revenues.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Hard Rock Biloxi also has a Lease and Air Space agreement with the City of Biloxi.

The agreement grants the Company rights to a parking area, and to the airspace above two defined parcels of land along with certain support structure rights for the construction of a parking garage.

The arrangement has a 40 -year term expiring November 18, 2043 with one 25 -year renewal option at the Company’s option;

the renewal option has not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the option.

Monthly rent escalates every 5 years based on CPI, and we are responsible for property taxes.

Future changes to the CPI are treated as variable lease payments and are recognized in the period in which the obligation for those payments is incurred.

In connection with the acquisition of Casino KC, the Company is party to a sublease with the Port Authority of Kansas City, Missouri, which has leased the property from the City of Kansas City.

Our sublease expires on October 18, 2021, but on that date will automatically renew for five additional periods of five years each.

The lease agreement provides for minimum annual rent paid in advance and subject to increases in the CPI every five years.

Current minimum annual rent payments are $ 3.1 million per year.

In addition, the agreement calls for quarterly percentage rent payments equal to 3.25 % of gross revenues, less the minimum annual rent payment.

Casino KC is obligated to operate Casino KC at all times.

If Casino KC fails to do so, it must pay the Port Authority, in lieu of percentage rent, a sum equal to 50% of the then-applicable base rent during the time Casino KC is not operating.

In connection with the acquisition of Shreveport, the Company is party to a ground lease with the City of Shreveport, Louisiana.

The Company’s initial lease will expire on November 30, 2021, but as of that date the Company can renew for five additional periods of five years each.

The renewal options have been included in the measurement of the lease liability as the Company has determined it is reasonably certain of exercising the options.

The lease agreement provides for minimum annual rent, subject to 15 % increases with each renewal term.

In addition, the agreement calls for monthly percentage rent of 1.0 % of adjusted gross revenues, subject to an annual minimum of $ 0.5 million.

During the year ended December 31, 2020, three equipment leases were terminated via purchase of the underlying assets.

At December 31, 2020, the Company had operating lease liabilities of $ 63.5 million and right of use assets of $ 36.1 million, which were included in the consolidated balance sheets.

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 $ 531.0 million and $ 63.5 million as of December 31, 2021 and 2020, respectively, and right of use assets of $ 507.8 million and $ 36.1 million as of December 31, 2021 and 2020, respectively, which were included in the consolidated balance sheets.

The Company’s total lease cost under ASC 842 for the years ended December 31, 2021, 2020 and 2019 is as follows:

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Total lease expense $ 52,291 $ 5,470 $ 4,326

Rent expense for the year ended December 31, 2018 was determined under ASC 840, which excludes variable lease cost and was $ 2.0 million.

Supplemental cash flow and other information for the year ended December 31, 2021 and 2020, related to operating leases is as follows:

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Weighted average discount rate 6.1 % 7.3 %

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, future minimum rental commitments under noncancelable operating leases are as follows:

(in thousands)

2022 $ 55,648

Thereafter 561,534

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Leasing arrangements for which the Company acts as a lessor are not deemed material as of December 31, 2021.

The Company has two equity incentive plans:

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Incentive Plans

The Company has three equity incentive plans:

the 2010 BLB Worldwide Holdings, Inc.

Stock Option Plan (the “2010 Option Plan”) and the 2015 Stock Incentive Plan (“2015 Incentive Plan”).

Stock Option Plan (the “2010 Option Plan”), the 2015 Stock Incentive Plan (“2015 Incentive Plan”) and the Bally’s Corporation 2021 Equity Incentive Plan (“2021 Incentive Plan”), collectively (the “Equity Incentive Plans”).

The 2010 Option Plan provided for options to acquire 2,455,368 shares of the Company’s common stock.

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Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan.

The 2015 Incentive Plan provides for the grant of stock options, RSAs, RSUs and other stock-based awards (including those with performance-based vesting criteria) to employees, directors or consultants of the Company.

The 2015 Incentive Plan provides for the issuance of up to 1,700,000 shares of the Company’s common stock.

The 2015 Incentive Plan provided for the grant of stock options, RSAs, RSUs, PSUs and other stock-based awards (“OSBAs”) (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 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.

As of December 31, 2021, 3,364,623 shares were available for grant under the 2021 Incentive Plan.

The Company recognized total share-based compensation expense of $ 17.7 million and $ 3.8 million for the years ended December 31, 2020 and 2019, respectively, compared to a benefit of $ 1.5 million for the year ended December 31, 2018.

The increase in share-based compensation expense was directly attributable to the Company’s annual grant of restricted stock awards to eligible employees and executive management which occurred during the first quarter of 2020 with one-third of the restricted stock award vesting during the first quarter of 2020 and one-third vesting at the end of the 2020 year.

Additionally, the Company issued other stock based awards (“OSBAs”) to eligible employees in the form of immediately vested common stock on December 30, 2020.

See “ Other Stock Based Awards” section below.

The total income tax benefit (expense) for share-based compensation arrangements was $ 6.9 million, $ 0.9 million , and $( 0.4 ) million, for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company recognized total share-based compensation expense of $ 20.1 million, $ 17.7 million and $ 3.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The total income tax benefit for share-based compensation arrangements was $ 5.1 million, $ 6.9 million, and $ 0.9 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, there was $ 37.6 million of unrecognized compensation cost related to outstanding share-based compensation arrangements (including stock options, RSA, RSU and PSU arrangements) which is expected to be recognized over a weighted average period of 1.3 years.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

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There were no stock options granted during the years ended December 31, 2021, 2020 or 2019.

The total intrinsic value of options exercised or unvested options put to the Company (see discussions below) and cancelled was $ 0.4 million and $ 40.5 million for the years ended December 31, 2020 and 2018, respectively.

The total intrinsic value of options exercised was $ 3.4 million and $ 0.4 million for the years ended December 31, 2021 and 2020, respectively.

There were no options exercised for the year ended December 31, 2019.

All stock option awards were vested as of December 31, 2017.

Accordingly, there was no remaining compensation cost relating to unvested stock options as of December 31, 2020, 2019 or 2018.

Exercises and Related Notes Receivable and Puts

In July and November 2015, certain employees and directors exercised a combined total of 1,864,428 outstanding stock options (the “Financed Options”) and executed promissory notes to TRMG in connection with those exercises to finance the exercise price and associated income taxes.

The notes are considered nonrecourse for accounting purposes.

As such, (i) the purchases of common stock with a promissory note continued to be accounted for as stock options and (ii) no receivable for amounts due under the promissory notes for the exercise price of the Financed Options were recorded on the Company’s consolidated balance sheets.

On August 19, 2015, all previously issued option agreements under the 2010 Option Plan were amended (the “Put Amendment”), allowing the participant to request purchase by the Company (“Put”) during April or October each year beginning in 2016 (“Put Periods”) of up to one-third of any previously issued shares or vested but unexercised options under the 2010 Option Plan for Fair Market Value, as defined therein, less the applicable exercise price in the case of vested but unexercised options.

Participants seeking to exercise the Put were required to be employed by the Company or serving as a director of the Company at the time of the request.

Any purchases by the Company during a Put Period were subject to limitations contained in the credit agreements related to the Company’s indebtedness that were outstanding at the time.

In March 2018, the Company revised the Put Periods from April and October to four periods in each year, subject to anticipated blackout periods.

In December 2018, all outstanding options under the 2010 Option Plan were amended to remove the Put rights.

Certain employees and directors Put a total of 331,112 Financed Options to the Company at $ 23.50 per share and paid the related promissory notes with a portion of the proceeds during the year ended December 31, 2018.

The shares were included in Treasury stock in the consolidated balance sheets after the respective Put dates.

During the year ended December 31, 2018, in addition to the Put shares discussed above, promissory notes related to 1,439,984 Financed Options were paid.

On the date the promissory notes are paid, the options are considered exercised and the common stock is considered issued for accounting purposes.

As of December 31, 2020 and 2019, there were no Financed Options outstanding.

Exercises for Cash and Puts of Unexercised Options

During 2017, 13,336 vested but unexercised options were Put to the Company at $ 24.38 per share and 54,976 options were exercised, with cash paid for the exercise price.

During the years ended December 31, 2018 and 2019, no vested but unexercised options were Put to the Company and no options, excluding the Financed Options, were exercised.

There were no unvested stock option awards outstanding as of December 31, 2021.

There was no remaining compensation cost relating to unvested stock options as of December 31, 2021, 2020 or 2019.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2018, when the Put rights were removed, the awards were reclassified from liability classified awards to equity classified awards.

Upon the modification of the awards, the intrinsic value of the outstanding stock options of $ 2.9 million was moved from the stock options liability to additional paid in capital in the consolidated balance sheets.

For the year ended December 31, 2018 the Company recorded a reduction to compensation expense of $ 3.2 million to adjust the stock options to the intrinsic value as of the date the stock options were exercised or reclassified to equity classified awards.

Restricted Stock Units and Performance-Based Restricted Stock Units

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The fair value of RSUs and PSUs issued subsequent to the Company becoming publicly traded in 2019 are determined based on the number of units granted and the quoted price of the Company’s common stock as of the grant date.

Refer to “ Valuation of Equity Compensation Awards” below for the valuation methodology used for awards issued prior to 2019.

Under the terms of the above awards, shares of the Company’s stock are issued upon vesting of the awards, unless deferral is elected by the participant at the time of the award.

The Company removed the Put rights from the award agreements in December 2018;

prior to that time, at the election of the participant, issued shares could be Put to the Company at fair value during any Put Period that was at least three years following the vesting date.

Equity-Classified Awards

The following summary presents information of equity-classified RSU and PSU activity for the year ended December 31, 2021:

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The weighted average grant date fair value for RSUs and PSUs was $ 53.52 , $ 31.27 and $ 30.68 in 2021, 2020, and 2019, respectively.

The total intrinsic value of RSUs vested, but not deferred, during the year ended December 31, 2020 was $ 23.7 million, $ 5.4 million and $ 0.6 million, for the years ended December 31, 2020, 2019 and 2018, respectively.

The total intrinsic value of RSUs vested was $ 9.1 million, $ 23.7 million and $ 5.4 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

For PSU awards, performance objectives for each year are established no later than 90 days following the start of the year.

As the performance targets have not yet been established for the PSUs that are eligible to be earned in 2021, a grant date has not yet been established for those awards in accordance with ASC 718, Compensation—Stock Compensation .

As the performance targets have not yet been established for the PSUs that are eligible to be earned in 2022, a grant date has not yet been established for those awards in accordance with ASC 718.

The grant date for the 2021, 2020 and 2019 performance periods have been established and, based upon achievement of the performance criteria for the years ended December 31, 2021, 2020 and 2019, 29,995 , 31,478 and 48,525 PSUs, respectively, became eligible for vesting.

For the 2018 performance period the Company did not achieve the performance target, thus no shares became eligible to vest.

Liability-Classified Awards

On January 1, 2018, the Company granted RSU’s to certain employees with a cash settlement feature.

The actual amount of cash will be determined by the number of RSUs to be settled in cash multiplied by the share price of the Company’s common stock at the time of settlement.

These awards vest in one-third increments as of December 31, 2018, 2019 and 2020.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following summary presents liability-classified RSU activity for the year ended December 31, 2020:

Stock Units Weighted

Outstanding at December 31, 2019 9,572 $ 25.50

Vested and settled for cash ( 9,572 ) 25.50

Forfeited — 25.50

Outstanding at December 31, 2020 — $ 25.50

The 9,572 cash-settled vested RSUs were settled for $ 0.5 million cash in January 2021 and 9,568 cash-settled vested RSUs were settled for $ 0.2 million of cash in January 2020.

Other Stock Based Awards

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Total net shares awarded on December 30, 2020 were 131,046 and the associated expense recognized was $ 6.3 million for the year ended December 31, 2020.

Valuation of Equity Compensation Awards

Prior to the Company becoming publicly traded in 2019, the fair values of the shares of common stock underlying the Company’s liability classified awards, RSUs and PSUs were estimated on each grant date by the Board of Directors.

In order to determine the fair value, the Company’s Board of Directors considered, among other things, valuations of its common stock in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately Held Company Equity Securities Issued as Compensation, or the Practice Aid.

Given the absence of a public trading market of the Company’s common stock, its Board of Directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of its common stock.

The Board of Directors used an income approach, weighted 50 %, and a market approach, weighted 50 %.

For the income approach, the Company performed a discounted cash flow analysis, which utilized projected cash flows as well as a residual value, which were discounted to the present value in order to arrive at an enterprise value.

The Company relied on the following key assumptions for the income approach, in addition to management projections for the business:

• a weighted average cost of capital (WACC), which served as the discount rate applied to forecasted future cash flows to calculate the present value of those cash flows;

• a long-term growth rate assumption, which was used to calculate the residual value of the Company before discounting to present value.

• For the market approach, the Company utilized the guideline company method and comparable transaction method by analyzing separately a population of comparable companies and comparable transactions and selected those companies considered to be the most comparable to the Company in terms of business description, size, growth, profitability, risk and return on investment, among other factors.

The Company then used these guideline companies and comparable transactions to develop relevant market multiples and ratios, which were applied to the corresponding latest twelve months and forward financials to estimate total enterprise value.

The Company relied on the following key assumptions for the market approach:

• the Company’s projected financial results determined as of the valuation date based on its best estimates;

• multiples of enterprise value to EBITDA, determined as of the valuation date, based on a group of comparable companies and comparable transactions.

BALLY’S CORPORATION

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STOCKHOLDERS’ EQUITY

Stock Dividend

On January 18, 2019, the Board of Directors of the Company approved a common stock dividend, accounted for as a stock split.

The stock split was effected through a stock dividend of three shares for each share outstanding as of the approval date.

The effect of this dividend has been retroactively applied to the consolidated financial statements as of and for the period ended December 31, 2018 resulting in an increase in shares outstanding from 9,855,339 to 39,421,356 .

All share and per share information included in the consolidated financial statements have been retroactively adjusted to reflect the impact of the stock dividend.

The shares of common stock authorized remained at 100,000,000 , and the shares retained a par value of $ 0.01 .

Capital Return Program and Quarterly Cash 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.

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During the year ended December 31, 2019, in addition to those shares purchased as part of the Offer, the Company repurchased 6,558,379 shares under the capital return program for an aggregate cost of $ 148.8 million.

On February 10, 2020, the Board of Directors approved an increase in the capital return program of $ 100 million.

Total share repurchase activity during the years ended December 31, 2021, 2020 and 2019 is as follows:

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All shares repurchased during the years ended December 31, 2020 and 2019 were transferred to treasury stock.

The Company retired 10,892,083 shares of its common stock held in treasury during the year ended December 31, 2020.

The Company retired 1,431,980 shares of its common stock held in treasury during the year ended December 31, 2019.

The Company retired 3,492,222 , 10,892,083 and 1,431,980 shares of its common stock held in treasury during the years ended December 31, 2021, 2020 and 2019, respectively.

The shares were returned to the status of authorized but unissued shares.

As of December 31, 2020, there were no shares remaining in treasury.

As of December 31, 2021, there were 795,578 shares remaining in treasury.

During the years ended December 31, 2020 and 2019, the Company paid cash dividends of $ 0.10 and $ 0.20 per common share for a total cost of approximately $ 3.2 million and $ 7.6 million, respectively.

There were no cash dividends paid during the year ended December 31, 2021.

As of December 31, 2021 and 2020, $ 347.9 million and $ 84.9 million, respectively, remained available for use under the above-mentioned capital return program.

Pursuant to the terms of the amendment to the Credit Facility entered into on April 24, 2020, as noted in Note 10.

“Long-term Debt,” the Company may not declare or pay dividends on its common stock or make other restricted payments (including repurchases of shares of its common stock) during the Leverage Ratio Covenant Relief Period.

Common Stock Offering

On April 20, 2021, the Company completed an underwritten public offering of common stock at a price to the public of $ 55.00 per share.

The Company issued a total of 12,650,000 shares of Bally’s common stock in the offering, which included 1,650,000 shares issued pursuant to the full exercise of the underwriters’ over-allotment option.

The net proceeds from the offering were approximately $ 671.4 million, after deducting underwriting discounts, but before expenses.

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).

The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition.

The exercise price of the warrant is nominal and its exercise is subject to, among other conditions, requisite gaming authority approvals.

Sinclair agreed not to acquire more than 4.9 % of Bally’s outstanding common shares without such approvals.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2021, no shares of preferred stock have been issued.

Shares Outstanding

As of December 31, 2021, the Company had 52,254,477 common shares 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 are summarized below:

Sinclair Penny Warrants ( Note 10 )

Sinclair Performance Warrants ( Note 10 )

Sinclair Options (1) ( Note 10 )

MKF penny warrants ( Note 5 )

MKF contingent shares ( Note 5 )

Telescope contingent shares ( Note 5 )

SportCaller contingent shares (2) ( Note 5 )

Outstanding awards under Equity Incentive Plans ( Note 14 )

__________________________________

(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>US Dollar conversion rate of 0.8827 as of December 31, 2021 and the closing share price of Company common shares of $ 38.06 per share to calculate the shares expected to be issued if all earn-out targets are met.

EMPLOYEE BENEFIT PLANS

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Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

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As of December 31, 2021 and 2020, all plans that have either a FIP or RP requirement have had the respective plan implemented.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan Number Pension Protection Act

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Plumbers and Pipefitters Pension Fund 52-6152779 Yellow Yellow Yes/Implemented 175 171 299 No 8/31/2022

Rhode Island Laborers Pension Fund 51-6095806 Green Green No 483 785 934 Yes 10/31/2022

Rhode Island Laborers Pension Fund 51-6095806 Green Green No 671 483 785 No 10/31/2022

New England Teamsters Pension Fund 04-6372430 Red Red Yes/Implemented 254 230 361 No 6/30/2023

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(3) Formerly listed as Hotel & Restaurant Employees International Pension Fund - Allocations of contributions between the two plans are determined by the plan administrator.

Unions at both our Twin River Lincoln and Bally's Atlantic City properties participate in the UNITE HERE Retirement funds.

(4) Contract renewal is currently in negotiations

Unions at Bally’s Twin River and Bally’s Atlantic City participate in the UNITE HERE Retirement funds.

Contributions, based on wages paid to covered employees totaled approximately $ 3.4 million, $ 2.0 million and $ 3.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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The Company’s share of the unfunded vested liability related to its multi-employer plans, if any, other than the New England Teamsters and Trucking Industry Pension Fund discussed below, is not determinable.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the terms of certain collective bargaining agreements, the Company contributes to a number of multi-employer annuity funds.

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The Company acquired two defined pension plans with the acquisition of Dover Downs on March 28, 2019, the Dover Downs Gaming & Entertainment, Inc.

Pension Plan (“Dover Downs Pension Plan”) and the Dover Downs Gaming & Entertainment, Inc Excess Pension Plan (“Excess Plan”).

Pension Plan (“Dover Downs Pension Plan”) and the Dover Downs Gaming & Entertainment, Inc Excess Pension Plan, which was settled as of March 31, 2019.

The acquisition resulted in a revaluation of the benefit pension plan obligation as of the acquisition date.

Dover Downs had historically maintained the Excess Plan, a non-qualified, non-contributory defined benefit pension plan for certain employees that had been frozen since July 2011.

This Excess Plan provided benefits that would otherwise be provided under the qualified Dover Downs Pension Plan but for maximum benefit and compensation limits applicable under federal tax law.

The cost associated with the Excess Plan is determined using the same actuarial methods and assumptions as those used for the qualified Dover Downs Pension Plan.

The Excess Plan was settled as of March 31, 2019.

The Company made a settlement payment of $ 0.5 million during the three months ended March 31, 2019.

The settlement payment is recorded within accrued liabilities on the opening balance sheet as of the acquisition date.

Dover Downs Pension Plan

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Compensation earned by employees up to July 31, 2011 is used for purposes of calculating benefits under the Dover Downs Pension Plan with no future benefit accruals after this date.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the defined benefit pension plan, the accumulated benefit obligation is equal to the projected benefit obligation.

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Beginning benefit obligation $ 30,935 $ 27,849 $ 24,067

Service cost — —

Interest cost 760 897 666

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Beginning fair value of plan assets $ 21,721 $ 19,162 $ 17,454

Actual return (loss) on plan assets 2,653 1,815

Actual return on plan assets 2,690 2,653 1,815

Employer contributions 670 786 365

Benefits paid ( 921 ) ( 880 ) ( 472 )

Settlement payments — —

Fair value of plan assets at end of year $ 24,160 $ 21,721 $ 19,162

Unfunded status at end of year $ ( 4,647 ) $ ( 9,214 ) $ ( 8,687 )

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized consist of the following:

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Expected return on plan assets ( 1,618 ) ( 1,428 ) ( 967 )

Net periodic benefit (income) cost $ ( 531 ) $ ( 301 )

Amortization of net loss 104 — —

Net periodic benefit income $ ( 754 ) $ ( 531 ) $ ( 301 )

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

Net actuarial loss $ 1,844 $ 2,740

Total expense recognized in other comprehensive income $ 1,844 $ 2,740

Total expense recognized in net periodic benefit cost (income) and other comprehensive income (loss) $ 1,313 $ 2,439

The estimated net actuarial loss expected to be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost for the Dover Downs Pension Plan for the year ending December 31, 2021 is $ 0.2 million.

Net actuarial (gain) loss $ ( 3,144 ) $ 1,844 $ 2,740

Total (income) expense recognized in other comprehensive loss $ ( 3,144 ) $ 1,844 $ 2,740

Total (income) expense recognized in net periodic benefit cost (income) and other comprehensive loss $ ( 3,898 ) $ 1,313 $ 2,439

No estimated net actuarial gain is expected to be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost for the Dover Downs Pension Plan for the year ending December 31, 2022.

Amounts recognized in the consolidated balance sheets as of December 31, 2021 and 2020 consist of non-current liabilities of $ 4.6 million and $ 9.2 million, respectively.

The principal assumptions used to determine net periodic pension benefit cost and benefit obligation under the Dover Downs Pension Plan as of December 31, 2020 consist of the following:

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The principal assumptions used to determine net periodic pension benefit cost and benefit obligation under the Dover Downs Pension Plan consist of the following:

Year Ended December 31,

2021 2020 2019

Benefit obligation assumptions:

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Of the equity portion, approximately 50 % will be targeted to be invested in passively managed securities using ETFs and the other approximately 50 % will be targeted to be invested in actively managed investment vehicles.

Diversification is addressed by investing in mutual funds and ETFs which hold large, mid and small capitalization U.S.

stocks, international (non-U.S.) equities, and emerging markets.

Diversification is addressed by investing in mutual funds and ETFs which hold large-, middle- and small-capitalization US stocks, international (non-US) equities and emerging markets.

A percentage of the investments are readily marketable in order to be available to fund benefit payment obligations as they become payable.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The asset allocation targets and the actual allocation of pension assets in the Dover Downs Pension Plan as of December 31, 2021 are as follows:

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Total mutual funds/ETFs $ 24,160 $ 24,160 $ — $ —

Minimum pension contributions of $ 0.5 million a re required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) in 2020.

We expect to contribute approximately $ 0.7 million to the Dover Downs Pension Plan in 2021.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

We are not expecting to contribute to the Dover Downs Pension Plan in 2022.

The estimated future benefit payments under the Dover Downs Pension Plan are as follows:

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2027-2031 6,349

Supplemental Executive Retirement Plan

The Company also acquired Dover Downs’ non-elective, non-qualified supplemental executive retirement plan (“SERP”) which provides deferred compensation to certain highly compensated employees of Dover Downs.

The SERP is a discretionary defined contribution plan and contributions made to the SERP in any given year are not guaranteed and will be at the sole discretion of the committee responsible for administering the SERP.

The liability for SERP pension benefits as of both the acquisition date and December 31, 2019, was de minimis.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering non-union employees and certain union employees.

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.

Dover Downs also maintains a defined contribution 401(k) plan, which permits participation by substantially all of its employees.

Total employer contribution expense to both 401(k) profit-sharing plans were $ 0.7 million, $ 1.6 million and $ 1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

New England Teamsters and Trucking Industry Pension Fund

The New England Teamsters and Trucking Industry Pension Fund (the “Pension Fund”) is in critical and declining status.

On September 30, 2018, the Company entered into an agreement to withdraw from the Pension Fund and is not expected to have any further obligation to contribute to the Pension Fund following the withdrawal payment of $ 3.7 million the Company paid in October 2018.

The Company recorded $ 3.7 million in “Advertising, general and administrative expense” in the consolidated statements of operations for the year ended December 31, 2018.

On October 1, 2018, the Company entered into an agreement to re-enter the Pension Fund as a new employer and to contribute specified rates in the new agreement.

The agreements have been ratified by the union and the trustees of the Pension Fund.

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 $ 4.8 million, $ 0.7 million and $ 1.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The components of income (loss) before taxes are as follows:

Years Ended December 31,

2021 2020 2019

Domestic $ ( 83,449 ) $ ( 74,811 ) $ 75,180

Foreign 7,273 — —

Total $ ( 76,176 ) $ ( 74,811 ) $ 75,180

The components of the provision for income taxes are as follows:

4 unchanged sentences

State 4,676 2,002 2,033

Foreign 6,448 — —

840 ( 70,515 ) 11,055

2 unchanged sentences

State 4,770 ( 8,680 ) 1,632

Foreign ( 10,281 ) — —

( 5,217 ) 1,191 8,995

(Benefit) Provision for income taxes $ ( 4,377 ) $ ( 69,324 ) $ 20,050

The effective rate varies from the statutory U.S.

federal tax rate as follows:

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The effective rate varies from the statutory US federal tax rate as follows:

Years Ended December 31,

(in thousands) 2021 2020 2019

Income tax expense at statutory federal rate $ ( 15,710 ) $ 15,789 $ 20,537

Income tax (benefit) expense at statutory federal rate $ ( 15,997 ) $ ( 15,710 ) $ 15,789

State income taxes, net of federal effect 7,462 ( 5,276 ) 2,883

Foreign tax rate adjustment ( 7,165 ) — —

Nondeductible professional fees 10,421 ( 665 ) 1,255

3 unchanged sentences

CARES Act ( 5,320 ) ( 33,347 ) —

Deferred tax impact of TCJA — — 117

Return to provision adjustments ( 595 ) ( 270 ) ( 245 )

Global intangible low-tax income (“GILTI”) 327 — —

Loss on derivative instruments 4,363 — —

Change in uncertain tax positions — — 205

1 unchanged sentence

Effective income tax rate on continuing operations 5.7 % 92.7 % 26.7 %

Benefit for income taxes for the years ended December 31, 2021 and 2020 was $ 4.4 million and $ 69.3 million, respectively.

The effective tax rate for the year ended December 31, 2021 was 5.7 % compared to 92.7 % in 2020.

The decrease in the effective tax rate was due to an increase in state tax expense and an increase in nondeductible costs related to the acquisition of Gamesys during 2021, as well as lower bargain purchase gain during 2021 as compared to 2020.

Further, the 2020 provision included a significant rate benefit as a result of the CARES Act, and we had a lesser benefit in the 2021 provision.

In addition, Gamesys entities are taxed at lowers rates versus the US federal tax rate, which impacted 2021 beneficially due to the rate differential.

This benefit was offset by amounts related to share-based compensation, loss on derivative instruments, and other permanent amounts.

BALLY’S CORPORATION

6 unchanged sentences

Accrued liabilities and other $ 1,162 $ 2,128

Tax basis difference in property and equipment — 9,148

Tax basis difference in share-based compensation 914 1,800

Tax basis difference in naming rights liabilities 60,159 —

Tax basis difference in self constructed assets 3,953 —

Federal tax net operating loss carryforwards 648 121

State tax net operating loss carryforwards 7,816 310

Share-based compensation 2,792 914

Naming rights liabilities 43,298 60,159

Self constructed assets 5,730 3,953

Interest 21,208 —

Net operating loss carryforwards 20,569 8,464

Total deferred tax assets, net $ 94,759 $ 75,618

Deferred tax liabilities:

Tax basis difference in land $ ( 5,053 ) $ ( 2,865 )

Tax basis difference in property and equipment ( 4,998 ) —

Land $ ( 4,071 ) $ ( 5,053 )

Property and equipment ( 35,807 ) ( 4,998 )

Change in accounting method ( 8,494 ) ( 16,234 )

Tax basis difference in non-shareholder contribution ( 6,766 ) —

Tax basis difference in goodwill ( 4,433 ) ( 4,296 )

Tax basis difference in amortizable assets ( 75,117 ) ( 21,241 )

Non-shareholder contribution — ( 6,766 )

Goodwill ( 12,544 ) ( 4,433 )

Amortizable assets ( 236,388 ) ( 75,117 )

Total deferred tax liabilities $ ( 297,304 ) $ ( 112,601 )

1 unchanged sentence

The Company will only recognize a deferred tax asset when, based on available evidence, realization is more likely than not.

The Company has assessed its deferred tax liabilities arising from taxable temporary differences and has concluded such liabilities are a sufficient source of income for the realization of deferred tax assets, including indefinite life taxable temporary differences which offset, subject to limitation, deferred tax assets with unlimited carryovers, such as the Section 163(j) interest limitation.

Accordingly, no valuation has been established as of December 31, 2021 and 2020, respectively.

During 2019, the Company acquired Dover Downs Entertainment, Inc.

in a stock acquisition.

Pursuant to ASC 805, the Company recognized an acquisition of $ 11.9 million of deferred tax assets.

During 2020, the Company acquired the assets of Bally’s Park Place LLC and Bally’s Atlantic City LLC in an asset acquisition.

Pursuant to ASC 805, the Company recognized an acquisition of $ 11.1 million of deferred tax liabilities.

During 2020, the Company acquired 100 % membership interests of Eldorado Shreveport, #1 LLC and Eldorado Shreveport, #2 LLC in an equity acquisition treated as an asset acquisition for tax purposes.

Pursuant to ASC Topic 805, Business Combinations , the Company recognized an acquisition of $ 11.5 million of deferred tax liabilities.

For the years ended December 31, 2020 and 2019 the net deferred tax liabilities increased by $ 23.2 million and decreased by $ 3.7 million, respectively.

For the year ended December 31, 2020, an increase of $ 1.2 million was included in income from operations, an increase of $ 22.6 million was acquired from business combinations in 2020, and a decrease $ 0.6 million was included in other comprehensive loss.

For the year ended December 31, 2019, an increase of $ 9.0 million was included in income from operations, a decrease of $ 11.9 million was acquired from the Dover Downs Entertainment, Inc., and a decrease of $ 0.9 million was included in other comprehensive loss.

At December 31, 2021, the Company's cash and cash equivalents totaled $ 206.2 million, of which approximately 36 % was held in locations outside the US where the Company has determined to establish an assertion to indefinitely reinvest undistributed earnings to support its continued expansion and investments in such foreign locations.

To the extent the Company were to repatriate such funds, it may incur withholding taxes, state income taxes and the tax expense or benefit associated with foreign currency gains or losses.

The Company believes it has sufficient sources of cash in the US to fund its US operations without the need to repatriate those funds held outside the US.

For the years ended December 31, 2021 and 2020 the net deferred tax liabilities increased by $ 165.6 million and $ 23.2 million, respectively.

For the year ended December 31, 2021, a decrease of $ 5.2 million was included in income from operations, an increase of $ 169.8 million was acquired from business combinations in 2021, and a decrease of $ 1.0 million was included in other comprehensive loss.

For the year ended December 31, 2020, an increase of $ 1.2 million was included in income from operations, an increase of $ 22.6 million was acquired from business combinations in 2020, and a decrease of $ 0.6 million was included in other comprehensive loss.

As of December 31, 2021, the Company has $ 14.6 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period.

There was $ 3.1 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period as of December 31, 2020.

As of December 31, 2021 and December 31, 2020, the Company had $ 92.4 million and $ 132.9 million of state net operating loss carryforwards, respectively, which expire at various dates through 2041.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, the Company has $ 3.1 million of federal net operating carryforwards subject to a section 382 limitation and $ 3.8 million of Delaware net operating loss carryforwards, both with an unlimited carryforward period.

There was $ 0.6 million of federal net operating carryforwards subject to a section 382 limitation and $ 2.6 million of Delaware net operating loss carryforwards, both with an unlimited carryforward period, as of December 31, 2019.

As of December 31, 2020 and December 31, 2019, the Company has $ 12.1 million and $ 3.6 million, respectively, of Colorado net operating loss carryforwards which expire at various dates through 2037.

In addition, at December 31, 2020, the Company has $ 22.7 million of Louisiana loss carryforwards, $ 15.5 million of Missouri loss carryforwards, $ 17.2 million of New Jersey loss carryforwards, and $ 65.3 million of Rhode Island loss carryforwards, which expire at various dates through 2040.

There were no Louisiana, Missouri, New Jersey, or Rhode Island loss carryforwards at December 31, 2019.

As of December 31, 2020, the Company anticipates sufficient taxable income to make utilization of these net operating losses more likely than not during the carryforward periods, and accordingly, no valuation allowance has been established.

The Internal Revenue Code (IRC) Section 382 provides for a limitation of the annual use of net operating loss and tax credit carryforwards following certain ownership changes (as defined by the IRC Section 382) that limits the Company’s ability to utilize these carryforwards prior to expiration.

Section 382 can also apply when we acquire subsidiaries with net operating loss carryforwards, as there may be limitations on the use of acquired net operating losses against our taxable income.

As of December 31, 2021, the Company expects to utilize all acquired tax attributes prior to expiration.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law.

The CARES Act provides opportunities for additional liquidity, loan guarantees, and other government programs to support companies affected by the COVID-19 pandemic and their employees, including those that operate in the gaming area.

Based on the Company’s analysis of the CARES Act, the benefits the Company believes will be available to it include:

refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return is filed;

The benefits of the CARES Act that were available to us included:

refund of federal income taxes due to five-year carryback of net operating loss incurred in 2020 when our 2020 tax return was filed in 2021;

relaxation of interest expense deduction limitation for income tax purposes;

the employee retention credit, providing a refundable federal tax credit equal to 50% of the first $10,000 of qualified wages and benefits, including qualified medical plan contributions, paid to employees while they are not performing services after March 12, 2020 and before January 1, 2021.

deferral of all employer Federal Insurance Contributions Act (“FICA”) taxes for the remainder of 2020, 50% payable by December 2021 and the remainder payable by December 2022.

The Company realized a tax benefit of $ 33.3 million in the 2020 provision.

The Company realized a tax benefit of $ 5.3 million and $ 33.3 million in the years ended December 31, 2021 and 2020, respectively.

The Company intends to continue to review and consider any available potential benefits under the CARES Act for which it qualifies, including those described above.

The Company cannot predict the manner in which such benefits or any of the other benefits described herein will be allocated or administered and the Company cannot provide assurances that it will be able to access such benefits in a timely manner or at all.

government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “TCJA”).

SAB 118 provides a measurement period that begins in the reporting period that includes the TCJA’s enactment date and ends when an entity has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC 740, however in no circumstance should the measurement period extend beyond one year from the enactment date.

In accordance with SAB 118, a company must reflect in its financial statements the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete.

SAB 118 provides that to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.

In accordance with SAB 118, the Company has recorded a provisional estimated income tax benefit of $( 0.1 ) million for the year ended December 31, 2019 related to the remeasurement of the Company’s net deferred tax liability and other effects of the TCJA.

As a result of the adoption of the TCJA, the Company remeasured the net deferred tax liability at the reduced federal corporate income tax rate.

During the fourth quarter of 2018, the Company completed its analysis to determine the deferred tax effect of the TCJA and recorded immaterial adjustments as of December 22, 2018.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If the US government or any other governmental authority agrees to provide such aid under the CARES Act or any other crisis relief assistance, it may impose certain requirements on the recipients of the aid, including restrictions on executive officer compensation, dividends, prepayment of debt, limitations on debt and other similar restrictions that will apply for a period of time after the aid is repaid or redeemed in full.

From time to time, the Company may be subject to audits covering a variety of tax matters by taxing authorities in any taxing jurisdiction where the Company conducts business.

1 unchanged sentence

This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor.

As of December 31, 2020, there were no tax contingency accruals for uncertain tax positions, which would impact the effective tax rate, if recognized.

There were no tax contingency accruals for uncertain tax positions recorded as of December 31, 2020.

There was an acquired tax contingency accrual of $ 5.1 million for uncertain tax positions recorded as of December 31, 2021.

There was no unrecognized tax benefit recorded as of December 31, 2020.

As of December 31, 2021, there was $ 5.1 million tax contingency accruals for uncertain tax positions, which would impact the effective tax rate, if recognized.

A reconciliation of the beginning and ending balances of the gross liability for uncertain tax positions is as follows:

Years Ended December 31,

Year Ended December 31,

(in thousands) 2021 2020 2019

2 unchanged sentences

Decreases related to tax positions taken during prior periods — — ( 400 )

Decreases related to settlements with taxing authorities — — ( 66 )

Uncertain tax position liability at the end of the year $ 5,131 $ — $ —

The Company and its subsidiaries file tax returns in several jurisdictions including the United States and the States of Colorado, Delaware, Louisiana, Mississippi, Missouri, New Jersey and Rhode Island.

The Company remains subject to examination for U.S.

federal income tax purposes for the years ended December 31, 2017 through 2020.

The Company remains subject to examination for state tax purposes for the years ended December 31, 2012 through 2020.

The Company and its subsidiaries file tax returns in several jurisdictions including the US and various US state and foreign jurisdictions.

The Company remains subject to examination for US federal income tax purposes for the years ended December 31, 2017 through 2021.

The Company remains subject to examination for state and foreign income tax purposes for the years ended December 31, 2012 through 2021.

The Company is currently under audit by the State of Colorado for tax years ended December 31, 2012 through 2015.

1 unchanged sentence

In addition, the disallowance of a loss carryforward generated in a period outside of the normal statute of limitations is generally open until the statute of limitations expires in the year of the utilization of the loss.

The Company has a tax sharing agreement with its subsidiaries.

Under the agreement, subsidiaries are required to satisfy their separate return liability and pay for benefits realized by virtue of filing a consolidated return.

The Company and its subsidiaries made total cash tax payments during 2020 and 2019 of $ 3.8 million and $ 16.5 million, respectively, to federal and state taxing authorities.

Effective July 10, 2014, the tax sharing agreement was amended to comply with the credit agreement in place related to the Company’s indebtedness.

The amendment limits payments to any Unrestricted Subsidiaries, as defined in the credit agreement, to the actual payments of tax made by the unrestricted subsidiary directly or indirectly to the consolidated group.

As of December 31, 2020, Mile High USA, Inc.

and its subsidiaries are unrestricted subsidiaries.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Hard Rock License Agreement

4 unchanged sentences

Bally’s Trade Name

On October 13, 2020, the Company announced we had acquired the Bally’s brand from Caesars.

Total cost to acquire the brand was $ 20.0 million which is payable in cash in two equal installments of $ 10.0 million on the first and second anniversary of the purchase date.

The present value of these amounts due are recorded within “Accrued liabilities” in the consolidated balance sheets as of December 31, 2020.

Acquisition Commitments

As noted in Note 5.

“Acquisitions,” the Company had multiple pending acquisition agreements as of December 31, 2020, each of which, if terminated in certain circumstances as a result of the failure of the Company to obtain regulatory approvals, the Company may be obligated to pay a termination fee.

The associated fee for MontBleu is $ 5.4 million, for Jumer’s is $ 4.0 million, in addition to the deposit already paid of $ 4.0 million, the fee for Tropicana Evansville is $ 16.8 million, and the fee for Bet.Works is $ 5.0 million.

On October 13, 2020, the Company announced we had acquired Bally’s brand from Caesars.

Total cost to acquire the brand was $ 20.0 million which is payable in cash in two equal installments of $ 10.0 million, the first made in October 2021 and the second payment to be made on the second anniversary of the purchase date.

The present value of these amounts due are recorded within “Accrued liabilities” in the consolidated balance sheets as of December 31, 2021 and 2020.

Master Video Lottery Terminal Contract

The current term for the Twin River Casino Hotel contract with the Division of Lotteries of the Rhode Island Department of Revenue ends July 17, 2025, with one additional five-year option subject to Twin River Casino Hotel meeting minimum employment requirements.

The current term for the Tiverton Casino Hotel contract with the Division of Lotteries of the Rhode Island Department of Revenue ends November 23, 2025, with one additional five-year option subject to meeting minimum employment requirements.

The current term for the Twin River Casino Hotel contract with the Division of Lotteries of the Rhode Island Department of Revenue ends July 1, 2043.

The current term for the Tiverton Casino Hotel contract with the Division of Lotteries of the Rhode Island Department of Revenue ends July 1, 2043.

The contract was automatically assigned, pursuant to Rhode Island law, from Newport Grand to Tiverton Casino Hotel upon commencement of gaming operations at the new facility.

Capital Expenditure Commitment - Bally’s Atlantic City

As part of the regulatory approval process with the State of New Jersey, the Company committed to spend $ 90 million in capital expenditures over a five year period to invest in and improve the property.

The commitment calls for expenditures of $ 25 million each in 2021, 2022, and 2023, $ 10 million in 2024, and $ 5 million in 2025.

To help defray some of these committed costs, the Company entered into a separate agreement with Caesars whereby Caesars would be responsible for $ 30 million of the committed capital spend.

The fair value of this agreement with Caesars was recorded as a reduction to the purchase price paid.

Refer to Note.

5 “Acquisitions” for further information.

In connection with the acquisition of the Tropicana Evansville casino operations, an affiliate of Gaming & Leisure Properties, Inc.

(“GLPI”) has agreed to acquire the real estate associated with the Tropicana Evansville Casino from the seller for $ 340.0 million and lease it back to the Company for $ 28.0 million per year, subject to escalation.

GLPI has also agreed to acquire the real estate associated with our Dover Downs casino for a purchase price of $ 144.0 million and lease it back to the Company for $ 12.0 million per year, subject to escalation.

Both leases are governed by a master lease agreement with GLPI which has an initial term of 15 years and includes four five-years options.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capital Expenditure Commitments

Bally’s Atlantic City - As part of the regulatory approval process with the State of New Jersey, the Company committed to spend $ 100 million in capital expenditures over a five year period to invest in and improve the property.

The commitment calls for expenditures of no less than $ 25 million each in 2021, 2022 and 2023 and $ 85 million in aggregate for 2021, 2022 and 2023.

The remaining $ 15 million of committed capital must be spent over 2024 and 2025.

From 2021 through 2025, no less than $ 35 million must be invested in the hotel and no less than $ 65 million must be invested in non-hotel projects.

Bally’s Twin River - Per the terms of the Regulatory Agreement in Rhode Island, the Company is committed to invest $ 100 million in its Rhode Island properties over the term of the master contract through June 30, 2043, including an expansion and the addition of new amenities at Bally’s Twin River.

Bally’s Lake Tahoe

The Company acquired Bally’s Lake Tahoe for $ 14.2 million, payable one year from the closing date and subject to customary post-closing adjustments.

Refer to Note 5 “ Acquisitions ” for further information.

As discussed in Note 13 “ Leases ,” per the terms of the Master Lease, an affiliate of GLPI agreed to acquire the real estate associated with the Company’s Bally’s Evansville property for $ 340.0 million and lease it back to the Company for $ 28.0 million per year and the Company’s Bally’s Dover casino for $ 144.0 million and lease it back to the Company for $ 12.0 million per year, each subject to escalation.

Both leases are governed by the Master Lease which has an initial term of 15 years and includes four five-years options.

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, £ 11.2 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing.

The Company has recorded $ 15.1 million representing the deferred consideration which is payable on March 26, 2022, and recorded within current liabilities of the consolidated balance sheet as of December 31, 2021.

Of such amount, $ 7.5 million is payable to related parties as former majority shareholders of GHL.

Collective Bargaining Agreements

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As of such date, we had 22 collective bargaining agreements covering approximately 2,364 employees.

Three collective bargaining agreements are scheduled to expire in 2021, and we are currently renegotiating one collective bargaining agreement that has expired.

All collective bargaining agreements are in good standing and have been renegotiated for a three or five year term or extended until 2022.

There can be no assurance that we will be able to extend or enter into replacement agreements.

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SEGMENT REPORTING

As of December 31, 2020, the Company has ten operating segments, Twin River Casino Hotel, Hard Rock Biloxi, Tiverton Casino Hotel, Dover Downs, the Black Hawk Casinos, Casino KC, Casino Vicksburg, Bally’s Atlantic City, Shreveport and Mile High USA.

Beginning in the third quarter of 2020, the Company changed its reportable 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 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, the Company’s operating segments are aggregated into four reportable segments:

Rhode Island, Mid-Atlantic, Southeast and West.

As of December 31, 2020, the Company’s Rhode Island reportable segment includes Twin River Casino Hotel and Tiverton Casino Hotel, the Mid-Atlantic reportable segment includes Dover Downs and Bally’s Atlantic City, the Southeast reportable segment includes Hard Rock Biloxi, Casino Vicksburg and Shreveport, and the West reportable segment includes Casino KC and the Black Hawk Casinos.

As of December 31, 2020, and reflected in the table below, the “Other” category includes Mile High USA, an immaterial operating segment, and also includes interest expense for the Company and certain corporate 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.

Hard Rock Biloxi and Dover Downs were previously reported as “Biloxi” and “Delaware” reportable segments, respectively, and prior year amounts have been conformed into the new presentation.

Black Hawk Casinos was previously included in the “Other’ category since its acquisition on January 23, 2020.

The Company is currently evaluating the impact that its pending casino acquisitions and developments will have on its operating and reporting segments.

It is expected that MontBleu will be reported with the West, but no determination has been made for Tropicana Evansville, Jumer’s or the Centre City, Pennsylvania development project.

In addition, the Company is expecting to create new reportable segment which would include SportCaller, Monkey Knife Fight and Bet.Works as the Bally’s Interactive segment.

The Company’s operations are all within the United States.

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 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 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.

The Company’s three reportable segments are comprised of the following components as of December 31, 2021:

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

As of December 31, 2021, the Company’s operations were predominately in the US but also included operations in Europe and Asia and other immaterial jurisdictions.

For geographical reporting purposes, Europe, Asia and other immaterial jurisdictions have been aggregated and no country exceeds 12% of total revenue.

The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

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The following table reflects revenues, income (loss) and identifiable assets for each of the Company’s reportable segments and reconciles these to the amounts shown in the Company’s consolidated financial statements.

Island Mid-Atlantic Southeast West Other Total

Prior year amounts have been conformed into the new segment presentation, as described above.

Casinos & Resorts North America Interactive International Interactive Other Total

Year Ended December 31,

Total revenue $ 1,032,828 $ 38,352 $ 251,263 $ — $ 1,322,443

Depreciation and amortization 54,120 18,096 46,341 26,229 144,786

Income (loss) from operations 258,452 ( 44,820 ) 20,689 ( 140,939 ) 93,382

Net income (loss) 186,287 ( 36,879 ) 24,337 ( 245,544 ) ( 71,799 )

Depreciation and amortization 17,310 6,082 10,037 4,104 309 37,842

Interest expense, net of amounts capitalized ( 62 ) ( 1 ) ( 91 ) ( 120,020 ) ( 120,174 )

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Capital expenditures 92,479 172 4,166 708 97,525

Total revenue $ 306,306 $ 80,806 $ 127,432 n/a $ 9,033 $ 523,577

Income (loss) from operations 102,080 9,039 23,242 n/a ( 19,735 ) 114,626

Net income (loss) 71,124 6,031 18,165 n/a ( 40,190 ) 55,130

Depreciation and amortization 18,473 3,996 9,743 n/a 180 32,392

Interest expense, net of amounts capitalized 3,274 147 — n/a 36,409 39,830

Capital expenditures 16,649 3,984 6,355 n/a 1,249 28,237

Total revenue $ 372,792 n/a n/a $ — $ 372,792

3 unchanged sentences

Interest expense, net of amounts capitalized 132 n/a n/a 63,116 63,248

Change in value of naming rights liabilities — n/a n/a ( 57,660 ) ( 57,660 )

Gain on bargain purchases — n/a n/a 63,871 63,871

Capital expenditures 14,480 n/a n/a 803 15,283

Island Mid-Atlantic Southeast West Other Total

Total revenue $ 523,577 n/a n/a $ — $ 523,577

Income (loss) from operations 134,616 n/a n/a ( 19,990 ) 114,626

Net income (loss) 95,575 n/a n/a ( 40,445 ) 55,130

Depreciation and amortization 32,367 n/a n/a 25 32,392

Interest expense, net of amounts capitalized 3,421 n/a n/a 36,409 39,830

Capital expenditures 28,091 n/a n/a 146 28,237

Casinos & Resorts North America Interactive International Interactive Other Total

As of December 31,

1 unchanged sentence

Total assets 2,437,249 528,634 3,429,725 157,609 6,553,217

Goodwill $ 83,101 $ 1,047 $ 48,934 n/a $ — $ 133,082

Total assets 537,168 144,376 259,970 n/a 80,373 1,021,887

Goodwill $ 186,979 $ — $ — $ — $ 186,979

Total assets 1,490,204 — — 439,651 1,929,855

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS (LOSS) PER SHARE

Earnings (Loss) Per Share

Basic earnings (loss) per common share is calculated in accordance with ASC 260, Earnings Per Share , which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic (loss) earnings per common share.

To calculate basic (loss) earnings per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants and RSUs, RSAs and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).

Years Ended December 31,

2021 2020 2019

Net (loss) income applicable to common stockholders $ ( 71,799 ) $ ( 5,487 ) $ 55,130

Weighted average shares outstanding, basic 49,643,991 31,315,151 37,705,179

Weighted average effect of dilutive securities — — 114,438

Weighted average shares outstanding, diluted 49,643,991 31,315,151 37,819,617

Per share data

Basic $ ( 1.45 ) $ ( 0.18 ) $ 1.46

Diluted $ ( 1.45 ) $ ( 0.18 ) $ 1.46

Anti-dilutive shares excluded from the calculation of diluted earnings per share 5,015,803 4,919,326 3,251

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.

In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method.

The warrants and options do not participate in net losses.

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 years ended December 31, 2021 and 2020, the Company reported a net loss, and as a result, all of the shares underlying the performance warrants and options were anti-dilutive.

Refer to Note 10 “ Sinclair Agreement ” for further information.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

4 unchanged sentences

Total operating costs and expenses 162,792 187,201 287,045 592,023

(Loss) income from operations ( 3,169 ) ( 20,963 ) 23,383 ( 17,637 )

Income (loss) from operations 29,474 80,532 27,734 ( 44,358 )

Total other expense, net ( 45,009 ) 15,391 ( 47,881 ) ( 92,059 )

(Loss) income before provision for income taxes ( 15,535 ) 95,923 ( 20,147 ) ( 136,417 )

Benefit for income taxes ( 5,664 ) ( 12,518 ) ( 248 ) ( 50,894 )

(Benefit) provision for income taxes ( 4,830 ) 26,981 ( 5,400 ) ( 21,128 )

Net (loss) income ( 10,705 ) 68,942 ( 14,747 ) ( 115,289 )

4 unchanged sentences

Total operating costs and expenses 112,317 49,887 93,241 135,733

Income from operations 30,307 33,846 21,451 29,022

(Loss) income from operations ( 3,169 ) ( 20,963 ) 23,383 ( 17,637 )

Total other expense, net ( 11,373 ) ( 15,110 ) ( 16,908 ) ( 13,034 )

Income before provision for income taxes 23,269 23,325 10,801 17,785

Provision for income taxes 5,673 6,145 3,802 4,430

Net income 17,596 17,180 6,999 13,355

Net income per share

(Loss) income before provision for income taxes ( 14,542 ) ( 36,073 ) 6,475 ( 30,671 )

Benefit for income taxes ( 5,664 ) ( 12,518 ) ( 248 ) ( 50,894 )

Net (loss) income ( 8,878 ) ( 23,555 ) 6,723 20,223

Net (loss) income per share

Basic $ ( 0.28 ) $ ( 0.77 ) $ 0.22 $ 0.62

1 unchanged sentence

SUBSEQUENT EVENTS

On January 22, 2021, the Company entered into an agreement to acquire Monkey Knife Fight.

Refer to Note 5 “Acquisitions” for further information.

On February 5, 2021, the Company acquired SportCaller.

Refer to Note 5 “Acquisitions” for further information.

On February 17, 2022, the Company and certain of its subsidiaries entered into an amended and restated regulatory agreement with the Rhode Island Department of Business Regulation and the Division of Lotteries of the Rhode Island Department of Revenue, which replaces the prior regulatory agreement among the parties.

Subsidiaries of the Company also entered into amendments to the Master Video Lottery Terminal Contracts, dated July 18, 2005 and November 23, 2005, in each case with the Division of Lotteries of the Rhode Island Department of Revenue.

The amended and restated regulatory agreement and the amendments to the master video lottery terminal contracts reflect legislative changes enacted in 2021 that authorized and directed State of Rhode Island regulators to amend the prior agreements to, among other things, authorize the creation of the previously announced video lottery terminal joint venture between the Company and International Gaming Technology PLC, require the Company to make certain investments in connection with the joint venture and otherwise (including $ 100 million in Rhode Island by June 30, 2043) and modify certain limitations in the regulatory agreement applicable to the Company without prior regulatory approval.

The modifications made include, among others, increasing the maximum leverage ratio applicable to the Company, clarifying that operating leases under sale-leaseback financings are not indebtedness for purposes of the leverage ratio calculation and updating the reporting and other administrative provisions to reflect the Company’s increased size following recent acquisition activity.

BALLY’S CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2021, 2020 and 2019

Balance at Beginning of Year Provision for Credit Loss Write-offs, Net of Recoveries Acquisitions Balance at End of Year

Provision for credit losses:

2019 $ 1,009 239 ( 16 ) 64 $ 1,296

2020 $ 1,296 411 ( 653 ) 2,013 $ 3,067

2021 $ 3,067 1,717 ( 701 ) 371 $ 4,454

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data