Bally's Corp 10-K/A

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements listed below are filed as part of this Annual Report on Form 10-K. INDEX TO FINANCIAL STATEMENTS Page No. Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID 34 ) 45 Consolidated Balance Sheets at December 31, 2021 and 2020 47 Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 48 Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2021, 2020 and 2019 49 Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 50 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 51 Notes to Consolidated Financial Statements 52 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts 111 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 US (“US GAAP”). 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 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. 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 (November 9, 2022 as to the effects of the material weaknesses described therein), expressed an adverse opinion on the Company's internal control over financial reporting because of the material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 matter or on the accounts or disclosures to which it relates. 45 Acquisition of Gamesys Group, Plc. – Refer to Notes 1 and 5 to the financial statements Critical Audit Matter Description 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 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; and ◦ 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. /s/ Deloitte & Touche LLP Stamford, Connecticut March 1, 2022 (November 9, 2022, as to Note 22 to the financial statements) We have served as the Company’s auditor since 2015. 46 BALLY’S CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, 2021 2020 Assets Cash and cash equivalents $ 206,193 $ 123,445 Restricted cash 68,647 3,110 Accounts receivable, net 48,178 14,798 Inventory 11,489 9,296 Tax receivable 128,217 84,483 Prepaid expenses and other current assets 104,463 53,823 Total current assets 567,187 288,955 Property and equipment, net 838,651 749,029 Right of use assets, net 507,843 36,112 Goodwill 2,122,653 186,979 Intangible assets, net 2,477,952 663,395 Deferred tax asset 11,922 — Other assets 27,009 5,385 Total assets $ 6,553,217 $ 1,929,855 Liabilities and Stockholders’ Equity Current portion of long-term debt $ 19,450 $ 5,750 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 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 Deferred tax liability 214,467 36,983 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 (Note 18) Stockholders’ equity: Common stock ($ 0.01 par value; 200,000,000 shares authorized; 53,050,055 and 30,685,938 shares issued; 52,254,477 and 30,685,938 shares outstanding 530 307 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 ( 29,166 ) — Retained (deficit) earnings ( 181,581 ) 34,792 Accumulated other comprehensive loss ( 26,809 ) ( 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 Total liabilities and stockholders’ equity $ 6,553,217 $ 1,929,855 The accompanying notes are an integral part of these consolidated financial statements. 47 BALLY’S CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Years Ended December 31, 2021 2020 2019 Revenue: Gaming $ 1,053,492 $ 298,070 $ 381,062 Hotel 95,356 24,742 38,988 Food and beverage 92,906 32,132 69,904 Retail, entertainment and other 80,689 17,848 33,623 Total revenue 1,322,443 372,792 523,577 Operating (income) costs and expenses: Gaming 407,032 95,901 103,557 Hotel 30,511 10,144 14,841 Food and beverage 70,417 29,367 58,447 Retail, entertainment and other 27,119 3,257 8,327 Advertising, general and administrative 511,669 176,943 180,400 Goodwill and asset impairment 4,675 8,659 — Expansion and pre-opening 1,772 921 — 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 Income (loss) from operations 93,382 ( 18,386 ) 114,626 Other income (expense): Interest income 2,250 612 1,904 Interest expense, net of amounts capitalized ( 120,174 ) ( 63,248 ) ( 39,830 ) Change in value of naming rights liabilities 17,029 ( 57,660 ) — Gain on bargain purchases 22,841 63,871 — Loss on extinguishment of debt ( 103,007 ) — ( 1,703 ) Foreign exchange loss, net ( 33,461 ) — — Other, net 2,066 — 183 Total other expense, net ( 212,456 ) ( 56,425 ) ( 39,446 ) (Loss) income before provision for income taxes ( 119,074 ) ( 74,811 ) 75,180 (Benefit) provision for income taxes ( 4,377 ) ( 69,324 ) 20,050 Net (loss) income $ ( 114,697 ) $ ( 5,487 ) $ 55,130 Basic (loss) income per share $ ( 2.31 ) $ ( 0.18 ) $ 1.46 Weighted average common shares outstanding - basic 49,643,991 31,315,151 37,705,179 Diluted (loss) income per share $ ( 2.31 ) $ ( 0.18 ) $ 1.46 Weighted average common shares outstanding - diluted 49,643,991 31,315,151 37,819,617 The accompanying notes are an integral part of these consolidated financial statements. 48 BALLY’S CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands) Years Ended December 31, 2021 2020 2019 Net (loss) income $ ( 114,697 ) $ ( 5,487 ) $ 55,130 Other comprehensive loss (income): Foreign currency translation adjustments ( 25,833 ) — — Defined benefit pension plan: Gains (losses) arising during the period 3,040 ( 1,844 ) ( 2,740 ) Reclassification adjustments 104 — — Tax effect ( 976 ) 588 852 Net of tax amount 2,168 ( 1,256 ) ( 1,888 ) Other comprehensive loss ( 23,665 ) ( 1,256 ) ( 1,888 ) Total comprehensive (loss) income $ ( 138,362 ) $ ( 6,743 ) $ 53,242 The accompanying notes are an integral part of these consolidated financial statements. 49 BALLY’S CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except shares) Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Loss Non-controlling Interest Total Stockholders’ Equity 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, net 226,817 2 ( 428 ) — — — — ( 426 ) Dividends and dividend equivalents - $ 0.20 per share — — — — ( 7,596 ) — — ( 7,596 ) Share-based compensation — — 3,826 — — — — 3,826 Retirement of treasury shares — — ( 30,233 ) 30,233 — — — — 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 income — — — — — ( 1,888 ) — ( 1,888 ) Net income — — — — 55,130 — — 55,130 Balance as of December 31, 2019 32,113,328 412 185,544 ( 223,075 ) 250,418 ( 1,888 ) — 211,411 Release of restricted stock and other stock awards, net 365,439 4 ( 9,766 ) — — — — ( 9,762 ) Dividends and dividend equivalents - $ 0.10 per share — — — — ( 3,174 ) — — ( 3,174 ) Share-based compensation — — 17,706 — — — — 17,706 Retirement of treasury shares — ( 109 ) ( 49,351 ) 256,367 ( 206,907 ) — — — Share repurchases ( 1,812,393 ) — — ( 33,292 ) — — — ( 33,292 ) Stock options exercised 19,564 — 84 — — — — 84 Issuance of penny warrants for naming rights — — 150,426 — — — — 150,426 Adoption of ASU 2016-13 — — — — ( 58 ) — — ( 58 ) Other comprehensive loss — — — — — ( 1,256 ) — ( 1,256 ) Net loss — — — — ( 5,487 ) — — ( 5,487 ) 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 — — — — — ( 23,665 ) — ( 23,665 ) Net loss — — — — ( 114,697 ) — — ( 114,697 ) Balance as of December 31, 2021 52,254,477 $ 530 $ 1,849,068 $ ( 29,166 ) $ ( 181,581 ) $ ( 26,809 ) $ 3,760 $ 1,615,802 The accompanying notes are an integral part of these consolidated financial statements. 50 BALLY’S CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net (loss) income $ ( 114,697 ) $ ( 5,487 ) $ 55,130 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 144,786 37,842 32,392 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 — 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 ) — Foreign exchange loss 33,461 — — Other operating activities 19,712 982 298 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: Cash paid for acquisitions, net of cash acquired ( 2,274,221 ) ( 425,063 ) ( 9,606 ) 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 ) 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: 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 ) Issuance of common stock, net 667,872 — — Issuance of Sinclair penny warrants 50,000 — — Payment of shareholder dividends — ( 3,204 ) ( 7,539 ) 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 Cash and cash equivalents and restricted cash, beginning of period 126,555 185,502 81,431 Cash and cash equivalents and restricted cash, end of period $ 274,840 $ 126,555 $ 185,502 Supplemental disclosure of cash flow information: Cash paid for interest $ 65,927 $ 57,234 $ 35,040 Cash paid for income taxes, net of refunds 42,291 3,835 16,519 Non-cash investing and financing activities: Unpaid property and equipment $ 31,123 $ 3,575 $ 419 Unpaid trade name — 20,000 — Unpaid Naming Rights — 332,313 — Deposit applied to fixed asset purchases — — 981 Termination of operating leases via purchase of underlying assets — — 1,665 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. 51 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION Description of Business 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; and • 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”). 52 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 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of 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. 53 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 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. Actual results may differ from these estimates. Cash and Cash Equivalents and Restricted Cash The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash equivalents. 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. December 31, (in thousands) 2021 2020 2019 Cash and cash equivalents $ 206,193 $ 123,445 $ 182,581 Restricted cash 68,647 3,110 2,921 Total cash and cash equivalents and restricted cash $ 274,840 $ 126,555 $ 185,502 Concentrations of Credit Risk The Company’s financial instruments which potentially expose the Company to concentrations of credit risk consisted of cash and cash equivalents and trade receivables. The Company maintains cash with financial institutions in excess of federally insured limits, however, management believes the credit risk is mitigated by the quality of the institutions holding such deposits. 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 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 Accounts receivable, net consists of the following: December 31, (in thousands) 2021 2020 Accounts due from Rhode Island and Delaware (1) $ 10,575 $ 3,880 Gaming receivables 10,576 7,893 Non-gaming receivables 31,481 6,092 Accounts receivable, net 52,632 17,865 Less: Allowance for doubtful accounts ( 4,454 ) ( 3,067 ) Accounts receivable, net $ 48,178 $ 14,798 __________________________________ (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. 54 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 and review of individual customer accounts and any other known information. The activity for the allowance for doubtful accounts is as follows: December 31, (in thousands) 2021 2020 2019 Balance at beginning of year $ 3,067 $ 1,296 $ 1,009 Charges to expense 1,717 353 239 Deductions ( 701 ) ( 653 ) ( 16 ) Acquisitions 371 2,013 64 Other adjustments (1) — 58 — Balance at end of year $ 4,454 $ 3,067 $ 1,296 __________________________________ (1) Adjustment resulting from adoption of Accounting Standard Update (“ASU”) 2016-13. Inventory 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: December 31, (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 55 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property and Equipment 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. 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: Years 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. Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using the weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. During the 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: December 31, 2021 2020 Land $ 75,328 $ 78,506 Land improvements 34,704 29,965 Building and improvements 650,837 635,145 Equipment 182,006 125,667 Furniture and fixtures 47,258 30,277 Construction in process 53,715 8,799 Total property, plant and equipment 1,043,848 908,359 Less: Accumulated depreciation ( 205,197 ) ( 159,330 ) Property and equipment, net $ 838,651 $ 749,029 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, 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. Leases The Company determines if a contract is or contains a lease at the contract inception date or the date in which a modification of an existing contract occurs. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. 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. 56 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. The Company recognizes a lease liability for the present value of lease payments at the lease commencement date using its incremental borrowing rate commensurate with the lease term based on information available at the commencement date, unless the rate implicit in the lease is readily determinable. Certain of the Company’s leases include renewal options and escalation clauses; 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 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. 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. Items that are considered in the qualitative assessment include, but are not limited to, the following: macroeconomic conditions, industry and market conditions and overall financial performance. 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). If the reporting unit’s estimated fair value exceeds its estimated net book value, goodwill is not impaired. An impairment is recognized if the estimated fair value of a reporting unit is less than its estimated net book value, in an amount not to exceed the carrying value of the reporting unit’s goodwill. Refer to Note 6 “ Goodwill and Intangible Assets ” for further information. Intangible Assets 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 Agreement ” for further information regarding the Sinclair Broadcast Group (“Sinclair”) naming rights. 57 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. Refer to Note 6 “ Goodwill and Intangible Assets ” for further information. Long-lived Assets The Company reviews its long-lived assets, other than goodwill and intangible assets not subject to amortization, for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is still under development, the analysis includes the remaining construction costs. Cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model. Debt Issuance Costs and Debt Discounts 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. Debt issuance costs and debt discounts are amortized over the contractual term of the debt to interest expense. Debt issuance costs of the revolving credit facility are amortized on a straight-line basis, while all other debt issuance costs and debt discounts are amortized using the effective interest method. 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. 58 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Self-Insurance Reserves The Company is self-insured for employee medical insurance coverage up to an individual stop loss of $ 100,000 in 2021, 2020 and 2019. Self-insurance liabilities are estimated based on the Company’s claims experience using actuarial methods to estimate the future cost of claims and related expenses that have been reported but not settled and that have been incurred but not yet reported. The self-insurance liabilities are included in “Accrued liabilities” in the consolidated balance sheets. Such amounts wer e $ 4.2 million and $ 3.3 million as of December 31, 2021 and 2020, respectively. Share-Based Compensation 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 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. Stock options are granted at exercise prices equal to the fair market value of the Company’s stock at the dates of grant. The Company recognizes share-based compensation expense on a straight-line basis over the requisite service period of the individual grants. The Company’s Chief Executive Officer and certain of its other executive officers or members of senior management have been granted PSUs which vest, when and if earned, in accordance with the terms of the related PSU award agreements. The Company recognizes share-based compensation expense based on the target number of shares of common stock that may be earned pursuant to the award and the Company’s stock price on the date of grant and subsequently adjusts expense based on actual and forecasted performance compared to planned targets. Forfeitures are recognized as reductions to share-based compensation when they occur. Warrant/Option Liabilities The Company accounts for the warrants and options issued to Sinclair under the Sinclair Agreement in accordance with ASC 815-40, Contracts in an Entity’s Own Equity . The Penny Warrants are classified in equity because they are indexed to the Company’s own stock and meet all conditions for equity classification. 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 “Change in value of naming rights liabilities” in the consolidated statements of operations. Refer to Note 10 “ Sinclair Agreement ” for further information. Sequencing Policy Under ASC 815-40-35, the Company has adopted a sequencing policy to determine equity or asset/liability classification for contracts involving the Company’s own equity that require cash settlement if sufficient shares are not available to settle the contracts in equity. Under this policy, the Company has elected to allocate available shares to contracts based on the order in which they become exercisable. Revenue 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, which also includes racing, hotel, food and beverage and other. Refer to Note 4 “ Revenue Recognition ” for further information. Gaming Expenses Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services. Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting. 59 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Advertising Expense The Company expenses advertising costs as incurred. 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 Expansion and pre-opening expenses are charged to expense as incurred. The Company defines pre-opening expenses as costs incurred before the property commences commercial operations and defines expansion expenses as costs incurred in connection with the opening of a new facility or significant expansion of an existing property. Costs classified as expansion and pre-opening costs consist primarily of marketing, master planning, conceptual design fees and legal and professional fees that are not eligible for capitalization . Expansion and pre-opening costs for the years ended December 31, 2021 and 2020 were $ 1.8 million and $ 0.9 million, respectively. There were no expansion and pre-opening costs for the year ended December 31, 2019. 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 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. Income Taxes The Company prepares its income tax provision in accordance with ASC 740, Income Taxes . Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate change is enacted. A valuation allowance is required when it is “more likely than not” that all or a portion of the deferred taxes will not be realized. 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. 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. 60 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 The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares. Business Combinations The Company accounts for its acquisitions in accordance with ASC 805, Business Combinations . The Company initially allocates the purchase price of an acquisition to the assets acquired and liabilities assumed based on their estimated fair values, with any excess of consideration transferred recorded as goodwill. If the estimated fair value of net assets acquired and liabilities assumed exceeds the purchase price, the Company records a gain on bargain purchase in earnings in the period of acquisition. The results of operations of acquisitions are included in the consolidated financial statements from their respective dates of acquisition. Costs incurred to complete the business combination such as investment banking, legal and other professional fees are not considered part of consideration and are charged to acquisition, integration and restructuring expense as they are incurred. Refer to Note 5 “ Acquisitions ” and Note 11 “ Acquisition, Integration and Restructuring Expense ” for further information. 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. Statement of Cash Flows The Company has presented the consolidated statements of cash flows using the indirect method, which involves the reconciliation of net income to net cash flow from operating activities. Fair Value Measurements Fair value is determined using the principles of ASC 820, Fair Value Measurement . Fair value is described as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes and defines the inputs to valuation techniques as follows: • Level 1: Observable quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2: Inputs are observable for the asset or liability either directly or through corroboration with observable market data. • Level 3: Unobservable inputs. 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. Refer to Note 8 “ Fair Value Measurements ” for further information. 61 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS Recently Issued Accounting Pronouncements Standards implemented In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326)–Measurement of Credit Losses on Financial Instruments (“ASC 326”). This standard amends several aspects of the measurement of credit losses on financial instruments, including trade receivables. The standard replaces the existing incurred credit loss model with the Current Expected Credit Losses (“CECL”) model and amends certain aspects of accounting for purchased financial assets with deterioration in credit quality since origination. Under CECL, the allowance for losses for financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets, based on historical experience, current conditions and forecasts that affect the collectability of the reported amount. 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. The standard is effective for annual and interim periods beginning after December 15, 2019. Adoption is through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (a modified-retrospective approach). The Company adopted this ASU in the first quarter of 2020 and recorded a $ 58,000 negative adjustment to retained earnings as of January 1, 2020. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820),–Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this ASU in the first quarter of 2020, with no impact to its consolidated financial statements. 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 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. 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes . This amendment serves to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendment also improves the consistent application of ASC Topic 740 by clarifying and amending existing guidance. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company’s adoption of this ASU in the first quarter of 2021, did not have a material impact to its 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. 62 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 . REVENUE RECOGNITION 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; and • 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. 63 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially 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. 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, 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. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increase. Online gaming Online gaming refers to digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Company operates similarly to land-based casinos, generating revenue from user wagers net of payouts and incentives awarded to users. Online gaming revenue includes the online bingo and casino revenue of Gamesys, beginning October 1, 2021. The revenue is earned from operating online bingo and casino websites, which consists of the difference between total amounts wagered by players less winnings payable to players, bonuses allocated and jackpot contributions. Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs. There is no significant degree of uncertainty involved in quantifying the amount of gaming revenue earned, including bonuses, jackpot contributions and loyalty points. Bonuses, jackpot contributions and loyalty points are measured at fair value at each reporting date. Sports betting 64 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 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 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: Years Ended December 31, (in thousands) 2021 2020 2019 Hotel $ 55,782 $ 15,099 $ 19,939 Food and beverage 61,038 18,548 31,569 Retail, entertainment and other 7,556 3,031 7,594 $ 124,376 $ 36,678 $ 59,102 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. 65 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, Casinos & Resorts North America Interactive International Interactive Total 2021 Gaming $ 803,940 $ 10,442 $ 239,110 $ 1,053,492 Hotel 95,356 — — 95,356 Food and beverage 92,906 — — 92,906 Retail, entertainment and other 40,626 27,910 12,153 80,689 Total revenue $ 1,032,828 $ 38,352 $ 251,263 $ 1,322,443 2020 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 2019 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 are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays and amounts due from tracks and OTB locations. 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, 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. 66 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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: December 31, 2021 2020 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. 5 . ACQUISITIONS Recent Acquisitions 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. Goodwill recognized is deductible for local tax purposes. 67 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. (“Caesars”). 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, net 582 — 582 Inventory 164 — 164 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, net 138,160 — 138,160 Other assets 117 — 117 Goodwill 53,896 380 54,276 Accounts payable ( 614 ) — ( 614 ) Accrued liabilities ( 3,912 ) ( 236 ) ( 4,148 ) Lease liability ( 34,452 ) — ( 34,452 ) Other long-term liabilities ( 306 ) 112 ( 194 ) Total purchase price $ 229,863 $ — $ 229,863 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. 68 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 Atlantic City. There were no purchase accounting adjustments recorded during the year ended December 31, 2021. Final As of November 18, 2020 Cash $ 8,651 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. 69 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, net 1,936 ( 143 ) 1,793 Inventory 495 103 598 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, net 58,140 — 58,140 Other assets 403 — 403 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. 70 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 71 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Bargain purchase gain ( 21,537 ) 681 ( 20,856 ) 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 $ 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. 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. 72 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 73 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 3,104 Property and equipment, net 596 Intangible assets, net 167,075 Goodwill 250,491 Total current liabilities ( 14,548 ) Deferred tax liability ( 15,811 ) Acquired non-controlling interest ( 3,760 ) Net investment in Bally’s Interactive Acquisitions $ 400,334 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. 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. 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. 74 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 27,876 Property and equipment, net 15,230 Right of use assets, net 14,185 Goodwill 1,678,476 Intangible assets, net 1,513,023 Other assets 17,668 Accounts payable ( 47,881 ) 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 ) Total purchase price $ 2,599,117 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. 75 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 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 Kansas City, Bally’s Vicksburg and Bally’s Shreveport . 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 Net (loss) income per share, basic $ ( 0.24 ) $ 2.46 Net (loss) income per share, diluted $ ( 0.24 ) $ 2.45 Pending Acquisitions 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. 76 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. GOODWILL AND INTANGIBLE ASSETS 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. Items that were considered included, but were not limited to, the following: 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 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. 2020 Annual Impairment Assessment 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. 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 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. 77 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: 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 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) $ 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: Intangible assets, net as of December 31, 2019 $ 110,373 Intangible assets from current year business combinations 203,380 Other intangibles acquired (1) 357,793 Impairment charges ( 3,299 ) Less: Accumulated amortization ( 4,852 ) Intangible assets, net as of December 31, 2020 $ 663,395 Intangible assets from current year business combinations 1,870,918 Change in TRA with Sinclair (2) ( 850 ) Effect of foreign exchange ( 12,538 ) Impairment charges ( 4,675 ) Internally developed software 20,952 Other intangibles acquired 31,551 Less: 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 “ Sinclair Agreement .” 78 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s identifiable intangible assets consist of the following: Weighted average remaining life (in years) December 31, 2021 (in thousands, except years) Gross Carrying Amount Accumulated Amortization Net Amortizable intangible assets: Naming rights - Sinclair (1) 9.2 $ 337,391 $ ( 25,721 ) $ 311,670 Trade names 10.6 28,439 ( 17,481 ) 10,958 Hard Rock license 25.5 8,000 ( 1,818 ) 6,182 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 Total amortizable intangible assets 1,846,882 ( 113,938 ) 1,732,944 Intangible assets not subject to amortization: Gaming licenses Indefinite 478,171 — 478,171 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) 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. Weighted average remaining life (in years) December 31, 2020 (in thousands, except years) Gross amount Accumulated amortization Net Amount Amortizable intangible assets: 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 Customer relationships 5.8 10,515 ( 5,483 ) 5,032 Other 3.7 1,950 ( 750 ) 1,200 Total amortizable intangible assets 409,606 ( 53,584 ) 356,022 Intangible assets not subject to amortization: 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 Total unamortizable intangible assets 307,373 — 307,373 Total intangible assets, net $ 716,979 $ ( 53,584 ) $ 663,395 __________________________________ (2) See note (1) above. 79 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. Refer to Note 5 “ Acquisitions ” for further information about the preliminary purchase price allocation and provisional goodwill and intangible balances added from current year business combinations. Refer to Note 10 “ Sinclair Agreement ” for intangible assets added through the Sinclair Agreement. The following table shows the remaining amortization expense associated with finite lived intangible assets as of December 31, 2021: (in thousands) 2022 $ 244,298 2023 244,119 2024 240,608 2025 239,102 2026 235,221 Thereafter 529,596 $ 1,732,944 7. 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 “ Sinclair Agreement ,” 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. 80 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: December 31, (in thousands) Balance Sheet Location 2021 2020 Liabilities: 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 ) 8. 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 Assets: Other current assets $ 176 $ — $ — Other assets — — 2,025 Total $ 176 $ — $ 2,025 Liabilities: Sinclair Performance Warrants $ — $ — $ 69,564 Contingent consideration — — 34,931 Total $ — $ — $ 104,495 81 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Assets: Contingent consideration $ — $ 27,909 $ — Liabilities: 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. 82 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. Other assets 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 — — 9. ACCRUED LIABILITIES As of December 31, 2021 and 2020, accrued liabilities consisted of the following: December 31, (in thousands) 2021 2020 Gaming liabilities $ 170,508 $ 33,795 Compensation 49,764 21,708 Interest payable 46,292 3,076 Construction accruals 18,931 2,151 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 83 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. SINCLAIR AGREEMENT 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 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 The Company has issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $ 0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $ 0.01 per share subject to the achievement of various performance metrics (“the Performance Warrants”) and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (“the Options”). The 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, which was obtained on January 27, 2021. Penny Warrants - The Penny Warrants were determined to be an equity classified instrument because they are indexed to the Company’s own stock and met the conditions to be classified as equity under ASC 815, Derivatives and Hedging , including sufficient available shares for the Company to settle the exercise of the warrants in shares. 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. 84 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 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. 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. 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 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 Intangible Assets ” for further information. 85 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. 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: Years Ended December 31, (in thousands) 2021 2020 2019 Acquisition and integration costs: Gamesys $ 43,495 $ — $ — Bally’s Evansville 6,702 661 — North America Interactive acquisitions (1) 5,348 — — Bally’s Quad Cities 2,026 1,003 — Richmond, Virginia (2) 1,899 — — Bally’s Atlantic City 1,191 4,373 — 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 Other (3) 7,371 1,153 1,724 Total 70,129 13,237 10,900 Restructuring expense 1,159 20 1,268 Total acquisition, integration and restructuring expense $ 71,288 $ 13,257 $ 12,168 __________________________________ (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, 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: Severance (in thousands) Casinos & Resorts North America Interactive International Interactive Total Restructuring liability as of December 31, 2019 $ 23 $ — $ — $ 23 Additions 20 — 20 Payments ( 43 ) — ( 43 ) Restructuring liability as of December 31, 2020 — — — — Additions — 142 1,017 1,159 Payments — — ( 753 ) ( 753 ) Restructuring liability as of December 31, 2021 $ — $ 142 $ 264 $ 406 86 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. LONG-TERM DEBT As of December 31, 2021 and 2020, long-term debt consisted of the following: December 31, (in thousands) 2021 2020 Term Loan Facility $ 1,945,000 $ 569,125 Revolving Credit Facility 85,000 35,000 6.75 % Senior Notes due 2027 — 525,000 5.625 % Senior Notes due 2029 750,000 — 5.875 % Senior Notes due 2031 750,000 — Less: Unamortized original issue discount ( 31,425 ) ( 11,771 ) Less: Unamortized deferred financing fees ( 52,348 ) ( 17,499 ) Long-term debt, including current portion 3,446,227 1,099,855 Less: Current portion of Term Loan and Revolving Credit Facility ( 19,450 ) ( 5,750 ) Long-term debt, net of discount and deferred financing fees; excluding current portion $ 3,426,777 $ 1,094,105 May 2019 Senior Secured Credit Facility 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 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. Senior Notes On August 20, 2021, two unrestricted subsidiaries (together, the “Escrow Issuers”) of the Company issued $ 750.0 million aggregate principal amount of 5.625 % senior notes due 2029 (the “2029 Notes”) and $ 750.0 million aggregate principal amount of 5.875 % Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “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. 87 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 88 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt Maturities As of December 31, 2021, the contractual annual principal maturities of long-term debt, including the Revolving Credit Facility, are as follows: (in thousands) 2022 $ 19,450 2023 19,450 2024 19,450 2025 19,450 2026 104,450 Thereafter 3,347,750 $ 3,530,000 13. LEASES 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 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. 89 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: Year Ended December 31, (in thousands) 2021 2020 2019 Operating leases: Operating lease cost $ 36,354 $ 3,256 $ 2,430 Variable lease cost 4,191 56 66 Operating lease expense 40,545 3,312 2,496 Short-term lease expense 11,746 2,158 1,830 Total lease expense $ 52,291 $ 5,470 $ 4,326 Supplemental cash flow and other information for the year ended December 31, 2021 and 2020, related to operating leases is as follows: Year Ended December 31, ($ in thousands) 2021 2020 Cash paid for amounts included in the lease liability - operating cash flows from operating leases $ 37,032 $ 5,235 Right of use assets obtained in exchange for operating lease liabilities $ 818,405 $ 9,376 Weighted average remaining lease term 15.3 years 24.3 years Weighted average discount rate 6.1 % 7.3 % As of December 31, 2021, future minimum rental commitments under noncancelable operating leases are as follows: 2021 (in thousands) 2022 $ 55,648 2023 55,486 2024 54,969 2025 53,991 2026 53,168 Thereafter 561,534 Total 834,796 Less: present value discount ( 303,815 ) Operating lease obligations $ 530,981 Future operating lease payments as shown above include $ 87.7 million related to extension options that are reasonably certain of being exercised. The Company also has leasing arrangements with third-party lessees at its properties. Leasing arrangements for which the Company acts as a lessor are not deemed material as of December 31, 2021. 90 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. EQUITY PLANS Equity Incentive Plans The Company has three equity incentive plans: the 2010 BLB Worldwide Holdings, Inc. 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. Options granted to employees, officers and directors of the Company under the 2010 Option Plan vested on various schedules by individual as defined in the individual participants’ option agreements. Vested options can generally be exercised all or in part at any time until the tenth anniversary of the date of grant. Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan. 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 $ 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. Stock Options Stock option activity under the 2010 Option Plan for the year ended December 31, 2021 is as follows: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2020 90,000 $ 4.31 Exercised ( 70,000 ) $ 4.31 Outstanding at December 31, 2021 20,000 $ 4.31 1.9 years $ 0.7 million Exercisable at December 31, 2021 20,000 $ 4.31 1.9 years $ 0.7 million There were no stock options granted during the years ended December 31, 2021, 2020 or 2019. 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. 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. 91 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted Stock Units and Performance-Based Restricted Stock Units Under the 2015 Incentive Plan, RSUs and PSUs have been awarded to eligible employees, members of the Company’s senior management and certain members of its Board of Directors. Each RSU and PSU represents the right to receive one share of the Company’s common stock. RSUs generally vest in one-third increments over a three year period, and compensation cost is recognized over the respective service periods based on the grant date fair value. PSUs generally vest over a two or three year period depending on the individual award agreement and become eligible for vesting upon attainment of performance objectives for the performance period. The number of PSUs that may become eligible for vesting varies and is dependent upon whether the performance targets are met, partially met or exceeded each year. 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. 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 following summary presents information of equity-classified RSU and PSU activity for the year ended December 31, 2021: Restricted Stock Units Performance Stock Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2020 414,409 31,478 $ 36.12 Granted 726,149 56,025 53.52 Vested ( 165,651 ) ( 31,478 ) 41.89 Forfeited ( 14,414 ) ( 26,030 ) 49.37 Outstanding at December 31, 2021 960,493 29,995 $ 48.28 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 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 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. Other Stock Based Awards On December 30, 2020, the Company issued OSBAs in the form of immediately vested common stock to eligible employees, members of the Company’s senior management and certain members of its Board of Directors under the 2015 Incentive Plan. These OSBAs were awarded in recognition of the strategic accomplishments of individuals and the Company as a whole for fiscal 2020 in lieu of potential cash incentive compensation. The Company elected to utilize stock as form of compensation in an effort to preserve liquidity for the Company in light of COVID-19 and its impact on operations. 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. 92 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. STOCKHOLDERS’ EQUITY 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. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. The Company expects to fund any share repurchases and dividends from existing capital resources. There is no fixed time period to complete share repurchases. On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”), purchasing 2,504,971 common shares at an aggregate purchase price of $ 73.9 million. The Offer was funded with cash on hand. 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. Total share repurchase activity during the years ended December 31, 2021, 2020 and 2019 is as follows: Year Ended December 31, (in thousands, except share and per share data) 2021 2020 2019 Number of common shares repurchased 2,188,532 1,812,393 9,079,690 Total cost $ 87,024 $ 33,292 $ 223,075 Average cost per share, including commissions $ 39.76 $ 18.37 $ 24.57 All shares repurchased during the years ended December 31, 2020 and 2019 were transferred to treasury stock. 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, 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. 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. 93 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 ) 7,911,724 Sinclair Performance Warrants ( Note 10 ) 3,279,337 Sinclair Options (1) ( Note 10 ) 1,639,669 MKF penny warrants ( Note 5 ) 24,611 MKF contingent shares ( Note 5 ) 787,557 Telescope contingent shares ( Note 5 ) 75,678 SportCaller contingent shares (2) ( Note 5 ) 231,932 Outstanding awards under Equity Incentive Plans ( Note 14 ) 1,010,488 14,960,996 __________________________________ (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. 16. EMPLOYEE BENEFIT PLANS Multi-employer Defined Benefit Plans The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: a. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. c. If the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The following table outlines the Company’s participation in multi-employer pension plans for the years ended December 31, 2021, 2020 and 2019 and sets forth the calendar year contributions and accruals for each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act zone status available in 2021 and 2020 relates to the plans’ two most recent fiscal year-ends. The zone status is based on information that the Company received from the plans’ administrators and is certified by each plan’s actuary. Plans certified in the red zone are generally less than 65% funded, plans certified in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans certified in the yellow zone are less than 80% funded and plans certified in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. As of December 31, 2021 and 2020, all plans that have either a FIP or RP requirement have had the respective plan implemented. 94 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EIN/ Pension Plan Number Pension Protection Act Zone Status FIP/RP Status Pending/ Implemented Contributions and Accruals (in $000’s) Company Contributions > 5% Union Contract Expires Pension Fund 2021 2020 2021 2020 2019 SEIU National Industry Pension Fund 52-6148540 Red Red Yes/Implemented $ 460 $ 366 $ 910 No 4/30/2022 New England Carpenters Pension Fund (1) 51-6040899 Green Green No 75 91 121 No 5/31/2024 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 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 The Legacy Plan of the UNITE HERE Retirement Fund (3) 82-0994119/001 Red Red Yes/Implemented 1,319 578 936 No 6/30/2022 The Adjustable Plan of the UNITE HERE Retirement Fund (3) 82-0994119/002 N/A (2) N/A (2) No 5/31/2022 Local 68 Engineers Union Pension Fund 51-0176618 Red Red Yes/Implemented 269 22 — No 6/30/2022 Northeast Carpenters Pension Fund 11-1991772 Green Green No 122 10 — No 4/30/2022 International Painters and Allied Trades Industry Pension Fund 52-6073909 Red Red Yes/Implemented 80 5 — No 4/30/2022 Total Contributions $ 3,425 $ 1,956 $ 3,412 __________________________________ (1) Effective January 1, 2018, the Rhode Island Carpenters Pension Fund (05-6016572) merged into the New England Carpenters Pension Fund. (2) The Plan is not subject to the Pension Protection Act of 2016 zone status certification rule. (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 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. These aggregate contributions were not individually significant to any of the respective plans. 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. Under the terms of certain collective bargaining agreements, the Company contributes to a number of multi-employer annuity funds. Contributions are made at a fixed rate per hour worked, in accordance with the collective bargaining agreements. These plans are not subject to the withdrawal liability provisions applicable to multi-employer defined benefit pension plans. Contributions made to these plans by the Company were $ 2.5 million, $ 1.2 million and $ 2.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Dover Downs Defined Benefit Pension Plans 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, 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 Pension Plan Dover Downs maintained the Dover Downs Pension Plan, a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011. All full-time employees and part-time employees who worked over 1,000 hours per year were eligible to participate in the Dover Downs Pension Plan. Benefits provided by the qualified pension plan were based on years of service and employees’ remuneration over their term of employment. 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. 95 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. The following tables present the benefit obligation, fair value of plan assets and funded status of the plan: Year Ended December 31, (in thousands) 2021 2020 2019 Changes in Benefit Obligation Beginning benefit obligation $ 30,935 $ 27,849 $ 24,067 Interest cost 760 897 666 Actuarial (gain) loss ( 1,967 ) 3,069 3,588 Benefits paid ( 921 ) ( 880 ) ( 472 ) Benefit obligation at end of year $ 28,807 $ 30,935 $ 27,849 Changes in Plan Assets Beginning fair value of plan assets $ 21,721 $ 19,162 $ 17,454 Actual return on plan assets 2,690 2,653 1,815 Employer contributions 670 786 365 Benefits paid ( 921 ) ( 880 ) ( 472 ) 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 ) Net periodic benefit (income) cost and other changes in plan assets and benefit obligations recognized consist of the following: Year Ended December 31, (in thousands) 2021 2020 2019 Net Periodic Benefit (Income) Cost Interest cost $ 760 $ 897 $ 666 Expected return on plan assets ( 1,618 ) ( 1,428 ) ( 967 ) 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 (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. 96 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: Discount rate 2.86 % 2.55 % 3.28 % Net periodic benefit cost assumptions: Discount rate 2.55 % 3.28 % 4.05 % Expected return on plan assets 7.5 % 7.5 % 7.5 % Average future years of service 8.9 8.9 n/a The Company utilizes a spot rate approach to determine the benefit obligation and the subsequent years’ interest cost component of the net periodic pension benefit. This method uses individual spot rates along the yield curve that correspond with the timing of each benefit payment and will provide a more precise measurement of the interest cost by improving the correlation between projected benefit cash flows and the corresponding spot yield curve rates. The Society of Actuaries’ RP 2014 Total Employee and Healthy Annuitant Mortality Tables rolled back to 2006 and projected with Mortality Improvement Scale MP-2018 are also utilized. For 2021, the assumed long-term rate of return on plan assets is 7.5 %. In developing the expected long-term rate of return assumption, the Company reviewed asset class return expectations and long-term inflation assumptions and considered its historical compounded return, which was consistent with its long-term rate of return assumption. The Company’s investment goals for the Dover Downs Pension Plan assets are to achieve a combination of moderate growth of capital and income with moderate risk. Acceptable investment vehicles will include mutual funds, exchange-traded funds (“ETFs”), limited partnerships and individual securities. Target allocations for plan assets are 60 % equities and 40 % fixed income. 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-, 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. 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: Asset Category Target December 31, 2021 Equity Securities 60 % 67 % Debt Securities 40 % 29 % Other — % 4 % Total 100 % 100 % The fair values of pension assets in the Dover Downs Pension Plan as of December 31, 2021 by asset category are as follows: (in thousands) Asset Category Total Level 1 Level 2 Level 3 Mutual funds/ETFs: Equity-large cap $ 10,001 $ 10,001 $ — $ — Equity-mid cap 1,453 1,453 — — Equity-small cap 1,333 1,333 — — Equity-international 3,558 3,558 — — Fixed income 6,856 6,856 — — Money market 959 959 — — Total mutual funds/ETFs $ 24,160 $ 24,160 $ — $ — 97 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: (in thousands) Year Ending December 31, 2022 $ 986 2023 1,045 2024 1,088 2025 1,123 2026 1,169 2027-2031 6,349 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. 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. 17. INCOME TAXES The components of income (loss) before taxes are as follows: Years Ended December 31, 2021 2020 2019 Domestic $ ( 126,347 ) $ ( 74,811 ) $ 75,180 Foreign 7,273 — — Total $ ( 119,074 ) $ ( 74,811 ) $ 75,180 The components of the provision for income taxes are as follows: Years Ended December 31, (in thousands) 2021 2020 2019 Current taxes Federal $ ( 10,284 ) $ ( 72,517 ) $ 9,022 State 4,676 2,002 2,033 Foreign 6,448 — — 840 ( 70,515 ) 11,055 Deferred taxes Federal 294 9,871 7,363 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 98 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 (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 Other permanent differences including lobbying expense 4,696 279 424 Share-based compensation 2,227 ( 922 ) ( 261 ) Gain on bargain purchases ( 4,796 ) ( 13,413 ) — CARES Act ( 5,320 ) ( 33,347 ) — 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 Total (benefit) provision for income taxes $ ( 4,377 ) $ ( 69,324 ) $ 20,050 Effective income tax rate on continuing operations 3.7 % 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 3.7 % 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. 99 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income taxes at December 31, 2021 and 2020 are as follows: Years Ended December 31, (in thousands) 2021 2020 Deferred tax assets: Accrued liabilities and other $ 1,162 $ 2,128 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: Land $ ( 4,071 ) $ ( 5,053 ) Property and equipment ( 35,807 ) ( 4,998 ) Change in accounting method ( 8,494 ) ( 16,234 ) Non-shareholder contribution — ( 6,766 ) Goodwill ( 12,544 ) ( 4,433 ) Amortizable assets ( 236,388 ) ( 75,117 ) Total deferred tax liabilities $ ( 297,304 ) $ ( 112,601 ) Net deferred tax liabilities $ ( 202,545 ) $ ( 36,983 ) 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. 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. 100 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. CARES Act 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. The benefits of the CARES Act that were available to us included: a. 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; b. relaxation of interest expense deduction limitation for income tax purposes; and c. 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. 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. 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. While the Company believes that the tax returns filed and tax positions taken are supportable and accurate, some tax authorities may not agree with the positions taken. This can give rise to tax uncertainties which, upon audit, may not be resolved in the Company’s favor. 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: (in thousands) 2021 2020 2019 Uncertain tax position liability at the beginning of the year $ — $ — $ 400 Increases related to tax positions taken during prior period 5,131 — — Decreases related to tax positions taken during prior periods — — ( 400 ) 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 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. Based on the current status of the Colorado audit, the Company believes no additional reserves are necessary. 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. 101 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. COMMITMENTS AND CONTINGENCIES Litigation The Company is a party to various legal and administrative proceedings which have arisen in the ordinary course of its business. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to the Company’s consolidated financial condition and those estimated losses are not expected to have a material impact on results of operations. Although the Company maintains what it believes is adequate insurance coverage to mitigate the risk of loss pertaining to covered matters, legal and administrative proceedings can be costly, time-consuming and unpredictable. Although no assurance can be given, the Company does not believe that the final outcome of these matters, including costs to defend itself in such matters, will have a material adverse effect on the company’s consolidated financial statements. 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. Hard Rock License Agreement Under the Hard Rock License agreement which runs through September 2025, with the option to renew for two successive ten-year terms, the Company is obligated to pay an annual fee plus fees based on non-gaming revenues. The Company will pay a “Continuing Fee” equal to 3 % of the Licensing Fee Revenues and a marketing fee equal to 1 % of the Licensing Fee Revenues during the term of the agreement. Fee expense under the license agreement for each of the years ended December 31, 2021, 2020 and 2019 was $ 2.8 million, $ 2.2 million and $ 3.0 million, respectively and is included in “Advertising, general and administrative” expenses in the consolidated statements of operations. As of December 31, 2021 and 2020, $ 0.2 million had been accrued and recorded in “Accrued liabilities” in the consolidated balance sheets. Bally’s Trade Name 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 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. 102 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. Master Lease 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 As of December 31, 2021, we had approximately 9,460 employees. Most of our employees in Rhode Island and New Jersey are represented by a labor union and have collective bargaining agreements with us. As of such date, we had 22 collective bargaining agreements covering approximately 2,364 employees. 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. If we are able to extend or enter into replacement agreements, there can be no assurance as to whether the terms will be on comparable terms to the existing agreements. 19. SEGMENT REPORTING 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. 103 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. 104 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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, 2021 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 ( 288,442 ) ( 114,697 ) Interest expense, net of amounts capitalized ( 62 ) ( 1 ) ( 91 ) ( 120,020 ) ( 120,174 ) Change in value of naming rights liabilities — — — 17,029 17,029 Gain on bargain purchases — — — 22,841 22,841 Capital expenditures 92,479 172 4,166 708 97,525 2020 Total revenue $ 372,792 n/a n/a $ — $ 372,792 Income (loss) from operations 12,571 n/a n/a ( 30,957 ) ( 18,386 ) Net income (loss) 28,555 n/a n/a ( 34,042 ) ( 5,487 ) Depreciation and amortization 37,786 n/a n/a 56 37,842 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 2019 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, 2021 Goodwill $ 201,952 $ 283,358 $ 1,637,343 $ — $ 2,122,653 Total assets 2,437,249 528,634 3,429,725 157,609 6,553,217 2020 Goodwill $ 186,979 $ — $ — $ — $ 186,979 Total assets 1,490,204 — — 439,651 1,929,855 105 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20. 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. 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, 2021 2020 2019 Net (loss) income applicable to common stockholders $ ( 114,697 ) $ ( 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 $ ( 2.31 ) $ ( 0.18 ) $ 1.46 Diluted $ ( 2.31 ) $ ( 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. 106 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table contains quarterly financial information for the years 2021 and 2020. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. (in thousands, except per share data) First Quarter Second Quarter Third Quarter Fourth Quarter 2021 Total revenue $ 192,266 $ 267,733 $ 314,779 $ 547,665 Total operating costs and expenses 162,792 187,201 287,045 592,023 Income (loss) from operations 29,474 80,532 27,734 ( 44,358 ) Total other expense, net ( 45,009 ) 15,391 ( 90,779 ) ( 92,059 ) (Loss) income before provision for income taxes ( 15,535 ) 95,923 ( 63,045 ) ( 136,417 ) (Benefit) provision for income taxes ( 4,830 ) 26,981 ( 5,400 ) ( 21,128 ) Net (loss) income ( 10,705 ) 68,942 ( 57,645 ) ( 115,289 ) Net (loss) income per share Basic $ ( 0.30 ) $ 1.43 $ ( 1.16 ) $ ( 1.87 ) Diluted $ ( 0.30 ) $ 1.40 $ ( 1.16 ) $ ( 1.87 ) 2020 Total revenue $ 109,148 $ 28,924 $ 116,624 $ 118,096 Total operating costs and expenses 112,317 49,887 93,241 135,733 (Loss) income from operations ( 3,169 ) ( 20,963 ) 23,383 ( 17,637 ) Total other expense, net ( 11,373 ) ( 15,110 ) ( 16,908 ) ( 13,034 ) (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 Diluted $ ( 0.28 ) $ ( 0.77 ) $ 0.22 $ 0.61 107 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22. CORRECTION OF CONSOLIDATED FINANCIAL STATEMENTS In connection with finalizing the third quarter 2022 financial reporting process, a prior period accounting error was identified in the Company’s previously reported consolidated financial statements as of and for the year ended December 31, 2021 (the “previously reported financial statements”). Based on management’s evaluation of the error in consideration of the SEC Staff’s Accounting Bulletins Nos. 99 (“SAB 99”) and 108 (“SAB 108”) and interpretations therewith, the Company concluded the error is not material to the Company’s previously reported financial statements. However, the Company further concluded that the error could not be corrected as an out-of-period adjustment in the Company’s fiscal year 2022 consolidated financial statements, because to do so would cause a material misstatement in those financial statements. Accordingly, the Company referred to the guidance prescribed by SAB 108 which specifies that the error must be corrected the next time the previously reported financial statements are filed. Therefore, in conjunction with the Company’s filing of this Form 10-K/A to amend management’s assessment of the Company’s assessment of internal control over financial reporting, the Company corrected the error in the accompanying consolidated financial statements as of and for the year ended December 31, 2021 as an immaterial revision of the previously reported financial statements and related notes thereto. The following is a description of the accounting error and its impact on the Company’s previously reported financial statements: In anticipation of the Company’s planned acquisition of Gamesys, and to comply with the “certain funds” requirements under UK law, approximately $ 1.80 billion US dollars were converted into approximately £ 1.31 billion GB pound sterling (“GB sterling”) in August 2021 and held as restricted cash for use in the acquisition. The GB sterling spot rate declined as compared to the corresponding rate on the date of conversion, which resulted in a foreign exchange loss of approximately $ 42.9 million as of September 30, 2021. The Company recognized the loss as an unrealized loss – foreign currency translation adjustment – in the Company’s previously reporte d consolidated statement of comprehensive income (loss) for the year ended December 31, 2021. However, as prescribed by ASC 830, Foreign Currency Matters, (“ASC 830”), since the Company’s functional currency is the US dollar, the $ 42.9 million should have been recognized as a loss on foreign currency translation in the Company’s previously reported consolidated statement of operations for the year ended December 31, 2021. As a result, other expenses and net (loss) for year ended December 31, 2021 were understated by $ 42.9 million, respectively, in the Company’s previously reported consolidated statement of operations. Similarly, foreign currency translation adjustment and total other comprehensive loss were overstated by $ 42.9 million, respectively, in the Company’s previously reported consolidated statement of comprehensive loss for the year ended December 31, 2021 and accumulated other comprehensive loss and accumulated deficit were overstated and understated, respectively, by $ 42.9 million in the Company’s previously reported consolidated statement of stockholders’ equity for the year ended December 31, 2021. Given the non-deductible nature of foreign currency translation gains and losses, the error had no impact on the Company’s previously reported income tax account balances. The following table presents the impact of correcting the error on the Company’s previously reported consolidated financial statements as of and for the year ended December 31, 2021 (in thousands): Consolidated Balance Sheet As Previously Issued Adjustment As Revised Retained deficit $ ( 138,683 ) $ ( 42,898 ) $ ( 181,581 ) Accumulated other comprehensive (loss) income ( 69,707 ) 42,898 ( 26,809 ) 108 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Operations As Previously Issued Adjustment As Revised Foreign exchange loss, net (1) $ 9,437 $ ( 42,898 ) $ ( 33,461 ) Other, net (1) 2,066 — 2,066 Total other expense, net ( 169,558 ) ( 42,898 ) ( 212,456 ) Loss before provision for income taxes $ ( 76,176 ) $ ( 42,898 ) $ ( 119,074 ) Net loss ( 71,799 ) ( 42,898 ) ( 114,697 ) Basic loss per share ( 1.45 ) ( 0.86 ) ( 2.31 ) Diluted loss per share ( 1.45 ) ( 0.86 ) ( 2.31 ) __________________________________ (1) Foreign exchange loss, net was included in Other, net in the previously issued Form 10-K for the year ended December 31, 2021. Consolidated Statement of Comprehensive (Loss) Income As Previously Issued Adjustment As Revised Net loss $ ( 71,799 ) $ ( 42,898 ) $ ( 114,697 ) Foreign currency translation adjustment ( 68,731 ) 42,898 ( 25,833 ) Other comprehensive loss (income) ( 66,563 ) 42,898 ( 23,665 ) Consolidated Statement of Stockholders' Equity As Previously Issued Adjustment As Revised Retained deficit $ ( 138,683 ) $ ( 42,898 ) $ ( 181,581 ) Net loss ( 71,799 ) ( 42,898 ) ( 114,697 ) Accumulated other comprehensive loss (income) ( 69,707 ) 42,898 ( 26,809 ) Other comprehensive loss (income) ( 66,563 ) 42,898 ( 23,665 ) Consolidated Statement of Cash Flows As Previously Issued Adjustment As Revised Net loss $ ( 71,799 ) $ ( 42,898 ) $ ( 114,697 ) Foreign exchange loss, net (1) ( 9,437 ) 42,898 33,461 Other operating activities (1) 19,712 — 19,712 __________________________________ (1) Foreign exchange loss, net was included in Other operating activities in the previously issued Form 10-K for the year ended December 31, 2021. 109 BALLY’S CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23. SUBSEQUENT EVENTS 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. 110 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 $ 4,454 111 BALLY’S CORPORATION