What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 713 added, 1022 removed, 1013 unchanged (63% of the section changed)

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Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020

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Notes to Consolidated Financial Statements

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts

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”).

Financial statement schedules have been omitted because they are not applicable, or the required information is included in the consolidated financial statements or the notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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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”).

We have audited the accompanying consolidated balance sheets of Bally’s Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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

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

Acquisition of Gamesys Group, Plc.

– Refer to Notes 1 and 5 to the financial statements

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.

Goodwill – International Interactive and North America Interactive Reporting Units – Refer to Notes 2 and 10 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.

The Company’s goodwill is tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value of the respective reporting units to their carrying value.

The Company determines the fair value of its reporting units in consideration of the income-based and market-based approaches.

The key inputs in determining the fair value of the International Interactive reporting unit include expected cash flows and projected financial results, including forecasted revenues (collectively the “International Interactive forecasts”), the selection of the discount rate, and market multiples.

As of December 31, 2022, the carrying value of the International Interactive reporting unit goodwill is $1,497.2 million.

The key inputs in determining the fair value of the North American Interactive reporting unit include forecasted revenues and market multiples.

As of December 31, 2022, the carrying value of the North America Interactive reporting unit goodwill is $39.7 million.

The Company’s fair value determination of its International Interactive and North America Interactive reporting units required management to make significant estimates and assumptions of International Interactive forecasts, discount rates, and market multiples, and of North America Interactive forecasted revenue and market multiples.

Therefore, performing audit procedures to evaluate the reasonableness of these estimates and assumptions involved a high degree of auditor judgment and 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;

Our audit procedures related to the International Interactive forecasts, discount rates, and market multiples, and the North America Interactive forecasted revenue and market multiples used by management to estimate the fair value of the International Interactive and North America Interactive reporting units included the following, among others:

• We tested the effectiveness of controls over determining the fair value of the Company’s International Interactive and North America Interactive reporting units, including controls over the International Interactive forecasts, discount rates, and market multiples, and the North America Interactive forecasted revenue and market multiples.

• We evaluated management’s ability to accurately project the International Interactive forecasts and the North America Interactive forecasted revenue by performing a retrospective review of actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s projected International Interactive forecasts and the North America Interactive forecasted revenue by:

◦ Comparing the International Interactive forecasts and the North America Interactive forecasted revenue to information included in the Company’s communications to the Board of Directors, industry reports, and analyst reports for the Company and certain of its peer companies;

◦ Comparing the International Interactive forecasts and the North America Interactive forecasted revenue to historical financial results;

◦ Evaluating the impact of changes in the regulatory environment on management’s projections.

◦ Conducting inquiries with management;

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

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

◦ Evaluating whether the International Interactive forecasts and the North America Interactive forecasted revenue 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 International Interactive discount rate and market multiples and the North America Interactive market multiples 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.

◦ Testing the source information underlying the determination of the market multiples;

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

/s/ Deloitte & Touche LLP

Stamford, Connecticut

New York, New York

March 1, 2023

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Prepaid expenses and other current assets 100,717 104,463

Assets held for sale 17,177 —

Total current assets 522,713 567,187

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Right of use assets, net 808,926 507,843

Goodwill 2,122,653 186,979

Goodwill, net 1,746,202 2,122,653

Intangible assets, net 1,961,938 2,477,952

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Accrued liabilities 573,931 401,428

Liabilities related to assets held for sale 3,409 —

Total current liabilities 755,802 570,132

Long-term debt, net 3,469,105 3,426,777

Long-term portion of financing obligation 200,000 —

Long-term portion of lease liabilities 803,212 506,475

Pension benefit obligations 4,647 9,215

Deferred tax liability 138,017 214,467

Naming rights liabilities 109,807 168,929

Contingent consideration payable 34,931 —

Other long-term liabilities 17,923 50,635

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Treasury stock, at cost, 0 and 795,578 shares as of December 31, 2022 and 2021, respectively

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

Retained deficit ( 535,373 ) ( 181,581 )

Accumulated other comprehensive loss ( 295,640 ) ( 26,809 )

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Gaming $ 1,846,124 $ 1,053,492 $ 298,070

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

Non-gaming 409,581 268,951 74,722

Total revenue 2,255,705 1,322,443 372,792

Operating (income) costs and expenses:

Operating costs and expenses:

Gaming 812,918 407,032 95,901

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 — —

Non-gaming 196,318 128,047 42,768

General and administrative 774,940 544,521 206,008

Impairment charges 463,978 4,675 8,659

Depreciation and amortization 300,559 144,786 37,842

Total operating costs and expenses 2,548,713 1,229,061 391,178

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

(Loss) income from operations ( 293,008 ) 93,382 ( 18,386 )

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 )

Other, net 11,503 — 183

Interest expense, net ( 208,153 ) ( 117,924 ) ( 62,636 )

Other non-operating expenses, net 46,692 ( 94,532 ) 6,211

Total other expense, net ( 161,461 ) ( 212,456 ) ( 56,425 )

(Loss) income before provision for income taxes ( 76,176 ) ( 74,811 ) 75,180

(Benefit) provision for income taxes ( 4,377 ) ( 69,324 ) 20,050

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

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

Loss before provision for income taxes ( 454,469 ) ( 119,074 ) ( 74,811 )

Benefit for income taxes ( 28,923 ) ( 4,377 ) ( 69,324 )

Net loss $ ( 425,546 ) $ ( 114,697 ) $ ( 5,487 )

Basic loss per share $ ( 7.32 ) $ ( 2.31 ) $ ( 0.18 )

Weighted average common shares outstanding, basic 58,111,699 49,643,991 31,315,151

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

Diluted loss per share $ ( 7.32 ) $ ( 2.31 ) $ ( 0.18 )

Weighted average common shares outstanding, diluted 58,111,699 49,643,991 31,315,151

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BALLY’S CORPORATION

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

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2022 2021 2020

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

Other comprehensive loss (income):

Foreign currency translation adjustments ( 68,731 ) — —

Net loss $ ( 425,546 ) $ ( 114,697 ) $ ( 5,487 )

Other comprehensive income (loss):

Foreign currency translation adjustments, net of tax ( 270,151 ) ( 25,833 ) —

Defined benefit pension plan:

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Net of tax amount 1,320 2,168 ( 1,256 )

Other comprehensive loss ( 66,563 ) ( 1,256 ) ( 1,888 )

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

Comprehensive loss ( 268,831 ) ( 23,665 ) ( 1,256 )

Total comprehensive loss $ ( 694,377 ) $ ( 138,362 ) $ ( 6,743 )

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

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Stock Retained

Earnings Accumulated

Earnings (Deficit) Accumulated

Comprehensive

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

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 )

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Adoption of ASU 2016-13 — — — — ( 58 ) — — ( 58 )

Other comprehensive loss — — — — — ( 1,256 ) — ( 1,256 )

Other comprehensive income — — — — — ( 1,256 ) — ( 1,256 )

Net loss — — — — ( 5,487 ) — — ( 5,487 )

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

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

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

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

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Balance as of December 31, 2021 52,254,477 530 1,849,068 ( 29,166 ) ( 181,581 ) ( 26,809 ) 3,760 1,615,802

Release of restricted stock and other stock awards, net 458,603 4 ( 5,957 ) 429 — — — ( 5,524 )

Share-based compensation — — 27,912 — — — — 27,912

Retirement of treasury shares — ( 74 ) ( 253,783 ) 182,103 71,754 — — —

Share repurchases (including tender offer) ( 6,621,841 ) — — ( 153,366 ) — — — ( 153,366 )

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

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

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

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

Conversion of non-controlling interest - Telescope 67,052 1 3,331 — — — ( 3,332 ) —

Other comprehensive loss — — — — — ( 268,831 ) — ( 268,831 )

Net loss — — — — ( 425,546 ) — — ( 425,546 )

Balance as of December 31, 2022 46,670,057 $ 466 $ 1,636,366 $ — $ ( 535,373 ) $ ( 295,640 ) $ 428 $ 806,247

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

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Cash flows from operating activities:

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

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

Net loss $ ( 425,546 ) $ ( 114,697 ) $ ( 5,487 )

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

Depreciation and amortization 300,559 144,786 37,842

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Share-based compensation 27,912 20,143 17,706

Goodwill and asset impairment 4,675 8,659 —

Amortization of debt issuance costs and debt discounts

Impairment charges 463,978 4,675 8,659

Amortization of debt discount and debt issuance costs

10,896 7,557 4,636

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Storm related losses — — 14,408

Gain on sale-leaseback ( 53,425 ) — —

Gain on sale-leaseback, net ( 50,766 ) ( 53,425 ) —

Contract termination — 30,000 —

Deferred income taxes ( 88,129 ) ( 5,217 ) 1,191

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

(Gain) loss on assets and liabilities measured at fair value ( 3,251 ) 21,440 —

Change in value of naming rights liabilities ( 32,577 ) ( 17,029 ) 57,660

Change in contingent consideration payable ( 10,747 ) ( 23,503 ) —

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

Adjustment (gain) on bargain purchase 107 ( 22,841 ) ( 63,871 )

Foreign exchange (gain) loss ( 516 ) 33,461 —

Other operating activities 10,764 19,712 982

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

Changes in current operating assets and liabilities 37,114 ( 61,579 ) ( 55,028 )

Net cash provided by operating activities 270,971 82,754 19,502

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Proceeds from sale-leaseback 150,000 144,000 —

Purchase of Bally’s Chicago land ( 200,000 ) — —

Advance deposit in connection with sale-leaseback transactions 200,000 — —

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

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Capital expenditures ( 212,256 ) ( 97,525 ) ( 15,283 )

Insurance proceeds from hurricane damage 18,660 — —

Insurance proceeds 1,265 18,660 —

Cash paid for internally developed software ( 37,121 ) ( 15,891 ) —

Acquisition of gaming licenses ( 55,117 ) ( 30,159 ) —

Purchase of equity securities ( 3,175 ) — —

Other intangible asset acquisitions ( 665 ) ( 19,157 ) —

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Repayments of long-term debt ( 564,450 ) ( 1,877,575 ) ( 254,375 )

Proceeds from Bally’s Chicago land financing obligation 200,000 — —

Payment of financing fees — ( 65,297 ) ( 1,734 )

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

Payment of deferred consideration ( 30,025 ) — —

Share repurchases ( 153,366 ) ( 87,024 ) ( 33,292 )

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Effect of foreign currency on cash and cash equivalents ( 20,722 ) ( 42,163 ) —

Change in cash and cash equivalents and restricted cash classified as assets held for sale ( 220 ) — —

Net change in cash and cash equivalents and restricted cash ( 9,656 ) 148,285 ( 58,947 )

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Cash and cash equivalents and restricted cash, end of period $ 265,184 $ 274,840 $ 126,555

Years Ended December 31,

2022 2021 2020

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

Cash paid for interest, net of amounts capitalized $ 200,901 $ 65,927 $ 57,234

Cash received from income tax refunds, net of cash paid ( 38,199 ) 42,291 3,835

Non-cash investing and financing activities:

Unpaid property and equipment $ 24,080 $ 31,123 $ 3,575

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 — —

Non-controlling interest ( 3,332 ) 3,760 —

Stock and equity instruments issued for North America Interactive acquisitions and Gamesys — 716,162 —

Acquisitions in exchange for contingent liability — 58,685 —

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Deposit applied to acquisition purchase price — 4,000 —

Non-controlling interest 3,760 — —

Unpaid trade name — — 20,000

Unpaid Naming Rights — — 332,313

Years Ended December 31,

2022 2021 2020

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents $ 212,515 $ 206,193 $ 123,445

Restricted cash 52,669 68,647 3,110

Total cash and cash equivalents and restricted cash $ 265,184 $ 274,840 $ 126,555

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

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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.

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

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

Casinos and Resorts (1)

Location Type Built/Acquired

Casinos and Resorts Location Type Built/Acquired

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

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

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

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Rock Island, Illinois Casino and Hotel 2021

Tropicana Las Vegas Casino and Resort (“Tropicana Las Vegas”) (2)

Las Vegas, Nevada Casino and Resort 2022

__________________________________

(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.

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

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

(“GLPI”) under the Master Lease agreement.

Refer to Note 15 “ Leases ” for further information.

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

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

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

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

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

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

• Telescope Inc.

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

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

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

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

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

Gamesys Acquisition

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the October 1, 2021 closing price of $ 53.08 per share of the Company’s common stock and a foreign exchange rate of 1.354 , the aggregate consideration paid to former Gamesys shareholders in connection with the Acquisition was approximately $ 2.60 billion.

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

See Note 5 “ Acquisitions ” for further information.

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

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

COVID-19 Pandemic

The 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.

The North America Interactive reportable segment includes a portfolio of sports betting, iGaming, and free-to-play gaming brands and the North American operations of Gamesys.

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

(“Gamesys”), an iCasino and online bingo platform provider and operator.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management has analyzed and concluded that Breckenridge Curacao B.V.

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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.

As of December 31, 2022 and 2021, Breckenridge had total assets of $ 93.4 million and $ 85.4 million, respectively, total liabilities of $ 77.1 million and $ 75.2 million, respectively, and revenues of $ 298.1 million and $ 79.6 million for the years ended December 31, 2022 and 2021, respectively.

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

The Company performs this analysis on an ongoing basis.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates in the Preparation of Financial Statements

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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.

(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

Cash and cash equivalents includes cash balances and highly liquid investments with an original maturity of three months or less.

Restricted cash includes player deposits, payment service provider deposits and Video Lottery Terminals (“VLT”) and table games related cash payable due to certain states where we operate, which are unavailable for the Company’s use.

Concentrations of Credit Risk

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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

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Non-gaming receivables 42,532 31,481

Accounts receivable, net 52,632 17,865

Accounts receivable 77,462 52,632

Allowance for doubtful accounts ( 5,789 ) ( 4,454 )

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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.

An allowance for doubtful accounts is determined to reduce the Company’s receivables for amounts that may not be collected.

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:

Activity for the allowance for doubtful accounts is as follows:

(in thousands) 2022 2021 2020

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Deductions ( 602 ) ( 701 ) ( 653 )

Acquisitions 371 2,013 64

Other adjustments 288 371 2,071

Balance at end of year $ 5,789 $ 4,454 $ 3,067

__________________________________

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

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

Prepaid Expenses and Other Assets

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

(in thousands) 2021 2020

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

Sales tax 18,308 —

Due from payment service providers 15,984 —

Prepaid marketing 10,066 641

Prepaid insurance 9,637 5,654

Deposits 8,748 4,674

Purse funds 8,286 5,667

Unbilled revenue 7,759 —

Contingent consideration receivable — 27,909

Other 4,179 3,453

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

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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:

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

Land improvements 10 - 20

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

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

During the years ended December 31, 2022 and 2021, there was $ 1.9 million and $ 0.2 million of capitalized interest, respectively.

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:

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

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.

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.

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

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.

Upon adoption of Accounting Standards 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain of the Company’s leases include renewal options and escalation clauses;

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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.

The Bally’s Chicago ground lease is accounted for as a financing obligation in accordance with ASC 470, Debt as the transaction did not qualify as a sale under ASC 842.

Lease payments are included in “Interest expense, net” within our consolidated statements of operations.

Refer to Note 15 “ Leases ” for further information.

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

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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.

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

For the quantitative goodwill impairment test, the Company estimates the fair value of the reporting unit and asset group using both income and market-based approaches.

Specifically, the Company applies the discounted cash flow (“DCF”) method under the income approach and the guideline company under the market approach and weighs the results of the two valuation methodologies based on the facts and circumstances surrounding the reporting unit.

For the DCF method, the Company relies on the present value of expected future cash flows, including terminal value, utilizing a market-based weighted average cost of capital (“WACC”) determined separately for the reporting unit as of the valuation date.

The determination of fair value under the DCF method involves the use of significant estimates and assumptions, including revenue growth rates driven by future gaming activity, operating margins, capital expenditures, working capital requirements, tax rates, terminal growth rates, and discount rates.

For the market approach, the Company utilizes a comparison of the reporting unit to comparable publicly-traded companies and transactions and, based on the observed earnings multiples, ultimately selects multiples to apply to the reporting unit.

The Company then compares the fair value of its reporting units to the carrying amounts.

If the carrying amount of the reporting unit exceeds the fair value, an impairment is recorded equal to the amount of the excess (not to exceed the amount of goodwill allocated to the reporting unit).

Intangible Assets

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Refer to Note 13 “ Sinclair Agreement ” for further information regarding the Sinclair Broadcast Group (“Sinclair”) naming rights.

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.

The Company reviews the carrying amount of its finite-lived intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Should events and circumstances indicate finite-lived intangible assets may not be recoverable, the Company performs a test for recoverability whereby estimated undiscounted cash flows are compared to the carrying values of the assets.

Should the estimated undiscounted cash flows exceed the carrying value, no impairments are recorded.

If the undiscounted cash flows do not exceed the carrying values, an impairment is recorded based on the fair value of the asset.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

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 the 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.

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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.

If the carrying value of the asset exceeds the expected undiscounted future cash flows generated by the asset, the asset is written down to its estimated fair value and an impairment loss is recognized.

Debt Issuance Costs and Debt Discounts

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Amortization of debt issuance costs and debt discounts included in interest expense was $ 10.9 million, $ 7.6 million and $ 4.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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.

The Company is self-insured for employee medical insurance coverage, general liability and workers’ compensation up to certain stop-loss amounts.

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.

The self-insurance liabilities are included in “Accrued liabilities” in the consolidated balance sheets and wer e $ 16.2 million and $ 10.8 million as of December 31, 2022 and 2021, respectively.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation

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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.

The Company accounts for Penny 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 and Options are classified in equity because they are indexed to the Company’s own stock and meet all conditions for equity classification.

The Performance Warrants are accounted for as a derivative liability in accordance with ASC 815, Derivatives and Hedging (“ASC 815”) 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 marked to market each reporting period, with changes in fair value recorded in “Other non-operating expenses, net” in the consolidated statements of operations.

Refer to Note 13 “ Sinclair Agreement ” for further information.

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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.

The Company generates revenue from four principal sources:

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

Refer to Note 5 “ 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.

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 marketing costs directly associated with the Company’s iGaming products and services.

These marketing expenses are included within Gaming expenses in the consolidated statements of operations for the years ended December 31, 2022 and 2021 and were $ 174.7 million and $ 60.8 million, respectively.

There were no such marketing expenses included within Gaming expenses for the year ended December 31, 2020 .

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

Advertising Expenses

The Company expenses advertising costs as incurred.

For the years ended December 31, 2022, 2021 and 2020, advertising expense was $ 26.8 million, $ 7.5 million and $ 4.5 million, respectively, and are included in “General and administrative” on the consolidated statements of operations.

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

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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.

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 and are included in “General and administrative” on the consolidated statements of operations.

Pre-opening expenses for the years ended December 31, 2022, 2021 and 2020 was $ 0.7 million , $ 1.8 million and $ 0.9 million , respectively.

There were no expansion expenses during the years ended December 31, 2022, 2021 and 2020.

Interest Expense, Net

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

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

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

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 earnings (loss) per common share.

The two-class method is an earnings allocation method under which basic earnings (loss) 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 earnings (loss) 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).

Foreign Currency

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 non-operating expenses, net” on the consolidated statements of operations.

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.

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

Treasury Stock

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Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations

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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.

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 general and administrative expense as they are incurred.

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

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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 Measur ements ” for further information.

CONSOLIDATED FINANCIAL INFORMATION

General and Administrative Expenses

Amounts included in General and administrative for the years ended December 31, 2022, 2021 and 2020 were as follows:

Year Ended December 31,

(in thousands) 2022 2021 2020

Advertising, general and administrative $ 776,226 $ 496,658 $ 192,751

Acquisition costs 49,480 71,288 13,257

Gain on sale-leaseback, net ( 50,766 ) ( 53,425 ) —

Contract termination — 30,000 —

Total general and administrative $ 774,940 $ 544,521 $ 206,008

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

Other Non-Operating Expenses

Amounts included in Other non-operating expenses for the years ended December 31, 2022, 2021 and 2020 were as follows:

Year Ended December 31,

(in thousands) 2022 2021 2020

Change in value of naming rights liabilities $ 32,577 $ 17,029 $ ( 57,660 )

(Adjustment) gain on bargain purchases ( 107 ) 22,841 63,871

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

Foreign exchange gain (loss) 516 ( 33,461 ) —

Other, net 13,706 2,066 —

Total other non-operating expenses, net $ 46,692 $ ( 94,532 ) $ 6,211

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.

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No.

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2022, the Financial Accounting Standards Board issued Accounting Standards Update No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

The amendments in this update defer the sunset date of Topic 848, which applies to entities which have transactions that reference LIBOR or other reference rates which are expected to be discontinued due to reference rate reform, until December 31, 2024.

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

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.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers , which requires companies to recognize revenue in a way that depicts the transfer of promised goods or services.

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.

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

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

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

Additional services include hotel, food and beverage.

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

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

Additional services include hotel, food, beverage, retail, entertainment and other.

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Retail gaming, online gaming and sports betting revenue, each as described below, contain two performance obligations.

Retail gaming transactions have an obligation to honor the outcome of a wager and to pay out 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.

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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 transaction price for hotel, food, beverage, retail, entertainment and other is the net amount collected from the customer for such goods and services.

Hotel, food, beverage, retail, entertainment and other 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:

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

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.

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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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

Gaming revenue includes casino revenue of the Company’s other properties which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by customers 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.

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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.

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

Online gaming revenue includes the online bingo and casino revenue of Gamesys since the date of acquisition, 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.

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Sports betting

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

If a player wins the wager, the Company pays the player 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 players.

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

The Company has entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in several jurisdictions 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.

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, 2022 and 2021.

Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $ 4.1 million and $ 6.8 million as of December 31, 2022 and 2021, 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.

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

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

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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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-gaming Revenue

Non-gaming revenue consists of hotel, food, beverage, 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.

Food, beverage, and retail 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 standalone selling price of food, beverage, 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 Non-gaming 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, 2022, 2021 and 2020:

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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):

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Retail, entertainment and other 51,060 42,941 46,508 140,509

Total non-gaming revenue 320,132 42,941 46,508 409,581

Total revenue $ 1,227,563 $ 81,700 $ 946,442 $ 2,255,705

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

Total non-gaming revenue 228,888 27,910 12,153 268,951

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

3 unchanged sentences

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

Total non-gaming revenue 74,722 — — 74,722

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

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue included in operations from Tropicana Las Vegas from the date of acquisition, September 26, 2022, of $ 24.1 million is reported in the Casinos & Resorts segment.

Refer to Note 6 “ Business Combinat ions ” for revenue included in operations from recent acquisitions.

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’s receivables related to contracts with customers were $ 44.0 million and $ 35.5 million as of December 31, 2022 and 2021, respectively.

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

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

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

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

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

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

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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.

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

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

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The Company recognized $ 31.0 million, $ 20.1 million and $ 5.5 million of revenue related to loyalty program redemptions for the years ended December 31, 2022, 2021 and 2020, respectively.

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.

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.

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.

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

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.

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.

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.

BUSINESS COMBINATIONS

Casinos & Resorts Acquisitions

Tropicana Las Vegas - On September 26, 2022, the Company completed its acquisition of Tropicana Las Vegas.

The total purchase price was $ 148.1 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.

Cash paid by the Company at closing net of $ 1.8 million cash acquired, was $ 146.3 million, excluding transaction costs.

In connection with the acquisition of Tropicana Las Vegas, the Company entered into a lease arrangement with GLPI to lease the land underlying the Tropicana Las Vegas property for an initial term of 50 years at annual rent of $ 10.5 million.

Bally’s Quad Cities - On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities.

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

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.

Bally’s Evansville - On June 3, 2021, the Company completed its acquisition of Bally’s Evansville.

The total purchase price was $ 139.7 million.

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

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

Refer to Note 15 “ Leases ” for further information.

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Bally’s Lake Tahoe - On April 6, 2021, the Company completed its acquisition of Bally’s Lake Tahoe for $ 14.2 million.

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

Bally’s Shreveport - 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 was $ 133.1 million, net cash acquired and a net working capital adjustment, excluding transaction costs.

Bally’s Atlantic City - On November 18, 2020, the Company completed its acquisition of Bally’s Atlantic City.

The Company paid cash of approximately $ 24.7 million, or $ 16.1 million net of cash acquired, excluding transaction costs.

Bally’s Kansas City and Bally’s Vicksburg - On July 1, 2020, the Company completed its acquisition Bally’s Kansas City and Bally’s Vicksburg for total cash consideration of approximately $ 229.9 million, or $ 225.5 million net of cash acquired, excluding transaction costs.

Bally’s Black Hawk - On January 23, 2020, the Company acquired three casino properties located in Black Hawk, Colorado for total cash consideration of $ 53.8 million, or $ 50.5 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 Casinos & Resorts acquisitions as of December 31, 2022:

Acquired during the year ended December 31, 2022 2021 2021 2021 2020 2020 2020

(in thousands) Tropicana Las Vegas Bally’s Quad Cities Bally’s Evansville Bally’s Lake Tahoe Bally’s Shreveport Bally’s Atlantic City Bally’s Kansas City and Bally’s Vicksburg

Preliminary (8)

Total current assets $ 8,141 $ 6,717 $ 12,031 $ 4,683 $ 7,616 $ 11,896 $ 5,538

Property and equipment, net 136,116 73,135 12,325 6,361 125,822 40,898 60,865

Right of use assets, net 164,884 — 285,772 57,017 9,260 — 10,315

Intangible assets, net 154,210 — 154,210

Intangible assets, net (1) to (7)

5,140 31,180 154,210 5,430 58,140 1,120 138,160

Other assets 766 — 468 — 403 — 117

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

Goodwill 8,590 13,308 — — — — 54,276

Total current liabilities ( 10,268 ) ( 5,412 ) ( 10,927 ) ( 3,546 ) ( 6,059 ) ( 11,114 ) (4,762)

Lease liabilities ( 164,884 ) — ( 285,772 ) ( 52,927 ) ( 14,540 ) — ( 34,452 )

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

Other long-term liabilities ( 395 ) — ( 7,543 ) ( 904 ) ( 12,137 ) ( 11,132 ) ( 194 )

2 unchanged sentences

Total purchase price $ 148,090 $ 118,928 $ 139,708 $ 14,172 $ 137,190 $ ( 927 ) $ 229,863

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.

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.

__________________________________

(1) Tropicana Las Vegas intangible assets include rated player relationships, a trade name and pre-bookings of $ 2.6 million, $ 1.7 million and $ 0.8 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years, 3 years and 2 years, respectively.

(2) Bally’s Quad Cities’ intangible assets 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.

(3) Bally’s Evansville’s intangible assets 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 .

(4) Bally’s Lake Tahoe’s intangible assets include gaming licenses of $ 5.2 million with an indefinite life and a trade name of $ 0.2 million, which are being amortized on a straight-line basis over its estimated useful life of approximately six months .

(5) Bally’s Shreveport intangible assets 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 an estimated useful life of eight years .

(6) Bally’s Atlantic City intangible assets include rated player relationships of $ 0.9 million and hotel and conference pre-bookings of $ 0.2 million, which are being amortized over useful lives of eight years and three years , respectively.

(7) Bally’s Kansas City and Bally’s Vicksburg intangible assets include gaming licenses of $ 137.3 million with an indefinite life and rated player relationships of $ 0.9 million, which are being amortized on a straight-line basis over estimated useful lives of approximately eight years .

(8) The Company recorded adjustments to the preliminary purchase price allocation during the year ended December 31, 2022 which decreased other current assets by $ 2.5 million, increased total current liabilities by $ 1.5 million, increased lease liabilities by $ 0.7 million, and increased right of use assets, net by $ 0.5 million, with the offset increasing goodwill by $ 4.2 million.

(9) The Company recorded immaterial adjustments to purchase price allocations for 2021 acquisitions during the year ended December 31, 2022.

The Company finalized purchase price allocations for 2020 acquisitions during the year ended December 31, 2021.

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

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.

During the year ended December 31, 2021, the Company recorded bargain purchase gains related to Bally’s Evansville and Bally’s Lake Tahoe of $ 20.9 million and $ 2.0 million, respectively.

During the year ended December 31, 2022, based on the final purchase price allocation for Bally’s Lake Tahoe, an adjustment of $ 0.1 million was recorded reducing the bargain purchase gain to $ 1.9 million.

During the year ended December 31, 2020, the Company recorded bargain purchase gains related to Bally’s Shreveport and Bally’s Atlantic City of $ 31.3 million and $ 32.6 million.

The Company believes it was able to acquire Bally’s Evansville, Bally’s Lake Tahoe and Bally’s Shreveport for less than fair value as a result of a distressed sale prior to Eldorado’s merger with Caesars, coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the US.

The Company incurred $ 4.0 million and $ 10.4 million of acquisition costs related to the above Casino & Resorts acquisitions during the years ended December 31, 2022 and 2021, respectively.

These costs are included within “General and administrative” of the consolidated statement of operations.

North America Interactive Acquisitions

During 2021, the Company completed six acquisitions within its North America Interactive segment for an aggregate net investment of $ 400.3 million.

The Company paid cash $ 128.8 million, net of cash acquired.

Total non-cash consideration was $ 255.7 million, which included $ 58.7 million of the fair value of contingent consideration representing the issuance of Company shares if certain post-closing performance targets are met and contingent penny warrants to purchase additional Company common shares based on future operations in certain jurisdictions.

In connection with one of the North America Interactive acquisitions, the Company recorded a 15.84 % non-controlling interest representing shares 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, classified as permanent equity.

During the year ended December 31, 2022, certain selling shareholders exercised their right to convert to Bally’s common stock reducing the non-controlling interest.

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

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

(in thousands) Final (2)

Cash and cash equivalents $ 8,689

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Acquired non-controlling interest ( 3,760 )

Net investment in Bally’s Interactive Acquisitions

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

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

Net investment in North America Interactive Acquisitions

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(1) Include customer relationships of $ 41.5 million, which are being amortized over estimated useful lives between three and ten years , developed software of $ 122.4 million, which is being amortized over estimated useful lives between three and ten years , and trade names of $ 3.1 million, which are being amortized over estimated useful lives between 10 and 15 years.

(2) The Company recorded immaterial adjustments to the purchase price allocation during the year ended December 31, 2022.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total goodwill recorded in connection with the North America Interactive Acquisitions was $ 250.7 million, of which $ 102.9 million is deductible for local tax purposes.

The goodwill of the North America Interactive Acquisitions has been assigned, as of the acquisition date, to the Company’s North America Interactive reportable segment.

The Company incurred $ 3.9 million and $ 5.3 million of transaction costs related to the North America Interactive Acquisitions in the years ended December 31, 2022 and 2021, respectively.

These costs are included within “General and administrative” of the consolidated statement of operations.

Gamesys Acquisition

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

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

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

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

Goodwill associated with the Gamesys acquisition is assigned as of the acquisition date to the Company’s International Interactive and North America Interactive reportable segments in the amounts of $ 1.65 billion and $ 33.3 million respectively, which include the reporting units expected to benefit from the synergies arising from the acquisition.

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

Goodwill recognized is not deductible for local tax purposes.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

(in thousands) Preliminary as of December 31, 2021

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

During the year ended December 31, 2022, the Company incurred $ 6.3 million of transaction costs related to the acquisition of Gamesys compared to $ 43.5 million during the year ended December 31, 2021.

These costs are included within “General and administrative” expense in the consolidated statement of operations.

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

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

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

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

(in thousands) Final (2)

Cash and cash equivalents and restricted cash $ 183,306

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Total purchase price

__________________________________

(1) Intangible assets 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 $ 247.1 million, which have indefinite lives.

(2) During the year ended December 31, 2022, the Company recorded adjustments to the purchase price allocation including a $ 0.5 million increase to prepaid expenses and other current assets, a $ 5.3 million increase to goodwill, a $ 2.7 million decrease to intangible assets, net and a $ 3.1 million increase to accrued liabilities.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Goodwill recognized is not deductible for local tax purposes.

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.

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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.

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

The revenue, earnings and pro forma effects of the Bally’s Interactive Acquisitions and Bally’s Quad Cities completed during the year ended December 31, 2021 and Tropicana Las Vegas in the third quarter of 2022 are not material to results of operations, individually or in the aggregate.

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

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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.

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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

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

Revenue $ 465,685

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.

Net loss $ ( 7,450 )

ASSETS AND LIABILITIES HELD FOR SALE

The Company applies a criteria that must be met before an asset is classified as held for sale, including that management, with the appropriate authority, commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer.

The Company recognizes assets held for sale at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model.

The Company then compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset.

If the undiscounted cash flows do not exceed the carrying value, then an impairment charge may be recorded for any difference between fair value and the carrying value.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, one of the Company’s North America Interactive businesses met the criteria to be classified as assets held for sale but did not qualify as discontinued operations as it did not represent a strategic shift having a major effect on the Company’s operations and financial results.

The major classes of assets and liabilities classified as held for sale as of December 31, 2022 are as follows:

(in thousands) December 31, 2022

Restricted cash, prepaid expenses and other current assets $ 3,756

Goodwill 9,399

Intangible assets, net 4,022

Assets held for sale (1)

Liabilities related to assets held for sale (1)(2)

__________________________________

(1) All assets and liabilities held for sale were classified as current as it’s probable the sale will be completed within one year.

(2) Liabilities related to assets held for sale were made up of accounts payable and accrued liabilities.

The revenues and net loss attributable to the business classified as held for sale were not significant for the year ended December 31, 2022.

PREPAID EXPENSES AND OTHER ASSETS

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

(in thousands) 2022 2021

Services and license agreements $ 31,396 $ 21,496

Due from payment service providers 30,621 15,984

Purse funds 8,093 8,286

Prepaid marketing 8,042 10,066

Prepaid insurance 6,374 9,637

Sales tax 5,900 18,308

Other 10,291 20,686

Total prepaid expenses and other current assets $ 100,717 $ 104,463

PROPERTY AND EQUIPMENT

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

(in thousands) 2022 2021

Land $ 259,378 $ 75,328

Land improvements 31,197 34,704

Building and improvements 752,964 650,837

Equipment 246,340 182,006

Furniture and fixtures 63,753 47,258

Construction in process 116,181 53,715

Total property, plant and equipment 1,469,813 1,043,848

Accumulated depreciation (1)

( 267,711 ) ( 205,197 )

Property and equipment, net $ 1,202,102 $ 838,651

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(1) Depreciation expenses on property and equipment for the years ended December 31, 2022, 2021 and 2020 was $ 71.7 million, $ 53.7 million and $ 33.0 million, respectively.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2022 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.

As of October 1, 2022, the Company performed its annual impairment assessment of goodwill and long lived assets for all reporting units and asset groups.

Each individual property within the Casinos and Resorts operating segment is determined to be its own reporting unit and asset group.

The reporting units and asset groups for the North America Interactive and International Interactive operating segments are the operating segments.

The estimated fair values of the reporting units were determined through a combination of discounted cash flow models and market-based approaches, which utilized Level 3 inputs.

For the North America Interactive reporting unit and asset group, primarily due to a decline in actual and projected revenues, the Company determined that it was more likely than not that the fair value of the reporting unit was less than its carrying value and therefore, a quantitative impairment analysis was performed.

Based on this analysis, the Company recorded an aggregate $ 390.7 million non-cash impairment charge in its North America Interactive reporting unit.

The Company allocated the loss first to intangible assets in the amount of $ 159.1 million and then the residual of $ 231.6 million to goodwill.

One component of the North America Interactive reporting unit met the criteria to be classified as held for sale during the fourth quarter of 2022.

Accordingly, the Company performed a relative fair value allocation of goodwill to this component.

No further impairment was recorded upon classifying this component as held for sale as the fair value exceeded the carrying value as of December 31, 2022.

The Company performed a quantitative test of goodwill for the International Interactive reporting unit and determined that the fair value of the International Interactive reporting unit and asset group exceeded its carrying amount and thus, there was no impairment.

If future results significantly vary from current estimates and related projections, the Company may be required to record impairment charges.

The Company recorded an impairment loss within the International Interactive segment of $ 73.3 million related to a long-standing indefinite lived trademark acquired as part of the Gamesys acquisition.

This trademark is being de-emphasized for other newer brands in Asia and Rest of World, resulting in a decline in actual and projected revenues attributable to the trademark as compared to when the fair value was determined during the purchase price allocation of the Gamesys acquisition.

The fair value of the trademark was determined using a relief from royalty method, which utilized Level 3 inputs.

These charges are recorded within “Impairment charges” in the consolidated statement of operations.

For all reporting units within the Casinos and Resorts segment, the Company performed a qualitative analysis for the annual assessment of goodwill and indefinite lived intangible assets (commonly referred to as “Step Zero”).

From a qualitative perspective, in evaluating whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, relevant events and circumstances are taken into account, with greater weight assigned to events and circumstances that most affect the fair value or the carrying amounts of its assets.

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

After assessing these and other factors, the Company determined that it was more likely than not that the fair value of 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.

After assessing these and other factors, the Company determined that it was more likely than not that the fair value of all reporting units within the Casinos and Resorts segment exceeded their carrying amounts as of October 1, 2022.

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.

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 “ Impairment charges ” on the consolidated statements of operations within the Casinos & Resorts reportable segment.

BALLY’S CORPORATION

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The change in carrying value of goodwill by reportable segment for the years ended December 31, 2022 and 2021 is as follows:

Casinos & Resorts North America Interactive International Interactive Total

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

Goodwill as of December 31, 2020 (1)

$ 186,979 $ — $ — $ 186,979

Goodwill from current year business combinations 14,593 283,767 1,645,200 1,943,560

Impairment charges ( 5,360 ) — — ( 5,360 )

Effect of foreign exchange — ( 409 ) ( 7,857 ) ( 8,266 )

Purchase accounting adjustments on prior year business combinations 380 — — 380

Goodwill as of December 31, 2021 (1)

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Goodwill from current year business combinations 8,590 — — 8,590

Impairment charges — ( 231,569 ) — ( 231,569 )

Effect of foreign exchange — ( 2,889 ) ( 145,424 ) ( 148,313 )

Purchase accounting adjustments on prior year business combinations ( 1,285 ) 239 5,286 4,240

Transferred to assets held for sale (3)

— ( 9,399 ) — ( 9,399 )

Goodwill as of December 31, 2022 (2)

1 unchanged sentence

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(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:

(1) Amounts are shown net of accumulated goodwill impairment charges of $ 5.4 million for Casinos and Resorts.

(2) Amounts are shown net of accumulated goodwill impairment charges of $ 5.4 million and $ 140.4 million for Casinos and Resorts and North America Interactive, respectively.

(3) Goodwill transferred to assets held for sale consists of $ 100.6 million of goodwill and $ 91.2 million of accumulated impairment.

The change in intangible assets, net for the years ended December 31, 2022 and 2021 is as follows (in thousands):

Intangible assets, net as of December 31, 2020 $ 663,395

Intangible assets from current year business combinations 1,870,918

Other intangibles acquired (1)

Change in TRA with Sinclair (1)

Effect of foreign exchange ( 12,538 )

Impairment charges ( 4,675 )

Internally developed software 20,952

Other intangibles acquired 31,551

Accumulated amortization ( 90,801 )

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Other intangibles acquired (2)

Transferred to assets held for sale ( 4,022 )

Accumulated amortization ( 228,909 )

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__________________________________

(1) Includes Naming rights and Bally’s trade name.

(2) Refer to Note 10 “ S inclair Agreement .”

(1) Refer to Note 13 “ Sinclair Agreement .”

(2) Includes the gaming license related to Bally’s Chicago.

BALLY’S CORPORATION

34 unchanged sentences

9.2 $ 337,391 $ ( 25,721 ) $ 311,670

Rhode Island contract for VLTs 0.0 $ 29,300 $ ( 29,300 ) $ —

Trade names 10.6 28,439 ( 17,481 ) 10,958

1 unchanged sentence

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

1 unchanged sentence

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

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

2 unchanged sentences

(2) See note (1) above.

Amortization of intangible assets was approximately $ 228.9 million, $ 91.1 million and $ 4.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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 6 “ Business Combinations ” for further information about the preliminary purchase price allocation and provisional goodwill and intangible balances added from current year business combinations.

Refer to Note 13 “ Sinclair Agreement ” for intangible assets added through the Sinclair Agreement.

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Thereafter 242,897

DERIVATIVE INSTRUMENTS

Foreign Exchange Forward Contracts

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

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

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

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

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

On October 1, 2021, the above mentioned foreign exchange forward contracts were discontinued as part of the acquisition of Gamesys.

The Company received $ 0.1 million at closing, which was reported within “Other, net” on the consolidated statements of operations.

The Company’s foreign exchange forward contracts were not designated as hedging instruments under ASC 815, Derivatives and Hedging (“ASC 815”).

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

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

Sinclair Agreement

As noted in Note 10 “ S inclair A greement ,” on November 18, 2020, Bally’s entered into a long-term strategic relationship with Sinclair.

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

(in thousands) Balance Sheet Location 2021 2020

Sinclair Performance Warrants Naming rights liabilities $ 69,564 $ 88,119

Sinclair Options Naming rights liabilities — 58,198

Total Liabilities $ 69,564 $ 146,317

The gains (losses) recognized in the consolidated statements of operations for derivatives not designated as hedging instruments during the years ended December 31, 2021 and 2020 are as follows:

Consolidated Statements of Operations Location Year Ended December 31,

(in thousands) 2021 2020

Foreign exchange forward contracts Other, net $ ( 20,882 ) $ —

Sinclair Performance Warrants Change in value of naming rights liabilities 18,555 ( 32,878 )

Sinclair Options Change in value of naming rights liabilities ( 1,526 ) ( 24,782 )

FAIR VALUE MEASUREMENTS

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December 31, 2022

(in thousands) Level 1 Level 2 Level 3

Other current assets $ 176 $ — $ —

Other assets — — 2,025

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

Cash and cash equivalents Cash and cash equivalents $ 212,515 $ — $ —

Restricted cash Cash and cash equivalents 52,669 — —

Convertible loans Prepaid expenses and other current assets 657 — —

Convertible loans Other assets — — 10,212

Investments in equity securities Other assets 2,395 — —

Total $ 268,236 $ — $ 10,212

Sinclair Performance Warrants $ — $ — $ 69,564

Contingent consideration — — 34,931

Sinclair Performance Warrants Naming rights liabilities $ — $ — $ 36,987

Contingent consideration Contingent consideration payable — — 8,220

Total $ — $ — $ 45,207

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021

(in thousands) Level 1 Level 2 Level 3

Contingent consideration $ — $ 27,909 $ —

Sinclair Performance Warrants $ — $ — $ 88,119

Sinclair Options — 58,198 —

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

Cash and cash equivalents Cash and cash equivalents $ 206,193 $ — $ —

Restricted cash Cash and cash equivalents 68,647 — —

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

Convertible loans Other assets 5,905 — 2,025

Total $ 280,921 $ — $ 2,025

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

Contingent consideration Contingent consideration payable — — 34,931

Total $ — $ — $ 104,495

There were no transfers made among the three levels in the fair value hierarchy for the years ended December 31, 2022 and 2021.

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:

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

( in thousands) Performance Warrants Contingent Consideration Other Assets Total

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

Balance 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

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

Additions in the period (acquisition fair value) — — 3,777 3,777

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

Change in fair value ( 32,577 ) ( 10,849 ) 4,410 ( 39,016 )

Balance as of December 31, 2022 $ 36,987 $ 8,220 $ 10,212 $ 55,419

The gains (losses) recognized in the consolidated statements of operations for derivatives not designated as hedging instruments during the years ended December 31, 2022 and 2021 are as follows:

Consolidated Statements of Operations Location Year Ended December 31,

(in thousands) 2022 2021 2020

Foreign exchange forward contracts Other non-operating expenses, net $ — $ ( 20,882 ) $ —

Sinclair Performance Warrants Other non-operating expenses, net 32,577 18,555 ( 32,878 )

Sinclair Options Other non-operating expenses, net — ( 1,526 ) ( 24,782 )

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.

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

Gains (losses) recognized in earnings resulting from the change in fair value were reported within “Other non-operating expenses, net” on the consolidated statements of operations.

On April 16, 2021, a subsidiary of the Company entered into foreign exchange forward contracts 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 and 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.

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 non-operating expenses, net” on the consolidated statements of operations.

The company did not have any foreign exchange forward contracts outstanding as of December 31, 2022 and 2021.

Sinclair Performance Warrants

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

Contingent consideration

As of December 31, 2021, the Company’s contingent consideration payable related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

In connection with the acquisitions of SportCaller and MKF on February 5, 2021 and March 23, 2021, respectively, the Company recorded contingent consideration at fair value of $ 58.6 million as of the acquisition dates.

After the acquisition dates and until the contingencies are resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to management’s estimate and the Company’s stock price.

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

As of December 31, 2020, the Company recorded a contingent consideration asset under ASC 805 in connection with its acquisition of Bally’s Atlantic City whereby the seller would reimburse the Company for a capital expenditure commitment by December 31, 2021.

This commitment was recognized at its present value of $ 27.7 million as of the acquisition date using inputs observable for the asset directly which represents a Level 2 measurement within the fair value hierarchy.

Refer to Note 5 “ Acquisitions ” for further information.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sinclair Options

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

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

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

Other current assets

The Company has agreements with certain third-party sports betting operators for online sports betting and related iGaming market access.

Pursuant to one of these agreements, the Company has a present right to payment for a fixed number of equity securities in exchange for market access.

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

Contingent consideration

Contingent consideration 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 Company’s acquisition of Monkey Knife Fight (“MKF”) and Telescope Inc.

(“Telescope”) which are included within the Company’s North America Interactive acquisitions in Note 6 “ Business Combinations ”, the Company recorded contingent consideration at fair value of $ 58.7 million as of the acquisition dates.

These changes in fair value are recognized within “Other non-operating expenses, net” of the consolidated statements of operations.

During the first quarter of 2022, the Company settled contingent consideration of $ 15.9 million comprised of 393,778 immediately exercisable penny warrants and 107,832 shares of Bally’s Corporation common stock and $ 0.1 million in cash in satisfaction of contingencies related to the respective acquisition agreements.

Convertible loans

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.

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

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

The fair value of the loans to vendors with share prices quoted on active markets are classified within Level 1 of the hierarchy and the fair value of the loans to vendors with share values based on unobservable inputs are classified within Level 3 of the hierarchy, both with changes to fair value included within “Other non-operating expenses, net” of the consolidated statements of operations.

Investment in equity securities

The Company has a long term investment in an unconsolidated entity which it accounts for under the equity method of accounting.

The Company has elected the fair value option allowed by ASC 825, Financial Instruments , with respect to this investment.

Under the fair value option, the investment is remeasured at fair value at each reporting period through earnings.

The Company measures fair value using quoted prices in active markets that are classified within Level 1 of the hierarchy, with changes to fair value included within “Other non-operating expenses, net” of the consolidated statements of operations.

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

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

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

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

Refer to Note 14 “ Long-Term Debt ” for further information.

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732,976 529,905 731,537 754,223

5.875 % Senior Notes due 2031

731,537 754,223 — —

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACCRUED LIABILITIES

1 unchanged sentence

(in thousands) 2022 2021

GLPI advance deposit (1)

$ 200,000 $ —

Gaming liabilities 168,386 170,508

1 unchanged sentence

Interest payable 36,173 46,292

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 108,909 134,864

Total accrued liabilities $ 573,931 $ 401,428

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________________________________

(1) Refer to Note 15 “ Leases ” for further information

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.

The Company received 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 Tax Receivable Agreement (“TRA”) with Sinclair.

The initial term of the agreement is ten years from the commencement date of the re-branded regional sports networks and can be renewed for one additional five-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.

Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Diamond Sports Group 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, Business Combinations—Related Issues , using a cost accumulation model.

The naming rights intangible asset, net of accumulated amortization, was $ 255.6 million and $ 311.7 million as of December 31, 2022 and 2021, respectively.

Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $ 33.3 million and $ 25.7 million for the years ended December 31, 2022 and 2021, respectively.

Refer to Note 10 “ Goodwill and Intangible Assets ” for further information.

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The total value of the liability as of December 31, 2022 and 2021 was $ 59.3 million and $ 58.9 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.

The short-term portion of the liability, which was $ 6.0 million and $ 2.0 million as of December 31, 2022 and 2021, respectively, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $ 53.3 million and $ 56.9 million as of December 31, 2022 and 2021, respectively, is recorded within “Naming rights liabilities” in the consolidated balance sheets.

Accretion expense for the years ended December 31, 2022 and 2021 was $ 4.4 million and $ 4.3 million, respectively, and was reported in “Interest expense, net of amounts capitalized” in the consolidated statements of operations.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The 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.

Penny Warrants & Options - The Penny Warrants and Options are equity classified instruments under ASC 815.

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Options was $ 59.7 million as of December 31, 2022 and 2021, and is recorded within “Additional paid-in capital” in the consolidated balance sheets.

2 unchanged sentences

The fair value is recorded within “Naming Rights liabilities” of the consolidated balance sheets.

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

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

The change in fair value of the Options from November 18, 2020 through December 31, 2020 was $ 24.8 million and was $ 1.5 million for December 31, 2020 through January 27, 2021, resulting in mark to market losses in the years ended December 31, 2021 and 2020, reported in “Change in value of naming rights liabilities” in the consolidated statements of operations.

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

Tax Receivable Agreement

1 unchanged sentence

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

As of December 31, 2021 and 2020, the estimate of the TRA liability was $ 42.2 million and $ 43.0 million, respectively, and was included in “Naming rights liabilities” in the consolidated balance sheets.

The change in value of the TRA liability, in the amount of $( 0.8 ) million and $ 5.9 million for the years ended December 31, 2021 and 2020, respectively, is included in “Change in value of naming rights liabilities” in the consolidated statements of operations.

The ending Naming rights intangible asset as of December 31, 2021 and 2020 was $ 337.4 million and $ 338.2 million, respectively.

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITION, INTEGRATION AND RESTRUCTURING

The following table reflects acquisition, integration and restructuring expense the Company recorded during the years ended December 31, 2021, 2020 and 2019:

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)

Bally’s Quad Cities 2,026 1,003 —

Richmond, Virginia (2)

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

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:

(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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The TRA liability was $ 19.4 million and $ 42.2 million as of December 31, 2022 and 2021, respectively, and is included in “Naming rights liabilities” in the consolidated balance sheets.

The change in value of the TRA liability, in the amount of $( 22.8 ) million and $( 0.8 ) million for the years ended December 31, 2022 and 2021, respectively, is included in “Other non-operating expenses, net” in the consolidated statements of operations.

LONG-TERM DEBT

4 unchanged sentences

5.625 % Senior Notes due 2029

750,000 750,000

5.875 % Senior Notes due 2031

750,000 750,000

Unamortized original issue discount ( 27,729 ) ( 31,425 )

4 unchanged sentences

excluding current portion $ 3,469,105 $ 3,426,777

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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”).

3 unchanged sentences

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

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

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

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 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.

1 unchanged sentence

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.

The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (iii) enter into certain transactions with affiliates, (iv) sell or otherwise dispose of assets, (v) create or incur liens and (vi) 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.

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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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

As of December 31, 2022, the Company’s borrowings under the Revolving Credit Facility did not exceed 30 % and therefore, financial covenants did not apply.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.75 % Senior Notes due 2027

In connection with the termination of a prior credit agreement and the 2027 Notes, the Company recorded a loss on extinguishment of debt of $ 103.0 million in its consolidated statements of operations during the year ended December 31, 2021.

Debt Maturities

3 unchanged sentences

Thereafter 3,328,300

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.

The Company is committed under various operating lease agreements for real estate and property used in operations.

Certain 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 consumer price index (“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.

Discount rates used to determine the present value of the lease payments are based on the Company’s incremental borrowing rate commensurate with the term of the lease.

The Company had total operating lease liabilities of $ 836.1 million and $ 531.0 million as of December 31, 2022 and 2021, respectively, and right of use assets of $ 808.9 million and $ 507.8 million as of December 31, 2022 and 2021, respectively, which were included in the consolidated balance sheets.

As of December 31, 2022, the Company’s Bally’s Evansville, Bally’s Dover, Bally’s Quad Cities and Bally’s Black Hawk properties are leased under the terms of a master lease agreement (the “Master Lease”) with GLPI.

All GLPI leases are accounted for as operating leases within the provisions of ASC 842 over the lease term or until a re-assessment event occurs.

The Master Lease has an initial term of 15 years and includes four , five-year options to renew and requires combined minimum annual payments of $ 52.0 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI.

The renewal options are not reasonably certain of exercise as of December 31, 2022.

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:

In connection with the sale of the real estate for Bally’s Dover in the second quarter of 2021, the Company received proceeds of $ 144.0 million and recognized a net gain of $ 53.4 million.

In connection with the sale of the real estate for Bally’s Quad Cities and Bally’s Black Hawk during the second quarter of 2022, the Company received proceeds of $ 150.0 million and recognized a gain of $ 50.8 million.

The gains recorded on the transactions represent the difference in the respective transaction prices and the derecognition of assets and are recorded within “General and administrative” in the consolidated statements of operations.

In addition to the properties under the Master Lease explained above, the Company has also entered into a lease with GLPI for the land associated with Tropicana Las Vegas which the Company acquired during the fourth quarter of 2022.

This lease has an initial term of 50 years (with a maximum term of 99 years with renewal options) at annual rent of $ 10.5 million, subject to minimum 1% annual escalation or greater escalation dependent on CPI.

The renewal options are not reasonably certain of exercise as of December 31, 2022.

On January 3, 2023, the Company completed a transaction with GLP Capital, L.P., the operating partnership of GLPI, related to the land and real estate assets of Bally’s Tiverton and Hard Rock Biloxi for total consideration of $ 635.0 million.

The transaction was structured as a tax-free capital contribution and a substantial portion of the proceeds will be applied to reduce the Company’s debt.

These properties will be added to the Master Lease, increasing minimum annual payments by $ 48.5 million.

During the third quarter of 2022, the Company received an advance deposit of $ 200.0 million in connection with this agreement which was recorded within “Accrued liabilities” in the consolidated balance sheets as of December 31, 2022.

Components of lease expense included within “General and administrative” for operating leases during the years ended December 31, 2022, 2021 and 2020 are as follows:

Year Ended December 31,

(in thousands) 2022 2021 2020

Operating leases:

Operating lease cost $ 75,675 $ 36,354 $ 3,256

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Short-term lease expense 17,536 11,746 2,158

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:

Total operating lease expense $ 101,597 $ 52,291 $ 5,470

Supplemental cash flow and other information related to operating leases for the year ended December 31, 2022 and 2021, are as follows:

Year Ended December 31,

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Weighted average discount rate 6.7 % 6.1 %

As of December 31, 2021, future minimum rental commitments under noncancelable operating leases are as follows:

As of December 31, 2022, future minimum lease payments under noncancelable operating leases are as follows:

(in thousands)

1 unchanged sentence

Thereafter 1,270,751

Total 834,796

Total lease payments 1,707,526

present value discount ( 871,385 )

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.

Lease obligations $ 836,141

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments disclosed in the table above include $ 87.7 million related to extension options that are reasonably certain of being exercised.

The table above does not include $ 18.1 million of payments for leases signed but not yet commenced as of December 31, 2022.

Financing Obligation

Bally’s Chicago Operating Company, LLC., an indirect wholly-owned subsidiary of the Company, entered into a ground lease for the land on which Bally’s Chicago will be built, which is accounted for as a financing obligation in accordance with ASC 470 Debt as the transaction did not qualify as a sale under ASC 842.

The lease commenced November 18, 2022 and has a 99-year term followed by ten separate 20-year renewals at the Company’s option.

The Company recorded land within property and equipment, net of $ 200.0 million with a corresponding long-term financing obligation of $ 200.0 million on its consolidated balance sheets as of December 31, 2022.

All lease payments are recorded as interest expense and there is no reduction to the financing obligation over the lease term.

Bally’s Chicago made cash payments, and recorded corresponding interest expense, of $ 2.0 million during the year ended December 31, 2022.

The Company leases its hotel rooms to patrons and records the corresponding lessor revenue in “ Non-gaming revenue ” within our consolidated statements of operations.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $ 153.8 million, $ 95.4 million and $ 24.7 million of lessor revenues related to the rental of hotel rooms, respectively.

Hotel leasing arrangements vary in duration, but are short-term in nature.

The cost and accumulated depreciation of property and equipment associated with hotel rooms is included in “Property and equipment, net” within our consolidated balance sheets.

Equity Incentive Plans

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Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan.

The 2015 Incentive Plan 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 provided for the grant of stock options, time-based RSUs, RSAs, 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.

3 unchanged sentences

As of December 31, 2022, 3,240,857 shares were available for grant under the 2021 Incentive Plan.

Share-Based Compensation

The Company recognized total share-based compensation expense of $ 27.9 million, $ 20.1 million and $ 17.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

1 unchanged sentence

As of December 31, 2022, there was $ 17.2 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 1.2 years.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

2 unchanged sentences

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

Exercised ( 20,000 ) $ 4.31

Outstanding at December 31, 2022 —

Exercisable at December 31, 2022 — $ — $ — $ —

There were no stock options granted during the years ended December 31, 2022, 2021 or 2020.

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.

The total intrinsic value of options exercised was $ 0.6 million, $ 3.4 million and $ 0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

There was no remaining compensation cost relating to unvested stock options as of December 31, 2022, 2021 or 2020.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units and Performance-Based Restricted Stock Units

2 unchanged sentences

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.

PSUs generally vest over a 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 fair value of RSUs and PSUs is based on the Company’s common stock price as of the grant date.

The following summary presents information of equity-classified RSU and PSU activity for the year ended December 31, 2022:

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The grant date for the 2022, 2021 and 2020 performance periods have been established and, based upon achievement of the performance criteria for the years ended December 31, 2022, 2021 and 2020, 62,133 , 29,995 and 31,478 PSUs, respectively, became eligible for vesting.

Other Stock Based Awards

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company elected to utilize stock as a 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Capital Return Program

The Company has a Board of Directors approved capital return program under which the Company may expend a total of up to $ 700 million for share repurchases and payment of dividends.

Future 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.

As of December 31, 2022, $ 194.6 million was available for use under the capital return program.

Total share repurchase activity during the years ended December 31, 2022, 2021 and 2020 is as follows:

4 unchanged sentences

Average cost per share, including commissions $ 23.16 $ 39.76 $ 18.37

__________________________________

(1) Includes 4.7 million shares repurchased from the Company’s modified Dutch auction tender offer completed July 27, 2022 at a price of $ 22.00 per share for an aggregate purchase price of $ 103.3 million.

All shares repurchased during the years ended December 31, 2022, 2021 and 2020 were transferred to treasury stock.

1 unchanged sentence

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.

As of December 31, 2022, there were no shares remaining in treasury.

During the year ended December 31, 2020, the Company paid cash dividends of $ 0.10 per common share for a total cost of approximately $ 3.2 million.

There were no cash dividends paid during the years ended December 31, 2022 and 2021.

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).

On April 20, 2021, the Company issued a total of 12,650,000 shares of Bally’s common stock in an underwritten public offering at a price to the public of $ 55.00 per share.

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, or $ 55.00 per share.

The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition.

2 unchanged sentences

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.

Preferred Stock

The Company has authorized the issuance of up to 10 million shares of $ 0.01 par value preferred stock.

As of December 31, 2022 and 2021, no shares of preferred stock have been issued.

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.

As of December 31, 2022, the Company had 46,670,057 common shares issued and outstanding.

The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets.

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(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $ 30.00 to $ 45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Sinclair Agreement.

(2) The contingent consideration related to the SportCaller acquisition is 10 M EUR, payable in shares subject to certain post-acquisition earnout targets and based on share price at time of payment.

(2) The contingent consideration related to the SportCaller acquisition is 6.5 M EUR as of December 31, 2022, 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 1.0666 as of December 31, 2022 and the closing share price of Company common shares of $ 19.38 per share to calculate the shares expected to be issued if all earn-out targets are met.

Accumulated Other Comprehensive Income (Loss)

The following table reflects the change in accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2022, 2021 and 2020:

(in thousands) Foreign Currency Translation Adjustments Defined Benefit Pension Plan Total

Accumulated other comprehensive loss at December 31, 2019 $ — $ ( 1,888 ) $ ( 1,888 )

Current period other comprehensive loss — ( 1,256 ) ( 1,256 )

Accumulated other comprehensive loss at December 31, 2020 — ( 3,144 ) ( 3,144 )

Current period other comprehensive income (loss) ( 25,833 ) 2,064 ( 23,769 )

Reclassification adjustments to net earnings — 104 104

Accumulated other comprehensive loss at December 31, 2021 ( 25,833 ) ( 976 ) ( 26,809 )

Current period other comprehensive income (loss) ( 270,151 ) 1,320 ( 268,831 )

Accumulated other comprehensive income (loss) at December 31, 2022 $ ( 295,984 ) $ 344 $ ( 295,640 )

EMPLOYEE BENEFIT PLANS

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• 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table outlines the Company’s participation in multi-employer pension plans for the years ended December 31, 2022, 2021 and 2020 and sets forth the calendar year contributions and accruals for each plan.

5 unchanged sentences

As of December 31, 2022 and 2021, all plans that have either a FIP or RP requirement have had the respective plan implemented.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan Number Pension Protection Act

6 unchanged sentences

51-6040899 Green Green No 95 75 91 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

Plumbers and Pipefitters Pension Fund (4)

52-6152779 Yellow Yellow Yes/Implemented 267 175 171 No 8/31/2022

Rhode Island Laborers Pension Fund (4)

51-6095806 Green Green No 656 671 483 No 10/31/2022

New England Teamsters Pension Fund 04-6372430 Red Red Yes/Implemented 278 254 230 No 6/30/2023

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82-0994119/002 N/A (2)

Local 68 Engineers Union Pension Fund 51-0176618 Red Red Yes/Implemented 269 22 — No 6/30/2022

Local 68 Engineers Union Pension Fund 51-0176618 Yellow Yellow Yes/Implemented 286 269 22 No 4/30/2027

Northeast Carpenters Pension Fund 11-1991772 Green Green No 127 122 10 No 4/30/2027

International Painters and Allied Trades Industry Pension Fund 52-6073909 Red Red Yes/Implemented 80 5 — No 4/30/2022

International Painters and Allied Trades Industry Pension Fund 52-6073909 Yellow Yellow Yes/Implemented 82 80 5 No 4/30/2027

Total Contributions $ 3,249 $ 3,425 $ 1,956

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Unions at Bally’s Twin River and Bally’s Atlantic City participate in the UNITE HERE Retirement funds.

(4) Union contract under negotiation as of 12/31/2022.

Contributions, based on wages paid to covered employees totaled approximately $ 3.2 million, $ 3.4 million and $ 2.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

5 unchanged sentences

Contributions made to these plans by the Company were $ 2.6 million, $ 2.5 million and $ 1.2 million for the years ended December 31, 2022, 2021 and 2020, 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.

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.

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 $ — $ —

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,

2027-2031 6,349

Dover Downs Defined Benefit Pension Plan

The Company sponsors a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.

As of December 31, 2022 and 2021 , the benefit obligation was $ 20.8 million and $ 28.8 million, respectively, and the fair value of plan assets were $ 19.0 million and $ 24.2 million, respectively.

The Company did not make any contributions to the plan during the year ended December 31, 2022 and does not expect to contribute in 2023.

Net periodic benefit income and total income recognized in other comprehensive loss for the year ended December 31, 2022 were $ 1.0 million and $ 1.9 million, respectively.

Amounts relating to the plan recognized in the consolidated balance sheets as of December 31, 2022 and 2021 consist of non-current liabilities of $ 1.8 million and $ 4.6 million, respectively.

Defined Contribution Plans

6 unchanged sentences

Years Ended December 31,

2021 2020 2019

(in thousands) 2022 2021 2020

Domestic $ ( 444,549 ) $ ( 126,347 ) $ ( 74,811 )

31 unchanged sentences

Loss on derivative instruments — 4,363 —

Goodwill 28,935 — —

Change in uncertain tax positions ( 2,224 ) — —

Change in valuation allowance 60,073 —

Total (benefit) provision for income taxes $ ( 28,923 ) $ ( 4,377 ) $ ( 69,324 )

Effective income tax rate on continuing operations 6.4 % 3.7 % 92.7 %

Benefit for income taxes for the years ended December 31, 2021 and 2020 was $ 4.4 million and $ 69.3 million, respectively.

The effective tax rate for the year ended December 31, 2021 was 5.7 % compared to 92.7 % in 2020.

The decrease in the effective tax rate was due to an increase in state tax expense and an increase in nondeductible costs related to the acquisition of Gamesys during 2021, as well as lower bargain purchase gain during 2021 as compared to 2020.

Further, the 2020 provision included a significant rate benefit as a result of the CARES Act, and we had a lesser benefit in the 2021 provision.

In addition, Gamesys entities are taxed at lowers rates versus the US federal tax rate, which impacted 2021 beneficially due to the rate differential.

This benefit was offset by amounts related to share-based compensation, loss on derivative instruments, and other permanent amounts.

BALLY’S CORPORATION

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.

8 unchanged sentences

Interest 79,757 21,208

Goodwill 3,140 —

Net operating loss carryforwards 19,043 20,569

Valuation allowance ( 60,073 ) —

Total deferred tax assets, net $ 84,089 $ 94,759

3 unchanged sentences

Change in accounting method ( 73 ) ( 8,494 )

Non-shareholder contribution — ( 6,766 )

Goodwill — ( 12,544 )

2 unchanged sentences

Net deferred tax liabilities $ ( 112,473 ) $ ( 202,545 )

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company has assessed its deferred tax liabilities arising from taxable temporary differences and has concluded such liabilities are not 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, a $ 60.1 million valuation allowance has been established as of December 31, 2022.

There was no valuation allowance established as of December 31, 2021.

The change in valuation allowance for the year ended December 31, 2022 was $ 60.1 million.

There was no change in valuation allowance for the years ended December 31, 2021 and 2020.

At December 31, 2022, the Company’s cash and cash equivalents totaled $ 212.5 million, of which approximately 41 % was held in locations outside the US.

During the year, the Company changed its assertion and will not indefinitely reinvest undistributed earnings.

Accordingly, the Company has determined that no deferred tax liability is required for undistributed foreign earnings at December 31, 2022 and will continue to monitor for future changes.

For the years ended December 31, 2022 and 2021 the net deferred tax liabilities decreased by $ 90.1 million and increased by $ 165.6 million, respectively.

For the year ended December 31, 2022, a decrease of $ 88.1 million was included in income from operations and a decrease of $ 2.0 million was included in other comprehensive loss.

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, 2022, the Company has $ 9.1 million of federal net operating carryforwards subject to a section 382 limitation with an unlimited carryforward period.

1 unchanged sentence

As of December 31, 2022 and December 31, 2021, the Company had $ 174.5 million and $ 92.4 million of state net operating loss carryforwards, respectively, which expire at various dates through 2041.

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.

8 unchanged sentences

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 realized no tax benefit in the year ended December 31, 2022.

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.

1 unchanged sentence

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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

3 unchanged sentences

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.

As of December 31, 2022, there was $ 11.3 million tax contingency accruals and deferred tax asset reductions for uncertain tax positions, of which $ 8.9 million 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:

Year Ended December 31,

(in thousands) 2022 2021 2020

3 unchanged sentences

Uncertain tax position liability at the end of the year $ 11,277 $ 5,131 $ —

It is reasonably possible that the Company’s unrecognized tax benefits could change in the next twelve months, however the Company is unable to estimate a range at this time.

The Company records interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit).

The Company has reserved interest and penalties on uncertain tax positions of $ 0.1 million as of December 31, 2022.

The Company has not reserved interest and penalties on uncertain tax positions as of December 31, 2021.

The Company has recorded $ 0.1 million of interest on uncertain tax positions on the statement of operations for the year ended December 31, 2022.

There was no interest on uncertain tax positions recorded in the statement of operations for the years ended December 31, 2021 and 2020.

The Company and its subsidiaries file tax returns in several jurisdictions including the US and various US state and foreign jurisdictions.

The Company remains subject to examination for US federal income tax purposes for the years ended December 31, 2017 through 2021.

The Company remains subject to examination for US federal income tax purposes for the years ended December 31, 2015 through 2021, as a result of a 2020 net operating loss carryback claim.

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.

The Company is currently appealing an audit by the State of Colorado for tax years ended December 31, 2012 through 2015.

Based on the current status of the Colorado appeal, 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.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

Further, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters.

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.

The current terms for the Twin River Casino Hotel and Tiverton Casino Hotel contracts with the Division of Lotteries of the Rhode Island Department of Revenue end on July 1, 2043.

The Tiverton Casino Hotel contract was automatically assigned, pursuant to Rhode Island law, from Newport Grand to Tiverton Casino Hotel upon commencement of gaming operations at the Tiverton Casino Hotel.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with the Company’s joint venture with International Game Technology PLC (“IGT”) a joint venture was organized as the Rhode Island VLT Company, LLC to supply the State of Rhode Island with all VLTs at both Bally’s Twin River and Bally’s Tiverton.

Under the transaction agreement for the joint venture, dated December 21, 2022, the Company has agreed to pay $ 7.5 million to an affiliate of IGT, payable in two equal parts on or before June 15, 2023 and 2024, respectively.

Capital Expenditure Commitments

4 unchanged sentences

Bally’s Twin River - Per the terms of the Regulatory Agreement in Rhode Island, the Company is committed to invest $ 100 million in its Rhode Island properties over the term of the master contract through June 30, 2043, including an expansion and the addition of new amenities at Bally’s Twin River.

Bally’s Lake Tahoe

The Company acquired Bally’s Lake Tahoe for $ 14.2 million, payable one year from the closing date and subject to customary post-closing adjustments.

Refer to Note 5 “ Acquisitions ” for further information.

As discussed in Note 13 “ Leases ,” per the terms of the Master Lease, an affiliate of GLPI agreed to acquire the real estate associated with the Company’s Bally’s Evansville property for $ 340.0 million and lease it back to the Company for $ 28.0 million per year and the Company’s Bally’s Dover casino for $ 144.0 million and lease it back to the Company for $ 12.0 million per year, each subject to escalation.

Both leases are governed by the Master Lease which has an initial term of 15 years and includes four five-years options.

Related Party Transaction

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

In connection with the JPJ acquisition, £ 11.2 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing.

The Company has recorded $ 15.1 million representing the deferred consideration which is payable on March 26, 2022, and recorded within current liabilities of the consolidated balance sheet as of December 31, 2021.

Of such amount, $ 7.5 million is payable to related parties as former majority shareholders of GHL.

City of Chicago Guaranty

In connection with the host community agreement, signed by Bally’s Chicago Operating Company, LLC (the “Developer”), a wholly-owned indirect subsidiary of the Company, the Company provided the City of Chicago with a performance guaranty whereby the Company agreed to have and maintain available financial resources in an amount reasonably sufficient to allow the Developer to complete its obligations under the host community agreement.

In addition, upon notice from the City of Chicago that the Developer has failed to perform various obligations under the host community agreement, the Company has indemnified the City of Chicago against any and all liability, claim or reasonable and documented expense the City of Chicago may suffer or incur by reason of any nonperformance of any of the Developer’s obligations.

Sponsorship Commitments

The Company has entered into several sponsorship agreements, totaling $ 83.3 million over 15 years, with various professional sports leagues and teams, allowing the Company use of official league marks for branding and promotions, among other rights.

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.

As of December 31, 2022, the Company had approximately 10,500 employees.

Most of the Company’s employees in Rhode Island, Nevada and New Jersey are represented by a labor union and have collective bargaining agreements with the Company.

As of such date, the Company had 29 collective bargaining agreements covering approximately 2,755 employees.

All collective bargaining agreements are in good standing and have been renegotiated for a three or five year term.

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.

If the Company is 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.

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:

The Company has 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.

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, acquisition and other transaction costs and certain non-recurring charges.

During the first quarter of 2022, the Company changed its methodology for allocating certain corporate operating expenses within general and administrative expense previously reported in “Other” to directly apply such costs to the segment supported.

The prior year results presented below were reclassified to conform to the new segment presentation.

The Company’s three reportable segments as of December 31, 2022 are:

Casinos & Resorts - Includes the Company’s 15 casino and resort properties and one horse race track.

North America Interactive - A portfolio of sports betting, iGaming, and free-to-play gaming brands.

International Interactive - Gamesys’ European and Asian operations.

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.

As of December 31, 2022, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide.

For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan.

Revenue generated from the UK and Japan represented approximately 25 % and 12 % of total revenue, respectively, during the year ended December 31, 2022, and approximately 11 % and 6 %, respectively, for the year ended December 31, 2021.

The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

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,

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

The Company utilizes Adjusted EBITDA (defined below) as a measure of its performance.

Management believes Adjusted EBITDA is representative of its ongoing business operations including its ability to service debt and to fund capital expenditures, acquisitions and operations, in addition to it being a commonly used measure of performance in the gaming industry and used by industry analysts to evaluate operations and operating performance.

The following table sets forth revenue and Adjusted EBITDA for the Company’s three reportable segments and reconciles Adjusted EBITDA on a consolidated basis to net income (loss).

The Other category is included in the following tables in order to reconcile the segment information to the Company’s consolidated financial statements.

Years Ended December 31,

(in thousands) 2022 2021 2020

Casinos & Resorts $ 1,227,563 $ 1,032,828 $ 372,792

North America Interactive 81,700 38,352 —

International Interactive 946,442 251,263 —

Total $ 2,255,705 $ 1,322,443 $ 372,792

Adjusted EBITDA (1)

Casinos & Resorts $ 345,617 $ 317,705 $ 89,913

North America Interactive ( 65,729 ) ( 12,413 ) —

International Interactive 321,651 69,944 —

Other ( 53,024 ) ( 45,334 ) ( 20,658 )

Total 548,515 329,902 69,255

Operating income (expense)

Depreciation and amortization ( 300,559 ) ( 144,786 ) ( 37,842 )

Income (loss) from operations 258,452 ( 44,820 ) 20,689 ( 140,939 ) 93,382

Net income (loss) 186,287 ( 36,879 ) 24,337 ( 245,544 ) ( 71,799 )

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

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

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,

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

Goodwill $ 186,979 $ — $ — $ — $ 186,979

Total assets 1,490,204 — — 439,651 1,929,855

Transaction costs ( 85,604 ) ( 84,543 ) ( 14,050 )

Share-based compensation ( 27,912 ) ( 20,143 ) ( 17,706 )

Gain on sale-leaseback 50,766 53,425 —

Impairment charges ( 463,978 ) ( 4,675 ) ( 8,659 )

Other ( 14,236 ) ( 35,798 ) ( 9,384 )

(Loss) income from operations ( 293,008 ) 93,382 ( 18,386 )

Other income (expense)

Interest expense, net of interest income ( 208,153 ) ( 117,924 ) ( 62,636 )

Other 46,692 ( 94,532 ) 6,211

Total other expense, net ( 161,461 ) ( 212,456 ) ( 56,425 )

Loss before provision for income taxes ( 454,469 ) ( 119,074 ) ( 74,811 )

Benefit for income taxes 28,923 4,377 69,324

$ ( 425,546 ) $ ( 114,697 ) $ ( 5,487 )

__________________________________

(1) Adjusted EBITDA is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition and other transaction related costs, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS (LOSS) PER SHARE

Years Ended December 31,

(in thousands) 2022 2021 2021

Capital Expenditures

Casinos & Resorts $ 183,693 $ 92,479 $ 14,480

North America Interactive 6,635 172 —

International Interactive 12,392 4,166 —

Other 9,536 708 803

Total $ 212,256 $ 97,525 $ 15,283

Total assets are not regularly reviewed for each operating segment when assessing segment performance or allocating resources and accordingly, are not presented.

As of December 31, 2022, the Company’s long-lived assets located outside of the US, consisting primarily of goodwill and intangible assets, were aggregated into the International Interactive reporting segment as disclosed in Note 10 “Goodwill and Intangible Assets.” Over 98 % of property and equipment is located within the US.

EARNINGS (LOSS) PER 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.

1 unchanged sentence

2022 2021 2020

Net (loss) income applicable to common stockholders $ ( 71,799 ) $ ( 5,487 ) $ 55,130

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

Net loss applicable to common stockholders $ ( 425,546 ) $ ( 114,697 ) $ ( 5,487 )

Weighted average common shares outstanding, basic 58,111,699 49,643,991 31,315,151

Weighted average effect of dilutive securities — — —

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

Weighted average common shares outstanding, diluted 58,111,699 49,643,991 31,315,151

Per share data

2 unchanged sentences

Anti-dilutive shares excluded from the calculation of diluted earnings per share 5,188,388 5,015,803 4,919,326

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.

On November 18, 2020, the Company issued Penny Warrants, Performance 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 Performance 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.

For the years ended December 31, 2022, 2021 and 2020, the shares underlying the Performance Warrants were anti-dilutive as certain contingencies were not met.

Refer to Note 13 “ Sinclair Agreement ” for further information.

BALLY’S CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 ( 47,881 ) ( 92,059 )

(Loss) income before provision for income taxes ( 15,535 ) 95,923 ( 20,147 ) ( 136,417 )

(Benefit) provision for income taxes ( 4,830 ) 26,981 ( 5,400 ) ( 21,128 )

Net (loss) income ( 10,705 ) 68,942 ( 14,747 ) ( 115,289 )

Net (loss) income per share

Basic $ ( 0.30 ) $ 1.43 $ ( 0.30 ) $ ( 1.87 )

Diluted $ ( 0.30 ) $ 1.40 $ ( 0.30 ) $ ( 1.87 )

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

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.

On January 3, 2023, the Company completed a transaction for its Bally’s Tiverton and Hard Rock Biloxi properties.

Refer to Note 15 “ Leases ” for further information.

On January 5, 2023, the Company acquired BACA Limited, (“Casino Secret”) a European based, online casino with one of the fastest growing brands in the market, for approximately € 43.9 million.

Due to the timing of the acquisition, the initial purchase accounting is incomplete.

The Company will complete its initial allocation of purchase price to total net assets acquired in the first quarter of 2023.

The results of Casino Secret will be reported within the Company’s International Interactive segment.

On January 18, 2023, the Company announced a restructuring plan of the Interactive business intended to reduce operating costs and continue the Company’s commitment to achieving profitable operations in its North America Interactive segment.

The Company estimates that it will incur between $ 10 million to $ 15 million in charges in connection with the restructuring plan representing cash severance costs which the Company expects to incur in the first quarter of 2023.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data