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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-26 · 502 added, 293 removed, 71 unchanged (92% of the section changed)

Risks Related to the COVID-19 Pandemic

You should be aware that the occurrence of any of the events described in this section and elsewhere in this report or in any other of our filings with the SEC could have a material adverse effect on our business, financial position, results of operations and cash flows.

In evaluating us, you should consider carefully, among other things, the risks described below.

Summary of Risk Factors

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Risks Related to Our Business and Industry

• The COVID-19 pandemic has had a material adverse effect on our business, financial condition, results of operations, and cash flows, and such impact could recur and last for an unknown period of time.

• Intense competition exists in the gaming and entertainment industries, and we expect competition to continue to intensify.

• Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.

• Our results of operations may fluctuate due to seasonality and other factors and, therefore, our periodic operating results will not be guarantees of future performance.

• Inclement weather, acts or threats of terrorism, and other casualty events could seriously disrupt our business and have a material adverse effect on our financial condition, results of operations, and cash flows.

• Negative events or negative media coverage including relating to, or a declining popularity of, sports betting, the underlying sports, teams or athletes and related talent, and/or online gaming may adversely impact our reputation, which could have an adverse impact on our business.

• Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations, both inside and outside of the United States.

As a result, our projected revenues and profitability may differ materially from our expectations.

• Consolidation among gaming equipment manufacturers could impose additional costs on us.

Risks Related to Our Operations

• We have certain properties that generate a significant percentage of our revenues and our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.

• We are required to utilize a significant portion of our cash flow from operations to make our rent payments under our Triple Net Leases, which could adversely affect our ability to fund our operations and growth and limit our ability to react to competitive and economic changes.

• Most of our facilities are leased and could experience risks associated with leased property.

• Our operations could be disrupted if management agreements and/or leases with third parties and local governments are not renewed.

• There can be no assurance that we will be able to compete effectively or generate sufficient returns on our recently expanded sports betting operations, our acquisition of theScore and our investment in Barstool Sports.

• Our operations and the success of our investment in Barstool Sports are largely dependent on the skill and experience of management and key personnel.

• Our business could suffer if we cannot attract and retain talented team members.

• Collective bargaining activity and strikes could disrupt our operations, increase our labor costs, and interfere with the ability of our management to focus on executing our business strategies.

• If we fail to detect fraud or theft, including by our users and employees, our reputation may suffer which could harm our brand and reputation and negatively impact our business, financial condition and results of operations and can subject us to investigations and litigation.

• We rely on, among other things, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights and we may be unable to protect or may not be successful in protecting our intellectual property rights.

• Our commercial success depends upon us avoiding the infringement of intellectual property rights owned by others and any such infringements, including those that are inadvertent, may have a material adverse effect on our business.

• Our technology contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to provide our offerings.

• We may face disruption and other difficulties in integrating and managing properties or other initiatives we have recently acquired, may develop, or may acquire in the future.

• We rely on a variety of third-party providers to support our business, and if we cannot manage our relationships with such third parties, our business, financial condition and results of operations could be adversely affected.

• Our information technology and other systems are subject to cyber security risk, including misappropriation of employee information, customer information or other breaches of information security, particularly as our online gaming division grows.

• Our growth prospects may suffer if we are unable to develop successful offerings or if we fail to pursue additional offerings.

In addition, if we fail to make the right investment decisions in our offerings and technology, we may not attract and retain key users and our revenue and results of operations may decline.

• The growth of our Interactive segment will depend on our ability to attract and retain users.

• Participation in the sports betting industry exposes us to trading, liability management and pricing risk.

We may experience lower than expected profitability and potentially significant losses as a result of a failure to determine accurately the odds in relation to any particular event and/or any failure of its sports risk management processes.

• We follow the industry practice of restricting and managing betting limits at the individual customer level based on individual customer profiles and risk level to the enterprise;

however, there is no guarantee that states will allow operators such as us to place limits at the individual customer level.

• We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.

• The success, including win or hold rates, of existing or future online gaming and sports betting products depends on a variety of factors and is not completely controlled by us.

• We face a number of challenges prior to opening new or upgraded gaming properties or launching new online gaming or sports betting channels, which may lead to increased costs and delays in anticipated revenues.

Risks Related to Our Capital Structure

• Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.

• The lack of availability and cost of financing could have an adverse effect on our business.

• To service our indebtedness, we will require a significant amount of cash, which depends on many factors beyond our control.

General Risk Factors

• We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition and results of operations.

• We face extensive regulation from gaming authorities, which could have a material adverse effect on us.

• We are subject to certain federal, state and other regulations, and if we fail to comply with such regulations, it could have a material adverse effect on our financial condition, results of operations, and cash flow.

• State and local smoking restrictions have and may continue to negatively affect our business.

• Changes to consumer privacy laws could adversely affect our ability to market our products effectively and may require us to change our business practices or expend significant amounts on compliance with such laws.

• We are subject to environmental laws and potential exposure to environmental liabilities which could have an adverse effect on us.

• In the event we make another acquisition, we may face risks related to our ability to receive regulatory approvals required to complete, or other delays or impediments to completing, such acquisition.

• Material increases to our taxes or the adoption of new taxes or the authorization of new or increased forms of gaming could have a material adverse effect on our future financial results.

The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Annual Report, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC.

If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected.

The risks summarized above or described in full below are not the only risks that we face.

Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

Risks Related to Our Business and Industry

The COVID-19 pandemic has significantly impacted the global economy, including the gaming industry, and has had a material adverse effect on our business, financial condition, results of operations, and cash flows, and may continue to do so.

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic.

The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States.

The global spread of the COVID-19 pandemic has been, and continues to be, complex and rapidly evolving, with governments, public institutions, and other organizations imposing or recommending, and businesses and individuals implementing, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation, stay-at-home directives, social distancing and health and safety guidelines, limitations on the size of gatherings, closures of work facilities, schools, public buildings, and businesses, cancellation of events, including sporting events, concerts, conferences, and meetings, and quarantines and lock-downs.

The COVID-19 pandemic and its consequences have also dramatically reduced travel and demand for casino gaming and related amenities.

Many jurisdictions where our properties are located required mandatory closures or imposed capacity limitations, health and safety guidelines and other restrictions affecting our operations.

The COVID-19 pandemic and these resulting developments caused significant disruptions to our ability to generate revenues, profitability, and cash flows and had a material adverse impact on our financial condition, results of operations, and cash flows.

Such impact could worsen and last for an unknown period of time.

In addition, these disruptions to us and the gaming industry in general as well as significant negative economic trends due to the COVID-19 pandemic may adversely affect our stock price.

During the first quarter of 2020, all of the Company’s properties were closed pursuant to various orders from state gaming regulatory bodies or governmental authorities to combat the spread of COVID-19.

We began reopening our properties on May 18, 2020 with reduced gaming and hotel capacity and limited food and beverage offerings in order to accommodate comprehensive social distancing and health and safety protocols.

As of June 30, 2020, we had reopened 31 of our properties and as of September 30, 2020, we had reopened 39 of our properties.

During the fourth quarter of 2020, our properties in Illinois, Michigan and Pennsylvania again temporarily suspended operations and as of December 31, 2020, we had reopened 34 of our properties.

As of February 26, 2021, the only properties that remain closed are Zia Park and Valley Race Park.

Though virtually all of our properties have reopened, we may be required again to temporarily suspend operations at our properties if ordered by such governmental bodies.

Our reopened properties face restrictions on our operations, including hours of operations, capacity limitations, cleaning requirements, restrictions on the number of seats per table game, slot machine spacing, temperature checks, mask protection and social distancing requirements and food and beverage options, which impact our future operations and ability to generate the same level of revenues and cash flows as before the COVID-19 pandemic.

The continued operation of our reopened properties, may be affected by our ability to retain our workforce.

Moreover, once restrictions are lifted, it is unclear how quickly customers will return to our properties in numbers comparable to before the COVID-19 pandemic, which may be a function of continued concerns over health and safety, ongoing social distancing measures, perceptions of the efficacy of any vaccines and the ability to achieve herd immunity, or changes in consumer spending behavior due to adverse economic conditions, including job losses.

Our properties have large customer-facing footprints and large areas where customers can gather together for personal interaction.

As such, some customers may choose for a period of time not to travel or visit our properties for health and safety concerns or due to overall changes in consumer behavior resulting from social distancing.

Upon reopening our properties, we have seen weakened visitation, which may have been due to increased level of unemployment, continued travel restrictions or warnings, consumer fears, reduced consumer discretionary spending or general economic uncertainty.

Our vendors and other suppliers could also experience potential adverse effects of the pandemic that could impact our ability to operate to the same level as prior to the closures.

Cancellations, delays or shortened sports seasons and sporting events due to the COVID-19 pandemic have also had an adverse impact on the revenues of our sports betting operations.

If COVID-19 continues to spread significantly in its current form or as a more contagious variant of the virus, governmental agencies or officials may order additional closures or impose further restrictions on the number of people allowed in our properties or in proximity to each other.

Any of these events could result in significant further disruption to our operations and a drop in demand for our properties and could have a material adverse effect on us.

We could experience other potential adverse impacts as a result of the COVID-19 pandemic, including, but not limited to, further charges from adjustments to the carrying amount of goodwill and other intangible assets, long-lived asset impairment charges, or impairments of investments in joint ventures.

The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic (including how long the current resurgence may last, and whether there will be multiple resurgences in the future);

the duration and impact on overall customer demand;

the possibility that governmental bodies may again order temporary suspension of operation at our properties;

our ability to again generate revenue and profits capable of supporting our ongoing operations;

new information which may emerge concerning the severity of COVID-19 or variants of the virus, or the efficacy of, or adverse reactions to, vaccines;

the negative impact it has on global and regional economies and economic activity;

the ability of us and our business partners to successfully navigate the impacts of the pandemic;

actions governments, businesses, and individuals continue to take in response to the pandemic, including limiting or banning travel and limiting or banning leisure, casino, and entertainment activities (including concerts, sports and similar events);

and how quickly economies, travel activity, and demand for gaming, entertainment and leisure activities recovers after the pandemic subsides and an effective vaccine is widely available.

The closing of our properties due to the COVID-19 pandemic caused significant disruptions to our ability to generate revenues, profitability, and cash flows and had a material adverse impact on our financial condition, results of operations, and cash flows.

While all our properties are currently open, the impact of the COVID-19 pandemic continues to fluctuate, and future closures may be appropriate or could be mandated.

Future disruptions, as well as significant negative economic trends, due to the COVID-19 pandemic may adversely affect our stock price.

The continuing impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows will depend on numerous evolving factors that we may not be able to accurately predict or assess.

The impact of the COVID-19 pandemic may also have the effect of exacerbating many of the other risks described in this Annual Report on Form 10-K.

As a result of the foregoing, we cannot predict the ultimate scope, duration, and impact that the COVID-19 pandemic will have on our results of operations, but we expect that it will continue to have a material impact on our business, financial condition, liquidity, results of operations (including revenues and profitability), and stock price.

Risks Related to Our Business and Operations

We face significant competition in the markets in which we operate and from other gaming and entertainment operations, which could have an adverse impact on our financial condition, results of operations, and cash flows.

The gaming industry is characterized by an increasingly high degree of competition among a large number of participants operating from physical locations and/or through online or mobile platforms, and other forms of gaming in the U.S.

Recently, there has been additional significant competition in our markets as a result of the upgrading or expansion of properties by existing market participants, the entrance of new gaming participants into a market or legislative changes permitting additional forms of gaming.

As competing properties and new markets open, our results of operations may be negatively impacted.

We expect each existing or future market in which we participate to be highly competitive.

Furthermore, competition from internet lotteries, sweepstakes, illegal slot machines and skill games, fantasy sports and internet or mobile-based gaming platforms could divert customers from our properties and our online sports betting and iGaming apps and thus adversely affect our financial condition, results of operations, and cash flows.

Currently, there are proposals that would legalize internet poker, sports betting and other varieties of iGaming in a number of states.

Several states have enacted legislation authorizing intrastate iGaming and iGaming operations have begun or will begin in these states.

Further, there has been recent expansion of sports betting in various states, as states have passed legislation legalizing sports betting in casinos and/or online.

Expansion of land-based and iGaming in other jurisdictions (both regulated and unregulated) could further compete with our traditional and iGaming operations, which could have an adverse impact on our financial condition, results of operations, and cash flows.

In a broader sense, our gaming operations face competition from all manner of leisure and entertainment activities, including shopping, athletic events, television and movies, concerts and travel.

Intense competition exists in the gaming, media, and entertainment industries, and we expect competition to continue to intensify.

The gaming, media and entertainment industries are characterized by an increasingly high degree of competition among a large number of participants.

In a broad sense, both our land-based and interactive gaming operations face competition from all manner of leisure and entertainment activities, including shopping, athletic events, television and movies, concerts and travel.

It is possible that these secondary competitors could reduce the number of visitors to our facilities or the amount they are willing to wager, which could have a material adverse effect on our ability to generate revenue or maintain our profitability and cash flows.

Legalized gaming is currently permitted in various forms throughout the U.S.

and on various lands taken into trust for the benefit of certain Native Americans and as well as various land taken into trust for the benefit of certain First Nations people in Canada.

Other jurisdictions, including states adjacent to states in which we currently have properties, have recently legalized, implemented and expanded gaming.

In addition, established gaming jurisdictions could award additional gaming licenses or permit the expansion or relocation of existing gaming operations (including VGTs, skill games, sports betting and iGaming).

Voters and state legislatures may seek to supplement traditional tax revenue sources of state governments or fill COVID-related budget gaps by authorizing or expanding gaming in the states, in which we operate or the states that are adjacent to or near our existing properties.

New, relocated, or expanded operations by other persons could increase competition for our gaming operations and could have a material adverse impact on us.

We may face reductions in discretionary consumer spending as a result of economic downturns (including as a result of COVID-19) which have had a material adverse effect on our business.

Our net revenues are highly dependent upon the volume and spending levels of customers at properties we manage, and as such, our business has been adversely impacted by economic downturns in the past and continues to be impacted by the economic downturn resulting from the COVID-19 pandemic.

Decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, cultural and demographic changes, high fuel or other transportation costs, and increased stock market volatility have negatively impacted our revenues and operating cash flow.

We have certain properties that generate a significant percentage of our revenues and our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.

For the year ended December 31, 2020, we generated 16.7%, 10.7%, and 15.6% of our revenues from our properties within the states of Louisiana, Missouri, and Ohio, respectively.

Other jurisdictions, including states adjacent to those in which we currently have properties, have recently legalized, implemented and expanded gaming.

Competition from gaming options such as state-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, illegal slot machines and skill games, fantasy sports and internet or mobile-based gaming platforms, including online gaming and sports betting, could divert customers from our properties and our online gaming and sports betting apps and thus adversely affect our financial condition, results of operations, and cash flows.

In addition, our properties compete with numerous casinos and hotel casinos of varying quality and size in market areas where they are located, including on various lands taken into trust for the benefit of certain Native Americans.

In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas.

In some markets, we face competition from nearby markets in addition to direct competition within our market areas.

We and our competitors have invested in expanding existing facilities, developing new facilities, and acquiring established facilities in existing markets.

This expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing

strategies of many of our competitors have increased competition in many markets in which we compete, and this intense competition can be expected to continue.

As competing properties and new markets open, our results of operations may be negatively impacted.

Increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive positions of our properties, including making expenditures to increase the attractiveness and add to the appeal of our facilities, including increasing the manner and frequency in which we refresh, refurbish or replace fixtures and equipment at our properties.

Because of our leverage, after satisfying our obligations under our outstanding indebtedness, there can be no assurance that we will have sufficient funds to undertake these expenditures or that we will be able to obtain sufficient financing to fund such expenditures.

If we are unable to make such expenditures, our competitive position could be materially adversely affected.

Similarly, there is intense competition among online gaming and sports betting providers.

A number of established, well-financed companies producing online gaming and/or interactive entertainment products and services compete with our offerings, and other well-capitalized companies may introduce competitive services.

Such competitors may spend more money and time on developing and testing products and services, undertake more extensive marketing campaigns, adopt more aggressive pricing or promotional policies or otherwise develop more commercially successful products or services than ours, which could negatively impact our business.

There has also been considerable consolidation among competitors in the interactive gaming sectors and such consolidation and future consolidation could result in the formation of larger competitors with increased financial resources and altered cost structures, which may enable them to offer more competitive products, gain a larger market share, expand offerings and broaden their geographic scope of operations.

If we are not able to maintain or improve our market share, or if our offerings do not continue to be popular, our business could suffer.

Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside of our control.

Our business is particularly sensitive to downturns in the economy and the associated impact on discretionary spending on leisure activities.

Decreases in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions, effects of declines in consumer confidence in the economy, any future employment and credit crisis, the impact of high and prolonged inflation, particularly with respect to housing, energy and food costs, the increased cost of travel, decreased disposable consumer income and wealth, fears of war and future acts of terrorism, or widespread illnesses or epidemics, including COVID-19, can have a material adverse effect on leisure and business travel, discretionary spending and other areas of economic behavior that directly impact the gaming and entertainment industries in general and could further reduce customer demand for the products and amenities that we offer, which may negatively impact our revenues and operating cash flow.

Our results of operations may fluctuate due to seasonality and other factors and, therefore, our periodic operating results will not be guarantees of future performance.

Our online sportsbook and core business operations may fluctuate due to seasonal trends and other factors.

A majority of our current online sports betting revenue is and will continue to be generated from bets placed on, or contests relating to, college and professional football and basketball, which have been highest in the fourth quarter when most of these games occur.

Significant sporting events, such as the playoffs and championship games from these sports, tend to impact, among other things, revenues from operations, key metrics and customer activity.

This seasonality may cause decreases in our future revenues during the applicable off-seasons.

In addition, certain individuals or teams advancing or failing to advance and their scores and other results within specific tournaments, games or events may impact our financial performance.

Our land-based gaming operations are also subject to seasonality, including seasonality based on the weather in the markets in which they operate, specific holidays, or other significant events.

The operations of our properties are subject to disruptions or reduced patronage as a result of severe weather conditions, natural disasters, acts or threats of terrorism, concerns about contagious diseases such as the COVID-19 pandemic, and other casualty events, such as hurricanes or tornados.

We maintain significant property insurance, including business interruption coverage, for these types of casualty events;

however, if any such events occur, there can be no assurances that we will be fully or promptly compensated, if at all, for losses at any of our properties in the event of future inclement weather or casualty events or from the closings of our properties due to the COVID-19 pandemic or other contagious disease.

In addition, the occurrence of such an event may adversely impact general economic or other conditions in the areas in which our properties are located or from which they draw their patrons, and our business, financial condition and results of operations could be materially adversely affected.

Negative events or negative media coverage including relating to, or a declining popularity of, sports betting, the underlying sports, teams or athletes and related talent, online gaming may adversely impact our reputation, which could have an adverse impact on our business.

Public opinion can significantly influence our business.

Unfavorable publicity regarding us or regarding the actions of third parties with whom we have relationships or the underlying sports (including declining popularity of the sports or athletes) could seriously harm our reputation.

In addition, a negative shift in the perception of sports betting and online gaming by the public or by politicians, lobbyists or others could affect future legislation of sports betting and online gaming.

Negative public perception could also lead to new restrictions on or to the prohibition of online gaming or sports betting in jurisdictions in which we currently operate.

Such negative publicity could also adversely affect:

(i) the size, demographics, engagement, and loyalty of our customer base and result in decreased revenue or slower user growth rates;

(ii) our ability to retain and attract team members;

and (iii) investor perception, all of which could seriously harm our business.

Our investment in and partnership with Barstool Sports may result in potential adverse reactions, negative publicity or changes to our business, regulatory or other stakeholder relationships.

Our relationships with state gaming regulators, stakeholders and business partners could be adversely affected as a result of our affiliation with Barstool Sports.

In addition, our business partners or stakeholders may react negatively to actual or perceived competitive threats from our affiliation with Barstool Sports and the individuals, influencers, and/or media personalities connected with Barstool Sports.

Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations, both inside and outside of the United States.

As a result, our projected revenues and profitability may differ materially from our expectations.

We operate in rapidly changing and competitive industries and our projections are subject to the risks and assumptions made by management with respect to our industries.

Operating results are difficult to forecast because they generally depend on our assessment of the timing of adoption of future legislation and regulations by different states, which are uncertain.

Furthermore, if we invest in the development of new products or distribution channels, such as our expanded media business and non-gaming land-based entertainment, that do not achieve significant commercial success or deliver projected results, whether because of competition or otherwise, we may not recover the often substantial “up front” costs of developing and marketing those products and distribution channels, or recover the opportunity cost of diverting management and financial resources away from other products or distribution channels.

Consolidation among gaming equipment manufacturers, or supply chain delays, could impose additional costs on us.

A majority of our revenues are attributable to gaming devices and related systems operated by us at our gaming properties.

A substantial majority of the gaming devices sold in the U.S.

are manufactured by a few select companies, and there has been extensive consolidation of such manufacturers in recent years, diminishing our ability to negotiate competitive pricing.

This inability could cause us to purchase new slot machines or enter into participation lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines, which could hurt our profitability.

Our business could also be impacted if gaming equipment manufacturers experience supply chain delays caused by the COVID-19 pandemic, such as semiconductor chip shortages.

Risks Related to our Operations

We have certain land-based properties that generate a significant percentage of our revenues and our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.

For the year ended December 31, 2021, we generated 15.6%, 9.6%, and 14.4% of our revenues from our land-based properties within the states of Louisiana, Missouri, and Ohio, respectively.

Additionally, we generated 5.4% of our revenues from our property in Charles Town, West Virginia.

Our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.

In addition, we anticipate meaningful contributions from Ameristar Black Hawk, Greektown, and our properties in Pennsylvania.

Therefore, our results will be dependent on the regional economies and competitive landscapes at these locations as well.

Therefore, our results will be dependent on the regional economies and competitive landscapes at these properties.

Likewise, our ability to meet our operating and debt service requirements is dependent, in part, upon the continued success of these properties.

We are required to utilize a significant portion of our cash flow from operations to make our rent payments under our Triple Net Leases, which could adversely affect our ability to fund our operations and growth and limit our ability to react to competitive and economic changes.

We are required to utilize a significant portion of our cash flow from operations which was $891.1 million inclusive of rent credits utilized for the year ended December 31, 2020, to make our rent payments pursuant to and subject to the terms and conditions of our Master Leases with GLPI, our Meadows Lease and Morgantown Lease with GLPI, our Margaritaville Lease

and Greektown Lease with VICI and our Tropicana Lease (as defined previously as our “Triple Net Leases”), although cash rent under our Tropicana Lease is nominal.

In 2020, all of our properties were temporarily closed due to COVID-19 and we were able to obtain rent credits of $337.5 million from GLPI in order to maintain compliance with our Master Leases with GLPI in connection with the sale of Tropicana and the real estate associated with Morgantown.

We are required to utilize a significant portion of our cash flow from operations to make our rent payments, which were $912.4 million for the year ended December 31, 2021, pursuant to and subject to the terms and conditions of our Master Leases, Meadows Lease, Perryville Lease, Tropicana Lease and Morgantown Lease each with GLPI, and our Margaritaville Lease and

Greektown Lease with VICI (as defined previously, collectively, our “Triple Net Leases”).

As a result of these commitments under our Triple Net Leases, our ability to fund our own operations or development projects, raise capital, make acquisitions and otherwise respond to competitive and economic changes may be adversely affected.

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We lease 37 of the facilities we operate, or plan to operate, pursuant to the Triple Net Leases.

Termination of the Penn Master Lease, Pinnacle Master Lease, Morgantown Lease or Tropicana Lease could result in a default under our debt agreements and could have a material adverse effect on our financial condition, results of operations, and cash flows.

Termination of the Penn Master Lease, Pinnacle Master Lease, or Morgantown Lease could result in a default under our debt agreements and could have a material adverse effect on our financial condition, results of operations, and cash flows.

Moreover, as a lessee, we do not completely control the land and improvements underlying our operations, and our landlords under the Triple Net Leases could take certain actions to disrupt our rights in the facilities leased under the Triple Net Leases that are beyond our control.

There can also be no assurance that we will be able to comply with our obligations under the Triple Net Leases in the future.

In addition, there can be no assurance that our landlords will be able to comply with their obligations under the Triple Net Leases with us.

In addition, if some of our leased facilities should prove to be unprofitable, we could remain obligated for lease payments and other obligations under the Triple Net Leases even if we decided to withdraw from those locations.

Inclement weather, acts or threats of terrorism, and other casualty events could seriously disrupt our business and have a material adverse effect on our financial condition, results of operations, and cash flows.

We maintain significant property insurance, including business interruption coverage, for these and other properties.

However, there can be no assurances that we will be fully, promptly, or compensated at all for losses at any of our properties in the event of future inclement weather or casualty events or from the closings of our properties due to the COVID-19 pandemic or other contagious disease.

For example, on August 27, 2020, Hurricane Laura made landfall in Lake Charles, Louisiana and caused significant damage to L’Auberge Lake Charles forcing it to close for approximately two weeks.

Further, there can also be no assurance that we will be able to comply with our obligations under the Triple Net Leases in the future or that our landlords will be able to comply with their obligations under the Triple Net Leases with us.

Our operations could be disrupted if management agreements and/or leases with third parties and local governments are not renewed.

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If we, or if GLPI or VICI in the case of leases pursuant to which we are the sub-lessee, are unable to renew these leases and agreements on satisfactory terms as they expire or if disputes arise regarding the terms of these agreements, our business may be disrupted and, in the event of disruptions in multiple jurisdictions, could have a material adverse effect on our financial condition, results of operations, and cash flows.

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

A majority of our revenues are attributable to slot machines and related systems operated by us at our gaming properties.

A substantial majority of the slot machines sold in the U.S.

in recent years were manufactured by a few select companies, and there has been extensive consolidation activity within the gaming equipment sector in recent years.

In recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participation lease arrangements in order to acquire the machines.

For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines, which could hurt our profitability.

There can be no assurance that we will be able to compete effectively or generate sufficient returns on our recently expanded sports betting operations and investment in Barstool Sports.

There can be no assurance that we will be able to compete effectively or generate sufficient returns on our recently expanded sports betting operations, our recent acquisition of theScore and our investment in Barstool Sports.

Certain of the jurisdictions in which we operate have legalized intra-state sports wagering and have established extensive state licensing and regulatory requirements governing any such intra-state sports wagering.

As of December 31, 2021, we have launched the Barstool Sportsbook app in eleven states, and we expect to launch our Barstool Sportsbook app in additional states throughout 2022.

Our sports betting operations compete, and will continue to compete, in a rapidly evolving and highly competitive market against an increasing number of competitors.

We launched the Barstool Sportsbook app in Pennsylvania in September 2020 and in Michigan in January 2021, and we expect to launch our Barstool Sportsbook app in additional states throughout 2021.

In addition, we have entered into certain market access agreements with certain other sports betting operators and may enter into agreements with additional strategic partners and other third-party vendors.

The success of our proposed sports betting operations is dependent on a number of additional factors that are beyond our control, including the ultimate tax rates and license fees charged by jurisdictions across the United States;

our ability to gain market share in a newly developing market;

Additionally, as described below under “— We rely on strategic relationships with casinos, tribes and horse-tracks in order to be able to offer our sports betting and online gaming products in certain jurisdictions.

If we cannot establish and manage such relationships with such partners, our business, financial condition and results of operations could be adversely affected,” we have entered into agreements with other sports betting operators and may enter into additional agreements with strategic partners and other third-party vendors to provide market access in certain jurisdictions.

In addition, there can be no assurance that the Barstool Sports audience will engage in sports betting and online gaming products to the extent that we expect.

Further, the success of our proposed sports betting operations is dependent on a number of additional factors, many of which are beyond our control, including the ultimate tax rates and license fees charged by jurisdictions across the United States and Canada;

our ability to gain market share in a new market;

the timeliness and the technological and popular viability of our products;

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changes in consumer demographics and public tastes and preferences;

cancellations and delays in sporting seasons and sporting events as a result of the COVID-19 pandemic;

cancellations and delays in sporting seasons and sporting matches as a result of events such as players strikes or lockouts or related to the COVID-19 pandemic;

and the availability and popularity of other forms of entertainment.

There can be no assurance that we will be able to compete effectively or that our expansion will be successful and generate sufficient returns on our investment.

We may not be able to achieve the expected benefits or financial returns of our investment in Barstool Sports due to fees, costs, taxes, delays or disruptions in connection with our roll out of our online and retail sportsbooks, the Barstool Sportsbook app, and iGaming products.

In addition, there can be no assurance that the Barstool Sports audience will engage in sports betting and iGaming products to the extent that we expect.

Any of the factors above could prevent us from receiving the expected returns of our investment in Barstool Sports, cause the market price of our common stock to decline, and have a material adverse effect on our financial condition, results of operations, and cash flows.

Our investment in and partnership with Barstool Sports may result in potential adverse reactions, negative publicity or changes to our business or regulatory relationships.

Our relationships with state gaming regulators and business partners could be adversely affected as a result of our affiliation with Barstool Sports.

Gaming regulators may not have extensive experience in the digital media industry, which may present unique challenges in regulating our business.

In addition, our business partners may react negatively to actual or perceived competitive threats from our affiliation with Barstool Sports.

Our operations and the success of our investment in Barstool Sports are largely dependent on the skill and experience of management and key personnel.

Our success and our competitive position are largely dependent upon, among other things, the efforts and skills of our senior executives and management team.

Any of the factors above could prevent us from receiving the expected returns of our acquisition of theScore or our investment in Barstool Sports, cause the market price of our common stock to decline, and have a material adverse effect on our financial condition, results of operations, and cash flows.

Our operations and the success are largely dependent on the skill and experience of management and key personnel.

Our success and our competitive position, including as relates to our land-based operations, online sports betting, iGaming and media businesses, are largely dependent upon, among other things, the efforts and skills of our senior executives and management team.

Although we enter into employment agreements with certain of our senior executives and key personnel, we cannot assure you that we will be able to retain our existing senior executive and management personnel or attract additional qualified senior executive and management personnel.

Further, Barstool Sports is dependent upon its ability to attract and retain key personnel, including content creators, bloggers, and marketing personnel.

If Barstool Sports loses the services of its senior management team or other key personnel, or if there is a shortage in the availability of the requisite qualified personnel, it would limit the ability of Barstool Sports to grow, to increase sales, and promote our online sports betting and iGaming products and our gaming facilities.

Work stoppages, organizing drives, and other labor problems could negatively impact our future profits.

Some of our employees are currently represented by labor unions.

A lengthy strike or other work stoppage at any of our casino properties or construction projects could have an adverse effect on our financial condition, results of operations, and cash flows.

Given the large number of employees, labor unions are making a concerted effort to recruit more employees in the gaming industry.

We cannot provide any assurance that we will not experience additional and more successful union organization activity in the future.

Further, there has from time to time been a shortage of skilled labor in our markets.

In addition to limitations that may otherwise exist in the supply of skilled labor, the continued expansion of gaming near our properties, including the expansion of Native American gaming, may make it more difficult for us to attract qualified individuals.

While we believe that we will continue to be able to attract and retain qualified employees, shortages of skilled labor will make it increasingly difficult and expensive to attract and retain the services of a satisfactory number of qualified employees, and we may incur higher costs than expected as a result.

We depend on agreements with our horsemen and pari-mutuel clerks, which if we fail to renew or modify on satisfactory terms, could have a material adverse effect on us.

In jurisdictions where we operate pari-mutuel wagering, if we fail to present evidence of an agreement with the horsemen at a track, we may not be permitted to conduct live racing and to export and import simulcasting at that track and OTWs and, in West Virginia, our video lottery license may not be renewed.

Failure to protect or enforce our intellectual property rights or the costs involved in such enforcement could harm our business, financial condition, and results of operations.

We rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights.

Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved.

In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights.

The market price of our common stock could fluctuate significantly, which could have a material adverse effect on the stock price or trading volume of our common stock.

securities markets in general have experienced significant price fluctuations in recent years, including recently due to the COVID-19 pandemic.

The market price of our common stock may be volatile and subject to wide fluctuations, and the trading volume of our common stock may fluctuate and cause significant price variations to occur.

We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition and results of operations.

From time to time, we are defendants in various lawsuits relating to matters incidental to our business.

The nature of our business subjects us to the risk of lawsuits filed by customers, past and present employees, competitors, business partners and others in the ordinary course of business (particularly in the case of class actions).

As with all litigation, no assurance can be provided as to the outcome of these matters and, in general, litigation can be expensive and time consuming.

We may not be successful in these lawsuits, and, especially with increasing class action claims in our industry, litigation could result in costs, settlements, or damages that could significantly impact our financial condition, results of operations, and cash flows.

Risks Related to Our Indebtedness and Capital Structure

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.

As of December 31, 2020, we had indebtedness of $2,431.6 million, including $1,628.1 million in outstanding term loans.

Our business could suffer if we cannot attract and retain talented team members.

We compete with other companies both within and outside of our industry for talented personnel.

If we cannot recruit, train, develop, and retain sufficient numbers of talented team members to our corporate, land-based operations, online sports betting, iGaming and media businesses, we could experience increased employee turnover, decreased guest or user satisfaction, low morale, inefficiency, or internal control failures.

Insufficient numbers of talented team members could also limit our ability to grow and expand our businesses.

A shortage of frontline and skilled labor could also result in higher wages that would increase our labor costs, which could reduce our profits.

We may also experience adverse impacts to our business if certain government-mandated measures intended to address the COVID-19 pandemic, such as mandatory quarantines, vaccine mandates and regular testing requirements, affect the availability of our employees or other workers or lead to attrition of key employees.

As our Interactive segment grows, we will need to recruit, integrate, and retain skilled and experienced personnel who can demonstrate our value proposition to users, advertisers, and business partners and who can increase the monetization of our products.

Qualified individuals are in high demand, particularly in the media industry, and we may incur significant costs to attract them.

We use equity awards to attract talented employees.

If the value of our ordinary shares declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees.

Our ability to attract, retain, and motivate employees may also be adversely affected by stock price volatility.

Collective bargaining activity and strikes could disrupt our operations, increase our labor costs, and interfere with the ability of our management to focus on executing our business strategies.

A significant number of team members at our properties are currently covered by collective bargaining agreements.

Numerous collective bargaining agreements are typically subject to negotiation each year, and our ability in the past to resolve such negotiations does not mean that we will be able to resolve future negotiations without strikes, disruptions, or on terms that we consider reasonable.

If relationships with our organized associates or the unions that represent them become adverse, then the properties we operate could experience labor disruptions such as strikes, lockouts, boycotts, and public demonstrations.

Labor disputes and disruptions have in the past, and could in the future, result in adverse publicity and adversely affect operations and revenues at affected properties.

In addition, labor disputes and disruptions could harm our relationship with our team members, result in increased regulatory inquiries and enforcement by governmental authorities, harm our relationships with our guests and customers, divert management attention, and reduce customer demand for our services, all of which could have an adverse effect on our reputation, business, financial condition, or results of operations.

In addition, labor regulation and the negotiation of new or existing collective bargaining agreements could lead to higher wage and benefit costs, changes in work rules that raise operating expenses and legal costs, and could impose limitations on our ability or the ability of our third-party property owners to take cost saving measures during economic downturns.

We do not have the ability to control the negotiations of collective bargaining agreements covering unionized labor employed by the operators of our franchised properties.

Given the large number of employees, labor unions are making a concerted effort to recruit more employees in the gaming industry, and, we have experienced attempts by labor organizations to organize certain of our non-union employees.

These efforts have achieved some success to date.

We cannot provide any assurance that we will not experience additional and successful union activity in the future.

The impact of this union activity is undetermined and could negatively impact our results of operations.

Increased unionization of our workforce, new labor legislation or changes in regulations could disrupt our operations, reduce our profitability or interfere with the ability of our management to focus on executing our business strategies.

If we fail to detect fraud or theft, including by our users and employees, our reputation may suffer which could harm our brand and reputation and negatively impact our business, financial condition and results of operations and can subject us to investigations and litigation.

We have in the past incurred, and may in the future incur, losses from various types of financial fraud, including use of stolen or fraudulent credit card data, claims of unauthorized payments by a user and attempted payments by users with

insufficient funds.

Bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts.

Under current credit card practices, we may be liable for use of funds on our products with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.

Acts of fraud may involve various tactics, including collusion.

Successful exploitation of our systems could have negative effects on our product offerings, services and user experience and could harm our reputation.

Failure to discover such acts or schemes in a timely manner could result in harm to our operations.

In addition, negative publicity related to such schemes could have an adverse effect on our reputation, potentially causing a material adverse effect on our business, financial condition, results of operations and prospects.

In the event of the occurrence of any such issues with our existing technology or product offerings, substantial engineering and marketing resources and management attention may be diverted from other projects to correct these issues, which may delay other projects and the achievement of our strategic objectives.

In addition, any misappropriation of, or access to, users’ or other proprietary information or other breach of our information security could result in legal claims or legal proceedings, including regulatory investigations and actions, or liability for failure to comply with privacy and information security laws, including for failure to protect personal information or for misusing personal information, which could disrupt our operations, force us to modify our business practices, damage our reputation and expose us to claims from our users, regulators, employees and other persons, any of which could have an adverse effect on our business, financial condition, results of operations and prospects.

Despite measures we have taken to detect and reduce the occurrence of fraudulent or other malicious activity on our offerings, we cannot guarantee that any of our measures will be effective or will scale efficiently with our business.

Our failure to adequately detect or prevent fraudulent transactions could harm our reputation or brand, result in litigation or regulatory action and lead to expenses that could adversely affect our business, financial condition and results of operations.

We rely on, among other things, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect our intellectual property rights and we may be unable to protect or may not be successful in protecting our intellectual property rights.

Our commercial success depends upon our ability to develop new or improved technologies and products, and to successfully obtain or acquire proprietary or statutory protection for our intellectual property rights.

We rely on, among other things, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights.

While we enter into license, confidentiality and non-disclosure agreements with our employees, consultants, users, potential users and others to attempt to limit access to and distribution of proprietary and confidential information, it is possible that:

• some or all of our confidentiality and non-disclosure agreements will not be honored;

• third parties will independently develop equivalent technology or misappropriate our technology or designs;

• disputes will arise with our strategic partners, users or others concerning the ownership of intellectual property;

• unauthorized disclosure or use of our intellectual property, including source code, know-how or trade secrets will occur;

• contractual provisions may not be enforceable.

There can be no assurance that we will be successful in protecting our intellectual property rights or that we will become aware of third-party infringements that might be occurring.

Inability to protect our intellectual property rights could have a material adverse effect on our prospects, business, financial condition or results of operations.

Our commercial success depends upon us avoiding the infringement of intellectual property rights owned by others and any such infringements, including those that are inadvertent, may have a material adverse effect on our business.

The industries in which we compete have many participants that own, or claim to own, intellectual property, including participants that have been issued patents and may have filed patent applications or may obtain additional patents and proprietary rights for technologies similar to those used by us in our products.

Some of these patents may grant very broad protection to the third-party owners thereof.

Patents can be issued very rapidly and there is often a great deal of secrecy surrounding pending patent applications.

We cannot determine with certainty whether any existing third-party patents or the issuance of any new third-party patents would require us to alter our technologies, pay for licenses, challenge the validity or enforceability of the patents, or cease certain activities.

Third parties may assert intellectual property infringement claims against us and against our partners and/or suppliers.

We may be subject to these types of claims either directly or indirectly

through indemnities assuming liability for these claims that we may provide to certain partners.

There can be no assurance that our attempts to negotiate favorable intellectual property indemnities in favor of us with our suppliers for infringement of third-party intellectual property rights will be successful or that a supplier’s indemnity will cover all damages and losses suffered by us and our partners and other suppliers due to infringing products, or that we can secure a license, modification or replacement of a supplier’s products with non-infringing products that may otherwise mitigate such damages and losses.

Some of our competitors have, or are affiliated with companies that have, substantially greater resources than us, and these competitors may be able to sustain the costs of complex intellectual property infringement litigation to a greater degree and for longer periods of time than us.

Regardless of whether third-party claims of infringement against us have any merit, these claims could:

• adversely affect our relationships with our customers and users;

• be time-consuming to evaluate and defend;

• result in costly litigation;

• result in negative publicity for us;

• divert our management’s attention and resources;

• cause product and software delivery delays or stoppages;

• subject us to significant liabilities;

• require us to enter into costly royalty or licensing agreements;

• require us to develop possible workaround solutions that may be costly and disruptive to implement;

• require us to cease certain activities or to cease distributing our products and delivering our services in certain markets.

In addition to being liable for potentially substantial damages relating to a patent or other intellectual property following an infringement action against us, we may be prohibited from developing or commercializing certain technologies or products unless we obtain a license from the holder of the patent or other applicable intellectual property rights, or purchase the patent.

There can be no assurance that we will be able to obtain any such license or purchase the patent on commercially reasonable terms, or at all.

If we do not obtain such a license, our prospects, business, operating results and financial condition could be materially adversely affected and we could be required to cease related business operations in some markets and restructure our business to focus on continuing operations in other markets.

Our technology contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to provide our offerings.

Our technology contains software modules licensed to us by third-party authors under “open source” licenses.

Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code.

In addition, the public availability of such software may make it easier for others to compromise our technology.

Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use, or grant other licenses to our intellectual property.

If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public.

This would allow our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages.

Alternatively, to avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software.

Although we monitor our use of open source software to avoid subjecting our technology to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S.

or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our technology.

From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their solutions.

As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software.

Moreover, we cannot assure you that our processes for controlling our use of open source software in our technology will be effective.

If we are held to have breached or failed to fully comply with all the terms and conditions of an open source software license, we could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing our offerings on terms that are not economically feasible, to re-engineer our technology, to discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or to make generally

available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition and results of operations.

We may face disruption and other difficulties in integrating and managing acquired operations or other initiatives we have recently acquired, may develop, or may acquire in the future.

We could face significant challenges in managing and integrating our expanded or combined operations and any other properties or operations we may develop or acquire, particularly in new competitive markets or business lines, including our recent acquisition of theScore.

The integration and management of more significant operations that we develop or acquire, such as our ability to (i) transition to the Score’s proprietary risk and trading platform in Ontario, (ii) integrate the Barstool Sportsbook into theScore’s mobile app in the U.S.

and (iii) migrate the Barstool Sportsbook to theScore’s player account management trading platforms, will require the dedication of management resources that may temporarily divert attention from our day-to-day business.

In addition, development and integration of new information technology systems that may be required is costly and time-consuming.

The process of integrating operations that we may acquire also could interrupt the activities of those businesses, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

In addition, the development of new operations may involve regulatory, legal and competitive risks, and, as it relates to property acquisitions construction and local opposition risks, as well as the risks attendant to partnership deals on these development opportunities.

In particular, local opposition can delay or increase the anticipated cost of a project, and, in projects where we team up with a joint venture partner, if we cannot reach agreement with such partners, or if our relationships otherwise deteriorate, we could face significant increased costs and delays.

Finally, given the competitive nature of these types of limited license opportunities, litigation is possible.

We cannot assure you that we will be able to manage the combined operations effectively or realize any of the anticipated benefits of our acquisitions or development projects.

We also cannot assure you that if acquisitions are completed, that the acquired businesses will generate returns consistent with our expectations.

Our ability to achieve our objectives in connection with any acquisition we may consummate may be highly dependent on, among other things, our ability to retain the senior level property management teams of such acquisition candidates.

If, for any reason, we are unable to retain these management teams following such acquisitions or if we fail to attract new capable executives, our operations after consummation of such acquisitions could be materially adversely affected.

The occurrence of some or all of the above-described events could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our retail casino gaming, online gaming, and sports betting rely heavily on technology services and an uninterrupted supply of electrical power.

Any unscheduled disruption in our technology services or interruption in the supply of electrical power could result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our retail casino gaming (including slot machines and security systems), online gaming, and sports betting operations.

We rely on third-party payment processors to process deposits and withdrawals made by our users, and if we cannot manage our relationships with such third parties and other payment-related risks, our business, financial condition and results of operations could be adversely affected.

We rely on a limited number of third-party payment processors to process deposits and withdrawals made by our users.

If any of our third-party payment processors terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would need to find an alternate payment processor, and may not be able to secure similar terms or replace such payment processor in an acceptable time frame.

Further, the software and services provided by our third-party payment processors may not meet our expectations, contain errors or vulnerabilities, be compromised or experience outages.

Any of these risks could cause us to lose our ability to accept online payments or other payment transactions or make timely payments to our users, any of which could make our technology less trustworthy and convenient and adversely affect our ability to attract and retain our users.

Nearly all of our payments are made by credit card, debit card or through other third-party payment services, which subjects us to certain regulations and to the risk of fraud.

We may in the future offer new payment options to users that may be subject to additional regulations and risks.

We are also subject to a number of other laws and regulations relating to the payments we accept from our users, including with respect to money laundering, money transfers, privacy and information security.

If we fail to comply with applicable rules and regulations, we may be subject to civil or criminal penalties, fines and/or higher transaction fees and may lose our ability to accept online payments or other payment card transactions, which could

make our offerings less convenient and attractive to our users.

If any of these events were to occur, our business, financial condition and results of operations could be adversely affected.

Additionally, our payment processors require us to comply with payment card network operating rules, which are set and interpreted by the payment card networks.

The payment card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit us from providing certain offerings to some users, be costly to implement or difficult to follow.

We have agreed to reimburse our payment processors for fines they are assessed by payment card networks if we or our users violate these rules.

Any of the foregoing risks could adversely affect our business, financial condition and results of operations.

If our third-party mobile application distribution platforms or service providers do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition, and results of operations could be adversely affected.

Our success depends in part on our relationships with other third-party service providers.

We rely upon third-party distribution platforms, including the Apple App Store and Google Play store, for distribution of our mobile applications.

As such, the promotion, distribution and operation of our mobile applications are subject to the respective distribution platforms’ standard terms and policies, which are very broad and subject to frequent changes and interpretation.

If Apple or Google choose to de-list any of our mobile applications due to what they perceive to be objectionable content, it could have a material negative impact on our business.

Further, the success of our Interactive segment depends in part on our relationships with other third-party service providers for content delivery, load balancing and protection against distributed denial-of-service attacks.

If those providers do not perform adequately or terminate their relationship with us, our users may experience issues or interruptions with their experiences.

We also rely on other software and services supplied by third parties, such as communications and internal software, and our business may be adversely affected to the extent such software and services do not meet our expectations, contain errors or vulnerabilities, are compromised or experience outages.

Further, any negative publicity related to any of our third-party partners could adversely affect our reputation and brand.

We also incorporate technology from third parties into our platform.

We cannot be certain that our licensors are not infringing the intellectual property rights of others or that the suppliers and licensors have sufficient rights to the technology in all jurisdictions in which we may operate.

Some of our license agreements may be terminated by our licensors for convenience.

If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our offerings containing that technology could be severely limited and our business could be harmed.

Additionally, if we are unable to obtain necessary technology from third parties, we may be forced to acquire or develop alternate technology, which may require significant time and effort and may be of lower quality or performance standards.

This would limit and delay our ability to provide new or competitive offerings and increase our costs.

If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations.

Further, we rely on third-party geolocation and identity verification systems to ensure we are in compliance with certain laws and regulations.

There is no guarantee that the third-party geolocation and identity verification systems will perform adequately, or be effective, and any service disruption to those systems would prohibit us from operating our platform and would adversely affect our business.

Additionally, incorrect or misleading geolocation and identity verification data with respect to current or potential users received from third-party service providers may result in us inadvertently allowing access to our offerings to individuals who should not be permitted to access them, or otherwise inadvertently deny access to individuals who should be able to access our offerings, in each case based on inaccurate identity or geographic location determination.

Our third-party geolocation services provider relies on its ability to obtain information necessary to determine geolocation from mobile devices, operating systems, and other sources.

Changes, disruptions or temporary or permanent failure to access such sources by our third-party services providers may result in their inability to accurately determine the location of our users.

Moreover, our inability to maintain our existing contracts with third-party services providers, or to replace them with equivalent third parties, may result in our inability to access geolocation and identity verification data necessary for our day-to-day operations.

If any of these risks materializes, we may be subject to disciplinary action, fines, lawsuits, and our business, financial condition and results of operations could be adversely affected.

If Internet and other technology-based service providers experience service interruptions, our ability to conduct our business may be impaired and our business, financial condition and results of operations could be adversely affected.

A substantial portion of our network infrastructure is provided by third parties, including Internet service providers and other technology-based service providers.

See “— We rely on third party cloud infrastructure services to deliver our offerings to users and any disruption of or interference with our use of these services could adversely affect our business, financial condition, results of operations and prospects.” We require technology-based service providers to implement cyber-attack-resilient systems and processes.

However, if Internet service providers experience service interruptions, including because of cyber-attacks, or due to an event causing an unusually high volume of Internet use (such as a pandemic or public health emergency), communications over the Internet may be interrupted and impair our ability to conduct our business.

Internet service providers and other technology-based service providers may in the future roll out upgraded or new mobile or other telecommunications services, such as 5G or 6G services, which may not be successful and thus may impact the ability of our users to access our offerings in a timely fashion or at all.

In addition, our ability to process e-commerce transactions depends on bank processing and credit card systems.

To prepare for system problems, we continuously seek to strengthen and enhance our current facilities and the capabilities of our system infrastructure and support.

Nevertheless, there can be no assurance that the Internet infrastructure or our own network systems will continue to be able to meet the demand placed on us by the continued growth of the Internet, the overall online gaming industry and our users.

Any difficulties these providers face, including the potential of certain network traffic receiving priority over other traffic (i.e., lack of net neutrality), may adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide.

Any system failure as a result of reliance on third parties, such as network, software or hardware failure, including as a result of cyber-attacks, which causes a loss of our users’ property or personal information or a delay or interruption in our online services and products and e-commerce services, including our ability to handle existing or increased traffic, could result in a loss of anticipated revenue, interruptions to our offerings, cause us to incur significant legal, remediation and notification costs, degrade the customer experience and cause users to lose confidence in our offerings, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We rely on third party cloud infrastructure services to deliver our offerings to users, and any disruption of or interference with our use of these services could adversely affect our business, financial condition, results of operations and prospects.

We currently host our sports betting and online gaming offerings and support our operations using a third-party provider of cloud infrastructure services.

We do not, and will not, have control over the operations of the facilities or infrastructure of the third-party service provider that we use.

Such third party’s facilities are vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct.

Our technology’s continuing and uninterrupted performance will be critical to our success.

We have experienced, and we expect that in the future we will experience, interruptions, delays and outages in service and availability from these third-party service providers from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints.

In addition, any changes in these third parties’ service levels may adversely affect our ability to meet the requirements of our users.

Since our technology’s continuing and uninterrupted performance is critical to our success, sustained or repeated system failures would reduce the attractiveness of our offerings.

It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as we expand and the usage of our offerings increases.

Any negative publicity arising from these disruptions could harm our reputation and brand and may adversely affect the usage of our offerings.

Any of the above circumstances or events may harm our reputation and brand, reduce the availability or usage of our technology, lead to a significant loss of revenue, increase our costs and impair our ability to attract new users, any of which could adversely affect our business, financial condition and results of operations.

We rely on strategic relationships with casinos, tribes and horse-tracks in order to be able to offer our sports betting, and online gaming products in certain jurisdictions.

If we cannot establish and manage such relationships with such partners, our business, financial condition and results of operations could be adversely affected.

Under the sports betting and online gaming laws of certain states, sports betting and online gaming are limited to a finite number of retail operators, such as casinos, tribes or tracks, who own a “skin” or “skins” under that state’s law.

A “skin” is a legally-authorized license from a state to offer sports betting or online gaming services provided by such a retail operator.

The “skin” provides a market access opportunity for mobile operators to operate in the jurisdiction pending licensure and other required approvals by the state’s regulator.

The entities that control those “skins,” and the numbers of “skins” available, are typically determined by a state’s law authorizing sports betting or online gaming.

In some of the jurisdictions in which we offer sports betting and online gaming, we currently rely on a casino, tribe or track in order to get a “skin.” These “skins” are what allows us to gain access to jurisdictions where online operators are required to have a retail relationship.

If we cannot establish,

renew or manage our relationships, our relationships could terminate and we would not be allowed to operate in those jurisdictions until we enter into new ones.

As a result, our business, financial condition and results of operations could be adversely affected.

We rely on other third-party sports data providers for real-time and accurate data for sporting events, and if such third parties do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected.

We rely on third-party sports data providers to obtain accurate information regarding schedules, results, performance and outcomes of sporting events.

We rely on this data to determine when and how sports bets are settled.

We have experienced, and may continue to experience, errors in this data feed which may result in us incorrectly settling bets.

If we cannot adequately resolve the issue with our users, our users may have a negative experience with our offerings, our brand or reputation may be negatively affected and our users may be less inclined to continue or resume utilizing our products or recommend our offerings to other potential users.

As such, a failure or significant interruption in our service may harm our reputation, business and operating results.

Furthermore, if any of our sports data partners terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would need to find an alternate provider, and may not be able to secure similar terms or replace such providers in an acceptable time frame.

Any of these risks could increase our costs and adversely affect our business, financial condition and results of operations.

Further, any negative publicity related to any of our third-party partners, including any publicity related to regulatory concerns, could adversely affect our reputation and brand, and could potentially lead to increased regulatory or litigation exposure.

Our growth will depend, in part, on the success of our strategic relationships with third parties.

Overreliance on certain third parties, or our inability to extend existing relationships or agree to new relationships may cause unanticipated costs for us and impact our financial performance in the future.

We rely on relationships with sports leagues and teams, professional athletes and athlete organizations, advertisers, casinos and other third parties, including those affiliated with Barstool Sports, in order to attract users to our offerings.

These relationships along with providers of online services, search engines, social media, directories and other websites and e-commerce businesses direct consumers to our offerings.

In addition, many of the parties with whom we have advertising arrangements provide advertising services to other companies, including other gaming products with whom we compete.

While we believe there are other third parties that could drive users to our offerings, adding or transitioning to them may disrupt our business and increase our costs.

In the event that any of our existing relationships or our future relationships fails to provide services to us in accordance with the terms of our arrangement, or at all, and we are not able to find suitable alternatives, this could impact our ability to attract consumers cost effectively and harm our business, financial condition, results of operations and prospects.

Our information technology and other systems are subject to cyber security risk, including misappropriation of employee information, customer information or other breaches of information security, particularly as our Interactive segment grows.

We increasingly rely on information technology and other systems (particularly as our Interactive segment grows), including our own systems and those of service providers and third parties, to manage our business and employee data and maintain and transmit customers’ personal and financial information, credit card settlements, credit card funds transmissions, mailing lists, and reservations information.

Our collection of such data is subject to extensive regulation by private groups, such as the payment card industry, as well as governmental authorities, including gaming authorities.

Privacy regulations continue to evolve and we have taken, and will continue to take, steps to comply by implementing processes designed to safeguard the confidential and personal information of our business, employees and customers.

In addition, our security measures are reviewed and evaluated regularly.

However, our information and processes and those of our service providers and other third parties, are subject to the ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus, or unauthorized or fraudulent use by customers, company employees, or employees of third party vendors.

The steps we take to deter and mitigate the risks of breaches may not be successful, and any resulting compromise or loss of data or systems could adversely impact operations or regulatory compliance and could result in remedial expenses, fines, litigation, disclosures, and loss of reputation, potentially impacting our financial results.

Further, as cyber-attacks continue to evolve, we may incur significant costs in our attempts to modify or enhance our protective measures or investigate or remediate any vulnerability.

Increased instances of cyber-attacks may also have a negative reputational impact on us and our properties that may result in a loss of customer confidence and, as a result, may have a material adverse effect on our financial condition, results of operations, and cash flows.

As our sports betting and online gaming business grows, we will face increased cyber risks and threats that seek to damage, exploit, disrupt or gain access to our networks, our products and services, and supporting infrastructure.

Any failure to prevent or mitigate security breaches or cyber risk could result in interruptions to the services we provide, degrade the user experience, and cause our users to lose confidence in our products.

The unauthorized access, acquisition or disclosure of consumer information could compel us to comply with disparate breach notification laws and otherwise subject us to proceedings by governmental entities or others and substantial legal and financial liability.

This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position.

Our growth prospects may suffer if we are unable to develop successful offerings or if we fail to pursue additional offerings.

In addition, if we fail to make the right investment decisions in our offerings and technology, we may not attract and retain key users and our revenue and results of operations may decline.

The industries in which we operate are subject to rapid and frequent changes in standards, technologies, products and service offerings, as well as in customer demands and expectations and regulations.

We must continuously make decisions regarding in which offerings and technology we should invest to meet customer demand in compliance with evolving industry standards and regulatory requirements and must continually introduce and successfully market new and innovative technologies, offerings and enhancements to remain competitive and effectively stimulate customer demand, acceptance and engagement.

Our ability to engage, retain, and increase our user base and to increase our revenue will depend heavily on our ability to successfully create new offerings, both independently and together with third parties.

We may introduce significant changes to our existing technology and offerings or develop and introduce new and unproven products and services, with which we have little or no prior development or operating experience.

The process of developing new offerings and systems is inherently complex and uncertain, and new offerings may not be well received by users, even if well-reviewed and of high quality.

If we are unable to develop technology and products that address users’ needs or enhance and improve our existing technology and offerings in a timely manner, we could experience a material adverse effect on our business, financial condition, results of operations and prospects.

Although we intend to continue investing in our research and development efforts, if new or enhanced offerings fail to engage our users or partners, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, any of which may seriously harm our business.

In addition, management may not properly ascertain or assess the risks of new initiatives, and subsequent events may alter the risks that were evaluated at the time we decided to execute any new initiative.

Creating additional offerings can also divert our management’s attention from other business issues and opportunities.

Even if our new offerings attain market acceptance, those new offerings could exploit the market share of our existing product offerings or share of our users’ wallets in a manner that could negatively impact their ecosystem.

Furthermore, such expansion of our business increases the complexity of our business and places an additional burden on our management, operations, technical systems and financial resources and we may not recover the often-substantial up-front costs of developing and marketing new offerings, or recover the opportunity cost of diverting management and financial resources away from other offerings.

In the event of continued growth of our operations, products or in the number of third-party relationships, we may not have adequate resources, operationally, technologically or otherwise to support such growth and the quality of our technology, offerings or our relationships with third parties could suffer.

In addition, failure to effectively identify, pursue and execute new business initiatives, or to efficiently adapt our processes and infrastructure to meet the needs of our innovations, may adversely affect our business, financial condition, results of operations and prospects.

Any new offerings may also require our users to utilize new skills to use our offerings.

This could create a lag in adoption of new offerings and new user additions related to any new offerings.

To date, new offerings and enhancements of our existing technology have not hindered our user growth or engagement, but that may be the result of a large portion of our user base being in a younger demographic and more willing to invest the time to learn to use our products most effectively.

To the extent that future users, including those in older demographics, are less willing to invest the time to learn to use our products, and if we are unable to make our products easier to learn to use, our user growth or engagement could be affected, and our business could be harmed.

We may develop new products that increase user engagement and costs without increasing revenue.

Additionally, we may make bad or unprofitable decisions regarding these investments.

If new or existing competitors offer more attractive offerings, we may lose users or users may decrease their spending on our offerings.

New customer demands, superior competitive offerings, new industry standards or changes in the regulatory environment could render our existing offerings unattractive, unmarketable or obsolete and require us to make substantial unanticipated changes to our technology or business model.

Our failure to adapt to a rapidly changing market or evolving customer demands could harm our business, financial condition, results of operations and prospects.

The growth of our Interactive segment will depend on our ability to attract and retain users.

Our ability to achieve growth in revenue in the future in our Interactive segment and its Barstool Sports sports betting and online gaming apps will depend, in large part, upon our ability to attract new users to our offerings, retain existing users of our offerings and reactivate users in a cost-effective manner.

Achieving growth in our community of users may require us to increasingly engage in sophisticated and costly sales and marketing and promotional efforts, which may not make sense in terms of return on investment.

We have used and expect to continue to use a variety of free and paid marketing channels, in combination with compelling offers and exciting games to achieve our objectives.

For paid marketing, we intend to leverage a broad array of advertising channels, including television, radio, social media influencers (brand ambassadors), social media platforms, such as Facebook, Instagram, Twitter and Snapchat, affiliates and paid and organic search, and other digital channels, such as mobile display.

If the search engines on which we rely modify their algorithms, change their terms around gaming, or if the prices at which we may purchase listings increase, then our costs could increase, and fewer users may click through to our website.

If links to our website are not displayed prominently in online search results, if fewer users click through to our website, if our other digital marketing campaigns are not effective, if the costs of attracting users using any of our current methods significantly increase, then our ability to efficiently attract new users could be reduced, our revenue could decline and our business, financial condition and results of operations could be harmed.

In addition, our ability to increase the number of users of our offerings will depend on continued user adoption of the Barstool Sportsbook app and online gaming.

Growth in the sportsbook and online gaming industries and the level of demand for and market acceptance of our product offerings will be subject to a high degree of uncertainty.

We cannot assure that consumer adoption of our product offerings will continue or exceed current growth rates, or that the industry will achieve more widespread acceptance.

Additionally, as technological or regulatory standards change and we modify our platform to comply with those standards, we may need users to take certain actions to continue playing, such as performing age verification checks or accepting new terms and conditions.

Users may stop using our product offerings at any time, including if the quality of the user experience on our platform, including our support capabilities in the event of a problem, does not meet their expectations or keep pace with the quality of the customer experience generally offered by competitive offerings.

Participation in the sports betting industry exposes us to trading, liability management and pricing risk.

Our fixed-odds betting products involve betting where winnings are paid on the basis of the stake placed and the odds quoted.

Odds are determined with the objective of providing an average return to the bookmaker over a large number of events and therefore, over the long term, our gross win percentage has remained fairly constant.

However, there can be significant variation in gross win percentage event-by-event and day-by-day.

We have systems and controls that seek to reduce the risk of daily losses occurring on a gross-win basis, but there can be no assurance that these will be effective in reducing our exposure, and consequently our exposure to this risk in the future.

As a result, in the short term, there is less certainty of generating a positive gross win, and we may experience (and we have from time to time experienced) significant losses with respect to individual events or betting outcomes, in particular if large individual bets are placed on an event or betting outcome or series of events or betting outcomes.

Odds compilers and risk managers are capable of human error, thus even allowing for the fact that a number of betting products are subject to capped pay-outs, significant volatility can occur.

In addition, it is possible that there may be such a high volume of trading during any particular period that even automated systems would be unable to address and eradicate all risks.

Any significant losses on a gross- win basis could have a material adverse effect on our business, financial condition and results of operations.

In addition, if a jurisdiction where we hold or wish to apply for a license imposes a high turnover tax for betting (as opposed to a gross-win tax), this too would impact profitability, particularly with high value/low margin bets, and likewise have a material adverse effect on our business.

We follow the industry practice of restricting and managing betting limits at the individual customer level based on individual customer profiles and risk level to the enterprise;

however there is no guarantee that states will allow operators such as us to place limits at the individual customer level.

Similar to a credit card company managing individual risk on the customer level through credit limits, it is customary for sports betting operators to manage customer-betting limits at the individual level to manage enterprise risk levels.

We believe this practice is beneficial overall, because if it were not possible, the betting options would be restricted globally and limits available to customers would be much lower to insulate overall risk due to the existence of a very small segment of highly sophisticated syndicates and algorithmic bettors, or bettors looking to take advantage of site errors and omissions.

We believe the majority of operators balance taking reasonable action from all customers against the risk of individual customers

significantly harming the business viability.

We cannot assure you that all state legislation and regulators will always allow operators to execute limits at the individual customer level, or at their sole discretion.

We extend credit to a portion of our customers, and we may not be able to collect gaming receivables from our credit customers.

We conduct our gaming activities on a credit and cash basis at many of our properties.

Any such credit we extend is unsecured.

Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than customers who tend to wager lower amounts.

High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a significant positive or negative impact on cash flow and earnings in a particular period.

We extend credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit.

These large receivables could have a significant impact on our results of operations if deemed uncollectible.

Gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of the jurisdictions in which we allow play on a credit basis, and judgments on gaming debts in such jurisdictions are enforceable in all U.S.

states under the Full Faith and Credit Clause of the U.S.

Constitution;

however, other jurisdictions may determine that enforcement of gaming debts is against public policy.

Although courts of some foreign nations will enforce gaming debts directly and the assets in the U.S.

of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S.

courts are not binding on the courts of many foreign nations.

The success, including win or hold rates, of existing or future sports betting and online gaming products depends on a variety of factors and is not completely controlled by us.

The sports betting and online gaming industries are characterized by an element of chance.

Accordingly, we employ theoretical win rates to estimate what a certain type of sports bet or iCasino game, on average, will win or lose in the long run.

Net win is impacted by variations in the hold percentage (the ratio of net win to total amount wagered), or actual outcome, in our iCasino and sports betting offerings.

We use the hold percentage as an indicator of the performance of the iCasino game or sports bet against its expected outcome.

Although each iCasino game or sports bet generally performs within a defined statistical range of outcomes, actual outcomes may vary for any given period.

In addition to the element of chance, win rates (hold percentages) may also (depending on the game involved) be affected by the spread of limits and factors that are beyond our control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of users, the volume of bets placed and the amount of time spent gambling.

As a result of the variability in these factors, the actual win rates on our iCasino and sports bets may differ from the theoretical win rates we have estimated and could result in the user’s winnings exceeding those anticipated.

The variability of win rates (hold rates) also have the potential to negatively impact our financial condition, results of operations, and cash flows.

Our success also depends in part on our ability to anticipate and satisfy user preferences in a timely manner.

As we will operate in a dynamic environment characterized by rapidly changing industry and legal standards, our products will be subject to changing consumer preferences that cannot be predicted with certainty.

We will need to continually introduce new offerings and identify future product offerings that complement our existing technology, respond to our users’ needs and improve and enhance our existing technology to maintain or increase our user engagement and growth of our business.

We may not be able to compete effectively unless our product selection keeps up with trends in the digital sports entertainment and gaming industries in which we compete, or trends in new gaming products.

We face a number of challenges prior to opening new or upgraded gaming properties or launching new online gaming or sports betting channels, which may lead to increased costs and delays in anticipated revenues.

No assurance can be given that, when we endeavor to open new or upgraded gaming properties or launch new online gaming or sports betting channels, the expected timetables for opening such properties or channels will be met in light of the uncertainties inherent in the development of the regulatory framework, construction, the licensing process, legislative action and litigation.

In addition, as we seek to launch online gaming and sports betting apps in additional states, we will need to hire additional qualified employees, such as engineers, IT professionals and other compliance personnel.

Given the significant competition in this area for qualified candidates, we may be unable to hire qualified candidates.

Delays in opening new or upgraded properties could lead to increased costs and delays in receiving anticipated revenues with respect to such properties or channels and could have a material adverse effect on our financial condition, results of operations, and cash flows.

Risks Related to Our Capital Structure

Our indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our outstanding indebtedness.

As of December 31, 2021, we had indebtedness of $2.8 billion, including $1.6 billion outstanding under our Senior Secured Credit Facilities.

In addition, we are required to make significant annual lease payments to our REIT Landlords pursuant to the Triple Net Leases, which we currently expect will be approximately $806.2 million for the year ending December 31, 2022.

We have a substantial amount of indebtedness and significant fixed annual lease payments under the Triple Net Leases.

Our substantial indebtedness and additional fixed costs under our Lease obligations could have important consequences to our financial health.

As noted above, due to the COVID-19 pandemic, our gaming properties had been temporarily closed.

The closure of our gaming properties had significantly disrupted our ability to generate revenues.

In order to remain in compliance with our debt covenants and meet our payment obligations, on April 14, 2020, we entered into an agreement to amend our Amended Credit Agreement to provide temporary relief from our financial covenants.

In addition, our substantial indebtedness could result in an event of default if we fail to satisfy our obligations under our indebtedness or fail to comply with the financial and other restrictive covenants contained in our debt instruments, which event of default could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on any of our assets securing such debt.

In addition, the interest rates of our Senior Secured Credit Facilities are tied to the London Interbank Offered Rate, or LIBOR.

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021 (“FCA Announcement”).

The FCA Announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021, which may impact our Revolving Credit Facility.

We have indebtedness and significant fixed annual lease payments under the Triple Net Leases.

Our indebtedness and additional fixed costs under our Lease obligations could have important consequences to our financial health.

The lack of availability and cost of financing could have an adverse effect on our business.

We intend to finance some of our current and future expansion, development and renovation projects and acquisitions with cash flow from operations, borrowings under our Senior Secured Credit Facilities and equity or debt financings.

unable to finance our current or future projects, we could have to seek alternative financing.

If we are unable to finance our current or future projects, we could have to seek alternative financing.

Depending on credit market conditions, alternative sources of funds may not be sufficient to finance our expansion, development and/or renovation, or such other financing may not be available on acceptable terms, in a timely manner or at all.

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If we are unable to secure additional financing, we could be forced to limit or suspend expansion, development and renovation projects and acquisitions, which may adversely affect our financial condition, results of operations, and cash flows.

The capacity under our Revolving Credit Facility, which expires in 2023, is $700.0 million.

The capacity under our Revolving Credit Facility is $700.0 million, of which $674.0 million is available as of December 31, 2021.

Our Revolving Credit Facility expires in 2023.

There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our Senior Secured Credit Facilities.

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In addition, if we consummate significant acquisitions in the future, our cash requirements may increase significantly.

Risks Related to Regulation, Taxes and Compliance

General Risk Factors

We are or may become involved in legal proceedings that, if adversely adjudicated or settled, could impact our financial condition and results of operations.

From time to time, we are defendants in various lawsuits relating to matters incidental to our business.

As with all litigation, no assurance can be provided as to the outcome of these matters and, in general, litigation can be expensive and time consuming.

We face extensive regulation from gaming authorities, which could have a material adverse effect on us.

As owners and managers of casino gaming, online gaming, sports betting, video lottery, VGTs, and pari-mutuel wagering operations, we are subject to extensive state and local regulation.

As owners and managers of retail casino gaming, online gaming, sports betting, video lottery, VGTs, and pari-mutuel wagering operations, we are subject to extensive state and local regulation.

These regulatory authorities have broad discretion, and may, for any reason set forth in the applicable legislation, rules and regulations, limit, condition, suspend, fail to renew or revoke a license or registration to conduct gaming operations or prevent us from owning the securities of any of our gaming subsidiaries or prevent another person from owning an equity interest in us.

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We cannot assure you that we will be able to obtain such renewals or approvals.

Regulatory authorities have input into our operations, for instance, hours of operation, location or relocation of a facility, and numbers and types of slot machines and table games.

Regulatory authorities have input into our operations, for instance, hours of operation, location or relocation of a

facility, and numbers and types of slot machines and table games.

Gaming regulators may not have extensive experience in the digital media industry, which may present unique challenges in regulating our business.

Regulators may also levy substantial fines against us, our subsidiaries, or the people involved in violating gaming laws or regulations and/or seize our assets or the assets of our subsidiaries.

Any of these events could have a material adverse effect on our financial condition, results of operations, and cash flows.

Regulations governing the conduct of gaming activities and the obligations of gaming companies in any jurisdiction in which we have or in the future may have gaming operations are subject to change and could impose additional operating, financial, competitive or other burdens on the way we conduct our business.

In particular, certain areas of law governing new gaming activities, such as the federal and state law applicable to retail casino gaming, online gaming, and sports betting, are new or developing in light of emerging technologies.

New and developing areas of law may be subject to the interpretation of the government agencies tasked with enforcing them and/or courts in which parties challenge the interpretation or enforcement of them.

In some circumstances, a government agency may interpret a statute or regulation in one manner and then reconsider its interpretation at a later date.

No assurance can be provided that government agencies will interpret or enforce new or developing areas of law consistently, predictably, or favorably.

Moreover, legislation or regulation to prohibit, limit, or add burdens to increase taxes on our business may be introduced in the future in states where gaming has been legalized.

In addition, from time to time, legislators and special interest groups have proposed legislation that would expand, restrict or prevent gaming operations or which may otherwise adversely impact our operations in the jurisdictions in which we operate.

Any expansion of gaming or restriction on or prohibition of our gaming operations or enactment of other adverse regulatory changes could have a material adverse effect on our operating results.

Certain public and private issuances of securities and other transactions that we are party to also require the approval of some state regulatory authorities.

We have demonstrated suitability to obtain and have obtained all governmental licenses, registrations, permits, and approvals necessary for us to operate our existing gaming and pari-mutuel properties.

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The approval process can be time-consuming and costly, and we cannot be sure that we will be successful.

Furthermore, this risk is particularly pertinent to our iGaming or sports betting initiatives because regulations in this area are not as fully developed or established.

Furthermore, this risk is particularly pertinent to our online gaming and sports betting initiatives because regulations in this area are not as fully developed or established.

Gaming authorities in the U.S.

generally can require that any record or beneficial owner of our securities file an application for a license or similar finding of suitability.

If a gaming authority requires a record or beneficial owner of our securities to file a suitability application, the owner must generally apply for a finding of suitability within 30 days or at an earlier time prescribed by the gaming authority.

generally can require that any record holder or beneficial owner of our securities file an application for a license or similar finding of suitability.

If a gaming authority requires a record holder or beneficial owner of our securities to file a suitability application, the owner must generally apply for a finding of suitability within 30 days or at an earlier time prescribed by the gaming authority.

The gaming authority has the power to investigate such an owner’s suitability and the owner must pay all costs of the investigation.

If the owner is found unsuitable, then the owner may be required by law to dispose of our securities.

If the owner is found unsuitable or fails to apply when required to do so, then the owner may be required by law to dispose of our securities.

Our directors, officers, key employees, and joint venture partners must also meet approval standards of certain state regulatory authorities.

If state gaming regulatory authorities were to find a person occupying any such position or a joint venture partner or one of our vendors unsuitable, we would be required to sever our relationship with that person or the joint

venture partner or vendor.

State regulatory agencies may conduct investigations into the conduct or associations of our directors, officers, key employees, joint venture partners or vendors to ensure compliance with applicable standards.

Certain public and private issuances of securities and other transactions that we are party to also require the approval of some state regulatory authorities.

Changes in legislation and regulation of our business could have an adverse effect on our financial condition, results of operations, and cash flows.

In particular, certain areas of law governing new gaming activities, such as the federal and state law applicable to iGaming and sports betting, are new or developing in light of emerging technologies.

New and developing areas of law may be subject to the interpretation of the government agencies tasked with enforcing them.

In some circumstances, a government agency may interpret a statute or regulation in one manner and then reconsider its interpretation at a later date.

No assurance can be provided that government agencies will interpret or enforce new or developing areas of law consistently, predictably, or favorably.

Moreover, legislation to prohibit, limit or add burdens to our business may be introduced in the future in states where gaming has been legalized.

Any expansion of gaming or restriction on or prohibition of our gaming operations or enactment of other adverse regulatory changes could have a material adverse effect on our operating results.

State and local smoking restrictions have and may continue to negatively affect our business.

Legislation in various forms to ban or substantially curtail indoor tobacco smoking in public places has been enacted or introduced in many states and local jurisdictions, including several of the jurisdictions in which we operate.

We believe the smoking restrictions have significantly impacted business volumes.

If additional smoking restrictions are enacted within jurisdictions where we operate or seek to do business, our financial condition, results of operations, and cash flows could be adversely affected.

Material increases to our taxes or the adoption of new taxes or the authorization of new or increased forms of gaming could have a material adverse effect on our future financial results.

We believe that the prospect of significant revenue is one of the primary reasons that jurisdictions permit or expand legalized gaming.

As a result, gaming companies are typically subject to significant revenue-based taxes and fees in addition to normal federal, state and local income taxes, and such taxes and fees are subject to increase at any time.

We pay substantial taxes and fees with respect to our operations.

From time-to-time, federal, state, and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry.

In addition, worsening economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes, property taxes and/or by authorizing additional gaming properties each subject to payment of a new license fee.

It is not possible to determine with certainty the likelihood of changes in such laws or in the administration of such laws.

Such changes, if adopted, could have a material adverse effect on our financial condition, results of operations, and cash flows.

The large number of state and local governments with significant current or projected budget deficits makes it more likely that those governments that currently permit gaming will seek to fund such deficits with new or increased gaming or new or increased gaming taxes and/or property taxes, and worsening economic conditions could intensify those efforts.

Any new or increased gaming or the material increase or adoption of additional taxes or fees, could have a material adverse effect on our future financial results, especially in light of our significant fixed rent payments.

We are subject to environmental laws and potential exposure to environmental liabilities which could have an adverse effect on us.

We are subject to various federal, state, and local environmental laws and regulations that govern our operations, including emissions and discharges into the environment, and the handling and disposal of hazardous and non-hazardous substances and wastes.

Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition

of other liabilities or restrictions.

From time to time, we have incurred and are incurring costs and obligations for correcting environmental noncompliance matters.

The extent of such potential conditions cannot be determined definitively.

To date, none of these matters have had a material adverse effect on our financial condition, results of operations, and cash flows;

however, there can be no assurance that such matters will not have such an effect in the future.

We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances into the environment.

Under certain of these laws and regulations, a current or previous owner or operator of the property may be liable for the costs of remediating contaminated soil or groundwater on or from its property, without regard to whether the owner or operator knew of, or caused, the contamination, as well as incur liability to third parties impacted by such contamination.

The presence of contamination, or failure to remediate it properly, may adversely affect our ability to use, sell or rent property.

Under our contractual arrangements under the Triple Net Leases, we will generally be responsible for both past and future environmental liabilities associated with our gaming operations, notwithstanding ownership of the underlying real property having been transferred.

Furthermore, we are aware that there is or may have been soil or groundwater or other contamination at certain of our properties resulting from current or former operations.

These environmental conditions may require remediation in isolated areas.

The extent of such potential conditions cannot be determined definitely, and may result in additional expense in the event that additional or currently unknown conditions are detected.

Additionally, certain of the gaming chips used at many gaming properties, including some of ours, have been found to contain some level of lead.

Analysis by third parties has indicated the normal handling of the chips does not create a health hazard.

We have disposed of a majority of these gaming chips.

To date, none of these matters or other matters arising under environmental laws has had a material adverse effect on our financial condition, results of operations, and cash flows;

however, there can be no assurance that such matters will not have such an effect in the future.

We are subject to certain federal, state and other regulations, and if we fail to comply with such regulations, it could have a material adverse effect on our financial condition, results of operations, and cash flow.

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In recent years the U.S.

Treasury Department has increased its focus on Bank Secrecy Act compliance throughout the gaming industry, and public comments by FinCEN suggest that casinos should obtain information on each customer’s sources of income.

Treasury Department has increased its focus on Bank Secrecy Act compliance throughout

the gaming industry, and public comments by FinCEN suggest that casinos should obtain information on each customer’s sources of income.

This could impact our ability to attract and retain casino guests.

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If we are not in compliance with these laws and regulations or we are subject to a substantial penalty, it could have a material adverse effect on our financial condition, results of operations, and cash flows.

Climate change, climate change regulations and greenhouse gas effects may adversely impact our operations.

There is a growing political and scientific consensus that greenhouse gas (“GHG”) emissions continue to alter the composition of the global atmosphere in ways that are affecting and are expected to continue affecting the global climate.

We may become subject to legislation and regulation regarding climate change, and compliance with any new rules could be difficult and costly.

Concerned parties, such as legislators and regulators, stockholders and nongovernmental organizations, as well as companies in many business sectors, are considering ways to reduce GHG emissions.

Many states have announced or adopted programs to stabilize and reduce GHG emissions and in the past federal legislation has been proposed in Congress.

If such legislation is enacted, we could incur increased energy, environmental and other costs and capital expenditures to comply with the limitations.

Unless and until legislation is enacted and its terms are known, we cannot reasonably or reliably estimate its impact on our financial condition, operating performance, or ability to compete.

Further, regulation of GHG emissions may limit our guests’ ability to travel to our properties as a result of increased fuel costs or restrictions on transport related emissions.

Climate change could have a material adverse effect on our financial condition, results of operations and cash flow.

We have described the risks to us associated with extreme weather events in the risk factors above.

Risks Related to Technology, Information Security, and Penn Interactive

Our gaming operations, online sports betting and iGaming rely heavily on technology services and an uninterrupted supply of electrical power.

Any unscheduled disruption in our technology services or interruption in the supply of electrical power could result in an immediate, and possibly substantial, loss of revenues due to a shutdown of our gaming operations (including slot machines and security systems), online sports betting, and iGaming operations.

We increasingly rely on information technology and other systems (particularly as our iGaming division grows), including our own systems and those of service providers and third parties, to manage our business and employee data and maintain and transmit customers’ personal and financial information, credit card settlements, credit card funds transmissions, mailing lists, and reservations information.

Our collection of such data is subject to extensive regulation by private groups, such as the payment card industry, as well as governmental authorities, including gaming authorities.

In addition, our security measures are reviewed and evaluated regularly.

Further, as cyber-attacks continue to evolve, we may incur significant costs in our attempts to modify or enhance our protective measures or investigate or remediate any vulnerability.

Our online sports betting and iGaming initiatives may result in increased risk of cyber-attack, hacking, or other security breaches, which could harm our reputation and competitive position and which could result in regulatory actions against us or in other penalties.

As our online sports betting and iGaming business grows, we will face increased cyber risks and threats that seek to damage, disrupt or gain access to our networks, our products and services, and supporting infrastructure.

This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position.

We rely upon third-party distribution platforms, including the Apple App Store and Google Play store, for distribution of our mobile applications.

If Apple or Google choose to de-list any of our mobile applications due to what they perceive to be objectionable content, it could have a material negative impact on our business.

Further, the success of Penn Interactive depends in part on our relationships with other third-party service providers for content delivery, load balancing and protection against distributed denial-of-service attacks.

If those providers do not perform adequately or terminate their relationship with us, our users may experience issues or interruptions with their experiences.

Further, any negative publicity related to any of our third-party partners could adversely affect our reputation and brand.

We also incorporate technology from third parties into our platform.

Further, we rely on third-party geolocation and identity verification systems to ensure we are in compliance with certain laws and regulations.

The growth of Penn Interactive will depend on our ability to attract and retain users.

Our ability to achieve growth in revenue in the future in Penn Interactive and Barstool Sports sports betting app will depend, in large part, upon our ability to attract new users to our offerings, retain existing users of our offerings and reactivate users in a cost-effective manner.

We have used and expect to continue to use a variety of free and paid marketing channels, in combination with compelling offers and exciting games to achieve our objectives.

For paid marketing, we intend to leverage a broad array of advertising channels, including television, radio, social media influencers (brand ambassadors), social media platforms, such as Facebook, Instagram, Twitter and Snap, affiliates and paid and organic search, and other digital channels, such as mobile display.

In addition, our ability to increase the number of users of our offerings will depend on continued user adoption of the Barstool Sportsbook app and iGaming.

Growth in the sportsbook and iGaming industries and the level of demand for and market acceptance of our product offerings will be subject to a high degree of uncertainty.

We cannot assure that consumer adoption of our product offerings will continue or exceed current growth rates, or that the industry will achieve more widespread acceptance.

We face a number of challenges prior to opening new or upgraded gaming properties or launching new iGaming or sports betting channels, which may lead to increased costs and delays in anticipated revenues.

No assurance can be given that, when we endeavor to open new or upgraded gaming properties or launch new iGaming or sports betting channels, the expected timetables for opening such properties or channels will be met in light of the uncertainties inherent in the development of the regulatory framework, construction, the licensing process, legislative action and litigation.

addition, as we seek to launch iGaming and sports betting apps in additional states, we will need to hire additional qualified employees, such as engineers, IT professionals and other compliance personnel.

Given the significant competition in this area for qualified candidates, we may be unable to hire qualified candidates.

Negative events or negative media coverage relating to, or a declining popularity of, sports betting, the underlying sports or athletes, online sports betting, or iGaming may adversely impact our ability to retain or attract users, which could have an adverse impact on our business.

Public opinion can significantly influence our business.

In addition, a negative shift in the perception of sports betting and iGaming by the public or by politicians, lobbyists or others could affect future legislation of sports betting and iGaming.

Negative public perception could also lead to new restrictions on or to the prohibition of iGaming or sports betting in jurisdictions in which we currently operate.

Such negative publicity could also adversely affect the size, demographics, engagement, and loyalty of our customer base and result in decreased revenue or slower user growth rates, which could seriously harm our business.

Risks Related to Acquisitions

We may face disruption and other difficulties in integrating and managing properties or other initiatives we have recently acquired, may develop, or may acquire in the future.

We could face significant challenges in managing and integrating our expanded or combined operations and any other properties we may develop or acquire, particularly in new competitive markets.

The integration of more significant properties that we may develop or acquire (such as Morgantown, Perryville, and York) will require the dedication of management resources that may temporarily divert attention from our day-to-day business.

In addition, development and integration of new information technology systems that may be required is costly and time-consuming.

The process of integrating properties that we may acquire also could interrupt the activities of those businesses, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

In addition, the development of new properties may involve construction, local opposition, regulatory, legal and competitive risks as well as the risks attendant to partnership deals on these development opportunities.

In particular, in projects where we team up with a joint venture partner, if we cannot reach agreement with such partners, or if our relationships otherwise deteriorate, we could face significant increased costs and delays.

Local opposition can delay or increase the anticipated cost of a project.

Many of these same risks apply to our iGaming and sports betting initiatives.

Finally, given the competitive nature of these types of limited license opportunities, litigation is possible.

Management of new properties, especially in new geographic areas and business lines may require that we increase our management resources or divert the attention of our current management.

We cannot assure you that we will be able to manage the combined operations effectively or realize any of the anticipated benefits of our acquisitions or development projects.

We also cannot assure you that if acquisitions are completed, that the acquired businesses will generate returns consistent with our expectations.

The occurrence of some or all of the above described events could have a material adverse effect on our financial condition, results of operations, and cash flows.

State and local smoking restrictions have and may continue to negatively affect our business.

We believe the smoking restrictions have significantly impacted business volumes.

Changes to consumer privacy laws could adversely affect our ability to market our products effectively and may require us to change our business practices or expend significant amounts on compliance with such laws.

We rely on a variety of direct marketing techniques, including email marketing, online advertising, and postal mailings.

Any further restrictions in laws such as the CAN-SPAM Act, the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the FTC Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Canada’s Anti-Spam Law and various U.S.

state laws, or new federal or state laws on marketing and solicitation or international privacy, e-privacy, and anti-spam laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising, and postal mailing techniques and could force further changes in our marketing strategy.

If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our sales of certain products.

Further, certain of our products and services depend on the ability to use non-public personal, financial transaction, and or other information relating to patrons, which we may collect and or obtain from travel service providers or other companies with whom we have substantial relationships.

To the extent that we collect, control, or process such information, federal, state, and foreign privacy laws and regulations, including without limitation the California Consumer Privacy Act, the General Data Protection Regulation and the Personal Information Protection and Electronic Documents Act, require us to make disclosures regarding our privacy and information sharing practices, safeguard and protect the privacy of such information, and, in some cases, provide patrons the opportunity to “opt out” of the use of their information for certain purposes, any of which could limit our ability to leverage existing and future databases of information which could have a material adverse effect on our financial condition, results of operations, and cash flows.

We must comply with federal, state, and foreign requirements regarding notice and consent to obtain, use, share, transmit and store such information.

Furthermore, we may face conflicting obligations arising from the potential concurrent application of laws of multiple jurisdictions.

In the event that we are not able to reconcile such obligations, we may be required to change business practices or face liability or sanction.

To the extent that we fail to comply with applicable consumer protection and data privacy laws, we may become subject to actions by individuals or regulatory authorities, which may result in the payment of fines or the imposition of other monetary or non-monetary penalties.

We are subject to environmental laws and potential exposure to environmental liabilities which could have an adverse effect on us.

Failure to comply with such laws and regulations could result in costs for corrective action, penalties or the imposition of other liabilities or restrictions.

From time to time, we have incurred and are incurring costs and obligations for correcting environmental noncompliance matters.

The extent of such potential conditions cannot be determined definitively.

To date, none of these matters have had a material adverse effect on our financial condition, results of operations, and cash flows;

however, there can be no assurance that such matters will not have such an effect in the future.

We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of other hazardous substances into the environment.

The presence of contamination, or failure to remediate it properly, may adversely affect our ability to use, sell or rent property.

Furthermore, we are aware that there is or may have been soil or groundwater or other contamination at certain of our properties resulting from current or former operations.

These environmental conditions may require remediation in isolated areas.

The extent of such potential conditions cannot be determined definitely, and may result in additional expense in the event that additional or currently unknown conditions are detected.

In the event we make another acquisition, we may face risks related to our ability to receive regulatory approvals required to complete, or other delays or impediments to completing, such acquisition.

Our growth is fueled, in part, by the acquisition of existing gaming, racing, and development properties, as well as our iGaming and sports betting initiatives.

Our growth is fueled, in part, by the acquisition of existing gaming, racing, and development properties, as well as our online gaming and sports betting initiatives.

In addition to standard closing conditions, our acquisitions are often conditioned on the receipt of regulatory approvals and other hurdles that create uncertainty and could increase costs.

Such delays could significantly reduce the benefits to us of such acquisitions and could have a material adverse effect on our financial condition, results of operations, and cash flows.

Risks Related to the Spin-Off

If the Spin-Off, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes, we could be subject to significant tax liabilities.

We received a private letter ruling (the “IRS Ruling”) from the IRS substantially to the effect that, among other things, the Spin-Off, together with certain related transactions, will qualify as a transaction that is generally tax-free for U.S.

federal income tax purposes under Sections 355 and/or 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”).

The IRS Ruling does not address certain requirements for tax-free treatment of the Spin-Off under Section 355, and we received from our tax advisors a tax opinion substantially to the effect that, with respect to such requirements on which the IRS will not rule, such requirements will be satisfied.

The IRS Ruling, and the tax opinions that we received from our tax advisors, relied on and will rely on, among other things, certain representations, assumptions and undertakings, including those relating to the past and future conduct of GLPI’s business, and the IRS Ruling and the opinions would not be valid if such representations, assumptions and undertakings were incorrect in any material respect.

Notwithstanding the IRS Ruling and the tax opinions, the IRS could determine the Spin-Off should be treated as a taxable transaction for U.S.

federal income tax purposes if it determines any of the representations, assumptions or undertakings that were included in the request for the IRS Ruling are false or have been violated or if it disagrees with the conclusions in the opinions that are not covered by the IRS Ruling.

If the Spin-Off fails to qualify for tax-free treatment, in general, we would be subject to tax as if we had sold the GLPI common stock in a taxable sale for its fair market value.

Under the tax matters agreement that GLPI entered into with us, GLPI generally is required to indemnify us against any tax resulting from the Spin-Off to the extent that such tax resulted from (1) an acquisition of all or a portion of the equity securities or assets of GLPI, whether by merger or otherwise, (2) other actions or failures to act by GLPI, or (3) any of GLPI’s representations or undertakings being incorrect or violated.

GLPI’s indemnification obligations to Penn and its subsidiaries, officers and directors will not be limited by any maximum amount.

If GLPI is required to indemnify Penn or such other persons under the circumstance set forth in the tax matters agreement, GLPI may be subject to substantial liabilities and there can be no assurance that GLPI will be able to satisfy such indemnification obligations.

In connection with the Spin-Off, GLPI agreed to indemnify us for certain liabilities.

However, there can be no assurance that these indemnities will be sufficient to insure us against the full amount of such liabilities, or that GLPI’s ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the separation and distribution agreement, GLPI has agreed to indemnify us for certain liabilities.

However, third parties could seek to hold us responsible for any of the liabilities that GLPI agreed to retain, and there can be no assurance that GLPI will be able to fully satisfy its indemnification obligations.

Moreover, even if we ultimately succeed in recovering from GLPI any amounts for which we are held liable, we may be temporarily required to bear these losses while seeking recovery from GLPI.

A court could deem the distribution in the Spin-Off to be a fraudulent conveyance and void the transaction or impose substantial liabilities upon us.

If the transaction is challenged by a third-party, a court could deem the distribution of GLPI common shares or certain internal restructuring transactions undertaken by us in connection with the Spin-Off to be a fraudulent conveyance or transfer.

Fraudulent conveyances or transfers are defined to include transfers made or obligations incurred with the actual intent to hinder, delay, or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due.

In such circumstances, a court could void the transactions or impose substantial liabilities upon us, which could adversely affect our financial condition and our results of operations.

Among other things, the court could require our shareholders to return to us some or all of the shares of our common stock issued in the distribution or require us to fund liabilities of other companies involved in the restructuring transactions for the benefit of creditors.

Whether a transaction is a fraudulent conveyance or transfer will vary depending upon the laws of the applicable jurisdiction.

If we and GLPI are treated by the IRS as being under common control, both we and GLPI could experience adverse tax consequences.

If we and GLPI are treated by the IRS as being under common control, the IRS will be authorized to reallocate income and deductions between us and GLPI to reflect arm’s length terms.

If the IRS were to successfully establish that rents paid by us to

GLPI are excessive, we would be (i) denied a deduction for the excessive portion and (ii) subject to a penalty on the portion deemed excessive, each of which could have a material adverse effect on our financial condition, results of operations, and cash flows.

Also, our shareholders would be deemed to have received a distribution that was then contributed to the capital of GLPI.

Material increases to our taxes or the adoption of new taxes or the authorization of new or increased forms of gaming could have a material adverse effect on our future financial results.

We believe that the prospect of generating incremental revenue is one of the primary reasons that jurisdictions permit or expand legalized gaming.

As a result, gaming companies are typically subject to revenue-based taxes and fees in addition to normal federal, state and local income taxes, and such taxes and fees are subject to increase at any time.

We pay substantial taxes and fees with respect to our operations.

From time-to-time, federal, state, and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry.

It is not possible to determine with certainty the likelihood of changes in such laws or in the administration of such laws.

Such changes, if adopted, could have a material adverse effect on our financial condition, results of operations, and cash flows.

If various state and local governments face economic challenges, it becomes more likely that those governments could seek to fund such deficits with new or increased gaming legislation or new or increased gaming taxes and/or property taxes.

Deteriorating economic conditions could intensify those efforts.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors