What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-07 compared with 2022-03-15 · 716 added, 652 removed, 624 unchanged (69% of the section changed)

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Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019

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

Consolidated Statements of Equity (Deficit) for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Vivid Seats Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), deficit, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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

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

Accordingly, we express no such opinion.

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March 7, 2023

We have served as the Company’s auditor since 2021.

We have served as the Company's auditor since 2021.

VIVID SEATS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share/unit data)

(in thousands, except per share data)

Current assets:

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Property and equipment –

Right-of-use assets –

Intangible assets –

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Long-term debt –

Long-term lease liabilities

Other liabilities

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Commitments and contingencies (Note 17 )

Redeemable Preferred Units and noncontrolling interests

Redeemable Senior Preferred Units - $ 0 par value;

0 and 100 units authorized, issued, and outstanding at December 31, 2021 and 2020, respectively (aggregate involuntary liquidation preference of $ 0 and $ 214,008 at December 31, 2021 and 2020, respectively)

Redeemable Preferred Units - $ 0 par value;

0 and 100 units authorized, issued, and outstanding at December 31, 2021 and 2020, respectively

Redeemable noncontrolling interests

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500,000,000 shares authorized, 82,410,774 issued and outstanding at December 31, 2022;

0 shares authorized, issued, and outstanding at December 31, 2020

79,091,871 shares issued and outstanding at December 31, 2021

Class B common stock, $ 0.0001 par value;

250,000,000 shares authorized, 118,200,000 issued and outstanding at December 31, 2021;

0 shares authorized, issued, and outstanding at December 31, 2020

250,000,000 shares authorized, 118,200,000 issued and outstanding at December 31, 2022 and December 31, 2021

Additional paid-in capital

Treasury stock, at cost, 4,342,477 shares at December 31, 2022;

no shares at December 31, 2021

Accumulated deficit

Accumulated other comprehensive loss

Total Shareholders' deficit

Total liabilities, Redeemable Preferred Units and noncontrolling interests, and Shareholders' deficit

Total liabilities, Redeemable noncontrolling interests, and Shareholders' deficit

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share/unit and per share/unit data)

(in thousands, except share data)

Years Ended December 31,

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Impairment charges

Change in fair value of contingent consideration

Income (loss) from operations

Other expenses:

Other (income) expense:

Interest expense –

Loss on extinguishment of debt

Other expenses

Loss before income taxes

Income tax expense

Other (income) expense

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net loss attributable to Hoya Intermediate, LLC shareholders prior to reverse recapitalization

Net loss attributable to redeemable noncontrolling interests

Net loss attributable to Class A Common Stockholders

Loss per Class A Common Stock (1) :

Net income (loss) attributable to redeemable noncontrolling interests

Net income (loss) attributable to Class A Common Stockholders

Income (loss) per Class A Common Stock (1) :

Weighted average Class A Common Stock outstanding (1) :

(1) Represents loss per common share and weighted-average common shares outstanding for the period following the Merger Transaction and PIPE Financing as defined in Note 1, Background, Description of Business and Basis of Presentation .

(1) There were no shares of Class A Common Stock outstanding prior to October 18, 2021.

Therefore, no income (loss) per share information has been presented for any period prior to that date.

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

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Years Ended December 31,

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) on derivative instruments

Comprehensive loss, net of taxes

Unrealized gain on derivative instruments

Comprehensive income (loss), net of taxes

Comprehensive loss attributable to Hoya Intermediate, LLC shareholders prior to reverse recapitalization

Comprehensive loss attributable to redeemable noncontrolling interests

Comprehensive loss attributable to Class A Common Stockholders

Comprehensive income (loss) attributable to redeemable noncontrolling interests

Comprehensive income (loss) attributable to Class A Common Stockholders

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

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Class B Common Shares

Treasury Stock

Redeemable noncontrolling interests

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Accumulated other comprehensive (income) loss

Total shareholders' deficit

Total shareholders' equity (deficit)

Balances at January 1, 2020

Unrealized loss on derivative instruments

Deemed contribution from former parent

Accretion of senior preferred units

Distributions to former parent

Balances at December 31, 2019

Unrealized gain on derivative instruments

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Loss reclassified from accumulated other comprehensive loss to earnings prior to reverse recapitalization

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in thousands, except share/unit data)

Deemed contribution from former parent prior to reverse recapitalization

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Equity-based compensation after reverse recapitalization

Change in fair value of warrants

Issuance of shares related to acquisition

Dividends paid to Class A Common Shareholders

Subsequent remeasurement of Redeemable noncontrolling interests

Balances at December 31, 2021

VIVID SEATS INC.

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(in thousands, except share/unit data)

Change in fair value of warrants

Issuance of shares related to Betcha acquisition

Dividends paid to Class A Common Shareholders

Issuance of shares

Deemed contribution from former parent

Equity-based compensation

Repurchases of common stock

Distributions to non-controlling interest

Reclassification of contingent consideration

Subsequent remeasurement of Redeemable noncontrolling interests

Increase in common shares outstanding following warrant exchange

Balances at December 31, 2022

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Cash flows from operating activities

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

Net income (loss)

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

Depreciation and amortization

Amortization of deferred financing costs and interest rate cap

Loss on disposal of long-lived assets

Loss on asset disposals

Equity-based compensation expense

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Impairment charges

Changes in operating assets and liabilities, net of impact of acquisitions:

Amortization of right-of-use assets

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Accounts receivable

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Accrued expenses and other current liabilities

Deferred paid-in-kind interest paid on May 2020 First Lien Loan

Deferred revenue

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Purchases of property and equipment

Proceeds from the sale of personal seat licenses

Purchases of personal seat licenses

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Cash flows from financing activities

Proceeds from February 2022 First Lien Loan

Payments of February 2022 First Lien Loan

Distributions to non-controlling interests

Repurchase of Common Stock as Treasury Stock

Cash paid for milestone payments

Proceeds from PIPE Financing

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Payments of June 2017 First Lien Loan

Payments of June 2017 Second Lien Loan

Prepayment penalty on extinguishment of debt

Payment of reverse recapitalization costs

Dividends paid to Class A Common Stock Shareholders

Proceeds from May 2020 First Lien Loan

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Payments of Revolving Facility

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Payments of deferred financing costs and other debt-related costs

Distributions

Payment of reverse recapitalization costs

Dividends paid to Class A Common Stock Shareholders

Net cash (used in) provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

VIVID SEATS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Cash and cash equivalents –

Cash, cash equivalents, and restricted cash –

beginning of period

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Cash paid for interest

Betcha acquisition non-cash consideration

Acquisition non-cash consideration

Property and equipment acquired through tenant improvement allowance

Right-of-use assets obtained in exchange for lease obligations

Equity-based compensation expense related to capitalized development costs

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

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Vivid Seats Inc.

and its subsidiaries including Hoya Intermediate, LLC and Vivid Seats LLC (collectively the “Company,”

("VSI") and its subsidiaries including Hoya Intermediate, LLC ("Hoya Intermediate"), Hoya Midco, LLC ("Hoya Midco"), and Vivid Seats LLC (collectively the “Company,”

“us,”

“we,”

and “our”), provide an online secondary ticket marketplace, that enables ticket buyers to discover and easily purchase tickets to sports, concerts, theater, and other live events in the United States and Canada.

and “our”) provide an online secondary ticket marketplace that enables ticket buyers to discover and easily purchase tickets to concert, sporting and theater events in the United States and Canada.

Through our Marketplace segment, we operate an online platform enabling ticket buyers to purchase tickets to live events, while enabling ticket sellers to seamlessly manage their operations.

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The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

We have included all adjustments necessary for a fair presentation of the results for the full year.

These adjustments consist of normal and recurring items.

Vivid Seats Inc.

was incorporated in Delaware on March 29, 2021 as a wholly owned subsidiary of Hoya Intermediate, LLC (“Hoya Intermediate”).

Vivid Seats Inc.

was formed for the purpose of completing the transactions contemplated by the definitive transaction agreement, dated April 21, 2021 (the “Transaction Agreement”), by and among Horizon Acquisition Corporation (“Horizon”), a publicly traded special purpose acquisition company, Hoya Intermediate, Hoya Topco, LLC (“Hoya Topco”), a Delaware limited liability company, the Company and the other parties thereto.

As more fully described below, on October 18, 2021, the transactions contemplated by the Transaction Agreement were completed.

As a result, Vivid Seats Inc.

holds approximately 40.1 % of the common units of Hoya Intermediate, which represents a controlling interest in Hoya Intermediate.

The Merger Transaction and PIPE Financing —On October 18, 2021, we consummated a series of transactions (collectively, the "Merger Transaction") between Horizon, Vivid Seats Inc., and Hoya Intermediate.

VSI was incorporated in Delaware on March 29, 2021 as a wholly owned subsidiary of Hoya Intermediate.

VSI was formed for the purpose of completing the transactions contemplated by the definitive transaction agreement, dated April 21, 2021 (the “Transaction Agreement”), by and among Horizon Acquisition Corporation (“Horizon”), a publicly traded special purpose acquisition company, Hoya Intermediate, Hoya Topco, VSI, and the other parties thereto.

On October 18, 2021, the transactions contemplated by the Transaction Agreement were completed.

The Merger Transaction and PIPE Financing —On October 18, 2021, we consummated a series of transactions (collectively, the "Merger Transaction") between Horizon, VSI, and Hoya Intermediate.

The Merger Transaction was accounted for as a reverse recapitalization, with Hoya Intermediate treated as the accounting acquirer.

Accordingly, our consolidated financial statements represent a continuation of the financial statements of Hoya Intermediate with net assets of Hoya Intermediate stated at historical cost.

In connection with the Merger Transaction, Vivid Seats Inc.:

Issued 29,431,260 shares of Class A common stock to former shareholders of Horizon, whereby $ 293.2 million in cash and cash equivalents (after the payment of $ 18.7 million in transaction costs incurred by Horizon) of Horizon became avail able to Vivid Seats Inc.

We subsequently paid an additional $ 15.5 million in transaction costs incurred by Horizon using the cash and cash equivalents that became available to Vivid Seats Inc.;

Issued 118,200,000 shares of Class B common stock and 6,000,000 warrants at an exercise price of $ 0.001 per share to purchase Class B common stock ("Class B Warrants"), which are only exercisable upon the exercise of a corresponding Hoya Intermediate Warrant (defined below), to Hoya Topco in exchange for the outstanding shares of Hoya Intermediate, LLC;

Received $ 475.2 million in aggregate consideration from certain investors, including Horizon Sponsor, LLC, in exchange for 47,517,173 shares of Class A common stock, pursuant to a private investment in public equity (“PIPE Financing”).

Used proceeds from Horizon and the PIPE Financing to pay (i) $ 482.4 million towards our outstanding debt, (ii) $ 236.0 million to facilitate the redemption of preferred units held in Hoya Intermediate, and (iii) $ 54.3 million for tr ansaction fees incurred in connection with the business combination;

Issued to Horizon Sponsor, LLC (i) warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share , (ii) warrants to purchase 17,000,000 shares of Class A common

In connection with the Merger Transaction, VSI:

We subsequently paid an additional $ 15.5 million in transaction costs incurred by Horizon using the cash and cash equivalents that became available to VSI;

Received $ 475.2 million in aggregate consideration from certain investors, including Horizon Sponsor in exchange for 47,517,173 shares of Class A common stock, pursuant to a private investment in public equity (“PIPE Financing”).

Issued to Horizon Sponsor (i) warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share , (ii) warrants to purchase 17,000,000 shares of Class A common stock at an exercise of $ 15.00 per share (collectively, the "Exercise Warrants"), and (iii) 50,000 shares of Class A common stock;

Issued private warrants to purchase 6,519,791 shares of Class A common stock at an exercise price of $ 11.50 per share ("Private Warrants"), and public warrants to purchase 18,132,776 shares of Class A

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

stock at an exercise of $ 15.00 per share (collectively, the "Exercise Warrants"), and (iii) 50,000 shares of Class A common stock;

Issued private warrants to purchase 6,519,791 shares of Class A common stock of Vivid Seats Inc., at an exercise price of $ 11.50 per share ("Private Warrants"), and public warrants to purchase 18,132,776 shares of Class A common stock of Vivid Seats Inc., at an exercise price of $ 11.50 per share ("Public Warrants"), to former holders of Horizon warrants;

In connection with the Merger Transaction, Hoya Intermediate issued to Hoya Topco (i) warrants to purchase 3,000,000 shares of Hoya Intermediate common units at an exercise price of $ 10.00 per share, and (ii) warrants to purchase 3,000,000 shares of Hoya Intermediate common units at an exercise of $ 15.00 per share (collectively, the "Hoya Intermediate Warrants").

A portion of the Hoya Intermediate Warrants consists of warrants to purchase 1,000,000 Hoya Intermediate common units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively, were issued in tandem with stock options issued by Vivid Seats, Inc.

to members of our management team (“Option Contingent Warrants”).

The Option Contingent Warrants only become available to exercise by Hoya Topco in the event that a corresponding management option is forfeited .

For additional details regarding the issuance of warrants in connection with the Merger Transaction, refer to Note 18, Warrants .

Following the business combination, the legacy unit holders of Hoya Intermediate own a controlling interest in Vivid Seats Inc.

through their ownership of Class B common stock in Vivid Seats Inc.

COVID-19 Update —The COVID-19 pandemic has materially impacted our business and results of operations in the years ended December 31, 2021 and 2020.

During the year ended December 31, 2020, we recognized impairment charges resulting in a reduction in the carrying values of goodwill, indefinite-lived trademarks, definite-lived intangible assets, and other long-lived assets.

Beginning in the second quarter of 2021, and continuing through the fourth quarter of 2021, we have seen a recovery in ticket orders as mitigation measures ease.

The COVID-19 pandemic is evolving, and as new variants emerge the ultimate pace and timing of recovery continues to remain uncertain.

We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic.

Our estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.

If economic conditions caused by the pandemic do not continue to recover, our financial condition, cash flows, and results of operations may be further materially impacted.

common stock at an exercise price of $ 11.50 per share ("Public Warrants"), to former holders of Horizon warrants.

In connection with the Merger Transaction, Hoya Intermediate issued to Hoya Topco (i) warrants to purchase 3,000,000 shares of common units of Hoya Intermediate (“Intermediate Units”) at an exercise price of $ 10.00 per share, and (ii) warrants to purchase 3,000,000 shares of Intermediate Units at an exercise of $ 15.00 per share (collectively, the "Hoya Intermediate Warrants").

A portion of the Hoya Intermediate Warrants consisting of warrants to purchase 1,000,000 Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit (“Option Contingent Warrants”), respectively, were issued in tandem with stock options issued by VSI to members of our management team (“Management Options”).

The Option Contingent Warrants only become available to exercise by Hoya Topco in the event that a Management Option is forfeited or goes unexercised.

For additional details regarding the issuance of warrants in connection with the Merger Transaction refer to Note 14, Financial Instruments .

Following the Merger Transaction, the legacy unit holders of Hoya Intermediate own a controlling interest in VSI through their ownership of Class B common stock in VSI.

Immaterial Correction of an Error in Prior Period —We identified an immaterial error related to the classification of the payment of previously deferred interest in our Consolidated Statement of Cash Flows for the year ended December 31, 2021.

The payment of $ 44.1 million of deferred interest was previously classified as a financing cash outflow included within the Payments of May 2020 First Lien Loan in the Consolidated Statement of Cash flows.

We subsequently determined that the $44.1 million should have been classified as an operating cash outflow in the Consolidated Statement of Cash Flows.

We therefore conducted an evaluation of the quantitative and qualitative factors outlined in Staff Accounting Bulletin No.

99 and concluded that the impact of the cash flow classification error was not material to the previously issued financial statements.

We corrected the deferred interest payment of $44.1 million from an outflow in cash flows from financing activities to an outflow in cash flows from operating activities in the Consolidated Statement of Cash Flows for the year ended December 31, 2021.

The effect of the error did not impact the Consolidated Statement of Operations, the Consolidated Statement of Comprehensive Income (Loss), or the Consolidated Statement of Equity (Deficit) for the year ended December 31, 2021.

The effect of the error did not impact the Consolidated Balance Sheet as of December 31, 2021.

The impact of this correction in the Consolidated Statement of Cash Flows for the year ended December 31, 2021 is as follows:

Cash flows from operating activities

Deferred paid-in-kind interest paid on May 2020 Loan

Net cash provided by operating activities

Cash flows from financing activities

Payments of May 2020 First Lien Loan

Net cash (used in) provided by financing activities

Supplemental disclosure of cash flow information:

Cash paid for interest

COVID-19 Update —Beginning in the second quarter of 2021, and continuing throughout 2022, we have seen a recovery in ticket orders as mitigation measures ease.

While we have experienced recovery from the COVID-19 pandemic, uncertainty remains around the potential for new variants to emerge or case counts to rise.

We expect some of our key accounting estimates to continue to evolve depending on the degree of future impacts associated with the COVID-19 pandemic.

If economic conditions caused by the pandemic worsen, our financial condition, cash flows, and results of operations may be materially impacted.

Summary of Significant Accounting Policies

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Use of Estimates —We use estimates and assumptions in the preparation of our consolidated financial statements in accordance with GAAP.

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The significant estimates underlying our consolidated financial statements include the accrual for future customer compensation and the related recovery of future customer compensation asset;

breakage rates related to customer credits;

usage assumptions for our loyalty program;

inventory valuation;

accounts receivable valuation;

valuation of equity-based compensation;

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valuation of acquired intangible assets and goodwill and valuation of earnouts issued in connection with our acquisition of Betcha Sports, Inc.

breakage rates related to customer credits;

(“Betcha”, as renamed "Vivid Picks");

useful life of definite-lived intangible assets and other long-lived assets;

and impairments of goodwill, indefinite-lived intangible assets, definite-lived intangible assets, and long-lived assets.

impairments of goodwill, indefinite-lived intangible assets, definite-lived intangible assets and long-lived assets, and valuation allowances.

C ash and Cash Equivalents —Cash and cash equivalents include all cash balances and highly liquid investments purchased with original maturities of three months or less.

Our cash and cash equivalents consist primarily of domestic bank accounts, interest-bearing deposit accounts, and money market accounts managed by third-party financial institutions.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Cash and cash equivalents are valued by us based on quoted prices in an active market, which represent a Level 1 measurement within the fair value hierarchy.

Cash and cash equivalents held in interest-bearing accounts may exceed the Federal Deposit Insurance Corporation insurance limits.

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As of December 31, 2022 and 2021, we have not experienced any loss or lack of access to its cash and cash equivalents.

Restricted Cash —Restricted cash consists of user funds which are separate from our operational funds and is reserved for users.

Accounts Receivable and Credit Policies —Due to the significant number of COVID-19 pandemic related event cancellations experienced during 2021 and 2020, $ 7.2 million and $ 23.4 million of the Accounts receivable balance at December 31, 2021 and 2020, respectively, consisted of a mounts due from marketplace ticket sellers for cancelled event tickets.

There is a concentration of risk associated with that cohort of creditors due to the unfavorable impact of the COVID-19 pandemic on the live event industry.

We recorded an allowance for doubtful accounts of $ 1.4 millio n and $ 5.7 million at December 31, 2021 and 2020, respectively to reflect potential challenges in collecting funds from marketplace ticket sellers.

The allowance for doubtful accounts decreased during 2021 as ticket sellers on the marketplace platform repaid their outstanding balances.

Accounts receivable balances are stated net of allowance for doubtful a ccounts.

Bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

Write-offs were $ 1.0 million for the year ended December 31, 2021 and immaterial for the years ended December 31, 2020, and 2019.

Restricted Cash —Restricted cash consists of funds reserved for Vivid Picks account balances, which are required to remain separate from our operational funds and are reserved for users.

Accounts Receivable and Credit Policies —

$ 18.9 million and $ 9.5 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of uncollateralized payment processor obligations due under normal trade terms typically requiring payment within three business days.

Credit risk with respect to accounts receivable from payment processing entities is limited due to the consolidation of those receivables with large financial institutions and the frequency with which the receivables turn over.

$ 1.0 million and $ 7.2 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of amounts due from marketplace ticket sellers for cancelled event tickets.

We recorded an allowance for doubtful accounts of $ 0.1 million and $ 1.4 million at December 31, 2022 and 2021, respectively, to reflect potential challenges in collecting funds from marketplace ticket sellers.

The allowance for doubtful accounts decreased during 2022 as ticket sellers on the marketplace platform repaid their outstanding balances or uncollectable amounts were written off.

Accounts receivable balances are stated net of allowance for doubtful accounts and bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

$ 11.7 million and $ 14.5 million of the Accounts receivable balance at December 31, 2022 and 2021, respectively, consisted of amounts due from distribution partners for cancellation charges, primarily related to cancelled events.

We recorded an allowance for doubtful accounts of $ 3.6 million and $ 1.6 million at December 31, 2022 and 2021, respectively, to reflect potential challenges in collecting funds from distribution partners, particularly for amounts due upon usage of store credit previously issued to buyers.

Accounts receivable balances are stated net of allowance for doubtful accounts and bad debt expense is presented as a reduction of Revenues in the Consolidated Statements of Operations.

Write-offs were $ 4.9 million , $ 1.0 million , and less than $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Inventory —Inventory consists of tickets to live events purchased by our Resale segment.

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A provision is recorded to adjust inventory to its estimated realizable value when inventory is determined to be in excess of anticipated demand.

During the years ended December 31, 2021, 2020, and 2019, we incurred inventory write-downs of $ 2.1 mi llion, $ 1.6 million, and $ 3.6 million, respectively, which are presented in Cost of revenues in the Consolidated Statements of Operations.

During the years ended December 31, 2022, 2021, and 2020, we incurred inventory write-downs of $ 5.0 million , $ 2.1 million , and $ 1.6 million , respectively, which are presented in Cost of revenues in the Consolidated Statements of Operations.

Property and Equipment—

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Intangible assets other than goodwill primarily consists of customer and supplier relationships, developed technology, non-compete agreements, and trademarks.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We evaluate goodwill and our indefinite-lived intangible asset for impairment annually on October 31 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable.

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If the fair value of the indefinite-lived intangible asset is less than the carrying value, we recognize an impairment equal to the difference.

The fair value of our definite-lived intangible assets is determined using both the market approach and income approach, utilizing Level 3 inputs.

We review our definite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

If circumstances require a definite-lived intangible asset or its asset group to be held and used be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that definite-lived intangible asset or asset group to its carrying amount.

If the carrying amount of the definite-lived intangible asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.

If the carrying amount of the definite-lived intangible asset or asset group is not recoverable on an

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value.

The fair value of our definite-lived intangible assets or asset group is determined using both the market approach and income approach, utilizing Level 3 inputs.

Definite-lived intangible assets are amortized on a straight-line basis over their estimated period of benefit, over the following estimated useful lives:

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Customer relationships

During the second quarter of 2020, we determined a triggering event occurred that required us to evaluate our goodwill, indefinite-lived intangible asset, and definite-lived intangible assets for impairment, and we recorded an impairment charge as a result of those assessments.

During the second quarter of 2020, we determined a triggering event occurred that required us to evaluate our long-lived assets for impairment.

We recorded an impairment charge as a result of those assessments.

Refer to Note 6, Impairments , for additional information.

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Capitalized development costs are classified as Intangible assets –

net on the Consolidated Balance Sheets and amortized using the straight-line method over the estimated useful life of the applicable software.

net on the Consolidated Balance Sheets and amortized using the straight-line method over the 3 year useful life of the applicable software.

The amortization is presented in Depreciation and amortization expense in the Consolidated Statements of Operations.

Accrued Customer Credits —We may issue credits to customers for cancelled events that can be applied to future purchases on our marketplace.

The amount recognized in Accrued expenses and other current liabilities in the Consolidated Balance Sheets represents the balance owed to customers on credit.

Breakage income from customer credits that are not expected to be used is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used.

The amount recognized in Accrued expenses and other current liabilities in the Consolidated Balance Sheets represents the balance of credits issued to these customers.

Breakage income from customer credits that are not expected to be used, and are not subject to escheatment, is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used.

We estimate breakage based on historical usage trends for credits issued by us and available data on comparable programs.

This estimate could be impacted by changes in credit usage rates, or in the determination of which credits are subject to escheatment, the effects of which could be material to the consolidated financial statements.

When customer credits are used to make a purchase, revenue is recognized for the new transaction.

Accrued Future Customer Compensation —Provisions for accrued future customer compensation are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets and represent compensation to be paid to customers for event cancellations or other service issues related to previously recorded sales transactions.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The expected recoveries of these obligations are included in Prepaid expenses and other current assets.

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This estimated accrual could be impacted by future activity differing from our estimates, the effects of which could be material to the consolidated financial statements.

Income Taxes —Prior to the Merger Transaction, Hoya Intermediate is treated as a partnership for U.S.

Income Taxes —Hoya Intermediate is treated as a partnership for U.S.

federal and most applicable state and local income tax purposes.

As a partnership, Hoya Intermediate's taxable income and losses were passed through to and included in the taxable income of its members, including Vivid Seats Inc.

As a partnership, Hoya Intermediate's taxable income and losses were passed through to and included in the taxable income of its members, including VSI, for periods following the Merger Transaction.

Accordingly, amounts related to income taxes were zero for us prior to the Merger Transaction, and therefore, are not representative of future amounts expected to be incurred by us.

Following the Merger Transaction, our parent legal entity is Vivid Seats Inc.

Following the Merger Transaction, our parent legal entity is VSI.

We are subject to income taxes at the U.S.

federal, state, and local levels for income tax purposes, including with respect to its allocable share of any taxable income of Hoya Intermediate.

federal, state, and local levels for income tax purposes, including with respect to our allocable share of any taxable income of Hoya Intermediate.

Income taxes are accounted for using the asset and liability method of accounting.

Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences on differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse.

Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences on differences

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NOTES to the Consolidated Financial Statements

between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse.

The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted.

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To date, the interest or penalties incurred related to income taxes have not been material.

Tax Receivable Agreement —In connection with the Merger Transaction, Vivid Seats Inc.

entered into an agreement (the "Tax Receivable Agreement") with Hoya Intermediate and Hoya Topco, among other parties ("other TRA Holders").

Pursuant to the Tax Receivable Agreement, Vivid Seats Inc.

is generally required to pay Hoya Topco and the other TRA Holders 85 % of the amount of certain tax benefits, if any, that Vivid Seats Inc.

and certain of its subsidiaries actually realize, or in some circumstances is deemed to realize, as a result of the various transactions occurring in connection with the Merger Transaction or in the future, including benefits arising from tax basis adjustments and certain other tax benefits attributable to payments made under the Tax Receivable Agreement.

The amount and timing of future tax benefits Vivid Seats Inc.

realizes as a result of future exchanges of Intermediate Common Units by Hoya Topco and other TRA Holders, and the resulting amounts Vivid Seats Inc.

will be required to pay to Hoya Topco and other TRA Holders pursuant to the Tax Receivable Agreement, will vary based on, among other things, (i) the amount and timing of future exchanges of Intermediate Common Units by Hoya Topco and other TRA Holders, and the extent to which such exchanges are taxable, (ii) the price per share of the Vivid Seats Class A common stock at the time of the exchanges, (iii) the amount and timing of future income against which to offset the tax benefits, and (iv) the tax rates then in effect.

To date, no exchanges of Intermediate Common Units by Hoya Topco or other TRA Holders have occurred, and as a result, we have no t recognized a liability under the Tax Receivable Agreement.

Tax Receivable Agreement —In connection with the Merger Transaction, we entered into a Tax Receivable Agreement with the existing Hoya Intermediate shareholders that will provide for payment to Hoya Intermediate shareholders of 85 % of the amount of the tax savings, if any, that we realize (or, under certain circumstances, is deemed to realize) as a result of, or attributable to, (i) increases in the tax basis of assets owned directly or indirectly by Hoya Intermediate or its subsidiaries from, among other things, any redemptions or exchanges of Intermediate Units (ii) existing tax basis (including depreciation and amortization deductions arising from such tax basis) in long-lived assets owned directly or indirectly by Hoya Intermediate and its subsidiaries, and (iii) certain other tax benefits (including deductions in respect of imputed interest) related to Hoya Intermediate making payments under the Tax Receivable Agreement.

Debt —Term debt is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

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Upon the repayment of our term debt, we reflected prepayment penalties and the write-off of any unamortized borrowing costs and discounts as loss on extinguishment of debt on the Consolidated Statements of Operations.

Derivatives —We recognize derivatives on the Consolidated Balance Sheets at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate

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NOTES to the Consolidated Financial Statements

a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

Hedge accounting generally provides for the matching of the timing of the gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the earnings effect of the hedged forecasted transactions in a cash flow hedge.

We formally evaluate, both at the inception of the hedge and quarterly, whether the derivative financial instrument is highly effective in offsetting changes in cash flows of the related underlying exposure.

For derivatives that are designated as, and meet all the required criteria for, a cash flow hedge, the net interest payments are recorded in Interest expense –

net in the Consolidated Statements of Operations and the remaining changes in the fair value are recorded in Accumulated other comprehensive loss (“AOCL”) in the Consolidated Balance Sheets and reclassified into earnings as the underlying hedged item affects earnings.

Derivative instruments related to our hedging of interest rates are classified within Prepaid expenses and other current assets or Other liabilities in the Consolidated Balance Sheets depending on the nature of the balance at the end of the period.

We also entered into a series of warrant agreements in connection with the Merger Transaction.

Certain of these warrants are classified as a liability within Other Liabilities in the Consolidated Balance Sheets.

Fair Value of Financial Instruments —Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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These fair value measurements require significant judgment.

Warrant Accounting —In connection with the Merger Transaction, we issued several types of warrants.

Our assets and liabilities measured at fair value on a recurring basis are presented in Note 12, Debt, and Note 14, Financial Instruments .

Our non-financial assets, such as goodwill, intangible assets, and long-lived assets are measured at fair value on a nonrecurring basis, utilizing Level 3 inputs, are presented in Note 9, Goodwill and Intangible Assets .

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

We did not have any transfers of financial instruments between valuation levels during the years ended December 31, 2022 and 2021.

Warrants —In connection with the Merger Transaction, we issued several types of warrants.

We separately evaluate the terms for each of these outstanding warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging:

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Our Public Warrants, Private Warrants, and Exercise Warrants meet the criteria to be classified as equity instruments.

Hoya Intermediate Warrants are exercisable for Hoya Intermediate common units, which allow for a potential cash redemption at the discretion of the unit holder, and hence, these warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

Hoya Intermediate Warrants are exercisable for Intermediate Units, which allow for a potential cash redemption at the discretion of the unit holder, and hence, these warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

The warrant liability is subject to a fair value remeasurement each period with an offsetting adjustment reflected in Other expenses on our Consolidated Statements of Operations.

Redeemable Noncontrolling Interests —Vivid Seats Inc.

holds a 40.1 % interest in Hoya Intermediate, with the remainder held by Hoya Topco.

Hoya Topco’s interest in Hoya Intermediate represents a redeemable noncontrolling interest.

At its discretion, Hoya Topco has the right to exchange its common units in Hoya Intermediate for either shares of Class A common stock of Vivid Seats Inc.

on a one-to-one basis or cash proceeds of equal value at the time of redemption.

Any redemption of Hoya Intermediate common units in cash must be funded through a private or public offering of Class A Common Stock and is subject to Board of Director's ("Board") approval by Vivid Seats Inc.

As of December 31, 2021, equity holders of Hoya Topco hold the majority of the voting rights on the Vivid Seats Inc.

As the redeemable noncontrolling interests are redeemable upon the occurrence of an event that is not solely within our control, we classify our redeemable noncontrolling interests as temporary equity.

The redeemable

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NOTES to the Consolidated Financial Statements

noncontrolling interests were initially measured at Hoya Topco’s share in the net assets of Hoya Intermediate upon consummation of the Merger Transaction.

Remeasurements of our redeemable noncontrolling interests are based on the fair value of our Class A common stock.

Offering costs —We incurred incremental costs associated with the Merger Transaction and PIPE Financing related legal, accounting, and other third-party fees.

Redeemable Noncontrolling Interests —VSI holds a 40.5 % int erest in Hoya Intermediate, with the remainder held by Hoya Topco.

Hoya Topco’s interest in Hoya Intermediate represents a redeemable noncontrolling interest.

At its discretion, Hoya Topco has the right to exchange its common units in Hoya Intermediate for either shares of Class A common stock of VSI on a one-to-one basis or cash proceeds of equal value at the time of redemption.

Any redemption of Intermediate Units in cash must be funded through a private or public offering of Class A Common Stock and is subject to the approval of the VSI Board of Directors ("Board").

As of December 31, 2022, equity holders of Hoya Topco hold the majority of the voting rights on the Board.

The redeemable noncontrolling interests were initially measured at Hoya Topco’s share in the net assets of Hoya Intermediate upon consummation of the Merger Transaction.

Subsequent remeasurements of our redeemable noncontrolling interests are recorded as a deemed dividend each reporting period, which reduces retained earnings, if any, or additional paid-in capital of VSI Remeasurements of our redeemable noncontrolling interests are based on the fair value of our Class A common stock.

Offering costs —We incurred incremental costs associated with the Merger Transaction and PIPE Financing related for legal, accounting, and other third-party fees.

In accordance with Staff Accounting Bulletin (“SAB”) Topic 5.A, Expenses of Offering , we deferred certain incremental costs directly associated with the Merger Transaction and PIPE Financing.

These deferred costs were capitalized by us and subsequently charged against the gross proceeds of the Merger Transaction and PIPE Financing as a reduction to additional paid-in capital on the Consolidated Balance Sheets.

Our tota l transaction costs were $ 32.7 million, of which $ 20.2 million was charged against the gross proceeds of the Merger Transaction and PIPE Financing.

Equity-Based Compensation —We have granted restricted stock units (RSUs), stock options, profits interest, and phantom units.

We started issuing RSUs and stock options following the Merger Transaction.

The restricted stock units vest on a quarterly basis over a four-year period for non-directors and on an annual basis over a five-year period for directors.

The stock options vest on a quarterly basis over a four-year period and expire ten years from the date of the grant.

Both are subject to the employee’s continued employment through the applicable vesting date.

The fair value of stock options granted to certain employees is estimated on the grant date using the Hull-White model, a lattice model which assumes holders will exercise when they achieve certain return thresholds.

We account for forfeitures in the period they occur.

The RSU and stock options grants are accounted for as equity-based compensation.

Prior to the Merger Transaction, certain members of management received profit interests in Hoya Topco, LLC and Phantom units in a cash bonus pool funded by Hoya Topco.

Our tota l transaction costs during the year ended December 31, 2021 were $ 32.7 million, of which $ 20.2 million was charged against the gross proceeds of the Merger Transaction and PIPE Financing.

Equity-Based Compensation —We account for Restricted Stock Units ("RSUs"), stock options, and profits interest at fair value as of the grant date.

We award RSUs to our employees, directors and consultants.

We award stock options to certain employees.

We account for forfeitures of outstanding, but unvested grants, in the period they occur.

The awards are subject to the recipient’s continued service through the applicable vesting date.

The grant-date fair value of stock options is estimated using an option pricing model.

The model requires us to make assumptions and judgments about the variables used in the calculation, the volatility of our common stock, risk-free interest rate, and expected dividends.

Expense related to grants of equity-based awards is recognized as equity-based compensation in the Consolidated Statements of Operations.

Prior to the Merger Transaction, certain members of management received profit interests in Hoya Topco and Phantom units in a cash bonus pool funded by Hoya Topco.

Under Accounting Standards Codification ("ASC") 718, Compensation–Stock Compensation , and ASC 480, Distinguishing Liabilities from Equity , the grants of profits interest meet the criteria to be recognized as equity-classified awards, whereas the grants of Phantom units meet the criteria to be recognized as liability-classified awards.

A market-based approach was used to determine the total equity value of Hoya Topco and allocate the resulting value between share classes using the Black-Scholes option pricing model to determine the grant date fair value of employee grants.

The exercise prices used are based on various scenarios considering the waterfall payout structure of the units that exists at the Hoya Topco, LLC level.

For liability-based compensation with service and performance conditions, we recognize a liability for the fair value of the outstanding units only when we conclude it is probable that the performance condition will be achieved.

For the profit interests and Phantom units, we used a market-based approach to determine the total equity value of Hoya Topco and allocate the resulting value between share classes using the Black-Scholes option pricing model to determine the grant date fair value of employee grants.

The exercise prices used are based on various scenarios considering the waterfall payout structure of the units that exists at the Hoya Topco level.

For Phantom Units with service and performance conditions, we recognize a liability for the fair value of the outstanding units only when we conclude it is probable that the performance condition will be achieved.

As of December 31, 2022 and 2021, it is not probable the performance condition will be achieved.

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Marketplace and Resale.

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NOTES to the Consolidated Financial Statements

Revenue Recognition —We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We adopted ASC 606 effective January 1, 2019, using the full retrospective transition method.

We report revenue on a gross or net basis based on management’s assessment of whether we are acting as a principal or agent in the transaction.

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The determination of whether we are acting as a principal or an agent in a transaction is based on the evaluation of control over the ticket, including the right to sell the ticket, before it is transferred to the ticket buyer.

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NOTES to the Consolidated Financial Statements

We act as an intermediary between ticket buyers and ticket sellers in our online secondary ticketing marketplace.

We act as an intermediary between ticket buyers and sellers in our online secondary ticketing marketplace.

Revenue primarily consists of service fees from ticketing operations and is reduced by incentives provided to ticket buyers.

We have one primary performance obligation, facilitating the Marketplace transaction between the ticket seller and ticket buyer and seller, which is satisfied at the time the order is confirmed.

In this transaction, we act as an agent as it does not control the ticket prior to it transferring to the ticket buyer.

Revenue is recognized net of the amount due to the seller when the ticket seller confirms an order with the ticket buyer, at which point the seller is obligated to deliver the tickets to the buyer in accordance with the original marketplace listing.

Payment from the buyer is due at the time of sale.

We have one primary performance obligation, facilitating the Marketplace transaction between the ticket buyers and sellers, which is satisfied at the time the order is confirmed.

In this transaction, we act as an agent as we do not control the ticket prior to transferring it to the ticket buyer.

Revenue is recognized net of the amount due to the ticket seller when the seller confirms an order with the ticket buyer, at which point the seller is obligated to deliver the tickets to the buyer in accordance with the original marketplace listing.

Payment from the ticket buyer is due at the time of sale.

Our sales terms provide that we will compensate the ticket buyer for the total amount of the purchase if an event is cancelled, the ticket is invalid, or if the ticket is delivered after the promised time.

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We estimate the customer compensation liability, and corresponding charge against revenue, using the expected value method, which best predicts customer compensation for future cancellations.

To the extent we estimate that a portion of the refund is recoverable from the ticket seller, we record the recovery as revenue to align with the net presentation of the original transaction.

The timing of event cancellations and rescheduling of postponed events versus new sales transactions can result in customer compensation costs exceeding current period sales resulting in negative marketplace revenue for that period.

To the extent we estimate that a portion of the refund is recoverable from ticket sellers or distribution partners, we record the recovery as revenue to align with the net presentation of the original transaction.

In extreme circumstances, such as the COVID-related shutdowns during 2020, the timing of event cancellations versus new sales transactions can result in customer compensation costs exceeding current period sales resulting in negative marketplace revenue for that period.

In certain instances, ticket buyers are compensated with credit to be used on future purchases.

When a credit is redeemed, revenue is recognized for the newly placed order.

Breakage income from customer credits that are not expected to be used is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used.

Breakage income from customer credits that are not expected to be used, and not subject to escheatment, is estimated and recognized as revenue in proportion to the pattern of redemption for the customer credits that are used.

We also earn referral commissions on purchases of third-party insurance services by ticket buyers at the time of sale of the associated ticket on the Marketplace platform.

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This revenue is included within all categories of Marketplace disaggregated revenue described in Note 4, Revenue Recognition .

We earn revenue from our daily fantasy sports offering, which is the difference between cash entry fees collected and cash amounts paid out to users for winning picks, less customer promotions and incentives in a period.

We sell tickets we own on secondary ticket marketplaces.

The Resale business has one performance obligation, which is to transfer control of a live event ticket to a ticket buyer once an order has been confirmed.

We act as a principal in these transactions as we own the ticket and therefore controls the ticket prior to transferring the ticket to the customer.

We act as a principal in these transactions as we own the ticket and therefore we control the ticket prior to transferring the ticket to the customer.

Revenue is recorded on a gross basis based on the value of the ticket and is recognized when an order is confirmed in the secondary ticket marketplace.

Payment from the marketplace is typically due upon delivery of the ticket or after the event has passed.

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NOTES to the Consolidated Financial Statements

Secondary ticket marketplace terms and conditions require sellers to repay amounts received for events that are cancelled or tickets that are invalid or delivered after the promised time.

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To the extent we estimate that a portion of the charge is recoverable from the event host, we record the estimated recovery asset to Prepaid expenses and other current assets.

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NOTES to the Consolidated Financial Statements

When our Resale business sells a ticket in our own marketplace, the service fee is recorded in Marketplace revenues and the sales price of the ticket is recorded in Resale revenues.

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The majority of the unsatisfied performance obligations are related to our loyalty program, Vivid Seats Rewards.

Vivid Seats Rewards allows customers to earn credits on certain purchases and then redeem those credits on future transactions.

The credits earned in the program represent a material right to the customer and constitute an additional performance obligation for us.

As such, we defer revenue based on expected future usage and recognizes the deferred revenue as credits are redeemed.

Revenues of sales of contingent events, such as postseason sporting events, is initially recorded as Deferred reve nue in the Consolidated Balance Sheets and is recognized when the contingency is resolved.

Vivid Seats Rewards allows ticket buyers to earn stamps for each ticket purchased, which convert to credits upon reaching certain thresholds.

Buyers can redeem those credits on future transactions.

The credits earned in the program represent a material right to the ticket buyer and constitute an additional performance obligation for us.

As such, we defer revenue based on expected future usage and recognize the deferred revenue as credits are redeemed.

Revenue from sales of contingent events, such as postseason sporting events, is initially recorded as Deferred revenue in the Consolidated Balance Sheets and is recognized when the contingency is resolved.

Sales Tax —Sales taxes are imposed by state, county, and city governmental authorities.

We collect sales tax from the customer where required and remit to the appropriate governmental agency.

We collect sales tax from the ticket buyer where required and remit to the appropriate governmental agency.

Collected sales taxes are recorded as a liability until remitted.

There is no impact on the Consolidated Statements of Operations as revenue is recorded net of sales tax.

Advertising Costs —We utilize various forms of advertising, including paid search, sponsorship agreements, e-mail marketing, and other forms of media.

There is no impact on the Consolidated Statements of Operations as revenue is recorded net of sales taxes.

Advertising Costs —We utilize various forms of advertising, including paid search, brand partnership, e-mail marketing, and other forms of media.

Advertising costs are expensed as incurred and were $ 247.3 million , $ 180.7 million , and $ 37.5 million for the years ended December 31, 2022, 2021, and 2020 respectively.

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Issued accounting standards adopted

Income taxes —In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The guidance was issued as part of FASB’s overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements.

Amendments include removal of certain exceptions to the general principles of Topic 740, “Income Taxes,”

and simplification in several other areas.

The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

We adopted this guidance on January 1, 2021, and it did not have a material impact on our consolidated financial statements.

Issued accounting standards not yet adopted

Leases —In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease) in the balance sheet.

The liability will be equal to the present value of lease payments.

Leases —In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease) in the balance sheet.

Lease liabilities are equal to the present value of lease payments, while right-of-use assets are based on the associated lease liabilities, subject to certain adjustments, such as for initial direct costs.

We elected the extended

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NOTES to the Consolidated Financial Statements

will be based on the liability, subject to adjustment, such as for initial direct costs.

ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842):

Effective Dates for Certain Entities, deferred the effective date for non-public companies.

ASU 2016-02 is now effective for fiscal periods beginning after December 15, 2021.

We elected the extended transition period available to emerging growth companies and expects to adopt this guidance using a modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application, January 1, 2022.

We expect that this standard will have a material effect on its consolidated financial statements.

While we continue to assess all of the effects of the adoption, it currently estimates that the most significant impact upon adoption will be to record operating lease liabilities and right-of-use assets for its real estate leases in the range of approximat ely $ 6.5 million to $ 9.0 million.

There is no material impact to our Consolidated Statements of Operations or its Consolidated Statements of Cash Flows.

The adoption of ASU 2016-02 will also require significant new disclosures about our leases.

transition period available to emerging growth companies and adopted Accounting Standards Codification ("ASC") 842 effective January 1, 2022 on a modified retrospective basis by applying the new standard to all leases existing at the date of initial application.

We elected to present the financial statements for all periods prior to January 1, 2022 under the previous lease standard ("ASC 840"), as well as elected other options, which allow us to use our previous evaluations regarding if an arrangement contains a lease, if a lease is an operating or financing lease, and what costs are capitalized as initial direct costs prior to adoption.

We also elected to combine lease and non-lease components.

Upon the adoption of the new lease standard, on January 1, 2022, we recognized right-of-use assets of $ 6.6 million and lease liabilities of $ 8.1 million (including a current liability of $ 3.0 million) in the Consolidated Balance Sheets and reclassified certain balances related to existing leases.

The right-of-use assets balance as of January 1, 2022 is adjusted for $ 1.5 million of lease termination liabilities and deferred rent liabilities recognized under the previous lease standard.

There was no impact to Accumulated deficit on the Consolidated Balance Sheets at adoption.

Refer to Note 8, Leases , for more information on leases.

Financial Instruments-Credit Losses —In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

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The standard is effective for non-public companies for fiscal years beginning after December 15, 2022.

We elected the extended transition period available to emerging growth companies and is currently evaluating the effect of adoption of the standard on our consolidated financial statements and related disclosures.

We adopted these requirements as of January 1, 2 023 with no material impact on our consolidated financial statements.

Reference Rate Reform —In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting , as modified in January 2021.

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The guidance also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients.

The amendment is effective for all entities starting March 12, 2020 and can be adopted through December 31, 2022.

We have not yet decided the date of adoption of this standard.

LIBOR is used to calculate the interest on borrowings under our June 2017 First Lien Loan.

We are currently evaluating whether this guidance will have a significant impact on its consolidated financial statements and related disclosures.

We adopted these requirements as of January 1, 2023 with no material impact on our consolidated financial statements.

Business Acquisition

On December 13, 2021 , we acquired 100 % of the equity interests of Betcha Sports, Inc.

(“Betcha”).

Betcha is a real money daily fantasy sports app with social and gamification features.

On December 13, 2021 , we acquired 100 % of the equity of Betcha.

In August 2022, we rebranded Betcha as Vivid Picks.

Vivid Picks is a real money daily fantasy sports app with social and gamification features that enhance fans' connection with their favorite live sports.

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting.

Acquisition costs directly related to the transaction were immaterial and are included in General and administrative expenses in the Consolidated Statements of Operations for the year ended December 31, 2021.

The purchase consideration transferred consisted of $ 0.8 million in cash and 2,143,438 shares of Class A common stock.

The purchase consideration also includes cash earnouts of $ 7.5 million as of the acquisition date representing the estimated fair value that we may be obligated to pay if Betcha mee ts certain earnings objectives following the acquisition.

The earnouts are measured at fair value using a Monte Carlo simulation model.

In addition, the purchase consideration includes future milestone payments of $ 9.7 million as of the acquisition date representing the estimated fair value that we may be obligated to pay upon the achievement of certain integration objectives.

Acquisition costs directly related to the transaction for the year ended December 31, 2022 were not material and are included in General and administrative expenses in the Consolidated Statements of Operations.

The acquisition date fair value of the consideration consisted of $ 0.8 million in cash and 2.1 million shares of our Class A common stock.

The total consideration includes cash earnouts of $ 3.4 million as of the acquisition date representing the estimated fair value that we may be obligated to pay if Vivid Picks meets certain earnings objectives.

In addition, the consideration includes future milestone payments of $ 9.5 million as of the acquisition date representing the estimated fair value that we may be obligated to pay upon the achievement of certain integration o bjectives.

For the year ended December 31, 2022, the estimated fair value of cash earnouts decreased by $ 2.1 million, which is presented in Change in fair value of contingent consideration on the Consolidated Statements of

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NOTES to the Consolidated Financial Statements

milestone payments are measured at fair value using a discounted cash flow valuation approach.

As of December 31, 2021, we made no payments related to cash earnouts and milestone payments.

As part of the acquisition, we agreed to pay cash bonuses to certain Betcha employees (the “Retention Bonus”) over three years on the payroll date following the anniversary of the acquisition date.

The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed.

Proforma financial information has not been presented as the Betcha acquisition was not considered material to our Consolidated Financial Statements.

The purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair value as of the acquisition date.

As of December 31, 2022, $ 2.6 million was recorded in Additional paid-in capital in the Consolidated Balance Sheets related to our first milestone payment.

For the year ended December 31, 2022, we made no payments related to cash earnouts and paid milestone payments which consisted of 0.3 million in shares of our Class A common stock and $ 1.1 million in cash.

Subsequent to the year ended December 31, 2022 , we paid a milestone payment of $ 2.5 million in cash.

As of December 31, 2022, we had $ 5.9 million recorded in accrued expenses and other current liabilities related to future milestone payments and $ 1.1 million in other liabilities related to earnouts.

As part of the acquisition, we agreed to pay cash bonuses to certain Vivid Picks employees over three years following the anniversary of the employee start date.

The payouts are subject to continued service, and therefore treated as compensation and expensed.

Proforma financial information has not been presented as the Vivid Picks acquisition was not considered material to our Consolidated Financial Statements.

The consideration was allocated to the assets acquired and liabilities assumed based on their fair value as of the acquisition date.

The excess of the purchase price over the net assets acquired was recorded as goodwill.

The goodwill recorded is not deductible for tax purposes as the Betcha acquisition was primarily a stock acquisition and is attributable to the assembled workforce as well as the anticipated synergies from the integration of Betcha's technology with our technology.

The purchase consideration allocation for Betcha is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process.

The primary areas that are not yet finalized relate to the valuations of certain intangible assets, cash earnouts, milestone payments, and acquired income tax assets and liabilities.

As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

The goodwill recorded is not deductible for tax purposes as the Vivid Picks acquisition was primarily a stock acquisition and is attributable to the assembled workforce as well as the anticipated synergies from the integration of Vivid Picks's technology with our technology.

During the year ended December 31, 2022, we recognized adjustments related to the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

The adjustments primarily consisted of $ 0.9 million in definite-lived intangible assets and $ 2.9 million i n goodwill.

Refer to Note 9, Goodwill and Intangible Assets , for the acquisition adjustment.

We have finalized purchase accounting for this acquisition in the fourth quarter of 2022.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Restricted cash

Accounts receivable

Prepaid expenses and other current assets

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Total acquired intangible assets

Revenue Recognition

We recognize revenue in accordance with ASC 606.

We have two reportable segments:

Marketplace and Resale.

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NOTES to the Consolidated Financial Statements

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers.

We earn revenue processing ticket sales from our Owned Properties, consisting of the Vivid Seats website and mobile applications, and from our Private Label offering, which is comprised of numerous distribution partners.

Revenue Recognition

During the years ended December 31, 2022, 2021, and 2020 Marketplace revenues consisted of the following (in thousands):

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Within the Resale segment, we sell tickets we hold in inventory on resale ticket marketplaces.

Resale revenues were $ 53.4 m illion, $ 11.8 million, and $ 65.3 million during the years ended December 31, 2021, 2020, and 2019, respectively.

At December 31, 2021, Deferred revenue in the Consolidated Balance Sheets was $ 25.1 mil lion, which primarily relates to Vivid Seats Rewards, our loyalty program.

At December 31, 2020, $ 6.0 million was recorded as deferred revenue, of wh ich $ 3.3 million was recognized as revenue during the year ended December 31, 2021.

Deferred revenue for contingent e vents at December 31, 2021 and 2020 was immaterial.

Resale revenues were $ 89.2 million , $ 53.4 million , and $ 11.8 million during the years ended December 31, 2022, 2021, and 2020, respectively.

At December 31, 2022, Deferred revenue in the Consolidated Balance Sheets was $ 32.0 million , which primarily relates to Vivid Seats Rewards, our loyalty program.

Stamps earned under the program expire in two to three years , if not converted to credits, and credits expire in two to four years , if not redeemed.

We expect to recognize all outstanding deferred revenue in the next seven years .

At December 31, 2021, $ 25.1 million was recorded as Deferred revenue, of which $ 16.2 million was recognized as revenue during year ended December 31, 2022.

At December 31, 2020, $ 6.0 million was recorded as deferred revenue, of which $ 3.3 million was recognized as revenue during the year ended December 31, 2021.

Segment Reporting

Our reportable segments are Marketplace and Resale.

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers within our online secondary ticket marketplace.

Through the Resale segment, we acquire tickets from primary sellers, which we then sell through secondary ticket marketplaces.

Revenues and contribution margin are used by our CODM to assess performance of the business.

We define contribution margin as revenues less cost of revenues and marketing and selling expenses.

We do not report our assets, capital expenditures, general and administrative expenses or related depreciation and amortization expenses by segment, because our CODM does not use this information to evaluate the performance of our operating segments.

The following table represents our segment information for the year ended December 31, 2022 (in thousands):

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Change in fair value of contingent consideration

Income from operations

Interest expense –

Loss on extinguishment of debt

Income before income taxes

The following table represents our segment information for the year ended December 31, 2021 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Income from operations

Interest expense –

Loss on extinguishment of debt

Other expenses

Loss before income taxes

The following table represents our segment information for the year ended December 31, 2020 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Impairment charges

Loss from operations

Interest expense - net

Loss on extinguishment of debt

Substantially all of our sales occur and assets reside in the United States.

As disclosed in Note 2, Summary of Significant Accounting Policies, we assess goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired.

Definite-lived intangible assets and other long-lived assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

During the second quarter of 2020, we identified the COVID-19 pandemic as a triggering event for its long-lived assets, goodwill, indefinite-lived trademark, and definite-lived intangible assets.

Due to global social distancing efforts put in place to mitigate the spread of the virus, and compliance with restrictions enacted by various governmental entities, most live events during 2020 were either postponed or cancelled.

Consequently, we experienced a significant reduction of revenue during the nine months ended September 30, 2020.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the second quarter of 2020, we identified the COVID-19 pandemic as a triggering event for our long-lived assets, goodwill, indefinite-lived trademark, and definite-lived intangible assets.

Consequently, we experienced a significant reduction of revenue during the year ended December 31, 2020.

The following summarizes the impairment charges recorded by us during the year ended December 31, 2020 (in thousands):

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The significant unobservable inputs also included forecasted costs, capital expenditures, and working capital needs which were informed by actual historical experience and estimates of the timing of when live events would return to pre-pandemic levels.

Refer to Note 14, Fair Value, for quantitative disclosure of significant unobservable inputs.

The following table presents quantitative information about the significant unobservable inputs applied to these Level 3 fair value measurements during our assessment for impairment in the second quarter of 2020:

Significant Unobservable Inputs

Range (Weighted

Discount rate

12.5 % - 13.5 % ( 13.0 %)

Long-term growth rate

2.5 % - 3.5 % ( 3.0 %)

The following table presents the sensitivities to changes in the significant unobservable inputs above (in thousands):

50 basis point increase in discount rate

50 basis point decrease in long-term growth rate

As a result, we recorded an impairment of $ 118.0 million, of which $ 107.4 million was related to definite-lived intangible assets.

The impairment is presented in Impairment charges in the Consolidated Statements of Operations.

No impairment triggering events to our long-lived assets were identified during 2021.

No impairment triggering events to our long-lived assets were identified during the years ended December 31, 2022 and 2021.

Indefinite-lived trademark and goodwill impairments

During the second quarter of 2020, we determined that the estimated carrying value of its indefinite-lived trademark was in excess of its fair value.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

During the second quarter of 2020, we determined that the estimated carrying value of our indefinite-lived trademark was in excess of its fair value.

The fair value of the indefinite-lived trademark asset, classified as a Level 3 measurement, was measured using the relief-from-royalty method.

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The significant estimates used in the market multiple valuation approach include identifying business factors;

such as size, growth,

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

profitability, risk and return on investment;

such as size, growth, profitability, risk and return on investment;

and assessing comparable revenue and earnings multiples.

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In accordance with its annual re-assessment, we assessed its goodwill and indefinite-lived trademark for impairment as of October 31, 2020, determining no further impairment had occurred.

No triggering events were identified during the year ended December 31, 2021.

No triggering events were identified during the years ended December 31, 2022 and 2021.

Our goodwill and indefinite-lived trademark constitute nonfinancial assets measured at fair value on a nonrecurring basis.

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Property and Equipment

Long-lived asset impairment charges related to property and equipment of $ 3.7 million were recognized for the year ended December 31, 2020, resulting in a full impairment of all property and equipment.

The impairment charges are presented in Impairment charges in the Consolidated Statements of Operations.

The following table summarizes our major classes of property and equipment, net of accumulated depreciation at December 31, 2021 (in thousands):

The following table summarizes our major classes of property and equipment, net of accumulated depreciation (in thousands):

Computer equipment

Leasehold Improvements

Construction in progress

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There were no impairment charges for the years ended December 31, 2022 and 2021.

For the year ended December 31, 2020, l ong-lived asset impairment charges related to property and equipment of $ 3.7 million were recognized, resulting in a full impairment of all property and equipment.

The impairment charges are presented in Impairment charges in the Consolidated Statements of Operations.

During the year ended December 31, 2022, we incurred a loss of $ 0.1 million on asset disposals related to property and equipment, which are included in General and administrative expenses in the Consolidated Statements of Operations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

On January 1, 2022, we adopted ASC 842 using a modified retrospective transition approach that allows for a cumulative-effect adjustment in the period of adoption without revising prior period presentation.

Therefore, for reporting periods beginning after December 31, 2021, the financial statements are prepared in accordance with the current lease standard (ASC 842) and we elected to present the financial statements for all periods prior to January 1, 2022 under the previous lease standard (ASC 840).

We elected the practical expedient package, which permits us to not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and any initial direct costs for any existing leases as of the effective date.

We determine if an arrangement is a lease at inception of a contract.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit interest rate, we use the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

As of December 31, 2022, the weighted average discount rate applied to the lease liabilities is approximately 7 % .

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets and rent expense for these short-term leases is recognized in General and administrative expenses in the Consolidated Statements of Operations on a straight-line basis over the lease term.

Short-term lease costs were not material to our Consolidated Statements of Operations for the year ended December 31, 2022.

We entered into all of our lease contracts as a lessee.

We are not acting as a lessor under any of our leasing arrangements.

The vast majority of our lease contracts are real estate leases for office space.

All of our leases are classified as operating.

At December 31, 2022, we had $ 7.9 million of ROU assets in Right-of-use assets —

net, and the corresponding operating lease liabilities of $ 0.6 million recorded in Accrued expenses and other current liabilities and $ 14.9 million recorded in Long-term lease liabilities in the Consolidated Balance Sheets.

Most leases have one or more options to renew, with renewal terms that can initially extend the lease term for various periods up to five years .

The exercise of renewal options is at our discretion and are included if they are reasonably certain to be exercised.

As of December 31, 2022, the weighted average remaining minimum lease term is approximately 9.7 years.

Lease expense for operating leases is recognized on a straight-line basis over the lease term and is recorded under General and administrative expenses in the Consolidated Statements of Operations.

We elected not to separate lease and non-lease components.

Our leases do not contain any material residual value guarantees or restrictive covenants.

In December 2021, we entered into a lease agreement for our new corporate headquarters in Chicago, Illinois.

The lease commenced in the first quarter of 2022 when we obtained control of the premises, and runs through December 31, 2033 with a 5-year renewal option.

The aggregate lease payments for the initial term are approximately $ 16.2 million with no rent due until March 2024.

The lease agreement provides for a tenant improvement allowance from the landlord in an amount equal to $ 6.5 million towards the design and construction on the leased premises.

As of December 31, 2022, we incurred leasehold improvement costs of $ 6.5 million related to the tenant improvement allowance.

This amount is recorded in Property and equipment - net in the Consolidated Balance Sheets.

On the commencement date, we recognized the ROU asset and corresponding lease liability of $ 3.4 million in Right-of-use assets —

net and Long-term lease liabilities, respectively, in the Consolidated Balance Sheets.

Operating and variable lease expenses for the years ended December 31, 2022, 2021 and 2020 were $ 3.6 million , $ 3.7 million and $ 2.8 million, respectively.

Cash payments for operating lease liabilities during the year ended December 31, 2022, which are included within the operating activities section in the Consolidated Statements of Cash Flows, were $ 3.1 million .

Future lease payments at December 31, 2022 are as follows (in thousands):

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Operating Leases

Total remaining lease payments

Imputed interest

Present value of lease liabilities

Future lease payments at December 31, 2021 under ASC 840 were as follows (in thousands):

Operating Leases

Total remaining lease payments

Goodwill and Intangible Assets

Definite-lived intan gible assets includes developed technology and customer relationships, which had a net carrying amount of $ 13.8 million and $ 2.4 million at December 31, 2021 and 2020, respectively.

Definite-lived intangible assets includes developed technology and customer relationships, which had a net carrying amount of $ 17.3 million and $ 13.8 million at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, accumulated amortization related to our developed technology was $ 9.6 million and $ 2.5 million , respectively.

Prior to its impairment, recorded during the second quarter of 2020, our definite-lived intangible assets included supplier relationships, customer relationships, and non-compete agreements, in addition to developed technology.

Our goodwill is included in our Marketplace segment.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The net changes in the carrying amounts of our intangible assets and goodwill were as follows (in thousands):

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Balance at December 31, 2021

Acquisition of Betcha

Acquisition adjustment

Capitalized development costs

Balance at December 31, 2022

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

We had recorded $ 563.2 million of cumulative impairment charges related to our intangible assets and goodwill as of December 31, 2022 and 2021.

Amortization expense on our definite-lived intangible assets w as $ 2.3 million, $ 47.4 million, and $ 91.5 million for the years ended December 31, 2021, 2020, and 2019, respectively, and is presented in Depreciation and amortization in the Consolidated Statements of Operations.

The estimated future amortization expense related to the definite-lived intangible assets as of December 31, 2021 is a follows (in thousands):

Amortization expense on our definite-lived intangible assets was $ 7.1 million , $ 2.3 million , and $ 47.4 million for the years ended December 31, 2022, 2021, and 2020, respectively, and is presented in Depreciation and amortization in the Consolidated Statements of Operatio ns.

During the year ended December 31, 2022, we incurred a loss of $ 0.3 million on asset disposals related to definite-lived intangible assets, which are included in General and administrative expenses in the Consolidated Statements of Operations.

The estimated future amortization expense related to the definite-lived intangible assets as of December 31, 2022 is as follows (in thousands):

Future amortization expense:

Prepaid Expenses and Other Current Assets

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Recovery of future customer compensation

Insurance recovery asset

Prepaid expenses

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Recovery of future customer compensation represents expected recoveries of compensation to be paid to customers for event cancellations or other service issues related to previously recorded sales transactions.

Recovery of future customer compensation costs decreased by $ 16.9 million during the year ended December 31, 2021, due to a reduction in the estimated rate of future cancellations in 2021 compared to 2020, partially offset by an increase in order volume.

The provision related to these expected recoveries are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Prepaid expenses increased by $ 7.3 million primarily related to a $ 4.5 million prepayment in a legal settlement pool.

Other current assets was $ 4.1 million at December 31, 2021 due to a deposit associated with a corporate credit card.

Recovery of future customer compensation costs decreased by $ 35.0 million due to a reduction in the estimated rate of future cancellations as of December 31, 2022.

The provision related to these expected recoveries is included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

Accrued Expenses and Other Current Liabilities

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Accrued contingencies

Accrued payroll

Other current liabilities

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Accrued customer credits represent credits issued and outstanding for event cancellations or other service issues related to recorded sales transactions.

The accrued amount is reduced by the amount of credits estimated to go unused, which is recognized in proportion to the pattern of redemption for the customer credits.

The accrued amount is reduced by the amount of credits estimated to go

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

unused, or breakage, provided that the credits are not subject to escheatment.

We estimate breakage based on historical usage trends and available data on comparable programs, and recognize breakage in proportion to the pattern of redemption for customer credits.

Our breakage estimate could be impacted by future activity differing from our estimates, the effects of which could be material.

During the year ended December 31, 2022, $ 24.3 million of accrued customer credits were redeemed and we recognized $ 11.5 million of revenue from breakage.

During the year ended December 31, 2021, $ 55.9 million of accrued customer credits were redeemed and we recognized $ 3.3 million of revenue from breakage.

During the year ended December 31, 2020, $ 7.4 million of accrued customer credits were redeemed and we recognized $ 0.8 million of revenue from breakage.

Breakage amounts are net of reductions in associated accounts receivable balances.

Accrued future customer compensation represents an estimate of the amount of customer compensation due from cancellation charges in the future.

These provisions are based on historic experience, revenue volumes for future events, and management’s estimate of the likelihood of future event cancellations and are recognized as a component of Revenues.

The expected recoveries of these obligations are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

This estimated accrual could be impacted by future activity differing from our estimates, the effects of which could be material.

During the years ended December 31, 2021, 2020, and 2019, we recognized an increase in revenue of $ 5.1 million, a decrease in revenue of $ 15.3 million, and an increase in revenue of $ 0.4 million, respectively, from the reversals of previously recorded revenue and changes to accrued future customer compensation related to event cancellations where the performance obligations were satisfied in prior periods.

Accrued contingencies includes the current portion of cash earnouts of $ 3.9 million that we may be obligated to pay if Betcha mee ts certain earnings objectives following the acquisition.

In addition, it includes the current portion of future milestone payments of $ 8.8 million upon the achievement of certain integration objectives.

A ccrued marketing expense and other current liabilities increased during the year ended December 31, 2021 due primarily to the increased volume of sales transactions occurring on our platform.

Accrued taxes decreased as we have historically accrued sales tax expense in jurisdictions where we expected to remit sales tax payments but were not yet collecting from ticket buyers.

During the second half of 2021, we began collecting sales tax from customers.

The majority of the tax accrual represents the exposure for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received.

Refer to Note 15, Commitments and Contingencies, for further discussion of the accrued tax expense.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

This estimated accrual could be impacted by future activity differing from our estimates, the effects of which co uld be material.

During the years ended December 31, 2022, 2021 and 2020, we recognized a net increase in revenue of $ 2.3 million, $ 5.1 million, and a decrease in revenue of $ 15.3 million, respectively, from the reversals of previously recorded revenue and changes to accrued future customer compensation related to event cancellations where the performance obligations were satisfied in prior periods.

Accrued future customer compensation decreased by $ 43.8 million due to a reduction in the estimated rate of future cancellations as of December 31, 2022.

Accrued taxes decreased as we have historically accrued contingent sales tax expense in jurisdictions where we expected to remit sales tax payments for sales prior to collecting tax from customers which began in the second half of 2021.

During 2022, we finalized the remaining open discussions with jurisdictions regarding the liability for uncollected sales tax and no longer have this contingent liability.

Other current liabilities primarily decreased as a result of making sales tax payments for liabilities that were no longer deemed contingent as of December 31, 2021, but were not yet paid at that time.

These payments represent the exposure for sales tax prior to the date we began collecting sales tax from customers reduced by abatements received, inclusive of any penalties and interest assessed by the jurisdictions.

The remaining historic sales tax liability payments were made during the year ended December 31, 2022.

Our outstanding debt at December 31, 2022 and 2021 is comprised of the following (in thousands):

June 2017 First Lien Loan

May 2020 First Lien Loan

February 2022 First Lien Loan

Total long-term debt, gross

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Total long-term debt, net

First Lien Loans —On June 30, 2017, we entered into a $ 575.0 million first lien debt facility, comprised of a $ 50.0 million revolving facility (the “Revolving Facility”) and a $ 525.0 million term loan (the “June 2017 First Lien Loan”), and a second lien credit facility, comprised of a $ 185.0 million second lien term loan (the “June 2017 Second Lien Loan”).

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

June 2017 Term Loans

O n June 30, 2017, we entered into a $ 575.0 million first lien debt facility, comprised of a $ 50.0 million revolving facility and a $ 525.0 million term loan (the “June 2017 First Lien Loan”), and a second lien credit facility, comprised of a $ 185.0 million second lien term loan (the “June 2017 Second Lien Loan”).

The First Lien Loan was amended to upsize the committed amount by $ 115.0 million on July 2, 2018.

On October 28, 2019 , we paid off its June 2017 Second Lien Loan balance.

The underlying credit facility was subsequently retired on May 22, 2020.

On October 18, 2021, in connection with and using the proceeds from the Merger Transaction, we made an early payment of a portion of its May 2020 First Lien Loan balance.

On May 22, 2020, we entered into a new $ 260.0 million first lien term loan (the “May 2020 First Lien Loan”) that is pari passu with the June 2017 First Lien Loan.

The proceeds from the May 2020 First Lien Loan were used for general corporate purposes and to extinguish and retire the Revolving Facility in full.

On October 18, 2021 , in connection with and using the proceeds from the Merger Transaction, we paid off in full its May 2020 First Lien Loan balance.

All obligations under the June 2017 First Lien Loan and May 2020 First Lien Loan are unconditionally guaranteed by Hoya Intermediate and substantially all Hoya Intermediate’s existing and future direct and indirect wholly owned domestic subsidiaries.

The amortization of original issue discount and debt issuance costs on the June 2017 First Lien Loan and May 2020 First Lien Loan wa s $ 3.6 million , $ 3.7 million, and $ 2.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, and is presented in Interest expense –

net in the Consolidated Statements of Operations.

The key terms of our debt agreements are as follows:

June 2017 First Lien Loan —The June 2017 First Lien Loan matures on June 30, 2024 and requires quarterly amortization payments equal to approximately 1.0 % of the original principal per annum.

The Revolving Facility did not require periodic payments.

All obligations under the June 2017 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

The June 2017 First Lien Loan is required to be prepaid, subject to certain exceptions, upon the following conditions:

(i) up to 50.0 % of excess cash flow subject to certain leverage ratios;

(ii) all of the net cash proceeds of certain asset sales or insurance/condemnation events subject to certain leverage ratios;

and (iii) all of the net cash proceeds of any issuance or incurrence of debt other than permitted debt.

At our option, the June 2017 First Lien Loan bears periodic interest of either (A) the LIBOR rate plus an applicable margin, ranging from 3.00 % to 3.50 % per annum based on the our first lien net leverage ratio, or (B) the base rate plus an applicable margin, ranging from 2.00 % to 2.50 % per annum based on our first lien net leverage ratio.

The LIBOR rate for the June 2017 First Lien Loan is subject to a 1.00 % floor.

The effective interest rate on the June 2017 First Lien Loan was 4.5 % per annum at December 31, 2021 and 2020.

May 2020 First Lien Loan —The May 2020 First Lien Loan, which we repaid in full on October 18, 2021, had a maturity date of May 22, 2026 , with springing maturity to June 30, 2024 if the June 2017 First Lien Loan, or a refinancing

On October 28, 2019 , we paid off the June 2017 Second Lien Loan balance.

The underlying revolving credit facility, part of the June 2017 First Lien Loan, was subsequently retired on May 22, 2020.

On October 18, 2021, we made an early principal payment related to the June 2017 First Lien Loan of $ 148.2 million in connection with, and using the proceeds from, the Merger Transaction and PIPE Financing.

On February 3, 2022, we repaid $ 190.7 million of the outstanding balance of the June 2017 First Lien Loan and refinanced the remaining balance with a new $ 275.0 million term loan.

The June 2017 First Lien Loan was held by third-party financial institutions and was carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

The fair value was estimated using quoted prices that are directly observable in the marketplace.

Therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2021, the June 2017 First Lien Loan had a fair value of $ 465.1 million as compared to the carrying amount of $ 460.1 million.

February 2022 First Lien Loan

On February 3, 2022, we entered into an amendment which refinanced the remaining June 2017 First Lien Loan with a new $ 275.0 million term loan (the "February 2022 First Lien Loan") with a maturity date of February 3, 2029 .

In connection with the February 2022 First Lien Loan, we also entered into a new revolving credit facility (the “Revolving Facility”), which allows for an aggregate principal amount of $ 100.0 million and has a maturity date of February 3, 2027 .

At December 31, 2022, we had no outstanding borrowings under our Revolving Facility.

The terms of the February 2022 First Lien Loan specified a secured overnight financing rate (“SOFR”) based floating interest rate and revised the springing financial covenant under the June 2017 First Lien Loan to require compliance with a first lien net leverage ratio when revolver borrowings exceed certain levels.

All obligations under the February 2022 First Lien Loan are unconditionally guaranteed by Hoya Intermediate and substantially all of Hoya Intermediate’s existing and future direct and indirect wholly owned domestic subsidiaries.

It requires quarterly amortization payments of $ 0.7 million.

The Revolving Facility does not require periodic payments.

All obligations under the February 2022 First Lien Loan are secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

The February 2022 First Lien Loan carries an interest rate of SOFR plus 3.25 %.

The SOFR rate for the February 2022 First Lien Loan is subject to a 0.5 % floor.

The effective interest rate on the February 2022 First Lien Loan was 7.98 % per annum at December 31, 2022.

Our February 2022 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

The fair value was estimated using quoted prices that are directly observable in the marketplace.

Therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2022, the fair value of our February 2022 First Lien Loan approximates the carrying value.

We are subject to certain reporting and compliance-related covenants to remain in good standing under the February 2022 First Lien Loan.

These covenants, among other things, limit our ability to incur additional indebtedness, and in certain circumstances, create restrictions on the ability to enter into transactions with affiliates;

create liens;

merge or consolidate;

and make certain payments.

Non-compliance with these covenants and failure to remedy could result in the acceleration of the loans or foreclosure on the collateral.

As of December 31, 2022, we were in compliance with all of our debt covenants related to the February 2022 First Lien Loan.

Due to the refinancing of the June 2017 First Lien Loan with the February 2022 First Lien Loan, we incurred a loss of $ 4.3 million for the year ended December 31, 2022, which is presented in Loss on extinguishment of debt in the Consolidated Statements of Operations.

May 2020 First Lien Loan

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

thereof with scheduled payments of principal prior to June 30, 2024, remained outstanding as of that date.

On May 22, 2020, we entered into a $ 260.0 million first lien term loan (the “May 2020 First Lien Loan”) that is pari passu with the June 2017 First Lien Loan.

The proceeds from the May 2020 First Lien Loan were used for general corporate purposes and to extinguish and retire t he revolving facility rel ated to the June 2017 First Lien Loan in full.

The May 2020 First Lien Loan had no required amortization payments.

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The LIBOR rate was subject to a 1.00 % floor and the base rate was subject to a 2.00 % floor.

All obligations under the May 2020 First Lien Loan were secured, subject to permitted liens and other exceptions, by first-priority perfected security interests in substantially all of our assets.

For any period ending prior to May 22, 2022, we had the option of submitting paid-in-kind elections, whereby the entire outstanding balance would be charged interest at 11.50 % per annum and interest amounts will be added to the outstanding principal.

On and after May 22, 2022 but prior to May 22, 2023, we had the option of submitting paid-in-kind elections with respect to all or some of the outstanding balance, whereby the portion for which such paid-in-kind election was made will be charged interest at a rate equal to the sum of i) 5.0 % per annum and ii) at the Borrower’s election, a LIBOR rate plus an applicable margin of 5.00 % per annum, or a base rate plus an applicable margin of 4.00 % per annum.

The effective interest rate on the May 2020 First Lien Loan was 11.50 % per annum at December 31, 2020.

On and after May 22, 2022 but prior to May 22, 2023, we had the option of submitting paid-in-kind elections with respect to all or some of the outstanding balance, whereby the portion for which such paid-in-kind election was made will be charged interest at a rate equal to the sum of i) 5.0 % per annum and ii) at our election, a LIBOR rate plus an applicable margin of 5.00 % per annum, or a base rate plus an applicable margin of 4.00 % per annum.

Under the terms of the May 2020 First Lien Loan, for certain prepayments and repricing transactions that occurred prior to May 22, 2023, we would owe a prepayment penalty of 3.0 % on the first $ 91.0 million of prepayments.

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For prepayments greater than $91.0 million on or after May 22, 2022 and prior to May 22, 2023, the amount exceeding $ 91.0 million would be subject to a prepayment penalty equal to 6.0 %.

The following is a summary of activity related to debt instruments during the years ended December 31, 2021 and 2020:

June 2017 First Lien Loan principal payments —We made quarterly principal payments of $ 4.8 million and $ 5.9 million during the years ended December 31, 2021 and 2020, respectively.

On October 18, 2021, we made a principal payment of $ 148.2 million in connection with, and using the proceeds from, the Merger Transaction.

We incurred a loss of $ 1.7 million for a portion of the remaining original issuance discount and issuance costs, which is presented as Loss on extinguishment of debt in the Consolidated Statements of Operations.

May 2020 First Lien Loan borrowing and payoff —On May 22, 2020, we entered into the May 2020 First Lien Loan and used the $ 260.0 million in proceeds to, among other things, repay and extinguish the Revolving Facility.

The total original debt discount costs and original debt issuance costs related to the May 2020 First Lien Loan borrowing were $ 6.5 million and $ 2.0 million, respectively, and are presented in Long-term debt –

net in the Consolidated Balance Sheets.

On October 18, 2021, in connection with, and using the proceeds from, the Merger Transaction, we paid off in full the remaining principal on the May 2020 First Lien Loan of $ 304.1 million.

Our May 2020 First Lien Loan was not traded and was carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

On October 18, 2021, in connection with, and using the proceeds from the Merger Transaction, we paid off in full the May 2020 First Lien Loan balance.

The debt extinguishment resulted in a loss of $ 34.1 million, which is presented in Loss on extinguishment of debt in the Consolidated Statements of Operations.

The loss consists of a $ 28.0 million prepayment penalty and the remaining balance of the original issuance discount and issuance costs of $ 6.1 million.

Revolving Facility drawdown and repayment —On March 17, 2020, we borrowed $ 50.0 million using its Revolving Facility.

This amount was repaid (and the Revolving Facility terminated in full) on May 22, 2020.

The debt extinguishment resulted in a loss of $ 0.7 million and is presented in Loss on extinguishment of debt in the Consolidated Statements of Operations.

Future maturities of our outstanding debt, excluding interest, as of December 31, 2022 were as follows (in thousands):

Employee Benefit Plan

We have a defined contribution and profit-sharing 401(k) plan that covers substantially all employees who meet eligibility requirements.

Participants may contribute to the plan, through regular payroll deductions, an amount subject to limitations imposed by the Internal Revenue Code.

The plan also provides for discretionary profit-sharing contributions and matching contributions.

We contributed approximately $ 1.3 million, $ 0.8 million, and $ 0.9 million in matching contributions for the years ended December 31, 2022, 2021, and 2020, respectively, and is included in

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NOTES to the Consolidated Financial Statements

Future maturities of our outstanding debt, excluding interest, as of December 31, 2021 were as follows (in thousands):

We are subject to certain reporting and compliance-related covenants to remain in good standing under the June 2017 First Lien Loan.

These covenants, among other things, limit our ability to incur additional indebtedness, and in certain circumstances, create restrictions on the ability to enter into transactions with affiliates;

create liens;

merge or consolidate;

and make certain payments.

Non-compliance with these covenants and failure to remedy could result in the acceleration of the loans or foreclosure on the collateral.

A s of December 31, 2021, we were in compliance with all of its debt covenants related to the June 2017 First Lien Loan.

General and administrative expense in the Consolidated Statements of Operations.

For the years ended December 31, 2022, and 2021, there were no discretionary profit-sharing contributions.

Financial Instruments

The financial instruments entered into by us are typically executed over-the-counter.

All financial instruments were measured at fair value on a recurring basis.

All financial instruments are measured at fair value on a recurring basis.

The fair value is derived from discounted cash flows adjusted for nonperformance risk.

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The credit valuation adjustment associated with the derivatives, related to the likelihood of default by us and the counterparty, was not significant to the overall valuation.

Refer to Note 14, Fair Value , for additional disclosure regarding fair value measurements.

Interest Rate Swaps

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The amount recognized in Interest expense —

net in the Consolidated Statements of Operations was $ 4.3 million and $ 2.1 million for the year ended December 31, 2020 and 2019.

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NOTES to the Consolidated Financial Statements

net in the Consolidated Statements of Operations was $ 4.3 million for the year ended December 31, 2020.

Interest Rate Cap

9 unchanged sentences

The design of the regression analysis addressed the effectiveness of the hedging relationship by considering how the hedge instrument performs against the forecasted transaction or hypothetical interest rate cap over historical months.

Historical changes in the fair value of the hedge instrument and the underlying item demonstrated the effectiveness of the hedging relationship.

Historical changes in the fair value of the hedge instrument and the underlying item demonstrated the effectiveness

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NOTES to the Consolidated Financial Statements

of the hedging relationship.

On an ongoing basis, we assess hedge effectiveness prospectively and retrospectively.

13 unchanged sentences

Ending accumulated derivative loss in AOCL

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NOTES to the Consolidated Financial Statements

The following table presents the effects of hedge accounting on AOCL for the year ended December 31, 2020 for interest rate contracts designated as cash flow hedges (in thousands):

3 unchanged sentences

Ending accumulated derivative loss in AOCL

We also entered into certain warrant agreements in connection with the Merger Transaction.

Refer to Note 18, Warrants , for additional details on our warrants.

Employee Benefit Plan

We have a defined contribution and profit-sharing 401(k) plan that covers substantially all employees who meet eligibility requirements.

Participants may contribute to the plan, through regular payroll deductions, an amount subject to limitations imposed by the Internal Revenue Code.

The plan also provides for discretionary profit-sharing contributions and matching contributions.

We contributed approximately $ 0.8 million, $ 0.9 million, and $ 1.1 million in matching contributions for the years ended December 31, 2021, 2020, and 2019, respectively, and is included in General and administrative expense in the Consolidated Statements of Operations.

For the years ended December 31, 2021, and 2020, there were no discretionary profit-sharing contributions.

We issued the following warrants during the year ended December 31, 2021 in connection with the Merger Transaction:

Public Warrants

W e issued warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share to former warrant holders of Horizon, of which 5,166,666 shares were issued to Horizon Sponsor.

These warrants are traded on the Nasdaq Stock Market under the symbol “SEATW.”

On May 26, 2022, we announced the commencement of an offer to the holders of outstanding Public Warrants to receive 0.240 shares of Class A common stock in exchange for each outstanding Public Warrant (the “Offer”).

On July 5, 2022, a total of 11,365,913 public warrants were tendered for 2,727,785 shares of Class A common stock (the “Exchange”).

Following the Exchange, 6,766,853 Public Warrants remained outstanding.

During the year ended December 31, 2022, ten Public Warrants were exercised.

The exercise of the Public Warrants are accounted for as a

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NOTES to the Consolidated Financial Statements

transaction within Additional paid-in capital in the Consolidated Balance Sheets.

As of December 31, 2022, we had 6,766,853 outstanding Public Warrants.

We may, in our sole discretion, reduce the exercise price of the Public Warrants to induce early exercise, provided that we provide at least five days advance notice.

The exercise price and number of Class A common stock shares issuable upon exercise of the Public Warrants may also be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation.

In no event are we required to net cash settle the Public Warrants.

The Public Warrants became exercisable 30 days following the Merger Transaction and expire at the earliest of five years following the Merger Transaction, our liquidation, or the date of redemption elected at our option provided that the value of the Class A common stock exceeds $ 18.00 per share.

There is an effective registration statement and prospectus relating to the shares issuable upon exercise of the Public Warrants.

Under certain circumstances, we may elect to redeem the Public Warrants at a redemption price of $ 0.01 per Public Warrant at any time during the term of the Public Warrant in which our Class A common stock share trading price has been at least $ 18.00 per share for 20 trading days within the 30 trading-day period.

If we elect to redeem the Public Warrants, we must notify the Public Warrant holders in advance, who would then have at least 30 days from the date of notification to exercise their respective warrants.

If the Public Warrant is not exercised within that 30-day period, it will be redeemed pursuant to this provision.

As part of the Merger Transaction, we modified the terms of the Public Warrants.

The modification resulted in a transfer of incremental value of $ 1.3 million to the holders of the Public Warrants, which we recorded as Other expenses in the Consolidated Statements of Operations during the year ended December 31, 2021.

Private Warrants

We issued warrants to purchase 6,519,791 shares of our Class A common stock at an exercise price of $ 11.50 per share to the Sponsor.

The Private Warrants have similar terms to the Public Warrants, except that the Private Warrants are not redeemable by us.

As part of the Merger Transaction, we modified the terms of the Private Warrants.

The modification did not result in a transfer of incremental value to the warrant holders.

As of December 31, 2022, we ha d 6,519,791 o utstanding Private Warrants.

Exercise Warrants

We issued warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share (“$ 10 Exercise Warrants”) and warrants to purchase 17,000,000 of Class A common stock at an exercise of $ 15.00 per share (“$ 15 Exercise Warrants”;

together with the $ 10 Exercise Warrants, “Exercise Warrants”).

The Exercise Warrants have similar terms to the Public Warrants, except that the Exercise Warrants have different exercise prices, an initial term of 10 years , are not redeemable by us, and are fully transferable.

As of December 31, 2022, we had 17,000,000 $ 10 Exercise Warrants outstanding and 17,000,000 $ 15 Exercise Warrants outstanding.

Mirror Warrants

Hoya Intermediate issued warrants to VSI to purchase 17,000,000 Intermediate Units at an exercise price of $ 10.00 per unit (“$ 10 Mirror Warrants”), warrants to purchase 17,000,000 Intermediate Units at an exercise of $ 15.00 per unit (“$ 15 Mirror Warrants”), warrants to purchase 24,652,557 Intermediate Units at an exercise price of $ 11.50 per unit (“$ 11.50 Mirror Warrants”;

together with the $ 10 Mirror Warrants and $ 15 Mirror Warrants, “Mirror Warrants”).

The number and terms of the Mirror Warrants are identical to the Public, Private and Exercise Warrants, respectively.

Upon the valid exercise of a Public Warrant, Private Warrant and Exercise Warrant, Hoya Intermediate will issue to VSI an equivalent number of Intermediate Units.

Similarly, if a Public, Private or Exercise Warrant is

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NOTES to the Consolidated Financial Statements

tendered, an equivalent number of Mirror Warrants will be tendered.

In connection with the Exchange, we tendered 11,365,913 $ 11.50 Mirror Warrants and received 2,727,785 Intermediate Units.

As of December 31, 2022, we had 17,000,000 $ 10 Mirror Warrants outstanding, 17,000,000 $ 15 Mirror Warrants outstanding and 13,286,644 $ 11.50 Mirror Warrants outstanding.

As the Public Warrants, Private Warrants and Exercise Warrants are indexed to our equity and meet the equity classification guidance of ASC 815-40, we reflect these warrants as a component of equity within additional paid-in capital.

Our Mirror Warrants eliminate in consolidation and do not impact the presentation of our consolidated financial statements.

Hoya Intermediate Warrants

Hoya Intermediate issued the Hoya Intermediate Warrants, which are classified as Other Liabilities in the Consolidated Balance Sheets.

1,000,000 Hoya Intermediate Warrants to purchase Intermediate Units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively (“Option Contingent Warrants”), were issued in tandem with stock options we issued to members of our management team (“Management Options”).

The Option Contingent Warrants only become exercisable by Hoya Topco if a Management Option is forfeited or expires unexercised.

As of December 31, 2022 , 0.2 million of the corresponding Management Options had been forfeited.

Hoya Intermediate Warrants allow for cash redemption at the option of the warrant holder.

Hence, the Hoya Intermediate Warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

Upon consummation of the Merger Transaction, we recorded a warrant liability of $ 20.4 million reflecting the fair value of the Hoya Intermediate Warrants determined using the Black Scholes model.

The fair value of the Hoya Intermediate Warrants includes Option Contingent Warrants of $ 1.6 million.

The estimated fair value of the Option Contingent Warrants is adjusted to reflect the probability of forfeiture of the Management Options based on historical forfeiture rates for Hoya Topco profit interests.

The following assumptions were used to calculate the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants at December 31, 2022 and 2021:

Estimated volatility

Expected term (years)

Risk-free rate

Expected dividend yield

For the year ended December 31, 2022, the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants decreased by $ 8.2 million, which is presented in Other income on the Consolidated Statements of Operations.

For the period fro m October 18, 2021 until December 31, 2021, we recognized a charge to Other expenses on the Consolidated Statements of Operations resulting from an increase in the fair value of the Hoya Intermediate Warrants and Option Contingent Warrants of $ 0.1 million.

Upon the valid exercise of a Hoya Intermediate Warrant for Intermediate Units, VSI will issue an equivalent amount of VSI Class B common shares to Hoya Topco.

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

Redeemable noncontrolling Interests

As of December 31, 2022, Hoya Topc o held 100 % of the Class B common stock in VSI and o wned 59.5 % of the Intermediate Units.

Hoya Topco has the right to exchange its Intermediate Units for shares of VSI Class A common stock on a one-to-one basis or cash proceeds of equal value at the time of redemption.

The option to redeem Intermediate Units for cash proceeds must be approved by the Board of VSI, which as of December 31, 2022, is controlled by investors in Hoya Topco.

The ability to put Intermediate Units is solely within the control of the holder

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NOTES to the Consolidated Financial Statements

of the redeemable noncontrolling interests.

If Hoya Topco elects the redemption to be settled in cash, the cash used to settle the redemption must be funded through a private or public offering of Class A common stock and subject to our Board's approval.

Net income (loss) attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate's net income (loss) incurred in the period by Hoya Topco's weighted average percentage allocation of Intermediate Units during the period.

Refer to Note 21, Earnings per Share , for computation of net income (loss) attributable to redeemable noncontrolling interests.

For periods prior to the Merger Transaction, Hoya Intermediate had Senior Preferred Units, Preferred Units, and Common Units, described below, authorized, issued and outstanding.

As described in Note 1, Background, Description of Business and Basis of Presentation , on October 18, 2021, we consummated a series of merger transactions between Horizon, VSI, and Hoya Intermediate.

Subsequent to the Merger Transaction, we have two classes of common stock authorized and issued by VSI:

Class A common stock and Class B common stock.

Hoya Intermediate Senior Preferred Units, Preferred Units, and Common Units

Prior to the Merger Transaction, Hoya Intermediate had authorized and issued 100 units of Redeemable Senior Preferred Units, 100 units of Redeemable Preferred Units and 100 common units.

In connection with the Merger Transaction, the Senior Preferred Units and the Preferred Units were redeemed and no longer remain outstanding.

As of December 31, 2022, 196,268,297 Intermediate Units are outstanding.

VSI holds 40.5 % of the outstanding Intermediate Units as of December 31, 2022, with the remainder held by Hoya Topco.

VSI Class A Common Stock

Holders of Class A common stock are entitled to full economic rights in VSI, including the right to receive dividends when and if declared by our Board, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

Each holder of Class A common stock is entitled to one vote for each share of Class A common stock held.

VSI Class B Common Stock

Holders of Class B common stock do not have economic rights in VSI but are entitled to one vote for each share of Class B common stock held.

Holders of Class B common stock receive one Intermediate Unit for each Class B share (see Note 15, Redeemable Noncontrolling Interest).

Holders of Class A common stock and Class B common stock vote as a single class on all matters requiring a shareholder vote.

Following the Merger Transaction, the quantity of Class A common stock and Class B common stock outstanding net of treasury stock is equal to the quantity of Intermediate Units outstanding.

Commitments and Contingencies

Purchase Obligations

We enter into non-cancelable arrangements, primarily related to the purchase of marketing services and tickets at an agreed upon price.

Our purchase obligations are $ 2.7 million payable in the next twelve months and $ 5.2 million payable thereafter.

From time to time, we are involved in various claims and legal actions arising in the ordinary course of business, none of which, in the opinion of management, could have a material effect on our business, financial position or results of operations other than those matters discussed herein.

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NOTES to the Consolidated Financial Statements

We are a co-defendant in a class action lawsuit in Canada alleging a failure to disclose service fees prior to checkout, which we have settled.

On January 5, 2022, we issued coupons to certain members of the class.

Other members were notified in 2022 that they are eligible to submit a claim for a coupon, which they will receive in 2023.

As of December 31, 2022 and December 31, 2021, a liability of $ 0.9 million was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to expected claim submissions and credit redemptions as of the measurement date.

We received multiple class action lawsuits related to customer compensation for cancellations, primarily as a result of COVID-19 restrictions.

A final order approving settlement of one of the lawsuits was entered by the court on November 1, 2021 .

As such, after insurance, $ 4.5 million was funded to a claims settlement pool in 2021 and fully disbursed in 2022.

A settlement was reached in another of the lawsuits in July 2022 which established a separate claims settlement pool of up to $ 2.5 million.

That settlement received final approval from the court on January 31, 2023 and the settlement pool will be funded in 2023.

As of December 31, 2022 and December 31, 2021, we had accrued a liability of $ 1.6 million and $ 1.7 million, respectively, within Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to these matters.

We expect to recover some of these costs under our insurance policies and have separately recognized an insurance recovery asset of $ 0.5 million within Prepaid expenses and other current assets in the Consolidated Balance Sheets at December 31, 2022 and December 31, 2021, respectively.

In 2018, the U.S.

Supreme Court issued its decision in South Dakota v.

Wayfair Inc., which overturned previous case law that had precluded states from imposing sales tax collection requirements on retailers without a physical presence in the state.

In response, most states have already adopted laws that attempt to impose tax collection obligations on out-of-state companies, and we have registered and are collecting tax, where required by statute.

However, states or local governments may continue to adopt laws requiring that we calculate, collect, and remit taxes on sales in their jurisdictions.

A successful assertion by one or more jurisdictions could result in tax liabilities, including taxes on past sales, as well as penalties and interest.

Based on our analysis of certain state regulations, specifically related to marketplace facilitators and ticket sales, we do not believe risk of loss is probable on historical revenue activities where tax has not already been remitted.

We continuously monitor state regulations and will implement required collection and remittance procedures if and when we are subject to such regulations.

Share Repurchase Program

On May 25, 2022, our board of directors authorized a share repurchase program of our Class A Common Stock of up to $ 40.0 million ("Repurchase Program").

The Repurchase Program was announced on May 26, 2022 and will be effective until March 31, 2023.

We may repurchase shares from time to time in open market transactions, through privately negotiated transactions or otherwise in accordance with applicable federal securities laws.

The amount and timing of repurchases will depend upon market conditions and other factors including price.

The Repurchase Program does not obligate us to acquire any particular amount of stock, and it may be terminated, modified, or suspended at any time at our discretion.

The Repurchase Program commenced on July 5, 2022 upon the completion of the Exchange of our Public Warrants.

As of December 31, 2022, we have repurchased 4.3 million shares of our Class A Common Stock for $ 32.5 million under the Repurchase Program.

The share repurchases are accounted for as Treasury stock in the Consolidated Balance Sheets.

Related-Party Transactions

Vivid Cheers Inc.

In December 2020, Vivid Cheers Inc.

(“Vivid Cheers”) was incorporated as a non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code.

Vivid Cheers’

mission is to support causes and organizations dedicated to healthcare, education, and support of workers in the live events industry during times of

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NOTES to the Consolidated Financial Statements

We have the right to elect the Board of Directors of Vivid Cheers, which currently comprises our executives.

We do not have a controlling financial interest in Vivid Cheers, and accordingly, do not consolidate Vivid Cheers’

statement of activities with its financial results.

We made charitable contributions of $ 0.6 million and $ 2.4 million for the years ended December 31, 2022 and 2021, respectively to Vivid Cheers.

We had no accrued charitable contributions payable as of December 31, 2022 and had $ 1.3 million of accrued charitable contributions payable as of December 31, 2021, which is included in Accrued expenses and other current liabilities in the Consolidated Balance Sheet.

Viral Nation Inc.

("Viral Nation") is a marketing agency that creates viral and social media influencer campaigns and provides advertising, marketing, and technology services.

Todd Boehly, a member of our Board, is the co-founder, Chairman and CEO of Eldridge Industries, which owns in excess of 25% of Viral Nation.

We incurred an expense of $ 0.8 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

Rolling Stone

Rolling Stone is a high-profile magazine and media platform that focuses on music, film, TV, and news coverages.

Todd Boehly, a member of our Board, is the co-founder, Chairman and CEO of Eldridge Industries, which owns in excess of 20% of Rolling Stone.

We incurred an expense of $ 0.9 million and $ 0.1 million as part of our multifaceted partnership with Rolling Stone for the years ended December 31, 2022 and 2021, respectively, which is presented in Marketing and selling expenses in the Consolidated Statements of Operations.

Khoros, LLC ("Khoros") is a social media engagement and management platform.

Martin Taylor, a member of our Board, is a principal at Vista Equity Partners, which is one of our investors and a majority owner of Khoros.

We incurred an expense of $ 0.1 million and zero for the years ended December 31, 2022 and 2021, respectively, which is presented in General and administrative expenses in the Consolidated Statements of Operations.

We are subject to U.S.

federal and state income taxes with respect to our allocable share of any taxable income or loss of Hoya Intermediate generated after the Merger Transaction, as well as any stand-alone income or loss we generate.

federal and state income taxes with respect to our allocable share of any taxable income or loss of Hoya Intermediate, as well as any stand-alone income or loss we generate.

Hoya Intermediate is organized as a limited liability company and treated as a partnership for federal tax purposes, with the exception to the Canadian operations of Vivid Seats Canada Ltd.

(formerly Fanxchange Ltd.), which we acquired in 2019.

Instead, Hoya Intermediate’s taxable income or loss is passed through to its members, including Vivid Seats Inc.

Vivid Seats Inc.

files and pays corporate income taxes for U.S.

Hoya Intermediate’s taxable income or loss is passed through to its members, including VSI.

VSI files and pays corporate income taxes for U.S.

federal and state income tax purposes.

We anticipate this structure to remain in existence for the foreseeable future.

Components of loss from continuing operations before income taxes for the years ended December 31 were as follows (in thousands):

Components of (loss) income from continuing operations before income taxes for the years ended December 31 were as follows (in thousands):

United States

Total loss before income taxes

Total (loss) income before income taxes

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1 unchanged sentence

Prior to 2021, we did not incur material amounts of income tax expense or have material income tax liability or deferred tax balances.

During 2021, significant components of income tax expense were as follows (in thousands):

During the years ended December 31, 2022 and 2021, significant components of income tax (expense) benefit were as follows (in thousands):

State & Local

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A reconciliation of income taxes computed at the U.S.

federal statutory income tax rate of 21 % to our income tax expense was as follows:

federal statutory income tax rate of 21 % for 2022 and 2021 to our income tax (expense) benefit was as follows:

statutory tax rate

4 unchanged sentences

Change in valuation allowance

Deferred tax partnership adjustment

Warrants remeasurement

Research & Development Credit

Total income tax expense (benefit)

As of December 31, 2021, our deferred tax balances consisted of the following (in thousands):

As of December 31, 2022 and 2021, our deferred tax balances consisted of the following (in thousands):

Deferred Tax Assets

Net operating loss

Interest carryforward

Interest carryforwards

Investment in partnerships

4 unchanged sentences

Total Deferred Tax Liabilities

Net Deferred Tax Asset / Liabilities

We recognize deferred tax assets to the extent we believe these assets are more likely than not to be realized.

Valuation allowances have been established primarily with regard to the tax benefits of certain net operating losses, tax credits, as well as its investment in partnerships.

In making such a determination, we considered all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

After considering all those factors, we

Net Deferred Tax Assets / (Liabilities)

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NOTES to the Consolidated Financial Statements

recorded $ 145.7 million of a valuation allowance against our deferred tax assets, as these assets are not more likely than not to be realized.

We recognize deferred tax assets to the extent we believe these assets are more likely than not to be realized.

Valuation allowances have been established primarily with regard to the tax benefits of certain net operating losses, tax credits, as well as its investment in partnership.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

After considering all those factors, we recorded a $ 118.7 million valuation allowance against our deferred tax assets, as we have determined these assets are not more likely than not to be realized as of December 31, 2022.

Excluded from the deferred tax asset for investment in partnerships above is a portion of the income tax basis in the partnership investment which will only reverse upon sale as a capital loss.

As the Company does not expect to have sufficient sources of future capital gains to offset this future capital loss, the Company has not recorded a deferred tax asset for this portion of the basis difference in the investment in the partnership.

The deferred tax asset valuation allowance and changes were as follows (in thousands):

Balance of beginning of period

Balance at beginning of period

Charged to costs and expenses

1 unchanged sentence

Ending balance

(1) This relates to a true-up of the investment in partnership deferred tax asset and related valuation allowance which has been updated to remove the basis that will only reverse upon sale as a capital loss.

As of December 31, 2022, we determined that there is sufficient positive evidence to conclude that it is more likely than not that our Canadian deferred taxes of $ 1.9 million are realizable.

We therefore reduced the valuation allowance accordingly.

We expect to continue maintaining a full valuation allowance on our U.S.

net deferred tax asset until there is sufficient positive evidence to support the reversal of a portion of this allowance.

However, given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that within the next 3-6 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion or the entirety of the valuation allowance will no longer be necessary to be recorded against our U.S.

net deferred tax assets.

Release of the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and an income tax benefit in the period in which the release of the valuation allowance is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of positive evidence becoming available.

At December 31, 2022, we had U.S.

state operating loss carryforwards totaling $ 16.1 million, U.S federal operating loss carryforwards totaling $ 32.0 million.

state operating loss carryforwards totaling $ 23.0 million, U.S.

federal operating loss carryforwards totaling $ 45.5 million.

federal and state operating loss carryforwards begin to expire in 2029 with $ 46.4 million of the operating loss carryforwards having no expiration date.

At December 31, 2022, with respect to our operations outside the U.S., we had foreign operating loss carryforwards totaling $ 5.3 million.

The foreign operating loss carryforwards begin to expire in 2022 .

At December 31, 2021, we were not indefinitely reinvested on undistributed earnings from its foreign operations and the deferred tax liability associated with the future repatriation of these earnings is expected to be immaterial.

The foreign operating loss carryforwards begin to ex pire in 2037 .

At December 31, 2022, we were not indefinitely reinvested on undistributed earnings from our foreign operations and the deferred tax liability associated with the future repatriation of these earnings is expected to be immaterial.

ASC 740, Income Taxes, prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements.

We note that as of December 31, 2021, we had no uncertain tax positions recorded in any jurisdiction.

Our unrecognized tax benefits which relate to a tax refund are as follows:

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NOTES to the Consolidated Financial Statements

Balance at beginning of the year

Tax positions taken in the prior year

Balance at end of the year

We classified interest and penalties associated with income taxes in income tax expense (benefit) within the consolidated statements of operations.

We did not recognize any interest and penalties during 2022.

There was no liability recognized related to interest and penalties as of December 31, 2022.

The total amount of gross unrecognized tax benefits that, if recognized, would impact the effective tax rate is $ 7.5 million as of December 31, 2022.

We are subject to routine audits by taxing jurisdictions.

1 unchanged sentence

There are currently no audits for any tax periods in progress.

Our financial assets and liabilities are valued using market prices on both active markets (Level 1), less active markets (Level 2) and little or no market activity (Level 3).

Level 1 instrument valuations are obtained from unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using other inputs that are directly or indirectly observable in the marketplace.

Level 3 instrument valuations typically reflect management’s estimate of assumptions and are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

We did not have any transfers of financial instruments between valuation levels during the years ended December 31, 2021 and 2020.

Cash and cash equivalents include all cash balances and highly liquid investments purchased with maturities of three months or less.

Our cash and cash equivalents consist primarily of domestic bank accounts, interest-bearing deposit accounts, and money market accounts managed by third-party financial institutions.

Cash and cash equivalents are valued by us based on quoted prices in an active market, which represent a Level 1 measurement within the fair value hierarchy.

The fair value for our derivative instruments is based upon inputs corroborated by observable market data with similar tenors, which are considered Level 2 inputs.

Refer to Note 11, Financial Instruments, for further details on our derivative instruments.

Our June 2017 First Lien Loan is held by third-party financial institutions and is carried at the outstanding principal balance, less debt issuance costs an d any unamortized discount or premium.

The fair value was estimated using quoted prices that are directly observable in the marketplace, therefore, the fair value is estimated on a Level 2 basis.

At December 31, 2021, the June 2017 First Lien Loan had a fair value of $ 465.1 million as compared to the

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NOTES to the Consolidated Financial Statements

carrying amount of $ 460.1 million.

At December 31, 2020, the June 2017 First Lien Loan had a fair value of $ 583.1 million as compared to the carrying amount of $ 609.1 million.

We made a partial principal payment of $ 148.2 million on this loan in connection with, and using the proceeds from, the business combination.

Refer to Note 10, Debt , for further information.

Our May 2020 First Lien Loan is not traded and is carried at the outstanding principal balance, less debt issuance costs and any unamortized discount or premium.

The fair value was estimated by discounting the future cash flows using current interest rates at which similar borrowings with similar maturities would be made to borrowers with similar credit ratings.

The fair value was estimated assuming prepayment of the loan upon the loan's third anniversary and is estimated on a Level 3 basis, as provided by ASC Topic 820, Fair Value Measurement .

During the year ended December 31, 2021, we repaid this loan in full in connection with, and using the proceeds from, the business combination.

Refer to Note 10, Debt , for further information.

At December 31, 2020, the May 2020 First Lien Loan had a fair value of $ 319.9 million as compared to the carrying amount of $ 268.2 million.

Refer to Note 10, Debt , for key terms of the June 2017 First Lien Loan and the May 2020 First Lien Loan.

In Connection with the Merger Transaction, we issued Hoya Intermediate Warrants to Hoya Topco, which are classified as Other Liabilities on the Consolidated Balance Sheets.

The Hoya Intermediate Warrants are remeasured to fair value each reporting period using the Black-Scholes valuation model.

Significant inputs used in the valuation of the Hoya Intermediate Warrants include the volatility, risk-free interest rate, and dividend yield.

Other financial instruments, including accounts receivable and accounts payable, are carried at cost, which approximates their fair value because of the short-term nature of these instruments.

Our non-financial assets, such as goodwill, intangible assets, and long-lived assets are measured at fair value on a nonrecurring basis, utilizing Level 3 inputs.

Significant Unobservable Inputs

Range (Weighted

Discount rate

12.5 % - 13.5 % ( 13.0 %)

Long-term growth rate

2.5 % - 3.5 % ( 3.0 %)

The following table presents the sensitivities to changes in the significant unobservable inputs above (in thousands):

50 basis point increase in discount rate

50 basis point decrease in long-term growth rate

Refer to Note 5, Impairments , for disclosure of our fair value methodologies applied to goodwill, intangible assets, and long-lived assets.

Commitments and Contingencies

Our future minimum cash obligations as of December 31, 2021, were as follows (in thousands):

Operating leases

Purchase obligations

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Operating Leases —We lease office space under several non-cancelable operating leases expiring at various dates through November 2025.

The le ases require monthly rental payments, which escalate over the term of the leases.

We are also responsible for our proportionate share of real estate taxes, insurance, and common area maintenance.

Rent expense was $ 3.7 million, $ 2.8 million, and $ 2.7 million for the years ended December 31, 2021, 2020, and 2019, respectively, and is included in General and administrative expense in the Consolidated Statements of Operations.

During 2021, we early terminated our h eadquarters lease and recorded a $ 1.3 million lease termination expense in General and administrative expense in the Consolidated Statements of Operations.

We entered into a new 11 -year lease expiring on December 31, 2034 with an annual payment ranging from $ 1.5 million to $ 1.8 million.

Lease expense is recognized on a straight-line basis over the term of the lease.

The excess of straight-line expense over cash paid is shown as a deferred rent liability and is recorded in Other liabilities in the Consolidated Balance Sheets.

The leases also require security deposits which are recorded as a component of Other non-current assets in the Consolidated Balance Sheets.

Purchase Obligations —We enter into non-cancelable arrangements, primarily related to the purchase of marketing services and tickets at an agreed upon price.

Litigation —We, from time to time, are involved in various claims and legal actions arising in the ordinary course of business, none of which, in the opinion of management, could have a material effect on our business, financial position or results of operations other than those matters discussed herein.

We are a co-defendant in a class action lawsuit in Canada alle ging a failure to disclose service fees prior to checkout.

On January 5, 2022, we issued coupons to certain members of the class.

Other members will be notified in 2022 that they are eligible to submit a claim for a coupon.

As of December 31, 2021 and 2020, a liability of $ 0.9 million and $ 1.1 million, respectively, was recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to expected credit redemptions as of the measurement date.

We received multiple class action lawsuits related to customer compensation for cancellations, primarily as a result of COVID-19 restrictions.

A final order approving settlement of one of the lawsuits was entered by the court on November 1, 2021 .

As such, after insurance, $ 4.5 million was funded to a claims settlement pool and is included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

As of December 31, 2021 and 2020, we had accrued a liability of $ 1.7 million and $ 2.6 million, respectively, in Accrued expenses and other current liabilities in the Consolidated Balance Sheets related to these matters.

We expect to recover some of these costs under our insurance policies and have separately recognized an insurance recovery asset of $ 0.5 million and $ 2.5 million, respectively, within Prepaid expenses and other current assets in the Consolidated Balance Sheets at December 31, 2021 and 2020.

Other —In 2018, the U.S.

Supreme Court issued its decision in South Dakota v.

Wayfair Inc., which overturned previous case law that had precluded states from imposing sales tax collection requirements on retailers without a physical presence in the state.

In response, most states have adopted laws that attempt to impose tax collection obligations on out-of-state companies.

We have registered, or are in the process of registering, where required by statute.

There remains a degree of uncertainty as to our obligations in jurisdictions where our registration is still in progress due to the complex laws that govern secondary ticket sales.

Pending discussions, it is more likely than not some jurisdictions could assess taxes and assessed amounts may differ materially from amounts currently accrued.

It is also possible that some jurisdictions may provide for a later start date for sales tax collection, which could provide a material reduction in amounts currently accrued.

In either case, we will adjust the recorded liability to reflect the new information, with a portion of the adjustment impacting orders placed in prior periods.

We have recognized a liability for this potential tax of $ 8.8 million and $ 16.8 million at December 31, 2021 and 2020, respectively.

This liability is recorded in Accrued expenses and other current liabilities in the Condensed Consolidated

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Balance Sheets.

The related sales tax expense was $ 9.0 million, $ 6.8 million, and $ 10.0 million for the years ended December 31, 2021, 2020, and 2019, respectively, which reflects uncollected amounts owed to jurisdictions reduced by abatements received.

Segment Reporting

Our reportable segments are Marketplace and Resale.

Through the Marketplace segment, we act as an intermediary between ticket buyers and sellers within our online secondary ticket marketplace.

Through the Resale segment, we acquire tickets from primary sellers, which it then sells through secondary ticket marketplaces.

Revenues and contribution margin are used by our Chief Operating Decision Maker (“CODM”) to assess performance of the business.

We define contribution margin as revenues less cost of revenues and marketing and selling expenses.

We do not report our assets, capital expenditures, or related depreciation and amortization expenses by segment, because our CODM does not use this information to evaluate the performance of our operating segments.

The following table represents our segment information for the year ended December 31, 2021 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Income from operations

Interest expense –

Loss on extinguishment of debt

Other expenses

Loss before income taxes

The following table represents our segment information for the year ended December 31, 2020 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Impairment charges

Loss from operations

Interest expense –

Loss on extinguishment of debt

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table represents our segment information for the year ended December 31, 2019 (in thousands):

Cost of revenues (exclusive of depreciation and amortization shown separately below)

Marketing and selling

Contribution margin

General and administrative

Depreciation and amortization

Loss from operations

Interest expense - net

Loss on extinguishment of debt

Substantially all of our sales occur and assets reside in the United States.

For periods prior to the Merger Transaction, Hoya Intermediate had Senior Preferred Units, Preferred Units, and Common Units, described below, authorized, issued and outstanding.

As described in Note 1, Background, Description of Business and Basis of Presentation , on October 18, 2021, we consummated a series of merger transactions between Horizon, Vivid Seats Inc., and Hoya Intermediate.

Subsequent to the Merger Transaction, we have two classes of common stock authorized and issued by Vivid Seats Inc.:

Class A common stock and Class B common stock.

Hoya Intermediate Senior Preferred Units, Preferred Units, and Common Units

Prior to the Merger Transaction, Hoya Intermediate had authorized and issued 100 units of Redeemable Senior Preferred Units, 100 units of Redeemable Preferred Units and 100 common units.

The Senior Preferred Units held first and second priority liquidation preference:

first for an amount equal to the sum of the amount of the aggregate unpaid yield and aggregate unreturned capital, and second for payment of any reasonable out-of-pocket expenses associated with certain agreements.

The Preferred Units had a liquidation preference subsequent to the Senior Preferred Units, but before the Common Units, for an amount equal to the aggregate unreturned capital.

Senior Preferred Units compounded semi-annually at a per annum yield rate of 12.5 %.

Unit holders were entitled to distributions when declared by our former parent, Hoya Topco, LLC.

As of December 31, 2020, no distributions toward unpaid yield or unreturned capital were made.

As of December 31, 2020 and up to the Merger Transaction, the Senior Preferred Units and Preferred Units were deemed to be currently redeemable and were measured at the maximum redemption amount, with the offset recorded to Additional paid-in capital on the Consolidated Balance Sheets.

Therefore, the Senior Preferred Units were accreted to an amount equal to their liquidation preference plus the applicable premium, and the Preferred Units were carried at an amount equal to their unreturned capital.

In connection with the Merger Transaction, the Senior Preferred Units and the Preferred Units were redeemed and no longer remain outstanding.

As of December 31, 2021, 197,291,871 Comm on Units of Hoya Intermediate are outstanding.

Vivid Seats Inc.

holds 40.1 % of the outstanding Common Units in Hoya intermediate as of December 31, 2021, with the remainder held by Hoya Topco.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Vivid Seats Inc.

Class A Common Stock

In connection with the Merger Transaction, Vi vid Seats Inc.

issued 29,431,260 shares of Class A common stock.

We issued an additional 2,143,438 shares of Class A common stock as part of the acquisition of Betcha.

Holders of Class A common stock are entitled to full economic rights, including the right to receive dividends when and if declared by our Board, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

Each holder of Class A common stock is entitled to one vote for each share of Class A common stock held.

Vivid Seats Inc.

Class B Common Stock

In connection with the Merger Transaction, Vivid Seats Inc.

issued 118,200,000 shares of Class B common stock.

Holders of Class B common stock do not have econ omic rights but are entitled to one vote for each share of Class B common stock held.

Holders of Class A common stock and Class B common stock vote as a single class on all matters requiring a shareholder vote.

Following the Merger Transaction, the quantity of Vivid Seats Inc.

Class A common stock and Class B common stock is equal to the quantity of Hoya Intermediate common units outstanding.

In connection with the Merger Transaction, we issued Public Warrants, Private Warrants, and Exercise Warrants (collectively, the “Class A Warrants”), which are recorded as a component of equity.

Class A Warrants —We issued the following Class A Warrants in connection with the Merger Transaction:

Public Warrants —We issued Public Warrants to purchase 18,132,776 shares of Class A common stock at an exercise price of $ 11.50 per share to former warrant holders of Horizon, of which 5,166,666 shares were issued to Horizon Sponsor, LLC.

We may, in our sole discretion, reduce the exercise price of the Public Warrants to induce early exercise, provided that we provide at least five days advance notice.

The exercise price and number of Class A common stock shares issuable upon exercise of the warrants may also be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation.

In no event are we required to net cash settle the Public Warrants.

The Public Warrants became exercisable 30 days following the Merger transaction and expire at the earliest of five years following the Merger Transaction, liquidation of the Company, or the date of redemption elected at our option provided that the value of common stock exceeds $ 18.00 per share.

There is an effective registration statement and prospectus relating to the shares issuable upon exercise of the warrants.

Under certain circumstances, we may elect to redeem the Public Warrants at a redemption price of $ 0.01 per Public Warrant at any time during the term of the warrant in which our Class A common stock share trading price has been at least $ 18.00 per share for 20 trading days within the 30 trading-day period.

If we elect to redeem the warrants, it must notify the Public Warrant holders in advance, who would then have at least 30 days from the date of notification to exercise their respective warrants.

If the warrant is not exercised within that 30-day period, it will be redeemed pursuant to this provision.

As of December 31, 2021, we had 18,132,776 outstanding public warrants to purchase 18,132,776 shares of our Class A common stock.

As part of the Merger Transaction, we modified the terms of the Public Warrants.

The modification resulted in a transfer of incremental value of $ 1.3 million to the holders of the Public Warrants, which we recorded as Other expenses in the Consolidated Statements of Operations.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Private Warrants —We issued Private Warrants to purchase 6,519,791 shares of our Class A common stock at an exercise price of $ 11.50 per share to former warrant holders of Horizon.

The Private Warrants have similar terms to the Public Warrants, except that the Private Warrants are not redeemable by us.

As of December 31, 2021, we had 6,519,791 outstanding private warrants to purchase 6,519,791 shares of our Class A common stock.

As part of the Merger Transaction, we modified the terms of the Private Warrants.

The modification did not result in a transfer of incremental value to the warrant holders.

Exercise Warrants —We issued warrants to purchase 17,000,000 shares of Class A common stock at an exercise price of $ 10.00 per share and warrants to purchase 17,000,000 of Class A common stock at an exercise of $ 15.00 per share.

As of December 31, 2021, we had 34,000,000 outstanding Exercise Warrants to purchase 34,000,000 shares of our Class A common stock.

As the Class A Warrants are indexed to our equity and meet the equity classification guidance of ASC 815-40, we reflect these warrants as a component of equity within additional paid-in capital.

Upon the valid exercise of a Class A Warrant for Class A common shares of Vivid Seats Inc., Hoya Intermediate will issue to Vivid Seats Inc.

an equivalent number of Intermediate Common Units.

Hoya Intermediate Warrants —Hoya Intermediate issued Hoya Intermediate Warrants to Hoya Topco, which consist of warrants to purchase 3,000,000 Hoya Intermediate common units at an exercise price of $ 10.00 per unit and warrants to purchase 3,000,000 Hoya Intermediate common units at an exercise price of $ 15.00 per unit.

A portion of the Hoya Intermediate Warrants, which consists of warrants to purchase 1,000,000 Hoya Intermediate common units at exercise prices of $ 10.00 and $ 15.00 per unit, respectively, were issued in tandem with stock options issued by Vivid Seats, Inc.

to members of our management team.

The Option Contingent Warrants only become available to exercise by Hoya Topco in the event that a corresponding management option is forfeited.

As of December 31, 2021, none of the Option Contingent Warrants are available to exercise by Hoya Topco.

Our Hoya Intermediate Warrants are exercisable for Hoya Intermediate common units, which allow for a potential cash redemption at the discretion of the unit holder.

Hence, the Hoya Intermediate Warrants are classified as a liability in Other liabilities on our Consolidated Balance Sheets.

Upon consummation of the Merger Transaction, we recorded a warrant liability of $ 20.4 million, reflecting the fair value of the Hoya Intermediate Warrants determined using the Black Scholes model.

The fair value of the Hoya Intermediate Warrants includes Option Contingent Warrants of $ 1.6 million.

The estimated fair value of the Option Contingent Warrants is adjusted to reflects the probability of forfeiture of the corresponding stock options based on historical forfeiture rates for Hoya Topco profits interests.

The following assumptions were used to calculate the fair value of the Hoya Intermediate and Option Contingent Warrants at December 31, 2021 and upon consummation of the Merger Transaction:

Estimated volatility

Expected term (years)

Risk-free rate

Expected dividend yield

For the period from October 18, 2021 until December 31, 2021, we recognized a charge to Other expenses on the Consolidated Statements of Operations resulting from an increase in the fair value of the warrant s of $ 0.1 million.

Upon the valid exercise of a Hoya Intermediate Warrant for Common Units in Hoya Intermediate, Vivid Seats Inc.

will issue an equivalent amount of Vivid Seats Inc.

Class B common shares to Hoya Topco.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Redeemable noncontrolling Interests

As of December 31, 2021, Hoya Topc o owns 59.9 % of the Common Units of Hoya Intermediate and 40.1 % of the voting power.

Hoya Topco has the right to exchange its common units in Hoya Intermediate for shares of Vivid Seats Class A common stock on a one-to-one basis or cash proceeds for an equivalent amount.

The option to redeem Hoya Intermediate common units for cash proceeds must be approved by the Board of Vivid Seats Inc., which as of December 31, 2021, is controlled by investors in Hoya Topco.

The ability to put common units is solely within the control of the holder of the redeemable noncontrolling interests.

If Hoya Topco elects the redemption to be settled in cash, the cash used to settle the redemption must be funded through a private or public offering of Class A Common Stock and subject to our Board's approval.

The financial results of Hoya Intermediate and its subsidiaries are consolidated with Vivid Seats Inc., with the redeemable noncontrolling interests' share of our net loss separately allocated.

Equity-Based Compensation

The 2021 Incentive Award Plan ("2021 Plan") was approved and adopted in order to facilitate the grant of equity incentive awards to our employees and directors.

The 2021 Incentive Award Plan ("2021 Plan") was approved and adopted to facilitate the grant of equity incentive awards to our employees, directors and consultants.

The 2021 Plan became effective on October 18, 2021 upon closing of the Merger Transaction.

On October 19, 2021, we granted 1,408,773 RSUs to directors and certain employees.

RSUs granted to directors vest on an annual basis over a five-year period, subject to the directors' continued service on the Board.

RSUs granted to employees vest on a quarterly basis over a four-year period, subject to the employee’s continued employment through the applicable vesting date.

We award RSUs to our employees, directors and consultants.

RSUs vest generally over periods from one to three years from issuance.

We account for forfeitures of outstanding, but unvested grants, in the period they occur.

A summary of activity for RSUs for the year ended December 31, 2021 is as follows (in thousands):

A summary of activity for RSUs is as follows (in thousands):

Weighted-Average Grant Date Fair Value Per Share

1 unchanged sentence

Unvested at December 31, 2022

Unrecognized compensation expense relating to unvested RSUs as of December 31, 2021, wa s $ 16.9 million, which is expected to be recognized over a weighted average period of approximately four years .

Stock options

On October 19, 2021, we granted 3,061,486 stock options at an exercise price of $ 13.09 and 1,000,000 stock options at an exercise price of $ 15.00 to certain employees.

Stock options provide for the purchase of shares of Vivid Seats Class A common stock in the future at an exercise price set on the grant date.

These stock options vest on a quarterly basis over a four-year period and expire ten years from the date of the grant, subject to the employee’s continued employment through the applicable vesting date.

Unrecognized compensation expense relating to unvested stock options as of December 31, 2021, was $ 14.5 million, w hich is expected to be recognized over a weighted average period of approximately four years .

No stock options were exercised or forfeited during the year ended December 31, 2021.

On October 19, 2021, we granted 3.1 million stock options at an exercise price of $ 13.09 and 1.0 million stock options at an exercise price of $ 15.00 to certain employees.

The fair value of stock options granted during 2021 is estimated on the grant date using the Hull-White model.

On March 11 ,2022, we gr anted 2.6 millio n stock options at an exercise price of $ 10.26 and grant fair value of $ 3.99 per option, and on November 11, 2022, we granted 0.1 million stock options at an exercise price of $ 8.22 and grant fair value of $ 3.66 , to certain employees.

The fair value of stock options granted during 2022 is estimated on the grant date using the Black-Scholes model.

Stock options provide for the purchase of shares of our Class A common stock in the future at an exercise price set on the grant date.

These stock options vest over three years , with one-third vesting upon the one-year anniversary of the grant date and the remaining portion vesting on a quarterly basis thereafter.

The stock options have a contractual term of ten years from the date of the grant, subject to the employee’s continued service through the applicable vesting date.

The following assumptions were used to calculate the fair value of our stock awards:

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The fair value of stock options granted is estimated on the grant date using the Hull-White model.

This valuation model requires us to make assumptions and judgments about the variables used in the calculation, including the sub-optimal exercise factor (“SOEF”), the volatility of our common stock, risk-free interest rate, and expected dividends.

We use the Hull-White model under the SEC’s Staff Accounting Bulletin No.

107, Share-Based Payment, as the options were effectively out of the money on the date of grant as we had announced, but not issued, a one-time dividend.

Changes in assumptions made on the risk-free rate of interest, and expected volatility can materially impact the estimate of fair value and ultimately how much share-based compensation expense is recognized.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the time of grant and corresponds to the full term of the options.

The expected volatility is estimated on the date of grant based on the statistics of historical stock return volatility of comparable publicly-traded companies as well as the implied volatility of our publicly traded warrants.

The following assumptions were used to calculate the fair value of our stock awards on the date of grant for the year ended December 31, 2021:

November 11, 2022

March 11, 2022

October 19, 2021

Estimated volatility

2 unchanged sentences

Expected dividend yield

A summary of activity for stock options is as follows (in thousands):

Outstanding Options

Weighted Average Exercise Price Per Option

Weighted Average Remaining Contractual Life (in Years)

Aggregate Intrinsic Value

Outstanding at December 31, 2021

Outstanding at December 31, 2022

Vested and exercisable at December 31, 2022

No options were vested and exercisable as of December 31, 2021.

The weighted-average grant-date fair value per stock options outstanding as of December 31, 2022 and 2021 was $ 3.82 and $ 3.71 , respectively.

The weighted-average grant-date fair value for stock options forfeited was $ 3.83 during the year ended December 31, 2022.

The weighted-average grant-date fair value for stock options vested was $ 3.71 during the year ended December 31, 2022.

During 2022, the total fair value of options vested was $ 3.5 million.

Profits interest and Phantom Units

Prior to the Merger Transaction, certain members of management received equity-based compensation awards for profits interest in Hoya Topco, LLC in the form of Incentive Units, Phantom Units, Class D Units, and Class E Units.

Each incentive unit vests ratably over five years and accelerates upon a change in control of Hoya Topco, LLC.

Prior to the Merger Transaction, certain members of management received equity-based compensation awards for profits interest in Hoya Topco in the form of Incentive Units, Phantom Units, Class D Units, and Class E Units.

Each incentive unit vests ratably over five years and accelerates upon a change in control of Hoya Topco.

We do not expect any future profits interest to be granted after the Merger Transaction.

10 unchanged sentences

NOTES to the Consolidated Financial Statements

The following table summarizes the Hoya Topco, LLC Incentive Units, Class D Units, and Class E Units for the years ended December 31, 2021, 2020, and 2019:

The following table summarizes the Hoya Topco Incentive Units, Class D Units, and Class E Units for the years ended December 31, 2022, 2021, and 2020:

Class B-1 Units

20 unchanged sentences

Balances at December 31, 2022

Unrecognized compensation expense as of December 31, 2021 related to these incentive units was $ 9.1 million, which is expected to be recognized over a weighted average period of approximately three years .

The following assumptions were used to calculate the fair value of our unit awards on the date of grant for the years ended December 31, 2020 and 2019:

Estimated volatility

47.0 % - 102.0 %

44.0 % - 47.0 %

Expected term (years)

Risk-free rate

0.1 % - 1.6 %

1.6 % - 2.2 %

Expected dividend yield

Compensation expense

For the years ended December 31, 2021, 2020 and 2019, equity-based compensation expense related to RSUs, stock options and profits interest was $ 6.0 million, $ 4.3 million and $ 5.2 million, respectively.

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to RSUs was $ 8.4 million, $ 0.8 million and zero , respectively.

Unrecognized compensation expense relating to unvested RSUs as of December 31, 2022, was approximately $ 26.6 million, which is expected to be recognized over a weighted average period of approximately three years .

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to stock options was $ 6.2 million, $ 0.8 million and zero , respectively.

Unrecognized compensation expense relating to unvested stock options as of December 31, 2022, was approximately $ 19.1 million, which is expected to be recognized over a weighted average period of approximately three years .

For the years ended December 31, 2022, 2021 and 2020, equity-based compensation expense related to profit interests was $ 4.5 million, $ 4.4 million and $ 4.3 million, respectively.

Unrecognized compensation expense as of December 31, 2022 related to these incentive units was $ 4.5 million, which is expected to be recognized over a weighted average period of approximately two years .

For the year ended December 31, 2022, equity-based compensation expense excludes $ 0.1 million related to capitalized development costs.

Our Board declared a special dividend of $ 0.23 per share to holders of Class A common stock on October 18, 2021, which we paid on November 2, 2021 .

On November 2, 2021, the exercise price was modified and reduced by the same $ 0.23 per share.

On November 2, 2021, the exercise price of outstanding options was modified and reduced by the same $ 0.23 per share.

The amount recognized in the compensation expense relating to stock option modifications for the year ended December 31, 2021 is immaterial.

Loss Per Share

We calculate basic and diluted net loss per share of Class A common stock in accordance with ASC 260, Earnings per Share.

Class B common stock does not have economic rights in the Company and as a result, is not considered a participating security for basic and diluted loss per share.

As such, basic and diluted loss per share of Class B common stock has not been presented.

Net loss per Class A common stock–basic is calculated by dividing net income attributable to Class A Common Stockholders by the weighted-average shares of Class A common stock outstanding.

Earnings Per Share

We calculate basic and diluted net income (loss) per share of Class A common stock in accordance with ASC 260, Earnings per Share.

Class B common stock does not have economic rights in VSI and as a result, is not considered a

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Net loss per Class A common stock–diluted is based on the average number of shares of Class A common stock used for the basic earnings per share calculation, adjusted for the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method and if-converted method, as applicable.

Net loss attributable to Class A Common Stockholders–diluted is adjusted for our share of Hoya Intermediate’s consolidated net loss after giving effect to Common Units of Hoya Intermediate that convert into potential shares of Class A common stock, to the extent it is dilutive.

In addition, Net loss attributable to Class A Common Stockholders–diluted is adjusted for the impact of changes in the fair value of Hoya Intermediate Warrants, to the extent they are dilutive.

We analyzed the calculation of loss per share for periods prior to the Merger Transaction and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements.

Therefore, loss per share information has not been presented for periods prior to the Merger Transaction.

The following table sets forth the computation of basic and diluted net loss per share of Class A common stock and represents the period from October 18, 2021 to December 31, 2021, the period where the Company had Class A and Class B common stock outstanding (in thousands, except share and per share data):

October 18, 2021 through December 31, 2021

participating security for basic and diluted income (loss) per share.

As such, basic and diluted income (loss) per share of Class B common stock has not been presented.

However, holders of Class B common stock are allocated income in Hoya Intermediate (our operating entity) according to their weighted average percentage ownership of Intermediate Units during each quarter.

Net loss attributable to redeemable noncontrolling interests is calculated by multiplying Hoya Intermediate's net income (loss) incurred in each quarterly period by Hoya Topco's weighted average percentage ownership of Intermediate Units during the period.

The following table provides the net income (loss) attributable to Hoya Topco's redeemable noncontrolling interest for the year ended December 31, 2022 and the period from October 18, 2021 to December 31, 2021:

Net income (loss)—Hoya Intermediate

Hoya Topco’s weighted average % allocation of Hoya Intermediate's net income (loss)

Net income (loss) attributable to Hoya Topco's redeemable noncontrolling interests

Net income (loss) to Class A common stock–basic is calculated by subtracting the portion of Hoya Intermediate's net loss attributable to redeemable noncontrolling interests from our total net loss, which includes our net loss for activities outside of our investment in Hoya Intermediate as well as the full results of Hoya Intermediate on a consolidated basis.

Net income (loss) per Class A common stock–diluted is based on the average number of shares of Class A common stock used for the basic earnings per share calculation, adjusted for the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method and if-converted method, as applicable.

Net income (loss) attributable to Class A common stockholders–diluted is adjusted for our share of Hoya Intermediate’s consolidated net loss after giving effect to Intermediate Units that convert into potential shares of Class A common stock, to the extent it is dilutive.

In addition, Net income (loss) attributable to Class A common stockholders–diluted is adjusted for the impact of changes in the fair value of Hoya Intermediate Warrants, to the extent they are dilutive.

The following tables set forth the computation of basic and diluted net income (loss) per share of Class A common stock for the year ended December 31, 2022 and the period from October 18, 2021 to December 31, 2021 where we had Class A and Class B common stock outstanding (in thousands, except share and per share data):

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

Numerator—basic:

Loss attributable to redeemable noncontrolling interests

Net loss attributable to Class A Common Stockholders—basic

Net income (loss)

(Income) loss attributable to redeemable noncontrolling interests

Net income (loss) attributable to Class A Common Stockholders—basic

Denominator—basic:

Weighted average Class A common stock outstanding—basic

Net loss per Class A common stock—basic

Net income (loss) per Class A common stock—basic

Numerator—diluted:

Net loss attributable to Class A Common Stockholders—basic

Net loss effect of dilutive securities:

Net income (loss) attributable to Class A Common Stockholders—basic

Net income (loss) effect of dilutive securities:

Effect of dilutive Exercise Warrants

Effect of dilutive RSUs

Effect of dilutive noncontrolling interests

Effect of dilutive Hoya Intermediate Warrants

Net loss attributable to Class A Common Stockholders—diluted

Net income (loss) attributable to Class A Common Stockholders—diluted

Denominator—diluted:

1 unchanged sentence

Weighted average effect of dilutive securities:

Effect of dilutive Hoya Intermediate Warrants

Effect of dilutive Exercise Warrants

Effect of dilutive RSUs

Effect of dilutive noncontrolling interests

Weighted average Class A common stock outstanding—diluted

Net loss per Class A common stock—diluted

Potential shares of common stock are excluded from the computation of diluted net loss per share if their effect would have been anti-dilutive for the period presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.

VIVID SEATS INC.

NOTES to the Consolidated Financial Statements

The following table presents potentially dilutive securities excluded from the computation of diluted net loss per share for the period presented:

For the Year Ended

Net income (loss) per Class A common stock—diluted

Potential shares of common stock are excluded from the computation of diluted net income per share if their effect would have been anti-dilutive for the period presented or if the issuance of shares is contingent upon events that did not occur by the end of the period.

The following tables present potentially dilutive securities excluded from the computation of diluted net income per share for the periods presented that could potentially dilute earnings per share in the future:

Stock options

Class A Warrants

Public Warrants and Private Warrants

Exercise Warrants

1 unchanged sentence

Shares of Class B common stock

Related-Party Transactions

In December 2020, Vivid Cheers Inc.

(“Vivid Cheers”) was incorporated as a non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code.

Vivid Cheers’

mission is to support causes and organizations dedicated to healthcare, education, and support of workers in the live events industry during times of need.

We have the right to elect the Board of Directors of Vivid Cheers, which currently comprises our executives.

We do not have a controlling financial interest in Vivid Cheers, and accordingly, do not consolidate Vivid Cheers’

statement of activities with its financial results.

We made charitable contributions of $ 2.4 million and $ 0.5 million for the years ended December 31, 2021 and 2020, respectively to Vivid Cheers.

We had accrued charitable contributions payable of $ 1.3 million and $ 0.5 million as of December 31, 2021 and 2020, respectively, and is included in Accrued expenses and other current liabilities in the Consolidated Balance Sheet.

Subsequent events

On February 3, 2022, we repaid $ 190.7 million of outstanding June 2017 First Lien Loan.

We entered into an amendment which refinances the remaining existing term loan with a new $ 275.0 million term loan with a maturity date of February 3, 2029, adds a new revolving credit facility in an aggregate principal amount of $ 100.0 million with a maturity date of February 3, 2027 , replaces the LIBOR based floating interest rate with a term SOFR based floating interest rate and revises the springing financial covenant to require compliance with a first lien net leverage ratio.

We analyzed the calculation of income (loss) per share for periods prior to the Merger Transaction and determined that it resulted in values that would not be meaningful to the users of the consolidated financial statements.

Therefore, income (loss) per share information has not been presented for periods prior to the Merger Transaction.

Changes in Disagreements with Accountants on Accounting and Financial Disclos ure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data