ORGANIZATION AND ACQUISITION OF THE NIAGARA GAMING BUNDLE:

Organization

The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe”) established the Mohegan Tribal Gaming Authority in July 1995 with the exclusive authority to conduct and regulate gaming activities for the Mohegan Tribe on tribal lands and the non-exclusive authority to conduct such activities elsewhere. In June 2017, the Mohegan Tribal Gaming Authority announced a corporate effort to align its brand image with its expanding business, and accordingly rebranded, and is now doing business as Mohegan Gaming & Entertainment (the “Company”). The Company is primarily engaged in the ownership, operation and development of integrated entertainment facilities both domestically and internationally.

Acquisition of the Niagara Gaming Bundle

In September 2018, MGE Niagara Entertainment Inc. (“MGE Niagara”), an indirect wholly-owned subsidiary of the Company, was selected by the Ontario Lottery and Gaming Corporation (the “OLG”) to be the service provider for the Fallsview Casino Resort, Casino Niagara and the future 5,000-seat Niagara Falls Entertainment Centre, all in Niagara Falls, Canada (the “Niagara Gaming Bundle”). Following its selection, MGE Niagara entered into a Transition and Asset Purchase Agreement with the OLG and the Ontario Gaming Assets Corporation. Pursuant to the terms of this agreement, MGE Niagara agreed to acquire certain assets associated with the Niagara Gaming Bundle and to perform certain transition activities in order to facilitate the transition of the operational responsibilities from the previous operator to MGE Niagara.

On June 11, 2019 (the “Closing Date”), MGE Niagara completed the acquisition of the Niagara Gaming Bundle (the “Acquisition”), assumed the day-to-day operations of the properties under the terms of a 21-year Casino Operating and Services Agreement (the “COSA”) with the OLG and engaged in a series of transactions related thereto, including the following:

•

Entered into a lease agreement with the OLG to lease the Fallsview Casino Resort and related administrative office space. This lease agreement requires MGE Niagara to make monthly payments of 2.2 million Canadian dollars ($1.7 million as of June 30, 2019) until the end of the lease term on March 31, 2040. This lease is classified as an operating lease in accordance with guidance provided by Accounting Standards Codification (“ASC”) Topic 840, “Leases” (“ASC 840”).

•

Entered into a lease agreement with a third-party investor to lease Casino Niagara and related license agreements to operate an adjacent parking lot and the right for patrons to use an adjacent parking garage. The lease agreement requires MGE Niagara to make monthly payments of approximately 500,000 Canadian dollars (approximately $381,000 as of June 30, 2019) until the end of the lease term on March 31, 2040 in exchange for the rights under the lease and licenses. The present value of the future payments has been allocated to the respective rights based upon their relative fair value and, in accordance with guidance provided by ASC 840 and ASC Topic 360, “Intangibles - Goodwill and Other”, accounted for as follows: (i) 36.9 million Canadian dollars ($28.1 million as of June 30, 2019) represents the Casino Niagara lease, which is classified as a capital lease, (ii) 6.9 million Canadian dollars ($5.3 million as of June 30, 2019) represents an intangible asset, which is being amortized over the term of the lease on a straight line basis and (iii) the residual allocation of the lease payments is classified as an operating land lease.

•

Committed to entering into a lease agreement with a third-party to lease the Niagara Falls Entertainment Centre following the completion of its construction, which is expected to occur by the end of calendar 2019. Rental payments are still to be determined. The Company is deemed, for accounting purposes only, to be the owner of this construction project, despite not being the legal owner. Accordingly, the Company capitalized 102.9 million Canadian dollars ($78.4 million as of June 30, 2019) for amounts paid as a build-to-suit asset within property and equipment, net and recorded a corresponding build-to-suit liability.

The purchase price of the Acquisition was approximately 96 million Canadian dollars (approximately $72 million), net of cash acquired of approximately 57 million Canadian dollars (approximately $43 million). The consideration paid for working capital is subject to post-closing adjustments, which are not expected to be material. MGE Niagara funded the Acquisition with proceeds from borrowings under a 100.0 million Canadian dollar ($76.2 million as of June 30, 2019) term loan facility, the issuance of a 40.0 million Canadian dollar ($30.5 million as of June 30, 2019) convertible debenture to a third-party investor and a 60.0 million Canadian dollar ($45.7 million as of June 30, 2019) investment by the Company (refer to Note 5). The Acquisition was accounted for as a purchase of a business under the acquisition method of accounting in accordance with guidance provided by ASC Topic 805, “Business Combinations”.

While no material adjustments are expected, the purchase price allocation is not final. This allocation will be finalized during the Company's fourth quarter of fiscal 2019. The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on June 11, 2019 (in thousands):



	June 11, 2019
Accounts receivable	$	1,448
Inventories	3,410
Other current assets	15,983
Property and equipment	50,282
Intangible asset	16,689
Other current liabilities	(15,525		)
Total	$	72,287

The intangible asset acquired represent the rights under the COSA, which include, among other things, the rights to use trade names, player databases and licenses during the term of the COSA. The intangible asset is being amortized over the term of the COSA on a straight line basis.

The following table summarizes the financial results of the Niagara Gaming Bundle since the Closing Date which are included in the accompanying condensed consolidated statements of income for the three months and nine months ended June 30, 2019 (in thousands):



	June 11, 2019 through June 30, 2019
Net revenues	$	21,288
Net income	$	1,783

The below unaudited pro forma financial information was prepared as if the Acquisition, the financing to fund the Acquisition and the lease transactions, all described above, had occurred on October 1, 2017. This pro forma information, which is based on the best information currently available, is preliminary and subject to change. Pro forma financial information does not necessarily represent results that may occur in the future. The following pro forma financial information includes historical financial results of the Niagara Gaming Bundle prior to the Acquisition, adjusted to include the Company's share of revenues earned under the COSA which are recorded on a net basis (refer to Note 2), along with other adjustments directly attributable to the Acquisition, including interest expense and depreciation (in thousands):



	For the		For the		For the	For the
	Three Months Ended		Three Months Ended		Nine Months Ended	Nine Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019	June 30, 2018
Net revenues	$	415,162	$	433,913	1,206,916	1,285,790
Net income attributable to Mohegan Tribal Gaming Authority	$	17,128	$	37,455	7,386	95,328