UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-38850

Bally’s Corporation

(Exact name of registrant as specified in its charter)

Delaware			20-0904604
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
100 Westminster Street	Providence,	RI	02903
(Address of principal executive offices)			(Zip Code)

(401) 475-8474

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value	BALY	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐   No  ☒

As of July 29, 2022, the number of shares of the registrant’s $0.01 par value common stock outstanding was 47,900,321.

For additional information regarding the Company’s shares outstanding, refer to Note 16 “Stockholders’ Equity.”

EXPLANATORY NOTE

Bally’s Corporation (“the Company” or “Bally’s”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amendment” or “Form 10-Q/A”) to amend the following items of its Quarterly Report on Form 10-Q for the second quarter ended June 30, 2022 (the “Form 10-Q” or “Original Filing”):

•Part I, Item 1, “Financial Statements”;

•Part I, Item 4. “Controls and Procedures”

•Part II, Item 1A, “Risk Factors”; and

•Part II, Item 6, “Exhibits”

The other Items of the Original Filing have not been amended and, accordingly, have not been repeated in this Form 10-Q/A.

The only changes to the Original Filing are those related to the matters described below and only in the items listed above. Except as described above, no changes have been made to the Original Filing, and this Form 10-Q/A does not modify, amend or update any of the other financial information or other information contained in the Original Filing. In addition, in accordance with SEC rules, this Form 10-Q/A includes updated certifications from our Chief Executive Officer and Chief Financial Officer as Exhibits 31.1, 31.2, 32.1 and 32.2. Otherwise, the information contained in this Form 10-Q/A is as of the date of the Original Filing and does not reflect any information or events occurring after the date of the Original Filing.

Background of Correction

In connection with finalizing closing procedures with respect to the Company’s third quarter ended September 30, 2022, management concluded that the Company’s previously reported unaudited interim condensed consolidated financial statements as of and for the three- and nine-months periods ended September 30, 2021 (the “previously reported financial statements”) contained an error related to the Company’s application of generally accepted accounting principles in the United States of America.

In August 2021, in anticipation of Bally’s acquisition of Gamesys Group plc (“Gamesys”) on October 1, 2021, approximately $1.80 billion US dollars were converted into approximately £1.31 billion GB pound sterling (“GB sterling”) and held as restricted cash for use as part of the cash consideration for the acquisition. As of September 30, 2021, the day before the closing of the Gamesys acquisition, the GB sterling spot rate had declined as compared to the corresponding rate on the date of conversion in August 2021, which resulted in a foreign exchange loss for purposes of Bally’s third quarter 2021 financial statements of approximately $42.9 million as of September 30, 2021. Bally’s recorded this loss as an unrealized loss within other comprehensive income (loss) instead of within non-operating income (expense) within Bally’s consolidated statements of operations. Bally’s did not need to fund additional cash to close the acquisition of Gamesys as the depreciation of the GB sterling to US dollars reduced the effective purchase price of the $2.62 billion acquisition.

Management evaluated the quantitative and qualitative impact of this accounting error on the Company's previously reported financial statements and concluded the error was not material. However, the Company further concluded that the error could not be corrected as an out-of-period adjustment in the Company’s unaudited interim condensed consolidated financial statements as of and for the three- and nine-month periods ended September 30, 2022, because to do so would cause a material misstatement in those financial statements. Accordingly, the Company referred to the guidance prescribed by the SEC’s Staff Accounting Bulletin Nos. 99 and 108, Materiality which specifies that the error must be corrected the next time the previously reported financial statements are filed. Therefore, in conjunction with the Company’s filing of this Form 10-Q/A to amend management's assessment of the Company's internal controls over financial reporting, as further described below, the Company corrected the error in the previously reported financial statements included in this filing as an immaterial revision.

With respect to the quarter ended June 30, 2022, the correction impacted the condensed consolidated balance sheets, condensed consolidated statements of stockholders’ equity and certain notes to the condensed consolidated financial statements to revise accumulated other comprehensive income (loss) and retained deficit. The correction of this accounting error does not impact the Company’s previously reported statements of operations or statements of cash flows.

In addition, the Company re-evaluated the effectiveness of the Company’s internal control over financial reporting and identified control deficiencies associated with the accounting error, which the Company has concluded represents material weaknesses in the Company’s internal control over financial reporting as of June 30, 2022. Accordingly, the Company is filing this Form 10-Q/A to amend management’s assessment of the Company’s internal control over financial reporting and its disclosure controls and procedures to indicate that they were not effective as of June 30, 2022.

As a result of the determination to file this Form 10-Q/A, for the reasons outlined in the preceding paragraph, on November 8, 2022, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after discussion with management of the Company and the Company’s independent registered public accounting firm, Deloitte & Touche LLP, determined that the Company will revise its (i) consolidated financial statements for the fiscal year ended December 31, 2021 and (ii) unaudited interim condensed consolidated financial statements for the fiscal quarters ended September 30, 2021, March 31, 2022 and June 30, 2022 to correct the accounting error for all periods presented and disclose the existence of the related material weaknesses

For a more detailed description refer to Note 2 “Significant Accounting Policies.”

BALLY’S CORPORATION

TABLE OF CONTENTS

		Page No.
	PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (unaudited)	3
	Condensed Consolidated Statements of Operations (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6
	Condensed Consolidated Statements of Cash Flows (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
ITEM 4.	Controls and Procedures	44
	PART II - OTHER INFORMATION
ITEM 6.	Exhibits	47
	Signatures	48

2

PART I.     FINANCIAL INFORMATION

ITEM 1.     Financial Statements

BALLY’S CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(In thousands, except share data)

	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	176,158	$	206,193
Restricted cash	55,198		68,647
Accounts receivable, net	57,709		48,178
Inventory	14,502		11,489
Tax receivable	59,996		128,217
Prepaid expenses and other current assets	89,372		104,463
Total current assets	452,935		567,187
Property and equipment, net	820,454		838,651
Right of use assets, net	642,885		507,843
Goodwill	1,970,058		2,122,653
Intangible assets, net	2,310,249		2,477,952
Deferred tax asset	14,087		11,922
Other assets	25,325		27,009
Total assets	$	6,235,993	$	6,553,217
Liabilities and Stockholders’ Equity
Current portion of long-term debt	$	19,450	$	19,450
Current portion of lease liabilities	30,753		24,506
Accounts payable	71,419		87,540
Accrued income taxes	40,771		37,208
Accrued liabilities	342,686		401,428
Total current liabilities	505,079		570,132
Long-term debt, net	3,336,617		3,426,777
Long-term portion of lease liabilities	637,949		506,475
Pension benefit obligations	4,165		4,647
Deferred tax liability	185,198		214,467
Naming rights liabilities	129,300		168,929
Contingent consideration payable	8,701		34,931
Other long-term liabilities	11,059		11,057
Total liabilities	4,818,068		4,937,415
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.01 par value, 200,000,000 shares authorized; 52,577,251 and 53,050,055 shares issued; 52,577,251 and 52,254,477 shares outstanding)	525		530
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding)	—		—
Additional paid-in-capital	1,838,238		1,849,068
Treasury stock, at cost	—		(29,166)
Retained deficit	(127,434)		(181,581)
Accumulated other comprehensive loss	(297,164)		(26,809)
Total Bally’s Corporation stockholders’ equity	1,414,165		1,612,042
Non-controlling interest	3,760		3,760
Total stockholders’ equity	1,417,925		1,615,802
Total liabilities and stockholders’ equity	$	6,235,993	$	6,553,217

See accompanying notes to condensed consolidated financial statements.

3

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(In thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue:
Gaming	$	455,088	$	207,490	$	918,790	$	362,768
Hotel	33,929		22,315		60,864		35,374
Food and beverage	27,435		23,382		51,423		38,882
Retail, entertainment and other	36,044		14,546		69,690		22,975
Total revenue	552,496		267,733		1,100,767		459,999
Operating (income) costs and expenses:
Gaming	204,051		63,350		423,263		110,604
Hotel	9,731		7,506		18,313		12,655
Food and beverage	21,898		17,004		40,854		29,213
Retail, entertainment and other	14,755		2,021		27,854		3,818
Advertising, general and administrative	181,707		101,211		363,323		181,710
Goodwill and asset impairment	—		4,675		—		4,675
Expansion and pre-opening	717		937		717		1,540
Acquisition, integration and restructuring	10,112		18,402		15,392		30,660
Gain from insurance recoveries, net of losses	14		(579)		(150)		(11,255)
Rebranding	185		382		474		1,295
Gain on sale-leaseback, net	(50,766)		(53,425)		(50,766)		(53,425)
Depreciation and amortization	74,773		25,717		153,654		38,503
Total operating costs and expenses	467,177		187,201		992,928		349,993
Income from operations	85,319		80,532		107,839		110,006
Other income (expense):
Interest income	148		530		310		1,054
Interest expense, net of amounts capitalized	(45,976)		(21,829)		(91,823)		(42,627)
Change in value of naming rights liabilities	20,032		19,070		33,411		(8,336)
Gain (adjustment) on bargain purchases	—		24,114		(107)		24,114
Other, net	5,412		(6,494)		11,619		(3,823)
Total other income (expense), net	(20,384)		15,391		(46,590)		(29,618)
Income before income taxes	64,935		95,923		61,249		80,388
Provision (benefit) for income taxes	5,434		26,981		(141)		22,151
Net income	$	59,501	$	68,942	$	61,390	$	58,237
Basic earnings per share	$	0.98	$	1.43	$	1.02	$	1.39
Weighted average common shares outstanding - basic	60,506		48,156		60,263		42,038
Diluted earnings per share	$	0.98	$	1.40	$	1.02	$	1.37
Weighted average common shares outstanding - diluted	60,541		49,102		60,332		42,374

See accompanying notes to condensed consolidated financial statements.

4

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	59,501	$	68,942	$	61,390	$	58,237
Other comprehensive income (loss):
Foreign currency translation adjustment	$	(198,813)	$	419	$	(270,355)	$	(633)
Defined benefit pension plan reclassification adjustment(1)	—		41		—		81
Other comprehensive (loss) income	(198,813)		460		(270,355)		(552)
Total comprehensive (loss) income	$	(139,312)	$	69,402	$	(208,965)	$	57,685

__________________________________

(1)    Tax effect of reclassification adjustment was de minimis.

See accompanying notes to condensed consolidated financial statements.

5

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained (Deficit) Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total Stockholders’ Equity
	Shares Outstanding	Amount
Balance as of December 31, 2021	52,254,477	$	530	$	1,849,068	$	(29,166)	$	(181,581)	$	(26,809)	$	3,760	$	1,615,802
Release of restricted stock	122,849	1		(2,534)		—		—		—		—		(2,533)
Share-based compensation	—	—		5,095		—		—		—		—		5,095
Retirement of treasury shares	—	(11)		(35,200)		42,454		(7,243)		—		—		—
Share repurchases	(350,616)	—		—		(13,288)		—		—		—		(13,288)
Stock options exercised	20,000	—		86		—		—		—		—		86
Penny warrants exercised	383,934	4		—		—		—		—		—		4
Issuance of MKF penny warrants	—	—		12,010		—		—		—		—		12,010
Settlement of consideration to SportCaller	107,832	1		3,699		—		—		—		—		3,700
Other comprehensive loss	—	—		—		—		—		(71,542)		—		(71,542)
Net income	—	—		—		—		1,889		—		—		1,889
Balance as of March 31, 2022	52,538,476	$	525	$	1,832,224	$	—	$	(186,935)	$	(98,351)	$	3,760	$	1,551,223
Release of restricted stock	38,775	—		(308)		—		—		—		—		(308)
Share-based compensation	—	—		6,322		—		—		—		—		6,322
Other comprehensive loss	—	—		—		—		—		(198,813)		—		(198,813)
Net income	—	—		—		—		59,501		—		—		59,501
Balance as of June 30, 2022	52,577,251	$	525	$	1,838,238	$	—	$	(127,434)	$	(297,164)	$	3,760	$	1,417,925

6

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interest		Total Stockholders’ Equity
	Shares Outstanding	Amount
Balance as of December 31, 2020	30,685,938	$	307	$	294,643	$	—	$	34,792	$	(3,144)	$	—	$	326,598
Release of restricted stock	23,811	—		(990)		—		—		—		—		(990)
Share-based compensation	—	—		4,483		—		—		—		—		4,483
Stock options exercised	30,000	—		129		—		—		—		—		129
Penny warrants exercised	932,949	9		—		(9)		—		—		—		—
Reclassification of Sinclair options	—	—		59,724		—		—		—		—		59,724
Issuance of MKF penny warrants	—	—		64,694		—		—		—		—		64,694
Shares issued for purchase of SportCaller	221,391	2		11,774		—		—		—		—		11,776
Other comprehensive loss	—	—		—		—		—		(1,012)		—		(1,012)
Net loss	—	—		—		—		(10,705)		—		—		(10,705)
Balance as of March 31, 2021	31,894,089	$	318	$	434,457	$	(9)	$	24,087	$	(4,156)	$	—	$	454,697
Release of restricted stock	9,181	—		(205)		(116)		—		—		—		(321)
Share-based compensation	—	—		3,901		—		—		—		—		3,901
Retirement of treasury shares	—	(21)		(28,488)		114,842		(86,333)		—		—		—
Common stock offering	12,650,000	127		667,746		—		—		—		—		667,873
Sinclair shares exchanged for penny warrants	(2,086,908)	—		114,717		(114,717)		—		—		—		—
Sinclair issuance of penny warrants	—	—		50,000		—		—		—		—		50,000
Bally’s Interactive equity issuance	2,084,765	21		121,479		—		—		—		—		121,500
Stock options exercised	40,000	—		172		—		—		—		—		172
Other comprehensive income	—	—		—		—		—		460		—		460
Net loss	—	—		—		—		68,942		—		—		68,942
Balance as of June 30, 2021	44,591,127	$	445	$	1,363,779	$	—	$	6,696	$	(3,696)	$	—	$	1,367,224

See accompanying notes to condensed consolidated financial statements.

7

BALLY’S CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Six Months Ended June 30,
(in thousands)	2022		2021
Cash flows from operating activities:
Net income	$	61,390	$	58,237
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	153,654		38,503
Non-cash lease expense	14,456		2,409
Share-based compensation	11,417		8,384
Goodwill and asset impairment	—		4,675
Amortization of debt discount and debt issuance costs	5,124		3,144
Gain from insurance recoveries	—		(11,160)
Gain on sale-leaseback, net	(50,766)		(53,425)
Deferred income taxes	(28,879)		(2,525)
Loss on assets and liabilities measured at fair value	567		15,069
Change in value of naming rights liabilities	(33,411)		8,336
Change in contingent consideration payable	(10,175)		(11,703)
Adjustment (gain) on bargain purchase	107		(24,114)
Other operating activities	1,520		2,761
Changes in current operating assets and liabilities	39,540		(4,366)
Net cash provided by operating activities	164,544		34,225
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	—		(332,029)
Proceeds from sale-leaseback	150,000		144,000
Foreign exchange forward contract premiums	—		(22,592)
Capital expenditures	(116,081)		(35,785)
Insurance proceeds from hurricane damage	—		11,160
Cash paid for internally developed software	(31,455)		—
Acquisition of gaming licenses	(51,560)		(250)
Purchase of equity securities	(3,175)		—
Other intangible asset acquisitions	(1,825)		—
Other investing activities	(1,738)		(231)
Net cash used in investing activities	(55,834)		(235,727)
Cash flows from financing activities:
Issuance of long-term debt	110,000		275,000
Repayments of long-term debt	(204,725)		(37,875)
Payment of financing fees	—		(5,840)
Payment of deferred consideration	(30,025)		—
Share repurchases	(13,288)		—
Issuance of common stock, net	—		667,872
Issuance of Sinclair penny warrants	—		50,000
Other financing activities	(2,752)		(1,010)
Net cash (used in) provided by financing activities	(140,790)		948,147
Effect of foreign currency on cash and cash equivalents	(11,404)		483
Net change in cash and cash equivalents and restricted cash	(43,484)		747,128
Cash and cash equivalents and restricted cash, beginning of period	274,840		126,555
Cash and cash equivalents and restricted cash, end of period	$	231,356	$	873,683
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	93,976	$	36,718
Cash received from income tax refunds, net of cash paid	(56,224)		17,396
Non-cash investing and financing activities:
Unpaid property and equipment	$	32,403	$	6,868
Stock and equity instruments issued for acquisition of SportCaller and Monkey Knife Fight	—		197,968
Acquisitions in exchange for contingent liability	—		58,685
Deferred purchase price payable	—		14,071
Deposit applied to acquisition purchase price	—		4,000

See accompanying notes to condensed consolidated financial statements.

8

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.    GENERAL INFORMATION

Description of Business

Bally’s Corporation (the “Company”, “Bally’s”, “we” or “us”) is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming (“iGaming”) business-to-business-to-consumer (“B2B2C”) businesses. The Company owns and manages the following casino and resort properties:

Casinos and Resorts	Location	Type	Built/Acquired
Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”)	Lincoln, Rhode Island	Casino and Resort	2004
Bally’s Arapahoe Park	Aurora, Colorado	Racetrack/OTB Site	2004
Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”)	Biloxi, Mississippi	Casino and Resort	2014
Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”)	Tiverton, Rhode Island	Casino and Hotel	2018
Bally’s Dover Casino Resort (“Bally’s Dover”)(1)	Dover, Delaware	Casino, Resort and Raceway	2019
Bally’s Black Hawk(1)(2)	Black Hawk, Colorado	Three Casinos	2020
Bally’s Kansas City Casino (“Bally’s Kansas City”)	Kansas City, Missouri	Casino	2020
Bally’s Vicksburg Casino (“Bally’s Vicksburg”)	Vicksburg, Mississippi	Casino and Hotel	2020
Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”)	Atlantic City, New Jersey	Casino and Hotel	2020
Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”)	Shreveport, Louisiana	Casino and Hotel	2020
Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”)	Lake Tahoe, Nevada	Casino and Resort	2021
Bally’s Evansville Casino & Hotel (“Bally’s Evansville”)(1)	Evansville, Indiana	Casino and Hotel	2021
Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”)(1)	Rock Island, Illinois	Casino and Hotel	2021

__________________________________

(1)    Properties leased from Gaming and Leisure Properties, Inc. (“GLPI”) under the Master Lease agreement. Refer to Note 13 “Leases” for further information. The Company completed its sale-leaseback of Bally’s Quad Cities and Bally’s Black Hawk on April 1, 2022.

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

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

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

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

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

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

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

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

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

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

The Company’s International Interactive reportable segment includes the interactive activities in Europe and Asia of Gamesys Group Ltd. (“Gamesys”), a B2B2C iCasino and online bingo platform provider and operator, acquired by the Company on October 1, 2021, and Solid Gaming, a games content aggregation business.

Refer to Note 18 “Segment Reporting” for further information.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”

9

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary. All intercompany transactions and balances have been eliminated in the consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The financial statements of our foreign subsidiaries are translated into US dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in net income (loss).

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Amendment No. 1 on Form 10-K/A to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no material changes in significant accounting policies from those described in Amendment No. 1 on Form 10-K/A to the Company’s Annual Report on Form 10-K.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates.

Correction of Cash Flow Classification

Subsequent to the issuance of the Company’s Form 10-Q for the quarterly period ended June 30, 2021, the Company concluded that the $144.0 million in proceeds from the sale-leaseback of the Company’s Dover property were incorrectly classified as cash provided by financing activities rather than cash provided by investing activities within the Company’s unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2021. The accompanying unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2022 correctly reflects such amount as cash provided by investing activities.

COVID-19 Pandemic

As of June 30, 2022, the Company’s properties are all operating with minimal restrictions. Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.

10

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

2.    SIGNIFICANT ACCOUNTING POLICIES

Correction of Previously Reported Consolidated Financial Statements

As previously disclosed in Note 23 to the Company’s consolidated financial statements as of and for the year ended December 31, 2021 (the “2021 financial statements”) included in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company revised its 2021 financial statements to correct an immaterial accounting error that pertained to a foreign exchange translation loss of approximately $42.9 million that was incorrectly recognized as a component of accumulated other comprehensive income (loss) in the Company’s consolidated statement of comprehensive income (loss) rather than as other income/(expense) in the Company’s consolidated statement of operations for the year ended December 31, 2021. As a result, the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021 and consolidated statement of stockholders’ equity for the three and six months ended June 30, 2022 have been revised to give effect to the correction of this error by decreasing previously reported accumulated other comprehensive loss and increasing previously reported accumulated deficit as of June 30, 2022 and December 31, 2021 by approximately $42.9 million, respectively.

Cash and Cash Equivalents and Restricted Cash

The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

As of June 30, 2022 and December 31, 2021, restricted cash of $55.2 million and $68.6 million, respectively, consisted primarily of player deposits and payment service provider deposits in connection with the Company’s iGaming operations. Restricted cash also includes Video Lottery Terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which are unavailable for the Company’s use. The following table reconciles cash and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statements of cash flows.

	June 30,		December 31,
(in thousands)	2022		2021
Cash and cash equivalents	$	176,158	$	206,193
Restricted cash	55,198		68,647
Total cash and cash equivalents and restricted cash	$	231,356	$	274,840

Accounts Receivable, Net

Accounts receivable, net consists of the following:

	June 30,		December 31,
(in thousands)	2022		2021
Amounts due from Rhode Island and Delaware(1)	$	13,729	$	10,575
Gaming receivables	12,110		10,576
Non-gaming receivables	37,485		31,481
Accounts receivable	63,324		52,632
Less: Allowance for doubtful accounts	(5,615)		(4,454)
Accounts receivable, net	$	57,709	$	48,178

__________________________________

(1)    Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Bally’s Dover.

11

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Gain from insurance recoveries, net of losses

Gain from insurance recoveries, net of losses, relate to losses incurred resulting from storms impacting the Company’s properties, net of insurance recovery proceeds. The Company recorded a gain from insurance recoveries, net of losses, of $0.6 million for the three months ended June 30, 2021 and $0.2 million and $11.3 million for the six months ended June 30, 2022 and 2021, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020.

Gaming Expenses

Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services. Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting.

Advertising Expense

The Company expenses advertising costs as incurred. For the three months ended June 30, 2022 and 2021, advertising expense was $52.1 million and $1.7 million, respectively. For the six months ended June 30, 2022 and 2021, advertising expense was $117.4 million and $3.0 million, respectively. Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and six months ended June 30, 2022 was $49.7 million and $112.7 million, respectively. There was no advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and six months ended June 30, 2021.

Strategic Partnership - Sinclair Broadcast Group

On November 18, 2020, the Company and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Tax Receivable Agreement (“TRA”) with Sinclair. The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional five-year term unless either the Company or Sinclair elect not to renew.

Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $88.0 million over the 10-year term of the agreement beginning April 1, 2021. The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50, Business Combinations—Related Issues, using a cost accumulation model. The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the TRA payments, each explained below. The naming rights intangible asset was $288.5 million and $311.7 million as of June 30, 2022 and December 31, 2021, respectively. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $8.4 million and $8.6 million for the three months ended June 30, 2022 and 2021, respectively, and $16.8 million and $8.6 million for the six months ended June 30, 2022 and 2021, respectively. Refer to Note 8 “Goodwill and Intangible Assets” for further information.

12

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement. The total value of the liability as of June 30, 2022 and December 31, 2021 was $59.1 million and $58.9 million, respectively. The short-term portion of the liability, which was $2.0 million as of June 30, 2022 and December 31, 2021, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $57.1 million and $56.9 million as of June 30, 2022 and December 31 2021, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets. Accretion expense reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations was $1.1 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively, and $2.2 million and $2.1 million for the six months ended June 30, 2022 and 2021, respectively.

Warrants and Options - The Company issued to Sinclair (1) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (2) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (3) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9% of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the NYSE, which was obtained on January 27, 2021.

Penny Warrants & Options. The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging, (“ASC 815”). The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset. The fair value of the Options was $59.7 million as of December 31, 2021 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.

Performance Warrants. The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. Refer to Note 9 “Fair Value Measurements” for further information.

Tax Receivable Agreement - The Company is required to share 60% of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the TRA with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns. Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset. The TRA liability was $35.8 million and $42.2 million as of June 30, 2022 and December 31, 2021, respectively, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets. The change in value of the TRA liability is included in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

13

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Variable Interest Entities

The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics: (1) the entity has insufficient equity to permit it to finance its activities without additional subordinated financial support (2) equity holders, as a group, lack the characteristics of a controlling financial interest or (3) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that it is the primary beneficiary of such entity.

In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.

Management analyzed and concluded that Breckenridge Curacao B.V. (“Breckenridge”) is a VIE because it does not have sufficient equity investment at risk. The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of Breckenridge, the Company has the power to direct the activities of Breckenridge that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between Breckenridge and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided. The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided. As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying consolidated financial statements. As of June 30, 2022 and December 31, 2021 Breckenridge had total assets of $73.1 million and $85.4 million, respectively, and total liabilities of $72.4 million and $75.2 million, respectively. Breckenridge had revenues of $73.9 million and $160.8 million for the three and six months ended June 30, 2022.

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

Related Party Transaction

On September 26, 2019, prior to the Company’s acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys. In connection with the JPJ acquisition, £10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing. The Company recorded deferred consideration of $15.1 million within current liabilities of the condensed consolidated balance sheets as of December 31, 2021. Of such amount, approximately $7.4 million was payable to related parties as former majority shareholders. The Company paid the deferred consideration in April 2022.

Provision (Benefit) for Income Taxes

During the three months ended June 30, 2022 and 2021, the Company recorded a provision for income tax of $5.4 million, at an effective tax rate of 8.4%, and a provision for income tax of $27.0 million, at an effective tax rate of 28.1%, respectively. The 2022 effective tax rate was lower than the US federal statutory rate of 21%, largely due to a tax benefit recorded in foreign jurisdictions during the quarter offset by discrete tax item related to gain on sale leaseback transactions in Colorado and Illinois. The 2021 effective tax rate was higher than the US federal statutory rate of 21%, largely due to higher state income tax related to gain on sale leaseback in Delaware.

During the six months ended June 30, 2022 and 2021, the Company recorded a benefit for income tax of $0.1 million, at an effective tax rate of (0.2)% and a provision for income tax of $22.2 million, at an effective tax rate of 27.6%, respectively. The 2022 effective tax rate was lower than the US federal statutory rate of 21%, largely due to a tax benefit recorded in foreign jurisdictions during the quarter offset by discrete tax item related to gain on sale leaseback transactions in Colorado and Illinois. The 2021 effective tax rate was higher than the US federal statutory rate of 21%, largely due to higher state income tax related to gain on sale leaseback in Delaware.

14

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the second quarter of 2022, the Company has changed its assertion and is no longer permanently reinvest in its undistributed foreign earnings and plans to remit cash back to the United States. The Company has determined, based on certain tax planning strategies available, no deferred taxes were accrued related to unremitted earnings as of the period ending June 30, 2022.

3.    RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

Standards to be implemented

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update address diversity in practice and inconsistency related to recognition of an acquired contract liability and the effect of payment terms on subsequent revenue recognition for the acquirer. This update is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements.

4.    REVENUE RECOGNITION

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which requires companies to recognize revenue in a way that depicts the transfer of promised goods or services. In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company generates revenue from four principal sources: gaming (which includes retail gaming, online gaming, sports betting and racing), hotel, food and beverage and retail entertainment and other.

The Company determines revenue recognition through the following steps:

•Identify the contract, or contracts, with the customer;

•Identify the performance obligations in the contract;

•Determine the transaction price;

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

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

The Company is currently engaged in gaming services, which include retail, online and racing. Additional services include hotel, food and beverage. The amount of revenue recognized by the Company is measured at the transaction price or the amount of consideration that the Company expects to receive through satisfaction of the identified performance obligations.

Retail gaming, online gaming and sports betting revenue, each as described below, contain a single performance obligation. Retail gaming transactions have an obligation to honor the outcome of a wager and to pay out an amount equal to the stated odds, including the return of the initial wager, if the customer receives a winning hand. These elements of honoring the outcome of the hand of play and generating a payout are considered one performance obligation. Online gaming and sports betting represent a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results of the arrangement. Revenue is recognized at the conclusion of each contest, wager or wagering game hand. Incentives can be used across online gaming products. The Company allocates a portion of the transaction price to certain customer incentives that create material future customer rights and are a separate performance obligation. In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest’s final stage. Racing revenue is earned through advance deposit wagering which consists of patrons wagering through an advance deposit account. Each wagering contract contains a single performance obligation.

The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price for racing operations, inclusive of live racing events conducted at the Company’s racing facilities, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations. The transaction price for food and beverage and hotel is the net amount collected from the customer for such goods

15

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

and services. Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.

The following contains a description of each of the Company’s revenue streams:

Gaming Revenue

Retail Gaming

The Company recognizes retail gaming revenue as the net win from gaming activities, which is the difference between gaming inflows and outflows, not the total amount wagered. Progressive jackpots are estimated and recognized as revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives.

Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from the application of an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned for a hotel room stay, food and beverage or other amenity. The performance obligation related to loyalty program incentives are deferred and recognized as revenue upon redemption by the customer. The amount associated with gaming wagers is recognized at the point the wager occurs, as it is settled immediately.

Gaming revenue includes the share of VLT revenue for Bally’s Twin River and Bally’s Tiverton, in each case, as determined by each property’s respective master VLT contracts with the State of Rhode Island. Bally’s Twin River is entitled to a 28.85% share of VLT revenue on the initial 3,002 units and a 26.00% share on VLT revenue generated from units in excess of 3,002 units. Beginning July 1, 2021, Bally’s Twin River is entitled to an additional 7.00% share of revenue on VLTs owned by the Company. Bally’s Tiverton is entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Bally’s Twin River. Gaming revenue also includes Bally’s Twin River’s and Bally’s Tiverton’s share of table games revenue. Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5% share of table games revenue generated as of June 30, 2022 and 2021. Revenue is recognized when the wager is settled, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming services on behalf of the State of Rhode Island.

Gaming revenue also includes Bally’s Dover’s share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition. Bally’s Dover is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. As of June 30, 2022 and 2021, Bally’s Dover was entitled to an approximate 42% share of VLT revenue and 80% share of table games revenue. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Delaware operations on a net basis, which is the percentage share of VLT and table games revenue received, as the Company acts as an agent in operating the gaming services on behalf of the State of Delaware.

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, and Bally’s Quad Cities, beginning June 14, 2021, which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by prior to play, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increases.

16

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Online gaming

Online gaming refers to digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Company operates similarly to land-based casinos, generating revenue from user wagers net of payouts and incentives awarded to users.

Online gaming revenue includes the online bingo and casino revenue of Gamesys, beginning October 1, 2021. The revenue is earned from operating online bingo and casino websites, which consists of the difference between total amounts wagered by players less winnings payable to players, bonuses allocated and jackpot contributions. Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs. There is no significant degree of uncertainty involved in quantifying the amount of gaming revenue earned, including bonuses, jackpot contributions and loyalty points. Bonuses, jackpot contributions and loyalty points are measured at fair value at each reporting date.

Sports betting

Sports betting involves a user wagering money on an outcome or series of outcomes. If a user wins the wager, the Company pays the user a pre-determined amount known as fixed odds. Sports betting revenue is generated through built-in theoretical margins in each sports wagering opportunity offered to users. Revenue is recognized as total wagers net of payouts made and incentives awarded to users.

During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company. The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement. The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the six months ended June 30, 2022 and 2021. Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $6.6 million and $6.8 million as of June 30, 2022 and December 31, 2021, respectively, and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.

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

Racing

Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Bally’s Dover’s share of wagering from live racing and the import of simulcast signals. Racing revenue is recognized upon completion of the wager based upon an established take-out percentage. The Company functions as an agent to the pari-mutuel pool. Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a reduction to racing revenue.

Hotel, Food and Beverage and Retail, Entertainment and Other Revenue

Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met. Food and beverage revenues are recognized at the time the goods are sold from Company-operated outlets. The estimated standalone selling price of hotel rooms is determined based on observable prices. The standalone selling price of food and beverage as well as retail, entertainment and other goods and services are determined based upon the actual retail prices charged to customers for those items. Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in hotel, food and beverage revenue within our consolidated statements of operations.

17

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Hotel	$	19,423	$	12,494	$	35,325	$	19,403
Food and beverage	18,056		15,380		34,766		25,829
Retail, entertainment and other	2,579		1,459		4,786		2,410
	$	40,058	$	29,333	$	74,877	$	47,642

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

In the fourth quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 18 “Segment Reporting” for further information. The following tables provide a disaggregation of revenue by segment:

(in thousands)	Casinos & Resorts		North America Interactive		International Interactive		Total
Three Months Ended June 30, 2022
Gaming	$	225,716	$	7,868	$	221,504	$	455,088
Hotel	33,929		—		—		33,929
Food and beverage	27,435		—		—		27,435
Retail, entertainment and other	12,795		10,182		13,067		36,044
Total revenue	$	299,875	$	18,050	$	234,571	$	552,496
Three Months Ended June 30, 2021
Gaming	$	206,699	$	791	$	—	$	207,490
Hotel	22,315		—		—		22,315
Food and beverage	23,382		—		—		23,382
Retail, entertainment and other	9,792		4,754		—		14,546
Total revenue	$	262,188	$	5,545	$	—	$	267,733
Six Months Ended June 30, 2022
Gaming	$	443,521	$	14,513	$	460,756	$	918,790
Hotel	60,864		—		—		60,864
Food and beverage	51,423		—		—		51,423
Retail, entertainment and other	24,037		18,764		26,889		69,690
Total revenue	$	579,845	$	33,277	$	487,645	$	1,100,767
Six Months Ended June 30, 2021
Gaming	$	361,128	$	1,640	$	—	$	362,768
Hotel	35,374		—		—		35,374
Food and beverage	38,882		—		—		38,882
Retail, entertainment and other	16,237		6,738		—		22,975
Total revenue	$	451,621	$	8,378	$	—	$	459,999

18

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Revenue included in operations from Bally’s Lake Tahoe from the date of its acquisition, April 6, 2021, Bally’s Evansville from the date of its acquisition, June 3, 2021, and Bally’s Quad Cities from the date of its acquisition, June 14, 2021 are reported in Casinos & Resorts. Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally’s Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, Telescope from the date of its acquisition, August 12, 2021, Degree 53 from the date of its acquisition, October 25, 2021, and the North American operations of Gamesys from the date of its acquisition, October 1, 2021 are reported in North America Interactive. Revenue included in operations from the European and Asian activities from Gamesys is reported in International Interactive. Refer to Note 5 “Acquisitions” for further information.

Contract Assets and Contract Related Liabilities

The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays, and amounts due from tracks and OTB locations. The Company’s receivables related to contracts with customers were $40.7 million and $35.5 million as of June 30, 2022 and December 31, 2021, respectively.

The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, advance deposits made for goods and services yet to be provided and unpaid wagers. All of the contract liabilities are short-term in nature and are included in “Accrued liabilities” in the condensed consolidated balance sheets.

Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than 12 months; therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months. While properties were operating at limited capacity, many properties extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points. As properties have resumed operations at full capacity, many have reinstated their pre-COVID-19 practices or put new loyalty programs into place.

Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits. The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay. The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability.

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

Liabilities related to contracts with customers as of June 30, 2022 and December 31, 2021 were as follows:

	June 30,		December 31,
(in thousands)	2022		2021
Loyalty programs	$	19,612	$	19,099
Advanced deposits from customers	28,156		36,068
Unpaid wagers	11,204		11,440
Total	$	58,972	$	66,607

The Company recognized $7.7 million and $9.4 million of revenue related to loyalty program redemptions for the three months ended June 30, 2022 and 2021, respectively, and $15.9 million and $12.2 million for the six months ended June 30, 2022 and 2021, respectively.

19

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5.    ACQUISITIONS

Recent Acquisitions

The Company accounted for all of the following acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805. Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date. The fair value of the identifiable intangible assets acquired are determined by using an income approach. Significant assumptions utilized in the income approach are based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The purchase price allocation for Gamesys and certain of the Bally’s Interactive Acquisitions, as defined below, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.

The Company recorded transaction costs related to its recent and pending acquisitions of $8.5 million and $13.0 million during the three and six months ended June 30, 2022, respectively, and $18.4 million and $30.7 million during the three and six months ended June 30, 2021. These costs are included in “Acquisition, integration and restructuring” in the condensed consolidated statements of operations. Refer to Note 11 “Acquisition, Integration and Restructuring” for further information.

Bally’s Lake Tahoe Casino Resort

On April 6, 2021, the Company acquired Bally’s Lake Tahoe in Lake Tahoe, Nevada from Eldorado Resorts, Inc. (“Eldorado”) and certain of its affiliates for $14.2 million, payable in cash one year from the closing date and subject to customary post-closing adjustments. The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet as of December 31, 2021 and was paid in April 2022.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition include gaming licenses of $5.2 million with an indefinite life and a trade name of $0.2 million, which was amortized on a straight-line basis over its estimated useful life of approximately six months. The fair value of the identifiable intangible assets acquired was determined by using an income approach.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Lake Tahoe on April 6, 2021:

	As of April 6, 2021
(in thousands)	Preliminary as of December 31, 2021		Year to Date Adjustments		Final
Total current assets	$	4,683	$	—	$	4,683
Property and equipment, net	6,361		—		6,361
Right of use assets, net	57,017		—		57,017
Intangible assets, net	5,430		—		5,430
Accounts payable and accrued liabilities	(3,402)		(144)		(3,546)
Lease liabilities	(52,927)		—		(52,927)
Other long-term liabilities	(941)		37		(904)
Net assets acquired	16,221		(107)		16,114
Bargain purchase gain	(2,049)		107		(1,942)
Total purchase price	$	14,172	$	—	$	14,172

20

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

During the year ended December 31, 2021, the Company recorded a bargain purchase gain of $2.0 million based on the preliminary purchase price allocation as the fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration. During the six months ended June 30, 2022, based on the final purchase price allocation, an adjustment of $0.1 million was recorded reducing the bargain purchase gain to $1.9 million. The original agreement to acquire Bally’s Lake Tahoe from Eldorado was made concurrently with the agreement of Bally’s Shreveport and the Company believes that it was able to acquire Bally’s Lake Tahoe for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the properties prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the US.

Bally’s Evansville

On June 3, 2021, the Company completed the acquisition of the Bally’s Evansville casino operations from Caesars. The total purchase price was $139.7 million. Cash paid by the Company at closing, net of $9.4 million cash acquired, was $130.4 million, excluding transaction costs.

In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of GLPI for the Bally’s Dover property. Refer to Note 13 “Leases” for further information.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Evansville acquisition include gaming licenses of $153.6 million with an indefinite life and rated player relationships of $0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years. The fair value of the identifiable intangible assets acquired was determined by using an income approach.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Evansville on June 3, 2021. There were no purchase accounting adjustments recorded during the six months ended June 30, 2022.

	As of June 3, 2021
(in thousands)	Final
Cash and cash equivalents	$	9,355
Accounts receivable, net	1,474
Inventory and prepaid expenses and other current assets	1,202
Property and equipment, net	12,325
Right of use assets, net	285,772
Intangible assets, net	154,210
Other assets	468
Accounts payable and accrued liabilities	(10,927)
Lease liabilities	(285,772)
Deferred tax liability	(7,233)
Other long-term liabilities	(310)
Net assets acquired	160,564
Bargain purchase gain	(20,856)
Total purchase price	$	139,708

The fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration and therefore, a bargain purchase gain of $20.9 million was recorded during the year ended December 31, 2021. The Company believes it was able to acquire Bally’s Evansville for less than fair value as a result of a distressed sale prior to Eldorado’s merger with Caesars, as noted above, coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the US.

21

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Bally’s Quad Cities Casino & Hotel

On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities in Rock Island, Illinois. Pursuant to the terms of the Equity Purchase Agreement, the Company acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for a purchase price of $118.9 million in cash. Cash paid by the Company, net of $2.9 million cash acquired and the $4.0 million deposit paid in the third quarter of 2020, was $112.0 million, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Bally’s Quad Cities acquisition include gaming licenses of $30.3 million with an indefinite life, as well as rated player relationships and a trade name of $0.7 million and $0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately nine years and four months, respectively. The fair value of the identifiable intangible assets acquired was determined by using an income approach. Goodwill recognized is deductible for local tax purposes and has been assigned as of the acquisition date to the Company’s Casinos & Resorts reportable segment, which includes the reporting unit expected to benefit from the synergies of the acquisition. Qualitative factors that contribute to the recognition of goodwill include an organized workforce and expected synergies from integrating the property into the Company’s casino portfolio and future development of its omni-channel strategy.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the Bally’s Quad Cities acquisition on June 14, 2021.

	As of June 14, 2021
(in thousands)	Preliminary as of December 31, 2021		Year to Date Adjustments		Final
Cash and cash equivalents	$	2,933	$	—	$	2,933
Accounts receivable, net	2,986		—		2,986
Inventory and prepaid expenses and other current assets	798		—		798
Property and equipment, net	73,135		—		73,135
Intangible assets, net	31,180		—		31,180
Goodwill	14,593		(1,285)		13,308
Total current liabilities	(6,697)		1,285		(5,412)
Total purchase price	$	118,928	$	—	$	118,928

North America Interactive Acquisitions

SportCaller - On February 5, 2021, the Company acquired SportCaller for total consideration of $42.6 million including $24.0 million in cash and 221,391 of the Company’s common shares at closing, pending adjustment, and up to $12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a US Dollar (“USD”) to Euro exchange ratio of 0.8334).

Monkey Knife Fight - On March 23, 2021, the Company acquired Fantasy Sports Shark, LLC (d/b/a/ Monkey Knife Fight) for total consideration of $118.6 million including, (1) immediately exercisable penny warrants to purchase up to 984,446 of the Company’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additional Company common shares, half of which are issuable on each of the first and second anniversary of closing. The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing at future dates.

The Company paid cash of $22.4 million, net of cash acquired, for SportCaller and MKF. Total non-cash consideration transferred for SportCaller and MKF was $135.3 million, which included $58.7 million of the fair value of contingent consideration as of the SportCaller and MKF acquisition dates. Refer to Note 9 “Fair Value Measurements” for further information.

22

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Bally’s Interactive - On May 28, 2021, the Company acquired Bally’s Interactive, formerly Bet.Works Corp., for total consideration of $192.1 million, which consisted of $70.4 million in cash, net of cash acquired, and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments. The shareholders of Bally’s Interactive will not transfer any shares of Company common stock received prior to June 1, 2022 and, for the following 12 months, may transfer only up to 1% of the Company’s common stock per every 90 days.

AVP - On July 12, 2021, the Company acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the US, for $10.0 million in cash.

Telescope - On August 12, 2021, the Company acquired an 84.16% controlling interest in Telescope, a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams, for $25.9 million in cash, net of cash acquired. The remaining 15.84% of Telescope is owned by certain selling shareholders and is reported as a non-controlling interest. The non-controlling interest is convertible into shares of Bally’s common stock based on a fixed exchange ratio share-settlement feature, valued using the Company’s common stock price, and is classified as permanent equity. Earnings attributable to the non-controlling interest are not material for the three and six months ended June 30, 2022.

Degree 53 - On October 25, 2021, the Company acquired Degree 53, a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries, for $7.8 million in cash, net of cash acquired.

The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally’s Interactive, AVP, Telescope and Degree 53 (collectively the “North America Interactive Acquisitions”) include customer relationships of $41.5 million, which are being amortized over estimated useful lives between three and ten years, developed software of $122.4 million, which is being amortized over estimated useful lives between three and ten years, and trade names of $3.1 million, which are being amortized over estimated useful lives between ten and 15 years. Total goodwill recorded in connection with the North America Interactive Acquisitions was $250.7 million. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry, and securing buyer-specific synergies expected to contribute to the Company’s omni-channel strategy which are expected to increase revenue and profits within the Company’s North America Interactive reportable segment. Goodwill of the Bally’s Interactive Acquisitions has been assigned as of the acquisition date to the Company’s North America Interactive reportable segment.

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

(in thousands)	As of June 30, 2022(1)
Cash and cash equivalents	$	8,689
Accounts receivable, net	4,498
Prepaid expenses and other current assets	3,104
Property and equipment, net	596
Intangible assets, net	167,075
Goodwill	250,730
Total current liabilities	(14,787)
Deferred tax liability	(15,811)
Acquired non-controlling interest	(3,760)
Net investment in the North America Interactive Acquisitions	$	400,334

__________________________________

(1)    As of June 30, 2022, the purchase price allocations of AVP, Telescope and Degree 53 are preliminary and are final for Bally’s Interactive, SportCaller and MKF.

23

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

During the three and six months ended June 30, 2022, the Company recorded purchase accounting adjustments for the North America Interactive Acquisitions, increasing both goodwill and accrued liabilities by $0.2 million.

Gamesys Acquisition

On October 1, 2021, the Company completed the acquisition of Gamesys. Total consideration was $2.60 billion, which consisted of $2.08 billion paid in cash and 9,773,537 shares of Bally’s common stock. Cash paid by the Company at closing, net of cash received of $183.3 million and a $10.3 million post-acquisition expense, explained below, was $1.90 billion, excluding transaction costs.

The identifiable intangible assets recorded in connection with the closing of the Gamesys acquisition are based on preliminary valuations and primarily include customer relationships of $980.2 million and developed technology of $282.0 million, both of which are being amortized over seven years, and trade names of $249.8 million, which have indefinite lives. Total goodwill of $1.68 billion represents the excess purchase price over the preliminary fair value of the assets acquired and liabilities assumed. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill, which consist primarily of benefits from acquiring a talented technology workforce and management team experienced in the online gaming industry. Goodwill associated with the Gamesys acquisition is assigned as of the acquisition date to the Company’s International Interactive and North America Interactive reportable segments in the amounts of $1.64 billion and $33.3 million respectively, which include the reporting units expected to benefit from the synergies arising from the acquisition. The assignment of goodwill to reporting units is based upon preliminary valuations subject to change throughout the measurement period. Goodwill recognized is not deductible for local tax purposes.

In connection with the acquisition of Gamesys, certain unvested and outstanding equity options held by Gamesys employees were discretionarily accelerated and vested by the Gamesys Board of Directors, requiring allocation of the fair value of post-acquisition service to purchase consideration, with the remainder allocated to non-recurring post-acquisition expense. The fair value of $36.4 million was attributed to pre-acquisition service and included in consideration transferred. In the fourth quarter of 2021, the fair value of $10.3 million, attributable to post-acquisition expense was recorded within “Advertising, general, and administrative” expense in the consolidated statements of operations.

24

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

(in thousands)	Preliminary as of December 31, 2021		Year to Date Adjustments		Preliminary as of June 30, 2022
Cash and cash equivalents and restricted cash	$	183,306	$	—	$	183,306
Accounts receivable, net	35,851		—		35,851
Prepaid expenses and other current assets	27,876		542		28,418
Property and equipment, net	15,230		—		15,230
Right of use assets, net	14,185		—		14,185
Goodwill	1,678,476		(542)		1,677,934
Intangible assets, net	1,513,023		—		1,513,023
Other assets	17,668		—		17,668
Accounts payable	(47,881)		—		(47,881)
Accrued income taxes	(40,250)		—		(40,250)
Accrued liabilities	(177,109)		—		(177,109)
Long-term debt, net	(456,469)		—		(456,469)
Lease liabilities	(14,185)		—		(14,185)
Deferred tax liability	(143,924)		—		(143,924)
Other long-term liabilities	(6,680)		—		(6,680)
Total purchase price	$	2,599,117	$	—	$	2,599,117

Pending Acquisitions

Tropicana Las Vegas

On April 13, 2021, the Company agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada (“Tropicana Las Vegas”) from GLPI valued at approximately $300 million. The purchase price for the Tropicana property’s non-land assets is $150.0 million. In addition, the Company agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at an annual rent of $10.5 million, subject to increases over time. The Company expects to complete the acquisition of Tropicana Las Vegas during the year ended December 31, 2022.

25

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Supplemental Pro Forma Consolidated Information

The following unaudited pro forma consolidated financial information for the three and six months ended June 30, 2021 combines the Company’s historical results with pro forma amounts for Bally’s Lake Tahoe, Bally’s Evansville and Gamesys. The unaudited pro forma consolidated financial information assumes that the acquisitions of Bally’s Lake Tahoe, Bally’s Evansville and Gamesys had occurred as of January 1, 2020. The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments related to the issuance of new debt and equity offerings as of January 1, 2020 as well as non-recurring adjustments for amortization of acquired intangible assets, compensation expense for share-based compensation arrangements that were cash settled in conjunction with the acquisitions, interest expense, transaction costs, together with the consequential tax effects. The revenue, earnings and pro forma effects of other acquisitions completed during the year ended December 31, 2021, which include Bally’s Interactive Acquisitions and Bally’s Quad Cities, are not material to results of operations, individually or in the aggregate.

These unaudited pro forma financial results are presented for informational purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the acquisitions actually taken place on January 1, 2020. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the acquisitions.

	Three Months Ended		Six Months Ended
(in thousands)	June 30, 2021		June 30, 2021
Revenue	$	575,116	$	1,081,731
Net loss	$	(40,989)	$	(26,319)

6.    PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 2022 and December 31, 2021, prepaid expenses and other current assets was comprised of the following:

	June 30,		December 31,
(in thousands)	2022		2021
Services and license agreements	$	24,357	$	21,496
Due from payment service providers	21,425		15,984
Sales tax	9,124		18,308
Deposits	8,028		8,748
Prepaid marketing	5,844		10,066
Convertible loans	5,205		—
Purse funds	4,921		8,286
Unbilled revenue	3,004		7,759
Prepaid insurance	2,043		9,637
Other	5,421		4,179
Total prepaid expenses and other current assets	$	89,372	$	104,463

26

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

7.    PROPERTY AND EQUIPMENT

As of June 30, 2022 and December 31, 2021, property and equipment was comprised of the following:

	June 30,		December 31,
(in thousands)	2022		2021
Land	$	59,378	$	75,328
Land improvements	31,170		34,704
Building and improvements	617,080		650,837
Equipment	209,825		182,006
Furniture and fixtures	60,256		47,258
Construction in process	73,407		53,715
Total property, plant and equipment	1,051,116		1,043,848
Less: Accumulated depreciation	(230,662)		(205,197)
Property and equipment, net	$	820,454	$	838,651

Depreciation expense relating to property and equipment for the three months ended June 30, 2022 and 2021 was $16.1 million and $12.8 million, respectively. Depreciation expense relating to property and equipment for the six months ended June 30, 2022 and 2021 was $32.9 million and $23.9 million, respectively. During the three and six months ended June 30, 2022 there was $0.4 million and $0.7 million of capitalized interest, respectively. There was no capitalized interest during the three and six months ended June 30, 2021.

27

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

8.    GOODWILL AND INTANGIBLE ASSETS

The change in carrying value of goodwill by reportable segment for the six months ended June 30, 2022 is as follows (in thousands):

	Casinos & Resorts		North America Interactive		International Interactive		Total
Goodwill as of December 31, 2021(1)	$	201,952	$	283,358	$	1,637,343	$	2,122,653
Effect of foreign exchange	—		(1,223)		(149,784)		(151,007)
Purchase accounting adjustments on prior year business acquisitions	(1,285)		239		(542)		(1,588)
Goodwill as of June 30, 2022(1)	$	200,667	$	282,374	$	1,487,017	$	1,970,058

__________________________________

(1)    Casinos & Resorts amounts are net of accumulated goodwill impairment charges of $5.4 million.

The change in intangible assets, net for the six months ended June 30, 2022 is as follows (in thousands):

Intangible assets, net as of December 31, 2021	$	2,477,952
Additions in current period	85,160
Change in TRA	(6,403)
Effect of foreign exchange	(125,342)
Other	(319)
Less: Amortization	(120,799)
Intangible assets, net as of June 30, 2022	$	2,310,249

The Company’s identifiable intangible assets consist of the following:

	Weighted average remaining life (in years)	June 30, 2022
(in thousands, except years)		Gross Carrying Amount		Accumulated Amortization		Net
Amortizable intangible assets:
Naming rights - Sinclair(1)	8.7	$	330,988	$	(42,497)	$	288,491
Trade names	10.6	28,132		(18,175)		9,957
Hard Rock license	25.0	8,000		(1,939)		6,061
Customer relationships	6.2	941,010		(111,275)		829,735
Developed technology	6.7	366,997		(43,780)		323,217
Internally developed software	4.7	50,167		(3,416)		46,751
Gaming licenses	8.5	30,764		(2,670)		28,094
Other	3.4	4,124		(1,461)		2,663
Total amortizable intangible assets		1,760,182		(225,213)		1,534,969
Intangible assets not subject to amortization:
Gaming licenses	Indefinite	528,871		—		528,871
Trade names	Indefinite	245,053		—		245,053
Other	Indefinite	1,356		—		1,356
Total unamortizable intangible assets		775,280		—		775,280
Total intangible assets, net		$	2,535,462	$	(225,213)	$	2,310,249

__________________________________

(1)    Naming rights intangible asset in connection with Sinclair Agreement. Refer to Note 2 “Significant Accounting Policies” for further information. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks.

28

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	Weighted average remaining life (in years)	December 31, 2021
(in thousands, except years)		Gross Carrying Amount		Accumulated Amortization		Net
Amortizable intangible assets:
Naming rights - Sinclair(2)	9.2	$	337,391	$	(25,721)	$	311,670
Trade names	10.6	28,439		(17,481)		10,958
Hard Rock license	25.5	8,000		(1,818)		6,182
Customer relationships	6.7	1,026,797		(46,789)		980,008
Developed technology	7.2	392,481		(19,690)		372,791
Internally developed software	4.8	20,952		(727)		20,225
Gaming licenses	10.0	30,409		(591)		29,818
Other	4.4	2,413		(1,121)		1,292
Total amortizable intangible assets		1,846,882		(113,938)		1,732,944
Intangible assets not subject to amortization:
Gaming licenses	Indefinite	478,171		—		478,171
Trade names	Indefinite	265,099		—		265,099
Other	Indefinite	1,738		—		1,738
Total unamortizable intangible assets		745,008		—		745,008
Total intangible assets, net		$	2,591,890	$	(113,938)	$	2,477,952

__________________________________

(2)    See note (1) above.

Amortization of intangible assets was approximately $58.7 million and $13.0 million for the three months ended June 30, 2022 and 2021, respectively, and approximately $120.8 million and $14.7 million for the six months ended June 30, 2022 and 2021, respectively.

The following table reflects the remaining amortization expense associated with the finite-lived intangible assets as of June 30, 2022:

(in thousands)
Remaining 2022	$	120,799
2023	234,775
2024	231,950
2025	228,097
2026	222,708
Thereafter	496,640
Total	$	1,534,969

9.    FAIR VALUE MEASUREMENTS

The Company categorizes financial assets and liabilities based on the following fair value hierarchy:

Level 1: Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly;

Level 3: Unobservable inputs in which little or no market data exists requiring an entity to develop its own assumptions.

29

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

		June 30, 2022
(in thousands)	Balance Sheet Location	Level 1		Level 2		Level 3
Assets:
Other current assets	Prepaid expenses and other current assets	$	25	$	—	$	—
Convertible loans	Prepaid expenses and other current assets	5,205		—		—
Convertible loans	Other assets	—		—		2,486
Investments in equity securities	Other assets	2,523		—		—
Total		$	7,753	$	—	$	2,486
Liabilities:
Sinclair Performance Warrants	Naming rights liabilities	$	—	$	—	$	36,153
Contingent consideration	Contingent consideration payable	—		—		8,701
Total		$	—	$	—	$	44,854

		December 31, 2021
(in thousands)	Balance Sheet Location	Level 1		Level 2		Level 3
Assets:
Other current assets	Prepaid expenses and other current assets	$	176	$	—	$	—
Convertible loans	Other assets	5,905		—		2,025
Total		$	6,081	$	—	$	2,025
Liabilities:
Sinclair Performance Warrants	Naming rights liabilities	$	—	$	—	$	69,564
Contingent consideration	Contingent consideration payable	—		—		34,931
Total		$	—	$	—	$	104,495

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

(in thousands)	Sinclair Performance Warrants		Contingent Consideration		Convertible Loans		Total
Beginning as of December 31, 2021	$	69,564	$	34,931	$	2,025	$	106,520
Additions in the period (acquisition fair value)	—		—		667		667
Reductions in the period	—		(15,862)		—		(15,862)
Change in fair value	(33,411)		(10,368)		(206)		(43,985)
Ending as of June 30, 2022	$	36,153	$	8,701	$	2,486	$	47,340

(in thousands)	Sinclair Performance Warrants		Contingent Consideration		Total
Beginning as of December 31, 2020	$	88,119	$	—	$	88,119
Additions in the period (acquisition fair value)	—		58,623		58,623
Change in fair value	6,810		(11,703)		(4,893)
Ending as of June 30, 2021	$	94,929	$	46,920	$	141,849

30

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three and six months ended June 30, 2022 and 2021 are as follows:

	Condensed Consolidated Statements of Operations Location	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)		2022		2021		2022		2021
Foreign exchange forward contracts	Other, net	$	—	$	(14,773)	$	—	$	(14,773)
Sinclair Performance Warrants	Change in value of naming rights liabilities	$	20,032	$	19,070	$	33,411	$	(6,810)
Sinclair Options	Change in value of naming rights liabilities	$	—	$	—	$	—	$	(1,526)

Sinclair Performance Warrants

Sinclair Performance Warrants are accounted for as a derivative instrument classified as a liability within Level 3 of the hierarchy as the warrants are not traded in active markets and are subject to certain assumptions and estimates made by management related to the probability of meeting performance milestones. These assumptions and the probability of meeting performance targets may have a significant impact on the value of the warrant. The Performance Warrants are valued using an option pricing model, considering the Company’s estimated probabilities of achieving the performance milestones for each tranche. Inputs to this valuation approach include volatility of 63%, risk free rates between 1.02% and 1.24%, the Company’s common stock price for each period and expected terms between 3.4 and 4.9 years.

Sinclair Options

As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value of $59.7 million and were reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the consolidated balance sheet. The increase in fair value of the Options from $58.2 million as of December 31, 2020, through January 27, 2021 was $1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported within “Change in value of naming rights liabilities” in the consolidated statements of operations. The fair value was based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity.

Contingent consideration

Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In connection with the acquisitions of SportCaller and MKF on February 5, 2021 and March 23, 2021, respectively, the Company recorded contingent consideration at fair value of $58.6 million as of the acquisition dates. After the acquisition dates and until the contingencies are resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to management’s estimate and the Company’s stock price. These changes in fair value are recognized within “Other, net” of the condensed consolidated statements of operations. During the first quarter of 2022, the Company settled contingent consideration of $15.9 million comprised of 393,778 immediately exercisable penny warrants to MKF and 107,832 shares of Bally’s Corporation common stock and $0.1 million in cash to SportCaller in satisfaction of contingencies related to the respective acquisition agreements (as described in Note 5 “Acquisitions”).

Other current assets

The Company has agreements with certain third-party sports betting operators for online sports betting and related iGaming market access. Pursuant to one of these agreements, the Company has a present right to payment for a fixed number of equity securities in exchange for market access. The Company recorded these securities as a stock receivable at their fair value based on quoted prices in active markets and classified within Level 1 of the hierarchy with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

31

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Convertible loans

The Company has certain agreements with vendors to provide a portfolio of games to its customers. Pursuant to these agreements, the Company has issued loans to its vendors and has an option to convert the loans to shares of the vendors’ equity, exercisable within a specified time period. The Company recorded the short-term portion of the instruments within “Prepaid expenses and other current assets” and the long-term portion of the instruments within “Other assets” at their fair value. The fair value of the loans to vendors with share prices quoted on active markets are classified within Level 1 of the hierarchy and the fair value of the loans to vendors with share values based on unobservable inputs are classified within Level 3 of the hierarchy.

Investments in equity securities

The Company has a long term investment in an unconsolidated entity which it accounts for under the equity method of accounting. The Company has elected the fair value option allowed by ASC 825, Financial Instruments, with respect to this investment. Under the fair value option, the investment is remeasured at fair value at each reporting period through earnings. The Company measures fair value using quoted prices in active markets that are classified within Level 1 of the hierarchy, with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.

Long-term debt

The fair values of the Company’s Term Loan Facility and senior notes are estimated based on quoted prices in active markets and are classified as a Level 1 measurements. The fair value of the Revolving Credit Facility approximates its carrying amount as it is revolving, variable rate debt, and is also classified as a Level 1 measurement. In the table below, the carrying amount of the Company’s long-term debt is net of debt issuance costs and debt discounts. Refer to Note 12 “Long-Term Debt” for further information.

	June 30, 2022				December 31, 2021
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan Facility	$	1,890,506	$	1,935,275	$	1,897,030	$	1,945,000
5.625% Senior Notes due 2029	733,443		534,041		732,660		746,250
5.875% Senior Notes due 2031	732,118		519,693		731,537		754,223

10.    ACCRUED LIABILITIES

As of June 30, 2022 and December 31, 2021, accrued liabilities consisted of the following:

(in thousands)	June 30, 2022		December 31, 2021
Gaming liabilities	$	156,800	$	170,508
Compensation	49,935		49,764
Interest payable	35,196		46,292
Other	100,755		134,864
Total accrued liabilities	$	342,686	$	401,428

32

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11.    ACQUISITION, INTEGRATION AND RESTRUCTURING

The following table reflects acquisition, integration and restructuring expenses the Company recorded during the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Acquisition and integration costs:
Gamesys	$	800	$	7,344	$	1,178	$	13,571
North America Interactive acquisitions(1)	1,883		834		2,347		3,674
Chicago, Illinois	4,095		—		5,872		—
Other(2)	1,698		10,224		3,561		13,415
Total	8,476		18,402		12,958		30,660
Restructuring expense	1,636		—		2,434		—
Total acquisition, integration and restructuring	$	10,112	$	18,402	$	15,392	$	30,660

__________________________________

(1)    Includes costs associated with the acquisition of Bally’s Interactive, SportCaller, MKF, AVP and Telescope, which are included within the North America Interactive segment.

(2)    Includes costs in connection with the development of a casino in Centre County, Pennsylvania, the completed acquisitions of Bally’s Atlantic City, Bally’s Black Hawk, Bally’s Dover, Bally’s Evansville, Bally’s Lake Tahoe, Bally’s Quad Cities and Bally’s Shreveport, the pending acquisition of Tropicana Las Vegas and other transactions.

Restructuring Expense

During the three and six months ended June 30, 2022, the Company incurred restructuring expense of $1.6 million and $2.4 million, respectively, attributable to severance costs incurred. There was no restructuring expense in the three and six months ended June 30, 2021. The following table summarizes the restructuring liability accrual activity by segment during the six months ended June 30, 2022:

(in thousands)	North America Interactive		International Interactive		Total
Restructuring liability as of December 31, 2021	$	142	$	264	$	406
Additions	507		1,927		2,434
Payments	(649)		(2,191)		(2,840)
Restructuring liability as of June 30, 2022	$	—	$	—	$	—

33

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

12.    LONG-TERM DEBT

As of June 30, 2022 and December 31, 2021, long-term debt consisted of the following:

(in thousands)	June 30, 2022		December 31, 2021
Term Loan Facility	$	1,935,275	$	1,945,000
Revolving Credit Facility	—		85,000
5.625% Senior Notes due 2029	750,000		750,000
5.875% Senior Notes due 2031	750,000		750,000
Less: Unamortized original issue discount	(29,693)		(31,425)
Less: Unamortized deferred financing fees	(49,515)		(52,348)
Long-term debt, including current portion	3,356,067		3,446,227
Less: Current portion of Term Loan and Revolving Credit Facility	(19,450)		(19,450)
Long-term debt, net of discount and deferred financing fees; excluding current portion	$	3,336,617	$	3,426,777

Senior Notes

On August 20, 2021, two unrestricted subsidiaries (together, the “Escrow Issuers”) of the Company issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 (the “2029 Notes”) and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “Senior Notes”). The Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S. Bank National Association, as trustee. Certain of the net proceeds from the Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys acquisition. On October 1, 2021, upon the closing of the Gamesys acquisition, the Company assumed the issuer obligation under the Senior Notes. The Senior Notes are guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries that guarantees the Company’s obligations under its Credit Agreement.

The 2029 Notes mature on September 1, 2029 and the 2031 Notes mature on September 1, 2031. Interest is payable on the Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.

The Company may redeem some or all of the Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the Senior Notes to be redeemed plus certain “make-whole” premiums, plus accrued and unpaid interest. In addition, prior to September 1, 2024, the Company may redeem up to 40% of the original principal amount of each series of the Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625% of the principal amount, in the case of the 2029 Notes, and 105.875%, in the case of the 2031 Notes, plus accrued and unpaid interest. The Company may redeem some or all of the Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.

The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (1) incur additional indebtedness, (2) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (3) enter into certain transactions with affiliates, (4) sell or otherwise dispose of assets, (5) create or incur liens and (6) merge, consolidate or sell all or substantially all of the Company’s assets. These covenants are subject to exceptions and qualifications set forth in the indenture.

Credit Facility

On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the “Revolving Credit Facility”), which will mature in 2026.

34

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The credit facilities allow the Company to increase the size of the Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio as set out in the Credit Agreement.

The credit facilities are guaranteed by the Company’s restricted subsidiaries, subject to certain exceptions, and secured by a first-priority lien on substantially all of the Company’s and each of the guarantors’ assets, subject to certain exceptions.

Borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) LIBOR determined by reference to the costs of funds for USD deposits for the interest period relevant to such borrowing, adjusted for certain additional costs and subject to a floor of 0.50% in the case of term loans and 0.00% in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50%, (b) the prime rate, (c) the one-month LIBOR rate plus 1.00%, (d) solely in the case of term loans, 1.50%, and (e) solely in the case of revolving loans, 1.00%, in each case of clauses (1) and (2), plus an applicable margin. In addition, on a quarterly basis, the Company is required to pay each lender under the Revolving Credit Facility a 0.50% or 0.375% commitment fee in respect of commitments under the Revolving Credit Facility, with the applicable commitment fee determined based on the Company’s total net leverage ratio.

The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments and grant liens. These covenants are subject to exceptions and qualifications set forth in the Credit Agreement. The Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the Revolving Credit Facility exceed 30% of the total revolving commitment. As of June 30, 2022, the Company’s borrowings under the Revolving Credit Facility did not exceed 30% and therefore, financial covenants did not apply.

13.    LEASES

GLPI Master Lease

In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI has agreed to acquire the real estate associated with Bally’s Evansville from the seller for $340.0 million and lease it to the Company under a master lease agreement (the “Master Lease”). GLPI also agreed to acquire the real estate associated with Bally’s Dover for $144.0 million and lease it back to the Company under the Master Lease. The Master Lease with GLPI has an initial term of 15 years and includes four, five-year options to renew and requires combined minimum annual payments of $40.0 million, subject to escalation. The acquisition of Bally’s Evansville and commencement of the Master Lease occurred on June 3, 2021.

During the second quarter of 2021, the Company sold the real estate associated with Bally’s Dover to GLPI and recorded a gain of $53.4 million representing the difference in the transaction price and the derecognition of assets.

During the second quarter of 2021, the Company recognized a lease liability and corresponding right of use asset of $117.3 million and $276.9 million related to Bally’s Dover and Bally’s Evansville, respectively.

On April 1, 2022, the Company completed the sale of its Bally’s Quad Cities and Bally’s Black Hawk properties to GLPI for $150.0 million, subsequently leasing the properties back under the above-mentioned Master Lease for combined minimum annual payments of $12.0 million, subject to escalation. During the second quarter of 2022, the Company recorded a net gain of $50.8 million, representing the difference in the transaction price and the derecognition of assets, and recorded lease liabilities and corresponding right of use assets of $82.7 million and $21.8 million, respectively.

All leases under the Master Lease are accounted for as operating leases within the provisions of ASC 842, Leases (“ASC 842”), over the lease term or until a re-assessment event occurs.

35

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Operating Leases

In addition to the operating lease components under the Master Lease, the Company is committed under various long-term operating lease agreements primarily related to submerged tidelands, property and equipment at Hard Rock Biloxi, Bally’s Kansas City, Bally’s Shreveport and Bally’s Lake Tahoe. These leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options. Certain of these leases include percentage rent payments based on property revenues and/or rent escalation provisions determined by increases in the consumer price index (“CPI”). These percentage rent and escalation provisions are treated as variable lease payments and recognized as lease expense in the period in which the obligation for those payments are incurred. Discount rates used to determine the present value of the lease payments are based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.

In the second quarter of 2021, in connection with the acquisition of Bally’s Lake Tahoe, the Company assumed a lease for the real estate and land underlying the operations of Bally’s Lake Tahoe facility. The original term of the lease expires on December 31, 2035, at which point the Company will have five options to renew the lease for additional periods of five years each. The renewal options have not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the options. The fixed rent due under the lease can escalate each year based on changes in CPI. Additionally, the Company is obligated to pay an annual percentage rent based on property net revenues.

Additionally, certain of the Company’s subsidiaries lease office space, data centers, parking space, memorabilia and equipment under agreements classified as operating leases that expire on various dates through 2030. Variable expenses generally represent the Company’s share of the landlord’s operating expenses, percentage rent and CPI increases. The Company does not have any leases classified as financing leases.

The Company had operating lease liabilities of approximately $668.7 million and $531.0 million as of June 30, 2022 and December 31, 2021, respectively, and right of use assets of approximately $642.9 million and $507.8 million as of June 30, 2022 and December 31, 2021, respectively, which were included in the condensed consolidated balance sheets.

Total lease cost under ASC 842 for the three and six months ended June 30, 2022 and 2021 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Operating leases:
Operating lease cost	$	17,265	$	6,363	$	32,564	$	7,695
Variable lease cost	2,001		780		3,818		918
Operating lease expense	19,266		7,143		36,382		8,613
Short-term lease expense	4,966		1,769		8,703		2,823
Total lease expense	$	24,232	$	8,912	$	45,085	$	11,436

36

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Supplemental cash flow and other information for the three and six months ended June 30, 2022 and 2021, related to operating leases was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cash paid for amounts included in the lease liability - operating cash flows from operating leases	$	15,820	$	5,328	$	29,007	$	6,137
Right of use assets obtained in exchange for operating lease liabilities	$	148,759	$	126,235	$	150,122	$	126,623

	June 30, 2022		December 31, 2021
Weighted average remaining lease term	14.4 years		15.3 years
Weighted average discount rate	6.5	%	6.1	%

As of June 30, 2022, future minimum rental commitments under noncancelable operating leases are as follows:

(in thousands)	June 30, 2022
Remaining 2022	$	36,238
2023	68,298
2024	72,251
2025	75,663
2026	74,797
Thereafter	722,172
Total	1,049,419
Less: present value discount	(380,717)
Operating lease liabilities	$	668,702

Future operating lease payments as shown above include $87.7 million related to extension options that are reasonably certain of being exercised.

The Company also has leasing arrangements with third-party lessees at its properties. Leasing arrangements for which the Company acts as a lessor are not deemed material as of June 30, 2022 and December 31, 2021.

14.    EQUITY PLANS

Equity Incentive Plans

The Company has three equity incentive plans: the 2010 BLB Worldwide Holdings, Inc. Stock Option Plan (the “2010 Option Plan”), the 2015 Stock Incentive Plan (“2015 Incentive Plan”) and the Bally’s Corporation 2021 Equity Incentive Plan (“2021 Incentive Plan”), collectively (the “Equity Incentive Plans”).

The 2010 Option Plan provided for options to acquire 2,455,368 shares of the Company’s common stock. Options granted to employees, officers and directors of the Company under the 2010 Option Plan vested on various schedules by individual as defined in the individual participants’ option agreements. Vested options can generally be exercised all or in part at any time until the tenth anniversary of the date of grant. Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan. During the three months ended March 31, 2022, there were 20,000 options exercised at a weighted average exercise price of $4.31 per share and an aggregate intrinsic value of $0.1 million. As of June 30, 2022, there were no unexercised options outstanding.

37

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The 2015 Incentive Plan provided for the grant of stock options, time-based restricted stock units (“RSUs”), restricted stock awards (“RSAs”), performance-based restricted stock units (“PSUs”) and other awards (collectively, “restricted awards”) (including those with performance-based vesting criteria) to employees, directors or consultants of the Company. The 2015 Incentive Plan authorized for the issuance of up to 1,700,000 shares of the Company’s common stock pursuant to grants of awards made under the plan. Effective May 18, 2021, no new awards were granted under the 2015 Incentive Plan as a result of the new 2021 Incentive Plan being approved at the Company’s 2021 Annual Shareholder Meeting. The 2021 Incentive Plan provides for the grant of stock options, RSAs, RSUs, PSUs and other awards (including those with performance-based vesting criteria) to employees, directors or consultants of the Company. The 4,250,000 shares of the Company’s common stock, decreased by the number of shares subject to awards granted under the 2015 Incentive Plan between December 31, 2020 and May 18, 2021, or 221,464 shares, plus any shares subject to awards granted under the 2021 Incentive Plan or the 2015 Incentive Plan that are added back to the share pool under the 2021 Incentive Plan pursuant to the plan’s share counting rules, are authorized for issuance under the 2021 Incentive Plan. During the six months ended June 30, 2022, the Company granted 356,709 restricted awards with an aggregate intrinsic value of $12.0 million under the 2021 Incentive Plan. As of June 30, 2022, 3,305,029 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules. There were 1,002,043 restricted awards outstanding as of June 30, 2022.

Share-Based Compensation

The Company recognized total share-based compensation expense of $6.3 million and $11.4 million for the three and six months ended June 30, 2022, respectively, and $3.9 million and $8.4 million for the three and six months ended June 30, 2021, respectively. The total income tax benefit for share-based compensation arrangements was $1.7 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively, and $2.9 million and $2.5 million for the six months ended June 30, 2022 and 2021, respectively.

15.    BENEFIT PLANS

The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The Company acquired a defined benefit pension plan with the acquisition of Bally’s Dover on March 28, 2019 (“Dover Downs Pension Plan”) which is a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011. 

Dover Downs Defined Benefit Pension Plan

The net periodic benefit (income) cost and other changes in plan assets and benefit obligations, excluding service cost, is set forth in the table below for the three and six months ended June 30, 2022 and 2021.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Service cost	$	—	$	—	$	—	$	—
Interest cost	202		224		404		448
Expected return on plan assets	(443)		(357)		(886)		(714)
Net periodic benefit income	$	(241)	$	(133)	$	(482)	$	(266)

Contributions

There is no minimum pension contribution required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended in 2021, for the year ended December 31, 2022. The Company does not expect to contribute in 2022. There were no contributions made to the Dover Downs Pension Plan during the three and six months ended June 30, 2022, and $0.2 million in contributions made to the Dover Downs Pension Plan during the three and six months ended June 30, 2021.

38

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Defined Contribution Plans

The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its US non-union employees and certain union employees. The plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. Gamesys also operates defined contribution retirement benefit plans for their UK, US, Toronto, Isle of Man and Gibraltar offices. Eligible employees are allowed to contribute between 3-5% of their base salary to the various plans and the Company matches all employee contributions. Total employer contribution expense was $1.9 million and $0.8 million for the three months ended June 30, 2022 and 2021, respectively, and $3.9 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively.

16.    STOCKHOLDERS’ EQUITY

Capital Return Program and Quarterly Cash Dividend

The Company had $334.6 million available for use under its previously announced capital return program, as of June 30, 2022. As described under Note 20 “Subsequent Events”, on July 27, 2022, the Company completed a modified Dutch auction tender offer (the “and repurchased 4.7 million shares of its common stock for cash at a price of $22.00 per share for an aggregate purchase price of $103.3 million. Future share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. There is no fixed time period to complete share repurchases.

Total share repurchase activity during the six months ended June 30, 2022 was as follows:

(in thousands, except share and per share data)	Six Months Ended June 30, 2022
Number of common shares repurchased	350,616
Total cost	$	13,288
Average cost per share, including commissions	$	37.90

__________________________________

There was no share repurchase activity during the three months ended June 30, 2022 and the three and six months ended June 30, 2021.

The Company retired 1,146,194 shares of its common stock held in treasury during the three months ended March 31, 2022. There were no shares retired during the three months ended June 30, 2022. The Company retired 2,089,226 shares of its common stock held in treasury during the three and six months ended June 30, 2021. The shares were returned to the status of authorized but unissued shares. As of June 30, 2022, there were no shares remaining in treasury.

There were no cash dividends paid during the six months ended June 30, 2022 and 2021. As of June 30, 2022 and December 31, 2021, $334.6 million and $347.9 million, respectively, remained available for use under the above-mentioned capital return program.

Common Stock Offering

On April 20, 2021, the Company completed an underwritten public offering of common stock at a price to the public of $55.00 per share. The Company issued a total of 12,650,000 shares of Bally’s common stock in the offering, which included 1,650,000 shares issued pursuant to the full exercise of the underwriters’ over-allotment option.

The net proceeds from the offering were approximately $671.4 million, after deducting underwriting discounts, but before expenses.

On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $50.0 million, the same price per share as the public offering price in Bally’s common stock public offering ($55.00 per share). The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition.

39

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The exercise price of the warrant is nominal, and its exercise is subject to, among other conditions, requisite gaming authority approvals. Sinclair agreed not to acquire more than 4.9% of Bally’s outstanding common shares without such approvals. In addition, in accordance with the agreements that Bally’s and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.

Changes to Authorized Shares

On May 18, 2021, following receipt of required shareholder approvals, the Company amended its Certificate of Incorporation to increase the number of authorized shares of common stock from 100 million to 200 million, and authorize the issuance of up to 10 million shares of preferred stock. As of June 30, 2022 and December 31, 2021, no shares of preferred stock have been issued.

Shares Outstanding

As of June 30, 2022, the Company had 52,577,251 common shares issued and outstanding. The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets. These incremental shares as of June 30, 2022 are summarized below:

Sinclair Penny Warrants (Note 2)	7,911,724
Sinclair Performance Warrants (Note 2)	3,279,337
Sinclair Options(1) (Note 2)	1,639,669
MKF penny warrants (Note 5)	34,455
MKF contingent shares (Note 5)	393,779
Telescope contingent shares (Note 5)	75,678
SportCaller contingent shares(2) (Note 5)	344,620
Outstanding awards under Equity Incentive Plans (Note 14)	1,002,043
	14,681,305

__________________________________

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

(2)    The contingent consideration related to the SportCaller acquisition is 6.5M EUR as of June 30, 2022, payable in shares subject to certain post-acquisition earn-out targets and based on share price at time of payment. For purposes of this estimate, the Company used the EUR>US Dollar conversion rate of 1.0487 as of June 30, 2022 and the closing share price of Company common shares of $19.78 per share to calculate the shares expected to be issued if earn-out targets are met.

40

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

17.    ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables reflect the changes in accumulated other comprehensive loss by component, net of tax, for the six months ended June 30, 2022 and 2021, respectively:

(in thousands)	Foreign Currency Translation Adjustment		Benefit Plans		Total
Accumulated other comprehensive loss at December 31, 2021	$	(25,833)	$	(976)	$	(26,809)
Current period other comprehensive loss	(270,355)		—		(270,355)
Accumulated other comprehensive loss at June 30, 2022	$	(296,188)	$	(976)	$	(297,164)

(in thousands)	Foreign Currency Translation Adjustment		Benefit Plans		Total
Accumulated other comprehensive loss at December 31, 2020	$	—	$	(3,144)	$	(3,144)
Current period other comprehensive loss	(633)		—		(633)
Reclassification adjustment to net earnings	—		81		81
Accumulated other comprehensive loss at June 30, 2021	$	(633)	$	(3,063)	$	(3,696)

18.    SEGMENT REPORTING

During the fourth quarter of 2021, the Company updated its operating and reportable segments to better align with its strategic growth initiatives in light of recent acquisitions. The growth and diversification achieved through the Company’s recent acquisitions resulted in a change in the way the Company’s chief operating decision maker makes operating decisions, assesses the performance of the business and allocates resources. As a result of this realignment, the Company determined it had three operating and reportable segments: Casinos & Resorts, North America Interactive and International Interactive. The “Other” category includes interest expense for the Company and certain unallocated corporate operating expenses and other adjustments, including eliminations of transactions among segments to reconcile to the Company’s consolidated results including, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges. During the first quarter of 2022 as a result of the segment realignment noted above, the Company changed its methodology for allocating certain corporate operating expenses within advertising, general and administrative expense previously reported in “Other” to directly apply such costs to the segment supported. The prior year results presented below were reclassified to conform to the new segment presentation.

The Company’s three reportable segments as of June 30, 2022 are:

Casinos & Resorts - Bally’s Twin River, Bally’s Tiverton, Bally’s Dover, Bally’s Atlantic City, Bally’s Evansville, Hard Rock Biloxi, Bally’s Vicksburg, Bally’s Kansas City, Bally’s Black Hawk, Bally’s Shreveport, Bally’s Lake Tahoe, Bally’s Quad Cities and Bally’s Arapahoe Park.

North America Interactive - Bally’s Interactive, SportCaller, MKF, AVP, Telescope, Degree 53, Live at the Bike, Gamesys’ North American operations and online and mobile sports betting operations.

International Interactive - Gamesys’ European and Asian operations.

The Company is currently evaluating the impact of its pending acquisition of Tropicana Las Vegas and the development of a casino in Centre City, Pennsylvania on its operating and reportable segments; however, it is expected that they will be included within the Casinos & Resorts segment.

41

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of June 30, 2022, the Company’s operations were predominately in the US, Europe and Asia with a less substantive footprint in other countries world-wide. For geographical reporting purposes, revenue generated outside of the US has been aggregated into the International Interactive reporting segment, and consists primarily of revenue from the UK and Japan. The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.

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

The following tables set forth certain operating data for the Company’s three reportable segments. The Other category is included in the following tables in order to reconcile the segment information to the Company’s condensed consolidated financial statements.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Revenue
Casinos & Resorts	$	299,875	$	262,188	$	579,845	$	451,621
North America Interactive	18,050		5,545		33,277		8,378
International Interactive	234,571		—		487,645		—
Total	$	552,496	$	267,733	$	1,100,767	$	459,999
Adjusted EBITDA(1)
Casinos & Resorts	$	88,001	$	91,806	$	161,791	$	149,426
North America Interactive	(16,961)		93		(36,286)		1,490
International Interactive	82,612		—		155,939		—
Other	(12,428)		(9,074)		(25,267)		(16,219)
Total	141,224		82,825		256,177		134,697
Operating income (expense)
Depreciation and amortization	(74,773)		(25,717)		(153,654)		(38,503)
Acquisition, integration and restructuring	(10,112)		(18,402)		(15,392)		(30,660)
Share-based compensation	(6,322)		(3,901)		(11,417)		(8,384)
Gain on sale-leaseback	50,766		53,425		50,766		53,425
Other	(15,464)		(7,698)		(18,641)		(569)
Income from operations	85,319		80,532		107,839		110,006
Other income (expense)
Interest expense, net of interest income	(45,828)		(21,299)		(91,513)		(41,573)
Other	25,444		36,690		44,923		11,955
Total other income (expense), net	(20,384)		15,391		(46,590)		(29,618)
Income before income taxes	64,935		95,923		61,249		80,388
(Provision) benefit for income taxes	(5,434)		(26,981)		141		(22,151)
Net income	$	59,501	$	68,942	$	61,390	$	58,237

__________________________________

(1)    Adjusted EBITDA is defined as earnings, or loss, for the Company before interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating (income) expense, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments. Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, nor is it directly comparable to similarly titled measures presented by other companies.

42

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Capital Expenditures
Casinos & Resorts	$	55,808	$	19,659	$	104,381	$	34,530
North America Interactive	291		183		466		251
International Interactive	5,426		—		11,108		—
Other	40		616		126		1,004
Total	$	61,565	$	20,458	$	116,081	$	35,785

(in thousands)	June 30, 2022		December 31, 2021
Total Assets
Casinos & Resorts	$	2,615,281	$	2,437,249
North America Interactive	576,256		528,634
International Interactive	3,209,863		3,429,725
Other	(165,407)		157,609
Total	$	6,235,993	$	6,553,217

19.    EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per common share is calculated in accordance with ASC 260, Earnings Per Share, which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic earnings (loss) per common share. The two-class method is an earnings allocation method under which basic earnings (loss) per common share is calculated for each class of common stock and participating security as if all such earnings had been distributed during the period. To calculate basic earnings (loss) per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants, and RSUs, RSAs, and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).

Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2022		2021		2022		2021
Net income	$	59,501	$	68,942	$	61,390	$	58,237
Weighted average shares outstanding - basic	60,506		48,156		60,263		42,038
Weighted average effect of dilutive securities	35		946		69		336
Weighted average shares outstanding - diluted	60,541		49,102		60,332		42,374
Basic earnings per share	$	0.98	$	1.43	$	1.02	$	1.39
Diluted earnings per share	$	0.98	$	1.40	$	1.02	$	1.37

There were 5,429,361 and 5,247,131 share-based awards that were considered anti-dilutive for the three and six months ended June 30, 2022, respectively. There were 3,288,603 and 3,279,337 share-based awards that were considered anti-dilutive for the three and six months ended June 30, 2021, respectively.

43

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

On November 18, 2020, the Company issued Penny Warrants, Performance Warrants, and Options which participate in dividends with the Company’s common stock subject to certain contingencies. In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method. The warrants and Options do not participate in net losses. The Penny Warrants were considered exercisable for little to no consideration and are therefore, included in basic shares outstanding at their issuance date. For the three and six months ended June 30, 2022 and 2021, the shares underlying the performance warrants were anti-dilutive as certain contingencies were not met. Refer to Note 2 “Significant Accounting Policies” for further information regarding the Sinclair Agreement.

20.    SUBSEQUENT EVENTS

On July 27, 2022, the Company completed a modified Dutch auction tender offer and repurchased 4.7 million shares of its common stock for cash at a price of $22.00 per share for an aggregate purchase price of $103.3 million. The Offer was funded with cash on hand and through borrowings on the Company’s revolving credit facility. Shares repurchased will be included in treasury stock.

ITEM 4.    CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), conducted an evaluation of the effectiveness of our disclosure controls and procedures for the reporting period ended June 30, 2022 as such terms is defined in Rule 13a-15(f) under the Exchange Act. Our chief executive officer and chief financial officer previously evaluated and concluded that our disclosure controls and procedures were effective as of June 30, 2022. As a result of the material weaknesses in our internal control over financial reporting, as explained below, our chief executive officer and chief financial officer, have updated their evaluation and now conclude the Company’s disclosure controls and procedures were not effective as of June 30, 2022 due to material weaknesses in the Company’s internal control over financial reporting described below.

The Company did not appropriately design a control to monitor the functional currency assessment of its subsidiaries in accordance with ASC Topic 830, Foreign Currency Matters, specifically with regard to foreign currency held by a newly formed subsidiary to effectuate a large international acquisition. The Company did not record the foreign currency transaction loss through earnings as required by ASC Topic 830 and did not reassess this conclusion upon review of the accumulated other comprehensive loss account each subsequent period. This design deficiency contributed to the potential for there to have been material errors in the Company’s financial statements and therefore resulted in the following material weaknesses:

•Risk Assessment— control deficiencies constituting a material weakness, either individually or in the aggregate, relating to identifying and assessing changes in the business that could impact the system of internal controls; and

•Control Activities— control deficiencies constituting a material weakness, either individually or in the aggregate, relating to: (i) designing controls that would address relevant risks identified through the assessment of changes in the business and (ii) operation at a level of precision to identify all potentially material errors.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If we are unable to satisfactorily address the deficiencies underlying the material weaknesses in a timely fashion, or if additional material weaknesses in our internal control over financial reporting are discovered or occur in the future, then our consolidated financial statements may contain material misstatements and we could be required to restate future financial results and the price of our common stock could be adversely impacted.

As of June 30, 2022 the material weaknesses described above have not yet been remediated.

Management is in the process of developing a remediation plan. The material weaknesses cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. The Company will monitor the effectiveness of its remediation plan and will make changes management determines to be appropriate.

44

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In response to the material weaknesses in the Company’s internal control over financial reporting, management is enhancing its risk assessment to identify changes in our business that could impact the system of internal controls and are in the process of designing control activities related to the monitoring of foreign currency and the application of ASC 830. The Company will continue to work towards full remediation of the material weaknesses to improve its internal control over financial reporting.

45

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

PART II

ITEM 1A.    RISK FACTORS

Our management identified material weaknesses in our internal control over financial reporting which could, if not remediated, result in material misstatements in our consolidated financial statements.

Our management is responsible for establishing and maintaining adequate internal controls over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. As disclosed in this report, the Company did not appropriately design a control to monitor the functional currency assessment of its subsidiaries in accordance with ASC Topic 830, Foreign Currency Matters, specifically with regard to foreign currency held by a newly formed subsidiary to effectuate a large international acquisition. This error related to the quarter ended September 30, 2021 and year ended December 31, 2021 and indicated that certain deficiencies existed in our internal control over financial reporting. As a result of the accounting error, the Company has re-evaluated the effectiveness of the Company’s internal control over financial reporting and identified material weaknesses in the Company’s internal control over financial reporting as of June 30, 2022. The material weaknesses are: (1) risk assessment –control deficiencies constituting a material weakness, either individually or in the aggregate, relating to identifying and assessing changes in the business that could impact the system of internal controls and (2) control activities – control deficiencies constituting a material weakness, either individually or in the aggregate, relating to: (i) designing controls that would address relevant risks identified through the assessment of changes in the business and (ii) operation at a level of precision to identify all potentially material errors. For further discussion regarding the accounting error and the correction of such error in the Company’s condensed consolidated financial statements, see Note 22 “Correction of Current Period Consolidated Financial Statements” included in Part I, Item 1 in the Form 10-K/A for the fiscal year ended December 31, 2021, which is being filed concurrently with this Form 10-Q/A.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. If not remediated, the material weaknesses identified above could result in material misstatements in our consolidated financial statements.

46

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ITEM 6.    EXHIBITS

EXHIBIT INDEX

Exhibit No.	Description
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page from Bally’s Corporation’s Quarterly report on Form 10-Q for the quarter ended June 30, 2022, formatted in inline XBRL contained in Exhibit 101

______________________________________________

*    Filed herewith.

47

BALLY’S CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on November 9, 2022.

                          

BALLY’S CORPORATION
By:	/s/ ROBERT M. LAVAN
	Robert M. Lavan
	Chief Financial Officer
	(Principal Financial and Accounting Officer)
	/s/ LEE D. FENTON
	Lee D. Fenton
	Chief Executive Officer
	(Principal Executive Officer)

48