Lucky Strike Entertainment Corp

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

(1)Description of Business and Significant Accounting Policies

Lucky Strike Entertainment Corporation, a Delaware corporation, and its subsidiaries (collectively referred to herein as the “Company,” “Lucky Strike Entertainment,” “Lucky Strike,” “we,” “us,” and “our”) is one of the world’s premier operators of location-based entertainment.

The Company operates location-based entertainment venues under different brand names. Our AMF branded locations are traditional bowling locations, while the Lucky Strike and Bowlero branded locations offer a more upscale entertainment concept with lounge seating, enhanced food and beverage offerings, and more robust customer service for individuals and group events. Additionally, within the brands, there exists a spectrum where some AMF branded locations are more upscale and some Bowlero branded locations are more traditional. The Company also operates other forms of location-based entertainment, including water parks and family entertainment centers (“FECs”), such as Raging Waves water park, Shipwreck Island water park, Big Kahuna’s water park, Wet 'n Wild Emerald Pointe water park, Raging Waters water park, Castle Park, Boomers Parks, and Octane Raceway. All of our locations are managed in a fully integrated and consistent basis, as all of our locations are in the same business of operating location-based entertainment.

Basis of Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended June 28, 2026.

Principles of Consolidation: The condensed consolidated financial statements and related notes include the accounts of Lucky Strike and the subsidiaries it controls. Control is determined based on ownership rights or, when applicable, based on whether the Company is considered to be the primary beneficiary of a variable interest entity. We use the equity method to account for investments in which we have the ability to exercise significant influence over the investee’s operating and financial policies, or in which we hold a partnership or limited liability company interest in an entity with specific ownership accounts, unless we have virtually no influence over the investee’s operating and financial policies. All significant intercompany balances and transactions have been eliminated in consolidation.

Segment Reporting: We manage our business activities on a consolidated basis and operate as a single operating segment: location-based entertainment. The Company’s Chief Executive Officer, Thomas Shannon, is the Company’s chief operating decision maker (“CODM”). The CODM reviews the financial information presented on a consolidated basis since the Company provides its offerings and views key metrics, costs, and margins similarly among our various location-based entertainment venues.

As a result, the CODM assesses performance and allocates resources based on net income (loss), as reported on our condensed consolidated statements of operations. The CODM manages and evaluates the results of the business in a consolidated manner to drive synergies and develop uniform strategies. Accordingly, key components and processes of the Company’s operations are centrally managed, including location acquisitions and development, customer service, marketing, human resources, finance and accounting, legal and government affairs. Segment asset information is not used by the CODM to allocate resources. The operating financial results along with significant segment expenses and other segment items are presented on the Company’s condensed consolidated statements of operations.

Use of Estimates: The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the balance sheets, statements of operations and accompanying notes. Significant estimates made by management include, but are not limited to, cash flow projections; the fair value of assets and liabilities in acquisitions; derivatives with hedge accounting; share-based compensation; depreciation and impairment of long-lived assets; carrying amount and recoverability analyses of property and equipment, assets held for sale, goodwill and other intangible assets; valuation of deferred tax assets and liabilities and income tax uncertainties; and reserves for litigation, claims and self-insurance costs. Actual results could differ from those estimates.

Fair Value Estimates: We have various financial instruments included in our financial statements. Financial instruments are carried in our financial statements at either cost or fair value. We estimate fair value of assets and liabilities using the following hierarchy using the highest level possible:

Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets, but are corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Cash and Cash Equivalents: The Company considers all highly liquid investments with a maturity date of three months or less when purchased to be cash equivalents. The Company accepts a range of debit and credit cards, and these transactions are generally transmitted to a bank for reimbursement within 24 hours. The payments due from the banks for these debit and credit card transactions are generally received, or settled, within 24 to 48 hours of the transmission date. The Company considers all debit and credit card transactions that settle in less than seven days to be cash equivalents.

Prepaid Expenses and Other Current Assets: Prepaid expenses consist primarily of payments made for goods and services to be received in the near future. Prepaid expenses consist of sales tax, insurance premiums, deposits, and other costs.

Equity Method Investments: The aggregate carrying amount of our equity method investments was $25,857 and $25,897 as of September 27, 2026 and June 28, 2026, respectively, and are included as a component of Other Assets in our accompanying condensed consolidated balance sheets. Substantially all of our equity method investments consist of a limited partner interest in a subsidiary of VICI Properties Inc. (“VICI”). Equity method investments are adjusted to recognize (1) our share, based on percentage ownership or other contractual basis, of the investee’s net income or loss after the date of investment, (2) additional contributions made or distributions received, (3) amortization of the recorded investment that exceeds our share of the book value of the investee’s net assets, and (4) impairments resulting from other-than-temporary declines in fair value. Cash distributions received from our equity method investments are considered returns on investment and presented within operating activities in the condensed consolidated statement of cash flows to the extent of cumulative equity in net income of the investee. Additional distributions in excess of cumulative equity are considered returns of our investment and are presented as investing activities.

Net Loss Per Share Attributable to Common Stockholders: We compute net loss per share of Class A common stock and Class B common stock under the two-class method. Holders of Class A common stock and Class B common stock have equal rights to the earnings of the Company. Our participating securities include the Series A preferred stock, which has a non-forfeitable right to dividends in the event that a dividend is paid on common stock but does not participate in losses, and thus is not included in the two-class method in periods of loss. In periods where the Company reports a net loss, all potentially dilutive securities are excluded from the calculation of the diluted net loss per share attributable to common stockholders as their effect is antidilutive and accordingly, basic and diluted net loss per share attributable to common stockholders are the same. Potentially dilutive securities include Series A preferred stock, service-based RSUs, market- and service-based RSUs, stock options, and purchases of shares under our Employee Stock Purchase Plan (“ESPP”). See Note 13 -Net Loss Per Share.

Recently Issued Accounting Standards: In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregated disclosure, in the notes to the financial statements, of certain expenses included in the expense captions presented on the face of the income statement, to provide enhanced transparency into the nature of those expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), which clarifies the effective date of ASU 2024-03, including for entities with non-calendar year-ends. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027 (fiscal 2028 and the interim periods of fiscal 2029, respectively, for the Company). It may be applied either prospectively or retrospectively, and early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which removes references to prescriptive software development stages and clarifies the threshold for beginning to capitalize internal-use software costs, including for software developed using an incremental and iterative method. ASU 2025-06 is effective for annual reporting periods, and interim periods within those annual reporting periods, beginning after December 15, 2027 (fiscal 2029 for the Company). It is to be applied prospectively, with early adoption and retrospective application permitted. We are currently evaluating the impact of this standard on our consolidated financial statements.

(2)Goodwill and Other Intangible Assets

Goodwill:

There were no changes in the carrying amount of goodwill for the three months ended September 27, 2026.

Intangible Assets:

(1)Consists of indefinite-lived trade names associated with the Company’s other forms of location-based entertainment, such as its water park and FEC locations, and the PBA trade name, none of which is individually significant.

The following table shows amortization expense for finite-lived intangible assets for each reporting period:

(3)Property and Equipment

As of September 27, 2026 and June 28, 2026, property and equipment consists of:

The following table shows depreciation expense related to property and equipment for each reporting period:

(4)Leases

The Company leases various assets under non-cancellable operating and finance leases. These assets include location-based entertainment venues, office space, vehicles, and equipment.

Most of our leases contain payments for some or all of the following: base rent, contingent rent, common area maintenance, insurance, real estate taxes, and other operating expenses. Rental payments are subject to escalation depending on future changes in designated indices or based on pre-determined amounts agreed upon at lease inception.

The following table summarizes the components of the net lease cost for each reporting period:

(1)Operating lease costs include both cash and non-cash expenses for operating leases. The operating lease costs associated with our locations are recognized evenly over the lease term, therefore, the timing of the expense may differ from the timing of actual cash payments. Cash payments and lease costs can differ due to (a) the timing of cash payments relative to the level of expense, (b)

non-cash adjustments as a result of purchase accounting, and (c) various other non-cash adjustments to lease costs. Please see the table below for cash paid for amounts included within our lease liabilities.

(2)Percentage rental costs for our locations primarily represent leases where we pay an extra rental amount based on a percentage of revenue in excess of predetermined revenue thresholds.

(3)Equipment and other operating lease costs primarily represent operating lease costs for equipment leases, common area maintenance charges, and other variable lease costs for operating leases where the lease payments escalate based on an index or rate.

(4)Variable occupancy costs primarily represent utilities, property insurance, and real estate taxes.

(5)Other lease costs primarily include short-term lease costs and other variable payments for various equipment leases.

(6)Sublease income primarily represents short-term leases with pro-shops and various retail tenants.

Cash paid for amounts included in the measurement of lease liabilities for each reporting period:

(1)This table includes cash paid for amounts included in the measurement of our lease liabilities. Since the lease liability only includes amounts that are contractually fixed, this table excludes cash paid for amounts that are variable in nature, such as utilities, common area maintenance, property insurance, real estate taxes, and percentage rent.

Supplemental balance sheet information related to leases was as follows:

Other supplemental cash flow information related to leases was as follows for each reporting period:

There were no landlord contributions received during the three months ended September 27, 2026 or September 28, 2025. For the purchase of previously leased property, the Company treated the net difference between operating lease assets and liabilities as a reduction of operating cash flows on the purchase date. Similarly, the Company treated the net difference between finance lease assets and liabilities as a reduction of financing cash flows on the purchase date. The remainder of the purchase price was allocated to investing cash outflows.

(5)Accounts Payable and Accrued Expenses

As of September 27, 2026 and June 28, 2026, accounts payable and accrued expenses consist of:

(6)Debt

The following table summarizes the Company’s debt structure as of September 27, 2026 and June 28, 2026:

Term Loan: Under the Company’s First Lien Credit Agreement (the “First Lien Credit Agreement”), the Company has a term loan with an aggregate initial principal amount of $1,200,000 (the “Term Loan”). The Term Loan matures on September 22, 2032. The Term Loan is repaid on a quarterly basis in principal payments of $3,000. The Term Loan bears interest at a rate per annum equal to the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 3.25%, subject to a step down to 3.00% per annum at a Total Leverage Ratio 2.90:1.00. Interest on the Term Loan is due on the last day of the interest period. The interest period, as agreed upon between the Company and its lenders, can be eitherone, three, orsix months in length. As of September 27, 2026, the interest period isone month.

7.25% Senior Secured Notes: The Company has outstanding $500,000 aggregate principal amount of 7.25% Senior Secured Notes (the “Notes”). The Notes were issued pursuant to an indenture (the “Indenture”). The Notes bear interest at the rate of 7.25% per annum and will mature on October 15, 2032. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year. The Indenture includes customary redemption provisions, including, among others, the right to redeem the Notes, in whole or in part, (1) prior to October 15, 2028, at a price equal to 100% of the principal amount thereof plus a “make-whole” premium, and (2) on or after October 15, 2028, at the redemption prices set forth in the Indenture.

Revolver: Under the First Lien Credit Agreement, the Company has access to a $425,000 senior secured revolving credit facility (the “Revolver”). Any outstanding balance on the Revolver is due on September 22, 2030. Interest on borrowings under the Revolver is based on the Adjusted Term SOFR. Borrowings under the Revolver bear interest at a rate per annum equal to SOFR plus 2.5%. Unused commitments under the Revolving Credit Facility incur initial commitment fees of 0.25%.

First Lien Credit Agreement Covenants: Obligations owed under the First Lien Credit Agreement are secured by a first priority security interest on substantially all assets of Lucky Strike and the guarantor subsidiaries. The First Lien Credit Agreement contains customary events of default, restrictions on indebtedness, liens, investments, asset dispositions, dividends and affirmative and negative covenants. The Company is subject to a financial covenant requiring that the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) not exceed 6.00:1.00 as of the end of any fiscal quarter if amounts outstanding on the Revolver exceed an amount equal to 40% of the aggregate Revolver commitment (subject to certain exclusions) at the end of such fiscal quarter. In addition, payment of borrowings under the Revolver may be accelerated if there is an event of default, and Lucky Strike would no longer be permitted to borrow additional funds under the Revolver while a default or event of default were outstanding.

7.25% Senior Secured Notes Covenants: The Notes are secured by substantially all of the assets of the Company and certain wholly owned subsidiaries of the Company. The Indenture contains customary restrictive covenants and events of default.

Letters of Credit: Outstanding standby letters of credit as of September 27, 2026 and June 28, 2026 totaled $27,622 and $24,122, respectively, and are guaranteed by JPMorgan Chase Bank, N.A. The available amount of the Revolver is reduced by the outstanding standby letters of credit.

Other Equipment Loan: On August 19, 2022, the Company entered into an equipment loan agreement for a principal amount of $15,350 with JPMorgan Chase Bank, N.A. The loan matures on August 19, 2029 and bears a fixed interest rate of 6.24%. The loan is repaid on a monthly basis in fixed payments of $153 plus a final payment at maturity. The loan obligation is secured by a lien on the equipment.

Covenant Compliance: The Company was in compliance with all debt covenants as of September 27, 2026.

(7)Income Taxes

For interim periods, the Company generally uses the estimated annual effective tax rate (“AETR”) method to calculate its income tax provision based on the current estimate of its AETR plus the tax effect of discrete items occurring during the period. The estimated AETR is based on forecasted annual results which may fluctuate due to significant changes in the forecasted or actual results and any other transaction that results in differing tax treatment.

For the three months ended September 27, 2026, the Company departed from the estimated AETR method and computed its provision for income taxes using the discrete effective tax rate method (the “discrete method”), as allowed under ASC Topic 740, Income Taxes - Interim Reporting. The discrete method is applied when the application of the estimated AETR is impractical because it is not possible to reliably estimate the AETR. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that, at this time, the use of this discrete method is more appropriate than the AETR method as our full-year forecasted pre-tax income, relative to our forecasted permanent differences, has the potential to distort our estimated AETR.

The Company’s effective tax rate for the three months ended September 27, 2026 was (19)%, which differs from the U.S. federal statutory rate of 21% primarily due to the change in fair value of the earnout liability, increase in valuation allowance against the deferred tax asset for business interest expense that cannot be deducted under IRC Section 163(j) and against general business credits, permanent differences, and other discrete tax items. The valuation allowance increased approximately $9,800 during the quarter: approximately $5,200 on interest expense disallowed under Section 163(j), consistent with the full allowance maintained against that carryforward, and approximately $4,600 on general business credits, reflecting the Company’s assessment that the credits are not more likely than not to be realizable before they expire. The Company continues to conclude that its federal net operating loss carryforwards are more likely than not to be realized. The Company’s effective tax rate for the three months ended September 28, 2025 was 48%, which differs from the U.S. federal statutory rate of 21% primarily due to state taxes incurred relating to the purchase of the 58 properties under the Carlyle master lease agreement, the change in fair value of the earnout liability, increase in valuation allowance against the deferred tax asset for business interest expense that cannot be deducted under IRC Section 163(j), permanent differences, and other discrete tax items.

(8)Commitments and Contingencies

From time to time, we are involved in various inquiries, investigations, claims, lawsuits and other legal proceedings that are incidental to the conduct of our business. These matters typically involve claims from customers, employees or other third parties involved in operational issues common to the retail, restaurant and entertainment industries. Such matters typically represent actions with respect to contracts, intellectual property, taxation, employment, employee benefits, personal injuries and other matters. A number of such claims may exist at any given time and there are currently a number of claims and legal proceedings pending against us. While it is not feasible to predict the outcome of all claims and legal proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

(9)Earnouts

There were 11,417,719 and 11,417,919 unvested earnout shares outstanding as of September 27, 2026 and June 28, 2026, respectively.

The outstanding unvested earnout shares will vest if the closing share price of Lucky Strike’s Class A common stock equals or exceeds $17.50 per share for any 10 trading days within any consecutive 20-trading-day period occurring from December 15, 2021 through December 15, 2026.

All but 28,021 earnout shares are classified as a liability, and changes in the fair value of the earnout shares are recognized in the statement of operations; as of September 27, 2026, the fair value of the earnout liability waszero. Those earnout shares not classified as a liability are classified as equity compensation to employees and recognized as compensation expense on a straight-line basis over the expected term or upon the contingency being met.

See Note 10 -Fair Value of Financial Instruments for a summary of changes in the estimated fair value of the earnout shares for the periods ended September 27, 2026 and September 28, 2025.

(10)Fair Value of Financial Instruments

Debt

The fair value and carrying value of our debt as of September 27, 2026 and June 28, 2026 are as follows:

The fair value of our debt is estimated based on trading levels of lenders buying and selling their participation levels of funding (Level 2).

There were no transfers in or out of any of the levels of the valuation hierarchy during the three months ended September 27, 2026 and the fiscal year ended June 28, 2026.

Items Measured at Fair Value on a Recurring Basis

The Company holds certain liabilities that are required to be measured at fair value on a recurring basis. As of September 27, 2026, the fair value of the earnout liability, the Company’s only liability measured at fair value on a recurring basis, waszero, reflecting the Company’s stock price relative to the $17.50 share price threshold and the limited time remaining in the measurement period, which ends December 15, 2026 (see Note 9 -Earnouts). The following table is a summary of fair value measurements and hierarchy level as of June 28, 2026:

The fair value of earnout shares was estimated using a Monte Carlo simulation model (Level 3 inputs). The key inputs into the Monte Carlo simulation as of September 27, 2026 were as follows:

The following table sets forth a summary of changes in the estimated fair value of the Company's Level 3 Earnout liability for the three months ended September 27, 2026 and September 28, 2025:

Other Financial Instruments

Other financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair value due to their short duration.

(11)Common Stock, Preferred Stock and Stockholders’ Equity

The Company is authorized to issue 2,400,000,000 shares of capital stock, par value $0.0001 per share, consisting of Class A common stock and Class B common stock (together, the “Common Stock”) and preferred stock, of which the Series A preferred stock (the “Preferred Stock”) has been designated. Authorized and issued and outstanding shares were as follows:

(1)Class A common stock issued and outstanding include 1,569,467 and 1,573,623 shares contingent on certain stock price thresholds as of September 27, 2026 and June 28, 2026, respectively, and exclude 45,193,723 shares held in treasury as of both dates.

Series A Preferred Stock

Dividends accumulate on a cumulative basis on a 360-day year commencing from the issue date. The dividend rate is fixed at 5.5% per annum on a liquidation preference of $1,000 per share. Payment dates are June 30 and December 31 of each year with a record date of June 15 for the June 30 payment date and December 15 for the December 31 payment date. Declared dividends will be paid in cash if the Company declares the dividend to be paid in cash. If the Company does not pay all or any portion of the dividends that have accumulated as of any payment date, then the dollar amount of the dividends not paid in cash will be added to the liquidation preference and deemed to be declared and paid in-kind. During the three months ended September 27, 2026, accumulated dividends in the amount of $3,697 for the period from January 1, 2026 through the June 30, 2026 payment date were added to the liquidation preference and deemed to be declared and paid in-kind. Dividends of $1,856 accumulated during the three months ended September 27, 2026, substantially all of which relate to the period subsequent to June 30, 2026 and remain accumulated and unpaid as of September 27, 2026.

Stock Dividends

Common stock dividends paid during the three months ended September 27, 2026 are as follows:

(1)Amounts include dividends paid to holders of Series A preferred stock on an as-converted basis. The amounts do not reflect amounts paid for accrued dividends on previously unvested share-based awards or amounts accrued for currently unvested share-based awards.

On October 29, 2026, the Company’s Board of Directors suspended the quarterly cash dividend on the Company’s common stock. The Board will continue to evaluate the Company’s capital allocation and dividend policy on an ongoing basis.

Share Repurchase Program

On February 7, 2022, the Company announced that its Board of Directors authorized a share repurchase program providing for repurchases of up to $200,000 of the Company’s outstanding Class A common stock through February 3, 2024. On each of May 15, 2023, September 6, 2023 and February 2, 2024, the Board of Directors authorized a replenishment of the then-remaining balance of the share repurchase program to $200,000, which in aggregate increased the total amount that has been authorized under the share repurchase program to approximately $551,518. On February 2, 2024, the Board of Directors extended the share repurchase program indefinitely. Treasury stock purchases are stated at cost and presented as a reduction of equity on the condensed consolidated balance sheets. Repurchases of shares are made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases are based on a variety of factors, including stock price, regulatory limitations, debt agreement limitations, and other market and economic factors. The share repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time.

During the three months ended September 27, 2026, no shares of Class A common stock were repurchased. As of September 27, 2026, the Company had $56,781 remaining under its current share repurchase authorization. In aggregate, the Company has repurchased 45,193,723 treasury shares for a total consideration of $489,355, at a weighted-average price of $10.83 per share.

(12)Share-Based Compensation

The Company hastwo stock plans: the Lucky Strike Entertainment Corporation 2021 Omnibus Incentive Plan (“2021 Plan”) and the Lucky Strike Entertainment Corporation Employee Stock Purchase Plan (“ESPP”). These stock incentive plans are designed to attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company and align the interests of key personnel with those of the Company’s stockholders.

As of September 27, 2026 and June 28, 2026, the total share-based compensation cost not yet recognized is as follows:

Share-based compensation recognized in the condensed consolidated statements of operations for the periods ended September 27, 2026 and September 28, 2025 is as follows:

The Company did not have any recognized income tax benefits, net of valuation allowances, related to our share-based compensation plans.

(13)Net Loss Per Share

The computation of basic and diluted net loss per Class A and B common share is as follows:

The following potentially dilutive securities were excluded from the diluted per share calculations because their effect would have been antidilutive: convertible Preferred Stock, service-based RSUs, market- and service-based RSUs, stock options, and shares purchasable under our ESPP. The table below presents the related incremental shares — the additional shares that would have been added to the diluted weighted-average denominator, not the gross shares underlying each instrument:

(14)Supplemental Cash Flow Information

(1) Includes cash paid for the interest portion on finance leases and financing obligations. See Note 4 -Leases for supplementary information relating to leasing transactions.