ASSETS

Current Assets:

Cash and cash equivalents

Restricted cash

Short term investments

Accounts receivable, net

Net related party receivables

Prepaid expenses

Other current assets

Total current assets

Investments and loans to nonconsolidated affiliates

Property and equipment, net

Right of-use lease assets

Amortizable intangible assets, net

Indefinite-lived intangible assets

Goodwill

Other assets

Total assets

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Current Liabilities:

Accounts payable

Net related party payables, current

Current portion of long-term debt, net of deferred financing costs

Income taxes payable

Accrued liabilities:

Employee related costs

Other accrued liabilities

Operating lease liabilities, current

Collections due to promoters

Deferred revenue

Total current liabilities

Long-term debt, net of deferred financing costs

Operating lease liabilities, noncurrent

Defined benefit and other postretirement obligations

Other employee related costs

Deferred tax liabilities, net

Other liabilities

Total liabilities

Redeemable noncontrolling interests

Company’s Divisional Equity:

MSG Investment

Accumulated other comprehensive loss

Total Company divisional equity

Nonredeemable noncontrolling interests

Total equity

Total liabilities, redeemable noncontrolling interests and divisional equity

Revenues

Operating expenses:

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Operating loss

Other income (expense):

Loss in equity method investments

Interest income

Interest expense

Miscellaneous income, net

Income from operations before income taxes

Income tax expense

Net income

Less: Net loss attributable to redeemable noncontrolling interests

Less: Net loss attributable to nonredeemable noncontrolling interests

Net income attributable to Madison Square Garden Entertainment Corp.’s stockholders

Pro forma earnings per share

Basic

Diluted

Pro forma weighted-average number of common shares outstanding:

Basic

Diluted

Revenues

Operating expenses:

Direct operating expenses

Selling, general and administrative expenses

Depreciation and amortization

Operating loss

Other income (expense):

Earnings in equity method investments

Interest income

Interest expense

Miscellaneous expense, net

Loss from operations before income taxes

Income tax expense

Net loss

Less: Net loss attributable to redeemable noncontrolling interests

Less: Net loss attributable to nonredeemable noncontrolling interests

Net loss attributable to Madison Square Garden Entertainment Corp.’s stockholders

Pro forma loss per share

Basic and diluted

Pro forma weighted-average number of common shares outstanding:

Basic and diluted

Disposal of MSG Forum. Each of the line items in the table below represents direct assets or liabilities of the MSG Forum, (except the adjustments for Cash and cash equivalents and Goodwill described under Note (b) and (c) below). Accordingly, the following amounts, which represent the carrying value of the assets and liabilities disposed, have been added (removed) from the unaudited pro forma condensed combined balance sheet as of December 31, 2019:

Unaudited Pro Forma Condensed Combined Balance Sheet Line Item

Working capital items:

Prepaid expenses

Other current assets

Accounts payable

Employee related costs

Other accrued liabilities

Collections due to promoters

Deferred revenue

Other liabilities

Net working capital

Other assets disposed:

Property and equipment, net

Indefinite-lived intangible assets

Goodwill

Total other assets disposed

Cash and cash equivalents. This adjustment represents the net proceeds from the completion of MIPA and consists of the following: (i) gross proceeds of $400,000, less (ii) various transaction costs of $53,645 ⁽¹⁾, (iii) working capital adjustments of $64,126⁽²⁾, (iv) income tax payment of $24,000 ⁽³⁾, and (v) other expenses of $128.

In September 2013, the Company acquired a 50% interest in the Azoff Company, which owned and operated businesses in the entertainment industry and focused on music management, performance rights, strategic marketing and venue management consulting services. The Company sold its interest in the Azoff Company on December 5, 2018. In connection with the sale, the Azoff Company obtained the right to participate in the proceeds of a sale of MSG Forum above a specified amount if certain conditions are met. Accordingly, given that the disposition meets those conditions, the Company’s estimate of cash proceeds includes an adjustment to reduce the gross cash proceeds from the sale of MSG Forum by $48,742 of transaction cost, reflecting the amount paid to the Azoff Company.

There are customary closing adjustments related to the actual assets transferred and pre-closing liabilities related to MSG Forum that are reflected herein which will result in changes to the final balances transferred to the buyers of the MSG Forum. As a result of the final balance transfers, there will be changes to the final cash settlement amount at the disposition date when compared to the $258,000 disclosed herein, which was based in part on net asset values as of December 31, 2019. In addition, the adjustments related to working capital will not result in a change to the gain on disposal.

The estimate of net cash proceeds includes an estimate of income taxes of $24,000, which would be payable in connection with the closing of the disposition. For purposes of the Company’s unaudited pro forma condensed combined financial statements, it has been assumed that net operating loss (“NOL”) carryforwards are available to offset any gain on the sale of MSG Forum as if it occurred on December 31, 2019. Accordingly, the gain has been fully offset by NOLs for purposes of these unaudited condensed combined pro forma financial statements and any estimated tax expense associated with the pre-tax gain would be fully offset by a reduction in the valuation allowance for the utilization of NOLs.

Goodwill. This adjustment represents the amount of goodwill of $2,864 allocated to the disposal of MSG Forum in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, ASC subtopics 350-20-40-1 to 350-20-40-7. Upon disposition of MSG Forum, a portion of the Company goodwill is allocated to the MSG Forum based on the fair value of MSG Forum compared to the fair value of the Company’s Entertainment reporting unit (“Relative Fair Value Basis”). The fair value of the Company’s MSG Entertainment reporting unit and MSG Forum were based on unobservable inputs classified within Level III of the fair value hierarchy, primarily from utilizing the discounted cash flow model, which is an income-based approach.

MSG Investment. This adjustment represents the net gain on the disposal of MSG Forum in accordance with SEC Regulation S-X Article 11. Adjustments related to the gain on the sale of MSG Forum were excluded from the unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2019 and the year ended June 30, 2019 as the probable disposition and use of the proceeds do not have a continuing impact on the Company’s operations. The reconciliation of net gain is as follow:

Gross proceeds

Less:

(i) Cost of property and equipment, indefinite-lived intangible asset and allocated goodwill

(ii) transaction costs

(iii) other expenses

(iv) income tax on gains

Net gains recorded to MSG Investment

Disposal of MSG Forum. These columns represent results of operations of MSG Forum for the six months ended December 31, 2019 and the year ended June 30, 2019. In conjunction with the disposition, the Company entered into a Transition Services Agreement with the buyer for various administrative services. The term of this arrangement will last between one and three months and as the fees the Company will receive under this arrangement are immaterial, no adjustments were recorded to the unaudited pro forma condensed combined statements of operations for this

Pro forma earnings (loss) per share. Pro forma earnings per share and pro forma weighted-average basic shares outstanding are based on the number of shares of the Company’s former parent’s (Madison Square Garden Sports Corp., “MSGS”) Class A Common Stock and Class B Common Stock outstanding of 23.9 million during the six months ended December 31, 2019 and 23.8 million during the year ended June 30, 2019, respectively. The Company’s weighted average shares outstanding is based on a distribution ratio of one share of our common stock for each share of MSGS Class A Common Stock and MSGS Class B Common Stock held on the record date for the Distribution.