What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 285 added, 167 removed, 501 unchanged (47% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

March 31, 2022

June 30, 2022

(Unaudited) December 31, 2021

18 unchanged sentences

Operating lease liabilities, current portion 5,726 12,814

Other current liabilities 17,283 —

Total current liabilities 920,629 929,425

8 unchanged sentences

Class A common stock, $ 0.0001 par value;

900,000 shares authorized as of March 31, 2022 and December 31, 2021;

425,151 and 414,911 shares issued and 417,228 and 407,781 outstanding as of March 31, 2022 and December 31, 2021, respectively

900,000 shares authorized as of June 30, 2022 and December 31, 2021;

456,199 and 414,911 shares issued and 448,022 and 407,781 outstanding as of June 30, 2022 and December 31, 2021, respectively

Class B common stock, $ 0.0001 par value;

900,000 shares authorized as of March 31, 2022 and December 31, 2021;

393,014 shares issued and outstanding as of March 31, 2022 and December 31, 2021

900,000 shares authorized as of June 30, 2022 and December 31, 2021;

393,014 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Treasury stock, at cost;

7,923 and 7,130 shares as of March 31, 2022 and December 31, 2021, respectively

8,177 and 7,130 shares as of June 30, 2022 and December 31, 2021, respectively

( 324,090 ) ( 306,614 )

8 unchanged sentences

(Amounts in thousands, except loss per share data)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Revenue $ 466,185 $ 297,605 $ 883,390 $ 609,881

7 unchanged sentences

Gain (loss) on remeasurement of warrant liabilities 14,315 16,984 26,996 ( 9,996 )

Other income, net 37,882 —

Loss before income tax provision (benefit) and loss from equity method investment ( 464,873 ) ( 350,786 )

Income tax provision (benefit) 469 ( 4,595 )

Other (expense) income, net ( 5,573 ) — 32,309 —

Loss before income tax (benefit) provision and loss from equity method investment ( 298,251 ) ( 302,928 ) ( 763,124 ) ( 653,714 )

Income tax (benefit) provision ( 81,226 ) 2,404 ( 80,757 ) ( 2,191 )

Loss from equity method investment 78 194 2,429 347

3 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.

DRAFTKINGS INC.

1 unchanged sentence

(Amounts in thousands)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Net loss $ ( 217,103 ) $ ( 305,526 ) $ ( 684,796 ) $ ( 651,870 )

1 unchanged sentence

Foreign currency translation adjustments arising during period, net of nil tax

— 7,697 — ( 19,621 )

Comprehensive loss $ ( 217,103 ) $ ( 297,829 ) $ ( 684,796 ) $ ( 671,491 )

See accompanying notes to unaudited condensed consolidated financial statements.

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.

DRAFTKINGS INC.

14 unchanged sentences

Balances at March 31, 2022 417,228 $ 42 393,014 $ 39 $ 5,891,235 $ ( 4,221,507 ) $ 36,488 $ ( 320,697 ) $ 1,385,600

Exercise of stock options 902 — — — 3,131 — — — 3,131

Stock-based compensation expense — — — — 135,521 — — — 135,521

Equity consideration issued for acquisitions 29,252 3 — — 460,125 — — — 460,128

Purchase of treasury stock ( 254 ) — — — — — — ( 3,393 ) ( 3,393 )

Restricted stock unit vesting 894 — — — — — — — —

Net loss — — — — — ( 217,103 ) — — ( 217,103 )

Balances at June 30, 2022 448,022 $ 45 393,014 $ 39 $ 6,490,012 $ ( 4,438,610 ) $ 36,488 $ ( 324,090 ) $ 1,763,884

Class A Common Stock Class B Common Stock Additional

8 unchanged sentences

Purchase of capped call options — — — — ( 123,970 ) — — — ( 123,970 )

Equity consideration issued for acquisition 464 — — — 29,399 — — — 29,399

Equity consideration issued for acquisitions 464 — — — 29,399 — — — 29,399

Shares issued for exercise of warrants 138 — — — 1,761 — — — 1,761

5 unchanged sentences

Balances at March 31, 2021 399,892 $ 40 393,014 $ 39 $ 5,133,806 $ ( 2,576,963 ) $ 56,216 $ ( 291,908 ) $ 2,321,230

Exercise of stock options 1,878 — — — 10,816 — — — 10,816

Stock-based compensation expense — — — — 171,739 — — — 171,739

Equity consideration issued for acquisitions 56 — — — 3,750 — — — 3,750

Shares issued for exercise of warrants 43 — — — 2,419 — — — 2,419

Purchase of treasury stock ( 115 ) — — — — — — ( 6,773 ) ( 6,773 )

Restricted stock unit vesting 739 — — — — — — — —

Foreign currency translation, net of nil tax

— — — — — — 7,697 — 7,697

Net loss — — — — — ( 305,526 ) — — ( 305,526 )

Balances at June 30, 2021 402,493 $ 40 393,014 $ 39 $ 5,322,530 $ ( 2,882,489 ) $ 63,913 $ ( 298,681 ) $ 2,205,352

See accompanying notes to unaudited condensed consolidated financial statements.

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.

DRAFTKINGS INC.

1 unchanged sentence

(Amounts in thousands)

Three months ended March 31,

Six months ended June 30,

Operating Activities:

9 unchanged sentences

Other expenses, net ( 2,667 ) —

Change in operating assets and liabilities, net of effect of business combination:

Change in operating assets and liabilities, net of effect of business combinations:

Receivables reserved for users ( 2,057 ) 5,334

33 unchanged sentences

(Amounts in thousands)

Three months ended March 31,

Six months ended June 30,

Supplemental Disclosure of Noncash Investing and Financing Activities:

3 unchanged sentences

Acquisition of gaming licenses included in accounts payable and accrued expenses — ( 4,976 )

Increase of other current assets from transfer agent related to warrants — 494

Supplemental Disclosure of Cash Activities:

2 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.

DRAFTKINGS INC.

4 unchanged sentences

is a digital sports entertainment and gaming company.

The Company’s business-to-consumer (“B2C”) segment provides users with daily fantasy sports (“DFS”), sports betting (“Sportsbook”) and online casino (“iGaming”) products, as well as media and other online consumer products.

The Company’s business-to-business (“B2B”) segment is involved in the design, development and licensing of sports betting and casino gaming software for its Sportsbook and casino gaming products.

As further discussed in Note 3 hereof entitled “Acquisition of Golden Nugget Online Gaming, Inc.,” on August 9, 2021, DK Crown Holdings Inc.

(formerly known as DraftKings Inc.), a Nevada corporation (“Old DraftKings”), and Golden Nugget Online Gaming, Inc.

(“GNOG”) entered into a definitive agreement and plan of merger (the “Merger Agreement”) for DraftKings to acquire GNOG in an all-stock transaction, which we refer to as the GNOG Transaction.

On May 5, 2022 (the “Closing Date”), Old DraftKings consummated the GNOG Transaction and, in connection therewith, undertook a holding company reorganization whereby a new holding company, New Duke Holdco, Inc., a Nevada corporation (“New DraftKings”), became the going-forward public company and the direct parent company of both Old DraftKings and GNOG.

The Company’s business-to-consumer (“B2C”) segment provides users with sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) products, as well as media and other online consumer products.

The Company’s business-to-business (“B2B”) segment’s principal activities involve the design and development of sports betting and casino gaming software.

As further discussed in the Explanatory Note and Note 3 hereof entitled “Acquisition of Golden Nugget Online Gaming, Inc.,” on May 5, 2022, Old DraftKings consummated the GNOG Transaction pursuant to the Merger Agreement.

In connection with the GNOG Transaction, Old DraftKings undertook a holding company reorganization whereby New DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG.

New DraftKings was renamed “DraftKings Inc.” on the Closing Date.

Unless otherwise indicated, the terms “DraftKings,” or the “Company” refer to (i) Old DraftKings for periods preceding the Closing Date and (ii) New DraftKings for periods on and subsequent to the Closing Date, in each case, together with their respective consolidated subsidiaries.

Unless otherwise indicated, the terms “DraftKings”, the “Company”, “we”, “us” and “our” refer to (i) Old DraftKings for periods preceding the Closing Date and (ii) New DraftKings for periods on and subsequent to the Closing Date, in each case, together with their respective consolidated subsidiaries.

In May 2018, the Supreme Court (the “Court”) struck down on constitutional grounds the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), a law that prohibited most states from authorizing and regulating sports betting.

Since the Court’s decision, many states have legalized sports betting.

As of March 31, 2022, 29 U.S.

As of June 30, 2022, 29 U.S.

states, the District of Columbia and Puerto Rico have legalized some form of sports betting.

Of those 31 legal jurisdictions, 24 have legalized online sports betting.

Of those 31 legal jurisdictions in the United States, 25 have legalized online sports betting.

Of those 25 jurisdictions, 20 are live, and DraftKings operates in 17 of them.

The jurisdictions with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia.

As of March 31, 2022, the Company operates online Sportsbooks in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia and Wyoming and has retail Sportsbooks in Colorado, Connecticut, Illinois, Iowa, Louisiana, Mississippi, New Hampshire, New Jersey and New York.

As of March 31, 2022, the Company offers iGaming products in Connecticut, Michigan, New Jersey, Pennsylvania and West Virginia.

The jurisdictions in the United States with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia.

As of June 30, 2022, the Company operates online Sportsbooks in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia and Wyoming and has retail Sportsbooks in Colorado, Connecticut, Illinois, Iowa, Louisiana, Mississippi, New Hampshire, New Jersey and New York, as well as Ontario, Canada.

As of June 30, 2022, the Company offers iGaming products in Connecticut, Michigan, New Jersey, Pennsylvania and West Virginia, as well as Ontario, Canada.

The Company also has arrangements in place with land-based casinos to expand operations into additional states upon the passing of relevant legislation, the issuance of related regulations and the receipt of required licenses.

The novel coronavirus (“COVID-19”) has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets.

Beginning in 2020 and continuing into 2022, the COVID-19 pandemic adversely impacted many different industries.

The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown.

The rapid development and fluidity of this situation precludes any prediction as to the extent and the duration of the impact of COVID-19.

The COVID-19 pandemic therefore presents material uncertainty and risk with respect to us and our performance and could affect our financial results in a materially adverse way.

Since the start of the COVID-19 pandemic, the primary impacts to the Company have been the suspension, cancellation and rescheduling of sports seasons and sporting events.

Beginning in March 2020 and continuing into the first month of the third quarter of 2020, many sports seasons and sporting events, including the MLB regular season, domestic soccer leagues and European Cup competitions, the NBA regular season and playoffs, the NCAA college basketball tournament, the Masters golf tournament, and the NHL regular season and playoffs, were suspended or cancelled.

Beginning in 2020 and continuing into 2022, the novel coronavirus (“COVID-19”) pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets.

The primary impacts of the COVID-19 pandemic on the Company were the suspension, cancellation, rescheduling and shortening of sports seasons and sporting events, particularly between March 2020 and July 2020, when many sports seasons and sporting events, including the MLB regular season, domestic soccer leagues and European Cup competitions, the NBA regular season and playoffs, the NCAA college basketball tournament, the Masters golf tournament, and the NHL regular season and playoffs, were suspended or cancelled.

The suspension of sports seasons and sporting events reduced customers’ use of, and spending on, the Company’s Sportsbook and DFS products.

Starting in the third quarter of 2020 and continuing into the fourth quarter of 2020, major professional sports leagues resumed their activities, many of which were held with shortened seasons.

MLB began its season after a three-month delay and also completed the World Series, the NHL resumed its season and completed the Stanley Cup Playoffs, the Masters golf tournament was held, most domestic soccer leagues resumed and several European cup competitions were held, and the NFL

season began on its regular schedule.

During this period, the NBA also resumed its season, completed the NBA Finals and commenced its 2020-2021 season.

In the three months ended March 31, 2022, sports seasons continued and sporting events were held as planned, including the NFL regular season, the NFL Playoffs and Superbowl LVI, the NBA regular season, the NHL regular season, the NASCAR Cup Series, various NCAA football bowl games and the NCAA college basketball regular season and tournament.

The continued return of major sports and sporting events has generated significant user interest and activity in the Company's Sportsbook and DFS products.

However, the possibility remains that sports seasons and sporting events may be suspended, cancelled or rescheduled due to COVID-19 outbreaks.

The Company’s revenue varies based on sports seasons and sporting events amongst other factors, and cancellations, suspensions or alterations resulting from COVID-19 have the potential to adversely affect its revenue, possibly materially.

Beginning in July 2020, major professional sports leagues started to resume their activities, many of which with shortened seasons, and gradually resumed regular activities.

In the six months ended June 30, 2022, sports seasons continued and sporting events were held as planned, including the NFL regular season, the NFL Playoffs and Superbowl LVI, the NBA regular season and playoffs, the NHL regular season and playoffs, the NASCAR Cup Series, various NCAA football bowl games, the NCAA college basketball regular season and tournament, the MLB regular season and several golf tournaments.

The continued return of major sports and sporting events generated significant user interest and activity in the Company's Sportsbook and DFS products.

However, the possibility remains that sports seasons and sporting events may be suspended, cancelled, rescheduled or shortened due to COVID-19 outbreaks.

However, the Company’s products that do not rely on sports seasons and sporting events, such as iGaming, may partially offset this adverse impact on revenue.

2 unchanged sentences

As steps taken to mitigate the spread of COVID-19 necessitated a shift away from a traditional office environment for many employees, the Company implemented business continuity programs to ensure that employees were safe and that the business continued to function with minimal disruptions to normal work operations while employees worked remotely.

The Company will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

During the second quarter of 2022, our primary offices, including our corporate headquarters in Boston, Massachusetts, re-opened with many of our employees returning to work onsite in various capacities.

We will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

Summary of Significant Accounting Policies and Practices

11 unchanged sentences

Certain amounts from a prior period, which are not material, have been reclassified to conform with the current period presentation.

Prior to the second quarter of 2021, the Company (a) included changes in “cash reserved for users” as a component within the change in operating assets and liabilities on its condensed consolidated statement of cash flows as the Company historically viewed the change in cash reserved for users as offsetting the change in player liabilities and (b) presented “cash reserved for users” separate from cash and cash equivalents on the condensed consolidated balance sheet.

Beginning with the second quarter of 2021, to reflect the Company’s total cash position (“cash and cash equivalents” and “cash reserved for users”) and to conform to Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows (Topic 230) — Restricted Cash , the Company revised its presentation to exclude changes in “cash reserved for users” from the “change in operating assets and liabilities” and instead present the total balance as a component of cash and cash equivalents and restricted cash on its condensed consolidated statement of cash flows.

This revision does not have a material impact on the Company’s presentation of cash flows as the change in cash reserved for users will continue to be presented as a supplemental disclosure in the condensed consolidated statement of cash flows.

addition, the Company will continue to present cash reserved for users as a separate line item on the Company’s condensed consolidated balance sheet.

These revisions have no impact on the Company’s previously reported consolidated statements of operations or consolidated balance sheets, including the Company’s cash and cash equivalents and cash reserved for user balances.

Prior period amounts have been revised to conform to the current period presentation.

The following table presents the condensed consolidated statement of cash flows line items after giving effect to the revision of presentation as discussed above for the three months ended March 31, 2021.

Three months ended March 31, 2021

Reported Adjustments Revised

Adjustments to reconcile net loss to net cash flows used in operating activities:

Change in operating assets and liabilities, net of effect of business combinations:

Cash reserved for users $ ( 18,014 ) $ 18,014 $ —

Net cash flows used in operating activities ( 77,751 ) 18,014 ( 59,737 )

Net increase in cash, cash equivalents and restricted cash 1,000,870 18,014 1,018,884

Cash and cash equivalents and restricted cash at the beginning of period 1,817,258 287,718 (a)

Cash and cash equivalents and restricted cash, end of period $ 2,818,128 $ 305,732 $ 3,123,860

(a) Represents the cash reserved for user balance as of December 31, 2020 as previously included in the Company’s 2021 Annual Report.

Foreign Currency

During the three months ended March 31, 2022, the Company’s significant non-U.S.

Effective as of January 1, 2022, the Company’s significant non-U.S.

subsidiaries’ functional currency changed from the Euro to the U.S.

Accordingly, the Company did not have to translate the financial statements of its significant non-U.S.

subsidiaries as of March 31, 2022.

subsidiaries for the period ended June 30, 2022.

Digital Assets and Liabilities

On March 31, 2022, the SEC issued Staff Accounting Bulletin No.

121 (“SAB 121”).

SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard digital assets that an entity holds for its platform users.

In accordance with SAB 121, the Company recognized a liability for the obligation to safeguard its users’ assets and recognized an associated asset for its non-fungible token (“NFTs”) held for its users.

Both the liability and the associated asset are measured at the fair value of the NFTs being safeguarded.

Refer to Note 6 hereof for disclosures required in accordance with Accounting Standards Codification 820, Fair Value Measurement .

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-08, Business Combinations (Topic 805):

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect, if any, on its consolidated financial statements.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) :

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards

Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted.

While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Business Combination

Acquisition of Golden Nugget Online Gaming, Inc.

On August 9, 2021, Old DraftKings and GNOG entered into the Merger Agreement, pursuant to which Old DraftKings would acquire GNOG in an all-stock transaction (the “GNOG Transaction”).

On May 5, 2022 (the “Closing Date”), Old DraftKings consummated the GNOG Transaction and, in connection therewith, undertook a holding company reorganization whereby New DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG.

On August 9, 2021, Old DraftKings and GNOG entered into the Merger Agreement, pursuant to which Old DraftKings would acquire GNOG in an all-stock transaction.

On May 5, 2022, Old DraftKings consummated the GNOG Transaction and, in connection therewith, undertook a holding company reorganization whereby New DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG.

New DraftKings was renamed “DraftKings Inc.” on the Closing Date.

Under the terms of the Merger Agreement and subject to certain exclusions contained therein, GNOG stockholders received a fixed ratio of 0.365 shares of New DraftKings’ Class A common stock for each share of GNOG that they held on the Closing Date.

The Company issued approximately 29.3 million shares of its Class A common stock will be issued in connection with the consummation of the GNOG Transaction.

The Company is currently in the process of finalizing the preliminary accounting for the GNOG Transaction and expects to complete its preliminary accounting of the assets acquired and liabilities assumed by the end of the second quarter of 2022.

The Company issued approximately 29.3 million shares of its Class A common stock in connection with the consummation of the GNOG Transaction.

New DraftKings is the registrant filing this Report as the successor registrant for Old DraftKings.

Operating results for GNOG on and after the Closing Date are included in the Company’s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022.

Because the Company is integrating GNOG's operations into its consolidated operating activities, the amount of revenue and earnings attributable to the GNOG business from the Closing Date through June 30, 2022, which is included within revenue and net loss attributable to common stockholders in the Company’s unaudited condensed consolidated statements of operations, is impracticable to determine.

Preliminary Purchase Price Accounting for the GNOG Transaction

On the Closing Date, the Company acquired 100 % of the equity interests of GNOG pursuant to the Merger Agreement.

The following is a summary of the consideration issued on the Closing Date:

Share consideration (1)

Other consideration (2)

Total consideration $ 603,465

(1) Includes the issuance of approximately 29.3 million shares of New DraftKings’ Class A common stock issued at a price of $ 15.73 .

(2) Includes (i) payments made by the Company on behalf of GNOG, including repayment of the outstanding portion of GNOG’s term loan (including the associated prepayment premium) and payment of certain of GNOG’s transaction expenses incurred in connection with the GNOG Transaction and (ii) warrants that were exercisable for shares of GNOG Class A common stock prior to the Closing Date, which were assumed by New DraftKings in connection with the GNOG Transaction and became eligible to be converted into approximately 2.1 million shares of New DraftKings Class A common stock in the aggregate.

These payments were partially offset by commercial credits received by the Company from Fertitta Entertainment, Inc.

(“FEI”), which can be applied by the Company from time to time to offset future amounts otherwise owed by it to FEI or its affiliates under commercial arrangements among such parties, subject to certain limited exceptions, which partially offsets the other consideration issued in connection with the GNOG Transaction.

The purchase price allocation for the GNOG Transaction set forth herein is preliminary and subject to change within the measurement period, which will not extend beyond one year from the Closing Date.

Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to intangible assets acquired, tax liabilities assumed, including the calculation of deferred tax assets and liabilities, and contingent consideration (if any).

Any such adjustments may be material.

The following table summarizes the consideration issued or paid in connection with the GNOG Transaction and the preliminary fair value of the assets acquired and liabilities assumed in connection with the consummation of the GNOG Transaction on the Closing Date.

The values set forth below are preliminary, pending finalization of valuation analyses:

Cash and cash equivalents $ 66,709

Cash reserved for users 7,633

Receivables reserved for users 2,814

Accounts receivables 9,005

Prepaid expenses and other current assets 541

Property and equipment, net 2,674

Intangible assets, net 307,000

Operating lease right-of-use assets 1,185

Deposits and other non-current assets 47,395

Total identifiable assets acquired 444,956

Liabilities assumed:

Accounts payable and accrued expenses 36,660

Liabilities to users 5,260

Operating lease liabilities 1,185

Other long-term liabilities 76,750

Total liabilities assumed 119,855

Net assets acquired (a) 325,101

Purchase consideration (b) 603,465

Goodwill (b) – (a) $ 278,364

Goodwill represents the excess of the gross consideration transferred over the difference between the fair value of the underlying net assets acquired and the underlying 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.

Intangible assets not recognized apart from goodwill consist primarily of benefits from securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a marketplace participant, as well as acquiring a talented workforce and cost savings opportunities.

Goodwill associated with the GNOG Transaction is assigned as of the Closing Date to the Company’s B2C reporting unit.

Goodwill recognized is partially deductible for tax purposes.

Intangible Assets

Fair Value Weighted-

Gaming licenses $ 137,000 12.2 years

Customer relationships 170,000 5.9 years

Total $ 307,000

Loan Receivable

The Company acquired a long-term receivable in the amount of $ 30.5 million in connection with the GNOG Transaction, which originally resulted from a $ 30.0 million mezzanine loan (the “Danville GN Casino Loan”) by GNOG to certain parties before the Closing Date to develop and construct a “Golden Nugget”-branded casino in Danville, Illinois, pending regulatory approvals, that would enable GNOG to obtain market access to the State of Illinois.

There has been no significant deterioration of credit quality since the origination date of the Danville GN Casino Loan.

The receivable related to the Danville GN Casino Loan is classified within deposits and other non-current assets on the Company’s condensed consolidated balance sheet.

Transaction Costs

For the three and six months ended June 30, 2022, the Company incurred $ 10.7 million and $ 14.4 million in advisory, legal, accounting and management fees in connection with the GNOG Transaction, respectively, which are included in general and administrative expenses on the Company’s condensed consolidated statements of operations.

Unaudited Pro-Forma Information

The financial information in the table below summarizes the combined results of operations of Old DraftKings and GNOG, on a pro forma basis, as though the companies had been combined as of the beginning of the periods presented.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the GNOG Transaction had been consummated as of the beginning of the periods presented or of results that may occur in the future.

Three months ended June 30, Six months ended June 30,

2022 Pro Forma 2021 Pro Forma 2022 Pro Forma 2021 Pro Forma

Revenue $ 478,416 $ 327,482 $ 927,525 $ 664,671

Net loss ( 210,769 ) ( 318,087 ) ( 686,543 ) ( 735,256 )

The foregoing pro forma results are based on estimates and assumptions, which the Company believes are reasonable.

The pro forma results include adjustments primarily related to purchase accounting adjustments.

Acquisition costs and other non-recurring charges incurred are included in the earliest period presented.

Intangible Assets and Goodwill

Intangible Assets

The Company has the following intangible assets, net as of March 31, 2022:

The Company has the following intangible assets, net as of June 30, 2022:

Weighted-Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net

7 unchanged sentences

Indefinite-lived intangible assets:

Digital assets Indefinite-lived 2,882 — 2,882

Digital assets, net of impairment Indefinite-lived 1,489 — 1,489

Intangible assets, net $ 1,064,492 $ ( 253,967 ) $ 810,525

11 unchanged sentences

Intangible assets, net $ 727,657 $ ( 192,640 ) $ 535,017

Amortization expense was $ 28.1 million and $ 25.2 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense was $ 38.1 million and $ 26.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 66.2 million and $ 51.9 million for the six months ended June 30, 2022 and 2021, respectively.

The changes in the carrying amount of goodwill for the six months ended June 30, 2022 by reporting unit are:

B2C B2B Media Total

Balance as of December 31, 2021 $ 360,756 $ 207,684 $ 47,215 $ 615,655

Goodwill resulting from the GNOG Transaction 278,364 — — 278,364

Balance as of June 30, 2022 $ 639,120 $ 207,684 $ 47,215 $ 894,019

Current and Long-term Liabilities

Revolving Line of Credit

In October 2016, DraftKings Inc., a Delaware corporation (“DK DE”) entered into an amended and restated loan and security agreement with Pacific Western Bank, which was most recently amended in May 2022 (as amended, the “Credit Agreement”).

In October 2016, DK Crown Holdings Inc.

(formerly DraftKings Inc.), a Delaware corporation (“DK DE”) entered into an amended and restated loan and security agreement with Pacific Western Bank, which was most recently amended in May 2022 (as amended, the “Credit Agreement”).

The Credit Agreement provides a revolving line of credit of up to $ 60.0 million.

1 unchanged sentence

Borrowings under the Credit Agreement bear interest at a variable annual rate equal to the greater of (i) 1.00 % above the prime rate then in effect and (ii) 6.50 %, and the Credit Agreement requires monthly, interest-only payments.

In addition, the Company is required to pay quarterly in arrears a fee equal to 0.25 % per annum of the unused portion of the revolving line of

As of March 31, 2022 and December 31, 2021, the Credit Agreement provided a revolving line of credit of up to $ 60.0 million.

There was no principal outstanding as of March 31, 2022 or December 31, 2021.

Net facility available from the Credit Agreement as of March 31, 2022 and December 31, 2021 totaled $ 56.0 million and $ 55.8 million, respectively, which, in each case, excludes the letters of credit outlined in Note 13.

In addition, the Company is required to pay quarterly in arrears a fee equal to 0.25 % per annum of the unused portion of the revolving line of credit.

As of June 30, 2022 and December 31, 2021, the Credit Agreement provided a revolving line of credit of up to $ 60.0 million.

There was no principal outstanding as of June 30, 2022 or December 31, 2021.

Net facility available from the Credit Agreement as of June 30, 2022 and December 31, 2021 totaled $ 56.0 million and $ 55.8 million, respectively, which, in each case, excludes the letters of credit outlined in Note 13.

The Company is also subject to certain affirmative and negative covenants until maturity.

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The Company also obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that would have otherwise resulted from exceeding a capital expenditure limitation for 2021 and the amendments to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2021 and June 30, 2021, in each case, for the material weakness previously identified in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, as filed with the SEC on November 5, 2021.

In connection with the GNOG Transaction, the Company obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that would have otherwise resulted from entering into the transactions contemplated thereby, as well as to permit certain transfers of cash from the borrowers thereunder to GNOG and its subsidiaries from time to time.

In connection with the GNOG Transaction, the Company obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that

would have otherwise resulted from entering into the transactions contemplated thereby, as well as to permit certain transfers of cash from the borrowers thereunder to GNOG and its subsidiaries from time to time.

Convertible Notes and Capped Call

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In connection with the issuance of the Convertible Notes, the Company incurred $ 17.0 million of lender fees and $ 1.7 million of debt financing costs.

The Convertible Notes represent senior unsecured obligations of the Company, which are being amortized through the Notes Maturity Date.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of the Company’s Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 94.85 per share of Class A common stock.

The Convertible Notes represent senior unsecured obligations of Old DraftKings, which are being amortized through the Notes Maturity Date.

On May 5, 2022, in connection with the GNOG Transaction, (i) New DraftKings agreed to fully and unconditionally guarantee all of Old DraftKings’ obligations under the Convertible Notes and the indenture governing the Convertible Notes and (ii) each Convertible Note which was outstanding as of the consummation of the GNOG Transaction and previously convertible into shares of Old DraftKings Class A common stock became convertible into shares of New DraftKings Class A common stock.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of New DraftKings’ Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $ 94.85 per share of New DraftKings’ Class A common stock.

The conversion rate is subject to adjustment upon the occurrence of certain specified events and includes a make-whole adjustment upon early conversion in connection with a make-whole fundamental change (as defined in the indenture governing the Convertible Notes).

Prior to September 15, 2027, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the Notes Maturity Date.

The Company will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of Class A common stock or a combination of cash and shares of Class A common stock.

During the three months ended March 31, 2022, the conditions allowing holders of the Convertible Notes to convert their Convertible Notes were not met.

Old DraftKings will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of New DraftKings’ Class A common stock or a combination of cash and shares of New DraftKings’ Class A common stock.

During the six months ended June 30, 2022, the conditions allowing holders of the Convertible Notes to convert their Convertible Notes were triggered by the holding company reorganization in connection with the GNOG Transaction, whereby New DraftKings became the going-forward public company and replaced Old DraftKings as the issuer of the Class A common stock issuable upon conversion of the Convertible Notes;

such conversion window expired on June 27, 2022, and no holders of the Convertible Notes exercised their conversion rights.

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, the Company entered into a privately negotiated capped call transaction (“Capped Call Transactions”).

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As the transaction qualifies for equity classification, the net cost of $ 124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

Although recorded at amortized cost on the Company’s consolidated balance sheet, the estimated fair value of the Convertible Notes was $ 907.6 million and $ 953.8 million as of March 31, 2022 and December 31, 2021, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period and is classified as Level 2 in the fair value hieraarchy.

Although recorded at amortized cost on the Company’s consolidated balance sheet, the estimated fair value of the Convertible Notes was $ 747.9 million and $ 953.8 million as of June 30, 2022 and December 31, 2021, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period and is classified as Level 2 in the fair value hierarchy.

Indirect Taxes

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it pertains to DFS and its users.

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it primarily pertains to DFS and its users.

The ultimate impact of indirect taxes on the Company’s business is uncertain, as is the period required to resolve this uncertainty.

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Tax authorities may impose indirect taxes on Internet-delivered activities based on statutes and regulations which, in some cases, were established prior to the advent of the Internet and do not apply with certainty to the Company’s business.

The Company’s estimated contingent liability for indirect taxes may be materially impacted by future audit results, litigation and settlements, should they occur.

The Company’s estimated contingent liability for indirect taxes may be materially impacted by future audit results, litigation and settlements,

should they occur.

The Company’s activities by jurisdiction may vary from period to period, which could result in differences in the applicability of indirect taxes from period to period.

As of March 31, 2022 and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was $ 49.2 million and $ 47.5 million, respectively.

The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the consolidated balance sheets and general and administrative expenses on the condensed consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was $ 52.7 million and $ 47.5 million, respectively.

Warrant Liabilities

As part of the initial public offering of Diamond Eagle Acquisition Corp, (“DEAC”) on May 14, 2019 (the “IPO”), DEAC issued 13.3 million warrants each of which entitles the holder to purchase one share of Class A common stock at an exercise price of $ 11.50 per share (the “Public Warrants”).

As part of the initial public offering of Diamond Eagle Acquisition Corp.

(“DEAC”) on May 14, 2019 (the “IPO”), DEAC issued 13.3 million warrants each of which entitles the holder to purchase one share of the Company’s Class A common stock at an exercise price of $ 11.50 per share (the “Public Warrants”).

Simultaneously with the closing of the IPO, DEAC completed the private sale of 6.3 million warrants to DEAC’s sponsor (the “Private Warrants”).

As of March 31, 2022, there were no Public Warrants outstanding.

As of March 31, 2022, 1.6 million Private Warrants remained outstanding at a fair value of $ 14.2 million.

Due to fair value changes throughout the three months ended March 31, 2022 and March 31, 2021, the Company recorded a gain on remeasurement of warrant liabilities of $ 12.7 million and a loss on remeasurement of warrant liabilities of $ 27.0 million, respectively.

During the three months ended March 31, 2022, a de minimis number of Private Warrants were exercised.

During the three months ended March 31, 2021, 0.1 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 1.8 million, reflecting the reclassification of the warrant liabilities of $ 1.6 million and proceeds upon exercise of $ 0.2 million.

As of June 30, 2022, there were no Public Warrants outstanding and 1.6 million Private Warrants outstanding.

On May 5, 2022, in connection with the consummation of the GNOG Transaction, Old DraftKings entered into an assignment and assumption agreement (the “Old DraftKings Warrant Assignment Agreement”) with New DraftKings, Computershare Trust Company, N.A.

and Computershare Inc.

(together, “Computershare”), pursuant to which Old DraftKings assigned to New DraftKings all of its rights, interests and obligations under the warrant agreement, dated as of May 10, 2019 (the “Old DraftKings Warrant Agreement”), by and between DEAC and Continental Stock Transfer & Trust Company, as warrant agent, as assumed by Old DraftKings and assigned to Computershare by that certain assignment and assumption agreement, dated as of April 23, 2020, governing Old DraftKings’ outstanding Private Warrants, on the terms and conditions set forth in the Old DraftKings Warrant Assignment Agreement.

In connection with the consummation of the GNOG Transaction and pursuant to the Old DraftKings Warrant Assignment Agreement, each of the outstanding Private Warrants became exercisable for one share of New DraftKings Class A common stock on the existing terms and conditions, except as otherwise described in the Old DraftKings Warrant Assignment Agreement.

In addition, on May 5, 2022, in connection with the consummation of the GNOG Transaction, the Company assumed an additional 5.9 million warrants, each of which entitled the holder to purchase one share of GNOG’s Class A common stock at an exercise price of $ 11.50 per share (the “GNOG Private Warrants”).

Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable for 0.365 of a share of the Company’s Class A common stock, or approximately 2.1 million shares of the Company’s Class A common stock in the aggregate, on the existing terms and conditions of such GNOG Private Warrants, except as otherwise described in the assignment and assumption agreement relating to the GNOG Private Warrants entered into on the Closing Date.

As of June 30, 2022, there were 5.9 million GNOG Private Warrants outstanding, which corresponds to an assumed warrant liability of $ 13.2 million as of the Closing Date less a gain on remeasurement of $ 4.8 million from the Closing Date through June 30, 2022.

As of June 30, 2022, the fair value of the Company's warrant liability was $ 13.1 million.

Due to fair value changes throughout the three and six months ended June 30, 2022, the Company recorded gains on remeasurement of warrant liabilities of $ 14.3 million and $ 27.0 million, respectively.

Due to fair value changes throughout the three and six months ended June 30, 2021, the Company recorded a gain on remeasurement of warrants liabilities of $ 17.0 million and a loss on remeasurement of warrant liabilities of $ 10.0 million, respectively.

During the six months ended June 30, 2022, a de minimis number of Private Warrants and GNOG Private Warrants were exercised.

During the six months ended June 30, 2021, 0.2 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 4.2 million, reflecting the reclassification of the warrant liabilities of $ 3.5 million and proceeds upon exercise of $ 0.7 million.

Fair Value Measurements

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of March 31, 2022 and December 31, 2021 based on the three-tier fair value hierarchy:

March 31, 2022

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of June 30, 2022 and December 31, 2021 based on the three-tier fair value hierarchy:

June 30, 2022

Level 1 Level 2 Level 3 Total

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$ — $ — $ 200,537

Other current assets:

Digital assets held for users — 17,283 (2)

Other non-current assets:

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Total $ 219,212 $ 30,816 $ 46,633 $ 296,661

Private Warrants $ — $ 14,230 (5)

Other current liabilities:

Digital assets held for users $ — $ 17,283 (2)

Warrant liabilities — 13,081 (6)

Total $ — $ 30,364 $ — $ 30,364

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Total $ 577,369 $ — $ 3,850 $ 581,219

Private Warrants $ — $ 26,911 (5)

Warrant liabilities $ — $ 26,911 (6)

Total $ — $ 26,911 $ — $ 26,911

(1) Represents the Company’s money market funds, which are classified as Level 1 because the Company fair values these assets using quoted market prices.

(2) Represents the Company’s marketable equity securities, which are classified as Level 1 because the Company fair values these assets using quoted market prices.

(3) Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company fair values these assets using observable inputs for similar investments of the same issuer.

(1) Represents the Company’s money market funds, which are classified as Level 1 because the Company measures these assets to fair value using quoted market prices.

(2) Represents the asset and liability balance for the digital assets held by the Company for its users, which are classified as Level 2 because the Company measures these digital assets to fair value using observable inputs for similar transactions.

(3) Represents the Company’s marketable equity securities, which are classified as Level 1 because the Company measures these assets to fair value using quoted market prices.

(4) Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company measures these assets to fair value using observable inputs for similar investments of the same issuer.

The Company has elected the remeasurement alternative for these assets.

(5) Represents the Company’s derivative instruments held in other public and privately held entities.

The Company measures these derivative instruments at fair value using option pricing models and, accordingly, classifies these assets as Level 3.

During the three months ended March 31, 2022, there were not a significant amount of new derivative instruments purchased by or issued to the Company.

The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to fair value the Level 3 derivative instruments.

The Company measures these derivative instruments to fair value using option pricing models and, accordingly, classifies these assets as Level 3.

During the six months ended June 30, 2022, there were not a significant amount of new derivative instruments purchased by or issued to the Company.

The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to measure these Level 3 derivative instruments to fair value.

A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Significant Unobservable Input Range (Weighted Average)

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Risk-free rate 1.3 % - 1.6 % ( 1.4 %)

(5) The Company measures its Private Warrants at fair value using a binomial lattice model with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2.

For the three months ended March 31, 2022 and 2021, the Company recorded $ 37.4 million and $ 0.0 million of unrealized gains, respectively, primarily all of which resulted from those financial assets categorized as Level 3.

Those unrealized gains are included within other income, net in the condensed consolidated statements of operations.

(6) The Company measures its Private Warrants and the GNOG Private Warrants to fair value using a binomial lattice model with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2.

During the three and six months ended June 30, 2022, the Company recorded $ 5.6 million of unrealized loss and $ 31.8 million of unrealized gains, respectively, primarily all of which resulted from those financial assets categorized as Level 3.

Those unrealized gains are included within other income, net in the Company’s condensed consolidated statements of operations.

During the three and six months ended June 30, 2021, no such gains or losses were recorded.

Revenue Recognition

Deferred Revenue

The Company included deferred revenue within accounts payable and accrued expenses and liabilities to users in the condensed consolidated balance sheets.

The Company included deferred revenue within accounts payable and accrued expenses and liabilities to users in its condensed consolidated balance sheets.

The deferred revenue balances were as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Deferred revenue, beginning of the period $ 95,402 $ 41,849 $ 91,554 $ 30,627

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Revenue Disaggregation

Disaggregation of revenue for the three months ended March 31, 2022 and 2021 is as follows:

Three months ended March 31,

Disaggregation of revenue for the three and six months ended June 30, 2022 and 2021 is as follows:

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Online gaming $ 434,123 $ 258,229 $ 820,801 $ 530,890

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Total Revenue $ 466,185 $ 297,605 $ 883,390 $ 609,881

Online gaming includes DFS, iGaming and Sportsbook, which have certain similar attributes and patterns of recognition.

Sources of other revenue primarily include media, marketplace and other online consumer products.

Online gaming includes Sportsbook, iGaming and DFS, which have certain similar attributes and patterns of recognition.

Sources of Other revenue primarily includes media, Marketplace and retail Sportsbooks.

The following table presents the Company’s revenue by geographic region for the periods indicated:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

United States $ 456,075 $ 269,532 $ 858,671 $ 549,648

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LTIP awards generally vest when revenue, Adjusted EBITDA or share price targets are achieved amongst other conditions, while PSP awards generally vest upon achievement of revenue targets and have a range of payouts amongst other conditions.

The following table shows restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2022:

The following table shows restricted stock unit (“RSU”) and stock option activity for the six months ended June 30, 2022:

Time-based PSP LTIP Total Weighted Average Exercise Price of Options Weighted Average FMV

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Forfeited ( 118 ) ( 549 ) — ( 6 ) — ( 281 ) ( 954 ) 4.76 39.29

Outstanding at March 31, 2022 14,005 11,687 2,310 624 11,671 13,215 53,512 $ 5.76 $ 41.68

As of March 31, 2022, total unrecognized stock-based compensation expense of $ 731.2 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of 2.0 years.

The following table shows stock compensation expense for the three months ended March 31, 2022 and 2021:

Three months ended March 31, 2022 Three months ended March 31, 2021

Outstanding at June 30, 2022 13,185 11,617 2,300 619 11,502 13,245 52,468 $ 5.83 $ 40.48

As of June 30, 2022, total unrecognized stock-based compensation expense of $ 608.4 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of 1.9 years.

The following table shows stock compensation expense for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30, 2022 Three months ended June 30, 2021

Options RSUs Total Options RSUs Total

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Total $ 3,830 $ 131,691 $ 135,521 $ 4,034 $ 167,705 $ 171,739

Six months ended June 30, 2022 Six months ended June 30, 2021

Options RSUs Total Options RSUs Total

Time Based (1)

$ 7,694 $ 48,769 $ 56,463 $ 6,467 $ 29,491 $ 35,958

— 57,131 57,131 — 35,404 35,404

— 209,004 209,004 — 252,220 252,220

Total $ 7,694 $ 314,904 $ 322,598 $ 6,467 $ 317,115 $ 323,582

(1) Time-based awards vest and are expensed over a defined service period.

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During the three months ended March 31, 2022, the Company recorded a cumulative catch-up adjustment of $ 20.7 million in additional stock-based compensation expense related to its updated expectation on achieving higher revenue targets than originally estimated for certain PSP awards which have a range of payouts.

The Company’s provision for income taxes for the three months ended March 31, 2022 and 2021 is as follows:

Three months ended March 31,

Income tax provision (benefit) $ 469 $ ( 4,595 )

The effective tax rates for the three months ended March 31, 2022 and 2021 were ( 0.1 )% and 1.3 %, respectively.

The difference between the Company’s effective tax rates for the three month periods in 2022 and 2021 and the U.S.

statutory tax rate of 21% was primarily due to a full valuation allowance related to the Company’s net U.S.

deferred tax assets, offset partially by current state tax and current foreign tax.

Additionally, the Company recorded a discrete income tax benefit of $ 6.8 million during the first quarter of 2021, which is attributable to a non-recurring partial release of the Company’s U.S.

valuation allowance as a result of the preliminary purchase price accounting of Vegas Sports Information Network, LLC (“VSiN”).

The Company’s provision for income taxes for the three and six months ended June 30, 2022 and 2021 is as follows:

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Income tax (benefit) provision $ ( 81,226 ) $ 2,404 $ ( 80,757 ) $ ( 2,191 )

The effective tax rates for the three months ended June 30, 2022 and 2021 were 27.2 % and ( 0.8 )%, respectively, and the effective tax rates for the six months ended June 30, 2022 and 2021 were 10.6 % and 0.3 %, respectively.

The difference between the Company’s effective tax rates for the three and six month periods in 2022 and 2021 and the U.S.

statutory tax rate of 21% was primarily due to a valuation allowance related to the Company’s deferred tax assets, offset partially by current state tax and current foreign tax.

Additionally, the Company recorded a discrete income tax benefit of $ 76.8 million during the second quarter of 2022, as well as a discrete tax benefit of $ 6.8 million during the first quarter of 2021, which were attributable to non-recurring partial releases of the Company’s U.S.

valuation allowance as a result of the preliminary purchase accounting for GNOG and Vegas Sports Information Network, Inc.

(“VSIN”), respectively.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.

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B2C and B2B, in accordance with ASC Topic 280, Segment Reporting.

The B2C segment provides users with DFS, Sportsbook and iGaming products, as well as media and other online consumer products.

The B2B segment is involved in the design, development and

licensing of sports betting and casino gaming software for its Sportsbook and casino gaming products, which is primarily comprised of SBTech.

The B2C segment provides users with Sportsbook, iGaming and DFS products, as well as media and other online consumer products.

The B2B segment is involved in the design and development of sports betting and casino gaming software, which is primarily comprised of the Company’s wholly-owned subsidiary, SBTech (Global) Limited (“SBTech”).

Operating segments are components of the Company for which separate discrete financial information is available to and evaluated regularly by the chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance.

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All of the Company’s operating revenues and expenses, other than those excluded from Adjusted EBITDA as detailed below, are allocated to the Company’s reportable segments.

We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense, income tax expense and depreciation and amortization, and further adjusted for the following items:

stock-based compensation, transaction-related costs, litigation, settlement and related costs and certain other non-recurring, non-cash and non-core items, as described in the reconciliation below.

The Company defines and calculates Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items:

stock-based compensation, transaction-related costs, litigation, settlement and related costs, advocacy and other related legal expenses, gain or loss on remeasurement of warrant liabilities and other non-recurring and non-operating costs or income, as described in the reconciliation below.

A measure of segment assets and liabilities has not been currently provided to the Company’s CODM and therefore is not shown below.

Summarized financial information for the Company’s segments is shown in the following table:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

B2C $ 454,715 $ 270,173 $ 858,425 $ 551,019

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Litigation, settlement and related costs 2,446 3,599 4,396 4,221

Advocacy and other related legal expenses

— 11,035 — 11,035

(Gain) loss on remeasurement of warrant liabilities ( 14,315 ) ( 16,984 ) ( 26,996 ) 9,996

Other non-recurring costs and non-operating (income) costs ( 34,482 ) 2,001

Other non-recurring and non-operating costs (income) 5,652 2,132 ( 28,830 ) 4,133

Net loss attributable to common shareholders $ ( 217,103 ) $ ( 305,526 ) $ ( 684,796 ) $ ( 651,870 )

Due to the timing of the consummation of the GNOG Transaction, the above periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.

Loss Per Share

The computation of loss per share and weighted-average shares of the Company’s Class A common stock outstanding for the periods presented are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Net loss $ ( 217,103 ) $ ( 305,526 ) $ ( 684,796 ) $ ( 651,870 )

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Basic and diluted $ ( 0.50 ) $ ( 0.76 ) $ ( 1.61 ) $ ( 1.63 )

There were no preferred or other dividends declared for the three months ended March 31, 2022.

There were no preferred or other dividends declared for the three and six months ended June 30, 2022.

For the periods presented, the following securities were not required to be included in the computation of diluted shares outstanding:

Three months ended March 31,

Warrants 1,613 1,812

Class A common stock resulting from exercise of all warrants 3,761 1,769

Stock options and RSUs 52,468 58,031

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The Company entered into an engagement letter with a related party (the “Financial Advisor”) in August 2019, as amended in December 2019.

For the three months ended March 31, 2022 and 2021, the Company incurred no fees payable to the Financial Advisor.

For the three and six months ended June 30, 2022, the Company incurred $ 8.5 million of fees payable to its Financial Advisor.

For the three and six months ended June 30, 2021, the Company incurred no fees payable to its Financial Advisor.

Receivables from Equity Method Investment

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The operational support is primarily in the form of general and administrative services.

As of March 31, 2022 and December 31, 2021, the Company had $ 0.5 million and $ 0.6 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in the consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, the Company had $ 0.4 million and $ 0.6 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in its consolidated balance sheets.

The Company has committed to invest up to $ 17.5 million into DBDK Venture Fund I, LP, a Delaware limited partnership and a subsidiary of DKFS LLC.

As of March 31, 2022, the Company had invested a total of $ 3.5 million of the total commitment.

As of June 30, 2022, the Company had invested a total of $ 4.9 million of the total commitment.

Transactions with a Shareholder and their Immediate Family Members

As of March 31, 2022 and December 31, 2021, the Company had $ 3.8 million of receivables due from former shareholders of SBTech, which includes a current director and shareholder of the Company.

For the three months ended March 31, 2022 and March 31, 2021, the Company had $ 0.6 million and $ 1.4 million in sales, respectively, to an immediate family member of a current director of the Company.

The Company had an associated accounts receivable balance of $ 0.2 million as of March 31, 2022 and December 31, 2021 included in accounts receivable in its condensed consolidated balance sheets.

As of June 30, 2022 and December 31, 2021, the Company had $ 0.0 million and $ 3.8 million of receivables due from former shareholders of SBTech, respectively, which includes a current director and shareholder of the Company.

For the three months ended June 30, 2022 and June 30, 2021, the Company had $ 0.5 million and $ 1.7 million in sales, respectively, to entities that are wholly owned by an immediate family member of a current director of the Company.

The Company recorded $ 1.1 million and $ 3.1 million of such sales in the six months ended June 30, 2022 and June 30, 2021, respectively.

The Company had an associated accounts receivable balance of $ 0.2 million and $ 0.2 million as of June 30, 2022 and December 31, 2021, respectively, included in accounts receivable in its condensed consolidated balance sheets.

Starting in 2022, from time to time, the Company has chartered, without mark-up, the private plane owned by Jason Robins, the Company’s Chief Executive Officer, utilizing aircraft services from Jet Aviation Flight Services, Inc.

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The Company had no direct or indirect interest in such private plane.

During the three months ended March 31, 2022, the Company incurred $ 0.7 million of expense for use of the aircraft under these chartering services.

During the three and six months ended June 30, 2022, the Company incurred $ 0.0 million and $ 0.7 million of expense for use of the aircraft under these chartering services, respectively.

In March 2022, the Company entered into a one-year lease of an aircraft from an entity controlled by Mr.

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Robins and his family fly private and their assessment that such an arrangement is more efficient and flexible and better ensures safety, confidentiality and privacy.

During the three and six months ended June 30, 2022, the Company incurred $ 0.1 million of expense under the aircraft lease.

Leases, Commitments and Contingencies

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Some of the Company’s leases include one or more options to renew.

For a majority of our leases, we do not assume renewals in our determination of the lease term as the renewals are not deemed to be reasonably assured.

For a majority of our leases, we do not assume renewals in our determination of the lease term as the renewals are not deemed to be reasonably certain to exercise.

Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

As of March 31, 2022, the Company’s lease agreements typically have terms not exceeding ten years .

As of June 30, 2022, the Company’s lease agreements typically have terms not exceeding ten years .

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments primarily represent costs related to common area maintenance and utilities.

The components of lease cost are as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Operating lease cost $ 5,679 $ 4,229 $ 9,909 $ 8,362

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Total lease cost $ 7,845 $ 5,558 $ 14,406 $ 10,708

Other information related to leases are as follows:

Three months ended March 31,

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

Six months ended June 30,

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

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 21,338 $ 2,413

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 5.7 years and 6.5 % as of March 31, 2022.

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 7.1 years and 6.5 % as of June 30, 2022.

The Company calculated the weighted-average discount rates using incremental borrowing rates, which equal the rates of interest that it would pay to borrow funds on a fully collateralized basis over a similar term.

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Years Ending December 31,

From April 1, 2022 to December 31, 2022 $ 12,443

From July 1, 2022 to December 31, 2022 $ 8,030

Thereafter 48,683

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Imputed interest ( 26,023 )

Present value of undiscounted future cash flows $ 67,368

As of March 31, 2022, the Company has an additional corporate office lease that has not yet commenced with lease obligations of approximately $ 33.7 million that are not included in the table above.

This operating lease is expected to commence in 2022 with a term of approximately 11 years.

As of March 31, 2022, the Company had long-lived assets, which consists of operating lease right-of-use assets and property and equipment, net, of $ 79.5 million and $ 31.4 million located in the United States and internationally, respectively.

Operating lease liabilities $ 83,902

As of June 30, 2022, the Company had long-lived assets, which consists of operating lease right-of-use assets and property and equipment, net, of $ 106.3 million and $ 25.0 million located in the United States and internationally, respectively.

As of December 31, 2021, the company had long-lived assets of $ 77.2 million and $ 32.6 million located in the United States and internationally, respectively.

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Years Ending December 31,

From April 1, 2022 to December 31, 2022 $ 349,135

From July 1, 2022 to December 31, 2022 $ 267,708

Thereafter 358,772

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The plaintiffs asserted 27 claims arising under both state and federal law against the DFS defendants.

The plaintiffs’ claims against us generally fall into four categories:

The plaintiffs’ claims against us generally fell into four categories:

(1) the Company’s online daily fantasy sports contests constitute illegal gambling;

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and (4) the Company allowed our employees to participate in competitors’ fantasy sports contests using non-public information, which gave such employees an unfair advantage over other contestants.

The plaintiffs seek money damages, equitable relief, and disgorgement of gains against the Company.

On October 6, 2021, the court entered judgment and an order approving a settlement and dismissing the claims with prejudice brought by all plaintiffs except the family members plaintiffs and one plaintiff asserting claims against the DFS defendants as a concerned citizen of the State of Florida.

The plaintiffs sought money damages, equitable relief, and disgorgement of gains against the Company.

This settlement agreement became effective on November 5, 2021;

as a result, the only remaining plaintiffs are the family member plaintiffs and the plaintiff who asserted the concerned citizen claims.

as a result, the only remaining plaintiffs were the family member plaintiffs and the plaintiff who asserted the Concerned Citizen Claims .

On January 21, 2022, DraftKings and the family member plaintiffs filed a joint motion for preliminary approval of a proposed settlement.

On February 18, 2022, the court entered an order preliminarily approving the proposed settlement and scheduled a fairness hearing for final approval of the settlement on June 8, 2022.

Once the family member settlement agreement becomes effective, the only remaining plaintiff will be the plaintiff who asserted the concerned citizen claims.

The Company intends to vigorously defend this case.

If the plaintiffs obtain a judgment in their favor in this matter, the Company could be subject to substantial damages and it could be restricted from offering DFS contests in certain states.

The Company established an accrual for this matter, but it cannot provide any assurance as to the outcome of this lawsuit.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.

On June 8, 2022, the court entered judgment and an order approving the settlement and dismissing all claims with prejudice other than the Concerned Citizens Claims.

On June 23, 2022, with all claims other than the Concerned Citizen Claims resolved, the court dismissed the Concerned Citizen Claims from federal court for lack of Article III standing and remanded the Concerned Citizens Claims to state court in Florida.

On July 8, 2022, the court officially closed the docket for In Re:

Daily Fantasy Sports Litigation (Multi-District Litigation) .

The Company previously provided an accrual for this matter.

The Company intends to vigorously defend the Concerned Citizen Claims .

If the plaintiff obtains a judgment in his favor in this matter, the Company could be subject to substantial damages and it could be restricted from offering DFS contests in Florida.

The Company cannot provide any assurance as to the outcome of the Concerned Citizen Claims .

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of the Concerned Citizen Claims will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.

Interactive Games LLC

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Letters of Credit

In connection with the Credit Agreement with Pacific Western Bank, the Company has entered into several letters of credit totaling $ 4.0 million and $ 4.2 million as of March 31, 2022 and December 31, 2021, respectively, for the Company’s leases of office space.

In connection with the Credit Agreement with Pacific Western Bank, the Company has entered into several letters of credit totaling $ 4.0 million and $ 4.2 million as of June 30, 2022 and December 31, 2021, respectively, for the Company’s leases of office space.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements