What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 197 added, 154 removed, 632 unchanged (36% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

June 30, 2022

September 30, 2022

(Unaudited) December 31, 2021

10 unchanged sentences

Operating lease right-of-use assets 74,703 63,831

Equity method investment 8,796 9,825

Equity method investments 8,746 9,825

Deposits and other non-current assets 174,634 45,377

16 unchanged sentences

Class A common stock, $ 0.0001 par value;

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

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

457,108 and 414,911 shares issued and 448,664 and 407,781 outstanding as of September 30, 2022 and December 31, 2021, respectively

Class B common stock, $ 0.0001 par value;

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

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

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

Treasury stock, at cost;

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

8,444 and 7,130 shares as of September 30, 2022 and December 31, 2021, respectively

( 328,626 ) ( 306,614 )

8 unchanged sentences

(Amounts in thousands, except loss per share data)

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

6 unchanged sentences

Other income (expense):

Interest income, net 1,929 1,642 2,077 2,627

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

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

Interest income (expense), net 6,301 ( 1,556 ) 8,378 1,071

(Loss) gain on remeasurement of warrant liabilities ( 6,797 ) 7,091 20,199 ( 2,905 )

Other income, net 8,257 — 40,566 —

Loss before income tax provision (benefit) and loss from equity method investment ( 447,267 ) ( 540,981 ) ( 1,210,391 ) ( 1,194,695 )

Income tax provision (benefit) 3,177 3,845 ( 77,580 ) 1,654

Loss from equity method investments 50 202 2,479 549

Net loss attributable to common stockholders $ ( 450,494 ) $ ( 545,028 ) $ ( 1,135,290 ) $ ( 1,196,898 )

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.

Due to the timing of the consummation of the GNOG Transaction (as defined below) , the above periods, to the extent applicable, exclude the operations of GNOG (as defined below) prior to the closing date of May 5, 2022.

DRAFTKINGS INC.

1 unchanged sentence

(Amounts in thousands)

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

5 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.

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

DRAFTKINGS INC.

21 unchanged sentences

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

Exercise of stock options 69 — — — 224 — — — 224

Stock-based compensation expense — — — — 126,038 — — — 126,038

Purchase of treasury stock ( 267 ) — — — — — — ( 4,536 ) ( 4,536 )

Restricted stock unit vesting 840 — — — — — — — —

Net loss — — — — — ( 450,494 ) — — ( 450,494 )

Balances at September 30, 2022 448,664 $ 45 393,014 $ 39 $ 6,616,274 $ ( 4,889,104 ) $ 36,488 $ ( 328,626 ) $ 1,435,116

Class A Common Stock Class B Common Stock Additional

26 unchanged sentences

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

Shares issued for exercise of warrants 28 — — — 1,050 — — — 1,050

Exercise of stock options 2,607 — — — 6,664 — — — 6,664

Stock-based compensation — — — — 175,664 — — — 175,664

Purchase of treasury stock ( 80 ) — — — — — — ( 4,437 ) ( 4,437 )

Restricted stock unit vesting 297 — — — — — — — —

Foreign currency translation — — — — — — ( 13,098 ) — ( 13,098 )

Net loss — — — — — ( 545,028 ) — — ( 545,028 )

Balances at September 30, 2021 405,345 $ 40 393,014 $ 39 $ 5,505,908 $ ( 3,427,517 ) $ 50,815 ( 303,118 ) $ 1,826,167

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.

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

DRAFTKINGS INC.

1 unchanged sentence

(Amounts in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating Activities:

2 unchanged sentences

Depreciation and amortization 120,629 88,600

Non-cash interest expense 931 775

Non-cash interest expense, net 985 1,442

Stock-based compensation expense 448,636 499,246

Loss from equity method investment 2,429 347

Loss from equity method investments 2,479 549

(Gain) loss on remeasurement of warrant liabilities ( 20,199 ) 2,905

Gain on equity securities and other financial assets ( 31,808 ) —

Gain on equity securities and other financial assets, net ( 32,483 ) —

Deferred income taxes ( 78,051 ) ( 11,737 )

36 unchanged sentences

(Amounts in thousands)

Six months ended June 30,

Nine months ended September 30,

Supplemental Disclosure of Noncash Investing and Financing Activities:

5 unchanged sentences

Supplemental Disclosure of Cash Activities:

(Decrease) increase in cash reserved for users ( 50,781 ) 26,539

Increase in cash reserved for users 104,405 192,450

Cash paid for interest — —

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.

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

DRAFTKINGS INC.

6 unchanged sentences

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”, 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.

As further discussed in Note 3 hereof entitled “Acquisition of Golden Nugget Online Gaming, Inc.,” on May 5, 2022 (the “GNOG Closing Date”), DraftKings Inc.

(formerly New Duke Holdco, Inc.) consummated the acquisition of Golden Nugget Online Gaming, Inc., a Delaware corporation (together with its subsidiaries unless the context requires otherwise, “GNOG”), pursuant to a definitive agreement and plan of merger, dated August 9, 2021 (the “Merger Agreement”), in an all-stock transaction (the “GNOG Transaction”).

In connection with the GNOG Transaction, DraftKings Inc.

undertook a holding company reorganization whereby DraftKings Inc.

became the going-forward public company and the direct parent company of both DraftKings Holdings Inc.

(formerly DraftKings Inc.), a Nevada corporation (“Old DraftKings”), and GNOG.

DraftKings Inc.

is the registrant filing this Quarterly Report on Form 10-Q as the successor registrant for Old DraftKings.

Unless otherwise indicated or the context otherwise requires, the terms “DraftKings”, the “Company”, “we”, “us” and “our” refer to DraftKings Inc.

(or, in respect of periods prior to the GNOG Closing Date, Old DraftKings), together with its 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 June 30, 2022, 29 U.S.

As of September 30, 2022, 32 U.S.

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

2 unchanged sentences

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.

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

As of September 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.

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.

Beginning in 2020 and continuing into 2022, the novel coronavirus (“COVID-19”) pandemic 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.

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.

Beginning in July 2020, major professional sports leagues gradually resumed regular activities with shortened seasons in many instances.

In the nine months ended September 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.

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 the Company’s revenue, possibly materially.

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.

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.

Since the second quarter of 2022, our primary offices, including our corporate headquarters in Boston, Massachusetts, have been 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.

9 unchanged sentences

Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Company’s revenue as a result of timing of the various sports seasons, sporting events and other factors.

The accompanying unaudited condensed consolidated financial statements include the accounts and operations of the Company.

The accompanying unaudited condensed consolidated financial statements include the accounts and operations of the Company, except that, due to the timing of the consummation of the GNOG Transaction, the accompanying unaudited condensed consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date of May 5, 2022.

All intercompany balances and transactions have been eliminated.

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

Foreign Currency

2 unchanged sentences

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

subsidiaries for the period ended June 30, 2022.

subsidiaries for the period ended September 30, 2022.

Digital Assets and Liabilities

1 unchanged sentence

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.

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 users, which is effective from the first interim period commencing after June 15, 2022, with retroactive application as of the beginning of the fiscal year to which the interim or annual period relates.

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

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

6 unchanged sentences

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.

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.

2 unchanged sentences

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.

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 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.

On May 5, 2022, DraftKings consummated the GNOG Transaction, and, 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 DraftKings Inc.’s Class A common stock for each share of GNOG that they held on the GNOG Closing Date.

DraftKings Inc.

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

Operating results for GNOG on and after the GNOG Closing Date are included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 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 GNOG Closing Date through September 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:

On the GNOG 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 GNOG Closing Date:

Share consideration (1)

1 unchanged sentence

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.

(1) Includes the issuance of approximately 29.3 million shares of DraftKings Inc.’s 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 GNOG Closing Date, which were assumed by DraftKings in connection with the GNOG Transaction and became eligible to be converted into approximately 2.1 million shares of DraftKings Inc.’s 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:

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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.

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 market participant, as well as acquiring a talented workforce and cost savings opportunities.

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

Goodwill recognized is partially deductible for tax purposes.

5 unchanged sentences

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.

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 GNOG 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.

1 unchanged sentence

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.

For the three and nine months ended September 30, 2022, the Company incurred $ 0.6 million and $ 14.9 million, respectively, in advisory, legal, accounting and management fees in connection with the GNOG Transaction 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 financial information in the table below summarizes the combined results of operations of Old DraftKings and GNOG, on an actual and a pro forma basis, as applicable, 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

Three months ended September 30, Nine months ended September 30,

2022 Actual 2021 Pro Forma 2022 Pro Forma 2021 Pro Forma

Revenue $ 501,938 $ 246,620 $ 1,429,463 $ 911,291

5 unchanged sentences

Intangible Assets

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

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

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

21 unchanged sentences

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

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:

Amortization expense was $ 40.6 million and $ 26.7 million for the three months ended September 30, 2022 and 2021, respectively, and $ 106.8 million and $ 78.6 million for the nine months ended September 30, 2022 and 2021, respectively.

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

B2C B2B Media Total

1 unchanged sentence

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

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

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

Current and Long-term Liabilities

1 unchanged sentence

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”).

(formerly DraftKings Inc.), a Delaware corporation (“DK DE”) entered into an amended and restated loan and security agreement with Pacific Western Bank (as amended from time to time, the “Credit Agreement”).

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

The Credit Agreement has a maturity date of August 28, 2022.

The Credit Agreement has a maturity date of November 26, 2022.

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 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.

As of September 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 September 30, 2022 or December 31, 2021.

Net borrowing capacity available from the Credit Agreement as of September 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.

1 unchanged sentence

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

In March 2021, the Company issued zero-coupon convertible senior notes in an aggregate principal amount of $ 1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”).

In March 2021, Old DraftKings issued zero-coupon convertible senior notes in an aggregate principal amount of $ 1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”).

The Convertible Notes will mature on March 15, 2028 (the “Notes Maturity Date”), subject to earlier conversion, redemption or repurchase.

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.

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

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.

On May 5, 2022, in connection with the consummation of the GNOG Transaction, (i) DraftKings Inc.

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 DraftKings Inc.

Class A common stock.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of DraftKings Inc.’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 DraftKings Inc.’s 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.

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;

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

During the nine months ended September 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 DraftKings Inc.

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”).

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

The Capped Call Transactions have a strike price of $ 94.85 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes.

The Capped Call Transactions have an initial cap price of $ 135.50 per share, subject to certain adjustments.

The Capped Call Transactions are expected generally to reduce potential dilution to the Company’s Class A common stock upon any conversion of Convertible Notes.

The Capped Call Transactions are expected generally to reduce potential dilution to DraftKings Inc.’s Class A common stock upon any conversion of Convertible Notes.

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 $ 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.

Although recorded at amortized cost on the Company’s consolidated balance sheet, the estimated fair value of the Convertible Notes was $ 830.5 million and $ 953.8 million as of September 30, 2022 and December 31, 2021, respectively, which was calculated using level 2 inputs, including 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.

Indirect Taxes

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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 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.

As of September 30, 2022 and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was $ 56.0 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 Company’s condensed consolidated statements of operations.

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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”).

(“DEAC”) on May 14, 2019 (the “IPO”), DEAC issued 13.3 million warrants each of which entitles the holder to purchase one share of DraftKings Inc.’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 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.

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

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.

(together, “Computershare”), pursuant to which Old DraftKings assigned to DraftKings Inc.

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.

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.

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 DraftKings Inc.’s Class A common stock, or approximately 2.1 million shares of DraftKings Inc.’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 GNOG Closing Date.

As of September 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 GNOG Closing Date less a loss on remeasurement of $ 3.7 million for the three months ended September 30, 2022 and a gain on remeasurement of $ 1.1 million from the GNOG Closing Date through September 30, 2022.

As of September 30, 2022, the fair value of the Company's warrant liability was $ 19.9 million.

Due to fair value changes throughout the three and nine months ended September 30, 2022, the Company recorded a loss on remeasurement of warrant liabilities of $ 6.8 million and a gain on remeasurement of warrant liabilities $ 20.2 million, respectively.

Due to fair value changes throughout the three and nine months ended September 30, 2021, the Company recorded a gain on remeasurement of warrants liabilities of $ 7.1 million and a loss on remeasurement of warrant liabilities of $ 2.9 million, respectively.

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

During the nine months ended September 30, 2021, 0.2 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 5.2 million, reflecting the reclassification of the warrant liabilities of $ 4.5 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 June 30, 2022 and December 31, 2021 based on the three-tier fair value hierarchy:

June 30, 2022

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

September 30, 2022

Level 1 Level 2 Level 3 Total

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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.

During the nine months ended September 30, 2022, the Company did not purchase or issue a significant amount of new derivative instruments.

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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Significant Unobservable Input Range (Weighted Average)

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Risk-free rate 1.3 % - 3.8 % ( 1.7 %)

(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.

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

During the three months ended September 30, 2022, the Company recorded $ 0.5 million and $ 0.2 million of unrealized gains for its Level 1 and Level 3 financial assets, respectively.

During the nine months ended September 30, 2022, the Company recorded $ 8.0 million of unrealized losses and $ 40.5 million of unrealized gains for its Level 1 and Level 3 financial assets, respectively.

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

During the three and nine months ended September 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 its condensed consolidated balance sheets.

The Company includes 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 June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Revenue Disaggregation

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,

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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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.

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 June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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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 six months ended June 30, 2022:

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

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

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Forfeited ( 154 ) ( 971 ) ( 5 ) ( 26 ) — ( 501 ) ( 1,657 ) 4.71 35.06

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

Outstanding at September 30, 2022 13,080 11,570 2,295 599 11,502 13,671 52,717 $ 5.84 $ 39.10

As of September 30, 2022, total unrecognized stock-based compensation expense of $ 471.9 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 and nine months ended September 30, 2022 and 2021:

Three months ended September 30, 2022 Three months ended September 30, 2021

Options RSUs Total Options RSUs Total

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Total $ 3,577 $ 122,461 $ 126,038 $ 3,787 $ 171,877 $ 175,664

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

Nine months ended September 30, 2022 Nine months ended September 30, 2021

Options RSUs Total Options RSUs Total

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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 and six months ended June 30, 2022 and 2021 is as follows:

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

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

Three months ended September 30, Nine months ended September 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.

Income tax provision (benefit) $ 3,177 $ 3,845 $ ( 77,580 ) $ 1,654

The effective tax rates for the three months ended September 30, 2022 and 2021 were ( 0.7 )% and ( 0.7 )%, respectively, and the effective tax rates for the nine months ended September 30, 2022 and 2021 were 6.4 % and ( 0.1 )%, respectively.

The difference between the Company’s effective tax rates for the three and nine 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.

valuation allowance as a result of the preliminary purchase accounting for GNOG and Vegas Sports Information Network, Inc., 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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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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Summarized financial information for the Company’s segments is shown in the following table:

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Depreciation and amortization 46,089 30,356 120,629 88,600

Interest income, net ( 1,929 ) ( 1,642 ) ( 2,077 ) ( 2,627 )

Interest (income) expense, net ( 6,301 ) 1,556 ( 8,378 ) ( 1,071 )

Income tax provision (benefit) 3,177 3,845 ( 77,580 ) 1,654

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Net loss attributable to common shareholders $ ( 450,494 ) $ ( 545,028 ) $ ( 1,135,290 ) $ ( 1,196,898 )

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 June 30, Six months ended June 30,

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Basic and diluted $ ( 1.00 ) $ ( 1.35 ) $ ( 2.63 ) $ ( 2.98 )

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

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

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

September 30,

Class A common stock resulting from exercise of all warrants 3,761 1,741

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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 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

For the three and nine months ended September 30, 2022, the Company incurred $ 0.0 million and $ 8.5 million, respectively, of fees payable to its Financial Advisor.

During the three and nine months ended September 30, 2021, the Company incurred no fees payable to its Financial Advisor.

Equity Method Investments

The Company provides office space and general operational support to DKFS, LLC, an equity-method affiliate.

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

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.

As of September 30, 2022 and December 31, 2021, the Company had $ 0.3 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 June 30, 2022, the Company had invested a total of $ 4.9 million of the total commitment.

As of September 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 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.

As of September 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 September 30, 2022 and September 30, 2021, the Company had $ 0.6 million and $ 0.9 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 $ 1.7 million and $ 4.0 million of such sales in the nine months ended September 30, 2022 and September 30, 2021, respectively.

The Company had an associated accounts receivable balance of $ 0.2 million and $ 0.2 million as of September 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 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.

During the three and nine months ended September 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.

During the three and nine months ended September 30, 2022, the Company incurred $ 0.1 million and $ 0.3 million, respectively, of expense under the aircraft lease.

Leases, Commitments and Contingencies

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

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

As of September 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 June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Total lease cost $ 7,841 $ 5,926 $ 22,247 $ 16,634

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,

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

Nine months ended September 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 $ 23,056 $ 3,055

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 weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 7.3 years and 6.5 % as of September 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 July 1, 2022 to December 31, 2022 $ 8,030

From October 1, 2022 to December 31, 2022 $ 3,861

Thereafter 52,416

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Operating lease liabilities $ 81,725

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 September 30, 2022, the Company had long-lived assets, which consists of operating lease right-of-use assets and property and equipment, net, of $ 109.7 million and $ 23.2 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 July 1, 2022 to December 31, 2022 $ 267,708

From October 1, 2022 to December 31, 2022 $ 164,209

Thereafter 355,050

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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.

Securities Matters

Securities Matters Related to Allegations in the Hindenburg Report

On July 2, 2021, the first of two substantially similar federal securities law putative class actions was filed in the U.S.

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Securities Matters Related to the GNOG Transaction

On August 12, 2022, a putative class action was filed in Nevada state District Court in Clark County against Golden Nugget Online Gaming, Inc.

(“GNOG Inc.”), the Company and one of its officers, as well as former officers or directors and the former controlling stockholder of GNOG Inc.

and Jefferies LLC.

The lawsuit asserts claims on behalf of a putative class of former minority stockholders of GNOG Inc.

alleging that certain former officers and directors of GNOG Inc.

and its former controlling stockholder (Tilman Fertitta and/or Fertitta Entertainment, Inc.) breached their fiduciary duties to minority stockholders of GNOG Inc.

in connection with the GNOG Transaction, and the other defendants aided and abetted the alleged breaches of fiduciary duty.

On September 9, 2022, two similar putative class actions were filed in the Delaware Court of Chancery against former directors of GNOG Inc.

and its former controlling stockholder, one of which also names the Company and Jefferies Financial Group, Inc.

as defendants.

These pending actions in Delaware assert substantially similar claims on behalf of a putative class of former minority stockholders of GNOG Inc.

alleging that certain former officers and directors of GNOG Inc.

and its former controlling stockholder (Tilman Fertitta) breached their fiduciary duties to minority stockholders of GNOG Inc.

in connection with the GNOG Transaction, and one of the actions also alleges that DraftKings aided and abetted the alleged breaches of fiduciary duty.

On October 12, 2022, the Delaware Court of Chancery consolidated these two actions under the caption In re Golden Nugget Online Gaming, Inc.

Stockholders Litigation .

The Company intends to vigorously defend against these claims.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities.

The Company also cannot provide an estimate of the possible loss or range of loss.

Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

Despite the potential for significant damages, the Company does not believe, based on currently available information, that the outcome of these proceedings 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.

Shareholder Derivative Litigation

7 unchanged sentences

The federal court action in Nevada also contends that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act.

The Nevada actions seek unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees.

The Nevada actions seek unspecified compensatory

damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities.

34 unchanged sentences

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 June 30, 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 September 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