DraftKings Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2022, which is the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022 to ensure that information required to be disclosed by the Company in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with U.S. GAAP. Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management’s evaluation of internal control over financial reporting excluded the internal control activities of GNOG, which we acquired in May 2022, as discussed in Note 3 “Business Combinations” to the consolidated financial statements. We have included the financial results of GNOG in the consolidated financial statements from the date of acquisition. Total assets, net assets, revenue, and net loss subject to GNOG's internal control over financial reporting each represented less than five percent of our consolidated total assets, net assets, revenue, and net loss, excluding acquisition method fair value adjustments, respectively, for the fiscal year ended December 31, 2022. Management has reviewed its assessment with the Audit Committee. The Company’s independent registered public accounting firm, BDO USA, LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 15 “ Exhibits, Financial Statement Schedules ” of this Annual Report. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three months ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Item 9B. Other Information. Letter Agreements On February 14, 2023, the Company entered into letter agreements with each of Messrs. Jason Robins, the Company’s Chief Executive Officer; Matthew Kalish, the Company’s President, DraftKings North America; and Paul Liberman, the 66 Company’s President, Global Technology and Product, pursuant to which each executive officer agreed to a voluntary reduction in their respective base salaries to $1 for fiscal year 2023 (the “Base Salary Reductions”). The Base Salary Reductions do not modify any other rights under each of Messrs. Robins', Kalish's and Liberman's employment agreements that are determined by reference to such executive officer’s base salary (other than to the extent otherwise described in such letter agreements), and such provisions will continue to be applied based on the base salary rate in effect without giving effect to any Base Salary Reductions. Furthermore, the Base Salary Reductions are not intended to reduce any Company employee benefit provided to Messrs. Robins, Kalish and Liberman that is determined by reference to base salary, except that life and disability insurance will not be provided to Messrs. Robins, Kalish and Liberman during the applicable Base Salary Reduction period. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 67 PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item will be included in our Proxy Statement for the 2023 Annual Meeting of Stockholders to be filed with the SEC, within 120 days of the fiscal year ended December 31, 2022 (the “2023 Proxy Statement”), and is incorporated herein by reference. Item 11. Executive Compensation . The information required by this item will be included in our 2023 Proxy Statement, which is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . The information required by this item will be included in our 2023 Proxy Statement, which is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence . The information required by this item will be included in our 2023 Proxy Statement, which is incorporated herein by reference. Item 14. Principal Accountant Fees and Services . The information required by this item will be included in our 2023 Proxy Statement, which is incorporated herein by reference. 68 PART IV Item 15. Exhibits, Financial Statement Schedules. (a) Documents filed as part of this report (a)(1) Financial Statements Audited Consolidated Financial Statements of DraftKings Inc. for the years ended December 31, 2022, December 31, 2021 and December 31, 2020: Reports of Independent Registered Public Accounting Firm ( BDO USA, LLP ; Boston, Massachusetts ; PCAOB ID# 243 ) 70 Consolidated Balance Sheets F-1 Consolidated Statements of Operations F-3 Consolidated Statements of Comprehensive Loss F-4 Consolidated Statements of Changes in Stockholders' Equity (Deficit) F-5 Consolidated Statements of Cash Flows F- 7 Notes to the Consolidated Financial Statements F- 9 (2) Financial Statement Schedule Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. (3) Exhibits: The exhibits to this report are listed in the exhibit index below. (3)(b) Description of Exhibits Exhibit Index 74 69 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and Board of Directors DraftKings Inc. Boston, Massachusetts Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of DraftKings Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 17, 2023 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Business Combinations - Valuation of Certain Intangible Assets As described in Note 3 to the consolidated financial statements, on May 5, 2022, the Company acquired Golden Nugget Online Gaming, Inc. (“GNOG”), for total consideration of $603.5 million. The Company accounted for the acquisition in accordance with ASC Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The determination of the fair values of the assets acquired and liabilities assumed requires management to make significant estimates and assumptions, including with respect to the fair values of identifiable intangible assets. Significant estimates and assumptions made by the Company in determining the fair value of acquired gaming licenses and customer relationships include future cash flows that it expects to generate from the acquired assets. The Company recognized $315 million of finite-lived intangible assets in connection with the GNOG acquisition. We identified the determination of fair values of certain identifiable finite-lived intangible assets, which included certain gaming licenses and customer relationships, as a critical audit matter. The principal considerations for our determination included the following: (i) changes in the key assumptions could have a significant impact on the fair value of the finite-lived intangible assets acquired, and (ii) the assumptions utilized by the Company in determining the fair value of certain gaming licenses and customer relationships acquired, specifically projected revenue growth rates and marketing synergies, are 70 subjective and require significant judgment. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters. The primary procedures we performed to address this critical audit matter included: • Evaluating the reasonableness of the revenue growth rates used in the determination of the fair value of certain gaming licenses and customer relationships by i) reviewing the historical performance of GNOG using publicly available information, ii) assessing the revenue projections against industry metrics and peer-group companies and iii) testing historical GNOG data used as a basis for revenue projections. • Testing the reasonableness of the amounts used to determine the marketing cost-saving synergies for GNOG by evaluating the historical marketing spend at GNOG and the Company. /s/ BDO USA, LLP We have served as the Company's auditor since 2016. Boston, Massachusetts February 17, 2023 71 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and Board of Directors DraftKings Inc. Boston, Massachusetts Opinion on Internal Control over Financial Reporting We have audited DraftKings Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria . We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 17, 2023 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying, “Item 9A, Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. As indicated in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Golden Nugget Online Gaming, Inc. (“GNOG”), which was acquired on May 5, 2022, and which is included in the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statement of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year then ended. GNOG constituted less than 5% of total assets, net assets, revenues and net loss (excluding acquisition method fair value adjustments) as of and for the year ended December 31, 2022. Management did not assess the effectiveness of internal control over financial reporting of GNOG because of the timing of the acquisition, which was completed on May 5, 2022. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of GNOG. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 72 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ BDO USA, LLP Boston, Massachusetts February 17, 2023 73 DRAFTKINGS INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value) December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 1,309,172 $ 2,152,892 Cash reserved for users 469,653 476,950 Receivables reserved for users 160,083 51,949 Accounts receivables 51,097 45,864 Prepaid expenses and other current assets 94,836 25,675 Total current assets 2,084,841 2,753,330 Property and equipment, net 60,102 46,019 Intangible assets, net 776,934 535,017 Goodwill 886,373 615,655 Operating lease right-of-use assets 65,957 63,831 Equity method investments 10,080 9,825 Deposits and other non-current assets 155,865 45,377 Total assets $ 4,040,152 $ 4,069,054 Liabilities and Stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 517,587 $ 387,737 Liabilities to users 686,173 528,874 Operating lease liabilities, current portion 4,253 12,814 Other current liabilities 38,444 — Total current liabilities 1,246,457 929,425 Convertible notes, net of issuance costs 1,251,103 1,248,452 Non-current operating lease liabilities 69,332 57,341 Warrant liabilities 10,680 26,911 Long-term income tax liabilities 69,858 79,125 Other long-term liabilities 70,029 49,272 Total liabilities $ 2,717,459 $ 2,390,526 Commitments and contingent liabilities (Note 15) See accompanying notes to consolidated financial statements. F-1 DRAFTKINGS INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value) December 31, 2022 2021 Stockholders’ equity: Class A common stock, $ 0.0001 par value; 900,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively; 459,265 and 414,911 shares issued and 450,575 and 407,781 outstanding at December 31, 2022 and December 31, 2021, respectively $ 45 $ 41 Class B common stock, $ 0.0001 par value; 900,000 shares authorized as of December 31, 2022 and December 31, 2021; 393,014 shares issued and outstanding at December 31, 2022 and December 31, 2021 39 39 Treasury stock, at cost; 8,690 and 7,130 shares as of December 31, 2022 and December 31, 2021, respectively ( 332,133 ) ( 306,614 ) Additional paid-in capital 6,750,055 5,702,388 Accumulated deficit ( 5,131,801 ) ( 3,753,814 ) Accumulated other comprehensive income 36,488 36,488 Total stockholders’ equity 1,322,693 1,678,528 Total liabilities and stockholders’ equity $ 4,040,152 $ 4,069,054 See accompanying notes to consolidated financial statements. F-2 DRAFTKINGS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) Years ended December 31, 2022 2021 2020 Revenue $ 2,240,461 $ 1,296,025 $ 614,532 Cost of revenue 1,484,273 794,162 346,589 Sales and marketing 1,185,977 981,500 495,192 Product and technology 318,247 253,655 168,633 General and administrative 763,720 828,325 447,374 Loss from operations ( 1,511,756 ) ( 1,561,617 ) ( 843,256 ) Other income (expense): Interest income (expense), net 18,702 1,957 ( 1,070 ) Gain (loss) on remeasurement of warrant liabilities 29,396 30,065 ( 387,565 ) Other income, net 20,700 11,951 — Loss before income tax provision (benefit) and loss (gain) from equity method investment ( 1,442,958 ) ( 1,517,644 ) ( 1,231,891 ) Income tax (benefit) provision ( 67,866 ) 8,269 ( 622 ) Loss (income) from equity method investment 2,895 ( 2,718 ) 566 Net loss attributable to common stockholders $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 ) Loss per share attributable to common stockholders: Basic and diluted $ ( 3.16 ) $ ( 3.78 ) $ ( 4.03 ) See accompanying notes to consolidated financial statements. Due to the timing of the GNOG Transaction (as defined below) and DEAC Business Combination (as defined below), the above periods, to the extent applicable, exclude the operations of GNOG (as defined below) and SBTech (as defined below) prior to their respective closing dates of May 5, 2022 and April 24, 2020. F-3 DRAFTKINGS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Amounts in thousands) Year ended December 31, 2022 2021 2020 Net loss $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 ) Other comprehensive (loss) income Foreign currency translation adjustments, net of nil tax — ( 47,046 ) 83,534 Comprehensive loss $ ( 1,377,987 ) $ ( 1,570,241 ) $ ( 1,148,301 ) See accompanying notes to consolidated financial statements. Due to the timing of the GNOG Transaction and DEAC Business Combination, the above periods, to the extent applicable, exclude the operations of GNOG and SBTech prior to their respective closing dates of May 5, 2022 and April 24, 2020. F-4 DRAFTKINGS INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Amounts in thousands) Class A Common Stock Class B Common Stock Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Income Treasury Stock Amount Total Stockholders' Equity Shares Amount Shares Amount Balances at December 31, 2021 407,781 $ 41 393,014 $ 39 $ 5,702,388 $ ( 3,753,814 ) $ 36,488 $ ( 306,614 ) $ 1,678,528 Exercise of stock options 3,267 — — — 8,743 — — — 8,743 Stock-based compensation expense — — — — 578,799 — — — 578,799 Equity consideration issued for acquisitions 29,252 3 — — 460,125 — — — 460,128 Purchase of treasury stock ( 1,560 ) — — — — — — ( 25,519 ) ( 25,519 ) Restricted stock unit vesting 11,835 1 — — — — — — 1 Net Loss — — — — — ( 1,377,987 ) — — ( 1,377,987 ) Balances at December 31, 2022 450,575 $ 45 393,014 $ 39 $ 6,750,055 $ ( 5,131,801 ) $ 36,488 $ ( 332,133 ) $ 1,322,693 Class A Common Stock Class B Common Stock Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Income Treasury Stock Amount Total Stockholders' Equity Shares Amount Shares Amount Balances at December 31, 2020 396,303 $ 40 393,014 $ 39 $ 5,067,135 $ ( 2,230,619 ) $ 83,534 $ ( 288,784 ) $ 2,631,345 Exercise of stock options 9,421 1 — — 31,478 — — — 31,479 Stock-based compensation expense — — — — 683,293 — — — 683,293 Purchase of capped call options — — — — ( 123,970 ) — — — ( 123,970 ) Equity consideration issued for acquisition 520 — — — 33,149 — — — 33,149 Exercise of warrants 337 — — — 9,205 — — — 9,205 Purchase of treasury stock ( 323 ) — — — — — — ( 17,830 ) ( 17,830 ) Restricted stock unit vesting 1,523 — — — — — — — — Foreign currency translation — — — — — — ( 47,046 ) — ( 47,046 ) Other — — — — 2,098 — — — 2,098 Net loss — — — — — ( 1,523,195 ) — — ( 1,523,195 ) Balances at December 31, 2021 407,781 $ 41 393,014 $ 39 $ 5,702,388 $ ( 3,753,814 ) $ 36,488 $ ( 306,614 ) $ 1,678,528 F-5 Convertible Redeemable Preferred Stock Class A Common Stock Class B Common Stock Additional Paid in Capital Accumulated Deficit Accumulated Other Comprehensive Income Treasury Stock Amount Total Stockholders’ (Deficit) Equity Shares Amount Shares Amount Shares Amount Balances at December 31, 2019 (as previously reported) 110,250 $ 258,371 389,610 $ 390 — $ — $ 690,443 $ ( 998,784 ) $ — $ — $ ( 307,951 ) Conversion of shares due to merger recapitalization ( 110,250 ) ( 258,371 ) ( 204,984 ) ( 372 ) — — 258,743 — — — 258,371 Balances at December 31, 2019 effect of reverse acquisition (refer to Note 2) — — 184,626 18 — — 949,186 ( 998,784 ) — — ( 49,580 ) Issuance of Series F preferred stock — — 1,526 — — — 11,000 — — — 11,000 Exercise of stock options — — 14,900 2 — — 27,585 — — — 27,587 Stock-based compensation expense — — — — 393,014 39 324,999 — — — 325,038 Merger recapitalization, net repurchase of $ 7,192 and issuance costs of $ 11,564 — — ( 278 ) — — — ( 18,756 ) — — — ( 18,756 ) Conversion of Convertible Notes to common shares — — 11,254 1 — — 112,544 — — — 112,545 DEAC shares recapitalized, net of redemptions and equity issuance costs of $ 10,631 — — 74,122 7 — — 542,327 — — — 542,334 Equity consideration issued to acquire SBTech — — 40,739 4 — — 789,060 — — — 789,064 Shares issued for earn outs - SBTech — — 720 — — — — — — — — Shares issued for earn outs - DEAC and DK — — 5,280 1 — — ( 1 ) — — — — Exercise of warrants — — 17,698 2 — — 649,130 — — — 649,132 Shares issued in offerings, net of issuance costs of $ 41,536 — — 36,820 4 — — 1,680,063 — — — 1,680,067 Purchase of treasury stock — — ( 6,807 ) ( 1 ) — — — — — ( 288,784 ) ( 288,785 ) RSU Vesting — — 15,703 2 — — ( 2 ) — — — — Foreign currency translation, net of nil tax — — — — — — — — 83,534 — 83,534 Net loss — — — — — — — ( 1,231,835 ) — — ( 1,231,835 ) Balances at December 31, 2020 — $ — 396,303 $ 40 393,014 $ 39 $ 5,067,135 $ ( 2,230,619 ) $ 83,534 $ ( 288,784 ) $ 2,631,345 See accompanying notes to consolidated financial statements. Due to the timing of the GNOG Transaction and DEAC Business Combination, the above periods, to the extent applicable, exclude the operations of GNOG and SBTech prior to their respective closing dates of May 5, 2022 and April 24, 2020. F-6 DRAFTKINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) Year ended December 31, 2022 2021 2020 Cash Flows from Operating Activities: Net loss $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 ) Adjustments to reconcile net loss to net cash flows used in operating activities: Depreciation and amortization 169,252 121,138 77,410 Non-cash interest expense, net 870 2,109 3,114 Stock-based compensation expense 578,799 683,293 325,038 (Gain) loss on remeasurement of warrant liabilities ( 29,396 ) ( 30,065 ) 387,565 Loss (gain) from equity method investment 2,895 ( 2,718 ) 566 Gain on marketable equity securities and other financial assets, net ( 10,999 ) ( 11,311 ) — Deferred income taxes ( 73,407 ) ( 15,509 ) ( 2,279 ) Other expenses, net ( 7,268 ) — — Change in operating assets and liabilities, net of effect of acquisitions: Receivables reserved for users ( 105,320 ) ( 21,700 ) ( 10,421 ) Accounts receivable 2,506 ( 1,787 ) ( 13,802 ) Prepaid expenses and other current assets ( 26,217 ) ( 10,078 ) 1,152 Deposits and other non-current assets ( 4,921 ) ( 6,458 ) ( 3,730 ) Operating leases, net 1,304 ( 1,059 ) 2,640 Accounts payable and accrued expenses 95,269 167,927 103,574 Liabilities to users 152,985 210,932 154,907 Long-term income tax liability ( 9,267 ) 13,227 ( 411 ) Other long-term liabilities 15,383 5,746 12,355 Net cash flows used in operating activities ( 625,519 ) ( 419,508 ) ( 194,157 ) Cash Flows from Investing Activities: Purchases of property and equipment ( 32,402 ) ( 15,925 ) ( 11,752 ) Cash paid for internally developed software costs ( 64,030 ) ( 46,542 ) ( 27,489 ) Acquisition of gaming licenses ( 7,213 ) ( 35,809 ) ( 6,830 ) Purchase of marketable equity securities and other financial assets — ( 25,000 ) — Cash paid for acquisitions, net of cash acquired ( 96,507 ) ( 64,970 ) ( 178,645 ) Other investing activities, net ( 8,614 ) ( 6,776 ) ( 2,625 ) Net cash flows used in investing activities ( 208,766 ) ( 195,022 ) ( 227,341 ) Cash Flow from Financing Activities: Proceeds from revolving credit line — — 37,750 Repayments of revolving credit line — — ( 44,500 ) Cash buyout of unaccredited investors — — ( 7,192 ) Issuance costs related to merger recapitalization — — ( 11,564 ) Proceeds from issuance of convertible notes, net — 1,248,025 41,077 Purchase of capped call options — ( 123,970 ) — Proceeds from recapitalization of DEAC shares, net of issuance costs — — 669,825 Proceeds from exercise of warrants 44 693 202,034 Proceeds from issuance of Class A common stock, net of issuance costs — — 1,680,067 Purchase of treasury stock ( 25,519 ) ( 17,830 ) ( 288,785 ) F-7 Proceeds from exercise of stock options 8,743 31,479 27,587 Other financing activities — 416 — Net cash flows provided by financing activities ( 16,732 ) 1,138,813 2,306,299 Effect of foreign exchange rates on cash and cash equivalents and restricted cash — 583 ( 358 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 851,017 ) 524,866 1,884,443 Cash and cash equivalents and restricted cash at the beginning of period 2,629,842 2,104,976 220,533 Cash and cash equivalents and restricted cash, end of period $ 1,778,825 $ 2,629,842 $ 2,104,976 Disclosure of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 1,309,172 $ 2,152,892 $ 1,817,258 Cash reserved for users 469,653 476,950 287,718 Total cash, cash equivalents and restricted cash, end of period $ 1,778,825 $ 2,629,842 $ 2,104,976 Supplemental Disclosure of Noncash Investing and Financing Activities: Conversion of convertible notes and accrued interest to common shares — — 112,545 Increase in net liabilities acquired from DEAC — — 2,514 Investing activities included in accounts payable and accrued expenses 9,155 ( 3,758 ) 4,966 Equity consideration issued for acquisitions 460,128 33,149 789,064 Supplemental Disclosure of Cash Activities: (Decrease) increase in cash reserved for users ( 7,297 ) 189,232 143,718 Cash paid for interest — — 417 Cash paid for income taxes, net of refunds 10,366 5,632 1,442 See accompanying notes to consolidated financial statements. Due to the timing of the GNOG Transaction and DEAC Business Combination, the above periods, to the extent applicable, exclude the operations of GNOG and SBTech prior to their respective closing dates of May 5, 2022 and April 24, 2020. F-8 DRAFTKINGS INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, unless otherwise noted) 1. Description of Business We are a digital sports entertainment and gaming company. We provide users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as DraftKings Marketplace (“Marketplace”), retail sportsbook, media and other consumer product offerings. We are also involved in the design and development of sports betting and casino gaming software for online and retail sportsbooks and iGaming operators. 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 “GNOG Merger Agreement”), in an all-stock transaction (the “GNOG Transaction”). In connection with the GNOG Transaction, DraftKings Inc. undertook a holding company reorganization whereby (i) each share of DraftKings Holdings Inc. (formerly DraftKings Inc.), a Nevada corporation (“Old DraftKings”), Class A common stock and Class B common stock was converted on a one-for-one basis into a share of DraftKings Inc. Class A common stock and Class B common stock, respectively, and (ii) DraftKings Inc. became the going-forward public company and the direct parent company of both Old DraftKings and GNOG. DraftKings Inc. is the registrant filing this Annual Report on Form 10-K 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 December 31, 2022, 32 U.S. states, the District of Columbia and Puerto Rico have legalized some form of sports betting. Of those 34 legal jurisdictions, 27 have legalized online sports betting. Of those 27 jurisdictions, 23 are live, and DraftKings operates in 19 of them. The U.S jurisdictions with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia. As of December 31, 2022, we operate our online sports betting product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Wyoming and Ontario, Canada and we operate retail sportsbooks in Colorado, Connecticut, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey, New York and Washington. As of December 31, 2022, the Company offers its iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and 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 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 product offerings. Beginning in July 2020, major professional sports leagues gradually resumed regular activities with shortened seasons in many instances. In 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 product offerings. However, the possibility remains that sports seasons and sporting events may be suspended, cancelled, rescheduled or shortened due to COVID-19 outbreaks. F-9 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 product offerings that do not rely on sports seasons and sporting events, such as iGaming, may partially offset this adverse impact on revenue. A significant or prolonged decrease in consumer spending on entertainment or leisure activities would also likely have an adverse effect on demand for the Company’s product offerings, reducing cash flows and revenues, and thereby materially harming the Company’s business, financial condition and results of operations. In addition, a materially disruptive resurgence of COVID-19 cases or the emergence of additional variants or strains of COVID-19 could cause other widespread or more severe impacts depending on where infection rates are highest. 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. 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 and the emergence of additional variants or strains thereof. 2. Summary of Significant Accounting Policies and Practices Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements include the accounts and operations of the Company and its subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation. Certain amounts, which are not material, in the prior years’ consolidated financial statements have been reclassified to conform to the current year presentation. As described above, the Company consummated the GNOG Transaction on May 5, 2022. In the GNOG Transaction, the Company was determined to be the accounting acquirer and, as such, the acquisition is considered a business combination under Accounting Standards Codification (“ASC”), Topic 805, Business Combinations , (“ASC 805”) and was accounted for using the acquisition method of accounting. The accompanying 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 consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date of May 5, 2022. We were incorporated in Nevada as DEAC NV Merger Corp., a wholly owned subsidiary of our legal predecessor, Diamond Eagle Acquisition Corp. (“DEAC”), a special purpose acquisition company. On April 23, 2020, DEAC consummated the transactions contemplated by the Business Combination Agreement, dated December 22, 2019, as amended on April 7, 2020 (the “DEAC Business Combination”). Pursuant to the DEAC Business Combination, the merger between a subsidiary of DEAC and DK Crown Holdings Inc. (“DK DE”) was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, DEAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of DK DE issuing stock for the net assets of DEAC, accompanied by a recapitalization. The net assets of DEAC are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of DK DE. The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the DEAC Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the DEAC Business Combination. Further, DK DE was determined to be the accounting acquirer in its acquisition of the issued and outstanding share capital of SBTech (Global) Limited (“SBTech” and, such acquisition, the “SBTech Acquisition”), and, as such, the acquisition is considered a business combination under ASC 805 and was accounted for using the acquisition method of accounting. DraftKings recorded the fair value of assets acquired and liabilities assumed from SBTech. The presented financial information for the year ended December 31, 2020 includes the financial information and activities for SBTech for the period from April 24, 2020 to (and including) December 31, 2020. Segments The Company regularly reviews its operating segments and the approach used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources. As a result of the consummation of the SBTech Acquisition in April 2020, the Company began to identify two distinct operating segments: a business-to-consumer (“B2C”) segment, which included its Sportsbook, iGaming and DFS product offerings, as well as media and other consumer product offerings, and a F-10 business-to-business (“B2B”) segment, which had principal activities involving the design and development of gaming software. However, beginning in the fourth quarter of 2022, as a result of the Company integrating the technology and expertise of SBTech, the Company began to view the B2B segment primarily as a cost center of the B2C segment and, therefore, began to operate its business and report its results as a single operating segment. The Company’s determination that it operates as a single segment is consistent with the financial information regularly reviewed by the CODM for purposes of evaluating performance, allocating resources and planning and forecasting for future periods. The Company’s CODM allocates resources and assesses financial performance on a consolidated basis. Prior periods have reclassified to conform with the new segment presentation. Foreign Currency and Comprehensive Loss Prior to January 1, 2022, the Company's reporting currency was the U.S. dollar while the functional currency of the Company’s significant non-U.S. subsidiaries was the Euro. The financial statements of the Company’s significant non-U.S. subsidiaries were translated into United States dollars in accordance with ASC 830, Foreign Currency Matters , using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs and expenses and historical rates for equity. For the period ending December 31, 2021 and 2020, the translation gain or loss is included in the consolidated statements of comprehensive loss. Effective as of January 1, 2022, the Company’s reporting currency remained the U.S. dollar and the functional currency of the Company's significant non-U.S. subsidiaries’ functional currency was changed from the Euro to the U.S. dollar. Accordingly, the Company did not have to translate the financial statements of its significant non-U.S. subsidiaries for the year ended December 31, 2022. During 2022, 2021 and 2020, foreign currency transactions did not have a material impact on net loss. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the financial statements relate to and include, but are not limited to, the valuation and expensing of equity awards, accounting for contingencies and uncertainties, purchase price allocations, including fair value estimates of intangible assets, the estimated useful lives of fixed assets and intangible assets, internally developed software costs and accrued expenses. Going Concern The Company currently expects that its cash will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months after February 17, 2023. The Company has experienced operating losses and negative operating cash flows for the years ended December 31, 2022, 2021 and 2020. While certain jurisdictions will experience improved cash flow, the Company expects to continue to incur annual operating losses and annual negative operating cash flow for the next twelve months. Concentration Risks and Uncertainties Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of operating cash and cash equivalents and cash reserved for users. The Company maintains separate accounts for cash and cash reserved for users primarily across six financial institutions. Some of the amounts held exceed federally insured limits. Management believes all financial institutions holding its cash are of high credit quality and does not believe the Company is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company relies on a limited number of vendors to support operations. In particular, a single vendor is currently the primary provider of web services that allows the Company to host its Sportsbook, iGaming and DFS product offerings. Any interruption in the services provided by this supplier could have a material adverse effect on its business, financial condition and results of operations. The Company’s growth prospects and market potential will depend on its ability to obtain and maintain licenses to operate in a number of jurisdictions, and if the Company fails to obtain and maintain such licenses, its business, financial condition, results of operations and prospects could be impaired. Business Combinations F-11 The Company accounts for business combinations under the acquisition method of accounting, in accordance with ASC 805, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. Any fair value of purchase consideration in excess of the fair value of the assets acquired less liabilities assumed is recorded as goodwill. The fair values of the assets acquired and liabilities assumed are determined based upon the valuation of the acquired business and involve management making significant estimates and assumptions. Cash and cash equivalents Cash and cash equivalents consist of highly liquid, unrestricted savings, checking, money market funds with maturities of less than three months and other bank accounts. Cash Reserved for Users The Company maintains separate bank accounts to segregate users’ funds from operational funds. In certain regulated jurisdictions, user funds are held by DK Player Reserve LLC, a Delaware limited liability company and wholly owned subsidiary of DraftKings Inc., which was organized for the purpose of protecting users’ funds in the event of creditor claims and complying with certain regulatory requirements of gaming authorities in certain jurisdictions. Receivables Reserved for Users Receivables for user deposits not yet received are stated at the amount the Company expects to collect from a payment processor, which includes an allowance for credit losses if appropriate. These receivables arise, primarily, due to process timing between when a user deposits and when the Company receives that deposit from the payment processor. The allowance for credit losses is determined based on the Company’s assessment of the probability of the non-payment of the receivable. This provision is netted against the receivable balance with the loss being recognized within general and administrative expenses in the consolidated statements of operations. As of and for the years ending December 31, 2022 and December 31, 2021, the provision did not have a material impact on the Company’s consolidated financial statements. Accounts Receivables Accounts receivables are recorded at amortized cost, less any allowance for credit losses. The allowance for credit losses is determined based on the Company’s assessment of the probability of non-payment of the receivable after all means of collection have been exhausted and the potential for recovery is considered remote. This provision is netted against the receivable balance with the loss being recognized within general and administrative expenses in the consolidated statements of operations. As of and for the years ending December 31, 2022 and December 31, 2021, the provision did not have a material impact on the Company’s consolidated financial statements. 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 users, which was 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. Refer to Note 8 hereof for disclosures required in accordance with ASC 820, Fair Value Measurement . Property and Equipment, Net Property and equipment are carried at cost, net of accumulated depreciation. Depreciation is computed utilizing the straight-line method over the estimated useful life of the asset. Leasehold improvements depreciation is computed over the shorter of the lease term or estimated useful life of the asset. Additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. Useful lives of each asset class are generally as follows: F-12 Computer equipment and software 3 years Furniture and fixtures 7 years Leasehold improvements Lesser of the lease terms or the estimated useful lives of the improvements, generally 1 – 10 years Intangible Assets, Net The Company’s intangible assets consist of developed technology, customer relationships, internally-developed software, gaming licenses, trademarks and tradenames and digital assets. The related amortization expense is classified as cost of revenue in the consolidated statements of operations. Estimates and assumptions that we must make in estimating the fair value of future acquired technology, user lists and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets. Developed Technology Developed technology primarily relates to the design and development of sports betting and casino gaming software for online and retail sportsbook and casino gaming products acquired from SBTech and other acquisitions and recorded at fair value at the date of acquisition. Internally Developed Software Software that is developed for internal use is accounted for pursuant to ASC 350-40, Intangibles, Goodwill and Other—Internal-Use Software . Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended. These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal use software. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internally developed software is amortized using the straight-line method over an estimated useful life. All other expenditures, including those incurred in order to maintain an intangible asset’s current level of performance, are expensed as incurred. When intangible assets are retired or disposed of, the cost and accumulated amortization thereon are removed and any resulting gain or losses are included in the consolidated statements of operations. Gaming Licenses The Company incurs fees in connection with applying for and maintaining good standing in jurisdictions via business licenses. Fees incurred in connection with the application and subsequent renewals are capitalized and amortized using the straight-line method over an estimated useful life. In certain arrangements, the Company enters into agreements to operate on a business partner’s license in exchange for upfront fees. These fees are capitalized and amortized over the shorter of their expected benefit under the partnership agreement or estimated useful life. Customer Relationships Customer (or “user”) relationships are finite-lived intangible assets, which are amortized over their estimated economic lives. Customer relationships are generally recognized as the result of business combinations. Trademarks and Tradenames The Company incurs fees in connection with applying for and maintaining trademarks and tradenames as well as trademarks and tradenames resulting from acquisitions. Fees incurred in connection with the application and subsequent renewals are capitalized and amortized using the straight-line method over an estimated useful life. Digital Assets The Company has purchased certain digital assets, including crypto currencies, with cash that is not required to currently support its operations. The Company accounts for digital assets in accordance with ASC 350, Intangibles—Goodwill and Other (Topic 350). Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value an impairment loss equal to the difference will be recognized in the consolidated statement of operations. We have not recorded any significant impairments. F-13 Impairment of Long-Lived Assets Long-lived assets, except for goodwill, consist of property and equipment and finite-lived acquired intangible assets, such as internal-use software, developed software, gaming licenses, trademarks, tradenames and customer relationships. Long-lived assets, except for goodwill and indefinite-lived assets, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. Impairment expense is recognized to the extent an asset’s expected undiscounted future cash flows are less than the asset’s carrying amount. The Company determined that these was no significant impairment of long-lived assets during 2022, 2021, or 2020. Goodwill The Company’s business is classified into three reporting units: B2C, Media and B2B. In testing goodwill for impairment, the Company has the option to begin with a qualitative assessment, commonly referred to as “Step 0,” to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, entity-specific financial performance and other events, such as changes in the Company’s management, strategy and primary user base. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company performs a quantitative goodwill impairment analysis by comparing the carrying amount to the fair value of the reporting unit. If the carrying amount exceeds the fair value, goodwill will be written down to the fair value and recorded as impairment expense in the consolidated statements of operations. The Company performs its impairment testing annually and when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company performed its annual impairment assessment of goodwill as of October 1, 2022 and concluded that goodwill was not impaired. Equity Method Investments The Company has a 49.9 % membership interest in DKFS, LLC, also known as DRIVE by DraftKings as of December 31, 2022. In addition, 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 December 31, 2022, the Company had invested a total of $ 6.7 million of the total commitment, which represents ownership of approximately 28.6 % in t he fund. The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, but does not exercise control and is not the primary beneficiary. The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions. The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investments” on the consolidated balance sheets. Changes in value of DKFS, LLC and DBDK Venture Fund I, LP are recorded in “Loss (income) from equity method investment” on the consolidated statements of operations. Under the equity method, the Company’s investment is initially measured at cost and subsequently increased or decreased to recognize the Company’s share of income and losses of the investee, capital contributions and distributions and impairment losses. The Company performs a qualitative assessment annually and recognizes an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value. There was no such impairment recorded during 2022, 2021, or 2020. Leases The Company leases certain office spaces, equipment and vehicles and recognizes lease expense on a straight-line basis over the initial term of the lease unless external economic factors exist such that renewals are reasonably certain. In those instances, the renewal period would be included in the lease term to determine the period in which to recognize the lease expense. Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-2, Leases (Topic 842) (“ASU 2016-2”), using the alternative transition method provided in ASU 2018-11, Leases (Topic 842) (“ASU 2018-11”): Targeted Improvements. Using the alternative transition method, the Company applied the transition requirements at the effective date of ASU 2016-2. F-14 The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard. In addition, the Company has elected to apply the practical expedient to combine lease and related non-lease components, for all classes of underlying assets, and account for the combined contract as a lease component, as well as the election was made to apply the short-term lease recognition exemption. Liabilities to Users The Company records liabilities for user account balances and pending wagers. User account balances consist of user deposits, most promotional awards and user winnings less user withdrawals, tax withholdings and user losses. Liabilities for user account balances may be covered through a combination of cash reserved for users, receivables reserved for users and surety bonds for the benefit of users. Loss Contingencies The Company’s loss contingencies, which are included within other long-term liabilities in our consolidated balance sheets, are uncertain by nature and their estimation requires significant management judgment as to the probability of loss and estimation of the amount of such loss. These contingencies include, but may not be limited to, indirect taxes, regulatory investigations and proceedings and management’s evaluation of complex laws and regulations, and the extent to which they may apply to our business and industry. The Company regularly reviews its contingencies to determine whether the likelihood of loss is probable and to assess whether a reasonable estimate of the loss can be made. Determination of whether a loss estimate can be made is a complex undertaking that considers the judgement of management, third-party research, the prospect of negotiation and interpretations by regulators and courts, among other information. When a loss is determined to be probable, and the amount of the loss can be reasonably estimated, an estimated contingent liability is recorded and the related legal costs are expensed as incurred. Revenue Recognition The Company records revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The cumulative effect of the adoption was immaterial to our consolidated financial statements. See Note 10 ( Revenue Recognition ) for further information. The Company determines revenue recognition through the following steps: • Identify the contract, or contracts, with the customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to performance obligations in the contract; and • Recognize revenue when, or as, the Company satisfies performance obligations by transferring the promised good or services. The Company is currently engaged in the business of digital sports entertainment and gaming and provides its users with online gaming opportunities. The Company also provides online sportsbook and casino operators with technical infrastructure as well as related services with respect to its direct customers and distributors. The following is a description of the Company’s revenue streams: Online gaming Sportsbook or sports betting involves a user wagering money on an outcome or series of outcomes occurring. When a user’s wager wins, the Company pays the user a pre-determined amount known as fixed odds. Sportsbook revenue is generated by setting odds such that there is a built-in theoretical margin in each sports wagering opportunity offered to users. Sportsbook revenue is generated from users’ wagers net of payouts made on users’ winning wagers and incentives awarded to users. F-15 iGaming, or online casino, typically includes digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these product offerings, the Company functions similarly to land-based casinos, generating revenue through hold, as users play against the house. iGaming revenue is generated from user wagers net of payouts made on users’ winning wagers and incentives awarded to users. DFS is a peer-to-peer product offering in which contestants compete against one another for prizes. Contestants pay an entry fee to join a DFS contest and compete for prizes, which are distributed to the highest performing contestants in each contest as defined by each contest’s prize table. DFS revenue is generated from contest entry fees from contestants, net of prizes and customer incentives awarded to contestants. Sportsbook, iGaming, and DFS, each as described above, create a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results. Revenue is recognized at the conclusion of each wager, wagering game hand or contest. Incentives can be used across online gaming product offerings. Additionally, certain incentives given to customers create material rights and represent separate performance obligations. User incentives in certain cases create liabilities when awarded to players and in those cases are generally recognized as revenue upon redemption. Gaming software The Company contracts with business customers to provide sports and casino betting software solutions. Gaming software revenue is recognized when control of the solutions is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for providing control of the sports betting and casino software. The Company’s direct customer contract revenue is generally calculated as a percentage of the wagering revenue generated by the business customer using our software and is recognized in the periods in which those wagering and related activities conclude. In contrast, the Company had also previously provided distributors with the right to resell the Company’s software-as-a-service product offering to their clients, using their own infrastructure. In reseller arrangements, revenue was generally calculated via a fixed monthly fee and an additional monthly fee which varied based on the number of gaming operators to whom each reseller sub-licensed the Company’s software. Our direct customer arrangements do not provide the customers with the right to take possession of our software, but only the right to purchase access to the Company’s sports and casino wagering software for a defined contractual period. In reseller arrangements, as opposed to direct customer arrangements, the resellers purchased a software license which enabled them to install, host, and serve their operators’ base using the Company’s software. As of December 31, 2022 and 2021, we no longer had agreements with any resellers. Non-fungible token (“NFT”) content The Company launched DraftKings Marketplace during the third quarter of 2021. Marketplace is a digital collectibles (non-fungible token or “NFT”) ecosystem designed for mainstream accessibility that offers curated initial NFT drops (“Primary Sales”). In addition to Primary Sales, owners of NFTs on Marketplace can list their NFTs for sale to other Marketplace customers (“Secondary Sales”). The revenue that the Company earns from Marketplace is primarily based on a specific percentage of the gross value of each Primary Sale or Secondary Sale. The revenue is recognized for each sale when the NFT transfers to the end user. Transaction Price Considerations Variability in the transaction price arises primarily due to market-based pricing, cash discounts, revenue sharing and usage-based fees. DraftKings offers loyalty programs, free plays, deposit bonuses, discounts, rebates and other rewards and incentives to its customers. Revenue for Sportsbook, iGaming and DFS is collected prior to the contest or event and is fixed once the outcome is known. Prizes paid and payouts made to users are recognized when awarded to the player. Contracts with customers may include multiple performance obligations. For such arrangements, the transaction price is allocated to performance obligations on a relative standalone selling price basis. Standalone selling prices are estimated based on observable data of the Company’s sales of such products and services to similar customers and in similar circumstances on a standalone basis. For Online Gaming, which includes Sportsbook, iGaming and DFS the Company allocates a portion of the transaction price to certain customer incentives that create material future customer rights. In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest’s final stage. F-16 Certain costs to obtain or fulfill contracts Under ASC 606, certain costs to obtain or fulfill a contract with a customer must be capitalized, to the extent recoverable from the associated contract margin, and subsequently amortized as the products or services are delivered to the customer. These costs are capitalized as contract acquisition costs and are amortized over the period of benefit to the customer. For the Company, the period of benefit is typically less than or equal to 1 year. As such, the Company applied the practical expedient and contract acquisition costs are expensed immediately. Customer contract costs which do not qualify for capitalization as contract fulfillment costs are expensed as incurred. Contract balances Contract assets and liabilities represent the differences in the timing of revenue recognition from the receipt of cash from the Company’s customers and billings to those customers. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Deferred revenue primarily represents contract liabilities related to the Company’s obligation to transfer future value in relation to in-period transactions in which the Company has received consideration. Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved. The Company maintains various programs to incentivize user behaviors, which allows users to earn awards. Incentive awards generally represent a material right to the user, and awards may be redeemed for future services. Incentive awards earned by users, but not yet redeemed, are generally recognized as a reduction to revenue and included within liabilities to users on our consolidated balance sheets. When a user redeems most types of awards, the Company recognizes revenue on its consolidated statements of operations. Certain player awards are not subject to expiration or have not been expired historically, on such awards the Company recognizes breakage (for amounts not expected to be redeemed) to the extent there is no requirement for remitting such balances to regulatory agencies. In addition to these incentive programs, the Company’s deferred revenue balance also consists of wagered amounts that relate to unsettled or pending outcomes. Cost of Revenue Cost of revenue consists primarily of variable costs. These include mainly (i) product taxes, (ii) payment processing fees and chargebacks, (iii) platform costs directly associated with revenue-generating activities, including those costs that were originally capitalized for internally developed software, (iv) revenue share / market access arrangements, and (v) feed / provider services. The Company incurs payment processing fees on user deposits, withdrawals and deposit reversals from payment processors. Cost of revenue also includes expenses related to the distribution of our services, amortization of intangible assets and compensation of revenue associated personnel. Sales and Marketing Sales and marketing expenses consist primarily of expenses associated with advertising, conferences, costs related to free to play contests, rent and facilities maintenance, and the compensation of sales and marketing personnel, including stock-based compensation expenses. Advertising costs are expensed as incurred and are included in sales and marketing expense in our consolidated statements of operations. Advertising costs include those costs associated with communicating with potential customers and generally use some form of media, such as internet, radio, print, television, or billboards. Advertising costs also include costs associated with strategic league and team partnerships. During the years ended December 31, 2022, 2021 and 2020, advertising costs calculated in accordance with U.S. GAAP were $ 964.9 million , $ 831.1 million and $ 430.4 million, respectively. Product and Technology Product and technology expenses consist primarily of research and development costs that are not capitalized and other costs not associated directly with revenue generating activities. Research and development costs primarily represent employee expenses (including stock-based compensation) for engineering product, design, analytical research and project management incurred for non-revenue generating activities. Other costs include related overhead for rent, facilities maintenance, third party software licenses and consulting services. General and Administrative General and administrative expenses consist of costs not related to sales and marketing, product and technology or revenue. General and administrative costs include professional services (including legal, regulatory, audit, accounting, lobbying and F-17 services related to acquisitions), rent and facilities maintenance, contingencies, insurance, allowance for credit losses, depreciation of leasehold improvements and furniture and fixtures and costs related to the compensation of executive and non-executive personnel, including stock-based compensation. Benefit Plans The Company maintains a defined contribution plan, which covers a majority of employees. The plan allows for employee salary deferrals, which are matched at our discretion. The Company contributions to these plans were $ 9.3 million and $ 6.7 million in 2022 and 2021, respectively. These costs were no t significant to the Company’s consolidated financial statements in 2020. Stock-based Compensation The Company measures compensation expense for stock options and other stock awards in accordance with ASC 718, Compensation—Stock Compensation . Stock-based compensation is measured at fair value on grant date and recognized as compensation expense over the requisite service period. Generally, the Company issues stock options and other stock awards to employees with service-based and/or performance-based vesting conditions. For awards with only service-based vesting conditions, the Company records compensation cost for these awards using the straight-line method less an assumed forfeiture rate. For awards with performance-based vesting conditions, the Company recognizes compensation cost on a tranche-by-tranche basis (the accelerated attribution method). Under the provisions of ASC 505-50, Equity-Based Payments to Non-Employees , the Company measures stock-based awards granted to non-employees at the earlier of: (i) the performance commitment date, or (ii) the date the services required under the arrangement have been completed. Compensation expense is recognized over the period during which services are rendered by non-employees until service is completed. Income Taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between U.S. GAAP treatment and tax treatment of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax liabilities are included in other long-term liabilities in the consolidated balance sheets. Changes in deferred tax assets and liabilities are included in the income tax (benefit) provision in the consolidated statement of operations. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by considering taxable income in carryback years, existing taxable temporary differences, prudent and feasible tax planning strategies and estimated future taxable profits. The Company accounts for uncertainty in income taxes recognized in its consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in our consolidated financial statements. Liabilities for uncertain tax positions are included in long-term income tax liabilities in the consolidated balance sheets. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The income tax (benefit) provision includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate, as well as the related net interest and penalties. F-18 Loss per share Basic loss per share is calculated using the two-class method. Under the two-class method, basic loss is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the period excluding the effects of any potentially dilutive instruments. The weighted-average number of common shares outstanding during the period includes Class A common stock but is exclusive of Class B common stock as these shares have no economic or participating rights. Diluted loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potential common shares had been issued if such additional common shares were dilutive. Since the Company had net losses for all the periods presented, basic and diluted loss per share are the same, and additional potential common shares have been excluded, as their effect would be anti-dilutive. Recently Issued Accounting Pronouncements Not Yet Adopted In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with ASC 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. 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. 3. Business Combinations Acquisition of Golden Nugget Online Gaming, Inc. On May 5, 2022, DraftKings consummated the GNOG Transaction, and, under the terms of the GNOG 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 consolidated statements of operations for the year ended December 31, 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 December 31, 2022, which is included within revenue and net loss attributable to common stockholders in the Company’s consolidated statements of operations , is impracticable to determine. Preliminary Purchase Price Accounting for the GNOG Transaction On the GNOG Closing Date, the Company acquired 100 % of the equity interests of GNOG pursuant to the GNOG Merger Agreement. The following is a summary of the consideration issued on the GNOG Closing Date: F-19 Share consideration (1) $ 460,128 Other consideration (2) 143,337 Total consideration $ 603,465 (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) $ 170.9 million of 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. 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 GNOG Closing Date. Since we first reported the preliminary purchase price allocation for the GNOG Transaction as of June 30, 2022, the Company made measurement period adjustments, which were primarily composed of an $ 8.0 million increase to intangible assets and a decrease to goodwill of $ 7.6 million. These adjustments did not have a significant impact on our consolidated statements of operations in the periods previously presented. Any further measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to tax liabilities assumed, including the calculation of deferred tax assets and liabilities. 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 GNOG Closing Date: Cash and cash equivalents $ 66,709 Cash reserved for users 7,633 Receivables reserved for users 2,814 Accounts receivables 7,783 Prepaid expenses and other current assets 64 Property and equipment, net 1,433 Intangible assets, net 315,000 Operating lease right-of-use assets 1,185 Deposits and other non-current assets 47,395 Total identifiable assets acquired 450,016 Liabilities assumed: Accounts payable and accrued expenses 32,989 Liabilities to users 4,314 Operating lease liabilities 1,185 Other long-term liabilities 78,781 Total liabilities assumed 117,269 Net assets acquired (a) 332,747 Purchase consideration (b) 603,465 Goodwill (b) – (a) $ 270,718 F-20 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 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, and the amount will be finalized within the measurement period. Intangible Assets Fair Value Weighted- Average Useful Life Gaming licenses $ 145,000 12.2 years Customer relationships 170,000 5.9 years Total $ 315,000 Loan Receivable The Company acquired a long-term receivable in the amount of $ 30.1 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. The receivable related to the Danville GN Casino Loan is classified within deposits and other non-current assets on the Company’s consolidated balance sheet. Transaction Costs For the year ended December 31, 2022 and 2021, the Company incurred $ 14.9 million and $ 9.2 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 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 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. Year Ended December 31, 2022 Pro Forma 2021 Pro Forma Revenue $ 2,284,596 $ 1,417,011 Net loss $ ( 1,375,161 ) $ ( 1,660,125 ) 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. F-21 Vegas Sports Information Network, Inc. Acquisition On March 26, 2021, the Company acquired 100 % of the equity of Vegas Sports Information Network, Inc. (“VSiN” and such acquisition, the “VSiN Acquisition”) for $ 40.6 million of cash and approximately $ 29.4 million of the Company’s Class A common stock. The acquired assets and assumed liabilities of VSiN were recorded at their estimated fair values, including $ 21.8 million of intangible assets. Goodwill of $ 47.2 million represents the excess of the gross considerations transferred over the fair value of the underlying net assets acquired and liabilities assumed. Goodwill associated with the VSiN Acquisition is assigned as of the acquisition date to the Company’s Media reporting unit. The purchase price allocation for the VSiN Acquisition was finalized as of December 31, 2021. Goodwill recognized is no t deductible for tax purposes. As VSiN’s financial results are not material to the Company’s consolidated financial statements, the Company has elected to not include pro forma results. Blue Ribbon Software Ltd. Acquisition On April 1, 2021, the Company acquired 100 % of the equity of Blue Ribbon Software Ltd. (“Blue Ribbon”) for $ 17.8 million of cash and approximately $ 3.8 million of the Company’s Class A common stock (the “Blue Ribbon Acquisition”). The acquired assets and assumed liabilities of Blue Ribbon were recorded at their estimated fair values. The purchase price allocation for the Blue Ribbon Acquisition was finalized as of December 31, 2021. SBTech Acquisition On April 23, 2020 DEAC consummated the transactions contemplated by the Business Combination Agreement, dated December 22, 2019 as amended on April 7, 2020 (the “Business Combination Agreement”) and, in connection therewith, (i) DEAC merged with and into Old DraftKings, whereby Old DraftKings survived the merger (the “DK Merger”) and became the successor issuer to DEAC by operation of Rule 12g-3(a) promulgated under the Exchange Act, (ii) Old DraftKings changed its name to “DraftKings Inc.,” (iii) Old DraftKings acquired DK DE by way of a merger and (iv) Old DraftKings acquired all of the issued and outstanding share capital of SBTech. Upon consummation of the foregoing transactions, DK DE and SBTech became wholly owned subsidiaries of Old DraftKings. Under ASC 805, DK DE was deemed the accounting acquirer based on the following predominant factors: its former owners had the largest portion of voting rights in Old DraftKings, the board of directors and management of Old DraftKings had more individuals coming from DK DE than either DEAC or SBTech, DK DE was the largest entity by revenue and by assets at the time of the DEAC Business Combination, and the headquarters of Old DraftKings was DK DE’s headquarters, which is located in Boston, Massachusetts. The DK Merger was accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, DEAC was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of DK DE issuing stock for the net assets of DEAC, accompanied by a recapitalization. The net assets of DEAC are stated at historical cost with no goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of DK DE. Reported shares and earnings per share available to holders of the Company’s common stock, prior to the DEAC Business Combination, were retroactively restated as shares reflecting the exchange ratio established in the DEAC Business Combination. Further, DK DE was determined to be the accounting acquirer in the SBTech Acquisition. As such, the SBTech Acquisition was treated as a business combination under ASC 805, and was accounted for using the acquisition method of accounting. We recorded the fair value of assets acquired and liabilities assumed from SBTech. The Business Combination Agreement contains provisions that indemnifies Old DraftKings for various losses. Operating results for SBTech are included in our consolidated statements of operations for periods on and after the date of the consummation of the SBTech Acquisition. The Company acquired 100 % of the equity of SBTech pursuant to the Business Combination Agreement by issuing 45.0 million shares of Class A common stock, options denominated in shares of Class A common stock, and earnout shares of Class A common stock of the Company at a weighted average fair value of $ 17.53 to the former stockholders and option holders of SBTech. The following summarizes the consideration transferred at the closing for the SBTech Acquisition: F-22 Cash consideration (1) $ 184,688 Share consideration (2) 789,064 Other cash consideration (3) 3,615 Total SBTech consideration $ 977,367 (1) Includes the cash consideration, adjusted for the Net Debt Amount, the Working Capital Adjustment, and the Aggregate Strike Price Amount, in each case as defined in the Business Combination Agreement, resulting in cash consideration of $ 184.7 million. (2) Includes $ 776.5 million for the share consideration for SBTech equity of 40.7 million shares and SBTech employees’ vested options of 3.6 million options, and $ 12.6 million of contingent consideration, which has been paid out for the 720 thousand earnout shares issued to former stockholders of SBTech as part of the DEAC Business Combination, recognized at their acquisition date fair value. (3) Includes transaction costs incurred by SBTech stockholders to be borne by DraftKings, costs related to the SBTech restructuring transaction that were paid by DraftKings, and the tail liability insurance for SBTech’s directors and officers, as specified in the Business Combination Agreement. The acquired assets of $ 554.6 million and assumed liabilities of $ 115.4 million were recorded at their estimated fair values, resulting in goodwill of $ 538.2 million. The purchase price allocation for the SBTech Acquisition was finalized as of December 31, 2020. Transaction Costs The Company incurred $ 30.9 million, for the year ended December 31, 2020, in advisory, legal, accounting and management fees in conjunction with the DEAC Business Combination and SBTech Acquisition, which are included in general and administrative expenses on the consolidated statement of operations. Direct and incremental transaction costs related to the DEAC Business Combination and additional equity offerings that would not otherwise have been incurred are treated as a reduction of the cash proceeds and are deducted from the Company’s additional paid-in capital. Accordingly, $ 63.7 million was incurred related to equity issuance costs for the year ended December 31, 2020. Unaudited Pro-Forma Information The financial information in the table below summarizes the combined results of operations of DK DE and SBTech, on a pro forma basis, as though the SBTech Acquisition had taken place on January 1, 2019. 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 SBTech Acquisition had taken place on January 1, 2019 or of results that may occur in the future. The following pro forma financial information for the year ended December 31, 2020 combines the historical results for DK DE for the year ended December 31, 2020 and the historical results of SBTech, as converted to U.S. GAAP, for such period: Year Ended December 31, 2020 Pro Forma Revenue $ 643,502 Net loss $ ( 1,232,651 ) These pro forma results were 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 year that the SBTech Acquisition is assumed to have taken place. 4. Property and Equipment Property and equipment, net consists of the following: F-23 December 31, 2022 December 31, 2021 Computer equipment and software $ 64,133 $ 48,200 Furniture and fixtures 8,526 8,057 Leasehold improvements 43,046 30,166 Property and Equipment 115,705 86,423 Accumulated depreciation ( 55,603 ) ( 40,404 ) Property and Equipment, net $ 60,102 $ 46,019 During the years ended December 31, 2022, 2021, and 2020 the Company recorded depreciation expense on property and equipment of $ 18.7 million , $ 13.8 million, and $ 9.3 million, respectively. 5. Intangible Assets and Goodwill Intangible Assets As of December 31, 2022, intangible assets, net consists of the following: Weighted- Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Amortized intangible assets: Developed technology 5.4 years $ 422,900 $ ( 140,200 ) $ 282,700 Internally developed software 2.4 years 168,277 ( 70,575 ) 97,702 Gaming licenses 11.0 years 206,655 ( 29,487 ) 177,168 Customer relationships 4.6 years 269,728 ( 75,791 ) 193,937 Trademarks, tradenames and other 3.8 years 36,193 ( 13,463 ) 22,730 1,103,753 ( 329,516 ) 774,237 Indefinite-lived intangible assets: Digital assets, net of impairment Indefinite-lived 2,697 — 2,697 Intangible assets, net $ 1,106,450 $ ( 329,516 ) $ 776,934 F-24 As of December 31, 2021, intangible assets, net consists of the following: Weighted- Average Remaining Amortization Period Gross Carrying Amount Accumulated Amortization Net Developed technology 6.4 years $ 422,900 $ ( 87,089 ) $ 335,811 Internally developed software 2.6 years 117,953 ( 52,607 ) 65,346 Gaming licenses 7.3 years 54,442 ( 13,466 ) 40,976 Trademarks and tradenames 4.5 years 30,639 ( 5,952 ) 24,687 Customer relationships 3.3 years 99,728 ( 33,526 ) 66,202 725,662 ( 192,640 ) 533,022 Indefinite-lived intangible assets: Digital assets, net of impairment Indefinite-lived 1,995 — 1,995 Intangible Assets, net $ 727,657 $ ( 192,640 ) $ 535,017 During the years ended December 31, 2022, 2021, and 2020 the Company recorded amortization expense on intangible assets of $ 150.6 million , $ 107.3 million, and $ 68.1 million, respectively The table below shows expected amortization expense for the next five years of intangible assets recorded as of December 31, 2022: Year ending December 31, Estimated Amortization 2023 $ 132,472 2024 121,092 2025 87,873 2026 58,743 2027 57,495 Goodwill The changes in the carrying amount of goodwill for the year ended December 31, 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 acquisitions 270,718 — — 270,718 Balance as of December 31, 2022 $ 631,474 $ 207,684 $ 47,215 $ 886,373 No impairment of goodwill was recorded in the years ended December 31, 2022, 2021 and 2020. F-25 6. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: December 31, 2022 December 31, 2021 Accounts payable $ 10,148 $ 52,537 Accrued compensation and related expenses 78,819 63,803 Accrued marketing 146,569 55,275 Accrued professional fees 23,151 18,400 Accrued operating taxes 70,891 50,813 Accrued partnership fees 99,633 72,736 Deferred revenue 17,373 1,577 Accrued other expenses 71,003 72,596 Total $ 517,587 $ 387,737 7. Current and Long-term Liabilities Revolving Line of Credit On December 20, 2022, the Company entered into a loan and security agreement with Pacific Western Bank and Citizens Bank, as lenders (as amended, the “Credit Agreement”), which provides the Company with a revolving line of credit of up to $ 125.0 million (the “Revolving Line of Credit”). The Credit Agreement has a maturity date of December 20, 2024 and replaced the Company’s amended and restated loan and security agreement entered into with Pacific Western Bank in October 2016 (the “Prior Credit Agreement”), which provided a revolving line of credit of up to $ 60.0 million and was terminated in connection with the Company’s entry into the Credit Agreement. 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) 5.00 %, and the Credit Agreement requires monthly, interest-only payments on any outstanding borrowings. In addition, the Company is required to pay quarterly in arrears a commitment fee equal to 0.25 % per annum of the unused portion of the Revolving Line of Credit. As of December 31, 2022, the Credit Agreement provided a revolving line of credit of up to $ 125.0 million, and there was no principal outstanding under the Credit Agreement. Net borrowing capacity available from the Credit Agreement as of December 31, 2022 totaled $ 122.7 million. The Company is also subject to certain affirmative and negative covenants under the Credit Agreement, which we are in compliance with as of December 31, 2022. Surety Bonds As of December 31, 2022, the Company has been issued $ 65.0 million in surety bonds at a combined annual premium cost of 0.5 % which are held for certain regulators’ use and benefit in order for the Company to satisfy state license requirements. There have been no claims against such bonds and the likelihood of future claims is remote. Convertible Notes and Capped Call 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, Old DraftKings incurred $ 17.0 million of lender fees and $ 1.7 million of debt financing costs, which are being amortized through the Notes Maturity Date. 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 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. F-26 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 DraftKings Inc.’s Class A common stock or a combination of cash and shares of DraftKings Inc.’s Class A common stock. During 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, 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 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. As of December 31, 2022, the Company’s convertible debt balance was $ 1,251.1 million, net of unamortized debt issuance costs of $ 13.9 million. The amortization of debt issuance costs were $ 2.7 million in 2022 and $ 2.1 million in 2021, and these costs are included in the interest income (expense) line-item on the Company's consolidated statements of operations. Although recorded at amortized cost on the Company’s consolidated balance sheets, the estimated fair value of the Convertible Notes was $ 786.5 million and $ 953.8 million as of December 31, 2022 and 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, which is a Level 1 fair value measurement. Indirect Taxes Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it primarily pertains to DFS and its contestants. The ultimate impact of indirect taxes on the Company’s business is uncertain, as is the period required to resolve this uncertainty. The Company’s estimated contingent liability for indirect taxes represents the Company’s best estimate of tax liability in jurisdictions in which the Company believes taxation is probable. The Company frequently reevaluates its tax positions for appropriateness. Indirect tax statutes and regulations are complex and subject to differences in application and interpretation. 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 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 December 31, 2022, and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was $ 60.3 million and $ 47.5 million, respectively. The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on our consolidated balance sheets and general and administrative expenses on our consolidated statements of operations. Warrant Liabilities F-27 As part of the initial public offering of 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”) where each whole warrant entitles the holder to purchase one share of DraftKings Inc.’s Class A common stock at an exercise price of $ 11.50 per share. As of December 31, 2022 and 2021, 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 DraftKings Inc., Computershare Trust Company, N.A. and Computershare Inc. (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. 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 DraftKings Inc. 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, at a price of $ 31.50 , 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. The Company classified its Public Warrants, Private Warrants and GNOG Private Warrants pursuant to ASC 815 as derivative liabilities with subsequent changes in their respective fair values recognized in its consolidated statement of operations at each reporting date. As of December 31, 2022, there were 5.9 million GNOG Private Warrants outstanding. As of December 31, 2022, the fair value of the Company’s warrant liability was $ 10.7 million. Due to fair value changes throughout 2022 and 2021, the Company recorded a gain on remeasurement of warrant liabilities of $ 29.4 million and $ 30.1 million, respectively. During 2022, a de minimis number of Private Warrants and GNOG Private Warrants were exercised. In 2021, 0.3 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 9.2 million, reflecting the reclassification of the warrant liabilities of $ 8.5 million and proceeds upon exercise of $ 0.7 million. During 2020, 17.7 million Private Warrants were exercised, resulting in a reclassification to additional paid-in-capital in the amount of $ 649.1 million, reflecting the reclassification of the warrant liabilities of $ 447.1 million and proceeds upon exercise of $ 202.0 million. 8. Fair Value Measurements Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value and nonrecurring fair value measurements are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • 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. F-28 The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of December 31, 2022 and December 31, 2021 based on the three-tier fair value hierarchy: December 31, 2022 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 304,216 (1) $ — $ — $ 304,216 Other current assets: Digital assets held for users — 38,444 (2) — 38,444 Other non-current assets: Derivative instruments — — 26,248 (5) 26,248 Equity securities 18,250 (3) 13,533 (4) — 31,783 Total $ 322,466 $ 51,977 $ 26,248 $ 400,691 Liabilities Other current liabilities: Digital assets held for users $ — $ 38,444 (2) $ — $ 38,444 Warrant liabilities — 10,680 (6) — 10,680 Total $ — $ 49,124 $ — $ 49,124 December 31, 2021 Level 1 Level 2 Level 3 Total Assets Cash equivalents: Money market funds $ 550,169 (1) $ — $ — $ 550,169 Other non-current assets: Derivative instruments — — 3,850 (5) 3,850 Equity securities 27,200 (3) — — 27,200 Total $ 577,369 $ — $ 3,850 $ 581,219 Liabilities Warrant liabilities $ — $ 26,911 (6) $ — $ 26,911 Total $ — $ 26,911 $ — $ 26,911 (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 to fair value using option pricing models and, accordingly, classifies these assets as Level 3. During 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. Changes to fair value of these instruments are F-29 recorded in Other income, net on the consolidated statements of operations and Gain on marketable equity securities and other financial assets, net in the consolidated statement of cash flows. December 31, 2022 December 31, 2021 Significant Unobservable Input Range (Weighted Average) Underlying stock price $ 7.30 - $ 19.80 ($ 16.53 ) $ 10.88 Volatility 56.0 % - 80.0 % ( 74.1 %) 60.0 % Risk-free rate 1.3 % - 4.3 % ( 4.1 %) 0.3 % (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 2022 and 2021, the Company recorded unrealized gains of $ 11.0 million and $ 6.1 million, respectively, in the aggregate for its Level 1, Level 2 and Level 3 financial assets. Those unrealized gains and losses are included within other income, net in the Company’s consolidated statements of operations. During 2020, no such gains or losses were recorded. 9. Stockholders’ Equity (Deficit) The consolidated statements of changes in equity reflect the Reverse Recapitalization and SBTech Acquisition as of April 23, 2020. As DK DE was deemed the accounting acquirer in the Reverse Recapitalization with DEAC, all periods prior to April 23, 2020 reflect the balances and activity of DK DE. All convertible redeemable preferred stock classified as mezzanine was retroactively adjusted, converted into Class A common stock, and reclassified to permanent as a result of the Reverse Recapitalization. Redeemable convertible preferred Series E-1 stock converted into shares of DK DE common stock at a share conversion factor of 1.40 whereas Series F converted into shares of DK DE common stock at a share conversion factor of 1 and both were immediately exchanged for Class A common stock of the Company using the recapitalization exchange ratio of 0.353628 as a result of the Reverse Recapitalization. Immediately prior to the DEAC Business Combination, DK DE issued 393.0 million shares of Class B common stock to Jason Robins (the Chief Executive Officer of DK DE and of the Company) which converted into 393.0 million shares of Class B common stock of the Company as a result of the DEAC Business Combination and is recorded as stock-based compensation for the year ended December 31, 2020. Such shares carry 10 votes per share and allowed Jason Robins to have, as of the closing of the DEAC Business Combination, approximately 90 % of the voting power of the capital stock of DraftKings on a fully-diluted basis. As these shares have no economic rights and are non-participating, they are allocated no earnings or losses when calculating earnings per share pursuant to the two-class method. Upon the consummation of the DEAC Business Combination, the mandatory conversion feature was triggered for the Company’s convertible notes then outstanding. As a result, all outstanding principal of $ 109.2 million and unpaid accrued interest of $ 3.4 million was collectively converted to equity securities at $ 10 per share. The noteholders received 11.3 million shares of Class A common stock in DraftKings as result of the conversion. As part of the DEAC Business Combination, $ 542.3 million of Class A common stock and Additional Paid in Capital was recorded, net of transaction costs of $ 10.6 million, in relation to DEAC shares being recapitalized. The Company then used $ 188.3 million as cash consideration in its acquisition of SBTech and $ 7.2 million for the buyout of unaccredited investors. Net cash proceeds to the Company were $ 484.0 million. In June 2020, we issued 16.0 million new shares of our Class A common stock in a public offering for net proceeds (net of underwriting fees) of $ 620.8 million. In October 2020, the Company issued 20.8 million shares of its Class A common stock in a public offering for net proceeds (net of underwriting fees) of $ 1,059.3 million. As of December 31, 2022, the Company had 300.0 million shares authorized of preferred stock, $ 0.0001 par value, of which none were issued and outstanding as of December 31, 2022 or December 31, 2021. F-30 10. Revenue Recognition Deferred Revenue The Company included deferred revenue within accounts payable and accrued expenses and liabilities to users in the consolidated balance sheets. The deferred revenue balances were as follows: Year Ended December 31, 2022 2021 Deferred revenue, beginning of the period $ 91,554 $ 30,627 Deferred revenue, end of the period $ 133,851 $ 91,554 Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period $ 74,837 $ 28,319 Revenue Disaggregation Disaggregation of revenue for years ended December 31, 2022, 2021 and 2020 are as follows: Year Ended December 31, 2022 2021 2020 Online gaming $ 2,106,708 $ 1,145,539 $ 517,632 Gaming software 43,000 97,415 75,629 Other 90,753 53,071 21,271 Total Revenue $ 2,240,461 $ 1,296,025 $ 614,532 Online gaming includes online Sportsbook, iGaming, and DFS, which have certain similar attributes and pattern of recognition. Other revenue primarily includes media, Marketplace and retail sportsbooks. The following table presents the Company’s revenue by geographic region for the periods indicated: Year ended December 31, 2022 2021 2020 United States $ 2,196,803 $ 1,198,748 $ 544,463 International 43,658 97,277 70,069 Total Revenue $ 2,240,461 $ 1,296,025 $ 614,532 11. Stock-Based Compensation In 2012, the Company’s board of directors adopted the 2012 Stock Option and Restricted Stock Incentive Plan (the “2012 Plan”), which provides for the granting of incentive and nonqualified stock options, shares of restricted stock and other equity interests or awards in the Company. The Company only issued time-based vesting awards under the 2012 Plan. In 2017, the Company’s board of directors approved the 2017 Equity Incentive Plan (the “2017 Plan”). No new awards have been issued under the 2012 Plan following the approval of the 2017 Plan. The 2017 Plan provides for the granting of incentive and nonqualified stock options, shares of restricted stock and other equity interests or awards in the Company. The Company issued time-based and performance-based vesting awards under the 2017 Plan. In 2020, the Company’s board of directors approved the 2020 Incentive Award Plan (the “2020 Plan”, together with the 2012 Plan and the 2017 Plan, the “Plans”). The 2020 Plan provides for the granting of incentive and nonqualified stock options, restricted stock units (“RSUs”) and other equity interests or awards in the Company. As of December 31, 2022, the total number of shares available for grant under the 2020 Plan was 1.5 million shares. The Company issued time-based and performance-based vesting awards under the 2020 Plan. As of December 31, 2022, a share reserve established that the aggregate number of shares may not exceed 900.0 million shares under the Plans. F-31 The Company has historically issued three types of stock-based compensation: time-based awards, long term incentive plan (“LTIP”) awards and performance-based stock compensation plan (“PSP”) awards. Time-based awards are equity awards that tie vesting to length of service with the Company. LTIP awards are performance-based equity awards that are used to establish longer-term performance objectives and incentivize management to meet those objectives. PSP awards are performance-based equity awards which establish performance objectives related to one or two particular fiscal years. All stock-based compensation awards expire seven to ten years after the grant date. Time-based awards generally vest over a four-year period in annual and/or quarterly installments and expire no later than ten years from the date of grant. Time-based options are valued using the Black-Scholes option-pricing model with the assumptions noted in the table below. The fair value of time-based RSUs is estimated on the grant date using the underlying share price. LTIP awards that were granted as RSUs subsequent to 2020 vest based on long-term revenue targets and used the underlying share price on the grant date to estimate their fair value. LTIP awards that were granted as RSUs in 2020 vested based on reaching specific share price targets and used a Monte Carlo Simulation with the assumptions noted in the table below to estimate their fair value. On and after November 2, 2022, certain DraftKings’ executives agreed to delay vesting of the third tranche of their restricted stock units granted under a long-term incentive plan and to add a service condition through an extended vesting date. This modification impacts the issuance of approximately 4 million shares of DraftKings Inc.’s Class A common stock, which are now expected to vest approximately one year after the performance condition is met. PSP awards granted in 2022 vest based on achievement of net revenue and Adjusted EBITDA targets and have a range of payouts from 0 % to 200 %. PSP awards granted in 2021 and 2020 vest based on achievement of revenue targets and have a range of payouts from 0 % to 300 %. As these awards are performance-based RSUs, the fair value is estimated on the grant date using the underlying share price. The fair value of each option is estimated on the grant date using the Black-Scholes option-pricing model and the assumptions noted in the table below. The fair value is recognized over the requisite service period of the awards, which is generally the vesting period. For awards with only service-based vesting conditions, the Company recognizes compensation cost using the straight-line method. Expected volatility is based on the Company's own volatility beginning in April 2022 as we now have sufficient data as a public company. Prior to April 2022, expected volatility is based on average volatility for a representative sample of comparable public companies. Stock options are generally granted with an exercise price equal to the fair value of the common stock at the grant date with a 10 -year contractual term. The expected term represents the period of time that the options are expected to be outstanding. The expected term is estimated using the average of the vesting term and the original contractual term of the option. The risk-free interest rate is estimated using the rate of return on U.S. treasury notes with a life that approximates the expected life of the option. The fair value of the stock options issued was measured using the following assumptions: Year ended December 31, 2022 2021 2020 Risk free interest rate 3.1 % 1.1 % 0.4 % Expected term (in years) 5.6 5.8 6.1 Expected volatility 75.0 % 43.0 % 42.5 % Expected dividend yield 0.0 % 0.0 % 0.0 % For grants with market-based conditions, the fair value of each award was determined using a Monte Carlo Simulation. No awards with market-based conditions were granted in 2022 or 2021. The model uses multiple input variables that determined the probability of satisfying the market condition requirements as follows: Year ended December 31, 2020 Risk free interest rate 1.7 % Expected volatility 38.9 % Expected dividend yield 0.0 % F-32 The following table shows stock option activity for the year ended December 31, 2022, 2021, and 2020: Time-based PSP LTIP Total Weighted Average Exercise Price of Options Weighted Average FMV of RSUs Weighted Average Remaining Term of Options (Years) Aggregate Intrinsic Value of Options Options RSUs Options RSUs Options RSUs Outstanding at December 31, 2020 20,519 3,548 3,023 907 13,854 12,800 54,651 $ 3.57 $ 47.01 7.05 $ 1,607,562 Granted 1,100 2,466 — 600 — 6,744 10,910 50.60 52.97 — — Exercised options / vested RSUs ( 6,571 ) ( 1,523 ) ( 667 ) — ( 2,183 ) — ( 10,944 ) 3.33 37.64 — — Forfeited ( 353 ) ( 296 ) ( 2 ) ( 19 ) — ( 201 ) ( 871 ) 4.30 44.20 — — Outstanding at December 31, 2021 14,695 4,195 2,354 1,488 11,671 19,343 53,746 $ 5.46 49.94 6.34 $ 622,108 Granted 400 15,254 — 12,523 — 1,390 29,567 28.24 17.79 — — Exercised options / vested RSUs ( 2,672 ) ( 2,913 ) ( 76 ) ( 2,671 ) ( 519 ) ( 6,251 ) ( 15,102 ) 2.68 43.19 — — Change in awards due to performance-based multiplier — — — 1,806 — — 1,806 — 33.69 — — Forfeited ( 164 ) ( 1,263 ) ( 5 ) ( 27 ) — ( 618 ) ( 2,077 ) 4.73 34.94 — — Outstanding at December 31, 2022 12,259 15,273 2,273 13,119 11,152 13,864 67,940 $ 6.17 $ 29.64 5.49 $ 192,062 The following table provides additional information for stock option awards outstanding as of December 31, 2022: Awards Outstanding Weighted Average Remaining Term of Options (Years) Aggregate Intrinsic Value Weighted Average Exercise Price of Options Stock options exercisable 24,300 5.4 $ 188,009 $ 5.23 Stock options remaining to vest 1,384 7.7 $ 4,053 $ 22.55 As of December 31, 2022, total unrecognized stock-based compensation expense of $ 614.1 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of 2.8 years. The following table shows stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020: Year ended Year ended Year ended December 31, 2022 December 31, 2021 December 31, 2020 Options RSUs Total Options RSUs Total Options RSUs Total Time Based (1) $ 15,222 $ 103,478 $ 118,700 $ 14,654 $ 61,085 $ 75,739 $ 8,176 $ 21,286 $ 29,462 PSP (2) — 90,180 90,180 — 82,089 82,089 1,633 21,275 22,908 LTIP (2) — 369,919 369,919 — 525,465 525,465 9,552 255,116 264,668 Class B Shares (3) — — — — — — 8,000 — 8,000 Total $ 15,222 $ 563,577 $ 578,799 $ 14,654 $ 668,639 $ 683,293 $ 27,361 $ 297,677 $ 325,038 (1) Time-based awards vest and are expensed over a defined service period. (2) PSP and LTIP awards vest based on defined performance criteria and are expensed based on the probability of achieving such criteria. (3) Related to the DEAC Business Combination; shares of Class B common stock have no economic rights. The weighted-average grant-date fair values of options granted during the years ended December 31, 2022, 2021 and 2020 were $ 7.46 , $ 19.53 and $ 2.00 per share, respectively. During the years ended December 31, 2022, 2021 and 2020 the Company received proceeds from the exercise of stock options of $ 8.7 million, $ 31.5 million and $ 27.6 million respectively, and the aggregate intrinsic value of those stock options F-33 exercised was $ 38.1 million, $ 473.4 million and $ 1,256.0 million respectively. The total grant date fair value of stock options that vested during the years ended December 31, 2022, 2021 and 2020 were $ 15.3 million, $ 14.0 million and $ 35.1 million, respectively. 12. Income Taxes Loss before income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 consists of the following: Year ended December 31, 2022 2021 2020 United States $ ( 1,329,931 ) $ ( 1,391,154 ) $ ( 1,168,482 ) Foreign ( 113,027 ) ( 126,490 ) ( 63,409 ) Loss before income tax (benefit) provision $ ( 1,442,958 ) $ ( 1,517,644 ) $ ( 1,231,891 ) The components of the provision (benefit) for income taxes consists of the following: Year ended December 31, 2022 2021 2020 Current: Federal $ — $ 90 $ ( 49 ) State 456 514 250 Foreign 5,085 23,174 1,456 Total current provision 5,541 23,778 1,657 Deferred: Federal ( 52,411 ) ( 5,523 ) ( 442 ) State ( 17,624 ) ( 2,075 ) 31 Foreign ( 3,372 ) ( 7,911 ) ( 1,868 ) Total deferred (benefit) provision ( 73,407 ) ( 15,509 ) ( 2,279 ) Total income tax (benefit) provision $ ( 67,866 ) $ 8,269 $ ( 622 ) F-34 The reconciliation between income taxes computed at the U.S. statutory income tax rate to our provision for income taxes for the years ended December 31, 2022, 2021 and 2020 are as follows: Year ended December 31, 2022 2021 2020 Benefit for income taxes at 21% rate $ ( 303,028 ) $ ( 318,705 ) $ ( 258,697 ) Prior year provision true-ups 938 ( 16,878 ) ( 5 ) State taxes, net of federal benefit ( 17,265 ) ( 142,119 ) ( 13,328 ) Internal restructurings — ( 167,692 ) — Stock-based compensation (benefit) expense 58,244 ( 70,150 ) ( 190,766 ) Non-deductible lobbying expenses 4,788 9,938 2,072 Non-deductible acquisition expenses — 455 4,041 Change in valuation allowance 166,978 575,225 243,352 Net operating loss write-off — — 998 Non-deductible executive compensation 24,695 117,849 118,423 (Gain) loss on remeasurement of warrant liabilities ( 6,173 ) ( 6,301 ) 81,388 Foreign rate differential 1,802 16,588 13,456 Foreign currency adjustments 177 8,265 ( 2,086 ) Income tax reserves ( 553 ) 5,098 1,676 Other 1,531 ( 3,304 ) ( 1,146 ) Total income tax provision (benefit) $ ( 67,866 ) $ 8,269 $ ( 622 ) Significant components of the Company’s deferred tax assets (liabilities) as of December 31, 2022 and 2021 are as follows: Year ended December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 961,352 $ 778,989 Intangible assets 72,299 163,242 Accrual and other temporary differences 57,281 42,381 Operating lease 18,213 17,141 Stock-based compensation 93,582 88,650 Capitalized research and development costs 61,584 — Fixed assets 411 — Gross deferred tax assets 1,264,722 1,090,403 Valuation allowance ( 1,228,117 ) ( 1,053,892 ) Net deferred tax assets $ 36,605 $ 36,511 Deferred tax liabilities: Capitalized software costs $ ( 7,529 ) $ ( 12,724 ) Fixed assets ( 3,590 ) ( 554 ) Operating lease ( 16,102 ) ( 15,581 ) Other ( 7,943 ) ( 221 ) Gross deferred tax liabilities ( 35,164 ) ( 29,080 ) Total net deferred tax assets $ 1,441 $ 7,431 The Company records its deferred tax assets in deposits and other non-current assets and its deferred tax liabilities in other long-term liabilities in the consolidated balance sheets. The Company has provided a valuation allowance for the U.S. deferred F-35 tax assets as of December 31, 2022. For the year ended December 31, 2022, the U.S. valuation allowance increased by $ 174.2 million primarily due to the current year operating losses. As of December 31, 2022, the Company had U.S. federal and state tax net operating loss (“NOL”) carryforwards of $ 3,452.8 million and $ 3,529.2 million, respectively, which may be available to offset future income tax liabilities. Of the federal net operating loss carryforward, $ 676.2 million expires at various dates beginning in 2032 through 2037 and $ 2,776.6 million does not expire. Of the state NOL carryforward, $ 3,438.2 million expires at various dates beginning in 2023 through 2042 and $ 91.0 million does not expire. Utilization of the NOL carryforwards may be subject to limitation under Section 382 of the Internal Revenue Code of 1986 based on ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. There could be additional ownership changes in the future, which may result in additional limitations on the utilization of the NOL and tax credit carryforwards. The Company has analyzed the impact of these limitations on its attributes and included the impact of these limitations in its U.S. deferred tax assets. As of December 31, 2022, foreign earnings of $ 12.9 million have been retained by the Company’s foreign subsidiaries for indefinite reinvestment. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company could be subject to withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred income tax liability related to these outside basis differences is not practicable. In addition to filing federal income tax returns, the Company files income tax returns in numerous states and foreign jurisdictions that impose an income tax. The Company is subject to U.S. federal, state and local income tax examinations by tax authorities for the years beginning in 2012. Tax years after 2015 remain open in certain major foreign jurisdictions and are subject to examination by the taxing authorities. The following table presents a reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, included in long-term income tax liabilities on the Company’s consolidated balance sheets: Year ended December 31, 2022 2021 2020 Unrecognized tax benefits at the beginning of the year $ 72,407 $ 70,341 $ — Additions for tax positions of prior years 1,807 — 70,341 Settlements ( 7,412 ) Foreign currency adjustments ( 8,791 ) 2,066 — Unrecognized tax benefits at the end of the year $ 58,011 $ 72,407 $ 70,341 If the unrecognized tax benefit balance as of December 31, 2022 were recognized, it would decrease the Company’s effective tax rate. The Company does not anticipate any material changes to its unrecognized tax benefits within the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense. During the years ended December 31, 2022, 2021 and 2020 the Company recognized $ 6.4 million, $ 5.0 million and $ 1.7 million in interest and penalties. The Company had $ 11.8 million and $ 6.7 million of interest and penalties accrued at December 31, 2022 and 2021, respectively. 13. 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: F-36 Year ended December 31, 2022 2021 2020 Net loss $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 ) Basic and diluted weighted-average common shares outstanding 436,513 402,492 305,593 Loss per share attributable to common stockholders: Basic and diluted $ ( 3.16 ) $ ( 3.78 ) $ ( 4.03 ) There were no preferred or other dividends declared for the period. For the periods presented, the following securities were not required to be included in the computation of diluted shares outstanding: Year ended December 31, 2022 2021 2020 Class A common stock resulting from exercise of all warrants 3,761 1,613 2,061 Stock options and RSUs 67,941 53,746 54,651 Convertible notes 13,337 13,337 — Total 85,039 68,696 56,712 14. Related-Party Transactions Financial Advisor The Company entered into an engagement letter with a related party (the “Financial Advisor”) in August 2019, as amended in December 2019. During 2022, 2021 and 2020, the Company incurred $ 8.5 million , $ 2.5 million and $ 12.3 million, respectively, of professional fees in connection with certain business combination transactions and offerings undertaken by the Company, which are recorded within general and administrative expenses on the consolidated statement of operations. Receivables from Equity Method Investment The Company provides office space and general operational support to DKFS, LLC, an equity-method affiliate. The operational support is primarily general and administrative services. As of December 31, 2022, and 2021, the Company had $ 0.2 million and $ 0.6 million, respectively, of receivables from the entity related to those services and expenses to be reimbursed to the Company. 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 December 31, 2022, the Company had invested a total of $ 6.7 million of the total commitment. Transactions with a Stockholder and their Immediate Family Members As of December 31, 2022 and December 31, 2021, the Company had $ 0.0 million and $ 3.8 million respectively, of receivables due from former stockholders of SBTech, which includes a current director and stockholder of the Company. During 2022, 2021 and 2020, the Company had $ 0.6 million, $ 4.5 million and $ 2.7 million, respectively, in sales to entities related to an immediate family member of the director. The Company had an associated accounts receivable balance of $ 0.2 million and $ 0.2 million as of December 31, 2022 and December 31, 2021, respectively, included in accounts receivable in its consolidated balance sheets. Aircraft 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. for the business and personal travel of Mr. Robins and his family. The Company had no direct or indirect interest in such private plane. During 2022, the Company incurred $ 0.7 million of expense for use of the aircraft under these chartering services. In March 2022, the Company entered into a one-year lease of an aircraft from an entity controlled by Mr. Robins. Pursuant to such agreement, Mr. Robins’ entity leases the aircraft to the Company for $ 0.6 million for a one-year period. The Company covers all operating, maintenance and other expenses associated with the aircraft. The audit and compensation committees of the Company’s board of directors approved this arrangement based, among other things, on the requirements of the overall F-37 security program that Mr. 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 2022, the Company incurred $ 0.4 million of expense under the aircraft lease. 15. Leases, Commitments and Contingencies Leases The Company leases corporate office facilities, data centers, and motor vehicles under operating lease agreements. Some of the Company’s leases include one or more options to renew. For a majority of the Company’s leases, it does not assume renewals in its determination of the lease term as the renewals are not deemed to be reasonably assured. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of December 31, 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 expense are as follows: December 31, 2022 December 31, 2021 December 31, 2020 Operating lease cost $ 20,003 $ 16,551 $ 14,968 Short term lease cost 6,004 3,273 2,538 Variable lease cost 4,462 4,261 3,652 Sublease income ( 849 ) ( 774 ) ( 1,382 ) Total lease cost $ 29,620 $ 23,311 $ 19,776 Supplemental cash flow and other information for 2022 and 2021 related to operating leases was as follows: December 31, 2022 December 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 16,390 $ 17,162 Right-of-use assets obtained in exchange for new operating lease liabilities $ 18,134 $ 3,329 The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 7.6 years and 6.5 % as of December 31, 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. 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. F-38 Maturity of lease liabilities are as follows: December 31, 2022 2023 $ 8,654 2024 12,948 2025 11,953 2026 11,787 2027 11,625 Thereafter 40,687 Total undiscounted future cash flows 97,654 Less: Imputed interest ( 24,069 ) Present value of undiscounted future cash flows $ 73,585 Other Contractual Obligations and Contingencies The Company is a party to several non-cancelable contracts with vendors where the Company is obligated to make future minimum payments under the terms of these contracts as follows: Year ending December 31, 2023 $ 447,605 2024 400,564 2025 315,307 2026 187,588 2027 107,988 Thereafter 247,196 Total $ 1,706,248 Contingencies From time to time, and in the ordinary course of business, the Company may be subject to certain claims, charges and litigation concerning matters arising in connection with the conduct of the Company’s business activities. Interactive Games LLC On June 14, 2019, Interactive Games LLC filed suit against the Company in the U.S. District Court for the District of Delaware, alleging that our Daily Fantasy Sports product offering infringes two patents and the Company’s Sportsbook product offering infringes two different patents. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. F-39 Winview Inc. On July 7, 2021, Winview Inc., a Delaware corporation, filed suit against the Company in the U.S. District Court for the District of New Jersey, which was subsequently amended on July 28, 2021, alleging that our Sportsbook product offering infringes two patents, our Daily Fantasy Sports product offering infringes one patent, and that our Sportsbook product offering and Daily Fantasy Sports product offering infringe another patent. On November 15, 2021, Winview Inc. filed a second amended complaint (the “SAC”), adding as defendants DK DE and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company. The SAC largely repeats the allegations of the first amended complaint. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. 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. District Court for the Southern District of New York against the Company and certain of its officers. The actions allege violations of Sections 10(b) and 20(a) of the Exchange Act on a behalf of a putative class of persons who purchased or otherwise acquired the Company's stock between December 23, 2019 and June 15, 2021. The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”). The Company intends to vigorously defend against these claims. On November 12, 2021, the court consolidated the two actions under the caption In re DraftKings Securities Litigation and appointed a lead plaintiff. The lead plaintiff filed a consolidated amended complaint on January 11, 2022. On January 10, 2023, the court granted the Company's motion to dismiss and final judgment was entered dismissing the action with prejudice. Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations raised in the Hindenburg Report, as well as the Company’s disclosures regarding its compliance policies and procedures, and related matters. The Company intends to comply with the related requests and is cooperating with the SEC’s ongoing inquiry. The Company cannot predict with any degree of certainty the outcome of the SEC matter 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 the SEC matter 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 the SEC matter will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. Shareholder Derivative Litigation Related to Allegations in the Hindenburg Report On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company. The actions purport to assert claims on behalf of the Company against certain current and former officers and/or members of the board of directors of the Company and DEAC. The two actions filed in the U.S. District Court for the District of Nevada have since been consolidated, and two of the actions filed in Nevada state District Court in F-40 Clark County likewise have been consolidated. A substantially identical fifth action was filed in Nevada state District Court in Clark County and has been dismissed voluntarily by the plaintiff. The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which has also been dismissed voluntarily by the plaintiff. The Nevada actions purport to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report. 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 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. Because the Nevada actions allege claims on behalf of the Company and purport to seek judgments in favor of the Company, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. 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 the Company 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 the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. AG 18, LLC d/b/a/ Arrow Gaming On August 19, 2021, AG 18, LLC d/b/a/ Arrow Gaming (“Arrow Gaming”) filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company's DFS and Casino product offerings infringe four patents. On October 12, 2021, Arrow Gaming filed an amended complaint to add one additional patent. On December 20, 2021, Arrow Gaming filed a second amended complaint adding new allegations with respect to alleged willful infringement. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer. F-41 The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. Beteiro, LLC On November 22, 2021, Beteiro, LLC filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company’s Sportsbook and Casino product offerings infringe four patents. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. Diogenes Ltd. & Colossus (IOM) Ltd. On December 1, 2021, Diogenes Ltd. & Colossus (IOM) Ltd. (“Colossus”), filed a complaint against the Company in the United States District Court for the District of Delaware alleging that the Company’s Sportsbook product offering infringes seven patents. Colossus amended its complaint on February 7, 2022 to, among other things, add one additional patent. The Company intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this proceeding will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period. Steiner Nelson Steiner filed suit against the Company and FanDuel Inc. in Florida state court on November 9, 2015. The action was subsequently transferred to In Re: Daily Fantasy Sports Litigation (Multi-District Litigation) (the “MDL”), and Mr. Steiner’s action was consolidated into the MDL’s amended complaint, which, in February 2016, consolidated numerous actions (primarily purported class actions) filed against the Company, FanDuel, and other related parties in courts across the United States. By June 23, 2022, the MDL was resolved, except for Mr. Steiner’s action, and the court officially closed the MDL docket on July 8, 2022. F-42 Mr. Steiner brings this action as a concerned citizen of the state of Florida alleging that, among other things, defendants’ daily fantasy sports contests are illegal gambling under the state laws of Florida and seeks disgorgement of “gambling losses” purportedly suffered by Florida citizens on behalf of the state. On June 23, 2022, the MDL court remanded Mr. Steiner’s action to the Circuit Court for Pinellas County, Florida. Plaintiff has not yet filed an amended pleading. The Company intends to vigorously defend this suit. 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 this matter. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period. Turley On January 9, 2023, Simpson G. Turley, individually and on behalf of all others similarly situated, filed a purported class action against the Company in the United States District Court for the District of Massachusetts. Plaintiff alleges, among other things, that he was a contestant in the Company’s daily fantasy showdown contest for the January 2, 2023, NFL game between the Cincinnati Bengals and the Buffalo Bills (the “Bengals-Bills Game”). The Bengals-Bills Game was postponed and eventually cancelled due to Damar Hamlin collapsing during the game. Plaintiff alleges that he was winning prizes in multiple showdown contests at the point in time that the Bengals-Bills Game was cancelled (with 5:58 remaining in the first quarter). Plaintiff alleges that, instead of paying out the prize money, the Company refunded entry fees to contestants that entered showdown or flash draft fantasy contests. Plaintiff asserts claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment. Among other things, Plaintiffs seeks statutory damages, monetary damages, punitive damages, attorney fees and interest. The Company intends to vigorously defend this case. 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 Massachusetts. The Company cannot provide any assurance as to the outcome of this matter. The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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 this matter will have a material adverse effect on Company’s financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period. Internal Revenue Service The Company is currently under Internal Revenue Service audit for prior tax years, with the primary unresolved issues relating to excise taxation of fantasy sports contests and informational reporting and withholding. The final resolution of that audit, and other audits or litigation, may differ from the amounts recorded in these consolidated financial statements and may materially affect the Company’s consolidated financial statements in the period or periods in which that determination is made. F-43 Exhibit Index (b) Exhibits. The following exhibits are being followed herewith: 74 Exhibit No. Description 2.1 † Business Combination Agreement, dated as of December 22, 2019, among DraftKings Inc., SBTech (Global) Limited, SBTech’s shareholders, Diamond Eagle Acquisition Corp., DEAC NV Merger Corp. and a wholly-owned subsidiary of DEAC (incorporated by reference to Exhibit 2.1 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 2.2 Agreement and Plan of Merger, dated as of March 12, 2020, by and among Diamond Eagle Acquisition Corp. and DEAC NV Merger Corp. (incorporated by reference to Exhibit 2.3 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 2.3 Amendment to Business Combination Agreement, dated as of April 7, 2020, among DraftKings Inc., SBTech (Global) Limited, SBTech’s shareholders, Diamond Eagle Acquisition Corp., DEAC NV Merger Corp. and a wholly-owned subsidiary of DEAC (incorporated by reference to Exhibit 2.4 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 2.4 *** Agreement and Plan of Merger, by and among DraftKings Inc., New Duke Holdco, Inc., Golden Nugget Online Gaming, Inc., Duke Merger Sub, Inc. and Gulf Merger Sub, Inc., dated as of August 8, 2021 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed with the SEC on August 10, 2021). 3.1 Amended and Restated Articles of Incorporation of DraftKings Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on Ma y 5, 2022 ) 3.2 Amended and Restated Bylaws of DraftKings Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022 ). 4.1 Specimen Class A Common Stock Certificate of DraftKings (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 4.2 Form of Warrant Certificate of DraftKings Inc. (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 4.3 Warrant Agreement, dated May 10, 2019, by and between Diamond Eagle Acquisition Corp. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 of Diamond Eagle Acquisition Corp.’s Current Report on Form 8-K filed on May 14, 2019). 4.4 Assignment and Assumption Agreement, dated April 23, 2020, by and among DraftKings Inc., DEAC, Continental Stock Transfer & Trust Company, Computershare Trust Company, N.A. and Computershare Inc. (incorporated by reference to Exhibit 4.4 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 4.5 Indenture, dated as of March 18, 2021, between the Company and Computershare Trust Company, N.A., as trustee (including Form of 0% Convertible Senior Notes due 2028) (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed with the SEC on March 18, 2021). 4.6 First Supplemental Indenture, dated as of May 5, 2022, between DraftKings Inc., Old DraftKings and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.6 of the Company's Current Report on Form 8-K, filed with the SEC on May 5, 2022). 4.7 Description of New DraftKings' Capital Stock (incorporated by reference to New DraftKings' Registration Statement on Form S-4 (Reg. No. 333-260174), filed with the SEC on December 9, 2021) . 4 .8 Assignment and Assumption Agreement, dated May 5, 2022, by and among New DraftKings, GNOG, Continental and Computershare (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022). 4 .9 Assignment and Assumption Agreement, dated May 5, 2022, by and among New DraftKings, Old DraftKings and Computershare (incorporated by reference to Exhibit 4.5 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022). 10.1 + DraftKings Inc. 2020 Incentive Award Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.2 Form of Subscription Agreement, dated December 22, 2019, by and between Diamond Eagle Acquisition Corp. and the undersigned subscriber party thereto (incorporated by reference to Exhibit 10.2 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 10.3 + Executive Employment Agreement, dated April 23, 2020, between DraftKings Inc. and Matt Kalish (incorporated by reference to Exhibit 10.2 the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.4 + Executive Employment Agreement, dated April 23, 2020, between DraftKings Inc. and Paul Liberman (incorporated by reference to Exhibit 10.3 the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.5 + Executive Employment Agreement, dated April 23, 2020, between DraftKings Inc. and Jason Robins (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.6 + DraftKings Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 75 Exhibit No. Description 10.7 Form of Indemnification Agreement (incorporated by reference to Exhibit 10. 1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022 ). 10.8 Earnout Escrow Agreement, dated April 23, 2020, by and among DraftKings Inc., Shalom Meckenzie, in his capacity as SBT Sellers’ Representative, Eagle Equity Partners LLC, Jeff Sagansky, Eli Baker, Harry Sloan, I.B.I. Trust Management, the trustee, and Computershare Trust Company, N.A., as escrow agent (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.9 Stockholders Agreement, dated April 23, 2020, by and among DraftKings Inc., the DK Stockholder Group, the SBT Stockholder Group and the DEAC Stockholder Group (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.10 Amendment to Stockholders Agreement, dated October 5, 2020, by and among DraftKings Inc., the DK Stockholder Group, the SBT Stockholder Group and the DEAC Stockholder Group (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on October 5, 2020). 10.11 Share Exchange Agreement, dated April 23, 2020, by and among DraftKings Inc., a Delaware corporation, Jason Robins and DEAC NV Merger Corp. (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020). 10.12 †** Agreement for the Provision of a Sports Betting Solution (“License Agreement”), between Sports Information Services Limited and Crown Gaming Inc., dated as of June 19, 2018 (incorporated by reference to Exhibit 10.5 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 10.13 †** Addendum to License Agreement, between Sports Information Services Limited and Crown Gaming Inc., dated as of August 22, 2019 (incorporated by reference to Exhibit 10.6 of DEAC NV Merger Corp.’s Registration Statement on Form S-4 (Reg. No. 333-235805), filed with the SEC on April 14, 2020). 10.14 †** Addendum, dated as of July 23, 2020 to the Agreement for the Provision of a Sports Betting Solution between Sports Information Services Limited and Crown Gaming Inc., dated as of June 19, 2018 (incorporated by reference to Exhibit 10.1 to DraftKings Inc.’s Current Report on Form 8-K (File No. 001-38908), filed with the SEC on July 23, 2020). 76 Exhibit No. Description 10.15 + DraftKings Inc. 2017 Equity Incentive Plan, as amended from time to time (incorporated by reference to Exhibit 10.22 of the Company’s Registration Statement on Form S-1 (No. 333-238051), filed with the SEC on May 6, 2020). 10.16 + Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 15, 2020). 10.17 + Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.11 of the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 15, 2020). 10.18 Form of Base Capped Call Transaction Confirmation (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed with the SEC on March 18, 2021). 10.19 Form of Additional Capped Call Transaction Confirmation (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K, filed with the SEC on March 18, 2021). 10.20 Amended Executive Employment Agreement, dated August 5, 2021, between DraftKings Inc. and R. Stanton Dodge (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q, filed with the SEC on August 6, 2021). 10.21 Amended and Restated Executive Employment Agreement, dated August 5, 2021, between DraftKings Inc. and Jason Park (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q, filed with the SEC on August 6, 2021). 10.22 Support Agreement, by and among DraftKings Inc., Tilman J. Fertitta, Fertitta Entertainment, Inc., Landry’s Fertitta, LLC, Golden Landry’s LLC, Golden Fertitta, LLC and New Duke Holdco, Inc., dated as of August 8, 2021 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed with the SEC on August 10, 2021). 14.1 Code of Business Ethics of the Company, dated April 23, 2020 (incorporated by reference to Exhibit 14.1 of the Company's Amended Annual Report on Form 10-K/A, filed with the SEC on May 3, 2021). 21.1* List of Subsidiaries. 23.1* Consent of BDO USA, LLP, independent registered public accounting firm. 31.1* Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934. 31.2* Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934. 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.1* Loan and Security Agreement, dated as of December 20, 2022, by and among DraftKings Inc., as borrower, the guarantors listed therein, the lenders listed therein, Pacific Western Bank, as administrative agent, collateral agent and payment agent, Citizens Bank, N.A., as syndication agent, and Pacific Western Bank and Citizens Bank, N.A., as joint bookrunners and joint lead arrangers. 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 104.1 Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit). * Filed herewith. ** Certain portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). The Registrant agrees to furnish an unredacted copy of the exhibit to the SEC upon its request. *** Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request. † Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. + Management contract or compensatory plan or arrangement. 77 Item 16. Form 10-K Summary. None. 78 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 17, 2023 By: /s/ Jason K. Park Name: Jason K. Park Title: Chief Financial Officer POWER OF ATTORNEY Each person whose individual signature appears below hereby authorizes and appoints Jason D. Robins, R. Stanton Dodge, and Jason K. Park, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 79 Name Position Date /s/ Jason D. Robins Chief Executive Officer and Chairman February 17, 2023 Jason D. Robins (Principal Executive Officer) /s/ Jason K. Park Chief Financial Officer February 17, 2023 Jason K. Park (Principal Financial Officer) /s/ Erik Bradbury Chief Accounting Officer February 17, 2023 Erik Bradbury (Principal Accounting Officer) /s/ Harry Evans Sloan Vice Chairman February 17, 2023 Harry Evans Sloan /s/ Matthew Kalish Director February 17, 2023 Matthew Kalish /s/ Woodrow H. Levin Director February 17, 2023 Woodrow H. Levin /s/ Paul Liberman Director February 17, 2023 Paul Liberman /s/ Shalom Meckenzie Director February 17, 2023 Shalom Meckenzie /s/ Jocelyn Moore Director February 17, 2023 Jocelyn Moore /s/ Ryan R. Moore Director February 17, 2023 Ryan R. Moore /s/ Valerie Mosley Director February 17, 2023 Valerie Mosley /s/ Steven J. Murray Director February 17, 2023 Steven J. Murray /s/ Marni M. Walden Director February 17, 2023 Marni M. Walden 80