What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 275 added, 417 removed, 412 unchanged (63% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value)

September 30, 2022

March 31, 2023

(Unaudited) December 31, 2022

10 unchanged sentences

Operating lease right-of-use assets 60,804 65,957

Equity method investments 8,746 9,825

Equity method investment 9,961 10,080

Deposits and other non-current assets 159,598 155,865

16 unchanged sentences

Class A common stock, $ 0.0001 par value;

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

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

900,000 shares authorized as of March 31, 2023 and December 31, 2022;

471,723 and 459,265 shares issued and 461,634 and 450,575 outstanding as of March 31, 2023 and December 31, 2022, respectively

Class B common stock, $ 0.0001 par value;

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

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

900,000 shares authorized as of March 31, 2023 and December 31, 2022;

393,014 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Treasury stock, at cost;

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

10,089 and 8,690 shares as of March 31, 2023 and December 31, 2022, respectively

( 359,491 ) ( 332,133 )

8 unchanged sentences

(Amounts in thousands, except loss per share data)

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

2022 2021 2022 2021

Three months ended March 31,

Revenue $ 769,652 $ 417,205

5 unchanged sentences

Other income (expense):

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

Interest income 11,795 801

Interest expense ( 655 ) ( 653 )

(Loss) gain on remeasurement of warrant liabilities ( 17,035 ) 12,681

Other income, net 19 37,882

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

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

Loss from equity method investments 50 202 2,479 549

Loss before income tax provision and loss from equity method investment ( 395,661 ) ( 464,873 )

Income tax provision 1,368 469

Loss from equity method investment 119 2,351

Net loss attributable to common stockholders $ ( 397,148 ) $ ( 467,693 )

2 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

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

2022 2021 2022 2021

Net loss $ ( 450,494 ) $ ( 545,028 ) $ ( 1,135,290 ) $ ( 1,196,898 )

Other comprehensive (loss) income:

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

— ( 13,098 ) — ( 32,719 )

Comprehensive loss $ ( 450,494 ) $ ( 558,126 ) $ ( 1,135,290 ) $ ( 1,229,617 )

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

13 unchanged sentences

Balances at March 31, 2023 461,634 $ 46 393,014 $ 39 $ 6,869,647 $ ( 5,528,949 ) $ 36,488 $ ( 359,491 ) $ 1,017,780

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

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

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

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

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

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

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

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

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

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

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

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

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

Class A Common Stock Class B Common Stock Additional

7 unchanged sentences

Stock-based compensation expense — — — — 187,077 — — — 187,077

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

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

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

Purchase of treasury stock ( 793 ) — — — — — — ( 14,083 ) ( 14,083 )

Restricted stock unit vesting 9,327 1 — — — — — — 1

Foreign currency translation, net of nil tax

— — — — — — ( 27,318 ) — ( 27,318 )

Net loss — — — — — ( 467,693 ) — — ( 467,693 )

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

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

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

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

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

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

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

Foreign currency translation, net of nil tax

— — — — — — 7,697 — 7,697

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

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

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

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

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

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

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

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

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

1 unchanged sentence

(Amounts in thousands)

Nine months ended September 30,

Three months ended March 31,

Operating Activities:

2 unchanged sentences

Depreciation and amortization 48,213 32,225

Non-cash interest expense, net 985 1,442

Non-cash interest expense 157 654

Stock-based compensation expense 117,400 187,077

Loss from equity method investments 2,479 549

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

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

Loss from equity method investment 119 2,351

Loss (gain) on remeasurement of warrant liabilities 17,035 ( 12,681 )

Loss (gain) on marketable equity securities and other financial assets 136 ( 37,433 )

Deferred income taxes 2,254 256

Other expenses, net ( 2,726 ) ( 768 )

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

Change in operating assets and liabilities:

Receivables reserved for users 35,547 ( 3,997 )

4 unchanged sentences

Accounts payable and accrued expenses ( 6,292 ) ( 16,087 )

Other long-term liabilities 9,476 ( 856 )

Long-term income tax liability ( 11,200 ) 7,789

Liabilities to users ( 15,717 ) ( 8,099 )

Long-term income tax liability ( 620 ) ( 178 )

Other long-term liabilities 2,145 1,507

Net cash flows used in operating activities $ ( 201,492 ) $ ( 356,718 )

3 unchanged sentences

Acquisition of gaming licenses ( 1,362 ) ( 267 )

Cash paid for acquisitions, net of cash acquired ( 96,507 ) ( 64,969 )

Other investing activities ( 5,090 ) ( 3,750 )

Other investing activities, net 311 ( 989 )

Net cash flows used in investing activities $ ( 27,564 ) $ ( 23,065 )

Financing Activities:

Proceeds from issuance of convertible notes, net — 1,247,116

Purchase of capped call options — ( 123,970 )

Proceeds from shares issued for warrants 44 199

Purchase of treasury stock ( 27,358 ) ( 14,083 )

Proceeds from exercise of stock options 2,192 1,770

Net cash flows (used in) provided by financing activities ( 16,843 ) 1,134,129

Effect of foreign exchange rates on cash and cash equivalents and restricted cash — 1,884

Net (decrease) increase in cash and cash equivalents and restricted cash ( 665,836 ) 770,057

Net cash flows used in financing activities $ ( 25,166 ) $ ( 12,313 )

Net decrease in cash and cash equivalents and restricted cash ( 254,222 ) ( 392,096 )

Cash and cash equivalents and restricted cash at the beginning of period 1,778,825 2,629,842

4 unchanged sentences

Total cash, cash equivalents and restricted cash, end of period $ 1,524,603 $ 2,237,746

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Nine months ended September 30,

Supplemental Disclosure of Noncash Investing and Financing Activities:

Equity consideration issued for acquisitions $ 460,128 $ 33,149

Acquisition of property and equipment, internally developed software and other investments included in accounts payable and accrued expenses 12,835 2,338

Convertible notes financing costs included in accounts payable and accrued expenses — 773

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

Increase of other current assets from transfer agent related to warrants — 525

Investing activities included in changes in accounts payable and accrued expenses $ ( 679 ) $ 7,604

Supplemental Disclosure of Cash Activities:

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

Decrease in cash reserved for users $ ( 32,718 ) $ ( 12,096 )

Cash paid for interest $ — $ —

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

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Description of Business

DraftKings Inc.

is a digital sports entertainment and gaming company.

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

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

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

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

In connection with the GNOG Transaction, DraftKings Inc.

undertook a holding company reorganization whereby DraftKings Inc.

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

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

DraftKings Inc.

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

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

(or, in respect of periods prior to the GNOG Closing Date, Old DraftKings), together with its consolidated subsidiaries.

We are a digital sports entertainment and gaming company that provides 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.

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 September 30, 2022, 32 U.S.

As of March 31, 2023, 33 U.S.

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

Of those 34 legal jurisdictions in the United States, 27 have legalized online sports betting.

Of those 35 legal jurisdictions, 28 have legalized online sports betting.

Of those 28 jurisdictions, 24 are live, and DraftKings operates in 21 of them.

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

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

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

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

As of March 31, 2023, we operate our Sportsbook product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, 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 and Washington.

As of March 31, 2023, we operate our 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 products.

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

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

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

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

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

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

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 products, 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.

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

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

(or, in respect of periods prior to the GNOG Closing Date, Old DraftKings), together with its consolidated subsidiaries.

Summary of Significant Accounting Policies and Practices

Basis of Presentation and Principles of Consolidation

These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“U.S.

GAAP”) for interim reporting.

1 unchanged sentence

GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements.

Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the fiscal year ended December 31, 2021, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on February 18, 2022 (“2021 Annual Report”).

The accompanying condensed consolidated financial statements are unaudited;

Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related notes as of and for the fiscal year ended December 31, 2022, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 17, 2023 (the “2022 Annual Report”).

These condensed consolidated financial statements are unaudited;

however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements for the periods presented.

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

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

All intercompany balances and transactions have been eliminated.

Foreign Currency

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

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

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

subsidiaries for the period ended September 30, 2022.

Digital Assets and Liabilities

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

121 (“SAB 121”).

SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard digital assets that an entity holds for its users, which is effective from the first interim period commencing after June 15, 2022, with retroactive application as of the beginning of the fiscal year to which the interim or annual period relates.

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

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

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

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

The Company consummated the GNOG Transaction on the GNOG Closing Date.

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.

These unaudited condensed consolidated financial statements include the accounts and operations of the Company, except that, due to the timing of the consummation of the GNOG Transaction, these unaudited condensed consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date.

All intercompany accounts and transactions are eliminated upon consolidation.

Certain amounts, which are not material, in the prior year’s consolidated financial statements have been reclassified to conform to the current year presentation.

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 Company’s acquisition of DK Crown Holdings Inc.

(formerly DraftKings Inc.), a Delaware corporation (“DK DE”), and SBTech (Global) Limited (“SBTech”) and the consummation of the transactions contemplated by the business combination agreement, dated December 22, 2019 (as amended), 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 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’s integration of 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 been reclassified to conform with the new segment presentation.

Recently Issued Accounting Pronouncements Not Yet Adopted

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

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

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

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

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

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Acquisition of Golden Nugget Online Gaming, Inc.

On May 5, 2022, DraftKings consummated the GNOG Transaction, and, under the terms of the Merger Agreement and subject to certain exclusions contained therein, GNOG stockholders received a fixed ratio of 0.365 shares of DraftKings Inc.’s Class A common stock for each share of GNOG that they held on the GNOG Closing Date.

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 unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

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

Preliminary Purchase Price Accounting for the GNOG Transaction

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

Operating results for GNOG are included in the Company’s consolidated statements of operations for the three months ended March 31, 2023 .

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:

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

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

(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, which partially offsets the other consideration issued in connection with the GNOG Transaction.

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

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

Any such adjustments may be material.

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

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

The following table summarizes the consideration issued or paid in connection with the GNOG Transaction and the 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

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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.

Goodwill associated with the GNOG Transaction was 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 of deductible goodwill was determined to be $ 160.7 million.

Intangible Assets

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Loan Receivable

The Company acquired a long-term receivable in the amount of $ 30.5 million in connection with the GNOG Transaction, which originally resulted from a $ 30.0 million mezzanine loan (the “Danville GN Casino Loan”) by GNOG to certain parties before the 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.

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 that, pending regulatory approvals, would enable GNOG to obtain market access to the State of Illinois.

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

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

Transaction Costs

For the three and nine months ended September 30, 2022, the Company incurred $ 0.6 million and $ 14.9 million, respectively, in advisory, legal, accounting and management fees in connection with the GNOG Transaction which are included in general and administrative expenses on the Company’s condensed consolidated statements of operations.

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.

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.

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

2022 Actual 2021 Pro Forma 2022 Pro Forma 2021 Pro Forma

Three months ended March 31,

2023 Actual 2022 Pro Forma

Revenue $ 769,652 $ 449,109

Net loss $ ( 397,148 ) $ ( 475,774 )

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

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

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

Intangible Assets and Goodwill

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

The pro forma financial information includes adjustments primarily related to purchase accounting adjustments.

Acquisition costs and other non-recurring charges incurred are included in the period of assumed acquisition.

Intangible Assets

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

Intangible Assets

The Company has the following intangible assets, net as of March 31, 2023:

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

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Gaming licenses 10.9 years 208,017 ( 33,747 ) 174,270

Trademarks, tradenames and other 3.9 years 34,367 ( 11,490 ) 22,877

Customer relationships 4.4 years 269,728 ( 89,127 ) 180,601

1,081,102 ( 294,581 ) 786,521

Trademarks, tradenames and other 3.7 years 36,882 ( 15,518 ) 21,364

Indefinite-lived intangible assets:

Digital assets, net of impairment Indefinite-lived 2,626 — 2,626

Intangible assets, net $ 1,083,228 $ ( 294,581 ) $ 788,647

Total $ 1,127,170 $ ( 372,661 ) $ 754,509

The Company had the following intangible assets, net as of December 31, 2022:

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Gaming licenses 11.0 years 206,655 ( 29,487 ) 177,168

Trademarks and tradenames 4.5 years 30,639 ( 5,952 ) 24,687

Customer relationships 4.6 years 269,728 ( 75,791 ) 193,937

725,662 ( 192,640 ) 533,022

Trademarks, tradenames and other 3.8 years 36,193 ( 13,463 ) 22,730

Indefinite-lived intangible assets:

Digital assets Indefinite-lived 1,995 — 1,995

Digital assets, net of impairment Indefinite-lived 2,697 — 2,697

Intangible assets, net $ 1,106,450 $ ( 329,516 ) $ 776,934

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

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

B2C B2B Media Total

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

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

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

Amortization expense was $ 43.1 million and $ 28.1 million for the three months ended March 31, 2023 and 2022, respectively.

Current and Long-term Liabilities

Revolving Line of Credit

In October 2016, DK Crown Holdings Inc.

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

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

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

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

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

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

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

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

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

In connection with the issuance of the Convertible Notes (as defined below) and the entry into the Capped Call Transactions (as defined below), the Company obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that would have otherwise resulted from entering into these financing transactions.

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

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

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

Convertible Notes and Capped Call

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, 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 March 31, 2023, 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 March 31, 2023 totaled $ 122.7 million.

The Company is also subject to certain affirmative and negative covenants under the Credit Agreement, with which the Company was in compliance with as of March 31, 2023.

As of March 31, 2023, the Company has been issued $ 125.0 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 Transactions

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.

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.

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Class A common stock.

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

The 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 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).

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

During the nine months ended September 30, 2022, the conditions allowing holders of the Convertible Notes to convert their Convertible Notes were triggered by the holding company reorganization in connection with the GNOG Transaction, whereby DraftKings Inc.

became the going-forward public company and replaced Old DraftKings as the issuer of the Class A common stock issuable upon conversion of the Convertible Notes;

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

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, 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.

Although recorded at amortized cost on the Company’s consolidated balance sheet, the estimated fair value of the Convertible Notes was $ 830.5 million and $ 953.8 million as of September 30, 2022 and December 31, 2021, respectively, which was calculated using level 2 inputs, including the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period.

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

As the Capped Call Transactions qualify 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 March 31, 2023, the Company’s convertible debt balance was $ 1,251.8 million, net of unamortized debt issuance costs of $ 13.2 million.

Amortization of debt issuance costs was $ 0.7 million for the three months ended March 31, 2023 and $ 0.7 million for the three months ended March 31, 2022, which are included in the interest 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 $ 883.9 million and $ 786.5 million as of March 31, 2023 and December 31, 2022, 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 users.

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

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

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

should they occur.

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

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

As of September 30, 2022 and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was $ 56.0 million and $ 47.5 million, respectively.

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

As of March 31, 2023 and December 31, 2022, the Company’s estimated contingent liability for indirect taxes was $ 63.6 million and $ 60.3 million, respectively.

Warrant Liabilities

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

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

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

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

As of March 31, 2023 and 2022, there were no Public Warrants outstanding and 1.6 million Private Warrants outstanding.

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

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

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

As of September 30, 2022, there were 5.9 million GNOG Private Warrants outstanding, which corresponds to an assumed warrant liability of $ 13.2 million as of the GNOG Closing Date less a loss on remeasurement of $ 3.7 million for the three months ended September 30, 2022 and a gain on remeasurement of $ 1.1 million from the GNOG Closing Date through September 30, 2022.

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

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

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

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

During the nine months ended September 30, 2021, 0.2 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 5.2 million, reflecting the reclassification of the warrant liabilities of $ 4.5 million and proceeds upon exercise of $ 0.7 million.

Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable, at an exercise 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.

As of March 31, 2023, there were 5.9 million GNOG Private Warrants outstanding.

The Company classifies the Public Warrants, the Private Warrants and the 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 March 31, 2023, the fair value of the Company’s warrant liability was $ 27.7 million.

Due to fair value changes throughout the three months ended March 31, 2023 and 2022, the Company recorded a loss on remeasurement of warrant liabilities of $ 17.0 million and a gain on remeasurement of $ 12.7 million, respectively.

During the three months ended March 31, 2023, no Private Warrants or GNOG Private Warrants were exercised.

Fair Value Measurements

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

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

September 30, 2022

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of March 31, 2023 and December 31, 2022 based on the three-tier fair value hierarchy:

March 31, 2023

Level 1 Level 2 Level 3 Total

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Total $ 226,014 $ 62,266 $ 25,287 $ 313,567

Other current liabilities:

Digital assets held for users $ — $ 48,733 (6)

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$ — $ — $ 304,216

Other current assets:

Digital assets held for users — 38,444 (6)

Other non-current assets:

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Total $ 322,466 $ 51,977 $ 26,248 $ 400,691

Digital assets held for users — $ 38,444 (6)

Warrant liabilities $ — $ 10,680 (5)

Total $ — $ 49,124 $ — $ 49,124

(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.

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

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

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

The Company has elected the remeasurement alternative for these assets.

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

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

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

During the three months ended March 31, 2023, there were no new derivative instruments purchased by or issued to the Company.

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

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

September 30, 2022 December 31, 2021

Significant Unobservable Input Range (Weighted Average)

March 31, 2023 December 31, 2022

Significant Unobservable Input Range (Weighted Average) Range (Weighted Average)

Underlying stock price $ 7.63 - $ 19.80 ($ 16.95 )

$ 7.30 - $ 19.80 ($ 16.53 )

Volatility 56.0 % - 80.0 % ( 74.8 %)

56.0 % - 80.0 % ( 74.1 %)

Risk-free rate 1.3 % - 4.7 % ( 4.2 %)

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

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

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

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

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

1.3 % - 4.3 % ( 4.1 %)

(5) The Company measures the fair value of its warrant liabilities 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.

(6) 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 the fair value of these digital assets using observable inputs for similar transactions.

For the three months ended March 31, 2023 and 2022, the Company recorded $ 0.1 million and $ 37.4 million of unrealized gains on its financial assets carried at fair value, respectively.

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

Revenue Recognition

Deferred Revenue

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

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

The deferred revenue balances were as follows:

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

2022 2021 2022 2021

Three months ended March 31,

Deferred revenue, beginning of the period $ 133,851 $ 91,554

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Revenue Disaggregation

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

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

2022 2021 2022 2021

Disaggregation of revenue for the three months ended March 31, 2023 and 2022 is as follows:

Three months ended March 31,

Online gaming $ 735,189 $ 386,678

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Online gaming includes Sportsbook, iGaming and DFS, which have certain similar attributes and patterns 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:

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

2022 2021 2022 2021

United States $ 495,563 $ 188,166 $ 1,354,234 $ 737,814

International 6,375 24,653 31,094 84,886

Total Revenue $ 501,938 $ 212,819 $ 1,385,328 $ 822,700

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

Stock-Based Compensation

The Company, historically, has issued three types of stock-based compensation:

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 which generally vest over a 4 -year period.

Time-based awards are equity awards that tie vesting to length of service with the Company and generally vest over a four-year period in annual and/or quarterly installments.

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 short-term performance-based equity awards which establish performance objectives related to one or two particular fiscal years.

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

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

PSP awards are performance-based equity awards which establish performance objectives related to one or two particular fiscal years.

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

All stock-based compensation awards expire seven to ten years after the grant date thereof.

The following table shows restricted stock unit (“RSU”) and stock option activity for the three months ended March 31, 2023:

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

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Forfeited — ( 369 ) — ( 55 ) — ( 41 ) ( 465 ) 4.53 25.67

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

As of September 30, 2022, total unrecognized stock-based compensation expense of $ 471.9 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of 2.0 years.

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

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

Options RSUs Total Options RSUs Total

Time Based (1)

$ 3,577 $ 25,924 $ 29,501 $ 3,787 $ 15,512 $ 19,299

— 11,368 11,368 — 18,537 18,537

— 85,169 85,169 — 137,828 137,828

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

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

Outstanding at March 31, 2023 12,329 22,764 2,102 14,481 11,152 5,594 68,422 $ 6.71 $ 21.99

As of March 31, 2023, total unrecognized stock-based compensation expense of $ 689.8 million related to granted and unvested stock-based compensation arrangements is expected to be recognized over a weighted-average period of 3.1 years.

The following table shows stock compensation expense for the three months ended March 31, 2023 and 2022:

Three months ended March 31, 2023 Three months ended March 31, 2022

Options RSUs Total Options RSUs Total

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

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

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

2022 2021 2022 2021

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

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

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

The Company’s provision for income taxes for the three months ended March 31, 2023 and 2022 is as follows:

Three months ended March 31,

Income tax provision $ 1,368 $ 469

The effective tax rates for the three months ended March 31, 2023 and 2022 were ( 0.3 )% and ( 0.1 )%, respectively.

The difference between the Company’s effective tax rates for the three month periods ended March 31, 2023 and 2022 and the U.S.

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

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

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

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

Segment Information

The Company operates its business and reports its results through two operating and reportable segments:

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

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

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

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

The CODM assesses a combination of metrics such as revenue and Adjusted EBITDA to evaluate the performance of each operating and reportable segment.

Any intercompany revenues or expenses are eliminated in consolidation.

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

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

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

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

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

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

2022 2021 2022 2021

B2C $ 492,846 $ 189,094 $ 1,351,271 $ 740,113

B2B 9,092 23,725 34,057 82,587

Total revenue 501,938 212,819 1,385,328 822,700

Adjusted EBITDA:

B2C ( 247,522 ) ( 307,700 ) ( 615,597 ) ( 541,313 )

B2B ( 16,689 ) ( 5,903 ) ( 56,257 ) ( 6,854 )

Total adjusted EBITDA ( 264,211 ) ( 313,603 ) ( 671,854 ) ( 548,167 )

Adjusted for:

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

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

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

Stock-based compensation 126,038 175,664 448,636 499,246

Transaction-related costs 751 4,348 15,030 15,261

Litigation, settlement and related costs 1,390 4,712 5,786 8,933

Advocacy and other related legal expenses

16,558 16,667 16,558 27,702

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

Other non-recurring and non-operating costs (income) ( 8,216 ) 1,368 ( 37,046 ) 5,501

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

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

Loss Per Share

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

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

2022 2021 2022 2021

Net loss $ ( 450,494 ) $ ( 545,028 ) $ ( 1,135,290 ) $ ( 1,196,898 )

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

Three months ended March 31,

Net loss attributable to common stockholders $ ( 397,148 ) $ ( 467,693 )

Basic and diluted weighted-average common shares outstanding 455,081 411,066

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Basic and diluted $ ( 0.87 ) $ ( 1.14 )

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

There were no preferred or other dividends declared for the three months ended March 31, 2023.

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

September 30,

Three months ended March 31,

Class A common stock resulting from exercise of all warrants 3,761 1,613

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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.

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

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

Equity Method Investments

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 in the form of general and administrative services.

As of September 30, 2022 and December 31, 2021, the Company had $ 0.3 million and $ 0.6 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in its consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, the Company had $ 0.1 million and $ 0.2 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in the consolidated balance sheets.

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

As of March 31, 2023, the Company had invested a total of $ 6.7 million of the total commitment.

Transactions with a Shareholder and their Immediate Family Members

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

For the three months ended September 30, 2022 and September 30, 2021, the Company had $ 0.6 million and $ 0.9 million in sales, respectively, to entities that are wholly owned by an immediate family member of a current director of the Company.

The Company recorded $ 1.7 million and $ 4.0 million of such sales in the nine months ended September 30, 2022 and September 30, 2021, respectively.

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

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

For the three months ended March 31, 2023 and March 31, 2022, the Company had $ 0.7 million and $ 0.6 million in sales, respectively, to entities owned by an immediate family member of a current director of the Company.

The Company had an associated accounts receivable balance of $ 0.3 million and $ 0.2 million a s of March 31, 2023 and December 31, 2022, respectively, included in accounts receivable in its condensed consolidated balance sheets.

In 2022, from time to time, the Company chartered, without mark-up, a private plane owned by an entity controlled 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.

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

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

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

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

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

During the three months ended March 31, 2023, the Company incurred no expense for use of the aircraft under these chartering services.

On March 30, 2022, the Company entered into a one-year lease of an aircraft from an entity controlled by Mr.

Robins, pursuant to which Mr.

Robins’ entity leased the aircraft to the Company for $ 0.6 million for a one-year period (the “Original Aircraft Lease”).

The Company covered all operating, maintenance and other expenses associated with the aircraft.

The Original Aircraft Lease expired in accordance with its terms on March 30, 2023, and DraftKings entered into a new one-year lease of such aircraft from an entity controlled by Mr.

Robins for $ 0.6 million and otherwise on terms and conditions substantially the same as the Original Aircraft Lease, effective upon the expiration thereof (collectively with the Original Aircraft Lease, the “Aircraft Leases”).

The audit and compensation committees of the Company’s board of directors approved this arrangement, as well as the Aircraft Leases, based, among other things, on the requirements of the overall security program that Mr.

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

During the three months ended March 31, 2023, the Company incurred $ 0.1 million of expense under the Original Aircraft Lease.

Leases, Commitments and Contingencies

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

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

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

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

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

As of March 31, 2023, the Company’s lease agreements typically have terms not exceeding ten years .

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

The components of lease cost are as follows:

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

2022 2021 2022 2021

Three months ended March 31,

Operating lease cost $ 5,028 $ 4,230

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Total lease cost $ 7,242 $ 6,561

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

Nine months ended September 30,

Supplemental cash flow and other information for the three months ended March 31, 2023 and 2022 related to operating leases was as follows:

Three months ended March 31,

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

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Right-of-use assets obtained in exchange for new operating lease liabilities $ 366 $ 619

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were 7.3 years and 6.5 % as of September 30, 2022.

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

The weighted-average remaining lease term for the Company's operating leases was 8.3 years, and the weighted-average discount rate for the Company's operating leases was 6.5 %, in each case as of March 31, 2023.

The Company calculated the weighted-average discount rate 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.

Maturity of lease liabilities are as follows:

Years Ending December 31,

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

From April 1, 2023 to December 31, 2023 $ 5,240

Thereafter 40,445

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Imputed interest ( 22,594 )

Operating lease liabilities $ 81,725

As of September 30, 2022, the Company had long-lived assets, which consists of operating lease right-of-use assets and property and equipment, net, of $ 109.7 million and $ 23.2 million located in the United States and internationally, respectively.

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

Present value of undiscounted future cash flows $ 70,441

Other Contractual Obligations and Contingencies

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Years Ending December 31,

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

From April 1, 2023 to December 31, 2023 $ 326,823

Thereafter 247,196

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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.

Daily Fantasy Sports Litigation (Multi-District Litigation)

Between late 2015 and early 2016, certain individuals who allegedly registered and competed in daily sports fantasy contests on our and FanDuel’s websites, and their family members, filed numerous actions (primarily purported class actions) against us, FanDuel, and other related parties in courts across the United States (the “DFS defendants”).

In February 2016, these actions were consolidated in a multi-district litigation in the U.S.

District Court for the District of Massachusetts.

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

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

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

(2) the Company promulgated false or misleading advertisements that emphasized the ease of play and likelihood of winning;

(3) the Company induced consumers to lose money through a deceptive bonus program;

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

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

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

This settlement agreement became effective on November 5, 2021;

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

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

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

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

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

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

Daily Fantasy Sports Litigation (Multi-District Litigation) .

The Company previously provided an accrual for this matter.

The Company intends to vigorously defend the Concerned Citizen Claims .

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

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

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

Interactive Games LLC

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 infringes two patents and the Company’s Sportsbook product infringes two different patents.

DraftKings intends to vigorously defend this case.

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.

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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 DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.

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.

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 infringes two patents, our Daily Fantasy Sports product infringes one patent, and that our Sportsbook product and Daily Fantasy Sports product infringe another patent.

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.

filed a second amended complaint (the “SAC”), adding as defendants DK Crown Holdings Inc.

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.

DraftKings intends to vigorously defend this case.

The Company intends to vigorously defend this case.

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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.

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

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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 DraftKings 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.

The actions alleged 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 related 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”).

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 these matters or determine the extent of any potential liabilities.

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 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.

Securities Matters Related to the GNOG Transaction

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 purported 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 were subsequently consolidated, and two of the actions filed in Nevada state District Court in Clark County likewise were consolidated.

A substantially identical fifth action was filed in Nevada state District Court in Clark County and was subsequently dismissed voluntarily by the plaintiff.

The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which was also dismissed voluntarily by the plaintiff.

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

The Nevada actions were voluntarily dismissed without prejudice by the plaintiffs in state court on February 27, 2023 and in federal court on March 3, 2023.

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.

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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.

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.

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

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

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.

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

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

Shareholder Derivative Litigation

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 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 DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.

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 DraftKings in the United States District Court for the District of New Jersey alleging that DraftKings’ DFS and Casino products infringe four patents.

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.

DraftKings intends to vigorously defend this case.

The Company intends to vigorously defend this case.

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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.

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 products infringe four patents.

DraftKings intends to vigorously defend this case.

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.

The Company intends to vigorously defend this case.

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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.

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& 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 infringes seven patents.

(“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.

DraftKings intends to vigorously defend this case.

The Company intends to vigorously defend this case.

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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.

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.

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.

Any adverse outcome in this matter could subject the Company 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.

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.

Any adverse outcome in this matter could subject the Company to substantial damages and/or require alterations to the Company’s business.

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 this 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.

Matter Related to DraftKings Marketplace

On March 9, 2023, a putative class action was filed in Massachusetts federal court by alleged purchasers of non-fungible tokens (“NFTs”) on the DraftKings Marketplace (“DK Marketplace”).

The complaint asserts claims for violations of federal and state securities laws against the Company and three of its officers on the grounds that, among other things, the NFTs that are sold and traded on the DK Marketplace allegedly constitute securities that were not registered with the SEC in accordance with federal and Massachusetts law, and that the DK Marketplace is a securities exchange that is not registered in accordance with federal and Massachusetts law.

Based on these allegations, plaintiff brings claims seeking rescissory damages and other relief on behalf of himself and a putative class of persons who purchased NFTs on the DK Marketplace between August 11, 2021 and the present.

The Company intends to vigorously defend this matter.

Any adverse outcome in this matter could subject the Company to substantial damages and/or require alterations to the Company’s business.

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 this matter 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 this 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.

Internal Revenue Service

1 unchanged sentence

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.

Letters of Credit

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

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

What changed 10-Q

Item 1. Financial Statements