What changed in this filing

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Item 9A. Controls and Procedures

2024-02-16 compared with 2023-02-17 · 394 added, 415 removed, 1173 unchanged (41% of the section changed)

7 unchanged sentences

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with U.S.

Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred.

Our management’s evaluation of internal control over financial reporting excluded the internal control activities of GNOG, which we acquired in May 2022, as discussed in Note 3 “Business Combinations” to the consolidated financial statements.

We have included the financial results of GNOG in the consolidated financial statements from the date of acquisition.

Total assets, net assets, revenue, and net loss subject to GNOG's internal control over financial reporting each represented less than five percent of our consolidated total assets, net assets, revenue, and net loss, excluding acquisition method fair value adjustments, respectively, for the fiscal year ended December 31, 2022.

Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2023 to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements in accordance with U.S.

Management has reviewed its assessment with the Audit Committee.

The Company’s independent registered public accounting firm, BDO USA, LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 15 “ Exhibits, Financial Statement Schedules ” of this Annual Report.

The Company’s independent registered public accounting firm, BDO USA, P.C., has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 15 “ Exhibits, Financial Statement Schedules ” of this Annual Report.

Changes in Internal Control Over Financial Reporting

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Other Information.

Rule 10b5-1 Trading Plans

Certain of our directors and executive officers have made, and may from time to time enter into trading plans or make elections to have shares sold or withheld to cover withholding taxes or pay the exercise price of options, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).

During the fiscal quarter ended December 31, 2023, except as noted above, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was designed to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement .

Letter Agreements

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Matthew Kalish, the Company’s President, DraftKings North America;

and Paul Liberman, the

Company’s President, Global Technology and Product, pursuant to which each executive officer agreed to a voluntary reduction in their respective base salaries to $1 for fiscal year 2023 (the “Base Salary Reductions”).

and Paul Liberman, the Company’s President, Global Technology and Product, pursuant to which each executive officer agreed to a voluntary reduction in their respective base salaries to $1 for fiscal year 2024 (the “Base Salary Reductions”).

The Base Salary Reductions do not modify any other rights under each of Messrs.

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for the years ended December 31, 2023, December 31, 2022 and December 31, 2021:

Reports of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Reports of Independent Registered Public Accounting Firm ( BDO USA P.C.) ;

Boston, Massachusetts ;

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

Consolidated Statements of Changes in Stockholders' Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of DraftKings Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 , in conformity with accounting principles generally accepted in the United States of America.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Business Combinations - Valuation of Certain Intangible Assets

As described in Note 3 to the consolidated financial statements, on May 5, 2022, the Company acquired Golden Nugget Online Gaming, Inc.

(“GNOG”), for total consideration of $603.5 million.

The Company accounted for the acquisition in accordance with ASC Topic 805, Business Combinations, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.

The determination of the fair values of the assets acquired and liabilities assumed requires management to make significant estimates and assumptions, including with respect to the fair values of identifiable intangible assets.

Significant estimates and assumptions made by the Company in determining the fair value of acquired gaming licenses and customer relationships include future cash flows that it expects to generate from the acquired assets.

The Company recognized $315 million of finite-lived intangible assets in connection with the GNOG acquisition.

We identified the determination of fair values of certain identifiable finite-lived intangible assets, which included certain gaming licenses and customer relationships, as a critical audit matter.

The principal considerations for our determination included the following:

(i) changes in the key assumptions could have a significant impact on the fair value of the finite-lived intangible assets acquired, and (ii) the assumptions utilized by the Company in determining the fair value of certain gaming licenses and customer relationships acquired, specifically projected revenue growth rates and marketing synergies, are

subjective and require significant judgment.

Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of the revenue growth rates used in the determination of the fair value of certain gaming licenses and customer relationships by i) reviewing the historical performance of GNOG using publicly available information, ii) assessing the revenue projections against industry metrics and peer-group companies and iii) testing historical GNOG data used as a basis for revenue projections.

• Testing the reasonableness of the amounts used to determine the marketing cost-saving synergies for GNOG by evaluating the historical marketing spend at GNOG and the Company.

/s/ BDO USA, LLP

Assessment of the probability of achieving the vesting performance criteria of performance-based stock compensation plan awards

As described in Notes 2 and 11 to the consolidated financial statements, the Company issues stock options and other stock awards to employees with performance-based vesting conditions pursuant to its performance-based stock compensation plan (“PSP Awards”).

The Company recognizes compensation cost for PSP Awards on a tranche-by-tranche basis (the accelerated attribution method), based on the probability of achieving the performance criteria.

PSP Awards granted in 2023 and 2022 vest based on achievement of revenue and Adjusted EBITDA targets and have a range of payouts from 0% to 200%.

For the year ended December 31, 2023, stock-based compensation expense attributable to all PSP Awards was $126.1 million.

We identified the assessment of the probability of achieving the performance-based vesting criteria and the related estimated payment of certain PSP Awards as a critical audit matter.

The revenue and Adjusted EBITDA projections used in the probability assessment for certain PSP Awards require significant judgement due to the subjectivity of the revenue growth rates, Adjusted EBITDA margins and certain other assumptions used in the projections.

Auditing these elements required especially challenging and subjective auditor judgment due to the nature and extent of effort required to address these matters.

The primary procedures we performed to address this critical audit matter included evaluating the reasonableness of the revenue growth rates, Adjusted EBITDA margins and certain other assumptions used in the projections by:

• Comparing the Company’s revenue and Adjusted EBITDA projections for the current year to current year results.

• Evaluating the consistency of the revenue growth rates and certain other assumptions with external industry data.

• Comparing the forecasted growth in revenue, forecasted Adjusted EBITDA margins and certain other assumptions to

historical results.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2016.

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 17, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Golden Nugget Online Gaming, Inc.

(“GNOG”), which was acquired on May 5, 2022, and which is included in the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statement of operations, comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year then ended.

GNOG constituted less than 5% of total assets, net assets, revenues and net loss (excluding acquisition method fair value adjustments) as of and for the year ended December 31, 2022.

Management did not assess the effectiveness of internal control over financial reporting of GNOG because of the timing of the acquisition, which was completed on May 5, 2022.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of GNOG.

Definition and Limitations of Internal Control over Financial Reporting

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

/s/ BDO USA, P.C.

Boston, Massachusetts

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Cash and cash equivalents $ 1,270,503 $ 1,309,172

Restricted cash 11,700 —

Cash reserved for users 341,290 469,653

Receivables reserved for users 301,770 160,083

Accounts receivables 51,097 45,864

Accounts receivable 47,539 51,097

Prepaid expenses and other current assets 98,565 94,836

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Total liabilities $ 3,104,560 $ 2,717,459

Commitments and contingent liabilities (Note 15)

See accompanying notes to consolidated financial statements.

DRAFTKINGS INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

Commitments and contingent liabilities (Notes 7 and 15)

Stockholders’ equity:

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Other income (expense):

Interest income (expense), net 18,702 1,957 ( 1,070 )

Gain (loss) on remeasurement of warrant liabilities 29,396 30,065 ( 387,565 )

Other income, net 20,700 11,951 —

Loss before income tax provision (benefit) and loss (gain) from equity method investment ( 1,442,958 ) ( 1,517,644 ) ( 1,231,891 )

Interest income 58,418 21,353 4,066

Interest expense ( 2,679 ) ( 2,651 ) ( 2,109 )

(Loss) gain on remeasurement of warrant liabilities ( 57,543 ) 29,396 30,065

Other (loss) gain, net ( 224 ) 20,700 11,951

Loss before income tax provision (benefit) and loss (income) from equity method investment ( 791,253 ) ( 1,442,958 ) ( 1,517,644 )

Income tax (benefit) provision 10,170 ( 67,866 ) 8,269

4 unchanged sentences

See accompanying notes to consolidated financial statements.

Due to the timing of the GNOG Transaction (as defined below) and DEAC Business Combination (as defined below), the above periods, to the extent applicable, exclude the operations of GNOG (as defined below) and SBTech (as defined below) prior to their respective closing dates of May 5, 2022 and April 24, 2020.

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

DRAFTKINGS INC.

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2023 2022 2021

Net loss $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 )

Net loss attributable to common stockholders $ ( 802,142 ) $ ( 1,377,987 ) $ ( 1,523,195 )

Other comprehensive (loss) income

3 unchanged sentences

See accompanying notes to consolidated financial statements.

Due to the timing of the GNOG Transaction and DEAC Business Combination, the above periods, to the extent applicable, exclude the operations of GNOG and SBTech prior to their respective closing dates of May 5, 2022 and April 24, 2020.

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

DRAFTKINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands)

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Equity consideration issued for acquisitions — — — — — — — — —

Exercise of warrants 153 — — — 4,942 — — — 4,942

Purchase of treasury stock ( 3,211 ) — — — — — — ( 80,049 ) ( 80,049 )

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Stock-based compensation expense — — — — 578,799 — — — 578,799

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

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

Exercise of warrants 337 — — — 9,205 — — — 9,205

Purchase of treasury stock ( 1,560 ) — — — — — — ( 25,519 ) ( 25,519 )

Restricted stock unit vesting 11,835 1 — — — — — — 1

Foreign currency translation — — — — — — ( 47,046 ) — ( 47,046 )

Other — — — — 2,098 — — — 2,098

Net loss — — — — — ( 1,377,987 ) — — ( 1,377,987 )

Balances at December 31, 2022 450,575 $ 45 393,014 $ 39 $ 6,750,055 $ ( 5,131,801 ) $ 36,488 $ ( 332,133 ) $ 1,322,693

Preferred Stock Class A Common

Stock Class B Common

Stock Additional

Paid in Capital Accumulated Deficit Accumulated

Comprehensive Income Treasury

Stock Amount Total

Stockholders’ (Deficit) Equity

Shares Amount Shares Amount Shares Amount

Balances at December 31, 2019 (as previously reported) 110,250 $ 258,371 389,610 $ 390 — $ — $ 690,443 $ ( 998,784 ) $ — $ — $ ( 307,951 )

Conversion of shares due to merger recapitalization ( 110,250 ) ( 258,371 ) ( 204,984 ) ( 372 ) — — 258,743 — — — 258,371

Balances at December 31, 2019 effect of reverse acquisition (refer to Note 2) — — 184,626 18 — — 949,186 ( 998,784 ) — — ( 49,580 )

Issuance of Series F preferred stock — — 1,526 — — — 11,000 — — — 11,000

Class A Common Stock Class B Common Stock Additional

Paid in Capital Accumulated

Deficit Accumulated Other

Comprehensive

Income Treasury Stock Amount Total Stockholders'

Shares Amount Shares Amount

Balances at December 31, 2020 396,303 $ 40 393,014 $ 39 $ 5,067,135 $ ( 2,230,619 ) $ 83,534 $ ( 288,784 ) $ 2,631,345

Exercise of stock options 9,421 1 — — 31,478 — — — 31,479

Stock-based compensation expense — — — — 683,293 — — — 683,293

Merger recapitalization, net repurchase of $ 7,192 and issuance costs of $ 11,564

— — ( 278 ) — — — ( 18,756 ) — — — ( 18,756 )

Conversion of Convertible Notes to common shares — — 11,254 1 — — 112,544 — — — 112,545

DEAC shares recapitalized, net of redemptions and equity issuance costs of $ 10,631

— — 74,122 7 — — 542,327 — — — 542,334

Equity consideration issued to acquire SBTech — — 40,739 4 — — 789,060 — — — 789,064

Shares issued for earn outs - SBTech — — 720 — — — — — — — —

Shares issued for earn outs - DEAC and DK — — 5,280 1 — — ( 1 ) — — — —

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

Equity consideration issued for acquisition 520 — — — 33,149 — — — 33,149

Exercise of warrants 337 — — — 9,205 — — — 9,205

Shares issued in offerings, net of issuance costs of $ 41,536

— — 36,820 4 — — 1,680,063 — — — 1,680,067

Purchase of treasury stock ( 323 ) — — — — — — ( 17,830 ) ( 17,830 )

RSU Vesting — — 15,703 2 — — ( 2 ) — — — —

Foreign currency translation, net of nil tax

— — — — — — — — 83,534 — 83,534

Restricted stock unit vesting 1,523 — — — — — — — —

Foreign currency translation — — — — — — ( 47,046 ) — ( 47,046 )

Other — — — — 2,098 — — — 2,098

Net loss — — — — — ( 1,523,195 ) — — ( 1,523,195 )

1 unchanged sentence

See accompanying notes to consolidated financial statements.

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

DRAFTKINGS INC.

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Cash Flows from Operating Activities:

Net loss $ ( 1,377,987 ) $ ( 1,523,195 ) $ ( 1,231,835 )

Net loss attributable to common shareholders $ ( 802,142 ) $ ( 1,377,987 ) $ ( 1,523,195 )

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

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Stock-based compensation expense 398,463 578,799 683,293

(Gain) loss on remeasurement of warrant liabilities ( 29,396 ) ( 30,065 ) 387,565

Loss (gain) on remeasurement of warrant liabilities 57,543 ( 29,396 ) ( 30,065 )

Loss (gain) from equity method investment 719 2,895 ( 2,718 )

Gain on marketable equity securities and other financial assets, net ( 10,999 ) ( 11,311 ) —

Loss (gain) on marketable equity securities and other financial assets, net 75 ( 10,999 ) ( 11,311 )

Deferred income taxes 5,849 ( 73,407 ) ( 15,509 )

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Receivables reserved for users ( 141,687 ) ( 105,320 ) ( 21,700 )

Accounts receivable 2,506 ( 1,787 ) ( 13,802 )

Accounts receivables 3,558 2,506 ( 1,787 )

Prepaid expenses and other current assets 2,451 ( 26,217 ) ( 10,078 )

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Acquisition of gaming licenses ( 12,105 ) ( 7,213 ) ( 35,809 )

Purchase of marketable equity securities and other financial assets — ( 25,000 ) —

Proceeds from (purchase of) marketable equity securities and other financial assets 24,425 — ( 25,000 )

Cash paid for acquisitions, net of cash acquired — ( 96,507 ) ( 64,970 )

2 unchanged sentences

Cash Flow from Financing Activities:

Proceeds from revolving credit line — — 37,750

Repayments of revolving credit line — — ( 44,500 )

Cash buyout of unaccredited investors — — ( 7,192 )

Issuance costs related to merger recapitalization — — ( 11,564 )

Proceeds from issuance of convertible notes, net — — 1,248,025

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

Proceeds from recapitalization of DEAC shares, net of issuance costs — — 669,825

Proceeds from exercise of warrants 288 44 693

Proceeds from issuance of Class A common stock, net of issuance costs — — 1,680,067

Purchase of treasury stock ( 80,049 ) ( 25,519 ) ( 17,830 )

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Other financing activities — — 416

Net cash flows provided by financing activities ( 16,732 ) 1,138,813 2,306,299

Effect of foreign exchange rates on cash and cash equivalents and restricted cash — 583 ( 358 )

Net increase (decrease) in cash, cash equivalents and restricted cash ( 851,017 ) 524,866 1,884,443

Cash and cash equivalents and restricted cash at the beginning of period 2,629,842 2,104,976 220,533

Cash and cash equivalents and restricted cash, end of period $ 1,778,825 $ 2,629,842 $ 2,104,976

Disclosure of cash, cash equivalents and restricted cash:

Net cash flows (used in) provided by financing activities ( 63,221 ) ( 16,732 ) 1,138,813

Effect of foreign exchange rates on cash and cash equivalents, restricted cash, and cash reserved for users — — 583

Net (decrease) increase in cash and cash equivalents, restricted cash, and cash reserved for users ( 155,332 ) ( 851,017 ) 524,866

Cash and cash equivalents, restricted cash, and cash reserved for users at the beginning of period 1,778,825 2,629,842 2,104,976

Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period $ 1,623,493 $ 1,778,825 $ 2,629,842

Disclosure of cash and cash equivalents, restricted cash, and cash reserved for users

Cash and cash equivalents $ 1,270,503 $ 1,309,172 $ 2,152,892

Restricted cash 11,700 — —

Cash reserved for users 341,290 469,653 476,950

Total cash, cash equivalents and restricted cash, end of period $ 1,778,825 $ 2,629,842 $ 2,104,976

Cash and cash equivalents, restricted cash, and cash reserved for users at the end of period $ 1,623,493 $ 1,778,825 $ 2,629,842

Supplemental Disclosure of Noncash Investing and Financing Activities:

Conversion of convertible notes and accrued interest to common shares — — 112,545

Increase in net liabilities acquired from DEAC — — 2,514

Investing activities included in accounts payable and accrued expenses 569 9,155 ( 3,758 )

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

Decrease in warrant liabilities from cashless exercise of warrants 4,654 — —

Supplemental Disclosure of Cash Activities:

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See accompanying notes to consolidated financial statements.

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

DRAFTKINGS INC.

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We are a digital sports entertainment and gaming company.

We provide users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as DraftKings Marketplace (“Marketplace”), retail sportsbook, media and other consumer product offerings.

We provide users with online sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”) product offerings, as well as 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 December 31, 2023, 35 U.S.

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

Of those 37 legal jurisdictions, 32 have legalized online sports betting.

Of those 32 jurisdictions, 30 are live, and DraftKings operates in 23 of them.

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

As of December 31, 2023, we operate our online sports betting product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Wyoming and Ontario, Canada and we operate retail sportsbooks in Arizona, Colorado, Connecticut, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey and Washington.

As of December 31, 2023, the Company offers its iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and Ontario, Canada.

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

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.

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

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

As of December 31, 2022, 32 U.S.

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

Of those 34 legal jurisdictions, 27 have legalized online sports betting.

Of those 27 jurisdictions, 23 are live, and DraftKings operates in 19 of them.

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

As of December 31, 2022, we operate our online sports betting product offering in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Wyoming and Ontario, Canada and we operate retail sportsbooks in Colorado, Connecticut, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, New Hampshire, New Jersey, New York and Washington.

As of December 31, 2022, the Company offers its iGaming product offering in Connecticut, Michigan, New Jersey, Pennsylvania, West Virginia and Ontario, Canada.

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

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

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

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

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

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

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

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

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

A significant or prolonged decrease in consumer spending on entertainment or leisure activities would also likely have an adverse effect on demand for the Company’s product offerings, reducing cash flows and revenues, and thereby materially harming the Company’s business, financial condition and results of operations.

In addition, a materially disruptive resurgence of COVID-19 cases or the emergence of additional variants or strains of COVID-19 could cause other widespread or more severe impacts depending on where infection rates are highest.

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

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

We will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19 and the emergence of additional variants or strains thereof.

Summary of Significant Accounting Policies and Practices

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

As described above, the Company consummated the GNOG Transaction on May 5, 2022.

In the GNOG Transaction, the Company was determined to be the accounting acquirer and, as such, the acquisition is considered a business combination under Accounting Standards Codification (“ASC”), Topic 805, Business Combinations , (“ASC 805”) and was accounted for using the acquisition method of accounting.

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

We were incorporated in Nevada as DEAC NV Merger Corp., a wholly owned subsidiary of our legal predecessor, Diamond Eagle Acquisition Corp.

(“DEAC”), a special purpose acquisition company.

On April 23, 2020, DEAC consummated the transactions contemplated by the Business Combination Agreement, dated December 22, 2019, as amended on April 7, 2020 (the “DEAC Business Combination”).

Pursuant to the DEAC Business Combination, the merger between a subsidiary of DEAC and DK Crown Holdings Inc.

(“DK DE”) was accounted for as a reverse recapitalization in accordance with U.S.

GAAP (the “Reverse Recapitalization”).

Under this method of accounting, DEAC was treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of DK DE issuing stock for the net assets of DEAC, accompanied by a recapitalization.

The net assets of DEAC are stated at historical cost, with no goodwill or other intangible assets recorded.

The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of DK DE.

The shares and corresponding capital amounts and earnings per share available for common stockholders, prior to the DEAC Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the DEAC Business Combination.

Further, DK DE was determined to be the accounting acquirer in its acquisition of the issued and outstanding share capital of SBTech (Global) Limited (“SBTech” and, such acquisition, the “SBTech Acquisition”), and, as such, the acquisition is considered a business combination under ASC 805 and was accounted for using the acquisition method of accounting.

DraftKings recorded the fair value of assets acquired and liabilities assumed from SBTech.

The presented financial information for the year ended December 31, 2020 includes the financial information and activities for SBTech for the period from April 24, 2020 to (and including) December 31, 2020.

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 , and was accounted for using the acquisition method of accounting.

These 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 consolidated financial statements exclude the operations of GNOG prior to the GNOG Closing Date.

The Company regularly reviews its operating segments and the approach used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources.

As a result of the consummation of the SBTech Acquisition in April 2020, the Company began to identify two distinct operating segments:

a business-to-consumer (“B2C”) segment, which included its Sportsbook, iGaming and DFS product offerings, as well as media and other consumer product offerings, and a

business-to-business (“B2B”) segment, which had principal activities involving the design and development of gaming software.

However, beginning in the fourth quarter of 2022, as a result of the Company integrating the technology and expertise of SBTech, the Company began to view the B2B segment primarily as a cost center of the B2C segment and, therefore, began to operate its business and report its results as a single operating segment.

The Company’s determination that it operates as a single segment is consistent with the financial information regularly reviewed by the CODM for purposes of evaluating performance, allocating resources and planning and forecasting for future periods.

The Company’s CODM allocates resources and assesses financial performance on a consolidated basis.

Prior periods have reclassified to conform with the new segment presentation.

Prior to the fourth quarter of 2022, the Company had 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 CODM's regular review of consolidated financial information for the purposes of evaluating performance, allocating resources and planning and forecasting for future periods.

Prior periods have been reclassified to conform to the new segment presentation.

Foreign Currency and Comprehensive Loss

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subsidiaries were translated into United States dollars in accordance with ASC 830, Foreign Currency Matters , using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs and expenses and historical rates for equity.

For the period ending December 31, 2021 and 2020, the translation gain or loss is included in the consolidated statements of comprehensive loss.

For the period ending December 31, 2021, the translation gain is included in the consolidated statements of comprehensive loss.

Effective as of January 1, 2022, the Company’s reporting currency remained the U.S.

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

subsidiaries for the year ended December 31, 2022.

subsidiaries for the years ended December 31, 2023 and 2022.

During 2023, 2022 and 2021, foreign currency transactions did not have a material impact on net loss.

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The Company has experienced operating losses and negative operating cash flows for the years ended December 31, 2023, 2022 and 2021.

While certain jurisdictions will experience improved cash flow, the Company expects to continue to incur annual operating losses and annual negative operating cash flow for the next twelve months.

While certain jurisdictions will experience improved operating cash flow, the Company expects to continue to incur annual operating losses for the next twelve months.

Concentration Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of operating cash and cash equivalents and cash reserved for users.

The Company maintains separate accounts for cash and cash reserved for users primarily across six financial institutions.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and cash reserved for users.

The Company maintains separate accounts for cash and cash reserved for users primarily across several financial institutions.

Some of the amounts held exceed federally insured limits.

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The Company relies on a limited number of vendors to support operations.

In particular, a single vendor is currently the primary provider of web services that allows the Company to host its Sportsbook, iGaming and DFS product offerings.

Any interruption in the services provided by this supplier could have a material adverse effect on its business, financial condition and results of operations.

In particular, a single vendor is currently the primary provider of web services that allow the Company to host its Sportsbook, iGaming and DFS product offerings.

interruption in the services provided by this supplier could have a material adverse effect on its business, financial condition and results of operations.

The Company’s growth prospects and market potential will depend on its ability to obtain and maintain licenses to operate in a number of jurisdictions, and if the Company fails to obtain and maintain such licenses, its business, financial condition, results of operations and prospects could be impaired.

We conduct business in numerous countries that carry high levels of currency, political, compliance and economic risk.

For example, we have offices in Ukraine and Israel, and the military conflict between Russia and Ukraine and the evolving conflict in Israel and Gaza and any business interruptions or other spillover effects from such conflicts could adversely affect our operations.

Business Combinations

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Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid, unrestricted savings, checking, money market funds with maturities of less than three months and other bank accounts.

Cash and cash equivalents consist of highly liquid, unrestricted savings, checking, money market funds with original maturities of less than three months and other bank accounts.

Restricted Cash

Restricted cash refers to cash that is held by the company but cannot be used for continuing operations.

Restricted cash as of December 31, 2023, primarily relates to collateral for a letter of credit in connection with a cyber-security insurance policy entered into in 2023.

Cash Reserved for Users

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Impairment of Long-Lived Assets

Long-lived assets, except for goodwill, consist of property and equipment and finite-lived acquired intangible assets, such as internal-use software, developed software, gaming licenses, trademarks, tradenames and customer relationships.

Long-lived assets, except for goodwill and indefinite-lived intangible assets, consist of property and equipment and finite-lived acquired intangible assets, such as internal-use software, developed software, gaming licenses, trademarks, tradenames, and customer relationships.

Long-lived assets, except for goodwill and indefinite-lived assets, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable.

Impairment expense is recognized to the extent an asset’s expected undiscounted future cash flows are less than the asset’s carrying amount.

The Company determined that these was no significant impairment of long-lived assets during 2022, 2021, or 2020.

The Company’s business is classified into three reporting units:

The Company determined that there was no impairment of long-lived assets during 2023, 2022, or 2021.

The Company regularly reviews its reporting units and the approach used by the CODM and segment management to evaluate performance and allocate resources.

Prior to 2023, the Company’s business was classified into three reporting units:

B2C, Media and B2B.

However, as a result of the Company’s integration of its B2B business and change in reporting structure to the CODM, the Company determined that it only had one reporting unit as of October 1, 2023, the Company’s annual goodwill impairment assessment date.

In testing goodwill for impairment, the Company has the option to begin with a qualitative assessment, commonly referred to as “Step 0,” to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.

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The Company performs its impairment testing annually and when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The Company performed its annual impairment assessment of goodwill as of October 1, 2022 and concluded that goodwill was not impaired.

The Company performed its annual impairment assessment of goodwill as of October 1, 2023 and, with consideration regarding the change in reporting units, concluded that goodwill was not impaired.

Equity Method Investments

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As of December 31, 2023, the Company had invested a total of $ 7.6 million of the total commitment, which represents ownership of approximately 28.6 % in t he fund.

The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, but does not exercise control and is not the primary beneficiary.

The Company uses the equity method to account for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, but it does not exercise control and is not the primary beneficiary.

The Company’s judgment regarding its level of influence over the equity method investee includes considering key factors, such as ownership interest, representation on the board of directors, and participation in policy-making decisions.

The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investments” on the consolidated balance sheets.

The Company’s carrying value in the equity method investee is reflected in the caption “Equity method investments”

on the consolidated balance sheets.

Changes in value of DKFS, LLC and DBDK Venture Fund I, LP are recorded in “Loss (income) from equity method investment” on the consolidated statements of operations.

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There was no such impairment recorded during 2023, 2022, or 2021.

The Company leases certain office spaces, equipment and vehicles and recognizes lease expense on a straight-line basis over the initial term of the lease unless external economic factors exist such that renewals are reasonably certain.

In those instances, the renewal period would be included in the lease term to determine the period in which to recognize the lease expense.

Effective January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-2, Leases (Topic 842) (“ASU 2016-2”), using the alternative transition method provided in ASU 2018-11, Leases (Topic 842) (“ASU 2018-11”):

Targeted Improvements.

Using the alternative transition method, the Company applied the transition requirements at the effective date of ASU 2016-2.

The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard.

In addition, the Company has elected to apply the practical expedient to combine lease and related non-lease components, for all classes of underlying assets, and account for the combined contract as a lease component, as well as the election was made to apply the short-term lease recognition exemption.

The Company determines if an arrangement is a lease at inception and categorizes it as either operating or finance based on the criteria of ASC 842.

An arrangement contains a lease when the arrangement conveys the right to control the use of an identified asset over the lease term.

Operating leases are recorded in the Consolidated Balance Sheets.

The Company currently does not have any finance leases.

The Company elects certain practical expedients that include not separating lease and non-lease components and it does not apply the right-of-use (“ROU”) assets and lease liability recognition requirements to short-term leases.

Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

These leases typically do not provide an implicit rate;

therefore, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments.

The incremental borrowing rate is the rate incurred to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

ROUs are recognized at the lease commencement date at the value of the lease liability, adjusted for any lease payments made prior to commencement and exclude lease incentives and initial direct costs incurred.

The lease terms include all non-cancelable periods and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense is recognized on a straight-line basis over the expected lease term.

Liabilities to Users

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Loss Contingencies

The Company’s loss contingencies, which are included within other long-term liabilities in our consolidated balance sheets, are uncertain by nature and their estimation requires significant management judgment as to the probability of loss and estimation of the amount of such loss.

These contingencies include, but may not be limited to, indirect taxes, regulatory investigations and proceedings and management’s evaluation of complex laws and regulations, and the extent to which they may apply to our business and industry.

The Company regularly reviews its contingencies to determine whether the likelihood of loss is probable and to assess whether a reasonable estimate of the loss can be made.

The Company’s loss contingencies, which are included within accounts payable and accrued expenses or other long-term liabilities in our consolidated balance sheets, are uncertain by nature and their estimation requires significant management judgment as to the probability of loss and estimation of the amount of such loss.

These contingencies include, but may not be limited to, litigation, indirect taxes, regulatory investigations and proceedings and management’s evaluation of complex laws and regulations, and the extent to which they may apply to our business and industry.

The Company regularly reviews its contingencies to determine whether the likelihood of loss is probable or reasonably possible and to assess whether a reasonable estimate of the loss can be made.

Determination of whether a loss estimate can be made is a complex undertaking that considers the judgement of management, third-party research, the prospect of negotiation and interpretations by regulators and courts, among other information.

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In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The cumulative effect of the adoption was immaterial to our consolidated financial statements.

See Note 9 ( Revenue Recognition ) for further information.

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The Company’s direct customer contract revenue is generally calculated as a percentage of the wagering revenue generated by the business customer using our software and is recognized in the periods in which those wagering and related activities conclude.

In contrast, the Company had also previously provided distributors with the right to resell the Company’s software-as-a-service product offering to their clients, using their own infrastructure.

In reseller arrangements, revenue was generally calculated via a fixed monthly fee and an additional monthly fee which varied based on the number of gaming operators to whom each reseller sub-licensed the Company’s software.

Our direct customer arrangements do not provide the customers with the right to take possession of our software, but only the right to purchase access to the Company’s sports and casino wagering software for a defined contractual period.

In reseller arrangements, as opposed to direct customer arrangements, the resellers purchased a software license which enabled them to install, host, and serve their operators’ base using the Company’s software.

As of December 31, 2022 and 2021, we no longer had agreements with any resellers.

Media and advertising revenue

The Company enters contracts with businesses where it receives consideration in exchange for advertisement activities over the related campaign periods.

These services are grouped into advertising promises and sponsored game promises.

The advertising packages range from standard ad placements and background ad placements to more high-touch integrations, such as sponsored DFS contest series or custom site takeovers.

Media and advertising revenue is generated from business users and recognized ratably over the respective ad periods.

Non-fungible token (“NFT”) content

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These costs are capitalized as contract acquisition costs and are amortized over the period of benefit to the customer.

For the Company, the period of benefit is typically less than or equal to 1 year.

For the Company, the period of benefit is typically less than or equal to one year .

As such, the Company applied the practical expedient and contract acquisition costs are expensed immediately.

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Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved.

The Company maintains various programs to incentivize user behaviors, which allows users to earn awards.

The Company maintains various programs to incentivize user behavior, which allow users to earn awards.

Incentive awards generally represent a material right to the user, and awards may be redeemed for future services.

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When a user redeems most types of awards, the Company recognizes revenue on its consolidated statements of operations.

Certain player awards are not subject to expiration or have not been expired historically, on such awards the Company recognizes breakage (for amounts not expected to be redeemed) to the extent there is no requirement for remitting such balances to regulatory agencies.

Certain player awards are not subject to expiration or have not been expired historically;

on such awards the Company recognizes breakage (for amounts not expected to be redeemed) to the extent there is no requirement for remitting such balances to regulatory agencies.

In addition to these incentive programs, the Company’s deferred revenue balance also consists of wagered amounts that relate to unsettled or pending outcomes.

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General and administrative expenses consist of costs not related to sales and marketing, product and technology or revenue.

General and administrative costs include professional services (including legal, regulatory, audit, accounting, lobbying and

services related to acquisitions), rent and facilities maintenance, contingencies, insurance, allowance for credit losses, depreciation of leasehold improvements and furniture and fixtures and costs related to the compensation of executive and non-executive personnel, including stock-based compensation.

General and administrative costs include professional services (including legal, regulatory, audit, accounting, lobbying and services related to acquisitions), rent and facilities maintenance, contingencies, insurance, allowance for credit losses, depreciation of leasehold improvements and furniture and fixtures and costs related to the compensation of executive and non-executive personnel, including stock-based compensation.

Benefit Plans

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The plan allows for employee salary deferrals, which are matched at our discretion.

The Company contributions to these plans were $ 9.3 million and $ 6.7 million in 2022 and 2021, respectively.

These costs were no t significant to the Company’s consolidated financial statements in 2020.

The Company contributions to these plans were $ 11.6 million, $ 9.3 million and $ 6.7 million in 2023, 2022 and 2021, respectively.

Stock-based Compensation

The Company measures compensation expense for stock options and other stock awards in accordance with ASC 718, Compensation—Stock Compensation .

Stock-based compensation is measured at fair value on grant date and recognized as compensation expense over the requisite service period.

Generally, the Company issues stock options and other stock awards to employees with service-based and/or performance-based vesting conditions.

The Company measures compensation cost for stock options and other stock awards in accordance with ASC 718, Compensation—Stock Compensation .

Stock-based compensation is measured at fair value on grant date and recognized as compensation cost over the requisite service period.

Generally, the Company issues stock options and other stock awards to employees with service-based or performance-based vesting conditions.

For awards with only service-based vesting conditions, the Company records compensation cost for these awards using the straight-line method less an assumed forfeiture rate.

For awards with performance-based vesting conditions, the Company recognizes compensation cost on a tranche-by-tranche basis (the accelerated attribution method).

For awards with performance-based vesting conditions, the Company recognizes compensation cost on a tranche-by-tranche basis (the accelerated attribution method), based on the probability of achieving the performance criteria.

Under the provisions of ASC 505-50, Equity-Based Payments to Non-Employees , the Company measures stock-based awards granted to non-employees at the earlier of:

(i) the performance commitment date, or (ii) the date the services required under the arrangement have been completed.

Compensation expense is recognized over the period during which services are rendered by non-employees until service is completed.

Compensation cost is recognized over the period during which services are rendered by non-employees until service is completed.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

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The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense.

Potential for recovery of deferred tax assets is evaluated by considering taxable income in carryback years, existing taxable temporary differences, prudent and feasible tax planning strategies and estimated future taxable profits.

Potential for recovery of deferred tax assets is evaluated by considering taxable income of the appropriate source and character in carryback years, existing taxable temporary differences, prudent and feasible tax planning strategies and estimated future taxable profits.

The Company accounts for uncertainty in income taxes recognized in its consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized.

First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.

If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in our consolidated financial statements.

If the tax position is deemed more-likely-than-not to be sustained, the tax position is then measured to determine the amount of benefit to recognize in our consolidated financial statements.

Liabilities for uncertain tax positions are included in long-term income tax liabilities in the consolidated balance sheets.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with ASC Topic 606.

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

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

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

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

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

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve reportable segment disclosures.

The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses.

The standard will be effective for us beginning with our annual reporting for fiscal year 2024 and interim periods thereafter, with early adoption permitted.

We are currently evaluating the impact of this standard on our segment disclosures.

In December 2023, the FASB issued ASU 2023-08, Accounting for and Disclosure of Crypto Assets (Topic 820) , a new standard designed to enhance decision-useful information about such assets and to better reflect the underlying economics of cryptocurrency transactions.

The standard will be effective for us beginning with our annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted.

We are currently evaluating the impact of this standard on our digital assets’ accounting and disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 modifies the rules on income tax disclosures to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid.

The amendments are intended to address investors’ requests for income tax disclosures that provide more information to help them better understand an entity’s exposure to potential changes in tax laws and the ensuing risks and opportunities and to assess income tax information that affects cash flow forecasts and capital allocation decisions.

The guidance also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities.

ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024.

All entities are required to apply the guidance prospectively but have the option to apply it retrospectively.

Early adoption is permitted.

The Company is continuing to assess the timing of adoption and the potential impacts of ASC 2023-09.

Business Combinations

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

Operating results for GNOG on and after the GNOG Closing Date are included in the Company’s consolidated statements of operations for the year ended December 31, 2022.

Because the Company is integrating GNOG’s operations into its consolidated operating activities, the amount of revenue and earnings attributable to the GNOG business from the GNOG Closing Date through December 31, 2022, which is included within revenue and net loss attributable to common stockholders in the Company’s consolidated statements of operations , is impracticable to determine.

Preliminary Purchase Price Accounting for the GNOG Transaction

Operating results for GNOG on and after the GNOG Closing Date are included in the Company’s consolidated statements of operations for the years ended December 31, 2023 and 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 for 2022, which is included within revenue and net loss attributable to common stockholders in the Company’s consolidated statements of operations , was impracticable to determine.

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.

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(“FEI”), which can be applied by the Company from time to time to offset future amounts otherwise owed by it to FEI or its affiliates under commercial arrangements among such parties, subject to certain limited exceptions.

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

Since we first reported the preliminary purchase price allocation for the GNOG Transaction as of June 30, 2022, the Company made measurement period adjustments, which were primarily composed of an $ 8.0 million increase to intangible assets and a decrease to goodwill of $ 7.6 million.

These adjustments did not have a significant impact on our consolidated statements of operations in the periods previously presented.

Any further measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to tax liabilities assumed, including the calculation of deferred tax assets and liabilities.

Any such adjustments may be material.

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

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, and the amount will be finalized within the measurement period.

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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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.

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Net loss $ ( 1,375,161 ) $ ( 1,660,125 )

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

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

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

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.

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

Vegas Sports Information Network, Inc.

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The purchase price allocation for the Blue Ribbon Acquisition was finalized as of December 31, 2021.

SBTech Acquisition

On April 23, 2020 DEAC consummated the transactions contemplated by the Business Combination Agreement, dated December 22, 2019 as amended on April 7, 2020 (the “Business Combination Agreement”) and, in connection therewith, (i) DEAC merged with and into Old DraftKings, whereby Old DraftKings survived the merger (the “DK Merger”) and became the successor issuer to DEAC by operation of Rule 12g-3(a) promulgated under the Exchange Act, (ii) Old DraftKings changed its name to “DraftKings Inc.,” (iii) Old DraftKings acquired DK DE by way of a merger and (iv) Old DraftKings acquired all of the issued and outstanding share capital of SBTech.

Upon consummation of the foregoing transactions, DK DE and SBTech became wholly owned subsidiaries of Old DraftKings.

Under ASC 805, DK DE was deemed the accounting acquirer based on the following predominant factors:

its former owners had the largest portion of voting rights in Old DraftKings, the board of directors and management of Old DraftKings had more individuals coming from DK DE than either DEAC or SBTech, DK DE was the largest entity by revenue and by assets at the time of the DEAC Business Combination, and the headquarters of Old DraftKings was DK DE’s headquarters, which is located in Boston, Massachusetts.

The DK Merger was accounted for as a reverse recapitalization, in accordance with U.S.

Under this method of accounting, DEAC was treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of DK DE issuing stock for the net assets of DEAC, accompanied by a recapitalization.

The net assets of DEAC are stated at historical cost with no goodwill or other intangible assets recorded.

The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of DK DE.

Reported shares and earnings per share available to holders of the Company’s common stock, prior to the DEAC Business Combination, were retroactively restated as shares reflecting the exchange ratio established in the DEAC Business Combination.

Further, DK DE was determined to be the accounting acquirer in the SBTech Acquisition.

As such, the SBTech Acquisition was treated as a business combination under ASC 805, and was accounted for using the acquisition method of accounting.

We recorded the fair value of assets acquired and liabilities assumed from SBTech.

The Business Combination Agreement contains provisions that indemnifies Old DraftKings for various losses.

Operating results for SBTech are included in our consolidated statements of operations for periods on and after the date of the consummation of the SBTech Acquisition.

The Company acquired 100 % of the equity of SBTech pursuant to the Business Combination Agreement by issuing 45.0 million shares of Class A common stock, options denominated in shares of Class A common stock, and earnout shares of Class A common stock of the Company at a weighted average fair value of $ 17.53 to the former stockholders and option holders of SBTech.

The following summarizes the consideration transferred at the closing for the SBTech Acquisition:

Cash consideration (1)

Share consideration (2)

Other cash consideration (3)

Total SBTech consideration $ 977,367

(1) Includes the cash consideration, adjusted for the Net Debt Amount, the Working Capital Adjustment, and the Aggregate Strike Price Amount, in each case as defined in the Business Combination Agreement, resulting in cash consideration of $ 184.7 million.

(2) Includes $ 776.5 million for the share consideration for SBTech equity of 40.7 million shares and SBTech employees’ vested options of 3.6 million options, and $ 12.6 million of contingent consideration, which has been paid out for the 720 thousand earnout shares issued to former stockholders of SBTech as part of the DEAC Business Combination, recognized at their acquisition date fair value.

(3) Includes transaction costs incurred by SBTech stockholders to be borne by DraftKings, costs related to the SBTech restructuring transaction that were paid by DraftKings, and the tail liability insurance for SBTech’s directors and officers, as specified in the Business Combination Agreement.

The acquired assets of $ 554.6 million and assumed liabilities of $ 115.4 million were recorded at their estimated fair values, resulting in goodwill of $ 538.2 million.

The purchase price allocation for the SBTech Acquisition was finalized as of December 31, 2020.

Transaction Costs

The Company incurred $ 30.9 million, for the year ended December 31, 2020, in advisory, legal, accounting and management fees in conjunction with the DEAC Business Combination and SBTech Acquisition, which are included in general and administrative expenses on the consolidated statement of operations.

Direct and incremental transaction costs related to the DEAC Business Combination and additional equity offerings that would not otherwise have been incurred are treated as a reduction of the cash proceeds and are deducted from the Company’s additional paid-in capital.

Accordingly, $ 63.7 million was incurred related to equity issuance costs for the year ended December 31, 2020.

Unaudited Pro-Forma Information

The financial information in the table below summarizes the combined results of operations of DK DE and SBTech, on a pro forma basis, as though the SBTech Acquisition had taken place on January 1, 2019.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the SBTech Acquisition had taken place on January 1, 2019 or of results that may occur in the future.

The following pro forma financial information for the year ended December 31, 2020 combines the historical results for DK DE for the year ended December 31, 2020 and the historical results of SBTech, as converted to U.S.

GAAP, for such period:

Year Ended December 31,

2020 Pro Forma

Revenue $ 643,502

Net loss $ ( 1,232,651 )

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

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

Acquisition costs and other non-recurring charges incurred are included in the year that the SBTech Acquisition is assumed to have taken place.

Property and Equipment

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During the years ended December 31, 2023, 2022, and 2021 the Company recorded depreciation expense on property and equipment of $ 20.4 million , $ 18.7 million, and $ 13.8 million, respectively.

The value of property and equipment, net in foreign countries is $ 4.0 million.

Intangible Assets and Goodwill

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Indefinite-lived intangible assets:

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

Digital assets, net of impairment Indefinite-lived 2,884 N/A 2,884

Intangible assets, net $ 1,188,590 $ ( 497,970 ) $ 690,620

As of December 31, 2021, intangible assets, net consists of the following:

As of December 31, 2022, intangible assets, net consisted of the following:

Amount Accumulated

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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

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

1,103,753 ( 329,516 ) 774,237

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During the years ended December 31, 2023, 2022, and 2021 the Company recorded amortization expense on intangible assets of $ 180.9 million , $ 150.6 million , and $ 107.3 million , respectively.

Future cash flows associated with the Company’s intangible assets are not expected to be materially affected by its ability to renew or extend its arrangements.

The table below shows expected amortization expense for the next five years of intangible assets recorded as of December 31, 2023:

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2024 $ 186,620

The changes in the carrying amount of goodwill for the year ended December 31, 2022 by reporting unit are:

B2C B2B Media Total

There were no changes in the carrying amount of goodwill for the year ended December 31, 2023.

As of December 31, 2023, the Company had no accumulated goodwill impairment losses.

Balance as of December 31, 2021 $ 615,655

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Balance as of December 31, 2022 $ 886,373

Changes in Goodwill —

Balance as of December 31, 2023 $ 886,373

No impairment of goodwill was recorded in the years ended December 31, 2023, 2022 and 2021.

As of December 31, 2023, the Company had no accumulated goodwill impairment losses.

Accounts Payable and Accrued Expenses

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Accrued marketing 100,840 146,569

Accrued professional fees 23,151 18,400

Accrued operating taxes 70,891 50,813

Accrued partnership fees 136,338 99,633

Accrued processor fees 21,357 14,440

Accrued product taxes 116,501 70,891

Accrued professional fees and litigation 53,870 23,151

Accrued software and license fees 25,829 12,558

Deferred revenue 43,634 40,520

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Net borrowing capacity available from the Credit Agreement as of December 31, 2023 totaled $ 122.7 million.

The Company is also subject to certain affirmative and negative covenants under the Credit Agreement, which we are in compliance with as of December 31, 2022.

As of December 31, 2022, the Company has been issued $ 65.0 million in surety bonds at a combined annual premium cost of 0.5 % which are held for certain regulators’ use and benefit in order for the Company to satisfy state license requirements.

There have been no claims against such bonds and the likelihood of future claims is remote.

The Company is also subject to certain affirmative and negative covenants, including the restriction of dividends, under the Credit Agreement which it is in compliance with as of December 31, 2023.

One such covenant involves maintaining compensating cash balances.

The compensating balances may be withdrawn but the availability of the line of credit is dependent upon maintenance of such compensating balances.

The performance of the Company’s obligations under the Credit Agreement are secured by a first-priority security interest on substantially all of its assets.

Convertible Notes and Capped Call

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

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

For the years ended December 31, 2023, 2022 and 2021 there were no changes to the initial conversion price.

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

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

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

As of December 31, 2023, no conditions were met to allow for the conversion of the Convertible Notes by any holder.

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”).

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

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

As the transaction qualifies for equity classification, the net

cost of $ 124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company's consolidated balance sheet.

As of December 31, 2023, the Company’s convertible debt balance was $ 1,253.8 million, net of unamortized debt issuance costs of $ 11.2 million.

The amortization of debt issuance costs were $ 2.7 million in 2022 and $ 2.1 million in 2021, and these costs are included in the interest income (expense) line-item on the Company's consolidated statements of operations.

The amortization of debt issuance costs were $ 2.7 million, $ 2.7 million and $ 2.1 million in 2023, 2022 and 2021, respectively, and these costs 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 $ 1,025.6 million and $ 786.5 million as of December 31, 2023 and 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.

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Warrant Liabilities

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

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

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

Simultaneously with the closing of the IPO, DEAC completed the private sale of 6.3 million warrants to DEAC’s sponsor (the “Private Warrants”) where each whole warrant entitles the holder to purchase one share of DraftKings Inc.’s Class A common stock at an exercise price of $ 11.50 per share.

As of December 31, 2022 and 2021, there were no Public Warrants outstanding and 1.6 million Private Warrants outstanding.

As of December 31, 2023, there were no Public Warrants outstanding and 1.4 million Private Warrants outstanding.

As of December 31, 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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The Company classified its Public Warrants, Private Warrants and GNOG Private Warrants pursuant to ASC 815 as derivative liabilities with subsequent changes in their respective fair values recognized in its consolidated statement of operations at each reporting date.

As of December 31, 2022, there were 5.9 million GNOG Private Warrants outstanding.

As of December 31, 2023 and 2022, there were 5.9 million GNOG Private Warrants outstanding.

As of December 31, 2023, the fair value of the Company’s warrant liability was $ 63.6 million.

Due to fair value changes throughout 2022 and 2021, the Company recorded a gain on remeasurement of warrant liabilities of $ 29.4 million and $ 30.1 million, respectively.

During 2022, a de minimis number of Private Warrants and GNOG Private Warrants were exercised.

In 2021, 0.3 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 9.2 million, reflecting the reclassification of the warrant liabilities of $ 8.5 million and proceeds upon exercise of $ 0.7 million.

During 2020, 17.7 million Private Warrants were exercised, resulting in a reclassification to additional paid-in-capital in the amount of $ 649.1 million, reflecting the reclassification of the warrant liabilities of $ 447.1 million and proceeds upon exercise of $ 202.0 million.

Due to fair value changes throughout 2023, the Company recorded a loss on remeasurement of warrant liabilities of $ 57.5 million and throughout 2022 and 2021, the Company recorded a gain on remeasurement of warrant liabilities of $ 29.4 million and $ 30.1 million, respectively.

In 2023, 0.2 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of $ 4.6 million, and no GNOG Private Warrants were exercised.

In 2022, a de minimis number of Private Warrants and no GNOG Private Warrants were exercised.

In 2021, 0.3 million Private Warrants were exercised, resulting in a reclassification to additional paid-in-capital in the amount of $ 9.2 million.

See Note 8 ( Fair Value Measurements ) and Note 13 ( Loss Per Share ) for further information on the Company’s warrant liabilities.

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 December 31, 2022 and December 31, 2021 based on the three-tier fair value hierarchy:

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

December 31, 2023

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$ — $ — $ 304,216

Other current assets:

Digital assets held for users — 38,444 (2)

Other non-current assets:

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

Other current liabilities:

Digital assets held for users $ — $ 38,444 (2)

Warrant liabilities — 10,680 (6)

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(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.

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

For the year ended December 31, 2023, the Company sold Level 3 derivative instruments with a fair value at December 31, 2022 of $ 6.3 million for proceeds of $ 5.2 million and recorded loss of $ 0.1 million related to this sale.

There were no new Level 3 derivative instruments purchased by or issued to the Company for the year ended December 31, 2023.

During 2022, the Company did not purchase or issue a significant amount of new derivative instruments.

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

Changes to fair value of these instruments are

recorded in Other income, net on the consolidated statements of operations and Gain on marketable equity securities and other financial assets, net in the consolidated statement of cash flows.

Changes to fair value of these instruments are recorded in Other (loss) income, net on the consolidated statements of operations and Loss (gain) on marketable equity securities and other financial assets, net in the consolidated statement of cash flows.

December 31, 2023 December 31, 2022

Significant Unobservable Input Range (Weighted Average)

Underlying stock price $ 7.30 - $ 19.80 ($ 16.53 )

Volatility 56.0 % - 80.0 % ( 74.1 %)

Risk-free rate 1.3 % - 4.3 % ( 4.1 %)

Range (Weighted Average) Range (Weighted Average)

Significant Unobservable Input of Level 3 Investments (amounts in dollars) (amounts in dollars)

Underlying stock price of Level 3 investments $ 12.79 - $ 19.80 ($ 19.41 )

$ 7.30 - $ 19.80 ($ 16.53 )

Volatility of Level 3 investments 75.0 % - 80.0 % ( 79.7 %)

56.0 % - 80.0 % ( 74.1 %)

Risk-free rate of Level 3 investments 1.3 % - 4.2 % ( 4.0 %)

1.3 % - 4.3 % ( 4.1 %)

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

During 2022 and 2021, the Company recorded unrealized gains of $ 11.0 million and $ 6.1 million, respectively, in the aggregate for its Level 1, Level 2 and Level 3 financial assets.

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

During 2020, no such gains or losses were recorded.

Stockholders’ Equity (Deficit)

The consolidated statements of changes in equity reflect the Reverse Recapitalization and SBTech Acquisition as of April 23, 2020.

As DK DE was deemed the accounting acquirer in the Reverse Recapitalization with DEAC, all periods prior to April 23, 2020 reflect the balances and activity of DK DE.

All convertible redeemable preferred stock classified as mezzanine was retroactively adjusted, converted into Class A common stock, and reclassified to permanent as a result of the Reverse Recapitalization.

Redeemable convertible preferred Series E-1 stock converted into shares of DK DE common stock at a share conversion factor of 1.40 whereas Series F converted into shares of DK DE common stock at a share conversion factor of 1 and both were immediately exchanged for Class A common stock of the Company using the recapitalization exchange ratio of 0.353628 as a result of the Reverse Recapitalization.

Immediately prior to the DEAC Business Combination, DK DE issued 393.0 million shares of Class B common stock to Jason Robins (the Chief Executive Officer of DK DE and of the Company) which converted into 393.0 million shares of Class B common stock of the Company as a result of the DEAC Business Combination and is recorded as stock-based compensation for the year ended December 31, 2020.

Such shares carry 10 votes per share and allowed Jason Robins to have, as of the closing of the DEAC Business Combination, approximately 90 % of the voting power of the capital stock of DraftKings on a fully-diluted basis.

As these shares have no economic rights and are non-participating, they are allocated no earnings or losses when calculating earnings per share pursuant to the two-class method.

Upon the consummation of the DEAC Business Combination, the mandatory conversion feature was triggered for the Company’s convertible notes then outstanding.

As a result, all outstanding principal of $ 109.2 million and unpaid accrued interest of $ 3.4 million was collectively converted to equity securities at $ 10 per share.

The noteholders received 11.3 million shares of Class A common stock in DraftKings as result of the conversion.

As part of the DEAC Business Combination, $ 542.3 million of Class A common stock and Additional Paid in Capital was recorded, net of transaction costs of $ 10.6 million, in relation to DEAC shares being recapitalized.

The Company then used $ 188.3 million as cash consideration in its acquisition of SBTech and $ 7.2 million for the buyout of unaccredited investors.

Net cash proceeds to the Company were $ 484.0 million.

In June 2020, we issued 16.0 million new shares of our Class A common stock in a public offering for net proceeds (net of underwriting fees) of $ 620.8 million.

In October 2020, the Company issued 20.8 million shares of its Class A common stock in a public offering for net proceeds (net of underwriting fees) of $ 1,059.3 million.

As of December 31, 2022, the Company had 300.0 million shares authorized of preferred stock, $ 0.0001 par value, of which none were issued and outstanding as of December 31, 2022 or December 31, 2021.

Key assumptions used in the valuation of the Private Warrants and GNOG Private Warrants include term, risk free rate and volatility.

See Note 7 Current and Long-term Liabilities and Note 13 Loss Per Share for further information on the Company’s warrant liabilities.

During 2022, the Company recorded an unrealized gain of $ 19.9 million in the aggregate for its Level 3 financial assets.

The Company did not record any unrealized gains or losses for its Level 3 financial assets during 2023 or 2021.

Revenue Recognition

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Year Ended December 31,

2023 2022 2021

Deferred revenue, beginning of the period $ 133,851 $ 91,554 $ 30,627

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Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period $ 129,246 $ 74,837 $ 28,319

Deferred revenue primarily represents contract liabilities related to the Company’s obligation to transfer future value in relation to in period transactions in which the Company has received consideration.

These obligations are primarily related to incentive programs and wagered amounts associated with unsettled or pending outcomes that fluctuate based on volume of activity.

Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved, often within the following year.

Revenue Disaggregation

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Total Revenue $ 3,665,393 $ 2,240,461 $ 1,296,025

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

Other revenue primarily includes media, Marketplace and retail sportsbooks.

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

Other revenue primarily includes media, retail sportsbooks and other consumer product offerings.

The opening and closing balances of the Company's accounts receivable from contracts with customers were $ 51.1 million and $ 47.5 million, respectively, for the year ended December 31, 2023, $ 45.8 million and $ 51.1 million, respectively, for the year ended December 31, 2022, and $ 44.5 million and $ 45.8 million, respectively, for the year ended December 31, 2021.

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

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Total Revenue $ 3,665,393 $ 2,240,461 $ 1,296,025

Stockholders’ Equity (Deficit)

Class A Common Stock

Holders of Class A common stock are entitled to cast one vote per share of Class A common stock.

Holders of Class A common stock are not entitled to cumulate their votes in the election of directors.

Holders of Class A common stock will share ratably (based on the number of shares of Class A common stock held) if and when any dividend is declared by the Board out of funds legally available therefor, subject to restrictions, whether statutory or contractual (including with respect to any outstanding indebtedness), on the declaration and payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock or any class or series of stock having a preference over, or the right to participate with, the Class A common stock with respect to the payment of dividends.

On the liquidation, dissolution, distribution of assets or winding up of DraftKings, each holder of Class A common stock will be entitled, pro rata on a per share basis, to all assets of DraftKings of whatever kind available for distribution to the holders of common stock, subject to the designations, preferences, limitations, restrictions and relative rights of any other class or series of preferred stock of DraftKings then outstanding.

Class B Common Stock

Shares of Class B common stock may be issued only to, and registered in the name of, Mr.

Robins and any entities wholly owned by Mr.

Robins (including all subsequent successors, assigns and permitted transferees).

Holders of Class B common stock are entitled to cast 10 votes per share of Class B common stock.

Holders of Class B common stock are not entitled to cumulate their votes in the election of directors.

Holders of Class B common stock will not participate in any dividend declared by the Board.

On the liquidation, dissolution, distribution of assets or winding up of DraftKings, holders of Class B common stock will not be entitled to receive any distribution of DraftKings assets of whatever kind available until distribution has first been made to all holders of Class A common stock.

Notwithstanding this, due to the liquidation rights of holders of Class A common stock described above in which all assets of DraftKings of whatever kind available will be distributed to holders of Class A common stock, no assets of DraftKings will be available for liquidating distributions in respect of Class B common stock.

Preferred Stock

The Company’s amended and restated articles of incorporation provide that its Board has the authority, without action by the stockholders, to designate and issue shares of preferred stock in one or more classes or series, and the number of shares

constituting any such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of preferred stock, including, without limitation, dividend rights, dividend rates, conversion rights, exchange rights, voting rights, rights and terms of redemption, dissolution preferences, and treatment in the case of a merger, business combination transaction, or sale of its assets, which rights may be greater than the rights of the holders of the common stock.

As of December 31, 2023, the Company had 300.0 million shares authorized of preferred stock, $ 0.0001 par value, of which none were issued and outstanding as of December 31, 2023 or December 31, 2022.

Stock-Based Compensation

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The 2020 Plan provides for the granting of incentive and nonqualified stock options, restricted stock units (“RSUs”) and other equity interests or awards in the Company.

As of December 31, 2022, the total number of shares available for grant under the 2020 Plan was 1.5 million shares.

As of December 31, 2023, the total number of shares available for issuance under the 2020 Plan was 10.1 million shares.

There are 10.4 million shares available for issuance under the 2017 Plan, however, we no longer issue awards under the 2017 Plan.

There are no securities remaining available for future issuance under the 2012 Plan as this plan has expired pursuant to the terms.

The Company issued time-based and performance-based vesting awards under the 2020 Plan.

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

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

Time-based awards generally vest over a four-year period in annual and/or quarterly installments and expire no later than ten years from the date of grant.

As applicable, certain stock-based compensation awards expire seven to ten years after the grant date.

Time-based awards generally vest over a four-year period in annual and/or quarterly installments and, as applicable, expire no later than ten years from the date of grant.

Time-based options are valued using the Black-Scholes option-pricing model with the assumptions noted in the table below.

Shares issued from the exercise of options are issued from the available Class A shares available under the Plans.

The fair value of time-based RSUs is estimated on the grant date using the underlying share price.

LTIP awards that were granted as RSUs subsequent to 2020 vest based on long-term revenue targets and used the underlying share price on the grant date to estimate their fair value.

LTIP awards that were granted as RSUs in 2020 vested based on reaching specific share price targets and used a Monte Carlo Simulation with the assumptions noted in the table below to estimate their fair value.

On and after November 2, 2022, certain DraftKings executives agreed to delay vesting of the third tranche of their restricted stock units granted under a long-term incentive plan and to add a service condition through an extended vesting date.

This modification impacts the issuance of approximately 4 million shares of DraftKings Inc.’s Class A common stock, which are now expected to vest approximately one year after the performance condition is met.

PSP awards granted in 2022 vest based on achievement of net revenue and Adjusted EBITDA targets and have a range of payouts from 0 % to 200 %.

This modification impacts the issuance of approximately 4 million shares of DraftKings Inc.’s Class A common stock, which vested approximately ten months after the performance condition was met.

PSP awards granted in 2023 and 2022 vest based on achievement of revenue and Adjusted EBITDA targets and have a range of payouts from 0 % to 200 %.

PSP awards granted in 2021 and 2020 vest based on achievement of revenue targets and have a range of payouts from 0 % to 300 %.

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For awards with only service-based vesting conditions, the Company recognizes compensation cost using the straight-line method.

Expected volatility is based on the Company's own volatility beginning in April 2022 as we now have sufficient data as a public company.

Prior to April 2022, expected volatility is based on average volatility for a representative sample of comparable public companies.

Expected volatility is based on an average volatility for a representative sample of

comparable public companies, including the Company.

Stock options are generally granted with an exercise price equal to the fair value of the common stock at the grant date with a 10 -year contractual term.

The expected term represents the period of time that the options are expected to be outstanding.

The expected term is estimated using the average of the vesting term and the original contractual term of the option.

The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No.

107, Share-Based Payment, to calculate the expected term for options granted, whereby, the expected term equals the average of the vesting term and the original contractual term of the options.

The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term.

The risk-free interest rate is estimated using the rate of return on U.S.

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Expected dividend yield 0.0 % 0.0 % 0.0 %

For grants with market-based conditions, the fair value of each award was determined using a Monte Carlo Simulation.

No awards with market-based conditions were granted in 2022 or 2021.

The model uses multiple input variables that determined the probability of satisfying the market condition requirements as follows:

December 31, 2020

Risk free interest rate 1.7 %

Expected volatility 38.9 %

Expected dividend yield 0.0 %

The following table shows stock option activity for the year ended December 31, 2022, 2021, and 2020:

The following table shows stock award activity for the years ended December 31, 2023 and 2022:

Time-based PSP LTIP Total Weighted

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Exercised options / vested RSUs ( 2,672 ) ( 2,913 ) ( 76 ) ( 2,671 ) ( 519 ) ( 6,251 ) ( 15,102 ) 2.68 43.19 — —

Change in awards due to performance-based multiplier — — — 1,806 — — 1,806 — 33.69 — —

Forfeited ( 164 ) ( 1,263 ) ( 5 ) ( 27 ) — ( 618 ) ( 2,077 ) 4.73 34.94 — —

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Stock options remaining to vest 547 8.9 $ 2,535 $ 33.10

As of December 31, 2022, total unrecognized stock-based compensation expense of $ 614.1 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of 2.8 years.

The following table shows stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020:

As of December 31, 2023, total unrecognized stock-based compensation cost of $ 597.5 million related to granted and unvested share-based compensation arrangements that are expected to vest is expected to be recognized over a weighted-average period of 2.6 years.

The following table shows stock-based compensation cost for the years ended December 31, 2023, 2022 and 2021:

Year ended Year ended Year ended

December 31, 2023 December 31, 2022 December 31, 2021

Options RSUs Total Options RSUs Total Options RSUs Total

Options RSUs Total (3)

Options RSUs Total Options RSUs Total

Time Based (1)

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— 78,277 78,277 — 369,919 369,919 — 525,465 525,465

Class B Shares (3)

— — — — — — 8,000 — 8,000

Total $ 10,178 $ 388,285 $ 398,463 $ 15,222 $ 563,577 $ 578,799 $ 14,654 $ 668,639 $ 683,293

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(2) PSP and LTIP awards vest based on defined performance criteria and are expensed based on the probability of achieving such criteria.

(3) Related to the DEAC Business Combination;

shares of Class B common stock have no economic rights.

(3) Total expenses includes $ 20.2 million of liability-classified awards recorded within accounts payable and accrued liabilities in the consolidated balance sheet as of December 31, 2023.

The weighted-average grant-date fair values of options granted during the years ended December 31, 2023, 2022 and 2021 were $ 8.59 , $ 7.46 and $ 19.53 per share, respectively.

During the years ended December 31, 2022, 2021 and 2020 the Company received proceeds from the exercise of stock options of $ 8.7 million, $ 31.5 million and $ 27.6 million respectively, and the aggregate intrinsic value of those stock options

exercised was $ 38.1 million, $ 473.4 million and $ 1,256.0 million respectively.

During the years ended December 31, 2023, 2022 and 2021 the Company received proceeds from the exercise of stock options of $ 16.5 million, $ 8.7 million and $ 31.5 million, respectively, and the aggregate intrinsic value of those stock options exercised was $ 101.7 million, $ 38.1 million and $ 473.4 million, respectively.

The total grant date fair value of stock options that vested during the years ended December 31, 2023, 2022 and 2021 were $ 11.1 million, $ 15.3 million and $ 14.0 million, respectively.

Loss before income tax provision (benefit) for the years ended December 31, 2022, 2021 and 2020 consists of the following:

Loss before income tax (benefit) provision for the years ended December 31, 2023, 2022 and 2021 consists of the following:

Year ended December 31,

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The reconciliation between income taxes computed at the U.S.

statutory income tax rate to our provision for income taxes for the years ended December 31, 2022, 2021 and 2020 are as follows:

statutory income tax rate to our provision for income taxes for the years ended December 31, 2023, 2022 and 2021 is as follows:

Year ended December 31,

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Non-deductible lobbying expenses 1,009 4,788 9,938

Non-deductible acquisition expenses — 455 4,041

Change in valuation allowance 130,817 166,978 575,225

Net operating loss write-off — — 998

Non-deductible executive compensation 30,106 54,925 117,849

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Foreign rate differential 3,348 1,802 16,588

Foreign currency adjustments 177 8,265 ( 2,086 )

Income tax reserves 4,119 ( 553 ) 5,098

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Gross deferred tax liabilities ( 38,023 ) ( 35,164 )

Total net deferred tax assets $ 1,441 $ 7,431

The Company records its deferred tax assets in deposits and other non-current assets and its deferred tax liabilities in other long-term liabilities in the consolidated balance sheets.

Total net deferred tax (liabilities) assets $ ( 4,595 ) $ 1,441

In assessing whether it is more likely than not that deferred tax assets will be realized, the Company considers all available evidence, both positive and negative, including its recent cumulative earnings or loss, experience and expectations of future available taxable income of the appropriate source and character by taxing jurisdiction, tax attribute carryback and carryforward periods available for tax purposes, and prudent and feasible tax planning strategies.

The Company records its deferred tax assets of $ 7.8 million and $ 10.7 million for 2023 and 2022, respectively, in deposits and other non-current assets and its deferred tax liabilities of $ 12.4 million and $ 9.3 million for 2023 and 2022, respectively, in other long-term liabilities in the consolidated balance sheets.

The Company has provided a valuation allowance for the U.S.

tax assets as of December 31, 2022.

deferred tax assets as of December 31, 2023.

For the year ended December 31, 2023, the U.S.

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As of December 31, 2023, the Company had U.S.

federal and state tax net operating loss (“NOL”) carryforwards of $ 3,452.8 million and $ 3,529.2 million, respectively, which may be available to offset future income tax liabilities.

Of the federal net operating loss carryforward, $ 676.2 million expires at various dates beginning in 2032 through 2037 and $ 2,776.6 million does not expire.

Of the state NOL carryforward, $ 3,438.2 million expires at various dates beginning in 2023 through 2042 and $ 91.0 million does not expire.

federal and state tax net operating loss (“NOL”) carryforwards of $ 3.8 billion and $ 4.1 billion, respectively, which may be available to offset future income tax liabilities.

Of the federal net operating loss carryforward, $ 0.7 billion expires at various dates beginning in 2032 through 2037 and $ 3.1 billion does not expire.

Of the state NOL carryforward, $ 3.9 billion expires at various dates beginning in 2024 through 2043 and $ 0.2 billion does not expire.

Utilization of the NOL carryforwards may be subject to limitation under Section 382 of the Internal Revenue Code of 1986 based on ownership changes that have occurred previously or that could occur in the future.

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federal, state and local income tax examinations by tax authorities for the years beginning in 2012.

Tax years after 2015 remain open in certain major foreign jurisdictions and are subject to examination by the taxing authorities.

The Company is no longer subject to foreign income tax examinations for tax years prior to 2016.

The following table presents a reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, included in long-term income tax liabilities on the Company’s consolidated balance sheets:

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Additions for tax positions of prior years 1,026 1,807 —

Reduction for tax positions of prior years ( 269 ) — —

Additions for tax positions of current year 449 — —

Settlements — ( 7,412 ) —

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Unrecognized tax benefits at the end of the year $ 57,424 $ 58,011 $ 72,407

If the unrecognized tax benefit balance as of December 31, 2022 were recognized, it would decrease the Company’s effective tax rate.

The Company does not anticipate any material changes to its unrecognized tax benefits within the next 12 months.

As of December 31, 2023, 2022 and 2021, the Company had $ 55.9 million, $ 58.0 million and $ 72.4 million, respectively, of net unrecognized tax benefits, which would affect the Company’s tax rate if recognized.

The Company does not anticipate any material changes to its unrecognized tax benefits within the next twelve months.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as income tax expense.

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The Company had $ 16.8 million and $ 11.8 million of interest and penalties accrued at December 31, 2023 and 2022, respectively.

Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes.

Although the Company believes that it has appropriately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different than expectations.

The Company will adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate, the closing of a statutory audit period or changes in applicable tax law.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences would impact the provision for income taxes in the period in which such determination is made.

The provision for income taxes includes the impact of reserve provisions and changes to the reserves that are considered appropriate, as well as related net interest.

The Company recognizes liabilities for anticipated tax audit issues in the U.S.

and other domestic and international tax jurisdictions based on its estimate of whether, and the extent to which, the tax positions are more likely than not to be sustained based on the technical merits.

The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter.

The Company believes it maintains appropriate reserves to offset any potential income tax liabilities that may arise upon final resolution of matters for open tax years.

If such reserve amounts ultimately prove to be unnecessary, the resulting reversal of such reserves could result in tax benefits being recorded in the period the reserves are no longer deemed necessary.

If such amounts prove to be less than an ultimate assessment, a future charge to expense would be recorded in the period in which the assessment is determined.

Loss Per Share

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Basic and diluted weighted-average common shares outstanding 462,599 436,513 402,492

Loss per share attributable to common stockholders:

Loss per share attributable to common stockholders (in dollars):

Basic and diluted $ ( 1.73 ) $ ( 3.16 ) $ ( 3.78 )

There were no preferred or other dividends declared for the period.

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

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Financial Advisor

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

During 2022, 2021 and 2020, the Company incurred $ 8.5 million , $ 2.5 million and $ 12.3 million, respectively, of professional fees in connection with certain business combination transactions and offerings undertaken by the Company, which are recorded within general and administrative expenses on the consolidated statement of operations.

Receivables from Equity Method Investment

On May 7, 2021, DraftKings entered into a master engagement letter (as amended, the “Master Engagement Letter”), with Raine Securities LLC (the “Financial Advisor”), an affiliate of Raine.

John Salter, who served as a member of our Board of Directors until April 2022, is a partner of Raine.

Pursuant to the Master Engagement Letter, Raine Securities will act as a financial advisor to DraftKings in connection with certain proposed transactions, and DraftKings will pay Raine Securities certain fees and expenses from time to time on the terms and conditions described in the related statements of work.

During 2023, 2022 and 2021, the Company incurred $ 0.0 million , $ 8.5 million , $ 2.5 million, respectively, of professional fees in connection with certain business combination transactions and offerings undertaken by the Company, which are recorded within general and administrative expenses on the consolidated statement of operations.

Receivables from Equity Method Investments

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

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As of December 31, 2023, the Company had invested a total of $ 7.6 million of the total commitment.

Transactions with a Stockholder and their Immediate Family Members

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

During 2022, 2021 and 2020, the Company had $ 0.6 million, $ 4.5 million and $ 2.7 million, respectively, in sales to entities related to an immediate family member of the director.

Transactions with a Former Director and their Immediate Family Members

During 2023, 2022 and 2021, the Company had $ 1.4 million, $ 2.3 million, and $ 4.5 million, respectively, in sales to entities related to an immediate family member of a former director.

The Company had an associated accounts receivable balance of $ 0.0 million and $ 0.2 million as of December 31, 2023 and December 31, 2022, respectively, included in accounts receivable in its consolidated balance sheets.

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

During 2022, the Company incurred $ 0.7 million of expense for use of the aircraft under these chartering services.

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

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 2022, the Company incurred $ 0.4 million of expense under the aircraft lease.

During 2023 and 2022, the Company incurred no expenses and $ 0.7 million of expense, respectively, for use of the aircraft under these chartering services, which was superseded by the lease referred to below.

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 of the Original Aircraft Lease (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 on, among other things, 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 2023 and 2022, the Company incurred $ 0.6 million and $ 0.4 million of expense, respectively, under the aircraft lease.

Leases, Commitments and Contingencies

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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.

Maturity of lease liabilities are as follows:

December 31, 2022

2024 $ 16,519

Thereafter 39,644

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Total $ 1,404,624

As of December 31, 2023, the Company has been issued $ 215.0 million in surety bonds at a combined annual premium cost of 0.4 % 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.

Contingencies

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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.

On July 7, 2021, Winview Inc., a Delaware corporation, filed suit against the Company in the U.S.

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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.

(“DK DE”) and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company.

The SAC largely repeats the allegations of the first amended complaint.

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Securities Matters Related to Allegations in the Hindenburg Report

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

District Court for the Southern District of New York against the Company and certain of its officers.

The actions allege violations of Sections 10(b) and 20(a) of the Exchange Act on a behalf of a putative class of persons who purchased or otherwise acquired the Company's stock between December 23, 2019 and June 15, 2021.

The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”).

The Company intends to vigorously defend against these claims.

On November 12, 2021, the court consolidated the two actions under the caption In re DraftKings Securities Litigation and appointed a lead plaintiff.

The lead plaintiff filed a consolidated amended complaint on January 11, 2022.

On January 10, 2023, the court granted the Company's motion to dismiss and final judgment was entered dismissing the action with prejudice.

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations raised in the Hindenburg Report, as well as the Company’s disclosures regarding its compliance policies and procedures, and related matters.

Securities Matters Arising From the Hindenburg Report and Related Matters

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research, as well as the Company’s adherence to and 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.

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

Shareholder Derivative Litigation Related to Allegations in the Hindenburg Report

On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company.

The actions purport to assert claims on behalf of the Company against certain current and former officers and/or members of the board of directors of the Company and DEAC.

The two actions filed in the U.S.

District Court for the District of Nevada have since been consolidated, and two of the actions filed in Nevada state District Court in

Clark County likewise have been consolidated.

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

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

The Nevada actions purport to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report.

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

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

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

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

Because the Nevada actions allege claims on behalf of the Company and purport to seek judgments in favor of the Company, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Company's financial condition, although the outcome could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

Matters Related to the GNOG Transaction

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

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

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

and Jefferies LLC.

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Stockholders Litigation .

The Company intends to vigorously defend against these claims.

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

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

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

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

At a mediation held on January 24, 2024, the parties reached an agreement in principle to settle the Delaware action, subject to negotiation and execution of mutually agreeable definitive documentation and the performance and satisfaction of terms and conditions set forth thereof.

The estimated loss was accrued as of December 31, 2023 in the accounts payable and accrued expenses line-item on the consolidated balance sheet.

The Company intends to vigorously defend the Nevada action.

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

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

Any adverse outcome in the Nevada action 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 Nevada action 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

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The Company intends to vigorously defend this suit.

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

Any adverse outcome in this matter could be 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.

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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.

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.

On May 8, 2023, plaintiff Turley and a new plaintiff (Erik Ramos) filed a First Amended Class Action Complaint.

The plaintiffs assert claims for breach of contract, unfair and deceptive acts and practices, false advertising, and unjust enrichment.

Among other things, plaintiffs seek statutory damages, monetary damages, punitive damages, attorney fees and interest.

The Company intends to vigorously defend this case.

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

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.

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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 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.

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.

Securities Matters 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.

On July 17, 2023, the Company received a subpoena from the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts seeking documents and requesting answers to interrogatories concerning, among other things, DK Marketplace and NFTs that are sold on DK Marketplace, and related matters.

We intend to comply with these requests.

The Company cannot predict with any degree of certainty the outcome of these matters 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, penalties and/or require alterations to the Company’s business 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 matters 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.

Shareholder Derivative Litigation Related to DraftKings Marketplace

On May 31, 2023, a putative shareholder derivative action was filed in Nevada state court by an alleged shareholder of the Company.

The action asserts claims on behalf of the Company against certain senior officers and members of the Board of Directors of the Company for breach of fiduciary duty and unjust enrichment based primarily on allegations that the defendants caused or allowed the Company to disseminate misleading and inaccurate information to its shareholders in connection with NFTs that are sold and traded on the DK Marketplace.

The action also alleges that certain individuals are liable for trading in Company stock at artificially inflated prices.

The action seeks unspecified compensatory damages, changes to corporate governance and internal procedures, restitution, disgorgement, costs and attorney’s fees, and other unspecified relief.

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

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

Because this action

alleges claims on behalf of the Company and purports to seek a judgment in favor of the Company, the Company does not believe, based on currently available information, that the outcome of the 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.

On December 8, 2023, plaintiffs Melissa Scanlon and Shane Harris, individually and on behalf of others similarly situated, filed a purported Massachusetts class action lawsuit against DraftKings in Middlesex County Superior Court of Massachusetts.

Among other things, Plaintiffs allege that the Company’s promotion that offered new customers an opportunity to earn up to 1,000 in site credits, and related advertisements, were:

(1) unfair or deceptive practices in violation of Massachusetts General Laws (“M.G.L.”) c.

93A, §§ 2, 9;

and (2) untrue and misleading advertising in violation of M.G.L.

The Plaintiffs are seeking, among other things, injunctive relief, actual damages, double or treble damages, and attorneys’ fees.

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.

Internal Revenue Service

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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.

Subsequent Events

Pending Acquisition of Jackpocket Inc.

(“Jackpocket”)

On February 11, 2024, the Company entered into a definitive agreement (the “Merger Agreement”) to acquire Jackpocket for total consideration of $ 750 million, with approximately 55 percent of the consideration payable in cash funded from the Company’s existing cash and cash equivalents balance, and approximately 45 percent of the consideration payable in the Company’s Class A common stock, subject to customary purchase price adjustments and the collar mechanism described below (the “Jackpocket Transaction”).

Under the terms of the Merger Agreement and subject to the terms and conditions set forth therein, the stock consideration will be subject to a collar pursuant to which a variable number of shares of DraftKings’ Class A common stock will be issued to Jackpocket stockholders in order to deliver a value of $ 337.5 million, so long as the 30 -trading-day volume weighted average price of DraftKings’ Class A common stock as of the second trading day immediately preceding the closing of the Jackpocket Transaction (the “Closing Stock Price”) remains between $ 31.68 and $ 42.86 .

In the event that DraftKings’ Closing Stock Price is above $ 42.86 or below $ 31.68 , Jackpocket stockholders will receive a fixed number of approximately 7,874,806 shares and 10,654,149 shares, respectively, of DraftKings’ Class A common stock, subject to adjustment in certain limited circumstances to the minimum extent necessary to maintain a tax-free transaction.

The consummation of the Jackpocket Transaction is subject to the receipt of required regulatory approvals and other customary closing conditions.

Exhibit Index

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and Gulf Merger Sub, Inc., dated as of August 8, 2021 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed with the SEC on August 10, 2021).

Agreement and Plan of Merger and Plan of Reorganization, dated as of February 11, 2024, by and among DraftKings Inc., DraftKings Holdings Inc., Fortune Merger Sub Inc., Fortune Merger Sub LLC, JackPocket, Inc.

and Shareholder Representative Services LLC (incorporated by refere nce to Exhibit 2.1 of the Company ’ s Current Report on Form 8-K , filed with the SEC on February 1 5, 2024) .

Amended and Restated Articles of Incorporation of DraftKings Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on Ma y 5, 2022 )

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022)

Amended and Restated Bylaws of DraftKings Inc.

(incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Specimen Class A Common Stock Certificate of DraftKings (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020).

Specimen Class A Common Stock Certificate of DraftKings.

Form of Warrant Certificate of DraftKings Inc.

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First Supplemental Indenture, dated as of May 5, 2022, between DraftKings Inc., Old DraftKings and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.6 of the Company's Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Description of New DraftKings' Capital Stock (incorporated by reference to New DraftKings' Registration Statement on Form S-4 (Reg.

Description of DraftKings Inc.

' s Capital Stock (incorporated by reference to DraftKings Inc .

' s Registration Statement on Form S-4 (Reg.

333-260174), filed with the SEC on December 9, 2021).

Assignment and Assumption Agreement, dated May 5, 2022, by and among New DraftKings, GNOG, Continental and Computershare (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Assignment and Assumption Agreement, dated May 5, 2022, by and among New DraftKings, Old DraftKings and Computershare (incorporated by reference to Exhibit 4.5 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Assignment and Assumption Agreement, dated May 5, 2022, by and among DraftKings Inc .

, GNOG, Continental and Computershare (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Assignment and Assumption Agreement, dated May 5, 2022, by and among DraftKings Inc.

, Old DraftKings and Computershare (incorporated by reference to Exhibit 4.5 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

DraftKings Inc.

11 unchanged sentences

Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, filed with the SEC on April 29, 2020).

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.

1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022 ).

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed with the SEC on May 5, 2022).

Earnout Escrow Agreement, dated April 23, 2020, by and among DraftKings Inc., Shalom Meckenzie, in his capacity as SBT Sellers’ Representative, Eagle Equity Partners LLC, Jeff Sagansky, Eli Baker, Harry Sloan, I.B.I.

25 unchanged sentences

List of Subsidiaries.

Consent of BDO USA, LLP, independent registered public accounting firm.

Consent of BDO USA, P.C.

, independent registered public accounting firm.

Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934.

4 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Loan and Security Agreement, dated as of December 20, 2022, by and among DraftKings Inc., as borrower, the guarantors listed therein, the lenders listed therein, Pacific Western Bank, as administrative agent, collateral agent and payment agent, Citizens Bank, N.A., as syndication agent, and Pacific Western Bank and Citizens Bank, N.A., as joint bookrunners and joint lead arrangers.

Executive Compensation Clawback Policy, dated as of December 1, 2023

101.INS* XBRL Instance Document

26 unchanged sentences

Park Chief Financial Officer February 16, 2024

Park (Principal Financial Officer)

/s/ Erik Bradbury Chief Accounting Officer February 17, 2023

Erik Bradbury (Principal Accounting Officer)

Park (Principal Financial and Accounting Officer)

/s/ Harry Evans Sloan Vice Chairman February 16, 2024

6 unchanged sentences

Paul Liberman

/s/ Shalom Meckenzie Director February 17, 2023

Shalom Meckenzie

/s/ Jocelyn Moore Director February 16, 2024

7 unchanged sentences

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-K

Item 9A. Controls and Procedures