UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from__________ to ___________.

Commission file number 001-41379

DRAFTKINGS INC.

(Exact name of registrant as specified in its charter)


Nevada			87-2764212
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

222 Berkeley Street, 5th Floor

Boston, MA 02116

(Address of principal executive offices) (Zip Code)

(617) 986-6744

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report).

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value

DKNG

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~May 4,~~August 3, 2022, there were ~~417,916,756~~448,545,834 shares of the registrant’s Class A common stock, par value $0.0001 per share, and 393,013,951 shares of the registrant’s Class B common stock, par value $0.0001 per share, outstanding.

DraftKings Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended ~~March 31,~~June 30, 2022

Table of Contents

EXPLANATORY NOTE

As further discussed in this Quarterly Report on Form 10-Q (this “Report”), on ~~August 9, 2021,~~May 5, 2022 (the “Closing Date”), DraftKings Holdings Inc. (formerly known as DraftKings Inc.), a Nevada corporation (“Old DraftKings”), ~~and~~consummated the acquisition of Golden Nugget Online Gaming, Inc., a Delaware corporation ~~(“GNOG”~~(together with its subsidiaries unless the context requires otherwise, “GNOG”), ~~entered into~~pursuant to a definitive agreement and plan of merger, dated August 9, 2021 (the “Merger Agreement”) ~~for Old DraftKings to acquire GNOG~~, in an all-stock transaction (the “GNOG Transaction”). ~~On May 5, 2022 (the “Closing Date”), Old DraftKings consummated~~In connection with the GNOG Transaction, ~~and, in connection therewith,~~Old DraftKings undertook a holding company reorganization whereby a new holding company, New Duke Holdco, Inc., a Nevada corporation (“New DraftKings”), became the going-forward public company and the direct parent company of both Old DraftKings and GNOG. New DraftKings was renamed “DraftKings Inc.” on the Closing Date. ~~New DraftKings is the registrant filing this Report as the successor registrant for Old DraftKings.~~ Unless otherwise indicated, the terms ~~“DraftKings,”~~“DraftKings”, the ~~“Company,” “we,” “us,” or~~“Company”, “we”, “us” and “our” refer to (i) Old DraftKings for periods preceding the Closing Date and (ii) New DraftKings for periods on and subsequent to the Closing Date, in each case, together with their respective consolidated subsidiaries.

PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements.

DRAFTKINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)


		March 31, 2022					June 30, 2022
		(Unaudited)		December 31, 2021			(Unaudited)		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,772,892	$	2,152,892	Cash and cash equivalents	$	1,514,371	$	2,152,892
Cash reserved for users	Cash reserved for users	464,854		476,950		Cash reserved for users	426,169		476,950
Receivables reserved for users	Receivables reserved for users	55,946		51,949		Receivables reserved for users	56,820		51,949
Accounts receivable	Accounts receivable	48,211		45,864		Accounts receivable	45,060		45,864
Prepaid expenses and other current assets	Prepaid expenses and other current assets	56,562		25,675		Prepaid expenses and other current assets	95,249		25,675
Total current assets	Total current assets	2,398,465		2,753,330		Total current assets	2,137,669		2,753,330
Property and equipment, net	Property and equipment, net	49,734		46,019		Property and equipment, net	53,926		46,019
Intangible assets, net	Intangible assets, net	523,023		535,017		Intangible assets, net	810,525		535,017
Goodwill	Goodwill	615,655		615,655		Goodwill	894,019		615,655
Operating lease right-of-use assets	Operating lease right-of-use assets	61,169		63,831		Operating lease right-of-use assets	77,338		63,831
Equity method investment	Equity method investment	7,474		9,825		Equity method investment	8,796		9,825
Deposits and other non-current assets	Deposits and other non-current assets	90,795		45,377		Deposits and other non-current assets	171,491		45,377
Total assets	Total assets	$	3,746,315	$	4,069,054	Total assets	$	4,153,764	$	4,069,054

Liabilities and Stockholders’ equity	Liabilities and Stockholders’ equity					Liabilities and Stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	379,254	$	387,737	Accounts payable and accrued expenses	$	414,680	$	387,737
Liabilities to users	Liabilities to users	520,775		528,874		Liabilities to users	482,940		528,874
Operating lease liabilities, current portion	Operating lease liabilities, current portion	12,911		12,814		Operating lease liabilities, current portion	5,726		12,814
Other current liabilities						Other current liabilities	17,283		—
Total current liabilities	Total current liabilities	912,940		929,425		Total current liabilities	920,629		929,425
Convertible notes, net of issuance costs	Convertible notes, net of issuance costs	1,249,106		1,248,452		Convertible notes, net of issuance costs	1,249,766		1,248,452
Non-current operating lease liabilities	Non-current operating lease liabilities	54,457		57,341		Non-current operating lease liabilities	78,176		57,341
Warrant liabilities	Warrant liabilities	14,230		26,911		Warrant liabilities	13,081		26,911
Long-term income tax liability	Long-term income tax liability	78,947		79,125		Long-term income tax liability	73,859		79,125
Other long-term liabilities	Other long-term liabilities	51,035		49,272		Other long-term liabilities	54,369		49,272
Total liabilities	Total liabilities	$	2,360,715	$	2,390,526	Total liabilities	$	2,389,880	$	2,390,526
Commitments and contingent liabilities (Note 13)	Commitments and contingent liabilities (Note 13)	0		0		Commitments and contingent liabilities (Note 13)	0		0

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Class A common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2022 and December 31, 2021; 425,151 and 414,911 shares issued and 417,228 and 407,781 outstanding as of March 31, 2022 and December 31, 2021, respectively		$	42	$	41
Class B common stock, $0.0001 par value; 900,000 shares authorized as of March 31, 2022 and December 31, 2021; 393,014 shares issued and outstanding as of March 31, 2022 and December 31, 2021		39		39
Treasury stock, at cost; 7,923 and 7,130 shares as of March 31, 2022 and December 31, 2021, respectively		(320,697)		(306,614)
Class A common stock, $0.0001 par value; 900,000 shares authorized as of June 30, 2022 and December 31, 2021; 456,199 and 414,911 shares issued and 448,022 and 407,781 outstanding as of June 30, 2022 and December 31, 2021, respectively						Class A common stock, $0.0001 par value; 900,000 shares authorized as of June 30, 2022 and December 31, 2021; 456,199 and 414,911 shares issued and 448,022 and 407,781 outstanding as of June 30, 2022 and December 31, 2021, respectively	$	45	$	41
Class B common stock, $0.0001 par value; 900,000 shares authorized as of June 30, 2022 and December 31, 2021; 393,014 shares issued and outstanding as of June 30, 2022 and December 31, 2021						Class B common stock, $0.0001 par value; 900,000 shares authorized as of June 30, 2022 and December 31, 2021; 393,014 shares issued and outstanding as of June 30, 2022 and December 31, 2021	39		39
Treasury stock, at cost; 8,177 and 7,130 shares as of June 30, 2022 and December 31, 2021, respectively						Treasury stock, at cost; 8,177 and 7,130 shares as of June 30, 2022 and December 31, 2021, respectively	(324,090)		(306,614)
Additional paid-in capital	Additional paid-in capital	5,891,235		5,702,388		Additional paid-in capital	6,490,012		5,702,388
Accumulated deficit	Accumulated deficit	(4,221,507)		(3,753,814)		Accumulated deficit	(4,438,610)		(3,753,814)
Accumulated other comprehensive income	Accumulated other comprehensive income	36,488		36,488		Accumulated other comprehensive income	36,488		36,488
Total stockholders’ equity	Total stockholders’ equity	1,385,600		1,678,528		Total stockholders’ equity	1,763,884		1,678,528
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,746,315	$	4,069,054	Total liabilities and stockholders’ equity	$	4,153,764	$	4,069,054

See accompanying notes to unaudited condensed consolidated financial statements.

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except loss per share data)


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Revenue	Revenue	$	417,205	$	312,276		Revenue	$	466,185	$	297,605	$	883,390	$	609,881
Cost of revenue	Cost of revenue	313,379		183,225			Cost of revenue	312,767		187,006		626,146		370,231
Sales and marketing	Sales and marketing	321,452		228,686			Sales and marketing	197,529		170,712		518,981		399,398
Product and technology	Product and technology	81,352		56,159			Product and technology	77,202		62,635		158,554		118,794
General and administrative	General and administrative	216,606		168,997			General and administrative	187,609		198,806		404,215		367,803
Loss from operations	Loss from operations	(515,584)		(324,791)			Loss from operations	(308,922)		(321,554)		(824,506)		(646,345)
Other income (expense):	Other income (expense):						Other income (expense):
Interest income, net	Interest income, net	148		985			Interest income, net	1,929		1,642		2,077		2,627
Gain (loss) on remeasurement of warrant liabilities	Gain (loss) on remeasurement of warrant liabilities	12,681		(26,980)			Gain (loss) on remeasurement of warrant liabilities	14,315		16,984		26,996		(9,996)
Other income, net		37,882		—
Loss before income tax provision (benefit) and loss from equity method investment		(464,873)		(350,786)
Income tax provision (benefit)		469		(4,595)
Other (expense) income, net							Other (expense) income, net	(5,573)		—		32,309		—
Loss before income tax (benefit) provision and loss from equity method investment							Loss before income tax (benefit) provision and loss from equity method investment	(298,251)		(302,928)		(763,124)		(653,714)
Income tax (benefit) provision							Income tax (benefit) provision	(81,226)		2,404		(80,757)		(2,191)
Loss from equity method investment	Loss from equity method investment	2,351		153			Loss from equity method investment	78		194		2,429		347
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(467,693)	$	(346,344)		Net loss attributable to common stockholders	$	(217,103)	$	(305,526)	$	(684,796)	$	(651,870)

Loss per share attributable to common stockholders:	Loss per share attributable to common stockholders:						Loss per share attributable to common stockholders:
Basic and diluted	Basic and diluted	$	(1.14)	$	(0.87)		Basic and diluted	$	(0.50)	$	(0.76)	$	(1.61)	$	(1.63)

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands)


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Net loss	Net loss	$	(467,693)	$	(346,344)		Net loss	$	(217,103)	$	(305,526)	$	(684,796)	$	(651,870)
Other comprehensive (loss) income:	Other comprehensive (loss) income:						Other comprehensive (loss) income:
Foreign currency translation adjustments arising during period, net of nil tax	Foreign currency translation adjustments arising during period, net of nil tax	—		(27,318)			Foreign currency translation adjustments arising during period, net of nil tax	—		7,697		—		(19,621)
Comprehensive loss	Comprehensive loss	$	(467,693)	$	(373,662)		Comprehensive loss	$	(217,103)	$	(297,829)	$	(684,796)	$	(671,491)

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(Amounts in thousands)


		Class A Common Stock			Class B Common Stock			Additional Paid in Capital				Accumulated Deficit		Accumulated Other Comprehensive Income			Treasury Stock Amount				Total Stockholders’ Equity				Class A Common Stock							Class B Common Stock						Additional Paid in Capital					Accumulated Deficit					Accumulated Other Comprehensive Income					Treasury Stock Amount					Total Stockholders’ Equity
		Shares	Amount		Shares	Amount										Shares								Amount			Shares				Amount
Balances at December 31, 2021	Balances at December 31, 2021	407,781	$	41	393,014	$	39			$	5,702,388			$	(3,753,814)				$	36,488			$	(306,614)		$	1,678,528	Balances at December 31, 2021		407,781			$	41			393,014				$	39				$	5,702,388				$	(3,753,814)				$	36,488				$	(306,614)	$	1,678,528
Exercise of stock options	Exercise of stock options	913	—		—	—		1,770				—		—			—				1,770			Exercise of stock options	913			—				—			—					1,770					—					—					—					1,770
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		187,077				—		—			—				187,077			Stock-based compensation expense	—			—				—			—			187,077					—					—					—					187,077

Purchase of treasury stock	Purchase of treasury stock	(793)	—		—	—		—				—		—			(14,083)				(14,083)			Purchase of treasury stock	(793)			—				—			—			—					—					—					(14,083)					(14,083)
Restricted stock unit vesting	Restricted stock unit vesting	9,327	1		—	—		—				—		—			—				1			Restricted stock unit vesting	9,327			1				—			—			—					—					—					—					1
Net loss	Net loss	—	—		—	—		—				(467,693)		—			—				(467,693)			Net loss	—			—				—			—			—					(467,693)					—					—					(467,693)
Balances at March 31, 2022	Balances at March 31, 2022	417,228	$	42	393,014	$	39	$	5,891,235			$	(4,221,507)	$	36,488		$	(320,697)			$	1,385,600		Balances at March 31, 2022	417,228			$	42			393,014			$	39		$	5,891,235				$	(4,221,507)				$	36,488				$	(320,697)				$	1,385,600
Exercise of stock options																								Exercise of stock options	902			—				—			—			3,131					—					—					—					3,131
Stock-based compensation expense																								Stock-based compensation expense	—			—				—			—			135,521					—					—					—					135,521
Equity consideration issued for acquisitions																								Equity consideration issued for acquisitions	29,252			3				—			—			460,125					—					—					—					460,128

Purchase of treasury stock																								Purchase of treasury stock	(254)			—				—			—			—					—					—					(3,393)					(3,393)
Restricted stock unit vesting																								Restricted stock unit vesting	894			—				—			—			—					—					—					—					—
Net loss																								Net loss	—			—				—			—			—					(217,103)					—					—					(217,103)
Balances at June 30, 2022																								Balances at June 30, 2022	448,022			$	45			393,014			$	39		$	6,490,012				$	(4,438,610)				$	36,488				$	(324,090)				$	1,763,884

Class A Common Stock Class B Common Stock Additional
Paid-in Capital Accumulated
Deficit Accumulated Other
Comprehensive
Income Treasury Stock Amount Total Stockholders’ Equity
Shares Amount Shares Amount
Balances at December 31, 2020 396,303 $ 40 393,014 $ 39 $ 5,067,135 $ (2,230,619) $ 83,534 $ (288,784) $ 2,631,345
Exercise of stock options 2,857 — — — 7,638 — — 7,638
Stock-based compensation expense — — — — 151,843 — — — 151,843
Purchase of capped call options — — — — (123,970) — — — (123,970)
Equity consideration issued for acquisition 464 — — — 29,399 — — — 29,399
Shares issued for exercise of warrants 138 — — — 1,761 — — — 1,761
Purchase of treasury stock (48) — — — — — — (3,124) (3,124)
Restricted stock unit vesting 178 — — — — — — — —
Foreign currency translation, net of nil tax — — — — — — (27,318) — (27,318)
Net loss — — — — — (346,344) — — (346,344)
Balances at March 31, 2021 399,892 $ 40 393,014 $ 39 $ 5,133,806 $ (2,576,963) $ 56,216 $ (291,908) $ 2,321,230


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Treasury Stock Amount		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balances at December 31, 2020	396,303	$	40	393,014	$	39	$	5,067,135	$	(2,230,619)	$	83,534	$	(288,784)	$	2,631,345
Exercise of stock options	2,857	—		—	—		7,638		—		—				7,638
Stock-based compensation expense	—	—		—	—		151,843		—		—		—		151,843
Purchase of capped call options	—	—		—	—		(123,970)		—		—		—		(123,970)
Equity consideration issued for acquisitions	464	—		—	—		29,399		—		—		—		29,399
Shares issued for exercise of warrants	138	—		—	—		1,761		—		—		—		1,761
Purchase of treasury stock	(48)	—		—	—		—		—		—		(3,124)		(3,124)
Restricted stock unit vesting	178	—		—	—		—		—		—		—		—
Foreign currency translation, net of nil tax	—	—		—	—		—		—		(27,318)		—		(27,318)
Net loss	—	—		—	—		—		(346,344)		—		—		(346,344)
Balances at March 31, 2021	399,892	$	40	393,014	$	39	$	5,133,806	$	(2,576,963)	$	56,216	$	(291,908)	$	2,321,230
Exercise of stock options	1,878	—		—	—		10,816		—		—		—		10,816
Stock-based compensation expense	—	—		—	—		171,739		—		—		—		171,739
Equity consideration issued for acquisitions	56	—		—	—		3,750		—		—		—		3,750
Shares issued for exercise of warrants	43	—		—	—		2,419		—		—		—		2,419
Purchase of treasury stock	(115)	—		—	—		—		—		—		(6,773)		(6,773)
Restricted stock unit vesting	739	—		—	—		—		—		—		—		—
Foreign currency translation, net of nil tax	—	—		—	—		—		—		7,697		—		7,697
Net loss	—	—		—	—		—		(305,526)		—		—		(305,526)
Balances at June 30, 2021	402,493	$	40	393,014	$	39	$	5,322,530	$	(2,882,489)	$	63,913	$	(298,681)	$	2,205,352

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Three months ended March 31,					Six months ended June 30,
		2022		2021			2022		2021
Operating Activities:	Operating Activities:					Operating Activities:
Net loss	Net loss	$	(467,693)	$	(346,344)	Net loss	$	(684,796)	$	(651,870)
Adjustments to reconcile net loss to net cash flows used in operating activities:	Adjustments to reconcile net loss to net cash flows used in operating activities:					Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	Depreciation and amortization	32,225		28,193		Depreciation and amortization	74,540		58,244
Non-cash interest expense	Non-cash interest expense	654		112		Non-cash interest expense	931		775
Stock-based compensation expense	Stock-based compensation expense	187,077		151,843		Stock-based compensation expense	322,598		323,582
Loss from equity method investment	Loss from equity method investment	2,351		153		Loss from equity method investment	2,429		347
(Gain) loss on remeasurement of warrant liabilities	(Gain) loss on remeasurement of warrant liabilities	(12,681)		26,980		(Gain) loss on remeasurement of warrant liabilities	(26,996)		9,996
Gain on equity securities and other financial assets	Gain on equity securities and other financial assets	(37,433)		—		Gain on equity securities and other financial assets	(31,808)		—
Deferred income taxes	Deferred income taxes	256		(8,104)		Deferred income taxes	(76,656)		(9,548)
Other expenses, net	Other expenses, net	(768)		—		Other expenses, net	(2,667)		—
Change in operating assets and liabilities, net of effect of business combination:
Change in operating assets and liabilities, net of effect of business combinations:						Change in operating assets and liabilities, net of effect of business combinations:
Receivables reserved for users	Receivables reserved for users	(3,997)		6,213		Receivables reserved for users	(2,057)		5,334
Accounts receivable	Accounts receivable	(2,347)		(4,180)		Accounts receivable	9,765		(993)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(30,887)		(519)		Prepaid expenses and other current assets	(47,574)		(9,136)
Deposits and other non-current assets	Deposits and other non-current assets	(493)		(1,527)		Deposits and other non-current assets	(135)		(2,944)
Operating leases, net	Operating leases, net	(125)		(239)		Operating leases, net	240		(432)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(16,087)		71,392		Accounts payable and accrued expenses	(15,659)		73,309
Other long-term liabilities	Other long-term liabilities	1,507		2,968		Other long-term liabilities	5,003		1,883
Long-term income tax liability	Long-term income tax liability	(178)		1,522		Long-term income tax liability	(5,266)		3,874
Liabilities to users	Liabilities to users	(8,099)		11,800		Liabilities to users	(51,195)		21,204
Net cash flows used in operating activities	Net cash flows used in operating activities	(356,718)		(59,737)		Net cash flows used in operating activities	(529,303)		(176,375)
Investing Activities:	Investing Activities:					Investing Activities:
Purchases of property and equipment	Purchases of property and equipment	(8,614)		(2,389)		Purchases of property and equipment	(14,457)		(6,221)
Cash paid for internally developed software costs	Cash paid for internally developed software costs	(13,195)		(8,686)		Cash paid for internally developed software costs	(29,419)		(19,489)
Acquisition of gaming licenses	Acquisition of gaming licenses	(267)		(305)		Acquisition of gaming licenses	(3,388)		(6,200)
Cash paid for acquisitions, net of cash acquired	Cash paid for acquisitions, net of cash acquired	—		(40,541)		Cash paid for acquisitions, net of cash acquired	(96,507)		(64,969)
Other investing activities	Other investing activities	(989)		—		Other investing activities	(3,697)		(3,700)
Net cash flows used in investing activities	Net cash flows used in investing activities	(23,065)		(51,921)		Net cash flows used in investing activities	(147,468)		(100,579)
Financing Activities:	Financing Activities:					Financing Activities:
Proceeds from issuance of convertible notes, net	Proceeds from issuance of convertible notes, net	—		1,248,025		Proceeds from issuance of convertible notes, net	—		1,247,125
Purchase of capped call options	Purchase of capped call options	—		(123,970)		Purchase of capped call options	—		(123,970)
Proceeds from shares issued for warrants	Proceeds from shares issued for warrants	—		199		Proceeds from shares issued for warrants	44		199
Purchase of treasury stock	Purchase of treasury stock	(14,083)		(3,124)		Purchase of treasury stock	(17,476)		(9,897)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,770		7,638		Proceeds from exercise of stock options	4,901		18,454

Net cash flows (used in) provided by financing activities	Net cash flows (used in) provided by financing activities	(12,313)		1,128,768		Net cash flows (used in) provided by financing activities	(12,531)		1,131,911
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	Effect of foreign exchange rates on cash and cash equivalents and restricted cash	—		1,774		Effect of foreign exchange rates on cash and cash equivalents and restricted cash	—		824
Net (decrease) increase in cash and cash equivalents and restricted cash	Net (decrease) increase in cash and cash equivalents and restricted cash	(392,096)		1,018,884		Net (decrease) increase in cash and cash equivalents and restricted cash	(689,302)		855,781
Cash and cash equivalents and restricted cash at the beginning of period	Cash and cash equivalents and restricted cash at the beginning of period	2,629,842		2,104,976		Cash and cash equivalents and restricted cash at the beginning of period	2,629,842		2,104,976
Cash and cash equivalents and restricted cash, end of period	Cash and cash equivalents and restricted cash, end of period	$	2,237,746	$	3,123,860	Cash and cash equivalents and restricted cash, end of period	$	1,940,540	$	2,960,757

Disclosure of cash, cash equivalents and restricted cash:	Disclosure of cash, cash equivalents and restricted cash:					Disclosure of cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	1,772,892	$	2,818,128	Cash and cash equivalents	$	1,514,371	$	2,646,500
Cash reserved for users	Cash reserved for users	464,854		305,732		Cash reserved for users	426,169		314,257
Total cash, cash equivalents and restricted cash, end of period	Total cash, cash equivalents and restricted cash, end of period	$	2,237,746	$	3,123,860	Total cash, cash equivalents and restricted cash, end of period	$	1,940,540	$	2,960,757

DRAFTKINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Three months ended March 31,					Six months ended June 30,
		2022		2021			2022		2021
Supplemental Disclosure of Noncash Investing and Financing Activities:	Supplemental Disclosure of Noncash Investing and Financing Activities:					Supplemental Disclosure of Noncash Investing and Financing Activities:
Equity consideration issued for acquisitions	Equity consideration issued for acquisitions	$	—	$	29,399	Equity consideration issued for acquisitions	$	460,128	$	33,149
Acquisition of property and equipment, internally developed software and other investments included in accounts payable and accrued expenses	Acquisition of property and equipment, internally developed software and other investments included in accounts payable and accrued expenses	7,604		680		Acquisition of property and equipment, internally developed software and other investments included in accounts payable and accrued expenses	9,425		(114)
Convertible notes financing costs included in accounts payable and accrued expenses	Convertible notes financing costs included in accounts payable and accrued expenses	—		1,024		Convertible notes financing costs included in accounts payable and accrued expenses	—		782
Acquisition of gaming licenses included in accounts payable and accrued expenses	Acquisition of gaming licenses included in accounts payable and accrued expenses	—		(100)		Acquisition of gaming licenses included in accounts payable and accrued expenses	—		(4,976)

Increase of other current assets from transfer agent related to warrants						Increase of other current assets from transfer agent related to warrants	—		494
Supplemental Disclosure of Cash Activities:	Supplemental Disclosure of Cash Activities:					Supplemental Disclosure of Cash Activities:
(Decrease) increase in cash reserved for users	(Decrease) increase in cash reserved for users	(12,096)		18,014		(Decrease) increase in cash reserved for users	(50,781)		26,539
Cash paid for interest	Cash paid for interest	—		—		Cash paid for interest	—		—

See accompanying notes to unaudited condensed consolidated financial statements.

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

DRAFTKINGS INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except loss per share data, unless otherwise noted)

1.Description of Business

DraftKings Inc. is a digital sports entertainment and gaming company. The Company’s business-to-consumer (“B2C”) segment provides users with sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”~~), sports betting (“Sportsbook”) and online casino (“iGaming”~~) products, as well as media and other online consumer products. The Company’s business-to-business (“B2B”) ~~segment is involved in~~segment’s principal activities involve the design ~~development~~ and ~~licensing~~development of sports betting and casino gaming ~~software for its Sportsbook and casino gaming products.~~software.

As further discussed in the Explanatory Note and Note 3 hereof entitled “Acquisition of Golden Nugget Online Gaming, Inc.,” on August 9, 2021, DK Crown Holdings Inc. (formerly known as DraftKings Inc.), a Nevada corporation (“Old DraftKings”), and Golden Nugget Online Gaming, Inc. (“GNOG”) entered into a definitive agreement and plan of merger (the “Merger Agreement”) for DraftKings to acquire GNOG in an all-stock transaction, which we refer to as the GNOG Transaction. On May 5, 2022, ~~(the “Closing Date”),~~ Old DraftKings consummated the GNOG Transaction ~~and, in~~pursuant to the Merger Agreement. In connection ~~therewith,~~with the GNOG Transaction, Old DraftKings undertook a holding company reorganization whereby ~~a new holding company,~~ New ~~Duke Holdco, Inc., a Nevada corporation (“New DraftKings”),~~DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG. New DraftKings was renamed “DraftKings Inc.” on the Closing Date. Unless otherwise indicated, the terms ~~“DraftKings,” or~~“DraftKings”, the “Company”, “we”, “us” and “our” refer to (i) Old DraftKings for periods preceding the Closing Date and (ii) New DraftKings for periods on and subsequent to the Closing Date, in each case, together with their respective consolidated subsidiaries.

In May 2018, the Supreme Court (the “Court”) struck down on constitutional grounds the Professional and Amateur Sports Protection Act of 1992 (“PASPA”), a law that prohibited most states from authorizing and regulating sports betting. Since the Court’s decision, many states have legalized sports betting. As of ~~March 31,~~June 30, 2022, 29 U.S. states, the District of Columbia and Puerto Rico have legalized some form of sports betting. Of those 31 legal jurisdictions 24in the United States, 25 have legalized online sports betting. Of those 2425 jurisdictions, 20 are live, and DraftKings operates in 17 of them. The jurisdictions in the United States with statutes legalizing iGaming are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia.

As of ~~March 31,~~June 30, 2022, the Company operates online Sportsbooks in Arizona, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Michigan, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia and Wyoming and has retail Sportsbooks in Colorado, Connecticut, Illinois, Iowa, Louisiana, Mississippi, New Hampshire, New Jersey and New ~~York.~~York, as well as Ontario, Canada. As of ~~March 31,~~June 30, 2022, the Company offers iGaming products in Connecticut, Michigan, New Jersey, Pennsylvania and West ~~Virginia.~~Virginia, as well as Ontario, Canada. The Company also has arrangements in place with land-based casinos to expand operations into additional states upon the passing of relevant legislation, the issuance of related regulations and the receipt of required licenses.

~~The~~Beginning in 2020 and continuing into 2022, the novel coronavirus (“COVID-19”) pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets. ~~Beginning in 2020 and continuing into 2022, the COVID-19 pandemic adversely impacted many different industries.~~ The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the extent and the duration of the impact of COVID-19. The COVID-19 pandemic therefore presents material uncertainty and risk with respect to us and our performance and could affect our financial results in a materially adverse way.

~~Since the start~~primary impacts of the COVID-19 pandemic ~~the primary impacts to~~on the Company ~~have been~~were the suspension, cancellation, rescheduling and ~~rescheduling~~shortening of sports seasons and sporting ~~events. Beginning in~~events, particularly between March 2020 and ~~continuing into the first month of the third quarter of~~July 2020, when many sports seasons and sporting events, including the MLB regular season, domestic soccer leagues and European Cup competitions, the NBA regular season and playoffs, the NCAA college basketball tournament, the Masters golf tournament, and the NHL regular season and playoffs, were suspended or cancelled. The suspension of sports seasons and sporting events reduced customers’ use of, and spending on, the Company’s Sportsbook and DFS products.

~~Starting~~Beginning in ~~the third quarter of 2020 and continuing into the fourth quarter of~~July 2020, major professional sports leagues ~~resumed~~started to resume their activities, many of which ~~were held~~ with shortened ~~seasons. MLB began its season after a three-month delay~~seasons, and ~~also completed the World Series, the NHL~~gradually resumed ~~its season and completed the Stanley Cup Playoffs, the Masters golf tournament was held, most domestic soccer leagues resumed and several European cup competitions were held, and the NFL~~

~~season began on its~~ regular ~~schedule. During this period, the NBA also resumed its season, completed the NBA Finals and commenced its 2020-2021 season.~~

activities. In the ~~three~~six months ended ~~March 31,~~June 30, 2022, sports seasons continued and sporting events were held as planned, including the NFL regular season, the NFL Playoffs and Superbowl LVI, the NBA regular season and playoffs, the NHL regular season and playoffs, the NASCAR Cup Series, various NCAA football bowl games, ~~and~~ the NCAA college basketball regular season and ~~tournament.~~tournament, the MLB regular season and several golf tournaments. The continued return of major sports and sporting events ~~has~~ generated significant user interest and activity in the Company's Sportsbook and DFS products. However, the possibility remains that sports seasons and sporting events may be suspended, cancelled, rescheduled or ~~rescheduled~~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 ~~its~~the Company’s revenue, possibly materially. However, the Company’s products that do not rely on sports seasons and sporting events, such as iGaming, may partially offset this adverse impact on revenue.

A significant or prolonged decrease in consumer spending on entertainment or leisure activities would also likely have an adverse effect on demand for the Company’s products, reducing cash flows and revenues, and thereby materially harming the Company’s business, financial condition and results of operations. In addition, a materially disruptive resurgence of COVID-19 cases or the emergence of additional variants or strains of COVID-19 could cause other widespread or more severe impacts depending on where infection rates are highest. As steps taken to mitigate the spread of COVID-19 necessitated a shift away from a traditional office environment for many employees, the Company implemented business continuity programs to ensure that employees were safe and that the business continued to function with minimal disruptions to normal work operations while employees worked remotely. ~~The Company~~During the second quarter of 2022, our primary offices, including our corporate headquarters in Boston, Massachusetts, re-opened with many of our employees returning to work onsite in various capacities. We will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

2.Summary of Significant Accounting Policies and Practices

Basis of Presentation and Principles of Consolidation

These unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States (“U.S. GAAP”) for interim reporting. As such, certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in the Company’s annual audited consolidated financial statements. Accordingly, the unaudited condensed consolidated financial statements should be read in connection with the Company’s audited financial statements and related notes as of and for the fiscal year ended December 31, 2021, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on February 18, 2022 (“2021 Annual Report”). The accompanying condensed consolidated financial statements are unaudited; however, in the opinion of management, they include all normal and recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial statements for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year, due to seasonal fluctuations in the Company’s revenue as a result of timing of the various sports seasons, sporting events and other factors.

The accompanying unaudited condensed consolidated financial statements include the accounts and operations of the Company. All intercompany balances and transactions have been eliminated. Certain amounts from a prior period, which are not material, have been reclassified to conform with the current period presentation.

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

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

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

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

These revisions have no impact on the Company’s previously reported consolidated statements of operations or consolidated balance sheets, including the Company’s cash and cash equivalents and cash reserved for user balances. Prior period amounts have been revised to conform to the current period presentation.

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

Three months ended March 31, 2021
Reported Adjustments Revised
Adjustments to reconcile net loss to net cash flows used in operating activities:
Change in operating assets and liabilities, net of effect of business combinations:
Cash reserved for users $ (18,014) $ 18,014 $ —
Net cash flows used in operating activities (77,751) 18,014 (59,737)
Net increase in cash, cash equivalents and restricted cash 1,000,870 18,014 1,018,884
Cash and cash equivalents and restricted cash at the beginning of period 1,817,258 287,718 (a) 2,104,976
Cash and cash equivalents and restricted cash, end of period $ 2,818,128 $ 305,732 $ 3,123,860

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

Foreign Currency

~~During the three months ended March 31,~~Effective as of January 1, 2022, the Company’s significant non-U.S. subsidiaries’ functional currency changed from the Euro to the U.S. dollar. Accordingly, the Company did not have to translate the financial statements of its significant non-U.S. subsidiaries ~~as of~~for the period ended June 30, 2022.

Digital Assets and Liabilities

On March 31, ~~2022.~~2022, the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard digital assets that an entity holds for its platform users. In accordance with SAB 121, the Company recognized a liability for the obligation to safeguard its users’ assets and recognized an associated asset for its non-fungible token (“NFTs”) held for its users. Both the liability and the associated asset are measured at the fair value of the NFTs being safeguarded. Refer to Note 6 hereof for disclosures required in accordance with Accounting Standards Codification 820, Fair Value Measurement.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect ~~if any,~~ on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies the guidance in Accounting Standards

Codification Topic 820, Fair Value Measurement (“Topic 820”), when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2022-03, it does not expect ASU 2022-03 to have a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

3.Business Combination

Acquisition of Golden Nugget Online Gaming, Inc.

On August 9, 2021, Old DraftKings and GNOG entered into the Merger Agreement, pursuant to which Old DraftKings would acquire GNOG in an all-stock ~~transaction (the “GNOG Transaction”).~~transaction. On May 5, 2022, ~~(the “Closing Date”),~~ Old DraftKings consummated the GNOG Transaction and, in connection therewith, undertook a holding company reorganization whereby New DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG. New DraftKings was renamed “DraftKings Inc.” on the Closing Date. Under the terms of the Merger Agreement and subject to certain exclusions contained therein, GNOG stockholders received a fixed ratio of 0.365 shares of New DraftKings’ Class A common stock for each share of GNOG that they held on the Closing Date. The Company issued approximately 29.3 million shares of its Class A common stock ~~will be issued~~ in connection with the consummation of the GNOG Transaction. The Company is currently in the process of finalizing the preliminary accounting for the GNOG Transaction and expects to complete its preliminary accounting of the assets acquired and liabilities assumed by the end of the second quarter of 2022. New DraftKings is the registrant filing this Report as the successor registrant for Old DraftKings.

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

Preliminary Purchase Price Accounting for the GNOG Transaction

On the Closing Date, the Company acquired 100% of the equity interests of GNOG pursuant to the Merger Agreement. The following is a summary of the consideration issued on the Closing Date:


Share consideration (1)	$	460,128
Other consideration (2)	143,337
Total consideration	$	603,465

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

(2)Includes (i) payments made by the Company on behalf of GNOG, including repayment of the outstanding portion of GNOG’s term loan (including the associated prepayment premium) and payment of certain of GNOG’s transaction expenses incurred in connection with the GNOG Transaction and (ii) warrants that were exercisable for shares of GNOG Class A common stock prior to the Closing Date, which were assumed by New DraftKings in connection with the GNOG Transaction and became eligible to be converted into approximately 2.1 million shares of New DraftKings Class A common stock in the aggregate. These payments were partially offset by commercial credits received by the Company from Fertitta Entertainment, Inc. (“FEI”), which can be applied by the Company from time to time to offset future amounts otherwise owed by it to FEI or its affiliates under commercial arrangements among such parties, subject to certain limited exceptions, which partially offsets the other consideration issued in connection with the GNOG Transaction.

The purchase price allocation for the GNOG Transaction set forth herein is preliminary and subject to change within the measurement period, which will not extend beyond one year from the Closing Date. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined and may include adjustments pertaining to intangible assets acquired, tax liabilities assumed, including the calculation of deferred tax assets and liabilities, and contingent consideration (if any). Any such adjustments may be material.

The following table summarizes the consideration issued or paid in connection with the GNOG Transaction and the preliminary fair value of the assets acquired and liabilities assumed in connection with the consummation of the GNOG Transaction on the Closing Date. The values set forth below are preliminary, pending finalization of valuation analyses:


Cash and cash equivalents	$	66,709
Cash reserved for users	7,633
Receivables reserved for users	2,814
Accounts receivables	9,005
Prepaid expenses and other current assets	541
Property and equipment, net	2,674
Intangible assets, net	307,000
Operating lease right-of-use assets	1,185
Deposits and other non-current assets	47,395
Total identifiable assets acquired	444,956
Liabilities assumed:
Accounts payable and accrued expenses	36,660
Liabilities to users	5,260
Operating lease liabilities	1,185
Other long-term liabilities	76,750
Total liabilities assumed	119,855
Net assets acquired (a)	325,101
Purchase consideration (b)	603,465
Goodwill (b) – (a)	$	278,364

Goodwill represents the excess of the gross consideration transferred over the difference between the fair value of the underlying net assets acquired and the underlying liabilities assumed. Qualitative factors that contribute to the recognition of goodwill include certain intangible assets that are not recognized as separate identifiable intangible assets apart from goodwill. Intangible assets not recognized apart from goodwill consist primarily of benefits from securing buyer-specific synergies that increase revenue and profits and are not otherwise available to a marketplace participant, as well as acquiring a talented workforce and cost savings opportunities. Goodwill associated with the GNOG Transaction is assigned as of the Closing Date to the Company’s B2C reporting unit. Goodwill recognized is partially deductible for tax purposes.

Intangible Assets


	Fair Value		Weighted- Average Useful Life
Gaming licenses	$	137,000	12.2 years
Customer relationships	170,000		5.9 years
Total	$	307,000

Loan Receivable

The Company acquired a long-term receivable in the amount of $30.5 million in connection with the GNOG Transaction, which originally resulted from a $30.0 million mezzanine loan (the “Danville GN Casino Loan”) by GNOG to certain parties before the Closing Date to develop and construct a “Golden Nugget”-branded casino in Danville, Illinois, pending regulatory approvals, that would enable GNOG to obtain market access to the State of Illinois. There has been no significant deterioration of credit quality since the origination date of the Danville GN Casino Loan. The receivable related to the Danville GN Casino Loan is classified within deposits and other non-current assets on the Company’s condensed consolidated balance sheet.

Transaction Costs

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

Unaudited Pro-Forma Information

The financial information in the table below summarizes the combined results of operations of Old DraftKings and GNOG, on a pro forma basis, as though the companies had been combined as of the beginning of the periods presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the GNOG Transaction had been consummated as of the beginning of the periods presented or of results that may occur in the future.


	Three months ended June 30,				Six months ended June 30,
	2022 Pro Forma		2021 Pro Forma		2022 Pro Forma		2021 Pro Forma
Revenue	$	478,416	$	327,482	$	927,525	$	664,671
Net loss	(210,769)		(318,087)		(686,543)		(735,256)

The foregoing pro forma results are based on estimates and assumptions, which the Company believes are reasonable. The pro forma results include adjustments primarily related to purchase accounting adjustments. Acquisition costs and other non-recurring charges incurred are included in the earliest period presented.

4.Intangible Assets and Goodwill

Intangible Assets

The Company has the following intangible assets, net as of ~~March 31,~~June 30, 2022:


		Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net			Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:	Amortized intangible assets:								Amortized intangible assets:
Developed technology	Developed technology	6.1 years	$	422,900	$	(99,806)	$	323,094	Developed technology	5.9 years	$	422,900	$	(113,677)	$	309,223
Internally developed software	Internally developed software	2.7 years	126,873		(54,047)		72,826		Internally developed software	2.6 years	142,574		(61,268)		81,306
Gaming licenses	Gaming licenses	7.2 years	54,709		(15,827)		38,882		Gaming licenses	11.0 years	194,830		(20,277)		174,553
Trademarks, tradenames and other	Trademarks, tradenames and other	4.3 years	31,863		(7,699)		24,164		Trademarks, tradenames and other	4.1 years	32,971		(9,627)		23,344
Customer relationships	Customer relationships	3.0 years	99,728		(38,553)		61,175		Customer relationships	5.0 years	269,728		(49,118)		220,610
			736,073		(215,932)		520,141				1,063,003		(253,967)		809,036
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:								Indefinite-lived intangible assets:
Digital assets		Indefinite-lived	2,882		—		2,882
Digital assets, net of impairment									Digital assets, net of impairment	Indefinite-lived	1,489		—		1,489
Intangible assets, net	Intangible assets, net		$	738,955	$	(215,932)	$	523,023	Intangible assets, net		$	1,064,492	$	(253,967)	$	810,525

The Company had the following intangible assets, net as of December 31, 2021:


	Weighted-Average Remaining Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Developed technology	6.4 years	$	422,900	$	(87,089)	$	335,811
Internally developed software	2.6 years	117,953		(52,607)		65,346
Gaming licenses	7.3 years	54,442		(13,466)		40,976
Trademarks and tradenames	4.5 years	30,639		(5,952)		24,687
Customer relationships	3.3 years	99,728		(33,526)		66,202
		725,662		(192,640)		533,022
Indefinite-lived intangible assets:
Digital assets	Indefinite-lived	1,995		—		1,995
Intangible assets, net		$	727,657	$	(192,640)	$	535,017

Amortization expense was ~~$28.1~~$38.1 million and ~~$25.2~~$26.6 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $66.2 million and $51.9 million for the six months ended June 30, 2022 and 2021, respectively.

Goodwill

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


	B2C		B2B		Media		Total
Balance as of December 31, 2021	$	360,756	$	207,684	$	47,215	$	615,655
Goodwill resulting from the GNOG Transaction	278,364		—		—		278,364
Balance as of June 30, 2022	$	639,120	$	207,684	$	47,215	$	894,019

5.Current and Long-term Liabilities

Revolving Line of Credit

In October 2016, DK Crown Holdings Inc. (formerly DraftKings Inc.), a Delaware corporation (“DK DE”) entered into an amended and restated loan and security agreement with Pacific Western Bank, which was most recently amended in May 2022 (as amended, the “Credit Agreement”). The Credit Agreement provides a revolving line of credit of up to $60.0 million. The Credit Agreement has a maturity date of August 28, 2022.

Borrowings under the Credit Agreement bear interest at a variable annual rate equal to the greater of (i) 1.00% above the prime rate then in effect and (ii) 6.50%, and the Credit Agreement requires monthly, interest-only payments. In addition, the Company is required to pay quarterly in arrears a fee equal to 0.25% per annum of the unused portion of the revolving line of

credit. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Credit Agreement provided a revolving line of credit of up to $60.0 million. There was no principal outstanding as of ~~March 31,~~June 30, 2022 or December 31, 2021. Net facility available from the Credit Agreement as of ~~March 31,~~June 30, 2022 and December 31, 2021 totaled $56.0 million and $55.8 million, respectively, which, in each case, excludes the letters of credit outlined in Note 13. The Company is also subject to certain affirmative and negative covenants until maturity. In connection with the issuance of the Convertible Notes (as defined below) and the entry into the Capped Call Transactions (as defined below), the Company obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that would have otherwise resulted from entering into these financing transactions. The Company also obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that would have otherwise resulted from exceeding a capital expenditure limitation for 2021 and the amendments to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2021 and June 30, 2021, in each case, for the material weakness previously identified in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, as filed with the SEC on November 5, 2021. In connection with the GNOG Transaction, the Company obtained a waiver from Pacific Western Bank for any breach of the Credit Agreement that

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

Convertible Notes and Capped Call

In March 2021, the Company issued zero-coupon convertible senior notes in an aggregate principal amount of $1,265.0 million, which includes proceeds from the full exercise of the over-allotment option (collectively, the “Convertible Notes”). The Convertible Notes will mature on March 15, 2028 (the “Notes Maturity Date”) , subject to earlier conversion, redemption or repurchase. In connection with the issuance of the Convertible Notes, the Company incurred $17.0 million of lender fees and $1.7 million of debt financing costs. The Convertible Notes represent senior unsecured obligations of ~~the Company,~~Old DraftKings, which are being amortized through the Notes Maturity Date. On May 5, 2022, in connection with the GNOG Transaction, (i) New DraftKings agreed to fully and unconditionally guarantee all of Old DraftKings’ obligations under the Convertible Notes and the indenture governing the Convertible Notes and (ii) each Convertible Note which was outstanding as of the consummation of the GNOG Transaction and previously convertible into shares of Old DraftKings Class A common stock became convertible into shares of New DraftKings Class A common stock.

The Convertible Notes are convertible at an initial conversion rate of 10.543 shares of ~~the Company’s~~New DraftKings’ Class A common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $94.85 per share of New DraftKings’ Class A common stock. The conversion rate is subject to adjustment upon the occurrence of certain specified events and includes a make-whole adjustment upon early conversion in connection with a make-whole fundamental change (as defined in the indenture governing the Convertible Notes).

Prior to September 15, 2027, the Convertible Notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the Notes Maturity Date. ~~The Company~~Old DraftKings will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of New DraftKings’ Class A common stock or a combination of cash and shares of New DraftKings’ Class A common stock. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the conditions allowing holders of the Convertible Notes to convert their Convertible Notes were ~~not met.~~triggered by the holding company reorganization in connection with the GNOG Transaction, whereby New DraftKings became the going-forward public company and replaced Old DraftKings as the issuer of the Class A common stock issuable upon conversion of the Convertible Notes; such conversion window expired on June 27, 2022, and no holders of the Convertible Notes exercised their conversion rights.

In connection with the pricing of the Convertible Notes and the exercise of the over-allotment option to purchase additional notes, the Company entered into a privately negotiated capped call transaction (“Capped Call Transactions”). The Capped Call Transactions have a strike price of $94.85 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Notes. The Capped Call Transactions have an initial cap price of $135.50 per share, subject to certain adjustments. The Capped Call Transactions are expected generally to reduce potential dilution to the Company’s Class A common stock upon any conversion of Convertible Notes. As the transaction qualifies for equity classification, the net cost of $124.0 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

Although recorded at amortized cost on the Company’s consolidated balance sheet, the estimated fair value of the Convertible Notes was ~~$907.6~~$747.9 million and $953.8 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, which was calculated using the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last business day of the period and is classified as Level 2 in the fair value ~~hieraarchy.~~hierarchy.

Indirect Taxes

Taxation of e-commerce is becoming more prevalent and could negatively affect the Company’s business as it primarily pertains to DFS and its users. The ultimate impact of indirect taxes on the Company’s business is uncertain, as is the period required to resolve this uncertainty. The Company’s estimated contingent liability for indirect taxes represents the Company’s best estimate of tax liability in jurisdictions in which the Company believes taxation is probable. The Company frequently reevaluates its tax positions for appropriateness.

Indirect tax statutes and regulations are complex and subject to differences in application and interpretation. Tax authorities may impose indirect taxes on Internet-delivered activities based on statutes and regulations which, in some cases, were established prior to the advent of the Internet and do not apply with certainty to the Company’s business. The Company’s estimated contingent liability for indirect taxes may be materially impacted by future audit results, litigation and settlements,

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

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company’s estimated contingent liability for indirect taxes was ~~$49.2~~$52.7 million and $47.5 million, respectively. The estimated contingent liability for indirect taxes is recorded within other long-term liabilities on the consolidated balance sheets and general and administrative expenses on the Company’s condensed consolidated statements of operations.

Warrant Liabilities

As part of the initial public offering of Diamond Eagle Acquisition ~~Corp,~~Corp. (“DEAC”) on May 14, 2019 (the “IPO”), DEAC issued 13.3 million warrants each of which entitles the holder to purchase 1 share of the Company’s Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, DEAC completed the private sale of 6.3 million warrants to DEAC’s sponsor (the “Private Warrants”). As of ~~March 31,~~June 30, 2022, there were no Public Warrants ~~outstanding. As of March 31, 2022,~~outstanding and 1.6 million Private Warrants ~~remained~~outstanding. On May 5, 2022, in connection with the consummation of the GNOG Transaction, Old DraftKings entered into an assignment and assumption agreement (the “Old DraftKings Warrant Assignment Agreement”) with New DraftKings, Computershare Trust Company, N.A. and Computershare Inc. (together, “Computershare”), pursuant to which Old DraftKings assigned to New DraftKings all of its rights, interests and obligations under the warrant agreement, dated as of May 10, 2019 (the “Old DraftKings Warrant Agreement”), by and between DEAC and Continental Stock Transfer & Trust Company, as warrant agent, as assumed by Old DraftKings and assigned to Computershare by that certain assignment and assumption agreement, dated as of April 23, 2020, governing Old DraftKings’ outstanding Private Warrants, on the terms and conditions set forth in the Old DraftKings Warrant Assignment Agreement. In connection with the consummation of the GNOG Transaction and pursuant to the Old DraftKings Warrant Assignment Agreement, each of the outstanding Private Warrants became exercisable for 1 share of New DraftKings Class A common stock on the existing terms and conditions, except as otherwise described in the Old DraftKings Warrant Assignment Agreement.

In addition, on May 5, 2022, in connection with the consummation of the GNOG Transaction, the Company assumed an additional 5.9 million warrants, each of which entitled the holder to purchase 1 share of GNOG’s Class A common stock at an exercise price of $11.50 per share (the “GNOG Private Warrants”). Effective as of the consummation of the GNOG Transaction, each of the outstanding GNOG Private Warrants became exercisable for 0.365 of a share of the Company’s Class A common stock, or approximately 2.1 million shares of the Company’s Class A common stock in the aggregate, on the existing terms and conditions of such GNOG Private Warrants, except as otherwise described in the assignment and assumption agreement relating to the GNOG Private Warrants entered into on the Closing Date. As of June 30, 2022, there were 5.9 million GNOG Private Warrants outstanding, which corresponds to an assumed warrant liability of $13.2 million as of the Closing Date less a gain on remeasurement of $4.8 million from the Closing Date through June 30, 2022.

As of June 30, 2022, the fair value of ~~$14.2~~the Company's warrant liability was $13.1 million. Due to fair value changes throughout the three and six months ended ~~March 31,~~June 30, 2022, the Company recorded gains on remeasurement of warrant liabilities of $14.3 million and ~~March 31,~~$27.0 million, respectively. Due to fair value changes throughout the three and six months ended June 30, 2021, the Company recorded a gain on remeasurement of ~~warrant~~warrants liabilities of ~~$12.7~~$17.0 million and a loss on remeasurement of warrant liabilities of ~~$27.0~~$10.0 million, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, a de minimis number of Private Warrants and GNOG Private Warrants were exercised. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~0.1~~0.2 million Private Warrants were exercised resulting in a reclassification to additional paid-in-capital in the amount of ~~$1.8~~$4.2 million, reflecting the reclassification of the warrant liabilities of ~~$1.6~~$3.5 million and proceeds upon exercise of ~~$0.2~~$0.7 million.

6.Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value and nonrecurring fair value measurements are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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

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


		March 31, 2022												June 30, 2022
		Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets	Assets												Assets
Cash equivalents:	Cash equivalents:												Cash equivalents:
Money market funds	Money market funds	$	200,212	(1)	$	—		$	—		$	200,212	Money market funds	$	200,537	(1)	$	—		$	—		$	200,537
Other current assets:													Other current assets:
Digital assets held for users													Digital assets held for users	—			17,283		(2)	—			17,283
Other non-current assets:	Other non-current assets:												Other non-current assets:
Derivative instruments	Derivative instruments	—			—			43,283		(4)	43,283		Derivative instruments	—			—			46,633		(5)	46,633
Equity securities	Equity securities	27,650		(2)	7,033		(3)	—			34,683		Equity securities	18,675		(3)	13,533		(4)	—			32,208

Total	Total	$	227,862		$	7,033		$	43,283		$	278,178	Total	$	219,212		$	30,816		$	46,633		$	296,661

Liabilities	Liabilities												Liabilities
Private Warrants		$	—		$	14,230	(5)	$	—		$	14,230
Other current liabilities:													Other current liabilities:
Digital assets held for users													Digital assets held for users	$	—		$	17,283	(2)	$	—		$	17,283
Warrant liabilities													Warrant liabilities	—			13,081		(6)	—			13,081
Total	Total	$	—		$	14,230		$	—		$	14,230	Total	$	—		$	30,364		$	—		$	30,364


		December 31, 2021												December 31, 2021
		Level 1			Level 2			Level 3			Total			Level 1			Level 2			Level 3			Total
Assets	Assets												Assets
Cash equivalents:	Cash equivalents:												Cash equivalents:
Money market funds	Money market funds	$	550,169	(1)	$	—		$	—		$	550,169	Money market funds	$	550,169	(1)	$	—		$	—		$	550,169
Other non-current assets:	Other non-current assets:												Other non-current assets:
Derivative instruments	Derivative instruments	—			—			3,850		(4)	3,850		Derivative instruments	—			—			3,850		(5)	3,850
Equity securities	Equity securities	27,200		(2)	—			—			27,200		Equity securities	27,200		(3)	—			—			27,200

Total	Total	$	577,369		$	—		$	3,850		$	581,219	Total	$	577,369		$	—		$	3,850		$	581,219

Liabilities	Liabilities												Liabilities
Private Warrants		$	—		$	26,911	(5)	$	—		$	26,911
Warrant liabilities													Warrant liabilities	$	—		$	26,911	(6)	$	—		$	26,911
Total	Total	$	—		$	26,911		$	—		$	26,911	Total	$	—		$	26,911		$	—		$	26,911

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

~~(3)~~

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

~~(4)~~(5)Represents the Company’s derivative instruments held in other public and privately held entities. The Company measures these derivative instruments atto fair value using option pricing models and, accordingly, classifies these assets as Level 3. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, there were not a significant amount of new derivative instruments purchased by or issued to the Company. The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to ~~fair value the~~measure these Level 3 derivative ~~instruments.~~instruments to fair value. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date.


	~~March 31,~~June 30, 2022	December 31, 2021
Significant Unobservable Input	Range (Weighted Average)
Underlying stock price	$~~11.06~~7.47 - $39.22 ($~~36.69)~~34.35)	$	10.88
Volatility	~~65.0%~~70.0% - 75.0% ~~(73.4%~~(73.5%)	60.0		%
Risk-free rate	~~1.0%~~1.3% - ~~1.4% (1.3%~~1.6% (1.4%)	0.3		%

~~(5)~~(6)The Company measures its Private Warrants atand the GNOG Private Warrants to fair value using a binomial lattice model with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2.

~~For~~During the three and six months ended ~~March 31,~~June 30, 2022, ~~and 2021,~~ the Company recorded ~~$37.4~~$5.6 million of unrealized loss and ~~$0.0~~$31.8 million of unrealized gains, respectively, primarily all of which resulted from those financial assets categorized as Level 3. Those unrealized gains are included within other income, net in the Company’s condensed consolidated statements of operations. During the three and six months ended June 30, 2021, no such gains or losses were recorded.

7.Revenue Recognition

Deferred Revenue

The Company included deferred revenue within accounts payable and accrued expenses and liabilities to users in ~~the~~its condensed consolidated balance sheets. The deferred revenue balances were as follows:


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Deferred revenue, beginning of the period	Deferred revenue, beginning of the period	$	91,554	$	30,627		Deferred revenue, beginning of the period	$	95,402	$	41,849	$	91,554	$	30,627
Deferred revenue, end of the period	Deferred revenue, end of the period	95,402		41,849			Deferred revenue, end of the period	84,674		51,791		84,674		51,791
Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period	Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period	51,680		24,493			Revenue recognized in the period from amounts included in deferred revenue at the beginning of the period	51,946		20,664		64,478		26,613

Deferred revenue primarily represents contract liabilities related to the Company’s obligation to transfer future value in relation to in period transactions in which the Company has received consideration. Such obligations are recognized as liabilities when awarded to users and are recognized as revenue when those liabilities are later resolved.

Revenue Disaggregation

Disaggregation of revenue for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 is as follows:


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Online gaming	Online gaming	$	386,678	$	272,661		Online gaming	$	434,123	$	258,229	$	820,801	$	530,890
Gaming software	Gaming software	13,495		31,429			Gaming software	11,470		27,432		24,965		58,862
Other	Other	17,032		8,186			Other	20,592		11,944		37,624		20,129
Total Revenue	Total Revenue	$	417,205	$	312,276		Total Revenue	$	466,185	$	297,605	$	883,390	$	609,881

Online gaming includes ~~DFS,~~Sportsbook, iGaming and ~~Sportsbook,~~DFS, which have certain similar attributes and patterns of recognition. Sources of ~~other~~Other revenue primarily ~~include~~includes media, ~~marketplace~~Marketplace and ~~other online consumer products.~~retail Sportsbooks.

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


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
United States	United States	$	402,597	$	280,117		United States	$	456,075	$	269,532	$	858,671	$	549,648
International	International	14,608		32,159			International	10,110		28,073		24,719		60,233
Total Revenue	Total Revenue	$	417,205	$	312,276		Total Revenue	$	466,185	$	297,605	$	883,390	$	609,881

8.Stock-Based Compensation

The Company, historically, has issued 3 types of stock-based compensation: Time-Based awards, Long Term Incentive Plan (“LTIP”) awards and Performance-Based Stock Compensation Plan (“PSP”) awards. Time-Based awards are equity awards which generally vest over a 4-year period. LTIP awards are performance-based equity awards that are used to establish longer-term performance objectives and incentivize management to meet those objectives. PSP awards are short-term performance-based equity awards which establish performance objectives related to one or two particular fiscal years. LTIP awards generally vest when revenue, Adjusted EBITDA or share price targets are achieved amongst other conditions, while PSP awards generally vest upon achievement of revenue targets and have a range of payouts amongst other conditions.

The following table shows restricted stock unit (“RSU”) and stock option activity for the ~~three~~six months ended ~~March 31,~~June 30, 2022:


		Time-based		PSP		LTIP		Total	Weighted Average Exercise Price of Options		Weighted Average FMV of RSUs			Time-based		PSP		LTIP		Total	Weighted Average Exercise Price of Options		Weighted Average FMV of RSUs
		Options	RSUs	Options	RSUs	Options	RSUs							Options	RSUs	Options	RSUs	Options	RSUs
Outstanding at December 31, 2021	Outstanding at December 31, 2021	14,695	4,195	2,354	1,488	11,671	19,343	53,746	$	5.46	$	49.94	Outstanding at December 31, 2021	14,695	4,195	2,354	1,488	11,671	19,343	53,746	$	5.46	$	49.94
Granted	Granted	200	8,013	—	2	—	173	8,388	31.40		23.30		Granted	200	9,270	—	2	—	434	9,906	31.40		21.96
Exercised options / vested RSUs	Exercised options / vested RSUs	(869)	(405)	(44)	(2,671)	—	(6,251)	(10,240)	1.94		46.15		Exercised options / vested RSUs	(1,592)	(1,299)	(54)	(2,671)	(169)	(6,251)	(12,036)	2.70		44.96
Change in awards due to performance-based multiplier	Change in awards due to performance-based multiplier	—	—	—	1,806	—	—	1,806	—		33.69		Change in awards due to performance-based multiplier	—	—	—	1,806	—	—	1,806	—		33.69
Forfeited	Forfeited	(21)	(116)	—	(1)	—	(50)	(188)	4.12		41.41		Forfeited	(118)	(549)	—	(6)	—	(281)	(954)	4.76		39.29
Outstanding at March 31, 2022		14,005	11,687	2,310	624	11,671	13,215	53,512	$	5.76	$	41.68
Outstanding at June 30, 2022													Outstanding at June 30, 2022	13,185	11,617	2,300	619	11,502	13,245	52,468	$	5.83	$	40.48

As of ~~March 31,~~June 30, 2022, total unrecognized stock-based compensation expense of ~~$731.2~~$608.4 million related to granted and unvested share-based compensation arrangements is expected to be recognized over a weighted-average period of ~~2.0~~1.9 years. The following table shows stock compensation expense for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three months ended March 31, 2022						Three months ended March 31, 2021							Three months ended June 30, 2022						Three months ended June 30, 2021
		Options		RSUs		Total		Options		RSUs		Total			Options		RSUs		Total		Options		RSUs		Total
Time Based (1)	Time Based (1)	$	3,864	$	21,786	$	25,650	$	2,433	$	14,268	$	16,701	Time Based (1)	$	3,830	$	26,983	$	30,813	$	4,034	$	15,223	$	19,257
PSP (2)	PSP (2)	—		43,367		43,367		—		16,314		16,314		PSP (2)	—		13,764		13,764		—		19,090		19,090
LTIP (2)	LTIP (2)	—		118,060		118,060		—		118,828		118,828		LTIP (2)	—		90,944		90,944		—		133,392		133,392
Total	Total	$	3,864	$	183,213	$	187,077	$	2,433	$	149,410	$	151,843	Total	$	3,830	$	131,691	$	135,521	$	4,034	$	167,705	$	171,739

															Six months ended June 30, 2022						Six months ended June 30, 2021
															Options		RSUs		Total		Options		RSUs		Total
Time Based (1)														Time Based (1)	$	7,694	$	48,769	$	56,463	$	6,467	$	29,491	$	35,958
PSP (2)														PSP (2)	—		57,131		57,131		—		35,404		35,404
LTIP (2)														LTIP (2)	—		209,004		209,004		—		252,220		252,220
Total														Total	$	7,694	$	314,904	$	322,598	$	6,467	$	317,115	$	323,582

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

(2) PSP and LTIP awards vest based on defined performance criteria and are expensed based on the probability of achieving such criteria. During the three months ended March 31, 2022, the Company recorded a cumulative catch-up adjustment of $20.7 million in additional stock-based compensation expense related to its updated expectation on achieving higher revenue targets than originally estimated for certain PSP awards which have a range of payouts.

9.Income Taxes

The Company’s provision for income taxes for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 is as follows:

Three months ended March 31,
2022 2021
Income tax provision (benefit) $ 469 $ (4,595)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Income tax (benefit) provision	$	(81,226)	$	2,404	$	(80,757)	$	(2,191)

The effective tax rates for the three months ended ~~March 31,~~June 30, 2022 and 2021 were ~~(0.1)%~~27.2% and ~~1.3%~~(0.8)%, respectively, and the effective tax rates for the six months ended June 30, 2022 and 2021 were 10.6% and 0.3%, respectively. The difference between the Company’s effective tax rates for the three and six month periods in 2022 and 2021 and the U.S. statutory tax rate of 21% was primarily due to a ~~full~~ valuation allowance related to the Company’s ~~net U.S.~~ deferred tax assets, offset partially by current state tax and current foreign tax. Additionally, the Company recorded a discrete income tax benefit of $76.8 million during the second quarter of 2022, as well as a discrete tax benefit of $6.8 million during the first quarter of 2021, which iswere attributable to a non-recurring partial ~~release~~releases of the Company’s U.S. valuation allowance as a result of the preliminary purchase ~~price~~ accounting offor GNOG and Vegas Sports Information Network, ~~LLC~~Inc. (“~~VSiN”~~VSIN”)., respectively. The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized.

10.Segment Information

The Company operates its business and reports its results through 2 operating and reportable segments: B2C and B2B, in accordance with ASC Topic 280, Segment Reporting. The B2C segment provides users with ~~DFS,~~ Sportsbook, iGaming and ~~iGaming~~DFS products, as well as media and other online consumer products. The B2B segment is involved in the design and development ~~and~~

~~licensing~~ of sports betting and casino gaming software, ~~for its Sportsbook and casino gaming products,~~ which is primarily comprised of ~~SBTech.~~the Company’s wholly-owned subsidiary, SBTech (Global) Limited (“SBTech”).

Operating segments are components of the Company for which separate discrete financial information is available to and evaluated regularly by the chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The CODM assesses a combination of metrics such as revenue and Adjusted EBITDA to evaluate the performance of each operating and reportable segment.

Any intercompany revenues or expenses are eliminated in consolidation. All of the Company’s operating revenues and expenses, other than those excluded from Adjusted EBITDA as detailed below, are allocated to the Company’s reportable segments. ~~We define~~The Company defines and ~~calculate~~calculates Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax ~~expense~~provision or benefit, and depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, litigation, settlement and related costs, advocacy and ~~certain~~other related legal expenses, gain or loss on remeasurement of warrant liabilities and other non-recurring ~~non-cash~~ and ~~non-core items,~~non-operating costs or income, as described in the reconciliation below.

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

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


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Revenue:	Revenue:						Revenue:
B2C	B2C	$	403,710	$	280,847		B2C	$	454,715	$	270,173	$	858,425	$	551,019
B2B	B2B	13,495		31,429			B2B	11,470		27,432		24,965		58,862
Total revenue	Total revenue	417,205		312,276			Total revenue	466,185		297,605		883,390		609,881

Adjusted EBITDA:	Adjusted EBITDA:						Adjusted EBITDA:
B2C	B2C	(269,171)		(141,355)			B2C	(98,904)		(92,259)		(368,075)		(233,613)
B2B	B2B	(20,338)		2,093			B2B	(19,230)		(3,043)		(39,568)		(951)
Total adjusted EBITDA	Total adjusted EBITDA	(289,509)		(139,262)			Total adjusted EBITDA	(118,134)		(95,302)		(407,643)		(234,564)
Adjusted for:	Adjusted for:						Adjusted for:
Depreciation and amortization	Depreciation and amortization	32,225		28,193			Depreciation and amortization	42,315		30,051		74,540		58,244
Interest income, net	Interest income, net	(148)		(985)			Interest income, net	(1,929)		(1,642)		(2,077)		(2,627)
Income tax provision (benefit)	Income tax provision (benefit)	469		(4,595)			Income tax provision (benefit)	(81,226)		2,404		(80,757)		(2,191)
Stock-based compensation	Stock-based compensation	187,077		151,843			Stock-based compensation	135,521		171,739		322,598		323,582
Transaction-related costs	Transaction-related costs	3,774		3,023			Transaction-related costs	10,505		7,890		14,279		10,913
Litigation, settlement and related costs	Litigation, settlement and related costs	1,950		622			Litigation, settlement and related costs	2,446		3,599		4,396		4,221

Advocacy and other related legal expenses							Advocacy and other related legal expenses	—		11,035		—		11,035
(Gain) loss on remeasurement of warrant liabilities	(Gain) loss on remeasurement of warrant liabilities	(12,681)		26,980			(Gain) loss on remeasurement of warrant liabilities	(14,315)		(16,984)		(26,996)		9,996
Other non-recurring costs and non-operating (income) costs		(34,482)		2,001
Other non-recurring and non-operating costs (income)							Other non-recurring and non-operating costs (income)	5,652		2,132		(28,830)		4,133
Net loss attributable to common shareholders	Net loss attributable to common shareholders	$	(467,693)	$	(346,344)		Net loss attributable to common shareholders	$	(217,103)	$	(305,526)	$	(684,796)	$	(651,870)

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

11.Loss Per Share

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


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Net loss	Net loss	$	(467,693)	$	(346,344)		Net loss	$	(217,103)	$	(305,526)	$	(684,796)	$	(651,870)
Basic and diluted weighted-average common shares outstanding	Basic and diluted weighted-average common shares outstanding	411,066		397,621			Basic and diluted weighted-average common shares outstanding	437,033		401,447		424,121		399,545
Loss per share attributable to common stockholders:	Loss per share attributable to common stockholders:						Loss per share attributable to common stockholders:
Basic and diluted	Basic and diluted	$	(1.14)	$	(0.87)		Basic and diluted	$	(0.50)	$	(0.76)	$	(1.61)	$	(1.63)

1721

There were no preferred or other dividends declared for the three and six months ended ~~March 31,~~June 30, 2022. For the periods presented, the following securities were not required to be included in the computation of diluted shares outstanding:


		Three months ended March 31,			June 30,
		2022	2021		2022	2021
Warrants		1,613	1,812
Class A common stock resulting from exercise of all warrants				Class A common stock resulting from exercise of all warrants	3,761	1,769
Stock options and RSUs	Stock options and RSUs	53,512	59,187	Stock options and RSUs	52,468	58,031
Convertible notes	Convertible notes	13,337	13,337	Convertible notes	13,337	13,337
Total	Total	68,462	74,336	Total	69,566	73,137

12.Related-Party Transactions

Financial Advisor

The Company entered into an engagement letter with a related party (the “Financial Advisor”) in August 2019, as amended in December 2019. For the three and six months ended ~~March 31,~~June 30, 2022, the Company incurred $8.5 million of fees payable to its Financial Advisor. For the three and six months ended June 30, 2021, the Company incurred no fees payable to ~~the~~its Financial Advisor.

Receivables from Equity Method Investment

The Company provides office space and general operational support to DKFS, LLC, an equity-method affiliate. The operational support is primarily in the form of general and administrative services. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had ~~$0.5~~$0.4 million and $0.6 million, respectively, of receivables from DKFS, LLC related to those services and expenses to be reimbursed to the Company, which are included within non-current assets in ~~the~~its consolidated balance sheets. The Company has committed to invest up to $17.5 million into DBDK Venture Fund I, LP, a Delaware limited partnership and a subsidiary of DKFS LLC. As of ~~March 31,~~June 30, 2022, the Company had invested a total of ~~$3.5~~$4.9 million of the total commitment.

Transactions with a Shareholder and their Immediate Family Members

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had $0.0 million and $3.8 million of receivables due from former shareholders of SBTech, respectively, which includes a current director and shareholder of the Company. For the three months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, the Company had ~~$0.6~~$0.5 million and ~~$1.4~~$1.7 million in sales, respectively, to entities that are wholly owned by an immediate family member of a current director of the Company. The Company recorded $1.1 million and $3.1 million of such sales in the six months ended June 30, 2022 and June 30, 2021, respectively. The Company had an associated accounts receivable balance of $0.2 million and $0.2 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, included in accounts receivable in its condensed consolidated balance sheets.

Aircraft

Starting in 2022, from time to time, the Company has chartered, without mark-up, the private plane owned by Jason Robins, the Company’s Chief Executive Officer, utilizing aircraft services from Jet Aviation Flight Services, Inc. for the business and personal travel of Mr. Robins and his family. The Company had no direct or indirect interest in such private plane. During the three and six months ended ~~March 31,~~June 30, 2022, the Company incurred $0.0 million and $0.7 million of expense for use of the aircraft under these chartering ~~services.~~services, respectively.

In March 2022, the Company entered into a one-year lease of an aircraft from an entity controlled by Mr. Robins. Pursuant to such agreement, Mr. Robins’ entity leases the aircraft to the Company for $0.6 million for a one-year period. The Company covers all operating, maintenance and other expenses associated with the aircraft. The audit and compensation committees of the Company’s board of directors approved this arrangement based, among other things, on the requirements of the overall security program that Mr. Robins and his family fly private and their assessment that such an arrangement is more efficient and flexible and better ensures safety, confidentiality and privacy.

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

1822

13.Leases, Commitments and Contingencies

Leases

The Company primarily leases corporate office facilities, data centers and motor vehicles under operating lease agreements. Some of the Company’s leases include one or more options to renew. For a majority of our leases, we do not assume renewals in our determination of the lease term as the renewals are not deemed to be reasonably ~~assured.~~certain to exercise. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of ~~March 31,~~June 30, 2022, the Company’s lease agreements typically have terms not exceeding ten years.

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments primarily represent costs related to common area maintenance and utilities. The components of lease cost are as follows:


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
		2022		2021				2022		2021		2022		2021
Operating lease cost	Operating lease cost	$	4,230	$	4,133		Operating lease cost	$	5,679	$	4,229	$	9,909	$	8,362
Short term lease cost	Short term lease cost	1,755		426			Short term lease cost	1,323		440		3,078		867
Variable lease cost	Variable lease cost	806		701			Variable lease cost	1,073		982		1,879		1,683
Sublease income	Sublease income	(230)		(111)			Sublease income	(230)		(93)		(460)		(204)
Total lease cost	Total lease cost	$	6,561	$	5,149		Total lease cost	$	7,845	$	5,558	$	14,406	$	10,708

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


		Three months ended March 31,					Six months ended June 30,
		2022		2021			2022		2021
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	Operating cash flows used by operating leases	$	4,283	$	4,378	Operating cash flows used by operating leases	$	8,489	$	8,687
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	619	$	8,790	Right-of-use assets obtained in exchange for new operating lease liabilities	$	21,338	$	2,413

The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were ~~5.7~~7.1 years and 6.5% as of ~~March 31,~~June 30, 2022. The Company calculated the weighted-average discount rates using incremental borrowing rates, which equal the rates of interest that it would pay to borrow funds on a fully collateralized basis over a similar term.

Maturity of lease liabilities are as follows:


		Years Ending December 31,			Years Ending December 31,
From April 1, 2022 to December 31, 2022		$	12,443
From July 1, 2022 to December 31, 2022				From July 1, 2022 to December 31, 2022	$	8,030
2023	2023	15,661		2023	11,110
2024	2024	13,167		2024	15,862
2025	2025	11,371		2025	13,931
2026	2026	9,817		2026	12,309
Thereafter	Thereafter	18,294		Thereafter	48,683
Total undiscounted future cash flows	Total undiscounted future cash flows	80,753		Total undiscounted future cash flows	109,925
Less: Imputed interest	Less: Imputed interest	(13,385)		Less: Imputed interest	(26,023)
Present value of undiscounted future cash flows		$	67,368
Operating lease liabilities				Operating lease liabilities	$	83,902

1923

As of March 31, 2022, the Company has an additional corporate office lease that has not yet commenced with lease obligations of approximately $33.7 million that are not included in the table above. This operating lease is expected to commence in 2022 with a term of approximately 11 years.

~~As of March 31,~~June 30, 2022, the Company had long-lived assets, which consists of operating lease right-of-use assets and property and equipment, net, of ~~$79.5~~$106.3 million and ~~$31.4~~$25.0 million located in the United States and internationally, respectively. As of December 31, 2021, the company had long-lived assets of $77.2 million and $32.6 million located in the United States and internationally, respectively.

Other Contractual Obligations and Contingencies

The Company is a party to several non-cancelable contracts with vendors where the Company is obligated to make future minimum payments under the terms of these contracts as follows:


		Years Ending December 31,			Years Ending December 31,
From April 1, 2022 to December 31, 2022		$	349,135
From July 1, 2022 to December 31, 2022				From July 1, 2022 to December 31, 2022	$	267,708
2023	2023	402,543		2023	431,068
2024	2024	344,405		2024	383,967
2025	2025	289,543		2025	292,138
2026	2026	177,980		2026	179,888
Thereafter	Thereafter	349,849		Thereafter	358,772
Total	Total	$	1,913,455	Total	$	1,913,541

Contingencies

From time to time, and in the ordinary course of business, the Company may be subject to certain claims, charges and litigation concerning matters arising in connection with the conduct of the Company’s business activities.

In Re: Daily Fantasy Sports Litigation (Multi-District Litigation)

Between late 2015 and early 2016, certain individuals who allegedly registered and competed in daily sports fantasy contests on our and FanDuel’s websites, and their family members, filed numerous actions (primarily purported class actions) against us, FanDuel, and other related parties in courts across the United States (the “DFS defendants”). In February 2016, these actions were consolidated in a multi-district litigation in the U.S. District Court for the District of Massachusetts. The plaintiffs asserted 27 claims arising under both state and federal law against the DFS defendants. The plaintiffs’ claims against us generally ~~fall~~fell into four categories: (1) the Company’s online daily fantasy sports contests constitute illegal gambling; (2) the Company promulgated false or misleading advertisements that emphasized the ease of play and likelihood of winning; (3) the Company induced consumers to lose money through a deceptive bonus program; and (4) the Company allowed our employees to participate in competitors’ fantasy sports contests using non-public information, which gave such employees an unfair advantage over other contestants. The plaintiffs ~~seek~~sought money damages, equitable relief, and disgorgement of gains against the Company.

On October 6, 2021, the court entered judgment and an order approving a settlement and dismissing the claims with prejudice brought by all plaintiffs except the family members plaintiffs and one plaintiff asserting claims against the DFS defendants as a concerned citizen of the State of ~~Florida.~~Florida (the “Concerned Citizen Claims”). This settlement agreement became effective on November 5, 2021; as a result, the only remaining plaintiffs ~~are~~were the family member plaintiffs and the plaintiff who asserted the ~~concerned citizen claims.~~Concerned Citizen Claims . On January 21, 2022, DraftKings and the family member plaintiffs filed a joint motion for preliminary approval of a proposed settlement. On February 18, 2022, the court entered an order preliminarily approving the proposed settlement and scheduled a fairness hearing for final approval of the settlement on June 8, 2022. ~~Once~~On June 8, 2022, the ~~family member~~court entered judgment and an order approving the settlement ~~agreement becomes effective,~~and dismissing all claims with prejudice other than the ~~only remaining plaintiff will be~~Concerned Citizens Claims. On June 23, 2022, with all claims other than the ~~plaintiff who asserted~~Concerned Citizen Claims resolved, the ~~concerned citizen claims.~~court dismissed the Concerned Citizen Claims from federal court for lack of Article III standing and remanded the Concerned Citizens Claims to state court in Florida. On July 8, 2022, the court officially closed the docket for In Re: Daily Fantasy Sports Litigation (Multi-District Litigation). The Company previously provided an accrual for this matter.

The Company intends to vigorously defend ~~this case.~~the Concerned Citizen Claims. If the ~~plaintiffs obtain~~plaintiff obtains a judgment in ~~their~~his favor in this matter, the Company could be subject to substantial damages and it could be restricted from offering DFS contests in ~~certain states.~~Florida. The Company ~~established an accrual for this matter, but it~~ cannot provide any assurance as to the outcome of ~~this lawsuit.~~the Concerned Citizen Claims.

2024

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

Interactive Games LLC

On June 14, 2019, Interactive Games LLC filed suit against the Company in the U.S. District Court for the District of Delaware, alleging that our Daily Fantasy Sports product infringes 2 patents and the Company’s Sportsbook product infringes 2 different patents. DraftKings intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer.

The Company cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. The Company also cannot provide an estimate of the possible loss or range of loss. Any adverse outcome in these matters could expose the Company to substantial damages or penalties that may have a material adverse impact on the Company’s operations and cash flows.

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

Winview Inc.

On July 7, 2021, Winview Inc., a Delaware corporation, filed suit against the Company in the U.S. District Court for the District of New Jersey, which was subsequently amended on July 28, 2021, alleging that our Sportsbook product infringes 2 patents, our Daily Fantasy Sports product infringes 1 patent, and that our Sportsbook product and Daily Fantasy Sports product infringe another patent. On November 15, 2021, Winview Inc. filed a second amended complaint (the “SAC”), adding as defendants DK DE and Crown Gaming Inc., a Delaware corporation, which are wholly-owned subsidiaries of the Company. The SAC largely repeats the allegations of the first amended complaint.

DraftKings intends to vigorously defend this case. In the event that a court ultimately determines that the Company is infringing the asserted patents, it may be subject to substantial damages, which may include treble damages and/or an injunction that could require the Company to modify certain features that we currently offer.

Securities Matters

On July 2, 2021, the first of 2 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 DraftKings stock between December 23, 2019 and June 15, 2021. The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about the Company on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”). The Company intends to vigorously defend against these claims. On November 12, 2021, the court consolidated the 2 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.

2125

Beginning on July 9, 2021, the Company received subpoenas from the SEC seeking documents concerning, among other things, certain of the allegations raised in the Hindenburg Report, as well as the Company’s disclosures regarding its compliance policies and procedures, and related matters. The Company intends to comply with the related requests and is cooperating with the SEC’s ongoing inquiry.

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

Shareholder Derivative Litigation

On October 21, 2021, the first of 5 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 2 actions filed in the U.S. District Court for the District of Nevada have since been consolidated, and 2 of the actions filed in Nevada state District Court in Clark County likewise have been consolidated. A substantially identical fifth action was filed in Nevada state District Court in Clark County and has been dismissed voluntarily by the plaintiff. The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which has also been dismissed voluntarily by the plaintiff. The Nevada actions purport to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report. The federal court action in Nevada also contends that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act. The Nevada actions seek unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney’s fees.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. Because the Nevada actions allege claims on behalf of the Company and purport to seek judgments in favor of the Company, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on DraftKings’ financial condition, although the outcome could be material to DraftKings’ operating results for any particular period, depending, in part, upon the operating results for such period.

AG 18, LLC d/b/a/ Arrow Gaming

2226

Beteiro, LLC

On November 22, 2021, Beteiro, LLC filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company’s Sportsbook and Casino products infringe 4 patents.

Diogenes Ltd. & Colossus(IOM) Ltd.

On December 1, 2021, Diogenes Ltd. & Colossus (IOM) Ltd. (“Colossus”), filed a complaint against the Company in the United States District Court for the District of Delaware alleging that the Company’s Sportsbook product infringes 7 patents. Colossus amended its complaint on February 7, 2022 to, among other things, add 1 additional patent.

Internal Revenue Service

The Company is currently under Internal Revenue Service audit for prior tax years, with the primary unresolved issues relating to excise taxation of fantasy sports contests and informational reporting and withholding. The final resolution of that audit, and other audits or litigation, may differ from the amounts recorded in these consolidated financial statements and may materially affect the Company’s consolidated financial statements in the period or periods in which that determination is made.

Letters of Credit

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

2327

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 18, 2022. As a result of the GNOG Transaction, which was consummated on May 5, 2022, New DraftKings became the going-forward public company and the direct parent company of both Old DraftKings and GNOG. New DraftKings was renamed “DraftKings Inc.” at the closing of the GNOG Transaction and is the registrant filing this Report as the successor registrant for Old DraftKings. Unless otherwise indicated, the terms “DraftKings,” the “Company,” “we,” “us,” or “our” refer to (i) Old DraftKings for periods preceding the Closing Date and (ii) New DraftKings for periods on and subsequent to the Closing Date, in each case, together with their respective consolidated subsidiaries.

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements depend upon events, risks and uncertainties that may be outside of our control. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Report. Any statements contained herein that are not statements of historical fact may be forward-looking statements.

•factors relating to our business, operations and financial performance, including:

•our ability to effectively compete in the global entertainment and gaming industries;

•our ability to successfully acquire and integrate new operations;

•our ability to obtain and maintain licenses with gaming authorities;

•our inability to recognize deferred tax assets and tax loss carryforwards;

•market and global conditions and economic factors beyond our control, including the potential adverse effects of the ongoing global coronavirus (“COVID-19”) pandemic on capital markets, general economic conditions, including inflation, unemployment and our liquidity, operations and personnel;

•intense competition and competitive pressures from other companies worldwide in the industries in which we operate;

•our ability to raise financing in the future;

•our success in retaining or recruiting officers, key employees or directors; and

•litigation and the ability to adequately protect our intellectual property rights.

These risks and other factors include those set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 18, 2022. Due to the uncertain nature of these factors, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this Report, except as required by applicable law. New factors may emerge and it is not possible to predict all factors that may affect our business and prospects.

2428

Our Business

We are a digital sports entertainment and gaming company. We provide users with sports betting (“Sportsbook”), online casino (“iGaming”) and daily fantasy sports (“DFS”~~), sports betting (“Sportsbook”) and online casino (“iGaming”~~) products, as well as media and other online consumer products. We are also involved in the design ~~development,~~ and ~~licensing~~development of sports betting and casino gaming software for online and retail Sportsbooks and casino gaming products, as well as other online consumer products. On May 5, 2022, we acquired GNOG in an all-stock ~~transaction.~~transaction to enable us to leverage Golden Nugget’s established brand to broaden our reach into new customer segments and enhance the combined company’s iGaming product offerings through our vertically-integrated tech stack and GNOG’s unique capabilities, including live dealer. For further details regarding the GNOG Transaction, please see the section entitled “Acquisition of Golden Nugget Online Gaming, Inc.” contained within Note 3 of our condensed consolidated financial statements.

Our mission is to make life more exciting by responsibly creating the world’s favorite real-money games and betting experiences. We accomplish this by creating an environment where our users can find enjoyment and fulfillment through ~~DFS,~~ Sportsbook, iGaming and ~~iGaming,~~DFS, as well as media and other online consumer products. We are also highly focused on our responsibility as a steward of this new era in real-money gaming. Our ethics guide our decision making, with respect to both the tradition and integrity of sports and our investments in regulatory compliance and consumer protection.

We make deliberate and substantial investments in support of our mission and long-term growth. For example, we have invested in our products and technology in order to ~~continually~~continuously launch new product innovations, improve marketing, merchandising, and operational efficiency through data science, and deliver a great user experience. We also make significant investments in sales and marketing and incentives to grow and retain our paid user base, including personalized cross-product offers and promotions, and promote brand awareness to attract the “skin-in-the-game” sports fan. Together, these investments have enabled us to create a leading product built on scalable technology, while attracting a user base that has resulted in the rapid growth of our business.

Our priorities are to (a) continue to invest in our products and services, (b) launch our products in new geographies, (c) create replicable and predictable state-level unit economics in sports betting and iGaming and (d) expand our other online consumer products. When we launch Sportsbook and iGaming offerings in a new jurisdiction, we invest in user acquisition, retention and cross-selling until the new jurisdiction provides a critical mass of users engaged across our products.

Our current technology is highly scalable with relatively minimal incremental spend required to launch our products in new jurisdictions. We will continue to manage our fixed-cost base in conjunction with our market entry plans and focus our variable spend on marketing, user experience and support and regulatory compliance to become the product of choice for users and maintain favorable relationships with regulators. We also expect to improve our profitability over time through cost synergies and new opportunities driven by the continued optimization of our technology infrastructure.

Our path to profitability is based on the acceleration of positive contribution profit growth driven primarily by marketing efficiencies as we continue the transition from local to regional to national advertising as well as scale benefits from investments in our product and technology and general and administrative functions. On a consolidated Adjusted EBITDA basis, we expect to achieve profitability when total contribution profit exceeds the fixed costs of our business, which depends, in part, on the percentage of the U.S. adult population that has access to our products and the other factors summarized in the section entitled “Forward-Looking Statements”.

Basis of Presentation

We operate two complementary business segments: our business-to-consumer (“B2C”) business and our business-to-business (“B2B”) business.

B2C

Our B2C business is comprised of the legacy business of DK Crown Holdings Inc. (formerly DraftKings Inc.), a Delaware corporation (“DK DE”), which includes our ~~DFS,~~DraftKings-branded Sportsbook, iGaming and ~~iGaming~~DFS products, as well as our other online consumer ~~products.~~products, and our GNOG brand. Across ~~these principal offerings,~~our DraftKings-branded products, we offer users a single integrated product that provides one account, one wallet, a centralized payment system and responsible gaming controls. Currently, we operate our B2C segment primarily in the United States.

B2B

Our B2B business is primarily comprised of the operations of SBTech, which we acquired on April 23, 2020. Our B2B segment’s principal activities involve the design and development of sports betting and casino gaming software. Our B2B services are delivered through our proprietary software, and our complementary service offerings include trading and risk

management and support for reporting, customer management and regulatory reporting requirements. The operations of our B2B segment are concentrated mainly in Europe and the United States.

Impact of COVID-19

~~The COVID-19~~Beginning in 2020 and continuing into 2022, the novel coronavirus (“COVID-19”) pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets. ~~Beginning in 2020 and continuing into 2022, the COVID-19 pandemic adversely impacted many different industries.~~ The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the extent and the duration of the impact of COVID-19. The COVID-19 pandemic therefore presents material uncertainty and risk with respect to us and our performance and could affect our financial results in a materially adverse way.

~~Since the start~~primary impacts of the COVID-19 pandemic ~~the primary impacts to~~on us ~~have been~~were the suspension, cancellation, rescheduling and ~~rescheduling~~shortening of sports seasons and sporting ~~events. Beginning in~~events, particularly between March 2020 and ~~continuing into the first month of the third quarter of~~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, our Sportsbook and DFS products.

~~Starting~~Beginning in ~~the third quarter of 2020 and continuing into the fourth quarter of~~July 2020, major professional sports leagues ~~resumed~~started to resume their activities, many of which ~~were held~~ with shortened ~~seasons. MLB began its season after a three-month delay~~seasons, and ~~also completed the World Series, the NHL~~gradually resumed its season and completed the Stanley Cup Playoffs, the Masters golf tournament was held, most domestic soccer leagues resumed and several European cup competitions were held, and the NFL season began on its regular ~~schedule. During this period, the NBA also resumed its season, completed the NBA Finals and commenced its 2020-2021 season.~~

activities. In the ~~three~~six months ended ~~March 31,~~June 30, 2022, sports seasons continued and sporting events were held as planned, including the NFL regular season, the NFL Playoffs and Superbowl LVI, the NBA regular season and playoffs, the NHL regular season and playoffs, the NASCAR Cup Series, various NCAA football bowl games, ~~and~~ the NCAA college basketball regular season and ~~tournament.~~tournament, the MLB regular season and several golf tournaments. The continued return of major sports and sporting events ~~has~~ generated significant user interest and activity in our Sportsbook and DFS products. However, the possibility remains that sports seasons and sporting events may be suspended, cancelled, rescheduled or ~~rescheduled~~shortened due to COVID-19 outbreaks.

Our 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 our revenue, possibly materially. However, our products that do not rely on sports seasons and sporting events, such as iGaming, may partially offset this adverse impact on revenue.

A significant or prolonged decrease in consumer spending on entertainment or leisure activities would also likely have an adverse effect on demand for our products, reducing cash flows and revenues, and thereby materially harming our 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, we implemented business continuity programs to ensure that employees were safe and that our business continued to function with minimal disruptions to normal work operations while employees worked remotely. During the second quarter of 2022, our primary offices, including our corporate headquarters in Boston, Massachusetts, re-opened with many of our employees returning to work onsite in various capacities. We will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

Financial Highlights and Trends

The following table sets forth a summary of our financial results for the periods indicated:


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
(amounts in thousands)	(amounts in thousands)	2022		2021			(amounts in thousands)	2022		2021		2022		2021
Revenue	Revenue	$	417,205	$	312,276		Revenue	$	466,185	$	297,605	$	883,390	$	609,881
Net Loss	Net Loss	(467,693)		(346,344)			Net Loss	(217,103)		(305,526)		(684,796)		(651,870)
Adjusted EBITDA (1)	Adjusted EBITDA (1)	(289,509)		(139,262)			Adjusted EBITDA (1)	(118,134)		(95,302)		(407,643)		(234,564)

(1)Adjusted EBITDA is a non-GAAP financial measure. See “—Non-GAAP Information” below for additional information about this measure and a reconciliation of this measure to the most directly comparable financial measure calculated in accordance with U.S. GAAP.

Revenue increased by ~~$104.9~~$168.6 million in the three months ended ~~March 31,~~June 30, 2022 compared to the three months ended ~~March 31,~~June 30, 2021 primarily due to the strong performance of our B2C segment as a result of robust customer acquisition and retention and the successful launches of our Sportsbook and iGaming products in additional jurisdictions since the ~~first~~second quarter of 2021.

Revenue increased by $273.5 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due to the strong performance of our B2C segment as a result of robust customer acquisition and retention and the successful launches of our Sportsbook and iGaming products in additional jurisdictions since the second quarter of 2021. These increases were partially offset by ~~planned~~an increase in promotional ~~investments associated with~~intensity (primarily due to the launch of our Sportsbook product in ~~new states in the first quarter of 2022 (primarily~~ New York) ~~and~~, as well as atypically low hold rates (primarily attributable to NCAA ~~college~~ basketball wagering). in the three months ended March 31, 2022.

Key Performance Indicators – B2C Operations

Monthly Unique Payers (“MUPs”). MUPs is the average number of unique paid users (“unique payers”) that use our B2C products on a monthly basis.

MUPs is a key indicator of the scale of our B2C user base and awareness of our brand. We believe that year-over-year MUPs is also generally indicative of the long-term revenue growth potential of our B2C segment, although MUPs in individual periods may be less indicative of our longer-term expectations. We expect the number of MUPs to grow as we attract, retain and re-engage users in new and existing jurisdictions and expand our products to appeal to a wider audience.

We define MUPs as the number of unique payers per month who had a paid engagement (i.e., participated in a real-money engagement with one of our B2C products such as a DFS contest, sports bet or casino game) across one or more of our products via our technology. For reported periods longer than one month, we average the MUPs for the months in the reported period.

A “unique paid user” or “unique payer” is any person who had one or more paid engagements via our B2C technology during the period (i.e., a user that participates in a paid engagement with one of our B2C products counts as a single unique paid user or unique payer for the period). We exclude users who have made a deposit but have not yet had a paid engagement. Unique payers or unique paid users include users who have participated in a paid engagement with only promotional incentives, which are fungible with other funds deposited into their wallets on our technology; however, the number of such users has not been material to date.

The chart below presents our MUPs for the three and six months ended ~~March 31,~~June 30, 2021 and 2022:

2731

Average Revenue per MUP (“ARPMUP”). ARPMUP is the average B2C segment revenue per MUP, and this key metric represents our ability to drive usage and monetization of our B2C products. The chart below presents our ARPMUP for the three and six months ended ~~March 31,~~June 30, 2021 and 2022:

We define and calculate ARPMUP as the average monthly B2C segment revenue for a reporting period, divided by MUPs (i.e., the average number of unique payers) for the same period.

Our period-on-period increase in MUPs for the three and six months ended ~~March 31,~~June 30, 2022, compared to the same periods in 2021, ~~primarily~~ reflects strong unique payer retention and acquisition across our Sportsbook and iGaming products, as well as the expansion of our ~~Sportsbook~~iGaming and ~~iGaming~~Sportsbook products into new ~~states,~~jurisdictions, partially offset by a decline in DFS MUPs.

ARPMUP increased in the three months ended ~~March 31,~~June 30, 2022, compared to the same period in 2021, primarily due to strong customer engagement, a continued mix shift into our iGaming ~~product~~ and Sportsbook products and reduced promotional intensity compared to the same period in 2021.

ARPMUP increased in the six months ended June 30, 2022, compared to the same period in 2021, primarily due to strong customer engagement and a continued mix shift into our iGaming and Sportsbook products, which was partially offset by an increase in ~~DFS activity on a per MUP basis, partially offset by~~promotional intensity (primarily due to the launch of our Sportsbook product in New York), as well as atypically low hold rates in the three months ended March 31, 2022 (primarily attributable to NCAA basketball wagering) ~~and an increase in promotional intensity (primarily in New York)~~.

Non-GAAP Information

This Report includes Adjusted EBITDA, which is a non-GAAP financial measure that we use to supplement our results presented in accordance with U.S. GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, similar to measures reported by our publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any U.S. GAAP financial measure. As calculated, it may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net loss before the impact of interest income or expense (net), income tax provision or benefit, and depreciation and amortization, and further adjusted for the following items: stock-based compensation, transaction-related costs, litigation, settlement and related costs, advocacy and other related legal expenses, gain or loss on remeasurement of warrant liabilities and ~~certain~~ other non-recurring ~~non-cash~~and non-operating costs or ~~non-core items,~~income, as described in the reconciliation below.

We include non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with U.S. GAAP because they are non-recurring items (for example, in the case of transaction-related ~~costs)~~costs and advocacy and other related legal expenses), non-cash expenditures (for example, in the case of depreciation and amortization, remeasurement of warrant liabilities and stock-based compensation), or

non-operating items which are not related to our underlying business performance (for example, in the case of interest income and expense and litigation, settlement and related costs).

Adjusted EBITDA

The table below presents our Adjusted EBITDA reconciled to our net loss, which is the most directly comparable financial measure calculated in accordance with U.S. GAAP, for the periods indicated:


		Three months ended March 31,				Three months ended June 30,				Six months ended June 30,
(amounts in thousands)	(amounts in thousands)	2022		2021			(amounts in thousands)	2022		2021		2022		2021
Net loss	Net loss	$	(467,693)	$	(346,344)		Net loss	$	(217,103)	$	(305,526)	$	(684,796)	$	(651,870)
Adjusted for:	Adjusted for:						Adjusted for:
Depreciation and amortization (1)	Depreciation and amortization (1)	32,225		28,193			Depreciation and amortization (1)	42,315		30,051		74,540		58,244
Interest income, net	Interest income, net	(148)		(985)			Interest income, net	(1,929)		(1,642)		(2,077)		(2,627)
Income tax provision (benefit)		469		(4,595)
Income tax (benefit) provision							Income tax (benefit) provision	(81,226)		2,404		(80,757)		(2,191)
Stock-based compensation (2)	Stock-based compensation (2)	187,077		151,843			Stock-based compensation (2)	135,521		171,739		322,598		323,582
Transaction-related costs (3)	Transaction-related costs (3)	3,774		3,023			Transaction-related costs (3)	10,505		7,890		14,279		10,913
Litigation, settlement, and related costs (4)	Litigation, settlement, and related costs (4)	1,950		622			Litigation, settlement, and related costs (4)	2,446		3,599		4,396		4,221

Advocacy and other related legal expenses (5)							Advocacy and other related legal expenses (5)	—		11,035		—		11,035
(Gain) loss on remeasurement of warrant liabilities	(Gain) loss on remeasurement of warrant liabilities	(12,681)		26,980			(Gain) loss on remeasurement of warrant liabilities	(14,315)		(16,984)		(26,996)		9,996
Other non-recurring costs and non-operating (income) costs (5)		(34,482)		2,001
Other non-recurring and non-operating costs (income) (6)							Other non-recurring and non-operating costs (income) (6)	5,652		2,132		(28,830)		4,133
Adjusted EBITDA	Adjusted EBITDA	$	(289,509)	$	(139,262)		Adjusted EBITDA	$	(118,134)	$	(95,302)	$	(407,643)	$	(234,564)
Adjusted EBITDA by segment:	Adjusted EBITDA by segment:						Adjusted EBITDA by segment:
B2B	B2B	$	(20,338)	$	2,093		B2B	$	(19,230)	$	(3,043)	$	(39,568)	$	(951)
B2C	B2C	$	(269,171)	$	(141,355)		B2C	$	(98,904)	$	(92,259)	$	(368,075)	$	(233,613)

(1)The amounts include the amortization of acquired intangible assets of ~~$19.2~~$27.1 million and ~~$19.1~~$20.6 million for the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $46.3 million and $39.7 million for the six months ended June 30, 2022 and 2021, respectively.

(2)Primarily reflects stock-based compensation expenses resulting from the issuance of awards under long-term incentive plans.

(3)Includes capital markets advisory, consulting, accounting and legal expenses related to evaluation, negotiation and integration costs incurred in connection with pending or completed transactions and offerings.

(4)Primarily includes external legal costs related to litigation and litigation settlement costs deemed unrelated to our core business operations.

(5)Includes certain non-recurring costs relating to advocacy efforts and other legal expenses in jurisdictions where we do not operate certain products and are actively seeking licensure, or similar approval, for those products. For the three and six months ended June 30, 2021, those costs primarily related to our activities in Florida. The amounts presented exclude other costs relating to advocacy efforts and other legal expenses incurred in jurisdictions where related legislation has been passed and we currently operate.

(6)Primarily includes the change in fair value of certain financial assets, as well as our equity method share of the investee’s losses and other costs relating to non-recurring and non-operating items.

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

Results of Operations

Three Months Ended ~~March 31,~~June 30, 2022 Compared to the Three Months Ended ~~March 31,~~June 30, 2021

The following table sets forth a summary of our consolidated results of operations for the interim periods indicated, and the changes between periods. Due to the timing of the consummation of the GNOG Transaction, the below periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.


		Three months ended March 31,									Three months ended June 30,
(amounts in thousands, except percentages)	(amounts in thousands, except percentages)	2022		2021		$ Change		% Change		(amounts in thousands, except percentages)	2022		2021		$ Change		% Change
Revenue	Revenue	$	417,205	$	312,276	$	104,929	33.6	%	Revenue	$	466,185	$	297,605	$	168,580	56.6	%
Cost of revenue	Cost of revenue	313,379		183,225		(130,154)		(71.0)	%	Cost of revenue	312,767		187,006		(125,761)		(67.2)	%
Sales and marketing	Sales and marketing	321,452		228,686		(92,766)		(40.6)	%	Sales and marketing	197,529		170,712		(26,817)		(15.7)	%
Product and technology	Product and technology	81,352		56,159		(25,193)		(44.9)	%	Product and technology	77,202		62,635		(14,567)		(23.3)	%
General and administrative	General and administrative	216,606		168,997		(47,609)		(28.2)	%	General and administrative	187,609		198,806		11,197		5.6	%
Loss from operations	Loss from operations	(515,584)		(324,791)		(190,793)		(58.7)	%	Loss from operations	(308,922)		(321,554)		12,632		3.9	%
Interest income, net	Interest income, net	148		985		(837)		(85.0)	%	Interest income, net	1,929		1,642		287		17.5	%
Gain (loss) on remeasurement of warrant liabilities		12,681		(26,980)		39,661		147.0	%
Other income, net		37,882		—		37,882		100.0	%
Loss before income tax provision (benefit) and loss from equity method investment		(464,873)		(350,786)		(114,087)		(32.5)	%
Income tax provision (benefit)		469		(4,595)		(5,064)		(110.2)	%
Gain on remeasurement of warrant liabilities										Gain on remeasurement of warrant liabilities	14,315		16,984		(2,669)		(15.7)	%
Other expense, net										Other expense, net	(5,573)		—		(5,573)		(100.0)	%
Loss before income tax (benefit) provision and loss from equity method investment										Loss before income tax (benefit) provision and loss from equity method investment	(298,251)		(302,928)		4,677		1.5	%
Income tax (benefit) provision										Income tax (benefit) provision	(81,226)		2,404		83,630		(3,478.8)	%
Loss from equity method investment	Loss from equity method investment	2,351		153		(2,198)		(1,436.6)	%	Loss from equity method investment	78		194		116		59.8	%
Net loss	Net loss	$	(467,693)	$	(346,344)	$	(121,349)	(35.0)	%	Net loss	$	(217,103)	$	(305,526)	$	88,423	28.9	%

Revenue. Revenue increased ~~$104.9~~$168.6 million, or ~~33.6%~~56.6%, to ~~$417.2~~$466.2 million in the three months ended ~~March 31,~~June 30, 2022, from ~~$312.3~~$297.6 million in the three months ended ~~March 31,~~June 30, 2021. The increase was attributable to ~~$122.9~~$184.5 million in incremental B2C segment revenue, partially offset by a decrease in B2B segment revenue of ~~$17.9~~$16.0 million.

The ~~$122.9~~$184.5 million increase in our B2C segment revenue was primarily attributable to our online gaming revenues which increased ~~$114.0~~$175.9 million, or ~~41.8%~~68.1%, to ~~$386.7~~$434.1 million in the three months ended ~~March 31,~~June 30, 2022, from ~~$272.7~~$258.2 million in the three months ended ~~March 31,~~June 30, 2021. The remaining increase in our B2C segment revenue was attributable to ~~“Other Revenues”,~~“Other” revenue, which primarily includes media, Marketplace and retail Sportsbooks.

Online gaming revenue grew in the three months ended ~~March 31,~~June 30, 2022 primarily due to MUPs increasing by ~~29.2%~~29.7% and ARPMUP also increasing by ~~10.5%, in each case,~~29.7% as compared to the three months ended ~~March 31,~~June 30, 2021. These key performance indicators increased primarily due to ~~the launch of our online Sportsbook product in Arizona, Connecticut, Louisiana and New York, the launch of~~strong customer engagement, a continued mix shift into our iGaming ~~product~~and Sportsbook products and reduced promotional intensity compared to the same period in Connecticut and a continued increase in customer engagement with our Sportsbook and iGaming products in previously launched states. These increases were partially offset in the three months ended March 31, 2022 by planned promotional investments in the launches of our Sportsbook product in new states (primarily in New York) and atypically low hold rates (primarily attributable to NCAA college basketball wagering).2021.

Cost of Revenue. Cost of revenue increased ~~$130.2~~$125.8 million, or ~~71.0%~~67.2%, to ~~$313.4~~$312.8 million in the three months ended ~~March 31,~~June 30, 2022, from ~~$183.2~~$187.0 million in the three months ended ~~March 31,~~June 30, 2021. Our B2C segment accounted for substantially all of this increase, reflecting growth in revenue from our expanded product and geographic footprint, including the launch of our Sportsbook product in Arizona, Connecticut, Louisiana, ~~and~~ New York and Ontario, Canada and the launch of our iGaming product in Connecticut ~~in each case,~~and Ontario, Canada since the three months ended ~~March 31,~~June 30, 2021. The cost of revenue increase was primarily attributable to an increase in our variable expenses such as product taxes and payment processing fees, which increased by ~~$80.4~~$65.8 million and ~~$21.5~~$16.7 million, respectively, relative to the expenses incurred during the three months ended ~~March 31,~~June 30, 2021. The remaining increase was primarily attributable to variable platform costs and revenue share arrangements resulting from additional customer activity.

B2C segment cost of revenue as a percentage of B2C revenue increased by ~~16.2~~5.4 percentage points to ~~70.1%~~62.1% in the three months ended June 30, 2022, as compared to 56.7% in the three months ended June 30, 2021, reflecting our changed revenue mix from our more mature DFS product to our iGaming and Sportsbook products as well as higher promotional investment in the launches of our products in new states, principally the launch of our Sportsbook product in New York in January 2022. In addition, as a result of customer activity in these new states, we incurred variable expenses that are not based on net revenue, including payment processing fees, and revenue share arrangements. In general, our iGaming and Sportsbook products produce revenue at a higher cost per revenue dollar relative to our more mature DFS product.

Sales and Marketing. Sales and marketing expense increased $26.8 million, or 15.7%, to $197.5 million in the three months ended June 30, 2022, from $170.7 million in the three months ended June 30, 2021. Our B2C segment accounted for substantially all of this increase. Of the $26.8 million increase, $21.7 million resulted from activities to acquire and retain players in new states that we operate in, such as marketing costs including advertising and the development of marketing campaigns, as well as headcount and technology associated with analyzing, developing and deploying those campaigns. The remainder of the increase primarily resulted from an increase in various team and league sponsorships.

Product and Technology. Product and technology expense increased $14.6 million, or 23.3%, to $77.2 million in the three months ended June 30, 2022, from $62.6 million in the three months ended June 30, 2021, of which $1.3 million was attributable to our B2B segment. The remaining increase of $13.3 million primarily reflects additions to our product operations and engineering headcount in our B2C segment.

General and Administrative. General and administrative expense decreased $11.2 million, or 5.6%, to $187.6 million in the three months ended June 30, 2022, from $198.8 million in the three months ended June 30, 2021. Our B2C segment accounted for substantially all of this decrease, primarily driven by a decrease in stock-based compensation expense of $32.8 million, which was partially offset by an increase of $17.2 million in compensation costs due to an increase in headcount.

Gain on Remeasurement of Warrant Liabilities. We recorded a gain on remeasurement of warrant liabilities of $14.3 million in the three months ended June 30, 2022, compared to a gain of $17.0 million in the three months ended June 30, 2021 primarily due to changes in the underlying share price of our Class A common stock.

Other Expense. Other expense, net was $5.6 million in the three months ended June 30, 2022, as compared to no other expense, net in the three months ended June 30, 2021. This increase was primarily attributable to a change in the fair value of certain financial assets.

Income tax (benefit) provision. We recorded an income tax benefit of $81.2 million in the three months ended June 30, 2022, as compared to an income tax provision of $2.4 million in the three months ended June 30, 2021. This increase was primarily due to a discrete income tax benefit of $76.8 million recorded during the second quarter of 2022, which was attributable to non-recurring partial releases of the Company’s U.S. valuation allowance as a result of the preliminary purchase accounting for GNOG.

Net Loss. Net loss decreased by $88.4 million to $217.1 million in the three months ended June 30, 2022, as compared to a net loss of $305.5 million in the three months ended June 30, 2021, for the reasons discussed above.

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021


	Six months ended June 30,
(amounts in thousands, except percentages)	2022		2021		$ Change		% Change
Revenue	$	883,390	$	609,881	$	273,509	44.8	%
Cost of revenue	626,146		370,231		(255,915)		(69.1)	%
Sales and marketing	518,981		399,398		(119,583)		(29.9)	%
Product and technology	158,554		118,794		(39,760)		(33.5)	%
General and administrative	404,215		367,803		(36,412)		(9.9)	%
Loss from operations	(824,506)		(646,345)		(178,161)		(27.6)	%
Interest income, net	2,077		2,627		(550)		(20.9)	%
Gain (loss) on remeasurement of warrant liabilities	26,996		(9,996)		36,992		370.1	%
Other income, net	32,309		—		32,309		100.0	%
Loss before income tax (benefit) provision and loss from equity method investment	(763,124)		(653,714)		(109,410)		(16.7)	%
Income tax benefit	(80,757)		(2,191)		78,566		3,585.9	%
Loss from equity method investment	2,429		347		(2,082)		(600.0)	%
Net loss	$	(684,796)	$	(651,870)	$	(32,926)	(5.1)	%

Revenue. Revenue increased $273.5 million, or 44.8%, to $883.4 million in the six months ended June 30, 2022, from $609.9 million in the six months ended June 30, 2021. The increase was attributable to $307.4 million in incremental B2C segment revenue, partially offset by a decrease in B2B segment revenue of $33.9 million.

The $307.4 million increase in our B2C segment revenue was primarily attributable to our online gaming revenues which increased $289.9 million, or 54.6%, to $820.8 million in the six months ended June 30, 2022, from $530.9 million in the six months ended June 30, 2021. The remaining increase in our B2C segment revenue was attributable to “Other” revenue, which primarily includes media, Marketplace and retail Sportsbooks.

Online gaming revenue grew in the six months ended June 30, 2022 primarily due to MUPs increasing by 29.4% and ARPMUP increasing by 19.9% as compared to the six months ended June 30, 2021. These key performance indicators increased primarily due to strong customer engagement and a continued mix shift into our iGaming and Sportsbook products, which was partially offset by an increase in promotional intensity (primarily due to the launch of our Sportsbook product in New York), as well as atypically low hold rates in the three months ended March 31, 2022 (primarily attributable to NCAA basketball wagering).

Cost of Revenue. Cost of revenue increased $255.9 million, or 69.1%, to $626.1 million in the six months ended June 30, 2022, from $370.2 million in the six months ended June 30, 2021. Our B2C segment accounted for substantially all of this increase, reflecting growth in revenue from our expanded product and geographic footprint, including the launch of our Sportsbook product in Arizona, Connecticut, Louisiana, New York and Ontario, Canada and the launch of our iGaming product in Connecticut and in Ontario, Canada since the six months ended June 30, 2021. The cost of revenue increase was primarily attributable to an increase in our variable expenses such as product taxes and payment processing fees, which increased by $146.2 million and $38.2 million, respectively, relative to the expenses incurred during the six months ended June 30, 2021. The remaining increase was primarily attributable to variable platform costs and revenue share arrangements resulting from additional customer activity.

B2C segment cost of revenue as a percentage of B2C revenue increased by 10.5 percentage points to 65.8% in the six months ended June 30, 2022, as compared to ~~53.9%~~55.3% in the ~~three~~six months ended ~~March 31,~~June 30, 2021, reflecting our changed revenue mix from our more mature DFS product to our iGaming and Sportsbook products as well as higher promotional investment in the launches of our products in new states, principally the launch of our Sportsbook product in New York. In addition, as a result of customer activity in these new states, we incurred variable expenses that are not based on net revenue,

including payment processing fees, and revenue share arrangements. In general, our iGaming and Sportsbook products produce revenue at a higher cost per revenue dollar relative to our more mature DFS product.

Sales and Marketing. Sales and marketing expense increased ~~$92.8~~$119.6 million, or ~~40.6%~~29.9%, to ~~$321.5~~$519.0 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, from ~~$228.7~~$399.4 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021. Our B2C segment accounted for substantially all of this increase with ~~$72.4~~$94.1 million of the increase resulting from activities to acquire and retain players in new states that we operate in, such as marketing costs including advertising and the development of marketing campaigns, as well as headcount and technology associated with analyzing, developing and deploying those campaigns. The remainder of the increase primarily resulted from an increase in various team and league sponsorships.

Product and Technology. Product and technology expense increased ~~$25.2~~$39.8 million, or ~~44.9%~~33.5%, to ~~$81.4~~$158.6 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, from ~~$56.2~~$118.8 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021, of which ~~$5.3~~$6.6 million was attributable to our B2B segment. The remaining increase of ~~$19.9~~$33.2 million primarily reflects additions to our product operations and engineering headcount in our B2C segment.

General and Administrative. General and administrative expense increased ~~$47.6~~$36.4 million, or ~~28.2%~~9.9%, to ~~$216.6~~$404.2 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, from ~~$169.0~~$367.8 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021. Our B2C segment accounted for substantially all of this increase, primarily driven by an increase ~~in stock-based compensation expense~~ of ~~$22.6 million, as well as an increase of $12.5~~$29.7 million in compensation costs due to an increase in ~~headcount. The remainder of the increase was primarily attributable to~~headcount, as well as an increase in software and facility ~~fees.~~fees, which were partially offset by a decrease in stock-based compensation expense of $10.2 million.

Gain (Loss) on Remeasurement of Warrant Liabilities. We recorded a gain on remeasurement of warrant liabilities of ~~$12.7~~$27.0 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, compared to a loss of ~~$27.0~~$10.0 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021 primarily due to changes in the underlying share price of our Class A common stock.

Other Income. Other income, net was ~~$37.9~~$32.3 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, as compared to no other income, net in the ~~three~~six months ended ~~March 31,~~June 30, 2021. This increase was primarily attributable to a change in the fair value of certain financial assets.

Income tax benefit. We recorded an income tax benefit of $80.8 million in the six months ended June 30, 2022, as compared to an income tax benefit of $2.2 million in the six months ended June 30, 2021. This increase was primarily due to a discrete income tax benefit of $76.8 million recorded during the second quarter of 2022, which was attributable to non-recurring partial releases of the Company’s U.S. valuation allowance as a result of the preliminary purchase accounting for GNOG.

Net Loss. Net loss increased by ~~$121.3~~$32.9 million to ~~$467.7~~$684.8 million in the ~~three~~six months ended ~~March 31,~~June 30, 2022, as compared to a net loss of ~~$346.3~~$651.9 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021, for the reasons discussed above.

Liquidity and Capital Resources

We had ~~$1.8~~$1.5 billion in cash and cash equivalents as of ~~March 31,~~June 30, 2022 (excluding player cash, which we segregate from our operating cash balances on behalf of our paid users for all jurisdictions and products). We believe our cash on hand is sufficient to meet our current working capital and capital expenditure requirements for a period of at least twelve ~~months, irrespective of the continuing impact of COVID-19.~~months. We will continue to evaluate our long-term operating performance and cash needs and believe we are well positioned to continue to fund the operations of the business long-term.

Debt. In March 2021, we issued zero-coupon convertible senior notes in an aggregate principal amount of $1,265.0 million. The Convertible Notes mature on March 15, 2028, subject to earlier conversion, redemption or repurchase. In connection with the pricing of the Convertible Notes and the exercise of the option to purchase additional Convertible Notes, we entered into privately negotiated Capped Call Transactions. The Capped Call Transactions are expected generally to reduce potential dilution to our Class A common stock upon any conversion of the Convertible Notes. The net cost of $124.0 million incurred to enter into the Capped Call Transactions was recorded as a reduction to additional paid-in capital on the Company’s consolidated balance sheet.

Leases. We have lease arrangements for certain corporate office facilities, data centers, and motor vehicles. As of ~~March 31,~~June 30, 2022, the Company had lease obligations of ~~$67.4~~$83.9 million, with ~~$12.9~~$5.7 million payable within 12 months.

Other Purchase Obligations. We have certain non-cancelable contracts with vendors, licensors and others requiring us to make future cash payments. As of ~~March 31,~~June 30, 2022, these purchase obligations were $1,913.5 million, with ~~$349.1~~$267.7 million payable in the remainder of 2022.

3138

Cash Flows

The ~~following~~ table below summarizes our cash flows for the periods ~~indicated:~~indicated. Due to the timing of the consummation of the GNOG Transaction, the below periods, to the extent applicable, exclude GNOG’s operations prior to the closing date of May 5, 2022.


		Three months ended March 31,					Six months ended June 30,
(amounts in thousands)	(amounts in thousands)	2022		2021		(amounts in thousands)	2022		2021
Net cash used in operating activities	Net cash used in operating activities	$	(356,718)	$	(59,737)	Net cash used in operating activities	$	(529,303)	$	(176,375)
Net cash used in investing activities	Net cash used in investing activities	(23,065)		(51,921)		Net cash used in investing activities	(147,468)		(100,579)
Net cash (used in) provided by financing activities	Net cash (used in) provided by financing activities	(12,313)		1,128,768		Net cash (used in) provided by financing activities	(12,531)		1,131,911
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	Effect of foreign exchange rates on cash and cash equivalents and restricted cash	—		1,774		Effect of foreign exchange rates on cash and cash equivalents and restricted cash	—		824
Net (decrease) increase in cash and cash equivalents and restricted cash	Net (decrease) increase in cash and cash equivalents and restricted cash	(392,096)		1,018,884		Net (decrease) increase in cash and cash equivalents and restricted cash	(689,302)		855,781
Cash and cash equivalents and restricted cash at beginning of period	Cash and cash equivalents and restricted cash at beginning of period	2,629,842		2,104,976		Cash and cash equivalents and restricted cash at beginning of period	2,629,842		2,104,976
Cash and cash equivalents and restricted cash at end of period	Cash and cash equivalents and restricted cash at end of period	$	2,237,746	$	3,123,860	Cash and cash equivalents and restricted cash at end of period	$	1,940,540	$	2,960,757

Operating Activities. Net cash used in operating activities in the ~~three~~six months ended ~~March 31,~~June 30, 2022 was ~~$356.7~~$529.3 million, compared to ~~$59.7~~$176.4 million in the ~~three~~six months ended ~~March 31,~~June 30, 2021, mainly reflecting a decrease in operating working capital of ~~$148.1~~$199.0 million primarily due to an increase in cash used in accounts payable, accrued expenses, liabilities to users, prepaid expenses and other current assets. In addition, we incurred a ~~$121.3~~$32.9 million higher net loss, for the reasons discussed above, net of non-cash cost items. Non-cash cost items decreased ~~$27.5~~$121.0 million period-over-period, primarily driven by deferred income taxes, a gain on remeasurement of warrants liabilities and a gain on various financial ~~assets, partially offset by an increase in stock-based compensation expense and depreciation and amortization.~~assets.

Investing Activities. Net cash used in investing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2022 ~~decreased~~increased by ~~$28.9~~$46.9 million to ~~$23.1~~$147.5 million from ~~$51.9~~$100.6 million during the same period in 2021, mainly reflecting ~~the~~an increase in cash ~~portion of consideration~~ paid ~~to shareholders of entities that the Company acquired~~for acquisitions during the ~~first quarter of 2021, which were not incurred in~~six months ended June 30, 2022 when compared to the ~~first quarter of 2022.~~six months ended June 30, 2021.

Financing Activities. Net cash provided by (used in) financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2022 decreased by ~~$1,141.1~~$1,144.4 million to ~~$(12.3)~~$(12.5) million from ~~$1,128.8~~$1,131.9 million during the same period in 2021, mainly reflecting the completion of our issuance of Convertible Notes during the three months ended March 31, 2021.

Commitments and Contingencies

Refer to Note 13 of our unaudited condensed consolidated financial statements included elsewhere in this Report for a summary of our commitments as of ~~March 31,~~June 30, 2022.

Critical Accounting Policies

Our financial statements have been prepared in accordance with U.S. GAAP. Our discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ materially from these estimates.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, there were no changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 18, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our exposure to market risk during the ~~three~~six months ended ~~March 31,~~June 30, 2022. Refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk in our 2021 Annual Report.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and

15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

3340

PART II. —OTHER INFORMATION

Item 1. Legal Proceedings.

We are involved in a number of legal proceedings (including those described below) concerning matters arising in connection with the conduct of our business activities. These proceedings are at varying stages, and many of these proceedings seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or an additional loss may have been incurred and to determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of the possible loss or range of possible loss can be made.

For certain cases described on the following pages, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought; (iii) damages are unsupported and/or exaggerated; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties involved. For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material adverse effect on our financial condition, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

In Re: Daily Fantasy Sports Litigation (Multi-District Litigation)

The plaintiffs ~~assert~~asserted 27 claims arising under both state and federal law against the DFS defendants. The plaintiffs’ claims against us generally ~~fall~~fell into four categories: (1) our online daily fantasy sports contests constitute illegal gambling; (2) we promulgated false or misleading advertisements that emphasized the ease of play and likelihood of winning; (3) we induced consumers to lose money through a deceptive bonus program; and (4) we allowed our employees to participate in competitors’ fantasy sports contests using non-public information, which gave such employees an unfair advantage over other contestants. The plaintiffs ~~seek~~sought money damages, equitable relief, and disgorgement of gains against us.

On November 16, 2016, the DFS defendants filed a motion to compel arbitration against all named plaintiffs except one plaintiff asserting claims against the DFS defendants as a concerned citizen of the State of Florida (the “Concerned Citizen Claims”). On November 27, 2019, the Court granted the DFS defendants’ motion to compel arbitration with respect to all named plaintiffs other than a small set of plaintiffs who are family members of individuals who have DraftKings or FanDuel accounts and who ~~assert~~asserted claims under various state laws regarding gambling (the “Family Member Plaintiffs”). On March 9, 2020, the DFS defendants moved to dismiss the Family Member Plaintiffs’ claims and the Concerned Citizen Claims. On April 7, 2020, an opposition to the motion to dismiss the Concerned Citizen Claim was filed. On April 20, 2020, the Family Member Plaintiffs filed their opposition to the DFS defendants’ motion to dismiss, and on April 29, 2020, the Family Member Plaintiffs filed a motion for leave to amend the First Amended Master Class Action Complaint. On May 11, 2020, the DFS defendants filed their reply in support of their motion to dismiss the Family Member Plaintiffs’ claims and the Concerned Citizen Claims, and on May 13, 2020, the DFS defendants filed their opposition to the Family Member Plaintiffs’ motion for leave to amend the First Amended Master Class Action Complaint. On March 5, 2020, one named plaintiff with respect to whom the motion to compel was granted filed a renewed motion to remand his case to state court. On May 29, 2020, we filed an opposition to that motion.

On March 3, 2021, DraftKings and the plaintiffs (other than the Family Member Plaintiffs) filed in Court a joint motion for preliminary approval of a proposed settlement, which the Court granted on June 15, 2021. On October 6, 2021, the Court entered judgment and an order approving a settlement and dismissing the claims with prejudice brought by all plaintiffs except the Family Member Plaintiffs and the Concerned Citizen Claims. This settlement agreement became effective on November 5, 2021; as a result, the only remaining plaintiffs ~~are~~were the Family Member Plaintiffs and the plaintiff who asserted the Concerned Citizen Claims. On January 21, 2022, DraftKings and the Family Member Plaintiffs filed a joint motion for preliminary approval of a proposed settlement.On February 18, 2022, the Court entered an order preliminarily approving the proposed settlement and scheduled a fairness hearing for final approval of the settlement on June 8, 2022. ~~Once~~ On June 8, 2022, the ~~family member~~court

3441

entered judgment and an order approving the settlement ~~agreement becomes effective,~~and dismissing all claims with prejudice other than the ~~only remaining plaintiff will be the plaintiff who asserted~~Concerned Citizens Claims. On June 23, 2022, with all claims other than the Concerned Citizen ~~Claims.~~Claims resolved, the court dismissed the Concerned Citizen Claims from federal court for lack of Article III standing and remanded the Concerned Citizen Claims to state court in Florida. On July 8, 2022, the court officially closed the docket for In Re: Daily Fantasy Sports Litigation (Multi-District Litigation). The Company previously provided an accrual for this matter.

We intend to vigorously defend ~~this case.~~the Concerned Citizen Claims. If the ~~plaintiffs were to obtain~~plaintiff obtains a judgment in ~~their~~his favor in this ~~lawsuit,~~matter, we may be subject to substantial damages and we may have to withdraw our DFS ~~operations~~operation in ~~certain states. We have established an accrual for this matter.~~Florida. We cannot predict with any degree of certainty the outcome of ~~this suit.~~the Concerned Citizen Claims.

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

Attorney General of Texas

On January 19, 2016, the Texas Attorney General issued an opinion letter that “odds are favorable that a court would conclude that participation in paid daily fantasy sports leagues constitutes illegal gambling” under Texas law. In response to the opinion letter, we sued the Texas Attorney General on March 4, 2016 in Dallas County, Texas.

The lawsuit makes five claims: (1) a claim for a declaratory judgment that daily fantasy sports contests do not violate Texas law; (2) a claim of denial of due process under the Fifth and Fourteenth Amendments to the U.S. Constitution; (3) a claim of denial of due course of law under Article I of the Texas Constitution; (4) a claim of denial of equal protection under the Fourteenth Amendment to the U.S. Constitution; and (5) a claim of denial of equal rights under Article I of the Texas Constitution. We are also seeking reimbursement of our costs and attorneys’ fees.

On May 2, 2016, the Texas Attorney General filed a motion to transfer venue to Travis County, Texas. On April 16, 2018, the parties filed a notice of agreed non-suit without prejudice, and we re-filed our lawsuit against the Texas Attorney General in Travis County. On April 17, 2018, the Dallas County court granted the parties’ agreed non-suit without prejudice, thereby dismissing the Dallas County lawsuit without prejudice.

On May 24, 2018, the Texas Attorney General answered the complaint filed in Travis County, Texas.

FanDuel filed a petition in intervention on August 24, 2018, seeking essentially the same relief as DraftKings seeks. The Court entered an updated scheduling order setting the case for a non-jury trial on April 20, 2021. The parties subsequently filed an agreed motion to extend the scheduling order seeking, among other things, to change the non-jury trial date to January ~~23, 2023.~~29, 2024.

We intend to vigorously pursue our claims. In the event a court ultimately determines that daily fantasy sports contests violate Texas law, that determination could cause financial harm to us and loss of business in Texas.

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

We do not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on our financial condition, although the outcome could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

Interactive Games LLC

On June 14, 2019, Interactive Games LLC (“IG”) filed suit against us in the U.S. District Court for the District of Delaware. In the Complaint, IG alleges that our daily fantasy sports (“DFS”) product infringes two patents: U.S. Patent No. 8,956,231 (the “231 Patent”), which is entitled “Multi-process communication regarding gaming information”, and U.S. Patent No. 8,974,302 (the “302 Patent”), which is entitled “Multi-process communication regarding gaming information.” That same Complaint alleges that our Sportsbook product infringes two additional patents: U.S. Patent No. 8,616,967 (the “967 Patent”), which is entitled “System and method for convenience gaming” and U.S. Patent No. 9,430,901 (the “901 Patent”), which is entitled “System and method for wireless gaming with location determination.” All four of these patents are collectively referred to as the “IG Patents.”

In response to the complaint, we filed a motion to dismiss the complaint under 35 U.S.C. Section 101, asserting the IG Patents are directed to non-patentable subject matter. The Court has not yet ruled on that motion, as the judge previously stayed

the District Court litigation pending resolution of the inter partes reviews and dismissed the motion to dismiss (without ruling on the merits), but granted leave to refile such motion with updated briefing if the stay is lifted.

On June 17, 2020, we filed petitions for inter partes review with the Patent Trial and Appeal Board (the “PTAB”) challenging the validity of each of the IG Patents. The PTAB instituted review for the ‘901 Patent, the ‘231 Patent, and the ‘967 Patent but denied institution for the ‘302 Patent. On February 5, 2021, we filed a request for rehearing regarding the decision on the ‘302 Patent, which was denied by the PTAB on March 2, 2021. On October 13, 2021, the PTAB heard oral argument on the ’901 Patent, the ’231 Patent, and the ’967 Patent. On January 4, 2022, the PTAB issued a final written decision finding all challenged claims of the ’901 Patent, the ’231 Patent, and the ’967 Patent unpatentable. On March 8, 2022, IG appealed the final written decisions for all three instituted inter partes reviews. On April 19, 2022, IG moved to voluntarily dismiss the appeal for the inter partes review related to the ’901 Patent, which was granted on April 20, 2022. On July 15, 2022, IG filed its opening briefs in the appeals of the inter partes reviews for the ’231 Patent and ’967 Patent. The District Court litigation remains stayed pending resolution of all appeals from the inter partes reviews.

We intend to vigorously defend this case. In the event that a court ultimately determines that we are infringing the asserted patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to modify certain features that we currently offer.

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

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

Winview Inc.

On July 7, 2021, Winview Inc., a Delaware corporation (“Winview”) filed suit against DraftKings Inc., a Nevada corporation in the U.S. District Court for the District of New Jersey. In the complaint, Winview alleges that DraftKings infringe two patents: U.S. Patent No. 9,878,243 (“the ’243 Patent”), entitled “Methodology for Equalizing Systemic Latencies in Television Reception in Connection with Games of Skill Played in Connection with Live Television Programming”, and U.S. Patent No. 10,721,543 (“the ’543 Patent”), entitled “Method of and System for Managing Client Resources and Assets for Activities on Computing Devices”. The allegations based on the ’243 Patent are directed to Sportsbook, and the allegations based on the ‘543 Patent are directed to both Sportsbook and DFS.

On July 28, 2021, Winview filed an amended complaint, in which it alleges that DraftKings infringes two additional patents: U.S. Patent No. 9,993,730 (“the ’730 Patent”), entitled ”Methodology for Equalizing Systemic Latencies in Television Reception in Connection with Games of Skill Played in Connection with Live Television Programming”, and U.S. Patent No. 10,806,988 (“the ’988 Patent”), entitled “Method Of and System For Conducting Multiple Contests of Skill with a Single Performance”. The allegations based on the ’730 Patent are directed at Sportsbook, and the allegations based on the ’988 Patent are directed at DFS.

On October 4, 2021, we filed a motion to dismiss Winview’s direct infringement claims for the ’543 Patent and the ’730 Patent, as well as its claims for willful, induced, and contributory infringement for all four asserted patents. On October 29, 2021, the parties filed a stipulation that allowed Winview to file a second amended complaint on or before November 15, 2021, which the court signed and ordered on November 1, 2021.

On November 15, 2021, Winview 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 DraftKings. The SAC, among other allegations, repeats the allegations of the first amended complaint that the defendants infringe the ’243 Patent, the ’543 Patent, the ’730 Patent, and the ’988 Patent. On December 15, 2021, DraftKings filed its motion to dismiss the SAC, again arguing that Winview failed to state a claim for direct infringement of the ’543 Patent and the ’730 Patent, and for willful, induced, and contributory infringement for all four asserted patents. Winview filed its memorandum in opposition to the motion to dismiss on January 24, 2022, and DraftKings filed its reply brief to Winview’s opposition on January 31, 2022. On August 3, 2022, we filed a petition for inter partes review with the PTAB challenging the validity of the ‘243 Patent.

Securities Matters

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 DraftKings stock between December 23, 2019 and June 15, 2021. The allegations relate to, among other things, allegedly false and misleading statements and/or failures to disclose information about the Company’s business and prospects, based primarily upon the allegations concerning SBTech that were contained in a report published about DraftKings on June 15, 2021 by Hindenburg Research (the “Hindenburg Report”). We intend 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 February 22, 2022, defendants filed a motion seeking dismissal of this action, and in response, the lead plaintiff filed a second amended complaint on April 5, 2022. On April 26, 2022, defendants again filed a motion seeking dismissal of this action. That motion remains pending.

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

Shareholder Derivative Litigation

On October 21, 2021, the first of five substantially similar putative shareholder derivative actions was filed in Nevada by alleged shareholders of the Company. The actions purport to assert claims on behalf of the Company against certain current and former officers and/or members of the board of directors of the Company and DEAC. The two actions filed in the U.S. District Court for the District of Nevada have since been consolidated, and two of the actions filed in Nevada state District Court in Clark County likewise have been consolidated. A substantially identical fifth action was filed in Nevada state District Court in Clark County and has been dismissed voluntarily by the plaintiff. The same plaintiff filed a substantially identical action in Massachusetts Superior Court, which has also been dismissed voluntarily by the plaintiff. The Nevada actions purport to assert claims on behalf of the Company for, among other things, breach of fiduciary duty and corporate waste based primarily upon the allegations concerning SBTech that were contained in the Hindenburg Report. The federal court action in Nevada also contends that certain individuals are liable to the Company for any adverse judgment in the federal securities class actions described above under Sections 10(b) and 21D of the Exchange Act. The Nevada actions seek unspecified compensatory damages, changes to corporate governance and internal procedures, equitable and injunctive relief, restitution, costs and attorney's fees. All proceedings in both pending Nevada actions have been stayed by agreement of the parties pending resolution of the above-referenced motion to dismiss in In re DraftKings Securities Litigation.

The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. Because the Nevada actions allege claims on behalf of the Company and purport to seek judgments in favor of the Company, the Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on

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

AG 18, LLC d/b/a/ Arrow Gaming

On August 19, 2021, AG 18, LLC d/b/a/ Arrow Gaming (“Arrow Gaming”) filed a complaint against DraftKings in the United States District Court for the District of New Jersey alleging that DraftKings’ DFS and Casino products infringe four patents. On October 12, 2021, Arrow Gaming filed an amended complaint to add one additional patent. The following U.S. Patents are asserted against one or both of DraftKings’ DFS and Casino products in the amended complaint: (1) U.S. Patent No. 9,613,498 (“the ’498 Patent”), entitled “Systems and Methods For Peer-to-Peer Gaming”; (2) U.S. Patent No. 9,978,205 (“the ’205 Patent”), entitled “Location Based Restrictions on Networked Gaming”; (3) U.S. Patent No. 10,497,220 (“the ’220 Patent”) entitled “Location Based Restrictions on Networked Gaming”); (4) U.S. Patent No. 10,614,657 (“the ’657 Patent”) entitled “Location Based Restrictions on Networked Gaming”; and (5) U.S. Patent No. 11,024,131 (“the ’131 Patent”) entitled “Location Based Restrictions on Networked Gaming” (collectively, the “Arrow Gaming Patents”).

On November 9, 2021, we filed a motion to dismiss plaintiff’s complaint. On November 10, 2021, we answered the complaint and filed counterclaims (the “Counterclaims”). In the Counterclaims we seek, among other things, a declaratory judgment that the Arrow Gaming Patents are invalid. On December 1, 2021, Arrow Gaming answered our Counterclaims. On December 20, 2021, Arrow Gaming filed a second amended complaint adding new allegations with respect to the alleged willful infringement.

On January 21, 2022, DraftKings filed a motion to dismiss plaintiff’s second amended complaint. On February 22, 2022, plaintiff filed its opposition to DraftKings’ motion to dismiss plaintiff’s second amended complaint, and on March 25, 2022, DraftKings filed its reply thereto. On March 7, 2022, DraftKings filed a motion to disqualify plaintiff’s counsel. On March 21, 2022, plaintiff filed its opposition to DraftKings’ motion to disqualify plaintiff’s counsel, and on March 28, 2022, DraftKings filed its reply thereto.

Beteiro, LLC

On November 22, 2021, Beteiro, LLC (“Beteiro”) filed a complaint against the Company in the United States District Court for the District of New Jersey alleging that the Company’s Sportsbook and Casino products infringe four patents. The following U.S. Patents are asserted against Company’s Sportsbook and Casino products in the complaint: U.S. Patent No. 9,965,920, entitled “Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity” (“the ’920 Patent”); U.S. Patent No. 10,043,341, entitled “Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity” (“the ’341 Patent”); U.S. Patent No. 10,147,266, entitled “Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity” (“the ’266 Patent”); and U.S. Patent No. 10,255,755, entitled “Apparatus and Method for Facilitating Gaming Activity and/or Gambling Activity” (“the ’755 Patent”) (collectively, the “Beteiro Patents”).

DraftKings’ filed its motion to dismiss plaintiff’s complaint on February 9, 2022. On April 7, 2022, Plaintiff filed its opposition to DraftKings’ motion to dismiss, and on April 25, 2022, DraftKings filed its reply thereto.

Diogenes Ltd. & Colossus (IOM) Ltd.

On December 1, 2021, Diogenes Ltd. & Colossus (IOM) Ltd. (“Colossus”), filed a complaint against DraftKings in the United States District Court for the District of Delaware alleging that the Company’s Sportsbook product infringes seven of its patents. The following U.S. Patents, each entitled “Wagering apparatus, methods and systems”, are asserted against the Company’s Sportsbook product in the complaint: U.S. Patent No. 8,721,439 (“the ’439 patent”); U.S. Patent No. 9,117,341 (“the ’341 patent”); U.S. Patent No. 9,275,516 (“the ’516 patent”); U.S. Patent No. 9,424,716 (“the ’716 patent”); U.S. Patent No. 9,704,338 (“the ’338 patent”); U.S. Patent No. 10,970,969 (“the ’969 patent”); and U.S. Patent No. 10,997,822 (“the ’822 patent”).

On January 24, 2022, DraftKings filed its motion to dismiss the original complaint. On February 7, 2022, Colossus filed an amended complaint (the “Amended Complaint”) to, among other things, assert one additional patent against DraftKings, U.S. Patent No. 11,200,779 (“the ’779 patent”).

DraftKings filed its motion to dismiss the Amended Complaint on February 22, 2022. On March 15, 2022, Plaintiffs filed their opposition to DraftKings’ motion to dismiss, and on March 29, 2022, DraftKings’ filed its reply thereto. On March 25, 2022, a scheduling order was entered in which, among other things, trial was scheduled for January 13, 2025. On July 18, 2022, Magistrate Judge Burke issued a report and recommendation (the “Report and Recommendation”) that the motion to dismiss be granted-in-part and denied-in-part. The Company and Colossus each filed their objections to the Report and Recommendation on August 1, 2022.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims that arise in the ordinary course of business. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial condition, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in our 2021 Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or

financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~Letter Agreements

On August 4, 2022, the Company entered into letter agreements with each of Messrs. Jason Robins, the Company’s Chief Executive Officer; Matthew Kalish, the Company’s President, DraftKings North America; and Paul Liberman, the 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 2022 (the “Base Salary Reductions”). The Base Salary Reductions do not modify any other rights under each of Messrs. Robins, Kalish and Liberman’s employment agreements that are determined by reference to such executive officer’s base salary (other than to the extent otherwise described in such letter agreements), and such provisions will continue to be applied based on the base salary rate in effect without giving effect to any Base Salary Reductions. Furthermore, the Base Salary Reductions are not intended to reduce any Company employee benefit provided to Messrs. Robins, Kalish and Liberman that is determined by reference to base salary, except that life and disability insurance will not be provided to Messrs. Robins, Kalish and Liberman during the applicable Base Salary Reduction period.

Item 6. Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

4047

Exhibit Index


Exhibit No.						Description
2.1†						Agreement and Plan of Merger, by and among Old DraftKings, New DraftKings, GNOG, Duke Merger Sub, Inc. and Gulf Merger Sub, Inc., dated as of August 9, 2021 (incorporated by reference to Exhibit 2.1 to Old DraftKings’ Current Report on Form 8-K, filed with the SEC on August 10, 2021).
31.1*						Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934.
31.2*						Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934.
32.1**						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104.1						Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit).

*Filed herewith.

**Furnished herewith.

† Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.

4148

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	DRAFTKINGS INC.
Date: ~~May 6,~~August 5, 2022
	By:	/s/ Jason K. Park
	Name: Jason K. Park
	Title: Chief Financial Officer
	(Principal Financial Officer)


	By:	/s/ Erik Bradbury
	Name: Erik Bradbury
	Title: Chief Accounting Officer
	(Principal Accounting Officer)

4249


			Page
PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2428
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3239
Item 4. Controls and Procedures			3240
PART II. —OTHER INFORMATION			3441
Item 1. Legal Proceedings			3441
Item 1A. Risk Factors			3946
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3947
Item 3. Defaults Upon Senior Securities			4047
Item 4. Mine Safety Disclosures			4047
Item 5. Other Information			4047
Item 6. Exhibits			4047













	Three months ended March 31, 2021
		Reported		Adjustments			Revised
Adjustments to reconcile net loss to net cash flows used in operating activities:
Change in operating assets and liabilities, net of effect of business combinations:
Cash reserved for users		$	(18,014)	$	18,014		$	—
Net cash flows used in operating activities		(77,751)		18,014			(59,737)

Net increase in cash, cash equivalents and restricted cash		1,000,870		18,014			1,018,884
Cash and cash equivalents and restricted cash at the beginning of period		1,817,258		287,718		(a)	2,104,976
Cash and cash equivalents and restricted cash, end of period		$	2,818,128	$	305,732		$	3,123,860