Business Combination

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition of Golden Nugget Online Gaming, Inc.

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

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

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.