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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934
Check the appropriate box:
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Preliminary Information Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
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Definitive Information Statement
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DraftKings Inc.
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(Name of Registrant as Specified in Its Charter)​
Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
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(1)
Title of each class of securities to which transaction applies:
   
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(2)
Aggregate number of securities to which transaction applies:
   
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(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
   
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(4)
Proposed maximum aggregate value of transaction:
   
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(5)
Total fee paid:
   
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
Amount Previously Paid:
   
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(2)
Form, Schedule or Registration Statement No.:
   
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(3)
Filing Party:
   
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(4)
Date Filed:
   
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JOINT INFORMATION STATEMENT/PROSPECTUS AND NOTICE OF ACTION BY WRITTEN CONSENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
TO THE STOCKHOLDERS OF DRAFTKINGS INC. AND
GOLDEN NUGGET ONLINE GAMING, INC.
December 9, 2021​
To Our Stockholders:
On behalf of the respective boards of directors of DraftKings Inc., a Nevada corporation, which we refer to as “DraftKings”, and Golden Nugget Online Gaming, Inc., a Delaware corporation, which we refer to as “GNOG”, we are pleased to enclose the joint information statement/prospectus relating to the proposed combination of DraftKings and GNOG.
On August 9, 2021, DraftKings, GNOG, New Duke Holdco, Inc., a Nevada corporation and a direct, wholly-owned subsidiary of DraftKings, which we refer to as “New DraftKings,” Duke Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of New DraftKings, which we refer to as “DraftKings Merger Sub,” and Gulf Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of New DraftKings, which we refer to as “GNOG Merger Sub”, entered into an Agreement and Plan of Merger, which, as the same may be amended from time to time, we refer to as the “merger agreement”. In connection with the merger agreement, DraftKings formed New DraftKings, which is the direct corporate parent of DraftKings Merger Sub and GNOG Merger Sub. Subject to the terms and conditions of the merger agreement and the agreements related thereto, New DraftKings will acquire (1) 100% of DraftKings in an all-stock transaction through the merger of DraftKings Merger Sub with and into DraftKings, which we refer to as the “DraftKings merger”, (2) 100% of GNOG in an all-stock transaction through the merger of GNOG Merger Sub with and into GNOG, which we refer to as the “GNOG merger” and, together with the DraftKings merger, as the “mergers”, and (3) that portion of LHGN Holdco, LLC, which we refer to as “LHGN Holdco”, the operating subsidiary of GNOG, that is not currently owned by GNOG from Landry’s Fertitta, LLC, a Texas limited liability company, which we refer to as “LHGN Interestholder”, in exchange for New DraftKings Class A common stock, which ownership interest will then be contributed by New DraftKings to GNOG resulting in LHGN Holdco becoming a wholly-owned subsidiary of New DraftKings. As a result of the mergers, DraftKings and GNOG will become direct, wholly-owned subsidiaries of New DraftKings, which will be renamed “DraftKings Inc.” immediately following the completion of the mergers. We refer to the transactions contemplated by the merger agreement as the “Transactions”.
Upon completion of the Transactions, including the mergers, (1) former holders of DraftKings Class B common stock will own shares of New DraftKings Class B common stock and (2) all other former DraftKings stockholders, all former GNOG stockholders and LHGN Interestholder will own shares of New DraftKings Class A common stock, which is expected to be listed for trading on the Nasdaq Global Select Market, which we refer to as the “Nasdaq”.
Upon completion of the DraftKings merger, the effective time of which we refer to as the “DraftKings merger effective time,” ​(1) each issued and outstanding share of DraftKings Class A common stock (other than certain excluded shares) will be converted into one share of New DraftKings Class A common stock and (2) each issued and outstanding share of DraftKings Class B common stock (other than certain excluded shares) will be converted into one share of New DraftKings Class B common stock, which collectively we refer to as the “DraftKings merger consideration”.
Upon completion of the GNOG merger, the effective time of which we refer to as the “GNOG merger effective time”, each issued and outstanding share of GNOG common stock (other than certain excluded shares) will be automatically converted into, and become exchangeable for, 0.365 of a share, which we refer
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to as the “exchange ratio”, of New DraftKings Class A common stock, which we refer to as the “GNOG merger consideration”. The implied value of the GNOG merger consideration is based upon the product of the exchange ratio and the closing price of DraftKings Class A common stock as of the GNOG merger effective time. DraftKings Class A common stock currently trades on the Nasdaq under the ticker symbol “DKNG.” On December 6, 2021, the closing price of DraftKings Class A common stock was $30.68 per share. You should be aware that because the exchange ratio is fixed, the value of the GNOG merger consideration will fluctuate as the market price of DraftKings Class A common stock changes.
At a meeting of a special committee of the board of directors of GNOG, which we refer to as the “GNOG Board” and which special committee we refer to as the “Special Committee”, the Special Committee unanimously adopted resolutions (i) determining that the merger agreement and the Transactions, including the mergers, are advisable and fair to, and in the best interests of, GNOG and its stockholders (other than Tilman J. Fertitta and his affiliates), (ii) directing that the merger agreement be submitted to the GNOG Board for the GNOG Board’s approval and recommendation that GNOG’s stockholders adopt the merger agreement and (iii) recommending that the GNOG Board: (v) approve and declare advisable the merger agreement and the Transactions, including the mergers, (w) declare that the merger agreement and the Transactions, including the mergers, are fair to, and in the best interests of, GNOG and its stockholders, (x) authorize and approve entry into the merger agreement and completion of the Transactions, including the mergers, (y) submit the adoption of the merger agreement for consideration by GNOG’s stockholders and (z) recommend that GNOG’s stockholders vote in favor of adoption of the merger agreement.
At a meeting of the GNOG Board held following the meeting of the Special Committee, and upon the unanimous recommendation of the Special Committee, the GNOG Board unanimously adopted resolutions (i) determining that the merger agreement and the Transactions, including the mergers, are advisable and fair to, and in the best interests of, GNOG and its stockholders, (ii) authorizing the execution, delivery and performance of the merger agreement and, subject to the requisite GNOG stockholder approval, completion of the Transactions, including the mergers, (iii) directing that the merger agreement be submitted to GNOG’s stockholders for their adoption and (iv) recommending to GNOG’s stockholders that they vote in favor of adoption of the merger agreement.
The board of directors of DraftKings, which we refer to as the “DraftKings Board”, (i) adopted the merger agreement, (ii) determined that the Transactions, including the mergers, are fair, advisable and in the commercial interests of DraftKings and its stockholders, (iii) authorized the execution and delivery of the merger agreement and documents governing the Transactions, including the mergers, on the terms and subject to the conditions as approved by DraftKings’ management, and (iv) directed that the merger agreement be submitted for approval by DraftKings’ stockholders.
The approval of the merger agreement and the Transactions, including the mergers, required the approval of stockholders representing at least a majority of the voting power of the stockholders of DraftKings common stock, voting as a single class, who are entitled to vote on such matters. Jason Robins, who beneficially owned, as of August 10, 2021, DraftKings common stock representing approximately 90.8% of the voting power of the outstanding shares of DraftKings common stock, has delivered a written consent, which we refer to as the “DraftKings Written Consent”, approving the merger agreement and the Transactions, including the mergers. Accordingly, the delivery of the DraftKings Written Consent was sufficient to approve the merger agreement and the Transactions, including the mergers, on behalf of DraftKings stockholders. DraftKings has not solicited and is not soliciting your approval of the merger agreement or the Transactions, including the mergers. No further action by any other DraftKings stockholder is required under applicable law, and DraftKings will not solicit the vote of DraftKings stockholders for the approval of the merger agreement and the Transactions, including the mergers, and will not call a special meeting of DraftKings stockholders for purposes of voting on the merger agreement or the Transactions, including the mergers. For this reason, the accompanying joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
The adoption of the merger agreement and, therefore, the approval of the Transactions, including the mergers, required the affirmative vote or consent of holders of at least a majority of the outstanding shares of GNOG common stock, voting together as a single class, entitled to vote on such matters. Each of Tilman J. Fertitta and LHGN Interestholder, who together, on September 8, 2021, owned shares of GNOG common stock representing approximately 79.9% of the voting power of the issued and outstanding shares of GNOG common stock, have delivered a written consent, which we refer to as the “GNOG Written Consent”, adopting and, therefore, approving the merger agreement and the Transactions, including the
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mergers. Accordingly, the delivery of the GNOG Written Consent was sufficient to adopt the merger agreement and, therefore, approve the Transactions, including the mergers, on behalf of GNOG stockholders. GNOG has not solicited and is not soliciting your adoption of the merger agreement or approval of the Transactions, including the mergers. No further action by any other GNOG stockholder is required under applicable law, and GNOG will not solicit the vote of GNOG stockholders for the adoption of the merger agreement or approval of the Transactions, including the mergers, and will not call a special meeting of GNOG stockholders for purposes of voting on the adoption of the merger agreement or approval of the Transactions, including the mergers. For this reason, the accompanying joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
DraftKings and GNOG are not required to complete the Transactions, including the mergers, unless a number of conditions are satisfied or waived, which we refer to as the “closing conditions”, including: (i) the absence of certain legal restraints that would prohibit or seek to prohibit the Transactions; (ii) the receipt of certain regulatory approvals; (iii) the approval for listing on the Nasdaq of the shares of New DraftKings Class A common stock to be issued to DraftKings stockholders and GNOG stockholders; (iv) the master commercial agreement being in full force and effect; (v) the absence, since the date of the merger agreement, of any effect, event, development, change, state of facts, condition, circumstance or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on GNOG or DraftKings; and (vi) the effectiveness of the registration statement on Form S-4, of which the accompanying joint information statement/prospectus forms a part.
The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired with respect to the Transactions. Assuming timely satisfaction or waiver of the other closing conditions, the Transactions, including the mergers, are expected to close in the first quarter of 2022. The closing date of the mergers will be at least 20 days after the mailing of the accompanying joint information statement/​prospectus to DraftKings stockholders and GNOG stockholders, in accordance with Rule 14c-2(b) promulgated under the Exchange Act.
We encourage you to read the entire accompanying joint information statement/prospectus carefully, in particular the risk factors set forth in the section entitled “Risk Factors” beginning on page 27 of the accompanying joint information statement/prospectus.
On behalf of DraftKings and GNOG, thank you for your consideration and continued support.
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Jason Robins
​ ​ Tilman J. Fertitta ​
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Chief Executive Officer and Chairman
​ ​ Chief Executive Officer and Chairman ​
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DraftKings Inc.
​ ​ Golden Nugget Online Gaming, Inc. ​
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Transactions, including the mergers, or the securities to be issued in connection therewith, passed upon the adequacy or accuracy of the accompanying joint information statement/prospectus or determined if the accompanying joint information statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The accompanying joint information statement/prospectus is dated December 9, 2021, and is first being mailed to DraftKings stockholders and GNOG stockholders on or about December 9, 2021.
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REFERENCES TO ADDITIONAL INFORMATION
This joint information statement/prospectus incorporates important business and financial information about DraftKings from other documents that DraftKings has filed with the U.S. Securities and Exchange Commission, which is referred to as the “SEC,” and that are contained in or incorporated by reference into this joint information statement/prospectus. For a listing of documents incorporated by reference into this joint information statement/prospectus, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus. This information is available for you to review through the SEC’s website at www.sec.gov.
You may request copies of this joint information statement/prospectus and any of the documents incorporated by reference into this joint information statement/prospectus (other than certain exhibits or schedules to those documents) or other information concerning DraftKings, without charge, by telephone or written request directed to:
Attention: Investor Relations
DraftKings Inc.
222 Berkeley Street, 5th Floor
Boston, Massachusetts 02116
(617) 986-6744
You may also request a copy of this joint information statement/prospectus or other information concerning GNOG, without charge, by telephone or written request directed to:
Attention: Investor Relations
Golden Nugget Online Gaming, Inc.
1510 West Loop South
Houston, Texas 77027
(713) 850-1010
If you request any such documents, DraftKings or GNOG, as applicable, will mail them to you by first class mail, or another equally prompt means, after receipt of your request. To receive timely delivery of the documents, your request must be received no later than December 24, 2021.
 
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ABOUT THIS JOINT INFORMATION STATEMENT/PROSPECTUS
This joint information statement/prospectus, which forms part of a registration statement on Form S-4 (File No. 333-260174) filed with the SEC by New Duke Holdco, Inc., a direct, wholly-owned subsidiary of DraftKings and which is referred to as “New DraftKings”, constitutes a prospectus of New DraftKings under Section 5 of the Securities Act with respect to the shares of Class A common stock, par value $0.0001 per share, of New DraftKings to be issued to DraftKings stockholders and GNOG stockholders pursuant to the merger agreement.
Information contained in or incorporated by reference into this joint information statement/prospectus relating to DraftKings, New DraftKings, Duke Merger Sub, Inc. and Gulf Merger Sub, Inc. has been supplied by DraftKings. Information contained in this joint information statement/prospectus relating to GNOG has been supplied by GNOG.
You should rely only on the information contained in or incorporated by reference into this joint information statement/prospectus. No person has been authorized to provide you with information that is different from what is contained in, or incorporated by reference into, this joint information statement/​prospectus, and, if given or made by any person, such information must not be relied upon as having been authorized. This joint information statement/prospectus is dated December 9, 2021, and you should not assume that the information contained in this joint information statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this joint information statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint information statement/prospectus to stockholders of DraftKings or GNOG nor the issuance of New DraftKings common stock pursuant to the merger agreement will create any implication to the contrary.
In this joint information statement/prospectus, unless the context otherwise requires:
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“ancillary agreements” refers to the contribution agreements, support agreement and master commercial agreement;
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“bylaws” refers to the amended and restated bylaws of New DraftKings, which at the DraftKings merger effective time will be in effect in substantially the form included as Annex F to this joint information statement/prospectus;
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“charter” refers to the amended and restated articles of incorporation of New DraftKings, which at the DraftKings merger effective time will be in effect in substantially the form included as Annex E to this joint information statement/prospectus;
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“Code” refers to the Internal Revenue Code of 1986, as amended;
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“combined company” refers to New DraftKings, following completion of the mergers;
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“contribution agreements” refers to the Opco Contribution Agreement and the GNOG Contribution Agreement, collectively;
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“credit agreement” refers to the credit agreement, dated as of April 28, 2020, by and among, LHGN Interestholder, GNOG LLC, the lenders from time to time party thereto, and Jefferies Finance LLC, as agent for the lenders, as amended from time to time;
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“Crown” refers to Crown Gaming Inc., an indirect, wholly-owned subsidiary of DraftKings;
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“DGCL” refers to the General Corporation Law of the State of Delaware;
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“DraftKings” refers to DraftKings Inc., a Nevada corporation, except in the sections entitled “Summary—Information About the Companies—DraftKings Inc.” and “Summary Information About the Companies—DraftKings” in which “DraftKings” refers to DraftKings Inc., a Nevada corporation, and its consolidated subsidiaries, in each case unless the context requires otherwise;
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“DraftKings Board” refers to the board of directors of DraftKings;
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“DraftKings Class A common stock” refers to the Class A common stock, par value $0.0001 per share, of DraftKings;
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“DraftKings Class B common stock” refers to the Class B common stock, par value $0.0001 per share, of DraftKings;
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“DraftKings common stock” refers to the DraftKings Class A common stock and DraftKings Class B common stock, collectively;
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“DraftKings excluded shares” refers to shares of DraftKings common stock held in treasury by DraftKings that are not held on behalf of a third party;
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“DraftKings merger” refers to the merger of DraftKings Merger Sub with and into DraftKings, with DraftKings surviving such merger and becoming a wholly-owned subsidiary of New DraftKings;
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“DraftKings merger consideration” refers to one share of New DraftKings Class A common stock, in the case of each issued and outstanding share of DraftKings Class A common stock (other than DraftKings excluded shares), and one share of New DraftKings Class B common stock, in the case of each issued and outstanding share of DraftKings Class B common stock (other than DraftKings excluded shares), in each case pursuant to the conversion of DraftKings common stock at the DraftKings merger effective time in accordance with the merger agreement;
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“DraftKings merger effective time” refers to the time at which the DraftKings merger is completed;
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“DraftKings Merger Sub” refers to Duke Merger Sub, Inc., a Nevada corporation and an indirect, wholly-owned subsidiary of DraftKings;
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“DraftKings Option” refers to an outstanding option to purchase DraftKings common stock issued by DraftKings;
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“DraftKings Private Placement Warrant” refers to an outstanding private warrant to purchase DraftKings common stock issued by DraftKings;
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“DraftKings RSU” refers to an outstanding restricted stock unit of DraftKings;
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“DTC” refers to the Depository Trust Company;
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“Exchange Act” refers to the U.S. Securities Exchange Act of 1934, as amended;
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“exchange ratio” refers to the exchange ratio of 0.365 of a share of New DraftKings Class A common stock for each share of GNOG common stock, as described in the merger agreement;
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“FEI” refers to Fertitta Entertainment, Inc.;
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“GAAP” refers to the United States generally accepted accounting principles;
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“Gaming Authority” refers to international, national, state, local and other governmental, regulatory and administrative authorities, agencies, board and officials responsible for or regulating gaming or gaming activities in any jurisdiction;
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“GNLV” refers to GNLV, LLC, a Nevada limited liability company, a direct, wholly-owned subsidiary of Golden Nugget and an indirect, wholly-owned subsidiary of FEI;
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“GNOG” refers to Golden Nugget Online Gaming, Inc., a Delaware corporation, except in the sections entitled “Summary—Information About the Companies—Golden Nugget Online Gaming, Inc.”, “Information About GNOG” and “GNOG Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in which “GNOG” refers to Golden Nugget Online Gaming, Inc., a Delaware corporation, and its consolidated subsidiaries, in each case unless the context requires otherwise;
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“GNOG Benefit Plan” refers to any benefit or compensation plan, program, policy, practice, agreement, contract, arrangement or other obligation, whether or not in writing and whether or not funded, in each case, which is sponsored or maintained by, or required to be contributed to, or with respect to which any potential liability is borne by the GNOG or any of its subsidiaries including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, employment, consulting, retirement, severance, termination or change in control agreements, deferred compensation, equity-based, incentive, bonus, supplemental retirement, profit sharing, insurance, medical, welfare, fringe or other benefits or remuneration of any kind;
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“GNOG Board” refers to the board of directors of GNOG;
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“GNOG Class A common stock” refers to the Class A common stock, par value $0.0001 per share, of GNOG;
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“GNOG Class B common stock” refers to the Class B common stock, par value $0.0001 per share, of GNOG;
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“GNOG common stock” refers to the GNOG Class A common stock and GNOG Class B common stock, collectively;
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“GNOG Contribution Agreement” refers to the contribution agreement, dated as of August 9, 2021, by and between New DraftKings and GNOG;
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“GNOG excluded shares” refers to (i) shares of GNOG Class A common stock held by (x) DraftKings, New DraftKings or the Merger Subs or any other direct or indirect wholly-owned subsidiary of DraftKings, and (y) GNOG or any direct or indirect wholly-owned subsidiary of GNOG, in each case not held on behalf of a third party, and (ii) shares of GNOG Class B common stock held by LHGN Interestholder;
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“GNOG Holdco” refers to GNOG Holdings, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of LHGN Holdco;
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“GNOG LLC” refers to Golden Nugget Online Gaming, LLC (formerly known as Golden Nugget Online Gaming, Inc.), a New Jersey limited liability company and wholly-owned subsidiary of GNOG Holdco;
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“GNOG merger” refers to the merger of GNOG Merger Sub with and into GNOG, with GNOG surviving such merger and becoming a wholly-owned subsidiary of New DraftKings;
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“GNOG merger consideration” refers to the 0.365 of a share of New DraftKings Class A common stock into which each issued and outstanding share of GNOG common stock, other than the GNOG excluded shares, will be converted pursuant to the merger agreement;
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“GNOG merger effective time” refers to the time at which the GNOG merger is completed;
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“GNOG Merger Sub” refers to Gulf Merger Sub, Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of DraftKings;
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“GNOG Private Placement Warrant” refers to an outstanding private warrant to purchase GNOG common stock issued by GNOG;
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“GNOG RSU” refers to an outstanding restricted stock unit of GNOG;
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“GNOG Stock Plan” refers to the 2020 Incentive Award Plan adopted by GNOG;
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“Golden Nugget” refers to Golden Nugget, LLC, a Nevada limited liability company and an indirect, wholly-owned subsidiary of FEI;
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“HSR Act” refers to the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976;
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“initial stockholders” refers to Eagle Equity Partners, LLC, Harry E. Sloan and the executive officers and directors of DraftKings at the time the DraftKings Private Placement Warrants were issued;
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“intercompany note” means the Second Amended and Restated Intercompany Note, dated December 29, 2020, issued by LHGN Interestholder to GNOG LLC;
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“IRS” refers to the Internal Revenue Service;
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“Landcadia Transaction” means the business combination involving the acquisition by Landcadia Holdings II, Inc. of GNOG LLC completed on December 29, 2020;
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“LHGN consideration” refers to the number of shares of New DraftKings Class A common stock as LHGN Interestholder would have received in the GNOG merger based on the exchange ratio if it had caused LHGN Holdco to redeem all of its partnership interests in LHGN Holdco in exchange for shares of GNOG Class A common stock on a one-for-one basis immediately prior to the GNOG merger effective time;
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“LHGN Holdco” refers to LHGN Holdco, LLC, a Delaware limited liability company;
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“LHGN Interestholder” refers to Landry’s Fertitta, LLC, a Texas limited liability company;
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“master commercial agreement” refers to the Master Commercial Agreement, dated as of August 9, 2021, by and between FEI and Crown;
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“mergers” refers to the DraftKings merger and the GNOG merger, collectively;
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“merger agreement” refers to the Agreement and Plan of Merger, dated as of August 9, 2021, by and among DraftKings, GNOG, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub;
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“Merger Subs” refers to DraftKings Merger Sub and GNOG Merger Sub, collectively;
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“Nasdaq” refers to The Nasdaq Global Select Market or The Nasdaq Global Market, as the context requires;
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“New DraftKings” refers to New Duke Holdco, Inc., a Nevada corporation;
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“New DraftKings Board” refers to the board of directors of New DraftKings;
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“New DraftKings Class A common stock” refers to the Class A common stock, par value $0.0001 per share, of New DraftKings;
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“New DraftKings Class B common stock” refers to the Class B common stock, par value $0.0001 per share, of New DraftKings;
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“New DraftKings common stock” refers to the New DraftKings Class A common stock and New DraftKings Class B common stock, collectively;
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“New DraftKings Organizational Documents” refers to the charter and the bylaws;
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“New DraftKings Private Placement Warrant” refers to an outstanding private warrant to purchase New DraftKings common stock issued by New DraftKings;
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“NRS” refers to the Nevada Revised Statutes;
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“Opco Contribution” refers to the contribution by LHGN Interestholder of its 40.5% partnership interest in LHGN Holdco to New DraftKings in exchange for the LHGN consideration;
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“Opco Contribution Agreement” refers to the Contribution Agreement, dated as of August 9, 2021, by and between LHGN Interestholder and New DraftKings and amended as of November 15, 2021;
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“Special Committee” refers to the special committee of the GNOG Board that approved the merger agreement and the Transactions, including the mergers;
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“stockholders” or “holders” refers to holders of the shares of DraftKings common stock, GNOG common stock or New DraftKings common stock, as the context requires;
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“support agreement” refers to the Support and Registration Rights Agreement, dated as of August 9, 2021, by and among Tilman J. Fertitta, FEI, LHGN Interestholder, Golden Landry’s LLC, Golden Fertitta, LLC, DraftKings and New DraftKings;
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“tax receivable agreement” refers to the Tax Receivable Agreement, dated as of December 29, 2020, by and among GNOG, LHGN Holdco, and LHGN Interestholder;
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“trademark license agreement” means the trademark license agreement, effective as of December 29, 2020, by and among Golden Nugget, GNLV and GNOG;
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“Transactions” refers to the transactions contemplated by the merger agreement and the contribution agreements, collectively; and
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“warrant agreement” refers to the warrant agreement, dated as of May 10, 2019, by and between DraftKings (as successor to Diamond Eagle Acquisition Corp.) and Continental Stock Transfer & Trust Company, as warrant agent.
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Certain sections in this joint information statement/prospectus refer to a number of shares of New DraftKings common stock immediately following the closing of the Transactions, including for the purposes of stating the beneficial ownership of certain persons and the number of shares underlying certain securities. Unless otherwise specified, such calculations are based upon the information included in this joint information statement/prospectus.
 
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QUESTIONS AND ANSWERS ABOUT THE MERGERS
The following questions and answers are intended to briefly address some commonly asked questions regarding the merger agreement and the Transactions, including the mergers. You are encouraged to carefully read the remainder of this joint information statement/prospectus, its annexes and exhibits and the documents that are referred to in this joint information statement/prospectus and to pay special attention to the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 27 and 25, respectively, of this joint information statement/prospectus, because the information contained in this section may not provide all the information that might be important to you with respect to the merger agreement and the Transactions, including the mergers. For further information, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/​prospectus.
Q:
Why am I receiving this joint information statement/prospectus?
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A:
On August 9, 2021, DraftKings, GNOG, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub entered into the merger agreement. In connection with the merger agreement, DraftKings formed a direct, wholly-owned subsidiary, New DraftKings, which is the direct corporate parent of two other wholly-owned subsidiaries formed in connection with the merger agreement, DraftKings Merger Sub and GNOG Merger Sub. Subject to the terms and conditions of the merger agreement and the contribution agreements, New DraftKings will acquire (1) 100% of DraftKings in an all-stock transaction through the merger of DraftKings Merger Sub with and into DraftKings, (2) 100% of GNOG in an all-stock transaction through the merger of GNOG Merger Sub with and into GNOG, and (3) that portion of LHGN Holdco, which is the operating subsidiary of GNOG, that is not currently owned by GNOG from LHGN Interestholder in exchange for New DraftKings Class A common stock, which ownership interest will then be contributed by New DraftKings to GNOG, which will result in LHGN Holdco becoming a wholly-owned subsidiary of New DraftKings. As a result of the mergers, DraftKings and GNOG will become direct, wholly-owned subsidiaries of New DraftKings, which will be renamed “DraftKings Inc.” immediately following the completion of the mergers.
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Upon completion of the Transactions, including the mergers, (1) former holders of DraftKings Class B common stock will own shares of New DraftKings Class B common stock and (2) all other former DraftKings stockholders and all former GNOG stockholders and LHGN Interestholder will own shares of New DraftKings Class A common stock, which is expected to be listed for trading on the Nasdaq.
We have included in this joint information statement/prospectus important information about Transactions, including the mergers, the merger agreement (a copy of which is attached as Annex A) and the contribution agreements (copies of which are attached as Annex B and Annex C). You should carefully read this information and the documents referred to therein in their entirety.
Please note that the delivery of the DraftKings Written Consent and the GNOG Written Consent are together sufficient to adopt and approve the merger agreement and the Transactions (including the mergers) on behalf of stockholders of DraftKings and stockholders of GNOG, respectively. You are not being asked for a proxy, and you are requested not to send a proxy.
Q:
Why are DraftKings and GNOG proposing the Transactions?
​
A:
DraftKings and GNOG believe that the Transactions, including the mergers, will benefit both DraftKings stockholders and GNOG stockholders. For further information, please read the sections entitled “The Transactions—DraftKings’ Reasons for the Transactions; Recommendation of the DraftKings Board of Directors” and “The Transactions—GNOG’s Reasons for the Transactions; Recommendations of the Special Committee and the GNOG Board of Directors” beginning on pages 108 and 112, respectively, of this joint information statement/prospectus.
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Q:
What will DraftKings stockholders receive in the DraftKings Merger?
​
A:
Upon completion of the DraftKings merger, (1) each issued and outstanding share of DraftKings Class A common stock will be converted into one share of New DraftKings Class A common stock and (2) each share of DraftKings Class B common stock will be converted into one share of New
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DraftKings Class B common stock. However, DraftKings excluded shares will not receive any shares of New DraftKings common stock and will be cancelled.
Q:
What will holders of DraftKings equity awards and warrants receive in the DraftKings merger?
​
A:
Equity Awards:   At the DraftKings merger effective time, each outstanding DraftKings RSU and DraftKings Option will be converted into an equivalent restricted stock unit and option of New DraftKings, respectively. For further information, please read the section entitled “The Merger Agreement—Merger Consideration Received by DraftKings Securityholders” beginning on page 133 of this joint information statement/prospectus.
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Warrants:   At the DraftKings merger effective time, each outstanding DraftKings Private Placement Warrant will entitle the holder to the right to purchase and receive, upon the terms and conditions specified in the DraftKings Private Placement Warrants and in lieu of the shares of DraftKings common stock, an amount of shares of New DraftKings common stock equivalent to the amount of shares of DraftKings common stock that such holder would have been entitled to purchase had such holder exercised such DraftKings Private Placement Warrant immediately prior to the DraftKings merger effective time.
Q:
What will GNOG stockholders receive in the GNOG merger?
​
A:
Upon completion of the GNOG merger, each issued and outstanding share of GNOG common stock (other than GNOG excluded shares) will be automatically converted into, and become exchangeable for, 0.365 of a share of New DraftKings Class A common stock.
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GNOG stockholders will not receive any fractional shares of New DraftKings common stock in the GNOG merger. Each GNOG stockholder that otherwise would have been entitled to receive a fraction of a share of New DraftKings common stock will receive, in lieu thereof, cash, without interest, rounded down to the nearest cent, equal to such fractional amount multiplied by the average of the volume weighted average price per share of DraftKings Class A common stock on the Nasdaq as reported in the eastern edition of The Wall Street Journal on the trading day immediately prior to the GNOG merger effective time for ten trading days ending on (and including) the fifth full business day immediately prior to the closing date of the mergers.
Q:
What will holders of GNOG equity awards and warrants receive in the GNOG merger?
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A:
Equity Awards:   At the GNOG merger effective time, all outstanding GNOG RSUs that (i) were outstanding on the date of the merger agreement or (ii) are issued to existing GNOG employees prior to the completion of the mergers in accordance with existing agreements, will vest, be cancelled, and entitle the holder thereof to receive a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG common stock subject to such GNOG RSU immediately prior to the GNOG merger effective time multiplied by the exchange ratio, less a number of shares of New DraftKings Class A common stock equal to any applicable withholding taxes. All other issued and outstanding GNOG RSUs will be automatically converted into an equivalent restricted stock unit of New DraftKings that entitles the holder thereof to a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG common stock subject to such GNOG RSU immediately prior to the GNOG merger effective time multiplied by the exchange ratio, and will remain outstanding in New DraftKings. For further information, please read the section entitled “The Merger Agreement—Merger Consideration Received by GNOG Securityholders” beginning on page 134 of this joint information statement/prospectus.
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Warrants:   At the GNOG merger effective time, each outstanding GNOG Private Placement Warrant will be automatically converted into an equivalent private placement warrant of New DraftKings that will allow the holder to purchase a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG Class A common stock subject to such GNOG Private Placement Warrant multiplied by the exchange ratio, at an exercise price equal to the per share exercise price of such GNOG Private Placement Warrant immediately prior to the GNOG Merger Effective Time divided by the exchange ratio. For further information, please read the section entitled “The Merger
 
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Agreement—Merger Consideration Received by GNOG Securityholders—GNOG Private Placement Warrants” beginning on page 134 of this joint information statement/prospectus.
Q:
What will LHGN Interestholder receive in the Transactions?
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A:
Upon completion of the mergers and pursuant to the Opco Contribution Agreement, LHGN Interestholder will contribute its 40.5% partnership interest in LHGN Holdco to New DraftKings in exchange for the LHGN consideration, which is a number of shares of New DraftKings Class A common stock equal to that which LHGN Interestholder would have received in the GNOG merger based on the exchange ratio if it had caused LHGN Holdco to redeem all of its partnership interests in LHGN Holdco in exchange for shares of GNOG Class A common stock on a one-for-one basis immediately prior to the GNOG merger effective time. For further information, please read the section entitled “The Contribution Agreements” beginning on page 158 of this joint information statement/prospectus.
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Q:
Should I send in my share certificates now for exchange?
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A:
DraftKings Stockholders: No. DraftKings stockholders should keep any DraftKings share certificates they hold both now and after the DraftKings merger effective time. As of the DraftKings merger effective time, (1) holders of DraftKings Class A common stock will be deemed to have received shares of New DraftKings Class A common stock and (2) holders of DraftKings Class B common stock will be deemed to have received shares of New DraftKings Class B common stock, in each case without the requirement to surrender any certificates previously representing shares of DraftKings common stock or the issuance of new certificates representing New DraftKings common stock.
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GNOG Stockholders: No. GNOG stockholders should keep any GNOG share certificates they hold at this time. At the GNOG merger effective time, GNOG stockholders holding GNOG share certificates will receive from the exchange agent (as defined below) a letter of transmittal and instructions on how to obtain the GNOG merger consideration.
Q:
What equity stake will DraftKings stockholders, GNOG stockholders and LHGN Interestholder hold in New DraftKings?
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A:
Based on the estimated number of shares of DraftKings common stock, shares of GNOG common stock and partnership interests of LHGN Holdco that are expected to be outstanding immediately prior to completion of the Transactions, including the mergers, it is expected that DraftKings stockholders will hold approximately 93.4%, GNOG stockholders (other than LHGN Interestholder) will hold approximately 3.9% and LHGN Interestholder will hold approximately 2.7%, in each case, of the shares of New DraftKings common stock outstanding after the completion of the Transactions, including the mergers.
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Q:
How do I calculate the value of the DraftKings merger consideration, GNOG merger consideration, and LHGN consideration?
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A:
New DraftKings will issue one share of New DraftKings Class A common stock in exchange for each share of DraftKings Class A common stock, one share of New DraftKings Class B common stock in exchange for each share of DraftKings Class B common stock and a fixed fraction of a share of New DraftKings Class A common stock in exchange for each share of GNOG common stock and partnership interest in LHGN Holdco. The value of the DraftKings merger consideration, GNOG merger consideration and LHGN consideration that the respective recipients will receive in the Transactions will therefore depend on the price per share of DraftKings common stock at the DraftKings merger effective time.
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The market prices of DraftKings common stock and GNOG common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint information statement/prospectus to the date the mergers are completed. Because the exchange ratio described above will not be adjusted to reflect any changes in the market prices of DraftKings common stock or GNOG common stock, the market value of the New DraftKings common stock issued in the Transactions and the DraftKings common stock, GNOG common stock and LHGN Holdco
 
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partnership interests surrendered or contributed in the Transactions may be higher or lower than the values of DraftKings common stock, GNOG common stock and LHGN Holdco partnership interests on earlier dates.
On August 6, 2021, which was the last trading day before the public announcement of the Transactions, the closing prices on the Nasdaq were $51.59 per share of DraftKings Class A common stock and $12.27 per share of GNOG Class A common stock, meaning that the GNOG merger consideration represented approximately $18.83 per share of GNOG common stock, a premium of 53.46%. On December 6, 2021, which was the latest practicable date before the printing of this joint information statement/prospectus, the closing prices on the Nasdaq were $30.68 per share of DraftKings Class A common stock and $11.13 per share of GNOG Class A common stock, meaning that the GNOG merger consideration represented approximately $11.19 per share of GNOG common stock, a premium of 0.539%.
Changes in the market prices of DraftKings common stock and GNOG common stock may result from a variety of factors that are beyond the control of DraftKings or GNOG, including, but not limited to, changes in their businesses, operations and prospects, regulatory considerations, governmental actions, and legal proceedings and developments. You are encouraged to obtain up-to-date market prices for DraftKings common stock and GNOG common stock.
Q:
What conditions must be satisfied to complete the Transactions, including the mergers?
​
A:
DraftKings and GNOG are not required to complete the Transactions, including the mergers, unless a number of conditions are satisfied or waived, which we refer to as the “closing conditions”. These closing conditions include, among others:
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•
the adoption of the merger agreement by DraftKings stockholders (which has been satisfied);
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•
the adoption of the merger agreement by GNOG stockholders (which has been satisfied);
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•
the absence of certain legal restraints that would prohibit or seek to prohibit the Transactions;
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•
the receipt of certain regulatory approvals;
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•
the approval for listing on the Nasdaq of the shares of New DraftKings Class A common stock to be issued to DraftKings stockholders and GNOG stockholders;
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•
the master commercial agreement being in full force and effect;
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•
the absence, since the date of the merger agreement, of any effect, event, development, change, state of facts, condition, circumstance or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on GNOG or DraftKings; and
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•
the effectiveness of the registration statement on Form S-4, of which this joint information statement/​prospectus forms a part.
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In addition, each of DraftKings’ and GNOG’s respective obligations to complete the mergers is subject to, among other conditions, the accuracy of the other party’s representations and warranties in the merger agreement (subject in most cases to “materiality” and “material adverse effect” qualifications), the other party’s compliance with its covenants and agreements in the merger agreement in all material respects and such party’s receipt of a legal opinion from its tax counsel with respect to the tax treatment of the mergers.
For a more complete summary of the closing conditions that must be satisfied or waived prior to the completion of the mergers, please read the section entitled “The Merger Agreement—Conditions to the Completion of the Mergers” beginning on page 152 of this joint information statement/prospectus.
Q:
When do you expect the Transactions, including the mergers, to be completed?
​
A:
DraftKings and GNOG are working to complete the Transactions, including the mergers, as soon as possible. As described above, certain closing conditions must be satisfied or waived before DraftKings and GNOG can complete the mergers. For further information, please read the section entitled “The
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Merger Agreement—Conditions to the Completion of the Mergers” beginning on page 152 of this joint information statement/prospectus.
Assuming timely satisfaction or waiver of the closing conditions, the mergers are expected to close in the first quarter of 2022. The closing date of the mergers will be at least 20 days after the mailing of this joint information statement/prospectus to DraftKings stockholders and GNOG stockholders, in accordance with Rule 14c-2(b) promulgated under the Exchange Act.
Q:
What happens if the Transactions, including the mergers, are not completed?
​
A:
If the Transactions, including the mergers, are not completed for any reason, (1) DraftKings stockholders will not receive the DraftKings merger consideration, (2) GNOG stockholders will not receive the GNOG merger consideration, (3) each of DraftKings and GNOG will remain an independent public company, (4) both DraftKings Class A common stock and GNOG Class A common stock will continue to be traded on the Nasdaq, and (5) New DraftKings, which is currently a direct, wholly-owned subsidiary of DraftKings, will not become a publicly traded corporation. Additionally, the DraftKings RSUs, the DraftKings Options, the DraftKings Private Placement Warrants, the GNOG RSUs and the GNOG Private Placement Warrants will not be converted into equivalent restricted stock units, options, or private warrants of New DraftKings.
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If the merger agreement is terminated under certain circumstances, GNOG may be required to pay DraftKings a termination fee of $55.0 million. For further information, please read the section entitled “The Merger Agreement—Effect of Termination; Termination Fees; Expenses” beginning on page 156 of this joint information statement/prospectus.
Q:
What approval by DraftKings stockholders is required to approve the Transactions, including the mergers?
​
A:
The approval of the merger agreement and the Transactions, including the mergers, requires the approval of stockholders representing at least a majority of the voting power of the stockholders of DraftKings common stock, voting as a single class, who are entitled to vote on such matters. On August 10, 2021, Jason Robins, CEO of DraftKings and chairman of the DraftKings Board, who beneficially owned, as of the date thereof, 4,556,098 shares of DraftKings Class A common stock and 393,013,951 shares of DraftKings Class B common stock, together representing approximately 90.8% of the voting power of the outstanding shares of DraftKings common stock entitled to vote on such matters, delivered a written consent, which we refer to as the “DraftKings Written Consent”, approving the merger agreement and the Transactions, including the mergers. Accordingly, the delivery of the DraftKings Written Consent was sufficient to approve the merger agreement and the Transactions, including the mergers, on behalf of DraftKings stockholders. DraftKings has not solicited and is not soliciting your approval of the merger agreement and the Transactions, including the mergers. No further action by any other DraftKings stockholder is required under applicable law, and DraftKings will not solicit the vote of DraftKings stockholders for the approval of the merger agreement and the Transactions, including the mergers, and will not call a special meeting of DraftKings stockholders for purposes of voting on the merger agreement or the Transactions, including the mergers. For this reason, this joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
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Q:
What approval by GNOG stockholders is required to adopt the merger agreement and, therefore, approve the Transactions, including the mergers?
​
A:
The adoption of the merger agreement and, therefore, approval of the Transactions, including the mergers, requires the affirmative vote or consent of holders of at least a majority of the outstanding shares of GNOG common stock, voting together as a single class, entitled to vote on such matters. On September 8, 2021, each of (i) Tilman J. Fertitta, who owned 4,090,625 shares of GNOG Class A common stock on such date, and (ii) LHGN Interestholder, which is indirectly wholly owned by Mr. Fertitta and owned 31,657,545 shares of GNOG Class B common stock on such date, together representing approximately 79.9% of the voting power of the issued and outstanding shares of GNOG common stock entitled to vote on such matters, delivered a written consent, which we refer to as the “GNOG Written Consent”, adopting and, therefore, approving the merger agreement and the Transactions, including the mergers. Accordingly, the delivery of the GNOG Written Consent was
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sufficient to adopt the merger agreement and, therefore, approve the Transactions, including the mergers, on behalf of GNOG stockholders. GNOG has not solicited and is not soliciting your adoption of the merger agreement or approval of the Transactions, including the mergers. No further action by any other GNOG stockholder is required under applicable law, and GNOG will not solicit the vote of GNOG stockholders for the adoption of the merger agreement or the approval of the Transactions, including the mergers, and will not call a special meeting of GNOG stockholders for purposes of voting on the adoption of the merger agreement or approving the Transactions, including the mergers. For this reason, this joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
Q:
What are the expected United States federal income tax consequences of the mergers?
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A:
For United States federal income tax purposes, each of the mergers is intended to qualify as a reorganization under the provisions of Section 368(a) of the Code and/or, taken together with the Opco Contribution, as an exchange described in Section 351 of the Code. It is a condition to DraftKings’ obligation to complete the DraftKings merger that DraftKings receive an opinion of its counsel, Sullivan & Cromwell LLP, which we refer to in this joint information statement/prospectus as “Sullivan & Cromwell”, to the effect that the mergers, taken together, will qualify as a reorganization as described in Section 368(a) of the Code and/or, taken together with the Opco Contribution, as an exchange described in Section 351 of the Code. It is a condition to GNOG’s obligation to complete the GNOG merger that GNOG receive a written opinion of its counsel, White & Case LLP, which we refer to in this joint information statement/prospectus as “White & Case”, to the effect that the GNOG merger, will qualify as a reorganization as described in Section 368(a) of the Code.
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For a more complete discussion of the United States federal income tax consequences of the Transactions, please read the section entitled “Material United States Federal Income Tax Consequences” beginning on page 182 of this joint information statement/prospectus. Tax matters can be complicated, and the tax consequences of the Transactions, including the mergers, to a particular holder of GNOG common stock or DraftKings common stock will depend on such holder’s particular facts and circumstances. All holders of GNOG common stock or DraftKings common stock should consult with their own tax advisors to determine the specific United States federal, state, or local or foreign income or other tax consequences of the Transactions, including the mergers, to them.
Q:
Are stockholders of DraftKings or GNOG entitled to dissenters’ or appraisal rights in connection with the mergers?
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A:
DraftKings stockholders:   No. Under Nevada law, holders of shares of DraftKings common stock will not have dissenters’ rights in connection with the mergers. For more information, please read the section entitled “No Dissenters’ or Appraisal Rights—Nevada” beginning on page 221 of this joint information statement/prospectus.
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GNOG stockholders:   No. Under Delaware law, holders of shares of GNOG common stock will not have dissenters’ rights or appraisal rights in connection with the Transactions, including the mergers. For more information, please read the section entitled “No Dissenters’ or Appraisal Rights—Delaware” beginning on page 220 of this joint information statement/prospectus.
Q:
Are there any important risks about the Transactions, including the mergers, DraftKings’ business or GNOG’s business of which I should be aware?
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A:
Yes, there are important risks involved. DraftKings and GNOG encourage you to carefully read in its entirety the section entitled “Risk Factors” beginning on page 27 of this joint information statement/​prospectus.
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Q:
Who do I contact if I have further questions about the Transactions, including the mergers, or the merger agreement?
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A:
DraftKings stockholders who have questions about the Transactions, including the mergers, or the merger agreement or who desire additional copies of this joint information statement/prospectus or other additional materials should contact:
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Attention: Investor Relations
DraftKings Inc.
222 Berkeley Street, 5th Floor
Boston, Massachusetts 02116
Telephone: (617) 986-6744
GNOG stockholders who have questions about the Transactions, including the mergers, or the merger agreement or who desire additional copies of this joint information statement/prospectus or other additional materials should contact:
Attention: Investor Relations
Golden Nugget Online Gaming, Inc.
1510 West Loop South
Houston, Texas 77027
Telephone: (713) 850-1010
 
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SUMMARY
The following summary highlights selected information contained in this joint information statement/​prospectus and may not include all the information that may be important to you. Accordingly, you are encouraged to carefully read this joint information statement/prospectus in its entirety, including the attached annexes and exhibits, and the documents that are referred to in this joint information statement/prospectus and to pay special attention to the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 27 and 25, respectively, of this joint information statement/prospectus, because the information contained in this section may not provide all the information that might be important to you with respect to the merger agreement and the Transactions, including the mergers. Each item in this summary includes a page reference directing you to a more complete description of that item. You may obtain the information incorporated by reference into this joint information statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus.
Information About the Companies (Page 62)
DraftKings Inc.
DraftKings is a digital sports entertainment and gaming company. DraftKings provides users with daily fantasy sports, sports betting and iGaming opportunities, as well as media and other online consumer product offerings, and is also involved in the design and development of sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.
DraftKings’ mission is to make life more exciting by responsibly creating the world’s favorite real-money games and betting experiences. DraftKings accomplishes this by creating an environment where its users can find enjoyment and fulfillment through daily fantasy sports contests, sports betting and iGaming.
DraftKings seeks to innovate and to constantly improve its games and product offerings. Its focus is on creating unique and exciting experiences for its users. DraftKings is also highly focused on its responsibility as a steward of this new era in real-money gaming. DraftKings’ ethics guide every decision it makes, both with respect to the tradition and integrity of sports and in its investments in regulatory compliance and consumer protection.
DraftKings Class A common stock is currently listed on the Nasdaq under the symbol “DKNG.” DraftKings’ principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116. DraftKings’ telephone number is (617) 986-6744, and its website address is www.draftkings.com. Information contained on DraftKings’ website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this joint information statement/prospectus or the registration statement of which it forms a part.
New Duke Holdco, Inc.
New DraftKings is a Nevada corporation and a direct, wholly-owned subsidiary of DraftKings. New DraftKings was incorporated on August 6, 2021, solely for the purpose of effecting the mergers and, immediately after the mergers, New DraftKings will be renamed “DraftKings Inc.”
Pursuant to the merger agreement, (1) DraftKings Merger Sub will merge with and into DraftKings, and (2) GNOG Merger Sub will merge with and into GNOG. As a result of the mergers, DraftKings and GNOG will survive and become wholly-owned subsidiaries of New DraftKings. New DraftKings will become a publicly traded corporation, and former DraftKings stockholders and former GNOG stockholders will own stock in New DraftKings.
New DraftKings has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. New DraftKings’ principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
 
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Duke Merger Sub, Inc.
DraftKings Merger Sub is a Nevada corporation and a direct, wholly-owned subsidiary of New DraftKings. DraftKings Merger Sub was incorporated on August 6, 2021, solely for the purpose of effecting the DraftKings merger. As a result of the DraftKings merger, DraftKings Merger Sub will merge with and into DraftKings, with DraftKings surviving and becoming a wholly-owned subsidiary of New DraftKings.
DraftKings Merger Sub has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. DraftKings Merger Sub’s principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
Gulf Merger Sub, Inc.
GNOG Merger Sub is a Delaware corporation and a direct, wholly-owned subsidiary of New DraftKings. GNOG Merger Sub was incorporated on August 6, 2021, solely for the purpose of effecting the GNOG merger. As a result of the GNOG merger, GNOG Merger Sub will merge with and into GNOG, with GNOG surviving and becoming a wholly-owned subsidiary of New DraftKings.
GNOG Merger Sub has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. GNOG Merger Sub’s principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
Golden Nugget Online Gaming, Inc.
GNOG is an online gaming, or iGaming, and digital sports entertainment company focused on providing its customers with the most enjoyable, realistic and exciting online gaming experience in the market. GNOG currently operates in New Jersey, Michigan and West Virginia, where it offers patrons the ability to play their favorite casino games and bet on live-action sports events, and in Virginia, where it currently offers online sports betting only. GNOG’s desire to innovate, improve and offer the most realistic online gaming platform drives its employees and defines its business, as it pursues its vision to be the leading destination for online gaming players with a modern mindset.
GNOG’s Class A common stock is currently listed on the Nasdaq under the symbol “GNOG.” GNOG’s principal executive offices are located at 1510 West Loop South, Houston, Texas 77027. GNOG’s telephone number is (713) 850-1010, and its website address is http://www.gnoginc.com. Information contained on GNOG’s website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this joint information statement/prospectus or the registration statement of which it forms a part.
Risk Factors (Page 27)
You are encouraged to carefully read all of the information contained in or incorporated by reference into this joint information statement/prospectus, including its annexes and exhibits and documents that are referred to in this joint information statement/prospectus. In particular, you should consider the factors described in the section entitled “Risk Factors” beginning on page 27 of this joint information statement/prospectus.
The Transactions (Page 95)
Subject to the terms and conditions of the merger agreement and the contribution agreements, New DraftKings will acquire (i) 100% of DraftKings in an all-stock transaction through the merger of DraftKings Merger Sub with and into DraftKings, (ii) 100% of GNOG in an all-stock transaction through the merger of GNOG Merger Sub with and into GNOG, and (iii) that portion of LHGN Holdco, which is the operating subsidiary of GNOG, that is not currently owned by GNOG from LHGN Interestholder in exchange for New DraftKings Class A common stock, which ownership interest will then be contributed by New DraftKings to GNOG, which will result in LHGN Holdco becoming a wholly-owned subsidiary of New
 
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DraftKings. As a result of the mergers, DraftKings and GNOG will become direct, wholly-owned subsidiaries of New DraftKings, which will be renamed “DraftKings Inc.” immediately following the completion of the mergers.
Upon completion of the Transactions, including the mergers, (i) former holders of DraftKings Class B common stock will own shares of New DraftKings Class B common stock and (ii) all other former DraftKings stockholders, all former GNOG stockholders and LHGN Interestholder will own shares of New DraftKings Class A common stock, which is expected to be listed for trading on the Nasdaq.
The following diagrams illustrate in simplified terms the current structure of DraftKings and GNOG and the expected structure of New DraftKings following the completion of the Transactions, including the mergers.
Before the Mergers
[MISSING IMAGE: tm2131583d1-fc_befmegbwlr.jpg]
The Mergers
[MISSING IMAGE: tm2131583d1-fc_themerbwlr.jpg]
 
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After the Mergers
[MISSING IMAGE: tm2131583d1-fc_aftmerbwlr.jpg]
After the Transactions
[MISSING IMAGE: tm2131583d1-fc_afttrabwlr.jpg]
Consideration to DraftKings Securityholders (Page 96)
At the DraftKings merger effective time, each issued and outstanding share of DraftKings Class A common stock and DraftKings Class B common stock (other than the DraftKings excluded shares) will be cancelled, cease to exist and be converted into one validly issued, full paid and non-assessable share of
 
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New DraftKings Class A common stock and New DraftKings Class B common stock, respectively. For a description of the New DraftKings Class A common stock and New DraftKings Class B common stock to be issued to DraftKings securityholders in connection with the Transactions, including the mergers, please read the section entitled “Description of New DraftKings’ Capital Stock” beginning on page 185 of this joint information statement/prospectus.
Additionally, at the DraftKings merger effective time, each outstanding DraftKings RSU will be converted into an equivalent restricted stock unit denominated in, and each outstanding DraftKings Option will be converted into an equivalent option exercisable for, shares of New DraftKings common stock, in each case otherwise having the same terms as the DraftKings RSUs and DraftKings Options, respectively, immediately prior to the DraftKings merger effective time. At the DraftKings merger effective time, each outstanding DraftKings Private Placement Warrant will thereafter entitle the holder to the right to purchase and receive, upon the terms and conditions specified in the DraftKings Private Placement Warrants and in lieu of shares of DraftKings common stock, an amount of shares of New DraftKings common stock equivalent to the amount of shares of DraftKings common stock that such holder would have been entitled to purchase had such holder exercised such DraftKings Private Placement Warrant immediately prior to the DraftKings merger effective time.
Consideration to GNOG Securityholders (Page 96)
At the GNOG merger effective time, each issued and outstanding share of GNOG common stock (other than the GNOG excluded shares) will be converted into, and become exchangeable for, 0.365 of a share of New DraftKings Class A common stock. Upon completion of the mergers and pursuant to the Opco Contribution Agreement, LHGN Interestholder will contribute its 40.5% partnership interest in LHGN Holdco to New DraftKings in exchange for the LHGN consideration, which is a number of shares of New DraftKings Class A common stock equal to that which LHGN Interestholder would have received in the GNOG merger based on the exchange ratio if it had caused LHGN Holdco to redeem all of its partnership interests in LHGN Holdco in exchange for shares of GNOG Class A common stock on a one-for-one basis immediately prior to the GNOG merger effective time. Given that LHGN Interestholder (the holder of all of the issued and outstanding shares of GNOG Class B common stock) will receive the LHGN consideration pursuant to the terms of the Opco Contribution Agreement, which will also constitute consideration in respect of the GNOG Class B common stock, LHGN Interestholder will not receive any additional GNOG merger consideration in exchange for such shares of GNOG Class B common stock in the GNOG merger, which shares will instead be cancelled in connection with the GNOG merger. For a description of the New DraftKings Class A common stock to be issued to GNOG securityholders in connection with the Transactions, including the mergers, please read the section entitled “Description of New DraftKings’ Capital Stock” beginning on page 185 of this joint information statement/prospectus.
Additionally, at the GNOG merger effective time, all outstanding GNOG RSUs that (i) were outstanding on the date of the merger agreement or (ii) are issued to existing GNOG employees prior to the closing of the mergers in accordance with existing arrangements, will vest, be canceled, and entitle the holder thereof to receive a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG common stock subject to such GNOG RSU immediately prior to the GNOG merger effective time multiplied by the exchange ratio, less a number of shares of New DraftKings Class A common stock equal to any applicable withholding taxes. All other issued and outstanding GNOG RSUs will be automatically converted into an equivalent restricted stock unit of New DraftKings that entitles the holder thereof to a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG common stock subject to such GNOG RSU immediately prior to the GNOG merger multiplied by the exchange ratio, and will remain outstanding in New DraftKings. Each outstanding GNOG Private Placement Warrant will be automatically converted into an equivalent private warrant of New DraftKings that will allow the holder to purchase a number of shares of New DraftKings Class A common stock equal to the number of shares of GNOG Class A common stock subject to such GNOG Private Placement Warrant multiplied by the exchange ratio, at an exercise price equal to the per share exercise price of such GNOG Private Placement Warrant immediately prior to the GNOG merger effective time divided by the exchange ratio.
 
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DraftKings’ Reasons for the Transactions; Recommendation of the DraftKings Board of Directors (Page 108)
At a meeting held on August 8, 2021, the DraftKings Board (i) adopted the merger agreement, (ii) determined that the Transactions, including the mergers, are fair, advisable and in the commercial interests of DraftKings and its stockholders, (iii) authorized the execution and delivery of the merger agreement, contribution agreements and other documents governing the Transactions, including the mergers, on the terms and subject to the conditions as approved by DraftKings’ management, and (iv) directed that the merger agreement be submitted for approval by DraftKings’ stockholders.
For a discussion of certain factors considered by the DraftKings Board in reaching the foregoing determination, please read the section entitled “The Transactions—DraftKings’ Reasons for the Transactions; Recommendation of the DraftKings Board of Directors” beginning on page 108 of this joint information statement/prospectus.
GNOG’s Reasons for the Transactions; Recommendations of the Special Committee and the GNOG Board of Directors (Page 112)
On July 23, 2021, the GNOG Board unanimously resolved to form the Special Committee, consisting of independent directors Michael S. Chadwick, G. Michael Stevens and Scott Kelly. Each of the members of the Special Committee also serve or are expected to serve as directors on the boards of entities controlled by Mr. Fertitta and his affiliates. The GNOG Board empowered the Special Committee, among other things, to investigate and negotiate the proposed transaction, as well any related agreements, to elect not to pursue the proposed transaction and to explore, in the Special Committee’s discretion, potential alternative transactions. The Special Committee was also directed to make a recommendation to the GNOG Board, at the appropriate time, as determined by the Special Committee, as to whether the proposed transaction was fair to and in the best interests of GNOG’s stockholders other than Mr. Fertitta and his affiliates. The GNOG Board also resolved that it would not approve the proposed transaction without having received a prior favorable recommendation of the Special Committee.
At a meeting held on August 8, 2021, the Special Committee unanimously adopted resolutions (i) determining that the merger agreement and the Transactions, including the mergers, are advisable and fair to, and in the best interests of, GNOG and its stockholders (other than Mr. Fertitta and his affiliates), (ii) directing that the merger agreement be submitted to the GNOG Board for the GNOG Board’s approval and recommendation by the GNOG Board that GNOG’s stockholders adopt the merger agreement and (iii) recommending that the GNOG Board: (1) approve and declare advisable the merger agreement and the Transactions, including the mergers, (2) declare that the merger agreement and the Transactions, including the mergers, are fair to, and in the best interests of GNOG and GNOG’s stockholders, (3) authorize and approve entry into the merger agreement and completion of the Transactions, including the mergers, (4) submit the adoption of the merger agreement for consideration by GNOG’s stockholders and (5) recommend that GNOG’s stockholders vote in favor of the adoption of the merger agreement and the Transactions, including the mergers.
At a meeting of the GNOG Board, and upon the unanimous recommendation of the Special Committee, on August 8, 2021, following the meeting of the Special Committee, the GNOG Board unanimously adopted resolutions (i) determining that the merger agreement and the Transactions, including the mergers, are advisable and fair to and in the best interests of GNOG and GNOG’s stockholders, (ii) subject to the requisite GNOG stockholder approval, authorizing the execution, delivery and performance of the merger agreement, (iii) directing that the merger agreement be submitted to GNOG’s stockholders for their adoption and (iv) recommending to GNOG’s stockholders that they adopt the merger agreement.
For a discussion of certain factors considered by the Special Committee and the GNOG Board in reaching their respective determinations, please read the section entitled “The Transactions—GNOG’s Reasons for the Transactions; Recommendations of the Special Committee and the GNOG Board of Directors” beginning on page 112 of this joint information statement/prospectus.
Opinion of the Special Committee’s Financial Advisor (Page 122)
On August 5, 2021, the Special Committee retained Spectrum Gaming Capital LLC, which we refer to as “SGC”, to act as its financial advisor to provide an opinion solely as to the fairness, from a financial point
 
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of view, of the consideration to be received by the holders of GNOG common stock, other than Mr. Fertitta, Jefferies Financial Group Inc. and their respective affiliates, which we collectively refer to as the “excluded holders”, in connection with the Transactions, including the mergers. On August 8, 2021, SGC rendered its oral opinion (which was subsequently confirmed by delivery of a written opinion dated as of August 8, 2021) to the Special Committee that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in such opinion, the consideration to be received by the holders of GNOG common stock, other than the excluded holders, in the Transactions was fair, from a financial point of view, to such holders.
The summary of the written opinion of SGC, dated as of August 8, 2021, is qualified in its entirety by reference to the complete text of the opinion, a copy of which is attached as Annex G and is incorporated by reference into this joint information statement/prospectus. SGC’s written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations upon the review undertaken by SGC in rendering its opinion. You are encouraged to carefully read the opinion in its entirety.
SGC’s opinion is addressed only to the Special Committee, addressed only the fairness, from a financial point of view, of the consideration to be received by GNOG stockholders, other than the excluded holders, in the Transactions and did not address any other aspect or implication of the Transactions or any other agreement, arrangement or understanding.
SGC acted as financial advisor to the Special Committee with respect to providing its opinion in connection with the Special Committee’s review of the Transactions. SGC received a fee from GNOG of $150,000 for its services, which became payable upon the rendering of SGC’s opinion, and such payment is not contingent on the completion of any transaction.
Regulatory Approvals (Page 130)
DraftKings and GNOG agreed in the merger agreement to cooperate with each other, and use their reasonable best efforts to take, or cause to be taken, all actions and to use their reasonable best efforts to do all things reasonably necessary, proper or advisable to complete the mergers, subject to certain specified limitations in the merger agreement. The mergers are subject to the expiration or termination of the waiting period (or any extension thereof) applicable under the HSR Act, which waiting period expired on September 22, 2021. The mergers are also subject to the receipt of approvals, determinations, grants and confirmations and the satisfaction of any other closing conditions, as may be applicable, with respect to certain gaming regulatory authorities. It is presently contemplated that if any such regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained. As of the date of this joint information statement/​prospectus, all necessary approvals have not yet been obtained.
Written Consent of DraftKings (Page 130)
The approval of the merger agreement and the Transactions, including the mergers, requires the approval of stockholders representing at least a majority of the voting power of the stockholders of DraftKings common stock, voting as a single class, who are entitled to vote on such matters.
On August 10, 2021, Jason Robins, who beneficially owned, as of the date thereof, 4,556,098 shares of DraftKings Class A common stock and 393,013,951 shares of DraftKings Class B common stock, together representing approximately 90.8% of the voting power of the outstanding shares of DraftKings common stock entitled to vote on such matters, delivered the DraftKings Written Consent approving the merger agreement and the Transactions, including the mergers. Accordingly, the delivery of the DraftKings Written Consent was sufficient to approve the merger agreement and the Transactions, including the mergers, on behalf of DraftKings stockholders. For this reason, this joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
Written Consent of GNOG (Page 130)
The adoption of the merger agreement and, therefore, approval of the Transactions, including the mergers, requires the affirmative vote or consent of holders of at least a majority of the outstanding shares of GNOG common stock, voting together as a single class, entitled to vote on such matters.
 
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On September 8, 2021, each of (i) Mr. Fertitta, who was the record holder of 4,090,625 shares of GNOG Class A common stock on such date, and (ii) LHGN Interestholder, which is indirectly wholly owned by Mr. Fertitta and was the record holder of 31,657,545 shares of GNOG Class B common stock on such date, together representing approximately 79.9% of the voting power of the issued and outstanding shares of GNOG common stock entitled to vote on such matters, delivered the GNOG Written Consent adopting the merger agreement and, therefore, approving the Transactions, including the mergers. Accordingly, the delivery of the GNOG Written Consent was sufficient to adopt the merger agreement and, therefore, approve the Transactions, including the mergers, on behalf of GNOG stockholders. For this reason, this joint information statement/prospectus is being provided to you for informational purposes only. You are not being asked for a proxy, and you are requested not to send a proxy.
Listing of New DraftKings Class A Common Stock (Page 131)
It is expected that upon the completion of the Transactions, including the mergers, New DraftKings Class A common stock will trade on the Nasdaq under the symbol “DKNG”.
Delisting and Deregistration of DraftKings common stock and DraftKings Private Placement Warrants (Page 131)
If the Transactions, including the mergers, are completed, DraftKings Class A common stock will be delisted from the Nasdaq, deregistered under the Exchange Act and cease to be publicly traded. Additionally, if the Transactions, including the mergers, are completed, the DraftKings Private Placement Warrants will also be deregistered under the Exchange Act.
Delisting and Deregistration of GNOG common stock and GNOG Private Placement Warrants (Page 131)
If the Transactions, including the mergers, are completed, GNOG common stock will be delisted from the Nasdaq, deregistered under the Exchange Act, and cease to be publicly traded. Additionally, if the Transactions, including the mergers, are completed, the GNOG Private Placement Warrants will also be deregistered as necessary under the Exchange Act.
Accounting Treatment of the Transactions (Page 131)
Accounting Standards Codification 805, Business Combinations, which we refer to as “ASC 805”, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquiror. New DraftKings’ management has determined that New DraftKings will be the accounting acquiror based on an analysis of the relevant GAAP guidance. Accordingly, pursuant to ASC 805, New DraftKings will allocate the purchase consideration to the identified tangible and intangible assets and liabilities acquired from GNOG based on their fair value as of the date the Transactions, including the mergers, are completed, with any excess recorded to goodwill.
Certain Terms of the Merger Agreement (Page 133)
No Solicitation and Change in Recommendation (Page 143)
GNOG agreed that it will not and will cause its subsidiaries not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal (as defined in the merger agreement), (ii) engage in, continue or otherwise participate in any discussions with or negotiations relating to any acquisition proposal or any inquiry, proposal or offer that would reasonably be expected to lead to an acquisition proposal, (iii) provide any non-public information to any person or entity in connection with any acquisition proposal or any proposal or offer that would reasonably be expected to lead to an acquisition proposal, (iv) otherwise knowingly facilitate any effort or attempt to make an acquisition proposal, or (v) cause or permit GNOG to enter into any alternative acquisition agreement (as defined in the merger agreement). Additionally, GNOG agreed to immediately cease and cause to be terminated any existing solicitations, discussion or negotiations conducted prior to the execution of the merger agreement that could reasonably be expected to lead to an acquisition proposal.
 
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Notwithstanding these restrictions, GNOG was permitted, prior to the delivery of the GNOG Written Consent, in response to an unsolicited, bona fide written acquisition proposal that did not arise from or in connection with a material breach of the merger agreement, to, among other things, (i) contact and engage in discussions with a person or group making the acquisition proposal or its or their representatives solely to clarify the terms and conditions thereof, (ii) provide access to GNOG’s properties, assets, books and records, personnel and information in response to a request therefor (including non-public information regarding it or any of its subsidiaries) to the person or group who made such acquisition proposal, subject to certain restrictions, and (iii) participate in any discussions or negotiations with any such person or group regarding such acquisition proposal.
GNOG agreed to notify DraftKings promptly, and in any event within 48 hours, if any inquiries, proposals or offers with respect to an acquisition proposal are received by, any information is requested in connection with any acquisition proposal from, or any discussions or negotiations with respect to an acquisition proposal are sought to be initiated or continued with GNOG or any of its representatives. Such notification must include the material terms and conditions of any such acquisition proposal and the identity of the person making any such acquisition proposal.
GNOG agreed that, subject to certain exceptions specific in the merger agreement, the GNOG Board, including any committee thereof, will not (i) withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify) the recommendation of the GNOG Board that GNOG stockholders adopt the merger agreement in a manner adverse to DraftKings, (ii) fail to include in this joint information statement/prospectus the recommendation of the GNOG Board that GNOG stockholders adopt the merger agreement, (iii) fail to recommend, within ten business days after the commencement of an acquisition proposal through a tender or exchange offer pursuant to Rule 14d-2 under the Exchange Act for outstanding shares of GNOG common stock (other than by DraftKings or an affiliate of DraftKings), against acceptance of such tender offer or exchange offer by GNOG’s stockholders, (iv) approve or recommend, or publicly declare advisable, any acquisition proposal, or (v) enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other agreement (other than a confidentiality agreement in certain circumstances) relating to any acquisition proposal.
Notwithstanding the foregoing, the GNOG Board (or any committee thereof, including the Special Committee) was permitted to, subject to certain additional requirements and procedures, make a change in recommendation if (i) an unsolicited bona fide written acquisition proposal that did not arise from or in connection with a breach of the non-solicitation obligations described in this section was (x) received by GNOG and was not withdrawn and (y) determined by the GNOG Board in good faith, after consultation with its outside legal counsel and financial advisor, to be a superior proposal; and (ii) the GNOG Board or such committee determined in good faith after consultation with its outside legal counsel and its financial advisor that failure to effect a change in recommendation or terminate the merger agreement in response to such superior proposal would be inconsistent with GNOG’s directors’ fiduciary duties under applicable law.
For a more complete description of the non-solicitation obligations, the restriction on changes in recommendation in the merger agreement and other covenants applicable to DraftKings and GNOG under the merger agreement, please read the section entitled “The Merger Agreement—Covenants and Agreements” beginning on page 140 of this joint information statement/prospectus.
Conditions to the Completion of the Mergers (Page 152)
Each party’s obligation to complete the mergers is subject to the satisfaction or (to the extent permitted by law) waiver by DraftKings and GNOG at or prior to the closing of the following conditions:
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GNOG Stockholder Approval.   GNOG having obtained the affirmative vote or written consent of the holders of at least a majority of the outstanding shares of GNOG common stock entitled to vote on such matter adopting the merger agreement. This condition was satisfied on September 8, 2021 by the delivery of the GNOG Written Consent;
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DraftKings Stockholder Approval.   DraftKings having obtained the affirmative vote or written consent of the holders of at least a majority in voting power of the outstanding shares of DraftKings
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common stock entitled to vote on such matter adopting the merger agreement. This condition was satisfied on August 10, 2021 by the delivery of the DraftKings Written Consent;
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Nasdaq Listing.   The shares of New DraftKings Class A common stock issuable pursuant to the mergers having been approved for listing on the Nasdaq upon official notice of issuance;
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Regulatory Approvals.   (i) The waiting period (and any extension thereof) applicable to the completion of the Transactions under the HSR Act having been expired or earlier terminated (which waiting period expired on September 22, 2021), (ii) certain gaming approvals having been filed, occurred, or obtained or waived and (iii) all such approvals being in full force and effect;
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Laws or Governmental Orders.   No specified governmental entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered into any law or order, writ, judgment, temporary, preliminary or permanent injunction, decree, ruling, stipulation, determination, or award, in each case restraining, enjoining, making illegal or otherwise prohibiting the completion of the Transactions; and
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Effectiveness of Registration Statement.   The registration statement on Form S-4, of which this joint information statement/prospectus forms a part, having become effective in accordance with the provisions of the Securities Act, and no stop order suspending the effectiveness of the registration statement having been issued and remaining in effect and no proceedings for that purpose having been commenced or threatened in writing by the SEC, unless subsequently withdrawn.
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The obligations of DraftKings, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub to complete the mergers are subject to the satisfaction (or waiver by DraftKings) at or prior to the closing of the following additional conditions:
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Representations and Warranties.   The representations and warranties of GNOG in the merger agreement being true and correct, in each case both when made and at and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), subject in most cases to “materiality” and “material adverse effect” qualifications;
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Covenants.   GNOG having performed in all material respects all obligations, and having complied in all material respects with all covenants, required to be performed or complied with by it under the merger agreement on or prior to the closing date;
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No Material Adverse Effect on GNOG.   No effect having occurred since the date of the merger agreement that, individually or in the aggregate, has had or would reasonably be expected to have, a material adverse effect with respect to GNOG;
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Fertitta Entity Agreements.   Certain agreements with affiliates of Mr. Fertitta having been terminated and being of no further force or effect and all liabilities and obligations thereunder having been fully satisfied, extinguished and released;
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Commercial Arrangements.   The master commercial agreement being in full force and effect;
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GNOG Officer’s Certificate.   DraftKings, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub having received a certificate signed on behalf of GNOG by an executive officer of GNOG certifying that the conditions described in this paragraph under “—Representations and Warranties,” “—Covenants and Agreements” and “—No Material Adverse Effect on GNOG” have been satisfied;
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Amendment to the Trademark License Agreement.   GNOG having entered into an amendment to the trademark license agreement, as mutually agreed by the parties to the merger agreement in good faith;
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Tax Opinion.   DraftKings having received a written opinion from Sullivan & Cromwell, dated as of the closing date and in form and substance reasonably satisfactory to DraftKings, to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the DraftKings merger will qualify for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and/or, taken together with the Opco Contribution, as an “exchange” described in Section 351 of the Code; and
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•
Licenses.   All of GNOG’s material gaming and sports betting licenses being in full force and effect and in good standing and not being subject to any proceedings relating to any alleged material noncompliance or violations before any governmental entity which if resolved against GNOG would be reasonably expected to have a material adverse impact on GNOG’s operations, including proceedings to suspend, revoke, or add new material conditions to such licenses as a result of material noncompliance or violations.
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The obligation of GNOG to complete the mergers are subject to the satisfaction (or waiver by GNOG) at or prior to the closing of the following additional conditions:
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Representations and Warranties.   The representations and warranties of DraftKings, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub in the merger agreement being true and correct, in each case both when made and at and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), subject in most cases to “materiality” and “material adverse effect” qualifications;
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Covenants.   Each of DraftKings, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub having performed in all material respects all obligations, and having complied in all material respects with all covenants, required to be performed or complied with by them under the merger agreement on or prior to the closing date;
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No Material Adverse Effect on DraftKings.   No effect having occurred that, individually or in the aggregate, has had or would reasonably be expected to have, a material adverse effect with respect to DraftKings that is continuing;
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DraftKings Officer’s Certificate.   GNOG having received a certificate signed on behalf of DraftKings, New DraftKings, DraftKings Merger Sub and GNOG Merger Sub by an executive officer of DraftKings certifying that the conditions described in this paragraph under “—Representations and Warranties,” “—Covenants” and “—No Material Adverse Effect on DraftKings” have been satisfied;
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Tax Opinion.   GNOG having received a written opinion from White & Case, dated as of the closing date and in form and substance reasonably satisfactory to GNOG, to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the GNOG merger will qualify for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; and
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Release Under Credit Agreement.   All actions having been taken to cause the liens relating to the assets, rights and properties of GNOG and its subsidiaries granted pursuant to the credit agreement to have been released and terminated without any further action by the secured parties, and none of Mr. Fertitta nor any of his affiliated entities having any further obligation or liability, or be subject to any restriction, under the credit agreement or any related document or with respect to the credit agreement or any indebtedness thereunder.
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Termination of the Merger Agreement (Page 154)
The merger agreement may be terminated and the mergers abandoned at any time prior to the DraftKings merger effective time by mutual written consent of DraftKings and GNOG by action of the GNOG Board (upon the recommendation of the Special Committee) and the DraftKings Board or as follows:
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by either DraftKings or GNOG if:
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the mergers shall not have been completed by 5:00 p.m. New York time on February 28, 2022, provided that, if on that date, any of the conditions described in the section entitled “—Conditions to the Completion of the Mergers—Regulatory Approvals” beginning on page 153 of this joint information statement/prospectus, are not satisfied or waived but all other closing conditions either have been satisfied or would have been satisfied or waived if the closing were to occur on such date, then the termination date will be extended automatically to May 31, 2022 (provided further that this right to terminate the merger agreement will not be available to any party thereto
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that has breached any obligation under the merger agreement that has proximately contributed to the occurrence of the failure of a condition to the completion of the mergers);
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any law or governmental order is enacted, issued, promulgated, enforced or any law or order, writ, judgment, temporary, preliminary or permanent injunction, decree, ruling, stipulation, determination, or award is entered into by any governmental entity, in each case restraining, enjoining, making illegal or otherwise prohibiting the completion of the Transactions has become final and non-appealable (provided that this right to terminate the merger agreement will not be available to any party that has breached any obligation under the merger agreement that has proximately contributed to the occurrence of the failure of a condition to the completion of the mergers);
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by DraftKings if:
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at any time prior to the GNOG merger effective time, there has been a breach by GNOG of any covenant or agreement set forth in the merger agreement, or if any representation or warranty of GNOG has become untrue, in either case, such that the applicable closing condition would not be satisfied and such breach or failure to be true and correct is not curable prior to February 28, 2022, or if curable prior to February 28, 2022, has not been cured within the earlier of (i) 30 days following notice of such breach from DraftKings to GNOG and (ii) three business days prior to February 28, 2022 (provided that this right to terminate the merger agreement will not be available to DraftKings if DraftKings has breached any of its representations, warranties, covenants or agreements contained in the merger agreement in any manner that has proximately contributed to the occurrence of the failure of a condition to the completion of the mergers);
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•
prior to the adoption of the merger agreement by GNOG stockholders, there had been a change in recommendation effected by the GNOG Board (this termination right is no longer available to DraftKings following the delivery of the GNOG Written Consent); or
​
•
by GNOG if:
​
•
at any time prior to the DraftKings merger effective time, there has been a breach by DraftKings, New DraftKings, GNOG Merger Sub or DraftKings Merger Sub of any covenant or agreement set forth in the merger agreement, or if any representation or warranty of DraftKings, New DraftKings, GNOG Merger Sub or DraftKings Merger Sub has become untrue, in either case, such that the applicable closing condition would not be satisfied and such breach or failure to be true and correct is not curable prior to February 28, 2022, or curable prior to February 28, 2022, has not been cured within the earlier of (i) 30 days following notice of such breach from GNOG to DraftKings and (ii) three business days prior to February 28, 2022 (provided that this right to terminate the merger agreement will not be available to GNOG if GNOG has breached of any of its representations, warranties, covenants or agreements contained in the merger agreement in any manner that has proximately contributed to the occurrence of the failure of a condition to the completion of the mergers).
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Effect of Termination; Termination Fees; Expenses (Page 156)
If the merger agreement is terminated under certain circumstances, GNOG will be required to pay DraftKings a termination fee of $55.0 million and reimburse DraftKings for all reasonable and documented out-of-pocket expenses incurred by it, New DraftKings, GNOG Merger Sub or DraftKings Merger Sub in connection with the merger agreement and the Transactions, including the mergers, which we refer to as the “termination fee”.
The Contribution Agreements (Page 158)
Opco Contribution Agreement
On August 9, 2021, concurrently with the execution of the merger agreement, LHGN Interestholder, which is indirectly and wholly owned by Mr. Fertitta, and New DraftKings entered into the Opco Contribution Agreement pursuant to which, effective immediately after the completion of, and as part of a
 
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plan with, the mergers, LHGN Interestholder agreed to contribute its 40.5% partnership interest in LHGN Holdco to New DraftKings in exchange for the LHGN consideration, which is a number of shares of New DraftKings Class A common stock equal to that which LHGN Interestholder would have received in the GNOG merger based on the exchange ratio if it had caused LHGN Holdco to redeem all of its partnership interests in LHGN Holdco in exchange for shares of GNOG Class A common stock on a one-for-one basis immediately prior to the GNOG merger effective time. The Opco Contribution Agreement was amended as of November 15, 2021 to further clarify and restate the terms of the initial Opco Contribution Agreement.
GNOG Contribution Agreement
On August 9, 2021, concurrently with the execution of the merger agreement, New DraftKings and GNOG entered into the GNOG Contribution Agreement, pursuant to which, effective immediately after the completion of the Opco Contribution, and as part of a plan with the mergers, New DraftKings agreed to contribute to GNOG the 40.5% partnership interest in LHGN Holdco that New DraftKings received pursuant to the Opco Contribution Agreement in exchange for shares of GNOG common stock.
Ancillary Agreements (Page 160)
Support Agreement
On August 9, 2021, concurrently with the execution of the merger agreement and as a condition and material inducement to DraftKings’ and the Merger Subs’ willingness to enter into the merger agreement, DraftKings and New DraftKings entered into the support agreement with Mr. Fertitta and certain affiliates of Mr. Fertitta, including FEI, LHGN Interestholder, Golden Landry’s LLC and Golden Fertitta, LLC, which affiliates, together with Mr. Fertitta, we refer to collectively as the “Fertitta Parties” in respect of the shares of GNOG common stock, GNOG Private Placement Warrants and partnership interests in LHGN Holdco beneficially owned by the Fertitta Parties, which we refer to as, together with any securities issued in relation thereto, the “subject securities”.
Pursuant to the support agreement, each of the Fertitta Parties agreed, among other things, (i) not to sell, dispose of or otherwise transfer any subject securities, except in connection with the Transactions on the terms contemplated thereby, until the first anniversary of the closing date of the Transactions, (ii) not to, directly or indirectly, take any action described in the section entitled “The Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation” beginning on page 143 of this joint information statement/prospectus and (iii) to terminate and waive any payments due under the tax receivable agreement and to waive the obligations of the Fertitta Parties to make interest payments on behalf of GNOG and for GNOG to issue equity to the Fertitta Parties in connection with such interest payments. Additionally, New DraftKings agreed to prepare and file with the SEC a registration statement on Form S-3, or the then appropriate form, for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act that covers all registrable securities (as defined therein) of the Fertitta Parties then outstanding.
Master Commercial Agreement
On August 9, 2021, concurrently with the execution of the merger agreement and as a condition and material inducement to DraftKings’ and the Merger Subs’ willingness to enter into the merger agreement, Crown entered into the master commercial agreement with FEI, an affiliate of Mr. Fertitta and the holding company of the Houston Rockets, Golden Nugget, LLC and Landry’s, Inc. The master commercial agreement covers four principal areas: market access, sportsbooks, marketing/rewards programs and certain rights with respect to the Houston Rockets. For further information, please read the section entitled “Ancillary Agreements—Master Commercial Agreement” beginning on page 163 of this joint information statement/prospectus.
Management and Directors of New DraftKings after the Mergers (Page 165)
Under the terms of the merger agreement, upon the completion of the mergers, the New DraftKings Board will be comprised of 14 individuals, 13 of whom are current directors of DraftKings, and, subject to
 
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the terms and conditions of the merger agreement, one of whom will be Mr. Fertitta, the chief executive officer and chairman of the GNOG Board. The DraftKings Board presently consists of 13 members.
Upon the completion of the mergers, the corporate headquarters, principal executive offices and related corporate and operational functions of New DraftKings will be located in Boston, Massachusetts. The officers of DraftKings immediately prior to the completion of the mergers will be the officers of New DraftKings immediately following the completion of the mergers.
Interests of Affiliates in the Transactions (Page 170)
Aside from their interests as stockholders of DraftKings, certain directors and executive officers of DraftKings may have interests in the Transactions, including the mergers, that may be different from, or in addition to, the interests of DraftKings stockholders generally. The current directors and executive officers of DraftKings are expected to serve as directors and executive officers of New DraftKings following the Transactions, including the mergers. The DraftKings Board was aware of these interests, among other matters, during their respective deliberations of the merits of the Transactions, including the mergers, and carefully considered these interests, among other matters, in determining to recommend the approval of the Transactions, including the mergers. For further information, please read the section entitled “Interests of Affiliates in the Transactions—Interests of DraftKings Affiliates in the Transactions—Interests of Directors and Executive Officers of DraftKings in the Transactions” beginning on page 170 of this joint information statement/prospectus.
Aside from their interests as stockholders of GNOG, certain directors, executive officers and other affiliates of GNOG have interests in the Transactions, including the mergers, including financial interests, that may be different from, or in addition to, the interests of GNOG generally. The Special Committee and the GNOG Board were aware of these interests, among other matters, during their respective deliberations of the merits of the Transactions, including the mergers, and carefully considered these interests, among other matters, in determining to recommend the approval of the Transactions, including the mergers. For further information, please read the section entitled “Interests of Affiliates in the Transactions—Interests of GNOG Affiliates in the Transactions” beginning on page 170 of this joint information statement/prospectus.
Certain Beneficial Owners of DraftKings Common Stock and GNOG Common Stock (Page 171)
Information regarding certain beneficial owners of DraftKings common stock is contained in DraftKings’ proxy statement for its 2021 annual meeting of stockholders under the section entitled “Security Ownership of Certain Beneficial Owners and Management”, which is incorporated by reference into this joint information statement/prospectus. For further information, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/​prospectus.
For information regarding certain beneficial owners of GNOG common stock, please read the section entitled “Certain Beneficial Owners of DraftKings Common Stock and GNOG Common Stock—Certain Beneficial Owners of GNOG Common Stock” beginning on page 179 of this joint information statement/​prospectus.
Litigation Relating to the Transactions (Page 131)
On November 11, 2021, a purported stockholder filed a complaint captioned Peter Wong v. Golden Nugget Online Gaming, Inc. et al., 21-cv-09331 in the U.S. District Court for the Southern District of New York against GNOG, members of the GNOG Board, DraftKings and the Merger Subs.  The complaint alleges, among other things, that the preliminary registration statement on Form S-4 filed by New DraftKings on October 8, 2021 in connection with the Transactions, including the mergers, is materially incomplete and misleading in violation of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The complaint seeks, among other relief, the award of attorney’s and expert fees to the plaintiffs and an injunction preventing the closing of the Transactions, including the mergers, and directing the defendants to comply with the Exchange Act in respect of the registration statement.
Each of GNOG, DraftKings and New DraftKings believes that the allegations in the complaint are without merit. GNOG has also received books and records demands from purported stockholders.
 
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Material United States Federal Income Tax Consequences (Page 182)
GNOG and DraftKings intend for each of the DraftKings merger and the GNOG merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and/or to, taken together with the Opco Contribution, qualify as an “exchange” described in Section 351 of the Code. Accordingly, assuming that each of the GNOG merger and the DraftKings merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code and/or, taken together with the Opco Contribution, as an “exchange” described in Section 351 of the Code, subject to the treatment of cash in lieu of fractional shares, a U.S. holder (as defined below) of GNOG common stock or DraftKings common stock that receives shares of New DraftKings common stock in the mergers will (i) not recognize any gain or loss upon the exchange of shares of GNOG common stock or DraftKings common stock for shares of New DraftKings common stock in the GNOG merger or the DraftKings merger, respectively, (ii) have a tax basis in the New DraftKings common stock received in the GNOG merger or the DraftKings merger (including fractional shares for which cash is received) equal to the tax basis of the GNOG common stock or DraftKings common stock, respectively, surrendered in exchange therefor; and (iii) have a holding period for shares of New DraftKings common stock received in the GNOG merger or the DraftKings merger (including fractional shares for which cash is received) that includes its holding period for its shares of GNOG common stock or DraftKings common stock, respectively, surrendered in exchange therefor. For further information, please read the section entitled “Material United States Federal Income Tax Consequences” on page 182 of this joint information statement/prospectus.
The United States federal income tax consequences described above may not apply to all holders of DraftKings common stock or GNOG common stock. Accordingly, you are encouraged to consult your tax advisor for a full understanding of the particular tax consequences of the mergers to you.
Description of New DraftKings’ Capital Stock (Page 185)
As a result of the Transactions, including the mergers, holders of DraftKings common stock and GNOG common stock and LHGN Interestholder will receive shares of New DraftKings common stock and become New DraftKings stockholders. The rights of New DraftKings stockholders will be governed by the NRS and the New DraftKings Organizational Documents. You are encouraged to carefully read in their entirety (i) the charter, which at the DraftKings merger effective time will be in effect substantially in the form included as Annex E to this joint information statement/prospectus, (ii) the bylaws, which at the DraftKings merger effective time will be in effect substantially in the form included as Annex F to this joint information statement/prospectus and (iii) the applicable provisions of the NRS.
Comparison of Stockholder Rights (Page 196)
The rights of GNOG stockholders are currently governed by the DGCL, the fourth amended and restated certificate of incorporation of GNOG and the amended and restated bylaws of GNOG. The rights of DraftKings stockholders are currently governed by the NRS, the amended and restated articles of incorporation of DraftKings and the amended and restated bylaws of DraftKings.
Immediately prior to the DraftKings merger effective time, New DraftKings will cause its charter and bylaws to be amended to contain provisions substantially identical to the articles of incorporation and bylaws of DraftKings, respectively, in effect immediately prior to the DraftKings merger, substantially in the form included as Annex E and Annex F, respectively, to this joint information statement/prospectus. The rights of GNOG stockholders under the charter and bylaws of New DraftKings will differ in certain important respects from such GNOG stockholders’ rights under the certificate of incorporation and bylaws of GNOG. The rights of DraftKings stockholders under the charter and bylaws of New DraftKings will be substantially the same as their rights under the articles of incorporation and bylaws of DraftKings.
No Dissenters’ or Appraisal Rights (Page 220)
No dissenters’ or appraisal rights will be available to GNOG stockholders with respect to the GNOG merger pursuant to Section 262 of the DGCL or any other applicable laws, as described in the section entitled “No Dissenters’ or Appraisal Rights—Delaware” beginning on page 220 of this joint information statement/​prospectus.
 
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No dissenters’ or appraisal rights will be available to DraftKings stockholders with respect to the DraftKings merger pursuant to NRS 92A.300 to 92A.500, inclusive, or any other applicable laws, as described in the section entitled “No Dissenters’ or Appraisal Rights—Nevada” beginning on page 221 of this joint information statement/prospectus.
 
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COMPARATIVE MARKET PRICE DATA
DraftKings Class A common stock is listed on the Nasdaq under the symbol “DKNG” and GNOG Class A common stock is listed on the Nasdaq under the symbol “GNOG”.
The following table presents the closing prices of DraftKings Class A common stock and GNOG Class A common stock both on August 6, 2021, which was the last full trading day before the date of the public announcement of the merger agreement, and on December 6, 2021, which was the last practicable date prior to the date of this joint information statement/prospectus. The following table also shows the estimated implied value of the merger consideration for each share of GNOG common stock on the relevant date.
Date
​ ​
GNOG
Class A
common
stock Closing
Price
​ ​
DraftKings
Class A
common stock
Closing Price(1)
​ ​
Exchange
Ratio
​ ​
Estimated
Equivalent Per
Share Value(2)
​
August 6, 2021
​ ​ ​ $ 12.27 ​ ​ ​ ​ $ 51.59 ​ ​ ​ ​ ​ 0.365 ​ ​ ​ ​ $ 18.83 ​ ​
December 6, 2021
​ ​ ​ $ 11.19 ​ ​ ​ ​ $ 11.13 ​ ​ ​ ​ $ 30.68 ​ ​ ​ ​ ​ 0.365 ​ ​
​
(1)
The merger agreement provides that upon the completion of the GNOG merger, each holder of GNOG common stock will receive 0.365 of a share of New DraftKings Class A common stock (into which shares of DraftKings Class A common stock also will be converted on a one-for-one basis) for each share of GNOG common stock issued and outstanding immediately prior to the completion of the GNOG merger, other than any GNOG excluded shares.
​
(2)
The implied value of the merger consideration is based upon the product of the exchange ratio and the closing price of DraftKings Class A common stock as of the applicable date.
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The above table shows only historical comparisons. DraftKings stockholders and GNOG stockholders are encouraged to obtain current market quotations for shares of DraftKings Class A common stock and GNOG Class A common stock and to review carefully and in its entirety the other information contained in, or incorporated by reference into, this joint information statement/prospectus. The market prices of DraftKings Class A common stock and GNOG Class A common stock will fluctuate between the date of this joint information statement/prospectus and the date of completion of the mergers. No assurance can be given concerning the market prices of DraftKings Class A common stock or GNOG Class A common stock before or after the effective date of the mergers. Changes in the market price of DraftKings Class A common stock prior to the completion of the mergers will affect the market value of the merger consideration that GNOG stockholders will receive upon completion of the mergers.
 
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint information statement/prospectus may contain forward-looking statements concerning GNOG, DraftKings, New DraftKings, the Transactions, including the mergers, and other matters within the meaning of Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. When used in this joint information statement/prospectus, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside DraftKings’ or GNOG’s control and difficult to predict, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. These forward-looking statements include, without limitation, DraftKings’ and GNOG’s expectations with respect to future performance and anticipated financial impacts of the Transactions, including the mergers, the satisfaction of the closing conditions to the Transactions, including the mergers, and the timing of the completion of the Transactions, including the mergers. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Factors that may cause such differences include, but are not limited to:
•
the ability to obtain regulatory approvals (and the timing of such approvals) and meet other closing conditions to the Transactions, including the mergers;
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•
the potential for delay in closing the Transactions, including the mergers;
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•
the outcome of any legal proceedings that may be instituted against DraftKings or GNOG following the announcement of the merger agreement and the Transactions, including the mergers;
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•
the inability to complete the Transactions, including the mergers, including due to failure to obtain approvals or other determinations from certain gaming regulatory authorities, or other conditions to the completion of the Transactions, including the mergers;
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•
the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement or could otherwise cause the Transactions, including the mergers, to fail to close;
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the inability to obtain or maintain the listing of New DraftKings Class A common stock on the Nasdaq following the Transactions, including the mergers;
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the risk that the Transactions, including the mergers, disrupt current plans and operations as a result of the announcement and completion of the Transactions, including the mergers;
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•
the ability to recognize the anticipated benefits of the Transactions, including the mergers, which may be affected by, among other things, competition and the ability of the combined company to grow and manage growth profitably and retain its key employees;
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•
costs related to the Transactions, including the mergers;
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•
changes in applicable laws or regulations, particularly with respect to gaming, gambling, sportsbooks, fantasy sports and other similar businesses;
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•
the inability to retain key personnel of DraftKings or GNOG;
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•
the possibility that DraftKings, GNOG or New DraftKings may be adversely affected by other economic, business and/or competitive factors;
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•
market and supply chain disruptions due to the COVID-19 outbreak or other epidemics, pandemics or similar public health events; and
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•
other risks and uncertainties indicated from time to time in this joint information statement/​prospectus relating to the Transactions, including the mergers, including those specified under “Risk Factors” in DraftKings’ filings with the SEC.
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Consequently, all of the forward-looking statements made by GNOG, DraftKings or New DraftKings contained or incorporated by reference in this joint information statement/prospectus are qualified by factors, risks and uncertainties, including those set forth under the headings titled “Risk Factors” beginning on
 
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page 27 of this joint information statement/prospectus and those set forth under the headings “Cautionary Statement Regarding Forward-Looking Statements”, “Risk Factors” and “Quantitative and Qualitative Disclosures About Market Risk” in DraftKings’ Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 26, 2021, as amended by the Form 10-K/A filed with the SEC on May 3, 2021 and as further amended by the Form 10-K/A filed with the SEC on November 5, 2021, and other filings with the SEC that are incorporated by reference into this joint information statement/prospectus. For further information, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this joint information statement/prospectus or the date of the applicable document incorporated by reference into this joint information statement/prospectus. GNOG, DraftKings and New DraftKings undertake no obligation to update or revise any forward-looking statements, even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. As a result of these risks and others, actual results could vary significantly from those anticipated herein, and the financial condition and results of operations of GNOG, DraftKings and New DraftKings could be materially adversely affected.
 
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RISK FACTORS
This section describes various risks and uncertainties related to the Transactions, including the mergers, and the businesses and results of operations of New DraftKings, DraftKings and GNOG. In addition to the other information included in, or incorporated by reference into, this joint information status/prospectus, the annexes and exhibits attached to this joint information statement/prospectus, and the documents that are referred to in this joint information statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 25 of this joint information statement/prospectus, you should carefully consider the following risks related to the Transactions, including the mergers. You should also read and consider the risk factors associated with the businesses of each of DraftKings and GNOG because these risk factors may affect the operations and financial results of New DraftKings. In the case of DraftKings, these risk factors may be found in its Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 26, 2021, as amended by the Form 10-K/A filed with the SEC on May 3, 2021 and as further amended by the Form 10-K/A filed with the SEC on November 5,2021; and (2) Part II, Item 1A in DraftKings’ Quarterly Report on Form 10-Q for the period ended March 31, 2021, each of which are incorporated by reference into this joint information statement/​prospectus. For further information, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus. In the case of GNOG, these risk factors may be found below under the subsection entitled “Risks Relating to GNOG’s Business”. Additional risks and uncertainties not presently known to DraftKings or GNOG or that are not currently considered to be material may also adversely affect the Transactions, including the mergers, or the businesses or results of operations of any of DraftKings, GNOG or New DraftKings.
Risk Factors Summary
The following is only a summary of principal risks that are applicable to the Transactions, including the mergers, and the businesses of DraftKings, GNOG and, after completion of the Transactions, New DraftKings. Such risks are discussed in more detail below and you should carefully read this Risk Factors section in its entirety.
Risks Relating to the Transactions
•
The numbers of shares of New DraftKings common stock that GNOG stockholders, DraftKings stockholders and LHGN Interestholder will receive under the merger agreement and the Opco Contribution Agreement is each based on a fixed exchange ratio. The market value of the shares of New DraftKings Class A common stock to be issued upon completion of the Transactions, including the mergers, is unknown, and therefore, GNOG stockholders, DraftKings stockholders and LHGN Interestholder cannot be certain of the value of New DraftKings common stock to be paid to them as consideration of the Transactions, including the mergers.
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•
The parties must obtain certain regulatory approvals in order to complete the Transactions, including the mergers; if such approvals are not obtained or are obtained with conditions, the mergers may be prevented or delayed.
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•
Combining the business of DraftKings and GNOG may be more difficult or more costly than expected and the benefits of combining the businesses may be lower than expected.
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•
The merger agreement limits DraftKings’ and GNOG’s ability to pursue alternatives to the mergers.
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•
The financial analyses, estimates and projections considered by DraftKings and GNOG and their respective financial advisors may not be realized, which may adversely affect the market price of New DraftKings common stock following the completion of the mergers.
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•
Executive officers and directors of DraftKings and GNOG may have interests in the Transactions, including the mergers, that are different from, or in addition to, the rights of their respective stockholders.
​
•
The shares of New DraftKings common stock to be received by DraftKings stockholders and GNOG stockholders as a result of the mergers will have rights that are different from the rights of shares of DraftKings common stock and the rights of shares of GNOG common stock, respectively.
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•
The Transactions, including the mergers, are subject to a number of closing conditions and, if these conditions are not satisfied, the merger agreement may be terminated in accordance with its terms and the Transactions, including the mergers, may not be completed. Failure to complete the Transactions, including the mergers, could negatively impact the financial results and or prices of DraftKings Class A common stock and GNOG Class A common stock.
​
•
Lawsuits may be filed against GNOG, DraftKings and/or their respective boards of directors challenging the mergers. An adverse ruling in any such lawsuit could result in substantial costs and may prevent the mergers from being completed.
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Risks Relating to DraftKings’ Business
•
There are a number of risks related to DraftKings’ business and industry. For further information, please read the section entitled “Risk Factors—Risks Relating to DraftKings’ Business” beginning on page 37 of this joint information statement/prospectus.
​
Risks Relating to GNOG’s Business
•
Competition within the gaming industry is intense and GNOG’s existing and potential users may be attracted to its competitors’ offerings. GNOG’s growth prospects may suffer if GNOG is unable to develop successful offerings or if it fails to pursue additional offerings.
​
•
The COVID-19 pandemic could adversely impact GNOG’s business, results of operations and financial condition.
​
•
Economic downturns and adverse political and market conditions beyond GNOG’s control could adversely affect its business, financial condition and results of operations.
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•
GNOG’s projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations. As a result, GNOG’s projected revenues, market share, expenses and profitability may differ materially from its expectations.
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•
GNOG relies on information technology and other systems and platforms, and any failures, errors, defects or disruptions in such systems or platforms could diminish GNOG’s brand and reputation, subject GNOG to liability, disrupt its business, affect its ability to scale its technical infrastructure and adversely affect its operating results and growth prospects.
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•
GNOG’s platform contains third-party open source software components and relies on licenses to use the intellectual property rights of third parties, which are incorporated into GNOG’s products and services.
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•
GNOG may incur significant costs in order to comply with software and app store guidelines and requirements. Non-compliance with such guidelines and requirements could limit GNOG’s ability to distribute its apps and, consequently, could have an adverse effect on its revenues.
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•
GNOG’s business is dependent on agreements with certain affiliates, strategic relationships with casinos, gaming operators, third-party payment processors and service providers. If GNOG cannot manage such relationships with these partners, its business, financial condition and results of operations could be adversely affected.
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•
GNOG’s business is subject to a variety of U.S. federal, state and local laws, many of which are unsettled, and which could subject it to claims or otherwise harm its business. Any change in existing regulations or their interpretation applicable to GNOG’s products and services could adversely impact its ability to operate its business and have a material adverse effect on its financial condition and results of operations.
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•
GNOG is subject to risks related to the geographic concentration of its operations, and GNOG’s growth prospects and market potential will depend on its ability to obtain licenses to operate in a number of jurisdictions and comply with regulatory requirements in particular jurisdictions.
​
•
Due to the nature of GNOG’s business, it is subject to taxation in several jurisdictions and changes in, or new interpretation of, tax laws, tax rulings or their application by tax authorities could result in additional tax liabilities and could materially affect its financial condition and results of operations.
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•
GNOG may be subject to litigation which, if adversely determined, could cause it to incur substantial losses. GNOG’s insurance may not provide adequate levels of coverage against such claims.
​
•
GNOG’s continued growth and success will depend on the performance of its current and future employees. In some jurisdictions, GNOG’s key executives, certain employees or other individuals related to the business are subject to licensing or compliance requirements. Failure by such individuals to obtain the necessary licenses or comply with individual regulatory obligations, could cause the business to be non-compliant with its obligations, or imperil its ability to obtain or maintain licenses necessary for the conduct of the business. In some cases, the remedy to such situation may require the removal of a key executive or employee and the mandatory redemption or transfer of such person’s equity securities. The loss of any of GNOG’s key executives or other key employees could harm its business.
​
Risks Relating to New DraftKings after Completion of the Transactions
•
The market price for shares of New DraftKings Class A common stock may be affected by factors different from those affecting the market price for shares of GNOG Class A common stock and shares of DraftKings Class A common stock and may decline as a result of the Transactions, including the mergers, and as a result of some New DraftKings stockholders adjusting their portfolios.
​
•
Declaration, payment and amount of dividends, if any, to holders of shares of New DraftKings common stock will be uncertain.
​
•
The Transactions, including the mergers, may not be accretive, and may be dilutive, to New DraftKings’ earnings per share, which may negatively affect the market price of shares of New DraftKings common stock.
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•
New DraftKings’ charter will be identical to the current articles of incorporation of DraftKings, which designate the Eighth Judicial District Court of Clark County, Nevada as the exclusive forum for certain types of actions and proceedings that may be initiated by New DraftKings’ stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with New DraftKings or its directors, officers, employees or agents.
​
Risks Relating to the Transactions
DraftKings stockholders will receive one share of New DraftKings Class A common stock for each share of DraftKings Class A common stock that they hold and one share of New DraftKings Class B common stock for each share of DraftKings Class B common stock that they hold. The numbers of shares that GNOG stockholders and LHGN Interestholder will receive under the merger agreement and the Opco Contribution Agreement are each based on a fixed exchange ratio. The market value of the shares of New DraftKings common stock to be issued upon completion of the Transactions, including the mergers, is unknown, and therefore, GNOG stockholders, DraftKings stockholders and LHGN Interestholder cannot be certain of the value of New DraftKings common stock to be paid to them as consideration for the Transactions, including the mergers.
DraftKings stockholders will receive one share of New DraftKings Class A common stock for each share of DraftKings Class A common stock that they hold, and one share of New DraftKings Class B common stock for each share of DraftKings Class B common stock that they hold. The GNOG stockholders and LHGN Interestholder will each receive a fixed number of shares of New DraftKings Class A common stock under the merger agreement and the Opco Contribution Agreement, rather than shares of New DraftKings Class A common stock with a particular fixed market value. The market prices of DraftKings Class A common stock and GNOG Class A common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate from the date of this joint information statement/prospectus to the date that the Transactions are completed, which could occur a considerable amount of time after the date of this joint information statement/prospectus. The market values of DraftKings Class A common stock and GNOG Class A common stock at the time of the Transactions, including the mergers, may vary significantly from their prices on the date of the merger agreement or the date of this joint information statement/prospectus. Because the respective exchange ratios with respect to the DraftKings merger consideration, GNOG merger consideration and LHGN consideration will not be adjusted to reflect
 
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any changes in the market prices of DraftKings Class A common stock or GNOG Class A common stock, the market value of the New DraftKings Class A common stock issued in the Transactions, including the mergers, and the DraftKings Class A common stock, GNOG common stock and partnership interests of LHGN Holdco surrendered in the mergers may be higher or lower than the values of such stock or interests on earlier dates. The DraftKings merger consideration to be received by DraftKings stockholders will consist of both New DraftKings Class A common stock and New DraftKings Class B common stock. All of the GNOG merger consideration to be received by GNOG stockholders and all of the LHGN consideration to be received by LHGN Interestholder will, in each case, only consist of New DraftKings Class A common stock. Until the completion of the Transactions, including the mergers, GNOG stockholders, DraftKings stockholders and LHGN Interestholder will not know or be able to determine the value of the GNOG merger consideration, the DraftKings merger consideration or the LHGN consideration that they will receive, as applicable, pursuant to the merger agreement and Opco Contribution Agreement.
Changes in the market prices of DraftKings Class A common stock and GNOG Class A common stock may result from a variety of factors that are beyond the control of DraftKings or GNOG, including, but not limited to, changes in the businesses, operations and prospects of DraftKings or GNOG, regulatory considerations, governmental actions, market assessments of the likelihood that the Transactions, including the mergers, will be completed, the timing of the Transactions, including the mergers, general market and economic conditions and legal proceedings and developments. You are encouraged to obtain up-to-date prices for DraftKings Class A common stock and GNOG Class A common stock.
DraftKings and GNOG must obtain certain regulatory approvals in order to complete the Transactions, including the mergers; if such approvals are not obtained or are obtained with conditions, the mergers may be prevented or delayed or the anticipated benefits of the mergers could be reduced.
The completion of the Transactions, including the mergers, is conditioned upon, among other things, the expiration or termination of the waiting period (and any extensions thereof) applicable to the Transactions, including the mergers, under the HSR Act (which waiting period expired on September 22, 2021). At any time before or after the Transactions, including the mergers, are completed, any of the DOJ, the Federal Trade Commission, which we refer to as the “FTC”, or U.S. state attorneys general could take action under the antitrust laws in opposition to the Transactions, including the mergers, including seeking to enjoin completion of the Transactions, including the mergers, conditioning completion of the Transactions, including the mergers, upon the divestiture of assets of DraftKings, GNOG or their respective subsidiaries or imposing restrictions on New DraftKings’ post-transaction operations. These requirements or restrictions could negatively affect the results of operations and financial condition of New DraftKings following completion of the Transactions, including the mergers. Any such requirements or restrictions may prevent or delay completion of the Transactions, including the mergers, or may reduce the anticipated benefits of the mergers, which could also have a material adverse effect on New DraftKings’ business and cash flows, financial condition and results of operations.
Completion of the Transactions, including the mergers, is also conditioned upon receiving certain approvals from, and/or making certain filings with, certain state gaming regulators with respect to the Transactions, including the mergers. No assurance can be given that the required regulatory approvals will be obtained or that the required conditions to closing will be satisfied, and, even if all such approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such approvals. For more information about the effects of a failure to complete the Transactions, including the mergers, please read the risk factor below entitled “—Risk Factors Summary—Risks Relating to the Transactions—Failure to complete the Transactions, including the mergers, could negatively impact the businesses or financial results of DraftKings and/or GNOG and the stock prices of DraftKings Class A common stock and/or GNOG Class A common stock .” Also, please read the section entitled “The Merger Agreement—​Conditions to the Completion of the Mergers” beginning on page 152 of this joint information statement/​prospectus for a discussion of the conditions to the completion of the mergers and the section entitled “The Transactions—Regulatory Approvals” beginning on page 130 of this joint information statement/​prospectus for a discussion of the regulatory approvals required in connection with the completion of the mergers.
 
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Combining the businesses of DraftKings and GNOG may be more difficult, time-consuming or costly than expected and the actual benefits of combining the businesses of DraftKings and GNOG may be less than expected, either or both of which may adversely affect New DraftKings’ future results.
The success of the Transactions, including the mergers, will depend, in part, on New DraftKings’ ability to realize the anticipated benefits from combining the businesses of DraftKings and GNOG as further described in the sections entitled “The Transactions—DraftKings’ Reasons for the Transactions; Recommendation of the DraftKings Board of Directors” and “The Transactions—GNOG’s Reasons for the Transactions; Recommendations of the Special Committee and the GNOG Board of Directors” beginning on pages 108 and 112, respectively, of this joint information statement/prospectus.
To realize such anticipated benefits, the businesses of DraftKings and GNOG must be successfully combined. DraftKings and GNOG have been operated as independent companies, and they will continue to be operated as such until the completion of the Transactions, including the mergers. Upon completion of the Transactions, including the mergers, the management of New DraftKings may face significant challenges in consolidating the functions of DraftKings and GNOG, integrating the technologies, organizations, systems, procedures, policies and operations, as well as addressing the different business cultures at the two companies, managing the increased scale and scope of the combined businesses, identifying and eliminating duplicative programs, and retaining key personnel. If the combined company is not successfully integrated, the anticipated benefits of the Transactions, including the mergers, may not be realized fully or at all or may take longer to realize than expected. Actual synergies, if achieved, may be less than expected and may take longer to achieve than anticipated.
The integration of the businesses of DraftKings and GNOG may also be complex and time consuming and require substantial resources and effort. In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized as a result. The integration process and other disruptions resulting from the Transactions, including the mergers, may also disrupt DraftKings’ or GNOG’s ongoing businesses operations and/or adversely affect DraftKings’ or GNOG’s relationships with employees, customers, clients, partners, regulators and others with whom DraftKings and GNOG have business or other dealings. Such consequences of the integration process may adversely affect New DraftKings’ business or results of its operations.
DraftKings, GNOG and New DraftKings will incur significant transaction and merger-related transition costs in connection with the Transactions, including the mergers.
New DraftKings, DraftKings and GNOG each expect that they and New DraftKings will incur significant, non-recurring costs in connection with the completion of the Transactions, including the mergers, and the integration of the operations of DraftKings and GNOG. New DraftKings, DraftKings and/or GNOG may incur additional costs to maintain employee morale and to retain key employees. DraftKings and/or GNOG will also incur significant fees and expenses relating to regulatory filings, legal, accounting, financial advisory and consulting fees and other costs associated with the Transactions, including the mergers. Some of these costs are payable regardless of whether the Transactions, including the mergers, are completed. Moreover, if the merger is not completed under specified circumstances, GNOG may be required to pay a termination fee of $55.0 million and certain transaction-related expenses. For further information, please read the section entitled “The Merger Agreement—Effect of Termination; Termination Fees; Expenses” beginning on page 156 of this joint information statement/prospectus.
DraftKings and GNOG will be subject to business uncertainties and contractual restrictions while the Transactions, including the mergers, are pending.
Uncertainty about the effect of the Transactions, including the mergers, on employees, clients, customers, suppliers and vendors may have an adverse effect on the ongoing business operations of DraftKings or GNOG and, consequently, have an adverse impact on the business operations of New DraftKings. These uncertainties may impair DraftKings’ or GNOG’s ability to retain and motivate key personnel and could cause customers and others that deal with DraftKings or GNOG, as applicable, to defer or decline entering into contracts with DraftKings or GNOG, as applicable, or making other decisions concerning DraftKings or GNOG, as applicable, or seek to change existing business relationships with DraftKings or GNOG, as applicable. Certain of GNOG’s customer contracts, joint venture agreements, operations agreements,
 
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credit agreements, license agreements, vendor or supplier contracts, financing-related agreements, promissory notes and indentures contain change of control restrictions that may give rise to a right of termination or cancellation in connection with the Transactions, including the mergers. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Transactions, including the mergers, DraftKings’ and GNOG’s businesses could be harmed. Furthermore, the merger agreement contains restrictions on the ability of DraftKings and GNOG to undertake certain actions or business opportunities outside the ordinary course of business prior to the completion of the Transactions, including the mergers. Please read the section entitled “The Merger Agreement—Covenants and Agreements” beginning on page 140 of this joint information statement/prospectus for a description of the restrictive covenants applicable to DraftKings and GNOG.
The merger agreement limits GNOG’s ability to pursue alternatives to the mergers, which may discourage other companies from making a favorable alternative transaction proposal and, in specified circumstances, could require GNOG to pay DraftKings a termination fee.
The merger agreement contains provisions that make it more difficult for GNOG to enter into alternative transactions, including provisions that restrict GNOG’s ability to, among other things, solicit, initiate or knowingly encourage or knowingly facilitate the submission of inquiries, proposals or offers relating to or that would reasonably be expected to lead to any acquisition proposal (as defined below) from a third party. Further, on September 8, 2021, Mr. Fertitta and certain of his affiliates, who beneficially owned, as of that date, 4,090,625 shares of GNOG Class A common stock and 31,657,545 shares of GNOG Class B common stock, together representing approximately 79.9% of the voting power of the issued and outstanding shares of GNOG common stock entitled to vote on such matters, delivered the GNOG Written Consent approving the merger agreement and the Transactions, including the mergers. As a result of the delivery of the GNOG Written Consent, no other action by GNOG stockholders is required to complete the Transactions, including the mergers, and therefore the right of GNOG to terminate the merger agreement in response to a superior proposal was eliminated. For further information, please read the sections entitled “The Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation” beginning on page 143 of this joint information statement/prospectus.
In addition, GNOG may be required to pay DraftKings a termination fee of $55.0 million and to reimburse DraftKings for certain transaction-related expenses if the mergers are not completed under specified circumstances. For a description of the circumstances under which such a termination fee is payable, please read the section entitled “The Merger Agreement—Effect of Termination; Termination Fees; Expenses” beginning on page 156 of this joint information statement/prospectus. While DraftKings and GNOG believe these provisions are reasonable, customary and not preclusive of other offers, the provisions may have discouraged a third party that had an interest in acquiring all or a significant part of GNOG from considering or proposing such an acquisition, even if such party were prepared to pay consideration with a higher per share value than the currently proposed GNOG merger consideration. Furthermore, the requirement for GNOG to pay a termination fee and certain transaction-related expenses under certain circumstances may have resulted in a third party proposing to pay a lower per share price to acquire GNOG than it may otherwise have proposed to pay because of the added expense of the $55.0 million termination fee and certain transaction-related expenses that may become payable by GNOG to DraftKings in certain circumstances.
The financial analyses, estimates and projections considered by the Special Committee, GNOG and their respective financial advisors may not be realized, which may adversely affect the market price of New DraftKings Class A common stock following the completion of the mergers.
In connection with the GNOG Board’s evaluation of the Transactions, including the mergers, GNOG’s management prepared and provided to the GNOG Board certain unaudited prospective financial information regarding GNOG’s anticipated future operations as a standalone company without giving effect to the Transactions, including the mergers, and as if the Transactions, including the mergers, had not been contemplated by GNOG. Such unaudited prospective financial information was also provided to the Special Committee in connection with its evaluation of the Transactions, including the mergers, and to SGC for its use and reliance in connection with its financial analyses and opinion. Such unaudited prospective financial information was also provided to DraftKings and its financial advisor to facilitate their respective
 
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evaluations of the Transactions, including the mergers. For further information, please read the section entitled “The Transactions—Certain GNOG Unaudited Prospective Financial Information” beginning on page 119 of this joint information statement/prospectus.
The unaudited prospective financial information regarding GNOG was prepared by, or directed by, the management of GNOG. Such unaudited prospective financial information is inherently based on various estimates and assumptions that are subject to the judgment of those preparing them and is also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of GNOG. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated. Moreover, as such unaudited prospective financial information covers multiple years, such information by its nature becomes less predictive with each successive year. The failure of the prospective results to be realized or any deviation of actual results may adversely affect the financial position of New DraftKings and, therefore, the market price of New DraftKings Class A common stock following completion of the Transactions, including the mergers.
Executive officers and directors of DraftKings and GNOG may have interests in the Transactions, including the mergers, that are different from, or in addition to, the rights of their respective stockholders.
Executive officers of DraftKings and GNOG negotiated the terms of the merger agreement and each of the DraftKings Board, the Special Committee, and the GNOG Board approved the merger agreement and the Transactions, including the mergers. These executive officers and directors may have interests in the Transactions, including the mergers, that are different from, or in addition to, those of stockholders of DraftKings or GNOG. These interests include the continued employment of certain executive officers of DraftKings and GNOG by New DraftKings, the continued positions of certain directors of DraftKings and GNOG as directors of New DraftKings, and the indemnification of DraftKings and GNOG executive officers and directors by New DraftKings and the surviving corporations. With respect to GNOG executive officers and directors and DraftKings executive officers and directors, these interests also include the treatment of previously granted equity awards in the mergers, and with respect to GNOG executive officers, these interests include enhanced change of control severance benefits. With respect to Mr. Fertitta, chief executive officer of GNOG, chairman of the GNOG Board and controlling stockholder of GNOG, these interests also include Mr. Fertitta’s control of LHGN Interestholder and of FEI, the counterparty to the commercial arrangements contemplated by the master commercial agreement as well as interests related to certain agreements between GNOG or one of its subsidiaries and Mr. Fertitta, LHGN Interestholder and their respective affiliates. For a description of the interests of DraftKings executive officers and directors in the Transactions, including the mergers, please read the section entitled “Interests of Affiliates in the Transactions—Interests of DraftKings Affiliates in the Transactions—Interests of Directors and Executive Officers of DraftKings in the Transactions” beginning on page 170 of this joint information statement/​prospectus. For a description of the interests of GNOG executive officers and directors in the Transactions, including the mergers, please read the section entitled “Interests of Affiliates in the Transactions—Interests of GNOG Affiliates in the Transactions—Interests of Certain Directors, Executive Officers and Other Affiliates of GNOG in the Transactions” beginning on page 170 of this joint information statement/prospectus. For a description of the master commercial agreement, please read the section entitled “Ancillary Agreements —​Master Commercial Agreement” beginning on page 163 of this joint information statement/prospectus.
The shares of New DraftKings common stock to be received by GNOG stockholders as a result of the mergers will have rights that are different from the rights of shares of GNOG common stock.
Following completion of the mergers, DraftKings stockholders and GNOG stockholders will no longer be DraftKings stockholders and GNOG stockholders, respectively, but will instead be New DraftKings stockholders whose rights as stockholders of New DraftKings will be governed by Nevada law, the charter and the bylaws. There will be important differences between the current rights of a GNOG stockholder and the rights of a New DraftKings stockholder. The current rights of DraftKings stockholders will be substantially the same as those of New DraftKings stockholders. For further information, please read the section entitled “Comparison of Stockholder Rights” beginning on page 196 of this joint information statement/prospectus.
 
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Declaration, payment and amounts of dividends, if any, to holders of shares of New DraftKings common stock will be uncertain.
The amount of dividends, if any, that are declared or paid to New DraftKings stockholders cannot yet be determined and depends on a number of factors. The New DraftKings Board will have sole discretion to determine whether any dividends will be declared, when dividends, if any, are declared, and the amount of such dividends.
Such determination would be based on a number of considerations, including, but not limited to, New DraftKings’ results of operations and capital management plans, the market price of New DraftKings Class A common stock, the availability of funds to New DraftKings, industry practice and other factors deemed relevant by the New DraftKings Board. In addition, New DraftKings’ ability to pay dividends and the amount of any dividends ultimately paid in respect of the New DraftKings common stock will, in each case, be subject to New DraftKings receiving funds, directly or indirectly, from its operating subsidiaries, including, but not limited to, the operating subsidiaries of DraftKings and GNOG.
Furthermore, the ability of the operating subsidiaries of DraftKings and GNOG to make distributions to New DraftKings will depend on the satisfaction of applicable state law with respect to such distributions, and the ability of DraftKings and GNOG to receive distributions from their own respective subsidiaries will continue to depend on applicable state law with respect to such distributions. There can be no guarantee that New DraftKings stockholders will receive or be entitled to dividends.
Both DraftKings stockholders and GNOG stockholders will have a reduced ownership and voting interest after the Transactions, including the mergers, and will exercise less influence over the management and policies of New DraftKings.
After the completion of the Transactions, including the mergers, DraftKings stockholders and GNOG stockholders will own a smaller percentage of New DraftKings than they currently own of DraftKings and GNOG, respectively. Based on the estimated number of shares of DraftKings common stock, shares of GNOG common stock and interests of LHGN Holdco that are expected to be outstanding immediately prior to the Transactions, including the mergers, it is expected that DraftKings stockholders will hold approximately 93.4%, GNOG stockholders (other than LHGN Interestholder) will hold approximately 3.9% and LHGN Interestholder will hold approximately 2.7%, in each case of the shares of New DraftKings common stock outstanding after the completion of the Transactions, including the mergers. Consequently, DraftKings stockholders, as a group, and GNOG stockholders, as a group, will each have reduced ownership and voting power in the combined company compared to their ownership and voting power in DraftKings and GNOG, respectively. In particular, GNOG stockholders, as a group, will have less than a majority of the ownership and voting power of New DraftKings and, therefore, will be able to exercise less collective influence over the management and policies of New DraftKings than they currently exercise over the management and policies of GNOG. Additionally, immediately following the completion of the Transactions, including the mergers, Mr. Robins will have beneficial ownership of New DraftKings common stock, representing approximately 0.9% of the economic interests in New DraftKings and approximately 90.1% of the voting power of New DraftKings.
The Transactions, including the mergers, are subject to a number of closing conditions and, if these conditions are not satisfied, the merger agreement may be terminated in accordance with its terms and the Transactions, including the mergers, may not be completed. In addition, the parties have the right to terminate the merger agreement under certain circumstances, in which case the Transactions, including the mergers, would not be completed.
The Transactions, including the mergers, are subject to a number of closing conditions and, if these conditions are not satisfied or waived (to the extent permitted by law), the Transactions, including the mergers, will not be completed. These conditions include, among others: (1) the adoption of the merger agreement by DraftKings stockholders (which has been satisfied); (2) the adoption of the merger agreement by GNOG stockholders (which has been satisfied); (3) the absence of certain legal restraints that prohibit or seek to prohibit the Transactions; (4) the receipt of certain regulatory approvals; (5) the approval for listing on the Nasdaq of the shares of New DraftKings Class A common stock to be issued to certain DraftKings stockholders and GNOG stockholders; (6) the master commercial agreement being in full force and
 
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effect; (7) the absence, since the date of the merger agreement, of any effect, event, development, change, state of facts, condition, circumstance or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on GNOG or DraftKings; and (8) the effectiveness of the registration statement on Form S-4, of which this joint information statement/prospectus forms a part. In addition, each of DraftKings’ and GNOG’s respective obligations to complete the Transactions, including the mergers, is subject to, among other conditions, the accuracy of the other party’s representations and warranties in the merger agreement (subject in most cases to “materiality” and “material adverse effect” qualifications), the other party’s compliance with its covenants and agreements in the merger agreement in all material respects and such party’s receipt of a legal opinion from its tax counsel with respect to the tax treatment of the Transactions, including the mergers.
These conditions to the closing may not be fulfilled and, accordingly, the Transactions, including the mergers, may not be completed. In addition, if the mergers are not completed by February 28, 2022 (subject to extension to May 31, 2022 in certain circumstances), DraftKings or GNOG may choose not to proceed with the Transactions, including the mergers. Moreover, DraftKings and GNOG can mutually decide to terminate the merger agreement at any time prior to the completion of the mergers. In addition, each of DraftKings and GNOG may elect to terminate the merger agreement in certain other circumstances, as described in the section entitled “The Merger Agreement—Termination” beginning on page 154 of this joint information statement/prospectus. If the merger agreement is terminated in certain circumstances, DraftKings and GNOG may incur substantial fees and neither DraftKings nor GNOG will realize the anticipated benefits of the Transactions, including the mergers. For a description of the circumstances under which a termination fee and certain transaction-related expenses are payable, please read the section entitled “The Merger Agreement—Effect of Termination; Termination Fees; Expenses” beginning on page 156 of this joint information statement/prospectus.
Failure to complete the Transactions, including the mergers, could negatively impact the businesses or financial results of DraftKings and/or GNOG and the stock prices of DraftKings Class A common stock and/or GNOG Class A common stock.
If the Transactions, including the mergers, are not completed, the ongoing businesses of DraftKings and GNOG may be adversely affected, and DraftKings and GNOG will be subject to several risks and consequences, including, but not limited to, the following:
•
GNOG may be required, under certain circumstances, to pay DraftKings a termination fee of $55.0 million, in addition to certain transaction-related expenses;
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•
GNOG and/or DraftKings will be required to pay certain costs relating to the Transactions, including the mergers, whether or not the Transactions, including the mergers, are completed, such as significant fees and expenses relating to regulatory filings, legal, accounting, financial advisory, consulting and other advisory fees and expenses, employee-benefit related expenses and filing and printing fees;
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•
under the merger agreement, each of DraftKings and GNOG is subject to certain restrictions on the conduct of its business prior to completing the Transactions, including the mergers, which may adversely affect its ability to execute certain of its business strategies; and
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•
matters relating to the Transactions, including the mergers, may require substantial commitments of time and resources by DraftKings management and GNOG management and the expenditure of significant funds in the form of fees and expenses, which could otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to DraftKings and GNOG as independent companies, as the case may be.
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In addition, if the Transactions, including the mergers, are not completed, DraftKings and/or GNOG may experience negative reactions from the financial markets and from their respective customers and employees. DraftKings and GNOG also could be subject to litigation related to a failure to complete the Transactions, including the mergers, or to enforce their respective obligations under the merger agreement. If the Transactions, including the mergers, are not completed, DraftKings and GNOG cannot assure their respective stockholders that the risks described above will not materialize and they may materially affect the business, financial results and stock prices of DraftKings and/or GNOG.
 
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For a description of the circumstances under which a termination fee and certain reimbursement expenses are payable, please read the section entitled “The Merger Agreement—Effect of Termination; Termination Fees; Expenses” beginning on page 156 of this joint information statement/prospectus.
No trading market currently exists for New DraftKings common stock.
Prior to the completion of the Transactions, including the mergers, there has been no market for New DraftKings common stock. Upon completion of the Transactions, including the mergers, shares of New DraftKings Class A common stock are expected to be listed for trading on the Nasdaq. However, there can be no assurance that an active market for New DraftKings Class A common stock will develop after the Transactions, including the mergers, are completed, or that if it develops, the market will be sustained.
DraftKings and GNOG may in the future be targets of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the completion of the mergers.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements in an effort to enjoin the relevant merger or seek monetary relief. DraftKings and GNOG may in the future be defendants in one or more lawsuits relating to the merger agreement and the Transactions, including the mergers, and, even if any such future lawsuits are without merit or resolved in DraftKings’ or GNOG’s favor, defending against these claims can result in substantial costs and divert management time and resources from pursuing the completion of the Transactions, including the mergers, and from other potentially beneficial business opportunities. DraftKings and GNOG cannot predict whether such lawsuits will be brought against DraftKings or GNOG or the outcome of such lawsuits or others, nor can either company predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation surrounding the merger agreement and the Transactions, including the mergers, could delay or prevent the completion of the Transactions, including the mergers, which may adversely affect DraftKings’, GNOG’s or, if the Transactions, including the mergers, are completed but delayed, New DraftKings’ business, financial position and results of operations.
DraftKings or GNOG may waive one or more of the closing conditions without re-obtaining stockholder approval.
Each of DraftKings and GNOG has the right to waive, in whole or in part, certain of the conditions to its obligation to complete the Transactions, including the mergers, to the extent permitted by law. Any such waiver may not require re-obtaining the approval of DraftKings’ or GNOG’s stockholders, as applicable (which has already been provided for both DraftKings and GNOG via the DraftKings Written Consent and the GNOG Written Consent, respectively), in which case DraftKings and GNOG will have the ability to complete the Transactions, including the mergers, without seeking additional stockholder approval. Any determination whether to waive any condition to the Transactions, including the mergers, whether stockholder approval would be re-obtained as a result of any such waiver or whether this joint information statement/prospectus would be amended as a result of any waiver will be made by DraftKings or GNOG, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time, and any such waiver could have an adverse effect on New DraftKings and the current stockholders of DraftKings and GNOG.
DraftKings, GNOG and, subsequently, New DraftKings must continue to retain, motivate and recruit executives and other key employees, which may be difficult in light of uncertainty regarding the Transactions, including the mergers, and failure to do so could negatively affect New DraftKings.
Both DraftKings and GNOG must continue to retain, motivate and recruit executives and other key employees during the period prior to completion of the Transactions, including the mergers. Moreover, New DraftKings must be successful at retaining and motivating key employees following the completion of the Transactions, including the mergers. Experienced employees in the industries in which DraftKings and GNOG operate are in high demand and competition for their talents can be intense. Employees of both DraftKings and GNOG may experience uncertainty about their future role with New DraftKings until, or even after, strategies with regard to the combined company are announced or executed. The potential distractions of the Transactions, including the mergers, may adversely affect the ability of DraftKings,
 
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GNOG or, following completion of the Transactions, including the mergers, New DraftKings, to retain, motivate and recruit executives and other key employees and keep them focused on applicable strategies and goals. A failure by DraftKings, GNOG or, following the completion of the Transactions, including the mergers, New DraftKings, to attract, retain and motivate executives and other key employees during the period prior to or after the completion of the Transactions, including the mergers, could have a negative impact on the business of DraftKings, GNOG or New DraftKings. Furthermore, if key employees of DraftKings or GNOG depart or are at risk of departing due to issues including the uncertainty and difficulty of integration, financial security or a desire not to become employees of New DraftKings, DraftKings, GNOG and/or New DraftKings may incur significant costs to retain such individuals or to identify, hire and retain replacements for departing employees and may lose significant expertise and talent relating to the business of DraftKings, GNOG and/or New DraftKings, and New DraftKings’ ability to realize the anticipated benefits of the Transactions, including the mergers, may be adversely affected.
The Transactions, including the mergers, may trigger change in control or other provisions in certain agreements, which may allow third parties to terminate or alter existing contracts or relationships with GNOG.
GNOG has contracts with customers, clients, vendors, licensors, joint venture partners, lenders and other business partners, which may require GNOG to obtain consents from these other parties in connection with the Transactions, including the mergers. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which GNOG currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their relationships with GNOG in anticipation of the Transactions, including the mergers, or with New DraftKings following the Transactions, including the mergers. The pursuit of such rights may result in GNOG or New DraftKings suffering a loss of potential future revenue or incurring liabilities in connection with a breach of such agreements or losing rights that are material to its business.
Any such disruptions could adversely impact New DraftKings’ ability to achieve the anticipated benefits of the Transactions, including the mergers. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the Transactions, including the mergers, or the termination of the merger agreement.
The opinions of the Special Committee’s financial advisor will not be updated to reflect changes in circumstances between the signing of the merger agreement in August 2021 and the closing of the Transactions, including the mergers, on the closing date.
The Special Committee has not obtained an updated opinion from its financial advisor as of the date of this joint information statement/prospectus, and the Special Committee does not anticipate asking its financial advisor to update its opinion, which was issued in connection with the signing of the merger agreement on August 9, 2021. Changes in the operations and prospects of DraftKings or GNOG, general market and economic conditions and other factors that may be beyond the control of DraftKings or GNOG, and on which the Special Committee’s financial advisor’s opinion were based, may significantly alter the prices of the shares of DraftKings common stock or GNOG common stock by completion of the Transactions, including the mergers. The opinion of the Special Committee’s financial advisor does not speak as of the time the Transactions, including the mergers, will be completed or as of any date other than the date of such opinion. Because the Special Committee’s financial advisor will not be updating its opinion, the opinion will not address the fairness, from a financial point of view, of the GNOG merger consideration at the time the Transactions, including the mergers, are completed. For a description of the opinion that the Special Committee received from its financial advisor, please read the section entitled “The Transactions—Opinion of the Special Committee’s Financial Advisor” beginning on page 122 of this joint information statement/prospectus.
Risks Relating to DraftKings’ Business
You should read and consider the risk factors specific to DraftKings’ business. These risks are described in the sections entitled “Risk Factors” in DraftKings’ Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on February 26, 2021, as amended by the Form 10-K/A filed with the SEC on May 3, 2021 and as further amended by the Form 10-K/A filed with the SEC on November 5,
 
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2021, and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, each of which are incorporated by reference into this joint information statement/prospectus. For further information, please read the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus.
Risks Relating to GNOG’s Business
Risks Relating to GNOG’s Business and Industry
Competition within the gaming industry is intense and GNOG’s existing and potential users may be attracted to its competitors’ offerings as well as competing forms of entertainment such as television, movies, sporting events, and other online/digital experiences. If GNOG’s offerings do not continue to be popular, its business could be harmed.
GNOG operates in the national gaming industry, itself a subsector of the broader entertainment industry, with GNOG’s business-to-consumer offerings, including iGaming and online sports betting. GNOG’s users face a vast array of entertainment choices. Other forms of entertainment, such as television, movies, sporting events and land-based casinos, are better established and may be perceived by GNOG’s users to offer a superior customer experience. GNOG competes with these other forms of entertainment for the discretionary time and income of its existing and potential users. If GNOG is unable to sustain sufficient interest in GNOG’s product offerings in comparison to other forms of entertainment, including new forms of entertainment, GNOG’s business may suffer.
The specific industries in which GNOG operates are characterized by dynamic customer demand and technological advances, and there is intense competition among online gaming and interactive entertainment providers. Several established, well-financed companies producing online gaming and/or interactive entertainment products and services compete with GNOG’s offerings, and other well-capitalized companies may introduce competitive services. Such competitors may spend more money and time on developing and testing products and services, undertake more extensive marketing campaigns, adopt more aggressive pricing or promotional policies or otherwise develop more commercially successful products or services than GNOG’s, which could negatively impact its business. GNOG’s competitors may also develop products, features, or services that are similar to GNOG’s or that achieve greater market acceptance. Furthermore, new competitors, whether licensed or not, may enter the online gaming industry. There has also been considerable consolidation among competitors in the entertainment and gaming industries and such consolidation and future consolidation could result in the formation of larger competitors with increased financial resources and altered cost structures, which may enable them to offer more competitive products, gain a larger market share, expand offerings and broaden their geographic scope of operations. If GNOG is not able to maintain or improve its market share, or if its offerings lose popularity, GNOG’s business could suffer.
The COVID-19 pandemic could adversely impact GNOG’s business, results of operations and financial condition.
The global spread and unprecedented impact of COVID-19 are complex and evolving. The COVID-19 pandemic has led governments and other authorities around the world to impose or recommend measures intended to control its spread, including travel bans, business and school closures, quarantines, “stay-at-home” orders and implementation of other social distancing measures. GNOG faces several risks arising from the COVID-19 pandemic, including with respect to macroeconomic impacts and well as the potential direct impact of the virus on its employees and operations.
Suspensions, postponements and cancellations of major sports seasons and sporting events during the COVID-19 pandemic have negatively impacted GNOG’s sports betting business. On the other hand, business closures or capacity limitations, stay-at-home orders and other measures imposed in light of the COVID-19 pandemic have resulted in a significant increase in GNOG’s iGaming business, as its offering is well suited for the current environment and consumers’ other options for leisure and entertainment are limited. According to the New Jersey Division of Gaming Enforcement, which we refer to as the “DGE”, total iGaming revenues in New Jersey during 2020 were $931.5 million, representing a 101.7% increase over the
 
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same period in 2019. If and when the threat of the COVID-19 pandemic diminishes, or businesses are otherwise able to return to operations at or near pre-pandemic levels, GNOG will face competition for consumers’ discretionary time and income from many more forms of entertainment that were unavailable, or available on a limited basis, during the COVID-19 pandemic. As a result, GNOG’s growth may slow as consumers, including those incremental players acquired during the pandemic, have more choices for entertainment. GNOG’s accelerated growth may not continue, and GNOG’s results for such period should not be considered a reliable indicator of GNOG’s future results of operations.
The COVID-19 pandemic has also caused substantial uncertainty about the strength of the U.S. economy, including a recession and high unemployment rates. If the COVID-19 pandemic and economic consequences thereof, including high unemployment rates, persist for a prolonged period of time, the resulting reductions in consumers’ disposable income could have an adverse effect on GNOG’s business. GNOG expects that the longer the pandemic continues, and if repeat, resurgent or cyclical outbreaks of the virus continue to occur, the more likely it is that the pandemic may have an adverse effect on GNOG’s business and, consequently, its results of operations and financial condition.
Finally, if a high percentage of GNOG’s employees and/or a subset of its key employees and executives are infected or otherwise adversely impacted by COVID-19, its ability to continue to operate effectively may be negatively impacted.
The extent of the duration and severity of the COVID-19 pandemic remains uncertain, and GNOG cannot predict the full impact it may have on GNOG’s business, results of operations and financial condition; however, the effect on GNOG’s results could be material and adverse.
Economic downturns and adverse political and market conditions beyond GNOG’s control could adversely negatively affect its business, financial condition and results of operations.
GNOG’s financial performance is subject to global and U.S. economic conditions and their impact on levels of spending by users, particularly discretionary spending for entertainment, gaming and leisure activities. Economic recessions have had, and may continue to have, far reaching adverse consequences across industries, including the global entertainment and gaming industries, which may adversely affect GNOG’s business and financial condition. As a result of the ongoing COVID-19 pandemic, there is substantial uncertainty about the strength of the U.S. economy, which may currently or in the near term be in a recession and has experienced rapid increases in unemployment rates and uncertainty about the pace of potential recovery. A continued economic downturn or recession, or slowing or stalled recovery therefrom, may have a material adverse effect on GNOG’s business, financial condition, results of operations or prospects.
In addition, changes in general market, economic and political conditions in domestic and foreign economies or financial markets, including fluctuation in stock markets resulting from, among other things, trends in the economy may reduce users’ disposable income. Any one of these changes could have a material adverse effect on GNOG’s business, financial condition, results of operations or prospects.
Reductions in discretionary consumer spending could have an adverse effect on GNOG’s business, financial condition, results of operations and prospects.
GNOG’s business is particularly sensitive to reductions in discretionary consumer spending. Demand for entertainment and leisure activities, including land-based gaming and online gaming variants, can be affected by changes in the broader economy and consumer tastes, both of which are difficult to predict and unmanageable. Adverse changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce GNOG’s users’ disposable income or result in fewer individuals engaging in entertainment and leisure activities including iGaming and online sports betting. As a result, GNOG cannot ensure that demand for its offerings will remain constant. Adverse developments affecting economies throughout the world, including a general tightening of availability of credit, decreased liquidity in financial markets, increased interest rates, foreign exchange volatility, increased energy costs, acts of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment, significant declines in stock markets, as well as concerns regarding pandemics, epidemics
 
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and the spread of contagious diseases, could lead to a further reduction in discretionary spending on leisure activities, such as gaming.
For example, the COVID-19 pandemic has negatively affected economic conditions in the U.S. as well as globally and has caused a reduction in consumer spending. As of the date of this joint information statement/prospectus, business closures or capacity limitations, stay-at-home orders and other measures imposed in light of the COVID-19 pandemic have resulted in a significant increase in GNOG’s business historically and may result in future increases in business, as its online offerings are well suited for the current environment and consumers’ other options for leisure and entertainment are limited. Nonetheless, in ordinary circumstances outside of the ongoing COVID-19 pandemic, any significant or prolonged decrease in consumer spending on entertainment or leisure activities could adversely affect the demand for GNOG’s offerings, reducing its cash flows and revenues, and thereby materially harming its business, financial condition, results of operations and prospects.
GNOG may experience fluctuations in its operating results, which make GNOG’s future results difficult to predict and may cause its operating results to fall below expectations.
GNOG’s financial results have fluctuated in the past and GNOG expects its financial results to fluctuate in the future. These fluctuations may be due to a variety of factors, some of which are outside of GNOG’s control and may not fully reflect the underlying performance of its business.
GNOG’s financial results in any given period may be influenced by numerous factors, many of which GNOG is unable to predict or are outside of its control, including the impact of seasonality, customer betting results, and the other risks and uncertainties set forth herein. Consumer engagement in GNOG’s iGaming and online sports betting services may decline or fluctuate as a result of a number of factors, including the user’s level of satisfaction with its platforms, its ability to improve and innovate, its ability to adapt its platform, outages and disruptions of online services, the services offered by its competitors, its marketing and advertising efforts or declines in consumer activity generally as a result of economic downturns, among others. Any decline or fluctuation in the recurring portion of GNOG’s business may have a negative impact on its business, financial condition, results of operations or prospects.
In GNOG’s iGaming offering, operator losses can at times be limited per stake to a maximum payout, but there is content where the maximum win exposure is uncapped due to features in the game that can potentially trigger more significant wins. When looking at bets across a period of time, however, these losses can potentially be significant. GNOG’s financial results may also fluctuate based on whether GNOG pays out any jackpots to its iGaming users during the relevant period. As part of GNOG’s iGaming offering, it offers progressive jackpot games. Each time a progressive jackpot game is played, a portion of the amount wagered by the user is contributed to the jackpot for that specific game or group of games. Once a jackpot is won, the progressive jackpot is reset with a predetermined base amount. While GNOG maintains a provision for these progressive jackpots, the cost of the progressive jackpot payout would be a cash outflow for its business in the period in which it is won with a potentially significant adverse effect on its financial condition and cash flows. Because winning is underpinned by a random algorithm, GNOG cannot predict with absolute certainty when a progressive jackpot payout will be incurred. In addition, GNOG does not insure against random outcomes or jackpot wins.
The success, including win or hold rates, of existing or future iGaming and sports betting products depends on a variety of factors and is not entirely in GNOG’s control.
The iGaming and sports betting industries are characterized by an element of chance. Accordingly, GNOG employs theoretical win rates to estimate what a certain type of iGaming or sports bet, on average, will win or lose after a significant number of iterations. Net win is impacted by variations in the hold percentage (the ratio of net win to total amount wagered), or actual outcome, on its iGaming and sports betting products that GNOG offers to its users. GNOG uses the hold percentage as an indicator of an iGaming’s or sports bet’s performance against its expected outcome. Although each iGaming or sports bet generally performs within a defined statistical range of outcomes, actual outcomes may vary in accordance with statistical probability. In addition to the element of chance, win rates (hold percentages) may also (depending on the game involved) be affected by the spread of limits and factors that are beyond GNOG’s control, such as a user’s skill, experience and behavior, the mix of games played, the financial resources of
 
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users, the volume of bets placed and the amount of time spent gambling. As a result of the variability in these factors, the actual win rates for GNOG’s iGaming offerings and sports betting wagers may differ materially from theoretical win rates GNOG has estimated and could result in the winnings exceeding its expectations based on statistical law. The variability of win rates (hold rates) also have the potential to negatively impact GNOG’s financial condition, cash flow and overall business operations.
GNOG’s success also depends in part on its ability to anticipate and satisfy user preferences in a timely and effective manner. As GNOG operates in a dynamic industry characterized by rapidly evolving legal standards and regulations, the scope of its potential product offerings is subject to rapid change, and as such its offerings will be subject to dynamic consumer preferences and expectations around said offerings that cannot be predicted with certainty. GNOG needs to continually introduce new offerings and identify future offerings that complement its existing platforms, respond to its users’ needs and improve and enhance its existing platforms to maintain or increase its user engagement and growth of its business.
GNOG’s projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding future legislation and changes in regulations. As a result, GNOG’s projected revenues, market share, expenses and profitability may differ materially from its expectations.
GNOG operates in a rapidly evolving and highly competitive industry and GNOG’s projections are subject to the risks and assumptions made by management with respect to this industry. Operating results are difficult to forecast because they generally depend on GNOG’s assessment of factors that are inherently beyond GNOG’s control and impossible to predict with certainty, such as the timing of adoption of future legislation and regulations by different states. Furthermore, if GNOG invests in the development of new products or distribution channels that do not achieve commercial success, whether because of competition or otherwise, it may not recover the often material “up front” costs of developing and marketing those products and distribution channels or recover the opportunity cost of diverting management and financial resources away from other products or distribution channels.
Additionally, as described above under “Risks Relating to GNOG’s Business—Reductions in discretionary consumer spending could have an adverse effect on GNOG’s business, financial condition, results of operations and prospects”, GNOG’s business may be affected by reductions in consumer spending which may occur as a result of numerous factors which may be difficult to predict. This may result in decreased revenue levels, and GNOG may be unable to adopt timely measures to compensate for any shortcomings in revenue and/or operating profitability. This inability could cause its operating results in a given period to be higher or lower than budgeted.
GNOG’s growth prospects may suffer if GNOG is unable to develop successful offerings or if it fails to pursue additional offerings. In addition, if GNOG fails to make the right investment decisions in its offerings and technology platform, GNOG may not attract and retain key users and its revenue and results of operations may decline.
The industries in which GNOG operates are subject to frequent changes in standards, technologies, products and service offerings, as well as in customer demands, preferences and regulations. GNOG must continuously make decisions regarding which offerings and technology to invest in to meet customer demand in compliance with evolving industry standards and regulatory requirements and must continually introduce and successfully market new and innovative technologies, offerings and enhancements to remain competitive and effectively stimulate customer demand, acceptance and engagement. GNOG’s ability to engage, retain, and increase its user base and to increase its revenue depends heavily on its ability to successfully implement new offerings, both independently and jointly with third parties. GNOG may introduce significant changes to its existing platforms and offerings or develop and introduce new and unproven products, with which GNOG has little or no prior development or operating experience. The process of developing new offerings and systems is inherently complex and uncertain, and new offerings may not be well received by users, even if well reviewed and of high quality. If GNOG is unable to develop technology and products that address users’ needs or enhance and improve its existing platforms and offerings in a timely manner, that could have a material adverse effect on its business, financial condition, results of operations and business prospects.
 
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Although GNOG intends to continue investing in innovative content and systems, if new or enhanced offerings fail to engage its users or partners, GNOG may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify its investments, any of which may seriously harm GNOG’s business. In addition, management may not properly ascertain or assess the risks of new initiatives, and subsequent events may alter the risks that GNOG had evaluated at the time it decided to execute any new initiative. Developing new offerings may also divert GNOG’s management’s attention from other business issues and opportunities. Even if GNOG’s new offerings attain market acceptance, those new offerings could cannibalize the market share of its existing product offerings or share of its users’ wallets in a manner that could negatively impact their economics. Furthermore, such expansion of GNOG’s business may increase the complexity of its business and place a significant strain on its management, operations, technical systems and financial resources and GNOG may not recover the often-substantial up-front costs of developing and marketing new offerings or recover the opportunity cost of diverting management and financial resources away from other offerings. In the event of continued growth of GNOG’s operations, products or in the number of its third-party relationships, GNOG may not have adequate resources, operationally, technologically or otherwise to support such growth and the quality of its existing platforms, offerings or relationships with third parties. Conversely, failure to effectively identify, pursue and execute new offerings, or to efficiently adapt GNOG’s processes and infrastructure to meet the needs of its innovations, may adversely affect GNOG’s business, financial condition, results of operations and business prospects.
Any new offerings may also require GNOG’s users to learn new skills to use its platform. This could create friction in the adoption of new offerings and new user additions related to any new offerings. To date, new offerings and enhancements on GNOG’s existing platforms have not hindered its user growth or engagement. To the extent that future users are less willing to invest the time to learn to use GNOG’s products, and if GNOG is unable to make its products easier to learn to use, GNOG’s user growth or engagement could be affected, and its business could be harmed. GNOG may develop new products that increase user engagement and costs without increasing revenue.
Additionally, GNOG may make poor or unprofitable decisions regarding these investments. If new or existing competitors offer more attractive offerings, GNOG may lose users or users may decrease their spending on its platforms. New customer preferences, superior competitive offerings, new industry standards or changes in the regulatory environment could render GNOG’s existing offerings unattractive, unmarketable or obsolete and require GNOG to make substantial unanticipated changes to its platforms or business model. GNOG’s failure to adapt to a rapidly changing market or evolving customer demands could harm its business, financial condition, results of operations and business prospects.
GNOG’s growth inherently depends on its ability to attract and retain users, and the loss of its users, failure to attract new users in a cost-effective manner, or failure to effectively manage its growth could adversely affect its business, financial condition, results of operations and business prospects.
GNOG’s ability to achieve growth in revenue in the future will depend, in large part, upon its ability to attract new users to its offerings, retain existing users of its offerings and reactivate users in a cost-effective manner. Achieving growth in GNOG’s database of users may require GNOG to engage in increasingly costly sales and marketing efforts, which may impact its return on investment. GNOG has used and expects to continue to use a variety of free and paid marketing channels, in combination with compelling offers and exciting games to achieve its objectives. For paid marketing, GNOG intends to leverage a broad array of advertising channels. If the search engines on which GNOG relies modify their algorithms, change their terms around gaming, or if the prices at which GNOG may purchase listings increase, then GNOG’s costs could increase, and fewer users may visit its website. If links to GNOG’s website are not displayed prominently in online search results, if fewer users visit its website, if its other digital marketing campaigns are not effective, or if the costs of attracting users using any of its current methods significantly increase, then GNOG’s ability to efficiently attract new users could be reduced, its revenue could decline and its business, financial condition and results of operations could be harmed.
In addition, GNOG’s ability to increase the number of users of its offerings will depend on continued user adoption of iGaming and online sports betting. Growth in the iGaming and online sports betting industries and the level of demand for and market acceptance of GNOG’s product offerings will be subject to a high degree of uncertainty. GNOG cannot assure that consumer adoption of its product offerings will continue or exceed current growth rates, or that the industry will achieve more widespread acceptance.
 
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Additionally, as technological or regulatory standards change and GNOG modifies its platform to comply with those standards, GNOG may need users to take certain actions to continue accessing its offerings, such as performing age verification checks or accepting new terms and conditions. Users may stop using GNOG’s product offerings if the quality of the user experience on its platform, including age checks, terms and conditions acceptance, and support capabilities in the event of a problem, does not meet their expectations or keep pace with the quality of the customer experience generally offered by competitive offerings.
GNOG may require additional capital to support its growth initiatives, and such capital may not be available on economically favorable terms, if at all. This could hamper GNOG’s growth and adversely affect its business.
GNOG intends to make significant investments to support its growth in the entertainment and gaming industries and may require additional capital to address business challenges, including the need to expand to new markets, develop new offerings and features or enhance its existing platforms, improve its operating infrastructure or acquire complementary businesses, personnel and technologies. Accordingly, GNOG may need to engage in additional equity or debt financings to secure additional funds. GNOG’s ability to obtain additional capital when required will depend on its business plans, investor demand, its operating performance, capital markets conditions and other variables, some of which are uncertain. If GNOG raises additional funds by issuing equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of its currently issued and outstanding equity, and its existing stockholders may experience dilution. If GNOG is unable to obtain additional capital when required, or on satisfactory terms, GNOG’s ability to continue to support its business growth or to respond to business opportunities, challenges or unforeseen circumstances could be adversely affected, and its business may be harmed.
Risks Relating to GNOG’s Information Technology
GNOG relies on information technology and other systems and platforms, and any failures, errors, defects or disruptions in such systems or platforms could diminish GNOG’s brand and reputation, subject GNOG to liability, disrupt its business, affect its ability to scale its technical infrastructure and adversely affect its operating results and growth prospects. GNOG’s online gaming offerings, software applications and systems, and the third-party platforms upon which they are made available could contain undetected errors.
GNOG’s technology infrastructure is provided by third party providers critical to the performance of GNOG’s platform and offerings. For example, GNOG’s back-end platform, which is critical to the performance of its platform and offering, is provided by NYX Digital Gaming (USA), LLC, which we refer to as “NYX”, a subsidiary of Scientific Games Corporation. GNOG’s agreement with NYX provides for an initial four-year term for each state in which GNOG conducts business, subject to optional one-year renewals thereafter unless either party elects to otherwise terminate. GNOG pays NYX a fee based on a percentage of net gaming revenue, plus certain fixed costs. Further, technology provided by Evolution Malta Limited, which we refer to as “Evolution”, is critical to the performance of GNOG’s live dealer offering. There are five years remaining in the term of GNOG’s agreement with Evolution. Under the Evolution agreement, GNOG pays a fee based on a percentage of net gaming revenue generated by GNOG’s own offering and, in some instances, generated by third parties utilizing GNOG’s live studio, plus certain fixed costs. These third party providers’ systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be detrimental to GNOG’s business.
The third parties on which GNOG relies provide resources for network and data security to protect GNOG’s systems and data. GNOG cannot assure with certainty that the measures GNOG and such third parties take to prevent or reduce the likelihood of cyber-attacks, protect their systems, data and user information, to prevent outages, to prevent data or information loss and fraud, and to prevent or detect security breaches, will provide absolute security. GNOG has experienced, and GNOG may in the future experience, website disruptions, outages and other performance problems resulting from a variety of factors, including internet and application connection issues, infrastructure failure and changes, human or software errors and capacity constraints. Such disruptions have not had a material impact on GNOG to date; however, future disruptions from unauthorized access to, fraudulent manipulation of, or tampering with GNOG’s computer systems and technological infrastructure, or those of third parties, could result in a wide
 
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range of negative outcomes, each of which could materially adversely affect GNOG’s business, financial condition, results of operations and business prospects.
Some of GNOG’s third-party platforms and systems are not fully redundant, and disaster recovery planning may not be sufficient for all eventualities. GNOG’s and its third-party service providers’ disaster recovery systems do not offer full offsite failover recovery, which could result in GNOG’s operations and offerings being offline for a period of time to sufficiently recover any impacted third-party infrastructure and recover the latest available data, as well as any time required to receive the required regulatory approvals.
GNOG owns and operates GNOG’s live dealer studio connectivity and technical infrastructure; however, the data center and key services such as security and access, surveillance, network and connectivity, electricity and cooling are provided by third parties. These third-party providers have experienced issues in the past and any such issues in the future could have a material impact on GNOG’s ability to provide live dealer services to GNOG’s and its partner customers. Any such material impact could result in a material effect on GNOG’s revenues and partner customer confidence in GNOG’s ability to provide reliable live dealer services. Any such loss of partner customer confidence could result in such partner customers moving to competitor live dealer services and studios. GNOG relies on facilities, components, and services supplied by third parties, including data center facilities and cloud storage services. If these third parties cease to provide such facilities or services, experience operational interference or disruptions, breach their agreements with GNOG, fail to perform their obligations or to meet GNOG’s expectations, or experience a cybersecurity incident, GNOG’s operations could be disrupted or otherwise negatively affected. Any such disruption or negative impact could result in an extensive interruption in GNOG’s operations and damage to GNOG’s reputation and brand, materially and adversely affecting GNOG’s business. GNOG does not carry business interruption insurance sufficient to compensate GNOG for all losses that may result from interruptions in GNOG’s service as a result of systems failures and other events.
Additionally, GNOG’s offerings may contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch. If a particular offering is unavailable when users attempt to access it, or navigation through GNOG’s platforms is slower than they expect, users may be unable to place their iGaming or sports betting wagers in time and may be less likely to return to GNOG’s platforms as frequently, if at all. Furthermore, programming errors, defects and data corruption could disrupt GNOG’s operations, adversely affect the experience of GNOG’s users, harm GNOG’s brand perception, cause GNOG’s users to stop utilizing its platforms, divert GNOG’s resources and delay market acceptance of its offerings, any of which could result in legal liability to GNOG or harm its business, financial condition, results of operations and business prospects.
If GNOG’s user base and engagement continue to grow, and the amount and types of offerings continue to grow and evolve, GNOG will need to allocate an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy GNOG’s users’ needs. Such infrastructure expansion may be complex, and unanticipated delays in completing expansion projects may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of GNOG’s offerings. In addition, there may be issues related to this infrastructure that are not detected during the testing phases of design and implementation, which may only become evident after GNOG had started to fully use the underlying equipment or software, that could further degrade the user experience or increase GNOG’s costs. As such, GNOG could fail to continue to effectively scale and grow its technical infrastructure to accommodate increased demands.
GNOG believes that if its users have a negative experience with its offerings, or if GNOG’s brand or reputation is negatively affected, users may be less inclined to continue utilizing its products or recommend its platform to other potential users. As such, a failure or significant interruption in GNOG’s service would harm its brand’s reputation, business prospects and operating results.
Despite GNOG’s security measures, GNOG’s information technology and infrastructure is vulnerable to attacks by hackers or breaches resulting from employee error, malfeasance or other disruptions. Any such breach could compromise GNOG’s networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory
 
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penalties, disruption of its operations and the services GNOG provides to users, damage to its reputation, and a loss of confidence in its products and services, which could adversely affect GNOG’s business.
The secure maintenance and transmission of user information is a critical element of GNOG’s operations. GNOG’s information technology and other systems that maintain and transmit user information, or those of GNOG’s service providers or its business partners have been in the past, and may in the future be, compromised by a malicious third-party penetration of GNOG’s network security, or impacted by intentional or unintentional actions or inactions by GNOG’s employees, or employees of its third-party service providers or GNOG’s business partners. As a result, GNOG’s users’ information may be lost, disclosed, accessed or taken without its guests’ consent.
The regulatory framework for the privacy and data security of GNOG’s user information and employee information is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government bodies and agencies, and industry associations, have adopted or are considering adopting laws, rules, regulations and standards regarding the collection, use, disclosure and security of personal information. In the United States, these include rules and regulations promulgated under the authority of the federal and state labor and employment laws, state data breach notification laws, state data security laws and state privacy laws. GNOG’s failure to comply with data security and privacy laws, rules, regulations and standards could result in regulatory scrutiny and increased exposure to the risk of litigation, contractual liability, or the imposition of consent orders or civil and criminal fines, penalties and assessments, which could have an adverse effect on GNOG’s results of operations or financial condition. Moreover, allegations of non-compliance with privacy regulations, whether or not true, could be costly, time consuming, distracting to GNOG’s management, and cause reputational harm.
GNOG relies on encryption and authentication technology licensed from third parties designed to securely transmit confidential and sensitive information, including credit card numbers, in an attempt to reduce the probability of breaches. Advances in computing capabilities, new technological discoveries or other developments may result in whole or partial failure of this technology protecting transaction data or other confidential and sensitive information from being breached or compromised. In addition, websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing. GNOG’s security measures, and those of its third-party service providers, may not detect or prevent all attempts to breach GNOG’s systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by its websites, networks and systems that GNOG or such third parties otherwise maintain. A security breach of GNOG’s or its service providers’ payment card systems may subject GNOG to fines or higher transaction fees or limit or terminate GNOG’s access to certain payment methods. GNOG and its third-party service providers may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against GNOG or its third-party service providers.
In addition, security breaches can also occur from non-technical issues, including intentional or inadvertent breaches by GNOG’s employees or third parties. The risks of these security breaches may increase over time as GNOG scales the business and the complexity and number of technical systems and applications GNOG uses increases. Breaches of GNOG’s security measures or those of GNOG’s third-party service providers could result in unauthorized access to GNOG’s sites, networks and systems; unauthorized access to and misappropriation of user information, including users’ personally identifiable information, or other confidential or proprietary information of GNOG or third parties; viruses, worms, spyware or other malware being served from GNOG’s sites, networks or systems; deletion or modification of content or the display of unauthorized content on GNOG’s sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; litigation, regulatory action and other potential liabilities.
In the past, GNOG and its third-party service providers have experienced social engineering, phishing, malware, threatened denial-of-service and similar attacks, none of which to date has been material to GNOG’s business; however, such attacks could in the future have a material adverse effect on its operations and third-party service providers. If a future breach of security should occur and be material, GNOG’s brand’s
 
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reputation could be damaged, its business may suffer, GNOG could be required to expend significant capital and other resources to alleviate problems caused by said breaches, and GNOG could be exposed to a risk of loss, litigation or regulatory action and possible liability. GNOG cannot guarantee that GNOG or its third-party service providers’ protocols and backup systems will be sufficient to prevent data loss. Actual or anticipated attacks may cause GNOG to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
A party who manages to illicitly obtain a user’s account information could access the user’s transaction data or personal information, resulting in the perception that GNOG systems are insecure. Any compromise or breach of GNOG’s security measures, or those of its third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws and cause significant legal and financial exposure, adverse publicity and a loss of confidence in GNOG’s security measures, which could have a material adverse effect on its business, financial condition, results of operations and business prospects. GNOG may need in the future to address problems caused by breaches, including notifying affected users and responding to any resulting litigation, which in turn, diverts resources from the growth and expansion of GNOG’s business.
GNOG’s platform contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict GNOG’s ability to provide its offerings.
GNOG’s internal and third-party platforms contain software modules licensed to GNOG by third-party authors under “open source” licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code. In addition, the public availability of such software may make it easier for others to compromise GNOG’s platform.
Some open source licenses contain requirements that GNOG and its third-party providers make available source code for modifications or derivative works GNOG and its third-party providers create, or that GNOG or its third-party providers grant other licenses to their proprietary software, based upon the type of open source software GNOG and its third-party providers use. If GNOG comingles any in-house software with open source software in a certain manner, GNOG and its third-party providers could, under certain open source licenses, be required to release their proprietary source code to the public. This would enable GNOG’s competitors to create similar offerings at a lower economic cost and ultimately could result in a loss of GNOG’s competitive advantages. Alternatively, to avoid the public release of the affected portions of GNOG’s source code, GNOG could be required to expend substantial time and resources to reengineer some or all of GNOG’s software.
Although GNOG monitors its use of open source software to avoid subjecting GNOG’s platform to conditions GNOG does not intend for it to be subject to, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on GNOG’s ability to provide or distribute GNOG’s platform. In the past there have been claims challenging the ownership of open source software against companies that incorporate open source software into their solutions. As such, GNOG could be subject to lawsuits by parties claiming infringement of intellectual property rights in what GNOG believes to be open source software. Moreover, GNOG cannot assure that its processes for controlling the use of open source software in its platform will be effective. If GNOG is determined to have breached or failed to fully comply with all the terms and conditions of an open source software license, it could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing its offerings on terms that are not economically feasible, to reengineer its platform, to discontinue or delay the provision of its offerings if reengineering could not be accomplished on a timely basis or to make generally available, proprietary source code, any of which could adversely affect its business, financial condition and results of operations.
GNOG may incur significant costs in order to comply with software and app store guidelines and requirements. Non-compliance with such guidelines and requirements could limit GNOG’s ability to distribute its apps and, consequently, could have an adverse effect on its revenues.
Microsoft, Apple, Google and other software and distribution providers that GNOG uses to distribute its apps and services continue to update their software development kits and app store guidelines. GNOG’s
 
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failure to comply with such guidelines and requirements could result in GNOG being refused or restricted access to critical distribution channels. As an example, Apple recently released updated app store and software development guidelines that require all real money gaming apps to comply with Apple’s native user interface requirements and content delivery mechanisms. Such updates require a fundamental change to the way all real money gaming operators develop and manage their app front ends and content. Further, updates and changes to software and app store guidelines and requirements may require GNOG and its third-party providers to invest significant time and resources to redevelop solutions, which may result in significant costs for GNOG. These changes can also limit the functionality of the user interface, competitive differentiation of the product and availability of content, which can have a material impact on GNOG’s business and revenues. App stores are a critical distribution channel for GNOG’s customers to download and access GNOG’s software and services. At any time, an app store provider could decline an app submission or remove an app due to non-compliance with its software development kit requirements and store guidelines, which could result in a material adverse impact on GNOG’s ability to distribute its apps and, consequently, a material adverse effect on its revenues.
If GNOG fails to detect fraud or theft, including by GNOG’s users and employees, GNOG’s brand’s reputation may suffer, which could negatively impact its business, financial condition and results of operations and can subject GNOG to investigations and litigation.
GNOG has in the past incurred, and may in the future incur, losses from various types of financial fraud, including use of stolen or fraudulent credit card data, claims of unauthorized payments by a user and attempted payments by users with insufficient funds. Bad actors use increasingly sophisticated methods to engage in illegal activities involving sensitive financial information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts. Under current credit card practices, GNOG may be liable for use of funds on its platform with fraudulent credit card data, even if the associated financial institution approved the credit card transaction.
Acts of fraud may involve various tactics, including collusion. Successful exploitation of GNOG’s systems could have negative effects on its product offerings, services and user experience and could harm its brand’s reputation. Failure to uncover such bad actors could result in harm to GNOG’s operations. In addition, negative publicity related to breaches of this nature could have an adverse effect on GNOG’s brand’s reputation, potentially causing a material adverse effect on its business, financial condition, results of operations and business prospects. In the event of the occurrence of any such issues with GNOG’s existing platform or product offerings, substantial engineering and marketing resources and management attention may be diverted from other projects to correct these issues, which may delay other projects and the achievement of GNOG’s strategic objectives. Despite measures GNOG has taken to detect and reduce the occurrence of fraudulent or other malicious activity on GNOG’s platform, GNOG cannot say with certainty that any of its measures will be effective. GNOG’s failure to adequately detect or prevent fraudulent transactions could harm its brand’s reputation, result in litigation or regulatory action and lead to expenses that could adversely affect its business, financial condition and results of operations.
Risks Relating to GNOG’s Reliance on Third Parties and Affiliates
GNOG’s business is dependent on agreements with certain of its current affiliates, and its failure to comply with the terms of such agreements, or failure to maintain its relationships with Golden Nugget and its affiliates, may have a material adverse effect on its business, results of operations, cash flows and financial condition.
Pursuant to an amended and restated online gaming operations agreement, which we refer to as the “online gaming operations agreement”, Golden Nugget Atlantic City, LLC, a New Jersey limited liability company and an indirect wholly-owned subsidiary of FEI, which we refer to as “GNAC”, granted GNOG LLC the right to host, manage, control, operate, support and administer, under GNAC’s land-based casino operating licenses, the Golden Nugget-branded online gaming business, the live dealer studio in New Jersey and the third-party operators. There are certain circumstances under which the online gaming operations agreement may be terminated in its entirety, including in the event of a party’s material breach thereof or in the event of a change in law or adverse regulatory action that prevents the operation of the online gaming business. Termination of the online gaming operations agreement would eliminate GNOG’s ability
 
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to operate its iGaming and sport betting business in New Jersey, which would have a material adverse effect on its business, results of operations, cash flows and financial condition. For more information, please read the sections entitled “Certain Beneficial Owners of DraftKings Common Stock and GNOG Common Stock” and “Interests of Affiliates in the Transactions—Interests of GNOG Affiliates in the Transactions,” beginning on pages 179 and 170, respectively, of this joint information statement/prospectus.
To date, all of GNOG’s business has been conducted under the Golden Nugget brand. GNOG’s ability to use the Golden Nugget brand is governed by the trademark license agreement among GNOG, Golden Nugget and GNLV. Pursuant to the trademark license agreement, GNLV granted to GNOG LLC an exclusive license to use certain “Golden Nugget” trademarks (and other trademarks related to GNOG LLC’s business) in connection with operating online real money casino gambling and sports betting in the U.S. and any of its territories, subject to certain restrictions, in exchange for a royalty payment. Golden Nugget and GNLV are subsidiaries of FEI. The term of the trademark license agreement is 20 years. Pursuant to the terms of the merger agreement, prior to and as a condition to the completion of the mergers, GNOG will enter into an amendment to the trademark license agreement which, among other things, will extend the term from 20 years to 50 years. There is no guarantee that GNOG will thereafter be able to renew or replace the trademark license agreement on commercially reasonable terms or at all. In addition, there are certain circumstances under which the trademark license agreement may be terminated in its entirety (subject to applicable cure periods). Termination of the trademark license agreement would eliminate GNOG’s rights to use the Golden Nugget brand and may result in GNOG having to negotiate a new or reinstated agreement with less favorable terms or cause GNOG to lose its rights under the trademark license agreement, including its right to use the Golden Nugget brand, which would require GNOG to change its corporate name and undergo other significant rebranding efforts. These rebranding efforts may require significant resources and expenses and may affect GNOG’s ability to attract and retain customers, all of which may have a material adverse effect on its business, financial condition, operating results, liquidity and prospects. For more information, please read the sections entitled “Merger Agreement—Conditions to the Completion of the Mergers,” “Certain Beneficial Owners of DraftKings Common Stock and GNOG Common Stock—Certain Beneficial Owners of GNOG Common Stock” and “Interests of Affiliates in the Transactions—Interests of GNOG Affiliates in the Transactions,” beginning on pages 152, 179 and 170, respectively, of this joint information statement/prospectus.
GNAC and Golden Nugget also provide certain services and facilities, including payroll, accounting, financial planning and other agreed upon services, to GNOG LLC from time to time pursuant to a services agreement between GNOG LLC and Golden Nugget, which we refer to as the “services agreement”. Under the services agreement, GNOG is obligated to reimburse the party providing the service or facilities at cost and GNOG LLC has agreed to provide continued management, consulting and administrative services to Golden Nugget’s applicable subsidiary in connection with retail sports betting conducted in such subsidiary’s brick-and-mortar casino. The services agreement may be terminated with respect to any party upon six months’ prior written notice. If the services agreement is terminated, GNOG will have to contract with another third party to provide such services or hire employees to perform them. GNOG may not be able to replace these services or hire such employees in a timely manner or on terms, including cost and level of expertise, that are as favorable as those GNOG LLC currently receives from GNAC and Golden Nugget. The services agreement is expected to be terminated in connection with the completion of the Transactions, including the mergers. However, certain services are expected to continue on a transitional basis pursuant to a transition services agreement to be entered into in connection with the completion of the Transactions, including the mergers. For more information, please read the sections entitled “ Certain Beneficial Owners of DraftKings Common Stock and GNOG Common Stock” and “Interests of GNOG Affiliates in the Transactions,” beginning on pages 179 and 170, respectively, of this joint information statement/prospectus.
GNOG relies on strategic relationships with casinos and other gaming operators to offer its products in certain jurisdictions. If GNOG cannot establish and manage such relationships with these partners, its business, financial condition and results of operations could be adversely affected.
Under some states’ gaming laws, online betting is limited to a finite number of retail operators, who own a “skin” or “skins” under that state’s law. A “skin” is a legally-authorized license from a state to offer online betting services provided by a casino. The “skin” provides a market access opportunity for mobile
 
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operators to operate in the jurisdiction subject to the appropriate licensure and other required approvals from the appropriate regulatory body. The entities that control those “skins,” and the numbers of “skins” available, are typically determined by state sports betting laws. In order to offer iGaming and online sports betting in Michigan, GNOG relies on a tribal casino in order to get access through a “skin”, and in order to offer iGaming and online sports betting in West Virginia, GNOG relies on a similar “skin” through a market access agreement with Greenbrier Hotel Corporation. GNOG has also executed similar agreements for access to offer online sports betting in Illinois, Colorado, Iowa, Nevada, Louisiana, and Arizona. A “skin” is what allows GNOG to gain access to a jurisdiction where online operators are required to have a retail relationship. If GNOG cannot establish, renew or manage its relationships, as it pertains to any of the foregoing or other states that GNOG enters or desires to enter in the future, GNOG’s relationships could be terminated, and GNOG would not be allowed to operate in those jurisdictions until GNOG enters into new relationships, which could be at significantly higher cost. As a result, GNOG’s business, financial condition and results of operations could be adversely affected.
GNOG relies on third-party providers to validate the identity and location of its users, and if such providers fail to accurately confirm user information or GNOG does not maintain business relationships with them, GNOG’s business, financial condition and results of operations could be adversely affected.
GNOG cannot guarantee that the third-party geolocation and identity verification systems that GNOG relies on will perform effectively. GNOG relies on these geolocation and identity verification systems to ensure that GNOG follows certain laws and regulations, and any service disruption to those systems would prohibit GNOG from operating its platform and would adversely affect its business. Additionally, incorrect or misleading geolocation and identity verification data with respect to current or potential users received from third-party service providers may result in GNOG inadvertently allowing access to its offerings to individuals who are not permitted to access them, or otherwise inadvertently denying access to individuals who are permitted access to them, in each case, based on inaccurate identity or geographic location determination. GNOG’s third-party geolocation services provider relies on GNOG’s ability to obtain information necessary to determine geolocation from mobile devices, operating systems, and other sources. Changes, disruptions or temporary or permanent failure to access such sources by GNOG’s third-party service providers may result in their inability to accurately determine the location of its users. Moreover, failure to maintain GNOG’s existing contracts with third-party service providers, or to replace them with equivalent third parties, may result in GNOG’s inability to access geolocation and identity verification data necessary for its operations. If any of these risks materialize, GNOG may be subject to disciplinary action, fines, lawsuits, and its business, financial condition and results of operations could be adversely affected.
GNOG relies on third-party payment processors to process deposits and withdrawals made by customers on its platform, and if GNOG cannot manage its relationships with such third parties and other payment-related risks, its business, financial condition and results of operations could be adversely affected.
GNOG relies on a limited number of third-party payment processors to process deposits and withdrawals made by customers on its platform. If any of GNOG’s third-party payment processors terminates its relationship with GNOG or refuses to renew its agreement with GNOG on economically reasonable terms, GNOG would be forced to find an alternative payment processor, and may not be able to secure favorable terms or replace such payment processor in a timely manner. Further, the software and services provided by GNOG’s third-party payment processors may not meet its expectations or may contain errors or other defects, be compromised or experience outages. Any of these could cause GNOG to lose its ability to accept online payments or other payment transactions or make timely payments to users on its platform, any of which could make its platform less well perceived by the market and adversely affect its ability to attract and retain its users.
Nearly all of GNOG’s payments are made by credit card, debit card or through other third-party payment services, which subjects GNOG to certain regulations, contractual obligations and to the risk of fraud. GNOG may in the future offer new payment options to users that may be subject to additional regulations and risks. GNOG is also subject to a number of other laws, regulations and contractual obligations relating to the payments that GNOG accepts from its users, including with respect to money laundering, money transfers, privacy and information security. If GNOG fails to comply with applicable rules and
 
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regulations, GNOG may be subject to civil or criminal penalties, fines and/or higher transaction fees and may lose its ability to accept online payments or other payment card transactions, which could make its platform less well perceived by its users. If any of these events were to occur, GNOG’s business, financial condition and results of operations could be adversely affected.
For example, if GNOG is deemed to be a money transmitter as defined by applicable regulation, GNOG could be subject to certain laws, rules and regulations enforced by multiple authorities and governing bodies in the U.S. and numerous state and local agencies who may define money transmitter differently. Certain states may have a more expansive view of who qualifies as a money transmitter. If GNOG is found to be a money transmitter under any applicable regulation and GNOG is not in compliance with such regulations, GNOG may be subject to fines or other penalties in one or more jurisdictions levied by federal or state or local regulators, including state Attorneys General, as well as those levied by foreign regulators. Penalties for failing to comply with applicable rules and regulations could include criminal and civil proceedings, forfeiture of material assets or other enforcement actions. GNOG could also be required to make changes to its business practices or compliance programs as a result of regulatory scrutiny.
Additionally, GNOG’s payment processors require GNOG to comply with payment card network operating rules, which are set and interpreted by payment card networks. The payment card networks could adopt new operating rules or interpret or reinterpret existing rules in ways that might prohibit GNOG from providing certain offerings to particular users, be costly to implement or difficult to follow. GNOG has agreed to reimburse its payment processors for fines they are assessed by payment card networks if GNOG or the users on its platform violate these rules. Any of the foregoing risks could adversely affect GNOG’s business, financial condition and results of operations.
GNOG relies on other third-party service providers and if such third parties do not perform adequately or terminate their relationships with GNOG, its costs may increase and GNOG’s business, financial condition and results of operations could be adversely affected.
GNOG relies heavily on its relationships with third-party information technology service providers. For example, GNOG relies on third parties for online connectivity, infrastructure hosting, technical infrastructure, network management, content delivery, load balancing and protection against hacking and distributed denial-of-service attacks. If those providers do not perform adequately, GNOG’s users may experience errors or disruptions in operations and services. Furthermore, if any of GNOG’s partners terminates their relationship with GNOG or refuses to renew their agreement with GNOG on commercially reasonable terms, GNOG could be forced to find an alternative provider and may not be able to secure similar terms in a timely manner. GNOG also relies on other software and services supplied by third parties, such as communications and internal software, and GNOG’s business may be adversely affected to the extent such software and services do not meet its expectations, contain errors or vulnerabilities, are compromised or experience outages. Any of these risks could increase GNOG’s costs and adversely affect its business, financial condition and results of operations. Further, any negative publicity related to any of GNOG’s third-party partners, including any publicity related to regulatory concerns, could adversely affect GNOG’s brand’s reputation and could potentially lead to increased regulatory or litigation exposure.
GNOG incorporates technology from third parties into its platform. GNOG cannot be certain that its licensors are not infringing the intellectual property rights of others or that the suppliers and licensors have sufficient rights to the technology in all jurisdictions in which GNOG may operate. Some of GNOG’s license agreements may be terminated by its licensors at their determination. If GNOG is unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against GNOG’s suppliers and licensors or against GNOG, or if GNOG is unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, GNOG’s ability to develop its platform containing that technology could be severely limited and GNOG’s business could be harmed.
Additionally, if GNOG is unable to obtain necessary technology from third parties, GNOG may be forced to acquire or develop or own services which could be economically costly and negatively impact its operations. If alternative technology cannot be obtained or developed, GNOG may not be able to offer certain functionality as part of its offerings, which could adversely affect its business, financial condition and results of operations.
 
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GNOG’s business is dependent on internet and other technology-based service providers, if these parties experience business interruptions, GNOG’s ability to conduct business may be impaired and GNOG’s financial condition and results of operations could be adversely affected.
A substantial portion of GNOG’s network infrastructure is provided by third parties, including internet service providers and other technology-based service providers. GNOG requires technology-based service providers to maintain adequate cyber security systems and processes. However, if these service providers experience service interruptions, including those due to cyber-attacks, or those due to an event causing an unusually high volume of internet use (such as a pandemic or public health emergency), communications over the Internet may be interrupted and impair GNOG’s ability to conduct its business. Internet service providers and other technology-based service providers may in the future roll out upgraded or new mobile or other telecommunications services, such as 5G or 6G services, which may impact the ability of GNOG’s users to access its platform or offerings in a timely fashion or at all. Any difficulties these providers face, including the potential of certain network traffic receiving priority over other traffic (i.e., lack of net neutrality), may adversely affect GNOG’s business, and GNOG exercises little influence over these providers, which increases its vulnerability to problems with their services. Furthermore, GNOG’s ability to process digital transactions depends on bank processing and credit card systems. To prepare for system malfunctions, GNOG continuously seeks to improve its facilities and the capabilities of its system infrastructure and support. Nevertheless, there can be no guarantee that the internet infrastructure or GNOG’s own network systems will be able to meet the demand placed on GNOG by the continued growth of the internet, the overall online gaming industry and GNOG’s users. Any system failure as a result of reliance on these third parties, such as network, software or hardware failure, including as a result of cyber-attacks, which causes a loss of GNOG’s users’ property or personal information or a delay or interruption in GNOG’s online services and products could result in a loss of anticipated revenue, interruptions to GNOG’s platform and offerings, cause GNOG to incur significant legal, remediation and notification costs, degrade the customer experience and cause users to lose confidence in GNOG’s offerings, any of which could have a material adverse effect on GNOG’s business, financial condition, results of operations and business prospects.
GNOG relies on licenses to use the intellectual property rights of third parties, which are incorporated into GNOG’s products and services. Failure to renew or expand existing licenses may require GNOG to modify, limit or discontinue certain offerings, which could materially affect GNOG’s business, financial condition and results of operations.
GNOG relies on products, technologies and intellectual property that GNOG licenses from third parties, for use in its business-to-business and business-to-consumers offerings. Substantially all of GNOG’s offerings and services use intellectual property licensed from third parties. The future success of GNOG’s business may depend, in part, on GNOG’s ability to obtain, retain and expand licenses for popular technologies and games in a competitive market. GNOG cannot assure that these third-party licenses, or support for such licensed products and technologies, will continue to be available to GNOG on commercially reasonable terms, if at all. In the event that GNOG cannot renew and expand existing licenses, GNOG may be required to discontinue or limit GNOG’s use of the products that include or incorporate the licensed intellectual property.
Some of GNOG’s license agreements contain minimum guaranteed royalty payments to the third-party licensor. If GNOG is unable to generate sufficient revenue to offset the minimum guaranteed royalty payments, it could have a material adverse effect on GNOG’s results of operations, cash flows and financial condition. GNOG’s license agreements generally allow for assignment by GNOG in the event of a strategic transaction but some contain limited termination rights in the event of an attempted assignment by GNOG. Certain of GNOG’s license agreements grant the licensor rights to audit GNOG’s use of the licensor’s intellectual property. Disputes with licensors over license agreements could result in the payment of additional royalties or penalties by GNOG, cancellation or non-renewal of the underlying license or litigation.
The regulatory review process and licensing requirements also may preclude GNOG from using technologies owned or developed by third parties if those parties are unwilling to subject themselves to regulatory review or do not meet regulatory requirements. Some gaming authorities require gaming manufacturers to obtain approval before engaging in certain transactions, such as acquisitions, mergers,
 
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reorganizations, financings, stock offerings and share repurchases. Obtaining such approvals can be costly and time consuming, and GNOG cannot assure that such approvals will be granted or that the approval process will not result in delays or disruptions to GNOG’s strategic objectives.
GNOG’s growth will depend, in part, on the success of GNOG’s strategic relationships with third parties. Overreliance on certain third parties, or GNOG’s inability to extend existing relationships or agree to new relationships may cause unanticipated costs and impact GNOG’s future financial performance.
GNOG relies on relationships with advertisers, casinos and other third parties in order to attract users to GNOG’s platform. These relationships, along with providers of online services, search engines, social media, directories and other websites and e-commerce businesses, direct consumers to GNOG’s platform. In addition, many of the parties with whom GNOG has advertising arrangements provide advertising services to other companies, including other gaming platforms with whom GNOG competes. While GNOG believes there are other third parties that could drive users to GNOG’s platform, adding or transitioning to them may disrupt GNOG’s business and increase its costs. In the event that any of GNOG’s existing relationships or its future relationships fails to provide services to GNOG in accordance with the terms of GNOG’s arrangement, or at all, and GNOG is not able to find suitable alternatives, this could impact GNOG’s ability to attract consumers in a cost-effective manner and thus harm its business, financial condition, results of operations and business prospects.
Risks Relating to Compliance with Gaming and Other Regulations
GNOG’s business is subject to a variety of U.S. laws, many of which are unsettled and still developing, and which could subject it to claims or otherwise harm its business. Any change in existing regulations or their interpretation, or the regulatory climate applicable to GNOG’s products and services, or changes in tax rules and regulations or interpretation thereof related to its products and services, could adversely impact its ability to operate its business as currently conducted or as it seeks to operate in the future, which could have a material adverse effect on its financial condition and results of operations.
GNOG is generally subject to laws and regulations relating to iGaming and online sports betting in the jurisdictions in which GNOG conducts its business, as well as the general laws and regulations that apply to all e-commerce businesses, such as those related to privacy and personal information, tax and consumer protection. These laws and regulations vary by jurisdiction and future legislative and regulatory action, court decisions or other governmental action, which may be affected by, among other things, political pressures, attitudes and climates, as well as personal biases, may have a material impact on GNOG’s operations and financial results. Some jurisdictions have introduced regulations attempting to restrict or prohibit online gaming, while others have taken the position that online gaming should be licensed and regulated and have adopted or are in the process of considering legislation and regulations to enable that to happen. The regulatory environment in any particular jurisdiction may change in the future and any such change could have a material adverse effect on GNOG’s results of operations. For example, in 2018, the U.S. Department of Justice, which we refer to as the “DOJ”, reversed its previously-issued opinion published in 2011, which stated that interstate transmissions of wire communications that do not relate to a “sporting event or contest” fall outside the purview of the Wire Act of 1961, which we refer to as the “Wire Act”. The DOJ’s updated opinion concluded instead that the Wire Act was not uniformly limited to gaming relating to sporting events or contests and that certain of its provisions apply to non-sports-related wagering activity. In June 2019, a federal district court in New Hampshire ruled that the DOJ’s new interpretation of the Wire Act was erroneous and vacated the DOJ’s new opinion. The DOJ had appealed the decision of the district court to the U.S. Court of Appeals for the First Circuit, which reaffirmed the district court’s decision on January 20, 2021. If such ruling were to be appealed to the U.S. Supreme Court, an adverse ruling or other disposition of the case by the U.S. Supreme Court could impact GNOG’s ability to engage in online internet gaming in the future.
Future legislative and regulatory action, and court decisions or other governmental action, may have a material impact on GNOG’s operations and financial results. Governmental authorities could view GNOG as having violated local laws, despite GNOG’s efforts to obtain all applicable licenses or approvals. There is also risk that civil and criminal proceedings, including class actions brought by or on behalf of prosecutors or public entities or incumbent monopoly providers, or private individuals, could be initiated against
 
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GNOG, service providers, credit card and other payment processors in the iGaming and online sports betting industries. Such potential proceedings could involve substantial litigation expense, penalties, fines, seizure of assets, injunctions or other restrictions being imposed upon GNOG or GNOG’s licensees or other business partners, while diverting the attention of key executives. Such proceedings could have a material adverse effect on GNOG’s business, financial condition, results of operations and prospects, as well as impact GNOG’s reputation.
There can be no assurance that legally enforceable legislation will not be proposed and passed in jurisdictions relevant or potentially relevant to GNOG’s business to prohibit, legislate or regulate various aspects of the iGaming and online sports betting industries (or that existing laws in those jurisdictions will not be interpreted negatively). Compliance with any such legislation may have a material adverse effect on GNOG’s business, financial condition and results of operations, either as a result of GNOG’s determination that a jurisdiction should be blocked, or because a local license or approval may be costly for GNOG or GNOG’s business partners to obtain and/or such licenses or approvals may contain other commercially undesirable conditions.
GNOG’s growth prospects depend on the legal status of real-money gaming in various jurisdictions and legalization may not occur in as many states as GNOG expects, or may occur at a slower pace than GNOG anticipates. Additionally, even if jurisdictions legalize real money gaming, this may be accompanied by legislative or regulatory restrictions and/or taxes that make it impracticable or less attractive to operate in those jurisdictions, or the process of implementing regulations or securing the necessary licenses to operate in a particular jurisdiction may take longer than GNOG anticipates, which could adversely affect its future results of operations and make it more difficult to meet its expectations for financial performance.
Several states have legalized or are currently evaluating the legalization of real money gaming, and GNOG’s business, financial condition, results of operations and business prospects are significantly dependent upon the status of legalization in these states. GNOG’s business plan is partially based upon the legalization of real money gaming in additional states and the legalization may not occur as GNOG had anticipated. Additionally, if a large number of additional states or the federal government enact real money gaming legislation and GNOG is unable to obtain, or is otherwise delayed in obtaining, the necessary licenses to operate iGaming websites or online sports betting in U.S. jurisdictions where such games are legalized, GNOG’s future growth in iGaming and online sports betting could be materially impaired.
As GNOG enters new jurisdictions, states or the federal government may legalize real money gaming in a manner that is unfavorable to it. As a result, GNOG may encounter legal, regulatory and political challenges that are difficult or impossible to foresee and which could result in an unforeseen adverse impact on planned revenues or costs associated with the new opportunity. For example, certain states require GNOG to have a relationship with a land-based, licensed casino for iGaming and online sports betting access, which tends to increase GNOG’s costs. States that have established state-run monopolies may limit opportunities for private sector participants like GNOG. States also impose substantial tax rates on online sports betting and iGaming revenue, in addition to a federal excise tax of 25 basis points on the amount of each sports wager. Tax rates, whether federal- or state-based, that are higher than GNOG expects will make it more costly and less desirable for GNOG to launch in a given jurisdiction, while tax increases in any of its existing jurisdictions may adversely impact GNOG’s profitability.
Therefore, even in cases in which a jurisdiction purports to license and regulate iGaming or online sports betting, the licensing and regulatory regimes can vary considerably in terms of their business-friendliness and at times may be intended to provide incumbent operators with advantages over new licensees. Therefore, some “liberalized” regulatory regimes are considerably more economically viable than others.
Failure to comply with regulatory requirements in a particular jurisdiction, or the failure to successfully obtain a license or permit applied for in a particular jurisdiction, could impact GNOG’s ability to comply with licensing and regulatory requirements in other jurisdictions, or could cause the rejection of license applications or cancelation of existing licenses in other jurisdictions, or could cause financial institutions, online and mobile platforms, and distributors to stop providing services to GNOG, which GNOG relies upon to receive payments from, or distribute amounts to, its users, or otherwise to deliver and promote its services.
Compliance with the various regulations applicable to real money gaming is costly and time-consuming. Regulatory authorities at the U.S. federal, state and local levels have broad powers with respect
 
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to the regulation of real money gaming operations and may revoke, suspend, condition or limit GNOG’s real money gaming licenses, impose substantial fines or take other actions, any one of which may have a material adverse effect on GNOG’s business, financial condition, results of operations and business prospects. These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current laws or regulations or enact new laws and regulations regarding these matters. GNOG will strive to comply with all applicable laws and regulations relating to its business. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules. Non-compliance with any such law or regulations could expose GNOG to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect GNOG’s business.
Any real money gaming license could be revoked, suspended or conditioned at any time. The loss of a license in one jurisdiction could trigger the loss of a license or affect GNOG’s eligibility for such a license in another jurisdiction, and any of such losses, or potential for such loss, could cause GNOG to cease offering some or all of its offerings in the impacted jurisdictions. GNOG may be unable to obtain or maintain all necessary registrations, licenses, permits or approvals, and could incur fines or experience delays related to the licensing process, which could adversely affect its operations. GNOG’s delay or failure to obtain or maintain licenses in any jurisdiction may prevent it from distributing its offerings, increasing its customer base and/or generating revenues. GNOG cannot guarantee that it will be able to obtain and maintain the licenses and related approvals necessary to conduct its iGaming and online sports betting operations. Any failure to maintain or renew GNOG’s existing licenses, registrations, permits or approvals could have a material adverse effect on its business, financial condition, results of operations and business prospects.
GNOG’s growth prospects and market potential will depend on its ability to obtain licenses to operate in a number of jurisdictions and if GNOG fails to obtain such licenses, its business, financial condition, results of operations and business prospects could be impaired.
GNOG’s ability to grow its business will depend on its ability to obtain and maintain licenses to offer its product offerings in a large number of jurisdictions or in heavily populated jurisdictions. If GNOG fails to obtain and maintain licenses in large jurisdictions or in a greater number of mid-market jurisdictions, this may prevent GNOG from expanding the footprint of its product offerings, increasing its user base and/or generating revenues. GNOG cannot be certain that it will be able to obtain and maintain licenses and related approvals necessary to conduct its iGaming and online sports betting operations. Any failure to obtain and maintain licenses, registrations, permits or approvals could have a material adverse effect on its business, financial condition, results of operations and business prospects.
In some jurisdictions GNOG’s key executives, certain employees or other individuals related to the business are subject to licensing or compliance requirements. Failure by such individuals to obtain the necessary licenses or comply with individual regulatory obligations, could cause the business to be non-compliant with its obligations, or imperil its ability to obtain or maintain licenses necessary for the conduct of the business. In some cases, the remedy to such situation may require the removal of a key executive or employee and the mandatory redemption or transfer of such person’s equity securities.
As part of obtaining real money gaming licenses, the responsible Gaming Authority will generally determine suitability of certain directors, officers and employees and, in some instances, significant stockholders. The criteria used by Gaming Authorities to make determinations as to who requires a finding of suitability or the suitability of an applicant to conduct gaming operations varies among jurisdictions, but generally requires extensive and detailed application disclosures followed by a thorough investigation. Gaming Authorities typically have broad discretion in determining whether an applicant should be found suitable to conduct operations within a given jurisdiction. If any Gaming Authority with jurisdiction over GNOG’s business were to find an applicable officer, director, employee or significant stockholder of GNOG unsuitable for licensing or unsuitable to continue having a relationship with GNOG, GNOG would be required to sever its relationship with that person. Furthermore, such Gaming Authorities may require GNOG to terminate the employment of any person who refuses to file required applications. Either result could have a material adverse effect on GNOG’s business, operations and prospects.
 
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The fourth amended and restated certificate of incorporation of GNOG provides that any of its capital stock owned or controlled by any unsuitable person or its affiliates will be transferred to GNOG or one or more third-party transferees, as and to the extent required by a Gaming Authority or deemed necessary or advisable by the GNOG Board in its sole and absolute discretion.
Additionally, a gaming regulatory body may refuse to issue or renew a gaming license or restrict or condition the same, based on GNOG’s present activities or the past activities of GNOG LLC, or the past or present activities of their current or former directors, officers, employees, stockholders or third parties with whom GNOG has relationships, which could adversely affect GNOG’s operations or financial condition. If additional gaming regulations are adopted in a jurisdiction in which GNOG operates, such regulations could impose restrictions or costs that could have a significant adverse effect on GNOG. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which GNOG has existing or planned operations that, if enacted, could adversely affect its directors, officers, key employees, or other aspects of GNOG’s operations. To date, GNOG has obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for its operations. However, GNOG can give no assurance that any additional licenses, permits and approvals that may be required will be given or that existing ones will be renewed or will not be revoked. Renewal is subject to, among other things, continued satisfaction of suitability requirements of GNOG’s directors, officers, key employees and stockholders. Any failure to renew or maintain GNOG’s licenses or to receive new licenses when necessary would have a material adverse effect on GNOG.
GNOG’s ability to offer online sport betting for NBA games, or at all, is limited in certain jurisdictions due to FEI’s ownership of the Houston Rockets.
Mr. Fertitta, the chairman of the GNOG Board and GNOG’s chief executive officer, owns a controlling interest in GNOG. Mr. Fertitta is also the sole shareholder, chairman and chief executive officer of FEI, which owns the National Basketball Association’s, which we refer to as the “NBA”, Houston Rockets. Pursuant to New Jersey law, the direct or indirect legal or beneficial owner of 10% or more of a member team of a sport’s governing body shall not place or accept any wager on a sports event in which that member team participates. Accordingly, in the State of New Jersey, GNOG cannot accept wagers on any NBA games in which the Houston Rockets play or have players participating in such games, or on the future performance of any Houston Rockets players, thereby limiting GNOG’s potential revenues from its online sports betting platform. Michigan’s regulations, once finalized, may result in restrictions similar to those in New Jersey. Illinois regulations, which have been adopted but not yet published in the register, may also include similar restrictions. Pennsylvania currently prohibits any such team owner from operating a sports book and this will prohibit us from engaging in any online sports betting in Pennsylvania. In addition to New Jersey, Michigan and Pennsylvania, online sports betting legislation has passed in 21 states and the District of Columbia, and is currently operational in 17 of those jurisdictions. Under current gaming laws, due to GNOG’s affiliation with Mr. Fertitta and the Houston Rockets, GNOG expects that it would be unable to obtain a license to conduct its online sports betting operations in Colorado and, if GNOG was able to obtain a license to conduct its online sports betting operations in other states, GNOG would be unable to accept wagers on Houston Rockets games or players in such other states. Further, states that legalize online sports betting in the future may also impose limitations on GNOG’s ability to obtain a license or accept wagers on certain NBA games, certain NBA players or at all, in each case due to GNOG’s affiliation with Mr. Fertitta and the Houston Rockets. Moreover, irrespective of jurisdictional limitations, as a condition of Mr. Fertitta’s ownership of the Houston Rockets, the NBA prohibits any gaming entity in which Mr. Fertitta or FEI holds a direct or indirect interest, including GNOG, from accepting any wager on the Houston Rockets, any NBA G League team affiliated with the Houston Rockets, or any game or games involving such team or any player’s individual performance in such game. The existing limitations on GNOG’s ability to accept certain sports wagers may have an adverse impact on its revenues, business and results of operations, and the potential limitations on its ability to obtain sports betting licenses in the future may have a material adverse effect on the growth of its business. As a result of the Transactions, including the mergers, these limitations will no longer apply due to GNOG becoming wholly-owned by DraftKings.
Failure to protect or enforce GNOG’s intellectual property rights or the costs involved in such enforcement could harm its business, financial condition and results of operations.
GNOG relies on trademark, copyright, trade secret, and domain-name-protection laws to protect its rights and the intellectual property that it licenses from third parties. However, third parties may knowingly
 
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or unknowingly infringe GNOG’s rights, third parties may challenge rights used or held by GNOG and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which GNOG operates or intends to operate its business. In any of these cases, GNOG may be required to expend significant time and expense to prevent infringement or to enforce its rights. There can be no assurance that others will not offer products or services that are substantially similar to GNOG’s products or services and compete with its business.
Circumstances outside GNOG’s control could pose a threat to its right to use intellectual property. For example, effective intellectual property protection may not be available in the U.S. or other countries from which GNOG’s iGaming and online sports betting product offerings or platforms are accessible. Also, the efforts GNOG has taken to protect and enforce its rights may not be sufficient or effective. Any significant impairment of GNOG’s intellectual property rights could harm its business or GNOG’s ability to compete. Also, protecting GNOG’s intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of GNOG’s owned or licensed intellectual property could make it more expensive to do business, thereby harming its operating results. Furthermore, if GNOG is unable to protect its rights or prevent unauthorized use or appropriation by third parties, the value of its brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic its offerings and service. Any of these events could seriously harm GNOG’s business.
GNOG may have difficulty accessing the service of banks, credit card issuers and payment processing services providers, which may impair its ability to sell its products and services.
Although financial institutions and payment processors are permitted to provide services to GNOG and others in the industry, banks, credit card issuers and payment processing service providers may be hesitant to offer banking and payment processing services to real money gaming businesses. Consequently, those businesses involved in the industry, including GNOG, may encounter difficulties in establishing and maintaining banking and payment processing relationships with a full scope of services and generating market rate interest. If GNOG was unable to maintain its bank accounts or its users were unable to use their credit cards, bank accounts or e-wallets to make deposits and withdrawals from GNOG’s platforms it would make it difficult for GNOG to operate its business, increase its operating costs, and pose additional operational, logistical and security challenges which could result in an inability to implement its business plan.
Due to the nature of GNOG’s business, it is subject to taxation in several jurisdictions and changes in, or new interpretation of, tax laws, tax rulings or their application by tax authorities could result in additional tax liabilities and could materially affect its financial condition and results of operations.
GNOG’s tax obligations are varied and include U.S. federal and state taxes due to the nature of its business. The tax laws applicable to GNOG’s business are subject to interpretation, and significant judgment is required in determining its worldwide provision for income taxes. In the course of GNOG’s business, there will be many transactions and calculations where the ultimate tax determination is uncertain. In addition, changes in tax laws or interpretations thereof, may require the collection of information not regularly produced by GNOG, the use of estimates in its consolidated financial statements, and the exercise of significant judgment in accounting for its provisions, which could cause its results to differ from previous estimates and could materially affect GNOG’s consolidated financial statements.
The gaming industry represents a significant source of tax revenue to the jurisdictions in which GNOG operates. Gaming companies and business-to-business providers in the gaming industry (directly and/or indirectly by way of their commercial relationships with operators) are currently subject to significant taxes and fees in addition to normal corporate income taxes, and such taxes and fees are subject to increases at any time. From time to time, various legislators and other government officials have proposed and adopted changes in tax laws, or in the administration or interpretation of such laws, affecting the gaming industry. In addition, any worsening of economic conditions and the large number of jurisdictions with significant current or projected budget deficits could intensify the efforts of governments to raise revenues through increases in gaming taxes and/or other taxes. It is not possible to determine with certainty the likelihood of changes in tax laws or in the administration or interpretation or enforcement of such laws. Any material increase, or the adoption of additional taxes or fees, could have a material adverse effect on GNOG’s business, financial condition, results of operations and prospects.
 
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Additionally, tax authorities may impose indirect taxes on internet-related commercial activity based on existing statutes and regulations which, in some cases, were established prior to the advent of the internet. Tax authorities may interpret laws originally enacted for mature industries and apply it to newer industries, such as GNOG. The application of such laws may be inconsistent from jurisdiction to jurisdiction. GNOG’s in-jurisdiction activities may vary from period to period which could result in differences in nexus from period to period.
GNOG is subject to periodic review and audit by domestic tax authorities. Tax authorities may disagree with certain positions GNOG has taken or that it will take, and any adverse outcome of such a review or audit could have a negative effect on its business, financial condition and results of operations. Although GNOG believes that its tax provisions, positions and estimates are reasonable and appropriate, tax authorities may disagree with certain positions it has taken. In addition, economic and political pressures to increase tax revenue in various jurisdictions may make resolving tax disputes favorably more difficult.
GNOG LLC was included in the consolidated tax return of FEI pursuant to a tax sharing agreement. On July 21, 2020, FEI was informed by the IRS that the year 2017 and 2018 tax returns are under audit. No findings that would adversely impact GNOG LLC in any material respect are expected.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of GNOG’s income or other tax returns could adversely affect its financial condition and results of operations.
GNOG is subject to income taxes in the United States, and its domestic tax liabilities are subject to the allocation of expenses in differing jurisdictions. GNOG’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including (i) changes in the valuation of its deferred tax assets and liabilities; (ii) expected timing and amount of the release of any tax valuation allowances; (iii) tax effects of stock-based compensation; (iv) costs related to intercompany restructurings; (v) changes in tax laws, regulations or interpretations thereof; and (vi) lower than anticipated future earnings in jurisdictions where GNOG has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where GNOG has higher statutory tax rates.
In addition, GNOG may be subject to audits of its income, sales and other transaction taxes by U.S. federal and state authorities. Outcomes from these audits could have an adverse effect on GNOG’s financial condition and results of operations.
Risks Relating to GNOG’s Management and Operations
GNOG is subject to risks related to the geographic concentration of its operations.
All of GNOG LLC’s revenue to date was generated from its iGaming and online sports betting operations in New Jersey, Michigan, West Virginia and Virginia (where it currently offers online sports betting only), and GNOG expects that it will continue to generate substantially all of its revenues in New Jersey, Michigan, West Virginia and Virginia until such time that GNOG is able to generate a material portion of its revenues from iGaming and online sports betting in other states. Even if GNOG’s planned launch, pending licensing and regulatory approvals, of iGaming and/or online sports betting platforms in Pennsylvania, Illinois, Colorado, Iowa, Louisiana, and Arizona are successful, GNOG’s operations will be limited to ten states. Changes to prevailing economic, demographic, competitive, regulatory or any other conditions in the markets in which GNOG operates, particularly in New Jersey, could lead to a reduction in demand for its offerings, resulting in a decline in its revenues and, in turn, a material deterioration of its financial condition. Further, GNOG’s ability to geographically diversify its revenues is limited by the legal status of real money gaming in other jurisdictions. For further information, please read the risk factor captioned “—Risks Relating to GNOG’s Business—GNOG’s growth prospects depend on the legal status of real-money gaming in various jurisdictions and legalization may not occur in as many states as GNOG expects, or may occur at a slower pace than GNOG anticipates. Additionally, even if jurisdictions legalize real money gaming, this may be accompanied by legislative or regulatory restrictions and/or taxes that make it impracticable or less attractive to operate in those jurisdictions, or the process of implementing regulations or securing the necessary licenses to operate in a particular jurisdiction may take longer than GNOG anticipates, which could adversely affect its future results of operations and make it more difficult to meet its expectations for financial performance,” beginning on page 53 of this joint information statement/prospectus.
 
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GNOG may be subject to litigation which, if adversely determined, could cause it to incur substantial losses. An adverse outcome in GNOG or more of such proceedings could adversely affect its business.
From time to time during the normal course of operating GNOG’s business, it may be subject to various litigation claims and legal disputes. Some of the litigation claims may not be covered under GNOG’s insurance policies, or its insurance carriers may seek to deny coverage. As a result, GNOG might also be required to incur significant legal fees, which may have a material adverse effect on its financial position. In addition, because GNOG cannot accurately predict the outcome of any action, it is possible that, as a result of current and/or future litigation, GNOG will be subject to adverse judgments or settlements that could significantly reduce its earnings or result in losses.
In addition, any litigation to which GNOG is a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or in payments of substantial monetary damages or fines, the posting of bonds requiring significant collateral, letters of credit or similar instruments, or GNOG may decide to settle lawsuits on similarly unfavorable terms. These proceedings could also result in reputational harm, criminal sanctions, consent decrees or orders preventing GNOG from offering certain products or requiring a change in its business practices in costly ways or requiring development of non-infringing or otherwise altered products or technologies. Litigation and other claims and regulatory proceedings against GNOG could result in unexpected disciplinary actions, expenses and liabilities, which could have a material adverse effect on GNOG’s business, financial condition, results of operations and prospects.
GNOG’s continued growth and success will depend on the performance of its current and future employees, including certain key employees. Recruitment and retention of these individuals is vital to growing GNOG’s business and meeting its business plans. The loss of any of GNOG’s key executives or other key employees could harm its business. GNOG is dependent on the continued service of its key executives and other key personnel and if GNOG fails to retain such individuals, its business could be adversely affected.
GNOG depends on a limited number of key executives and other key personnel to manage and operate its business, including Mr. Fertitta, Michael Harwell and Thomas Winter. The leadership of these key executives and key personnel was a critical element of GNOG LLC’s previous success, and GNOG expects that such leadership will continue to be a critical element of its success in the future. The departure, death or disability of any one of these individuals, or other extended or permanent loss of any of their services, or any negative market or industry perception with respect to any of them or their loss, could have a material adverse effect on GNOG’s business.
In addition, certain of GNOG’s other employees have made significant contributions to its growth and success. GNOG believes its success and ability to compete and grow will depend in large part on the efforts and talents of its employees and on its ability to retain highly skilled personnel. The competition for these types of personnel is intense and GNOG competes with other potential employers for the services of its employees. As a result, GNOG may not succeed in retaining the executives and other key employees that it needs. Employees, particularly analysts and engineers, are in high demand, and GNOG devotes significant resources to identifying, hiring, training, successfully integrating and retaining these employees. GNOG cannot provide assurance that it will be able to attract or retain such highly qualified personnel in the future. If GNOG does not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, GNOG may be unable to grow effectively, and its business could be seriously harmed. In addition, the loss of employees or the inability to hire additional skilled employees as necessary could result in significant disruptions to its business, and the integration of replacement personnel could be time-consuming and expensive and cause additional disruptions to its business.
GNOG may invest in or acquire other businesses, and its business may suffer if GNOG is unable to successfully integrate acquired businesses or otherwise manage the growth associated with these acquisitions.
As part of GNOG’s business strategy, GNOG may make acquisitions as opportunities arise to add new or complementary businesses, products, brands or technologies. In some cases, the costs of such acquisitions may be substantial, including as a result of professional fees and due diligence efforts. There is no assurance that the time and resources expended on pursuing acquisitions will result in a completed transaction, or that any completed transaction will ultimately be successful. In addition, GNOG may be unable to identify suitable acquisition or strategic investment opportunities or may be unable to obtain any required financing
 
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or regulatory approvals, and therefore may be unable to complete such acquisitions or strategic investments on favorable terms, if at all. GNOG may decide to pursue acquisitions with which its investors may not agree, and GNOG cannot assure investors that any acquisition or investment will be successful or otherwise provide a favorable return on investment. In addition, acquisitions and the integration thereof require significant time and resources and place significant demands on its management, as well as on its operational and financial infrastructure. Furthermore, if GNOG fails to successfully close transactions or integrate new teams, or integrate the products and technologies associated with these acquisitions into it, its business could be adversely affected. Acquisitions may expose GNOG to operational challenges and risks, including:
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the ability to profitably manage acquired businesses or successfully integrate the acquired businesses’ operations, personnel, financial reporting, accounting and internal controls, technologies and products into GNOG’s business;
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increased indebtedness and the expense of integrating acquired businesses, including significant administrative, operational, economic, geographic or cultural challenges in managing and integrating the expanded or combined operations;
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entry into jurisdictions or acquisition of products or technologies with which GNOG has limited or no prior experience, and the potential of increased competition with new or existing competitors as a result of such acquisitions;
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diversion of management’s attention and the over-extension of GNOG’s operating infrastructure and its management systems, information technology systems, and internal controls and procedures, which may be inadequate to support growth;
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the ability to fund GNOG’s capital needs and any cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions, or unforeseen internal difficulties; and
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the ability to retain or hire qualified personnel required for expanded operations.
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GNOG’s acquisition strategy may not succeed if it is unable to remain attractive to target companies or expeditiously close transactions. Issuing shares of GNOG common stock to fund an acquisition may cause economic dilution to existing stockholders. If GNOG develops a reputation for being a difficult acquirer or having an unfavorable work environment, or target companies view its common stock unfavorably, it may be unable to complete key acquisition transactions essential to its corporate strategy and its business may be materially harmed.
GNOG’s insurance may not provide adequate levels of coverage against claims.
GNOG maintains insurance that it believes is customary for businesses of its size and type. However, there are types of losses GNOG may incur that cannot be insured against or that it believes are not economically reasonable to insure. Moreover, any loss incurred could exceed policy limits and policy payments made to GNOG may not be made on a timely basis. Such losses could adversely affect GNOG’s business prospects, results of operations, cash flows and financial condition.
Furthermore, from time to time GNOG may be subject to litigation, including potential stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. GNOG does not currently maintain directors’ and officers’ liability insurance, which we refer to as “D&O insurance”, to cover such risk exposure for its directors and officers. Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines and expenses including attorneys’ fees) of officers and directors who are the subject of a lawsuit as a result of their service to the company. If GNOG obtains D&O insurance in the future, the amount of D&O insurance GNOG obtains may not be adequate to cover such expenses should such a lawsuit occur, and its deductibles may be higher than it may be able to pay. GNOG has entered into indemnification agreements with its directors and its executive officers providing that, subject to limited exceptions, and among other things, GNOG will indemnify the director or officer to the fullest extent permitted by applicable law for claims arising in his or her capacity as a director or officer of GNOG. Applicable Delaware law provides for the indemnification of GNOG’s directors, officers, employees and agents, under certain circumstances, for attorney’s fees and other expenses incurred by them in any litigation to which they become
 
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a party resulting from their association with GNOG or activities on GNOG’s behalf. Without adequate D&O insurance, the amounts GNOG pays to indemnify its officers and directors in connection with their being subject to legal action based on their service to GNOG could have a material adverse effect on its financial condition, results of operations and liquidity. Further, GNOG’s lack of D&O insurance may make it difficult for it to retain and attract talented and skilled directors and officers, which could adversely affect its business.
Risks Relating to New DraftKings after Completion of the Transactions
The market price for shares of New DraftKings Class A common stock may be affected by factors different from those affecting the market price for shares of GNOG Class A common stock and shares of DraftKings Class A common stock.
Upon completion of the Transactions, including the mergers, (i) holders of DraftKings Class A common stock and DraftKings Class B common stock will become holders of New DraftKings Class A common stock and New DraftKings Class B common stock, respectively, (ii) holders of GNOG common stock will become holders of New DraftKings Class A common stock, and (iii) LHGN Interestholder will become a holder of New DraftKings Class A common stock. DraftKings’ business differs from that of GNOG, and accordingly the results of operations of New DraftKings will be affected by factors different from those currently affecting the results of operations of GNOG and DraftKings when operated as independent businesses. For a discussion of the business of DraftKings and of certain material risk factors to consider in connection therewith, please read the documents incorporated by reference into this joint information statement/prospectus and referred to under the section entitled “Where You Can Find More Information” beginning on page 224 of this joint information statement/prospectus. For a discussion of the business of GNOG and of certain material risk factors to consider in connection therewith, please read the risk factors included under the subsection entitled “Risks Relating to GNOG’s Business” above.
The market price for shares of New DraftKings Class A common stock may decline as a result of the Transactions, including the mergers, and as a result of some New DraftKings stockholders adjusting their portfolios.
Following the completion of the Transactions, including the mergers, the market price of New DraftKings Class A common stock may decline if, among other things, the operating synergy estimates in connection with the integration of DraftKings’ and GNOG’s businesses are not realized, if the transaction costs related to the Transactions, including the mergers, are greater than expected, or if the commercial arrangements contemplated by the master commercial agreement do not achieve the expected benefits. The market price also may decline if New DraftKings does not achieve the perceived benefits of the Transactions, including the mergers, as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the Transactions, including the mergers, on New DraftKings’ financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
In addition, sales of New DraftKings common stock or warrants for New DraftKings common stock by securityholders of New DraftKings after the completion of the Transactions, including the mergers, may cause the market price of New DraftKings Class A common stock to decrease.
Based on the number of shares of DraftKings common stock, shares of GNOG common stock and interests of LHGN Holdco outstanding as of December 6, 2021, which was the latest practicable date before the printing of this joint information statement/prospectus, approximately 436,554,619 shares of New DraftKings Class A common stock and 393,013,951 shares of New DraftKings Class B Common stock are expected to be issued and outstanding following the completion of the Transactions, including the mergers. Certain DraftKings stockholders and GNOG stockholders may decide not to hold the shares of New DraftKings common stock that they receive in the Transactions, including the mergers. However, certain parties, including Mr. Fertitta, LHGN Interestholder and certain of their affiliates, have agreed not to, directly or indirectly sell, convey, assign, transfer, exchange, pledge, hypothecate or otherwise encumber or dispose of any shares of New DraftKings common stock received in the Transactions for a period of one year from the closing of the Transactions. Other New DraftKings stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of New DraftKings
 
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Class A common stock that they receive in the mergers. Such sales of New DraftKings Class A common stock could have the effect of depressing the market price for New DraftKings Class A common stock and may take place promptly following the completion of the Transactions, including the mergers.
Any of these events may make it more difficult for New DraftKings to sell equity or equity-related securities, dilute your ownership interest in New DraftKings and/or have an adverse impact on the market price of New DraftKings Class A common stock.
The synergies attributable to the mergers may vary from expectations, which may negatively affect the market price of shares of New DraftKings Class A common stock.
DraftKings currently expects that the Transactions, including the mergers, will result in a number of benefits and synergies, including, but not limited to, operating synergies and stronger fundamental demand for New DraftKings’ products and services, and that the mergers will be accretive to New DraftKings’ earnings. These expectations are based on current estimates that may materially change. Actual operating, technological, strategic and revenue opportunities, if achieved at all, may be less significant than expected or may take longer to achieve than anticipated. In addition, future events and conditions, including, but not limited to, adverse changes in market conditions, regulatory framework, additional transaction and integration-related costs and other factors such as the failure to realize some or all of the anticipated benefits of the Transactions, including the mergers, could decrease or delay the accretion that is currently anticipated or could result in dilution. Any dilution of, decrease in, or delay of any accretion to the New DraftKings’ earnings per share could cause the price of shares of New DraftKings Class A common stock to decline or grow at a reduced rate.
The charter will be identical to the current articles of incorporation of DraftKings, which designate the Eighth Judicial District Court of Clark County, Nevada as the exclusive forum for certain types of actions and proceedings that may be initiated by New DraftKings’ stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with New DraftKings or its directors, officers, employees or agents.
The charter will require that, to the fullest extent permitted by law, and unless New DraftKings otherwise consents in writing to the selection of an alternative forum, the Eighth Judicial District Court of Clark County, Nevada (or if the Eighth Judicial District Court of Clark County, Nevada does not have jurisdiction, any other state district court located in the State of Nevada, and if no state district court in the State of Nevada has jurisdiction, any federal court located in the State of Nevada), will be the exclusive forum for each of the following:
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any action or proceeding brought in the name or right of New DraftKings or on its behalf;
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any action asserting a claim for breach of any fiduciary duty owed by any director, officer, employee or agent of New DraftKings to New DraftKings or to its stockholders;
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any action asserting a claim arising pursuant to any provision of NRS Chapters 78 or 92A, the charter or the bylaws;
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any action to interpret, apply, enforce or determine the validity of the charter or the bylaws; or
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any action asserting a claim governed by the internal affairs doctrine.
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The exclusive forum provision will provide federal courts located in the State of Nevada as the forum for claims to the extent that any such claim may be based upon federal law claims, Section 27 of the Exchange Act or the rules and regulations promulgated under the Exchange Act establishing jurisdiction with the federal courts over all suits brought to enforce any duty of liability created by the Exchange Act.
 
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INFORMATION ABOUT DRAFTKINGS, NEW DRAFTKINGS, DRAFTKINGS MERGER SUB AND GNOG MERGER SUB
DraftKings Inc.
DraftKings is a digital sports entertainment and gaming company. DraftKings provides users with daily fantasy sports, sports betting and iGaming opportunities, as well as media and other online consumer product offerings, and is also involved in the design and development of sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.
DraftKings’ mission is to make life more exciting by responsibly creating the world’s favorite real-money games and betting experiences. DraftKings accomplishes this by creating an environment where its users can find enjoyment and fulfillment through daily fantasy sports contests, sports betting and iGaming.
DraftKings seeks to innovate and to constantly improve its games and product offerings. Its focus is on creating unique and exciting experiences for its users. DraftKings is also highly focused on its responsibility as a steward of this new era in real-money gaming. DraftKings’ ethics guide every decision it makes, both with respect to the tradition and integrity of sports and in its investments in regulatory compliance and consumer protections.
DraftKings Class A common stock is currently listed on the Nasdaq under the symbol “DKNG.” DraftKings’ principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116. DraftKings’ telephone number is (617) 986-6744, and its website address is www.draftkings.com. Information contained on DraftKings’ website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this joint information statement/prospectus or the registration statement of which it forms a part.
New Duke Holdco, Inc.
New DraftKings is a Nevada corporation and a direct, wholly-owned subsidiary of DraftKings New DraftKings was incorporated on August 6, 2021, solely for the purpose of effecting the mergers and, immediately after the mergers, New DraftKings will be renamed “DraftKings Inc.”
Pursuant to the merger agreement, (1) DraftKings Merger Sub will merge with and into DraftKings, and (2) GNOG Merger Sub will merge with and into GNOG. As a result of the mergers, DraftKings and GNOG will survive and become wholly-owned subsidiaries of New DraftKings. New DraftKings will become a publicly traded corporation, and former DraftKings stockholders and former GNOG stockholders will own stock in New DraftKings.
New DraftKings has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. New DraftKings’ principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
Duke Merger Sub, Inc.
DraftKings Merger Sub is a Nevada corporation and a direct, wholly-owned subsidiary of New DraftKings. DraftKings Merger Sub was incorporated on August 6, 2021, solely for the purpose of effecting the DraftKings merger. As a result of the DraftKings merger, DraftKings Merger Sub will merge with and into DraftKings, with DraftKings surviving and becoming a wholly-owned subsidiary of New DraftKings.
DraftKings Merger Sub has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. DraftKings Merger Sub’s principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
Gulf Merger Sub, Inc.
GNOG Merger Sub is a Delaware corporation and a direct, wholly-owned subsidiary of New DraftKings. GNOG Merger Sub was incorporated on August 6, 2021, solely for the purpose of effecting
 
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the GNOG merger. GNOG Merger Sub will merge with and into GNOG and, as a result, GNOG will become a wholly-owned subsidiary of New DraftKings.
GNOG Merger Sub has not conducted any business operations other than that which is incidental to its formation and in connection with the Transactions. GNOG Merger Sub’s principal executive offices are located at 222 Berkeley Street, 5th Floor, Boston, Massachusetts 02116.
 
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INFORMATION ABOUT GNOG
Description of GNOG’s Business
Overview
GNOG is an online gaming, or iGaming, and digital sports entertainment company focused on providing its customers with the most enjoyable, realistic and exciting online gaming experience in the market. GNOG currently operates in New Jersey, Michigan and West Virginia, where it offers patrons the ability to play their favorite casino games and bet on live-action sports events, and in Virginia, where it currently offers online sports betting only. GNOG’s desire to innovate, improve and offer the most realistic online gaming platform drives its employees and defines its business, as it pursues its vision to be the leading destination for online gaming players with a modern mindset.
GNOG was one of the first online gaming operators to enter the New Jersey market in 2013, was also one of the first online gaming operators to enter the Michigan market on January 22, 2021, and has recently entered the West Virginia market on September 22, 2021 and the Virginia market (offering online sports betting only) on September 29, 2021. As an affiliate of the Golden Nugget/Landry’s family of companies, which we refer to as “GNL”, GNOG aspires to live up to the reputation of the Golden Nugget brand, a storied brand in the gaming industry, by providing customers with an online gaming experience consistent with Golden Nugget’s land-based casinos. GNOG’s technology is designed to create superior online betting experiences for the avid casino and sports bettor. GNOG’s goals have been shaped with these players in mind, both in who he or she is today and who GNOG anticipates he or she will become as the gaming industry evolves. The vision of the Golden Nugget brand underpins GNOG’s position as a market leader and innovator in today’s rapidly expanding online gaming industry.
GNOG believes that it is well-positioned for continued growth with the support of the Golden Nugget brand and its seasoned management team, together with its commitment to innovation. GNOG believes that this enviable combination of expertise, brand recognition and infrastructure will not only support its continued success in the New Jersey, Michigan and West Virginia markets, but also allow GNOG to capture market share in other key online gaming states in the future. GNOG recently entered the Virginia (in respect of online sports betting only), West Virginia and Michigan markets, and is currently targeting Pennsylvania and Illinois as states in which it plans to enter in the near future, subject to regulatory approvals, with Colorado, Iowa, Louisiana, and Arizona expected to follow in 2022, subject to regulatory approvals.
GNOG has experienced tremendous growth since it began operations. According to information published by the DGE, as of December 31, 2020, GNOG’s market share in the New Jersey online gaming market was 11%. GNOG’s gross gaming revenues, which we refer to as “GGR”, have grown from $9.6 million in 2014 to $60.9 million in 2019, and $101.9 million in 2020. In addition, GNOG has steadily grown its average monthly net casino revenue per depositing user from $467 in 2014 to $566 in 2019, and $631 in 2020. GNOG’s GGR is defined as the sum of all customer wagers (including the amount of all promotional credits wagered by such customers), minus all winnings paid to such customers on such wagers. For purposes of calculating its GGR, GNOG includes only settled wagers, and excludes all pending online casino or online sports bets which have not yet settled (e.g., sports bets on sports events that have not concluded as of the date of determination of GGR).
GNOG’s Class A common stock is currently listed on the Nasdaq under the symbol “GNOG.” GNOG’s principal executive offices are located at 1510 West Loop South, Houston, Texas 77027. GNOG’s telephone number is (713) 850-1010, and its website address is http://www.gnoginc.com. Information contained on GNOG’s website or connected thereto is provided for textual reference only and does not constitute part of, and is not incorporated by reference into, this joint information statement/prospectus or the registration statement of which it forms a part.
Corporate History
GNOG (formerly known as Landcadia Holdings II, Inc., which we refer to as “Landcadia II”, prior to the completion of the Landcadia Transaction) was originally incorporated as CAPS Holdings LLC, a Delaware limited liability company on August 11, 2015 and converted into a Delaware corporation on
 
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February 4, 2019 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses. On May 9, 2019, Landcadia II completed an initial public offering, after which its securities began trading on the Nasdaq.
On December 29, 2020, GNOG completed the Landcadia Transaction. The Landcadia Transaction was completed pursuant to the purchase agreement, dated June 28, 2020 (as amended on September 17, 2020 and December 20, 2020) by and among GNOG, LHGN Holdco, LHGN Interestholder, GNOG Holdco and GNOG LLC. Following the closing of the Landcadia Transaction, GNOG changed its name from “Landcadia Holdings II, Inc.” to “Golden Nugget Online Gaming, Inc.”
GNOG operates as an umbrella partnership C-corporation, which we refer to as an “Up-C”, meaning that substantially all of its assets are held indirectly through GNOG LLC, its indirect subsidiary, and its business is conducted through GNOG LLC.
GNOG LLC was incorporated in New Jersey in February 2011 under the name Landry’s A/C Gaming, Inc., which was subsequently changed to Landry’s Finance Acquisition Co. in November 2011 and ultimately Golden Nugget Online Gaming, Inc. on May 6, 2020, and which converted into a limited liability company by merging with and into GNOG LLC in December 2020 in connection with the Landcadia Transaction.
Industry
Background /Market Opportunity
GNOG is focused on becoming a leader in U.S. iGaming, which is a fast-growing part of the larger U.S. gaming industry. iGaming includes all online casino games played on a computer or mobile device such as slots, video poker, electronic table games and live dealer table games, but does not include online sports betting. The iGaming market includes both “Pure Casino” players who sign up for the primary purpose of playing online casino games, such as slots or table games, as well as sports betting players who also want to play casino games.
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus, which we refer to as “COVID-19”. The current COVID-19 pandemic has served as a catalyst to accelerate growth in the U.S. iGaming industry as many people are spending more time at home. The pandemic has changed the way people work and live, with increased use and dependence on technology and a need for at-home entertainment options. The number of people engaging in iGaming has increased significantly as a result of these changes, some of which are currently expected to continue for an indefinite period of time or may become permanent. According to the DGE, the iGaming market in New Jersey has grown significantly, from approximately $221 million in total iGaming revenues in 2017 to approximately $462 million in 2019, and to approximately $931.5 million in 2020, representing a 101.7% increase over the same period in 2019.
GNOG has operated real money iGaming and/or online sports betting within New Jersey since 2013, Michigan since January 2021 and West Virginia since September 2021, and GNOG has operated online sports betting within Virginia since September 2021. GNOG is also contracted to manage certain third parties that are also authorized to operate real money iGaming in New Jersey, for which GNOG receives royalties and cost reimbursement. Today, iGaming is legal in New Jersey, Pennsylvania, Delaware, Michigan, Connecticut and West Virginia, and online sports betting is legal in 21 states and the District of Columbia. In addition, legislation to legalize iGaming and/or online sports betting is pending in several states. GNOG anticipates that legalization of iGaming and online sports betting will expand across the U.S. as states understand and appreciate the revenue potential.
Over the last few years, iGaming revenue as a percentage of land-based gaming revenue has grown. For example, based on data released by the DGE, between 2016 and 2019, iGaming revenue grew from 7% to 17% of land-based gaming revenue in New Jersey. For 2020, iGaming revenue in New Jersey represented 62% of land-based gaming revenue, according to data published by the DGE. On March 16, 2020, all Atlantic City land-based casinos were required to close because of the governmental response to the COVD-19 pandemic. In January, February and March 2020, iGaming revenues represented 27.7%, 23.0% and 75.8%
 
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of Atlantic City land-based casino gaming revenues, respectively. During April, May and June 2020, Atlantic City land-based casino gaming generated no revenue. Atlantic City casinos reopened on July 2, 2020, resulting in the percentage of iGaming revenues compared to Atlantic City land-based casino gaming revenues decreasing to 65.6% for the month of December 2020. The increase in iGaming revenues in 2020 is attributable, in part, to the temporary closure of Atlantic City casinos, leading traditional casino players to utilize online gaming. Nonetheless, GNOG believes the COVID-19 pandemic has accelerated the growth trend in iGaming. GNOG’s management estimates that, on a run-rate basis, the iGaming market in the U.S. over time will achieve 30% penetration versus the land-based market.
GNOG’s Competitive Strengths
GNOG’s competitive strengths include:
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The strength of the Golden Nugget brand;
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iGaming focus targeting high value customers;
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Profitable customer acquisition;
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Market-leading innovation and content;
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Continued support from Golden Nugget;
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Seasoned management team of industry experts;
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Best-in-class customer support; and
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Proven operator with industry recognition.
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Strength of the Golden Nugget Brand
One of the unique features that has contributed to GNOG’s success is its affiliation with GNL and Mr. Fertitta, GNL’s chairman and chief executive officer and GNOG’s chief executive officer and chairman of the GNOG Board. GNL is a household name in the U.S., with a diversified restaurant, hospitality, entertainment and gaming portfolio. The Golden Nugget name is a well-known and storied brand in the gaming industry. Celebrated since opening as a gambling hall in Las Vegas in 1946, Golden Nugget is associated with gaming and high-quality service at an attractive value. Golden Nugget maintains a geographically diverse portfolio of five land-based casinos: Golden Nugget Las Vegas, Nevada; Golden Nugget Laughlin, Nevada; Golden Nugget Lake Charles, Louisiana; Golden Nugget Biloxi, Mississippi; and Golden Nugget Atlantic City, New Jersey. The Golden Nugget casino properties offer popular slot machines and table games as well as a wide selection of amenities.
As the online gaming affiliate of Golden Nugget Atlantic City, LLC, a New Jersey limited liability company and an indirect, wholly-owned subsidiary of FEI, which we refer to as “GNAC”, GNOG has taken the best aspects of its legacy brand and modified them to attract today’s online gaming customer.
Mr. Fertitta is an internationally recognized businessman with a significant media presence throughout the U.S. According to CNBC, Mr. Fertitta’s TV show, “Billion Dollar Buyer,” was the network’s “most watched premiere hour ever” in 2016 and has aired three successful seasons. In addition, he is a New York Times Best-Selling author with his book “Shut Up and Listen,” which outlines his business philosophies. In addition to GNL, Mr. Fertitta is the sole owner of the NBA’s Houston Rockets. GNOG’s brand has been significantly enhanced through Mr. Fertitta’s promotion and support of GNOG.
iGaming Focus Targeting High Value Customers
As one of the only true iGaming-focused online gaming companies, GNOG believes that it is well positioned to continue to acquire the highest value customers in the iGaming market. While GNOG offers both iGaming and online sports betting, its management believes the combination of higher lifetime player value, which we refer to as “LTV”, and player demographics of iGaming players creates a superior value proposition for iGaming. As a result, GNOG intends to focus its efforts on acquiring high value iGaming players. Nevertheless, GNOG believes that offering online sports betting increases its competitive advantage because many online sports betting players also choose to play casino games.
 
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A key to GNOG’s success is its superior ability to acquire and retain the highest value iGaming players, resulting in higher engagement as measured by LTV. GNOG believes that the average iGaming player plays longer, reinvests his or her winnings more quickly and has a higher disposable income, all of which contributes to a higher total engagement per active month than land-based casino players and online sports bettors. As of December 31, 2020, GNOG’s five-year gross LTV in gross gaming revenue was approximately $7,671, which it believes is greater than that of its competitors. In addition, GNOG has steadily grown its average monthly net casino revenue per depositing user from $467 in 2014 to $566 in 2019, and $631 in 2020.
Player demographics for GNOG’s iGaming players are relatively split between gender, with around 55% of customers being male and 45% being female. In contrast, approximately 95% of its online sports bettors are male. Similarly, GNOG’s average iGaming player is between 40 and 45 years old, whereas GNOG’s online sports player tends to be between 30 and 35 years old.
Profitable Customer Acquisition
Another component of GNOG’s success is its ability to attract new high value customers through GNL’s customer database. Landry’s Select Club, a restaurant loyalty program implemented in 2009 by GNL, had over 3 million members as of December 31, 2020, and prior to the outbreak of COVID-19, was adding more than 5,500 members per week. Approximately 18% of GNL’s restaurant sales are associated with Landry’s Select Club transactions. The Golden Nugget 24k Select Club, a loyalty program for Golden Nugget casino customers, had over 3.9 million members as of December 31, 2020, and prior to the outbreak of COVID-19, was adding over 7,000 new members per week on average since July 2019. In 2019, approximately 80% of rated play revenue at Golden Nugget casinos was associated with 24k members. GNOG’s management believes that access to this database is an advantage in promoting its products to new customers and will accelerate its growth into new jurisdictions as the legalization of online gaming spreads across the U.S.
In addition to using the GNL databases, GNOG targets its marketing efforts through high-quality traffic sources including TV advertising, targeted digital spend, and extensive relationships with leading affiliates in the U.S. market to increase its customer base. As is typical in high-growth industries, GNOG believes most companies in the online gaming industry to date have allocated a disproportionate amount of their capital to marketing and advertising to build a customer database in the hopes of capturing market share. In contrast, GNOG has been able to keep customer acquisition costs relatively low as a percentage of its revenue while achieving significant growth. GNOG estimates that it typically earns a break-even return on investment, or ROI, on new players by month five, earns an approximate 2.2x ROI on such new players by year one, and an approximate 8.0x ROI on such new players by year five, in each case where ROI is calculated as cumulative GGR divided by advertising spend.
Market-Leading Innovation and Content
GNOG offers customers a superior platform for iGaming with what GNOG believes to be a best-in-class iGaming content mix, combined with continued innovation and new product offerings. As of September 30, 2021, GNOG offered over 900 iGaming game titles. GNOG believes that its ability to offer a wider array of iGaming products effectively reduces its customer acquisition costs and player churn by providing a superior product offering as compared to its competitors.
GNOG believes that its commitment to innovation is demonstrated by consistently being first-to-market with the latest iGaming offerings:
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Live Dealer Studio.   GNOG was the first company to launch a live dealer studio in the United States. The live dealer studio provides a more realistic environment for customers through interactions with a live dealer and fellow players, which GNOG’s management believes has been a significant factor in convincing casino players to use iGaming. Because of the success of the live dealer studio, GNOG has 18 tables in its live dealer studio as of December 31, 2020, increased from four tables when GNOG first offered this product in 2016.
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Golden Nugget Branded Video Slot Games.   GNOG believes that it was also the first to offer a branded video slot game online, the “Golden Nugget Video Slot,” which gives players the experience of being in one of Golden Nugget’s land-based casinos.
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New Games.   GNOG has been successful in introducing new game categories to its customers, such as Steppers and Megaways.
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GNOG is well positioned to maintain its status as an online gaming innovator through its strategic partnerships with the top gaming equipment suppliers in the industry, including Scientific Games Digital, which we refer to as “SGD”. GNOG has a multi-year, multi-state, multi-product, multi-channel agreement with SGD for iGaming and online sports betting, whereby SGD provides GNOG with its core platform (Player Account Management, Wallet, Bonusing Tools), online casino platform (Open Gaming System), online casino games and its online sports betting platform and sports managed trading services through June 30, 2024 in New Jersey, and will provide such platforms and services in the future for terms of generally three or four years following specified milestone events such as the initial deployment of GNOG's software in a state, or of any additional vertical in Pennsylvania or certain other states. This and other partnerships have enabled GNOG to launch 20 exclusive games in 2020 with 36 more games that have been released to date in 2021.
Continued Support from GNL
GNOG receives significant support from GNL through several contractual arrangements described below. Set forth below is a summary of the terms of these contractual arrangements.
Trademark License Agreement
On December 29, 2020, in connection with the closing of the Landcadia Transaction, GNOG LLC, Golden Nugget and GNLV entered into the trademark license agreement, pursuant to which GNLV granted to GNOG LLC an exclusive license to use certain “Golden Nugget” trademarks (and other trademarks related to GNOG LLC’s business) in connection with operating online real money casino gambling and sports betting in the U.S. and any of its territories, subject to certain restrictions, in exchange for a royalty payment. Golden Nugget and GNLV are subsidiaries of FEI. Pursuant to the terms of the merger agreement, prior to and as a condition to the completion of the mergers, GNOG, Golden Nugget and GNLV will enter into an amendment to the trademark license agreement. For further information, please read the section entitled “The Merger Agreement—Conditions to the Completion of the Mergers” beginning on page 152 of this joint information statement/prospectus.
A&R Online Gaming Operations Agreement with GNAC
Pursuant to an amended and restated online gaming operations agreement, which we refer to as the “online gaming operations agreement”, GNAC granted GNOG LLC the right to host, manage, control, operate, support and administer, under GNAC’s land-based casino operating licenses, the “Golden Nugget”-branded online gaming business, the live dealer studio in New Jersey and the third-party operators. Under the online gaming operations agreement, GNOG LLC is responsible for managing, administering and operating its online gaming business and providing services to GNAC in connection with the management and administration of certain platform agreements and GNAC is required to provide certain operational and infrastructure services to GNOG LLC in connection with its New Jersey operations. In addition to the royalty payable pursuant to the trademark license agreement, under the online gaming operations agreement GNOG LLC is also obligated to reimburse GNAC for certain expenses incurred by GNAC in connection with the New Jersey online gaming business, such as New Jersey licensing costs, regulatory fees, certain gaming taxes and other expenses incurred by GNAC directly in connection with GNOG LLC’s operations in New Jersey. The online gaming operations agreement has a term of five years commencing from April 2020 and is renewable by GNOG LLC for an additional five-year term. The online gaming operations agreement also provides for, among other things, (a) minimum performance standards under which GNOG LLC is required to operate the “Golden Nugget”-branded online gaming business, and (b) an arm’s length risk allocation framework (including with respect to insurance and indemnification obligations). The online gaming operations agreement, as modified by the master commercial agreement, is expected to remain in effect following the completion of the Transactions, including the mergers.
Leases
GNOG LLC leases a portion of the space within the Golden Nugget Atlantic City Hotel & Casino located at 600 Huron Ave, Atlantic City, NJ 08401 from GNAC, for the operation of an online live casino
 
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table gaming studio from which live broadcasted casino games are offered to online gaming customers. The lease has a five-year term from April 27, 2020, plus one five-year renewal period. This lease is expected to remain in effect following the completion of the Transactions, including the mergers.
In connection with the completion of the Landcadia Transaction, GNOG LLC entered into office leases with GNAC and Golden Nugget (or their respective affiliates). These office leases provide for annual rent payments of $88,128 for the office space leased in Houston, Texas and $24,252 for the office space leased in Atlantic City, New Jersey, subject to an increase of 10% for any renewal term and market rent increases in the event that GNOG LLC requires the use of additional office space during the term thereof. However, any amounts actually paid by GNOG LLC under the trademark license agreement and the online gaming operations agreement will be credited against GNOG LLC’s rent obligations under these office leases. Consequently, GNOG LLC paid no rent payments pursuant to these leases during 2021. Each such office lease has a term of five years. In connection with any renewal of the term of the online gaming operations agreement, GNOG LLC has an option to renew each office lease for the lesser of (i) five years or (ii) the length of the renewed term of the online gaming operations agreement. Each office lease may be terminated by GNOG LLC or the respective landlord upon six months’ notice. These office leases are expected to remain in effect following the completion of the Transactions, including the mergers.
Services Agreement
In connection with the Landcadia Transaction, GNOG LLC entered into the services agreement with Golden Nugget to provide for the performance of certain services. Pursuant to the services agreement, GNAC and Golden Nugget have agreed to provide certain services and facilities, including payroll, accounting, financial planning and other agreed upon services, to GNOG LLC from time to time and GNOG LLC has agreed to provide continued management, consulting and administrative services to Golden Nugget’s applicable subsidiary in connection with retail sports betting conducted in such subsidiary’s brick-and-mortar casino. Under the services agreement, each party is responsible for its own expenses and the employer of any shared employee is responsible for such shared employee’s total compensation. The services agreement is expected to be terminated in connection with the completion of the Transactions, including the mergers. However, certain services are expected to continue on a transitional basis pursuant to a transition services agreement to be entered into in connection with the completion of the Transactions, including the mergers.
Agreement with Danville Development
On November 18, 2020, GNOG LLC entered into a definitive agreement with Danville Development, LLC, which we refer to as “Danville Development”, for market access to the State of Illinois. Danville Development is a joint venture between Wilmot Gaming Illinois, LLC and GN Danville, LLC, a wholly owned subsidiary of Golden Nugget and an affiliate of GNOG LLC, formed to build a new “Golden Nugget”-branded casino in Danville, Illinois, pending obtaining all regulatory approvals. GN Danville, LLC will own a 25% equity interest in Danville Development and has an option to purchase the other equity interests in the future at a price to be determined pursuant to the definitive agreement. The definitive agreement has a term of 20 years and requires GNOG LLC to pay Danville Development a percentage of its online net gaming revenue, subject to minimum royalty payments over the term. In addition, under the definitive agreement, GNOG LLC holds the exclusive right to offer online sports betting and, if permitted by law in the future, online casino wagering. GNOG LLC has committed that it will cause a mezzanine loan in the amount of $30.0 million to be provided to Danville Development, for the development and construction of the casino, which will indirectly benefit GN Danville, LLC. This mezzanine loan is currently expected to be fully funded in the first quarter of 2022.
Seasoned Management Team of Industry Experts
GNOG is led by a seasoned management team of industry experts that enable the company to continue to achieve success in the online gaming space. Mr. Fertitta, GNOG’s chief executive officer and chairman of the GNOG Board, has established himself as one of the preeminent businessmen in the United States regardless of industry focus. Mr. Fertitta has an extensive track record in the consumer, hospitality and gaming sectors with over 30 years of experience. Mr. Winter, GNOG’s president, is a gaming industry
 
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veteran and has served as senior vice-president and general manager of the online gaming division of Landry’s LLC for seven years. Prior to Landry’s LLC, Mr. Winter served as chief executive officer of Betclic, a major European online sports betting and gaming operator, which merged with Expekt.com.
Best-In-Class Customer Support
GNOG strives to provide its patrons with a best-in-class customer support network and unparalleled service. GNOG believes that this commitment to excellent customer service has enabled GNOG to retain more of its acquired players by offering users the live support needed to facilitate an enjoyable online gaming experience. GNOG’s customer service representatives, who are available via phone, live chat, email and help center 24 hours a day, seven days a week, have an average of three years of experience in the online gaming industry, providing users with a knowledgeable network of professionals to facilitate connectivity with GNOG’s interface, answer questions and improve user play. GNOG’s commitment to its customers has resulted in superb customer support reviews.
Based on a survey of over 27,000 customers, GNOG earned a customer satisfaction rate of 96% in 2019. Based on its bi-weekly statistics that GNOG reported to the DGE, in 2019 GNOG’s inbound answer rate for customer calls was 95%, meaning that 95% of customer calls were answered by a live customer support agent before going to voicemail.
Proven Operator with Industry Recognition
Since GNOG’s inception, GNOG has consistently been recognized as one of the best online gaming operators in the United States. GNOG has received the following awards:
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eGaming Review, which we refer to as “EGR”, North America’s Operator of the Year award in 2017, 2018, 2019 and 2020;
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EGR North America’s Casino Operator of the Year award in 2017, 2018 and 2019;
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EGR North America’s Acquisition Strategy award in 2017, 2018 and 2019;
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EGR North America’s Marketing Campaign of the year 2021;
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EGR North America’s Best New Game award in 2019;
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EGR North America’s Mobile Operator of the Year award in 2020 and 2021; and
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iGaming North America’s Operator of the Year award in 2015, 2016 and 2017.
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While GNOG does not benchmark its success on industry awards and recognition, GNOG believes these awards help to demonstrate its established cutting-edge, online gaming platform.
Short-Term Growth Plan and Opportunities
GNOG commenced iGaming and online sports betting operations in Michigan in January 2021 and West Virginia in September 2021, and GNOG commenced online sports betting operations in Virginia in September 2021.
Michigan
GNOG began offering iGaming and online sports betting in Michigan in January 2021 through an arrangement with a licensed tribal casino. According to the Michigan Lawful Internet Gaming Act, as of December 31, 2020, Michigan has authorized up to 15 licenses for iGaming (three commercial land-based casinos and 12 tribes), and the applicable Michigan law allows for only one iGaming operating brand per licensee.
On June 17, 2020, GNOG LLC entered into a market access agreement with Keweenaw Bay Indian Community, a federally recognized Indian Tribe, which we refer to as “KBIC”, pursuant to which KBIC agreed to grant it the right to operate a “Golden Nugget”-branded online casino (including, at its discretion, online poker) and online sportsbook in the State of Michigan under KBIC’s casino license held in connection with KBIC’s ownership of the Ojibwa Casinos located in Baraga, Michigan and Marquette,
 
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Michigan. The initial term of the agreement with KBIC is 15 years with an optional 10-year renewal period. On December 8, 2020, GNOG was issued a Provisional I-Gaming & Internet Sports Betting Supplier License. On October 12, 2021, the Michigan Gaming Board approved the issuance of an I-Gaming & Internet Sports Betting Supplier License to GNOG.
West Virginia
GNOG launched iGaming and online sports betting operations in West Virginia in September 2021. Online sports betting was legalized in West Virginia in March 2018 and iGaming was legalized in March 2019. According to the West Virginia Lottery Interactive Wagering Act and the West Virginia Lottery Sports Wagering Act, as of December 31, 2020, West Virginia has authorized up to five statewide licenses for online sports betting and iGaming each, and the applicable West Virginia laws allow for three brands per licensee.
On November 20, 2020, GNOG LLC entered into a market access agreement with Greenbrier Hotel Corporation, which gives GNOG the right to offer online sports betting and iGaming in West Virginia. The term of the agreement with Greenbrier Hotel Corporation is for 10 years and allows GNOG LLC to use the “Golden Nugget” brand. As part of such agreement, GNOG LLC pays a percentage of its online net gaming revenue, subject to making minimum royalty payments to Greenbrier Hotel Corporation over the term.
Virginia
GNOG launched online sports betting operations in September 2021 and is pursuing iGaming, if and when legalized, in Virginia. For its operations in Virginia, LHGN Holdco has partnered with the Virginia Sports Technology Group, LLC, who have retained an equity interest in Golden Nugget Online Gaming VA, LLC, to operate online sports betting in Virginia. Golden Nugget Online VA, LLC, was granted an untethered temporary sports betting permit by the Virginia Lottery. Sports betting in Virginia was legalized in April 2020, initially authorizing a minimum of four untethered sports betting licenses and a maximum of 12 under a single brand, not including professional sports teams who may also be eligible; the same bill also authorized five new retail casinos, each of which will be able to authorize a skin.
Intellectual Property
GNOG does not currently own any registered intellectual property. GNOG’s intellectual property portfolio consists substantially of licensed intellectual property, including the “GOLDEN NUGGET” trademarks licensed pursuant to the trademark license agreement with Golden Nugget and GNLV, each of which are subsidiaries of FEI.
Pursuant to the trademark license agreement, GNLV granted GNOG LLC an exclusive license to use certain “GOLDEN NUGGET” trademarks (and other trademarks related to its business) and domain names, including goldennuggetcasino.com, solely in connection with online real money casino gambling and sports betting in the U.S. and any of its territories. Pursuant to the terms of the merger agreement, prior to and as a condition to the completion of the mergers, GNOG, Golden Nugget and GNLV will enter into an amendment to the trademark license agreement. For further information, please read the section entitled “The Merger Agreement—Conditions to the Completion of the Mergers” beginning on page 152 of this joint information statement/prospectus.
In addition to the intellectual property licensed by GNOG LLC under the trademark license agreement, GNOG licenses certain third-party intellectual property (such as GNOG’s platform and/or games) under licenses and service agreements with those third parties to operate its online real money casino gambling and sports betting business, including through agreements with gaming content creators and service providers. Although GNOG believes the licenses under the trademark license agreement and these third-party agreements are sufficient for the operation of GNOG’s business, these licenses limit the use of the licensed intellectual property in specific manners and for specific time periods and GNOG relies entirely on such rights granted by third parties or affiliates to operate its business. GNOG may also rely in part on the counterparties to the trademark license agreement and such other third-party agreements to appropriately register, protect and defend the licensed intellectual property.
 
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Companies in the gaming, sports betting, casino, technology and other industries may own large numbers of patents, copyrights, trade secrets, and trademarks and may frequently request license agreements, threaten litigation or file suit against GNOG based on allegations of infringement, misappropriation, or other violations of intellectual property rights. From time to time, GNOG may face allegations by third parties, including GNOG’s competitors and non-practicing entities, that GNOG has infringed, misappropriated, or otherwise violated their trademarks, copyrights, trade secrets, patents and other intellectual property rights. As GNOG’s business grows, GNOG will likely face more claims of infringement.
Government Regulation
GNOG is subject to various U.S. and foreign laws and regulations that affect its ability to operate in the iGaming and sports betting industries. These industries are generally subject to extensive and evolving regulations that could change based on political and social norms and that could be interpreted in ways that could negatively impact its business.
The gaming industry, which includes iGaming and sports betting, is heavily regulated and in order to continue its operations GNOG must maintain licenses and pay gaming taxes or a percentage of revenue in each jurisdiction in which GNOG operates. GNOG’s business is subject to extensive regulation under the laws, rules and regulations of the jurisdictions in which GNOG operates. These laws, rules and regulations generally concern the responsibility, financial stability, integrity and character of the owners, managers and persons with material financial interests in gaming operations, along with the integrity and security of GNOG’s iGaming and sports betting offerings. Violations of laws or regulations in one jurisdiction could result in disciplinary action in that and other jurisdictions.
Gaming laws are generally based upon declarations of public policy designed to protect gaming consumers and the viability and integrity of the gaming industry. Gaming laws also may be designed to protect and maximize state and local tax revenues, as well as to enhance economic development and tourism. To accomplish these public policy goals, gaming laws establish stringent procedures to ensure that participants in the gaming industry meet certain standards of character and responsibility. Among other things, gaming laws require gaming industry participants to:
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ensure that unsuitable individuals and organizations have no role in gaming operations;
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establish procedures designed to prevent cheating and fraudulent practices;
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establish and maintain anti-money laundering practices and procedures;
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establish and maintain responsible accounting practices and procedures;
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maintain effective controls over their financial practices, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues;
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maintain systems for reliable record keeping;
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file periodic reports with gaming regulators;
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establish programs to promote responsible gaming; and
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enforce minimum age requirements.
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Typically, a state regulatory environment is established by statute and underlying regulations and is administered by one or more regulatory agencies (typically a gaming commission or state lottery) who regulate the affairs of owners, managers and persons with financial interests in gaming operations. Among other things, gaming authorities in the various jurisdictions in which GNOG conducts or intends to conduct its business:
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adopt rules and regulations under the applicable implementing statutes;
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interpret and enforce gaming laws and regulations;
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impose fines and penalties for violations;
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review the character and fitness of participants in gaming operations and make determinations regarding their suitability or qualification for licensure;
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•
grant licenses for participation in gaming operations;
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collect and review reports and information submitted by participants in gaming operations;
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review and approve certain transactions, which may include acquisitions or change-of-control transactions of gaming industry participants and securities offerings and debt transactions in which such participants engage; and
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establish and collect fees and taxes in jurisdictions where applicable.
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While GNOG believes that it is in compliance in all material respects with all applicable iGaming and sports betting laws, licenses and regulatory requirements, GNOG cannot assure that its activities or the activities of its users will not become the subject of any regulatory or law enforcement investigation, proceeding or other governmental action or that any such proceeding or action, as the case may be, would not have a material adverse impact on GNOG or its business, financial condition or results of operations.
Licensing and Suitability Determinations
In order to operate in certain jurisdictions, GNOG must obtain either a temporary or permanent license or determination of suitability from the responsible authorities. GNOG seeks to ensure that it obtains all necessary licenses to develop and put forth its offerings in the jurisdictions in which GNOG operates and where GNOG’s users are located.
Gaming laws require GNOG, and often each of its holding and intermediary companies as well as subsidiaries, certain of its directors, officers and employees, and in some cases, certain of GNOG’s shareholders, to obtain licenses from, or found suitable by, gaming authorities. Licenses and suitability findings require a determination that the applicant is qualified. Where not mandated by statute, rule or regulation, gaming authorities typically have broad discretion in determining who must apply for a license or finding of suitability and whether an applicant qualifies for licensing or should be deemed suitable to conduct operations within a given jurisdiction. When determining to grant a license to an applicant, gaming authorities generally consider: (i) the financial stability, integrity, responsibility and suitability of the applicant and its applicable affiliated entities and individuals (including verification of the applicant’s sources of funding); (ii) the quality and security of the applicant’s online real-money gaming platform, hardware and related software, including the platform’s ability to operate in compliance with local regulation, as applicable; (iii) the applicant’s history; (iv) the applicant’s ability to operate its gaming business in a socially responsible manner; and (v) in certain circumstances, the effect on competition.
Gaming authorities may, subject to certain administrative procedural requirements, (i) deny an application, or limit, condition, revoke or suspend any license issued, or suitability finding made, by them; (ii) impose fines, either on a mandatory basis or as a consensual settlement of regulatory action; (iii) demand that named individuals or shareholders be disassociated from a gaming business; and (iv) in serious cases, liaise with local prosecutors to pursue legal action, which may result in civil or criminal penalties.
Events that may trigger revocation of a gaming license or another form of sanction vary by jurisdiction. However, typical events include, among others: (i) conviction in any jurisdiction of certain persons with an interest in, or key personnel of, the licensee of an offense that is punishable by imprisonment or may otherwise cast doubt on such person’s integrity; (ii) failure to comply with any material term or condition of the gaming license; (iii) declaration of, or otherwise engaging in, certain bankruptcy, insolvency, winding-up or discontinuance activities, or an order or application with respect to the same; (iv) obtaining the gaming license by a materially false or misleading representation or in some other improper way; (v) violation of applicable anti-money laundering or terrorist financing laws or regulations; (vi) failure to meet commitments to users, including social responsibility commitments; (vii) failure to pay in a timely manner all gaming or betting taxes or fees due; or (viii) determination by the gaming authority that there is another material and sufficient reason to revoke or impose another form of sanction upon the licensee.
As noted above, in addition to GNOG and its direct and indirect holding companies and subsidiaries, gaming authorities generally also have the right to investigate individuals or entities having a material relationship to, or material involvement with, GNOG or any of its affiliates, to determine whether such individual or entity is suitable as a business associate. Specifically, as part of the process of GNOG obtaining
 
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iGaming and sportsbook licenses, certain of GNOG’s officers, directors, and employees and in some cases, certain of GNOG’s shareholders (typically, beneficial owners of more than five percent (5%) of a company’s outstanding equity, with most jurisdictions providing that “institutional investors” ​(as defined by a particular jurisdiction) can seek a waiver of these requirements) must file applications with the gaming authorities and may be required to be licensed or to qualify or be found suitable in many jurisdictions. Qualification and suitability determinations generally require the submission of extensive and detailed personal and financial disclosures followed by a thorough investigation. The applicant must pay all the costs of the investigation. Changes with respect to the individuals who occupy licensed positions must be reported to gaming authorities and in addition to the authority to deny an application for licensure, qualification, or a finding of suitability, gaming authorities have jurisdiction to disapprove a change in a corporate position. If any director, officer, employee or significant shareholder of GNOG is found unsuitable (including due to the failure to submit required documentation) by a gaming authority, GNOG may deem it necessary, or be required, to sever its relationship with such person. Furthermore, the GNOG certificate of incorporation provides that any of GNOG’s capital stock owned or controlled by an unsuitable person or its affiliates is transferred to GNOG or one or more third-party transferees, as and to the extent required by a gaming authority or deemed necessary or advisable by the GNOG Board in its sole and absolute discretion.
Generally, any person who fails or refuses to apply for a finding of suitability or a license within the prescribed period after being advised that it is required by gaming authorities may be denied a license or found unsuitable, as applicable. Furthermore, GNOG may be subject to disciplinary action or GNOG’s licenses may be in peril if, after GNOG receives notice that a person is unsuitable to be a stockholder or to have any other relationship with GNOG or any of its subsidiaries, GNOG: (i) pays that person any dividend or interest upon its voting securities; (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pays remuneration in any form to that person for services rendered or otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish their voting securities.
iGaming
GNOG previously operated its iGaming platform in New Jersey pursuant to a transactional waiver order issued by the DGE. GNOG previously applied to the Casino Control Commission for the issuance of a casino license as an “internet gaming affiliate” of GNAC and for qualification of GNOG as a holding company of casino licensee GNOG LLC. GNOG also sought qualification as a financial source of GNAC in connection with its business. On November 25, 2020, regulatory approvals were received in New Jersey for the issuance of a casino license to GNOG LLC as an internet gaming affiliate of GNAC; GNOG to act as a holding company of casino licensee GNOG LLC; and, GNOG LLC to qualify as a financial source of GNAC. GNOG is seeking regulatory approvals to be a “qualified gaming entity” in Pennsylvania. As a qualified gaming entity, GNOG would have the option, subject to regulatory approvals, to partner with competing online gaming companies, or skins, in a revenue share arrangement. GNOG LLC has also entered into an agreement with a tribal casino in Michigan, which allows GNOG to conduct its iGaming operations under the tribe’s license pursuant to a revenue share arrangement. GNOG has also recently executed similar agreements in Illinois and West Virginia. On November 20, 2020, GNOG LLC entered into a market access agreement with Greenbrier Hotel Corporation, which gave GNOG the right to offer online sports betting and iGaming in West Virginia. GNOG subsequently launched iGaming and online sports betting operations in West Virginia in September 2021. Generally, online gambling in the United States is only lawful when specifically permitted under applicable state law (e.g., Ohio, Iowa, Colorado, New York and Arizona). At the federal level, several laws provide federal law enforcement with the authority to enforce and prosecute gambling operations conducted in violation of underlying state gambling laws. These enforcement laws include the Unlawful Internet Gambling Enforcement Act, which we refer to as the “UIGEA”, the Illegal Gambling Business Act and the Travel Act. No violation of the UIGEA, the Illegal Gambling Business Act or the Travel Act can be found absent a violation of an underlying state law or other federal law. The Wire Act provides that anyone engaged in the business of betting or wagering who knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, will be fined or imprisoned, or both. However, the Wire Act notes
 
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that it shall not be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a state or foreign country where betting on that sporting event or contest is legal into a state or foreign country in which such betting is legal. In 2018, the DOJ reversed its previously-issued opinion published in 2011, which stated that interstate transmissions of wire communications that do not relate to a “sporting event or contest” fall outside the purview of the Wire Act. The DOJ’s updated opinion concluded instead that the Wire Act was not uniformly limited to gaming relating to sporting events or contests and that certain of its provisions apply to non-sports-related wagering activity. In June 2019, a federal district court in New Hampshire ruled that the DOJ’s new interpretation of the Wire Act was erroneous and vacated the DOJ’s new opinion. The DOJ had appealed the decision of the district court to the U.S. Court of Appeals for the First Circuit, which reaffirmed the district court’s decision on January 20, 2021.
Sportsbook
GNOG previously operated its online sports betting platform in New Jersey pursuant to the transactional waiver order referenced above. On November 25, 2020, GNOG obtained regulatory approval in New Jersey for the issuance of a casino license to GNOG as an “internet gaming affiliate” of GNAC. GNOG LLC’s agreement with a tribal casino in Michigan and with Greenbrier Hotel Corporation in West Virginia allow GNOG to conduct online sports betting operations in those states. In Virginia, GNOG was granted an untethered temporary sports betting permit by the Virginia Lottery, and GNOG has partnered with the Virginia Sports Technology Group, LLC, which has retained an equity interest in Golden Nugget Online Gaming VA, LLC, to operate online sports betting in Virginia. GNOG LLC’s market access agreement in Illinois will also allow GNOG to conduct future online sports betting operations in that state. On May 14, 2018, the U.S. Supreme Court issued an opinion determining that the Professional and Amateur Sports Protection Act of 1992, which we refer to as “PASPA”, was unconstitutional. PASPA prohibited a state from “authorizing by law” any form of sports betting. In striking down PASPA, the Supreme Court opened the potential for state-by-state authorization of sports betting. Several states and territories, including Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Washington, D.C., Virginia, West Virginia and Wyoming already have laws authorizing and regulating some form of sports betting online or in brick- and-mortar establishments. Sports betting in the United States is subject to additional laws, rules and regulations at the state level.
Data Protection and Privacy
Because GNOG handles, collects, stores, receives, transmits and otherwise processes certain personal information of its users and employees, GNOG is also subject to federal, state and foreign laws related to the privacy and protection of such data. The regulatory framework for privacy issues is rapidly evolving and is likely to remain uncertain for the foreseeable future.
Competition
Given that the U.S. online gaming market is vast and rapidly expanding, GNOG believes any company competing for the time and disposable income of customers within such market to be a competitor. Currently there are several online gaming companies in the United States that provide iGaming, online sports betting, or both, including, but not limited to, DraftKings, FanDuel, Betfair, Hard Rock Digital, Points Bet, Wynn Bet, Caesars Interactive, BetMGM, Roar Digital, Penn National Gaming and Rush Street Interactive. Additionally, GNOG expects competition from new entrants over time.
GNOG believes the principal competitive factors in the business include reliability, gaming offerings, the ability to acquire and retain users, regulatory compliance, market access, brand equity, customer service, and innovation.
Employees
GNOG has 239 employees. GNOG relies on a number of independent contractors to support GNOG’s operations. None of GNOG’s employees are represented by a labor organization or are a party to any collective bargaining arrangement.
 
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Responsible Gaming
GNOG is committed to the welfare of its users and as such has made available to them the industry-leading tools, systems, resources and processes they need to play responsibly.
Properties
GNOG leases a portion of the space within the Golden Nugget Atlantic City Hotel & Casino located at 600 Huron Ave, Atlantic City, NJ 08401, which we refer to as the “Atlantic City Hotel and Casino”, from GNAC for the operation of an online live casino table gaming studio from which live broadcasted casino games are offered to online gaming customers. The lease has a five-year term from April 27, 2020, plus one five-year renewal period. The lease is expected to remain in effect following the completion of the Transactions, including the mergers.
GNOG also has the right to use certain office and equipment spaces within the Atlantic City Hotel and Casino and in Houston, Texas by virtue of leases entered into with GNAC and Golden Nugget (or their respective affiliates).
Legal Proceedings
GNOG is from time to time subject to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. However, GNOG does not consider any such claims, lawsuits or proceedings that are currently pending, individually or in the aggregate, to be material to its business or likely to result in a material adverse effect on its future operating results, financial condition or cash flows.
 
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GNOG MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to assist in understanding GNOG’s financial condition and results of operations should be read in conjunction with GNOG’s financial statements and the notes thereto beginning on page F-1 of this joint information statement/prospectus.
The discussion and analysis should also be evaluated in conjunction with the section entitled “Risk Factors” beginning on page 27 of this joint information statement/prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled “Risk Factors” beginning on page 27 of this joint information statement/​prospectus. For further information, please read the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 25 of this joint information statement/prospectus.
Overview
GNOG is an online gaming, or iGaming, and digital sports entertainment company focused on providing its customers with the most enjoyable, realistic and exciting online gaming experience in the market. GNOG currently operates in New Jersey, Michigan and West Virginia, where it offers patrons the ability to play their favorite casino games and bet on live-action sports events, and in Virginia, where it offers online sports betting only. GNOG was one of the first online gaming operators to enter the New Jersey market in 2013 and was one of the first to enter the Michigan market on January 22, 2021, and has recently entered the West Virginia market on September 22, 2021, and the Virginia market (offering online sports betting only) on September 29, 2021.
GNOG operates as an Up-C, meaning that substantially all of GNOG’s assets are held indirectly through GNOG LLC, GNOG’s indirect subsidiary, and GNOG’s business is conducted through GNOG LLC.
Landcadia Transaction
As of May 9, 2019, GNOG (formerly known as Landcadia Holdings II, Inc. prior to the completion of the Landcadia Transaction) was a blank check company formed under the laws of the State of Delaware for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. On December 29, 2020, Landcadia II completed the Landcadia Transaction and changed its name to Golden Nugget Online Gaming, Inc. The Landcadia Transaction was accounted for as a reverse recapitalization and the reported amounts from operations prior to the Landcadia Transaction are those of GNOG LLC. For further information, please read Note 4 in the Notes to GNOG’s consolidated financial statements, included herein.
The historical financial information of Landcadia II (a special purpose acquisition company, which we refer to as a “SPAC”), prior to the closing of the Landcadia Transaction has not been reflected in GNOG’s financial statements as these historical amounts have been determined to be not useful information to a user of GNOG’s financial statements. SPACs deposit the proceeds from their initial public offerings into a segregated trust account until a business combination occurs, where such funds are then used to pay consideration for the acquiree and/or to pay stockholders who elect to redeem their shares of common stock in connection with the business combination. The operations of a SPAC, until the closing of a business combination, other than income from the trust account investments and transaction expenses, are nominal. Accordingly, no other activity in GNOG was reported for periods prior to December 29, 2020 besides GNOG LLC’s operations.
Covid-19
The COVID-19 pandemic has significantly impacted economic conditions around the world as federal, state and local governments react to the public health crisis. The direct impact on GNOG has been primarily through an increase in new patrons utilizing online gaming due to closures of land-based casinos and suspensions, postponement and cancellations of major sports seasons and sporting events, although the sports cancellations have not significantly affected GNOG since sports betting accounted for less than 1%
 
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of GNOG’s revenues for 2020. Land based casinos reopened in July 2020 with significant restrictions, which eased over time. However, virus cases began to increase in the fall and winter of 2020 and capacity restrictions were reinstituted. During 2021 there has been additional concerns regarding COVID-19 variants; as a result, the ultimate impact of this pandemic on GNOG’s financial and operating results is unknown and will depend, in part, on the length of time that these disruptions exist and the subsequent behavior of new patrons after land-based casinos reopen fully.
A significant or prolonged decrease in consumer spending on entertainment or leisure activities as a result of COVID-19 or otherwise could have an adverse effect on the demand for GNOG’s product offerings, reducing cash flows and revenues, and thereby materially harming GNOG’s business, financial condition and results of operations. In addition, a recurrence of COVID-19 cases or an emergence of additional variants or strains 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 have necessitated a shift away from a traditional office environment for many employees, GNOG has business continuity programs in place to ensure that employees are safe and that GNOG’s business continues to function with minimal disruptions to normal work operations while employees work remotely. GNOG will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.
Components of GNOG’s Results of Operations
GNOG’s Revenues
Gaming
GNOG earns revenues primarily through online real money gaming, offering a suite of games similar to those available in land-based casinos, as well as online sports betting. Similar to land-based casinos, the revenue recognized is the aggregate net difference between gaming wins and losses. GNOG records accruals related to the incremental anticipated payouts of progressive jackpots as the progressive game is played. Free play and other incentives to customers are recorded as a reduction of gaming revenue.
Other
GNOG has entered into contracts to manage multi-year market access agreements entered into with other third-party online betting operators that are authorized to operate online casino and online sports betting. GNOG receives royalties from the third-party online betting operators and reimbursements for costs incurred. Initial fees received for the market access agreements and prepaid guaranteed minimum royalties are deferred and recognized over the term of the contract as the performance obligations are satisfied.
GNOG has entered into contracts to manage multi-year live dealer studio broadcast license agreements with online casino operators that provide for the use of the live table games that are broadcast from GNOG’s studio at the Golden Nugget Atlantic City Hotel & Casino in Atlantic City, New Jersey. GNOG receives royalties from the online casino operators based on a percentage of GGR. GNOG also offers some “private tables” for which GNOG receives a flat monthly fee in addition to a percentage of GGR.
GNOG’s Operating Costs and Expenses
Cost of Revenue
Cost of revenue includes the gaming taxes that are imposed by the jurisdictions in which GNOG operates, fees paid to platform and content providers, market access and license fees, brand royalties, payment processing fees and related chargebacks, labor and other related costs associated with GNOG’s live dealer studio and other reimbursable costs incurred.
Advertising and Promotion
Advertising and promotion expense includes costs associated with marketing GNOG’s product offerings and other related costs incurred to acquire new customers. GNOG uses a variety of advertising channels to optimize its marketing spend based on performance and the highest possible returns.
 
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General and Administrative
General and administrative expense includes administrative personnel costs, professional fees related to GNOG’s legal, audit and other consulting expenses, stock-based compensation and insurance costs.
Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
(in thousands, except percentages)
​ ​
Three Months Ended September 30,
​
​
2021
​ ​
2020
​ ​
$ Change
​ ​
% Change
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Gaming
​ ​ ​ $ 31,792 ​ ​ ​ ​ $ 22,938 ​ ​ ​ ​ $ 8,854 ​ ​ ​ ​ ​ 38.6% ​ ​
Other
​ ​ ​ ​ 3,846 ​ ​ ​ ​ ​ 2,990 ​ ​ ​ ​ ​ 856 ​ ​ ​ ​ ​ 28.6% ​ ​
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
​ ​ ​ ​ 35,638 ​ ​ ​ ​ ​ 25,928 ​ ​ ​ ​ ​ 9,710 ​ ​ ​ ​ ​ 37.4% ​ ​
Costs and expenses ​ ​ ​ ​ ​
Cost of revenue
​ ​ ​ ​ 17,007 ​ ​ ​ ​ ​ 10,241 ​ ​ ​ ​ ​ 6,766 ​ ​ ​ ​ ​ 66.1% ​ ​
Advertising and promotion
​ ​ ​ ​ 16,618 ​ ​ ​ ​ ​ 5,284 ​ ​ ​ ​ ​ 11,334 ​ ​ ​ ​ ​ 214.5% ​ ​
General and administrative expense
​ ​ ​ ​ 7,858 ​ ​ ​ ​ ​ 2,187 ​ ​ ​ ​ ​ 5,671 ​ ​ ​ ​ ​ 259.3% ​ ​
Merger related expenses
​ ​ ​ ​ 2,763 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,763 ​ ​ ​ ​ ​ n/a ​ ​
Depreciation and amortization
​ ​ ​ ​ 76 ​ ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ 21 ​ ​ ​ ​ ​ 38.2% ​ ​
Total costs and expenses
​ ​ ​ ​ 44,322 ​ ​ ​ ​ ​ 17,767 ​ ​ ​ ​ ​ 26,555 ​ ​ ​ ​ ​ 149.5% ​ ​
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . .
​ ​ ​ ​ (8,684) ​ ​ ​ ​ ​ 8,161 ​ ​ ​ ​ ​ (16,845) ​ ​ ​ ​ ​ (206.4)% ​ ​
Other expense (income) ​ ​ ​ ​ ​
Interest expense, net
​ ​ ​ ​ 5,180 ​ ​ ​ ​ ​ 11,311 ​ ​ ​ ​ ​ (6,131) ​ ​ ​ ​ ​ (54.2)% ​ ​
Loss on warrant derivatives
​ ​ ​ ​ 18,944 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 18,944 ​ ​ ​ ​ ​ n/a ​ ​
Other expense (income)
​ ​ ​ ​ (101) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (101) ​ ​ ​ ​ ​ n/a ​ ​
Total other expense (income)
​ ​ ​ ​ 24,023 ​ ​ ​ ​ ​ 11,311 ​ ​ ​ ​ ​ 12,712 ​ ​ ​ ​ ​ 112.4% ​ ​
Income (loss) before income taxes
​ ​ ​ ​ (32,707) ​ ​ ​ ​ ​ (3,150) ​ ​ ​ ​ ​ (29,557) ​ ​ ​ ​ ​ 938.3% ​ ​
Provision for income taxes
​ ​ ​ ​ (1,361) ​ ​ ​ ​ ​ (1,376) ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ (1.1)% ​ ​
Net income (loss)
​ ​ ​ ​ (31,346) ​ ​ ​ ​ ​ (1,774) ​ ​ ​ ​ ​ (29,572) ​ ​ ​ ​ ​ 1,667.0% ​ ​
Net loss attributable to non-controlling interests
​ ​ ​ ​ 5,590 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 5,590 ​ ​ ​ ​ ​ n/a ​ ​
Net income (loss) attributable to GNOG
​ ​ ​ $ (25,756) ​ ​ ​ ​ $ (1,774) ​ ​ ​ ​ $ (23,982) ​ ​ ​ ​ ​ 1,351.9% ​ ​
GNOG’s Revenues
Gaming
Gaming revenues increased $8.9 million, or 38.6%, to $31.8 million from $22.9 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was primarily the result of the impact of GNOG’s launch in Michigan in late January of 2021. GNOG also commenced operations in West Virginia and Virginia late in the third quarter.
Other
Other revenues increased $0.9 million, or 28.6%, to $3.9 million compared to $3.0 million for the three months ended September 30, 2020. Market access and live dealer studio broadcast revenues increased $0.6 million, or 27.5%, as royalties with existing partners increased and the addition of a new partner when compared to the prior year comparable period. Reimbursable revenues under these arrangements also increased by $0.2 million, or 32.5%, for the three months ended September 30, 2021 compared to the prior year comparable period.
 
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GNOG’s Operating Costs and Expenses
Cost of Revenue
Cost of revenue increased $6.8 million, or 66.1%, for the three months ended September 30, 2021 compared to the prior year comparable period as a result of the increase in gaming revenue for the third quarter of 2021. Increased gaming taxes and market access fees associated with GNOG’s launch in Michigan in late January 2021 increased cost of revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
Advertising and Promotion
Advertising and promotion expenses increased $11.3 million, or 214.5%, to $16.6 million for the three months ended September 30, 2021 compared to $5.3 million for the three months ended September 30, 2020. This increase from the prior year comparable period is primarily attributable to GNOG’s launch in the Michigan market in late January 2021.
General and Administrative
General and administrative expenses increased $5.7 million, or 259.3%, to $7.9 million for the three months ended September 30, 2021 compared to $2.2 million for the prior year comparable period. This increase is due largely to stock-based compensation of $3.4 million during the three months ended September 30, 2021, whereas there was no stock-based compensation expense in the prior year comparable period. Compensation expense for the three months ended September 30, 2021 is also higher than the prior year comparable period and professional fees for audit services, tax services, legal services and other costs associated with being a public company are significantly higher compared to the prior year comparable period.
Merger Related Expenses
Merger related expenses amounted to $2.8 million for the three months ended September 30, 2021 and related primarily to regulatory, legal and other professional fees incurred in connection with the DraftKings Merger. There were no merger related expenses incurred in the prior year comparable period.
Interest Expense
Interest expense for the three months ended September 30, 2021 was $5.2 million as compared to $11.3 million for the three months ended September 30, 2020. The decrease is the result of the repayment of $150.0 million of the principal balance of the $300.0 term loan in connection with the December 29, 2020 closing of the Landcadia Transaction and the repayment of an additional $10.6 million in February of 2021.
Loss on Warrant Derivatives
In accordance with ASC 815-40, GNOG classifies its warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. The loss on warrant derivatives during the three months ended September 30, 2021 amounted to $18.9 million and no such gains or losses were recognized for the three months ended September 30, 2020.
Provision for Income Taxes
The provision for income taxes was a benefit of $1.4 million for the three months ended September 30, 2021 compared to a benefit of $1.4 million for the prior year comparable period. The effective tax rate was 4.2% for the three months ended September 30, 2021 as compared to 43.7% for the three months ended September 30, 2020. This decrease in the effective tax rate is primarily a result of the loss on the warrant derivative of $18.9 million and the loss attributable to the non-controlling interest, in each case for the three months ended September 30, 2021, which are not subject to federal or state income tax in GNOG’s consolidated statements of operations.
 
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Net Loss Attributable to Non-Controlling Interests
Net loss attributable to non-controlling interests represents a 40.5% economic interest in the losses from GNOG LLC for the three months ended September 30, 2021. The non-controlling interests consist of the Class B Units in Landcadia Holdco held by LHGN Interestholder that have no voting rights and that are redeemable, together with an equal number of GNOG Class B common stock, for either 31,657,545 shares of GNOG Class A common stock or an equal value of cash, at GNOG’s election.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
(in thousands, except percentages)
​ ​
Nine Months Ended September 30,
​
​
2021
​ ​
2020
​ ​
$ Change
​ ​
% Change
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Gaming
​ ​ ​ $ 82,886 ​ ​ ​ ​ $ 59,890 ​ ​ ​ ​ $ 22,996 ​ ​ ​ ​ ​ 38.4% ​ ​
Other
​ ​ ​ ​ 11,192 ​ ​ ​ ​ ​ 8,201 ​ ​ ​ ​ ​ 2,991 ​ ​ ​ ​ ​ 36.5% ​ ​
Total revenue . . . . . . . . . . . . . . . . . . . .
​ ​ ​ ​ 94,078 ​ ​ ​ ​ ​ 68,091 ​ ​ ​ ​ ​ 25,987 ​ ​ ​ ​ ​ 38.2% ​ ​
Costs and expenses ​ ​ ​ ​ ​
Cost of revenue
​ ​ ​ ​ 43,868 ​ ​ ​ ​ ​ 26,930 ​ ​ ​ ​ ​ 16,938 ​ ​ ​ ​ ​ 62.9% ​ ​
Advertising and promotion
​ ​ ​ ​ 47,496 ​ ​ ​ ​ ​ 12,870 ​ ​ ​ ​ ​ 34,626 ​ ​ ​ ​ ​ 269.0% ​ ​
General and administrative expense
​ ​ ​ ​ 21,260 ​ ​ ​ ​ ​ 5,648 ​ ​ ​ ​ ​ 15,612 ​ ​ ​ ​ ​ 276.4% ​ ​
Merger related expenses
​ ​ ​ ​ 2,763 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 2,763 ​ ​ ​ ​ ​ n/a ​ ​
Depreciation and amortization
​ ​ ​ ​ 160 ​ ​ ​ ​ ​ 138 ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 15.9% ​ ​
Total costs and expenses
​ ​ ​ ​ 115,547 ​ ​ ​ ​ ​ 45,586 ​ ​ ​ ​ ​ 69,961 ​ ​ ​ ​ ​ 153.5% ​ ​
Operating income (loss)
​ ​ ​ ​ (21,469) ​ ​ ​ ​ ​ 22,505 ​ ​ ​ ​ ​ (43,974) ​ ​ ​ ​ ​ (195.4)% ​ ​
Other expense (income) ​ ​ ​ ​ ​
Interest expense, net
​ ​ ​ ​ 15,983 ​ ​ ​ ​ ​ 19,077 ​ ​ ​ ​ ​ (3,094) ​ ​ ​ ​ ​ (16.2)% ​ ​
Gain on warrant derivatives
​ ​ ​ ​ (71,031) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (71,031) ​ ​ ​ ​ ​ n/a ​ ​
Other expense (income)
​ ​ ​ ​ 331 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 331 ​ ​ ​ ​ ​ n/a ​ ​
Total other expense (income)
​ ​ ​ ​ (54,717) ​ ​ ​ ​ ​ 19,077 ​ ​ ​ ​ ​ (73,794) ​ ​ ​ ​ ​ (386.8)% ​ ​
Income (loss) before income taxes
​ ​ ​ ​ 33,248 ​ ​ ​ ​ ​ 3,428 ​ ​ ​ ​ ​ 29,820 ​ ​ ​ ​ ​ 869.9% ​ ​
Provision for income taxes
​ ​ ​ ​ (3,477) ​ ​ ​ ​ ​ 914 ​ ​ ​ ​ ​ (4,391) ​ ​ ​ ​ ​ (480.4)% ​ ​
Net income (loss)
​ ​ ​ ​ 36,725 ​ ​ ​ ​ ​ 2,514 ​ ​ ​ ​ ​ 34,211 ​ ​ ​ ​ ​ 1,360.8% ​ ​
Net loss attributable to non-controlling interests
​ ​ ​ ​ 16,126 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 16,126 ​ ​ ​ ​ ​ n/a ​ ​
Net income attributable to GNOG
​ ​ ​ $ 52,851 ​ ​ ​ ​ $ 2,514 ​ ​ ​ ​ $ 50,337 ​ ​ ​ ​ ​ 2,002.3% ​ ​
GNOG’s Revenues
Gaming
Gaming revenues increased $23.0 million, or 38.4%, to $82.9 million for the nine months ended September 30, 2021 compared to $59.9 million for the nine months ended September 30, 2020. The increase was primarily the result of the impact of GNOG’s launch in Michigan in late January of 2021. GNOG also commenced operations in West Virginia and Virginia late in the third quarter.
Other
Other revenues increased $3.0 million, or 36.5%, to $11.2 million for the nine months ended September 30, 2021 compared to $8.2 million the nine months ended September 30, 2020. Market access and live dealer studio broadcast revenues increased $2.3 million, or 37.2%, as royalties with existing partners increased and the addition of a new partner when compared to the prior year comparable period. Reimbursable
 
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revenues under these arrangements also increased by $0.6 million, or 34.2%, for the nine months ended September 30, 2021 compared to the prior year comparable period.
GNOG’s Operating Costs and Expenses
Cost of Revenue
Cost of revenue increased $16.9 million, or 62.9%, for the nine months ended September 30, 2021 compared to the prior year comparable period as a result of the increase in gaming revenue. Increased gaming taxes and market access fees associated with GNOG’s launch in Michigan in late January 2021 and brand royalty expense paid to an affiliate which began in May 2020 also increased cost of revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Advertising and Promotion
Advertising and promotion expenses increased $34.6 million, or 269.0%, to $47.5 million for the nine months ended September 30, 2021 compared to $12.9 million for the nine months ended September 30, 2020. This increase from the prior year comparable period is primarily attributable to GNOG’s launch in the Michigan market in late January 2021.
General and Administrative
General and administrative expenses increased $15.6 million, or 276.4%, to $21.3 million for the nine months ended September 30, 2021, compared to $5.6 million for the prior year comparable period. This increase is due largely to stock-based compensation of $8.7 million during the nine months ended September 30, 2021, whereas there was no stock-based compensation expense in the prior year comparable period. Compensation expense was also higher for the nine months ended September 30, 2021 compared to the prior year comparable period and professional fees for audit services, tax services, legal services and other costs associated with being a public company increased compared to the prior year comparable period.
Merger related expenses
Merger related expenses amounted to $2.8 million for the nine months ended September 30, 2021 and related primarily to regulatory, legal and other professional fees incurred in connection with the DraftKings Merger. There were no merger related expenses incurred in the prior year comparable period.
Interest Expense
Interest expense for the nine months ended September 30, 2021 was $16.0 million as compared to $19.1 million in the prior year comparable period. GNOG entered into a $300.0 million term loan credit agreement on April 28, 2020. GNOG repaid $150.0 million principal balance of the term loan in connection with the December 29, 2020 closing of the Landcadia Transaction and repaid an additional $10.6 million in February of 2021. In connection with this repayment during the nine months ended September 30, 2021, GNOG expensed $0.6 million in unamortized discount and loan origination costs as interest expense.
Gain on Warrant Derivatives
In accordance with ASC 815-40, GNOG classifies warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings. The gain on warrant derivatives during the nine months ended September 30, 2021 amounted to $71.0 million and no such gains were recognized for the nine months ended September 30, 2020.
Other Expense
Other expense for the nine months ended September 30, 2021 consists of prepayment premiums associated with the repayment of $10.6 million principal amount of GNOG’s term loan during the nine months ended September 30, 2021, partially offset by non-cash gains on the tax receivable agreement during the period.
 
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Provision for Income Taxes
The provision for income taxes was a benefit of $3.5 million for the nine months ended September 30, 2021 compared to tax expense of $0.9 million for the comparable prior year period. This decrease of $4.4 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, is primarily a result of pre-tax losses for the period as the gain on the warrant derivative of $71.0 million and the loss attributable to the non-controlling interest for the nine months ended September 30, 2021, are not subject to federal or state income tax in GNOG’s consolidated statements of operations.
Net Loss Attributable to Non-Controlling Interests
Net loss attributable to non-controlling interests represents an average 41.4% economic interest in the losses from GNOG LLC for the nine months ended September 30, 2021. The non-controlling interests consist of the Class B Units in Landcadia Holdco held by LHGN Interestholder that have no voting rights and that are redeemable, together with an equal number of GNOG Class B common stock, for either 31,657,545 shares of GNOG Class A common stock or an equal value of cash, at GNOG’s election.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
(in thousands, except percentages)
​ ​
Year Ended December 31,
​
​
2020
​ ​
2019
​ ​
$ Change
​ ​
% Change
​
Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Gaming
​ ​ ​ $ 79,919 ​ ​ ​ ​ $ 47,694 ​ ​ ​ ​ $ 32,225 ​ ​ ​ ​ ​ 67.6% ​ ​
Other
​ ​ ​ ​ 11,201 ​ ​ ​ ​ ​ 7,727 ​ ​ ​ ​ ​ 3,474 ​ ​ ​ ​ ​ 45.0% ​ ​
Total revenue
​ ​ ​ ​ 91,120 ​ ​ ​ ​ ​ 55,421 ​ ​ ​ ​ ​ 35,699 ​ ​ ​ ​ ​ 64.4% ​ ​
Costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Labor
​ ​ ​ ​ 9,026 ​ ​ ​ ​ ​ 7,102 ​ ​ ​ ​ ​ 1,924 ​ ​ ​ ​ ​ 27.1% ​ ​
Gaming taxes
​ ​ ​ ​ 17,238 ​ ​ ​ ​ ​ 9,985 ​ ​ ​ ​ ​ 7,253 ​ ​ ​ ​ ​ 72.6% ​ ​
Royalty and licenses fees
​ ​ ​ ​ 10,128 ​ ​ ​ ​ ​ 5,875 ​ ​ ​ ​ ​ 4,253 ​ ​ ​ ​ ​ 72.4% ​ ​
Selling, general and administrative expense
​ ​ ​ ​ 25,909 ​ ​ ​ ​ ​ 14,687 ​ ​ ​ ​ ​