SEC Company Response from DraftKings Inc. (CIK 0001772757) — Aug 27, 2021
DraftKings Inc. (CIK 0001772757)
Date: Aug. 27, 2021 · CIK: 0001772757 · Accession: 0001772757-21-000015
AI Filing Summary & Sentiment
File numbers found in text: 001-38908
Referenced dates: August 19, 2021
Letter
Via EDGAR Division of Corporation Finance Office of Trade & Services Attention: Keira Nakada and Linda Cvrkel Filed May 3, 2021 Form 10-Q for the Quarterly Period Ended June 30, 2021 Filed August 6, 2021 File No. 001-38908
Dear Ms. Nakada and Ms. Cvrkel:
DraftKings Inc. (the “Company,” “DraftKings,” “we,” “our,” or “us”) is pleased to address the comments (the “Comments”) of the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in your letter dated August 19, 2021 regarding the filings noted above.
For ease of reference, set forth below are the Company’s responses to the Comments. The numbering of the paragraphs below corresponds to the numbering of the Comments, which we have incorporated into this response letter for your convenience. Page references in the text of this response letter correspond to the page numbers of the Amended Form 10-K for the Fiscal Year Ended December 31, 2020 (the “Amended 10-K”) and the Form 10-Q for the Quarterly Period Ended June 30, 2021 (the “Q2 10-Q”), as applicable. Capitalized terms used in this letter but not otherwise defined herein have the meanings set forth in the Amended 10-K and the Q2 10-Q, as applicable.
Amended Form 10-K for the Fiscal Year Ended December 31, 2020
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
2020 Compared to 2019, page 61
1.Where you attribute material fluctuations in your revenues, costs and expenses to multiple factors, please quantify each factor cited so that investors may understand the magnitude and relative impact of each factor. Refer to Item 303(b) of Regulation S-K.
Securities and Exchange Commission
August 27, 2021
Page 2
Response:
The Company respectfully acknowledges the Staff’s Comment and will endeavor, in its future filings, where material fluctuations in the Company’s revenue, costs and expenses are attributed to multiple factors, to quantify such factors as appropriate to enhance an investors’ understanding of the magnitude and relative impact of each factor, to the extent, among other things, such information is available to the Company.
While the Company believes that its revenue disclosures at the reportable segment level remain appropriate, it will expand its disclosure within Management’s Discussion and Analysis in future filings to highlight the product and geographical revenue disaggregation disclosures, as currently disclosed in Note 9 of the Notes to the Consolidated Financial Statements in the Amended 10-K. Additionally, we believe the year-over-year disclosures for our key operational metrics Monthly Unique Payers (“MUPs”) and Average Revenue per MUP (“ARPMUPs”), provide appropriate quantification for customer acquisition and retention as well as incremental customer engagement, respectively. We will continue to evaluate those metrics to ensure investors can view the Company’s revenue performance from management’s perspective.
Presented below for illustrative purposes is the Company’s proposed disclosure (for the fiscal year 2020 compared to 2019) of additional information about the Company’s revenue disaggregation as well as quantification of expense details for factors to which changes are attributed. The newly added disclosures have been marked in red to facilitate the Staff’s review. While we do not believe that the added disclosures are material to an investor’s assessment of the financial condition and results of operations of the Company, the Company will endeavor to provide similar levels of disclosure to the below proposed disclosure in its future filings.
Revenue. Revenue increased by $291.1 million, or 90.0%, to $614.5 million in 2020 from $323.4 million in 2019. Of this increase, $75.6 million was attributable to revenue from SBTech, our new B2B segment, which primarily derives its revenues from international geographic regions.
Excluding the impact of the acquisition of SBTech, revenue would have increased by approximately $215.5 million in 2020, reflecting the performance of our B2C segment. The increase was primarily attributable to the strong performance of our B2C operations prior to the outbreak of COVID-19. Prior to March 11, 2020, our net revenue was up approximately 60% year-over-year, reflecting the launch of our online Sportsbook offering in Indiana, New Hampshire, Pennsylvania and West Virginia in the third and fourth quarters of 2019, and Iowa in the first quarter of 2020. Revenue declined versus the prior year beginning in mid-March 2020 due to the suspension and cancellation of sports seasons and sporting events. Revenue growth resumed when many of these seasons and sporting events returned towards the end of the second quarter and into the third and fourth quarters. Revenue growth also reflected the launch of our online Sportsbook product offering in Colorado, Illinois and Tennessee, the launch of our iGaming product offering in Pennsylvania and West Virginia, increased engagement with our Sportsbook and iGaming product offerings in previously launched states, and growth in DFS revenues in the third and fourth quarters. Year-over-year, MUPs for our B2C segment increased by 29.1% while ARPMUP increased by 29.0%. online gaming revenues, which were up $209.5 million compared to the prior year with $6.0 million coming from “Other” revenues, which primarily includes media and retail sportsbooks.
Online gaming revenue grew in 2020 due to MUPs increasing by 29.1% and ARPMUP increasing by 29.0%, as compared to the prior year.
Securities and Exchange Commission
August 27, 2021
Page 3
Online gaming revenue grew in 2020 due to the ongoing legalization of online sports betting and iGaming throughout the country. In 2020, we launched our online Sportsbook product offering in Colorado, Illinois and Tennessee, our iGaming product offering in Pennsylvania and West Virginia, and we increased engagement with our Sportsbook and iGaming product offerings in previously launched states while also growing activity in DFS.
The growth in online gaming revenue in 2020 was impacted by COVID-19. Prior to March 11, 2020, when the COVID-19 pandemic resulted in the suspension, cancellation and rescheduling of sports seasons and sporting events, our online gaming revenues were growing approximately 60% year-over-year, but that growth rate slowed dramatically from March 11, 2020 through approximately the second quarter of 2020. Revenue growth resumed when many of these seasons and sporting events returned towards the end of the second quarter and into the third and fourth quarters and also accelerated based on the states that launched in 2020 referenced above.
Cost of Revenue. Cost of revenue increased by $242.7 million, or 233.6%, to $346.6 million in 2020 from $103.9 million in 2019. Of this increase, $77.3 million was attributable to SBTech, including $50.5 million attributable to the amortization of acquired intangibles.
Excluding the impact of the SBTech Acquisition, the increase would have been $165.4 million in 2020, reflecting the growth in revenue from our expanded product and geographic footprint of our B2C segment. This increase can be primarily attributed to an increase in our variable expenses such as product taxes due to expansion into new states and growth in existing states, an increase in technology, which increased $82.2 million. The remaining increase was primarily attributable to variable platform costs and, revenue share arrangements due to our expanded footprint and increased customer engagement and an increase in and payment processing fees resulting from additional customer deposits activity.
B2C segment cost of revenue as a percentage of B2C revenue increased by 24.3 percentage points to 56.4% in 2020 from 32.1% in 2019, mainly due to a change in revenue mix towards products with higher cost of revenue, investment in new geographies, and the adverse revenue impact of COVID-19 primarily in the second quarter of 2020. In general, our iGaming and Sportsbook product offerings produce revenue at a higher cost per revenue dollar relative to our more mature DFS offering.
Sales and Marketing. Sales and marketing expense increased by $309.9 million, or 167.3%, to $495.2 million in 2020 from $185.3 million in 2019. Our B2C segment accounted for substantially all of this increase, reflecting higher with $288.3 million of the increase resulting from activities to acquire and retain players, such as marketing costs including advertising and development of marketing spend to increase awareness and user acquisition for our Sportsbook and iGaming offerings, particularly in newly launched states; higher campaigns, as well as headcount; marketing and technology and support costs; and associated with analyzing, developing and deploying those campaigns. The remainder of the increase came from an increase in stock-based compensation expense of $21.6 million when compared to the prior year.
While we decreased our advertising spending upon the outbreak of COVID-19 in mid-March of 2020, we increased advertising and customer acquisition marketing spending beginning in May 2020 and ramped up this spending in July 2020 with the resumption of major sports, including the MLB, the NBA and the NHL, as well as the beginning of the NFL season in September 2020.
Product and Technology. Product and technology expense increased by $112.7 million, or 201.5%, to $168.6 million in 2020 from $55.9 million in 2019. Of this increase, $43.0 million was attributable to SBTech. Excluding the impact of the SBTech Acquisition, the increase would
Securities and Exchange Commission
August 27, 2021
Page 4
have been $69.7 million, primarily driven by an increase in stock-based compensation expense of $50.6 million and an increase in product operations and engineering headcount.
General and Administrative. General and administrative expense increased by $322.5 million, or 258.3%, to $447.4 million in 2020 from $124.9 million in 2019. Of this increase, $13.8 million was attributable to SBTech. Excluding the impact of the SBTech Acquisition, the increase would have been $308.7 million, primarily driven by an increase in stock-based compensation expense, of $234.6 million and an increase in one-time transaction-related costs (including transaction-related employee bonuses, and an increase in general and administrative headcount) of $25.9 million.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures, page 70
2.Please explain in further detail how you determined that your disclosure controls and procedures were effective as of December 31, 2020 given your need to restate your financial statements for the year ended December 31, 2020 as described in Note 2 of your audited financial statements.
Response:
The Company respectfully acknowledges the Staff’s Comment. In reaching its conclusion that the Company’s disclosure controls and procedures were effective as of December 31, 2020, the Company carefully reviewed the facts and circumstances relating to the restatement of its financial statements for the fiscal year ended December 31, 2020 (the “Restatement”), and for the specific reasons described below, the Company believes that such facts and circumstances do not warrant a change in the Company’s assessment of the effectiveness of its disclosure controls and procedures as of the end of the period covered by the Restatement.
In reaching this conclusion, the Company acknowledges that on April 12, 2021, the SEC released a statement regarding the accounting treatment for certain warrants commonly issued by Special Purpose Acquisition Companies (“SPAC”) in connection with their formation and initial public offering. As a result of that statement, and in consultation with its audit committee, external auditors and in-house and external SEC counsel, the Company determined to restate its accounting for its public and private warrants (the “Warrants”) and immediately conducted a careful review of its current and historical disclosure controls and procedures. As a result of that evaluation, the Company concluded that its disclosure controls and procedures were effective primarily because the Restatement did not impact the controls and procedures the Company had in place to accurately account for, report and disclose the treatment of Warrants in its financial statements.
Rule 13a-15(e) defines disclosure controls and procedures as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.”
Among other things, the Company has concluded the following controls and procedures were in place and properly designed to record, process, summarize and report relevant information for disclosure regarding the Warrants:
Securities and Exchange Commission
August 27, 2021
Page 5
•Management identified the Warrants as new and complex transactions that had an accounting and financial reporting impact—once identified, the Warrants were individually evaluated to ensure that the appropriate accounting treatment and financial reporting presentation conclusions were appropriate and in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and SEC regulations.
•Management read the Warrant agreements and the terms and conditions of the Warrants to understand the facts and circumstances and sought clarification from legal counsel, advisors and other finance team members to reach a comprehensive understanding of the transaction.
•Management prepared a technical accounting memo (the “technical memo”), which was shared with key stakeholders, third-party accounting firms and consultants, for review and feedback, and received sign off on the technical memo by key levels of senior management. The technical memo cited appropriate accounting literature, referenced existing firm interpretive guidance, and reached an accounting conclusion that was supported by management’s understanding of U.S. GAAP and existing interpretations and current accounting practices. Management also engaged a third-party accounting expert familiar with such transactions to help with its analysis. In reaching its conclusion, management carefully considered existing published views and documented those views in its technical memo to support its judgments and considerations, as well as precedent treatment of similar warrants disclosed by other companies that recently had a SPAC transaction.
•In reaching an understanding of the Warrants, various complex aspects were discussed with external auditors, in-house and external SEC counsel, third-party valuation experts and third-party consultants.
•Management prepared appropriate accounting entries, reviewed those entries, and verified those entries were consistent with the conclusions reached pursuant to the technical accounting memo.
•Management prepared disclosures, reviewed those disclosures with the Company’s disclosure committee and verified the completeness and accuracy of those disclosures.
•Management reviewed current SEC practices including existing statements and guidance applicable to the transaction.
•After the initial evaluation, management monitored standard-setting practices, including but not limited to changes to U.S. GAAP that would result in a change to the accounting and disclosures related to the Warrants.
•Management held quarterly disclosure commi
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CORRESP 1 filename1.htm Document August 27, 2021 Via EDGAR U.S. Securities and Exchange Commission Division of Corporation Finance Office of Trade & Services 100 F. Street, N.E. Washington, D.C. 20549 Attention: Keira Nakada and Linda Cvrkel Re: DraftKings Inc. Form 10-K for the Fiscal Year Ended December 31, 2020 Filed February 26, 2021 Amended Form 10-K for the Fiscal Year Ended December 31, 2020 Filed May 3, 2021 Form 10-Q for the Quarterly Period Ended June 30, 2021 Filed August 6, 2021 File No. 001-38908 Dear Ms. Nakada and Ms. Cvrkel: DraftKings Inc. (the “Company,” “DraftKings,” “we,” “our,” or “us”) is pleased to address the comments (the “Comments”) of the Staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in your letter dated August 19, 2021 regarding the filings noted above. For ease of reference, set forth below are the Company’s responses to the Comments. The numbering of the paragraphs below corresponds to the numbering of the Comments, which we have incorporated into this response letter for your convenience. Page references in the text of this response letter correspond to the page numbers of the Amended Form 10-K for the Fiscal Year Ended December 31, 2020 (the “Amended 10-K”) and the Form 10-Q for the Quarterly Period Ended June 30, 2021 (the “Q2 10-Q”), as applicable. Capitalized terms used in this letter but not otherwise defined herein have the meanings set forth in the Amended 10-K and the Q2 10-Q, as applicable. Amended Form 10-K for the Fiscal Year Ended December 31, 2020 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 2020 Compared to 2019, page 61 1.Where you attribute material fluctuations in your revenues, costs and expenses to multiple factors, please quantify each factor cited so that investors may understand the magnitude and relative impact of each factor. Refer to Item 303(b) of Regulation S-K. Securities and Exchange Commission August 27, 2021 Page 2 Response: The Company respectfully acknowledges the Staff’s Comment and will endeavor, in its future filings, where material fluctuations in the Company’s revenue, costs and expenses are attributed to multiple factors, to quantify such factors as appropriate to enhance an investors’ understanding of the magnitude and relative impact of each factor, to the extent, among other things, such information is available to the Company. While the Company believes that its revenue disclosures at the reportable segment level remain appropriate, it will expand its disclosure within Management’s Discussion and Analysis in future filings to highlight the product and geographical revenue disaggregation disclosures, as currently disclosed in Note 9 of the Notes to the Consolidated Financial Statements in the Amended 10-K. Additionally, we believe the year-over-year disclosures for our key operational metrics Monthly Unique Payers (“MUPs”) and Average Revenue per MUP (“ARPMUPs”), provide appropriate quantification for customer acquisition and retention as well as incremental customer engagement, respectively. We will continue to evaluate those metrics to ensure investors can view the Company’s revenue performance from management’s perspective. Presented below for illustrative purposes is the Company’s proposed disclosure (for the fiscal year 2020 compared to 2019) of additional information about the Company’s revenue disaggregation as well as quantification of expense details for factors to which changes are attributed. The newly added disclosures have been marked in red to facilitate the Staff’s review. While we do not believe that the added disclosures are material to an investor’s assessment of the financial condition and results of operations of the Company, the Company will endeavor to provide similar levels of disclosure to the below proposed disclosure in its future filings. Revenue. Revenue increased by $291.1 million, or 90.0%, to $614.5 million in 2020 from $323.4 million in 2019. Of this increase, $75.6 million was attributable to revenue from SBTech, our new B2B segment, which primarily derives its revenues from international geographic regions. Excluding the impact of the acquisition of SBTech, revenue would have increased by approximately $215.5 million in 2020, reflecting the performance of our B2C segment. The increase was primarily attributable to the strong performance of our B2C operations prior to the outbreak of COVID-19. Prior to March 11, 2020, our net revenue was up approximately 60% year-over-year, reflecting the launch of our online Sportsbook offering in Indiana, New Hampshire, Pennsylvania and West Virginia in the third and fourth quarters of 2019, and Iowa in the first quarter of 2020. Revenue declined versus the prior year beginning in mid-March 2020 due to the suspension and cancellation of sports seasons and sporting events. Revenue growth resumed when many of these seasons and sporting events returned towards the end of the second quarter and into the third and fourth quarters. Revenue growth also reflected the launch of our online Sportsbook product offering in Colorado, Illinois and Tennessee, the launch of our iGaming product offering in Pennsylvania and West Virginia, increased engagement with our Sportsbook and iGaming product offerings in previously launched states, and growth in DFS revenues in the third and fourth quarters. Year-over-year, MUPs for our B2C segment increased by 29.1% while ARPMUP increased by 29.0%. online gaming revenues, which were up $209.5 million compared to the prior year with $6.0 million coming from “Other” revenues, which primarily includes media and retail sportsbooks. Online gaming revenue grew in 2020 due to MUPs increasing by 29.1% and ARPMUP increasing by 29.0%, as compared to the prior year. Securities and Exchange Commission August 27, 2021 Page 3 Online gaming revenue grew in 2020 due to the ongoing legalization of online sports betting and iGaming throughout the country. In 2020, we launched our online Sportsbook product offering in Colorado, Illinois and Tennessee, our iGaming product offering in Pennsylvania and West Virginia, and we increased engagement with our Sportsbook and iGaming product offerings in previously launched states while also growing activity in DFS. The growth in online gaming revenue in 2020 was impacted by COVID-19. Prior to March 11, 2020, when the COVID-19 pandemic resulted in the suspension, cancellation and rescheduling of sports seasons and sporting events, our online gaming revenues were growing approximately 60% year-over-year, but that growth rate slowed dramatically from March 11, 2020 through approximately the second quarter of 2020. Revenue growth resumed when many of these seasons and sporting events returned towards the end of the second quarter and into the third and fourth quarters and also accelerated based on the states that launched in 2020 referenced above. Cost of Revenue. Cost of revenue increased by $242.7 million, or 233.6%, to $346.6 million in 2020 from $103.9 million in 2019. Of this increase, $77.3 million was attributable to SBTech, including $50.5 million attributable to the amortization of acquired intangibles. Excluding the impact of the SBTech Acquisition, the increase would have been $165.4 million in 2020, reflecting the growth in revenue from our expanded product and geographic footprint of our B2C segment. This increase can be primarily attributed to an increase in our variable expenses such as product taxes due to expansion into new states and growth in existing states, an increase in technology, which increased $82.2 million. The remaining increase was primarily attributable to variable platform costs and, revenue share arrangements due to our expanded footprint and increased customer engagement and an increase in and payment processing fees resulting from additional customer deposits activity. B2C segment cost of revenue as a percentage of B2C revenue increased by 24.3 percentage points to 56.4% in 2020 from 32.1% in 2019, mainly due to a change in revenue mix towards products with higher cost of revenue, investment in new geographies, and the adverse revenue impact of COVID-19 primarily in the second quarter of 2020. In general, our iGaming and Sportsbook product offerings produce revenue at a higher cost per revenue dollar relative to our more mature DFS offering. Sales and Marketing. Sales and marketing expense increased by $309.9 million, or 167.3%, to $495.2 million in 2020 from $185.3 million in 2019. Our B2C segment accounted for substantially all of this increase, reflecting higher with $288.3 million of the increase resulting from activities to acquire and retain players, such as marketing costs including advertising and development of marketing spend to increase awareness and user acquisition for our Sportsbook and iGaming offerings, particularly in newly launched states; higher campaigns, as well as headcount; marketing and technology and support costs; and associated with analyzing, developing and deploying those campaigns. The remainder of the increase came from an increase in stock-based compensation expense of $21.6 million when compared to the prior year. While we decreased our advertising spending upon the outbreak of COVID-19 in mid-March of 2020, we increased advertising and customer acquisition marketing spending beginning in May 2020 and ramped up this spending in July 2020 with the resumption of major sports, including the MLB, the NBA and the NHL, as well as the beginning of the NFL season in September 2020. Product and Technology. Product and technology expense increased by $112.7 million, or 201.5%, to $168.6 million in 2020 from $55.9 million in 2019. Of this increase, $43.0 million was attributable to SBTech. Excluding the impact of the SBTech Acquisition, the increase would Securities and Exchange Commission August 27, 2021 Page 4 have been $69.7 million, primarily driven by an increase in stock-based compensation expense of $50.6 million and an increase in product operations and engineering headcount. General and Administrative. General and administrative expense increased by $322.5 million, or 258.3%, to $447.4 million in 2020 from $124.9 million in 2019. Of this increase, $13.8 million was attributable to SBTech. Excluding the impact of the SBTech Acquisition, the increase would have been $308.7 million, primarily driven by an increase in stock-based compensation expense, of $234.6 million and an increase in one-time transaction-related costs (including transaction-related employee bonuses, and an increase in general and administrative headcount) of $25.9 million. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures, page 70 2.Please explain in further detail how you determined that your disclosure controls and procedures were effective as of December 31, 2020 given your need to restate your financial statements for the year ended December 31, 2020 as described in Note 2 of your audited financial statements. Response: The Company respectfully acknowledges the Staff’s Comment. In reaching its conclusion that the Company’s disclosure controls and procedures were effective as of December 31, 2020, the Company carefully reviewed the facts and circumstances relating to the restatement of its financial statements for the fiscal year ended December 31, 2020 (the “Restatement”), and for the specific reasons described below, the Company believes that such facts and circumstances do not warrant a change in the Company’s assessment of the effectiveness of its disclosure controls and procedures as of the end of the period covered by the Restatement. In reaching this conclusion, the Company acknowledges that on April 12, 2021, the SEC released a statement regarding the accounting treatment for certain warrants commonly issued by Special Purpose Acquisition Companies (“SPAC”) in connection with their formation and initial public offering. As a result of that statement, and in consultation with its audit committee, external auditors and in-house and external SEC counsel, the Company determined to restate its accounting for its public and private warrants (the “Warrants”) and immediately conducted a careful review of its current and historical disclosure controls and procedures. As a result of that evaluation, the Company concluded that its disclosure controls and procedures were effective primarily because the Restatement did not impact the controls and procedures the Company had in place to accurately account for, report and disclose the treatment of Warrants in its financial statements. Rule 13a-15(e) defines disclosure controls and procedures as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.” Among other things, the Company has concluded the following controls and procedures were in place and properly designed to record, process, summarize and report relevant information for disclosure regarding the Warrants: Securities and Exchange Commission August 27, 2021 Page 5 •Management identified the Warrants as new and complex transactions that had an accounting and financial reporting impact—once identified, the Warrants were individually evaluated to ensure that the appropriate accounting treatment and financial reporting presentation conclusions were appropriate and in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and SEC regulations. •Management read the Warrant agreements and the terms and conditions of the Warrants to understand the facts and circumstances and sought clarification from legal counsel, advisors and other finance team members to reach a comprehensive understanding of the transaction. •Management prepared a technical accounting memo (the “technical memo”), which was shared with key stakeholders, third-party accounting firms and consultants, for review and feedback, and received sign off on the technical memo by key levels of senior management. The technical memo cited appropriate accounting literature, referenced existing firm interpretive guidance, and reached an accounting conclusion that was supported by management’s understanding of U.S. GAAP and existing interpretations and current accounting practices. Management also engaged a third-party accounting expert familiar with such transactions to help with its analysis. In reaching its conclusion, management carefully considered existing published views and documented those views in its technical memo to support its judgments and considerations, as well as precedent treatment of similar warrants disclosed by other companies that recently had a SPAC transaction. •In reaching an understanding of the Warrants, various complex aspects were discussed with external auditors, in-house and external SEC counsel, third-party valuation experts and third-party consultants. •Management prepared appropriate accounting entries, reviewed those entries, and verified those entries were consistent with the conclusions reached pursuant to the technical accounting memo. •Management prepared disclosures, reviewed those disclosures with the Company’s disclosure committee and verified the completeness and accuracy of those disclosures. •Management reviewed current SEC practices including existing statements and guidance applicable to the transaction. •After the initial evaluation, management monitored standard-setting practices, including but not limited to changes to U.S. GAAP that would result in a change to the accounting and disclosures related to the Warrants. •Management held quarterly disclosure commi