0001104659-21-105211.txt : 20210813 0001104659-21-105211.hdr.sgml : 20210813 20210813170158 ACCESSION NUMBER: 0001104659-21-105211 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 72 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Rush Street Interactive, Inc. CENTRAL INDEX KEY: 0001793659 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39232 FILM NUMBER: 211173198 BUSINESS ADDRESS: STREET 1: 900 N. MICHIGAN AVENUE, SUITE 950 CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 312-915-2815 MAIL ADDRESS: STREET 1: 900 N. MICHIGAN AVENUE, SUITE 950 CITY: CHICAGO STATE: IL ZIP: 60611 FORMER COMPANY: FORMER CONFORMED NAME: dMY Technology Group, Inc. DATE OF NAME CHANGE: 20191108 10-Q 1 tmb-20210630x10q.htm FORM 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from              to             

Commission file number: 001-39232

Rush Street Interactive, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

84-3626708

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

900 N. Michigan Avenue, Suite 950

Chicago, Illinois 60611

    

(312) 915-2815

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

RSI

The New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 13, 2021, there were 59,177,489 shares of the registrant’s Class A common stock, $0.0001 par value per share, issued and outstanding, and 160,000,000 shares of the registrant’s Class V common stock, $0.0001 per value per share, issued and outstanding.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements depend upon events, risks and uncertainties that may be outside of our control. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. You are cautioned that our business and operations are subject to a variety of risks and uncertainties, many of which are beyond our control, and, consequently, our actual results may differ materially from those projected.

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

competition in the online casino, online sports betting and retail sports betting (i.e., such as within a bricks-and-mortar casino) industries is intense and, as a result, we may fail to attract and retain customers, which may negatively impact our operations and growth prospects;
economic downturns and political and market conditions beyond our control, including a reduction in consumer discretionary spending and sports leagues shortening, delaying or cancelling their seasons due to COVID-19, could adversely affect our business, financial condition, results of operations and prospects;
our growth prospects may suffer if we are unable to develop successful offerings, if we fail to pursue additional offerings or if we lose any of our key executives or other key employees;
our business is subject to a variety of U.S. and foreign laws (including Colombia, where we have business operations), many of which are unsettled and still developing, and our growth prospects depend on the legal status of real-money gaming in various jurisdictions;
failure to comply with regulatory requirements or to successfully obtain a license or permit applied for could adversely impact our ability to comply with licensing and regulatory requirements or to obtain or maintain licenses in other jurisdictions, or could cause financial institutions, online platforms and distributors to stop providing services to us;
we rely on information technology and other systems and platforms (including reliance on third-party providers to validate the identity and location of our customers and to process deposits and withdrawals made by our customers), and any breach or disruption of such information technology could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, corrupted or stolen;
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business;
our projections, including for revenues, market share, expenses and profitability, are subject to significant risks, assumptions, estimates and uncertainties;
the requirements of being a public company, including compliance with the SEC’s requirements regarding internal controls over financial reporting, may strain our resources and divert our attention, and the increases in legal, accounting and compliance expenses that may continue to arise as a result of us becoming a publicly listed company may be greater than we anticipate;
we license certain trademarks and domain names to Rush Street Gaming, LLC (“RSG”) and its affiliates, and RSG’s and its affiliates’ use of such trademarks and domain names, or failure to protect or enforce our intellectual property rights, could harm our business, financial condition, results of operations and prospects; and
we currently and will likely continue to rely on licenses and service agreements to use the intellectual property rights of third parties that are incorporated into or used in our products and services.

i

Due to the uncertain nature of these factors, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any of these statements to reflect events or circumstances occurring after the date of this Report. New factors may emerge, and it is not possible to predict all factors that may affect our business and prospects.

Limitations of Key Metrics and Other Data

The numbers for our key metrics, which include our monthly active users (“MAUs”) and average revenue per MAU (“ARPMAU”), are calculated using internal company data based on the activity of user accounts. While these numbers are based on what we believe to be reasonable estimates of our user base and activity levels for the applicable period of measurement, there are inherent challenges in measuring usage of our offerings across large online and mobile populations across numerous jurisdictions. In addition, we are continually seeking to improve our estimates of our user base and user activity, and such estimates may change due to improvements or changes in our methodology.

We regularly evaluate these metrics to estimate the number of “duplicate” accounts among our MAUs and remove the effects of such duplicate accounts on our key metrics. A duplicate account is one that a user maintains in addition to his or her principal account. Generally duplicate accounts arise as a result of users signing up to use more than one of our brands (i.e., BetRivers and PlaySugarHouse) or to use our offerings in more than one jurisdiction, for instance when a user lives in New Jersey but works in Pennsylvania. The estimates of duplicate accounts are based on an internal review of a limited sample of accounts, and we apply significant judgment in making this determination. For example, to identify duplicate accounts we use data signals such as similar IP addresses or usernames. Our estimates may change as our methodologies evolve, including through the application of new data signals or technologies, which may allow us to identify previously undetected duplicate accounts and may improve our ability to evaluate a broader population of our users. Duplicate accounts are very difficult to measure, and it is possible that the actual number of duplicate accounts may vary significantly from our estimates.

Our data limitations may affect our understanding of certain details of our business. We regularly review our processes for calculating these metrics, and from time to time we may discover inaccuracies in our metrics or make adjustments to improve their accuracy, including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated. In addition, our key metrics and related information and estimates, including the definitions and calculations of the same, may differ from those published by third parties or from similarly titled metrics of its competitors due to differences in operations, offerings, methodology and access to information.

The data and numbers used to calculate MAUs and ARPMAU discussed in this Report only include U.S.-based users unless stated otherwise.

ii

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

RUSH STREET INTERACTIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except for share and per share amounts)

June 30, 

December 31, 

    

2021

    

2020

(Unaudited)

ASSETS

Current assets

 

  

 

  

Cash and cash equivalents

$

360,805

$

255,622

Restricted cash

 

12,015

 

6,443

Players’ receivables

 

4,710

 

779

Due from affiliates

 

14,631

 

28,764

Prepaid expenses and other current assets

 

2,608

 

2,871

Total current assets

 

394,769

 

294,479

Intangible assets, net

 

12,821

 

9,750

Property and equipment, net

 

3,290

 

2,016

Operating lease right-of-use asset, net

 

1,428

 

1,100

Other assets

 

2,393

 

1,215

Total assets

$

414,701

$

308,560

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

Accounts payable

$

5,318

$

11,994

Accrued expenses

 

30,930

 

27,042

Players’ liabilities

15,810

8,500

Deferred royalty, short-term

 

325

 

195

Operating lease liabilities, short-term

 

450

 

226

Earnout interests liability

 

 

351,048

Other current liabilities

1,920

1,983

Total current liabilities

 

54,753

 

400,988

Deferred royalty, long-term

 

3,642

 

3,813

Operating lease liabilities, long-term

 

1,067

 

979

Warrant liabilities

170,109

Other long-term liabilities

372

Total liabilities

 

59,834

 

575,889

Commitments and contingencies

Stockholders’ equity (deficit)

Class A common stock, $0.0001 par value, 750,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 59,396,078 and 44,792,517 shares issued as of June 30, 2021 and December 31, 2020, respectively; 59,177,489 and 44,792,517 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

6

4

Class V common stock, $0.0001 par value, 200,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 160,000,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020

16

16

Treasury stock, 218,589 and 0 shares as of June 30, 2021 and December 31, 2020, respectively

(850)

Additional paid-in capital

 

144,130

 

(18,402)

Accumulated other comprehensive income (loss)

 

(122)

 

93

Accumulated deficit

 

(47,274)

 

(43,490)

Total stockholders’ equity (deficit) attributable to Rush Street Interactive, Inc.

95,906

(61,779)

Non-controlling interests

258,961

(205,550)

Total stockholders’ equity (deficit)

354,867

(267,329)

Total liabilities and stockholders’ equity (deficit)

$

414,701

$

308,560

See accompanying notes to condensed consolidated financial statements.

F-1

RUSH STREET INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in thousands except for share and per share amounts)

Three Months Ended

    

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenue

$

122,800

$

65,038

$

234,620

$

100,215

Operating costs and expenses

Costs of revenue

84,760

49,287

 

164,447

 

71,667

Advertising and promotions

37,543

7,445

 

79,759

 

15,915

General administration and other

11,768

58,399

 

28,332

 

75,165

Depreciation and amortization

914

457

 

1,588

 

916

Total operating costs and expenses

134,985

115,588

 

274,126

 

163,663

Loss from operations

(12,185)

(50,550)

 

(39,506)

 

(63,448)

Other income (expenses)

Interest expense, net

(17)

(40)

 

(30)

 

(85)

Change in fair value of warrant liabilities

41,802

Change in fair value of earnout interests liability

(13,740)

Total other income (expenses)

(17)

(40)

 

28,032

 

(85)

Loss before income taxes

(12,202)

(50,590)

(11,474)

(63,533)

Income tax expense

1,752

2,556

Net loss

$

(13,954)

$

(50,590)

$

(14,030)

$

(63,533)

Net loss attributable to non-controlling interests

(10,187)

(10,246)

Net loss attributable to Rush Street Interactive, Inc.

$

(3,767)

$

(50,590)

$

(3,784)

$

(63,533)

Net loss per common share attributable to Rush Street Interactive, Inc. – basic

$

(0.06)

N/A

$

(0.07)

N/A

Weighted average common shares outstanding – basic

59,163,547

N/A

53,093,129

N/A

Net loss per common share attributable to Rush Street Interactive, Inc. – diluted

$

(0.06)

N/A

$

(0.24)

N/A

Weighted average common shares outstanding – diluted

59,163,547

N/A

55,452,029

N/A

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Net loss

$

(13,954)

$

(50,590)

$

(14,030)

$

(63,533)

Other comprehensive income (loss)

 

 

Foreign currency translation adjustment

(268)

54

 

(892)

 

(310)

Comprehensive loss

$

(14,222)

$

(50,536)

$

(14,922)

$

(63,843)

Comprehensive loss attributable to non-controlling interests

(10,383)

 

(10,923)

 

Comprehensive loss attributable to Rush Street Interactive, Inc.

$

(3,839)

$

(50,536)

$

(3,999)

$

(63,843)

See accompanying notes to condensed consolidated financial statements.

F-2

RUSH STREET INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(Amounts in thousands except for share amounts)

    

    

    

    

    

    

    

    

Total

    

Stockholders’

Accumulated

Equity

Total

Class A

Class V

Additional

Other

(Deficit)

Non-

Stockholders’

Common Stock

Common Stock

Treasury Stock

Paid-in

Comprehensive

Accumulated

Attributable

Controlling

Equity

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

To RSI

    

    Interests

    

(Deficit)

Balance at December 31, 2020

 

44,792,517

$

4

 

160,000,000

$

16

 

$

$

(18,402)

$

93

$

(43,490)

$

(61,779)

$

(205,550)

$

(267,329)

Share-based compensation

 

571,239

 

 

 

 

 

2,772

 

 

2,772

8,804

 

11,576

Foreign currency translation adjustment

 

 

 

 

 

 

 

(143)

 

(143)

(481)

 

(624)

Issuance of Class A Common Stock upon exercise of Warrants

14,014,197

2

75,372

75,374

184,521

259,895

Repurchase of Class A Common Stock

218,589

(850)

(850)

(2,615)

(3,465)

Settlement of earnout interests liability

83,093

83,093

281,695

364,788

Net loss

 

 

 

 

 

 

 

 

(17)

(17)

(59)

 

(76)

Balance at March 31, 2021 (Unaudited)

59,377,953

$

6

160,000,000

$

16

218,589

$

(850)

$

142,835

$

(50)

$

(43,507)

$

98,450

$

266,315

$

364,765

Share-based compensation

18,125

1,295

1,295

3,366

4,661

Foreign currency translation adjustment

(72)

(72)

(196)

(268)

Distributions paid to non-controlling interest holders

(337)

(337)

Net loss

(3,767)

(3,767)

(10,187)

(13,954)

Balance at June 30, 2021 (Unaudited)

59,396,078

$

6

160,000,000

$

16

218,589

$

(850)

$

144,130

$

(122)

$

(47,274)

$

95,906

$

258,961

$

354,867

Accumulated

Class A 

Class V 

Additional 

Other

Total 

Non- 

Common Stock

Common Stock

Paid-in

 Comprehensive

Accumulated

Stockholders’

Controlling

Members’

Total

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Deficit

    

Interests

    

Deficit

    

Deficit

Balance at December 31, 2019(1)

$

$

$

$

$

$

$

$

(3,368)

$

(3,368)

Members’ contribution

 

 

 

 

 

 

 

 

 

 

2,000

 

2,000

Share-based compensation

 

 

 

 

 

 

 

 

 

 

285

 

285

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

(364)

 

(364)

Net loss

 

 

 

 

 

 

 

 

 

 

(12,943)

 

(12,943)

Balance at March 31, 2020 (Unaudited)

$

$

$

$

$

$

$

$

(14,390)

$

(14,390)

Members’ contribution

4,500

4,500

Share-based compensation

1,407

1,407

Foreign currency translation adjustment

54

54

Net loss

(50,590)

(50,590)

Balance at June 30, 2020 (Unaudited)

 

$

 

$

$

$

$

$

$

$

(59,019)

$

(59,019)

(1)Previously reported amounts have been adjusted for the retroactive application of the recapitalization related to the Business Combination.

See accompanying notes to condensed consolidated financial statements.

F-3

RUSH STREET INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

    

Six Months Ended

June 30, 

    

2021

    

2020

(Unaudited)

(Unaudited)

Cash flows from operating activities

 

 

Net loss

$

(14,030)

$

(63,533)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities

Share-based compensation expense

 

16,237

 

67,259

Depreciation and amortization expense

 

1,588

 

916

Deferred income taxes

(437)

Noncash lease expense

139

95

Change in fair value of earnout interests liability

13,740

Change in fair value of warrant liabilities

(41,802)

Changes in assets and liabilities:

Players receivables

 

(3,931)

 

849

Due from affiliates

 

14,133

 

(9,077)

Prepaid expenses and other current assets

 

263

 

16

Other assets

 

(491)

 

(105)

Accounts payable

 

(6,693)

 

4,780

Accrued expenses and other current liabilities

 

3,521

 

(308)

Players liabilities

7,310

(96)

Deferred royalty

 

(41)

 

1,111

Lease liabilities

 

71

 

(91)

Net cash (used in) provided by operating activities

 

(10,423)

 

1,816

Cash flows from investing activities

Purchases of property and equipment

 

(844)

 

(809)

Acquisition of gaming licenses

 

(2,349)

 

(3,517)

Internally developed software costs

 

(1,820)

 

Investment in long-term time deposits

 

(250)

 

Net cash used in investing activities

 

(5,263)

 

(4,326)

Cash flows from financing activities

Proceeds from related party loan

 

 

650

Members’ capital contribution

 

 

6,500

Proceeds from shares issued for warrants

131,588

Repurchase of common stock

(3,465)

Principal payments of finance lease liabilities

(457)

Distributions paid to non-controlling interest holders

(337)

Net cash provided by financing activities

 

127,329

 

7,150

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(888)

 

(308)

Net change in cash, cash equivalents and restricted cash

 

110,755

 

4,332

Cash, cash equivalents and restricted cash, at the beginning of the period (1)

 

262,065

 

10,543

Cash, cash equivalents and restricted cash, at the end of the period (1)

$

372,820

$

14,875

Supplemental disclosure of noncash investing and financing activities:

Right-of-use assets obtained in exchange for new or modified operating lease liabilities

$

1,374

$

971

Non-cash redemption of Private Placement and Working Capital Warrants

$

50,798

$

Non-cash settlement of Public Warrants

$

77,509

$

Non-cash settlement of earnout interests liability

$

364,788

$

Increase in accounts payable for property and equipment purchases

$

17

$

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

2,313

$

Cash paid for interest

$

14

$

81

(1)Cash and cash equivalents and Restricted cash are each included separately on the condensed consolidated balance sheets.

See accompanying notes to condensed consolidated financial statements.

F-4

Table of Contents

RUSH STREET INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    Description of Business

Rush Street Interactive, Inc. is a holding company organized under the laws of the State of Delaware and, through its main operating subsidiary, Rush Street Interactive, LP and its subsidiaries (collectively, “RSILP”), is a leading online gaming company that provides online casino and sports betting in the U.S. and Latin America markets. Rush Street Interactive, Inc. and its subsidiaries (including RSILP) are collectively referred to as “RSI” or the “Company.”  The Company is headquartered in Chicago, IL.  

On December 29, 2020, dMY Technology Group, Inc. (“dMY”), a special purpose acquisition company incorporated in Delaware on September 27, 2019, completed the acquisition of certain units of RSILP pursuant to a Business Combination Agreement, dated as of July 27, 2020 (as amended and restated on October 9, 2020 and as further amended on December 4, 2020, the “Business Combination Agreement”), between RSILP, the sellers set forth on the signature pages thereto (collectively, the “Sellers” and each, a “Seller”), dMY Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), and Rush Street Interactive GP, LLC, a Delaware limited liability company, in its capacity as the Sellers’ Representative (in such capacity, the “Sellers’ Representative”).

In connection with the closing (the “Closing”) of the transactions described in the Business Combination Agreement (the “Business Combination”), the Company was reorganized in an umbrella partnership-C corporation, or UP-C, structure, in which substantially all of the assets of the combined company are held by RSILP and the Company’s only assets are its equity interests in RSILP (which are held indirectly through wholly-owned subsidiaries of the Company – RSI ASLP, Inc. (the “Special Limited Partner”) and RSI GP, LLC (“RSI GP”), which is the general partner of RSILP). As of the Closing, the Company owned, indirectly through the Special Limited Partner, approximately 23.1% of the Common Units of RSILP (“RSILP Units”) and controls RSILP through RSI GP, and the Sellers owned approximately 76.9% of the RSILP Units and control the Company through their ownership of the Class V Common Stock, par value $0.0001 per share, of the Company (the “Class V Common Stock”). Upon consummation of the Business Combination, dMY changed its name to “Rush Street Interactive, Inc.” As of June 30, 2021, the Company and the Sellers owned approximately 27.0% and 73.0% of the RSILP Units, respectively.

Impact of COVID-19

The COVID-19 pandemic has adversely impacted global commercial activity, disrupted supply chains and contributed to significant volatility in financial markets. In 2020 and continuing into 2021, the COVID-19 pandemic continued to adversely impact many different industries. The ongoing COVID-19 pandemic could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the extent and the duration of the impact of COVID-19. The COVID-19 pandemic therefore presents material uncertainty and risk with respect to the Company and its performance and could affect its financial results in a materially adverse way.

The COVID-19 pandemic has significantly impacted RSI. The direct impact, beyond disruptions in normal business operations, is primarily through the change in consumer habits as a result of stay-at-home orders and similar consumer restrictions. During that time, RSI experienced increased player activity that has continued to remain strong even after many of these orders were lifted. COVID-19 has also had a direct impact on sports betting due to the rescheduling, reconfiguring, suspension, postponement and cancellation of major sports seasons and sporting events or exclusion of certain players or teams from sporting events. The suspension of sports seasons and sporting events reduced RSI’s customers’ use of, and spending on, RSI’s sports betting offerings. Primarily starting in the third quarter and continuing into the fourth quarter of 2020, most major professional sports leagues resumed their activities. The return of major sports and sporting events, as well as the unique and concentrated sports calendar, generated significant customer interest and activity in the Company’s sports betting offerings. However, sports seasons and calendars continue to remain uncertain and could be further suspended, cancelled or rescheduled due to additional COVID-19 outbreaks.

The Company’s revenues vary based on sports seasons and sporting events, among other things, and cancellations, suspensions or alterations resulting from COVID-19 have the potential to adversely affect our revenue, possibly materially. However, the Company’s online casino offerings do not rely on sports seasons and sporting events, and as such, they may partially offset this adverse impact on revenue.

F-5

Table of Contents

RUSH STREET INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The ultimate impact of COVID-19 and the related restrictions on consumer behavior is currently unknown. A significant or prolonged decrease in consumer spending on entertainment or leisure activities would likely have an adverse effect on demand for RSI offerings, reducing cash flows and revenues, thus materially harming the 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, the Company has business continuity programs in place to ensure that employees are safe, and that the business continues to function with minimal disruptions to normal work operations while employees work remotely. The Company will continue to monitor developments relating to disruptions and uncertainties caused by COVID-19.

2.    Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the applicable regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 25, 2021 and as amended by Amendment No. 1 on Form 10-K/A and Amendment No. 2 on Form 10-K/A, as filed with the SEC on April 30, 2021 and May 7, 2021, respectively (collectively referred to herein as “Amended Annual Report”).

These unaudited condensed consolidated financial statements include the accounts of the Company and its directly and indirectly wholly owned subsidiaries. For consolidated entities that are less than wholly owned, the third party’s holding of an equity interest is presented as Non-controlling interests in the Company’s condensed consolidated balance sheets and condensed consolidated statements of equity (deficit). The portion of net earnings attributable to the non-controlling interests is presented as Net loss attributable to non-controlling interests in the Company’s condensed consolidated statements of operations and comprehensive loss. All intercompany accounts and transactions have been eliminated upon consolidation.

Pursuant to the Business Combination Agreement, the Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, dMY was treated as the acquired company and RSILP was treated as the acquirer for financial statement reporting purposes.

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

RSILP was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

RSILP’s existing members, through their ownership of the Class V Common Stock, have the largest portion of the voting rights in the Company;
The Board of Directors of the Company and management are primarily composed of individuals associated with RSILP; and
RSILP is the larger entity based on historical operating activity and has the larger employee base.

Thus, the financial statements included in this Report reflect: (i) the historical operating results of RSILP prior to the Reverse Recapitalization; (ii) the combined results of the RSILP and dMY following the Business Combination; and (iii) the acquired assets and liabilities of dMY stated at historical cost, with no goodwill or other intangible assets recorded.

Certain prior period amounts have been reclassified to conform to the current period presentation.

F-6

Table of Contents

RUSH STREET INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Interim Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations and comprehensive loss and changes in equity (deficit) for the three- and -six months ended June 30, 2021 and 2020, and the statement of cash flows for the six months ended June 30, 2021 and 2020, are unaudited. The condensed consolidated balance sheet as of December 31, 2020 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three-and-six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the consolidated financial statements relate to and include, but are not limited to: the valuation of share-based awards; the estimated useful lives of property and equipment and intangible assets; redemption rate assumptions associated with the player loyalty program and other discretionary player bonuses; deferred revenue relating to our social gaming revenue stream; accrued expenses; determination of the incremental borrowing rate to calculate operating lease liabilities and finance lease liabilities; valuation of the earnout interests liability; valuation of the warrant liabilities; and deferred taxes and amounts associated with the Tax Receivable Agreement entered into in connection with the Business Combination (the “Tax Receivable Agreement”).

Significant Accounting Policies

The following accounting policy is incremental to the Company’s significant accounting policies as described in Note 2, “Summary of Significant Accounting Policies,” of its audited consolidated financial statements included in the Amended Annual Report.

Internally Developed Software

Software that is developed for internal use is accounted for pursuant to Accounting Standards Codification (“ASC”) 350-40, Intangibles, Goodwill and Other — Internal-Use Software. Qualifying costs incurred to develop internal-use software are capitalized when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project and (iii) it is probable that the project will be completed and perform as intended. These capitalized costs include compensation for employees who develop internal-use software and external costs related to development of internal-use software. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internally developed software is amortized using the straight-line method over an estimated useful life of three to four years. All other expenditures, including those incurred to maintain an intangible asset’s current level of performance, are expensed as incurred.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption had no impact on its condensed consolidated financial statements.

F-7

Table of Contents

RUSH STREET INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). Together with subsequent amendments, this ASU sets forth a “current expected credit loss” model, which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This ASU replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, available-for-sale debt securities and applies to certain off-balance sheet credit exposures. This ASU is effective for the Company in calendar year 2023. The Company is currently assessing the impact of the adoption of this ASU on its condensed consolidated financial statements.

3.    Revenue Recognition

The Company’s revenue from contracts with customers consists of online casino, online sports betting, retail sports betting and social gaming.  

Online casino and online sports betting

Online casino offerings typically include the full suite of games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Company generates revenue through hold, or gross winnings, as customers play against the house. Online casino revenue is generated based on total player bets less amounts paid to players for winning bets, less other incentives awarded to players, plus or minus the change in the progressive jackpot liability, plus or minus the change in unsettled bets.

Online sports betting involves a user placing a bet on the outcome of a sporting event, or a series of sporting events, with the chance to win a pre-determined amount, often referred to as fixed odds. Online sports betting revenue is generated by setting odds such that there is a built-in theoretical margin in each sports bet offered to its customers. Online sports betting revenue is generated based on total player bets less amounts paid to players for winning bets, less other incentives awarded to players, plus or minus the change in unsettled bets.

Retail sports betting

The Company provides retail sports services to land-based casinos in exchange for a monthly commission based on the land-based casino’s retail sportsbook revenue. Services include ongoing management and oversight of the retail sportsbook, technical support for the land-based casino’s customers, risk management, advertising and promotion, and support for the third-party vendor’s sports betting equipment. The Company has a single performance obligation to provide retail sports services and records the revenue as services are performed and when the commission amounts are no longer constrained (i.e., the amount is known).  

Certain relationships with business partners provide the Company the ability to operate the retail sportsbook at the land-based casino. In this scenario, revenue is generated based on total player bets less amounts paid to players for winning bets, less other incentives awarded to players.

Social gaming

The Company provides a social gaming platform for players to enjoy free-to-play games that use virtual credits. While virtual credits are issued to players for free, some players may choose to purchase additional virtual credits through the Company’s virtual cashier. The Company has a single performance obligation associated with social gaming services, to provide social gaming services to players upon the redemption of virtual credits. Deferred revenue is recorded when players purchase virtual credits and revenue is recognized when the virtual credits are redeemed, and the Company’s performance obligation has been fulfilled.

F-8

Table of Contents

RUSH STREET INTERACTIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Disaggregation of revenue for the three-and-six months ended June 30, 2021 and 2020, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

($ in thousands)

    

2021

    

2020

    

2021

    

2020

Online casino and online sports betting

$

121,207

$

64,042

$

231,185

$

98,522

Retail sports betting

572

1

 

1,199

 

214

Social gaming

1,021

995

 

2,236

 

1,479

Total revenue

$

122,800

$

65,038

$

234,620

$

100,215

Revenue by geographic region for the three-and-six months ended June 30, 2021 and 2020, is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

($ in thousands)

    

2021

    

2020

    

2021

    

2020

United States

$

111,756

$

62,334

$

217,059

$

95,217

Colombia

11,044

2,704

 

17,561

 

4,998

Total revenue

$

122,800

$

65,038

$

234,620

$

100,215

The Company included deferred revenue within Players’ liabilities in the condensed consolidated balance sheets. Deferred revenue includes unsettled player bets, unredeemed social gaming virtual credits and unredeemed bonus amounts. The deferred revenue balances were as follows:

($ in thousands)

    

Deferred revenue balance at December 31, 2020

$

1,797

Deferred revenue balance at June 30, 2021

 

2,872

Revenue recognized in the period from amounts included in deferred revenue at December 31, 2020

 

800

4.    Intangible Assets, Net

The Company has the following intangible assets, net as of June 30, 2021 and December 31, 2020:

Weighted

Average