10-Q 1 rsi-20210930.htm 10-Q rsi-20210930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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)
Delaware84-3626708
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 par value per shareRSIThe 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 x 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 x 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 filerxSmaller reporting companyx
Emerging growth companyx
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 x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of November 9, 2021, there were 59,255,080 shares outstanding of the registrant’s Class A common stock, $0.0001 par value per share, and 159,958,729 shares outstanding of the registrant’s Class V common stock, $0.0001 per value per share.


TABLE OF CONTENTS
Rush Street Interactive, Inc.


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 and Canada, 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 customer deposits and withdrawals), 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.
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
i

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 based in numerous jurisdictions. In addition, we continuously seek 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, PlaySugarHouse and RushBet) 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.
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 our 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)
September 30,
2021
December 31,
2020
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents$346,632 $255,622 
Restricted cash13,654 6,443 
Players’ receivables8,194 779 
Due from affiliates25,878 28,764 
Prepaid expenses and other current assets2,975 2,871 
Total current assets397,333 294,479 
Intangible assets, net14,412 9,750 
Property and equipment, net4,560 2,016 
Operating lease right-of-use asset, net1,326 1,100 
Other assets3,418 1,215 
Total assets$421,049 $308,560 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable$9,917 $11,994 
Accrued expenses44,992 27,042 
Players’ liabilities17,491 8,500 
Deferred royalty, short-term365 195 
Operating lease liabilities, short-term472 226 
Earnout interests liability 351,048 
Other current liabilities2,744 1,983 
Total current liabilities75,981 400,988 
Deferred royalty, long-term3,562 3,813 
Operating lease liabilities, long-term941 979 
Warrant liabilities 170,109 
Other long-term liabilities337  
Total liabilities80,821 575,889 
Commitments and contingencies
Stockholders’ equity (deficit)
Class A common stock, $0.0001 par value, 750,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 59,437,349 and 44,792,517 shares issued as of September 30, 2021 and December 31, 2020, respectively; 59,218,760 and 44,792,517 shares outstanding as of September 30, 2021 and December 31, 2020, respectively
6 4 
Class V common stock, $0.0001 par value, 200,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 159,958,729 and 160,000,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
16 16 
Treasury stock, 218,589 and zero shares as of September 30, 2021 and December 31, 2020, respectively
(850) 
Additional paid-in capital163,811  
Accumulated other comprehensive income (loss)(167)93 
Accumulated deficit(70,976)(61,892)
Total stockholders’ equity (deficit) attributable to Rush Street Interactive, Inc.91,840 (61,779)
Non-controlling interests248,388 (205,550)
Total stockholders’ equity (deficit)340,228 (267,329)
Total liabilities and stockholders’ equity (deficit)$421,049 $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
September 30,
Nine Months Ended
September 30,
2021202020212020
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenue$122,920 $78,237 $357,540 $178,452 
Operating costs and expenses
Costs of revenue81,221 47,107 245,668 118,774 
Advertising and promotions46,077 17,506 125,836 33,421 
General administration and other12,318 39,650 40,650 114,815 
Depreciation and amortization1,007 452 2,595 1,368 
Total operating costs and expenses140,623 104,715 414,749 268,378 
Loss from operations(17,703)(26,478)(57,209)(89,926)
Other income (expenses)
Interest expense, net(11)(16)(41)(101)
Change in fair value of warrant liabilities  41,802  
Change in fair value of earnout interests liability  (13,740) 
Total other income (expenses)(11)(16)28,021 (101)
Loss before income taxes(17,714)(26,494)(29,188)(90,027)
Income tax expense1,225  3,781  
Net loss$(18,939)$(26,494)$(32,969)$(90,027)
Net loss attributable to non-controlling interests(13,639) (23,885) 
Net loss attributable to Rush Street Interactive, Inc.$(5,300)$(26,494)$(9,084)$(90,027)
Net loss per common share attributable to Rush Street Interactive, Inc. – basic$(0.09)N/A$(0.16)N/A
Weighted average common shares outstanding – basic59,191,384 N/A55,148,218 N/A
Net loss per common share attributable to Rush Street Interactive, Inc. – diluted$(0.09)N/A$(0.33)N/A
Weighted average common shares outstanding – diluted59,191,384 N/A56,488,691 N/A
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Net loss$(18,939)$(26,494)$(32,969)$(90,027)
Other comprehensive loss
Foreign currency translation adjustment(168)(134)(1,060)(444)
Comprehensive loss$(19,107)$(26,628)$(34,029)$(90,471)
Comprehensive loss attributable to non-controlling interests(13,762) (24,685) 
Comprehensive loss attributable to Rush Street Interactive, Inc.$(5,345)$(26,628)$(9,344)$(90,471)
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)
Class A
Common Stock
Class V
Common Stock
Treasury StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
Attributable
To RSI
Non-
Controlling
Interests
Total
Stockholders’
Equity
(Deficit)
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2020
44,792,517 $4 160,000,000 $16  $ $ $93 $(61,892)$(61,779)$(205,550)$(267,329)
Share-based compensation571,239 —  —  — 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 Warrants14,014,197 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)$161,237 $(50)$(61,909)$98,450 $266,315 $364,765 
Share-based compensation18,125 — — — — — 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)$162,532 $(122)$(65,676)$95,906 $258,961 $354,867 
Share-based compensation— — — — — — 1,279 — — 1,279 3,189 4,468 
RSILP Unit Exchange41,271 — (41,271)— — — — — — — — — 
Foreign currency translation adjustment— — — — — — — (45)— (45)(123)(168)
Net loss— — — — — — — — (5,300)(5,300)(13,639)(18,939)
Balance at September 30, 2021 (Unaudited)
59,437,349 $6 159,958,729 $16 218,589 $(850)$163,811 $(167)$(70,976)$91,840 $248,388 $340,228 





F-3

RUSH STREET INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Amounts in thousands except for share amounts)
Class A
Common Stock
Class V
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Deficit
Non-
Controlling
Interests
Members’
Deficit
Total
Deficit
SharesAmountSharesAmount
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)
Foreign currency translation adjustment— — — — — — — — — (134)(134)
Net loss— — — — — — — — — (26,494)(26,494)
Balance at September 30, 2020 (Unaudited)
 $  $ $ $ $ $ $ $(85,647)$(85,647)
_____________________________________
(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-4

RUSH STREET INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Nine Months Ended
September 30,
20212020
(Unaudited)(Unaudited)
Cash flows from operating activities
Net loss$(32,969)$(90,027)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Share-based compensation expense20,705 103,282 
Depreciation and amortization expense2,595 1,368 
Deferred income taxes(228) 
Noncash lease expense241 155 
Change in fair value of earnout interests liability13,740  
Change in fair value of warrant liabilities(41,802) 
Changes in assets and liabilities:
Players receivables(7,415)1,192 
Due from affiliates2,886 (32,000)
Prepaid expenses and other current assets646 (3,352)
Other assets(225)(158)
Accounts payable(2,122)6,434 
Accrued expenses and other current liabilities18,620 13,732 
Players liabilities8,991 986 
Deferred royalty(81)1,091 
Lease liabilities(259)(144)
Net cash (used in) provided by operating activities(16,677)2,559 
Cash flows from investing activities
Purchases of property and equipment(1,987)(909)
Acquisition of gaming licenses(3,472)(3,787)
Internally developed software costs(2,984) 
Investment in equity(1,500) 
Short-term advances(750) 
Investment in long-term time deposits(250) 
Net cash used in investing activities(10,943)(4,696)
Cash flows from financing activities
Proceeds from related party loan 650 
Members’ capital contribution 6,500 
Proceeds from shares issued for warrants131,588  
Repurchase of common stock(3,465) 
Principal payments of finance lease liabilities(870) 
Distributions paid to non-controlling interest holders(337) 
Net cash provided by financing activities126,916 7,150 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,075)(441)
Net change in cash, cash equivalents and restricted cash98,221 4,572 
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)
$360,286 $15,115 
Supplemental disclosure of noncash investing and financing activities:
Right-of-use assets obtained in exchange for new or modified operating lease liabilities$1,765 $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$45 $ 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$3,180 $ 
Cash paid for interest$21 $101 
_____________________________________
(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-5

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 into 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 September 30, 2021, the Company and the Sellers owned approximately 27.02% and 72.98% 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 to the business, beyond disruptions in normal business operations, is primarily through the change in consumer habits as a result of people being ordered or requested to stay home and restrict their traveling or otherwise voluntarily choosing to stay home or restrict travel. During the periods affected by government imposed stay-at-home orders, the Company’s business volume significantly increased and has since continued to remain strong as many of these orders were lifted. COVID-19 directly impacted 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. While most major professional sports leagues resumed their activities primarily starting in the second half of 2020, the third quarter of 2021 was still impacted by the COVID-19 pandemic. For example, the number of games in the NBA’s 2020-2021 and NHL’s 2021 season were reduced and nearly every major professional sports league has experienced postponed, rescheduled or canceled games, or players or teams being excluded from certain games or events due to COVID-19, COVID-19 protocols or local COVID-19 vaccine requirements.

The return of major sports and sporting events during the second half of 2020, 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 alteration of sports seasons and sporting events, including the postponement or cancellation of events, during the third quarter of 2021 reduced the Company’s customers’ use of, and spending on, the Company’s sports betting offerings
F-6

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and from time to time caused us to issue refunds for canceled events. Additionally, while many bricks-and-mortar casinos where we operate retail sports betting have reopened, visitation at these casinos is still generally below their pre-COVID-19 levels. Ongoing or future closures of bricks-and-mortar casinos and certain ongoing limitations on visitations to such casinos due to COVID-19 may provide additional opportunities for us to market online casino and sports betting to traditional bricks-and-mortar casino patrons.
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 the Company’s revenue, possibly materially. However, the Company’s online casino offerings do not rely on sports seasons and sporting events, thus, they may partially offset this adverse impact on revenue.
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 uptick in 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, its directly and indirectly wholly owned subsidiaries, and all entities in which the Company has a controlling interest. RSI is deemed to have a controlling interest of RSILP through its wholly owned subsidiary RSI GP, which is the sole general partner of RSILP. 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 Company's Board of Directors and management are primarily composed of individuals associated with RSILP; and
F-7

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
RSILP is the larger entity based on historical operating activity and has the larger employee base.
Thus, the financial statements included in this Quarterly Report on Form 10-Q 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, including the $18.4 million reclassification of negative Additional paid-in capital to Accumulated deficit as of December 31, 2020.
Interim Unaudited Condensed Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of September 30, 2021, the Condensed Consolidated Statements of Operations and Comprehensive Loss and Changes in Equity (Deficit) for the three and nine months ended September 30, 2021 and 2020, and the statement of cash flows for the nine months ended September 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 nine months ended September 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, long-lived assets and investments in equity; the estimated useful lives of property, equipment, and intangible assets; redemption rate assumptions associated with the player loyalty program and other discretionary player bonuses; deferred revenue relating to the Company’s 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 policies are 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.
F-8

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Investments in equity

The Company accounts for investments in equity that are within the scope of ASC 321-10, Investments - Equity Securities (“ASC 321-10”) as either (1) investments with a readily determinable fair value, which are recorded at fair value; or (2) investments without a readily determinable fair value, which are recorded at cost less any impairment. Equity investments that are initially concluded to not have a readily determinable fair value are reassessed at each reporting period. If the Company identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, it measures the equity security at fair value as of the date that the observable transaction occurred using valuation techniques that are permitted under ASC 820, Fair Value Measurement.

During the three and nine months ended September 30, 2021, the Company paid $1.5 million to acquire a less than 20% equity interest of Boom Entertainment, a business-to-business supplier and designer of free-to-play and regulated real money digital wagering content. The equity investment is accounted for in accordance with ASC 321-10 and the Company has elected to account for this equity investment at cost less impairment, because there is not a readily determinable fair value for this investment as of September 30, 2021. No impairment was recorded during the three and nine months ended September 30, 2021. The investment is recognized in Other assets as of the balance sheet date.
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.
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 customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in the progressive jackpot liability.
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 customers. Online sports betting revenue is generated based on total customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled bets.
F-9

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Retail sports betting
The Company provides retail sports services to land-based partners in exchange for a monthly commission based on the land-based partner’s retail sportsbook revenue. Services generally include ongoing management and oversight of the retail sportsbook, technical support for the land-based partner’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 customer bets less amounts paid to customers for winning bets, less other incentives awarded to customers, plus or minus the change in unsettled retail sports bets.
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.
Disaggregation of revenue for the three and nine months ended September 30, 2021 and 2020, is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)2021202020212020
Online casino and online sports betting$121,360 $76,937 $352,545 $175,459 
Retail sports betting545 264 1,744 478 
Social gaming1,015 1,036 3,251 2,515 
Total revenue$122,920 $78,237 $357,540 $178,452 
Revenue by geographic region for the three and nine months ended September 30, 2021 and 2020, is as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)2021202020212020
United States$113,966$73,945$331,025$169,162
Colombia8,9544,29226,5159,290
Total revenue$122,920$78,237$357,540$178,452
Deferred revenue associated with online casino and online sports betting revenue and retail sports betting revenue includes unsettled customer bets and unredeemed customer incentives, and is included within Players’ liabilities in the condensed consolidated balance sheets. Deferred revenue associated with social gaming revenue includes unredeemed social gaming virtual credits and is included within Other current liabilities in the condensed consolidated balance sheets. The deferred revenue balances as of September 30, 2021 and December 31, 2020 were as follows:
($ in thousands)
Deferred revenue balance at December 31, 2020
$1,797 
Deferred revenue balance at September 30, 2021
3,822 
Revenue recognized in the period from amounts included in deferred revenue at December 31, 2020
1,635 
F-10

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4.Intangible Assets, Net
The Company has the following intangible assets, net as of September 30, 2021 and December 31, 2020:
($ in thousands)Weighted
Average
Remaining
Amortization
Period (years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
License Fees
September 30, 20216.91$16,107 $(4,541)$11,566
December 31, 20208.03$13,225 $(3,475)$9,750
Internally Developed Software
September 30, 20212.88$2,985 $(139)$2,846
December 31, 2020— $ $$
Amortization expense was $0.7 million and $1.8 million for the three and nine months ended September 30, 2021, respectively, compared to amortization expense of $0.4 million and $1.1 million in the same periods of 2020.
5.Accrued Expenses
The Company has the following accrued expenses as of September 30, 2021 and December 31, 2020:
($ in thousands)September 30,
2021
December 31,
2020
Accrued compensation and related expenses$4,111 $1,948 
Accrued operating expenses14,483 7,006 
Accrued marketing expenses23,946 12,093 
Accrued professional fees727 873 
Due to affiliates313 3,751 
Other1,412 1,371 
Total accrued expenses$44,992 $27,042 
6.Warrant Liabilities
As part of dMY’s initial public offering, dMY issued to third-party investors 23.0 million units, consisting of one share of Class A common stock of dMY (“Class A Common Stock”) and one-half of one warrant, at a price of $10.00 per unit. Each whole warrant entitled the holder to purchase one share of Class A Common Stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the dMY initial public offering, 6,600,000 private placement warrants were sold to the Sponsor (the “Private Placement Warrants”) and an additional 75,000 warrants were issued to the Sponsor upon the Closing in connection with converting certain working capital loans into warrants (the “Working Capital Warrants” and together with the Private Placement Warrants, the “Private Warrants” and the Private Warrants together with the Public Warrants, the “Warrants”). Each Private Warrant allows the Sponsor to purchase one share of Class A Common Stock at $11.50 per share.
The Company classified the Warrants as derivative liabilities on its consolidated balance sheet at fair value as of each reporting date, with subsequent changes in their respective fair values recognized in its consolidated statement of operations and comprehensive loss.
Public Warrants
On February 22, 2021, the Company announced the redemption of all the Company’s Public Warrants, which were exercisable for an aggregate of approximately 11.5 million shares of Class A Common Stock at a price of $11.50 per share. During the nine months ended September 30, 2021, 11,442,389 Public Warrants were exercised at a price of $11.50 per
F-11

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
share, resulting in cash proceeds of approximately $131.6 million and the issuance of 11,442,389 shares of Class A Common Stock. None of the Public Warrants remain outstanding as of September 30, 2021.
The Company determined the fair value of its Public Warrants based on the publicly listed trading price of such warrants as of the valuation date. Accordingly, the Public Warrants were classified as Level 1 financial instruments. The aggregate fair value of the Public Warrants on the dates of exercise throughout March 2021 was $77.5 million. The fair value of the Public Warrants was $88.1 million as of December 31, 2020.
Private Warrants
On March 26, 2021, the Private Warrants were exercised in full on a cashless basis, resulting in the issuance of 2,571,808 shares of Class A Common Stock. None of the Private Warrants remain outstanding as of September 30, 2021.
The estimated fair value of the Private Warrants was determined with Level 3 inputs using the Black-Scholes model. The significant inputs and assumptions in this method are the stock price, exercise price, volatility, risk-free rate, and term or maturity. The underlying stock price input is the closing stock price as of each valuation date and the exercise price is the price as stated in the warrant agreement. The volatility input was determined using the historical volatility of comparable publicly traded companies that operate in a similar industry or compete directly against the Company. Volatility for each comparable publicly traded company is calculated as the annualized standard deviation of daily continuously compounded returns. The Black-Scholes analysis is performed in a risk-neutral framework, which requires a risk-free rate assumption based upon constant-maturity treasury yields, which are interpolated based on the remaining term of the Private Warrants as of each valuation date. The term/maturity is the duration between each valuation date and the maturity date, which is five years following the Closing, or December 29, 2025.
The following table provides quantitative information regarding Level 3 fair value measurement inputs at their measurement dates:
March 26,
2021
December 31,
2020
Exercise price$11.50$11.50
Stock price$15.96$22.76
Volatility42.6%41.4%
Term (years)4.775.0
Risk-free interest rate0.76%0.37%
The fair value of the Private Warrants was $50.8 million and $82.0 million as of March 26, 2021 and December 31, 2020, respectively.
The Company recorded $41.8 million to Change in fair value of warrant liabilities on the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss, representing the change in fair value of the Public Warrants and Private Warrants from December 31, 2020 through the dates of exercise.
7.Earnout Interests Liability
The earnout interests were subject to certain restrictions on transfer and voting and potential forfeiture pending the achievement of certain earnout targets. The earnout targets included (a) a change of control within three years of the Closing, (b) achieving certain revenue targets for the 2021 year, and (c) achieving certain volume weighted average share prices (“VWAPs”) within three years of the Closing.
Earnout interests represented a freestanding financial instrument initially classified as liabilities on the accompanying Condensed Consolidated Balance Sheet as the Company determined that these financial instruments were not indexed to the Company’s own equity in accordance with ASC 815, Derivatives and Hedging. Earnout interests were initially recorded at fair value and were adjusted to fair value at each reporting date with changes in fair value recorded in Change in fair value of earnout interests liability in the consolidated statement of operations and comprehensive loss.
On January 13, 2021, the earnout interests were fully earned and no longer subject to the applicable restrictions on transfer and voting because the VWAP exceeded $14.00 per share for 10 trading days within a 20 consecutive trading day
F-12

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
period following the Closing. As a result, the earnout interests liability was reclassed to equity resulting in 1,212,813 shares of Class A Common Stock held by Darla Anderson, Francesca Luthi, Charles E. Wert and Sponsor and 15,000,000 shares of Class V Common Stock and RSILP Units issued to the Sellers (i.e., non-controlling interests) that were no longer subject to the applicable restrictions.
The Company recorded $13.7 million to Change in fair value of earnout interests liability on the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss, representing the change in fair value of the earnout interests from December 31, 2020 through January 13, 2021 when the earnout interests were no longer subject to the restrictions.
8.Equity
Non-Controlling Interest
The non-controlling interest represents the RSLIP Units held by holders other than the Company. As of December 31, 2020, the non-controlling interests owned 76.9% of the RSILP Units outstanding (which excluded the earnout interests that did not vest until January 2021). The table below illustrates a rollforward of the non-controlling interest percentage during the nine months ended September 30, 2021:
Non-Controlling Interest %
Non-controlling interest % as of December 31, 2020:
76.89 %
Issuance of RSILP units in connection with the vesting of earnout interest in January 2021
1.24 %
Issuance of Class A Common Stock in connection with the exercise of the Warrants
(4.98)%
Issuance of Class A Common Stock in connection with the vesting of certain share-based equity grants(0.23)%
Repurchases of Class A Common Stock
0.08 %
Issuance of Class A Common Stock upon the conversion of RSILP Unit Exchanges
(0.02)%
Non-controlling interest % as of September 30, 2021:
72.98 %
Treasury Stock
During the nine months ended September 30, 2021, the Company repurchased 218,589 shares of its Class A Common Stock at an average price of $15.85 and a total cost of $3.5 million. The repurchased shares are considered issued but not outstanding.
9.Share-Based Compensation
The Company adopted the Rush Street Interactive, Inc. 2020 Omnibus Equity Incentive Plan, as amended from time to time (the “2020 Plan”), to attract, retain and incentivize employees, consultants and independent directors who will contribute to the success of the Company. Awards that may be granted under the 2020 Plan include incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards, cash awards and other equity-based awards. There is an aggregate of 13.4 million shares of Class A Common Stock reserved under the 2020 Plan, which may consist of authorized and unissued shares, treasury shares or shares reacquired by the Company. The 2020 Plan will terminate on December 29, 2030.
The Company granted 14,733 and 4,007,085 restricted stock units (“RSUs”) during the three and nine months ended September 30, 2021, respectively. Certain awards are based on service conditions and other awards are based on market conditions. The grant date fair value of the awards with service conditions is determined based on the quoted market price, while the grant date fair value of the awards with market-based conditions is estimated using a Monte Carlo simulation.


F-13

RUSH STREET INTERACTIVE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company granted nil and 130,565 stock options during the three and nine months ended September 30, 2021, respectively. The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model using the following weighted-average assumptions:
September 30, 2021
Volatility rate53.52 %
Risk-free interest rate1.66 %
Average expected life (in years)5.4
Dividend yieldNone
RSU and stock option activity for the nine months ended September 30, 2021 was as follows:
RSUsOptions
Number of unitsWeighted average
grant price
Number of unitsWeighted average
grant price
Unvested balance at December 31, 2020
 $