Skillz Inc

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (“SEC”) rules and forms.

Based on the evaluation of our disclosure controls and procedures, management has concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

(b) Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 framework), the Company’s management, under supervision and participation of the CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023.

Based on our assessment under the framework in Internal Control—Integrated Framework (2013 framework), management concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to the existence of material weaknesses described below.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Our management concluded that material weaknesses existed as of December 31, 2023 with respect to the following:

1. Risk assessment

2. Information technology general controls

3. Internal control over accounting processes

Risk Assessment

In 2023, the Company continued to experience significant turnover of personnel involved in the design and operation of our system of internal control over financial reporting. While we backfilled vacated positions by engaging consultants and invested in hiring initiatives to recruit full-time employees, such hiring was not completed timely to offset the impact of the turnover we experienced. As a result, we were unable to maintain an effective risk assessment process based on the criteria established in the COSO Framework, due to the lack of sufficient trained personnel to adequately identify new or changing risks of misstatement to our financial statements and to design responsive internal controls over financial reporting.

As a result, the Company has been unable to reassess and adequately design and implement controls over financial reporting, including identification and review of disclosures and monitoring controls, and in providing the appropriate evidence of review of reconciliations, budgets, and key elements of the financial close process.

Information Technology General Controls (ITGCs)

As of December 31, 2023, ITGCs in the areas of access and program change over information technology (IT) systems that support the Company’s financial reporting processes were not designed or operating effectively. Specifically, the Company did not maintain sufficient: (a) user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; (b) program change management controls to ensure that IT program and data changes affecting financial information technology applications and underlying records are identified, tested, authorized, and implemented appropriately; and (c) program operations controls. As a result, the Company’s related IT dependent manual and application controls that rely upon the affected ITGCs, or information coming from IT systems with affected ITGCs were also deemed ineffective.

Internal Controls Over Accounting Processes

As of December 31, 2023, controls designed to properly evaluate certain accounting processes, including where management review was involved, were not implemented or did not operate effectively due to the lack of sufficient documentation or evidence retained to demonstrate management’s review over certain financial statement areas, including payroll, accounts receivable, tax liability, investments, end user liability, revenue recognition, and nonroutine transactions.

Conclusion

These material weaknesses create a reasonable possibility that a material misstatement to the consolidated financial statements might not be prevented or detected on a timely basis. Therefore, we concluded that the deficiencies above represent material weaknesses in our internal control over financial reporting, and that our internal control over financial reporting was not effective as of December 31, 2023.

Following identification of these material weaknesses, prior to filing this Annual Report on Form 10-K, we performed additional analyses and other procedures to ensure that our consolidated financial statements included in this Annual Report were prepared in accordance with U.S. GAAP. Our CEO and CFO have concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in this Annual Report.

Management has been actively engaged in developing and implementing remediation plans to address these material weaknesses as described below.

The Company’s independent registered public accounting firm, Grant Thornton, LLP, who audited our internal controls over financial reporting, has issued an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, as stated in its report.

(c) Material Weakness Remediation Efforts

During fiscal year 2023 and first quarter of 2024, management made the following changes to towards remediation of material weaknesses related to internal controls over financial reporting:

•Ensured system administrator access is restricted to appropriate individuals.

•Made significant investment in hiring additional resources to enhance our technical accounting and internal control over financial reporting capabilities.

•Redesigned controls in all financial reporting processes and implemented additional internal control procedures in our financial reporting processes.

•Trained finance and accounting personnel and key management roles across the organization in the design and execution of internal controls under required standards.

•Made an investment in transitioning and automating our financial statement close process to Blackline – which we anticipate implementing and deploying in the fourth quarter of 2024.

•Added 2 director-level staff in Accounting – one, who will oversee external/SEC Reporting & Technical Accounting, the second, who will oversee all of general accounting/general ledger functions.

•Hired an Internal Audit Consulting Team with expertise in internal control design, including IT general controls to remediate material weaknesses.

•Established a Steering Committee to facilitate and administer remediation of material weaknesses.

Although the Company implemented meaningful control enhancements throughout the year and hired additional resources, including a new internal audit consulting firm, there was insufficient time to demonstrate full remediation of its controls related to an effective control environment and process level controls in certain financial statement areas.

While we have implemented changes to our control environment, we require additional time to complete the implementation of our remediation plans and demonstrate the effectiveness of our efforts in fiscal year 2024. The material weaknesses cannot be considered remediated until the underlying remedial controls operate for sufficient time, and management has concluded, through testing, that these controls are operating effectively.

Management, with oversight from the Audit Committee, will work to remedy material weaknesses and reinforce the overall design and capability of our internal control environment. The following has been planned for implementation in management’s ongoing efforts to remediate the identified material weaknesses:

•Management will enhance and standardize policies and procedures across the Company to ensure consistency and performance of internal controls;

•Management will continue to make strategic investments in personnel, external consultants, and available tools or systems to streamline / automate execution and documentation of internal controls throughout the Company; and

•Management will continue to engage and educate personnel (including external consultants) throughout the Company on the importance of documenting and following internal controls.

Changes in Internal Controls Over Financial Reporting

•Management assessed control design in all financial reporting processes, identifying additional key controls over financial reporting.

•Other than the changes noted above, there have been no changes in our internal controls over financial reporting during the fiscal quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Attestation of Independent Registered Public Accounting Firm

Our independent registered public accounting firm, Grant Thornton LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and chief financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. An internal controls system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.