myps-20210930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2021


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

For transition period from to

Commission File Number 001-39652

PLAYSTUDIOS, Inc.

(Exact name of registrant as specified in its charter)


Delaware						98-1606155
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

10150 Covington Cross Drive

Las Vegas, NV 89144

(725) 877-7000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock

MYPS

The Nasdaq Stock Market LLC

Redeemable warrants exercisable for one Class A common stock at an exercise price of $11.50

MYPSW

The Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit 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 7(a)(2)(B) of the Securities Act. ☐

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

As of November 8, 2021, there were 109,877,291 shares of Class A common stock, $0.0001 par value per share, and 16,130,300 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.

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Cautionary Note Regarding Forward-Looking Statements			4
Part I - Financial Information			6
Item 1. Financial Statements (Unaudited)			6
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020			6
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and September 30, 2020			7
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and September 30, 2020			8
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2021 and September 30, 2020			9
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and September 30, 2020			13
Notes to Unaudited Condensed Consolidated Financial Statements			14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			33
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			43
Part II - Other Information			45
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			77
Item 3. Defaults Upon Senior Securities			77
Item 4. Mine Safety Disclosures			77
Item 5. Other Information			77
Item 6. Exhibits			78
Signatures			79

In this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” the “Company” and “PLAYSTUDIOS” mean PLAYSTUDIOS, Inc. (formerly Acies Acquisition Corp.) and our subsidiaries. On June 21, 2021 (the “Closing Date”), Acies Acquisition Corp., a Delaware corporation (“Acies” and after the Business Combination described herein, the “Company”), consummated a business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of February 1, 2021 (the “Merger Agreement”), by and among Acies, Catalyst Merger Sub, Inc., a Delaware corporation (“First Merger Sub”), Catalyst Merger Sub II, Inc., a Delaware limited liability company ("Second Merger Sub"), and PlayStudios, Inc., a Delaware corporation (“Old PLAYSTUDIOS”). Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Merger Agreement (collectively, the “Transactions”, and such completion, the “Closing”), First Merger Sub merged with and into Old PLAYSTUDIOS, with Old PLAYSTUDIOS surviving as a wholly owned subsidiary of Acies. Immediately following the First Merger, and as part of an integrated transaction with the First Merger, Old PLAYSTUDIOS merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary of Acies. In connection with the Transactions, Acies changed its name to “PLAYSTUDIOS, Inc.” and Old PLAYSTUDIOS changed its name to “PLAYSTUDIOS US, LLC.”

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. All statements, other than statements of present or historical fact included in this Quarterly Report, about our future financial performance, strategy, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management are forward-looking statements. Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “continue,” “goal,” “project” or the negative of such terms or other similar expressions.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our business strategy and market opportunity;

•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (including changes in sales and marketing, research and development, and general and administrative expenses) and profitability;

•market acceptance of our games;

•our ability to raise financing in the future and the global credit and financial markets;

•factors relating to our business, operations and financial performance and our subsidiaries, including:

◦changes in the competitive and regulated industries in which we operate, variations in operating performance across competitors and changes in laws and regulations affecting our business; and

◦our ability to implement business plans, forecasts and other expectations, and identify and realize additional opportunities;

•our ability to maintain relationships with our platforms, such as the Apple App Store, Google Play Store, Amazon Appstore, and Facebook;

•the accounting for our outstanding warrants to purchase shares of Class A common stock;

•our ability to develop, maintain, and improve our internal control over financial reporting;

•our ability to maintain, protect and enhance our intellectual property rights;

•our ability to successfully defend litigation brought against us;

•our ability to successfully close and integrate acquisitions to contribute to our growth objectives;

•our success in retaining or recruiting, or changes required in, our officers, key employees or directors; and

•the impact of COVID-19 (including existing and possible future variants as well as vaccinations) on our business.

These statements are based on our current plans, estimates and projections in light of information currently available to us, and are subject to known and unknown risks, uncertainties and assumptions about us, including those described under the heading “Risk Factors” in this Quarterly Report on Form 10-Q, and in other filings that we make with the Securities and Exchange Commission (the “SEC”) from time to time, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In addition, the risks described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our 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. Forward-looking statements are also not guarantees of performance. You should not put undue reliance on any forward-looking statements, which speak only as of the date hereof. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking

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statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q whether as a result of new information, future events or otherwise.

We intend to announce material information to the public through our Investor Relations website, ir.playstudios.com, SEC filings, press releases, public conference calls and public webcasts. We use these channels, as well as social media, to communicate with our investors, customers, and the public about our company, our offerings, and other issues. It is possible that the information we post on our website or social media could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including our website and the social media channels listed on our Investor Relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

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Item 1. Financial Statements

PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except par value amounts)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	225,975	$	48,927
Receivables	18,462		16,616
Prepaid expenses	6,440		2,429
Income tax receivable	10,471		6,959
Other current assets	416		2,854
Total current assets	261,764		77,785
Property and equipment, net	5,222		6,201
Internal-use software, net	42,731		38,756
Goodwill	5,059		5,059
Intangibles, net	1,350		1,624
Deferred income taxes	6,562		3,109
Other long-term assets	7,849		1,927
Total non-current assets	68,773		56,676
Total assets	$	330,537	$	134,461
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	8,832		4,717
Warrant liabilities	8,468		—
Accrued liabilities	10,596		29,089
Total current liabilities	27,896		33,806
Minimum guarantee liability	—		300
Deferred income taxes	2,579		2,970
Other long-term liabilities	1,672		1,306
Total non-current liabilities	4,251		4,576
Total liabilities	$	32,147	$	38,382
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value (100,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020)	—		—

Class A common stock, $0.0001 par value (2,000,000 shares authorized, 109,830 and 74,422 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)	11		8
Class B common stock, $0.0001 par value (25,000 shares authorized, 16,130 and 18,977 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively).	2		2
Additional paid-in capital	264,067		71,786
Retained earnings	33,921		23,802
Accumulated other comprehensive income	389		481
Total stockholders’ equity	298,390		96,079
Total liabilities and stockholders’ equity	$	330,537	$	134,461

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net revenues	$	70,571	$	69,711	$	215,490	$	205,883
Operating expenses:
Cost of revenue(1)	22,282		23,840		69,802		70,199
Selling and marketing	19,274		15,078		60,461		41,232
Research and development	14,509		14,812		46,551		35,942
General and administrative	8,092		4,362		24,769		13,883
Depreciation and amortization	7,213		5,577		20,145		16,405
Total operating costs and expenses	71,370		63,669		221,728		177,661
Income (loss) from operations	(799)		6,042		(6,238)		28,222
Other income (expense), net:
Change in fair value of warrant liabilities	11,876		—		11,986		—
Interest expense, net	(57)		(107)		(206)		(94)
Other income (expense), net	(113)		494		(242)		509
Total other income, net	11,706		387		11,538		415
Income before income taxes	10,907		6,429		5,300		28,637
Income tax benefit (expense)	329		(1,309)		4,819		(5,066)
Net income	$	11,236	$	5,120	$	10,119	$	23,571
Net income per share attributable to Class A and Class B common stockholders:
Basic	$	0.09	$	0.06	$	0.09	$	0.25
Diluted	$	0.08	$	0.05	$	0.08	$	0.23
Weighted average shares of common stock outstanding:
Basic	125,823		92,596		106,880		92,879
Diluted	138,795		105,078		120,516		101,876

(1)Amounts exclude depreciation and amortization.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	11,236	$	5,120	$	10,119	$	23,571
Other comprehensive income (loss):
Change in foreign currency translation adjustment(1)	(5)		(154)		(92)		97
Total other comprehensive income (loss)	(5)		(154)		(92)		97
Comprehensive income	$	11,231	$	4,966	$	10,027	$	23,668

(1)These amounts are presented gross of the effect of income taxes. The total change in foreign currency translation adjustment and the corresponding effect of income taxes are immaterial.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Preferred Stock			Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount						Retained Earnings
Balance as of June 30, 2020	162,596	$	8	226,474	$	11	—	$	—	—	$	—	$	68,463	$	349	$	31,961	$	100,792
Retroactive application of reverse recapitalization	(162,596)	(8)		(226,474)	(11)		73,100	8		18,977	2		9		—		—		—
Adjusted balance as of June 30, 2020	—	$	—	—	$	—	73,100	$	8	18,977	$	2	$	68,472	$	349	$	31,961	100,792
Net income	—	—		—	—		—	—		—	—		—		—		5,120		5,120
Exercise of stock options	—	—		—	—		414	—		—	—		478		—		—		478
Stock-based compensation	—	—		—	—		—	—		—	—		1,341		—		—		1,341
Repurchase and retirement of common stock	—	—		—	—		(837)	—		—	—		—		—		(2,515)		(2,515)
Other comprehensive loss	—	—		—	—		—	—		—	—		—		(154)		—		(154)
Balance as of September 30, 2020	—	$	—	—	$	—	72,677	$	8	18,977	$	2	$	70,291	$	195	$	34,566	$	105,062

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Preferred Stock			Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount						Retained Earnings
Balance as of June 30, 2021	—	$	—	—	$	—	109,623	$	11	16,130	$	2	$	262,931	$	394	$	22,685	$	286,021


Net income	—	—		—	—		—	—		—	—		—		—		11,236		11,236
Business Combination and PIPE Financing	—	—		—	—		—	—		—	—		(73)		—		—		(73)
Exercise of stock options	—	—		—	—		207	—		—	—		192		—		—		192
Stock-based compensation	—	—		—	—		—	—		—	—		1,017		—		—		1,017

Other comprehensive loss	—	—		—	—		—	—		—	—		—		(5)		—		(5)
Balance as of September 30, 2021	—	$	—	—	$	—	109,830	$	11	16,130	$	2	$	264,067	$	389	$	33,921	$	298,390

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Preferred Stock			Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount						Retained Earnings
Balance as of December 31, 2019	162,596	$	8	225,490	$	11	—	$	—	—	$	—	$	66,661	$	98	$	13,535	80,313
Retroactive application of reverse recapitalization	(162,596)	(8)		(225,490)	(11)		72,871	8		18,977	2		9		—		—		—
Adjusted balance as of December 31, 2019	—	$	—	—	$	—	72,871	$	8	18,977	$	2	$	66,670	$	98	$	13,535	80,313
Net income	—	—		—	—		—	—		—	—		—		—		23,571		23,571
Exercise of stock options	—	—		—	—		649	—		—	—		622		—		—		622
Stock-based compensation	—	—		—	—		—	—		—	—		2,999		—		—		2,999
Repurchase and retirement of common stock	—	—		—	—		(843)	—		—	—		—		—		(2,540)		(2,540)
Other comprehensive income	—	—		—	—		—	—		—	—		—		97		—		97
Balance as of September 30, 2020	—	$	—	—	$	—	72,677	$	8	18,977	$	2	$	70,291	$	195	$	34,566	$	105,062

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited, in thousands)


	Preferred Stock			Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income				Total Stockholders' Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount						Retained Earnings
Balance as of December 31, 2020	162,596	$	8	238,186	$	12	—	$	—	—	$	—	$	71,776	$	481	$	23,802	96,079
Retroactive application of reverse recapitalization	(162,596)	(8)		(238,186)	(12)		74,422	8		18,977	2		10		—		—		—
Adjusted balance as of December 31, 2020	—	$	—	—	$	—	74,422	$	8	18,977	$	2	$	71,786	$	481	$	23,802	96,079
Net income	—	—		—	—		—	—		—	—		—		—		10,119		10,119
Business Combination and PIPE Financing	—	—		—	—		32,968	3		(2,847)	—		186,008		—		—		186,011
Exercise of stock options	—	—		—	—		2,440	—		—	—		2,091		—		—		2,091
Stock-based compensation	—	—		—	—		—	—		—	—		4,182		—		—		4,182

Other comprehensive loss	—	—		—	—		—	—		—	—		—		(92)		—		(92)
Balance as of September 30, 2021	—	$	—	—	$	—	109,830	$	11	16,130	$	2	$	264,067	$	389	$	33,921	$	298,390

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PLAYSTUDIOS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	10,119	$	23,571
Adjustments:
Depreciation and amortization	20,145		16,405
Amortization of loan costs	295		—
Stock-based compensation expense	3,680		2,624
Change in fair value of warrant liabilities	(11,986)		—
Deferred income tax expense	(3,070)		(771)

Other	1,517		(53)
Changes in operating assets and liabilities
Receivables	(1,588)		(9,323)
Prepaid expenses and other current assets	(3,679)		337
Income tax receivable	(3,512)		—
Accounts payable & accrued liabilities	5,684		1,688

Other	3,158		(761)
Net cash provided by operating activities	20,763		33,717
Cash flows from investing activities:
Purchase of property and equipment	(1,241)		(1,457)
Additions to internal-use software	(19,540)		(18,116)
Additions to notes receivable and other investments	(9,533)		—
Net cash used in investing activities	(30,314)		(19,573)
Cash flows from financing activities:
Proceeds from stock option exercises	2,091		622
Repurchases of common stock for retirement	—		(2,540)
Net proceeds from Business Combination	185,311		—
Other	(690)		(481)

Net cash provided by financing activities	186,712		(2,399)
Foreign currency translation	(113)		49
Net change in cash and cash equivalents	177,048		11,794
Cash and cash equivalents at beginning of period	48,927		31,022
Cash and cash equivalents at end of period	$	225,975	$	42,816
Supplemental cash flow disclosures:
Interest paid	$	53	$	27
Income taxes paid, net of refunds	818		4,498
Non-cash investing and financing activities:
Capitalization of stock-based compensation	$	502	$	375
Reduction of notes receivable in exchange for internal-use software	1,754		—
Settlement of MGM Profit Share liability through the issuance of shares of Class A common stock	20,000		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited, in thousands, unless otherwise noted)

NOTE 1—BACKGROUND AND BASIS OF PRESENTATION

Organization and Description of Business

PLAYSTUDIOS, Inc., formerly known as Acies Acquisition Corp. (the "Company” or "PLAYSTUDIOS"), was incorporated on August 14, 2020 as a Cayman Islands exempted company, and domesticated into a Delaware corporation on June 21, 2021 (the "Domestication"). The Company's legal name became PLAYSTUDIOS, Inc. following the closing of the business combination discussed in Note 3. The prior period financial information represents the financial results and conditions of Old PLAYSTUDIOS (as defined in Note 3).

The Company develops and operates online and mobile social gaming applications (“games” or “game”) each of which incorporate a unique loyalty program offering “real world” rewards provided by a collection of rewards partners. The Company’s games are free-to-play and available via the Apple App Store, Google Play Store, Amazon Appstore, and Facebook (collectively, “platforms” or “platform operators”). The Company creates games based on its own original content as well as third-party licensed brands. The Company generates revenue through the in-game sale of virtual currency and through advertising.

Unless the context indicates otherwise, all references herein to “PLAYSTUDIOS,” the “Company,” “we,” “us,” and “our” are used to refer collectively to PLAYSTUDIOS, Inc. and its subsidiaries.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of PLAYSTUDIOS, Inc. and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Certain reclassifications in these financial statements have been made to comply with US GAAP applicable to public companies and SEC Regulation S-X.

In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position as of September 30, 2021, and its results of operations for the three and nine months ended September 30, 2021, and 2020, and cash flows for the nine months ended September 30, 2021, and 2020. The Consolidated Balance Sheets as of December 31, 2020 was derived from the audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes thereto. Significant estimates and assumptions reflected in the Company’s condensed consolidated financial statements include the estimated consumption rate of virtual goods that is used in the determination of revenue recognition, useful lives of property and equipment and definite-lived intangible assets, the expensing and capitalization of research and development costs for internal-use software, assumptions used in accounting for income taxes, stock-based compensation and the evaluation of goodwill and long-lived assets for impairment. The Company believes the accounting estimates are appropriate and reasonably determined. Due to the inherent uncertainties in making these estimates, actual amounts could differ materially.

Segments

Operating segments are defined as components of an entity for which discrete financial information is available, and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The CODM, the Company’s Chief Executive Officer, reviews financial information on a consolidated basis for purposes of evaluating performance and allocating resources. As such, the Company has one operating and reportable segment.

Emerging Growth Company

At September 30, 2021, the Company qualified as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and the Company has

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taken and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has opted to take advantage of such extended transition period available to emerging growth companies which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company can adopt the new or revised standard at the time private companies adopt the new or revised standard. The Company no longer expects to lose its emerging growth company status on December 31, 2021. As a result, the Company does not expect to adopt any accounting pronouncements currently deferred based on private company standards until a year subsequent to 2022. The Company will reevaluate its eligibility to retain emerging growth company status at the end of its second quarter of 2022, and otherwise as required.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Warrant Liabilities

The Company evaluates all of its financial instruments, including issued warrants, to determine if such instruments are liability classified, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) or derivatives or contain features that qualify as embedded derivatives pursuant to ASC Topic 815, Derivatives and Hedging (“ASC 815”). The classification of instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Issuance costs incurred with the Business Combination that are attributable to liability classified warrants are expensed as incurred.

Share-Based Compensation

The Company measures compensation expense for all share-based awards at fair value on the date of grant and recognizes compensation expense over the service period on a straight-line basis for awards expected to vest.

The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value for option awards. In valuing our option awards, the Company makes assumptions about risk-free interest rates, dividend yields, volatility and weighted-average expected lives. The Company accounts for forfeitures as they occur. Risk-free interest rates are derived from United States Treasury securities as of the option award grant date. Expected dividend yield is based on our historical cash dividend payments, which have been zero to date. The expected volatility for shares of the Company's Class A common stock is estimated using our historical volatility. The weighted-average expected life of the option awards is estimated based on our historical exercise data.

The Company's dual class structure was created upon the Domestication (as defined in Note 3). The Class B common stock including Class B common stock underlying vested stock options, held by Mr. Andrew Pascal, the Company's Chairman and Chief Executive Officer, or his affiliates (the "Founder Group") carry a super vote premium. As the Founder Group did not have control of Old PLAYSTUDIOS prior to the Business Combination, and Mr. Pascal is an employee of the Company, the incremental value resulting from the super vote premium is accounted for as incremental compensation costs.

The Company utilized the market approach by observing other market participants with (i) dual class structures, (ii) super vote premiums for a single class and (iii) both classes trading on a national exchange. Based on the observed data, management selected a premium for the Class B common stock and the stock options held by members of the Founder Group.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842). The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities in the Consolidated Balance Sheets and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of the Company’s operating leases, where the Company is the

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lessee, to be recognized in the Company’s Consolidated Balance Sheets. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This guidance is effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within that annual reporting period, with earlier adoption permitted. The Company is currently evaluating the impact of adopting this guidance.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The new guidance replaces the incurred loss impairment methodology in current guidance with a current expected credit loss model (“CECL”) that incorporates a broader range of reasonable and supportable information including the forward-looking information. This guidance is effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within that annual reporting period, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of adopting this guidance.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within that annual reporting period, with early adoption permitted with simultaneous adoption of all provisions of the new standard. The Company is currently evaluating the impact of adopting this guidance.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Under the new amendment, the Company is required to perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The guidance is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within that annual period, with early adoption permitted. The Company early adopted this guidance prospectively on January 1, 2021, and it did not have any impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation costs Incurred in a Cloud Computing Arrangement that is a Service Contract, that requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance in ASC Topic 350, Intangibles—Goodwill and Other. This guidance is effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within that annual reporting period, with early adoption permitted. The Company early adopted this guidance prospectively on January 1, 2020, and it did not have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This temporary guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 and may be applied prospectively through December 31, 2022. The Company adopted this guidance prospectively on January 1, 2021, and it did not have any impact on the Company’s consolidated financial statements.

NOTE 3—BUSINESS COMBINATION

Business Combination

On June 21, 2021 (the “Closing Date”), Acies Acquisition Corp., a Cayman Islands exempted company (prior to the Closing Date, “Acies”), consummated the previously announced business combination (“Business Combination”) with PlayStudios, Inc., a Delaware corporation (“Old PLAYSTUDIOS”) pursuant to the Agreement and Plan of Merger, dated as of February 1, 2021 (the “Merger Agreement”), by and among Acies, Catalyst Merger Sub I, Inc., a Delaware corporation and a direct wholly owned subsidiary of Acies (“First Merger Sub”), Catalyst Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Acies (“Second Merger Sub”), and Old PLAYSTUDIOS.

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In connection with the closing of the Business Combination, Acies filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation (the “Certificate of Incorporation”) and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Acies was domesticated and continues as a Delaware corporation, changing its name to PLAYSTUDIOS, Inc. (the “Domestication”). As a consequence of filing the Certificate of Incorporation, the Company adopted a dual class structure, comprised of the Company’s Class A common stock, which is entitled to one vote per share, and the Company’s Class B common stock, which is entitled to 20 votes per share. See Note 16 for further discussion on the dual class structure.

As a result of and upon the effective time of the Domestication, among other things, (1) each of the then-issued and outstanding Class A ordinary shares, par value $0.0001 per share, of Acies (the “Acies Class A ordinary shares”), automatically converted, on a one-for-one basis, into a share of the Class A common stock, par value $0.0001 per share, of the Company (the “Class A common stock”); (2) each then-issued and outstanding redeemable warrant of Acies automatically converted into a redeemable warrant (the "Warrants") to acquire one share of Class A common stock; and (3) each of the then-issued and outstanding units of Acies that had not been previously separated into the underlying Acies Class A ordinary shares and underlying Acies warrants upon the request of the holder thereof were cancelled and entitled the holder thereof to one share of Class A common stock and one-third of one Warrant. Any fractional Warrants for any holder of units were rounded down and canceled for no consideration.

Following the Domestication, the following transactions (the “Transactions”) occurred:

•First Merger Sub merged with and into Old PLAYSTUDIOS, with Old PLAYSTUDIOS surviving as a wholly owned subsidiary of Acies (the “First Merger”);

•immediately following the First Merger, and as part of an integrated transaction with the First Merger, Old PLAYSTUDIOS merged with and into Second Merger Sub, with Second Merger Sub surviving as a wholly owned subsidiary of Acies (the “Second Merger” and, together with the First Merger, the “Mergers”);

•as a result of the Mergers, among other things, each outstanding share of common stock of Old PLAYSTUDIOS (“PlayStudios Common Stock”) and each outstanding share of preferred stock of Old PLAYSTUDIOS (“PlayStudios Preferred Stock”) and, together with the "PlayStudios Common Stock," the "Old PLAYSTUDIOS Stock" as of the effective time of the First Merger (the “Effective Time”) were cancelled in exchange for the following:

◦if the holder of such share made an election to receive cash, $0.233 in cash per share of Old PLAYSTUDIOS Stock subject to such cash election, provided that no holder could elect to receive cash for more than 15% of such holder's shares of Old PLAYSTUDIOS Stock;

◦if the holder of such share did not make a cash election, the capital stock held by the holder was automatically canceled and converted into the right to receive 0.233 shares of the Company's common stock (the "Exchange Ratio"), rounded down to the nearest whole number of shares;

•as a result of the Mergers, each outstanding share of PlayStudios Common Stock and PlayStudios Preferred Stock issued and outstanding immediately prior to the Effective Time as well as any outstanding unexercised vested options to purchase shares of PlayStudios Common Stock received the contingent right to receive the applicable Earnout Pro Rata Portion (as defined in the Merger Agreement) of an aggregate of 15.0 million additional shares of Class A common stock (the “Earnout Shares”), which right shall be contingent upon the closing price of the Class A common stock exceeding $12.50 and $15.00 per share, respectively, for any 20 trading days within any 30-trading day period commencing on or after November 18, 2021 and ending no later than June 21, 2026 (the Earnout Shares will also vest based on the price targets in connection with a sale of the Company) (each of the foregoing vesting events, an “Earnout Triggering Event”); and

•as a result of the Mergers, each outstanding and unexercised option to purchase PlayStudios Common Stock, whether or not vested or exercisable, converted into an option to purchase a share of Class A common stock, except for any such option that was held by any member of the Founder Group, which converted into an option to purchase a share of Class B common stock, in each case with the same terms except for the number of shares exercisable thereunder and the exercise price, each of which were adjusted using the Exchange Ratio.

In connection with the Business Combination, Acies entered into subscription agreements with certain investors ("PIPE Investors"), whereby it issued 25.0 million shares of Class A common stock at $10.00 per share (the "PIPE Shares") for an

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aggregate purchase price of $250.0 million (the "PIPE Financing"), which closed simultaneously with the consummation of the Business Combination. $20.0 million of the PIPE Financing was used to terminate the profit share provision of an agreement with MGM Resorts International, one of the PIPE Investors.

The following table summarizes the total number of shares of common stock outstanding immediately following the Closing.


						Shares
Acies public stockholders(1)						10,191
Sponsor(1)(2)						3,724
PLAYSTUDIOS stockholders (excluding the Founder Group)(3)						70,708
Founder Group(3)						16,130
PIPE Investors						25,000
Common Stock						125,753

Class A common stock						109,623
Class B common stock						16,130

(1)Excludes the shares of Class A common stock underlying the Warrants, as the Warrants are not exercisable until October 27, 2021. Reflects the redemption of 11.3 million Acies Class A ordinary shares.

(2)Includes 0.9 million shares of Class A common stock, held by Acies Acquisition, LLC (the "Sponsor") that are subject to forfeiture if certain earnout conditions are not satisfied, as the shares are issued and outstanding as of the Closing of the Business Combination. The 0.9 million shares do not have voting rights until the Earnout Triggering Events have occurred.

(3)Excludes the shares of Class A and Class B common stock underlying stock options and the Earnout Shares, as they do not represent legally outstanding shares of common stock at Closing.

In connection with the Business Combination, the Company incurred direct and incremental costs of $32.8 million related to the equity issuance, consisting primarily of investment banking and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds.

The Company incurred approximately $1.4 million of expenses primarily related to advisory, legal and accounting fees in conjunction with the Business Combination. Of this, $0.1 million and $1.3 million was recorded in general and administrative expenses on the consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

The aggregate consideration for the Business Combination was approximately $1,041.0 million, payable in the form of the Company's Class A and Class B common stock and cash. The following table summarizes the merger consideration (in thousands, except per share information).


	Consideration
Cash consideration	$	102,020
Shares transferred at closing(1)	86,838
Value per share	$	10.00
Share consideration	$	868,380
Total consideration	$	970,400
Shares of common stock underlying vested options	7,060
Value per share	$	10.00
	70,600
Aggregate consideration	$	1,041,000

(1)Excludes shares of common stock underlying stock options that are vested but unexercised as of the closing date of the Business Combination. As the shares do not represent legally outstanding shares of common stock at closing, they are excluded from the total consideration amount.

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The following table reconciles the elements of the Business Combination to the condensed consolidated statements of cash flows for the nine months ended September 30, 2021:


Cash - Acies Trust and cash (net of redemptions)	$	101,962
Cash - PIPE	230,000
Less: Cash consideration	(102,020)
Less: Transaction costs	(44,631)
Net Business Combination and PIPE Financing	$	185,311

Reverse Recapitalization

The Business Combination was accounted for as a reverse recapitalization and Acies was treated as the “acquired” company for accounting purposes. The Business Combination was accounted as the equivalent of Old PLAYSTUDIOS issuing stock for the net assets of Acies, accompanied by a recapitalization. Accordingly, all historical financial information presented in these condensed consolidated interim financial statements represents the accounts of Old PLAYSTUDIOS “as if” Old PLAYSTUDIOS is the predecessor to the Company. The common stock and net income per share, prior to the Business Combination, have been adjusted to share amounts reflecting the Exchange Ratio.

NOTE 4—RELATED-PARTY TRANSACTIONS

The following table is a summary of balance sheet assets and liabilities from related parties:


	September 30, 2021		December 31, 2020		Financial Statement Line Item
Marketing Agreement	$	1,000	$	1,000	Intangibles, net
Marketing Agreement	$	—	$	20,000	Accrued liabilities

The Company did not have any revenues recognized from related parties during the three and nine months ended September 30, 2021 and 2020.

In connection with the Business Combination and in accordance with the Merger Agreement, during the nine months ended September 30, 2021, the Company paid $2.5 million to myCause Charitable Foundation ("myCause"), a 501(c)(3) foundation established and administered by certain members of management of the Company.

The Company’s remaining expenses recognized from related parties were immaterial during the three and nine months ended September 30, 2021 and 2020.

MGM Resorts International (“MGM”)

MGM is a stockholder and MGM's Chief Executive Officer and President also serves on the Company’s Board of Directors. MGM owns approximately 16.6 million and 14.6 million shares of the Company's outstanding Class A common stock as of September 30, 2021 and December 31, 2020, respectively.

Marketing Agreement

In April 2011, the Company entered into a joint marketing agreement with MGM (as amended, the “Marketing Agreement”) in exchange for assistance with marketing campaigns and the exclusive right to utilize MGM’s licensed marks and licensed copyrights for the development of certain of the Company’s social casino games. The initial term was for one year from the go-live date of the first such game in July 2012, with an automatic renewal provision for successive two-year terms based on the games meeting certain performance criteria. If the games do not achieve the specified performance criteria, the term will be automatically renewed for a one-year period and the right to utilize MGM’s licensed marks and copyrights will become non-exclusive. The non-exclusive term will be automatically renewed for successive one-year periods so long as the games meet certain other performance criteria. As consideration for the use of MGM’s intellectual property, the Company issued 19.2 million shares of its common stock representing 10% of its then-outstanding common stock; and in lieu of royalty payments, the Company agreed to pay MGM a profit share of: (i) during the exclusive term, a mid- to high-single digit percentage of cumulative net operating income, as defined in the Marketing Agreement, and (ii) during the non-exclusive term, a low- to mid-single digit percentage of cumulative net operating income. As further described in Note 9, the Marketing Agreement was recorded as an indefinite-lived intangible asset.

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On October 30, 2020, the Company and MGM agreed to amend the Marketing Agreement (the “MGM Amendment”), under which the Company and MGM agreed to terminate the profit share provision. In exchange, the Company agreed to remit to MGM a one-time payment of $20.0 million, payable on the earliest to occur of (i) the PIPE Investment, (ii) the date that the Company waives MGM’s commitment to participate in the PIPE Investment, or (iii) two years from the date of the MGM Amendment. In addition, MGM agreed to reinvest in the Company at a minimum amount of $20.0 million by participating in the PIPE Investment or a private placement of equity offering to third party investors for minimum gross proceeds to the Company of $50.0 million. As a result of the termination, the Company is no longer obligated to make profit share payments, but the other rights and obligations under the Marketing Agreement continue in full force and effect. The Company recorded none and $0.3 million as profit share expense during the three months ended September 30, 2021 and 2020, respectively, and recorded none and $0.3 million as profit share expense during the nine months ended September 30, 2021 and 2020, respectively.

On June 21, 2021, the Company consummated the previously announced Business Combination and MGM participated in the PIPE Investment. In connection with the PIPE Investment, the Company recorded an equity contribution from MGM as a settlement of the $20.0 million liability. As of September 30, 2021, the $20.0 million liability was settled in full and no amount remained outstanding.

NOTE 5—RECEIVABLES

Receivables consist of the following:


	September 30, 2021		December 31, 2020
Trade receivables	$	18,160	$	16,616
Notes receivables	32		—
Other receivables	270		—
Total receivables	$	18,462	$	16,616

Trade receivables represent amounts due to the Company from social and mobile platform operators, including Apple, Google, Amazon and Facebook. Trade receivables are recorded when the right to consideration becomes unconditional. No allowance for doubtful accounts was considered necessary as of September 30, 2021 and December 31, 2020.

Concentration of Credit Risk

As of September 30, 2021, Apple, Inc. and Google, Inc. accounted for 47.9% and 38.3% of the Company’s total receivables, respectively, while as of December 31, 2020, Apple, Inc. and Google, Inc. accounted for 48.9% and 42.7% of the Company’s total receivables, respectively. As of September 30, 2021 and December 31, 2020, the Company did not have any additional counterparties that exceeded 10% of the Company’s net accounts receivable.

As of September 30, 2021, 77.3% of the Company’s total notes receivables were concentrated in amounts due from game developers. Each of the counterparties within the concentrated group are engaged in game development services as their primary form of business, subjecting the group to similar activities and economic risks. In the event that the group fails completely to perform according to the terms of the notes, and any collateral applicable proved to be of no value, the maximum amount of loss which the Company may incur is approximately $3.8 million, all of which is reported within the Other long-term assets line item on the Condensed Consolidated Balance Sheets. Approximately 67.2% of the notes subject to risk are secured by certain intellectual property created, developed or acquired by the developers.

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NOTE 6—FAIR VALUE MEASUREMENT

The carrying values of the Company’s cash and cash equivalents, trade receivables and accounts payable approximate fair value due to their short maturities.

The following tables present the financial assets not measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:


	September 30, 2021
	Carrying Value		Estimated Fair Value		Fair Value Hierarchy	Financial Statement Line Item
Financial assets:
Notes receivable - current	$	32	$	32	Level 3	Receivables
Notes receivable - non-current	4,944		4,944		Level 3	Other long-term assets
Total financial assets	$	4,976	$	4,976


	December 31, 2020
	Carrying Value		Estimated Fair Value		Fair Value Hierarchy	Financial Statement Line Item
Financial assets:
Notes receivable - non-current	$	4,891	$	4,891	Level 3	Other long-term assets
Total financial assets	$	4,891	$	4,891

The notes receivable are fixed-rate investments, are not traded and do not have observable market inputs, therefore, the fair value is estimated to be equal to the carrying value.

The following table presents the liabilities measured at fair value on a recurring basis, by input level, in the Consolidated Balance Sheets at September 30, 2021:

September 30, 2021

Level 1

Level 2