PLAYSTUDIOS, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

2011 and 2021 Equity Incentive Plans

The Company has two equity incentive plans: Old PLAYSTUDIOS' 2011 Omnibus Stock and Incentive Plan (the “2011 Plan”) and the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other stock awards, and performance awards to employees, officers, non-employee directors and independent service providers of the Company. The 2021 Plan became effective immediately upon the Closing of the Acies Merger and replaced the 2011 Plan and no additional awards will be available under the 2011 Plan.

Each Old PLAYSTUDIOS stock option from the 2011 Plan that was outstanding immediately prior to the Acies Merger and held by current employees or service providers, whether vested or unvested, was converted into an option to purchase approximately 0.233 shares of common stock (each such option, an “Exchanged Option”). Except as specifically provided in the Merger Agreement, following the Acies Merger, each Exchanged Option continues to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Old PLAYSTUDIOS option immediately prior to the consummation of the Acies Merger. All equity awards activity was retroactively restated to reflect the Exchanged Options.

The number of shares of common stock available under the 2021 Plan will increase annually on the first day of each calendar year, beginning with the calendar year ending December 31, 2022, with such annual increase equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on the last business day of the immediately preceding fiscal year and (ii) an amount determined by the Company's Board of Directors. If any award (or any award under

the 2011 Plan) is forfeited, cancelled, expires, terminates or otherwise lapses or is settled in cash, in whole or in part, without the delivery of Class A common stock or Class B common stock, then the shares (including both the Class A common stock and Class B common stock) covered by such forfeited, expired, terminated or lapsed award shall again be available as shares for grant under the 2021 Plan.

As of September 30, 2022, the Company had 14.1 million shares of Class A common stock reserved for issuance under the 2021 Plan.

Stock-Based Compensation

The following table summarizes stock-based compensation expense that the Company recorded in income (loss) from operations for the periods shown:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Selling and marketing	$	165	$	22	$	646	$	54
General and administrative	1,767		117		6,319		1,587
Research and development	1,622		694		6,598		2,039
Stock-based compensation expense	$	3,554	$	833	$	13,563	$	3,680
Capitalized stock-based compensation	$	430	$	184	$	1,966	$	502

Stock Options

All of the options granted under the 2011 Plan have time-based vesting periods vesting over a period of three to four years and a maximum term of 10 years from the grant date.

The following is a summary of stock option activity for time-based options for the nine months ended September 30, 2022 (in thousands, except weighted-average exercise price and remaining term):


	No. of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Term (in Years)	Aggregate Intrinsic Value
Outstanding - December 31, 2021	14,749	$	0.85
Granted	—	—
Exercised	(2,150)	0.56
Forfeited	(233)	1.91
Expired	(104)	1.99
Outstanding - September 30, 2022	12,262	0.87		5.9	$	32,604
Unvested - September 30, 2022	1,776	0.87		6.9	4,929
Exercisable - September 30, 2022	10,486	$	0.87	5.7	$	27,675

As of September 30, 2022, there was approximately $3.1 million of total unrecognized compensation expense related to stock options to employees. As of September 30, 2022, this cost is expected to be recognized over a remaining average period of 0.5 years. The total intrinsic value of stock options exercised under the provisions of the 2011 Plan during the three months ended September 30, 2022 and 2021, was $4.8 million and $16.1 million, respectively, and during the nine months ended September 30, 2022 and 2021 was $8.1 million and $21.9 million, respectively.

Restricted Stock Units ("RSUs")

RSUs are granted using a three or four year vesting schedule, either vesting pro rata annually or a cliff vest over the requisite service period, subject to continued employment. Except as provided in an award agreement between the Company and the employee, if an employee is terminated (voluntarily or involuntarily), any unvested awards as of the date of termination will be forfeited. RSUs settle for outstanding shares of the Company’s Class A common stock upon vesting.

The following is a summary of RSU activity for the nine months ended September 30, 2022 (in thousands, except weighted-average grant date fair value):


	No. of RSUs	Weighted-Average Grant Date Fair Value		Total Fair Value of Shares Vested
Outstanding - December 31, 2021	—	$	—
Granted	10,255	4.21
Vested	(1,518)	4.32		$	6,552
Forfeited	(426)	4.11
Outstanding - September 30, 2022	8,311	$	4.20

As of September 30, 2022, there was approximately $28.5 million of total unrecognized compensation expense related to RSUs granted to employees and this cost is expected to be recognized over a remaining average period of 2.4 years.