Annual report pursuant to Section 13 and 15(d)

BUSINESS COMBINATIONS

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BUSINESS COMBINATIONS
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
BUSINESS COMBINATIONS
NOTE 4—BUSINESS COMBINATIONS
WonderBlocks Acquisition
On August 2, 2022, playBLOCKS, Inc., a newly formed wholly-owned subsidiary of the Company ("playBLOCKS") entered into an agreement with WonderBlocks Labs, Inc. (“WonderBlocks"), which provides tools for the development of a play-to-earn loyalty platform for digital entertainment on the Ethereum blockchain, pursuant to which playBLOCKS acquired substantially all of the assets of WonderBlocks. playBLOCKS paid WonderBlocks $2.0 million less Indebtedness (borrowed money and accrued interest, including debt to the Company) at closing and agreed to pay between zero and $3 million subject to the satisfaction of certain product and financial milestones. We believe this acquisition will allow us to enhance our playAWARDS model with new Web3 features and capabilities.
The Company recorded the excess of the fair value of the consideration transferred in the acquisition over the fair value of net assets acquired as goodwill. The goodwill reflects our expectations of favorable future growth opportunities and
anticipated synergies through the scale of our operations. The Company expects that none of the goodwill will be deductible for federal income tax purposes. The following table summarizes the consideration paid for WonderBlocks and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:
Consideration: August 2,
2022
Cash consideration $ 945 
Note receivable plus accrued interest conversion 1,055 
Contingent consideration 1,564 
Total consideration transferred $ 3,564 
Identifiable assets acquired and liabilities assumed:
Developed technology (weighted-average useful life of 5 years)
 2,403 
Liabilities assumed $ (15)
Total identifiable net assets $ 2,388 
Goodwill $ 1,176 
As of December 31, 2023, the fair value of the contingent consideration was zero.

Brainium Studios Acquisition
On October 7, 2022, PLAYSTUDIOS US, LLC, a direct wholly-owned subsidiary of the Company entered into a membership interest purchase agreement to acquire all of the issued and outstanding membership interests in Brainium Studios LLC (“Brainium"), a mobile game publisher. The closing of the acquisition occurred on October 12, 2022, and Brainium became an indirect wholly-owned subsidiary of the Company. The purchase price for the membership interests was $70.0 million at closing, as adjusted for cash, indebtedness, and working capital, and between zero and $27.3 million following the closing subject to the satisfaction of certain financial milestones for the fiscal year ended December 31, 2022.
The Company recorded the excess of the fair value of the consideration transferred in the acquisition over the fair value of net assets acquired as goodwill. The goodwill reflects our expectations of favorable future growth opportunities and anticipated synergies through the scale of our operations. The Company expects that substantially all of the goodwill will be deductible for federal income tax purposes. The following table summarizes the consideration paid for Brainium and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:
Consideration: October 12,
2022
Cash consideration $ 73,457 
Contingent consideration 1,797 
Total consideration transferred $ 75,254 
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents $ 3,738 
Accounts receivable 3,190 
Property and equipment 4,042 
Operating lease assets 4,195 
Trade names (weighted-average useful life of 10 years)
 1,500 
Developed technology (weighted-average useful life of 5 years)
 12,600 
Customer relationships (weighted-average useful life of 5 years)
 12,000 
Other assets 740 
Liabilities assumed (7,649)
Total identifiable net assets $ 34,356 
Goodwill $ 40,898 
During the year ended December 31, 2022, the Company reduced the amount of contingent consideration to be paid to zero. As of December 31, 2023 and 2022, the Company has no remaining liability reflected in the financial statements.
Merger with Acies Acquisition Corp.
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 (“Acies Merger”) 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.
In connection with the closing of the Acies Merger, 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. 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 19—Stockholders’ Equity for further discussion on the dual class structure.
In connection with the Acies Merger, 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 aggregate purchase price of $250.0 million (the "PIPE Financing"), which closed simultaneously with the consummation of the Acies Merger. $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.
In connection with the Acies Merger, 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 Acies Merger. Of this, $0.1 million and $1.3 million was recorded in general and administrative expenses on the Consolidated Statements of Operations for the years ended December 31, 2021 and December 31, 2020, respectively.
The aggregate consideration for the Acies Merger 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 
Total consideration for vested options 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 Acies Merger. Since the shares do not represent legally outstanding shares of common stock at closing, they are excluded from the total consideration amount.
The following table reconciles the elements of the Acies Merger to the Consolidated Statements of Cash Flows for the year ended December 31, 2021:
Cash - Acies Trust and cash (net of redemptions) $ 101,965 
Cash - PIPE 230,000 
Less: Cash consideration (102,020)
Less: Transaction costs, net of proceeds received from exercises of Old PLAYSTUDIOS' warrants (44,775)
Net Acies Merger and PIPE Financing
 $ 185,170 
The Acies Merger was accounted for as a reverse recapitalization and Acies was treated as the “acquired” company for accounting purposes. The Acies Merger 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 consolidated 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 Acies Merger, have been adjusted to share amounts reflecting the recapitalization exchange ratio of approximately 0.233 for Old PLAYSTUDIOS common stock.