Business Context and Reporting Period
PLBY Group, Inc., formerly Mountain Crest Acquisition Corp. (“MCAC”), filed this Form 10-K for the fiscal year ended December 31, 2020. MCAC was a blank-check company and had no operating business or revenue during the reporting period. The filing therefore primarily reflects SPAC formation, IPO, trust-account activity, and transaction expenses rather than Playboy’s operating results.
On February 10, 2021, after year-end, MCAC completed its business combination with Playboy Enterprises, Inc. and changed its name to PLBY Group, Inc. The 2020 financial statements do not reflect the post-closing operations of Playboy except where disclosed as subsequent events.
Key Financial Metrics
| Metric | 2020 | 2019 Comparable Period |
|---|---|---|
| Revenue | $0 | $0 |
| Operating costs | $1.1 million | $492 |
| Net loss | $1.06 million | $492 |
| Net loss per non-redeemable share | $0.56 | $0.00 |
| Net cash used in operating activities | $371,622 | $0 |
| Cash and marketable securities in trust account | $58.68 million | $0 |
| Cash outside the trust account | $57,732 | $0 |
| Total assets | $58.77 million | $100,231 |
| Total liabilities | $2.77 million | $100,723 |
Other income consisted primarily of $31,669 of interest earned and a $362 unrealized gain on trust-account securities. The company had no operating margins to report because it generated no revenue.
MCAC completed its IPO and partial over-allotment transactions in June 2020, issuing 5,749,800 public units and raising gross proceeds of approximately $57.5 million. It also issued 355,241 private units for approximately $3.6 million. Total transaction costs were $4.01 million, including $2.01 million of deferred underwriting fees.
Material Changes Versus the Prior Comparable Period
- MCAC moved from formation-stage activity in 2019 to completing its IPO and pursuing the Playboy transaction in 2020.
- Net loss increased to $1.06 million from $492, primarily because of public-company, offering, diligence, and transaction-related expenses.
- Cash and assets increased substantially because approximately $58.65 million was deposited into the trust account.
- The business combination closed on February 10, 2021. PLBY issued 20,916,812 shares to former Playboy stockholders, assumed options covering 3,560,541 shares at a weighted-average exercise price of $5.61, and assumed obligations related to 2,045,634 terminated restricted stock units.
- The post-closing company became obligated for approximately $158.2 million of Playboy debt outstanding under its credit agreement at closing.
- PLBY received $50.0 million of gross PIPE proceeds from the issuance of 5,000,000 shares at $10.00 per share. After closing, 33,560,980 shares were outstanding.
Liquidity, Debt, Outlook, and Risks
Before the business combination, MCAC’s liquidity was limited to cash held outside the trust account. Management stated that, following closing, liquidity would consist principally of cash from the trust account, PIPE proceeds, cash generated by operations, and potential debt or equity financing. Management believed available liquidity would be sufficient for the next 12 months, while noting that additional financing might be required and might not be available on acceptable terms.
MCAC had no long-term debt, capital leases, or operating lease obligations at December 31, 2020, other than its monthly $10,000 affiliate administrative-services arrangement and deferred underwriting fees. This should not be confused with the approximately $158.2 million of Playboy debt assumed at the February 2021 closing.
The filing does not provide 2020 consolidated operating guidance for PLBY Group. It describes strategic expectations involving Playboy’s licensing, direct-to-consumer, digital content, sexual wellness, apparel, beauty, and lifestyle businesses, but emphasizes that these statements are forward-looking and subject to significant uncertainty.
- COVID-19 could reduce discretionary spending, retail traffic, licensing activity, supply-chain capacity, and access to capital.
- The Playboy brand is exposed to reputational damage, negative publicity, boycotts, content restrictions, and limits on advertising, payment processing, and third-party service relationships.
- Licensing revenue is concentrated: the five largest consumer-brand licensing agreements represented 32% of 2020 consolidated revenue and the largest represented 15%.
- International exposure was significant: approximately 52% of 2020 consolidated revenue came from outside the United States, compared with 77% in 2019.
- Competition, free online adult content, changing distribution technology, cybersecurity, privacy regulation, intellectual-property disputes, litigation, and regulatory restrictions could materially affect results.
- Playboy’s indefinite-lived intangible assets and goodwill totaled $337.2 million, or 81.8% of its consolidated assets, creating material impairment risk.
- Following closing, RT-ICON Holdings LLC controlled approximately 51% of the outstanding shares and the company qualified as a Nasdaq “controlled company,” potentially permitting exemptions from certain governance requirements.
Unusual and Subsequent Items
- On April 1, 2021, the company entered into an agreement to purchase a used aircraft for $12 million, including a generally non-refundable $500,000 deposit.
- In April 2021, Chardan partially exercised its unit purchase option on a cashless basis, receiving 167,252 shares for 247,500 units.
- Material legal matters include insurance coverage litigation, a purported website-tracking class action, and disputes with a terminated licensee, AVS Products, LLC.
- The auditor issued an unqualified opinion on the 2020 financial statements. Management concluded that disclosure controls and procedures were effective, but the filing did not include management’s assessment or an auditor attestation of internal control over financial reporting because of applicable emerging-growth-company and newly public-company accommodations.
Investor Verification Checklist
- Verify that post-closing financial statements appropriately reflect Playboy’s operating results and the reverse-recapitalization accounting.
- Reconcile the approximately $158.2 million of assumed Playboy debt to the credit agreement, including interest rates, maturities, covenants, amendments, and compliance status.
- Confirm cash available after the business combination, including trust-account releases, PIPE proceeds, transaction costs, redemptions, and working-capital needs.
- Assess licensing concentration, renewal terms, guaranteed minimum royalties, licensee credit quality, and exposure to China and other international markets.
- Evaluate the carrying value and impairment sensitivity of the Playboy trademarks, goodwill, and other intangible assets.
- Review the $12 million aircraft purchase and its strategic rationale, funding source, and effect on liquidity.
- Monitor the insurance, website-tracking, and AVS litigation for potential losses, settlements, injunctions, or reputational effects.
- Review dilution from assumed options, restricted stock units, rights, the unit purchase option, PIPE shares, resale registration rights, and future equity financing.
- Confirm the company’s ability to maintain Nasdaq listing requirements and assess the implications of controlled-company governance exemptions.