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 June 30, ~~2022~~2023

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

For the transition period from to

Commission File Number 001-39312

PLBY Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware		37-1958714
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
	10960 Wilshire Blvd., Suite 2200
	Los Angeles, California 90024
(Address of principal executive offices including zip code)
Registrant’s telephone number, including area code: (310) 424-1800

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	PLBY	Nasdaq Global Market

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, 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 13(a) of the Exchange Act. ☐

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

The number of shares of Registrant’s Common Stock outstanding as ofof August 1, ~~2022~~2023 was ~~45,629,127.~~73,881,146.

TABLE OF CONTENTS


			Page
Part I - Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations			1
Condensed Consolidated Statements of Comprehensive Loss			2
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Stockholders’ Equity			4
Condensed Consolidated Statements of Cash Flows			6
Notes to the Unaudited Condensed Consolidated Financial Statements			78
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3328
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5045
Item 4. Controls and Procedures			5146
Part II - Other Information
Item 1. Legal Proceedings			5449
Item 1A. Risk Factors			5449
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5449
Item 3. Defaults Upon Senior Securities			5449
Item 4. Mine Safety Disclosures			5549
Item 5. Other Information			5549
Item 6. Exhibits			5650
Signatures			5751

Part I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

PLBY Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share amounts)

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Net revenues $ 65,414 $ 49,851 $ 134,792 $ 92,531
Costs and expenses
Cost of sales (28,058) (23,675) (56,958) (42,699)
Selling and administrative expenses (40,965) (29,616) (72,195) (57,561)
Related party expenses — — — (250)
Other operating expenses
(2,574) — (4,933) —
Total costs and expenses (71,597) (53,291) (134,086) (100,510)
Operating (loss) income (6,183) (3,440) 706 (7,979)
Nonoperating income (expense):
Interest expense (4,083) (2,253) (8,133) (5,550)
Loss on extinguishment of debt — (1,217) — (1,217)
Fair value remeasurement gain 1,754 — 1,754 —
Other (expense) income, net (317) (3) (397) 742
Total nonoperating expense (2,646) (3,473) (6,776) (6,025)
Loss before income taxes (8,829) (6,913) (6,070) (14,004)
Benefit (expense) from income taxes 514 (2,003) 3,298 91
Net loss (8,315) (8,916) (2,772) (13,913)
Net loss attributable to PLBY Group, Inc. $ (8,315) $ (8,916) $ (2,772) $ (13,913)
Net loss per share, basic and diluted $ (0.18) $ (0.24) $ (0.06) $ (0.42)
Weighted-average shares used in computing net loss per share, basic and diluted 46,604,046 36,736,446 46,258,833 33,298,957


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues	$	35,101	$	47,881	$	70,304	$	94,941
Costs and expenses:
Cost of sales	(10,859)		(19,545)		(32,636)		(37,531)
Selling and administrative expenses	(32,592)		(38,613)		(74,179)		(78,786)
Contingent consideration fair value remeasurement gain	75		8,641		267		27,939
Impairments	(148,190)		(3,940)		(148,190)		(6,299)
Other operating income, net	259		—		249		—
Total operating expense	(191,307)		(53,457)		(254,489)		(94,677)
Operating (loss) income	(156,206)		(5,576)		(184,185)		264
Nonoperating income (expense):
Interest expense	(5,757)		(4,083)		(10,966)		(8,133)
Gain on extinguishment of debt	7,980		—		6,133		—
Fair value remeasurement gain	9,523		1,754		6,505		1,754
Other income (expense), net	175		(347)		250		(479)
Total nonoperating income (expense)	11,921		(2,676)		1,922		(6,858)
Loss from continuing operations before income taxes	(144,285)		(8,252)		(182,263)		(6,594)
Benefit from income taxes	9,950		140		11,620		2,648
Net loss from continuing operations	(134,335)		(8,112)		(170,643)		(3,946)
Income (loss) from discontinued operations, net of tax	452		(203)		(920)		1,174
Net loss	(133,883)		(8,315)		(171,563)		(2,772)
Net loss attributable to PLBY Group, Inc.	$	(133,883)	$	(8,315)	$	(171,563)	$	(2,772)
Net loss per share from continuing operations, basic and diluted	$	(1.79)	$	(0.17)	$	(2.43)	$	(0.09)
Net income (loss) per share from discontinued operations, basic and diluted	$	0.01	$	—	$	(0.01)	$	0.03
Weighted-average shares outstanding, basic and diluted	74,916,379		46,604,046		70,129,055		46,258,833

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

PLBY Group, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net loss	Net loss	$	(8,315)	$	(8,916)	$	(2,772)	$	(13,913)	Net loss	$	(133,883)	$	(8,315)	$	(171,563)	$	(2,772)
Other comprehensive loss:	Other comprehensive loss:									Other comprehensive loss:
Foreign currency translation adjustment	Foreign currency translation adjustment	(22,229)		—		(14,719)		—		Foreign currency translation adjustment	(272)		(22,229)		(1,968)		(14,719)
Other comprehensive loss	Other comprehensive loss	(22,229)		—		(14,719)		—		Other comprehensive loss	(272)		(22,229)		(1,968)		(14,719)
Comprehensive loss	Comprehensive loss	$	(30,544)	$	(8,916)	$	(17,491)	$	(13,913)	Comprehensive loss	$	(134,155)	$	(30,544)	$	(173,531)	$	(17,491)

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

PLBY Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	44,613	$	69,245	Cash and cash equivalents	$	34,404	$	31,640
Restricted cash		2,097		2,211
Receivables, net of allowance for credit losses	Receivables, net of allowance for credit losses	29,876		14,129		Receivables, net of allowance for credit losses	15,086		14,214
Inventories, net	Inventories, net	37,122		39,881		Inventories, net	14,061		20,612
Prepaid expenses and other current assets	Prepaid expenses and other current assets	17,392		13,416		Prepaid expenses and other current assets	12,604		17,221
Assets held for sale						Assets held for sale	19,311		34,910
Total current assets	Total current assets	131,100		138,882		Total current assets	95,466		118,597
Restricted cash	Restricted cash	3,737		4,030		Restricted cash	1,955		3,809
Property and equipment, net	Property and equipment, net	29,642		26,445		Property and equipment, net	14,981		13,804
Operating right of use assets	Operating right of use assets	39,992		38,746		Operating right of use assets	27,906		28,082
Digital assets, net		1,742		6,836
Goodwill	Goodwill	259,156		270,577		Goodwill	54,283		123,217
Other intangible assets, net	Other intangible assets, net	410,821		418,444		Other intangible assets, net	163,871		236,137
Contract assets, net of current portion	Contract assets, net of current portion	15,935		17,315		Contract assets, net of current portion	9,165		13,680
Other noncurrent assets	Other noncurrent assets	15,167		14,132		Other noncurrent assets	14,911		15,137
Total assets	Total assets	$	907,292	$	935,407	Total assets	$	382,538	$	552,463
Liabilities and Stockholders’ Equity
Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity						Liabilities, Redeemable Noncontrolling Interest and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	17,095	$	20,577	Accounts payable	$	12,752	$	14,090
Accrued salaries, wages, and employee benefits		3,469		4,623
Accrued agency fees and commissions						Accrued agency fees and commissions	5,169		7,785
Deferred revenues, current portion	Deferred revenues, current portion	9,226		11,036		Deferred revenues, current portion	6,445		10,480
Long-term debt, current portion	Long-term debt, current portion	3,235		2,808		Long-term debt, current portion	304		2,050
Contingent consideration		8,342		36,630
Operating lease liabilities, current portion	Operating lease liabilities, current portion	9,754		9,697		Operating lease liabilities, current portion	6,403		6,278
Other current liabilities and accrued expenses	Other current liabilities and accrued expenses	24,987		32,417		Other current liabilities and accrued expenses	26,764		25,106
Liabilities held for sale						Liabilities held for sale	15,817		27,126
Total current liabilities	Total current liabilities	76,108		117,788		Total current liabilities	73,654		92,915
Deferred revenues, net of current portion	Deferred revenues, net of current portion	42,807		42,532		Deferred revenues, net of current portion	28,316		21,406
Long-term debt, net of current portion	Long-term debt, net of current portion	224,709		226,042		Long-term debt, net of current portion	186,487		191,125
Deferred tax liabilities, net	Deferred tax liabilities, net	85,573		91,208		Deferred tax liabilities, net	14,313		25,293
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	36,060		35,534		Operating lease liabilities, net of current portion	26,302		26,695
Preferred stock liability		22,247		—
Mandatorily redeemable preferred stock, at fair value						Mandatorily redeemable preferred stock, at fair value	—		39,099
Other noncurrent liabilities	Other noncurrent liabilities	108		20		Other noncurrent liabilities	904		886
Total liabilities	Total liabilities	487,612		513,124		Total liabilities	329,976		397,419
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)	0		0		Commitments and contingencies (Note 13)
Redeemable noncontrolling interest	Redeemable noncontrolling interest	(208)		(208)		Redeemable noncontrolling interest	(208)		(208)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.0001 par value per share, 150,000,000 shares authorized, 46,321,763 shares issued and 45,621,763 shares outstanding as of June 30, 2022; 42,996,191 shares issued and 42,296,191 shares outstanding as of December 31, 2021		4		4
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized, 50,000 shares designated Series A preferred stock, of which 25,000 shares were issued and 25,000 shares were unissued as of June 30, 2022; 0 shares issued or designated as of December 31, 2021		—		—
Treasury stock, at cost, 700,000 shares as of June 30, 2022 and December 31, 2021		(4,445)		(4,445)
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized, 50,000 shares designated Series A preferred stock, of which 0 shares were issued and outstanding as of June 30, 2023; 50,000 shares were issued and outstanding as of December 31, 2022						Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized, 50,000 shares designated Series A preferred stock, of which 0 shares were issued and outstanding as of June 30, 2023; 50,000 shares were issued and outstanding as of December 31, 2022	—		—
Common stock, $0.0001 par value per share, 150,000,000 shares authorized, 74,497,250 shares issued and 73,797,250 shares outstanding as of June 30, 2023; 47,737,699 shares issued and 47,037,699 shares outstanding as of December 31, 2022						Common stock, $0.0001 par value per share, 150,000,000 shares authorized, 74,497,250 shares issued and 73,797,250 shares outstanding as of June 30, 2023; 47,737,699 shares issued and 47,037,699 shares outstanding as of December 31, 2022	7		5
Treasury stock, at cost, 700,000 shares as of June 30, 2023 and December 31, 2022						Treasury stock, at cost, 700,000 shares as of June 30, 2023 and December 31, 2022	(4,445)		(4,445)
Additional paid-in capital	Additional paid-in capital	601,237		586,349		Additional paid-in capital	688,280		617,233
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(18,444)		(3,725)		Accumulated other comprehensive loss	(26,113)		(24,145)
Accumulated deficit	Accumulated deficit	(158,464)		(155,692)		Accumulated deficit	(604,959)		(433,396)
Total stockholders’ equity	Total stockholders’ equity	419,888		422,491		Total stockholders’ equity	52,770		155,252
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	907,292	$	935,407	Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	382,538	$	552,463

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

PLBY Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

(for the period ended June 30, ~~2022)~~2023)

Common Stock Series A Preferred Stock

Shares Amount Treasury Stock Shares Amount Additional
Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Balance at December 31, 2021 42,296,121 $ 4 $ (4,445) — $ — $ 586,349 $ (155,692) $ (3,725) $ 422,491
Shares issued in connection with options exercise, net exercised 342,661 — — — — 1,369 — — 1,369
Shares issued in connection with employee stock plans 2,475,511 — — — — — — — —
Shares issued pursuant to a license, services and collaboration agreement 3,312 — — — — 125 — — 125
Stock-based compensation expense and vesting of restricted stock units — — — — — 6,414 — — 6,414
Other comprehensive income — — — — — — — 7,510 7,510
Net income — — — — — — 5,543 — 5,543
Balance at March 31, 2022 45,117,605 $ 4 $ (4,445) — $ — $ 594,257 $ (150,149) $ 3,785 $ 443,452
Shares issued in connection with options exercise, net exercised 10,370 — — — — 80 — — 80
Shares issued in connection with employee stock plans 16,320 — — — — — — — —
Shares issued pursuant to a license, services and collaboration agreement 20,975 — — — — — — — —
Shares issued in connection with asset purchase 103,570 — — — — 1,333 — — 1,333
Shares issued in connection with preferred shares agreement — — — 25,000 — — — — —
Shares issued in connection with the settlement of the performance holdback contingent consideration relating to the acquisition of GlowUp 352,923 — — — — 260 — — 260
Stock-based compensation expense and vesting of restricted stock units — — — — — 5,307 — — 5,307
Other comprehensive loss — — — — — — — (22,229) (22,229)
Net loss — — — — — — (8,315) — (8,315)
Balance at June 30, 2022 45,621,763 $ 4 $ (4,445) 25,000 $ — $ 601,237 $ (158,464) $ (18,444) $ 419,888


	Series A Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Treasury Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
Balance at December 31, 2022	50,000	$	—	47,037,699	$	5	$	(4,445)	$	617,233	$	(24,145)	$	(433,396)	$	155,252
Issuance of common stock in rights offering	—	—		19,561,050	2		—		47,600		—		—		47,602
Issuance of common stock in registered direct offering	—	—		6,357,341	—		—		13,890		—		—		13,890
Shares issued in connection with employee stock plans	—	—		215,145	—		—		—		—		—		—
Shares issued pursuant to a license, services and collaboration agreement	—	—		3,312	—		—		—		—		—		—
Stock-based compensation expense and vesting of restricted stock units	—	—		—	—		—		5,920		—		—		5,920
Other comprehensive loss	—	—		—	—		—		—		(1,696)		—		(1,696)
Net loss	—	—		—	—		—		—		—		(37,680)		(37,680)
Balance at March 31, 2023	50,000	$	—	73,174,547	$	7	$	(4,445)	$	684,643	$	(25,841)	$	(471,076)	$	183,288
Shares issued in connection with employee stock plans	—	—		622,703	—		—		—		—		—		—
Stock-based compensation expense and vesting of restricted stock units	—	—		—	—		—		3,637		—		—		3,637
Exchange of mandatorily redeemable preferred shares	(50,000)	—		—	—		—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		—		(272)		—		(272)
Net loss	—	—		—	—		—		—		—		(133,883)		(133,883)
Balance at June 30, 2023	—	$	—	73,797,250	$	7	$	(4,445)	$	688,280	$	(26,113)	$	(604,959)	$	52,770

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

PLBY Group, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

(for the period ended June 30, ~~2021)~~2022)

Common Stock

Shares Amount Treasury Stock Additional
Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Total
Balance at December 31, 2020 20,626,249 $ 2 $ — $ 161,033 $ (78,016) $ — $ 83,019
Conversion of convertible promissory note 290,563 — — 2,730 — — 2,730
Business Combination and PIPE financing 12,644,168 1 (4,445) 99,299 — — 94,855
Stock-based compensation expense and vesting of restricted stock units — — — 3,498 — — 3,498
Net loss — — — — (4,997) — (4,997)
Balance at March 31, 2021 33,560,980 3 (4,445) 266,560 (83,013) — 179,105
Issuance of common stock in public offering 4,720,000 1 — 202,894 — — 202,895
Shares issued in connection with unit purchase options exercise 247,976 — — — — — —
Adjustment to transaction costs related to the Business Combination — — — 319 — — 319
Stock-based compensation expense and vesting of restricted stock units — — — 361 — — 361
Net loss — $ — $ — $ — (8,916) $ — $ (8,916)
Balance at June 30, 2021 38,528,956 4 (4,445) 470,134 (91,929) — 373,764


	Series A Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Treasury Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total
Balance at December 31, 2021	—	$	—	42,296,121	$	4	$	(4,445)	$	586,349	$	(3,725)	$	(155,692)	$	422,491
Shares issued in connection with options exercise, net exercised	—	—		342,661	—		—		1,369		—		—		1,369
Shares issued in connection with employee stock plans	—	—		2,475,511	—		—		—		—		—		—
Shares issued pursuant to a license, services and collaboration agreement	—	—		3,312	—		—		—		—		—		—
Stock-based compensation expense and vesting of restricted stock units	—	—		—	—		—		6,539		—		—		6,539
Other comprehensive income	—	—		—	—		—		—		7,510		—		7,510
Net income	—	—		—	—		—		—		—		5,543		5,543
Balance at March 31, 2022	—	$	—	45,117,605	$	4	$	(4,445)	$	594,257	$	3,785	$	(150,149)	$	443,452
Shares issued in connection with options exercise, net exercised	—	—		10,370	—		—		80		—		—		80
Shares issued in connection with employee stock plans	—	—		16,320	—		—		—		—		—		—
Shares issued pursuant to a license, services and collaboration agreement	—	—		20,975	—		—		—		—		—		—
Shares issued in connection with asset purchase	—	—		103,570	—		—		1,333		—		—		1,333
Shares issued in connection with preferred shares agreement	25,000	—		—	—		—		—		—		—		—
Shares issued in connection with the settlement of the performance holdback contingent consideration relating to the acquisition of GlowUp	—	—		352,923	—		—		260		—		—		260
Stock-based compensation expense and vesting of restricted stock units	—	—		—	—		—		5,307		—		—		5,307
Other comprehensive loss	—	—		—	—		—		—		(22,229)		—		(22,229)
Net loss	—	—		—	—		—		—		—		(8,315)		(8,315)
Balance at June 30, 2022	25,000	$	—	45,621,763	$	4	$	(4,445)	$	601,237	$	(18,444)	$	(158,464)	$	419,888

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

PLBY Group, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash Flows From Operating Activities	Cash Flows From Operating Activities					Cash Flows From Operating Activities
Net loss	Net loss	$	(2,772)	$	(13,913)	Net loss	$	(171,563)	$	(2,772)
Net loss from continuing operations						Net loss from continuing operations	$	(170,643)	$	(3,946)
Loss from discontinued operations, net of tax						Loss from discontinued operations, net of tax	$	(920)	$	1,174
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	5,962		1,762		Depreciation and amortization	3,537		5,056
Stock-based compensation	Stock-based compensation	11,286		3,859		Stock-based compensation	8,370		11,286
Fair value measurement of liabilities	Fair value measurement of liabilities	(29,693)		—		Fair value measurement of liabilities	(6,772)		(29,693)
Loss on extinguishment of debt		—		1,217
Gain from settlement of convertible promissory note		—		(700)
Impairment of digital assets		4,933		—
Gain on extinguishment of debt						Gain on extinguishment of debt	(6,133)		—
Impairments						Impairments	148,190		6,299
Inventory reserve charges						Inventory reserve charges	5,860		—
Amortization of right of use assets	Amortization of right of use assets	4,170		2,507		Amortization of right of use assets	1,676		1,907
Deferred income taxes	Deferred income taxes	(2,831)		(1,113)		Deferred income taxes	(10,923)		(2,831)
Asset impairment		1,363		—
Other	Other	2,610		82		Other	1,093		2,610
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables, net	Receivables, net	(15,747)		(3,269)		Receivables, net	(6,212)		(16,441)
Inventories	Inventories	2,214		1,139		Inventories	4,949		852
Contract assets	Contract assets	193		(7,238)		Contract assets	(14,947)		193
Prepaid expenses and other assets	Prepaid expenses and other assets	(3,430)		(5,423)		Prepaid expenses and other assets	2,353		(3,707)
Accounts payable	Accounts payable	(4,264)		5,838		Accounts payable	(1,341)		(3,816)
Accrued salaries, wages, and employee benefits		(1,154)		(3,010)
Accrued agency fees and commissions						Accrued agency fees and commissions	(1,415)		(1,450)
Deferred revenues	Deferred revenues	(2,769)		(1,416)		Deferred revenues	17,590		(1,778)
Operating lease liabilities	Operating lease liabilities	(5,401)		—		Operating lease liabilities	(1,795)		(6,038)
Other	Other	(7,725)		(1,940)		Other	(90)		(3,132)
Net cash used in operating activities from continuing operations						Net cash used in operating activities from continuing operations	(26,653)		(44,629)
Net cash provided by operating activities from discontinued operations						Net cash provided by operating activities from discontinued operations	30		1,574
Net cash used in operating activities	Net cash used in operating activities	(43,055)		(21,618)		Net cash used in operating activities	(26,623)		(43,055)
Cash Flows From Investing Activities	Cash Flows From Investing Activities					Cash Flows From Investing Activities
Purchases of property and equipment	Purchases of property and equipment	(5,178)		(14,663)		Purchases of property and equipment	(752)		(4,774)
Cash paid for acquisitions, net of cash acquired		—		(23,093)
Proceeds from disposals of property and equipment		—		4
Net cash used in investing activities		(5,178)		(37,752)
Proceeds from sale of Yandy						Proceeds from sale of Yandy	1,000		—
Net cash provided by (used in) investing activities - continuing operations						Net cash provided by (used in) investing activities - continuing operations	248		(4,774)
Net cash used in investing activities - discontinued operations						Net cash used in investing activities - discontinued operations	(68)		(404)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	180		(5,178)
Cash Flows From Financing Activities	Cash Flows From Financing Activities					Cash Flows From Financing Activities
Proceeds from issuance of common stock in rights offering, net						Proceeds from issuance of common stock in rights offering, net	47,600		—
Proceeds from issuance of common stock in registered direct offering, net						Proceeds from issuance of common stock in registered direct offering, net	13,890		—
Proceeds from issuance of long-term debt						Proceeds from issuance of long-term debt	11,828		—
Net proceeds from issuance of preferred stock						Net proceeds from issuance of preferred stock	—		23,750
Repayment of long-term debt						Repayment of long-term debt	(45,476)		(1,597)
Payment of financing costs						Payment of financing costs	(508)		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	1,449		—		Proceeds from exercise of stock options	—		1,449
Repayment of long-term debt		(1,597)		(159,058)
Repayment of convertible notes		—		(2,800)
Net proceeds from issuance of preferred stock		23,750		—
Settlement of the performance holdback contingent consideration	Settlement of the performance holdback contingent consideration	(151)		—		Settlement of the performance holdback contingent consideration	—		(151)
Net proceeds from public offering of stock		—		202,895
Net proceeds from issuance of long-term debt		—		169,000
Payment of financing costs		—		(8,479)
Net contribution from the Merger and PIPE Financing		—		99,911
Net cash provided by financing activities		23,451		301,469
Net cash provided by financing activities - continuing operations						Net cash provided by financing activities - continuing operations	27,334		23,451
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(257)		—		Effect of exchange rate changes on cash and cash equivalents	19		(257)
Net increase (decrease) in cash and cash equivalents and restricted cash	Net increase (decrease) in cash and cash equivalents and restricted cash	(25,039)		242,099		Net increase (decrease) in cash and cash equivalents and restricted cash	910		(25,039)
Balance, beginning of year	Balance, beginning of year	$	75,486	$	15,560	Balance, beginning of year	$	35,449	$	75,486
Balance, end of period	Balance, end of period	$	50,447	$	257,659	Balance, end of period	$	36,359	$	50,447
Cash and cash equivalents and restricted cash consist of:	Cash and cash equivalents and restricted cash consist of:					Cash and cash equivalents and restricted cash consist of:
Cash and cash equivalents	Cash and cash equivalents	$	44,613	$	255,529	Cash and cash equivalents	$	34,404	$	44,613
Restricted cash	Restricted cash	5,834		2,130		Restricted cash	1,955		5,834
Total	Total	$	50,447	$	257,659	Total	$	36,359	$	50,447
Supplemental Disclosures
Cash paid for income taxes		$	3,748	$	2,392
Cash paid for interest		$	7,652	$	8,302
Supplemental Disclosure of Non-cash Activities
Purchases of property and equipment		$	—	$	422
Conversion of convertible notes into common stock		$	—	$	2,730
Reclassification of stock receivable to treasury stock upon settlement		$	—	$	4,445
Right of use assets in exchange for lease liabilities		$	5,984	$	2,397
Shares issued in connection with asset purchase		$	1,333	$	—
Shares issued in connection with the settlement of the performance holdback contingent consideration relating to the acquisition of GlowUp		$	260	$	—
Shares issued pursuant to a license, services and collaboration agreement		$	125	$	—

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

PLBY Group, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(Unaudited)

(in thousands)


	Six Months Ended June 30,
	2023		2022
Supplemental Disclosures
Cash (refunded) paid for income taxes	$	(749)	$	3,748
Cash paid for interest	$	8,853	$	7,652
Supplemental Disclosure of Non-cash Activities	$	—
Right of use assets in exchange for lease liabilities - continuing operations	$	2,400	$	3,786
Right of use assets in exchange for lease liabilities - discontinued operations	$	885	$	2,198
Shares issued in connection with asset purchase	$	—	$	1,333
Shares issued in connection with the settlement of the performance holdback contingent consideration relating to the acquisition of GlowUp	$	—	$	260
Shares issued pursuant to a license, services and collaboration agreement	$	236	$	825

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

PLBY Group, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

PLBY Group, Inc. (the “Company”, “PLBY”, “we”, “our” or “us”), ~~known as Mountain Crest Acquisition Corp (“MCAC”) prior to the completion of the Business Combination (defined below),~~ together with its subsidiaries, ~~including Playboy Enterprises, Inc. (“Legacy Playboy”),~~ through which it conducts business, is a global consumer and lifestyle company marketing the Playboy brand through a wide range of direct-to-consumer products, licensing initiatives, and digital subscriptions and content, in addition to the sale of direct-to-consumer products under its Honey Birdetteand ~~location-based entertainment.~~Lovers brands.

We have 3three reportable segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. Refer to Note ~~18,~~17, Segments. ~~We realigned our segments in the first quarter of 2022 and adjusted respective disclosures accordingly.~~

~~Business Combination~~

On September 30, 2020, Legacy Playboy entered into an agreement and plan of merger (“Merger Agreement”), with MCAC, MCAC Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of MCAC (“Merger Sub”), and Dr. Suying Liu, the Chief Executive Officer of MCAC. Pursuant to the Merger Agreement, at the closing of the transactions contemplated thereby, Merger Sub would merge with and into Legacy Playboy (the “Merger”) with Legacy Playboy surviving the Merger as a wholly-owned subsidiary of MCAC (the “Business Combination”). Under the Merger Agreement, MCAC agreed to acquire all of the outstanding shares of Legacy Playboy common stock for approximately $381.3 million in aggregate consideration, comprised of (i) 23,920,000 shares of MCAC common stock, based on a price of $10.00 per share, subject to adjustment, and (ii) the assumption of no more than $142.1 million of Legacy Playboy net debt. The Merger was subject to certain closing conditions, including stockholder approval, no material adverse effects with respect to Legacy Playboy, and MCAC capital requirements.

On September 30, 2020, concurrently with the execution of the Merger Agreement, MCAC entered into subscription agreements (the “Subscription Agreements”) and registration rights agreements (the “PIPE Registration Rights Agreements”), with certain institutional and accredited investors (collectively, the “PIPE Investors”), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors collectively subscribed for an aggregate 5,000,000 shares of MCAC common stock at $10.00 per share for aggregate gross proceeds of $50.0 million (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the closing of the Business Combination for net proceeds of $46.8 million.

On February 10, 2021, the Business Combination was consummated, and MCAC (i) issued an aggregate of 20,916,812 shares of its common stock to existing stockholders of Legacy Playboy, (ii) assumed Legacy Playboy options exercisable for an aggregate of 3,560,541 shares of MCAC common stock at a weighted-average exercise price of $5.61 and (iii) assumed the obligation to issue shares in respect of terminated Legacy Playboy restricted stock units (“RSUs”) for an aggregate of 2,045,634 shares of MCAC common stock to be settled one year following the closing date. In addition, in connection with the consummation of the Business Combination, MCAC was renamed “PLBY Group, Inc.” We incurred $1.3 million in transaction costs that were recorded in “additional paid-in capital” upon consummation of the Business Combination.

Legacy Playboy’s options and RSUs that were outstanding as of immediately prior to the closing of the Business Combination (other than an option granted to Ben Kohn on January 31, 2021 to purchase 965,944 shares of Legacy Playboy common stock at an exercise price of $10.52 per share (the “Pre-Closing Option”)) were accelerated and fully vested. Each outstanding option was assumed by MCAC and automatically converted into an option to purchase such number of shares of MCAC’s common stock equal to the product of (x) the merger consideration and (y) the option holder’s respective percentage of the merger consideration. All RSUs that were then outstanding were terminated and will be settled in shares of common stock equal to the product of (x) the merger consideration, and (y) the terminated RSU holder’s respective percentage of the merger consideration.

The Business Combination was accounted for as a reverse recapitalization whereby MCAC, who is the legal acquirer, was treated as the “acquired” company for financial reporting purposes and Legacy Playboy was treated as the accounting acquirer. This determination was primarily based on Legacy Playboy having a majority of the voting power of the post-combination company, Legacy Playboy’s senior management comprising substantially all of the senior management of the post-combination company, the relative size of Legacy Playboy compared to MCAC, and Legacy Playboy’s operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of a capital transaction in which Legacy Playboy is issuing stock for the net assets of MCAC. The net assets of MCAC are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Legacy Playboy. All share, per share and net loss per share amounts prior to the Business Combination have been retroactively restated to reflect the recapitalization.

The following table reconciles the elements of the Merger to the condensed consolidated statement of cash flows and the condensed consolidated statement of stockholders’ equity for the six months ended June 30, 2021 (in thousands):


~~Cash - trust account and cash~~	$	~~54,044~~
~~Cash - PIPE Investment~~	~~46,844~~
~~Less: transaction costs paid in 2021~~	~~(977)~~
~~Net contributions from Merger and PIPE Investment~~	~~99,911~~
~~Less: transaction costs paid in 2020~~	~~(292)~~
~~Merger and PIPE Investment~~	$	~~99,619~~

Basis of Presentation

The interim condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

As discussed in Note 3, Assets and Liabilities Held for Sale and Discontinued Operations, we concluded that the Yandy Enterprises LLC (“Yandy”) and TLA Acquisition Corp. (“TLA”) disposal groups met the criteria for discontinued operations classification in the second quarter of 2023. As a result, the Yandy and TLA disposal groups, previously included in the Direct-to-Consumer segment, were classified as discontinued operations in the condensed consolidated statements of operations for all periods presented. The Yandy sale was completed on April 4, 2023. Assets and liabilities of these businesses were classified as assets and liabilities held for sale of the condensed consolidated balance sheets for all periods presented.

Principles of Consolidation

The interim condensed consolidated financial statements include our accounts and all majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The Company ~~and~~follows a monthly reporting calendar, with its fiscal year ending on December 31. Prior to the third quarter of 2022, Honey Birdette (Aust) Pty Limited ("(“Honey ~~Birdette"~~Birdette”), which the Company acquired in August 2021 ~~(see Note 16, Business Combinations) have~~had different fiscal quarter and year ~~ends.~~ends than the Company. Honey Birdette ~~follows~~followed a fiscal calendar widely used by the retail industry ~~that results~~which resulted in a fiscal year consisting of a 52- or 53-week period ending on the Sunday closest to December 31. ~~Each~~Honey Birdette’s fiscal year ~~of Honey Birdette consists~~previously consisted of four 13-week quarters, with an extra week added to each fiscal year every five or six years. Honey Birdette’s second fiscal quarter in 2022 consisted of 1413 weeks. The ~~Company follows a monthly reporting calendar, with its fiscal year ending on December 31. The~~ difference in prior fiscal periods for Honey Birdette and the Company is ~~considered to be insignificant~~immaterial and no related adjustments have been made in the preparation of these unaudited condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Financial Statements

The interim condensed consolidated balance sheet as of June 30, ~~2022,~~2023, and the interim condensed consolidated statements of operations, comprehensive loss, cash flows, and stockholders’ equity for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of our financial position as of June 30, ~~2022~~2023 and our results of operations and cash flows for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. The financial data and other financial information disclosed in these notes to the interim condensed consolidated financial statements related to the ~~three-~~three and six-month periods are also unaudited. The interim condensed consolidated results of operations for the six months ended June 30, ~~2022~~2023 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2022~~2023 or for any future annual or interim period. The condensed consolidated balance sheet as of December 31, ~~2021~~2022 included herein was derived from the audited financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with our audited financial statements included in the Annual Report on Form 10-K as filed by us with the Securities and Exchange Commission on March 16, ~~2022.~~ 2023.

Reclassifications

Certain prior period amounts in the condensed consolidated statements of operations and condensed consolidated balance sheet have been reclassified to conform with the current period presentation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We regularly assess these estimates, including but not limited to, valuation of our trademarks and trade ~~name;~~names; valuation of our contingent consideration liabilities; valuation of our ~~Series~~only authorized and issued preferred stock (our “Series A Preferred ~~Stock;~~Stock”); pay-per-view and video-on-demand buys, and monthly subscriptions to our television and digital content; the adequacy of reserves associated with accounts receivable and inventory; unredeemed gift cards and store credits; and stock-based compensation expense. We base these estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates and such differences could be material to the financial position and results of operations.

Concentrations of Business and Credit Risk

~~At various times throughout the period, we maintained~~We maintain certain cash balances in excess of Federal Deposit Insurance Corporation insured limits. We periodically evaluate the credit worthiness of the financial institutions with which we maintain cash deposits. We have not experienced any losses in such accounts and do not believe that there is any credit risk to our cash. Concentration of credit risk with respect to accounts receivable is limited due to the wide variety of customers to whom our products are sold and/or licensed.

The following table represents receivables from ~~the Company's~~our customers exceeding 10% of ~~the~~our total ~~as of June 30, 2022 and December 31, 2021:~~receivables, excluding receivables held for sale:

Customer June 30,
2022 December 31,
2021
Customer A 29 % 30 %
Customer B * 15 %
Customer C 34 % *

*Indicates receivables for the customer did not exceed 10% of the Company’s total as of June 30, 2022 and December 31, 2021.


Customer	June 30, 2023		December 31, 2022
Customer A	59	%	31	%

The following table represents revenue from ~~the Company's~~our customers exceeding 10% of ~~the~~our total ~~for the three and six months ended June 30, 2022 and 2021:~~revenue, excluding revenues from discontinued operations:

Three Months Ended June 30, Six Months Ended June 30,
Customer 2022 2021 2022 2021
Customer A * 11 % * 12 %
Customer B * * * *
Customer C * * * *
*Indicates revenues for the customer did not exceed 10% of the Company’s total for the three and six months ended June 30, 2022 and 2021.

~~Cash Equivalents~~

~~Cash equivalents are temporary cash investments with an original maturity of three months or less at the date of purchase and are stated at cost, which approximates fair value.~~


	Three Months Ended June 30,				Six Months Ended June 30,
Customer	2023		2022		2023		2022
Customer A	15	%	11	%	15	%	11	%

Restricted Cash

At June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, restricted cash was primarily related to a cash collateralized letter of credit we maintained in connection with the lease of our Los Angeles headquarters, ~~and the purchase of an aircraft,~~ as well as Honey Birdette’s term deposit in relation to certain of its ~~Sydney office lease.~~leases.

~~Accounts Receivable, Net~~Advertising Costs

~~Trade receivables are reported at their outstanding unpaid balances, less allowances~~We expense advertising costs as incurred. Advertising expenses were $1.4 million and $3.7 million for ~~credit losses. The allowance for expected credit losses are increased by~~ the recognition of bad debt expense and decreased by charge-offs (net of recoveries) or by reversals to income. In determining expected credit losses, we consider our historical level of credit losses, current economic trends, and reasonable and supportable forecasts that affect the collectability of the future cash flows. A receivable balance is written off when we deem the balance to be uncollectible. The allowance for expected credit losses was immaterial atthree months ended June 30, 2023 and 2022, respectively, excluding $0.3 million and ~~December 31, 2021.~~$2.0 million, respectively, of advertising costs related to discontinued operations. Advertising expenses for the six months ended June 30, 2023 and 2022 were $3.7 million and $7.9 million, respectively, excluding $2.3 million and $4.9 million, respectively, of advertising costs related to discontinued operations. We also have various arrangements with collaborators pursuant to which we reimburse them for a portion of their advertising costs in the form of co-op marketing which provide advertising benefits to us. The costs that we incur for such advertising costs are recorded as a reduction of revenue.

Intangible Assets and Goodwill

Indefinite-lived intangible assets that are not amortized but subject to annual impairment testing consist of Playboy-branded trademarks. We periodically perform a quantitative assessment to estimate the fair value of our Playboy-branded trademarks.

~~Income Taxes~~

~~For interim reporting periods, our provision~~We evaluate the indefinite-lived Playboy-branded trademarks for ~~income taxes~~impairment using the relief from royalty method. This valuation approach requires that we make a number of assumptions to estimate fair value, including projections of future revenues, market royalty rates, tax rates, discount rates and other relevant variables. The projections we use in the model are updated annually and will change over time based on the historical performance and changing business conditions. If the carrying value of the trademark exceeds its estimated fair value, an impairment charge is ~~calculated using our annualized estimated effective tax rate~~recognized for the ~~year. This rate~~excess amount.

We perform annual impairment testing on goodwill in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. We may first assess qualitative factors to determine whether it is ~~based~~more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, an impairment test is unnecessary. If an impairment test is necessary, we will estimate the fair value of a related reporting unit. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is determined to be impaired, and we will proceed with recording an impairment charge equal to the excess of the carrying value over the related fair value. If we determine it is more likely than not that goodwill is not impaired, a quantitative test is not necessary.

We have experienced further declines in revenue and profitability, causing us to test the recoverability of our indefinite-lived assets, including goodwill as of June 30, 2023. The quantitative test performed in the second quarter of 2023 indicated that the fair value of the indefinite-lived Playboy-branded trademarks was less than their carrying value. Our valuation estimate was most sensitive to changes in royalty rates and the cost of capital. We recognized $65.5 million of impairment charges on our indefinite-lived assets at the impairment date in the second quarter of 2023.

Utilizing the income approach, we performed a quantitative impairment test on goodwill using a discounted cash flow analysis, which determined that the carrying value of certain of our reporting units exceeded their fair value. As a result, we recognized $66.7 million of impairment charges on our goodwill at the impairment date.

Definite-lived intangible assets include distribution agreements, photo and magazine archives, licensing agreements, and trade names, which we recognized in connection with our business combinations. Because these assets were recognized as identifiable intangible assets in connection with our previous business combinations, we do not incur costs to renew or extend their terms. All of our definite-lived intangible assets are amortized using the straight-line method over their useful lives.

Impairment of Long-Lived Assets

The carrying amounts of long-lived assets, including property and equipment, stores, acquired intangible assets and right-of-use operating lease assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate over their remaining lives. If such review indicates that the carrying amount of long-lived assets is not recoverable, the carrying amount of such assets is reduced to their fair value.

If the useful life is shorter than originally estimated, ~~full-year income~~we amortize the remaining carrying value over the revised shorter useful life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the ~~related income tax expense~~fair value of the impaired asset.

We have experienced further declines in revenue and profitability, causing us to test recoverability as of June 30, 2023. Recoverability tests for ~~each jurisdiction in which~~certain of our amortizable trade names indicated that a quantitative impairment test would be necessary. The fair values of certain of our amortizable trade names were less than their carrying values. As a result, we ~~operate. Changes~~recognized $5.1 million of impairment charges on our trade names at the impairment date in the ~~geographical mix, permanent differences or the estimated level~~second quarter of ~~annual pre-tax income can affect the effective tax rate. This rate is adjusted~~2023.

Assets and Liabilities Held for ~~the effects of discrete items occurring in the period.~~Sale and Discontinued Operations

We classify assets and liabilities as held for sale, collectively referred to as the disposal group, when management commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, it is unlikely that significant changes will be made to the plan, the assets are ~~subject~~available for immediate sale in its present condition, an active program to ~~federal~~locate a buyer and ~~state income taxes~~other actions required to complete the sale have been initiated, and the sale of the assets is expected to be completed within one year. A disposal group that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the United States and foreign income and withholding taxes. We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves in these jurisdictions. We evaluate our deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors, our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward periods, and tax planning alternatives. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periodsperiod in which the ~~related deferred tax assets become deductible.~~held for sale criteria are met. Conversely, gains are not recognized on the sale of a disposal group until the date of sale. The fair value of ~~our deferred tax assets depends on applicable income tax rates.~~a disposal group less any costs to sell is assessed each reporting period it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

We account for discontinued operations when assets and liabilities of a disposal group are classified as held for sale, or have been sold, and only if the disposal represents a strategic shift that has or will ~~continue to evaluate both~~have a meaningful effect on our operations and financial results. We aggregate the ~~positive and negative evidence on~~results of operations for discontinued operations into a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of future results. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changessingle line item in the ~~valuation~~consolidated statements of operations for all periods presented. General corporate overhead is not allocated to discontinued operations. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.

Recently Adopted Accounting Pronouncements

In December 2022, the Financial Accounting Standards Board issued Accounting Standard Update 2022-06 Reference Rate Reform (“Topic 848”) “Deferral of the Sunset Date of Topic 848”, which deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. Topic 848 provides optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The standard was effective upon issuance and we may apply the optional expedients and elections in Topic 848 prospectively through December 31, 2024. Upon amendment and restatement of our ~~deferred tax assets that could~~Credit Agreement on May 10, 2023, LIBOR was replaced with the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. Refer to Note 9, Debt. The provisions of this pronouncement did not have a material impact on our condensed consolidated financial statements. ~~Changes in existing federal and state tax laws and corporate income tax rates could also affect actual tax results and the realization of deferred tax assets over time.~~

~~Comprehensive Loss~~

Comprehensive loss consists of net loss and other gains and losses affecting stockholders’ deficit that, under GAAP, are excluded from net loss. Our other comprehensive loss represents foreign currency translation adjustment attributable to Honey Birdette operations. Refer to Condensed Consolidated Statements of Comprehensive Loss.

~~Net Loss Per Share~~

Basic net loss per share is calculated by dividing the net loss attributable to PLBY Group, Inc. stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period. For periods in which we report net losses, diluted net loss per share is the same as basic net loss per share because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

~~Recently Adopted Accounting Pronouncements~~

~~There were no recently adopted accounting pronouncements applicable to us for the quarter ended June 30, 2022.~~

Accounting Pronouncements Issued but Not Yet Adopted

We do not believe that there were any recently issued, but not yet effective, accounting pronouncements that would have a material effect on our financial statements.

2. Fair Value ~~Measurement~~Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 inputs: Based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 inputs: Based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 inputs: Based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

For cash equivalents, receivables and certain other current assets and liabilities at June 30, 2023 and December 31, 2022, the amounts reported approximate fair value due to their short-term nature. For debt, ~~we believe that the amounts reported approximate fair value~~ based upon the ~~refinancing~~amendment of our senior secured debt in ~~May 2021,~~August 2022, December 2022 and February 2023, as well as its amendment ~~in August 2021~~ and ~~August 2022 and the Aircraft Term Loan we obtained~~restatement in May ~~2021.~~2023, we believe that its carrying value approximates fair value, as such debt is variable-rate debt that reprices to current market rates frequently. Refer to Note 9,10, Debt, ~~and Note 19, Subsequent Events,~~ for additional disclosures about our debt. Our debt is classified within Level 2 of the valuation hierarchy.

Liabilities Measured and Recorded at Fair Value on a Non-recurring Basis

The following table summarizes the fair value of our financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


		June 30, 2022									June 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Liabilities	Liabilities									Liabilities
Contingent consideration liability	Contingent consideration liability	$	—	$	—	$	(8,342)	$	(8,342)	Contingent consideration liability	$	—	$	—	$	(568)	$	(568)
Preferred stock liability		—		—		(22,247)		(22,247)
Total liabilities		$	—	$	—	$	(30,589)	$	(30,589)

December 31, 2021
Level 1 Level 2 Level 3 Total
Liabilities
Contingent consideration liability $ — $ — $ (36,630) $ (36,630)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration liability	$	—	$	—	$	(835)	$	(835)
Mandatorily redeemable preferred stock	—		—		(39,099)		(39,099)
Total liabilities	$	—	$	—	$	(39,934)	$	(39,934)

There were no transfers of Level 3 financial instruments ~~between Level 1, Level 2, and Level 3~~ during the periods presented.

Contingent consideration liability ~~is comprised of contingent consideration recorded in connection with the acquisition of Honey Birdette, which represents the fair value for the shares issued~~relates to the ~~Honey Birdette sellers that remained subject to lock-up restrictions as of June 30, 2022, and~~ contingent consideration recorded in connection with the acquisition of GlowUp Digital Inc. (“GlowUp”), which represents the fair value for shares which may be issued and cash which may be paid to the GlowUp ~~Digital Inc.~~ sellers, subject to certain indemnification obligations that remained unsettled as of June 30, 2023 and ~~performance criteria. Refer to Note 16, Business Combinations.~~December 31, 2022.

We recorded the acquisition-date fair value of ~~these~~the contingent ~~liabilities~~liability as part of the consideration transferred. The fair value of contingent and deferred consideration was estimated using either (i) a Monte Carlo simulation analysis in an option pricing framework, using revenue projections, volatility and stock price as key inputs or (ii) a scenario-based valuation model using probability of payment, certain cost projections, and either discounting (in the case of cash-settled consideration) or stock price (for share-settled consideration) as key inputs. The analysis approach was chosen based on the terms of each purchase agreement and our assessment of appropriate methodology for each case. The contingent payments and value of stock issuances are subsequently remeasured to fair value each reporting date using the same fair value estimation method originally applied with updated estimates and inputs as of June 30, ~~2022.~~2023. We recorded $0.1 million and $8.6 million of fair value ~~change~~gain as a result of contingent liabilities fair value remeasurement in selling and administrative expenses for the three months ended June 30, 2023 and 2022, respectively, and $0.3 million and $27.9 million of fair value ~~change~~gain as a result of contingent liabilities fair value remeasurement for the six months ended June 30, ~~2022.~~2023 and 2022, respectively. We classified financial liabilities associated with the contingent consideration as Level 3 due to the lack of relevant observable inputs. Changes in assumptions described above could have an impact on the payout of contingent consideration.

Our Series A Preferred Stock ~~Liability was~~liability, initially valued as of May 16, 2022 (the initial issuance date), and our subsequent Series A Preferred Stock liability, valued as of the August 8, 2022 (the final issuance ~~date,~~date), were each calculated using a stochastic interest rate model implemented in a binomial lattice, in order to incorporate the various early redemption features. The fair value option was elected for Series A Preferred Stock liability, isas we believe fair value best reflects the expected future economic value. Such liabilities are subsequently remeasured to fair value for each reporting date using the same valuation methodology as originally applied with updated input assumptions. We recorded ~~$1.8~~$9.5 million and $6.5 million of fair value ~~change~~gain in nonoperating income as a result of remeasurement of the fair value of our Series A Preferred Stock ~~since issuance to~~during the ~~period~~three and six months ended June 30, ~~2022. The decrease in~~2023, respectively, and $1.8 million for the ~~fair value of our Series A Preferred Stock since issuance was primarily due to an increase in observed market preferred stock yields.~~three and six months ended June 30, 2022. We classified financial liabilities associated with our Series A Preferred Stock as Level 3 due to the lack of relevant observable inputs. ~~Changes~~In May 2023, in ~~key assumptions, namely preferred stock yields~~connection with the amendment and ~~interest rate volatility, could have an impact on~~restatement of our Credit Agreement, the ~~fair value of our~~outstanding Series A Preferred ~~Stock.~~Stock was exchanged (and thereby eliminated). See Note 10, Debt, for further details.

The following table provides a roll-forward of the fair value of the liabilities categorized as Level 3 for the six months ended June 30, ~~2022~~2023 (in thousands):


	June 30, 2022
~~Beginning balance~~	$	~~36,630~~
~~Preferred stock liability in relation to the issuance of preferred stock~~	~~24,000~~
~~Change in fair value and other~~	~~(29,679)~~
~~Partial settlement of the contingent consideration relating to the acquisition of GlowUp~~	~~(362)~~
~~Ending balance~~	$	~~30,589~~


	Contingent Consideration		Mandatorily Redeemable Preferred Stock Liability		Total
Balance at December 31, 2022	$	835	$	39,099	$	39,934
Change in fair value	(267)		(6,505)		(6,772)
Exchange of mandatorily redeemable preferred shares	$	—	$	(32,594)	$	(32,594)
Balance at June 30, 2023	$	568	$	—	$	568

The decrease in the fair value of the contingent consideration for the six months ended June 30, ~~2022~~2023 was primarily due to a decrease in a price per share of our common ~~stock~~stock.

Assets and Liabilities Held for Sale

We initially measure an asset that is classified as held for sale at the lower of its carrying amount or fair value less costs to sell. We assess the fair value of an asset less costs to sell each reporting period that it remains classified as held for sale, and report any subsequent changes as an adjustment to the carrying amount of the asset. Assets are not depreciated or amortized while they are classified as held for sale.

The assumptions used in measuring fair value of assets and liabilities held for sale are considered Level 3 inputs, which include recent purchase offers and market comparables. During the three and six months ended June 30, ~~2022. In the second quarter of 2022, contingent consideration related~~2023, impairment charges recorded in relation to ~~the acquisition of GlowUp was partially satisfied as certain performance criteria~~assets and liabilities held for sale were met. A portion of the total consideration for the acquisition held back in respect of indemnification obligations remained contingent as of June 30, 2022, pursuant to the terms of the GlowUp Agreement.immaterial.

Assets Measured and Recorded at Fair Value on a Non-recurring Basis

In addition to liabilities that are recorded at fair value on a recurring basis, ~~the Company records~~we record assets and liabilities at fair value on a nonrecurring basis. Generally, our non-financial instruments, which primarily consist of goodwill, intangible assets, including digital assets, right-of-use assets and property and equipment, are ~~recorded~~not required to be measured at fair value on a ~~nonrecurring~~recurring basis asand are reported at carrying value. However, on a ~~result~~periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written-down to and recorded at fair value, considering market participant assumptions. Recognized losses related to the impairment of ~~impairment charges. The Company recognized losses of $2.6 million and $4.9 million~~our digital assets during the three and six months ended June 30, ~~2022 related to~~2023 were immaterial, and the fair value of our digital assets was immaterial as of June 30, 2023. During the three and six months ended June 30, 2022 we recognized $2.6 million and $4.9 million, respectively, of losses related to the impairment of our digital assets, which had a fair value of ~~$1.7~~$0.3 million ~~on the impairment date.~~as of December 31, 2022. Fair value of digital assets held are predominantly based on Level 1 inputs.

~~Additionally,~~We use an income approach, using discounted cash flow and relief from royalty valuation models with Level 3 inputs to measure the fair value of our non-financial assets, including goodwill, indefinite-lived trademarks and definite-lived trade names, and liabilities. With respect to goodwill, key assumptions applied in an income approach using the discounted cash flow valuation model include revenue growth rates and discount rates. With respect to indefinite-lived trademarks, key assumptions used in the income approach and the relief from royalty valuation model include revenue growth rates, royalty rates, and discount rates. With respect to definite-lived trade names, key assumptions used in the relief from royalty valuation model include revenue growth rates, royalty rates and discount rates. Our cash flow projections represent management’s most recent planning assumptions, which are based on a combination of industry outlooks, views on general economic conditions, our expected pricing plans and expected future savings. Terminal values are determined using a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant weighted-average cost of capital and long-term growth rates. Changes in key assumptions, namely discount rates, royalty rates, growth rates and projections, could have an impact on the fair value of our non-financial assets and liabilities. At the impairment date in the second quarter of ~~2022,~~2023, we ~~purchased intellectual property~~recorded impairment charges on our intangible assets, ~~which had~~including goodwill, indefinite-lived trademarks, trade names and certain other assets of $137.3 million. Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, and Note 8, Intangible Assets and Goodwill, for further information.

3. Assets and Liabilities Held for Sale and Discontinued Operations

In the second quarter of 2023, we announced plans to explore strategic disposition opportunities in our Direct-to-Consumer business as we pursue a ~~fair value of $1.4 million~~capital-light business model focused on ~~the date of purchase~~our most valuable brands, Playboy and ~~were fully impaired as~~Honey Birdette. As of June 30, ~~2022.~~2023, we determined that Yandy and TLA disposal groups met the criteria discussed in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, to be classified as discontinued operations for all periods presented, as the divestiture of Yandy and TLA in the aggregate represents a strategic shift that has or will have a major effect on our operations and financial results. Their assets and liabilities are classified as current assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented. On April 4, 2023, we completed the sale of Yandy, recognizing a loss on sale of $0.3 million, which is recorded in Other Operating Income, Net in the condensed consolidated statements of operations.

The following table summarizes the components of income (loss) from discontinued operations, net of tax in the accompanying condensed consolidated statements of operations (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues	$	10,003	$	17,533	$	26,241	$	39,851
Costs and expenses:
Cost of sales	(3,810)		(8,513)		(12,179)		(19,427)
Selling and administrative expenses	(5,686)		(9,627)		(15,016)		(19,982)
Total operating expense	(9,496)		(18,140)		(27,195)		(39,409)
Operating income (loss)	507		(607)		(954)		442
Nonoperating income (expense):
Other income, net	11		30		51		82
Total nonoperating income	11		30		51		82
Income (loss) from discontinued operations before income taxes	518		(577)		(903)		524
(Expense) benefit from income tax	(66)		374		(17)		650
Net income (loss) from discontinued operations	$	452	$	(203)	$	(920)	$	1,174

The major classes of assets and liabilities classified as held for sale in the condensed consolidated balance sheets were as follows (in thousands):


	June 30, 2023		December 31, 2022
Assets
Receivables, net of allowance for credit losses	$	12	$	4,206
Inventories, net	4,842		12,477
Prepaid expenses and other current assets	341		539
Property and equipment, net	1,502		3,571
Operating right of use assets	11,906		13,183
Other intangible assets, net	433		471
Other noncurrent assets	275		463
Total assets held for sale	$	19,311	$	34,910
Liabilities
Accounts payable	$	1,100	$	6,541
Deferred revenues	—		282
Operating lease liabilities	12,411		13,682
Other current liabilities and accrued expenses	2,306		6,621
Total liabilities held for sale	$	15,817	$	27,126

4. Revenue Recognition

Contract Balances

Our contract assets relate to the Trademark Licensing revenue stream where arrangements are typically long-term and non-cancelable. Contract assets are reclassified to accounts receivable when the right to bill becomes unconditional. Our contract liabilities consist of billings or payments received in advance of revenue recognition and are recognized as revenue when transfer of control to customers has occurred. Contract assets and contract liabilities are netted on a contract-by-contract basis. Contract assets were $10.5 million and $16.2 million as of June 30, 2023 and December 31, 2022, respectively. Contract liabilities were $34.8 million and $31.9 million as of June 30, 2023 and December 31, 2022, respectively, which excludes $0.3 million of contract liabilities included in liabilities held for sale in the condensed consolidated balance sheets as of December 31, 2022. The changes in such contract balances during the six months ended June 30, 2023 primarily relate to (i) $22.1 million of revenues recognized that were included in gross contract liabilities at December 31, 2022, (ii) a $2.3 million increase in contract liabilities due to cash received in advance or consideration to which we are entitled remaining in the net contract liability balance at period-end, (iii) $22.0 million of contract assets reclassified into accounts receivable as the result of rights to consideration becoming unconditional, and (iv) a $6.1 million decrease in contract assets primarily due to impairment of certain trademark licensing contracts and certain contract modifications and terminations.

Contract assets were $17.2 million and $17.4 million as of June 30, 2022 and December 31, 2021, respectively. Contract liabilities, excluding liabilities recorded as held for sale in the condensed consolidated balance sheets, were ~~$52.0~~$51.9 million and ~~$53.6~~$52.5 million as of June 30, 2022 and December 31, 2021, respectively. The changes in such contract balances, excluding changes recorded as discontinued operations in the condensed consolidated statements of operations, during the six months ended June 30, 2022 primarily ~~relate~~relate to (i) ~~$28.6~~$27.5 million of revenues recognized that were included in gross contract liabilities at December 31, 2021, (ii) a ~~$2.1~~$2.0 million increase in contract liabilities due to cash received in advance or consideration to which we are entitled remaining in the net contract liability balance at period-end, and (iii) $24.3 million of contract assets reclassified into accounts receivable as ~~the~~a result of rights to consideration becoming unconditional.

~~Contract~~Future Performance Obligations

In the second quarter of 2023, we reviewed the revenue recognition for certain of our licensees pursuant to their contract modifications and expected collectability, which resulted in the impairment of corresponding assets ~~were $15.6~~of $11.2 million, net of a $1.2 million reduction in related commission accrual. The decrease in revenue from such licensees was $3.1 million and ~~$8.3~~$6.7 million as of June 30, 2021 and December 31, 2020, respectively. Contract liabilities were $53.5 million and $55.0 million as of June 30, 2021 and December 31, 2020, respectively. The changes in such contract balances during the three and six months ended June 30, ~~2021 primarily re~~late to (i) $27.9 million of revenues recognized that were included in gross contract liabilities at December 31, 2020, (ii) a $2.7 million increase in contract liabilities due to cash received in advance or consideration to which we are entitled remaining in the net contract liability balance at period-end, (iii) $23.7 million of contract assets reclassified into accounts receivable as a result of rights to consideration becoming unconditional, (iv) a $1.3 million increase in contract liabilities due2023, respectively compared to the ~~acquisition~~comparable prior year periods. Due to the impact of ~~TLA Acquisition Corp. (“TLA”),~~the weakening economy in China, collections have slowed, and ~~(v) a $7.4 million increase~~we have been in discussions with our partners to renegotiate terms of certain agreements. Future contract ~~assets due to certain trademark licensing~~modifications and collectability issues could impact the revenue recognized against our ongoing contract ~~modifications.~~assets.

~~Future Performance Obligations~~

As of June 30, ~~2022,~~2023, unrecognized revenue attributable to unsatisfied and partially unsatisfied performance obligations under our long-term contracts was ~~$346.3~~$193.9 million, of which ~~$340.1~~$187.0 million relates to Trademark Licensing, ~~$4.9~~$5.3 million relates to ~~Magazine and~~ Digital Subscriptions and ~~$1.3~~Products, and $1.6 million relates to other obligations.

Unrecognized revenue of the Trademark Licensing revenue stream will be recognized over the next ~~eight~~ten years, of which ~~69%~~75% will be recognized in the first five years. Unrecognized revenue of the ~~Magazine~~Digital Subscriptions and ~~Digital Subscriptions~~Products revenue stream will be recognized over the next five years, of which ~~36% will~~38% will be recognized in the first year. Unrecognized revenues under contracts disclosed above do not include contracts for which variable consideration is determined based on the customer’s subsequent sale or usage.

Disaggregation of Revenue

The following table disaggregates revenue by type (in thousands):, excluding revenues from discontinued operations:

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022
Licensing Direct-to-Consumer Digital Subscription and Content Other Total Licensing Direct-to-Consumer Digital Subscription and Content Other Total
Trademark Licensing $ 15,876 $ — $ — $ — $ 15,876 $ 30,437 $ — $ — $ — $ 30,437
Magazine and Digital Subscriptions — — 2,347 243 2,590 — — 4,647 678 5,325
TV and Cable Programming — — 2,347 — 2,347 — — 4,787 — 4,787
Consumer Products — 44,601 — — 44,601 — 94,243 — — 94,243
Total revenues $ 15,876 $ 44,601 $ 4,694 $ 243 $ 65,414 $ 30,437 $ 94,243 $ 9,434 $ 678 $ 134,792


	Three Months Ended June 30, 2023										Six Months Ended June 30, 2023
	Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total		Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total
Trademark licensing	$	10,288	$	—	$	—	$	—	$	10,288	$	19,982	$	—	$	—	$	—	$	19,982
Digital subscriptions and products	—		—		3,097		1		3,098		—		—		5,786		4		5,790
TV and cable programming	—		—		2,015		—		2,015		—		—		4,064		—		4,064
Consumer products	—		19,700		—		—		19,700		—		40,468		—		—		40,468
Total revenues	$	10,288	$	19,700	$	5,112	$	1	$	35,101	$	19,982	$	40,468	$	9,850	$	4	$	70,304

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Licensing Direct-to-Consumer Digital Subscription and Content Other Total Licensing Direct-to-Consumer Digital Subscription and Content Other Total
Trademark Licensing $ 15,961 $ — $ — $ — $ 15,961 $ 31,665 $ — $ — $ — $ 31,665
Magazine and Digital Subscriptions — — 3,271 9 3,280 — — 5,594 23 5,617
TV and Cable Programming — — 2,433 163 2,596 — — 5,025 163 5,188
Consumer Products — 28,014 — — 28,014 — 50,061 — — 50,061
Total revenues $ 15,961 $ 28,014 $ 5,704 $ 172 $ 49,851 $ 31,665 $ 50,061 $ 10,619 $ 186 $ 92,531


	Three Months Ended June 30, 2022										Six Months Ended June 30, 2022
	Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total		Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total
Trademark licensing	$	15,876	$	—	$	—	$	—	$	15,876	$	30,437	$	—	$	—	$	—	$	30,437
Magazine, digital subscriptions and products	—		—		2,347		243		2,590		—		—		4,647		678		5,325
TV and cable programming	—		—		2,347		—		2,347		—		—		4,787		—		4,787
Consumer products	—		27,068		—		—		27,068		—		54,392		—		—		54,392
Total revenues	$	15,876	$	27,068	$	4,694	$	243	$	47,881	$	30,437	$	54,392	$	9,434	$	678	$	94,941

The following table disaggregates revenue by point-in-time versus over time (in thousands):, excluding revenues from discontinued operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Point in time	Point in time	$	44,670	$	29,010	$	94,403	$	51,057	Point in time	$	20,801	$	27,137	$	42,144	$	54,531
Over time	Over time	20,744		20,841		40,389		41,474		Over time	14,300		20,744		28,160		40,410
Total revenues	Total revenues	$	65,414	$	49,851	$	134,792	$	92,531	Total revenues	$	35,101	$	47,881	$	70,304	$	94,941

4.5. Inventories, Net

The following table sets forth inventories, net, which are stated at the lower of cost (specific cost and first-in, first-out) and net realizable value (in thousands):. The table excludes $4.8 million and $12.5 million of inventory, net, which is included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Editorial and other pre-publication costs	Editorial and other pre-publication costs	$	466	$	263	Editorial and other pre-publication costs	$	320	$	690
Merchandise finished goods	Merchandise finished goods	36,656		39,618		Merchandise finished goods	13,741		19,922
Total	Total	$	37,122	$	39,881	Total	$	14,061	$	20,612

At June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, reserves for slow-moving and obsolete inventory related to merchandise finished goods amounted to ~~$0.9~~$9.9 million and ~~$1.5~~$3.6 million, respectively. Reserves for slow-moving and obsolete inventory as of June 30, 2023 exclude an immaterial amount of inventory reserves included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023. Reserves for slow-moving and obsolete inventory as of December 31, 2022 exclude $1.4 million of inventory reserves included in assets held for sale in the condensed consolidated balance sheets as of December 31, 2022. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.

1316

5.6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the ~~following~~items set forth in the table below (in thousands):

June 30,
2022 December 31,
2021
Prepaid taxes $ 1,869 $ —
Prepaid foreign withholding taxes 2,234 2,431
Deposits 883 1,302
Prepaid insurance 173 1,209
Contract assets, current portion 1,263 77
Software implementation and subscription costs 3,002 1,910
Prepaid inventory not yet received 1,840 2,749
Licensed programming costs 398 447
Upfront fees 2,202 130
Other 3,528 3,161
Total $ 17,392 $ 13,416

As. The table excludes $0.3 million and $0.5 million of assets included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.


	June 30, 2023		December 31, 2022
Prepaid taxes	$	2,534	$	3,150
Deposits	142		205
Prepaid insurance	228		1,074
Contract assets, current portion	1,295		2,559
Prepaid software	1,576		3,714
Prepaid inventory not yet received	3,619		3,397
Prepaid platform fees	703		1,126
Promissory note receivable	706		—
Other	1,801		1,996
Total	$	12,604	$	17,221

In the ~~unamortized balance~~first quarter of 2023, we significantly restructured our technology expenses, and cost-excessive and under-utilized software packages were either terminated or not renewed upon expiration of applicable agreements. This resulted in a restructuring charge of $4.6 million recorded in selling and administrative expenses in the ~~licensed programming costs will be recognized over~~ ~~two years. Amortization expense related to licensed programming costs was immaterial~~condensed consolidated results of operations for the ~~three and~~ six months ended June 30, ~~2022 and 2021.~~

~~Additionally, in the third quarter~~2023, excluding $0.4 million of ~~2021, the Company began capitalizing implementation~~ costs incurred through certain cloud computing arrangements that are service contracts. These costs are amortized over the terms of the arrangements, which are three years, and are classified in our condensed consolidated balance sheets in prepaid expenses and other current assets or other noncurrent assets based on the terms of the arrangements, and the related cash flows are presented as cash outflows from operations~~. The amortization expense~~ related to ~~capitalized implementation costs~~discontinued operations, out of which $1.5 million was ~~immaterial for~~ the ~~three and six months ended June 30, 2022.~~accelerated amortization of prepaid software.

6.7. Property and Equipment, Net

Property and equipment, net consists of the ~~following~~items set forth in the table below (in thousands):

June 30,
2022 December 31,
2021
Aircraft $ 13,443 $ 13,298
Leasehold improvements 11,657 9,619
Construction in progress 6,105 3,317
Equipment 4,045 1,381
Internally developed software 3,431 2,001
Furniture and fixtures 2,141 5,209
Total property and equipment, gross 40,822 34,825
Less: accumulated depreciation (11,180) (8,380)
Total $ 29,642 $ 26,445

~~In May 2021, we purchased an aircraft for an aggregate purchase price of $12.0 million. Subsequently, we capitalized $1.3~~. The table excludes $1.5 million and $3.6 million of ~~costs related~~property and equipment, net included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Refer to ~~the refurbishment of the aircraft~~Note 3, Assets and ~~inspecting~~Liabilities Held for Sale and ~~testing the aircraft prior to purchase. The aircraft is being amortized on a straight-line basis over its estimated useful life of seven years.~~Discontinued Operations.

~~We capitalize certain costs related to internally developed software for~~ ~~centerfold.com. Internally developed software is being amortized on a straight-line basis over its estimated useful life of three years. Costs not yet being amortized are recorded in construction in progress.~~


	June 30, 2023		December 31, 2022
Leasehold improvements	9,875		9,096
Construction in progress	1,232		782
Equipment	3,668		3,704
Internally developed software	9,428		7,096
Furniture and fixtures	1,954		1,953
Total property and equipment, gross	26,157		22,631
Less: accumulated depreciation	(11,176)		(8,827)
Total	$	14,981	$	13,804

The aggregate depreciation expense related to property and equipment, was ~~$0.9~~$1.3 million and $0.7 million for the three months ended June 30, 2023 and 2022, ~~and 2021,~~ respectively, ~~and $2.3~~excluding $0.1 million and ~~$1.1~~$0.2 million, respectively, of depreciation expense related to discontinued operations. The aggregate depreciation expense related to property and equipment was $2.5 million and $1.9 million for the six months ended June 30, 2023 and 2022, respectively, excluding $0.4 million and ~~2021, respectively.~~$0.4 million, respectively, of depreciation expense included in discontinued operations in the condensed consolidated statements of operations.

7.8. Intangible Assets and Goodwill

Intangible Assets

Our indefinite-lived intangible assets that are not amortized ~~but subject to annual impairment testing consist~~consisted of ~~$332.2~~$150.7 million and ~~$331.9~~$216.0 million of Playboy-branded trademarks and acquired trade names as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Capitalized trademark costs include costs associated with the acquisition, registration and/or renewal of our trademarks. We expense certain costs associated with the defense of our trademarks. Registration and renewal costs that were capitalized during each of the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were immaterial.

~~Our digital assets as~~

As a result of ~~June 30, 2022~~ongoing impacts to our revenue, including declines in consumer demand and ~~December 31, 2021 were comprised~~discontinued operations, we recorded non-cash asset impairment charges, at the impairment date, related to the write-down of ~~the crypto currency “Ethereum” received for sales~~goodwill of ~~our~~ ~~"Rabbitar" non-fungible tokens. As~~$66.7 million, to indefinite-lived trademarks of ~~June 30, 2022, the carrying value of our digital assets held was $1.7~~ ~~million, which reflects impairments for the three and six months ended~~ ~~June 30, 2022 of $2.6~~$65.5 million, and ~~$4.9 million, respectively.~~to trade names and other assets of $5.1 million. Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, for additional disclosures about impairment charges.

The table below summarizes our intangible assets, net (in thousands):. The table excludes $0.4 million and $0.5 million of other intangible assets, net included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Digital assets, net		$	1,742	$	6,836
Digital assets						Digital assets	$	5	$	327
Total amortizable intangible assets, net	Total amortizable intangible assets, net	78,642		86,519		Total amortizable intangible assets, net	13,216		19,796
Total indefinite-lived intangible assets	Total indefinite-lived intangible assets	332,179		331,925		Total indefinite-lived intangible assets	150,650		216,014
Total	Total	$	412,563	$	425,280	Total	$	163,871	$	236,137

Impairment charges related to our digital assets, which were comprised of the crypto currency “Ethereum” as of June 30, 2023 and December 31, 2022, were immaterial for the three and six months ended June 30, 2023, and $2.6 million and $4.9 million for the three and six months ended June 30, 2022, respectively.

Our amortizable intangible assets consisted of the following (in thousands):

Weighted-Average Life (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount
June 30, 2022
Trade names 11.8 $ 81,759 $ — $ (6,679) $ — $ 75,080
Distribution agreements 15 3,720 — (2,811) — 909
Photo and magazine archives 10 2,000 — (2,000) — —
Customer list 10 1,180 — (295) — 885
Developed technology 3 2,300 (532) 1,768
Total $ 90,959 $ (12,317) $ 78,642
Weighted-Average Life (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount
December 31, 2021
Trade names 11.8 $ 85,684 $ (3,293) $ 82,391
Distribution agreements 15 3,720 (2,687) 1,033
Photo and magazine archives 10 2,000 (2,000) —
Customer list 10 1,180 (236) 944
Developed technology 3 2,300 (149) 2,151
Total $ 94,884 $ (8,365) $ 86,519


	Weighted-Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairments*		Net Carrying Amount

June 30, 2023
Trade names	11.8	$	73,933	$	(7,572)	$	(53,806)	$	12,555
Distribution agreements	15	3,720		(3,059)		—		661
Total		$	77,653	$	(10,631)	$	(53,806)	$	13,216

*Includes trade name impairment charges of $5.1 million during the three months ended June 30, 2023.

The table below excludes TLA’s customer lists and Yandy’s trade names as these were included in assets held for sale in the condensed consolidated balance sheets as of December 31, 2022.


	Weighted- Average Life (Years)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairments		Net Carrying Amount

December 31, 2022
Trade names	12	$	74,625	$	(6,881)	$	(48,733)	$	19,011
Distribution agreements	15	3,720		(2,935)		—		785
Developed technology	3	2,300		(2,300)		—		—
Total		$	80,645	$	(12,116)	$	(48,733)	$	19,796

The aggregate amortization expense for definite-lived intangible assets included in loss from continuing operations was ~~$1.9~~$0.5 million and ~~$0.3~~$1.6 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense for definite-lived intangible assets attributable to discontinued operations was immaterial for the three months ended June 30, 2023 and ~~2021, respectively, and $4.1~~2022. The aggregate amortization expense for definite-lived intangible assets included in the continuing operations was $1.0 million and ~~$0.6~~$3.6 million for the six months ended June 30, 2023 and 2022, respectively. Amortization expense for definite-lived intangible assets attributable to discontinued operations was immaterial for the six months ended June 30, 2023 and ~~2021, respectively.~~2022.

1518

As of June 30, ~~2022,~~2023, expected amortization expense relating to definite-lived intangible assets for each of the next five years and thereafter is as follows (in thousands):


Remainder of 2022		$	4,052
2023		8,103
Remainder of 2023				Remainder of 2023	$	736
2024	2024	7,954		2024	1,473
2025	2025	7,336		2025	1,473
2026	2026	7,129		2026	1,266
2027				2027	1,225
Thereafter	Thereafter	44,068		Thereafter	7,043
Total	Total	$	78,642	Total	$	13,216

Goodwill

Changes in the carrying value of goodwill for the six months ended June 30, ~~2022~~2023 were as follows (in thousands):


~~Balance at December 31, 2021~~	$	~~270,577~~
~~Foreign currency translation adjustment in relation to Honey Birdette~~	~~(11,421)~~
~~Balance at June 30, 2022~~	$	~~259,156~~


	Gross Goodwill		Impairments		Net Goodwill
Balance at December 31, 2022	$	257,545	$	(134,328)	$	123,217
Foreign currency translation adjustment in relation to Honey Birdette	(2,274)				(2,274)
Impairments*			(66,660)		(66,660)
Balance at June 30, 2023	$	255,271	$	(200,988)	$	54,283

*Goodwill impairment charges recorded during the three and six months ended June 30, 2023 were $67.5 million. The difference from the amount shown in the table is due to foreign currency translation.

Changes in the recorded carrying value of goodwill for the six months ended June 30, 2023 by reportable segment were as follows:


	Direct-to-Consumer		Licensing		Digital Subscriptions and Content
Balance at December 31, 2022	$	90,117	$	—	$	33,100
Foreign currency translation and other adjustments	(2,274)		—		—
Impairments*	(66,660)		—		—
Balance at June 30, 2023	$	21,183	$	—	$	33,100

*Goodwill impairment charges recorded during the three and six months ended June 30, 2023 were $67.5 million. The difference from the amount shown in the table is due to foreign currency translation.

8.9. Other Current Liabilities and Accrued Expenses

Other current liabilities and accrued expenses ~~consist~~consisted of the ~~following~~items set forth in the table below (in thousands):. The table excludes $2.3 million and $6.6 million of other current liabilities and accrued expenses included in assets held for sale in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. Refer to Note 3, Assets and Liabilities Held for Sale and Discontinued Operations.


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Accrued interest	Accrued interest	$	1,268	$	1,476	Accrued interest	$	2,899	$	2,096
Accrued agency fees and commissions		6,335		3,456
Accrued salaries, wages and employee benefits						Accrued salaries, wages and employee benefits	4,439		3,850
Outstanding gift cards and store credits	Outstanding gift cards and store credits	4,017		4,960		Outstanding gift cards and store credits	1,572		1,571
Inventory in transit	Inventory in transit	3,077		8,323		Inventory in transit	5,723		6,510
Taxes		4,268		5,654
Sales taxes						Sales taxes	4,143		4,542
Accrued creator fees						Accrued creator fees	1,517		—
Other	Other	6,022		8,548		Other	6,471		6,537
Total	Total	$	24,987	$	32,417	Total	$	26,764	$	25,106

9.10. Debt

The following table sets forth our debt (in thousands):

June 30,
2022 December 31,
2021
Term loan, due 2027 (as refinanced and amended) $ 227,700 $ 228,850
Aircraft term loan, due 2026 8,122 8,569
Total debt 235,822 237,419
Less: unamortized debt issuance costs (2,194) (2,389)
Less: unamortized debt discount (5,684) (6,180)
Total debt, net of unamortized debt issuance costs and debt discount 227,944 228,850
Less: current portion of long-term debt (3,235) (2,808)
Total debt, net of current portion $ 224,709 $ 226,042

~~Term Loan~~

~~2014 Term Loan~~

In June 2014, we borrowed $150.0 million under a four-and-one-half-year term loan maturing on December 31, 2018, at an effective rate of 7.0% from DBD Credit Funding LLC pursuant to a credit agreement (the “Credit Agreement”). From 2016 to 2020, the term loan was amended multiple times to borrow an additional $12.0 million, increase the commitment amount, extend the maturity date to December 31, 2023, set up a debt reserve account and excess cash account, and to revise the quarterly principal payments and applicable margin rates, among other amendments.


	June 30, 2023		December 31, 2022
Term loan, due 2027	$	209,924	$	201,613
Total debt	209,924		201,613
Less: unamortized debt issuance costs	(668)		(1,822)
Less: unamortized debt discount	(22,465)		(6,616)
Total debt, net of unamortized debt issuance costs and debt discount	186,791		193,175
Less: current portion of long-term debt	(304)		(2,050)
Total debt, net of current portion	$	186,487	$	191,125

On ~~May 25, 2021, the Credit Agreement was repaid in full and terminated upon completion of the refinancing described below.~~

~~New Term Loan~~

~~In May 2021,~~April 4, 2023, we ~~consummated the refinancing of the term loan facility~~entered into Amendment No. 5 (the ~~“Refinancing”~~“Fifth Amendment”)~~, which was scheduled to expire on December 31, 2023. Pursuant~~ to the ~~Refinancing’s new~~ Credit and Guaranty Agreement, dated as of May 25, 2021 (as previously amended on August 11, 2021, August 8, 2022, December 6, 2022 and February 17, 2023, the “Credit Agreement”, and as further amended by the Fifth Amendment) to permit, among other things, the sale of our wholly-owned subsidiary, Yandy Enterprises, LLC, and that the proceeds of such sale would not be required to prepay the loans under the Credit Agreement (as amended ~~modified or supplemented from time to time,~~through the ~~“New~~Fifth Amendment); provided that at least 30% of the consideration for the Yandy Sale was paid in cash.

On May 10, 2023 (the “Restatement Date”), we entered into an amendment and restatement of the Credit Agreement (the “A&R Credit Agreement”) ~~with~~, by and among Playboy Enterprises, Inc., as the borrower (the “Borrower”), the Company and certain other subsidiaries of the Company as guarantors (collectively, the “Guarantors”), the lenders party thereto, and Acquiom Agency Services LLC, as the administrative agent and collateral agent ~~we obtained a new $160 million~~(the “Agent”). The A&R Credit Agreement was entered into to reduce the interest rate applicable to our senior secured ~~term loan (the “New Term Loan”), which was fully funded at~~debt and the ~~closing of the Refinancing.~~ implied interest rate on our Series A Preferred Stock, exchange (and thereby eliminate) our outstanding Series A Preferred Stock, and obtain additional covenant relief and funding.

In connection with the ~~Refinancing, we were required~~A&R Credit Agreement, Fortress Credit Corp. and its affiliates (together, “Fortress”) became our lender with respect to ~~pay off~~approximately 90% of the ~~prior~~ term ~~loan facility with an~~loans under the A&R Credit Agreement (the “A&R Term Loans”), Fortress exchanged 50,000 shares of our Series A Preferred Stock (representing all of our issued and outstanding preferred stock) for approximately $53.6 million of the A&R Term Loans, and Fortress extended approximately $11.8 million of additional funding as part of the A&R Term Loans. As a result, our Series A Preferred Stock was eliminated, and the principal balance of the A&R Term Loans under the A&R Credit Agreement is approximately ~~$154.7~~$210.0 million (whereas the original Credit Agreement had an outstanding balance of approximately $156.0 million as ~~well as certain fees and expenses in connection with such payoff. We financed~~of March 31, 2023).

The primary changes to the ~~payoff~~terms of the ~~prior facility with proceeds from~~original Credit Agreement set forth in the ~~New Term Loan.~~A&R Credit Agreement, include:

~~As a result~~•The apportioning of the ~~Refinancing, we recognized a loss on the early extinguishment of debt of $1.2 million during the year ended December 31, 2021, due to $1.0~~original Credit Agreement’s term loans into approximately $20.6 million of ~~fees which were expensed as incurred in connection with the Refinancing, as well as the write-off of $0.2~~Tranche A term loans (“Tranche A”) and approximately $189.4 million of ~~unamortized debt discount~~Tranche B term loans (“Tranche B”, and ~~deferred financing fees as a result of such Refinancing.~~together with Tranche A comprising the A&R Term Loans);

•Eliminating the prior amortization payments applicable to the total term loan under the original Credit Agreement and requiring that only the smaller Tranche A be subject to quarterly amortization payments of approximately $76,000 per quarter;

•The benchmark rate for the A&R Term Loans will be the applicable term of secured overnight financing rate as published by the U.S. Federal Reserve Bank of New ~~Term Loan has a six year term and matures in May 25, 2027. The New Term Loan accrues~~York, rather than LIBOR;

•As of the Restatement Date, Tranche A will accrue interest at ~~LIBOR~~SOFR plus ~~5.75%~~6.25%, with a ~~LIBOR~~SOFR floor of 0.50%. ;

•As of the Restatement Date, Tranche B will accrue interest at SOFR plus 4.25%, with a SOFR floor of 0.50%;

•No leverage covenants through the first quarter of 2025, with testing of a total net leverage ratio covenant commencing following the quarter ending March 31, 2025, which covenant will be initially set at 7.25:1.00, reducing in 0.25 increments per quarter until the ratio reaches 5.25:1.00 for the quarter ending March 31, 2027;

•The requisite lenders for approvals under the A&R Credit Agreement will no longer require two unaffiliated lenders when there are at least two unaffiliated lenders, except with respect to customary fundamental rights;

•The lenders will be entitled to appoint one observer to our board of directors (subject to certain exceptions), and we shall be responsible for reimbursing the board observer for all reasonable out-of-pocket costs and expenses; and

•Allowing us to make up to $15 million of stock buybacks through the term of the A&R Credit Agreement.

The interest rate applicable to borrowings under the ~~New~~A&R Term ~~Loan~~Loans may ~~subsequently~~ be adjusted on periodic measurement dates provided for under the ~~new credit agreement~~A&R Credit Agreement based on the type of loans borrowed by us and ~~our~~the total leverage ratio of the Company at such time. We, at our option, may borrow loans which accrue interest at (i) a base rate (with a floor of 1.50%) or (ii) at SOFR, in each case plus an applicable per annum margin. The ~~New Term Loan requires quarterly amortization payments of $0.6 million, commencing on September 30, 2021,~~per annum applicable margin for Tranche A base rate loans is 5.25% or 4.75%, with the ~~balance becoming due at maturity.~~lower rate applying when the total leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less, and the per annum applicable margin for Tranche A SOFR loans is 6.25% or 5.75%, with the lower rate applying when the total leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less. With respect to Tranche B loans that are SOFR loans, the per annum applicable margin will be 4.25% and with respect to Tranche B loans that are base rate loans, the per annum applicable margin will be 3.25%. In addition, the A&R Term Loans will be subject to a credit spread adjustment of 0.10% per annum. The stated interest rate of Tranche A and Tranche B term loans as of June 30, 2023 was 11.41% and 9.41%, respectively. The stated interest rate of the term loan pursuant to the Credit Agreement as of December 31, 2022 was 11.01%.

~~Our obligations pursuant~~We accounted for the amendment and restatement of the Credit Agreement (the “Restatement”) as a partial debt extinguishment and recognized $8.0 million in gain on debt extinguishment related to the ~~New Credit Agreement are guaranteed by~~lenders that sold their debt positions in our debt to Fortress. For the ~~Company and any current and future wholly-owned, domestic subsidiaries~~rest of the ~~Company, subject to certain exceptions. In connection with~~lenders, the ~~New Credit Agreement, the Company and the other guarantor subsidiaries~~transaction was accounted for as a debt modification. As a result of the ~~Company entered into a Pledge~~Restatement, we capitalized an additional $21.0 million of debt discount while deferring and ~~Security Agreement with~~continuing to amortize an existing discount of $2.6 million, which will be amortized over the ~~collateral agent, pursuant to which we granted a senior security interest to the agent in substantially all~~remaining term of our ~~assets (including the stock~~senior secured debt and recorded in interest expense in our condensed consolidated statements of ~~certain of our subsidiaries) in order to secure our obligations under the New Credit Agreement.~~

~~In August 2021, in connection with the acquisition of Honey Birdette, the New Term Loan was amended to (a) obtain~~operations. As a $70.0 million incremental term loan for the purpose of funding the acquisition, thereby increasing the aggregate principal amount of term loan indebtedness outstanding under the New Credit Agreement to $230.0 million, and (b) amend the termsresult of the ~~New Credit Agreement to, among other things, permit Honey Birdette~~Restatement, fees of $0.3 million were expensed as incurred and ~~certain of its subsidiaries to guaranty the obligations under the New Credit Agreement. In connection with such amendment, $2.0~~$0.4 million of debt issuance costs were ~~expensed~~capitalized.

The A&R Term Loans are subject to mandatory prepayments under certain circumstances, with certain exceptions, from excess cash flow, the proceeds of the sale of assets, the proceeds from the incurrence of certain other indebtedness, and certain casualty and condemnation proceeds. The A&R Term Loans may be voluntarily prepaid by us at any time without any prepayment penalty. The A&R Credit Agreement does not include any minimum cash covenants.

The A&R Term Loans retained the same final maturity date of May 25, 2027 as ~~incurred,~~the term loan under the original Credit Agreement. In connection with the A&R Credit Agreement, we were not required to pay any fees, but we were required to pay the lenders’ and ~~$1.7 million of debt discount were capitalized. The stated interest rate~~the Agent’s legal expenses in connection with the transaction. Compliance with the financial covenants as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~6.25%.~~

~~As was the case with the 2014 Credit Agreement,~~waived pursuant to the terms of the ~~New~~A&R Credit Agreement ~~limit or prohibit, among other things, our ability to: incur liens, incur additional indebtedness, make investments, transfer, sell or acquire assets, pay dividends~~ and ~~change~~ the ~~business we conduct. Acquiom Agency Services LLC has a lien on all our assets as stated in~~third amendment of the ~~New Credit Agreement. The New~~ Credit Agreement, contains a financial covenant which requires the Company to maintain a maximum total gross leverage ratio (calculated as a ratio of consolidated gross funded debt to consolidated EBITDA, as defined in the New Credit Agreement). The Company was in compliance with the financial covenants under the New Credit Agreement as of December 31, 2021. The Company was in compliance with the financial covenants under the New Credit Agreement, as amended by the Second Amendment, as of June 30, 2022 (see Note 19, Subsequent Events).

~~Aircraft Term Loan~~

~~In May 2021, we borrowed $9.0 million under a five-year~~ term loan maturing in May 2026 to fund the purchase of an aircraft (the “Aircraft Term Loan”). The stated interest rate was 6.25% as of June 30, 2022. The Aircraft Term Loan requires monthly amortization payments of approximately $0.1 million, commencing on July 1, 2021. We incurred $0.1 million of financing costs related to the Aircraft Term Loan, which were capitalized.

Original issue discounts and deferred financing costs were incurred in connection with the issuance of our term loans. Costs incurred in connection with debt are capitalized and offset against the carrying amount of the related indebtedness. These costs are amortized over the term of the related indebtedness and are included in “interest expense” in the condensed consolidated statements of operations. Amortization expense related to deferred financing costs was immaterial for the three and six months ended June 30, 2022 and 2021. Interest expense related to our debt was $3.7 million and $2.3 million for the three months ended June 30, 2022 and 2021, respectively, and $7.4 million and $5.6 million for the six months ended June 30, 2022 and 2021, respectively.

The following table sets forth maturities of the principal amount of our ~~term loan~~A&R Term Loans as of June 30, ~~2022~~2023 (in thousands):


Remainder of 2022		$	1,609
2023		3,265
Remainder of 2023				Remainder of 2023	$	152
2024	2024	3,327		2024	304
2025	2025	3,396		2025	304
2026	2026	6,875		2026	304
Thereafter		217,350
2027				2027	208,860
Total	Total	$	235,822	Total	$	209,924

~~Convertible Promissory Note — Creative Artists Agency~~

In August 2018, a convertible promissory note was issued to CAA Brand Management, LLC (“CAA”) for $2.7 million. This note was noninterest bearing and was convertible into shares of our common stock. In January 2021, the outstanding note with CAA was converted into 51,857 shares of Legacy Playboy’s common stock, which was exchanged for 290,563 shares of our common stock upon the closing of the Business Combination in February 2021.

~~Convertible Promissory Note — United Talent Agency, LLC~~

In March 2018, we issued a convertible promissory note to United Talent Agency, LLC (“UTA”) for $2.0 million. In June 2018, we issued a second convertible promissory note to UTA for $1.5 million. These notes were noninterest bearing and were convertible into shares of our common stock. In February 2021, the outstanding convertible notes with UTA were settled for $2.8 million resulting in a gain from settlement of $0.7 million.

~~10. Redeemable Noncontrolling Interest~~

On April 13, 2015, we sold 25% of the membership interest in our subsidiary, After Dark LLC, to an unaffiliated third party for $1.0 million. As part of the arrangement we granted a put right to this party which provides the right, but not the obligation, to the third party to cause us to purchase all of the third party’s interest in After Dark LLC at the then fair market value. This put right can be exercised on April 13 of each year. Additionally, the put right can be exercised upon a change of control of the Company. To date, the put right has not been exercised, including in connection with the Business Combination. Our controlling interest in this subsidiary requires the operations of this subsidiary to be included in the condensed consolidated financial statements. Noncontrolling interest with redemption features, such as put options, that are not solely within our control (redeemable noncontrolling interest) are reported as mezzanine equity on the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, between liabilities and equity. Net income or loss of After Dark LLC is allocated to its noncontrolling member interest based on the noncontrolling ownership percentage.

Additionally, to the extent that there are results of operations of the subsidiary that are not attributable to us, they would be shown as “net loss attributable to redeemable noncontrolling interest” in the condensed consolidated statements of operations. There was no change in the balance of the redeemable noncontrolling interest as After Dark LLC did not generate any operating activities for the six months ended June 30, 2022 and 2021.

11. Stockholders’ Equity

Common Stock

The holders of our common stock have 1 vote for each share of common stock. Common stockholders are entitled to dividends when, as, and if declared by our Board of Directors (the “Board of Directors”). As of June 30, 2022, no dividends had been declared by the Board of Directors.

Common stock reserved for future issuance consists of the following:


		June 30, 2022	December 31, 2021		June 30, 2023	December 31, 2022
Shares available for grant under equity incentive plans	Shares available for grant under equity incentive plans	433,663	4,003,059	Shares available for grant under equity incentive plans	2,621,468	492,786
Options issued and outstanding under equity incentive plans	Options issued and outstanding under equity incentive plans	2,845,577	3,211,071	Options issued and outstanding under equity incentive plans	2,496,494	2,599,264
Unvested restricted stock units	Unvested restricted stock units	2,217,748	585,075	Unvested restricted stock units	1,066,281	2,058,534
Vested restricted stock units not yet settled	Vested restricted stock units not yet settled	1,193,240	2,133,179	Vested restricted stock units not yet settled	32,580	11,761
Unvested performance-based restricted stock units	Unvested performance-based restricted stock units	1,115,455	544,036	Unvested performance-based restricted stock units	1,089,045	1,089,045
Vested performance-based restricted stock units not yet settled		—	1,331,031
Shares to be issued pursuant to a license, services and collaboration agreement		55,198	79,485
Shares issuable pursuant to a license, services and collaboration agreement				Shares issuable pursuant to a license, services and collaboration agreement	9,936	48,574
Maximum number of shares issuable to Glowup sellers pursuant to acquisition indemnity holdback	Maximum number of shares issuable to Glowup sellers pursuant to acquisition indemnity holdback	249,116	249,116	Maximum number of shares issuable to Glowup sellers pursuant to acquisition indemnity holdback	249,116	249,116
Total common stock reserved for future issuance	Total common stock reserved for future issuance	8,109,997	12,136,052	Total common stock reserved for future issuance	7,564,920	6,549,080

~~Treasury Stock~~

In connection with the execution of the Merger Agreement, Legacy Playboy, Sponsor, and Dr. Suying Liu entered into the Insider Stock Purchase Agreement, pursuant to which Legacy Playboy purchased 700,000 shares of MCAC’s common stock (the “Initial Shares”) from Sponsor. Subject to the satisfaction of conditions set forth under the Merger Agreement, Sponsor was obligated to transfer the Initial Shares to Legacy Playboy upon the closing of the Merger or, if the Merger Agreement was terminated, upon the consummation of any other business combination. As of December 31, 2020, Legacy Playboy had paid a nonrefundable $4.4 million prepayment, representing the purchase price of the 700,000 Initial Shares, at a price of $6.35 per share. In February 2021, the Initial Shares were transferred to us upon the closing of the Merger and reclassified from “stock receivable” to “treasury stock” as part of the recapitalization.

In connection with our recapitalization that occurred with the consummation of the Business Combination, we eliminated Legacy Playboy’s previously held treasury stock of 1,164,847 shares. We held 700,000 shares of treasury stock as of June 30, 2022.

In May 2022, the Board of Directors approved a common stock repurchase program (the “2022 Stock Repurchase Program”), pursuant to which up to $50 million of shares of Company common stock may be repurchased through May 31, 2024. As of the date of this report, no repurchases have been made under the 2022 Stock Repurchase Program.

~~Preferred Stock~~

The Company has authorized 5,000,000 shares of preferred stock, with a par value of $0.0001 per share. Of the 5,000,000 authorized preferred shares, 50,000 shares are designated as "Series A Preferred Stock". On May 16, 2022, we issued and sold 25,000 shares of Series A Preferred Stock to Drawbridge DSO Securities LLC (the “Purchaser”) at a price of $1,000 per share, resulting in total gross proceeds to us of $25.0 million, and we agreed to sell to the Purchaser, and the Purchaser agreed to purchase from us, up to an additional 25,000 shares of Series A Preferred Stock on the terms set forth in the securities purchase agreement entered into by us and the Purchaser. We incurred approximately $1.5 million of fees associated with the transaction, out of which $1.0 million was netted against the gross proceeds.

The Series A Preferred Stock ranks senior and in priority of payment to the Company’s common stock with respect to distributions on liquidation, winding-up and dissolution. Each share of Series A Preferred Stock has an initial liquidation preference of $1,000 per share (the “Liquidation Preference”).

Holders of shares of Series A Preferred Stock are entitled to cumulative dividends, which are payable quarterly in arrears in cash or, subject to certain limitations, in shares of common stock or any combination thereof, or by increasing the Liquidation Preference for each outstanding share of Series A Preferred Stock to the extent not so paid. Dividends will initially accrue on each share of Series A Preferred Stock at the rate of 8.0% per annum from the date of issuance until the fifth anniversary of the date of issuance, and thereafter such rate will increase quarterly by 1.0%.

At any time, the Company has the right, at its option, to redeem the Series A Preferred Stock, in whole or in part. The Company will also be required to redeem the Series A Preferred Stock in full on September 30, 2027, or upon certain changes of control of the Company, subject to the terms of the Certificate of Designation.

The redemption price will be equal to the initial Liquidation Preference of each share of Series A Preferred Stock to be redeemed multiplied by (i) if any applicable redemption date occurs on or prior to the first anniversary of the closing of a sale of the Series A Preferred Stock, 120%, (ii) if any applicable redemption date occurs after the first anniversary of the closing, but prior to or on the second anniversary of the closing, 125%, (iii) if any applicable redemption date occurs after the second anniversary of the closing, but prior to or on the third anniversary of the closing, 130%, (iv) if any applicable redemption date occurs after the third anniversary of the closing, but prior to or on the fourth anniversary of the closing, 145%, and (v) if any applicable redemption date occurs after the fourth anniversary of the closing, 160%, plus, in each case, a pro rata portion of the increase in the value of the shares of common stock repurchased with the proceeds of the offering of the Series A Preferred Stock as of the applicable redemption date, as set forth in the Certificate of Designation.

~~The redemption price will be payable in cash or, subject to certain limitations, in shares of common stock or any combination of cash and shares of common stock, at the Company’s election.~~

Holders of the Series A Preferred Stock will generally not be entitled to vote on any matter required or permitted to be voted upon by the shareholders of the Company. However, certain matters will require the approval of the holders of not less than the majority of the aggregate Liquidation Preference of the outstanding Series A Preferred Stock, voting as a separate class, including (1) the incurrence or issuance by the Company of certain indebtedness or shares of senior equity securities, (2) certain restricted payments by the Company, (3) certain consolidations, amalgamations or merger transactions involving the Company, (4) certain amendments to the organizational documents of the Company, (5) the incurrence of indebtedness or preferred equity securities by certain subsidiaries of the Company and (6) certain business activities of the Company.

12. Stock-Based Compensation

InAs of June 2018, Legacy Playboy adopted its 2018 Equity Incentive Plan (“2018 Plan”), under which 6,287,687 of Legacy Playboy’s common shares were originally reserved for issuance. Our employees, directors, officers, and consultants were eligible to receive nonqualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other share awards under the 2018 Plan. All stock options and restricted stock unit awards granted under the 2018 Plan in 2019 and 2020 that were outstanding immediately prior to the consummation of the Business Combination were accelerated and fully vested (other than the Pre-Closing Option), and subsequently converted into options to purchase or the right to receive30, 2023, 7,835,715 shares of ~~our~~ common stock as described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies. The impact of the acceleration of the vesting of 829,547 stock options and 288,494 restricted stock unit awards was $3.1 millionhad been authorized for ~~the three months ended March 31, 2021.~~

~~On February 9, 2021,~~issuance under our ~~stockholders approved the~~ 2021 Equity and Incentive Compensation Plan (“2021 Plan”)~~, which became effective following consummation of the Business Combination. As~~ ~~of June 30, 2022,~~ ~~5,954,208~~ shares were authorized for issuance under the 2021 Plan. In addition, the shares authorized for the 2021 Plan may be increased on an annual basis via an evergreen refresh mechanism for a period of up to 10 years, beginning with the fiscal year that begins January 1, 2022, in an amount equal up to 4% of the outstanding and 6,287,687 shares of common stock ~~on the last day of the immediately preceding fiscal year. Following the effectiveness of the 2021~~were originally reserved for issuance under our 2018 Equity Incentive Plan (“2018 Plan”); however, no further ~~awards will~~grants may be ~~granted under~~made pursuant to the 2018 Plan, but the 2018 Plan will remain outstanding and continue to govern outstanding awards granted thereunder. During the six months ended June 30, 2022, restricted stock units for 1,969,174 shares and restricted performance-based stock units for 571,419 shares were granted under the 2021 Plan.

Stock Option Activity

A summary of the stock option activity under our equity incentive plans is as follows:


		Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)			Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Balance – December 31, 2021		3,211,071	$	7.77	7.9	$	60,978
Balance – December 31, 2022								Balance – December 31, 2022	2,599,264	$	8.41	7.2	$	—
Granted	Granted	—	—		—	—		Granted	—	—		—	—
Exercised	Exercised	(353,031)	4.10		—	3,775		Exercised	—	—		—	—
Forfeited and cancelled	Forfeited and cancelled	(12,463)	28.08		—	—		Forfeited and cancelled	(102,770)	$	22.14	—	—
Balance – June 30, 2022		2,845,577	$	8.13	7.6	$	4,571
Exercisable – June 30, 2022		2,158,116	$	6.17	7.2	$	4,571
Balance – June 30, 2023								Balance – June 30, 2023	2,496,494	$	7.85	6.3	$	—
Exercisable – June 30, 2023								Exercisable – June 30, 2023	2,260,042	$	7.40	6.1	$	—
Vested and expected to vest as of June 30,2023								Vested and expected to vest as of June 30,2023	2,496,494	$	7.85	6.3	$	—

~~The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of our common stock at June 30, 2022.~~

~~The grant date fair value of options that vested during the three months ended June 30, 2022 and 2021~~ ~~were $0.6 and $0 million, respectively. The grant date fair value of options that vested during the six months ended June 30, 2022 and 2021 were~~ ~~$3.2 millionand $2.1 million, respectively.~~ There were no options granted ~~during~~in the ~~three months ended June 30, 2022 and 2021. There were no options granted during the six months ended June 30,~~first or second quarter of 2023 or 2022. ~~The options granted during the six months ended June 30, 2021 had a weighted-average fair value of $4.63 per share at the grant date.~~

Restricted Stock Units

~~Restricted~~A summary of restricted stock unit activity under our equity incentive plans is as follows:


		Number of Awards	Weighted- Average Grant Date Fair Value per Share			Number of Awards	Weighted- Average Grant Date Fair Value per Share

Unvested and outstanding balance at December 31, 2021		585,075	$	28.15
Unvested and outstanding balance at December 31, 2022					Unvested and outstanding balance at December 31, 2022	2,058,534	$	12.79
Granted	Granted	1,969,174	10.82		Granted	—	—
Vested	Vested	(217,390)	22.52		Vested	(817,978)	13.11
Forfeited	Forfeited	(119,111)	24.83		Forfeited	(174,275)	20.23
Unvested and outstanding balance at June 30, 2022		2,217,748	$	13.50
Unvested and outstanding balance at June 30, 2023					Unvested and outstanding balance at June 30, 2023	1,066,281	$	11.32

The total fair value of restricted stock units that vested during the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 was approximately $1.2 million and $0.2 million, ~~and $0, respectively~~.respectively. The total fair value of restricted stock units that vested during the six months ended June 30, 2023 and 2022 ~~and 2021~~ was ~~approximately $3.1~~approximately $1.6 million and ~~$1.4~~$3.1 million, respectively. We had ~~1,193,240~~32,580 outstanding and fully vested restricted stock units remained unsettled at June 30, ~~2022,~~2023, all of which are expected to be settled in ~~the second half of 2022.~~2023. As such, they are excluded from outstanding shares of common stock but are included in weighted-average shares outstanding for the calculation of net loss per share for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

~~Performance Stock Units~~

~~Our~~There was no activity with respect to performance-based restricted stock units ("PSUs") vest upon achieving each of certain Company stock price milestones during the contractual vesting period. The stock price milestones vary among grantees and are set forth in each grantee’s PSU grant agreement (for example, achievement of each of the following 30-day volume-weighted average prices for a share of Company common stock: $20, $30, $40 and $50). The vesting of PSUs is subject to each grantee’s continued service to the Company.

To determine the value of PSUs for stock-based compensation purposes, the Company uses the Monte Carlo simulation valuation model. The Monte Carlo simulation model utilizes multiple input variables, including a derived service period of 1.88 years for 2021 grants and a weighted-average derived service period of 3.8 years for 2022 grants, to estimate the probability that the market conditions will be achieved and is applied to the trading price of our common stock on the date of grant. For milestones that have not been achieved, such PSUs vest over the derived requisite service period and the fair value of such awards is estimated on the grant date using Monte Carlo simulations. The determination of the grant date fair value of PSUs issued is affected by a number of variables and subjective assumptions, including (i) the fair value of the Company’s common stock, (ii) the expected common stock price volatility over the expected life of the award, (iii) the expected term of the award, (iv) risk-free interest rates, (v) the exercise price, and (vi) the expected dividend yield. Forfeitures are recognized when they occur.

~~A summary of performance stock unit activity under our 2021 Plan is as follows:~~

Number of
awards Weighted-
average grant
date fair value
per share
Unvested and outstanding balance at December 31, 2021 544,036 $ 26.18
Granted 571,419 5.68
Vested — —
Forfeited — —
Unvested and outstanding balance at June 30, 2022 1,115,455 $ 15.68

~~Stock Options Granted~~

To determine the value of stock option awards for stock-based compensation purposes, we used the Black-Scholes option-pricing model and the assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.

~~Fair value of common stock~~ — Prior to the Business Combination, the fair value of our shares of common stock underlying the awards has historically been determined by the Board of Directors with input from management and contemporaneous third-party valuations, as there was no public market for our common stock. The Board of Directors determined the fair value of the common stock by considering a number of objective and subjective factors including: the valuation of comparable companies, our operating and financial performance, the lack of liquidity of our common stock, transactions in our common stock, and general and industry specific economic outlook, among other factors. Subsequent to the Business Combination, the fair value of our common stock is based on the quoted price of our common stock.

~~Expected term~~ — For employee awards granted at-the-money, we estimate the expected term based on the simplified method, which is the midpoint between the vesting date and the end of the contractual term for each award since our historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. For non-employee awards and employee awards granted out-of-the-money, our best estimate of the expected term is the contractual term of the award.

~~Volatility~~ — We derive the volatility from the average historical stock volatilities of several peer public companies over a period equivalent to the expected term of the awards as we do not have sufficient historical trading history for our stock. We selected companies with comparable characteristics to us, including enterprise value, risk profiles, and position within the industry and with historical share price information sufficient to meet the expected term of the stock options. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

~~Risk-free interest rate~~ ~~— The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant, the term of which is consistent with the expected life of the award.~~

~~Dividend yield~~ ~~— We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.~~

For options granted during the period, we estimated the fair value of each option on the date of grant using the Black-Scholes option pricing model applying the weighted-average assumptions in the following table~~. There were no options granted~~ during the three and six months ended June 30, ~~2022~~2023. Performance-based restricted stock units for 1,089,045 shares were unvested and ~~no options were granted during the~~ ~~three months ended~~outstanding as of June 30, ~~2021.~~


						Six Months Ended June 30, 2021
~~Fair value of common stock~~						~~10.52~~
~~Expected term, in years~~						~~5.86~~
~~Expected volatility~~						~~47%~~
~~Risk-free interest rate~~						~~0.57%~~
~~Expected dividend yield~~						0%

2023 and December 31, 2022.

Stock-Based Compensation Expense

Stock-based compensation expense under our equity incentive plans was as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Cost of sales (1)	Cost of sales (1)	$	764	$	—	$	1,643	$	—	Cost of sales (1)	$	(826)	$	764	$	(453)	$	1,643
Selling and administrative expenses(2)	Selling and administrative expenses(2)	3,983		361		9,643		3,859		Selling and administrative expenses(2)	3,977		3,983		8,823		9,643
Total	Total	$	4,747	$	361	$	11,286	$	3,859	Total	$	3,151	$	4,747	$	8,370	$	11,286

(1) Cost of sales for the three and six months ended June 30, ~~2022~~2023 includes ~~$0.6~~a net reversal of $1.1 million ~~and $0.7 million, respectively,~~ of stock-based compensation expense associated with equity awards granted to an independent contractor for services pursuant to the terms of a license services and collaboration agreement. Stock-based compensation expense associated with equity awards granted to an independent contractor for services pursuant to the terms of a license, services and collaboration agreement and recorded in cost of sales for the three and six months ended June 30, 2022 were $0.6 million and $0.7 million, respectively.

(2) Selling and administrative expenses for the three and six months ended June 30, 2023 includes $1.3 million and $2.3 million of accelerated amortization of stock-based compensation expense for certain equity awards during the three and six months ended June 30, 2023, respectively.

The expense presented in the table above is net of capitalized stock-based compensation relating to software development costs of ~~$0.6~~$0.5 million and $1.2 million during the three and six months ended June 30, 2023, respectively, and $0.6 million during the three and six months ended June 30, 2022.

At June 30, ~~2022,~~2023, unrecognized compensation cost related to unvested stock options was ~~$4.1~~$1.2 million and is expected to be recognized over the remaining weighted-average service period of ~~1.75~~0.74 years. ~~Unrecognized~~At June 30, 2023, total unrecognized compensation cost related to unvested performance-based stock units and restricted stock units was ~~$37.0~~$13.7 million ~~at June 30, 2022~~ and is expected to be recognized over the remaining weighted-average service period of ~~2.53~~1.91 years.

13. Commitments and Contingencies

Leases

Our principal lease commitments are for office space and operations under several non-cancelable operating leases with contractual terms expiring from 2021 to 2031. Some of these leases contain renewal options and rent escalations.

~~We had a $1.7 million and $2.0 million cash collateralized letter of credit related to our corporate headquarters lease as~~As of June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~

~~We sublease our New York office space for a period approximating the remaining term of our lease. This lease expires in 2024.~~

In connection with the acquisition of TLA in 2021, as disclosed in Note 16, Business Combinations, we had 40 retail stores as of June 30, 2022, which TLA leases and operates in Washington, Oregon, California, Texas and Tennessee for the purpose of selling its products to customers. The majority of the leases are triple net leases, for which TLA, as a lessee, is responsible for paying rent as well as common area maintenance, insurance and taxes. Lease terms run between ~~two~~ ~~and 10 years in length, with the average lease term being approximately five years and in many cases include renewal options.~~

In connection with the acquisition of Honey Birdette in 2021, as disclosed in Note 16, Business Combinations, we acquired 59 retail stores and 2 office spaces, which Honey Birdette leases and operates in Australia, the United States and the United Kingdom for the purpose of selling its products to customers. The majority of the leases are triple net leases, for which Honey Birdette, as a lessee, is responsible for paying rent as well as common area maintenance, ~~insurance and taxes. Lease terms run between~~ ~~two~~ ~~and 10 years in length, with the average lease term being approximately~~ ~~five~~ ~~and in many cases include renewal options. In the second quarter of 2022, we entered into 3 new store leases.~~

Lease cost associated with operating leases is charged to expense in the year incurred and is included in our condensed consolidated statements of operations. For the three months ended June 30, 2022 and 2021, the lease cost charged to selling, general and administrative expense was $3.5 million and $2.1 million, respectively. Lease cost charged to selling, general and administrative expense for the six months ended June 30, 2022 and 2021 was $6.6 million and $3.3 million, respectively. Lease cost for the three and six months ended June 30, 2022 and 2021 is included in the table below. Lease cost charged to cost of sales for the three and six months ended June 30, 2022 and 2021 was immaterial. Most of our leases include 1 or more options to renew, with renewal terms that generally can extend the lease term for an additional 4 to 5 years. The exercise of lease renewal options is at our sole discretion.

~~As of June 30,~~ 2022, the weighted average remaining term of ~~these~~our operating leases from continuing operations was ~~5.41~~5.7 years and 5.8 years, respectively, and the weighted average discount rate used to estimate the net present value of the operating lease liabilities was ~~5.12%.~~5.9% and 5.8%, respectively. Cash payments for amounts included in the measurement of operating lease liabilities attributable to continuing operations, were ~~$3.5~~$2.1 million and ~~$7.2~~$2.3 million for the three months ended June 30, 2023 and 2022, respectively, and $4.3 million and $4.8 million for the six months ended June 30, 2023 and 2022, respectively. Right of use assets obtained in exchange for new operating lease liabilities were ~~$5.5~~$1.2 million and ~~$6.0~~$3.5 million for the three months ended June 30, 2023 and 2022, respectively, excluding $0.7 million and $2.0 million, respectively, of right of use assets related to assets held for sale. Right of use assets obtained in exchange for new operating lease liabilities from continuing operations were $2.4 million and $3.8 million for the six months ended June 30, 2023 and 2022, respectively. Right of use assets obtained in exchange for new operating lease liabilities attributable to discontinued operations for the six months ended June 30, 2023 and 2022 were $0.9 million and $2.2 million, respectively.

In conjunction with the sale of Yandy in the second quarter of 2023, we entered into a sublease agreement with the buyer of Yandy in relation to its warehouse and office space for the remaining term of the lease, which expires in 2031.

Net lease cost recognized in our condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 is summarized in the table below (in thousands). The table excludes TLA’s total net lease cost of $1.6 million and $3.1 million for the three and six months ended June 30, 2023, respectively, and $1.5 million and $3.1 million for the three and six months ended June 30, 2022, ~~and~~ ~~2021~~ respectively, which is ~~summarized as follows (in thousands):~~included in discontinued operations in the unaudited condensed consolidated statements of operations.


		Three Months Ended June 30,					Three Months Ended June 30,
		2022		2021			2023		2022
Operating lease cost	Operating lease cost	$	3,026	$	1,992	Operating lease cost	$	1,928	$	1,846
Variable lease cost	Variable lease cost	526		450		Variable lease cost	343		161
Short-term lease cost	Short-term lease cost	498		94		Short-term lease cost	581		498
Sublease income	Sublease income	(65)		(72)		Sublease income	(196)		(65)
Total	Total	$	3,985	$	2,464	Total	$	2,656	$	2,440


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Operating lease cost	Operating lease cost	$	6,136	$	3,182	Operating lease cost	$	3,819	$	3,765
Variable lease cost	Variable lease cost	1,106		618		Variable lease cost	745		366
Short-term lease cost	Short-term lease cost	925		192		Short-term lease cost	1,291		925
Sublease income	Sublease income	(129)		(143)		Sublease income	(265)		(129)
Total	Total	$	8,038	$	3,849	Total	$	5,590	$	4,927

Maturities of our operating lease liabilities as of June 30, ~~2022~~2023 ~~are~~were as follows (in thousands):


Remainder of 2022		$	6,044
2023		11,408
Remainder of 2023				Remainder of 2023	$	4,129
2024	2024	9,690		2024	8,104
2025	2025	7,950		2025	7,018
2026	2026	7,506		2026	6,785
2027				2027	4,654
Thereafter	Thereafter	13,256		Thereafter	9,296
Total undiscounted lease payments	Total undiscounted lease payments	55,854		Total undiscounted lease payments	39,986
Less: imputed interest	Less: imputed interest	(10,040)		Less: imputed interest	(7,281)
Total operating lease liabilities	Total operating lease liabilities	45,814		Total operating lease liabilities	$	32,705

Operating lease liabilities, current portion	Operating lease liabilities, current portion	9,754		Operating lease liabilities, current portion	$	6,403
Operating lease liabilities, noncurrent portion	Operating lease liabilities, noncurrent portion	$	36,060	Operating lease liabilities, noncurrent portion	$	26,302

Legal Contingencies

From time to time, we may have certain contingent liabilities that arise in the ordinary course of our business activities. We accrue a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount.

~~TNR Case~~

On December 17, 2021, Thai Nippon Rubber Industry Public Limited Company, a manufacturer of condoms and lubricants and a publicly traded Thailand company (“TNR”), filed a complaint in the U.S. District Court for the Central District of California against the Company and its subsidiary Products Licensing, LLC. TNR alleges a variety of claims relating to the termination of a license agreement with TNR and the business relationship between the Company and TNR prior to such termination. TNR alleges, among other things, breach of contract, unfair competition, breach of the implied covenant of good faith and fair dealing, and interference with contractual and business relations due to our conduct. TNR is seeking over $100 million in damages arising from the loss of expected profits, declines in the value of TNR’s business, unsalable inventory and investment losses. We believe TNR’s claims and allegations are without merit, and we will defend ourselves vigorously in this matter. On April 25, 2022, we filed a motion to dismiss the complaint. That motion was partially granted, and the court dismissed TNR’s claims under franchise laws without leave to amend. Accordingly, during the quarter ended June 30, 2022, this case did not have a contingent liability that was probable and able to be reasonably estimated.

AVS Case

In March 2020, our subsidiary Playboy Enterprises International, Inc. (together with its subsidiaries, “PEII”) terminated its license agreement with a licensee, AVS Products, LLC (“AVS”), for AVS’s failure to make required payments to PEII under the agreement, following notice of breach and an opportunity to cure. On February 6, 2021, PEII received a letter from counsel to AVS alleging that the termination of the contract was improper, and that PEII failed to meet its contractual obligations, preventing AVS from fulfilling its obligations under the license agreement.

On February 25, 2021, PEII brought suit against AVS in Los Angeles Superior Court to prevent further unauthorized sales of ~~PLAYBOY-branded~~Playboy-branded products and for disgorgement of unlawfully obtained funds. On March 1, 2021, PEII also brought a claim in arbitration against AVS for outstanding and unpaid license fees. PEII and AVS subsequently agreed that the claims PEII brought in arbitration would be alleged in the Los Angeles Superior Court case instead, and on April 23, 2021, the parties entered into and filed a stipulation to that effect with the court. On May 18, 2021, AVS filed a demurrer, asking for the court to remove an individual defendant and dismiss PEII’s request for a permanent injunction. On June 10, 2021, the court denied AVS’s demurrer. AVS filed an opposition to PEII’s motion for a preliminary injunction to enjoin AVS from continuing to sell or market ~~PLAYBOY-branded~~Playboy-branded products on July 2, 2021, which the court denied on July 28, 2021.

On August 10, 2021, AVS filed a cross-complaint for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit and declaratory relief. As in its February 2021 letter, AVS alleges its license was wrongfully terminated and that PEII failed to approve AVS’ marketing efforts in a manner that was either timely or that was commensurate with industry practice. AVS is seeking to be excused from having to perform its obligations as a licensee, payment of the value for services rendered by AVS to PEII outside of the license, and damages to be proven at trial. ~~On May 3, 2022, we filed a~~The court heard PEII’s motion for summary ~~judgment. After we moved~~judgment on June 6, 2023, and dismissed six out of 10 of AVS’ causes of action. AVS’ contract-related claims remain to be determined at trial, which is set for ~~summary judgment, the court allowed AVS to amend its complaint and moved the trial date~~January 22, 2024. The parties are currently engaged in ~~the matter to April 10, 2023.~~discovery. We believe AVS’ remaining claims and allegations are without merit, and we will defend ~~ourselves vigorously in~~ this ~~matter. The parties are currently engaged in discovery. During the quarter ended June 30, 2022, this case did not have a contingent liability that was probable and able to be reasonably estimated.~~matter vigorously.

~~Indian Harbor~~TNR Case

On ~~October 15, 2018, Playboy Enterprises, Inc.~~December 17, 2021, Thai Nippon Rubber Industry Public Limited Company, a manufacturer of condoms and lubricants and a publicly traded Thailand company (“~~Playboy”~~TNR”), filed a ~~lawsuit~~complaint in ~~Los Angeles Superior~~the U.S. District Court ~~(the “Court”)~~for the Central District of California against PEII and its ~~insurer, Indian Harbor Insurance Company (“Indian Harbor”), captioned Playboy Enterprises, Inc. v. Indian Harbor Insurance Company, for~~subsidiary Products Licensing, LLC. TNR alleges a variety of claims relating to the termination of a license agreement with TNR and the business relationship between PEII and TNR prior to such termination. TNR alleges, among other things, breach of contract, ~~and~~unfair competition, breach of the implied covenant of good faith and fair dealing, and interference with contractual and business relations due to PEII’s conduct. TNR is seeking ~~declaratory relief, after Indian Harbor threatened~~over $100 million in damages arising from the loss of expected profits, declines in the value of TNR’s business, unsalable inventory and investment losses. After PEII indicated it would move to ~~sue Playboy on~~dismiss the complaint, TNR received two extensions of time from the court to file an alleged theory of lack of coverage after Indian Harbor paid approximately $4.8 million towards the settlement of claims against Playboy made by Elliot Friedman. Among other things, we are seeking declaratory relief that the underlying claims asserted against Playboy are covered claims under Playboy’s insurance policies with Indian Harbor. On December 14, 2018, Indian Harboramended complaint. TNR filed its ~~answer to the~~amended complaint and filed counterclaims against Playboy for declaratory relief that it has no obligation to provide coverage for the underlying claims and that it is entitled to recoup the amounts it paid in the settlement, with interest. Indian Harboron March 16, 2022. On April 25, 2022, PEII filed a motion to dismiss the complaint. That motion was partially granted, and the court dismissed TNR’s claims under California franchise laws without leave to amend. A trial date has been set for summary judgment, seeking, among other things, summary adjudication that (1) the insurance policy does not provide coverage because the underlying claim was allegedly first made before the policy period of the policyFebruary 13, 2024. We believe TNR’s claims and (2) that Indian Harbor does not have to provide coverage because Playboy allegedly failed to provide timely notice of the claim. On September 9, 2020, the Court denied Indian Harbor’s motion, in part, ruling as a matter of law that Playboy had properly reported the underlying claim under the correct policy; but granted the motion as to Playboy’s breach of contract and bad faith claims because Indian Harbor ultimately funded the settlement. Based on the summary judgment ruling, the parties agreed to enter into a stipulated judgment in Playboy’s favor to advance the issues for appeal, with Indian Harbor intending to appeal the Court’s decision as to when the underlying claim was first made. The Court entered the parties’ stipulated judgment on July 26, 2021. On October 15, 2021, Indian Harbor filed its notice of appeal. On December 13, 2021, Indian Harbor filed its opening appellate brief,allegations are without merit, and we ~~filed our response on April 14, 2022. Indian Harbor filed its reply brief on July 1, 2022. We intend to continue to prosecute our claims in~~will defend this matter and vigorously defend ourselves against Indian Harbor’s counterclaims on appeal. During the quarter ended June 30, 2022, this case did not have a contingent liability that was probable and able to be reasonably estimated.vigorously.

14. Severance Costs

We ~~may periodically be involved~~incurred severance costs during the first half of 2023 due to the reduction of headcount, as we shift our business to a capital-light model. Severance costs are recorded in ~~other legal proceedings arising~~selling, general and administrative expenses in the ~~ordinary course~~condensed consolidated statements of ~~business. These matters are not expected to have a material adverse effect on~~operations, with an immaterial amount recorded in cost of sales, and in accrued salaries, wages, and employee benefits in our condensed consolidated ~~financial statements.~~balance sheets.

Severance costs in our condensed consolidated statements of operations were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Direct-to-Consumer	$	756	$	—	$	1,127	$	—
Corporate	10		141		1,221		141
Digital Subscriptions and Content	—		582		39		582
Licensing	36		8		53		8
Total	$	802	$	731	$	2,440	$	731

~~COVID-19~~

~~In March 2020, COVID-19 was declared~~The following is a pandemic by the World Health Organization. Since that time, we have focused on protecting our employees, customers and vendors to minimize potential disruptions while managing through this pandemic. Nonetheless, the COVID-19 pandemic continues to disrupt and delay global supply chains, affect production and sales across a range of industries and result in legal restrictions requiring businesses to close and consumers to stay at home for days-to-months at a time. These disruptions have impacted our business by slowing the launch of new products, causing certain products sold by Yandy to be out-of-stock, hindering new licensing and collaboration deals, temporarily closing retail stores of Honey Birdette post-acquisition and certain of our licensees, reducing retail store traffic during the Omicron variant surge and closing the London Playboy Club and certain other Playboy-branded live gaming operations. As a result, licensing revenues from certain gaming and retail licensees declined in the last three quarters of 2020 and during the year of 2021, as compared to royalties from such sources during pre-pandemic periods.

In the first six months of 2022, certain of our licensing partners faced macroeconomic pressures, such as supply chain and inventory issues, as well as chronic COVID-related closures, resulting in lower than expected retail sales versus their forecasts. They have been working proactively to catch up on delayed launches. Holiday sales are anticipated to come earlier this year and consumers to start shopping ahead this holiday season, and we will be in close communication with our licensing partners during the second half of this year.

Asreconciliation of the ~~date of these~~beginning and ending severance costs balances recorded in accrued salaries, wages, and employee benefits in our condensed consolidated financial statements, our business as a whole has not suffered any material adverse consequences to date from the COVID-19 pandemic. The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the further duration of the COVID-19 pandemic and spread of its variants and its impact on employees and vendors, all of which are uncertain and cannot be predicted. As of the date of these consolidated financial statements, the full extent to which COVID-19 may impact our future financial condition or results of operations is uncertain.balance sheets (in thousands):


	Employee Separation Costs
Balance at December 31, 2022	$	1,192
Costs incurred and charged to expense	2,440
Costs paid or otherwise settled	(2,096)
Balance at June 30, 2023	$	1,536

~~14.~~15. Income Taxes

The effective tax rate for the three months ended June 30, 2023 and 2022 was 6.9% and ~~2021 was 5.8% and a benefit~~ of ~~29.0%~~1.7%, respectively. The effective tax rate for the six months ended June 30, 2023 and 2022 was 6.4% and ~~2021 was 54.3% and 0.7%~~40.2%, respectively. The effective tax rate for the three and six months ended June 30, 2023 differed from the U.S. statutory federal income tax rate of 21% primarily due to foreign withholding taxes, Section 162(m) limitations, stock compensation shortfall deductions and the release of valuation allowance due to a reduction in net deferred tax liabilities of indefinite lived intangibles. The effective tax rate for the three and six months ended June 30, 2022 differed from the U.S. statutory federal income tax rate of 21% primarily due to foreign withholding taxes, Section 162(m) limitations, stock compensation windfall deductions, contingent consideration fair market value adjustment related to prior acquisitions, foreign income taxes, and the release of valuation allowance due to a reduction in net deferred tax liabilities of indefinite lived intangibles. The effective tax rate for the three and six months ended June 30, 2021 differed from the U.S. statutory federal income tax rate of 21% primarily due to foreign withholding taxes, state taxes, permanent tax adjustments, and movements of the valuation allowance recorded against deferred tax assets that are more likely than not to be realized.

In response to the COVID-19 pandemic, on March 18, 2020, the Families First Coronavirus Response Act (“FFCR Act”) was enacted, on March 27, 2020, the Coronavirus Aid, Relief, Economic Security Act (“CARES Act”) was enacted and, on March 11, 2021, the American Rescue Plan Act of 2021 (with the FFCR Act and the CARES Act, the “Acts”) was enacted. The Acts contain numerous income tax provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Acts did not have a material impact on our condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021.

~~15.~~16. Net Loss Per Share

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Stock options to purchase common stock 2,845,577 3,560,541 2,845,577 3,560,541
Unvested restricted stock units 2,217,748 — 2,217,748 —
Unvested performance-based restricted stock units 1,115,455 — 1,115,455 —
Total 6,178,780 3,560,541 6,178,780 3,560,541

~~16. Business Combinations~~

~~Acquisition of TLA~~

On March 1, 2021, we acquired 100% of the equity of TLA for cash consideration of $24.9 million. TLA is the parent company of the Lovers family of stores, a leading omnichannel online and brick-and-mortar sexual wellness chain, with 40 stores in 5 states as of June 30, 2022. The primary drivers for the acquisition were to leverage TLA’s brick-and-mortar presence, e-commerce capabilities, attractive brand positioning and customer database.

The following table sets forth the final allocation of the purchase price for TLA to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from TLA (in thousands):


~~Tangible net assets and liabilities:~~
~~Inventory~~	$	~~7,614~~
~~Property and equipment~~	~~1,665~~
~~Accounts payable~~	~~(1,319)~~
~~Other net assets~~	~~(3,518)~~
~~Total net assets~~	~~4,442~~
~~Intangible assets:~~
~~Trade name~~	~~4,100~~
~~Total intangible assets~~	~~4,100~~
~~Net assets acquired~~	~~8,542~~
~~Purchase consideration~~	~~24,916~~
~~Goodwill~~	$	~~16,374~~

The estimated fair value of the assets and liabilities acquired was determined by our management. TLA’s inventory consists of merchandise finished goods and its fair value was measured as net realizable value, or the selling price of the inventory less costs of disposal and a reasonable profit allowance for the selling effort. Trade name consists of the Lovers trade name/domain and its fair value was estimated using a relief-from-royalty method. The useful life of the Lovers trade name was estimated to be ten years. Unfavorable leasehold interest is due to the fair values of acquired lease contracts having contractual rents higher than fair market rents. This liability will be wound down as an offset to rent expense over a four-year period, which is the average remaining contractual life of the acquired leases. The unfavorable leasehold interest liability is included in the other net assets amount in the table above.

The total acquisition consideration was greater than the fair value of the net assets acquired resulting in the recognition of goodwill of $16.4 million. The factors that make up the goodwill amount primarily pertain to the value of the expected synergies resulting in strengthening and expansion of our e-commerce and brick-and-mortar market positions. Although this TLA acquisition does not give rise to any new tax deductible goodwill, TLA has tax deductible goodwill of $19.0 million from a previous acquisition.


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Stock options to purchase common stock	2,496,494	2,845,577	2,496,494	2,845,577
Unvested restricted stock units	1,066,281	2,217,748	1,066,281	2,217,748
Unvested performance-based restricted stock units	1,089,045	1,115,455	1,089,045	1,115,455
Total	4,651,820	6,178,780	4,651,820	6,178,780

~~Pro Forma Financial Information (Unaudited)~~

The following table summarizes certain of our supplemental pro forma financial information for the three and six months ended June 30, 2021, as if the acquisition of TLA had occurred as of January 1, 2021. The unaudited pro forma financial information for the three and six months ended June 30, 2021 reflects (i) the reduction in amortization expense based on fair value adjustments to the intangible assets acquired from TLA; (ii) the reduction in rent expense due to the amortization of unfavorable leasehold interest acquired from TLA; and (iii) the reversal of interest expense on TLA’s debt that was settled on the acquisition date. Transaction costs incurred by us and TLA during the three months ended June 30, 2021 were immaterial. Transaction costs incurred by us and TLA were $0.9 million and $0.7 million, respectively, for the six months ended June 30, 2021. The unaudited pro forma financial information is for comparative purposes only and is not necessarily indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).

Three Months Ended
June 30, 2021 Six Months Ended
June 30, 2021
As Reported Pro Forma As Reported Pro Forma
Net revenues $ 49,851 $ 49,851 $ 92,531 $ 101,380
Net loss $ (8,916) $ (8,916) $ (13,913) $ (12,502)

~~Acquisition of Honey Birdette~~

On June 28, 2021, we entered into a Share Purchase Agreement (the “SPA”) to acquire Honey Birdette, a company organized under the laws of Australia. Pursuant to the SPA, on August 9, 2021 (the “Closing Date”), we acquired all of the capital stock of Honey Birdette. Aggregate consideration for the acquisition consisted of approximately $233.4 million in cash and 2,155,849 shares of our common stock. The Closing Date per share price of our common stock of $26.57 resulted in total consideration transferred of $288.8 million. As a result of the transaction, Honey Birdette became our indirect, wholly-owned subsidiary.

~~On August 19, 2021, an additional 4,412 shares of Company common stock were issued to the Honey Birdette sellers pursuant to the terms of the FY21 true-up under the SPA.~~

~~The acquisition of the luxury lingerie brand Honey Birdette, with 59 stores as of June 30, 2022 ac~~ross 3 continents, expands our brand portfolio with a new high-end franchise, and provides us with product design, sourcing and direct-to-consumer capabilities that we believe can be leveraged to accelerate the growth of our core apparel and sexual wellness businesses.

The following table presents the fair value of the consideration transferred in the acquisition of Honey Birdette (in thousands) at the closing of the acquisition. The amounts initially reported in Australian dollars, were translated into U.S. dollars using an exchange rate of $0.7356 as of the Closing Date.


~~Cash consideration~~	$	~~233,441~~
~~Stock consideration:~~
~~Transferred shares~~ ~~(1)~~	~~29,889~~
~~Lock-up shares~~ ~~(2)~~	~~25,460~~
~~Total consideration transferred~~	$	~~288,790~~

~~(1)~~ ~~The fair value of approximately 1,124,919 shares of common stock of the Company transferred to the sellers based on a price of $26.57 per share on the Closing Date.~~

(2) The fair value of approximately 1,030,930 shares of common stock of the Company issued and held at the Company’s transfer agent account based on a price of $26.57 per share on the Closing Date, and true-up adjustments representing a fair value of the settlement at closing based on Honey Birdette’s fiscal year 2021 EBITDA results and price per share of $26.57 on the Closing Date, as well as fiscal year 2022 forecasted revenue. The fiscal year 2021 EBITDA and true-up in connection with the closing of the acquisition resulted in 4,412 shares of our common stock being issued to the Honey Birdette sellers on August 19, 2021.

The lock-up shares are subject to post-closing true-up adjustments, where, following the closing of the acquisition, the Honey Birdette sellers are entitled to the issuance of additional shares of Company common stock in the event that Honey Birdette’s financial results for each of its 2021 and 2022 fiscal years exceed certain financial targets set forth in the SPA (each a “true-up”). In the event that Honey Birdette fails to achieve certain financial results for its 2021 and 2022 fiscal years as set forth in the SPA, a portion of the stock consideration may be canceled in accordance with the terms of the SPA.

The fair value of the lock-up shares and the FY22 true-up adjustment were recorded as a contingent liability in current liabilities at closing. The acquisition-date fair value of the contingent consideration liability to be settled in a variable number of shares was determined based on the likelihood of issuing stock related to the contingent earn-out clauses, as part of the consideration transferred. For contingent consideration to be settled in common stock, we use public market data to determine the fair value of the shares as of the acquisition date and on an ongoing basis. See Note 2, Fair Value Measurements, for liabilities. The targets for the FY22 true-up adjustment were not met and the contingent consideration was cancelled, as a result no liability balance was held as of ~~June 30, 2022.~~

The following table sets forth the final allocation of the purchase price for Honey Birdette to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from Honey Birdette (in thousands):


~~Net assets and liabilities:~~
~~Cash~~	$	~~3,950~~
~~Inventory~~	~~16,015~~
~~Property and equipment~~	~~5,185~~
~~Other tangible net assets (liabilities)~~	~~(12,243)~~
~~Unfavorable leasehold interest, net~~	~~(1,690)~~
~~Trade name~~	~~77,238~~
~~Deferred tax liability~~	~~(23,046)~~
~~Total net assets acquired~~	~~65,409~~
~~Purchase consideration~~	~~288,790~~
~~Goodwill~~	$	~~223,381~~

The estimated fair value of the assets and liabilities acquired was determined by our management. Honey Birdette’s inventory consists of merchandise finished goods, and its fair value was measured as net realizable value, or the selling price of the inventory less costs of disposal and a reasonable profit allowance for the selling effort. Trade name consists of the Honey Birdette trade name/domain, and its fair value was estimated using a relief-from-royalty method. The useful life of the Honey Birdette trade name was estimated to be 12 years. Unfavorable leasehold interest, net is due to the fair values of acquired lease contracts having contractual rents higher than fair market rents. This liability will be wound down as an offset to rent expense over the remaining contractual life of the acquired leases.

The total acquisition consideration was greater than the fair value of the net assets acquired resulting in the recognition of goodwill of $223.4 million. The factors that make up the goodwill amount primarily pertain to the value of the expected synergies resulting in strengthening and expansion of our e-commerce and brick-and-mortar market positions.

The acquisition was a tax-free acquisition as we acquired the carryover tax basis of Honey Birdette’s assets and liabilities. As a result of the acquisition, we acquired estimated deferred tax liabilitie~~s of $23.0 million~~.

~~Pro Forma Financial Information (Unaudited)~~

~~The following table summarizes certain of our supplemental pro forma financial information for the three and six months ended June 30, 2021, as if the acquisition of Honey Birdette had occurred as of January 1, 2020. The unaudited pro forma financial information for the~~ ~~three and six months ended June 30, 2021~~ reflects (i) the increase in amortization expense based on fair value adjustments to the intangible assets acquired from Honey Birdette; (ii) the reduction in rent expense due to the amortization of unfavorable leasehold interest, net acquired from Honey Birdette; (iii) intere~~st expense associated with the borrowing of an additional $70.0 million~~ under our New Credit Agreement used to partially finance the acquisition; (iv) tax adjustments calculated using an estimated blended statutory rate of 27.55% based on the predominant taxable jurisdictions of Honey Birdette; and (v) certain adjustments ~~to convert Honey Birdette’s consolidated income statements from IFRS to U.S. GAAP. The~~ unaudited pro forma financial information is for comparative purposes only and is not necessarily indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).

Three Months Ended
June 30, 2021 Six Months Ended
June 30, 2021
As Reported Pro Forma As Reported Pro Forma
Net revenues $ 49,851 $ 68,738 $ 92,531 $ 130,431
Net loss $ (8,916) $ (8,330) $ (13,913) $ (7,866)

~~Acquisition of GlowUp~~

On October 22, 2021, we completed the acquisition (the “GlowUp Merger”) of GlowUp Digital Inc., a Delaware corporation (“GlowUp”), pursuant to that certain Agreement and Plan of Merger, dated as of October 15, 2021 (the “GlowUp Agreement”), by and among the Company, PB Global Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Dream Merger Sub”), GlowUp and Michael Dow, solely in his capacity as representative of the holders of the outstanding shares of GlowUp’s common stock and of the holders of the outstanding SAFEs (Simple Agreements for Future Equity) issued by GlowUp. At the effective time of the GlowUp Merger, the separate corporate existence of Dream Merger Sub ceased, and GlowUp survived the GlowUp Merger as a wholly-owned subsidiary of the Company under the name “Centerfold Digital Inc” ("Centerfold").

At the closing of the GlowUp Merger, in accordance with the terms of the GlowUp Agreement, including certain adjustments to the GlowUp Merger consideration determined as of the closing, (i) holders of GlowUp’s equity securities that are accredited investors became entitled to receive, in the aggregate, 548,034 shares of the Company’s common stock and (ii) holders of GlowUp equity securities that are non-accredited investors became entitled to receive, in the aggregate, $342,308 in cash. Pursuant to the GlowUp Agreement, the number of GlowUp Merger consideration shares was determined based on a price per share of $23.4624, which was the volume weighted-average closing price per share of the Company’s common stock on the Nasdaq Global Market over the 10 consecutive trading day period ending on (and including) the trading day immediately preceding the execution of the GlowUp Agreement (i.e., October 14, 2021), representing aggregate closing consideration of approximately $13.2 million. In addition, ~~$0.8 million in transaction expenses were paid by the Company on behalf of the sellers as of closing.~~Contingent consideration of up to an additional 664,311 shares of our stock and $0.4 million in cash in the aggregate may be issued or paid (as applicable) to GlowUp’s equity holders upon the release of the portion thereof held back in respect of indemnification obligations or the satisfaction of performance criteria, as applicable, pursuant to the terms of the GlowUp Agreement. The fair value of contingent consideration at closing was valued at $18.1 million, $9.2 million of which was classified as equity and $8.9 million was recorded in current liabilities. ~~The closing date per share price of the Company’s common stock of $27.60 resulted in total consideration transferred valued at $34.4 million at closing.~~

~~The following table summarizes the fair value of the total consideration transferred in the acquisition of GlowUp at the closing of the acquisition (in thousands).~~


~~Cash consideration (including transaction expenses paid for sellers)~~	$	~~1,142~~
~~Stock consideration~~	~~15,126~~
~~Contingent consideration~~	~~18,097~~
~~Total consideration transferred~~	$	~~34,365~~

The acquisition-date fair value of the contingent consideration to be settled in shares or paid in cash (as applicable) to GlowUp’s equity holders upon the release of the portion thereof held back in respect of indemnification obligations or the satisfaction of performance criteria was determined based on the likelihood of issuing stock or paying cash related to the contingent clauses, as part of the consideration transferred. For contingent consideration to be settled in common stock, we use public market data to determine the fair value of the shares as of the acquisition date and on an ongoing basis. As of June 30, 2022, the performance-based component of the contingent consideration was settled. As a result, the Company issued 352,923 shares of the Company’s common stock and made a payment of $0.2 million to GlowUp’s equity holders. The fair value of the remaining contingent consideration relating to an indemnity holdback at ~~June 30, 2022 was $1.7 million, and it was recorded in current liabilities.~~ ~~See Note 2, Fair Value Measurements, for subsequent measurements of these contingent liabilities.~~

~~The following table sets forth~~ ~~the final~~ ~~allocation of the purchase price for GlowUp to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from GlowUp (in thousands):~~


~~Net assets and liabilities:~~
~~Developed technology~~	$	~~2,300~~
~~Deferred tax liability~~	~~(538)~~
~~Total net assets acquired~~	~~1,762~~
~~Purchase consideration~~	~~34,365~~
~~Goodwill~~	$	~~32,603~~

~~The estimated fair value of the assets and liabilities acquired was determined by our management. Developed technology has a useful life of three years.~~

The total acquisition consideration was greater than the fair value of the net assets acquired resulting in the recognition of goodwill of $32.6 million. The factors that make up the goodwill amount primarily pertain to the value of the expected synergies resulting in strengthening and expansion of our digital subscription positions.

~~The acquisition was a tax-free acquisition as we acquired the carryover tax basis of GlowUp’s assets and liabilities. As a result of the acquisition, we recorded estimated deferred tax liabilities of $0.5 million~~. Our estimate is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the acquisition date. During the measurement period, we will adjust the estimate if new information is obtained about facts or circumstances that existed as of the acquisition date that, if known, would have changed the estimate.

17. ~~Related Party Transactions~~

During 2011, we entered into a management agreement with an affiliate of one of our stockholders for management and consulting services. Based on the terms of this agreement, management fees were $1.0 million per calendar year. We terminated this agreement in the first quarter of 2021 upon consummation of the Business Combination. Management fees for the three and six months ended June 30, 2022 and three months ended June 30, 2021 were $0. Management fees for the six months ended June 30, 2021 were immaterial. There were no amounts due to or due from this affiliate as of June 30, 2022 or December 31, 2021.

~~18.~~ Segments

We have 3three reportable segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. The Licensing segment derives revenue from trademark licenses for third-party consumer products and location-based entertainment businesses. The Direct-to-Consumer segment derives revenue from sales of consumer products sold through third-party retailers, online direct-to-customer or brick-and-mortar through our ~~recently acquired sexual wellness chain, Lovers, with 40 stores in 5 states, and~~ lingerie ~~company,~~business, Honey Birdette, with 5958 stores in 3three countries as of June 30, ~~2022,~~2023. The TLA and Yandy direct-to-consumer businesses met the criteria for discontinued operations classification as ~~disclosed~~of June 30, 2023 (see Note 3, Assets and Liabilities Held for Sale and Discontinued Operations). Therefore, they were excluded from the table below and classified as discontinued operations in ~~Note 16, Business Combinations.~~our condensed consolidated statements of operations for all periods presented. The Digital Subscriptions and Content segment derives revenue from the subscription of Playboy programming that is distributed through various channels, including websites and domestic and international television, from ~~trademark licenses for online gaming and from~~ sales of tokenized digital art and ~~collectibles.~~collectibles, and sales of creator content offerings to consumers on playboy.com.

Our Chief Executive Officer is our Chief Operating Decision Maker (“CODM”). Segment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources. Total asset information is not included in the tables below as it is not provided to and reviewed by our CODM. The “All Other” line items in the tables below are primarily attributable to ~~Playboy~~ revenues and costs related to the fulfillment of magazine ~~and brand marketing and these segments~~subscription obligations in the prior year comparative periods, which do not meet the quantitative threshold for determining reportable segments. We discontinued publishing Playboy magazine in the first quarter of 2020. The “Corporate” line item in the tables below includes certain operating expenses that are not allocated to the reporting segments presented to our CODM. These expenses include legal, human resources, accounting/finance, information technology and facilities. The accounting policies of the reportable segments are the same as those described in Note 1, Basis of Presentation and Summary of Significant Accounting Policies.

The following table sets forth financial information by reportable segment (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net revenues:	Net revenues:									Net revenues:
Licensing	Licensing	$	15,876	$	15,961	$	30,437	$	31,665	Licensing	$	10,288	$	15,876	$	19,982	$	30,437
Direct-to-Consumer	Direct-to-Consumer	44,601		28,014		94,243		50,061		Direct-to-Consumer	19,700		27,068		40,468		54,392
Digital Subscriptions and Content	Digital Subscriptions and Content	4,694		5,704		9,434		10,619		Digital Subscriptions and Content	5,112		4,694		9,850		9,434
All Other	All Other	243		172		678		186		All Other	1		243		4		678
Total	Total	$	65,414	$	49,851	$	134,792	$	92,531	Total	$	35,101	$	47,881	$	70,304	$	94,941
Operating (loss) income:	Operating (loss) income:									Operating (loss) income:
Licensing	Licensing	$	12,653	$	11,655	$	24,122	$	22,963	Licensing	$	(68,281)	$	10,945	$	(64,714)	$	20,704
Direct-to-Consumer	Direct-to-Consumer	690		(656)		2,951		1,019		Direct-to-Consumer	(75,002)		(1,231)		(90,058)		(1,716)
Digital Subscriptions and Content	Digital Subscriptions and Content	(5,692)		1,845		(8,052)		4,164		Digital Subscriptions and Content	1,002		(6,738)		393		(9,842)
Corporate	Corporate	(13,987)		(16,289)		(18,861)		(36,098)		Corporate	(13,918)		(8,783)		(29,794)		(9,485)
All Other	All Other	153		5		546		(27)		All Other	(7)		231		(12)		603
Total	Total	$	(6,183)	$	(3,440)	$	706	$	(7,979)	Total	$	(156,206)	$	(5,576)	$	(184,185)	$	264

Geographic Information

Revenue by geography is based on where the customer is located. The following table sets forth revenue by geographic area (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues:
United States	$	14,975	$	19,532	$	30,634	$	38,099
China	7,475		10,927		14,423		21,730
Australia	7,608		10,760		15,136		22,580
UK	2,943		3,072		5,445		6,053
Other	2,100		3,590		4,666		6,479
Total	$	35,101	$	47,881	$	70,304	$	94,941

3127

~~19. Subsequent Events~~

On August 8, 2022, the Company entered into Amendment No. 2 to the Credit and Guaranty Agreement (the “Second Amendment”), dated as of May 25, 2021 (as previously amended on August 11, 2021, the “Existing Credit Agreement”, and as further amended by the Second Amendment), by and among the Company, Playboy Enterprises, Inc., the subsidiary guarantors party thereto, the lenders party thereto (the “Lenders”), and Acquiom Agency Services LLC, as the administrative agent and the collateral agent, to amend the terms of the Existing Credit Agreement to, among other things: (i) require the Company to maintain a minimum consolidated cash balance of $40 million, to be tested twice quarterly (with a 45-day cure period), subject to certain exceptions; (ii) require that the Company’s consolidated cash balance not fall below $25 million for more than 5 consecutive business days during any applicable test period (with a 15-day cure period to then exceed a cash balance of $40 million); (iii) increase addbacks to the determination of the Company’s consolidated EBITDA (as defined in the New Credit Agreement); (iv) set Total Net Leverage Ratios for Test Periods (as such terms are defined in the New Credit Agreement) ending June 30, 2022 through March 31, 2023 at 7.00 to 1.00, reducing quarterly thereafter at the step-downs specified in the New Credit Agreement to 4.50 to 1.00 as of September 30, 2024, in each case subject to up to $12.5 million of cash netting; (v) increase the per annum interest rates applicable to base rate loans to 4.75% or 5.25%, with the lower rate applying when the total net leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less, and the per annum interest rates applicable to LIBOR loans to 5.75% or 6.25%, with the lower rate applying when the total net leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less; (vi) impose an additional 0.25% interest rate for each 0.5x increase in the total net leverage ratio (as defined in the New Credit Agreement) of the Company above the quarterly levels in the Existing Credit Agreement for test periods ending June 30, 2022 through maturity of the New Credit Agreement; (vii) allow the Company to prepay the loans under the New Credit Agreement at par and allow the Company and its investors to purchase such loans from the Lenders on a pro rata basis (subject to certain limitations set forth in the New Credit Agreement); and (viii) increase financial reporting to the Lenders and impose certain limitations on the ability of the Company to incur further indebtedness or undertake certain transactions until the Company has significantly reduced certain leverage ratios set forth in the New Credit Agreement.

The cash balance requirements are subject to a dollar-for-dollar reduction for payments which reduce the outstanding principal amount of the loans under the New Credit Agreement, and such requirements and limitations on the Company’s ability to make certain restricted payments (including repurchases of its stock) terminate upon achieving a pro forma total leverage ratio (as defined in the New Credit Agreement) of less than 4.00 to 1.00. NaN designees of the Lenders will also serve as observers of the Company’s board of directors until the total leverage ratio is less than 4.00 to 1.00.

The Company paid certain fees and expenses in connection with the Second Amendment. In the event that the outstanding principal amount of the loans under the New Credit Agreement as of August 8, 2022 is not reduced by $10 million as of December 31, 2022, then the Company shall pay to the Lenders an additional amount equal to 0.50% of the outstanding principal amount of the loans under the New Credit Agreement as of December 31, 2022.

In connection with the Second Amendment and pursuant to a securities purchase agreement, dated May 13, 2022 (the “Purchase Agreement”), with Drawbridge DSO Securities LLC, on August 8, 2022, the Company issued and sold 25,000 shares of Series A Preferred Stock to the Purchaser at a price of $1,000 per share, resulting in total gross proceeds to the Company of $25.0 million (the “Drawdown”). We incurred approximately $0.5 million of fees associated with the Drawdown, resulting in net proceeds of $24.5 million to the Company. As a result of the Drawdown, all of the Company’s authorized shares of Series A Preferred Stock were issued and outstanding as of August 8, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements as of and for the years ended December 31, 2022, 2021 and 2020 and the related notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 16, ~~2022.~~2023. This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors,” “Business” and “Cautionary Note Regarding Forward-Looking Statements” contained in our Annual Report on Form 10-K filed with the SEC on March 16, ~~2022.~~2023. As used herein, “we”, “us”, “our”, the “Company” and ~~“Playboy”~~“PLBY” refer to ~~Playboy Enterprises, Inc. and its subsidiaries prior to the consummation of the Business Combination (as defined below) and~~ PLBY Group, Inc. and its ~~subsidiaries following the consummation of the Business Combination.~~subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that are forward-looking and as such are not historical facts. These statements are based on the expectations and beliefs of the management of the Company in light of historical results and trends, current conditions and potential future developments, and are subject to a number of factors and uncertainties that could cause actual results to differ materially from forward-looking statements. These forward-looking statements include all statements other than historical fact, including, without limitation, statements regarding the financial position, capital structure, dividends, indebtedness, business strategy and plans and objectives of management for future operations of the Company. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans, we are making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, our management.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting us will be those that we anticipated. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Factors that may cause such differences include, but are not limited to: (1) the impact of ~~the COVID-19 pandemic~~public health crises and epidemics on the Company’s ~~business and acquisitions;~~business; (2) the inability to maintain the listing of the Company’s shares of common stock on Nasdaq; (3) the risk that the Company’s ~~acquisitions~~completed or ~~any~~ proposed transactions disrupt the Company’s current plans and/or operations, including the risk that the Company does not complete any such proposed transactions or achieve the expected benefits from ~~them;~~any transactions; (4) the ability to recognize the anticipated benefits of ~~acquisitions,~~corporate transactions, commercial collaborations, commercialization of digital assets and proposed transactions, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, and the Company's ability to retain its key employees; (5) costs related to being a public company, ~~acquisitions,~~corporate transactions, commercial collaborations and proposed transactions; (6) changes in applicable laws or regulations; (7) the possibility that the Company may be adversely affected by global hostilities, supply chain ~~disruptions,~~delays, inflation, interest rates, foreign currency exchange rates or other economic, business, and/or competitive factors; (8) risks relating to the uncertainty of the projected financial information of the ~~Company;~~Company, including changes in the Company's estimates of the fair value of certain of our intangible assets, including goodwill; (9) risks related to the organic and inorganic growth of the Company’s businesses, and the timing of expected business milestones; (10) changing demand or shopping patterns for the Company's products and ~~(10)~~services; (11) failure of licensees, suppliers or other third-parties to fulfill their obligations to the Company; (12) the Company's ability to comply with the terms of its indebtedness and other obligations; (13) changes in financing markets or the inability of the Company to obtain financing on attractive terms; and (14) other risks and uncertainties indicated in this Quarterly Report on Form 10-Q, including those under “Part II—Item 1A. Risk ~~Factors.”~~Factors”, and in “Part I—Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We caution that the foregoing list of factors is not exclusive, and readers should not place undue reliance upon any forward-looking statements.

Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q or any earlier date specified for such statements. We do not undertake any obligation to update or revise any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based, except as may be required under applicable securities laws. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this Cautionary Note Regarding Forward-Looking Statements.

3328

Business Overview

We are a large, global consumer lifestyle company marketing our brands through a wide range of direct-to-consumer products, licensing initiatives, and digital subscriptions and ~~content, and location-based entertainment.~~content. We reach ~~millions of~~ consumers worldwide with products across four key market categories: Sexual Wellness, including lingerie and intimacy products; Style and Apparel, including a variety of apparel and accessories ~~products for men and women; Gaming~~products; Digital Entertainment and Lifestyle, ~~such as digital gaming,~~including our creator platform, web and television-based entertainment, and our spirits and hospitality ~~and spirits;~~products; and Beauty and Grooming, including fragrance, skincare, grooming and ~~cosmetics for women and men.~~cosmetics.

We have three reportable segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. The Licensing segment derives revenue from trademark licenses for third-party consumer products, ~~and~~ location-based entertainment ~~businesses.~~businesses and online gaming. The Direct-to-Consumer segment derives its revenue from sales of consumer products sold directly to consumers through our own online channels, our retail stores or through third-party retailers. The TLA and Yandy direct-to-consumer businesses were classified as discontinued operations in the condensed consolidated statements of operations for all periods presented (see Note 3, Assets and Liabilities Held for Sale and Discontinued Operations). The Digital Subscriptions and Content segment derives revenue from the subscription of Playboy programming, which is distributed through various channels, including websites and domestic and international TV, ~~from trademark licenses for online gaming~~ and ~~from~~ sales of ~~tokenized digital art and collectibles.~~creator content offerings to consumers on playboy.com.

~~Business Combination with MCAC~~

On September 30, 2020, Playboy Enterprises, Inc. (“Legacy Playboy”) entered into an agreement and plan of merger (“Merger Agreement”), with our predecessor, Mountain Crest Acquisition Corp, a publicly-traded special purpose acquisition company incorporated in Delaware (“MCAC”), MCAC Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of MCAC (“Merger Sub”), and Dr. Suying Liu, the Chief Executive Officer of MCAC. Pursuant to the Merger Agreement, at the closing of the transactions contemplated thereby, Merger Sub would merge with and into Legacy Playboy (the “Merger”) with Legacy Playboy surviving the Merger as a wholly-owned subsidiary of MCAC (the “Business Combination”). Under the Merger Agreement, MCAC acquired all of the outstanding shares of Legacy Playboy common stock for approximately $381.3 million in aggregate consideration, comprised of (i) 23,920,000 shares of MCAC common stock, based on a price of $10.00 per share, subject to adjustment, and (ii) the assumption of no more than $142.1 million of Legacy Playboy net debt (the “Net Debt Target”). The number of shares issued at closing was subject to adjustment at a rate of one share of MCAC common stock for each $10.00 increment that the Net Debt (as defined in the Merger Agreement) is greater than (in which case the number of shares would be reduced) or less than (in which case the number of shares would be increased) the Net Debt Target. The Business Combination closed on February 10, 2021.

Legacy Playboy’s options and restricted stock units (“RSUs”) that were outstanding as of immediately prior to the closing of the Business Combination, other than the Pre-Closing option granted to Legacy Playboy’s Chief Executive Officer in January 2021, were accelerated and fully vested. Each outstanding option was assumed by MCAC and automatically converted into an option to purchase such number of shares of our common stock equal to the product of (x) the merger consideration and (y) the option holder’s respective percentage of the merger consideration. All RSUs that were then outstanding were terminated and shall be subsequently paid, in settlement, in shares of common stock equal to the product of (x) the merger consideration, and (y) the terminated RSU holder’s respective percentage of the merger consideration.

In connection with the execution of the Merger Agreement, Legacy Playboy, Sunlight Global Investment LLC (“Sponsor”), and Dr. Suying Liu entered into a stock purchase agreement pursuant to which Legacy Playboy purchased 700,000 shares of MCAC’s common stock (the “Initial Shares”) from Sponsor. The Sponsor transferred the Initial Shares to Legacy Playboy upon the closing of the Merger and the Initial Shares were recorded as treasury stock on the condensed consolidated balance sheet.

In connection with the Merger, MCAC also entered into subscription agreements (the “Subscription Agreements”) and registration rights agreements (the “PIPE Registration Rights Agreements”), each dated as of September 30, 2020, with certain institutional and accredited investors, pursuant to which, among other things, MCAC agreed to issue and sell, in a private placement immediately prior to the closing of the Business Combination, an aggregate of 5,000,000 shares of common stock for $10.00 per share (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the closing of the Business Combination for net proceeds of $46.8 million.

On February 10, 2021, the Business Combination was consummated and MCAC (i) issued an aggregate of 20,916,812 shares of its common stock to existing stockholders of Legacy Playboy, (ii) assumed Legacy Playboy options exercisable for an aggregate of 3,560,541 shares of MCAC common stock at a weighted-average exercise price of $5.61 and (iii) assumed the obligation to issue shares in respect of terminated Legacy Playboy RSUs for an aggregate of 2,045,634 shares of MCAC common stock to be settled one year following the closing date. In addition, in connection with the consummation of the Business Combination, MCAC was renamed “PLBY Group, Inc.” and started trading on the Nasdaq on February 11, 2021.

The Business Combination was accounted for as a reverse recapitalization whereby MCAC, who is the legal acquirer, was treated as the “acquired” company for financial reporting purposes and Legacy Playboy was treated as the accounting acquirer. This determination was primarily based on Legacy Playboy having a majority of the voting power of the post-combination company, Legacy Playboy’s senior management comprising substantially all of the senior management of the post-combination company, the relative size of Legacy Playboy compared to MCAC, and Legacy Playboy’s operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of a capital transaction in which Legacy Playboy was issued stock for the net assets of MCAC. The net assets of MCAC are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Legacy Playboy.

~~Acquisition of TLA~~

On March 1, 2021, we completed the acquisition of 100% of the equity of TLA Acquisition Corp. for $24.9 million in cash consideration. TLA is the parent company of the Lovers family of stores, a leading omnichannel online and brick and mortar sexual wellness chain, with 40 stores in five states as of June 30, 2022. Refer to Note 16, Business Combinations, for additional information.

~~Acquisition of Honey Birdette~~

On June 28, 2021 (“Contract Date”), we entered into a Share Purchase Agreement (the “SPA”) to acquire Honey Birdette (Aust) Pty Limited (“Honey Birdette”), a company organized under the laws of Australia. Aggregate consideration for the acquisition of $327.7 million as of the Contract Date consisted of approximately $235.0 million in cash (based on an exchange rate of 0.7391 U.S. dollars per Australian dollars) and 2,155,849 shares of Company common stock, valued at $92.7 million as of the Contract Date, based on a Contract Date per share price of $43.02. Pursuant to the SPA, on August 9, 2021 (“Closing Date”), the Company acquired all of the capital stock of Honey Birdette. The Closing Date per share price of $26.57 per share of Company common stock resulted in total consideration transferred of $288.8 million. As a result of the transaction, Honey Birdette became an indirect, wholly-owned subsidiary of the Company. On August 19, 2021, an additional 4,412 shares of Company common stock were issued to the Honey Birdette sellers pursuant to the terms of a true-up under the SPA. ~~Refer to Note 16, Business Combinations, for additional information.~~

~~Acquisition of GlowUp Digital Inc.~~

On October 22, 2021, we completed the acquisition of GlowUp Digital Inc. ("GlowUp"), a Delaware corporation, pursuant to that certain Agreement and Plan of Merger, dated as of October 15, 2021, by and among the Company, PB Global Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of the Company, GlowUp and Michael Dow, solely in his capacity as representative of the holders of the outstanding shares of GlowUp’s common stock and of the holders of the outstanding Simple Agreements for Future Equity ("SAFEs") issued by GlowUp (the "GlowUp Merger"). At the effective time of the GlowUp Merger, the separate corporate existence of Merger Sub ceased, and GlowUp survived the GlowUp Merger as a wholly-owned subsidiary of the Company under the name “Centerfold Digital Inc” ("Centerfold").

At the closing of the GlowUp Merger, in accordance with the terms of the GlowUp Agreement, including certain adjustments to the GlowUp Merger consideration determined as of the closing, (i) holders of GlowUp’s equity securities that are accredited investors became entitled to receive, in the aggregate, 548,034 shares of the Company’s common stock, par value $0.0001 per share, and (ii) holders of GlowUp equity securities that are nonaccredited investors became entitled to receive, in the aggregate, $342,308 in cash. Pursuant to the GlowUp Agreement, the number of GlowUp Merger consideration shares was determined based on a price per share of $23.4624, which was the volume weighted-average closing price per share of the Company’s common stock on the Nasdaq Global Market over the 10 consecutive trading day period ending on (and including) the trading day immediately preceding the execution of the GlowUp Agreement (i.e., October 14, 2021), representing aggregate closing consideration of approximately $13.2 million. In addition, $0.8 million in transaction expenses were paid by the Company on behalf of the sellers as of closing. Contingent consideration of up to an additional 664,311 shares of our stock and $0.4 million in cash in the aggregate may be issued or paid (as applicable) to GlowUp’s equity holders upon the release of the portion thereof held back in respect of indemnification obligations or the satisfaction of performance criteria, as applicable, pursuant to the terms of the GlowUp Agreement. The fair value of contingent consideration at closing was $18.1 million, ~~$9.2 million~~ of which was classified as equity and $8.9 million was recorded in current liabilities. The closing date per share price of the Company’s common stock of $27.60 resulted in total consideration transferred valued at $34.4 million at closing.

Key Factors and Trends Affecting Our Business

We believe that our performance and future success depends on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Quarterly Report on Form 10-Q titled “Risk Factors.”

~~Expanding the Consumer Products~~Shifting to a Capital-Light Business ~~through Owned and Operated Products and Channels~~Model

We are ~~accelerating~~pursuing a commercial strategy that relies on a more capital-light business model focused on revenue streams with higher margin, lower working capital requirements and higher growth potential. We intend to do this by leveraging our flagship Playboy brand to attract best-in-class strategic partners and scale our creator platform with influencers who embody our brand’s aspirational lifestyle. We are refocusing our two key growth pillars: first, strategically expanding our licensing business in ~~company-owned~~key categories and ~~branded consumer products~~territories. We will continue to use our licensing business as a marketing tool and brand builder, in ~~attractive~~particular through our high-end designer collaborations and ~~expanding markets~~our large-scale partnerships. Second, investing in ~~which we have a proven history of brand affinity and consumer spend. Additionally, in 2021, we acquired and launched~~ our ~~own direct-to-consumer online sales channels,~~ ~~yandy.com, loversstores.com and honeybirdette.com,~~ ~~in addition to~~Playboy ~~playboy.com~~,digital platform as we return to ~~further accelerate the sales of theseproducts. However,~~ our ~~new product~~roots as a place to see and ~~new distribution strategies are in their early stages~~be seen for creators and ~~will take time to fully develop.~~up and coming cultural influencers.

~~Reduced Reliance on China Licensing Revenues~~

We have enjoyed substantial success in licensing our trademarks in China where we are a leading men’s apparel brand and where licensing revenues have grown year-over-year. However, as a result of this success,continue to review the ~~percentage of total net revenue attributable to China licensing had become 48%~~cost structure of our ~~total revenue by~~businesses and additional cost rationalization. We significantly restructured our technology expenses in the ~~end~~first quarter of ~~2019. With~~2023, and cost-excessive and under-utilized software packages were either terminated or not renewed upon expiration of applicable agreements. This resulted in a restructuring charge of $4.6 million for the ~~acquisition~~six months ended June 30, 2023, excluding $0.4 million of ~~Yandy~~costs related to discontinued operations. In addition, we reduced headcount within the Playboy Direct-to-Consumer business and our corporate office during fiscal 2023, resulting in ~~December 2019, TLA in March 2021~~a severance charge of $0.8 million and ~~Honey Birdette in August 2021 and the ramp up of North American consumer product sales, that percentage reduced to 16.6% and 16.0% f~~or$2.4 million during the three and six months ended June 30, ~~2022,~~ 2023, respectively, and additional stock-based compensation expenses of $1.3 million and $2.3 million due to acceleration of certain equity awards during the three and six months ended June 30, 2023.

Furthermore, we ~~expect it will~~had conducted an extensive review of our inventory balances in the first quarter of 2023 and recorded additional inventory reserve charges of $3.6 million during the three and six months ended June 30, 2023, respectively, to reflect the restructuring of the Playboy Direct-to-Consumer business as well as additional deterioration in consumer demand.

China Licensing Revenues

Our licensing revenues from China (including Hong Kong) as a percentage of our total revenues, excluding revenues from discontinued operations, were 21% and 23% for the three months ended June 30, 2023 and 2022, respectively, and 21% and 23% for the six months ended June 30, 2023 and 2022, respectively. Due to the impact of the weakening economy in China, collections have slowed, and we have been in discussions with our partners to renegotiate terms of certain agreements. Future contract modifications and collectability issues could impact the revenue recognized against our ongoing contract assets. At the end of the first quarter of 2023, we entered into a joint venture (“Playboy China”) with Charactopia Licensing Limited, the brand management unit of Fung Group, which operates the Playboy consumer products business in mainland China, Hong Kong and Macau. Playboy China is intended to build on Playboy’s current roster of licensees and online storefronts and to expand into new product categories with new licensees.

Impairments

Our indefinite-lived intangible assets, including trademarks and goodwill, that are not amortized, and the carrying amounts of our long-lived assets, including property and equipment, stores, acquired intangible assets and right-of-use operating lease assets, may continue to ~~become a smaller percentage~~be subject to impairment testing and impairments which reduce their value on our balance sheet. We periodically review for impairments whenever events or changes in our circumstances indicate that such assessment would be appropriate. We experienced further declines in revenue and profitability (including due to discontinued operations) during the six months ended June 30, 2023, which caused us to test the recoverability of ~~total net revenue~~our indefinite-lived and long-lived assets and resulted in the ~~future~~impairments set forth in our condensed consolidated financial statements. If we continue to experience declines in revenue or profitability, which could occur upon further declines in consumer demand or additional discontinued operations, we may record further non-cash asset impairment charges as ~~North American consumer product sales, largely through direct-to-consumer channels, accelerate.~~of the applicable impairment testing date.

Seasonality of Our Consumer Product Sales ~~Results in Stronger Fourth Quarter Revenues~~

~~A combination of online Halloween costume sales and holiday sales toward the end of~~While we receive revenue throughout the year, ~~typically result~~our businesses have experienced, and may continue to experience, seasonality. For example, our licensing business under our consumer products business have historically experienced higher receipts in ~~higher revenues~~its first and ~~profit~~third fiscal quarters due to the licensing fee structure in our licensing agreements which typically require advance payment of such fees during those quarters, but such payments can be subject to extensions or delays. Our direct-to-consumer businesses have historically experienced higher sales in the fourth quarter ~~particularly at Yandy. Historically, October sales~~due to the U.S. holiday season and changing market conditions and demand could affect such sales. Historical seasonality of ~~costumes have resulted in significantly higher~~ revenues ~~than in other months, but are also coming under~~may be subject to change as increasing pressure from competition and changes in ~~this category. We expect investment~~economic conditions impact our licensees and ~~growth in expanding the~~consumers. Transitioning to a capital-light business model with a more streamlined consumer products ~~category and distribution will likely accelerate~~business may further impact the ~~strong fourth quarter~~ seasonality of ~~the~~our business in the future.

~~Attractive Merger and Acquisition Opportunities are Increasing~~

Building on our successful acquisition and integration of Yandy in late 2019, TLA in March of 2021, Honey Birdette in August 2021 and GlowUp in October 2021, we continue to identify and assess potentially advantageous merger, acquisition and investment opportunities. On April 1, 2022, pursuant to an asset purchase agreement, we acquired assets that could be used to enhance our Centerfold business. We will continue focusing on potential tuck-in opportunities to complement our organic growth with potential for larger, strategic mergers and acquisitions initiatives over the long-term. We believe our mergers and acquisitions strategy will be supported by our operating cash flow and balance sheet flexibility.

~~Impact of COVID-19 on our Business~~

In March 2020, COVID-19 was declared a pandemic by the World Health Organization. Since that time, we have focused on protecting our employees, customers and vendors to minimize potential disruptions while managing through this pandemic, including taking the following actions during 2020 and 2021:

•~~Temporarily closed our offices in Los Angeles, CA and Phoenix, AZ;~~

•Implemented social distancing measures, required the wearing of masks and increased sanitization practices in our warehousing and fulfillment facilities, Lovers and Honey Birdette retail stores and corporate offices;

•~~Established ongoing work at home accommodations for all office employees, and limited company-related travel;~~

•Amended our credit facility to defer amortization payments for the quarters ended June 30, 2020 and September 30, 2020, to 2021 and eliminated excess cash flow (principal) payments during those two quarters;

•~~Deferred payroll taxes to 2021/2022 under the Coronavirus Aid, Relief and Economic Security Act of 2020;~~

•~~Offered curbside pickup at our Lovers stores;~~

•~~Temporarily closed certain Honey Birdette retail stores in Australia subsequent to its acquisition; and~~

•~~Required employees at our offices in Los Angeles, CA to be vaccinated before returning to the office.~~

Nonetheless, the COVID-19 pandemic continues to disrupt and delay global supply chains, affect production and sales across a range of industries and result in legal restrictions requiring businesses to close and consumers to stay at home for days-to-months at a time. These disruptions have impacted our business, including by:

•~~Slowing product development processes and the launch of new products;~~

•~~Causing certain products sold by Yandy to be out-of-stock;~~

•~~Hindering new licensing and collaboration deals;~~

•~~Temporarily closing retail stores of Honey Birdette and certain of our licensees;~~

•~~Reducing retail store traffic during the Omicron variant surge; and~~

•~~Closing the London Playboy Club and certain other Playboy-branded live gaming operations.~~

As a result of such disruptions, licensing revenues from certain gaming and retail licensees declined in 2020 and 2021, as compared to royalties from such sources during pre-pandemic periods. In the first six months of 2022, certain of our licensing partners faced macroeconomic pressures, such as supply chain and inventory issues, as well as chronic COVID-related closures, resulting in lower than expected retail sales versus their forecasts. They have been working proactively to catch up on delayed launches. Holiday sales are anticipated to come earlier this year and consumers to start shopping ahead this holiday season, and we will be in close communication with our licensing partners during the second half of this year.

As of the date of this Quarterly Report, our business as a whole has not suffered any material adverse consequences to date from the COVID-19 pandemic. The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the further duration of the COVID-19 pandemic and spread of its variants and its impact on employees and vendors, all of which are uncertain and cannot be predicted. As of the date of these unaudited consolidated financial statements, the full extent to which COVID-19 may impact our future financial condition or results of operations is uncertain.

How We ~~Assesses~~Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key indicators of the financial condition and operating performance of the business are revenues, salaries and benefits, and selling and administrative expenses. To help assess performance with these key indicators, we use Adjusted EBITDA as a non-GAAP financial measure. We believe this non-GAAP measure provides useful information to investors and expanded insight to measure revenue and cost performance as a supplement to the GAAP consolidated financial statements. See the “EBITDA and Adjusted EBITDA” section below for reconciliations of Adjusted EBITDA to net loss, the closest GAAP measure.

Components of Results of Operations

Revenues

We generate revenue from trademark licenses for third-party consumer products, online gaming and location-based entertainment businesses, ~~sales of our tokenized digital art and collectibles,~~ and sales of creator offerings to consumers on ~~centerfold.com,~~ our creator-led platform ~~launched in December 2021,~~on playboy.com, in addition to sales of consumer products sold through third-party retailers or online direct-to-customer and from the subscription of our programming which is distributed through various channels, including websites and domestic and international television.

Trademark Licensing

We license trademarks under multi-year arrangements to consumer products, online gaming and location-based entertainment businesses. Typically, the initial contract term ranges between one to ten years. Renewals are separately negotiated through amendments. Under these arrangements, we generally receive an annual non-refundable minimum guarantee that is recoupable against a sales-based royalty generated during the license year. Earned royalties received in excess of the minimum guarantee (“Excess Royalties”) are typically payable quarterly. We recognize revenue for the total minimum guarantee specified in the agreement on a straight-line basis over the term of the agreement and ~~recognizes~~recognize Excess Royalties only when the annual minimum guarantee is exceeded. In the event that the collection of any royalty becomes materially uncertain or unlikely, we recognize revenue from our licensees on a cash basis. Generally, Excess Royalties are recognized when they are earned.

Consumer Products

Revenue from sales of online apparel and accessories, including sales through third-party sellers, is recognized upon delivery of the goods to the customer. Revenue is recognized net of incentives and estimated returns. We periodically offer promotional incentives to customers, which include basket promotional code discounts and other credits, which are recorded as a reduction of revenue.

3730

~~Magazine and~~ Digital Subscriptions

Digital subscription revenue is derived from subscription sales of playboyplus.com and playboy.tv, which are online content platforms. We receive fixed consideration shortly before the start of the subscription periods from these contracts, which are primarily sold in monthly, annual, or lifetime subscriptions. Revenues from lifetime subscriptions are recognized ratably over a five-year period, representing the estimated period during which the customer accesses the platforms. Revenues from ~~Playboy~~ ~~magazine and~~ digital subscriptions are recognized ratably over the subscription period. ~~We discontinued publishing~~ ~~Playboy~~ ~~magazine in the first quarter of 2020.~~

Revenues generated from the sales of creator offerings to consumers via our creator platform on ~~centerfold.com~~playboy.com~~, our creator-led platform launched in December 2021,~~ are recognized at the point in time when the sale is processed. Revenues generated from ~~centerfold.com~~subscriptions to our creator platform are recognized ratably over the subscription period.

~~Revenue from sales of our tokenized digital art and collectibles is recognized at the point in time when the sale is processed.~~

TV and Cable Programming

We license programming content to certain cable television operators and direct-to-home satellite television operators who pay royalties based on monthly subscriber counts and pay-per-view and video-on-demand buys for the right to distribute our programming under the terms of affiliation agreements. Royalties are generally collected monthly and recognized as revenue as earned.

Cost of Sales

Cost of sales primarily consist of merchandise costs, warehousing and fulfillment costs, agency fees, website expenses, marketplace traffic acquisition costs, credit card processing fees, ~~and collectibles,~~ personnel costs, including stock-based compensation, ~~Playboy Television~~ digital subscription-related operating expenses, costs associated with branding events, paper and printing costs, customer shipping and handling expenses, fulfillment activity costs and freight-in expenses.

Selling and Administrative Expenses

Selling and administrative expenses primarily consist of corporate office and retail store occupancy costs, personnel costs, including stock-based compensation, and contractor fees for accounting/finance, legal, human resources, information technology and other administrative functions, general marketing and promotional activities and insurance.

Contingent Consideration Fair Value Remeasurement Gain

Contingent consideration fair value remeasurement gain consists of non-cash changes in the fair value of contingent consideration ~~general marketing~~recorded in conjunction with the acquisitions of GlowUp and ~~promotional activities and insurance.~~Honey Birdette.

~~Related Party Expenses~~Impairments

~~Related party expenses~~Impairments consist of ~~management fees paid to an affiliate~~the impairments of ~~one of our stockholders for management~~digital assets, certain licensing contracts, Playboy-branded trademarks, trade names and ~~consulting services.~~goodwill.

Other Operating ~~Expenses~~Income, Net

Other operating ~~expenses~~income, net consists primarily ~~consist~~ of ~~impairment~~gains recognized from the sale of ~~digital~~crypto assets.

Nonoperating Income (Expense)

Interest Expense

Interest expense consists of interest on our long-term debt and the amortization of deferred financing ~~costs.~~costs and debt discount.

Gain on Extinguishment of Debt

In the first quarter of 2023, we recorded a partial extinguishment of debt in the amount of $1.8 million related to the write-off of unamortized debt discount and deferred financing costs as a result of $45 million in prepayments of our senior debt pursuant to the third and fourth amendments of our Credit Agreement in February 2023. In the second quarter of 2023, we recorded a partial extinguishment of debt in amount of $8.0 million upon the amendment and restatement of the Credit Agreement. See Liquidity and Capital Resources section for definitions and additional details.

Fair Value Remeasurement Gain

~~Changes~~Fair value remeasurement gain consists of changes to the fair value of mandatorily redeemable preferred stock liability related to its remeasurement.

Other Income (Expense), Net

Other income (expense), net consists primarily of other miscellaneous nonoperating items, such as the loss on sale of Yandy, bank charges and foreign exchange gains or losses as well as non-recurring transaction fees. ~~Other income (expense), net for the three and six months ended June 30, 2021 also included a $0.7 million gain~~

Benefit from ~~settlement of convertible promissory notes payable to United Talent Agency, LLC (“UTA”) at a 20% discount.~~

~~Provision for~~ Income Taxes

~~The provision for~~Benefit from income taxes consists of an estimate for U.S. federal, state, and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Due to cumulative losses, we maintain a valuation allowance against our U.S. and state deferred tax assets.

Results of Operations

Comparison of the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes key components of our results of operations for the periods ~~indicated:~~indicated (in thousands, except percentages):


		Three Months Ended June 30,
		2022		2021		$ Change		% Change			Three Months Ended June 30,
		(in thousands)									2023		2022		$ Change		% Change
Net revenues	Net revenues	$	65,414	$	49,851	$	15,563	31	%	Net revenues	$	35,101	$	47,881	$	(12,780)	(27)	%
Costs and expenses
Costs and expenses:										Costs and expenses:	—		—
Cost of sales	Cost of sales	(28,058)		(23,675)		(4,383)		19	%	Cost of sales	(10,859)		(19,545)		8,686		(44)	%
Selling and administrative expenses	Selling and administrative expenses	(40,965)		(29,616)		(11,349)		38	%	Selling and administrative expenses	(32,592)		(38,613)		6,021		(16)	%
Other operating expenses		(2,574)		—		(2,574)		100	%
Total costs and expenses		(71,597)		(53,291)		(18,306)		34	%
Contingent consideration fair value remeasurement gain										Contingent consideration fair value remeasurement gain	75		8,641		(8,566)		(99)	%
Impairments										Impairments	(148,190)		(3,940)		(144,250)		over 150%
Other operating income, net										Other operating income, net	259		—		259		100	%
Total operating expense										Total operating expense	(191,307)		(53,457)		(137,850)		*
Operating (loss) income	Operating (loss) income	(6,183)		(3,440)		(2,743)		80	%	Operating (loss) income	(156,206)		(5,576)		(150,630)		*
Nonoperating income (expense):	Nonoperating income (expense):									Nonoperating income (expense):
Interest expense	Interest expense	(4,083)		(2,253)		(1,830)		81	%	Interest expense	(5,757)		(4,083)		(1,674)		41	%
Loss on extinguishment of debt		—		(1,217)		1,217		(100)	%
Gain on extinguishment of debt										Gain on extinguishment of debt	7,980		—		7,980		100	%
Fair value remeasurement gain	Fair value remeasurement gain	1,754		—		1,754		100	%	Fair value remeasurement gain	9,523		1,754		7,769		over 150%
Other (expense) income, net		(317)		(3)		(314)		*
Total nonoperating expense		(2,646)		(3,473)		827		24	%
Loss before income taxes		(8,829)		(6,913)		(1,916)		28	%
Benefit (expense) from income taxes		514		(2,003)		2,517		*
Other income (expense), net										Other income (expense), net	175		(347)		522		*
Total nonoperating income (expense)										Total nonoperating income (expense)	11,921		(2,676)		14,597		*
Loss from continuing operations before income taxes										Loss from continuing operations before income taxes	(144,285)		(8,252)		(136,033)		*
Benefit from income taxes										Benefit from income taxes	9,950		140		9,810		over 150%
Net loss from continuing operations										Net loss from continuing operations	(134,335)		(8,112)		(126,223)		*
Income (loss) from discontinued operations, net of tax										Income (loss) from discontinued operations, net of tax	452		(203)		655		*
Net loss	Net loss	(8,315)		(8,916)		601		7	%	Net loss	(133,883)		(8,315)		(125,568)		*
Net loss attributable to PLBY Group, Inc.	Net loss attributable to PLBY Group, Inc.	$	(8,315)	$	(8,916)	$	601	7	%	Net loss attributable to PLBY Group, Inc.	$	(133,883)	$	(8,315)	$	(125,568)	*

_________________

*Not meaningful

3932

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:


		Three Months Ended June 30,			Three Months Ended June 30,
		2022	2021		2023	2022
Net revenues	Net revenues	100%	100%	Net revenues	100%	100%
Costs and expenses
Costs and expenses:				Costs and expenses:
Cost of sales	Cost of sales	(43)	(47)	Cost of sales	(31)	(41)
Selling and administrative expenses	Selling and administrative expenses	(63)	(60)	Selling and administrative expenses	(93)	(81)
Other operating expenses		(3)	—
Total costs and expenses		(109)	(107)
Contingent consideration fair value remeasurement gain				Contingent consideration fair value remeasurement gain	—	18
Impairments				Impairments	(422)	(8)
Other operating income, net				Other operating income, net	1	—
Total operating expense				Total operating expense	(545)	(112)
Operating (loss) income	Operating (loss) income	(9)	(7)	Operating (loss) income	(445)	(12)
Nonoperating income (expense):	Nonoperating income (expense):			Nonoperating income (expense):

Interest expense	Interest expense	(6)	(5)	Interest expense	(16)	(9)
Loss on extinguishment of debt		—	(2)
Gain on extinguishment of debt				Gain on extinguishment of debt	23	—
Fair value remeasurement gain	Fair value remeasurement gain	3	—	Fair value remeasurement gain	27	4
Other (expense) income, net		—	—
Total nonoperating expense		(3)	(7)
Loss before income taxes		(12)	(14)
Benefit (expense) from income taxes		1	(4)
Other income (expense), net				Other income (expense), net	—	(1)
Total nonoperating income (expense)				Total nonoperating income (expense)	34	(6)
Loss from continuing operations before income taxes				Loss from continuing operations before income taxes	(411)	(18)
Benefit from income taxes				Benefit from income taxes	28	—
Net loss from continuing operations				Net loss from continuing operations	(383)	(18)
Income (loss) from discontinued operations, net of tax				Income (loss) from discontinued operations, net of tax	1	—
Net loss	Net loss	(13)	(18)	Net loss	(381)	(18)
Net loss attributable to PLBY Group, Inc.	Net loss attributable to PLBY Group, Inc.	(13)%	(18)%	Net loss attributable to PLBY Group, Inc.	(381)%	(18)%

Net Revenues

~~Net~~The decrease in net revenues ~~increased by $15.6 million, or 31%,~~for the three months ended June 30, 2023 as compared to the prior year comparative period was primarily due to ~~higher~~lower direct-to-consumer revenue of ~~$16.6~~$7.4 million, ~~of which $22.4~~a $5.6 million ~~was attributable~~decrease in licensing revenue and a $0.3 million decrease in TV and cable programming revenue, all due to ~~the acquisition of Honey Birdette,~~weaker consumer demand, partly offset by ~~a decrease~~$1.0 million of ~~$5.8 million in other direct-to-consumer revenue.~~higher revenues from our creator platform.

Cost of Sales

~~Cost~~The decrease in cost of sales ~~increased by $4.4 million, or 19%,~~for the three months ended June 30, 2023 as compared to the prior year comparative period was primarily due to $2.8 million less of direct-to-consumer product and shipping costs of due to fewer products sold, $1.8 million less of stock-based compensation expenses, primarily related to the ~~increase~~cancellation of independent contractor equity awards, $0.8 million lower licensing royalties and commissions, and $4.2 million lower licensing royalties and commissions, which includes a $3.4 million reduction in ~~direct-to-consumer cost~~commission accrual related to impairments and modifications of ~~sales~~certain trademark licensing contracts.

Selling and Administrative Expenses

The decrease in selling and administrative expenses for the three months ended June 30, 2023 as compared to the prior year comparative period was primarily due to a $1.6 million decrease in marketing expenses from our reduction of ~~$9.5~~digital marketing spend, $3.1 million lower payroll expense, as we shift to a capital-light business model, and the elimination of $1.1 million in airplane expenses following the sale of our aircraft in the third quarter of 2022.

Contingent Consideration Fair Value Remeasurement Gain

The decrease in contingent consideration fair value remeasurement gain for the three months ended June 30, 2023 as compared to the prior year comparative period was due to the resolution of contingent consideration related to the acquisition of Honey Birdette during 2022 and ~~expenses related~~partial settlement of the contingent consideration recorded in connection with the acquisition of GlowUp in the second quarter of 2022.

Impairments

The increase in impairments for the three months ended June 30, 2023 as compared to ~~our creator~~ ~~platform~~the prior year comparative period was primarily due to $138.2 million of ~~$2.8~~impairment charges on Playboy-branded trademarks, Honey Birdette’s trade names and goodwill recorded in the second quarter of 2023 and $11.2 million of impairment charges on certain licensing contracts, partly offset by ~~a decrease~~$1.2 million of related reduction in commission accrual on such licensing contracts, $2.6 million of higher impairment charges related to our digital assets during the three months ended June 30, 2022, due to their fair value decreasing below their carrying value, and a $1.4 million impairment of purchased intellectual property assets in the second quarter of 2022.

Other Operating Income, Net

The increase in other operating income, net was due to the gain on sale of our crypto assets.

Nonoperating Income (Expense)

Interest Expense

The increase in interest expense for the three months ended June 30, 2023 as ~~a result~~compared to the prior year comparative period was primarily due to the higher interest rates of ~~lower product~~11.41% and ~~shipping costs, TLA amortization~~9.41% on Tranche A and Tranche B, respectively, of our A&R Term Loans in the ~~inventory step-up~~second quarter of 2023 compared to 6.25% interest rate in the prior year comparative period, offset by the elimination of ~~$2.3 million, lower personnel costs of $1.1 million and $0.8~~$0.1 million of ~~inventory written off~~interest expense related to our former corporate aircraft loan in the prior year comparative ~~period.~~period (which loan was repaid in September 2022, resulting in no interest on the aircraft loan in the first quarter of 2023).

~~Selling~~Gain on Extinguishment of Debt

Gain on extinguishment of debt for the three months ended June 30, 2023 represents a gain of $8.0 million due to the partial extinguishment of debt upon the amendment and ~~Administrative Expenses~~restatement of the Credit Agreement.

Se~~lling~~Fair Value Remeasurement Gain

The increase in fair value remeasurement gain for the three months ended June 30, 2023 as compared to the prior year comparative period was due to the remeasurement of our mandatorily redeemable preferred stock liability to its fair value recorded during the period upon exchange (and thereby elimination) of the outstanding Series A Preferred Stock in connection with the amendment and ~~administrative expenses increased by $11.3 million, or 38%,~~restatement of the Credit Agreement.

Benefit from Income Taxes

The change in benefit from income taxes for the three months ended June 30, 2023 as compared to the prior year comparative period was primarily due to ~~increased direct-to-consumer costs~~the decrease of ~~$9.8 million related to~~disallowed Section 162(m) compensation, the ~~acquisition~~shortfall of ~~Honey Birdette~~stock-based compensation and ~~$1.7 million related to increased e-commerce marketing costs, $2.9 million of expenses related to our creator~~ ~~platform, $7.7 million of higher employee compensation related costs, partly offset by $8.6 million of non-cash fair value~~ change ~~due to contingent liabilities fair value remeasurement relating to our acquisitions.~~

~~Other Operating Expenses~~

~~Other operating expenses increased by $2.6 million, or 100%,~~in valuation allowance due to the ~~impairment of digital assets recognized~~reduction in net indefinite-lived deferred tax liabilities, offset by increased foreign income taxes in the three months ended June 30, ~~2022 as a result of the fair value of our digital assets decreasing below their carrying value.~~

~~Nonoperating Income (Expense)~~

~~Interest Expense~~

~~Interest expense increased by $1.8 million, or 81%, primarily due to incremental borrowings of $70.0 million pursuant to the Amendment No. 1 to the New Credit Agreement and the Aircraft Term Loan of~~ ~~$9.0 million,~~ ~~offset by the lower interest rate obtained pursuant to the Refinancing.~~2023.

4034

~~Loss on Extinguishment of Debt~~

~~Loss on extinguishment of debt decreased by $1.2 million, or 100% due to the Refinancing in the second quarter of 2021.~~

~~Fair Value Remeasurement Gain~~

~~Fair value remeasurement gain increased by $1.8 million, or 100%, due to the remeasurement of our preferred stock~~ ~~liability to its fair value at~~ ~~June 30, 2022.~~

~~Benefit (Expense) from Income Taxes~~

Provision for income taxes changed from $2.0 million of tax expense during the three months ended June 30, 2021 to $0.5 million of tax benefit during the three months ended June 30, 2022. During the three months ended June 30, 2022, we recognized a net discrete tax expense of $0.1 million, primarily related to (i) Section 162(m) limitations and (ii) a stock compensation shortfall addback. During the three months ended June 30, 2021, we recognized a net discrete tax benefit of $0.4 million, primarily related to the release of valuation allowance due to purchase accounting deferred tax adjustments.

Comparison of the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022

The following table summarizes key components of our results of operations for the periods ~~indicated:~~indicated (in thousands, except percentages):


		Six Months Ended June 30,
		2022		2021		$ Change		% Change			Six Months Ended June 30,
		(in thousands)									2023		2022		$ Change		% Change
Net revenues	Net revenues	$	134,792	$	92,531	$	42,261	46	%	Net revenues	$	70,304	$	94,941	$	(24,637)	(26)	%
Costs and expenses
Costs and expenses:										Costs and expenses:
Cost of sales	Cost of sales	(56,958)		(42,699)		(14,259)		33	%	Cost of sales	(32,636)		(37,531)		4,895		(13)	%
Selling and administrative expenses	Selling and administrative expenses	(72,195)		(57,561)		(14,634)		25	%	Selling and administrative expenses	(74,179)		(78,786)		4,607		(6)	%
Related party expenses		—		(250)		250		(100)	%
Other operating expenses		(4,933)		—		(4,933)		100	%
Total costs and expenses		(134,086)		(100,510)		(33,576)		33	%
Contingent consideration fair value remeasurement gain										Contingent consideration fair value remeasurement gain	267		27,939		(27,672)		(99)	%
Impairments										Impairments	(148,190)		(6,299)		(141,891)		over 150%
Other operating income, net										Other operating income, net	249		—		249		(100)	%
Total operating expense										Total operating expense	(254,489)		(94,677)		(159,812)		*
Operating (loss) income	Operating (loss) income	706		(7,979)		8,685		*		Operating (loss) income	(184,185)		264		(184,449)		*
Nonoperating income (expense):	Nonoperating income (expense):									Nonoperating income (expense):
Interest expense	Interest expense	(8,133)		(5,550)		(2,583)		47	%	Interest expense	(10,966)		(8,133)		(2,833)		35	%
Loss on extinguishment of debt		—		(1,217)		1,217		100	%
Gain on extinguishment of debt										Gain on extinguishment of debt	6,133		—		6,133		(100)	%
Fair value remeasurement gain	Fair value remeasurement gain	1,754		—		1,754		100	%	Fair value remeasurement gain	6,505		1,754		4,751		over 150%
Other (expense) income, net		(397)		742		(1,139)		(154)	%
Total nonoperating expense		(6,776)		(6,025)		(751)		12	%
Loss before income taxes		(6,070)		(14,004)		7,934		(57)	%
Benefit (expense) from income taxes		3,298		91		3,207		*
Other income (expense), net										Other income (expense), net	250		(479)		729		*
Total nonoperating income (expense)										Total nonoperating income (expense)	1,922		(6,858)		8,780		(128)	%
Loss from continuing operations before income taxes										Loss from continuing operations before income taxes	(182,263)		(6,594)		(175,669)		*
Benefit from income taxes										Benefit from income taxes	11,620		2,648		8,972		over 150%
Net loss from continuing operations										Net loss from continuing operations	(170,643)		(3,946)		(166,697)		*
Loss from discontinued operations, net of tax										Loss from discontinued operations, net of tax	(920)		1,174		(2,094)		*
Net loss	Net loss	(2,772)		(13,913)		11,141		(80)	%	Net loss	(171,563)		(2,772)		(168,791)		*
Net loss attributable to PLBY Group, Inc.	Net loss attributable to PLBY Group, Inc.	$	(2,772)	$	(13,913)	$	11,141	(80)	%	Net loss attributable to PLBY Group, Inc.	$	(171,563)	$	(2,772)	$	(168,791)	*

_________________

*Not meaningful

4135

The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of total revenue for the periods indicated:


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Net revenues	Net revenues	100	%	100	%	Net revenues	100	%	100	%
Costs and expenses
Costs and expenses:						Costs and expenses:
Cost of sales	Cost of sales	(42)		(46)		Cost of sales	(46)		(40)
Selling and administrative expenses	Selling and administrative expenses	(54)		(62)		Selling and administrative expenses	(105)		(82)
Related party expenses		—		—
Other operating expenses		(3)		—
Total costs and expenses		(99)		(108)
Contingent consideration fair value remeasurement gain						Contingent consideration fair value remeasurement gain	—		29
Impairments						Impairments	(211)		(7)
Other operating income, net						Other operating income, net	—		—
Total operating expense						Total operating expense	(362)		(100)
Operating (loss) income	Operating (loss) income	1		(8)		Operating (loss) income	(262)		—
Nonoperating income (expense):	Nonoperating income (expense):	—		—		Nonoperating income (expense):

Interest expense	Interest expense	(6)		(6)		Interest expense	(16)		(8)
Gain on extinguishment of debt						Gain on extinguishment of debt	10		—
Fair value remeasurement gain	Fair value remeasurement gain	1		—		Fair value remeasurement gain	9		2
Loss on extinguishment of debt		—		(1)
Other (expense) income, net		—		—
Total nonoperating expense		(5)		(7)
Loss before income taxes		(4)		(15)
Benefit (expense) from income taxes		2		—
Other income (expense), net						Other income (expense), net	—		(1)
Total nonoperating income (expense)						Total nonoperating income (expense)	3		(7)
Loss from continuing operations before income taxes						Loss from continuing operations before income taxes	(259)		(7)
Benefit from income taxes						Benefit from income taxes	16		3
Net loss from continuing operations						Net loss from continuing operations	(243)		(4)
Loss from discontinued operations, net of tax						Loss from discontinued operations, net of tax	(1)		1
Net loss	Net loss	(2)		(15)		Net loss	(244)		(3)
Net loss attributable to PLBY Group, Inc.	Net loss attributable to PLBY Group, Inc.	(2)	%	(15)	%	Net loss attributable to PLBY Group, Inc.	(244)	%	(3)	%

Net Revenues

~~Net~~The decrease in net revenues ~~increased by $42.3 million, or 46%,~~for the six months ended June 30, 2023 as compared to the prior year comparative period was primarily due to ~~increased~~$13.9 million less direct-to-consumer revenue, a $10.5 million decrease in licensing revenue and a $0.7 million decrease in TV and cable programming revenue, all due to weaker consumer demand, offset by $1.5 million of increased revenue from our creator platform.

Cost of Sales

The decrease in cost of sales for the six months ended June 30, 2023 as compared to the prior year comparative period was primarily due to $5.2 million of lower direct-to-consumer product and shipping costs, as a result of fewer products sold, $2.2 million less of stock-based compensation expenses, primarily related to the cancellation of independent contractor equity awards, partly offset by a $6.2 million increase in inventory reserve charges and a $3.4 million reduction in commission accrual for certain licensing contracts.

Selling and Administrative Expenses

The decrease in selling and administrative expenses for the six months ended June 30, 2023 as compared to the prior year comparative period was primarily due to a $3.8 million decrease in marketing expenses from our reduction of digital marketing spend, lower payroll expense of $3.1 million, as we shift to a capital-light business model, the elimination of $2.1 million in airplane expenses following the sale of our aircraft in the third quarter of 2022, a $1.6 million decrease in recruiting costs, and a $1.3 million decrease in stock-based compensation expense, net of $2.3 million of additional stock-based compensation expense due to the acceleration of certain equity awards in connection with severance payments, partly offset by $5.2 million higher technology costs, out of which ~~$6.3~~$4.6 million was ~~attributable~~due to a restructuring charge taken on direct-to-consumer cloud-based software, and $1.8 million of salary and related severance charges in connection with headcount reductions.

Contingent Consideration Fair Value Remeasurement Gain

The decrease in contingent consideration fair value remeasurement gain for the six months ended June 30, 2023 as compared to the ~~acquisition~~prior year comparative period was due to the resolution of ~~TLA and $44.6 million was attributable~~contingent consideration related to the acquisition of Honey Birdette ~~offset by a decrease~~during 2022 and partial settlement of the contingent consideration recorded in ~~other direct-to-consumer revenu~~econnection with the acquisition of ~~$6.7 million and higher sales~~GlowUp in the second quarter of ~~non-fungible tokens~~2022.

Impairments

The increase in impairments for the six months ended June 30, 2023 as compared to the prior year comparative period o~~f $0.8 million.~~

~~Cost of Sales~~

~~Cost of sales increased by $14.3 million, or 33%,~~was primarily due to ~~an increase~~ impairment charges of $138.2 million on Playboy-branded trademarks, Honey Birdette’s trade names and goodwill recorded in ~~direct-to-consumer cost~~the second quarter of ~~sales~~2023 and the $11.2 million impairment of ~~$18.5 million related to Honey Birdette, as well as expenses related to~~ ~~our creator platform~~of~~$4.1 million,~~certain licensing contracts, partly offset by ~~a decrease~~$1.2 million of ~~$2.7~~related reduction in commission accrual for such licensing contracts, $4.9 million ~~in the cost~~ of ~~sales as a result of lower product and shipping costs for e-commerce and lower cost of sales from TLA primarily due to~~ ~~the amortization of the~~ ~~inventory step-up in the prior year comparative period of $2.3 million.~~

~~Related Party Expenses~~

Related party expenses decreased by $0.3 million, or 100%, due to the termination of our management agreement with an affiliate of one of our stockholders for management and consulting services in the first quarter of 2021 upon consummation of the Business Combination.

~~Selling~~ ~~and Administrative Expenses~~

~~Selling and administrative expenses increased by $14.6 million, or 25%, primarily due to increased direct-to-consumer costs of $19.9 million~~higher impairment charges related to ~~the acquisition of Honey Birdette and $4.8 million related to the acquisition of TLA, higher e-commerce marketing costs of $3.4 million, higher employee compensation related costs of $11.6 million, $4.1 million of expenses attributable to~~ our creator platform as well as increased cloud-based software and technology infrastructure investments of $2.8 million, partly offset by $27.9 million of non-cash fair value change due to the contingent liabilities fair value remeasurement relating to our acquisitions, and $5.0 million of bonus payments in the prior year comparative period.

~~Other Operating Expenses~~

~~Other operating expenses increased by $4.9 million, or 100%, due to impairment of~~ digital assets ~~recognized in~~during the six months ended June 30, 2022 as a result of ~~the~~their fair value ~~of our digital assets~~ decreasing below their carrying ~~value.~~value, and the $1.4 million impairment of certain other assets in the second quarter of 2022.

Other Operating Income, Net

The increase in other operating income, net was due to the gain on sale of our crypto assets.

Nonoperating Income (Expense)

Interest Expense

~~Interest~~The increase in interest expense ~~increased by $2.6 million, or 47%, from $5.6 million,~~for the six months ended June 30, 2023 as compared to the prior year comparative period was primarily due to ~~incremental borrowings~~the higher interest rate on our debt of ~~$70.0 million pursuant~~11.20% in the first quarter of 2023 and interest rates of 11.41% and 9.41% on Tranche A and Tranche B, respectively, of the A&R Term Loans, in the second quarter of 2023 compared to 6.25% interest rate in the ~~Amendment No. 1 to the New Credit Agreement and the Aircraft Term Loan of~~ ~~$9.0 million~~prior year comparative period, offset by the elimination of $0.3 million of interest expense related to our former corporate aircraft loan in the prior year comparative period (which loan was repaid in September 2022) and reduced debt interest on the lower ~~interest rate obtained pursuant~~outstanding principal balance of our term loan in the first quarter of 2023 due to mandatory prepayments made in the ~~Refinancing.~~fourth quarter of 2022 and first quarter of 2023.

~~Loss~~Gain on Extinguishment of Debt

~~Loss~~Gain on extinguishment of debt ~~decreased by $1.2~~for the six months ended June 30, 2023 represents a $8.0 million ~~or 100%,~~gain due to the ~~Refinancing~~partial extinguishment of debt upon the amendment and restatement of the Credit Agreement in the second quarter of ~~2021.~~2023, net of a $1.8 million loss recorded in the first quarter of 2023 due to the partial extinguishment of debt related to $45 million of prepayments of our senior debt.

Fair Value Remeasurement Gain

~~Fair~~The increase in fair value remeasurement gain ~~increased by~~ ~~$1.8~~ ~~million, or 100%,~~for the six months ended June 30, 2023 as compared to the prior year comparative period was due to the remeasurement of our mandatorily redeemable preferred stock liability to its fair value at June 30, ~~2022.~~

~~Other (Expense) Income, Net~~

Other (expense) income, net decreased by $1.1 million, primarily due to the $0.7 million gain from settlement of convertible promissory notes recognized during the first quarter of 2021, as we settled the convertible promissory note payable to UTA at a 20% discount.2023.

Benefit ~~(Expense)~~ from Income Taxes

~~Provision for~~The change in benefit from income taxes ~~increased from $0.1 million of tax benefit during~~for the six months ended June 30, ~~2021~~2023 as compared to ~~$3.3 million~~the prior year comparative period was primarily due to a decrease of disallowed Section 162(m) compensation, a shortfall of stock-based compensation and a change in valuation allowance due to a reduction in net indefinite-lived deferred tax ~~benefit during~~liabilities, offset by increased foreign income taxes in the six months ended June 30, 2022. During the six months ended June 30, 2022, we recognized a net discrete tax benefit of $2.8 million, primarily related to (i) Section 162(m) limitations, (ii) stock compensation windfall and shortfall adjustments, and (iii) withholding tax prior year true-up adjustments. During the six months ended June 30, 2021,we recognized a net discrete tax benefit of $0.6, primarily related to the release of valuation allowance due to purchase accounting deferred tax adjustments.2023.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measure is useful in evaluating our operational performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors in assessing our operating performance.

EBITDA and Adjusted EBITDA

“EBITDA” is defined as net income or loss before results from discontinued operations, interest, income tax expense or benefit, and depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for stock-based compensation and other special items determined by management. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, investors should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

In addition to adjusting for non-cash stock-based compensation, non-cash charges for the fair value remeasurements of certain liabilities and non-recurring non-cash impairments, asset write-downs and inventory reserve charges, we typically adjust for nonoperating expenses and income, such as ~~management fees paid to one of our stockholders, merger related bonus payments,~~ non-recurring special projects including the implementation of internal controls, expenses associated with financing activities, ~~acquisition related inventory step-up amortization and costs, the expense associated with~~ reorganization and severance resulting in the elimination or rightsizing of specific business activities or operations ~~as we transform from a print~~ and ~~digital media~~non-recurring gains (losses) on the sale of business ~~to a commerce centric business.~~units.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. Investors should review the reconciliation of net loss to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

The following table reconciles net loss to EBITDA and Adjusted ~~EBITDA:~~EBITDA (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss from continuing operations	$	(134,335)	$	(8,112)	$	(170,643)	$	(3,946)
Adjusted for:
Interest expense	5,757		4,083		10,966		8,133
Gain on extinguishment of debt	(7,980)		—		(6,133)		—
Benefit from income taxes	(9,950)		(140)		(11,620)		(2,648)
Depreciation and amortization	1,848		1,992		3,537		5,056
EBITDA	(144,660)		(2,177)		(173,893)		6,595
Adjusted for:
Stock-based compensation	3,151		4,747		8,370		11,286
Adjustments	1,623		1,426		4,843		2,715
Inventory reserve charges	—		—		3,637		—
Contingent consideration fair value remeasurement	(75)		(8,641)		(267)		(27,939)
Mandatorily redeemable preferred stock fair value remeasurement	(9,523)		(1,754)		(6,505)		(1,754)
Impairments	148,190		3,940		148,190		6,299
Write-down of capitalized software	—		—		4,632		—
Adjusted EBITDA	$	(1,294)	$	(2,459)	$	(10,993)	$	(2,798)

•

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(in thousands)
Net loss $ (8,315) $ (8,916) $ (2,772) $ (13,913)
Adjusted for:
Interest expense 4,083 2,253 8,133 5,550
Loss on extinguishment of debt — 1,217 — 1,217
Provision for income taxes (514) 2,003 (3,298) (91)
Depreciation and amortization 2,457 1,034 5,962 1,762
EBITDA (2,289) (2,409) 8,025 (5,475)
Adjusted for:
Stock-based compensation 4,747 361 11,286 3,859
Adjustments 1,431 1,460 2,720 7,500
Amortization of inventory step-up — 2,250 — 2,250
Contingent consideration fair value remeasurement (8,641) — (27,939) —
Preferred stock fair value remeasurement (1,754) — (1,754) —
Impairments 3,937 — 6,296 —
Acquisition related costs — 4,218 — 4,218
Management fees and expenses — — — 250
Adjusted EBITDA $ (2,569) $ 5,880 $ (1,366) $ 12,602
Adjustments for the three and six months ended June 30, 2023 are primarily related to consulting, advisory and other costs relating to corporate transactions and other strategic opportunities, the loss on the sale of Yandy, as well as reorganization and severance costs resulting in the elimination or rightsizing of specific business activities or operations.

•Adjustments for the three and six months ended June 30, 2022 are related to amortization of previously capitalized fees allocated to our Series A Preferred Stock upon the Second Drawdown (as defined below), severance, ~~and~~ consulting, advisory and other costs relating to special projects, including the implementation of internal controls over financial reporting and adoption of accounting standards.

•Inventory reserve charges for the six months ended June 30, 2023 and 2022 related to non-cash inventory reserve charges, excluding certain ordinary inventory reserve items, recorded in the first quarter of 2023 to reflect the restructuring of the Playboy Direct-to-Consumer business.

•Contingent consideration fair value remeasurement for the three and six months ended June 30, ~~2022~~2023 relates to non-cash fair value ~~change~~gain due to ~~contingent liabilities~~the fair value remeasurement ~~resulting from the~~of contingent liabilities related to our acquisition of ~~Honey Birdette and GlowUp.~~GlowUp that remained unsettled as of June 30, 2023.

•~~Preferred stock~~Contingent consideration fair value remeasurement for the three and six months ended June 30, 2022 relates to non-cash fair value ~~change due~~gain with respect to the fair value remeasurement of contingent liabilities in connection with our Honey Birdette and GlowUp acquisitions.

•Mandatorily redeemable preferred stock ~~liability~~ fair value ~~remeasurement.~~remeasurement for the three and six months ended June 30, 2023, and the three months ended 2022, relates to the fair value remeasurement, non-cash fair value gain of the liability for our Series A Preferred Stock.

•Write-down of capitalized software for the six months ended June 30, 2023 related to a $5.0 million restructuring charge taken on direct-to-consumer cloud-based software in the first quarter of 2023, excluding $0.4 million of costs related to discontinued operations.

•Impairments for the three and six months ended June 30, 2023 relate primarily to the impairments of intangible assets, including goodwill, and impairments on certain of our licensing contracts, net of related reduction in commission accrual.

•Impairments for the three and six months ended June 30, 2022 ~~relate~~ relates to the ~~impairment~~impairments of digital assets and ~~asset impairment related to intangible assets acquired during the three months~~ ~~ended June 30, 2022~~.purchased intellectual property assets.

•~~Adjustments for the three and six~~ ~~months ended June 30, 2021 are p~~rimarily related to bonus payments in connection with the Business Combination, as well as consulting, advisory and other costs relating to non-recurring items and special projects, including, the implementation of internal controls over financial reporting, and executive search costs.

•~~Amortization of inventory valuation step-up adjustment for the~~ ~~three and six months ended June 30, 2021 relates to amortization of a non-cash inventory valuation step-up as part of the purchase accounting resulting from the acquisition of TLA.~~

•~~Acquisition related costs for the three and six~~ ~~months ended June 30, 2021 include consulting and advisory costs related to acquisition activities.~~

•~~Management fees and expenses adjustments for the six months ended June 30, 2021 represent fees paid to one of our stockholders.~~

Segments

Our Chief Executive Officer is our Chief Operating Decision Maker (“CODM”). Our segment disclosure is based on our intention to provide the users of our condensed consolidated financial statements with a view of the business from our perspective. We operate our business in three primary operating and reportable segments: Licensing, Direct-to-Consumer, and Digital Subscriptions and Content. Licensing operations include the licensing of one or more of our trademarks and/or images for consumer products and location-based entertainment businesses. Direct-to-Consumer operations include consumer products sold through third-party retailers or online direct-to-customer. Digital Subscriptions and Content operations include the ~~licensing of one or more of our trademarks and/or images for online gaming and the~~ production, marketing and sales of programming under the Playboy brand name, which is distributed through various channels, including domestic and international television, ~~and~~ sales of tokenized digital art and ~~collectibles.~~collectibles, and sales of creator content offerings to consumers on playboy.com.

Comparison of the Three Months Ended June 30, 2023 and 2022

The following are our results of financial performance from continuing operations by segment for each of the periods ~~presented:~~presented (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			Three Months Ended June 30,
		(in thousands)				(in thousands)					2023		2022		$ Change		% Change
Net revenues:	Net revenues:									Net revenues:
Licensing	Licensing	$	15,876	$	15,961	$	30,437	$	31,665	Licensing	$	10,288	$	15,876	$	(5,588)	(35)	%
Direct-to-Consumer	Direct-to-Consumer	44,601		28,014		94,243		50,061		Direct-to-Consumer	19,700		27,068		(7,368)		(27)	%
Digital Subscriptions and Content	Digital Subscriptions and Content	4,694		5,704		9,434		10,619		Digital Subscriptions and Content	5,112		4,694		418		9	%
All Other	All Other	243		172		678		186		All Other	1		243		(242)		(100)	%
Total	Total	$	65,414	$	49,851	$	134,792	$	92,531	Total	$	35,101	$	47,881	$	(12,780)	(27)	%
Operating income (loss):	Operating income (loss):									Operating income (loss):
Licensing	Licensing	$	12,653	$	11,655	$	24,122	$	22,963	Licensing	$	(68,281)	$	10,945	$	(79,226)	over 150%
Direct-to-Consumer	Direct-to-Consumer	690		(656)		2,951		1,019		Direct-to-Consumer	(75,002)		(1,231)		(73,771)		over 150%
Digital Subscriptions and Content	Digital Subscriptions and Content	(5,692)		1,845		(8,052)		4,164		Digital Subscriptions and Content	1,002		(6,738)		7,740		(115)	%
Corporate	Corporate	(13,987)		(16,289)		(18,861)		(36,098)		Corporate	(13,918)		(8,783)		(5,135)		58	%
All Other	All Other	153		5		546		(27)		All Other	(7)		231		(238)		(103)	%
Total	Total	$	(6,183)	$	(3,440)	$	706	$	(7,979)	Total	$	(156,206)	$	(5,576)	$	(150,630)	over 150%

Licensing

~~Net~~The decrease in net revenues ~~decreased by $0.1 million, or 0.5%,~~ for the three months ended June 30, ~~2022,~~2023 compared to the comparable prior year period was primarily due to ~~lower royalties~~the decline in contractual revenue and overages from ~~licensing collaborations.~~our licensees due to weaker consumer demand.

~~For~~The decrease in operating income for the ~~six~~three months ended June 30, ~~2022, net revenues decreased by $1.2 million, or 3.9%,~~2023 compared to the comparable prior year period was primarily due to ~~lower royalties~~$65.5 million of non-cash impairment charges on our trademarks, $4.7 million decline in ~~2022 due to~~licensing gross profit, $11.2 million of impairment of certain ~~amended~~ licensing ~~agreements~~contracts, partly offset by $1.2 million of related reduction in commission accrual for such licensing contracts, and ~~contract terminations.~~$1.3 million of costs associated with operations of the Playboy China joint venture, partly offset by a $4.6 million reduction in commission accrual for certain licensing contracts.

~~Operating income increased by $1.0 million, or 8.6%,~~Direct-to-Consumer

The decrease in net revenues for the three months ended June 30, ~~2022,~~2023 compared to the comparable prior year period was primarily due to ~~lower costs.~~declines in consumer demand experienced by our direct-to-consumer businesses.

~~For~~The increase in operating loss for the ~~six~~three months ended June 30, ~~2022, operating income increased by $1.2 million, or 5.0%,~~2023 compared to the comparable prior year period was primarily due to $72.6 million of non-cash impairment charges on certain of our intangible assets, including goodwill, $5.5 million lower ~~costs of $2.3 million, partly offset by decreased revenues of $1.2 million.~~

~~Direct-to-Consumer~~

Net revenues increased by $16.6 million, or 59.2%, for the three months ended June 30, 2022, compared to the comparable prior year period, primarily due to revenue of $22.4 million attributable to the acquisition of Honey Birdette in the third quarter of 2021, ~~partly offset by a decrease of $5.8 million in other direct-to-consumer revenue~~.

For the six months ended June 30, 2022, net revenues increased by $44.2 million, or 88.3%, compared to the comparable prior year period, primarily due to revenue of $44.6 million attributable to the acquisition of Honey Birdette in the third quarter of 2021 and ~~$6.3 million attributable to the acquisition of TLA in the first quarter of 2021,~~ ~~partially offset by a decrease in e-commerce revenue of~~ ~~$6.7 million~~.

Operating income increased by $1.3 million, or over 100%, for the three months ended June 30, 2022, compared to the comparable prior year period, primarily due to operating income of $3.1 million attributable to the acquisition of Honey Birdette in the third quarter of 2021 and $1.3 million ~~attributable to the acquisition of TLA in the first quarter of 2021,~~ ~~offset by higher e-commerce marketing costs of $1.7 million and $1.4 million primarily~~gross profit as a result of lower ~~e-commerce sales.~~

~~For the six months ended June 30, 2022, operating income increased by $1.9~~revenue, and approximately $0.8 million ~~or over 100%, primarily due to operating income~~ of ~~$6.2 million attributable to the acquisition of Honey Birdette in the third quarter of 2021 and $2.6 million~~ ~~attributable to the acquisition of TLA in the first quarter of 2021,~~severance charges, partly offset by ~~higher e-commerce~~a $1.6 million decrease in marketing expenses as a result of our reduction of digital marketing, following a review of returns on advertising spending, $1.2 million lower technology costs, ~~of $3.4~~and $1.5 million ~~and $4.1 million of~~ lower ~~e-commerce sales.~~payroll expenses, as we shift to a capital-light business model.

Digital Subscriptions and Content

Net revenues decreased by $1.0 million for the three months ended June 30, 2022, compared to the comparable prior year period of $5.7 million, attributable to the sale of non-fungible tokens in the second quarter of 2021.

For the six months ended June 30, 2022, net revenues decreased by $1.2 million, or 11.2%, compared to the comparable prior year period. The decrease was primarily attributable to the sale of non-fungible tokens in the second quarter of 2021.

Operating income decreased by $7.5 million, or more than 100%, for the three months ended June 30, 2022, compared to the comparable prior year period. The decrease was primarily attributable to the digital assets impairment of $2.6 million, as well as e~~xpenses related to our creator~~ ~~platform of $5.7 million.~~

For the six months ended June 30, 2022, operating income decreased by $12.2 million, or more than 100%, compared to the comparable prior year period, primarily due to the impairment of digital assets of $4.9 million and e~~xpenses related to our creator~~ ~~platform of $8.2 million.~~

~~All Other~~

The increase in net revenues for the three months ended June 30, ~~2022,~~2023 compared to the comparable prior year period was ~~immaterial.~~

~~For the six months ended June 30, 2022~~primarily due to a $1.0 million increase in net ~~revenues increased~~revenue from our creator platform, partly offset by ~~$0.5~~a $0.6 million ~~or more than 100%, compared to the comparable prior year period. The increase was primarily attributable to revenue recognized from the fulfillment of magazine subscription obligations~~decrease in ~~the first quarter of 2022.~~other digital subscriptions and content revenue.

The increase in operating income for the three months ended June 30, ~~2022,~~2023, compared to the comparable prior year period was ~~immaterial.~~primarily due to a $0.4 million increase in net revenues, a $2.3 million decrease in expenses related to our creator platform, $1.0 million lower payroll and severance costs and $3.9 million of higher impairments of digital and other assets in the comparable prior year period.

~~For~~Corporate

The increase in corporate expenses for the ~~six~~three months ended June 30, ~~2022, operating income increased by $0.6 million, or more than 100%,~~2023 compared to the comparable prior year period was primarily due to $8.6 million less in non-cash contingent liabilities fair value remeasurement gain relating to our 2021 acquisitions, partly offset by the elimination of $1.1 million in airplane expenses after to the sale of our former corporate aircraft in the third quarter of 2022, and $1.2 million of lower payroll expense, as we shift to a capital-light business model.

Comparison of the Six Months Ended June 30, 2023 and 2022

The following are our results of financial performance from continuing operations by segment for each of the periods presented (in thousands):


	Six Months Ended June 30,
	2023		2022		$ Change		% Change
Net revenues:
Licensing	$	19,982	$	30,437	$	(10,455)	(34)	%
Direct-to-Consumer	40,468		54,392		(13,924)		(26)	%
Digital Subscriptions and Content	9,850		9,434		416		4	%
All Other	4		678		(674)		(99)	%
Total	$	70,304	$	94,941	$	(24,637)	(26)	%
Operating income (loss):
Licensing	$	(64,714)	$	20,704	$	(85,418)	over 150%
Direct-to-Consumer	(90,058)		(1,716)		(88,342)		over 150%
Digital Subscriptions and Content	393		(9,842)		10,235		(104)	%
Corporate	(29,794)		(9,485)		(20,309)		over 150%
All Other	(12)		603		(615)		(102)	%
Total	$	(184,185)	$	264	$	(184,449)	over 150%

Licensing

The decrease in net revenues for the six months ended June 30, 2023 compared to the comparable prior year period was primarily due to the decline in contractual revenue and overages from our licensees due to weaker consumer demand.

The decrease in operating income for the six months ended June 30, 2023 compared to the comparable prior year period was primarily due to $65.5 million of non-cash impairment charges on our trademarks, $9.3 million decline in licensing gross profit, the $11.2 million impairment of certain licensing contracts, partly offset by $1.2 million of related reduction in commission accrual for such licensing contracts and $2.5 million of costs associated with the formation and operation of the Playboy China joint venture, partly offset by a $4.6 million reduction in commission accrual for certain licensing contracts.

Direct-to-Consumer

The decrease in net revenues for the six months ended June 30, 2023 compared to the comparable prior year period was primarily due to declines in consumer demand experienced by our direct-to-consumer businesses.

The increase in operating loss for the six months ended June 30, 2023 compared to the comparable prior year period was primarily due to $72.6 million of non-cash impairment charges on certain of our intangible assets, including goodwill, $10.1 million of lower gross profit as a result of lower revenue, $5.2 million of higher technology costs (of which $4.6 million was due to a restructuring charge taken on direct-to-consumer cloud-based software attributable to continuing operations), a $6.2 million increase in inventory reserve charges, and approximately $1.1 million of severance charges, partly offset by $2.9 million of lower marketing expenses as a result of our reduction of digital marketing spend, $1.1 million lower trade name amortization due to accelerated amortization recognized in the prior year period, $1.3 million lower payroll expense as we shift to a capital-light business model, and a $1.2 million decrease in other selling and administrative expenses.

Digital Subscriptions and Content

The increase in net revenues for the six months ended June 30, 2023 compared to the comparable prior year period was primarily due to a $1.5 million increase in net revenues from our creator platform, partly offset by a $1.1 million decrease in other digital subscriptions and content revenue.

The increase in operating income for the six months ended June 30, 2023, compared to the comparable prior year period was primarily due to a $0.4 million increase in net revenues, a $3.0 million decrease in expenses related to our creator platform, and the $6.3 million higher impairment of digital and other assets in the comparable prior year period.

All Other

The decrease in both revenues and operating loss for the six months ended June 30, 2023 was primarily attributable to the recognized revenues related to the fulfillment of magazine subscription obligations in the first quarter of ~~2022.~~2022 that did not reoccur in the subsequent periods, as a result of the cessation of publishing the magazine.

Corporate

~~Corporate~~The increase in corporate expenses ~~decreased by $2.3 million, or 14.1%,~~ for the ~~three~~six months ended June 30, ~~2022.~~2023 compared to the comparable prior year period was primarily due to ~~$8.6~~$27.7 million ofless in non-cash ~~fair value change due to~~ contingent liabilities fair value remeasurement gain relating to our 2021 acquisitions ~~$4.2~~and $1.1 million of ~~acquisition~~severance costs related ~~costs and expenses in the prior year comparative period,~~to headcount reductions as we shift to a capital-light business model, partly offset by ~~higher employee~~$1.3 million lower stock-based compensation ~~related~~expense, net of $2.3 million of additional stock-based compensation expense, due to the acceleration of certain equity awards in connection with severance payments, $2.3 million lower professional services costs, the elimination of ~~$6.4~~$2.1 million of aircraft costs following the sale of our aircraft in the third quarter of 2022, and $1.1 million and ~~increased cloud-based software and technology infrastructure investments of $1.6 million.~~

~~For the six months ended June 30, 2022, corporate expenses decreased by $17.2 million, or 47.8%, compared to the comparable prior year period, primarily due to $27.9~~$1.5 million of ~~non-cash fair value change due to contingent liabilities fair value remeasurement relating to our acquisitions, $4.2 million of acquisition related costs~~lower payroll and costs associated with our transition to a public company in the prior year comparative period, partly offset by higher employee compensation related costs of $11.4 million and increased cloud-based software and technrecruiting expenses, respectively.

~~ology infrastructure~~ ~~investments of $2.5 million.~~

Liquidity and Capital Resources

Sources of Liquidity

Our main source of liquidity is cash generated from operating and financing activities, which primarily includes cash derived from revenue generating activities, in addition to proceeds from our ~~public offering and~~ issuance of debt, ~~in 2021,~~ and proceeds from stock offerings (as described further below). As of June 30, 2023, our principal source of liquidity was cash in the ~~issuance~~amount of $34.4 million, which is primarily held in operating and ~~sale of Series A Preferred Stock in May 2022.~~

In June 2021, we completed a public offering in which 4,720,000 shares of our common stock were sold at a price of $46 per share. The underwriters were also granted an option to purchase up to an additional 708,000 shares of our common stock from us at the public offering price, less underwriting discounts and commissions. Such option expired unexercised. We incurred approximately $13.2 million of underwriting commissions and $1.0 million of public offering related fees, which were netted against the proceeds. The net proceeds received from the public offering were $202.9 million.deposit accounts.

On May 16, 2022, we issued and sold 25,000 shares of Series A Preferred Stock to Drawbridge DSO Securities LLC (the “Purchaser”) at a price of $1,000 per share, resulting in total gross proceeds to us of $25.0 million, and we agreed to sell to the Purchaser, and the Purchaser agreed to purchase from us, up to an additional 25,000 shares of Series A Preferred Stock on the terms set forth in the securities purchase agreement entered into by us and the Purchaser. We incurred approximately $1.5 million of fees associated with the transaction, ~~$1.3~~$1.0 million of which was netted against the gross proceeds.

On August 8, 2022, we issued and sold the remaining 25,000 shares of Series A Preferred Stock to the Purchaser at a price of $1,000 per share (the “Second Drawdown”), resulting in additional gross proceeds to us of $25.0 million. We incurred approximately $0.5 million of fees associated with the Second Drawdown, which were netted against the gross proceeds. As a result of ~~June 30, 2022,~~the transaction, all of our ~~principal source~~authorized shares of ~~liquidity was~~Series A Preferred Stock were issued and outstanding as of August 8, 2022.

On January 24, 2023, we issued 6,357,341 shares of our ~~cash~~common stock in a registered direct offering to a limited number of investors. We received $15 million in gross proceeds from the ~~amount~~registered direct offering, and net proceeds of ~~$44.6~~$13.9 million, after the payment of offering fees and expenses.

We also completed a rights offering in February 2023, pursuant to which ~~is primarily held in operating~~we issued 19,561,050 shares of common stock. We received net proceeds of $47.6 million from the rights offering, after the payment of offering fees and ~~deposit accounts.~~ expenses. We used $45 million of the net proceeds from the rights offering for repayment of debt under our Credit Agreement, with the remainder to be used for other general corporate purposes.

Although consequences of ~~the COVID-19 pandemic and resulting economic~~ongoing macroeconomic uncertainty could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors, such as those discussed above, we believe our existing sources of liquidity will be sufficient to fund our operations, including lease obligations, debt service requirements, capital expenditures and working capital obligations for at least the next 12 ~~months.~~months from the filing of this Quarterly Report. We may seek additional equity or debt financing in the future to satisfy capital requirements, respond to adverse developments such as ~~the COVID-19 pandemic,~~ changes in our circumstances or unforeseen events or conditions, or fund organic or inorganic growth opportunities. In the event that additional financing is required from ~~third party~~third-party sources, we may not be able to raise it on acceptable terms or at all.

Debt

~~2014 Term Loan~~On April 4, 2023, we entered into Amendment No. 5 (the “Fifth Amendment”) to the Credit and Guaranty Agreement, dated as of May 25, 2021 (as previously amended on August 11, 2021, August 8, 2022, December 6, 2022 and February 17, 2023, the “Credit Agreement”, and as further amended by the Fifth Amendment) to permit, among other things, the Yandy Sale, and that the proceeds of such sale would not be required to prepay the loans under the Credit Agreement (as amended through the Fifth Amendment); provided that at least 30% of the consideration for the Yandy Sale was paid in cash.

On May 10, 2023, we entered into an amendment and restatement of the Credit Agreement (the “A&R Credit Agreement”) to reduce the interest rate applicable to our senior secured debt, eliminate our Series A Preferred Stock, and obtain additional covenant relief and funding. Refer to Note 9, Debt, of this Quarterly Report on Form 10-Q for additional information.

In ~~June 2014, we borrowed $150.0 million under a four-and-one-half-year term loan maturing on December 31, 2018, at an effective rate~~connection with the A&R Credit Agreement, Fortress Credit Corp. and its affiliates (together, “Fortress”) became our lender with respect to approximately 90% of ~~7.0% from DBD Credit Funding LLC pursuant to a credit agreement (the “Credit Agreement”). From 2016 to 2020,~~ the term ~~loan~~loans under the A&R Credit Agreement (the “A&R Term Loans”), Fortress exchanged 50,000 shares of the Company’s Series A Preferred Stock (representing all of the Company’s issued and outstanding preferred stock) for approximately $53.6 million of the A&R Term Loans, and Fortress extended approximately $11.8 million of additional funding as part of the A&R Term Loans. As a result, the Company’s Series A Stock was ~~amended multiple times~~eliminated, and the principal balance of the A&R Term Loans under the A&R Credit Agreement is approximately $210.0 million (whereas the original Credit Agreement had an outstanding balance of approximately $156.0 million as of March 31, 2023).

The primary changes to ~~borrow an additional $12.0 million, increase~~ the commitment amount, extend the maturity date to December 31, 2023, set up a debt reserve account and excess cash account, and to revise the quarterly principal payments and applicable margin rates, among other amendments. Our debt bore interest at a rate per annum equal to the Eurodollar Rate for the interest period in effect plus the applicable margin in effect from time to time. The Eurodollar Rate is the greater of (a) an interest rate per annum (rounded upward, if necessary, to the next 1/100th of 1%) determined by the administrative agent divided by 1 minus the statutory reserves (if any) and (b) 1.25% per annum.

~~In January 2021, the term loan was amended to defer the excess cash flow payment due in January 2021 to April 2021 among other amendments. The~~ terms of the ~~modified~~original Credit Agreement set forth in the A&R Credit Agreement, include:

•The apportioning of the original Credit Agreement’s term loans into approximately $20.6 million of Tranche A term loans (“Tranche A”) and approximately $189.4 million of Tranche B term loans (“Tranche B”, and together with Tranche A comprising the A&R Term Loans);

•Eliminating the prior amortization payments applicable to the total term loan ~~were not considered substantially different and~~under the ~~amendment was accounted for as a modification. On May 25, 2021, the~~original Credit Agreement ~~was repaid in full~~ and ~~terminated upon completion~~requiring that only the smaller Tranche A be subject to quarterly amortization payments of approximately $76,000 per quarter;

•The benchmark rate for the A&R Term Loans will be the applicable term of secured overnight financing rate as published by the U.S. Federal Reserve Bank of New York, rather than LIBOR;

•As of the ~~refinancing described below.~~

~~New Term Loan~~

~~On May 25, 2021, we borrowed $160.0 million under a term loan maturing on May 25, 2027 (the “New Term Loan”),~~Restatement Date, Tranche A will accrue interest at ~~an effective rate of LIBOR~~SOFR plus ~~5.75%~~6.25%, with a ~~LIBOR~~SOFR floor of 0.50%. ;

•As of the Restatement Date, Tranche B will accrue interest at SOFR plus 4.25%, with a SOFR floor of 0.50%;

•The ~~New Term Loan replaced~~requisite lenders for approvals under the ~~2014 Term Loan.~~ A&R Credit Agreement will no longer require two unaffiliated lenders when there are at least two unaffiliated lenders, except with respect to customary fundamental rights;

•The lenders will be entitled to appoint one observer to the Company’s board of directors (subject to certain exceptions), and the Company shall be responsible for reimbursing the board observer for all reasonable out-of-pocket costs and expenses; and

•Allowing the Company to make up to $15 million of stock buybacks through the term of the A&R Credit Agreement.

The interest rate applicable to borrowings under the ~~New~~A&R Term ~~Loan~~Loans may ~~subsequently~~ be adjusted on periodic measurement dates provided for under the ~~New~~A&R Credit Agreement based on the type of loans borrowed by usthe Company and ~~our~~the total leverage ratio of the Company at such time. ~~At our~~The Company, at its option, we may borrow loans which accrue interest at (i) a base rate (with a floor of 1.50%) or (ii) at ~~LIBOR,~~SOFR, in each case plus an applicable per annum margin. The per annum applicable margin for Tranche A base rate loans is ~~4.25%~~5.25% or 4.75%, with the lower rate applying when the total leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less, and the per annum applicable margin for ~~LIBOR~~Tranche A SOFR loans is ~~5.25%~~6.25% or 5.75%, with the lower rate applying when the total leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less. With respect to Tranche B loans that are SOFR loans, the per annum applicable margin will be 4.25% and with respect to Tranche B loans that are base rate loans, the per annum applicable margin will be 3.25%. In addition, the A&R Term Loans will be subject to a credit spread adjustment of 0.10% per annum. The ~~New Term Loan requires quarterly amortization payments of $0.4 million, commencing on September 30, 2021, with the balance becoming due at maturity. The~~stated interest rate ~~on the New Term Loan was 6.25%~~of Tranche A and Tranche B term loans as of June 30, ~~2022.~~

~~Our obligations~~2023 was 11.41% and 9.41%, respectively. The stated interest rate of the term loan pursuant to the ~~New~~ Credit Agreement ~~are guaranteed by us and any~~as of our current and future wholly-owned, domestic subsidiaries, subject to certain exceptions. In connection with the New Credit Agreement, the Company and the other guarantor subsidiaries of the Company entered into a Pledge and Security Agreement with the collateral agent, pursuant to which we granted a senior security interest to the agent in substantially all of our assets (including the stock of certain of our subsidiaries) in order to secure our obligations under the New Credit Agreement.December 31, 2022 was 11.01%.

4743

We ~~entered into Amendment No. 1~~accounted for the amendment and restatement of the Credit Agreement (the “Restatement”) as a partial debt extinguishment and recognized $8.0 million in gain on debt extinguishment related to the ~~New Credit Agreement, dated as~~lenders that sold their debt positions in our debt to Fortress. For the rest of ~~August 11, 2021, by and among PLBY, Playboy Enterprises, Inc., the subsidiary guarantors party thereto,~~ the lenders, ~~party thereto, and Acquiom Agency Services LLC,~~the transaction was accounted for as ~~the administrative agent and the collateral agent, to, among other things: (a) obtain~~ a $70 million incremental term loan (the “Incremental Term Loan”), thereby increasing the aggregate principal amount of term loan indebtedness outstanding under the New Credit Agreement to $230 million, and (b) amend the termsdebt modification. As a result of the ~~New Credit Agreement~~Restatement, we capitalized an additional $21.0 million of debt discount while deferring and continuing to ~~among other things, permit Honey Birdette~~amortize an existing discount of $2.6 million, which will be amortized over the remaining term of our senior secured debt and ~~certain~~recorded in interest expense in our condensed consolidated statements of ~~its subsidiaries to guaranty~~operations. $0.3 million of fees were expensed as incurred and $0.4 million of debt issuance costs were capitalized as a result of the ~~obligations under the New Credit Agreement.~~Restatement.

The ~~Incremental~~A&R Term ~~Loan was incurred on materially~~Loans are subject to mandatory prepayments under certain circumstances, with certain exceptions, from excess cash flow, the proceeds of the sale of assets, the proceeds from the incurrence of certain other indebtedness, and certain casualty and condemnation proceeds. The A&R Term Loans may be voluntarily prepaid by us at any time without any prepayment penalty. The A&R Credit Agreement does not include any minimum cash covenants.

The A&R Term Loans retained the same ~~terms~~final maturity date of May 25, 2027 as the ~~New Term Loan. The New~~term loan under the original Credit Agreement. In connection with the A&R Credit Agreement, as amended by the First Amendment, requires quarterly amortization payments of $0.6 million, commencing on September 30, 2021. The Incremental Term Loan, together with cash on hand, was used to finance the acquisition of Honey Birdette andwe were not required to pay any fees, but we were required to pay the lenders’ and the Agent’s legal expenses ~~incurred~~ in connection with the ~~Incremental Term Loan and such acquisition.~~

~~On August 8, 2022, we entered into Amendment No. 2 to~~transaction. Compliance with the New Credit Agreement, by and among the Company, Playboy Enterprises, Inc., the subsidiary guarantors party thereto, the lenders party thereto, and Acquiom Agency Services LLC, as the administrative agent and the collateral agent. ~~See Note 19, Subsequent Events, within the notes to our unaudited condensed consolidated~~ financial ~~statements, in addition to Part II, Item 5, “Other Information” of this Quarterly Report, for a summary of the Second Amendment.~~

~~Aircraft Term Loan~~

~~In May 2021, we borrowed $9.0 million under a five-year~~ ~~term loan maturing in May 2026 to fund the purchase of an aircraft. The stated interest rate was 6.25%~~covenants as of June 30, 2022. The Aircraft Term Loan requires monthly amortization payments of approximately $0.1 million, commencing on July 1, 2021. We incurred $0.1 million of financing costs related to the Aircraft Term Loan as of2023 and December 31, ~~2021, which were capitalized.~~

~~Promissory Notes — Creative Artists Agency and Global Brands Group~~

In December 2016, we entered into a global consumer products licensing agency representation agreement with Creative Artists Agency — Global Brands Group LLP (“CAA-GBG”). Concurrently, we borrowed $13.0 million from CAA-GBG2022 was waived pursuant to the terms of ~~a promissory note. The promissory note was noninterest bearing~~the A&R Credit Agreement and ~~was to be repaid in monthly installments in an amount equal to 11.00%~~the third amendment of the ~~monthly collections~~Credit Agreement, respectively.

Leases

Our principal lease commitments are for office space and operations under several noncancelable operating leases with contractual terms expiring from 2023 to 2033. Some of these leases contain renewal options and rent escalations. As of June 30, 2023 and December 31, 2022, our fixed leases were $32.7 million and $33.0 million, respectively, with $6.4 million and $6.3 million due in the ~~representation agreement beginning in 2017 and ending in 2021. In August 2018, we and CAA-GBG agreed~~next 12 months. For further information on our lease obligations, refer to ~~terminate the original promissory note and issue convertible promissory notes with the principal amounts equal to the outstanding amount~~Note 13 of the ~~original promissory note. A convertible promissory note was issued~~Notes to CAA Brand Management, LLC (“CAA”) for $2.7 million and a convertible promissory note was issued to GBG International Holding Company Limited (“GBG”) for $7.3 million. These notes were noninterest bearing and were convertible into sharesCondensed Financial Statements included in Part I, Item 1 of our common stock no later than October 31, 2020, which was extended to December 31, 2020. In December 2020, we repaid the outstanding principal balance of the GBG note at a 20% discount resulting in a gainthis Quarterly Report on settlement of $1.5 million. In January 2021, the outstanding note with CAA was converted into 51,857 shares of Legacy Playboy’s common stock, which was exchanged for 290,563 shares of our common stock upon the closing of the Business Combination in February 2021.Form 10-Q.

~~Convertible Promissory Notes — United Talent Agency~~

In March and June 2018, we issued convertible promissory notes to UTA for an aggregate principal amount of $3.5 million. These notes were noninterest bearing and were convertible into shares of our common stock no later than October 31, 2020, which was extended to December 31, 2020. In January 2021, the settlement terms of the outstanding notes were amended to extend the term to the one-month anniversary of the termination or expiration of the Merger Agreement. In February 2021, we repaid the outstanding principal balance of the notes at a 20% discount resulting in a gain on settlement of $0.7 million.

Cash Flows

The following table summarizes our cash flows from continuing operations for the periods ~~indicated:~~indicated (in thousands):

Six Months Ended June 30,
2022 2021
(in thousands)
Net cash provided by (used in):
Operating activities $ (43,055) $ (21,618)
Investing activities (5,178) (37,752)
Financing activities 23,451 301,469


	Six Months Ended June 30,
	2023		2022		$ Change		% Change
Net cash provided by (used in):
Operating activities	$	(26,653)	$	(44,629)	$	17,976	(40)	%
Investing activities	248		(4,774)		5,022		(105)	%
Financing activities	27,334		23,451		3,883		17	%

Cash Flows from Operating Activities

~~Net~~The decrease in net cash used in operating activities ~~was $43.1 million, including a net loss of $2.8 million~~ for ~~the~~ six months ended June 30, ~~2022. Net loss~~2023 over the prior year comparable period was ~~adjusted for non-cash charges of $2.2 million,~~ primarily ~~attributable~~due to stock-based compensation expense of $11.3 million, impairment of digital and other assets of $6.3 million and $6.0 million of depreciation and amortization expense and fixed asset impairments, partially offset by changes in the fair value of contingent liabilities of $29.7 million, amortization of right of use assets of $4.2 million and deferred income taxes of $2.8 million. Other changes in assets and liabilities ~~represent items~~ that had a current period cash flow impact, such as ~~changes in working capital. Net cash outflows from~~$34.4 million of changes in working capital and $150.3 million of ~~$38.1~~changes in non-cash charges, offset by a $166.7 million ~~were primarily associated with an~~ increase in ~~receivables~~net loss from continuing operations. The change in assets and liabilities as compared to the prior year comparable period was primarily driven by a $10.2 million decrease in accounts receivable due to the timing of royalties collections and modifications of certain trademark licensing contracts, a $15.1 million decrease in contract assets due to the impairment, modification or termination of certain trademark licensing contracts, an decrease of $6.1 million in prepaid expenses and other assets primarily due to a restructuring charge taken on direct-to-consumer cloud-based software in the first quarter of 2023, an decrease of $4.1 million in inventories, net due to reduced purchasing, a $2.5 million decrease in accounts payable due to the timing of payments, and a $19.4 million decrease in deferred revenues due to the timing of the direct-to-consumer order shipments as well as impairments and modifications of certain trademark licensing contracts. The change in non-cash charges compared to the change in the prior year comparable period was primarily driven by a $141.9 million increase in non-cash impairment charges, a $22.9 million change in fair value remeasurement charges, a $5.9 million increase in inventory reserve charges, and a $6.1 million net gain on the extinguishment of debt in 2023, partly offset by a $2.9 million decrease in ~~accrued payables, salaries, wages, and employee benefits, deferred revenues, operating lease liabilities and other current liabilities.~~stock-based compensation expense.

~~Net~~Cash Flows from Investing Activities

The increase in net cash used in ~~operating~~investing activities ~~was $21.6 million, including a net loss of $13.9 million~~ for the six months ended June 30, ~~2021. Net loss~~2023 over the prior year comparable period was ~~adjusted for non-cash charges~~primarily due to proceeds from the sale of ~~$7.6 million, primarily attributable to stock-based compensation expense of $3.9 million, amortization of right of use assets of $2.5 million~~ and $1.8 million of depreciation and amortization expense. Other changes in assets and liabilities represent items that had a current period cash flow impact, such as changes in working capital. Net cash outflows from changes in working capital of $15.3 million were primarily associated with an increase in contract assets, receivables and other assets and liabilities, and a decrease in accrued salaries, wages, and employee benefits,Yandy, offset by ~~an increase in accounts payable largely associated with infrastructure development costs incurred as part~~lower purchases of ~~our transition to a public company.~~property and equipment.

Cash Flows from ~~Investing~~Financing Activities

~~Net~~The increase in net cash ~~used in investing~~provided by financing activities ~~was $5.2 million~~ for the six months ended June 30, ~~2022, which~~2023 over the prior year comparable period was ~~primarily due to the acquisition of property and equipment.~~

~~Net cash used in investing activities was $37.8~~ ~~million for the six months ended June 30, 2021, which was primarily due to the acquisition of TLA and purchase of an aircraft.~~

~~Cash Flows from Financing Activities~~

~~Net cash provided by financing activities was $23.5 million for the six months ended June 30, 2022, which was primarily~~ due to net proceeds of ~~$23.8~~$13.9 million from our registered direct offering in January of 2023 and net proceeds of $47.6 million from the issuance of ~~preferred stock.~~

~~Net cash provided~~common stock in our rights offering in February of 2023, gross proceeds of $11.8 million from the Restatement in the second quarter of 2023, partly offset by ~~financing activities was $301.5~~a $43.9 million ~~for~~increase in the ~~six months ended June 30, 2021, which~~ ~~was primarily due to net proceeds from our June 2021 public offering, as well as issuance~~repayment of long-term debt ~~net cash acquired~~ from the ~~Business Combination~~proceeds of such offerings, $1.4 million of proceeds from the exercise of stock options, and ~~PIPE Investment, partially offset by~~$23.8 million of proceeds from the ~~repayment~~issuance of ~~borrowings and~~Series A Preferred Stock in the ~~payment of financing costs.~~prior year comparable period.

Contractual Obligations

There have been no material changes to our contractual obligations from December 31, ~~2021,~~2022, as disclosed in our audited consolidated financial statements included in our Annual Report on Form 10-K filed on March 16, ~~2022, other than those relating to new store leases entered into in the second quarter of 2022, as disclosed in Note 13 “Commitments and Contingencies”.~~2023.

Critical Accounting Policies and Estimates

Our interim condensed consolidated financial statements have been prepared in accordance with USU.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Estimates and judgments used in the preparation of our interim condensed consolidated financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our control, such as demand for our products, inflation, foreign currency exchange rates, economic conditions and other current and future events, such as the impact of ~~the COVID-19 pandemic~~public health crises and epidemics and global hostilities. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

During the six months ended June 30, ~~2022,~~2023, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on March 16, ~~2022.~~2023.

Recent Accounting Pronouncements

~~There were no recently adopted~~See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, ~~applicable~~the timing of their adoption, and our assessment, to the ~~Company for the quarter ended June 30, 2022. We do not believe that there were any recently issued, but not yet effective, accounting pronouncements that would~~extent we have ~~a material effect~~made one, of their potential impact on our financial ~~statements.~~condition and results of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to a variety of market and other risks, including the effects of changes in interest rates, inflation, and foreign currency exchange rates, as well as risks to the availability of funding sources, hazard events, and specific asset risks.

Interest Rate Risk

The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had cash of ~~$44.6~~$34.4 million and ~~$69.2~~$31.6 million, respectively, and restricted cash and cash equivalents of ~~$5.8~~$2.0 million and ~~$6.2~~$3.8 million, respectively, primarily consisting of interest-bearing deposit accounts for which the fair market value would be affected by changes in the general level of U.S. interest rates. However, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and restricted cash and cash equivalents.

In order to maintain liquidity and fund business operations, our long-term A&R Term Loans are subject to a variable interest rate based on prime, federal funds, or SOFR plus an applicable margin based on our total net leverage ratio. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions, and other factors. We may elect to enter into interest rate swap contracts to reduce the impact associated with interest rate fluctuations, but as of June 30, 2023, we have not entered into any such contracts.

As of June 30, ~~2022 and December 31, 2021~~2023, we had outstanding debt obligations of ~~$235.8~~$209.9 million, ~~and $237.4 million, respectively,~~ which accrued interest at a rate of ~~6.25%~~11.41% and 9.41% for Tranche A and Tranche B term loans, respectively. As of December 31, 2022, outstanding debt obligations were $201.6 million, which accrued interest at a rate of 11.01%. ~~A hypothetical 10% change in~~Based on the ~~interest rate on~~balance outstanding under our ~~debt for all periods presented would not have a material impact on our consolidated financial statements.~~

~~Credit Risk~~

At various times throughout the year, we maintained cash balances in excess of Federal Deposit Insurance Corporation insured limits. We have not experienced any losses in such accounts and do not believe that there is any credit risk to our cash. Concentration of credit risk with respect to accounts receivable i~~s limited due to the wide variety of customers to whom our products are sold and/or licensed. We had a licensee that accounted for approximately~~ 8% ~~and 11%~~ ~~of our net revenues for the three months ended~~A&R Term Loans at June 30, ~~2022 and 2021, respectively.~~2023, we estimate that a 0.5% or 1% increase or decrease in underlying interest rates would increase or decrease annual interest expense by $1.1 million or $2.2 million, respectively, in any given fiscal year.

Foreign Currency Risk

We transact business in various foreign currencies and have significant international revenues, as well as costs denominated in foreign currencies other than the U.S. dollar, primarily the Australian dollar. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, have in the past, and may in the future, negatively affect our revenue and other operating results as expressed in U.S. dollars. For the three ~~and six~~ months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we derived approximately ~~43%~~57% and ~~42%, and 30% and 33%~~59%, respectively, of our revenue from ~~international customers,~~outside the United States, out of which 30% and 29%, respectively, was denominated in foreign currency. For the six months ended June 30, 2023 and 2022, we ~~expect the percentage~~derived approximately 56% and 60%, respectively, of our revenue ~~derived~~ from outside the United States, ~~to increase~~out of which 29% and 30%, respectively, was denominated in ~~future periods as we continue to expand globally.~~foreign currency. Revenue and related expenses generated from our international operations (other than most international licenses) are denominated in the functional currencies of the corresponding country. The functional currency of our subsidiaries that either operate in or support these markets is generally the same as the corresponding local currency. The majority of our international licenses are denominated in U.S. dollars. The results of operations of, and certain of our intercompany balances associated with, our international operations are exposed to foreign exchange rate fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. We do not have an active foreign exchange hedging program.

There are numerous factors impacting the amount by which our financial results are affected by foreign currency translation and transaction gains and losses resulting from changes in currency exchange rates, including, but not limited to, the volume of foreign currency-denominated transactions in a given period. Foreign currency transaction exposure from a 10% movement of currency exchange rates would have a material impact on our results, assuming no foreign currency hedging. For the three and six months ended June 30, ~~2022,~~2023, we recorded an unrealized loss of ~~$22.2~~$0.3 million and ~~$14.7~~$2.0 million, respectively, which is included in accumulated other comprehensive loss as of June 30, ~~2022.~~2023. This was primarily related to the increase in the U.S. dollar against the Australian dollar during the three and six months ended June 30, ~~2022. A hypothetical 10% movement~~2023.

Inflation Risk

Inflationary factors such as increases in the ~~Australian dollar would~~cost of our product and overhead costs may adversely affect our operating results. Although we do not ~~have~~believe that inflation has had a material impact on our ~~consolidated~~ financial ~~statements.~~

~~Market Price Risk~~position or results of ~~Digital Assets~~

~~During~~operations in recent periods, a high rate of inflation in the ~~fourth quarter~~future may have an adverse effect on our ability to maintain or improve current levels of ~~2021 we released "Rabbitars", a non-fungible token collection,~~revenue, gross margin and ~~accepted Ethereum as payment. As of June 30, 2022,~~selling and administrative expenses, or the ~~net carrying value~~ability of our ~~digital assets held was $1.7 million. We account for our digital assets as indefinite-lived intangible assets, which are subject~~customers to ~~impairment losses if the fair value~~make discretionary purchases of our ~~digital assets decreases below their carrying value at any time. Impairment losses cannot~~goods and services. See our “Risk Factors—Risks Related to Our Business and Industry—Our business depends on consumer purchases of discretionary items, which can be ~~recovered for any subsequent increase~~negatively impacted during an economic downturn or periods of inflation. This could negatively affect our sales, profitability and financial condition,” included in fair value. For example, the market price of one Ethereum in our principal market ranged from $964 to $3,522 during the second quarter of 2022, but the carrying value of each Ethereum we held at the end of the reporting period reflects the lowest price of one Ethereum quoted on the active exchange at any time since its receipt. Therefore, negative swings in the market price of Ethereum could have a material impact on our earnings and on the carrying valueItem 1A of our digital assets. Positive swings in the market price of Ethereum are not reflected in the carrying value of our digital assets and impact earnings only when the Ethereum is sold at a gain. For the three and six months ended June 30, 2022, we incurred an impairment loss of $2.6 million and $4.9 millionAnnual Report on ~~our Ethereum, respectively.~~Form 10-K filed on March 16, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described below. However, after giving full consideration to such material weaknesses, and the additional analyses and other procedures that we performed to ensure that our condensed consolidated financial statements included in this Quarterly Report were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.

Management has determined that the Company had the following material weaknesses in its internal control over financial reporting:

Control Environment, Risk Assessment, and Monitoring

We did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment procedures, and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to: (i) lack of structure and responsibility, insufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, (ii) ineffective identification and assessment of risks impacting internal control over financial reporting, and (iii) ineffective evaluation and determination as to whether the components of internal control were present and functioning.

Control Activities and Information and Communication

These material weaknesses contributed to the following additional material weaknesses within certain business processes and the information technology environment:

•We did not fully design, implement and monitor general information technology controls in the areas of program change management, user access, and segregation of duties for systems supporting substantially all of the Company’s internal control processes. Accordingly, the Company did not have effective automated process-level controls, and manual controls that are dependent upon the information derived from the IT systems are also determined to be ineffective.

•We did not design and implement, and retain appropriate documentation of formal accounting policies, procedures and controls across substantially all of the Company’s business processes to achieve timely, complete, accurate financial accounting, reporting, and disclosures. Additionally, we did not design and implement controls maintained at the corporate level which are at a sufficient level of precision to provide for the appropriate level of oversight of business process activities and related controls.

•We did not appropriately design and implement management review controls at a sufficient level of precision around complex accounting areas and disclosure including ~~business combinations,~~asset impairments, income tax, digital assets, stock-based compensation and lease accounting.

•We did not appropriately design and implement controls over the existence, accuracy, completeness, valuation and cutoff of inventory.

Further, although management did not conduct a formal assessment of internal controls over financial reporting, in connection with the integration of our 2021 acquisitions, as well as during the audit of the consolidated financial statements for the year ended December 31, 2021, management has identified material weaknesses in internal controls over financial reporting relating to our 2021 acquisitions:

•~~We did not appropriately design and implement controls over the existence, accuracy, completeness, and cutoff of inventory related to our 2021 acquisitions.~~

Although these material weaknesses did not result in any material misstatement of our consolidated financial statements for the periods presented, they could lead to a material misstatement of account balances or disclosures. Accordingly, management has concluded that these control deficiencies constitute material weaknesses.

Remediation Efforts

We have begun the process of, and we are focused on, designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate the material weaknesses. Our internal control remediation efforts include the following:

•We hired additional qualified accounting resources and outside resources to segregate key functions within our financial and information technology processes ~~supporting our internal controls over financial reporting.~~

•~~We are in the process of reassessing and formalizing the design of certain accounting and information technology policies~~ relating to security and change management controls. We expect the full remediation of certain of such systems by the end of fiscal year 2024.

•We engaged an outside firm to assist management with (i) reviewing our current processes, procedures, and systems and assessing the design of controls to identify opportunities to enhance the design of controls that would address relevant risks identified by management, and (ii) enhancing and implementing protocols to retain sufficient documentary evidence of ~~operating~~operating effectiveness of such controls.

•We implemented our warehouse management system, and continue to refine our inventory process controls to increase the level of precision. We expect the full remediation of certain of such systems by 2024.

In addition to implementing and refining the above activities, we expect to engage in additional remediation activities in coming fiscal ~~year 2022,~~years including:

•Continuing to enhance and formalize our accounting, business operations, and information technology policies, procedures, and controls to achieve complete, accurate, and timely financial accounting, reporting and disclosures.

•~~Complete~~Designing and implementing controls that address the completeness and accuracy of underlying data used in the performance of controls over accounting transactions and disclosures.

•Completing the implementation of our ~~new~~ enterprise reporting software and other system integrations and ~~establish~~establishing effective general controls over these systems to ensure that our automated process level controls and information produced and maintained in our IT systems is relevant and ~~reliable~~

•~~Implementation of a new warehouse management system, and redesigning certain inventory process controls to increase the level of precision.~~

•~~Designing and implementing controls that address the completeness and accuracy of underlying data used in the performance of controls over accounting transactions and disclosures.~~reliable.

•Enhancing policies and procedures to retain adequate documentary evidence for certain management review controls over certain business processes including precision of review and evidence of review procedures performed to demonstrate effective operation of such controls.

•Developing monitoring controls and protocols that will allow us to timely assess the design and the operating effectiveness of controls over financial reporting and make necessary changes to the design of controls, if any.

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

As described above, we are in the process of implementing changes to our internal control over financial reporting to remediate the material weaknesses described herein. There have been no changes in our internal control over financial reporting, during the quarter ended June 30, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are party to pending litigation and claims in connection with the ordinary course of our business. We make provisions for estimated losses to be incurred in such litigation and claims, including legal costs, and we believe such provisions are adequate. See Note 13, Commitments and Contingencies—Legal Contingencies, within the notes to our unaudited condensed consolidated financial statements for a summary of material legal proceedings, in addition to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K filed with the SEC on March 16, ~~2022.~~2023.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report, please carefully consider the risk factors described in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, under the heading “Part I – Item 1A. Risk Factors.” Such risks described are not the only risks facing us. Additional risks and uncertainties not currently known to us, or that our management currently deems to be immaterial, also may adversely affect our business, financial condition, and/or operating results. There have been no material changes to those risk factors since their disclosure in our most recent Annual Report on Form 10-K.

Item 2. Recent Sales of Unregistered Securities and Use of Proceeds.

On April 1, 2022, we issued 103,570 shares of our common stock, based on a price of $14.0002 per share, as consideration for the purchase of assets from With Vibe Inc. The issuance of such shares was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for transactions not involving a public offering, as such issuance was pursuant to a private placement.

On May 16, 2022, we sold 25,000 shares of Series A Preferred Stock to Drawbridge DSO Securities LLC at a price of $1,000 per share, resulting in total gross proceeds to us of $25.0 million, and we agreed to sell to the Purchaser, and the Purchaser agreed to purchase from us, up to an additional 25,000 shares of Series A Preferred Stock on the terms set forth in the securities purchase agreement entered into by us and the Purchaser. We agreed to pay to the Purchaser a fee of 2.0% of the aggregate purchase price of the Series A Preferred Stock purchased by the Purchaser, and a fee of 1.0% of the aggregate purchase price of the 50,000 shares of Series A Preferred Stock.

In connection with the Second Amendment, on August 8, 2022, we issued and sold the additional 25,000 shares of Series A Preferred Stock to the Purchaser at a price of $1,000 per share, resulting in total gross proceeds to the Company of $25.0 million (the “Drawdown”). We incurred approximately $0.5 million of fees associated with the Drawdown, resulting in net proceeds of $24.5 million to the Company. As a result of the Drawdown, all of the Company’s authorized shares of Series A Preferred Stock were issued and outstanding as of August 8, 2022. We intend to use the proceeds from the sales of the Series A Preferred Stock to repurchase shares of common stock pursuant to the 2022 Stock Repurchase Program and for general corporate purposes.

The offer and sales of the shares of Series A Preferred Stock were made in reliance upon an exemption from registration under the Securities Act, pursuant to Section 4(a)(2) thereof. Any shares of common stock payable as dividends on or the redemption price for the Series A Preferred Stock will be issued in reliance upon the exemption from registration in Section 3(a)(9) of the Securities Act.

On May 17, 2022, we issued 352,923 shares of our common stock to the sellers of GlowUp, based on a price of $23.4624 per share pursuant to the terms of the GlowUp Agreement. Such shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act, as they were issued pursuant to a private placement to accredited investors.

On May 31, 2022 and June 27, 2022, we issued 3,312 shares and 17,663 shares, respectively, of our common stock to an independent contractor based on a price of $37.7444 per share as payment for services pursuant to the terms of a license, services and collaboration agreement. Such shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act, as they were issued pursuant to a private placement to an accredited investor.

As of June 30, ~~2022,~~2023, we had not repurchased any shares of our common stock as authorized pursuant to the 2022 Stock Repurchase Program, which was authorized by the Board of Directors on May 14, 2022.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On August 8, 2022, the Company entered into Amendment No. 2 to the Credit and Guaranty Agreement (the “Second Amendment”), dated as of May 25, 2021 (as previously amended on August 11, 2021, the “Existing Credit Agreement”, and as further amendedNo Rule 10b5‑1 plans or non-Rule 10b5-1 trading arrangements were adopted, modified or terminated by the Second Amendment), by and among the Company, Playboy Enterprises, Inc., the subsidiary guarantors party thereto, the lenders party thereto (the “Lenders”), and Acquiom Agency Services LLC, as the administrative agent and the collateral agent, to amend the terms of the Existing Credit Agreement to, among other things: (i) require the Company to maintain a minimum consolidated cash balance of $40 million, to be tested twice quarterly (with a 45-day cure period), subject to certain exceptions; (ii) require that the Company’s consolidated cash balance not fall below $25 million for more than five consecutive business days during any applicable test period (with a 15-day cure period to then exceed a cash balance of $40 million); (iii) increase addbacks to the determination of the Company’s consolidated EBITDA (as defined in the New Credit Agreement); (iv) set Total Net Leverage Ratios for Test Periods (as such terms are defined in the New Credit Agreement) ending June 30, 2022 through March 31, 2023 at 7.00 to 1.00, reducing quarterly thereafter at the step-downs specified in the New Credit Agreement to 4.50 to 1.00 as of September 30, 2024, in each case subject to up to $12.5 million of cash netting; (v) increase the per annum interest rates applicable to base rate loans to 4.75%officers or 5.25%, with the lower rate applying when the total net leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less, and the per annum interest rates applicable to LIBOR loans to 5.75% or 6.25%, with the lower rate applying when the total net leverage ratio as of the applicable measurement date is 3.00 to 1.00 or less; (vi) impose an additional 0.25% interest rate for each 0.5x increase in the total net leverage ratio (as defined in the New Credit Agreement)directors of the Company, above the quarterly levels in the Existing Credit Agreement for test periods ending June 30, 2022 through maturity of the New Credit Agreement; (vii) allow the Company to prepay the loans under the New Credit Agreement at par and allow the Company and its investors to purchase such loans from the Lenders on a pro rata basis (subject to certain limitations set forth in the New Credit Agreement); and (viii) increase financial reportingnor were there any material changes to the ~~Lenders and impose certain limitations on the ability of the Company~~procedures by which security holders may recommend nominees to ~~incur further indebtedness or undertake certain transactions until the Company has significantly reduced certain leverage ratios set forth in the New Credit Agreement.~~

The cash balance requirements are subject to a dollar-for-dollar reduction for payments which reduce the outstanding principal amount of the loans under the New Credit Agreement, and such requirements and limitations on the Company’s ability to make certain restricted payments (including repurchases of its stock) terminate upon achieving a pro forma total leverage ratio (as defined in the New Credit Agreement) of less than 4.00 to 1.00. Two designees of the Lenders will also serve as observers of the Company’s board of directors, ~~until~~during the ~~total leverage ratio is less than 4.00 to 1.00.~~

The foregoing descriptions of the Second Amendment and the Purchase Agreement, and, in each case, the transactions contemplated thereby, do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Purchase Agreement and Second Amendment filed herewith as Exhibits 10.1 and 10.2, respectively, which are incorporated herein by reference.quarter ended June 30, 2023.

5549

Item 6. Exhibits.


Exhibit No.						Description
3.1						Second Amended and Restated Certificate of Incorporation of PLBY Group, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 16, 2021)
3.2						Amended and Restated Bylaws of PLBY Group, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on February 16, 2021)
3.3						Certificate of Designation of the Series A Preferred Stock ~~(incorporat~~ed (incorporated by reference to Exhibit 3.1 ~~of the Compa~~ny ’~~s Current Report on Form 8-K filed with the SEC on May~~ 17 ~~, 2022)~~
~~10.1^~~						~~Purchase Agreement, dated~~ ~~May 13, 2022,~~ by ~~and among PLBY Group, Inc. and~~ ~~the~~ ~~Purchaser(incorporated by reference to Exhibit~~ 10 .1 of the Company’s Current Report on Form 8-K filed with the SEC on May 17, 2022)
~~10.2*^~~10.1						Amendment No. 25 to Credit and Guaranty Agreement, dated as of ~~August 8, 2022,~~April 4, 2023, by and among PLBY Group, Inc., Playboy Enterprises, Inc., each guarantor party thereto, the lenders party thereto, and Acquiom Agency Services LLC, as the administrative agent and the collateral ~~agent.~~agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 5, 2023)
10.2 †						PLBY Group, Inc. Non-Employee Director Compensation Policy, amended and restated as of April 20, 2023 (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 10-Q filed with the SEC on May 10, 2023)
10.3 ^						Amended and Restated Credit and Guaranty Agreement, dated as of May 10, 2023, by and among PLBY Group, Inc., Playboy Enterprises, Inc., each guarantor party thereto, the lenders party thereto, and Acquiom Agency Services LLC, as the administrative agent and the collateral agent (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 10-Q filed with the SEC on May 10, 2023)
31.1*						Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended
31.2*						Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated pursuant to the Securities Exchange Act of 1934, as amended
32.1**						Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
31.232.2*						Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101						The following financial information from PLBY Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022~~2023 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) related notes (submitted electronically with this Quarterly Report on Form 10-Q)
101.INS						Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document (submitted electronically with this Quarterly Report on Form 10-Q)
101.SCH						Inline XBRL Taxonomy Extension Schema Document (submitted electronically with this Quarterly Report on Form 10-Q)
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document (submitted electronically with this Quarterly Report on Form 10-Q)
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically with this Quarterly Report on Form 10-Q)
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document (submitted electronically with this Quarterly Report on Form 10-Q)
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document (submitted electronically with this Quarterly Report on Form 10-Q)
104						Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

_____________________

^ Schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

* Filed herewith.

** This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of PLBY Group, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

† Management contract or compensation plan or arrangement.

^ Schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

5650

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PLBY GROUP, INC.

Date: August 9, ~~2022~~2023	By:	/s/ Ben Kohn
	Name:	Ben Kohn
	Title:	Chief Executive Officer and President (principal executive officer)

Date: August 9, ~~2022~~2023	By:	/s/ ~~Lance Barton~~Marc Crossman
	Name:	~~Lance Barton~~Marc Crossman
	Title:	Chief Financial Officer and Chief Operation Officer (principal financial officer)

5751


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration liability	$	—	$	—	$	(36,630)	$	(36,630)


	Three Months Ended June 30, 2021										Six Months Ended June 30, 2021
	Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total		Licensing		Direct-to-Consumer		Digital Subscription and Content		Other		Total
Trademark Licensing	$	15,961	$	—	$	—	$	—	$	15,961	$	31,665	$	—	$	—	$	—	$	31,665
Magazine and Digital Subscriptions	—		—		3,271		9		3,280		—		—		5,594		23		5,617
TV and Cable Programming	—		—		2,433		163		2,596		—		—		5,025		163		5,188
Consumer Products	—		28,014		—		—		28,014		—		50,061		—		—		50,061
Total revenues	$	15,961	$	28,014	$	5,704	$	172	$	49,851	$	31,665	$	50,061	$	10,619	$	186	$	92,531


	June 30, 2022		December 31, 2021
Aircraft	$	13,443	$	13,298
Leasehold improvements	11,657		9,619
Construction in progress	6,105		3,317
Equipment	4,045		1,381
Internally developed software	3,431		2,001
Furniture and fixtures	2,141		5,209
Total property and equipment, gross	40,822		34,825
Less: accumulated depreciation	(11,180)		(8,380)
Total	$	29,642	$	26,445


	June 30, 2022		December 31, 2021
Term loan, due 2027 (as refinanced and amended)	$	227,700	$	228,850
Aircraft term loan, due 2026	8,122		8,569
Total debt	235,822		237,419
Less: unamortized debt issuance costs	(2,194)		(2,389)
Less: unamortized debt discount	(5,684)		(6,180)
Total debt, net of unamortized debt issuance costs and debt discount	227,944		228,850
Less: current portion of long-term debt	(3,235)		(2,808)
Total debt, net of current portion	$	224,709	$	226,042


	Number of awards	Weighted- average grant date fair value per share
Unvested and outstanding balance at December 31, 2021	544,036	$	26.18
Granted	571,419	5.68
Vested	—	—
Forfeited	—	—
Unvested and outstanding balance at June 30, 2022	1,115,455	$	15.68


	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
	As Reported		Pro Forma		As Reported		Pro Forma
Net revenues	$	49,851	$	49,851	$	92,531	$	101,380
Net loss	$	(8,916)	$	(8,916)	$	(13,913)	$	(12,502)