424B3 1 tm2035405-12_424b3.htm 424B3 tm2035405-12_424b3 - none - 33.0471539s
 Filed Pursuant to Rule 424(b)(3)
 Registration No. 333-250017
PROSPECTUS
PLBY GROUP, INC.
5,390,766 Shares of Common Stock
This prospectus relates to the resale from time to time by the selling stockholders named in this prospectus or their permitted transferees (collectively, the “Selling Stockholders”) of (i) 390,766 shares of common stock, par value of $0.0001 per share (‘‘Common Stock’’) of Mountain Crest Acquisition Corp, a Delaware corporation, which was renamed PLBY Group, Inc. in connection with the Closing (as defined below) (‘‘MCAC’’) underlying the 355,241 private units issued in connection with a private placement completed on June 4, 2020 (the ‘‘Private Units,’’), and (ii) up to 5,000,000 shares of Common Stock (the “PIPE Shares”) issued in a private placement pursuant to the terms of the Subscription Agreements (as defined below) in connection with the Business Combination (as described below).
On September 30, 2020, MCAC entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MCAC Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of MCAC (“Merger Sub”), and Playboy Enterprises, Inc., a Delaware corporation (“Playboy”), and Suying Liu (solely for purposes of Section 7.2 and Article XI of the Merger Agreement). Pursuant to the terms of the Merger Agreement, Playboy merged with and into Merger Sub, with Playboy surviving the merger as a wholly owned subsidiary of MCAC (the “Business Combination”). MCAC changed its name to “PLBY Group, Inc.” upon consummation of the Business Combination.
On June 9, 2020, simultaneously with the closing of MCAC’s initial public offering (“IPO”), MCAC sold an aggregate of 321,500 Private Units in a private placement to Sunlight Global Investment LLC (“Sponsor”) and Chardan Capital Markets, LLC (“Chardan”). On June 17, 2020, simultaneously with the closing of Chardan’s exercise of its over-allotment option in part, MCAC sold an aggregate of an additional 33,741 Private units. There are a total of 390,766 shares of Common Stock underlying a total of 355,241 Private Units, currently held by Chardan, Dr. Liu, our Chief Executive Officer and Mr. Dong Liu, our Chief Financial Officer, all of whom are included as Selling Stockholders.
In connection with the Business Combination, MCAC entered into subscription agreements, each dated as of September 30, 2020 (the “Subscription Agreements”), with certain institutional and accredited investors (collectively, the “PIPE Investors”), pursuant to which MCAC issued and sold to the PIPE Investors, in a private placement closed immediately prior to the closing of the Business Combination, the PIPE Shares at $10.00 per share, for an aggregate purchase price of $50,000,000.
Upon the consummation of the Business Combination, Craig-Hallum Capital Group LLC and Roth Capital Partners LLC each received 100,000 shares of Common Stock as compensation for advisory services rendered to MCAC, including in their role as placement agents in the PIPE investment pursuant to an agreement, dated July 22, 2020, which was subsequently amended to join Roth Capital Partners, LLC on September 30, 2020. The services were completed as of September 30, 2020.
The Selling Stockholders may offer, sell or distribute all or a portion of the shares of Common Stock registered hereby publicly or through private transactions at prevailing market prices or at negotiated prices. We will pay certain offering fees and expenses and fees in connection with the registration of the Common Stock and will not receive proceeds from the sale of the securities by the Selling Stockholders. Our Common Stock is currently listed on the Nasdaq Global Market under the symbol “PLBY.”
We are an “emerging growth company” under applicable federal securities laws and will be subject to reduced public company reporting requirements.
INVESTING IN OUR SECURITIES INVOLVES RISKS THAT ARE DESCRIBED IN THE “RISK FACTORS” SECTION BEGINNING ON PAGE 13 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is February 10, 2021.

 
TABLE OF CONTENTS
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F-1
You should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.
For investors outside the United States:    We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
Certain information in this prospectus reflects the anticipated completion of the Business Combination which was completed on the date of this prospectus. That information includes certain anticipated effects on the post-combination company and its capitalization. More detailed information reflecting the impact of the completion of the Business Combination will be provided in the Combined Company’s Current Report on Form 8-K to be filed within four business days of the completion of the Business Combination.
 
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FREQUENTLY USED TERMS
Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and “MCAC” refer to Mountain Crest Acquisition Corp, a Delaware corporation, and the term “Combined Company” refers to the company following the consummation of the Business Combination. In this prospectus:

“Board” means the board of directors of MCAC.

“Business Combination” means the transactions contemplated under the Merger Agreement.

“Certificate of Incorporation” means MCAC’s Amended and Restated Certificate of Incorporation.

“Chardan” means Chardan Capital Markets, LLC, MCAC’s underwriter in the IPO.

“Closing” means the closing of the Business Combination.

“Closing Date” means date of the consummation of the Business Combination.

“Code” means the Internal Revenue Code of 1986, as amended.

“Combined Company” means PLBY Group, Inc. after the Business Combination.

“Common Stock” means the shares of Common Stock, par value $0.0001 per share, of MCAC.

“Continental” means Continental Stock Transfer & Trust Company, MCAC’s transfer agent.

“DGCL” means Delaware General Corporation Law.

“Effective Time” means the time at which the Merger becomes effective.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means accounting principles generally accepted in the United States of America.

“Initial Stockholders” means the Sponsor and the officers and directors of MCAC.

“IPO” refers to the initial public offering of 5,000,000 units of MCAC consummated on June 9, 2020.

“Insider Shares” means the 1,437,450 shares of Common Stock.

“MCAC Units” means the units that were issued in the IPO, each consisting of one share of Common Stock and one right to receive one-tenth (1/10) of a MCAC share of Common Stock.

“MCAC Rights” means the right to receive one-tenth (1/10) of a share of Common Stock underlying the MCAC Units.

“Merger Agreement” means that certain agreement and plan of merger, dated as of September 30, 2020, by and among MCAC, Merger Sub, Playboy and Suying Liu (solely for purposes of Section 7.2 and Article XI of the Merger Agreement).

“Merger Consideration” means Closing Payment Shares (as defined herein), subject to any Net Debt (as defined herein) adjustment.

“Merger Sub” means MCAC Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of MCAC.

“Organizational Documents” means certificate of incorporation and bylaws.

“PIPE Investment” means the private placement of 5,000,000 shares of Common Stock for an aggregate of $50,000,000 in a private placement immediately prior to the Closing.

“Playboy” means Playboy Enterprises, Inc., a Delaware corporation.

“Private Units” means the 355,241 units sold to the Sponsor and Chardan, in the aggregate, in private placements that occurred contemporaneously with the IPO and the exercise of Chardan’s over-allotment option.
 
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“RT” means RT-ICON Holdings LLC, a Delaware limited liability company, together with its affiliates and its and their successors and assigns (other than the Combined Company and its subsidiaries).

“RSU” means restricted stock unit awards of Playboy.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Sponsor” means Sunlight Global Investment LLC.

“Underwriting Agreement” means the Underwriting Agreement, dated June 4, 2020, by and between the MCAC and Chardan.

“Yandy” means Yandy Enterprises LLC, a wholly-owned subsidiary of Playboy.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including with respect to the anticipated timing, completion and effects of the Business Combination. All statements, other than statements of historical facts, may be forward-looking statements. These statements are based on the expectations and beliefs of management of MCAC and Playboy 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 statements about the future performance and opportunities of Playboy; benefits of the Business Combination; statements of the plans, strategies and objectives of management for future operations of Playboy; statements regarding future economic conditions or performance; and other statements regarding the Business Combination. Forward-looking statements may contain words such as “will be,” “will,” “expect,” “anticipate,” “continue,” “project,” “believe,” “plan,” “could,” “estimate,” “forecast,” “guidance,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “pursue,” “should,” “target” or similar expressions, and include the assumptions that underlie such statements.
The forward-looking statements are based on the current expectations of the management of MCAC and Playboy as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors,” those discussed and identified in public filings made with the SEC by MCAC and the following:

expectations regarding Playboy’s strategies and future financial performance, including its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and Playboy’s ability to invest in growth initiatives and pursue acquisition opportunities;

the outcome of any legal proceedings that may be instituted against MCAC or Playboy following announcement of the Merger Agreement and the transactions contemplated therein;

the inability to maintain the listing of shares of Common Stock of the Combined Company on Nasdaq following the Business Combination;

the risk that the announcement and consummation of the Business Combination disrupts Playboy’s current plans and operations;

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of Playboy to grow and manage growth profitably, and retain its key employees;

costs related to the Business Combination;

limited liquidity and trading of the Combined Company’s securities;

geopolitical risk and changes in applicable laws or regulations;

the possibility that Playboy may be adversely affected by other economic, business, and/or competitive factors;

risks relating to the uncertainty of the projected financial information with respect to Playboy;

risks related to the organic and inorganic growth of Playboy’s business and the timing of expected business milestones;

risk that the COVID-19 pandemic, and local, state, and federal responses to addressing the pandemic may have an adverse effect on Playboy’s business operations, as well as our and their financial condition and results of operations; and

litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Playboy’s resources.
 
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Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of MCAC and Playboy prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
All subsequent written and oral forward-looking statements concerning the Business Combination or other matters addressed in this prospectus and attributable to MCAC, Playboy or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this prospectus. Except to the extent required by applicable law or regulation, MCAC and Playboy undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
 
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SUMMARY OF THE PROSPECTUS
This summary highlights selected information from this prospectus and does not contain all of the information that is important to you in making an investment decision. This summary is qualified in its entirety by the more detailed information included in this prospectus. Before making your investment decision with respect to our securities, you should carefully read this entire prospectus, including the information under “Risk Factors,” “MCAC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Playboy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements included elsewhere in this prospectus.
Unless otherwise indicated or the context otherwise requires, references in this prospectus to “we,” “our,” “us” and other similar terms refer to MCAC or Playboy, as the context suggests.
The Parties to the Business Combination
Mountain Crest Acquisition Corp
MCAC was incorporated as a blank check company on November 12, 2019, under the laws of the state of Delaware, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On June 9, 2020, MCAC consummated the IPO of 5,000,000 MCAC Units, generating gross proceeds of $50,000,000. Simultaneously with the closing of our IPO, MCAC consummated the sale of 321,500 Private Units in a private placement to our Sponsor and Chardan, generating gross proceeds of $3,215,000. On June 17, 2020, Chardan exercised its over-allotment option in part and sold an additional 749,800 MCAC Units at an offering price of $10.00 per MCAC Unit, generating additional gross proceeds of $7,498,000. On June 19, 2020, simultaneously with the sale of the over-allotment option MCAC Units, MCAC also consummated the private sale of an additional 33,741 Private Units, at a price of $10.0 per Private Unit in a private placement to our Sponsor and Chardan, generating gross proceeds of $337,410. The Private Units were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, as the transactions did not involve a public offering.
After deducting the underwriting discounts, offering expenses, and commissions from the IPO and the sale of the Private Units, a total of $58,647,960 was deposited into the Trust Account, and the remaining $432,822 of the net proceeds were outside of the Trust Account and made available to be used for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. As of January 19, 2021, MCAC had cash of $58,680,248 outside of the Trust Account. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest. As of January 19, 2021, there was $58,680,248 held in the Trust Account.
In accordance with MCAC’s Amended and Restated Certificate of Incorporation, the amounts held in the Trust Account may only be used by MCAC upon the consummation of a business combination, except that there can be released to MCAC, from time to time, any interest earned on the funds in the Trust Account that it may need to pay its tax obligations. The remaining interest earned on the funds in the Trust Account will not be released until the earlier of the completion of a business combination and MCAC’s liquidation. MCAC executed the Merger Agreement on September 30, 2020 and it must liquidate unless a business combination is consummated by June 9, 2021 (unless such date has been extended).
The MCAC Units, MCAC shares of Common Stock, and MCAC Rights were listed on the Nasdaq Stock Market, under the symbols “MCACU,” “MCAC,” and “MCACR,” respectively. The MCAC Units commenced trading on the Nasdaq Stock Market on June 5, 2020, and the MCAC shares of Common Stock and MCAC Rights commenced separate trading from the MCAC Units on August 27, 2020.
The mailing address of MCAC’s principal executive office is 311 West 43rd Street, 12th Floor, New York, NY 10036, and its telephone number is (646) 493-6558.
Playboy
Playboy is a large, global consumer lifestyle platform. Playboy is one of the largest and most recognizable lifestyle brands in the world, with more than $3 billion in global consumer spend against the brand across 180 countries.
 
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Founded as a Delaware company in 1953 by Hugh Hefner as the publisher of Playboy magazine, over the following decades, Playboy has grown into a leader and pioneer in the adult media publication industry and expanded its business into other media and entertainment interests. Building upon almost seven decades of groundbreaking media, entertainment, hospitality and social advocacy, Playboy today reaches millions of consumers around the world with products and content across four major categories:

Sexual Wellness, including intimacy products and lingerie;

Style and Apparel, including a variety of apparel and accessories products for men and women globally;

Gaming and Lifestyle, such as digital gaming, hospitality and spirits; and

Beauty and Grooming, including fragrance, skincare, grooming and cosmetics for men and women.
Playboy currently generates revenue from the sale of these products and content through the following business models:

Licensing, including licensing its brand to third parties for products, services, venues and events;

Direct-to-Consumer, including sales of third-party products through its owned-and-operated ecommerce platforms; and sales of its proprietary products through our platforms and/or third-party retailers; and

Digital Subscriptions and Content, including the sale of subscriptions to Playboy content programming and trademark licensing for online gaming products and services.
Playboy’s principal office and mailing address is 10960 Wilshire Blvd., Suite 2200, Los Angeles, California 90024, its telephone number is (310) 424-1800 and its website is www.plbygroup.com. The information contained on, or accessible through, Playboy’s website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, Playboy’s website as part of this prospectus.
For more information on Playboy, please see the sections titled “Playboy’s Business” and “Playboy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
The Business Combination and the Merger Agreement
Merger Agreement
On September 30, 2020, MCAC entered into the Merger Agreement with Playboy, Merger Sub and Suying Liu. Pursuant to the Merger Agreement, at the Closing, Merger Sub merged with and into Playboy with Playboy surviving the Merger as a wholly owned subsidiary of MCAC. In addition, in connection with the consummation of the Business Combination, MCAC was renamed “PLBY Group, Inc.”
Under the Merger Agreement, MCAC has agreed to acquire all of the outstanding Playboy shares for approximately $381.3 million in aggregate consideration, comprising (i) 23,920,000 shares of common stock, based on a price of $10.00 per share, subject to adjustment as described below (the “Closing Payment Shares”), and (ii) the assumption of no more than $142.1 million of Playboy debt (the “Net Debt Target”). The number of Closing Payment Shares issuable shall be 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 Closing Payment Shares will be reduced) or less than (in which case the number of Closing Payment Shares will be increased) the Net Debt Target. If Net Debt equals the Net Debt Target, then no adjustment will be made to the number of Closing Payment Shares. Any adjustment to the Closing Payment Shares shall be in whole shares of MCAC common stock and no adjustment shall be made for any divergence that is in an increment of $9.99 or less.
No later than two business days prior to the anticipated Closing Date, Playboy delivered to MCAC a stockholder allocation schedule setting forth each stockholder, option holder and RSU holder as of the closing, and such stockholder’s, option holder’s and RSU holder’s respective percentage of the Merger Consideration. Prior to the Effective Time, the Playboy options and RSUs that were outstanding as of
 
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immediately prior to the Effective Time accelerated and vested. At the Effective Time, by virtue of the Merger (defined herein) and without any further action on the part of MCAC, Merger Sub or Playboy, each Playboy share issued and outstanding immediately prior to the Effective Time was canceled and automatically converted into the right to receive, without interest, the respective percentage of the Merger Consideration issuable to the stockholders in accordance with the stockholder allocation schedule. Each outstanding Playboy option was assumed by MCAC and automatically converted into an option to purchase such number of shares of Common Stock equal to the product of (x) the Merger Consideration and (y) the option holder’s respective percentage of the Merger Consideration set forth in the stockholder allocation schedule, which shall be reserved for future issuance upon the exercise of such assumed options. At the Effective Time, all RSUs that were then outstanding were terminated and subsequently paid, in settlement, such 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 as set forth in the stockholder allocation schedule. No certificates or scrip representing fractional shares were issued pursuant to the Merger. Stock certificates evidencing the Merger Consideration shall bear restrictive legends as required by any securities laws at the time of the Merger.
PIPE Subscription Agreements and PIPE Registration Rights Agreement
MCAC 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 issued and sold, in a private placement immediately prior to the Closing, an aggregate of 5,000,000 shares of Common Stock for $10.00 per share (the “PIPE Shares”).
Pursuant to the PIPE Registration Rights Agreements, MCAC agreed to file (at MCAC’s sole cost and expense) a registration statement registering the resale of the shares of Common Stock to be purchased in the PIPE Investment (the “PIPE Resale Registration Statement”) with the SEC no later than the 5th calendar day following the date that this prospectus is first filed with the SEC. MCAC will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective at the same time that MCAC has cleared comments with the SEC on this prospectus, but no later than the 60th calendar day following the Closing Date (or, in the event the SEC notifies MCAC that it will “review” the PIPE Resale Registration Statement, the 90th calendar day following the date hereof) (the “Effectiveness Date”). The registration statement of which this prospectus forms a part has been filed and declared effective to satisfy MCAC’s obligations under the PIPE Registration Rights Agreement.
Under certain circumstances, additional payments by MCAC may be assessed with respect to the PIPE Shares in the event that (i) the PIPE Resale Registration Statement has not been filed with the SEC by the Closing Date; (ii) the PIPE Resale Registration Statement has not been declared effective by the SEC by the Effectiveness Date; (iii) the PIPE Resale Registration Statement is declared effective by the SEC but thereafter ceases to be effective or is suspended for more than fifteen (15) consecutive calendar days or more than an aggregate of twenty (20) calendar days (which need not be consecutive calendar days) during any 12-month period; or (iv) MCAC fails for any reason to satisfy the current public information requirement under Rule 144(c) under the Securities Act of 1933, as amended (the “Securities Act”) and the PIPE Shares are not then registered for resale under the Securities Act during the period commencing from the twelve (12) month anniversary of the closing and ending at such time that all of the PIPE Shares may be sold without the requirement for MCAC to be in compliance with Rule 144(c)(1) under the Securities Act and otherwise without restriction or limitation pursuant to Rule 144 under the Securities Act. The additional payments by MCAC will accrue on the applicable PIPE Shares at a rate of 1.0% of the aggregate purchase price paid for such shares per month, subject to certain terms and limitations (including a cap of 6.0% of the aggregate purchase price paid for such shares pursuant to the Subscription Agreements).
Risks Related to Our Business
Investing in our securities involves risks. You should carefully consider the risks described in “Risk Factors” beginning on page 13 before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition and results of operations would likely be materially adversely affected. In such case, the trading price of our securities would likely decline, and you may lose all or part of your investment. Set forth below is a summary of some of the principal risks we face:
 
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Playboy’s business could be materially and adversely affected by the current global COVID-19 pandemic;

Playboy may not be able to maintain the value and reputation of its brand, which Playboy’s success substantively relies upon;

Since the entertainment industry in which Playboy competes is rapidly evolving, it is difficult to forecast long-term competitiveness of Playboy and its ability to maintain market shares;

Despite the actions Playboy is taking to defend and protect its intellectual property, Playboy may not be able to adequately protect or enforce its intellectual property rights. Playboy’s efforts to protect and enforce its intellectual property rights and prevent third parties from violating its rights may be costly;

Playboy may not be able to identify, fund investment in and commercially exploit new technology, which could have a material adverse impact on our business, financial condition or results of operations;

Playboy’s business involves the provision of sexually explicit content which can create negative publicity, lawsuits and boycotts;

Playboy may face limitations business partnership due to the fact that some of its services contain adult content.
 
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THE OFFERING
Issuer
PLBY Group, Inc. (formerly Mountain Crest Acquisition Corp) (“MCAC”)
In connection with the Closing, MCAC changed its name to PLBY Group, Inc.
Common stock offered by the Selling Stockholders
(i) 390,766 shares of common stock underlying total of 355,241 Private Units, and (ii) up to 5,000,000 shares of common stock, which were issued pursuant to the terms of the Subscription Agreements in a private placement in connection with the Business Combination.
Common stock to be issued and outstanding after the consummation of this offering and the Business Combination (assuming no redemptions)(1)(3)(4)
33,586,915
Common stock to be issued and outstanding after the consummation of this offering and the Business Combination (assuming high redemptions)(2)(3)(4)
29,307,155
Use of proceeds
We will not receive any of the proceeds from the sale of the shares of common stock by the selling stockholders.
Market for our shares of common stock
Prior to the Business Combination, our common stock was listed on Nasdaq under the symbol “MCAC.” Following the closing of the Business Combination, our common stock will be listed on Nasdaq under the symbol “PLBY.”
Risk factors
Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” and elsewhere in this prospectus.
(1)
Represents the number of shares of the Combined Company’s Common Stock outstanding at Closing assuming that none of MCAC’s public stockholders exercise their redemption rights in connection with the Meeting. See “Beneficial Ownership of Securities” for more information.
(2)
Represents the number of shares of the Combined Company’s common stock outstanding at Closing assuming (i) the conversion of the MCAC Rights into shares of Combined Company Common Stock and (ii) that a maximum of 4,279,760 shares of Common Stock have been redeemed upon consummation of the Business Combination. The high redemption amount is presented taking into consideration the closing condition under the Merger Agreement requiring a minimum Trust Account balance of $15,000,000, after giving effect to the payments to redeeming stockholders, but prior to payment of estimated transaction expenses.
(3)
The number of shares of the Combined Company’s Common Stock outstanding at the closing of the Business Combination (a) does not take into account any Playboy option awards and RSUs that are assumed by MCAC in connection with the Business Combination and will be outstanding immediately following the Business Combination or settled in the future, (b) does not take into account any equity awards that may be issued under the proposed 2021 Incentive Plan of the Combined Company following the Business Combination, and (c) assumes Net Debt Adjustments to the Merger Consideration as set forth under the caption “Unaudited Pro Forma Condensed Combined Financial Information” contained elsewhere in this prospectus. If the actual facts are different than these assumptions (which
 
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they are likely to be), the number of shares of the Combined Company’s common stock outstanding at Closing, the number of shares issued to and percentage ownership by Playboy stockholders, the percentage ownership of PIPE Investors, and the percentage ownership retained by MCAC’s existing stockholders in the Combined Company will be different. See “Unaudited Pro Forma Condensed Combined Financial Information” and “Beneficial Ownership of Securities” for more information.
(4)
More detailed information reflecting the impact of the completion of the Business Combination will be provided in the Combined Company’s Current Report on Form 8-K to be filed within four business days of the completion of the Business Combination.
 
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SELECTED HISTORICAL FINANCIAL INFORMATION OF MCAC
MCAC’s balance sheet data as of September 30, 2020 and statement of operations data for the nine months ended September 30, 2020 are derived from MCAC’s unaudited financial statements included elsewhere in this prospectus. MCAC’s balance sheet data as of December 31, 2019 and statement of operations data for the period from November 12, 2019 (inception) through December 31, 2019 are derived from MCAC’s audited financial statements included elsewhere in this prospectus.
The historical results of MCAC included below and elsewhere in this prospectus are not necessarily indicative of the future performance of MCAC. You should read the following selected financial data in conjunction with “MCAC’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes appearing elsewhere in this prospectus.
Nine Months
Ended
September 30,
2020
(Unaudited)
For the
Period from
November 12, 2019
(inception)
through
December 31,
2019
(Audited)
Operating and formation costs
$ 176,572 $ 492
Loss from operations
(176,572)
Other income:
Interest earned on marketable securities held in Trust Account
23,042
Unrealized loss on marketable securities held in Trust Account
(1,171)
Other income, net
21,871
Loss before provision for income taxes
(154,701)
Benefit from income taxes
345
Net loss
$ (154,356) $ (492)
Weighted average shares outstanding – basic and diluted
1,731,559(1) 1,250,000(2)
Basic and diluted net loss per share common share
$ (0.09) $ (0.00)
(1)
Excludes an aggregate of 5,090,066 shares subject to possible redemption at September 30, 2020.
(2)
Excludes an aggregate of up to 187,500 shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 7 to MCAC Audited Financial Statements).
Balance Sheet Data:
As of
September 30,
2020
(Unaudited)
As of
December 31,
2019
Current assets
Cash
$ 235,334 $
Deferred offering costs
$ $ 100,231
Marketable securities held in Trust Account
$ 58,669,831 $
Total assets
$ 58,964,066 $ 100,231
Total liabilities
$ 2,053,763 $ 100,723
Common stock subject to possible redemption, 5,090,066 shares at redemption
value
$ 51,910,297 $
Total Stockholders’ Equity (Deficit)
$ 5,000,006 $ (492)
 
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF PLAYBOY
The following table sets forth selected historical financial information derived from Playboy’s unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2020 and 2019 and Playboy’s audited consolidated financial statements as of and for the years ended December 31, 2019 and 2018, each of which is included elsewhere in this registration statement. Such financial information should be read in conjunction with the audited and unaudited financial statements and related notes included elsewhere in this registration statement.
The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the following summary selected financial information in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Playboy” and Playboy’s financial statements and the related notes appearing elsewhere in this registration statement.
Nine Months Ended
September 30,
Year Ended
December 31
2020
2019
2019
2018
(in thousands, except share and per share data)
Consolidated Statement of Operations Data:
Net revenues
$ 101,335 $ 56,871 $ 78,110 $ 100,873
Costs and expenses:
Cost of sales
(50,548) (25,390) (37,742) (50,607)
Selling and administrative expenses
(41,349) (33,001) (45,328) (26,835)
(Loss) gain on disposals of assets
(8) 20 (71) (3,741)
Related-party expenses
(757) (750) (1,005) (1,311)
Total costs and expenses
(92,662) (59,121) (84,146) (82,494)
Operating (loss) income
8,673 (2,250) (6,036) 18,379
Nonoperating (expense) income:
Investment income
30 182 225 21
Interest expense
(10,073) (10,884) (14,225) (9,211)
Extinguishment of debt
(4,037)
Gain from bargain purchase
1,483
Other, net
81 (107) (173) (1,208)
Total nonoperating expense
(9,962) (10,809) (12,690) (14,435)
(Loss) income before income taxes
(1,289) (13,059) (18,726) 3,944
Provision for income taxes
(3,470) (4,499) (4,850) (2,262)
Net (loss) income
(4,759) (17,558) (23,576) 1,682
Net (loss) income attributable to redeemable noncontrolling interest
Net (loss) income attributable to Playboy
$ (4,759) $ (17,558) $ (23,576) $ 1,682
Net (loss) income per share, basic
$ (1.20) $ (4.57) $ (6.12) $ 0.37
Weighted-average shares used in computing net (loss)
income per share, basic
3,949,844 3,839,456 3,854,256 4,510,310
Net (loss) income per share, diluted
$ (1.20) $ (4.57) $ (6.12) $ 0.33
Weighted-average shares used in computing net (loss)
income per share, diluted
3,949,844 3,839,456 3,854,256 5,136,756
 
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September 30,
2020
December 31,
2019
2018
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents
$ 15,872 $ 27,744 $ 26,841
Total current assets
$ 49,839 $ 53,834 $ 48,438
Total assets
$ 413,562 $ 418,651 $ 397,592
Total current liabilities
$ 63,540 $ 61,149 $ 55,726
Long-term debt
$ 156,157 $ 157,810 $ 152,595
Total liabilities
$ 330,731 $ 333,557 $ 305,980
Total stockholders’ equity
$ 83,039 $ 85,302 $ 91,820
 
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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined balance sheet as of September 30, 2020 combines the unaudited historical condensed consolidated balance sheet of Playboy as of September 30, 2020 with the unaudited historical condensed balance sheet of MCAC as of September 30, 2020, giving effect to the Business Combination as if it had been consummated as of that date.
The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the unaudited historical condensed consolidated statement of operations of Playboy for the nine months ended September 30, 2020 with the unaudited condensed historical statement of operations of MCAC for the nine months ended September 30, 2020, giving effect to the Business Combination as if it had occurred on January 1, 2019.
The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the unaudited combined statement of operations of Playboy for the year ended December 31, 2019, based on the audited historical consolidated statement of operations of Playboy giving pro forma effect to the acquisition of Yandy by Playboy as if it had occurred on January 1, 2019, with the audited historical statement of operations of MCAC for the period from November 12, 2019 (inception) through December 31, 2019, giving effect to the Business Combination as if it had occurred on January 1, 2019.
The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption into cash of MCAC’s public shares:

Assuming no redemptions for cash:   This presentation assumes that no MCAC stockholders exercise redemption rights with respect to their shares of Common Stock upon consummation of the Business Combination; and

Assuming high redemptions for cash:   This presentation assumes that MCAC stockholders exercise their redemption rights with respect to a maximum of 4,279,760 shares of Common Stock upon consummation of the Business Combination at a redemption price of approximately $10.20 per share. The high redemption amount is presented based on a minimum Trust Account balance of $15,000,000, after giving effect to the payments to redeeming stockholders, but prior to payment of estimated transaction expenses. The “high redemption” scenario includes all adjustments contained in the “no redemption” scenario and presents additional adjustments to reflect the effect of the “high redemption” scenario.
The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable and are expected to have a continuing impact on the results of the Combined Company. The adjustments presented to the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the Combined Company upon consummation of the Business Combination.
The historical financial statements of MCAC and Playboy have been prepared in accordance with accounting principles generally accepted in the United States of America, which we refer to as GAAP.
The historical financial information of Playboy as of September 30, 2020 was derived from the unaudited financial statements of Playboy as of and for the nine months ended September 30, 2020, which are included elsewhere in this prospectus. The historical financial information of MCAC as of September 30, 2020 was derived from the unaudited financial statements of MCAC as of and for the nine months ended September 30, 2020, which are included elsewhere in this prospectus. The historical financial information of Playboy for the year ended December 31, 2019 was derived from Playboy’s unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 which combines Playboy’s audited consolidated statement of operations and Yandy’s audited statement of operations for the year ended December 31, 2019, each as included elsewhere in this prospectus, giving pro forma effect to the acquisition of Yandy by Playboy as if it had occurred on January 1, 2019. The historical financial information of MCAC was derived from the audited financial statements of MCAC for the period from November 12, 2019 (inception) through December 31, 2019, which are included elsewhere in this prospectus. This information should be
 
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read together with Playboy’s and MCAC’s audited financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MCAC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Playboy” and other financial information included elsewhere in this prospectus.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies actually been combined as of January 1, 2019. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies actually been combined as of January 1, 2019 or the future results that the Combined Company will experience. Playboy and MCAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
Selected Unaudited Pro Forma Financial Information
(in thousands, except share and per-share data)
MCAC
Playboy
Combined
Pro Forma
Combined
(Assuming No
Redemptions)
Pro Forma
Combined
(Assuming
High
Redemptions)
Statement of Operations Data – Nine Months Ended September 30, 2020
Net revenues
$ $ 101,335 $ 101,335 $ 101,335
Total costs and expenses
(177) (92,662) (91,525) (91,525)
Operating (loss) income
(177) 8,673 9,810 9,810
Net loss
(155) (4,759) (3,622) (3,622)
Net loss per common share – basic and diluted
(0.09) (1.20) (0.10) (0.12)
Balance Sheet Data – As of September 30, 2020
Total current assets
$ 293 $ 49,839 $ 140,926 $ 97,256
Total assets
58,963 413,562 504,649 460,979
Total current liabilities
41 63,540 48,889 48,889
Total liabilities
2,053 330,731 316,080 316,080
Total stockholders’ equity
5,000 83,039 188,777 145,107
Statement of Operations Data – Year Ended December 31, 2019
Net revenues
$ $ 121,212 $ 121,212 $ 121,212
Total costs and expenses
(123,588) (123,588) (123,588)
Operating loss
(2,376) (2,376) (2,376)
Net loss
(21,178) (21,178) (21,178)
Net loss per common share – basic and diluted
(5.49) (0.59) (0.68)
 
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COMPARATIVE PER SHARE INFORMATION
The following table sets forth the historical comparative share information for MCAC and Playboy on a stand-alone basis and the unaudited pro forma combined share information for the nine months ended September 30, 2020 and the year ended December 31, 2019, after giving effect to the Business Combination, assuming (i) no MCAC stockholders exercise redemption rights with respect to their public shares upon the consummation of the Business Combination; and (2) MCAC stockholders exercise their redemption rights with respect to 4,279,760 public shares. This leads to a total high redemption value of $43.7 million calculated by multiplying the 4,279,760 public shares by the redemption price of approximately $10.20 per share. The estimated per share redemption value of $10.20 was calculated by dividing the amount of $58.7 million in the Trust Account as of September 30, 2020 by the 5,749,800 total public shares. Furthermore, one of Playboy’s closing conditions in the Merger Agreement that requires a cash closing balance of $15.0 million for MCAC was considered. This condition leads to a calculated potential high redemption amount of $43.7 million calculated as the difference between the balance of $58.7 million in the Trust Account as of September 30, 2020 and the minimum Trust Account cash closing condition of $15.0 million.
This information is only a summary and should be read together with the selected historical financial information summary included elsewhere in this prospectus, and the historical financial statements of MCAC and Playboy and related notes that are included elsewhere in this prospectus. The unaudited pro forma combined per share information of MCAC and Playboy is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this prospectus.
The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of MCAC and Playboy would have been had the companies been combined during the periods presented.
Playboy
(Historical)
MCAC
(Historical)
Pro Forma
Combined
(Assuming
No
Redemptions)
Pro Forma
Combined
(Assuming
High
Redemptions)
As of and for the Nine Months Ended September 30, 2020
Book value per share(1)
$ 21.02 $ 2.89 $ 5.30 $ 4.63
Net loss per non-redeemable share – basic and diluted
$ (1.20) $ (0.09) (0.10) (0.12)
Weighted average non-redeemable shares outstanding – basic and diluted
3,949,844 1,731,559 35,611,763 31,332,003
Net income per redeemable share – basic and diluted
$ 0.00
Weighted average redeemable shares outstanding – basic and diluted
5,090,066
As of and for the Year Ended December 31, 2019
Book value per share
N/A N/A N/A N/A
Net loss per share – basic and diluted(2)
$ (6.12) $ $ (0.59) $ (0.68)
Weighted average non-redeemable shares outstanding – basic and diluted(2)
3,854,256 1,250,000 35,611,763 31,332,003
(1)
Book value per share = Total stockholders’ equity (deficit)/Total basic (or diluted) outstanding shares.
(2)
Historical net loss per share and weighted average shares outstanding for MCAC are based on the period from November 12, 2019 (Inception) through December 31, 2019.
 
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RISK FACTORS
The Combined Company will face a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. You should consider carefully the following risk factors, as well as the other information set forth in this prospectus, before making a decision on the Business Combination. Risks related to Playboy, including risks related to Playboy’s business, financial position and capital requirements, development, regulatory approval and commercialization, dependence on third parties, intellectual property and taxation, will continue to be applicable to the Combined Company after the Closing.
Risks Related to Playboy
Unless the context otherwise requires, all references in this section to “we,” “us,” or “our” refer to Playboy and its subsidiaries prior to the consummation of the Business Combination.
General Risks Related to Playboy’s Business and Industry
Our success depends on our ability to maintain the value and reputation of our brand.
Our success depends on the value and reputation of the Playboy brand. The Playboy name is integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting, and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality product, and customer experience.
We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand and reputation could be adversely affected if we fail to achieve these objectives, if our public image was to be tarnished by negative publicity, which could be amplified by social media, if we fail to deliver innovative and high quality products and experiences acceptable to our customers, or if we face or mishandle a product recall.
We license our brand to third parties to use in connection with various goods and services, subject to our approval. Our financial condition could be negatively impacted if any such third parties use our brand in a manner that adversely reflects on Playboy or our brand.
Additionally, while we devote considerable efforts and resources to protecting our intellectual property, if these efforts are not successful, the value of our brand may be harmed. Any harm to our brand and reputation could have a material adverse effect on our financial condition.
Our businesses operate in highly competitive industries.
The sexual wellness, lifestyle experiences, apparel and accessories, and beauty and grooming industries in which we operate are highly competitive. The ability of our businesses to compete in each of these industries successfully depends on a number of factors, including our ability to consistently supply high quality and popular content and products, adapt to new technologies and distribution platforms, maintain our brand reputation and produce new and successful products and content. There can be no assurance that we will be able to compete successfully in the future against existing or new competitors, or that increasing competition will not result in price reductions, reduced margins or loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations.
Additionally, many of our competitors, including large entertainment and media enterprises and apparel and beauty retailers, have greater financial and human resources than we do. We cannot assure you that we can remain competitive with companies that have greater resources or that offer alternative entertainment or product offerings.
The market for our adult oriented products is changing rapidly, and unless we are able to anticipate these changes and rapidly adapt, we will lose market share.
Online usage is changing rapidly as technological advancements allow the deployment of more advanced and interactive multimedia product offerings and the Internet and mobile device usage have resulted in new digital distribution channels. As a result, we have to rapidly develop new business models,
 
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products and distribution models that will allow us to otherwise capitalize on our large library of titles that we own and license as well as our product offerings.
Unless we are able to effectively modify our business model to compete with the products offered digitally on the Internet or elsewhere, our market share, revenues and profits from our product offerings could decrease. Although we are currently developing new products and seeking potential acquisition targets, no assurance can be given that we will remain competitive in the rapidly changing adult entertainment marketplace or the other industries we compete in. Our future success will depend, in part, on our ability to adapt to rapidly changing technologies, to enhance existing product offerings and to develop and introduce a variety of new products to address changing demands of our consumers.
If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks and copyrights, our ability to compete could be negatively impacted.
Our intellectual property rights, particularly our trademarks in the Playboy name and Rabbit Head Design, are valuable assets of our business and are critical to our success, growth potential and competitive position. Although certain of the intellectual property we use is registered in the U.S. and in many of the foreign countries in which we operate, there can be no assurances with respect to the continuation of such intellectual property rights, including our ability to further register, use or defend key current or future trademarks. Further, applicable law may provide only limited and uncertain protection, particularly in emerging markets, such as China.
Furthermore, we may not apply for, or be unable to obtain, intellectual property protection for certain aspects of our business. Third parties have in the past, and could in the future, bring infringement, invalidity, co-inventorship, re-examination, opposition or similar claims with respect to our current or future intellectual property. Any such claims, whether or not successful, could be costly to defend, may not be sufficiently covered by any indemnification provisions to which we are party, divert management’s attention and resources, damage our reputation and brands, and substantially harm our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
In addition, third parties may distribute and sell counterfeit (or grey market) versions of our products, which may be inferior or pose safety risks and could confuse consumers or customers, which could cause them to refrain from purchasing our brands in the future or otherwise damage our reputation. The presence of counterfeit versions of our products in the market and of prestige products in mass distribution channels could also dilute the value of our brands, force us and our distributors to compete with heavily discounted products, cause us to be in breach of contract (including license agreements), impact our compliance with distribution and competition laws in jurisdictions including the E.U. and China, or otherwise have a negative impact on our reputation and business, prospects, financial condition or results of operations.
In order to protect or enforce our intellectual property and other proprietary rights, we may initiate litigation or other proceedings against third parties, such as infringement suits, opposition proceedings or interference proceedings. Any lawsuits or proceedings that we initiate could be expensive, take significant time and divert management’s attention from other business concerns, adversely impact customer relations and we may not be successful. Litigation and other proceedings may also put our intellectual property at risk of being invalidated or interpreted narrowly. The occurrence of any of these events may have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property of third parties.
Our commercial success depends in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties. However, we cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate such rights. Moreover, our acquisition targets and other businesses in which we may make strategic investments are often smaller or younger companies with less robust intellectual property clearance practices, and we may face challenges on the use of their trademarks and other proprietary rights.
 
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If we are found to be infringing, misappropriating or otherwise violating a third party trademark, patent, copyright or other proprietary rights, we may need to obtain a license, which may not be available in a timely manner on commercially reasonable terms or at all, or redesign or rebrand our products, which may not be possible or result in a significant delay to market or otherwise have an adverse commercial impact. We may also be required to pay substantial damages or be subject to a court order prohibiting us and our customers from selling certain products or engaging in certain activities, which could therefore have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows, as well as the trading price of our securities.
Any inability to identify, fund investment in and commercially exploit new technology could have a material adverse impact on our business, financial condition or results of operations.
We are engaged in businesses that have experienced significant technological changes over the past several years and are continuing to undergo technological changes. Our ability to implement our business plan and to achieve the results projected by management will depend on management’s ability to anticipate technological advances and implement strategies to take advantage of future technological changes. Any inability to identify, fund investment in and commercially exploit new technology or the commercial failure of any technology that we pursue, such as Internet and mobile, could result in our businesses becoming burdened by obsolete technology and could have a material adverse impact on our business, financial condition or results of operations.
Our business involves the provision of sexually explicit content which can create negative publicity, lawsuits and boycotts.
We are engaged in the business of providing adult-oriented, sexually explicit products worldwide. Many people regard our primary business as unwholesome. Various national and local governments, along with religious and children’s advocacy groups, consistently propose and enact legislation to restrict the provision of, access to, and content of such entertainment. These groups also often file lawsuits against providers of adult entertainment, encourage boycotts against such providers and mount negative publicity campaigns. In this regard, some of our distribution outlets and advertisers, have from time-to-time been the target of groups who seek to limit the availability of our products because of their content. We expect to continue to be subject to these activities.
The adult-oriented content of our websites may also subject us to obscenity or other legal claims by third parties. We may also be subject to claims based upon the content that is available on our websites through links to other sites and in jurisdictions that we have not previously distributed content in. Implementing measures to reduce our exposure to this liability may require us to take steps that would substantially limit the attractiveness of our websites and other distribution channels and/or their availability in various geographic areas, which could negatively impact their ability to generate revenue.
In addition, some investors, investment banks, market makers, lenders and others in the investment community may refuse to participate in the market for our Common Stock, financings or other activities due to the nature of our adult business. These refusals may negatively impact the value of our Common Stock and our opportunities to attract market support.
Companies providing products and services on which we rely may refuse to do business with us because some of our products contain adult content.
Some companies that provide products and services we need may be concerned that associating with us could lead to their becoming the target of negative publicity campaigns by public interest groups and boycotts of their products and services. As a result of these concerns, these companies may be reluctant to enter into or continue business relationships with us. There can be no assurance that we will be able to maintain our existing business relationships with the companies, domestic or international, that currently provide us with services and products. Our inability to maintain such business relationships, or to find replacement service providers, would materially adversely affect our business, financial condition and results of operations. We could be forced to enter into business arrangements on terms less favorable to us than we might
 
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otherwise obtain, which could lead to our doing business with less competitive terms, higher transaction costs and more inefficient operations than if we were able to maintain such business relationships or find replacement service providers.
If we are unable to advertise on certain platforms because of our brand or products, our business would be harmed.
Some companies that operate websites and offline media, including search engines and social media platforms, on which we would like to advertise our products, and provide direct purchasing capabilities, may be reluctant or refuse to allow such advertising due to the adult nature of certain of our products and the history of our brand. Our inability to advertise on such platforms would make it more difficult for us to reach a broad audience, which could limit sales of our products, and reduce the value of our brand. Our existing competitors, as well as potential new competitors, may not face such obstacles and be able to undertake more extensive marketing campaigns and reach a broader consumer base, making it more difficult for Playboy to compete with them with similar products.
If we are unable to generate revenues from advertising and sponsorships our future growth may be harmed.
If companies perceive Playboy.com or any of our other free websites to be limited or ineffective advertising mediums, they may be reluctant to advertise in our products or to be our sponsors. Our ability to generate significant advertising and sponsorship revenues depends upon several factors, including, among others, the following:

our ability to maintain a large, demographically attractive subscriber base for Playboy.com and any of our other free websites;

our ability to offer attractive advertising rates;

our ability to attract advertisers and sponsors; and

our ability to provide effective advertising delivery and measurement systems.
Our potential advertising revenues are also dependent on the level of spending by advertisers, which is impacted by a number of factors beyond our control, including general economic conditions, changes in consumer purchasing and viewing habits and changes in the retail sales environment. Our existing competitors, as well as potential new competitors, may have significantly greater financial, technical and marketing resources than we do. These companies may be able to undertake more extensive marketing campaigns, adopt aggressive advertising pricing policies and devote substantially more resources to attracting advertising customers.
We have experienced seasonality in our revenues, which may result in volatility in our earnings.
While we receive revenue throughout the year, our businesses do experience seasonality. For example, our consumer brand licensing business under our consumer business experiences higher receipts in its first and third fiscal quarters due to the licensing fee structure in its licensing agreements which typically require advance payment of such fees during these quarters. To the extent that we continue to experience seasonality after the Business Combination, this may result in volatility in our earnings.
We have a significant amount of intangible assets, including our trademarks, recorded on our balance sheet. As a result of changes in market conditions and declines in the estimated fair value of these assets, we may be required to record impairments of our intangible assets in the future which could adversely affect our results of operations.
As of December 31, 2019, indefinitive-lived intangible assets and goodwill represented $336.4 million, or 80.4 % of our total consolidated assets. Under GAAP, indefinite-lived intangible assets are not amortized, but instead are subject to impairment evaluation based on related estimated fair values, with such testing to be done at least annually. Our trademarks are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any write-down of intangible assets resulting from future periodic evaluations would, as applicable, either decrease our net income or increase our net loss and those decreases or increases could be material.
 
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Our use of certain tax attributes may be limited.
We have significant net operating losses (“NOLs”). A valuation allowance has been provided as of December 31, 2019 which primarily relates to state net operating losses and capital loss carryforwards. As of December 31, 2019, we have federal NOLs available to carryforward to future periods of $181.8 million which begin expiring in 2027 and we have state NOLs available to carryforward to future periods of $113.4 million which begin expiring in 2020. We have foreign tax credits available to carryforward to future periods of $4.4 million as of December 31, 2019 which begin expiring in 2020. The statute of limitations for tax years 2015 and forward remains open to examination by the major U.S. taxing jurisdictions to which we are subject. In addition, due to the NOL carryforward provision, tax authorities continue to have the ability to adjust the amount of our carryforward. The limitations on the use of the NOLs under Section 382 could affect our ability to offset future taxable income.
We are subject to taxation related risks in multiple jurisdictions.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be challenged by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.
Tax laws are being re-examined and evaluated globally. New laws and interpretations of the law are taken into account for financial statement purposes in the quarter or year that they become applicable. Tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.
Our digital operations are subject to systems failures.
The uninterrupted performance of our computer systems is critical to the operations of our websites. Our computer systems are located at external third-party sites, and, as such, may be vulnerable to fire, loss of power, telecommunications failures and other similar catastrophes. In addition, we may have to restrict access to our websites to solve problems caused by computer viruses or other system failures. Our customers may become dissatisfied by any disruption or failure of our computer systems that interrupts our ability to provide our content. Repeated system failures could substantially reduce the attractiveness of our websites and/or interfere with commercial transactions, negatively affecting our ability to generate revenues. Our websites must accommodate a high volume of traffic and deliver regularly-updated content. Our sites have, on occasion, experienced slow response times and network failures. These types of occurrences in the future could cause users to perceive our websites as not functioning properly and therefore induce them to frequent websites other than ours. We are also subject to risks from failures in computer systems other than our own because our customers depend on their own Internet service providers for access to our sites. Our revenues could be negatively affected by outages or other difficulties customers experience in accessing our websites due to Internet service providers’ system disruptions or similar failures unrelated to our systems. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures in our Internet systems or the systems of our customers’ Internet service providers.
Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.
We rely significantly upon the ability of consumers to access our products through the internet. If network operators block, restrict or otherwise impair access to our products over their networks, our business could be negatively affected. To the extent that network operators implement usage based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our membership acquisition and retention could be negatively
 
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impacted. Furthermore, to the extent network operators create tiers of internet access service and either charge us for or prohibit us from being available through these tiers, our business could be negatively impacted.
Most network operators that provide consumers with access to the internet also provide these consumers with multichannel video programming. As such, many network operators have an incentive to use their network infrastructure in a manner adverse to our continued growth and success. While we believe that consumer demand, regulatory oversight and competition will help check these incentives, to the extent that network operators are able to provide preferential treatment to their data as opposed to ours or otherwise implement discriminatory network management practices, our business could be negatively impacted. The extent to which these incentives limit operator behavior differs across markets.
We are subject to data security and privacy risks that could negatively affect our results, operations or reputation.
Online security breaches could materially adversely affect our business, financial condition or results of operations. Any well-publicized compromise of security could deter use of the Internet in general or use of the Internet to conduct transactions that involve transmitting confidential information or downloading sensitive materials in particular. In addition to our own sensitive and proprietary business information, we handle transactional and personal information about our consumers and users of our digital experiences, which include online distribution channels and product engagement. In offering products via online payment, we may increasingly rely on technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information such as customer credit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments could compromise or breach the algorithms that we use to protect our customers’ transaction data. If third parties are able to penetrate our network security or otherwise misappropriate confidential information, we could be subject to liability, which could result in litigation. In addition, experienced programmers or “hackers” may attempt to misappropriate proprietary information or cause interruptions in our product offerings that could require us to expend significant capital and resources to protect against or remediate these problems. Increased scrutiny by regulatory agencies, such as the Federal Trade Commission and state agencies, of the use of customer information could also result in additional expenses if we are obligated to reengineer systems to comply with new regulations or to defend investigations of our privacy practices.
In addition, we must comply with increasingly complex and rigorous, and sometimes conflicting, regulatory standards enacted to protect business and personal data in the United States, Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation (the “GDPR”), which became effective on May 25, 2018; and California passed the California Consumer Privacy Act (the “CCPA”) which became effective on January 1, 2020. The U.S. Children’s Online Privacy Protection Act (COPPA) also regulates the collection, use and disclosure of personal information from children under 13 years of age. While none of our content is directed at children under 13 years of age, if COPPA were to apply to us, failure to comply with COPPA may increase our costs, subject us to expensive and distracting government investigations and could result in substantial fines. These laws impose additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and recently enacted laws (including implementation of the privacy and process enhancements called for under GDPR and CCPA) and regulations can be costly and time consuming, and any failure to comply with these regulatory standards could subject us to legal and reputational risks.
Customer interaction with our content is subject to our privacy policy and terms of service. If we fail to comply with our posted privacy policy or terms of service or if we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and harm our business. If regulators, the media or consumers raise any concerns about our privacy and data protection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation, and negatively impact our financial condition and damage our business.
 
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We are subject to payment processing risk.
Our customers pay for our products using a variety of different payment methods, including credit and debit cards, gift cards, prepaid cards, direct debit, online wallets and direct carrier and partner billing. We rely on internal systems as well as those of third parties to process payment. Acceptance and processing of these payment methods are subject to certain rules and regulations, including additional authentication requirements for certain payment methods, and require payment of interchange and other fees. To the extent there are increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, changes to rules or regulations concerning payments, loss of payment partners and/or disruptions or failures in our payment processing systems, partner systems or payment products, including products we use to update payment information, our revenue, operating expenses and results of operation could be adversely impacted. In certain instances, we leverage third parties such as our cable and other partners to bill subscribers on our behalf. If these third parties become unwilling or unable to continue processing payments on our behalf, we would have to transition subscribers or otherwise find alternative methods of collecting payments, which could adversely impact member acquisition and retention. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operations and if not adequately controlled and managed could create negative consumer perceptions of our products. If we are unable to maintain our fraud and chargeback rate at acceptable levels, card networks may impose fines, our card approval rate may be impacted and we may be subject to additional card authentication requirements. The termination of our ability to process payments on any major payment method would significantly impair our ability to operate our business.
Government regulations could adversely affect our business, financial condition or results of operations.
Our businesses are regulated by governmental authorities in the countries in which we operate. Because of our international operations, we must comply with diverse and evolving regulations. Regulation relates to, among other things, licensing, access to satellite transponders, commercial advertising, subscription rates, foreign investment, Internet gaming, use of confidential customer information and content, including standards of decency/obscenity. Changes in the regulation of our operations or changes in interpretations of existing regulations by courts or regulators or our inability to comply with current or future regulations could adversely affect us by reducing our revenues, increasing our operating expenses and/or exposing us to significant liabilities. While we are not able to reliably predict particular regulatory developments that could affect us adversely, those regulations related to adult content, the Internet, consumer products and commercial advertising illustrate some of the potential difficulties we face.

Adult content.   Regulation of adult content could prevent us from making our content available in various jurisdictions or otherwise have a material adverse effect on our business, financial condition or results of operations. The governments of some countries, such as China and India, have sought to limit the influence of other cultures by restricting the distribution of products deemed to represent foreign or “immoral” influences. Regulation aimed at limiting minors’ access to adult content could also increase our cost of operations and introduce technological challenges, such as by requiring development and implementation of age verification systems. U.S. government officials could amend or construe and seek to enforce more broadly or aggressively the adult content recordkeeping and labeling requirements set forth in 18 U.S.C. Section 2257 and its implementing regulations in a manner that is unfavorable to our business.

Internet.   Various governmental agencies are considering a number of legislative and regulatory proposals that may lead to laws or regulations concerning various aspects of the Internet, including online content, intellectual property rights, user privacy, taxation, access charges, liability for third-party activities and jurisdiction. Regulation of the Internet could materially adversely affect our business, financial condition or results of operations by reducing the overall use of the Internet, reducing the demand for our products or increasing our cost of doing business.

Consumer products.   Any attempts to limit or otherwise regulate the sale or distribution of certain consumer products sold by our licensees could materially adversely affect our business, financial condition or results of operations.
 
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We are subject to risks resulting from our operations outside the U.S., and we face additional risks and challenges as we continue to expand internationally.
The international scope of our operations may contribute to volatile financial results and difficulties in managing our business. For the nine months ended September 30, 2020 and the fiscal year ended December 31, 2019, we derived approximately 51% and 77% of our consolidated revenues from countries outside the U.S., respectively. Our international operations expose us to numerous challenges and risks, including, but not limited to, the following:

adverse political, regulatory, legislative and economic conditions in various jurisdictions;

costs of complying with varying governmental regulations;

fluctuations in currency exchange rates;

difficulties in developing, acquiring or licensing programming and products that appeal to a variety of audiences and cultures;

scarcity of attractive licensing and joint venture partners;

the potential need for opening and managing distribution centers abroad; and

difficulties in protecting intellectual property rights in foreign countries.
In addition, important elements of our business strategy, including capitalizing on advances in technology, expanding distribution of our products and content and leveraging cross-promotional marketing capabilities, involve a continued commitment to expanding our business internationally. This international expansion will require considerable management and financial resources.
We cannot assure you that one or more of these factors or the demands on our management and financial resources would not harm any current or future international operations and our business as a whole.
We are subject to periodic claims and litigation that could result in unexpected expenses and could ultimately be resolved against us.
From time to time, we are involved in litigation and other proceedings and litigation arising in the ordinary course of business, such as the matters described in “Playboy’s Business—Legal Proceedings” of this prospectus. Defending these claims, even those without merit, could cause us to incur significant legal expenses and divert financial and management resources. These claims could also result in significant settlement amounts, damages, fine or other penalties. An unfavorable outcome of any particular proceeding could exceed the limits of our insurance policies or the carriers may decline to fund such final settlements and/or judgments and could have an adverse impact on our business, financial condition, and results of operations. In addition, an adverse resolution of any lawsuit or claim against us could negatively impact our reputation and our brand image and could have a material adverse effect on our business.
In addition, we rely on our employees, consultants and sub-contractors to conduct our operations in compliance with applicable laws and standards. Any violation of such laws or standards by these individuals, whether through negligence, harassment, discrimination or other misconduct, could result in significant liability for us and adversely affect our business. For example, negligent operations by employees could result in serious injury or property damage, and sexual harassment or racial and gender discrimination could result in legal claims and reputational harm.
If we are unable to attract and retain key employees and hire qualified management and personnel our ability to compete could be harmed.
We believe that our ability to successfully implement our business strategy and to operate profitably depends, in part, on our ability to retain our key personnel. If key personnel become unable or unwilling to continue in their present positions, our business, financial condition or results of operations could be materially adversely affected. Our success also depends, in part, on our continuing ability to identify, hire, attract, train and develop other highly qualified personnel.
 
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Competition for these employees can be intense, and our ability to hire, attract and retain them depends on our ability to provide competitive compensation. We may not be able to attract, assimilate, develop or retain qualified personnel in the future, and our failure to do so could adversely affect our business, including the execution of our global business strategy. Any failure by our management team to perform as expected may have a material adverse effect on our business, prospects, financial condition and results of operations.
Past performance by our management team and their affiliates may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, our management team or businesses associated with them is presented for informational purposes only. Past performance by our management team is not a guarantee the success with respect to any acquisition we may consummate. You should not rely on the historical record of the performance of our management team’s or businesses associated with them as indicative of our future performance of an investment in us or the returns we will, or is likely to, generate going forward.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage its transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Combined Company. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The development and implementation of the standards and controls necessary for the Combined Company to achieve the level of accounting standards required of a public company in the United States may require costs greater than expected. It is possible that the Combined Company will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods.
Our expansion into new products, technologies, and geographic regions subjects us to additional risks.
We may have limited or no experience in our newer market segments, and our customers may not adopt our product or content offerings. These offerings, which can present new and difficult technology and regulatory challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or content could result in the value of those investments being written down or written off.
We expect to incur transaction costs in connection with our acquisitions.
We have incurred and expect to continue to incur significant costs and expenses in connection with past and future acquisitions, including financial advisory, legal, accounting, consulting and other advisory fees and expenses, reorganization and restructuring costs, litigation defense costs, severance/employee benefit-related expenses, filing fees, printing expenses and other related charges. There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with our acquisitions. There are many factors beyond our control that could affect the total amount or timing of the integration and implementation expenses. These costs and expenses could reduce the benefits and income we expect to achieve from our acquisitions.
We may, in the future, require additional capital to help fund all or part of potential acquisitions. If, at the time required, we do not have sufficient cash to finance those additional capital needs, we will need to raise additional funds through equity and/or debt financing. We cannot guarantee that, if and when needed, additional financing will be available to us on acceptable terms or at all. If additional capital is needed and
 
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is either unavailable or cost prohibitive, our growth may be limited as we may need to change our business strategy to slow the rate of, or eliminate, our expansion plans. In addition, any additional financing we undertake could impose additional covenants upon us that restrict our operating flexibility, and, if we issue equity securities to raise capital, our existing stockholders may experience dilution or the new securities may have rights senior to those of our Common Stock.
The officers, directors or other key personnel of an acquisition candidate may resign upon completion of such an acquisition. The loss of a target’s key personnel could negatively impact the operations and profitability of our Combined Company’s business.
The role of an acquisition candidate’s key personnel upon the completion of an acquisition cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following an acquisition, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
We may seek acquisition opportunities in industries or sectors that may be outside of our management’s areas of expertise.
We will consider an acquisition outside of our management’s areas of expertise if an acquisition candidate is presented to us and we determine that such candidate offers an attractive acquisition opportunity for our company. Although our management will endeavor to evaluate the risks inherent in any particular acquisition candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not ultimately prove to be less favorable to investors than a direct investment, if an opportunity were available, in an acquisition candidate.
In pursuing selective acquisitions, we may incur various costs and liabilities and we may never realize the anticipated benefits of the acquisitions.
If appropriate opportunities become available, we may acquire businesses, products or technologies that we believe are strategically advantageous to us. Transactions of this sort could involve numerous risks, including:

unforeseen operating difficulties and expenditures arising from the process of integrating any acquired business, product or technology, including related personnel;

diversion of a significant amount of management’s attention from the ongoing development of our business;

dilution of existing stockholders’ ownership interest in us;

incurrence of additional debt;

exposure to additional operational risk and liability, including risks arising from the operating history of any acquired businesses;

entry into markets and geographic areas where we have limited or no experience;

loss of key employees of any acquired companies;

adverse effects on our relationships with suppliers and customers; and

adverse effects on the existing relationships of any acquired companies, including suppliers and customers.
Furthermore, we may not be successful in identifying appropriate acquisition candidates or consummating acquisitions on terms favorable or acceptable to us or at all.
When we acquire businesses, products or technologies, our due diligence reviews are subject to inherent uncertainties and may not reveal all potential risks. We may therefore fail to discover or inaccurately assess undisclosed or contingent liabilities, including liabilities for which we may have responsibility as a successor to the seller or the target company. As a successor, we may be responsible for any past or continuing violations
 
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of law by the seller or the target company, including violations of decency laws. Although we generally attempt to seek contractual protections, such as representations and warranties and indemnities, we cannot be sure that we will obtain such provisions in our acquisitions or that such provisions will fully protect us from all unknown, contingent or other liabilities or costs. Finally, claims against us relating to any acquisition may necessitate our seeking claims against the seller for which the seller may not indemnify us or that may exceed the scope, duration or amount of the seller’s indemnification obligations.
Our acquisitions may result in disruptions in our business and diversion of management’s attention.
Any acquisitions will require the integration of the operations, products and personnel of the acquired businesses and the training and motivation of these individuals. Such acquisitions may disrupt our operations and divert management’s attention from day-to-day operations, which could impair our relationships with current employees, customers and partners. We may also incur debt or issue equity securities to pay for any future acquisitions. These issuances could be substantially dilutive to our stockholders. In addition, our profitability may suffer because of acquisition-related costs or amortization, or impairment costs for acquired goodwill and other intangible assets. If management is unable to fully integrate acquired business, products or persons with existing operations, we may not receive the benefits of the acquisitions, and our revenues and stock trading price may decrease.
We may not realize all of the anticipated benefits of our acquisitions or those benefits may take longer to realize than expected.
Our ability to realize the anticipated benefits of our acquisitions depends, to a large extent, on our ability to implement changes to acquired businesses in a manner that facilitates growth opportunities and realizes anticipated synergies. We will be required to devote significant management attention, resources and costs to realigning the business practices and operations of acquired businesses to our brand management model. We generally expect to benefit from operational synergies from our acquisitions resulting from the consolidation of capabilities and elimination of redundancies, as well as greater efficiencies from increased scale and market integration. However, this process may preclude or impede realization of the benefits expected from acquisitions and could adversely affect current revenues and investments in future growth, which could adversely affect our results of operations. We cannot be certain that we will not be required to implement further realignment activities, make additions or other changes to our workforce based on other cost reduction measures or changes in the markets and industry in which we compete. In addition, future business conditions and events may impact our ability to continue to realize any benefits of these initiatives. If we are not able to successfully achieve these objectives, the anticipated benefits of our acquisitions may not be realized fully or at all or may take longer to realize than expected.
Any future acquisition may not be accretive, and may be dilutive, to our earnings per share, which may negatively affect the market price of our Common Stock.
Future acquisitions may not be accretive to our earnings per share. Our expectations regarding the timeframe in which a potential acquisition may become accretive to our earnings per share may not be realized. In addition, we could fail to realize all of the benefits anticipated in a potential acquisition or experience delays or inefficiencies in realizing such benefits. Such factors could, combined with the potential issuance of shares of our Common Stock in connection with a potential acquisition, result in such acquisition being dilutive to our earnings per share, which could negatively affect the market price of our Common Stock.
The terms of our credit facility impose restrictions on us that may affect our ability to successfully operate our business.
Our credit facility contains covenants that limit our actions. These covenants could materially and adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that may be in our best interests. The covenants restrict our ability to, among other things:

incur or guarantee additional indebtedness;

make loans and investments;
 
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enter into agreements restricting our subsidiaries’ abilities to pay dividends;

create liens;

sell or otherwise dispose of assets;

enter new lines of business;

merge or consolidate with other entities; and

engage in transactions with affiliates.
The credit facility also contains financial covenants requiring us to maintain specified minimum net worth and interest coverage ratios.
Our ability to comply with these covenants and requirements may be affected by events beyond our control, such as prevailing economic conditions and changes in regulations, and if such events occur, we cannot be sure that we will be able to comply.
A variety of uncontrollable events may reduce demand for our products, impair our ability to provide our products or increase the cost of providing our products.
Demand for our products can be significantly adversely affected in the U.S., globally or in specific regions as a result of a variety of factors beyond our control, including: adverse weather conditions arising from short-term weather patterns or long-term change, catastrophic events or natural disasters (such as excessive heat or rain, hurricanes, typhoons, floods, tsunamis and earthquakes); health concerns, such as pandemics; international, political or military developments; and terrorist attacks. These events and others, such as fluctuations in travel and energy costs and computer virus attacks, intrusions or other widespread computing or telecommunications failures, may also damage our ability to provide our products or to obtain insurance coverage with respect to these events. An incident that affected our property directly would have a direct impact on our ability to provide products and content. Moreover, the costs of protecting against such incidents reduces the profitability of our operations.
In addition, we derive affiliate fees and royalties from the distribution of our programming, sales of our licensed goods and services by third parties, and the management of businesses operated under brands licensed from us, and we are therefore dependent on the successes of those third parties for that portion of our revenue. A wide variety of factors could influence the success of those third parties and if negative factors significantly impacted a sufficient number of those third parties, the profitability of one or more of our businesses could be adversely affected.
We obtain insurance against the risk of losses relating to some of these events, generally including physical damage to our property and resulting business interruption, certain injuries occurring on our property and some liabilities for alleged breach of legal responsibilities. When insurance is obtained it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss and we may experience material losses not covered by our insurance.
Our financial condition and results of operations have been and are expected to continue to be adversely affected by the coronavirus pandemic.
A novel strain of coronavirus (“COVID-19”) was first identified in China in December 2019, and subsequently declared a pandemic by the World Health Organization. To date, this pandemic and preventative measures taken to contain or mitigate the pandemic have caused, and are expected to continue to cause, business slowdown or shutdown in affected areas and significant disruption in the financial markets, both globally and in the United States. These events have led to and could continue to lead to a decline in discretionary spending by consumers, and in turn materially impact, our business, sales, financial condition and results of operations. We may experience a negative impact on our sales, operations and financial results, and we cannot predict the degree to, or the time period over, which our sales, operations and financial results will continue to be subject to risk by the pandemic and preventative measures. Risks presented by the
 
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COVID-19 pandemic include, but are not limited to:

Deterioration in economic conditions in the United States and globally, including China;

Reduced consumer demand for our products as consumers seek to reduce or delay discretionary spending in response to the impacts of COVID-19, including as a result of a rise in unemployment rates and diminished consumer confidence;

Decreased retail traffic as a result of store closures, reduced operating hours, social distancing restrictions and/or changes in consumer behavior;

The risk that any safety protocols in our facilities will not be effective or not be perceived as effective, or that any virus-related illnesses will be linked or alleged to be linked to such facilities, whether accurate or not;

Incremental costs resulting from the adoption of preventative measures, including providing facial coverings and hand sanitizer, rearranging operations to follow social distancing protocols, conducting temperature checks and undertaking regular and thorough disinfecting of surfaces;

Disruption to our distribution centers and our third-party manufacturing partners and other vendors, including through the effects of facility closures, reductions in operating hours, labor shortages, and real time changes in operating procedures, including for additional cleaning and disinfection procedures;

Bankruptcies or other financial difficulties facing our wholesale customers or licensing partners, which could cause them to be unable to make or delay making payments to us, or result in cancellation or reduction of their orders or licensing agreements;

Operational risk, including but not limited to cybersecurity risks, as a result of extended workforce remote work arrangements, and restrictions on employee travel;

Impacts to our distribution and logistics providers’ ability to operate or increases in their operating costs. These supply chain effects may have an adverse effect on our ability to meet consumer demand, including digital demand, and could result in an increase in our costs of production and distribution, including increased freight and logistics costs and other expenses;

Disruption to our operations if a large number of our employees and/or a subset of our key employees and executives are impacted by COVID-19, which could negatively impact our ability to continue to operate effectively.

Significant disruption of and volatility in global financial markets, which could have a negative impact on our ability to access capital in the future.
We continue to monitor the latest developments regarding the pandemic and have made certain assumptions regarding the pandemic for purposes of our operating, financial and tax planning projections, including assumptions regarding the duration and severity of the pandemic and the global macroeconomic impacts of the pandemic. However, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations and financial condition due to the uncertainty of future developments. In particular, we believe the ultimate impacts on our business, results of operations, cash flows and financial condition will depend on, among other things, the further spread and duration of COVID-19, third party or governmental actions taken to contain its spread and mitigate its public health effects the requirements to take action to help limit the spread of the illness, the availability, safety and efficacy of a vaccine and treatments for COVID-19 and the economic impacts of the pandemic. Even in those regions where we are beginning to experience business recovery, should those regions fail to fully contain COVID-19 or suffer a COVID-19 relapse, those markets may not recover as quickly or at all, which could have a material adverse effect on our business and results of operations. The pandemic may also affect our business, operations or financial condition in a manner that is not presently known to us or that we currently do not consider to present significant risks.
In addition, the impact of COVID-19 may also exacerbate other risks discussed in this “Risk Factors” section, which could have a material effect on us.
 
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Global economic conditions could have a material adverse effect on our business, operating results and financial condition.
The uncertain state of the global economy continues to impact businesses around the world. If global economic and financial market conditions further deteriorate or do not improve, the following factors could have a material adverse effect on our business, operating results and financial condition:

Our sales are impacted by discretionary spending by consumers. Declines in consumer spending may result in reduced demand for our products, increased inventories, reduced orders from retailers for our products, order cancellations, lower revenues, higher discounts and lower gross margins.

In the future, we may be unable to access financing in the credit and capital markets at reasonable rates in the event we find it desirable to do so.

We conduct transactions in various currencies, which creates exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar. Continued volatility in the markets and exchange rates for foreign currencies and contracts in foreign currencies could have a significant impact on our reported operating results and financial condition.

As a result, we cannot ensure that demand for our offerings will remain constant. Adverse developments affecting economies throughout the world, including a general tightening of the availability of credit, decreased liquidity in certain financial markets, increased interest rates, foreign exchange fluctuations, increased energy costs, acts of war or terrorism, transportation disruptions, natural disasters, declining consumer confidence, sustained high levels of unemployment or significant declines in stock markets, as well as concerns regarding pandemics, epidemics and the spread of contagious diseases, could lead to a further reduction in discretionary spending.

Continued volatility in the availability and prices for commodities and raw materials we use in our products and in our supply chain (such as cotton or petroleum derivatives) could have a material adverse effect on our costs, gross margins and profitability.

If retailers of our products experience declining revenues or experience difficulty obtaining financing in the capital and credit markets to purchase our products, this could result in reduced orders for our products, order cancellations, late retailer payments, extended payment terms, higher accounts receivable, reduced cash flows, greater expense associated with collection efforts and increased bad debt expense.

If retailers of our products experience severe financial difficulty, some may become insolvent and cease business operations, which could negatively impact the sale of our products to consumers.

Our business is particularly sensitive to reductions from time to time in discretionary consumer spending. Demand for entertainment and leisure activities, can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions, including recessions, economic slowdowns, sustained high levels of unemployment, and rising prices or the perception by consumers of weak or weakening economic conditions, may reduce our users’ disposable income or result in fewer individuals engaging in entertainment and leisure activities, including lifestyle experiences such as casino gaming, and lower spending on sexual wellness, apparel or beauty products. As a result, we cannot ensure that demand for our offerings will remain constant.
If contract manufacturers of our products or other participants in our supply chain experience difficulty obtaining financing in the capital and credit markets to purchase raw materials or to finance capital equipment and other general working capital needs, it may result in delays or non-delivery of shipments of our products.
In particular, since we derived in 2019 and expect to continue to derive a significant portion of our revenue from China, our business development plans, results of operations and financial condition may be materially adversely affected by significant political, social and economic developments in China. A slowdown in economic growth in China, such as due to the outbreak of the COVID-19 pandemic could adversely impact our licensees in China, prospective customers, suppliers, distributors and partners of our licensees in China, which could have a material adverse effect on our results of operations and financial condition. In
 
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addition, a deterioration in trade relations between the U.S. and China or other countries, or the a negative perception of U.S. brands by Chinese or other international consumers, could have a material adverse effect on our results of operations and financial condition. There is no guarantee that economic downturns, any further decrease in economic growth rates or an otherwise uncertain economic outlook in China will not persist in the future, that they will not be protracted or that governments will respond adequately to control and reverse such conditions, any of which could materially and adversely affect our business, financial condition and results of operations.
Additional Risks Related to Playboy’s Licensing and Direct-to-Consumer Businesses
We utilize various licensing and selling models in our operations, and our success is dependent on our ability to manage these different models.
In addition to the licensing model, we operate online retail stores and we produce and sell directly to customers. Although we believe these various models could have certain benefits, these models could themselves be unsuccessful and our beliefs could turn out to be wrong. Moreover, our pursuit of these different models could divert management’s attention and other resources, including time and capital. As a result, our future success depends in part on our ability to successfully manage these multiple models. If we are unable to do so, our performance, financial condition and prospects could be materially harmed.
Risks that impact our business as a whole may also impact the success of our direct-to-consumer, or DTC, business.
We may not successfully execute on our DTC strategy (which includes our online retail platforms). Consumers may not be willing to pay for an expanding set of DTC products, potentially exacerbated by an economic downturn. Government regulation, including revised foreign content and ownership regulations, may impact the implementation of our DTC business plans. Poor quality broadband infrastructure in certain markets may impact our customers’ access to our DTC products and may diminish our customers’ experience with our DTC products. These and other risks may impact the profitability and success of our DTC businesses.
A new agency relationship for our consumer brands licensing business may not ultimately be successful.
We currently engaged an agency to act as our global products licensing agent. In the event we need to engage a new agency to act as our global products licensing agent, the transition from the current regional licensing agent to our new global products licensing agent may be subject to delays, as the new global agent lacks institutional knowledge of the consumer brand licensing business, and there may be unanticipated issues arising from the new relationship and the transition. The failure of our global agent to find or maintain revenue-enhancing licensing opportunities for the business could have an adverse impact on the revenue and cash flows of our consumer business.
A substantial portion of our licensing revenue is concentrated with a limited number of licensees and retail partners, such that the loss of a licensee or retail partner could materially decrease our revenue and cash flows.
Our licensing revenues are concentrated with a limited number of licensees and retail partners. For instance, the five largest license agreements in our consumer brands licensing business comprised 34% of consolidated revenues in the nine months ended September 30, 2020, and the largest contributed 16% of consolidated revenues during that period. Because we are dependent on these licensees for a significant portion of our licensing revenue, if any of these licensees were to have financial difficulties affecting their ability to make payments, cease operations, or if any of these licensees decides not to renew or extend any existing agreements, or to significantly reduce its sales of licensed products under any agreement, our revenue and cash flows could be reduced substantially, which could have a material adverse effect on our financial condition, results of operations or business.
Our wholesale licensing arrangements subject us to a number of risks.
We have entered into several arrangements in connection a licensing strategy. Although we believe our licensing arrangements may have certain benefits, these arrangements are subject to a number of risks and
 
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our beliefs could turn out to be wrong. If any of these risks occur and we do not achieve the intended or expected benefits of our licensing strategy, our results of operations, and financial condition could be materially adversely affected.
The terms of our licensing arrangements vary. These different terms could have a material impact on our performance. These effects on our performance could become increasingly significant in future periods, to the extent our new licensees gain traction over time with new retailers and consumer bases and the proportion of our royalty revenues from these licensees increases, or if we pursue similar arrangements in the future.
Additionally, in licensing arrangements, we have limited ability to control various aspects of the manufacturing process, including access to raw materials, the timing of delivery of finished products, the quality of finished products and manufacturing costs. Our licensees may not be able to produce finished products of the quality or in the quantities that are sufficient to meet retailer and consumer demand in a timely manner or at all, which could result in an inability to generate revenues from any such products and loss of confidence in our brands. Interruptions or delays in the manufacturing process can occur at any time and for a variety of reasons, many of which are outside our control, including, among others, unforecasted spikes in demand, shortages of raw materials, labor disputes, backlogs, insufficient devotion of resources to the manufacture of products bearing our brands, or problems that may arise with manufacturing operations or facilities or our licensees’ businesses generally. On the other hand, our licensees may produce inventory in excess of retailer and consumer demand, in which case over-supply may cause retail prices of products bearing our brands to decline. Further, we compete with other brand owners for the time and resources of our licensees, which could curtail or limit our ability to engage new or maintain relationships with existing licensee partners on acceptable terms or at all. Further, the unplanned loss of any of our wholesale licensees could lead to inadequate market coverage for retail sales of products bearing our brands, create negative impressions of us and our brands with retailers and consumers, and add downward pricing pressure on products bearing our brands as a result of liquidating a former wholesaler’s inventory of such products. The occurrence of any of these risks could adversely impact our reputation, performance and financial condition.
We rely on the accuracy of our licensees’ sales reports for reporting and collecting our royalty revenues, and if these reports are untimely or incorrect, our revenues could be delayed or inaccurately reported or collected.
Most of our licensing royalty revenues are generated from retailers that manufacture and sell products bearing our brands in their stores and on their websites, and from wholesalers that manufacture and distribute products bearing our brands and sell these products to retailers. In addition, we generate revenues from licensees that sell products that we have developed and designed. Under our existing agreements, our licensees pay us fees based on their sales of products or, for some of our wholesale licensees, based on their manufacturing costs. As a result, we rely on our licensees to accurately report their sales or costs in collecting our license and design fees, preparing our financial reports, projections and budgets and directing our sales and marketing efforts. Although all of our agreements permit us to audit our licensees, if any of them understate their sales or costs, we may not collect and recognize the royalty revenues to which we are entitled on a timely basis or at all, or we may endure significant expense to obtain compliance.
The failure of licensees to adequately produce, market, import and sell products bearing Playboy’s trademarks in their license categories, continue their operations, renew their license agreements or pay their obligations under their license agreements could result in a decline in the results of operations of our business.
A significant part of our revenues depend on royalty payments made to us pursuant to license agreements. Although the license agreements for our trademarks usually require the advance payment of a portion of the license fees and, in most cases, provide for guaranteed minimum royalty payments to us, the failure of licensees to satisfy their obligations under these agreements, or their inability to operate successfully or at all, could result in their breach and/or the early termination of such agreements, their non-renewal of such agreements or the decision to amend such agreements to reduce the guaranteed minimum royalty payments or sales royalties due thereunder, thereby eliminating some or all of that stream of revenue.
There can be no assurances that we will not lose the licensees under our license agreements due to their failure to exercise the option to renew or extend the term of those agreements or the cessation of their business
 
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operations (as a result of their financial difficulties or otherwise) without equivalent options for replacement. Any of such failures could reduce the anticipated revenue stream to be generated by the license agreements. In addition, the failure of licensees to meet their production, manufacturing and distribution requirements, or to be able to continue to import goods (including, without limitation, as a result of labor strikes or unrest), could cause a decline in their sales and potentially decrease the amount of royalty payments (over and above the guaranteed minimum royalty payments) due to us. Any decrease in royalties for any of the above reasons could have a material and adverse effect on our financial condition, results of operations or business.
Further, the failure of licensees and/or their third party manufacturers, which we do not control, to adhere to local laws, industry standards and practices generally accepted in the United States in areas of worker safety, worker rights of association, social compliance, and general health and welfare, could result in accidents and practices that cause disruptions or delays in production and/or substantial harm to the reputation of our trademarks, any of which could have a material adverse effect on the business and financial results of our business. A weak economy or softness in sectors of licensees of our consumer business could exacerbate this risk. This, in turn, could decrease our potential revenues and cash flows.
We rely on third parties to help operate certain aspects of our e-commerce business. If these third parties fail to perform, our business could be harmed.
We are dependent on information technology systems and third parties to operate certain of our e-commerce and subscription websites, process transactions, respond to customer inquiries, and maintain cost-efficient operations. The failure of our information technology systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems, could adversely affect our business. Our information technology systems, websites, and operations of third parties on whom we rely, may encounter damage or disruption or slowdown caused by a failure to successfully upgrade systems, system failures, viruses, computer “hackers”, natural disasters, pandemics, or other causes. These could cause information, including data related to customer orders, to be lost or delayed which could result in delays in the delivery of products to our customers or lost sales, which could reduce demand for our products and cause our sales to decline. Any significant disruption in our information technology systems or websites could harm our reputation and credibility, and could have a material adverse effect on our business, financial condition, and results of operations.
Our commercial agreements, strategic alliances, and other business relationships expose us to risks.
We provide physical, e-commerce, and omnichannel retail and other products and content to businesses through commercial agreements, strategic alliances, and business relationships. These arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business we can service. We may not be able to implement, maintain, and develop the components of these commercial relationships, which may include web services, fulfillment, customer service, inventory management, tax collection, payment processing, hardware, content, and third-party software, and engaging third parties to perform services. The amount of compensation we receive under certain of our commercial agreements is partially dependent on the volume of the other company’s sales. Therefore, when the other company’s offerings are not successful, the compensation we receive may be lower than expected or the agreement may be terminated. Moreover, we may not be able to enter into additional or alternative commercial relationships and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we provide these products and content if we are unsuccessful in implementing, maintaining, or developing these products and content.
As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. We may in the future enter into amendments on less favorable terms or encounter parties that have difficulty meeting their contractual obligations to us, which could adversely affect our operating results.
Our present and future e-commerce services agreements, other commercial agreements, and strategic alliances create additional risks such as:

disruption of our ongoing business, including loss of management focus on existing businesses;

impairment of other relationships;
 
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variability in revenue and income from entering into, amending, or terminating such agreements or relationships; and

difficulty integrating under the commercial agreements.
Our consumer business is subject to additional risks associated with our international licensees.
Many of the licensees of our consumer business are located outside the U.S. Our consumer business and our licensees face numerous risks in doing business outside the U.S., including: (i) unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements; (ii) tariffs, trade protection measures, import or export licensing requirements, trade embargoes, sanctions and other trade barriers; (iii) competition from foreign companies; (iv) longer accounts receivable collection cycles and difficulties in collecting accounts receivable; (v) less effective and less predictable protection and enforcement of intellectual property rights; (vi) changes in the political or economic condition of a specific country or region (including, without limitation, as a result of political unrest), particularly in emerging markets or jurisdictions where political events may strongly influence consumer spending; (vii) fluctuations in the value of foreign currency versus the U.S. dollar, the cost of currency exchange and compliance with exchange controls; (viii) potentially adverse tax consequences; and (ix) cultural differences in the conduct of business. Any one or more of such factors could cause the future international sales of licensees to decline. In addition, the business practices of our consumer business in international markets are subject to the requirements of the U.S. Foreign Corrupt Practices Act and all other applicable anti-bribery laws, any violation of which could subject us to significant fines, criminal sanctions and other penalties. The occurrence of any of the above risks and uncertainties could result in a material adverse effect on our consumer business’s financial condition, results of operations or business.
We are subject to product liability claims when people or property are harmed by the products we sell or manufacture.
Some of the products we sell or manufacture expose us to product liability or food safety claims relating to personal injury or illness, death, or environmental or property damage, and can require product recalls or other actions. Third parties who sell products using our platforms and stores increase our exposure to product liability claims, such as when these sellers do not have sufficient protection from such claims. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Although we impose contractual terms on sellers that are intended to prohibit sales of certain type of products, we may not be able to detect, enforce, or collect sufficient damages for breaches of such agreements. In addition, some of our agreements with our vendors and sellers do not indemnify us from product liability.
Additional Risks Related to Playboy’s Digital Subscriptions and Content Business
Free content on the Internet and competition from the tube sites is increasing competition for our adult content products and is changing the dynamics of the marketplace for our adult content products.
Demand for our paid adult content products is significantly impacted by the availability of free adult entertainment available on the Internet in general and at the “YouTube-like” adult video sites that are commonly known as “tube sites.” The tube sites feature free adult videos, some of which consist of unlicensed, or pirated, excerpts of professionally produced adult movies (including at times pirated versions of our proprietary videos). The availability of these free adult videos has diminished the demand for our paid video offerings on our proprietary websites, Playboy TV and Playboy Plus, and for our other content products, and has diluted the market presence of our website. The tube sites have materially affected the revenues we generate from our website and other adult content offerings. It is uncertain what affect these tube sites and other free internet adult websites will have on our on-going operations and our future financial results. No assurance can be given that we will be able to effectively compete against the tube sites and other internet products.
 
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Failure to maintain our agreements with multiple system operators, or MSOs, and direct-to-home, or DTH, operators on favorable terms could adversely affect our business, financial condition or results of operations.
We currently have agreements with many of the largest MSOs in the U.S. and internationally. Our agreements with these operators may be terminated on short notice without penalty. If one or more MSOs or DTH operators terminate or do not renew these agreements, or do not renew them on terms as favorable as those of current agreements, our business, financial condition or results of operations could be materially adversely affected.
In addition, competition among television programming providers is intense for both channel space and viewer spending. Our competition varies in both the type and quality of programming offered, but consists primarily of other premium pay platforms, such as general-interest premium channels, and other adult movie pay platforms. We compete with other pay platforms as we attempt to obtain or renew carriage with DTH operators and individual cable affiliates, negotiate fee arrangements with these operators, negotiate for video-on-demand, or VOD, and subscription video-on-demand rights and market our programming through these operators to consumers. The competition with programming providers has intensified as a result of consolidation in the DTH and cable systems industries, which has resulted in fewer, but larger, operators. Competition has also intensified with VOD’s lower cost of entry for programmers compared to linear networks and with capacity constraints disappearing. The impact of industry consolidation, any decline in our access to and acceptance by DTH and/or cable systems and the possible resulting deterioration in the terms of agreements, cancellation of fee arrangements or pressure on margin splits with operators of these systems could adversely affect our business, financial condition or results of operations.
Limits on our access to satellite transponders could adversely affect our business, financial condition or results of operations.
Our cable television and DTH operations require continued access to satellite transponders to transmit programming to cable and DTH operators. Material limitations on our access to these systems or satellite transponder capacity could materially adversely affect our business, financial condition or results of operations. Our access to transponders may also be restricted or denied if:

we or the satellite transponder providers are indicted or otherwise charged as a defendant in a criminal proceeding;

the Federal Communications Commission issues an order initiating a proceeding to revoke the satellite owner’s authorization to operate the satellite;

the satellite transponder providers are ordered by a court or governmental authority to deny us access to the transponder;

we are deemed by a governmental authority to have violated any obscenity law; or

the satellite transponder providers fail to provide the required services.
In addition to the above, the access of Playboy TV and the Playboy Channel and our other networks to transponders may be restricted or denied if a governmental authority commences an investigation or makes an adverse finding concerning the content of their transmissions. Technical failures may also affect our satellite transponder providers’ ability to deliver transmission services.
There has been a shift in consumer behavior as a result of technological innovations and changes in the distribution of content, which may affect our viewership and the profitability of our content business in unpredictable ways.
Technology and business models in our industry continue to evolve rapidly. Changes to these business models include the increasing presence of streaming platforms and the greater video consumption through time-delayed or time-shifted viewing of television programming through streaming platforms, on-demand platforms, and digital video recorder, or DVRs. Consumer behavior related to changes in content distribution and technological innovation affect our economic model and viewership in ways that are not entirely predictable.
 
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Consumers are increasingly viewing content on a time-delayed or on-demand basis from traditional distributors and from streaming platforms, connected apps and websites and on a wide variety of screens, such as televisions, tablets, mobile phones and other devices. Additionally, devices that allow users to view television programs on a time-shifted basis and technologies that enable users to fast-forward or skip programming, including commercials, such as DVRs and portable digital devices and systems that enable users to store or make portable copies of content may affect the attractiveness of our offerings to advertisers and could therefore adversely affect our revenues. There is increased demand for short-form, user-generated and interactive content, which have different economic models than our traditional content offerings. Likewise, distributors are offering smaller programming packages known as “skinny bundles,” which are delivered at a lower cost than traditional offerings and sometimes allow consumers to create a customized package of networks, that are gaining popularity among consumers. If our networks are not included in these packages or consumers favor alternative offerings, we may experience a decline in viewership and ultimately the demand for our programming, which could lead to lower distribution and advertising revenues.
In order to respond to changes in content distribution models in our industry, we have invested in, developed and launched DTC products (including our online retail stores). There can be no assurance, however, that our viewers will respond to our DTC products or that our DTC strategy will be successful, particularly given the increase in DTC products on the market. Each distribution model has different risks and economic consequences for us, so the rapid evolution of consumer preferences may have an economic impact that is not completely predictable. Distribution windows are also evolving, potentially affecting revenues from other windows. If we cannot ensure that our distribution methods and content are responsive to our target audiences, our business could be adversely affected.
Our digital content business involves risks of liability claims for media content, which could adversely affect our business, financial condition or results of operations.
As a distributor of media content, we may face potential liability for:

defamation;

invasion of privacy;

negligence;

copyright or trademark infringement; and

other claims based on the nature and content of the materials distributed.
These types of claims have been brought, sometimes successfully, against broadcasters, publishers, online providers and other disseminators of media content. We could also be exposed to liability in connection with material available through our websites. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on us. In addition, measures to reduce our exposure to liability in connection with material available through our websites could require us to take steps that would substantially limit the attractiveness of our websites and/or their availability in various geographic areas, which would negatively affect their ability to generate revenues.
Risks Related to MCAC and the Business Combination
MCAC will be forced to liquidate the Trust Account if it cannot consummate a business combination by the date that is 12 months from the closing of the IPO, or June 9, 2021. In the event of a liquidation, MCAC’s public stockholders will receive $10.20 per share and the MCAC Rights will expire worthless.
If MCAC is unable to complete a business combination by the date that is 12 months from the closing of the IPO, or June 9, 2021, and is forced to liquidate, the per-share liquidation distribution will be $10.20. Furthermore, there will be no distribution with respect to the MCAC Rights, which will expire worthless as a result of MCAC’s failure to complete a business combination.
 
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We do not have a specified maximum redemption threshold in our Certificate of Incorporation. The absence of such a redemption threshold may make it possible for us to complete a Business Combination with which a substantial majority of our public stockholders may redeem their public shares.
Our Certificate of Incorporation does not provide a specified maximum redemption threshold, except that we will not redeem our public shares in an amount that would cause MCAC’s net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (such that we are not subject to the SEC’s “penny stock” rules). However, the Merger Agreement provides that Playboy’s obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the PIPE Investment equaling or exceeding $65,000,000. As a result, we may be able to complete our Business Combination even though a substantial portion of our public stockholders have redeemed their public shares.
In the event the aggregate cash consideration we would be required to pay for all shares of Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement (if such conditions are not waived) exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all public shares submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.
We can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a stockholder of MCAC might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of the Business Combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this prospectus. A stockholder should consult the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.
You must tender your shares of Common Stock in order to validly seek redemption at the Meeting of stockholders.
In connection with tendering your shares for redemption, you must elect either to physically tender your share certificates to Continental or to deliver your Common Stock to Continental electronically using DTC’s DWAC (Deposit/Withdrawal At Custodian) System, in each case at least two business days before the Meeting. The requirement for physical or electronic delivery ensures that a redeeming holder’s election to redeem is irrevocable once the Business Combination is consummated. Any failure to observe these procedures will result in your loss of redemption rights in connection with the vote on the Business Combination.
If third parties bring claims against MCAC, the proceeds held in trust could be reduced and the per-share liquidation price received by MCAC’s stockholders may be less than $10.20.
MCAC’s placing of funds in trust may not protect those funds from third party claims against MCAC. Although MCAC has received from many of the vendors, service providers (other than its independent accountants) and prospective target businesses with which it does business executed agreements waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of MCAC’s public stockholders, they may still seek recourse against the Trust Account. Additionally, a court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of MCAC’s public stockholders. If MCAC liquidates the Trust Account before the completion of a business combination and distributes the proceeds held therein to its public stockholders, the Sponsor has contractually agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us, but only if such a
 
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vendor or prospective target business does not execute such a waiver. However, MCAC cannot assure you that they will be able to meet such obligation. Therefore, the per-share distribution from the Trust Account for our stockholders may be less than $10.20 due to such claims.
Additionally, if MCAC is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in MCAC’s bankruptcy estate and subject to the claims of third parties with priority over the claims of its stockholders. To the extent any bankruptcy claims deplete the Trust Account, MCAC may not be able to return $10.20 to our public stockholders.
Any distributions received by MCAC stockholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, MCAC was unable to pay its debts as they fell due in the ordinary course of business.
MCAC’s Certificate of Incorporation provides that it will continue in existence only until the date that is 12 months from the closing of the IPO, or June 9, 2021 (unless such time period has been extended as described herein). If MCAC is unable to consummate a transaction within the required time periods, upon notice from MCAC, the trustee of the Trust Account will distribute the amount in its Trust Account to its public stockholders. Concurrently, MCAC shall pay, or reserve for payment, from funds not held in trust, its liabilities and obligations, although MCAC cannot assure you that there will be sufficient funds for such purpose. If there are insufficient funds held outside the Trust Account for such purpose, the Sponsor has contractually agreed that, if it liquidates prior to the consummation of a business combination, they will be liable to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by MCAC for services rendered or contracted for or products sold to it, but only if such a vendor or prospective target business does not execute such a waiver. However, we may not properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of the date of distribution. Accordingly, third parties may seek to recover from our stockholders amounts owed to them by us.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
If MCAC’s due diligence investigation of Playboy was inadequate, then stockholders of MCAC following the Business Combination could lose some or all of their investment.
Even though MCAC conducted a due diligence investigation of Playboy, it cannot be sure that this diligence uncovered all material issues that may be present inside Playboy or its business, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Playboy and its business and outside of its control will not later arise.
Stockholder litigation and regulatory inquiries and investigations are expensive and could harm MCAC’s business, financial condition and operating results and could divert management attention.
In the past, securities class action litigation and/or stockholder derivative litigation and inquiries or investigations by regulatory authorities have often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, such as the Business Combination. Any stockholder litigation and/or regulatory investigations against MCAC, whether or not resolved in MCAC’s favor, could result in substantial costs and divert MCAC’s management’s attention from other business concerns, which could adversely affect MCAC’s business and cash resources and the ultimate value MCAC’s stockholders receive as a result of the Business Combination.
 
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The Initial Stockholders who own shares of Common Stock and Private Units will not participate in liquidation distributions and, therefore, they may have a conflict of interest in determining whether the Business Combination is appropriate.
As of the date of this prospectus, the Initial Stockholders owned an aggregate of 1,063,942 shares of Common Stock, inclusive of the 326,492 shares of Common Stock underlying Private Units, but not including the 700,000 Insider Shares sold to Playboy, which will be transferred at the closing of the Business Combination. They have waived their right to redeem these shares, or to receive distributions with respect to these shares upon the liquidation of the Trust Account if MCAC is unable to consummate a business combination. Based on a market price of $11.74 per share of Common Stock on January 13, 2021, the value of these shares was approximately $12.5 million The shares of Common Stock and Private Units acquired prior to the IPO will be worthless if MCAC does not consummate a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting Playboy as a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of the Business Combination are appropriate and in MCAC’s public stockholders’ best interest.
MCAC is requiring stockholders who wish to redeem their public shares in connection with a proposed business combination to comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights prior to the deadline for exercising their rights.
MCAC is requiring stockholders who wish to redeem their Common Stock to either tender their certificates to Continental or to deliver their shares to Continental electronically using the DTC’s DWAC (Deposit/Withdrawal At Custodian) System at least two business days before the Meeting. In order to obtain a physical certificate, a stockholder’s broker and/or clearing broker, DTC and Continental will need to act to facilitate this request. It is MCAC’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from Continental. However, because we do not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While we have been advised that it takes a short time to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it takes longer than MCAC anticipates for stockholders to deliver their Common Stock, stockholders who wish to redeem may be unable to meet the deadline for exercising their redemption rights and thus may be unable to redeem their Common Stock.
MCAC will require its public stockholders who wish to redeem their public shares in connection with the Business Combination to comply with specific requirements for redemption described above, such redeeming stockholders may be unable to sell their securities when they wish to in the event that the Business Combination is not consummated.
If MCAC requires public stockholders who wish to redeem their public shares in connection with the proposed Business Combination to comply with specific requirements for redemption as described above and the Business Combination is not consummated, MCAC will promptly return such certificates to its public stockholders. Accordingly, investors who attempted to redeem their public shares in such a circumstance will be unable to sell their securities after the failed acquisition until MCAC has returned their securities to them. The market price for shares of our Common Stock may decline during this time and you may not be able to sell your securities when you wish to, even while other stockholders that did not seek redemption may be able to sell their securities.
If MCAC’s security holders exercise their registration rights with respect to their securities, it may have an adverse effect on the market price of MCAC’s securities.
MCAC’s Initial Stockholders are entitled to make a demand that it register the resale of their Insider Shares at any time commencing three months prior to the date on which their shares may be released from escrow. Additionally, our Initial Stockholders, officers and directors are entitled to demand that MCAC register the resale of the shares underlying any securities our Initial Stockholders, officers, directors or their affiliates may be issued in payment of working capital loans made to us at any time after MCAC consummates a business combination. If such persons exercise their registration rights with respect to all of their securities, then there will be an additional 1,096,591 shares of Common Stock eligible for trading in
 
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the public market. The presence of these additional shares of Common Stock trading in the public market may have an adverse effect on the market price of MCAC’s securities.
MCAC will not obtain an opinion from an unaffiliated third party as to the fairness of the Business Combination to its stockholders.
MCAC is not required to obtain an opinion from an unaffiliated third party that the price it is paying in the Business Combination is fair to its public stockholders from a financial point of view. MCAC’s public stockholders therefore, must rely solely on the judgment of the Board.
If the Business Combination’s benefits do not meet the expectations of financial or industry analysts, the market price of MCAC’s securities may decline.
The market price of MCAC’s securities may decline as a result of the Business Combination if:

MCAC does not achieve the perceived benefits of the acquisition as rapidly as, or to the extent anticipated by, financial or industry analysts; or

The effect of the Business Combination on the financial statements is not consistent with the expectations of financial or industry analysts.
Accordingly, investors may experience a loss as a result of decreasing stock prices.
MCAC’s directors and officers may have certain conflicts in determining to recommend the acquisition of Playboy, since certain of their interests, and certain interests of their affiliates and associates, are different from, or in addition to, your interests as a shareholder.
MCAC’s management and directors have interests in and arising from the Business Combination that are different from, or in addition to, your interests as a shareholder, which could result in a real or perceived conflict of interest. These interests include the fact that certain of the shares of Common Stock owned by MCAC’s management and directors, or their affiliates and associates, would become worthless if the Business Combination is not approved and MCAC otherwise fails to consummate a business combination prior to June 9, 2021 (unless such date has been extended as described herein).
MCAC has incurred and expects to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by the Combined Company if the Business Combination is completed or by MCAC if the Business Combination is not completed.
MCAC has incurred significant costs associated with the Business Combination. Whether or not the Business Combination is completed, MCAC expects to incur approximately $15 million in expenses. These expenses will reduce the amount of cash available to be used for other corporate purposes by MCAC if the Business Combination is completed or by MCAC if the Business Combination is not completed.
The unaudited pro forma condensed combined financial information included in this prospectus may not be indicative of what the Combined Company’s actual financial position or results of operations would have been.
The unaudited pro forma condensed combined financial information in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what Combined Company’s actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
In the event that a significant number of public shares are redeemed, our Common Stock may become less liquid following the Business Combination.
If a significant number of public shares are redeemed, MCAC may be left with a significantly smaller number of stockholders. As a result, trading in the shares of the Combined Company may be limited and your ability to sell your shares in the market could be adversely affected. The Combined Company intends to
 
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apply to list its shares on the Nasdaq Stock Market (“Nasdaq”), and Nasdaq may not list the Common Stock on its exchange, which could limit investors’ ability to make transactions in MCAC’s securities and subject MCAC to additional trading restrictions.
The Combined Company will be required to meet the initial listing requirements to be listed on the Nasdaq Stock Market. However, the Combined Company may be unable to maintain the listing of its securities in the future.
If the Combined Company fails to meet the continued listing requirements and Nasdaq delists its securities, MCAC could face significant material adverse consequences, including:

a limited availability of market quotations for its securities;

a limited amount of news and analyst coverage for the company; and

a decreased ability to issue additional securities or obtain additional financing in the future.
MCAC may waive one or more of the conditions to the Business Combination without resoliciting shareholder approval for the Business Combination.
MCAC may agree to waive, in whole or in part, some of the conditions to its obligations to complete the Business Combination, to the extent permitted by applicable laws. The Board will evaluate the materiality of any waiver to determine whether amendment of this prospectus and resolicitation of proxies is warranted. In some instances, if the Board determines that a waiver is not sufficiently material to warrant resolicitation of stockholders, MCAC has the discretion to complete the Business Combination without seeking further shareholder approval. For example, it is a condition to MCAC’s obligations to close the Business Combination that there be no restraining order, injunction or other order restricting Playboy’s conduct of its business, however, if the Board determines that any such order or injunction is not material to the business of Playboy, then the Board may elect to waive that condition without shareholder approval and close the Business Combination.
MCAC’s stockholders will experience immediate dilution as a consequence of the issuance of Common Stock as consideration in the Business Combination. Having a minority share position may reduce the influence that MCAC’s current stockholders have on the management of MCAC.
After the Business Combination, assuming no redemptions of public shares for cash, and based on the assumptions of the number of shares issuable to former Playboy stockholders described under “Unaudited Pro Forma Condensed Combined Financial Information” elsewhere in this prospectus, MCAC’s current public stockholders will own approximately 19% of MCAC’s non-redeemable shares, MCAC’s current directors, officers and affiliates will own approximately 3% of MCAC’s non-redeemable shares, the PIPE Investors will own approximately 15% of MCAC’s non-redeemable shares, and the former stockholders of Playboy will own approximately 62% of MCAC’s non-redeemable shares. Assuming redemption by holders of 4,279,760 outstanding public shares, MCAC public stockholders will own approximately 7% of MCAC’s non-redeemable shares, MCAC’s current directors, officers and affiliates will own approximately 4% of MCAC’s non-redeemable shares, the PIPE Investors will own approximately 17% of MCAC’s non-redeemable shares, and the former stockholders of Playboy will own approximately 71% of MCAC’s non-redeemable shares. The minority position of the former MCAC stockholders will give them limited influence over the management and operations of the Combined Company.
The Combined Company will likely be a controlled company within the meaning of the Nasdaq rules, and, as a result, qualifies for exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. To the extent the Combined Company utilizes any of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to such requirements. The Combined Company does not currently intend to rely on the exemptions afforded to controlled companies at this time.
So long as more than 50% of the voting power for the election of directors of the Combined Company is held by an individual, a group or another company, the Combined Company will qualify as a “controlled company” under Nasdaq rules. Following the completion of the Business Combination, RT will likely
 
37

 
control a majority of the voting power of Combined Company’s outstanding Common Stock. As a result, the Combined Company will likely be a “controlled company” under Nasdaq rules. In the event the Combined Company is a controlled company, the Combined Company will be exempt from certain Nasdaq corporate governance requirements, including those that would otherwise require the Combined Company’s Board of Directors to have a majority of independent directors and require that the Combined Company either establish compensation and nominating and corporate governance committees, each comprised entirely of independent directors, or otherwise ensure that the compensation of the Combined Company’s executive officers and nominees for directors are determined or recommended to the board of directors by the independent members of the board of directors. While the Combined Company does not currently intend to rely on any of these exemptions, it will be entitled to do so for as long as the Combined Company will be considered a “controlled company,” and to the extent it relies on one or more of these exemptions, holders of the Combined Company’ Common Stock will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
Risks Related to Combined Company’s Common Stock
The market price of the Combined Company’s Common Stock is likely to be highly volatile, and you may lose some or all of your investment.
Following the Business Combination, the market price of Combined Company’s Common Stock is likely to be highly volatile and may be subject to wide fluctuations in response to a variety of factors, including the following:

the impact of COVID-19 pandemic on Playboy’s business;

the inability to obtain or maintain the listing of the Combined Company’s shares of Common Stock on Nasdaq;

the inability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, Playboy’s ability to grow and manage growth profitably, and retain its key employees;

changes in applicable laws or regulations;

risks relating to the uncertainty of Playboy’s projected financial information;

risks related to the organic and inorganic growth of Playboy’s business and the timing of expected business milestones; and

the amount of redemption requests made by MCAC’s stockholders.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory and market conditions, may negatively affect the market price of the Combined Company’s Common Stock, regardless of the Combined Company’s actual operating performance.
Volatility in the Combined Company’s share price could subject the Combined Company to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If the Combined Company faces such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm its business.
If securities or industry analysts do not publish research or reports about the Combined Company, or publish negative reports, the Combined Company’s stock price and trading volume could decline.
The trading market for the Combined Company’s Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about the Combined Company. The Combined Company does not have any control over these analysts. If the Combined Company’s financial performance
 
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fails to meet analyst estimates or one or more of the analysts who cover the Combined Company downgrade its Common Stock or change their opinion, the Combined Company’s stock price would likely decline. If one or more of these analysts cease coverage of the Combined Company or fail to regularly publish reports on the Combined Company, it could lose visibility in the financial markets, which could cause the Combined Company’s stock price or trading volume to decline.
Because the Combined Company does not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, would be your sole source of gain.
The Combined Company currently anticipates that it will retain future earnings for the development, operation and expansion of its business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of the Combined Company’s shares of Common Stock would be your sole source of gain on an investment in such shares for the foreseeable future.
Future sales of shares of the Combined Company’s Common Stock may depress its stock price.
Sales of a substantial number of the Combined Company’s Common Stock in the public market after the Closing, or the perception that these sales might occur, could depress the market price of the Combined Company’s Common Stock and could impair its ability to raise capital through the sale of additional equity securities.
The Combined Company is an emerging growth company, and the Combined Company cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make its shares less attractive to investors.
After the completion of the Business Combination, the Combined Company will be an emerging growth company, as defined in the JOBS Act. For as long as the Combined Company continues to be an emerging growth company, it may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Combined Company will remain an emerging growth company until the earlier of (1) the date (a) June 9, 2025, (b) in which the Combined Company has total annual gross revenue of at least $1.07 billion or (c) in which the Combined Company is deemed to be a large accelerated filer, which means the market value of shares of the Combined Company’s Common Stock that are held by non-affiliates exceeds $700 million as of the prior September 30th, and (2) the date on which the Combined Company has issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Combined Company has elected to avail itself of this exemption from new or revised accounting standards and, therefore, the Combined Company will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Even after the Combined Company no longer qualifies as an emerging growth company, it may still qualify as a “smaller reporting company,” which would allow it to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in this prospectus and the Combined Company’s periodic reports and prospectus.
The Combined Company cannot predict if investors will find its Common Stock less attractive because the Combined Company may rely on these exemptions. If some investors find the Combined Company’s Common Stock less attractive as a result, there may be a less active trading market for the Common Stock and its market price may be more volatile.
 
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USE OF PROCEEDS
All of the shares of Common Stock offered by the Selling Stockholders pursuant to this prospectus will be sold by the Selling Stockholders for their respective amounts. We will not receive any of the proceeds from these sales.
 
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
MCAC is providing the following unaudited pro forma condensed combined financial information to assist in your evaluation of the Business Combination.
The unaudited pro forma condensed combined balance sheet as of September 30, 2020 gives pro forma effect to the Business Combination as if it had been consummated as of that date. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019 give pro forma effect to the Business Combination as if it had occurred as of January 1, 2019. This information should be read together with Playboy’s and MCAC’s respective audited and unaudited financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MCAC,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Playboy” and other financial information included elsewhere in this prospectus.
The unaudited pro forma condensed combined balance sheet as of September 30, 2020 has been prepared using the following:

Playboy’s unaudited historical condensed consolidated balance sheet as of September 30, 2020, as included elsewhere in this prospectus; and

MCAC’s unaudited historical condensed balance sheet as of September 30, 2020, as included elsewhere in this prospectus.
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 has been prepared using the following:

Playboy’s unaudited historical condensed consolidated statement of operations for the nine months ended September 30, 2020, as included elsewhere in this prospectus; and

MCAC’s unaudited historical statement of operations for the nine months ended September 30, 2020, as included elsewhere in this prospectus.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 has been prepared using the following:

Playboy’s unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 which combines Playboy’s audited consolidated statement of operations and Yandy’s audited statement of operations for the year ended December 31, 2019, as included elsewhere in this prospectus giving pro forma effect to the acquisition of Yandy by Playboy as if it had occurred on January 1, 2019 (see Note 4 below); and

MCAC’s audited historical statement of operations for the period from November 12, 2019 (inception) through December 31, 2019, as included elsewhere in this prospectus.
Description of the Transactions
On September 30, 2020, MCAC entered into the Merger Agreement with Playboy, Merger Sub and Suying Liu. Pursuant to the Merger Agreement, at the closing of the transactions contemplated thereby, Merger Sub will merge with and into Playboy with Playboy surviving the Merger as a wholly owned subsidiary of MCAC. In addition, in connection with the consummation of the Business Combination, MCAC will be renamed “PLBY Group, Inc.”
Under the Merger Agreement, MCAC will acquire all of the outstanding Playboy shares for approximately $381.3 million in aggregate consideration, comprising (i) 23,920,000 shares of MCAC’s Common Stock, based on a price of $10.00 per share, subject to adjustment as described below (the “Closing Payment Shares”), and (ii) the assumption of no more than $142.1 million of Playboy debt (the “Net Debt Target”). The number of Closing Payment Shares issuable shall be 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 Closing Payment Shares will be reduced) or less
 
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than (in which case the number of Closing Payment Shares will be increased) the Net Debt Target. If Net Debt equals the Net Debt Target, then no adjustment will be made to the number of Closing Payment Shares. Any adjustment to the Closing Payment Shares shall be in whole shares of MCAC Common Stock and no adjustment shall be made for any divergence that is in an increment of $9.99 or less. The total number of shares to be issued at closing is estimated to be 20,933,921 shares with 2,024,848 shares and 3,489,114 shares reserved for future issuance to Playboy holders of fully vested RSUs and options, respectively.
In connection with the Merger, MCAC 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 issued and sold, 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 Shares”).
Additionally, in connection with the execution of the Merger Agreement, MCAC, the Sponsor, Suying Liu and Playboy entered into a stock purchase agreement (the “Insider Stock Purchase Agreement”), pursuant to which Playboy purchased 700,000 shares of Common Stock (the “Initial Shares”) from Sponsor. Subject to the satisfaction of conditions set forth under the Merger Agreement, MCAC shall transfer the Initial Shares to Playboy upon the closing or, if the Merger Agreement is terminated, upon the consummation of any other business combination (as defined in MCAC’s Organizational Documents). In the event of a Compliance Failure (as defined in the Merger Agreement) that is not cured, upon Playboy’s request as of the closing, or in the event the Merger Agreement is terminated, upon the consummation of any other business combination (as defined in MCAC’s Organizational Documents), up to $1,000,000 in Insider Shares held by Dr. Liu shall be transferred to Playboy (the “Balance Shares”). In the event that (i) the Initial Shares and/or Balance Shares are subject to contractual lock-up at the time of transfer, Dr. Liu shall transfer additional Insider Shares to Playboy in accordance with the terms of Section 7.2 of the Merger Agreement, in the event that the per share price of the shares of Common Stock on the business day immediately prior to such lock-up expiration is lower than the price per share at the time of the Closing or, (ii) if the Merger Agreement is terminated, upon the consummation of any other business combination (as defined in MCAC’s Organizational Documents) such that the total aggregate value of the Initial Shares is at least $4,445,000 (or, if the Balance Shares have been issued, at least $5,445,000).
The Playboy options and RSUs that are outstanding as of immediately prior to the closing of the Business Combination (other than the Pre-Closing Option) shall accelerate and fully vest. Each outstanding Playboy option shall be assumed by MCAC and automatically converted into an option to purchase such number of shares of Common Stock equal to the product of (x) the Merger Consideration and (y) the option holder’s respective percentage of the Merger Consideration set forth in the stockholder allocation schedule, which shall be reserved for future issuance upon the exercise of such assumed options. All RSUs that are then outstanding shall be terminated and shall be subsequently paid, in settlement, such 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 as set forth in the stockholder allocation schedule. Settlement of the RSUs in 2,024,848 shares of the Combined Company shall occur one year from the Closing Date of the Business Combination.
Accounting for the Merger
The Merger will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, MCAC, who is the legal acquirer, will be treated as the “acquired” company for financial reporting purposes and Playboy will be treated as the accounting acquirer. This determination was primarily based on Playboy expecting to have a majority of the voting power of the post-combination company, Playboy’s senior management comprising substantially all of the senior management of the post-combination company, the relative size of Playboy compared to MCAC, and Playboy’s operations comprising the ongoing operations of the post-combination company. Accordingly, for accounting purposes, the Merger will be treated as the equivalent of a capital transaction in which Playboy is issuing stock for the net assets of MCAC. The net assets of MCAC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger will be those of Playboy.
 
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Basis of Pro Forma Presentation
The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable, and as it relates to the unaudited pro forma condensed combined statements of operations, are expected to have a continuing impact on the results of the post-combination company. The adjustments presented on the unaudited pro forma combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the post-combination company upon consummation of the Business Combination.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma combined financial information as being indicative of the historical financial position and results that would have been achieved had the companies always been combined or the future financial position and results that the post-combination company will experience. Playboy and MCAC have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma combined financial information has been prepared assuming two alternative levels of redemption into cash of MCAC’s shares of Common Stock:

Assuming no redemptions for cash:   This presentation assumes that no MCAC stockholders exercise redemption rights with respect to their shares of MCAC’s Common Stock upon consummation of the Business Combination; and

Assuming high redemptions for cash:   This presentation assumes that MCAC stockholders exercise their redemption rights with respect to a maximum of 4,279,760 shares of MCAC’s Common Stock upon consummation of the Business Combination at a redemption price of approximately $10.20 per share. The high redemption amount is presented taking into consideration the closing condition requiring a minimum Trust Account balance of $15,000,000, after giving effect to the payments to redeeming stockholders, but prior to payment of estimated transaction expenses. The “high redemption” scenario includes all adjustments contained in the “no redemption” scenario and presents additional adjustments to reflect the effect of the “high redemption” scenario.
The foregoing scenarios are for illustrative purposes as MCAC does not have, as of the date of this prospectus, a meaningful way of providing any certainty regarding the number of redemptions by MCAC’s public stockholders that may actually occur. Additionally, the final number of Closing Payment Shares issuable under the Merger Agreement to Playboy stockholders is subject to adjustment as described therein based on the Net Debt Target prior to Closing. Accordingly, the actual number of shares of MCAC Common Stock issuable to Playboy stockholders (including in respect of RSUs and Options), the number of redemptions of MCAC's public stockholders, and the resulting Combined Company ownership percentages may vary significantly from those described herein.
Included in the shares outstanding and weighted-average shares outstanding as presented in the pro forma combined financial statements are 20,933,921 shares of MCAC Common Stock to be issued to Playboy stockholders under the no redemption and high redemption scenarios. Refer to Note 3, Net Loss Per Share.
As a result of the Business Combination and immediately following the closing of the Business Combination, assuming no MCAC stockholders elect to redeem their shares for cash, current stockholders of Playboy will own approximately 62% of the outstanding Combined Company common stock, the PIPE Investors will own approximately 15% of the outstanding Combined Company common stock, MCAC’s Sponsor, officer, directors and other holders of founder shares will own approximately 3% of the Combined Company common stock and the former stockholders of MCAC will own approximately 19% of the outstanding Combined Company common stock as of September 30, 2020 (in each case, not giving effect to any shares issuable to them upon exercise of rights or options). As a result, current stockholders of Playboy, as a group, will collectively own more shares of Combined Company common stock than any single stockholder following consummation of the Business Combination with no current stockholder of MCAC owning more than 10% of the issued and outstanding capital stock of the Combined Company.
 
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If 4,279,760 shares of Common Stock are redeemed for cash, which assumes the high redemption scenario of Combined Company common stock to ensure a minimum consolidated Trust Account balance of $15,000,000, after giving effect to payments to redeeming stockholders and prior to payment of estimated transaction expenses, Playboy will own approximately 71% of the outstanding Combined Company common stock, the PIPE Investors will own approximately 17% of the outstanding Combined Company common stock, MCAC’s Sponsor, officer, directors and other holders of founder shares will own approximately 4% of Combined Company common stock and the former stockholders of MCAC will own approximately 7% of the outstanding Combined Company common stock (in each case, not giving effect to any shares issuable to them upon exercise of rights or options).
 
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PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2020
(UNAUDITED)
(in thousands, except share amounts)
MCAC
Playboy
Pro Forma
Adjustments
(Assuming No
Redemptions)
Note
Pro Forma
Combined
(Assuming No
Redemptions)
Additional
Pro forma
Adjustments
(Assuming High
Redemptions)
Note
Pro Forma
Combined
(Assuming High
Redemptions)
Assets
Cash and cash equivalents
$ 235 $ 15,872 $ 58,670
a
50,000
b
(4,815)
c
(4,445)
d
(8,616)
g
$ 106,901 $ (43,670)
f
$ 63,231
Restricted cash
968 968 968
Receivables, net
6,581 6,581 6,581
Inventories, net
11,959 11,959 11,959
Contract assets, current portion
1,262 1,262 1,262
Licensed programming costs
480 480 480
Stock receivable
4,445 4,445 4,445
Prepaid expenses and other current assets
58 8,272 8,330 8,330
Total current assets
293 49,839 90,794 140,926 (43,670) 97,256
Property and equipment, net
5,222 5,222 5,222
Trademarks and trade name
336,386 336,386 336,386
Goodwill
504 504 504
Other intangible assets, net
2,518 2,518 2,518
Marketable securities held in Trust
Account
58,670 (58,670)
a
Contract assets, net of current portion
6,940 6,940 6,940
Other noncurrent assets
12,153 12,153 12,153
Total assets
$ 58,963 $ 413,562 $ 32,124 $ 504,649 $ (43,670) $ 460,979
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$ 9,180 (1,192)
c
7,988 7,988
Paybles to related parties
7 7 7
Accrued salaries, wages, and employee benefits
3,998 3,998 3,998
Deferred revenues, current portion
15,931 15,931 15,931
Long-term debt, current portion
4,052 4,052 4,052
Convertible promissory notes, current portion
13,500 (13,500)
g
Other current liabilities and accrued expenses
41 16,872 16,913 16,913
Total current liabilities
41 63,540 (14,692) 48,889 48,889
Deferred revenues, net of current portion
34,997 34,997 34,997
 
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PRO FORMA CONDENSED COMBINED BALANCE SHEET (continued)
AS OF SEPTEMBER 30, 2020
(UNAUDITED)
(in thousands, except share amounts)
MCAC
Playboy
Pro Forma
Adjustments
(Assuming No
Redemptions)
Note
Pro Forma
Combined
(Assuming No
Redemptions)
Additional
Pro forma
Adjustments
(Assuming High
Redemptions)
Note
Pro Forma
Combined
(Assuming High
Redemptions)
Long-term debt, net of current portion
156,157 156,157 156,157
Deferred tax liabilities, net
74,469 74,469 74,469
Deferred underwriting fees
2,012 (2,012)
c
Other noncurrent liabilities
1,568 1,568 1,568
Total liabilities
2,053 330,731 (16,704) 316,080 316,080
Mezzanine equity
Common stock subject to possible redemption, 5,090,066 shares at redemption value
51,910 (51,910)
e
Redeemable noncontrolling interest
(208) (208) (208)
Total mezzanine equity
51,910 (208) (51,910) (208) (208)
Stockholders’ Equity
Common stock
36 1
b
1
e
(35)
h
3
f
3
Treasury stock
(38,455) (4,445)
d
38,455
h
(4,445) (4,445)
Additional paid-in capital
5,155 198,962 49,999
b
51,909
e
2,730
g
(38,575)
h
2,891
i
2,000
c
275,071 (43,670)
f
231,401
Accumulated deficit
(155) (77,504) (3,611)
c
2,154
g
155
h
(2,891)
i
(81,852) (81,852)
Total stockholders’ equity
5,000 83,039 100,738 188,777 (43,670) 145,107
Total liabilities and stockholders’ equity
$ 58,963 $ 413,562 $ 32,124 $ 504,649 $ (43,670) $ 460,979
 
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PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)
(in thousands, except per share and per share amounts)
MCAC
Playboy
Pro Forma
Adjustments
(Assuming No
Redemptions)
Note
Pro Forma
Combined
(Assuming No
Redemptions)
Additional
Pro forma
Adjustments
(Assuming High
Redemptions)
Note
Pro Forma
Combined
(Assuming High
Redemptions)
Net revenues
$ $ 101,335 $ $ 101,335 $ $ 101,335
Costs and expenses:
Cost of sales
(50,548) (50,548) (50,548)
Selling and administrative
(177) (41,357) 40
aa
1,274
bb
(40,220) (40,220)
Related-party expenses
(757) (757) (757)
Total costs and expenses
(177) (92,662) 1,314 (91,525) (91,525)
Operating (loss) income
(177) 8,673 1,314 9,810 9,810
Nonoperating (expense) income:
Investment income
23 30 (23)
cc
30 30
Interest expense
(10,073) (10,073) (10,073)
Unrealized loss on marketable securities held in Trust
Account
(1) 1
cc
Other, net
81 81 81
Total nonoperating expense
22 (9,962) (22) (9,962) (9,962)
Loss before income taxes
(155) (1,289) 1,292 (152) (152)