What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-04 · 152 added, 62 removed, 434 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Current assets:

2 unchanged sentences

Restricted cash and cash equivalents 450,145 546,604

Accounts receivable, net of allowances of $ 2,201 and $ 443 at June 30, 2020 and March 31, 2020, respectively

Accounts receivable, net of allowances of $ 448 and $ 443 at September 30, 2020 and March 31, 2020, respectively

787,818 592,555

28 unchanged sentences

Preferred stock, $ .01 par value, 5,000 shares authorized;

no shares issued and outstanding at June 30, 2020 and March 31, 2020

no shares issued and outstanding at September 30, 2020 and March 31, 2020

Common stock, $ .01 par value, 200,000 shares authorized;

136,689 and 135,927 shares issued and 114,268 and 113,506 outstanding at June 30, 2020 and March 31, 2020, respectively

137,349 and 135,927 shares issued and 114,928 and 113,506 outstanding at September 30, 2020 and March 31, 2020, respectively

Additional paid-in capital 2,285,394 2,134,748

Treasury stock, at cost;

22,421 common shares at June 30, 2020 and March 31, 2020

22,421 common shares at September 30, 2020 and March 31, 2020

( 820,572 ) ( 820,572 )

7 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended

September 30,

2020 2019 2020 2019

Net revenue $ 841,142 $ 857,841 $ 1,672,452 $ 1,398,300

1 unchanged sentence

Gross profit 408,637 389,593 763,258 688,583

General and administrative 102,173 74,833

Selling and marketing 113,691 149,566 198,470 241,387

General and administrative 91,433 76,659 193,606 151,492

Research and development 74,216 76,197 147,324 145,160

4 unchanged sentences

Interest and other, net 2,706 8,054 10,924 18,479

Loss on long-term investments 655 — 655 —

Income before income taxes 117,418 82,874 207,779 145,029

9 unchanged sentences

Three Months Ended

September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net income $ 99,321 $ 71,815 $ 187,826 $ 118,095

13 unchanged sentences

(in thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Operating activities:

22 unchanged sentences

Business acquisitions ( 75,482 ) ( 8,715 )

Net cash (used in) provided by investing activities ( 247,465 ) 166,793

Net cash used in investing activities ( 502,624 ) ( 36,200 )

Financing activities:

10 unchanged sentences

(in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance, June 30, 2020 136,689 $ 1,367 $ 2,151,774 ( 22,421 ) $ ( 820,572 ) $ 1,370,590 $ ( 52,131 ) $ 2,651,028

Net income — — — — — 99,321 — 99,321

Change in cumulative foreign currency translation adjustment — — — — — — 18,861 18,861

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 1,554 ) ( 1,554 )

Stock-based compensation — — 45,675 — — — — 45,675

Issuance of restricted stock, net of forfeitures and cancellations 115 1 ( 1 ) — — — — —

Net share settlement of restricted stock awards ( 59 ) ( 1 ) ( 9,695 ) — — — — ( 9,696 )

Employee share purchase plan settlement — — — — — — — —

Issuance of shares related to Playdots, Inc.

acquisition 604 6 97,641 — — — — 97,647

Balance, September 30, 2020 137,349 $ 1,373 $ 2,285,394 ( 22,421 ) $ ( 820,572 ) $ 1,469,911 $ ( 34,824 ) $ 2,901,282

Three Months Ended September 30, 2019

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

Balance, June 30, 2019 135,527 $ 1,355 $ 2,025,626 ( 22,421 ) $ ( 820,572 ) $ 923,906 $ ( 43,988 ) $ 2,086,327

Net income — — — — — 71,815 — 71,815

Change in cumulative foreign currency translation adjustment — — — — — — ( 12,567 ) ( 12,567 )

Change in unrealized gains on cash flow hedge, net — — — — — — 2,095 2,095

Net unrealized gain on available-for-sale securities, net of taxes — — — — — — ( 2 ) ( 2 )

Stock-based compensation — — 43,455 — — — — 43,455

Issuance of restricted stock, net of forfeitures and cancellations 164 2 ( 2 ) — — — — —

Net share settlement of restricted stock awards ( 75 ) ( 1 ) ( 9,359 ) — — — — ( 9,360 )

Employee share purchase plan settlement — — — — — — — —

Balance, September 30, 2019 135,616 $ 1,356 $ 2,059,720 ( 22,421 ) $ ( 820,572 ) $ 995,721 $ ( 54,462 ) $ 2,181,763

Six Months Ended September 30, 2020

Common Stock Additional

Capital Treasury Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders'

Shares Amount Shares Amount

Balance, March 31, 2020 135,927 $ 1,359 $ 2,134,748 ( 22,421 ) $ ( 820,572 ) $ 1,282,085 $ ( 58,376 ) $ 2,539,244

7 unchanged sentences

Employee share purchase plan settlement 65 1 6,502 — — — — 6,503

Balance, June 30, 2020 136,689 $ 1,367 $ 2,151,774 ( 22,421 ) $ ( 820,572 ) $ 1,370,590 $ ( 52,131 ) $ 2,651,028

Three Months Ended June 30, 2019

Issuance of shares related to Playdots, Inc.

acquisition 604 6 97,641 — — — — 97,647

Balance, September 30, 2020 137,349 $ 1,373 $ 2,285,394 ( 22,421 ) $ ( 820,572 ) $ 1,469,911 $ ( 34,824 ) $ 2,901,282

Six Months Ended September 30, 2019

Common Stock Additional

11 unchanged sentences

Stock-based compensation — — 96,706 — — — — 96,706

Repurchased common stock — — — — — — — —

Issuance of restricted stock, net of forfeitures and cancellations 1,503 15 ( 15 ) — — — — —

1 unchanged sentence

Employee share purchase plan settlement 62 1 5,132 — — — — 5,133

Balance, June 30, 2019 135,527 $ 1,355 $ 2,025,626 ( 22,421 ) $ ( 820,572 ) $ 923,906 $ ( 43,988 ) $ 2,086,327

Balance, September 30, 2019 135,616 $ 1,356 $ 2,059,720 ( 22,421 ) $ ( 820,572 ) $ 995,721 $ ( 54,462 ) $ 2,181,763

See accompanying Notes.

6 unchanged sentences

We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe.

We develop and publish products principally through Rockstar Games, 2K, Private Division, and Social Point.

We develop and publish products principally through Rockstar Games, 2K, Private Division, Social Point, and Playdots.

Our products are designed for console systems and personal computers, including smart phones and tablets, and are delivered through physical retail, digital download, online platforms, and cloud streaming services.

45 unchanged sentences

Net revenue by product revenue and service and other was as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net revenue recognized:

7 unchanged sentences

Net revenue by full game and other revenue and recurrent consumer spending was as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net revenue recognized:

4 unchanged sentences

Net revenue by geographic region was as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net revenue recognized:

3 unchanged sentences

Net revenue by platform was as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net revenue recognized:

5 unchanged sentences

Net revenue by distribution channel was as follows:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Net revenue recognized:

4 unchanged sentences

We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations.

Deferred revenue, including current and non-current balances as of June 30, 2020 and March 31, 2020 were $ 960,951 and $ 806,123 , respectively.

For the three months ended June 30, 2020, the additions to our deferred revenue balance were due primarily to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended June 30, 2020 and 2019, $ 371,213 and $ 330,421 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of June 30, 2020, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,070,511 , which includes our deferred revenue balances and amounts to be invoiced and recognized in future periods.

Deferred revenue, including current and non-current balances as of September 30, 2020 and March 31, 2020 were $ 1,095,944 and $ 806,123 , respectively.

For the three months ended September 30, 2020, the additions to our deferred revenue balance were due primarily to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the three months ended September 30, 2020 and 2019, $ 241,732 and $ 234,411 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

During the six months ended September 30, 2020 and 2019, $ 612,946 and $ 564,833 , respectively, of revenue was recognized that was included in the deferred revenue balance at the beginning of the respective period.

As of September 30, 2020, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,223,304 , which includes our deferred revenue balances and amounts to be invoiced and recognized in future periods.

We expect to recognize approximately $ 1,092,423 of this balance as revenue over the next 12 months, and the remainder thereafter.

This balance does not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum guarantee.

As of June 30, 2020 and March 31, 2020, our contract asset balances were $ 92,733 and $ 81,625 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

As of September 30, 2020 and March 31, 2020, our contract asset balances were $ 98,053 and $ 81,625 , respectively, which are recorded within Prepaid expenses and other in our Condensed Consolidated Balance Sheets.

MANAGEMENT AGREEMENT

3 unchanged sentences

The 2017 Management Agreement provides for an annual management fee of $ 3,100 over the term of the agreement and a maximum annual bonus opportunity of $ 7,440 over the term of the agreement, based on the Company achieving certain performance thresholds.

In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and administrative expenses) of $ 2,665 and $ 1,670 during the three months ended June 30, 2020 and 2019, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 6,740 and $ 5,545 during the three months ended June 30, 2020 and 2019, respectively.

In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and administrative expenses) of $ 2,605 and $ 1,705 during the three months ended September 30, 2020 and 2019, respectively, and $ 5,270 and $ 3,375 during the six months ended September 30, 2020 and 2019, respectively.

We recorded stock-based compensation expense for restricted stock units granted to ZelnickMedia, which is included in General and administrative expenses, of $ 6,887 and $ 5,956 during the three months ended September 30, 2020 and 2019, respectively, and $ 13,657 and $ 11,501 during the six months ended September 30, 2020 and 2019, respectively.

In connection with the 2017 Management Agreement, we have granted restricted stock units as follows:

Three Months Ended June 30,

Six Months Ended September 30,

Time-based 79 92

14 unchanged sentences

At the end of each reporting period, we assess the probability of each performance metric and upon determination that certain thresholds are probable, we record expense for the unvested portion of the shares of performance-based restricted stock units.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia were 588 and 613 as of June 30, 2020 and March 31, 2020, respectively.

During the three months ended June 30, 2020, 297 restricted stock units previously granted to ZelnickMedia vested, and no restricted stock units were forfeited by ZelnickMedia.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia were 588 and 613 as of September 30, 2020 and March 31, 2020, respectively.

During the three and six months ended September 30, 2020, 297 restricted stock units previously granted to ZelnickMedia vested, and no restricted stock units were forfeited by ZelnickMedia.

FAIR VALUE MEASUREMENTS

7 unchanged sentences

The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which is measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

June 30, 2020 Quoted prices

September 30, 2020 Quoted prices

(level 1) Significant

31 unchanged sentences

Total recurring fair value measurements, net $ 2,212,804 $ 1,669,165 $ 540,880 $ 2,759

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the three months ended June 30, 2020

We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers into or out of Level 3 during the six months ended September 30, 2020.

SHORT-TERM INVESTMENTS

Our Short-term investments consisted of the following:

June 30, 2020

September 30, 2020

Amortized Cost Gains Losses Fair Value

16 unchanged sentences

Total short-term investments $ 646,786 $ 645 $ ( 3,428 ) $ 644,003

The following table summarizes the contracted maturities of our short-term investments at June 30, 2020:

June 30, 2020

The following table summarizes the contracted maturities of our short-term investments at September 30, 2020:

September 30, 2020

Short-term investments

10 unchanged sentences

The following table shows the gross notional amounts of foreign currency forward contracts:

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Forward contracts to sell foreign currencies $ 193,693 $ 122,024

Forward contracts to purchase foreign currencies 71,783 52,596

For the three months ended June 30, 2020 and 2019, we recorded a loss of $ 2,657 and a loss of $ 3,298 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

For the three months ended September 30, 2020 and 2019, we recorded a loss of $ 1,029 and a gain of $ 2,210 , respectively, and for the six months ended September 30, 2020 and 2019 we recorded a loss of $ 3,685 and a loss of $ 1,087 , respectively, related to foreign currency forward contracts in Interest and other, net in our Condensed Consolidated Statements of Operations.

Our foreign currency exchange forward contracts are not designated as hedging instruments under hedge accounting and are used to reduce the impact of foreign currency on certain balance sheet exposures and certain revenue and expense.

6 unchanged sentences

Inventory balances by category were as follows:

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Finished products $ 24,660 $ 17,984

1 unchanged sentence

Inventory $ 26,934 $ 19,108

Estimated product returns included in inventory at June 30, 2020 and March 31, 2020 were $ 541 and $ 506 , respectively.

Estimated product returns included in inventory at September 30, 2020 and March 31, 2020 were $ 425 and $ 506 , respectively.

SOFTWARE DEVELOPMENT COSTS AND LICENSES

Details of our capitalized software development costs and licenses were as follows:

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Current Non-current Current Non-current

3 unchanged sentences

Software development costs and licenses $ 73,714 $ 403,390 $ 40,316 $ 401,778

During the three months ended June 30, 2020 and June 30, 2019, we recorded $ 19,695 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the three months ended June 30, 2020 related to unamortized capitalized costs for the development of a title, which are anticipated to exceed the net realizable value of the asset.

During the three months ended September 30, 2020 and 2019, we did no t record any software development impairment charges (a component of Cost of goods sold).

During the six months ended September 30, 2020 and 2019, we recorded $ 19,695 and $ 0 , respectively, of software development impairment charges (a component of Cost of goods sold).

The impairment charge recorded during the six months ended September 30, 2020 related to unamortized capitalized costs for the development of a title, which were anticipated to exceed the net realizable value of the asset at the time they were impaired.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Software development royalties $ 713,928 $ 822,416

9 unchanged sentences

In addition, the Credit Agreement contains uncommitted incremental capacity permitting the incurrence of up to an additional $ 250,000 in term loans or revolving credit facilities.

Loans under the Credit Agreement will bear interest at a rate of (a) 0.250 % to 0.750 % above a certain base rate ( 3.25 % at June 30, 2020) or (b) 1.125 % to 1.750 % above LIBOR (approximately 1.63 % at June 30, 2020), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at June 30, 2020.

Loans under the Credit Agreement will bear interest at a rate of (a) 0.250 % to 0.750 % above a certain base rate ( 3.25 % at September 30, 2020) or (b) 1.125 % to 1.750 % above LIBOR (approximately 1.48 % at September 30, 2020), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at September 30, 2020.

Information related to availability on our Credit Agreement was as follows:

June 30, 2020 March 31, 2020

September 30, 2020 March 31, 2020

Available borrowings $ 198,336 $ 198,336

Outstanding letters of credit 1,664 1,664

We recorded interest expense and fees related to the Credit Agreement of $ 82 and $ 82 for the three months ended June 30, 2020 and 2019, respectively.

We recorded interest expense and fees related to the Credit Agreement of $ 82 and $ 84 for the three months ended September 30, 2020 and 2019, respectively, and $ 164 and $ 166 for the six months ended September 30, 2020 and 2019, respectively.

The Credit Agreement also includes, among other terms and conditions, maximum leverage ratio, minimum cash reserves and, in certain circumstances, minimum interest coverage ratio financial covenants, as well as limitations on us and each of our subsidiaries’ ability to:

8 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended June 30,

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Computation of Basic earnings per share:

8 unchanged sentences

Diluted earnings per share $ 0.86 $ 0.63 $ 1.63 $ 1.04

During the three months ended June 30, 2020, 979 restricted stock awards vested, we granted 645 unvested restricted stock awards, and 3 unvested restricted stock awards were forfeited.

During the six months ended September 30, 2020, 1,112 restricted stock awards vested, we granted 729 unvested restricted stock awards, and 18 unvested restricted stock awards were forfeited.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table provides the components of accumulated other comprehensive loss:

Three Months Ended June 30, 2020

Six Months Ended September 30, 2020

adjustments Unrealized

9 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss — — ( 1,333 ) — ( 1,333 )

Balance at June 30, 2020 $ ( 55,834 ) $ 600 $ — $ 3,103 $ ( 52,131 )

Three Months Ended June 30, 2019

Balance at September 30, 2020 $ ( 36,973 ) $ 600 $ — $ 1,549 $ ( 34,824 )

Six Months Ended September 30, 2019

adjustments Unrealized

9 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss — — ( 3,408 ) — ( 3,408 )

Balance at June 30, 2019 $ ( 41,887 ) $ 600 $ ( 4,009 ) $ 1,308 $ ( 43,988 )

Balance at September 30, 2019 $ ( 54,454 ) $ 600 $ ( 1,914 ) $ 1,306 $ ( 54,462 )

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

In the first quarter of fiscal year 2018, we announced and initiated actions to implement a strategic reorganization at one of our labels (the "2018 Plan").

In connection with this initiative, we recorded a benefit of $ 0 and expense of $ 386 for business reorganization during the three months ended June 30, 2020 and 2019, respectively, due to updating estimates for employee separation costs and made payments of $ 3,500 related to these reorganization activities.

As of June 30, 2020, $ 1,600 remained accrued in Accrued expenses and other current liabilities and $ 1,254 in Other non-current liabilities.

In connection with this initiative, we recorded expense of $ 239 and $ 327 for business reorganization during the three months ended September 30, 2020 and 2019, respectively, and $ 239 and $ 713 during the six months ended September 30, 2020 and 2019, respectively, due to updating estimates for employee separation costs.

During the six months ended September 30, 2020, we made payments of $ 3,500 related to these reorganization activities.

As of September 30, 2020, $ 3,096 remained accrued in Accrued expenses and other current liabilities.

Although we may record additional expense or benefit in future periods to true-up estimates, we do not expect to incur additional reorganization costs in connection with the 2018 Plan.

The provision for income taxes for the three months ended June 30, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 1,856 for the three months ended June 30, 2020 as compared to $ 15,875 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 2.1 % for the three months ended June 30, 2020 was due primarily to excess tax benefits of $ 7,867 from employee stock-based compensation, tax benefits of $ 4,931 due to tax credits, and geographic mix of earnings.

On June 21, 2018, the U.S.

Supreme Court issued its decision in South Dakota v.

Wayfair, which overturned previous case law that precluded states from requiring retailers to collect and remit sales and use tax collection on sales made to in-state customers unless the retailer had physical presence in the state.

Although this case is limited to sales tax collection obligations, we continue to monitor the potential impact of this decision on our state income tax footprint.

The provision for income taxes for the three months ended September 30, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 18,097 for the three months ended September 30, 2020 as compared to $ 11,059 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 15.4 % for the three months ended September 30, 2020 was due primarily to a tax benefit of $ 5,730 due to tax credits, excess tax benefits of $ 2,321 from employee stock-based compensation, and the geographic mix of earnings.

The provision for income taxes for the six months ended September 30, 2020 is based on our projected annual effective tax rate for fiscal year 2021, adjusted for specific items that are required to be recognized in the period in which they are incurred.

The provision for income taxes was $ 19,953 for the six months ended September 30, 2020 as compared to $ 26,934 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 9.6 % for the six months ended September 30, 2020 was due primarily to a tax benefit of $ 10,662 due to tax credits and excess tax benefits of $ 10,188 from employee stock-based compensation.

We are regularly examined by domestic and foreign taxing authorities.

2 unchanged sentences

It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.

On September 4, 2020, we completed the acquisition of privately-held Playdots, Inc.

("Playdots"), a New York City based free-to-play mobile game developer, for consideration of $ 97,846 in cash and 603,843 shares of our common stock.

The cash portion was funded from our cash on hand.

Of the cash consideration, $ 13,440 was contractually deferred and accrued for within Accrued expenses and other current liabilities within our Condensed Consolidated Balance Sheet.

We acquired Playdots as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property and to diversify and strengthen further our mobile offerings.

The acquisition-date fair value of the consideration totaled $ 195,493 , which consisted of the following:

Fair value of purchase consideration

Cash $ 97,846

Common stock ( 603,843 shares)

Total $ 195,493

We used the acquisition method of accounting and recognized assets at their fair value as of the date of acquisition, with the excess recorded to goodwill.

The preliminary fair values of net tangible and intangible assets are management’s estimates based on the information available at the acquisition date and may change over the measurement period, which will end no later than one year from the acquisition date, as additional information is received.

The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Playdots:

Fair Value Weighted average useful life

Cash acquired $ 12,098 N/A

Other tangible net assets 8,206 N/A

Other liabilities assumed ( 24,680 ) N/A

Intangible Assets

Developed game technology 69,000 6

User base 6,200 1

Branding and trade names 3,400 8

Game engine technology 2,200 4

Goodwill 119,069 N/A

Total $ 195,493

Goodwill, which is not deductible for U.S.

income tax purposes, is primarily attributable to the assembled workforce of the acquired business and expected synergies at the time of the acquisition.

The amounts of revenue and earnings of Playdots included in our Consolidated Statement of Operations from the acquisition date to the period ending September 30, 2020 are as follows:

September 4, 2020 to September 30, 2020

Net revenue $ 1,234

Net income (loss) $ ( 6,049 )

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the three and six months ended September 30, 2020 and 2019, as though the acquisition had occurred on April 1, 2019, the beginning of Fiscal 2020, and Playdots had been included in our consolidated results for the entire periods subsequent to that date.

Three Months Ended September 30, Six Months Ended September 30,

2020 2019 2020 2019

Pro-forma Net revenue $ 849,872 $ 862,096 $ 1,693,352 $ 863,431

Pro-forma Net income $ 95,147 $ 60,705 $ 177,250 $ 47,435

The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and Playdots and not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of Fiscal 2020 and are not indicative of the future operating results of the combined company.

The financial information for Playdots prior to the acquisition has been included in the pro-forma results of operations and includes certain adjustments to the historical consolidated financial statements of Playdots to align with the Company's accounting policies.

The pro-forma consolidated results of operations also include the business combination accounting effects resulting from the acquisition, including amortization expense related to finite-lived intangible assets acquired and the related tax effects assuming that the business combination occurred on April 1, 2019.

Transaction costs of $ 2,512 for the three and six months ended September 30, 2020, which have been recorded within General and administrative expense in our Condensed Consolidated Statements of Operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements