What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-05-19 compared with 2020-05-22 · 228 added, 327 removed, 1283 unchanged (30% of the section changed)

13 unchanged sentences

Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of March 31, 2021.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting.

The report on the audit of internal control over financial reporting is included in this Form 10-K.

In accordance with SEC guidance, our management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Playdots, which we acquired in September 2020 and is included in the March 31, 2021 Consolidated Financial Statements and constituted 3.2% of consolidated total assets as of March 31, 2021.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting, which is included in this Form 10-K.

Changes in Internal Control Over Financial Reporting

2 unchanged sentences

We are continually monitoring and assessing the effect of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

On September 4, 2020, we acquired Playdots.

We are currently in the process of incorporating the internal controls and procedures of Playdots into our internal control over financial reporting for purposes of our assessment of and report on internal control over financial reporting for the fiscal year ending March 31, 2022.

Other Information

18 unchanged sentences

(ii) Financial Statement Schedule.

See Note 22 to the Consolidated Financial Statements.

See Note 2 1 - Supplement ary F inancial Information to our Consolidated Financial Statements.

(iii) Index to Exhibits:

1 unchanged sentence

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

2.1 Agreement and Plan of Merger, dated as of August 17, 2020, by and among Take-Two Interactive Software, Inc., Dash MS, LLC, Dash MS II, LLC, Playdots, Inc.

and Shareholder Representative Services LLC, as Stockholder Representative

8-K 8/18/2020 2.1

3.1 Restated Certificate of Incorporation

15 unchanged sentences

4.1 Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10-K 5/22/2020 4.1

10.1 Take-Two Interactive Software, Inc.

21 unchanged sentences

10-Q 10/30/2013 10.5

10.11 Take-Two Interactive Software, Inc.

2017 Stock Incentive Plan, effective as of September 15, 2017 +

10.11 Amended and Restated Take-Two Interactive Software, Inc.

2017 Stock Incentive Plan

14A 7/24/2020 Annex B

10.12 Amendment No.

1 to the Amended and Restated Take-Two Interactive Software, Inc.

2017 Stock Incentive Plan +

S-8 9/4/2020 99.2

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.13 Take-Two Interactive Software, Inc.

7 unchanged sentences

10-Q 11/8/2017 10.4

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.16 Form of Global Restricted Stock Performance Unit Agreement Pursuant to the Take-Two Interactive Software, Inc.

41 unchanged sentences

10-Q 2/8/2018 10.4

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.33 Management Agreement, dated as of November 17, 2017, by and between the Company and ZelnickMedia Corporation +

6 unchanged sentences

S-3 ASR 4/15/2019 10.2

Incorporated by Reference

Exhibit Number Exhibit Description Form Filing Date Exhibit Filed

10.35 R estricted Unit Agree ment dated as of April 13, 2020, by an d between Take-Two Interactive Software, Inc.

and ZelnickMedia C orporation +

10.36 Restricted Unit Agreement dated as of April 13, 2020, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation +

S-3 ASR 4/13/2020 10.2

10.37 Restricted Unit Agreement dated as of April 13, 2021, by and between Take-Two Interactive Software, Inc.

and ZelnickMedia Corporation +

S-3 ASR 4/13/2021 10.2

10.38 Credit Agreement, dated as of February 8, 2019, by and among Take-Two Interactive Software, Inc., the lender parties thereto, Wells Fargo Bank, National Association, as administrative agent for the Lenders, Wells Fargo Securities, LLC and JP Morgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and JPMorgan Chase Bank, N.A.

15 unchanged sentences

10-Q 2/8/2018 10.2

10.44 Xbox One Publisher License Agreement dated October 31, 2013, between Microsoft Licensing, GP and the Company *

10-Q 2/4/2014 10.1

10.45 Amendment to the Xbox One Publisher License Agreement, dated May 7, 2014, between Microsoft Licensing, GP and the Company *

10-Q 8/6/2014 10.1

10.46 Amendment to the Xbox One Publisher License Agreement, dated January 30, 2015, between Microsoft Corporation and the Company *

10-K 5/19/2016 10.48

10.47 Amendment No.

3 to the Xbox One Publisher License Agreement, dated August 13, 2015, between Microsoft Corporation and the Company *

10-K 5/19/2016 10.49

10.48 Amendment No.

4 to the Xbox One Publisher License Agreement, dated December 15, 2016, between Microsoft Corporation and the Company *

10-Q/A 5/23/2017 10.2

10.49 Amendment No.

5 to the Xbox One Publisher License Agreement, signed on January 10, 2018, between Microsoft Corporation and the Company *

10-K 5/17/2018 10.55

10.50 Amendment No.

6 to the Xbox One Publisher License Agreement, dated as of April 9, 2019, between Microsoft Corporation and the Company **

10.46 Xbox Console Publisher License Agreement, dated as of July 1, 2020, by and between Take-Two Interactive Software, Inc.

and Microsoft Corporation **

10-Q 11/6/2020 10.1

1 unchanged sentence

10-K 5/24/2017 10.48

10.48 PlayStation 5 Amendment to PlayStation Global Developer and Publisher Agreement, effective as of May 1, 2020 and signed on September 30, 2020, between Take-Two Interactive Software, Inc.

and certain of its affiliates and Sony Interactive Entertainment, Inc., Sony Interactive Entertainment America LLC, and Sony Interactive Entertainment Europe Ltd.

10-Q 11/6/2020 10.4

Incorporated by Reference

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Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language):

(i) Consolidated Balance Sheets at March 31, 2020 and 2019, (ii) Consolidated Statements of Operations for the fiscal years ended March 31, 2020, 2019 and 2018, (iii) Consolidated Statements of Comprehensive Income for the fiscal years ended March 31, 2020, 2019 and 2018, (iv) Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2020, 2019 and 2018, (v) Consolidated Statements of Stockholders' Equity for the fiscal years ended March 31, 2020, 2019 and 2018;

and (vi) Notes to the Consolidated Financial Statements.

(i) Consolidated Balance Sheets at March 31, 2021 and 2020, (ii) Consolidated Statements of Operations for the fiscal years ended March 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the fiscal years ended March 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2021, 2020 and 2019, (v) Consolidated Statements of Stockholders' Equity for the fiscal years ended March 31, 2021, 2020 and 2019, and (vi) Notes to the Consolidated Financial Statements.

Form 10-K Summary

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2016-02, Leases (Topic 842) and the related amendments.

Adoption of ASU No.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition effective April 1, 2018 due to the adoption of Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.

Basis for Opinion

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Revenue recognition

Description of the Matter As described in Note 1 to the consolidated financial statements, a significant portion of the Company’s revenue recognized is for full game software products that management evaluates whether such products sold have distinct and separable performance obligations.

Such performance obligations can be licenses for intellectual property that provides a functional offline gaming experience or game related services.

Description of the Matter As described in Note 1 to the consolidated financial statements, a significant portion of the Company’s revenue recognized is for full game software products that management must evaluate to determine whether such products sold have distinct and separable performance obligations.

Such performance obligations can be licenses for intellectual property that provide a functional offline gaming experience or game related services.

If multiple performance obligations are identified, management must estimate a standalone selling price for each identified performance obligation which is used to allocate the full game software product transaction price.

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Separately, revenue for amounts allocated to the game related services is recognized ratably over an estimated service period.

Significant judgment is exercised by the Company in identifying performance obligations within its full game software products that should be accounted for separately in each revenue arrangement, estimating the standalone selling price for each performance obligation and determining the service period to recognize revenue over time.

Auditing the identification of performance obligations for full game software products requires complex auditor judgment as each full game software product has unique features that management must determine whether to be accounted for separately.

Auditing the judgments and estimates made by management in determining the standalone selling prices for identified performance obligations is especially challenging as the Company typically does not have observable standalone selling prices for each performance obligation and must rely on an expected cost-plus margin methodology, taking into account relevant cost assumptions including estimates of post-release support.

Auditing the judgments and estimates made by management in determining the standalone selling prices for each identified performance obligation is especially challenging as the Company typically does not have observable standalone selling prices for each performance obligation and must rely on an expected cost-plus margin methodology, taking into account relevant cost assumptions including estimates of post-release support.

Similarly, auditing the estimated service period for the game related services is especially challenging as the Company must consider a variety of data points.

Such data points include the weighted average number of days between players’ first and last days played online, known online trends, the service periods of the Company’s previously released products, and, to the extent publicly available, the service periods of the Company’s competitors’ products that are similar in nature.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the revenue recognition process.

We selected a sample of transactions and tested the Company’s controls over evaluating and identifying performance obligations, determining the estimated selling price and estimating the service period for revenue recognized over time.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of Company’s controls over the revenue recognition process.

We selected a sample of transactions and tested the Company’s controls over evaluating and identifying performance obligations, determining the estimated standalone selling price and estimating the service period over which game related services revenue is recognized.

Our audit procedures to test the Company’s identification of performance obligations included, among others, inspecting product-specific marketing materials for promised full game software product features, inspecting summaries of product features from Company personnel in product development roles, and independently evaluating the full game software product to corroborate identified product features on a sample basis.

Our audit procedures to test the Company’s estimates of standalone selling price for performance obligations included, among others, testing the underlying data used in management’s calculations for completeness and accuracy as well as evaluating the reasonableness of significant assumptions used and other factors utilized in making estimates of standalone selling price.

Our audit procedures to test the Company’s estimates of standalone selling price for performance obligations included, among others, testing the underlying data used in management’s calculations for completeness and accuracy as well as evaluating the reasonableness of significant assumptions and other factors utilized in making estimates of standalone selling price.

For example, for a selection of full game software products which included multiple performance obligations, we tested the Company’s expected cost-plus margin analysis by testing the appropriateness of the assumptions used in the analysis, including product development costs and forecasted post-release support costs, marketing costs and licensing costs.

1 unchanged sentence

Capitalized internally developed software costs

Description of the Matter As described in Note 1 to the consolidated financial statements, the Company capitalizes internally developed software development costs, subsequent to establishing technological feasibility of a product.

Amortization of internally developed software costs commences when a product is available for general release and is recorded on a product-by-product basis in cost of goods sold.

Description of the Matter As described in Note 1 to the consolidated financial statements, the Company capitalizes internally developed software costs, subsequent to establishing technological feasibility of a product.

As noted in Note 8, the Company had approximately $435.1 million of capitalized internally developed software as of March 31, 2021.

Auditing the Company’s capitalization of internally developed software costs was especially challenging because management’s determination of which products qualify for capitalization and the timing of establishing technological feasibility requires significant judgment.

The auditing of amortization of capitalized internally developed software costs is especially challenging as the calculation is dependent on judgments around the estimated economic life and estimates of total revenue of the product.

Changes in management’s assumptions of product revenue can have a material effect on amortization.

Auditing the Company’s determination of the establishment of technological feasibility was especially challenging because management’s determination of which products qualify and the related timing of capitalization requires significant judgment.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the internally developed software costs process.

For example, we tested controls over management’s determination of products that qualify for capitalization.

We also tested management's review controls related to the estimation of product revenue forecasts used in the calculation of amortization.

To test the Company’s capitalization of internally developed software costs, we performed audit procedures that included, among others, inspecting underlying documentation to evaluate whether the costs to develop products were capitalizable in accordance with the applicable accounting standards.

For example, we tested controls over management’s evaluation of products that established technological feasibility.

To test the Company’s capitalization of internally developed software costs, we performed audit procedures that included, among others, inspecting underlying documentation to support management’s conclusion on the establishment of technological feasibility in accordance with the applicable accounting standards.

This included inspecting the product’s technical and game design documentation.

We also held corroborative inquiries of Company personnel in product development roles to assess the Company’s conclusions as to the technological feasibility of its products.

For a sample of transactions our audit procedures included, among others, testing amortization source data by product, including current period and forecasted revenue by product.

Our audit procedures included assessing the reasonableness of the Company’s product specific revenue forecasts and performing sensitivity analyses to evaluate the changes in amortization that would result from changes in the Company's significant assumptions.

We also tested the mathematical accuracy of management’s calculations of amortization expense recognized in the consolidated financial statements.

/s/ Ernst & Young LLP

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Playdots, Inc., which is included in the March 31, 2021 consolidated financial statements of the Company and constituted 3% of total assets as of March 31, 2021 and 1% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Playdots, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended March 31, 2021, and the related notes and our report dated May 18, 2021 expressed an unqualified opinion thereon.

49 unchanged sentences

Non-current lease liabilities 159,671 152,059

Non-current software development royalties 110,127 104,417

Other long-term liabilities 154,511 86,234

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Interest and other, net 8,796 38,505 26,113

Loss on long-term investments 5,333 — —

Gain (loss) on long-term investments, net 39,636 ( 5,333 ) —

Income before income taxes 677,816 458,439 232,785

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Net income $ 588,886 $ 404,459 $ 333,837

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation adjustment 51,253 ( 27,445 ) ( 28,803 )

4 unchanged sentences

Change in fair value of cash flow hedges ( 4,905 ) 9,590 4,906

Available-for-sale securities:

Net unrealized (loss) gain, net of taxes ( 3,332 ) 2,440 ( 1,778 )

Change in fair value of available-for-sale securities 3,364 ( 3,332 ) 2,440

Other comprehensive (loss) income ( 21,187 ) ( 21,457 ) 31,410

Other comprehensive income (loss) 49,712 ( 21,187 ) ( 21,457 )

Comprehensive income $ 638,598 $ 383,272 $ 312,380

5 unchanged sentences

2021 2020 2019

(as Adjusted) (1)

Operating activities:

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Depreciation 56,309 47,628 39,726

Amortization of discount on Convertible Notes — 91 15,662

Impairment of in-process research and development — — 11,257

Deferred income taxes 10,631 ( 3,486 ) 110,603

Impairment of long-term investments 5,333 — —

Gain on redemption of Convertible Notes — — ( 4,900 )

Gain on long-term investments, net ( 41,588 ) — —

Other, net 5,515 9,074 675

13 unchanged sentences

Purchases of fixed assets ( 68,923 ) ( 53,384 ) ( 66,969 )

Proceeds from sale of long-term investment 47,472 — —

Purchase of long-term investments ( 16,852 ) ( 27,891 ) —

Business acquisitions, net of cash acquired ( 102,469 ) ( 12,040 ) ( 28,149 )

Asset acquisition — — ( 25,965 )

Net cash provided by (used in) investing activities 4,049 ( 223,576 ) ( 271,827 )

Net cash (used in) provided by investing activities ( 806,724 ) 4,049 ( 223,576 )

Financing activities:

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Issuance of common stock 14,214 10,515 —

Other — — ( 13,791 )

Net cash used in financing activities ( 57,338 ) ( 77,453 ) ( 463,685 )

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Income taxes paid $ 70,749 $ 27,998 $ 19,280

(1) Prior period amounts have been adjusted retrospectively to reflect the adoption of ASU 2016-18, Statement of Cash Flows (Topic 230):

Restricted Cash .

Refer to Note 1 for further discussion.

(1) Cash, cash equivalents and restricted cash and cash equivalents shown on our Consolidated Statements of Cash Flow includes amounts in the Cash and cash equivalents, Restricted cash and cash equivalents, and Long-term restricted cash and cash equivalents on our Consolidated Balance Sheet.

See accompanying Notes.

21 unchanged sentences

Net share settlement of restricted stock awards ( 920 ) ( 9 ) ( 101,284 ) — — — — ( 101,293 )

Adoption of ASU 2016-09, Stock Comp Simplification — — — — — ( 323 ) — ( 323 )

Impact from adoption of New Revenue Accounting Standard — — — — — 470,273 4,653 474,926

Employee share purchase plan settlement 57 1 5,069 — — — — 5,070

Balance, March 31, 2019 134,602 $ 1,346 $ 2,019,369 ( 22,421 ) $ ( 820,572 ) $ 877,626 $ ( 37,189 ) $ 2,040,580

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Issuance of restricted stock, net of forfeitures and cancellations 1,970 19 ( 19 ) — — — — —

Repurchased common stock — — — ( 3,716 ) ( 362,392 ) — — ( 362,392 )

Conversion of 1.00 % Convertible Notes Due 2018

377 4 8,108 — — — — 8,112

Net share settlement of restricted stock awards ( 771 ) ( 8 ) ( 87,960 ) — — — — ( 87,968 )

Impact from adoption of New Revenue Accounting Standard — — — — — 470,273 4,653 474,926

Employee share purchase plan settlement 126 2 10,513 — — — — 10,515

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Employee share purchase plan settlement 139 2 14,212 — — — — 14,214

Issuance of shares related to Playdots, Inc.

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

Balance, March 31, 2021 137,584 $ 1,376 $ 2,288,781 ( 22,421 ) $ ( 820,572 ) $ 1,870,971 $ ( 8,664 ) $ 3,331,892

7 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.

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.

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

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

Principles of Consolidation

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the recoverability and amortization of software development costs, licenses, and intangible assets;

assets acquired and liabilities assumed in business combinations;

the realization of deferred income taxes;

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While we attempt to limit credit exposure with any single institution, balances often exceed insurable amounts.

Accounts receivable are recorded at the original invoiced amount less an allowance for credit losses.

In evaluating our ability to collect outstanding receivable balances and related allowance for credit losses, we consider many factors, including the age of the balance, the customer’s payment history and current creditworthiness, as well as current and forecasted economic conditions that may affect our customers’ ability to pay.

Bad debts are written off after all collection efforts have been exhausted.

We do not require collateral from our customers.

If the financial condition and operations of our customers deteriorate, our risk of collection could increase substantially.

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One customer accounted for 38.9 %, 31.9 % and 31.3 % of net revenue during the fiscal years ended March 31, 2021, 2020, and 2019, respectively.

A second customer accounted for 20.0 %, 18.1 %, and 17.6 % of net revenue during the fiscal years ended March 31, 2020, 2019, and 2018 respectively.

A second customer accounted for 22.2 %,

20.0 %, and 18.1 % of net revenue during the fiscal years ended March 31, 2021, 2020, and 2019 respectively.

A third customer accounted for 10.5 % of net revenue during the fiscal year ended March 31, 2019.

1 unchanged sentence

Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 69.2 % and 48.8 % of such balances at March 31, 2021 and 2020, respectively.

We had two customers who accounted for 29.4 % and 19.4 % of our gross accounts receivable as of March 31, 2020 and two customers who accounted for 40.1 % and 15.7 % of our gross accounts receivable as of

March 31, 2019.

We had two customers who accounted for 50.4 % and 18.8 % of our gross accounts receivable as of March 31, 2021 and two customers who accounted for 29.4 % and 19.4 % of our gross accounts receivable as of March 31, 2020.

We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2021 and 2020.

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In addition, investments with maturities beyond one year at the time of purchase that are highly liquid in nature and represent the investment of cash that is available for current operations are classified as short-term investments.

Unrealized gains and losses of available-for-sale securities are excluded from earnings and are reported as a component of Other comprehensive income (loss), net of tax, until the security is sold, the security has matured, or we determine that the fair value of the security has declined below its adjusted cost basis and the decline is other-than-temporary.

Realized gains and losses on short-term investments are calculated based on the specific identification method and would be reclassified from accumulated other comprehensive loss to Interest and other, net.

1 unchanged sentence

We consider various factors in determining whether we should recognize an impairment charge, including the credit quality of the issuer, the duration that the fair value has been less than the adjusted cost basis, the severity of the impairment, the reason for the decline in value, and our intent to sell and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

If we conclude that an investment is other-than-temporarily impaired, we recognize an impairment charge at that time in the Consolidated Statements of Operations.

Determining whether the decline in fair value is other-than-temporary requires management judgment based on the specific facts and circumstances of each security.

If we conclude that an investment is impaired or a portion of the unrealized loss is a result of a credit loss, we recognize the charge at that time in our Consolidated Statements of Operations.

Determining whether the decline in fair value is due to a credit loss requires management judgment based on the specific facts and circumstances of each security.

The ultimate value realized on these securities is subject to market price volatility until they are sold.

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Significant changes in demand for our products would affect management's estimates in establishing our inventory provision.

We write down inventory based on excess or obsolete inventories determined primarily by future anticipated demand for our products.

We write down inventory based on excess or obsolete inventories determined primarily by anticipated future demand for our products.

Inventory write-downs are measured as the difference between the cost of the inventory and market value, based upon assumptions about future demand that are inherently difficult to assess.

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We enter into agreements with third-party developers that require us to make payments for game development and production services.

In exchange for our payments, we receive the exclusive publishing and distribution rights to the finished

game title as well as, in some cases, the underlying intellectual property rights.

In exchange for our payments, we receive the exclusive publishing and distribution rights to the finished game title as well as, in some cases, the underlying intellectual property rights.

Such agreements typically allow us to fully recover these payments to the developers at an agreed upon royalty rate earned on the subsequent sales of such software, net of any agreed upon costs.

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For capitalized licenses, amortization is calculated as a ratio of (1) current year revenue to the total revenue expected to be recorded over the remaining estimated life of the title or (2) the contractual royalty rate based on actual net product sales as defined in the licensing agreement, whichever is greater.

Amortization periods for our software products generally range from 12 to 36 months.

Amortization periods for our software products generally range from twelve to 30 months.

We evaluate the future recoverability of capitalized software development costs and licenses on a quarterly basis.

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We have profit and unit sales based internal royalty programs that allow selected employees to participate in the success of software titles that they assist in developing.

Royalties earned under this program are recorded as a component of Cost of goods sold in the period earned.

Royalties earned under these programs are recorded as a component of Cost of goods sold in the period earned.

Amounts earned and not yet paid are reflected within the software development royalties component of Accrued expenses and other current liabilities on our Consolidated Balance Sheets.

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The carrying amounts of these assets are recorded at historical cost.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for leases codified under Topic 842, Leases.

The new lease accounting standard replaced all prior U.S.

GAAP guidance on this topic as codified principally under Topic 840, Leases.

The new standard, among other things, requires a lessee to classify a lease as either an operating or financing lease and to recognize a lease liability and a right-of-use (“ROU”) asset for its leases.

On April 1, 2019, we adopted the new lease accounting standard using the alternative transition approach provided in ASU 2018-11, “Leases (Topic 842) - Targeted Improvements,” which allows initial application of the new standard using the

modified retrospective method.

Refer to the Recently Adopted Accounting Pronouncements section below for the impact of adoption on our Consolidated Financial Statements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting for leases codified under Topic 842, Leases , which we adopted on April 1, 2019.

We determine if an arrangement is a lease at contract inception.

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Variable lease payments are recognized as lease expenses as incurred.

The operating lease ROU asset also includes any lease payments made prior to commencement, initial direct costs incurred, and lease incentives received.

The operating lease right-of-use (“ROU”) asset also includes any lease payments made prior to commencement, initial direct costs incurred, and lease incentives received.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate in determining the present value of future lease payments.

3 unchanged sentences

Lease modifications result in remeasurement of the lease liability.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.

Leases with an initial term of twelve months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term.

We do not separate non-lease components from the related lease components.

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Our estimates for market growth are based on historical data, various internal estimates and observable external sources when available, and are based on assumptions that are consistent with the plans and estimates we use to manage the underlying business.

During the fiscal year ended March 31, 2019, we changed the measurement date for performing our annual goodwill impairment test from the beginning of August to the beginning of March.

This voluntary change in accounting principle,

applied prospectively, was preferable as it aligns the annual goodwill impairment test date more closely with our internal budgeting process and did not delay, accelerate, or avoid an impairment of our goodwill.

Based on our annual impairment assessment process for goodwill, no impairments were recorded during the fiscal years ended March 31, 2021, 2020, or 2019.

As of March 31, 2020, the goodwill balance of one of our reporting units is $ 152,175 , and the fair value of that reporting unit approximates its carrying values.

Therefore, a modest reduction in its fair value would result in an impairment charge, which would be equal to the excess of the carrying value over the fair value of such assets.

As of March 31, 2021, the goodwill balance of one of our reporting units is $ 345,725 , and a moderate reduction in its fair value may result in an impairment charge, which would be equal to the excess of the carrying value over the fair value of such assets.

Long-lived Assets

2 unchanged sentences

If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we record an impairment charge for the difference between the carrying amount of the asset and its fair value.

The estimated fair value is generally measured by discounting expected future cash flows using our incremental borrowing rate or fair value, if available.

The estimated fair value is generally measured by discounting expected future cash flows using our incremental borrowing rate or discount rate, if available.

As of March 31, 2021, no indicators of impairment existed.

15 unchanged sentences

The effect of these revisions is recorded in income tax expense or benefit in the period in which they become known.

In December 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the "Tax Act"), which, among other provisions, subjects a U.S.

shareholder to current tax on Global Intangible Low-Taxed Income ("GILTI") earned by foreign subsidiaries.

We have elected to recognize the resulting tax on GILTI as an expense in the period incurred.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) .

Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

On April 1, 2018, we adopted the new accounting standard and related amendments (the “New Revenue Accounting Standard”) using the modified retrospective method.

Refer to Note 1 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the

fiscal year ended March 31, 2018 for our revenue recognition accounting policy as it relates to revenue transactions prior to April 1, 2018.

We derive revenue primarily from the sale of our interactive entertainment content, principally for console gaming systems and personal computers, including smartphones and tablets.

12 unchanged sentences

Generally, our full game software products deliver a license of our intellectual property that provides a functional offline gaming experience (i.e., one that does not require an Internet connection to access the main game content or other significant game related services).

We recognize revenue related to the license of our intellectual property that provides offline functionality at the time control of the products have been transferred to our customers (i.e.

We recognize revenue related to the license of our intellectual property that provides offline functionality at the time control of the products has been transferred to our customers (i.e.

upon delivery of the software product).

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Certain software products are sold to customers with a “street date” (the earliest date these products may be sold by these retailers).

For the transaction price related to the license for these products that also provide a functional offline gaming experience, we recognize revenue on the later of the street date or the sale date as this is generally when we have transferred

control of this performance obligation.

For the sale of physical software products, recognition of revenue allocated to game related services does not begin until the product is sold-through by our customer to the end user.

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In certain countries, we use third-party licensees to distribute and host our games in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee and sales-based royalties.

These arrangements typically include multiple performance obligations, such as an upfront license of intellectual property and rights to future updates.

These arrangements typically include multiple performance obligations, such as an upfront license of intellectual property and rights to future

Based on the allocated transaction price, we recognize revenue associated with the minimum guarantee when we transfer control of the upfront license of intellectual property (generally upon commercial launch) and the remaining portion ratably over the contractual term in which we provide the licensee with future update rights.

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Contract assets are recorded within Prepaid expenses and other on our Consolidated Balance Sheet.

Our allowance for doubtful accounts are typically immaterial and, if required, are based on our best estimate of probable losses inherent in our accounts receivable balance.

Our allowances for doubtful accounts are typically immaterial and, if required, are based on our best estimate of expected credit losses inherent in our accounts receivable balance.

Deferred revenue is comprised primarily of unsatisfied revenue related to the portion of the transaction price allocable to game related services of our full game software products and sales of virtual currency.

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When a new game is launched and therefore no history of online player data is available, we consider other factors to determine the user life, such as the estimated service period of other games actively being sold with similar characteristics.

We also consider known online trends, the service periods of our previously released software products, and, to the extent publicly available, the service periods of our competitors’ software products that are similar in nature to ours.

similar in nature to ours.

We believe this provides a reasonable depiction of the transfer of our game related services to our customers, as it is the best representation of the period during which our customers play our software products.

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Future usage patterns may differ from historical usage patterns, and therefore the estimated service period may change in the future.

The estimated service periods for players of our current software products are generally between 6 and 15 months depending on the software product.

The estimated service periods for players of our current software products are generally between six and fifteen months depending on the software product.

Revenue Arrangements with Multiple Performance Obligations

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This evaluation is performed on a product by product basis.

Price Protection and Allowances for Returns

Price Protection, Allowances for Returns, and Sales Incentives

We grant price protection and accept returns in connection with our distribution arrangements.

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We estimate the amount of price protection and returns for software products based upon, among other factors, historical experience and performance of the titles in similar genres, historical performance of the hardware platform, customer inventory levels, analysis of sell-through rates, sales force and retail customer feedback, industry pricing, market conditions, and changes in demand and acceptance of our products by consumers.

Revenue is recognized after deducting the estimated price protection and allowances for returns, which are accounted for as variable consideration.

Price protection and allowances for returns are considered refund liabilities and are reported within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.

Sales Incentives

We enter into various sales incentive arrangements with our customers, such as rebates, discounts, and cooperative marketing.

These incentives are considered adjustments to the transaction price of our software products and are reflected as

reductions to revenue.

These incentives are considered adjustments to the transaction price of our software products and are reflected as reductions to revenue.

Sales incentives incurred by us for distinct goods or services received, such as the appearance of our products in a customer’s national circular ad, are included in Selling and marketing expense if there is a separate identifiable benefit and the benefit’s fair value can be established.

Otherwise, such sales incentives are reflected as a reduction to revenue and are considered refund liabilities, which are reported within Accrued expenses and other current liabilities in our Consolidated Balance Sheet.

Otherwise, such sales incentives are reflected as a reduction to revenue.

Revenue is recognized after deducting the estimated price protection, allowances for returns, and sales incentives, which are accounted for as variable consideration.

Price protection, allowances for returns, and sales incentives are considered refund liabilities and are reported within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.

Significant Estimates

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Adjustments to estimates are recorded in the period in which they become known.

We expense advertising costs as incurred, except for production costs associated with media advertising, which are deferred and charged to expense when the related advertisement is run for the first time.

Advertising, marketing, and other promotional expenses for the fiscal years ended March 31, 2020, 2019 and 2018 amounted to $ 285,607 , $ 249,315 and $ 140,618 , respectively, and are included in "Selling and marketing expense" in our Consolidated Statements of Operations.

We expense marketing costs as incurred, except for production costs associated with media advertising, which are deferred and charged to expense when the related advertisement is run for the first time.

Advertising, marketing, and other

promotional expenses for the fiscal years ended March 31, 2021, 2020 and 2019 amounted to $ 241,068 , $ 285,607 and $ 249,315 , respectively, and are included in Selling and marketing expense in our Consolidated Statements of Operations.

Stock-based Compensation

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Diluted EPS is computed by dividing the net income (loss) applicable to common stockholders for the period by the weighted average number of shares of common stock and common stock equivalents outstanding.

Certain of our unvested stock-based awards are considered participating securities since these securities have non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award, and thus require the two-class method of computing EPS.

The calculation of EPS for common stock under the two-class method excludes the income attributable to the participating securities from the numerator and excludes the dilutive effect of those awards from the denominator.

We define common stock equivalents as unvested stock-based awards and common stock underlying our Convertible Notes (see Note 12 - Debt) outstanding during the period.

Common stock equivalents are measured using the treasury stock method, and common stock equivalents underlying the Convertible Notes are assessed for their effect on diluted EPS using the more dilutive of the treasury stock method or the if-converted method.

Under the provisions of the if-converted method, the Convertible Notes are assumed to be converted and included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Notes is added back to the numerator.

However, potential common shares are not included in the denominator of the diluted earnings (loss) per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.

Common stock equivalents are measured using the treasury stock method and represent unvested stock-based awards.

Foreign Currency

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Recently Adopted Accounting Pronouncements

Accounting for Leases

As noted in our Lease accounting policy above, we adopted the New Lease Accounting Standard Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) effective April 1, 2019.

As part of the adoption, the new lease accounting standard allows a number of practical expedients and exemptions.

At transition, we elected the following:

• The package of practical expedients, which allows us to carryforward our historical lease classification, our assessment of whether a contract is or contains a lease and our initial direct costs for any leases that exist prior to adoption of the new standard;

• The practical expedient to not separate non-lease components from the related lease components;

• The exemption to not apply the balance sheet recognition requirements for leases with a lease term of 12 months or less and instead expense those costs on a straight-line basis over the lease term or in the period in which the obligation is incurred, if such costs are variable.

Impact of Adoption

As a result of adopting Topic 842, the following adjustments, including reclassifying prepaid and deferred rent to ROU assets, were made to our Condensed Consolidated Balance Sheet at April 1, 2019:

March 31, 2019 Adjustments April 1, 2019

Prepaid expenses and other $ 186,688 $ ( 792 ) $ 185,896

Right-of-use assets $ — $ 118,799 $ 118,799

LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and other current liabilities $ 1,035,695 $ ( 2,976 ) $ 1,032,719

Lease Liabilities $ — $ 18,937 $ 18,937

Non-current lease liabilities $ — $ 122,041 $ 122,041

Other long-term liabilities $ 229,633 $ ( 19,995 ) $ 209,638

Recently Issued Accounting Pronouncements

Accounting for Reference Rate Reform

In March 2020, the FASB issued ASU 2020-01, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional guidance to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and LIBOR.

The guidance includes practical expedients for contract modifications due to reference rate reform.

Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or

reassessment of a previous accounting determination at the modification date.

This guidance is effective immediately and is only available through December 31, 2022.

We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements.

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law.

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2020 (April 1, 2021 for the Company), with early adoption permitted.

We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements.

Accounting for Fair Value Measurement

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Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements by removing, modifying, or adding certain disclosures.

ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2019 (April 1, 2020 for the Company), with early adoption permitted.

Certain disclosures in ASU 2018-13 are required to be applied on a retrospective basis and others on a prospective basis.

We are currently evaluating the potential impact of adopting this guidance on our Consolidated Financial Statements.

We adopted this update effective April 1, 2020.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Accounting for Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses , which replaces the incurred loss impairment methodology in current U.S.

GAAP with a methodology that will require the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates.

GAAP with a methodology that requires the reflection of expected credit losses and also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

For most financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which will generally result in the earlier recognition of credit losses on financial instruments.

For most financial instruments, the standard requires the use of a forward-looking expected loss model rather than

the incurred loss model for recognizing credit losses, which generally results in the earlier recognition of credit losses on financial instruments.

We adopted this update effective April 1, 2020 under a modified retrospective basis.

No adjustment to retained earnings was recorded as a result of the adoption of this standard, which did not have an impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2020 (April 1, 2021 for the Company), with early adoption permitted.

These changes will be applied on a modified retrospective basis, with the cumulative effect of adoption recorded as an adjustment to retained earnings.

We are continuing to monitor the economic implications of the COVID-19 pandemic, but we do not expect that the impact of adopting this guidance will be material to our Consolidated Financial Statements.

We do not expect that the impact of the adoption will be material to our Consolidated Financial Statements.

REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of revenue

Service and other revenue

Service and other revenue is primarily comprised of revenue from our software products that include game related services, or separate virtual currency transactions, and in-game purchases, which are recognized over an estimated service period.

Product revenue

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upon delivery of the software product).

Service and other revenue

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

Twelve Months Ended March 31,

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

Fiscal Year Ended March 31,

2021 2020 2019

Net revenue recognized:

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Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394

Full game and other revenue

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

Recurrent consumer spending revenue

Recurrent consumer spending revenue is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, and in-game purchases.

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

Twelve Months Ended March 31,

Full game and other revenue

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

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

Fiscal Year Ended March 31,

2021 2020 2019

Net revenue recognized:

Full game and other $ 1,703,971 $ 1,597,478

Recurrent consumer spending $ 2,074,687 $ 1,384,999 $ 1,070,916

Full game and other 1,298,085 1,703,971 1,597,478

Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394

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Net revenue by geographic region was as follows:

Twelve Months Ended March 31,

Fiscal Year Ended March 31,

2021 2020 2019

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Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394

(1) This disaggregated revenue category had previously been disclosed as part of Note 17 - Segment and Geographic Information in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

Amounts have not been retrospectively adjusted to reflect the adoption of ASC Topic 606.

Net revenue by platform was as follows:

Twelve Months Ended March 31,

Fiscal Year Ended March 31,

2021 2020 2019

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Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394

Amounts have not been retrospectively adjusted to reflect the adoption of ASC Topic 606.

Distribution channel

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Net revenue by distribution channel was as follows:

Twelve Months Ended March 31,

Fiscal Year Ended March 31,

2021 2020 2019

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Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394

Amounts have not been retrospectively adjusted to reflect the adoption of ASC Topic 606.

Deferred Revenue

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

The opening balance and ending balance of deferred revenue, including current and non-current balances as of March 31, 2020 and March 31, 2019 were $ 806,123 and $ 864,360 , respectively.

For the twelve months ended March 31, 2020, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the twelve months ended March 31, 2020, $ 850,266 of revenue was recognized that was included in the deferred revenue balance at the beginning of the period.

The balance of deferred revenue, including current and non-current balances, as of March 31, 2021 and March 31, 2020 were $ 965,331 and $ 806,123 , respectively.

For the fiscal year ended March 31, 2021, the additions to our deferred revenue balance were primarily due 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 fiscal year ended March 31, 2021, $ 774,279 of revenue was recognized that was included in the deferred revenue balance at the beginning of the period.

As of March 31, 2021, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $ 1,100,441 , which includes our deferred revenue balances and amounts to be invoiced and recognized as revenue in future periods.

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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 March 31, 2020 and March 31, 2019, our contract asset balances were $ 81,625 and $ 57,643 , respectively.

As of March 31, 2021 and March 31, 2020, our contract asset balances were $ 105,554 and $ 81,625 , respectively, which are included within Prepaid and other in our Consolidated Balance Sheet.

MANAGEMENT AGREEMENT

In March 2014, we entered into an amended management services agreement, (the "2014 Management Agreement") with ZelnickMedia Corporation ("ZelnickMedia") pursuant to which ZelnickMedia provided us with certain management, consulting and executive level services.

The 2014 Management Agreement became effective April 1, 2014.

The 2014 Management Agreement provided for an annual management fee of $ 2,970 over the term of the agreement and a maximum annual bonus opportunity of $ 4,752 over the term of the agreement, based on the Company achieving certain performance thresholds.

In November 2017, we entered into a new management agreement, (the "2017 Management Agreement"), with ZelnickMedia pursuant to which ZelnickMedia continues to provide financial and management consulting services to the Company through March 31, 2024.

The 2017 Management Agreement became effective January 1, 2018 and supersedes and replaces the 2014 Management Agreement, except as otherwise contemplated by the 2017 Management Agreement.

As part of the 2017 Management Agreement, Strauss Zelnick, the President of ZelnickMedia, continues to serve as Executive Chairman

and Chief Executive Officer of the Company, and Karl Slatoff, a partner of ZelnickMedia, continues to serve as President of the Company.

In November 2017, we entered into a new management agreement (the "2017 Management Agreement") with ZelnickMedia Corporation ("ZelnickMedia") that replaced our previous agreement with ZelnickMedia and pursuant to which ZelnickMedia provides financial and management consulting services to the Company through March 31, 2024.

The 2017 Management Agreement became effective January 1, 2018.

As part of the 2017 Management Agreement, Strauss Zelnick, the President of ZelnickMedia, continues to serve as Executive Chairman and Chief Executive Officer of the Company, and Karl Slatoff, a partner of ZelnickMedia, continues to serve as President of the Company.

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 $ 10,540 , $ 10,540 , and $ 9,265 for the fiscal years ended March 31, 2021, 2020, and 2019, respectively.

Pursuant to the 2017 Management Agreement and 2014 Management Agreement, we also issued stock-based awards to ZelnickMedia.

Pursuant to the 2017 Management Agreement, we also issued stock-based awards to ZelnickMedia.

During the fiscal years ended March 31, 2021, 2020, and 2019, we recorded $ 27,281 , $ 23,413 , and $ 21,257 , respectively, of stock-based compensation expense for non-employee awards, which is included in General and administrative expenses.

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Commercial paper 100,105 — 100,105 — Cash and cash equivalents

Corporate bonds 9,888 — 9,888 — Cash and cash equivalents

Money market funds 528,659 528,659 — — Restricted cash and cash equivalents

Bank-time deposits 563 563 — — Restricted cash and cash equivalents

Corporate bonds 521,224 — 521,224 — Short-term investments

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Commercial paper 148,150 — 148,150 — Short-term investments

Cross-currency swap 11,275 — 11,275 — Prepaid expenses and other

Asset-backed securities 470 — 470 — Short-term investments

Money market funds 98,541 98,541 — — Long-term restricted cash and cash equivalents

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Money market funds $ 497,861 $ 497,861 $ — $ — Cash and cash equivalents

Bank-time deposits 313,757 313,757 — — Cash and cash equivalents

Commercial paper 97,544 — 97,544 — Cash and cash equivalents

US Treasuries 25,449 25,449 — — Cash and cash equivalents

Money market funds 565,461 565,461 — — Restricted cash

Corporate bonds 9,888 — 9,888 — Cash and cash equivalents

Money market funds 546,604 546,604 — — Restricted cash and cash equivalents

Corporate bonds 334,631 — 334,631 — Short-term investments

Bank-time deposits 191,000 191,000 — — Short-term investments

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Commercial paper 87,553 — 87,553 — Short-term investments

Corporate bonds 296,141 — 296,141 — Short-term investments

Cross-currency swap 11,275 — 11,275 — Prepaid expenses and other

Money market funds 89,124 89,124 — — Long-term restricted cash and cash equivalents

Private equity 2,759 — — 2,759 Other assets

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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 fiscal year ended March 31, 2021.

Nonrecurring fair value measurements

We hold equity investments in certain unconsolidated entities without a readily determinable fair value.

Our strategic investments represent less than a 20% ownership interest in each of the privately held entities, and we do not maintain power over or control of the entities.

We have elected the practical expedient in Topic 321, Investments-Equity Securities , to measure these investments at cost less any impairment, adjusted for observable price changes, if any.

Based on these considerations, we estimate that the carrying value of the acquired shares represents the fair value of the investment.

At March 31, 2021, we held approximately $ 20,000 of such investments in Other assets within our Consolidated Balance Sheet.

During the fiscal year ended March 31, 2021, we recognized a gain on the sale of one of these investments of $ 40,588 .

The gain is reflected in Gain (loss) on long-term investments, net within our Consolidated Statements of Operations.

SHORT-TERM INVESTMENTS

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Commercial paper 148,149 1 — 148,150

Asset-backed securities 469 1 — 470

Total short-term investments $ 1,307,895 $ 1,053 $ ( 256 ) $ 1,308,692

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

Based on our evaluation of impairment for these investments, we did not consider any of these investments to be other-than-temporarily impaired as of March 31, 2020 or 2019.

We do not intend to sell any of our investments with unrealized losses, nor is it more likely than not that we will be required to sell those investments.

The following table summarizes the contracted maturities of our short-term investments at March 31, 2021:

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We do not enter into derivative financial contracts for speculative or trading purposes.

We classify cash flows from its derivative transactions as cash flows from operating activities in our Consolidated Statements of Cash Flows.

We classify cash flows from derivative transactions as cash flows from operating activities in our Consolidated Statements of Cash Flows.

Foreign currency forward contracts

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Forward contracts to purchase foreign currencies $ 92,123 $ 52,596

For the fiscal years ended March 31, 2020, 2019 and 2018, we recorded a loss of $ 959 , a gain of $ 16,831 , and a loss of $ 19,473 , respectively, related to foreign currency forward contracts in Interest and other, net on the Consolidated Statements of Operations.

Our derivative contracts are foreign currency exchange forward contracts that 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.

For the fiscal years ended March 31, 2021, 2020 and 2019, we recorded a loss of $ 3,584 , a loss of $ 959 , and a gain of $ 16,831 , respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.

and certain revenue and expense.

These instruments are generally short term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates.

Cross-currency swaps

We entered into a cross-currency swap agreement in August 2017 related to an intercompany loan that has been designated and accounted for as a cash flow hedge of foreign currency exchange risk.

The intercompany loan is related to the acquisition of Social Point.

As of March 31, 2020, the notional amount of the cross-currency swap is $ 108,867 .

This cross-currency swap mitigates the exposure to fluctuations in the U.S.

dollar-euro exchange rate related to the intercompany loan.

The critical terms of the cross-currency swap agreement correspond to the intercompany loan and both mature at the same time in 2027;

as such, there was no ineffectiveness during the period.

Changes in the fair value of this cross-currency swap are recorded in Accumulated other comprehensive income (loss) and offset the change in value of interest and principal payment as a result of changes in foreign exchange rates.

Resulting gains or losses from the cross-currency swap are reclassified from Accumulated other comprehensive income (loss) to earnings to offset foreign currency transaction gains and losses recognized on the intercompany loan.

We recognize the difference between the U.S.

dollar interest payments received from the swap counterparty and the U.S.

dollar equivalent of the euro interest payments made to the swap counterparty in Interest and other, net on our Consolidated Statement of Operations.

There are no credit-risk related contingent features associated with these swaps.

In August 2017, we entered into a cross-currency swap agreement related to an intercompany loan that was designated and accounted for as a cash flow hedge of foreign currency exchange risk.

During the three months ended June 30, 2020, we settled the intercompany loan and cross-currency swap, thereby discontinuing the cash flow hedge.

As a result, we reclassified $ 3,109 from Accumulated other comprehensive income (loss) to earnings as an increase to Interest and other, net on our Consolidated Statement of Operations.

We also received $ 7,420 in cash to settle our corresponding derivative asset.

Inventory balances by category are as follows:

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Amortization and impairment, net of stock-based compensation $ 144,263 $ 167,925 $ 201,221

During the twelve months ended March 31, 2019, we recorded $ 7,426 of software development impairment charges (a component of Cost of goods sold).

The impairment charges related to a decision not to proceed with further development of certain interactive entertainment software.

The impairment charges related (i) to unamortized capitalized costs for the development of certain interactive entertainment software products, which are anticipated to exceed the net realizable value of the asset, and (ii) to decisions not to proceed with further development of certain interactive entertainment software products.

FIXED ASSETS, NET

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Office equipment 13,282 12,109

Buildings 857 —

386,509 330,090

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Balance at March 31, 2019 $ 381,717

Additions from immaterial acquisition 3,149

Additions from immaterial acquisitions 13,205

Currency translation adjustment ( 8,428 )

Balance at March 31, 2020 $ 386,494

Additions from immaterial acquisition 13,205

Acquisition of Playdots, Inc.

(see Note 22 )

Additions from immaterial acquisitions 13,260

Currency translation adjustment 16,483

Balance at March 31, 2021 $ 535,306

Definite-lived intangibles

The following table sets forth the intangible assets that are subject to amortization:

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Branding and trade names 8,245 ( 2,245 ) 6,000 4,343 ( 1,528 ) 2,815 6 years

Total definite-lived intangible assets $ 125,499 $ ( 74,239 ) $ 51,260 $ 127,230 $ ( 54,115 ) $ 73,115

User base 6,200 ( 3,617 ) 2,583 — — — 1 year

Total intangible assets $ 231,918 $ ( 110,327 ) $ 121,591 $ 125,499 $ ( 74,239 ) $ 51,260 5 years

Amortization of intangible assets is included in our Consolidated Statements of Operations as follows:

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Compensation and benefits 122,404 81,791

Refund Liability 77,829 65,853

Licenses 84,330 57,651

Refund Liability 53,361 77,829

Marketing and promotions 32,591 40,797

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Credit Agreement

On February 8, 2019, we entered into an unsecured credit agreement (the “Credit Agreement”).

The Credit Agreement replaced our prior credit agreement, which was terminated on the same day.

The Credit Agreement runs through February 8, 2024.

On February 8, 2019, we entered into an unsecured credit agreement (the “Credit Agreement”) that runs through February 8, 2024.

The Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of $ 200,000 , including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $ 25,000 and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros and Canadian Dollars in an aggregate principal amount of up to $ 25,000 .

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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 March 31, 2021) or (b) 1.125 % to 1.750 % above LIBOR (approximately 1.10 % at March 31, 2021), which rates are determined by reference to our consolidated total net leverage ratio.

We had no outstanding borrowings at March 31, 2020.

We had no outstanding borrowings at March 31, 2021 and March 31, 2020.

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

March 31, March 31,

Available borrowings $ 197,874 $ 198,336

Outstanding letters of credit $ 2,126 $ 1,664

We recorded interest expense and fees related to the Credit Agreement of $ 275 and $ 372 , for the fiscal years ended March 31, 2020 and 2019, respectively and, under a prior credit agreement that was terminated on the same day that we entered into the Credit Agreement, $ 472 and $ 441 , for the fiscal years ended March 31, 2019 and 2018, 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:

create, incur, assume or be liable for indebtedness;

We recorded interest expense and fees related to the Credit Agreement of $ 355 , $ 275 and $ 372 , for the fiscal years ended March 31, 2021, 2020 and 2019, respectively and, under a prior credit agreement that was terminated on the same day that we entered into the Credit Agreement, $ 472 for the fiscal year ended March 31, 2019.

dispose of assets outside the ordinary course;

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In addition, the Credit Agreement provides for certain events of default such as nonpayment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency and default on indebtedness held by third parties (subject to certain limitations and cure periods).

1.00 % Convertible Notes Due 2018

On June 18, 2013, we issued $ 250,000 aggregate principal amount of 1.00 % Convertible Notes due 2018.

The Convertible Notes were issued at 98.5 % of par value for proceeds of $ 283,188 , which included a $ 37,500 overallotment option that was exercised.

Interest on the Convertible Notes was payable semi-annually in arrears on July 1 st and January 1 st of each year, commencing on January 1, 2014.

The Convertible Notes matured on July 1, 2018.

The following table provides the components of interest expense related to our Convertible Notes:

Fiscal Year Ended March 31,

2020 2019 2018

Cash interest expense (coupon interest expense) $ — $ 1 $ 539

Non-cash amortization of discount on 1.00 % Convertible Notes

Amortization of debt issuance costs — 3 466

Total interest expense related to 1.00 % Convertible Notes

$ — $ 95 $ 16,667

EARNINGS PER SHARE ("EPS")

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Net income $ 588,886 $ 404,459 $ 333,837

net income allocated to participating securities — — ( 159 )

Net income for basic earnings per share calculation $ 404,459 $ 333,837 $ 173,374

Total weighted average shares outstanding—basic 113,096 113,176 110,210

weighted average participating shares outstanding — — ( 101 )

Weighted average common shares outstanding—basic 114,602 113,096 113,176

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Net income $ 588,886 $ 404,459 $ 333,837

net income allocated to participating securities — — ( 155 )

Net income for diluted earnings per share calculation $ 404,459 $ 333,837 $ 173,378

Weighted average common shares outstanding—basic 114,602 113,096 113,176

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Weighted average common shares outstanding—diluted 115,744 114,136 115,198

weighted average participating shares outstanding — — ( 101 )

Weighted average common shares outstanding- diluted 114,136 115,198 112,763

Diluted earnings per share $ 5.09 $ 3.54 $ 2.90

Certain of our unvested stock-based awards (including restricted stock units and restricted stock awards) are considered participating securities since these securities have non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award and thus requires the two-class method of computing EPS.

As of March 31, 2020, we have no material participating securities.

The calculation of EPS for common stock under the two-class method shown above excludes income attributable to the participating securities from the numerator and excludes the dilutive effect of those awards from the denominator.

We define common stock equivalents as stock-based awards and common stock related to our Convertible Notes (see Note 12 - Debt) outstanding during the period.

Common stock equivalents are measured using the treasury stock method, except for the Convertible Notes, which were assessed for their effect on diluted EPS using the more dilutive of the treasury stock method or the if-converted method.

Our lease arrangements are primarily for (1) corporate, administrative, and development studio offices and (2) data centers and server equipment.

Our existing leases have remaining lease terms ranging from one to fifteen years .

Our existing leases have remaining lease terms ranging from one to thirteen years .

In certain instances, such leases include one or more options to renew, with renewal terms that generally extend the lease term by one to five years for each option.

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Information related to our operating leases are as follows:

Twelve Months Ended March 31, 2020

Fiscal Year Ended March 31,

Operating lease costs $ 37,300 $ 29,383

Short term lease costs $ 1,148 $ 2,771

Rent expense prior to our adoption of Topic 842 amounted to $ 29,204 and $ 25,301 for the fiscal years ended March 31, 2019 and 2018, respectively.

Twelve Months Ended March 31, 2020

Rent expense prior to our adoption of Topic 842 amounted to $ 29,204 for the fiscal year ended March 31, 2019.

Fiscal Year Ended March 31,

Supplemental operating cash flow information

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ROU assets obtained in exchange for lease obligations $ 34,638 $ 58,745

At March 31, 2020

Weighted average information

Remaining lease term 8.90 years

Remaining lease term 8.61 years 8.90 years

Discount rate 4.91 % 4.98 %

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As of March 31, 2021, we have entered into facility leases that have not yet commenced with future lease payments of approximately $ 5,709 .

These leases are expected to commence within the next 12 months and will have lease terms ranging from 7 years to 10 years.

These leases are expected to commence within the next twelve months and will have lease terms ranging from three to nine years .

COMMITMENTS AND CONTINGENCIES

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Software Development and Licensing Agreements:

We make payments to third-party software developers that include contractual payments to developers under several software development agreements that expire at various times through March 2025.

We make payments to third-party software developers that include contractual payments to developers under several software development agreements that expire at various times through July 2031.

Our aggregate outstanding software development commitments assume satisfactory performance by third-party software developers.

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We also have various pension plans for our non-U.S.

employees, some of which are required by local laws, and allow or require Company contributions.

employees, some of which are required by local laws, and allow or require employer contributions.

Employer contributions under all defined contribution and pension plans during the fiscal years ended March 31, 2021, 2020, and 2019 were $ 17,701 , $ 14,071 , and $ 10,881 , respectively.

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One-time transition tax — % — % ( 2.0 ) %

Domestic production deduction — % — % ( 2.8 ) %

Valuation allowance—domestic 0.1 % 0.2 % ( 46.0 ) %

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income tax rates.

Includes the impact of the reversal of a net deferred tax asset of $ 19,826 related to the effects of stock-based compensation from our intercompany cost-sharing arrangements due to an appeals court decision issued in Altera Corp.

Commissioner for the fiscal year ended March 31, 2020.

(2) Includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.

Fiscal year ended March 31, 2020 includes the impact of the reversal of a net deferred tax asset of $ 19,826 related to the effects of stock-based compensation from our intercompany cost-sharing arrangements due to an appeals court decision issued in Altera Corp.

Commissioner.

(2) Fiscal year ended March 31, 2020 includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.

(3) Tax benefits were recorded for fiscal years ended March 31, 2021, 2020, and 2019 attributable to certain tax credits related to software development activities.

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Net operating loss carryforward 5,576 5,555

Deferred revenue 3,323 —

Business reorganization 401 1,874

Deferred rent — 5,965

Other 10,236 7,785

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Total deferred tax liabilities ( 172,520 ) ( 137,784 )

Net deferred tax asset / (liability) (1)

Net deferred tax asset (1)

86,749 111,546

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At March 31, 2021, we had domestic net operating loss carryforwards totaling $ 44,481 of which $ 19,329 will expire in 2022 to 2028, $ 18,296 will expire from 2029 to 2032, and $ 6,856 will expire in 2036 to 2041.

In addition, we had foreign net operating loss carryforwards of $ 12,351 , of which $ 3,606 will expire from 2021 and the remainder may be carried forward indefinitely.

In addition, we had foreign net operating loss carryforwards of $ 10,236 , of which $ 1,170 will expire in 2028 and the remainder may be carried forward indefinitely.

At March 31, 2021, we had domestic tax credit carryforwards totaling $ 173,559 , of which $ 46,875 expire in 2038 to 2041, and the remainder may be carried forward indefinitely.

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We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes.

Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on the Consolidated Financial Statements.

Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on our Consolidated Financial Statements.

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.

We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations.

For the fiscal years ended March 31, 2020, 2019 and 2018, we recognized an increase of $ 71 , $ 232 and $ 2,363 , respectively.

For the fiscal years ended March 31, 2021, 2020 and 2019, we recognized an increase of interest and penalties of $ 2,594 , $ 71 and $ 232 , respectively.

The gross amount of interest and penalties accrued as of March 31, 2021 and 2020 was $ 9,351 and $ 6,757 , respectively.

As of March 31, 2021, we had gross unrecognized tax benefits, including interest and penalties, of $ 167,559 , of which $ 62,569 would affect our effective tax rate if realized.

For the fiscal year ended March 31, 2020, gross unrecognized tax benefits decreased by $ 4,737 .

For the fiscal year ended March 31, 2021, gross unrecognized tax benefits increased by $ 33,290 .

We are no longer subject to audit for U.S.

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Research and development 26,587 31,563 23,037

Business reorganization — — 2,424

Stock-based compensation expense before income taxes $ 110,472 $ 257,881 $ 247,700

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During the fiscal year ended March 31, 2020, the forfeiture of awards resulted in the reversal of expense of $ 425 and amounts capitalized as software development costs of $ 2,607 .

During the fiscal year ended March 31, 2018, the forfeiture of awards resulted in the reversal of expense of $ 17,609 .

During the fiscal year ended March 31, 2019, the forfeiture of awards resulted in the reversal of expense of $ 5,784 and amounts capitalized as software development costs of $ 17,504 .

As of March 31, 2021, the total future unrecognized compensation cost related to outstanding unvested restricted stock was $ 410,665 and will be either recognized as compensation expense over a weighted-average period of approximately 2.07 years or capitalized as software development costs.

For the fiscal years ended March 31, 2020, 2019 and 2018, the weighted average fair values of restricted stock units that vested were $ 219,007 , $ 264,162 and $ 268,570 , respectively.

For the fiscal years ended March 31, 2021, 2020 and 2019, the total fair values of restricted stock units that vested were $ 205,867 , $ 219,007 and $ 264,162 , respectively.

Restricted Stock Units

Employee Awards

Time-based restricted stock units granted to employees under our stock-based compensation plans generally vest either annually or quarterly over 3 years from the date of grant.

Time-based restricted stock units granted to employees under our stock-based compensation plans generally vest either annually or quarterly over three years from the date of grant.

Certain restricted stock units granted to key officers, senior-level employees, or key employees vest based on market conditions, primarily related to the performance of the price of our common stock.

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ZelnickMedia Non-Employee Awards

In connection with the 2014 Management Agreement and the 2017 Management Agreement, we granted restricted stock units to ZelnickMedia (see Note 3 - Management Agreement) as follows:

In connection with the 2017 Management Agreement, we granted restricted stock units to ZelnickMedia (see Note 3 - Management Agreement ) as follows:

Fiscal Year Ended March 31,

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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.

Certain performance metrics have been achieved as of March 31, 2020 for the "IP" and "RCS" performance-based restricted stock units granted in fiscal year 2019 and year fiscal 2020.

Certain performance metrics have been achieved as of March 31, 2021 for the "IP" and "RCS" performance-based restricted stock units granted in fiscal year 2020 and fiscal year 2021.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia as of March 31, 2021 and 2020 were 588 and 613 , respectively.

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Interest expense ( 6,207 ) ( 2,637 ) ( 8,032 )

Foreign currency exchange loss ( 3,589 ) ( 505 ) ( 3,038 )

Foreign currency exchange gain (loss) 727 ( 3,589 ) ( 505 )

Other ( 4,425 ) ( 2,610 ) ( 3,369 )

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Balance at March 31, 2020 $ ( 60,535 ) $ 600 $ 4,305 $ ( 2,746 ) $ ( 58,376 )

Other comprehensive (loss) income before reclassifications ( 27,445 ) — 10,504 ( 3,332 ) ( 20,273 )

Other comprehensive income (loss) before reclassifications 51,253 — ( 3,817 ) 3,364 50,800

Amounts reclassified from accumulated other comprehensive (loss) income — ( 600 ) ( 1,333 ) — ( 1,933 )

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Balance at March 31, 2021 $ ( 9,282 ) $ — $ — $ 618 $ ( 8,664 )

BUSINESS REORGANIZATION

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

In the fourth quarter of fiscal 2018, we announced and initiated a second phase of the 2018 plan.

In connection with both phases of this initiative, we incurred business reorganization expenses of $ 83 , $ 972 , and $ 14,742 during the fiscal year ended March 31, 2020, 2019 and 2018, respectively, due primarily to employee separation costs.

Through March 31, 2020, we had paid $ 9,502 related to these reorganization activities.

As of March 31, 2020, $ 3,862 remained accrued for in Accrued expenses and other current liabilities and $ 2,493 in Other non-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 in connection with the 2018 Plan.

In fiscal 2016, we announced and initiated actions to implement a strategic reorganization at one of our labels (the "2016 Plan"), including reorganizing one development studio and closing two development studios.

During fiscal 2016, we incurred business reorganization expenses of $ 71,285 due primarily to employee separation costs in connection with this initiative and did not incur expenses in fiscal 2017 or 2018.

During fiscal 2019, we recognized a benefit of $ 5,930 as a result of updating our estimate of costs to complete the plan.

Through March 31, 2019, we had paid $ 65,355 related to these reorganization activities.

As of March 31, 2019, the 2016 Plan was completed and no further amounts remain accrued or were expected to be incurred.

SUPPLEMENTARY FINANCIAL INFORMATION

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Valuation allowance for deferred income taxes $ 49,413 44,703 ( 7,179 ) — $ 86,937

$ 195,640 11,850 ( 107,133 ) ( 50,944 ) $ 49,413

Allowance for doubtful accounts 995 — ( 547 ) ( 5 ) 443

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Valuation allowance for deferred income taxes (1)

Price protection, sales returns and other allowances (2)

$ 195,640 11,850 ( 107,133 ) ( 50,944 ) $ 49,413

Allowance for doubtful accounts 1,247 651 — ( 903 ) 995

Total accounts receivable allowances $ 66,483 $ 59,674 $ ( 75,058 ) $ 3,191 $ 54,290

(1) Amount categorized as Other represents a reduction to the valuation allowance included in the cumulative effect of initially applying the New Revenue Accounting Standard as an adjustment to the opening balance of Retained earnings, due to revenues that were previously deferred being accelerated to Retained earnings, for which a timing difference exists for accounting and tax purposes.

(2) Under the New Revenue Accounting Standard, Price protection, sales returns and other allowances are considered refund liabilities and are reported within Accrued expenses and other current liabilities on our Consolidated Balance Sheet and are no longer considered accounts receivable allowance as they were under ASC 605.

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables set forth quarterly supplementary data for each of the years in the two-year period ended March 31, 2020:

Fiscal Year Ended March 31, 2020 First Second Third Fourth

Net revenue $ 540,459 $ 857,841 $ 930,129 $ 760,541

Gross profit 298,990 389,593 493,036 364,901

Income from operations 51,730 74,820 176,833 121,884

Net income $ 46,280 $ 71,815 $ 163,642 $ 122,722

Earnings per share:

Basic earnings per share $ 0.41 $ 0.63 $ 1.44 $ 1.08

Diluted earnings per share $ 0.41 $ 0.63 $ 1.43 $ 1.07

Fiscal Year Ended March 31, 2019 First Second Third Fourth

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

("Playdots"), a New York, New York based free-to-play mobile game developer, for consideration of $ 97,846 in cash and 604 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 Consolidated Balance Sheet at acquisition.

During the fiscal year ended March 31, 2021, we paid out $ 3,840 of this amount.

As of March 31, 2021, $ 9,600 remained accrued within Accrued expenses and other current liabilities within our Consolidated Balance Sheet at acquisition.

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 ( 604 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, to the extent 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 March 31, 2021 are as follows:

Fiscal Year Ended March 31, 2021

Net revenue $ 20,640

Gross profit 256,617 257,787 350,254 280,092

Income from operations 70,846 25,986 51,779 58,061

Net income $ 71,693 $ 25,367 $ 179,948 $ 56,829

Earnings per share:

Basic earnings per share $ 0.63 $ 0.22 $ 1.59 $ 0.50

Diluted earnings per share $ 0.62 $ 0.22 $ 1.57 $ 0.50

Basic and diluted earnings per share are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted earnings per share information may not equal annual basic and diluted earnings per share.

Net income (loss) $ ( 27,407 )

The following table summarizes the pro forma consolidated results of operations (unaudited) for the fiscal years ended March 31, 2021 and 2020, respectively, 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.

Fiscal Year Ended March 31,

Pro forma Net revenue $ 3,392,117 $ 3,112,757

Pro forma Net income $ 580,393 $ 370,225

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 our 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 $ 2,553 for the fiscal years ended March 31, 2021, which have been recorded within General and administrative expense in our Consolidated Statements of Operations, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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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-K

Item 9A. Controls and Procedures