What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-12 · 324 added, 312 removed, 675 unchanged (49% of the section changed)

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millions, except share data)

September 30,

Accounts receivable, net

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49,000,000 shares authorized;

22,594,207 shares and 22,430,475 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

22,754,597 shares and 22,430,475 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid in capital

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Product sales

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Depreciation and amortization

Net operating loss

Net operating income (loss)

Other (expense) income

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Loss from equity method investee

Other finance (expense) income

Total other expense, net

Loss before income taxes

Other finance income (expense)

Total other income (expense), net

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Other comprehensive (loss)/income:

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Other comprehensive income (loss)

Comprehensive loss

Net loss per common share – basic and diluted

Weighted average number of shares outstanding during the period – basic and diluted

Comprehensive income (loss)

Net income (loss) per common share – basic

Net income (loss) per common share – diluted

Weighted average number of shares outstanding during the period – basic

Weighted average number of shares outstanding during the period – diluted

Supplemental disclosure of stock-based compensation expense

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

THE PERIOD JANUARY 1, 2021 TO JUNE 30, 2021

THE PERIOD JANUARY 1, 2021 TO SEPTEMBER 30, 2021

millions, except share data)

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Change in fair value of hedging instrument

Reclassification of loss on hedging instrument to comprehensive income

Shares issued in net settlement of RSUs

Reclassification of loss on hedging instrument to comprehensive

Stock-based compensation expense – ESPP

Stock-based compensation expense – ESPP, shares

Shares issued in net settlement of RSUs

Stock-based compensation expense

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Change in fair value of hedging instrument

Reclassification of loss on hedging instrument to comprehensive income

Reclassification of loss on hedging instrument to comprehensive

Stock-based compensation expense

Balance as of June 30, 2021

Foreign currency translation adjustments

Actuarial gains on pension plan

Change in fair value of hedging instrument

Reclassification of loss on hedging instrument to comprehensive

Shares issued in net settlement of RSUs

Stock-based compensation expense

Balance as of September 30, 2021

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

THE PERIOD JANUARY 1, 2020 TO JUNE 30, 2020

THE PERIOD JANUARY 1, 2020 TO SEPTEMBER 30, 2020

millions, except share data)

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Balance as of June 30, 2020

Foreign currency translation adjustments

Actuarial losses on pension plan

Change in fair value of hedging instrument

Reclassification of loss on hedging instrument to comprehensive income

Stock-based compensation expense

Net income (loss)

Balance as of September 30, 2020

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

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Other long-term liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

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Property and equipment acquired through finance lease

Property and equipment transferred to inventory

Additional paid in capital from net settlement of RSUs

Lease liabilities arising from obtaining right of use assets

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Capitalized interest payments

Assets arising from asset retirement obligations

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

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Liquidity Plans

of June 30, 2021, the Company’s cash on hand was $ 24.5

million, and the Company had working capital of ($ 17.7 )

The Company recorded net losses of $ 60.5

million and $ 36.0

million for the six months ended June 30, 2021

and 2020, respectively.

Net losses include non-cash debt fees expensed as part of the repayment of Prior Financing (see Note 4) of $ 14.4

million and $ 0.0

million for the six months ended June 30, 2021

and 2020, respectively, non-cash changes in fair value of warrant liability of $ 13.5

million loss and $ 5.9

million income for the six months ended June

30, 2021 and 2020, respectively, excess depreciation and amortization over capital expenditure of $ 12.8

million and $ 10.4

million for the six months ended June 30, 2021,

and 2020, respectively, and non-cash stock-based compensation of $ 4.8

million and $ 2.0

million for the six months ended June 30, 2021

and 2020, respectively.

Historically, the Company has generally had positive cash flows from operating activities and has relied on a

combination of cash flows provided by operations and the incurrence of debt and/or the refinancing of existing debt to fund its obligations.

Cash flows used in operations amounted to $ 12.8

million and $ 10.2

million provided by operations for the six months

ended June 30, 2021 and 2020, respectively with the change year on year due to higher debt interest payments made in the six months ended

June 30, 2021, as there was an agreement in place to defer and capitalize such payments in the six months ended June 30, 2020.

capital of ($ 17.7 )

million includes a non-cash settled item of $ 9.7

million of deferred income, and an item not expected to be

cash settled of $ 26.5 million

comprising a warrant liability.

Management currently believes that, absent any unanticipated COVID-19 impact (see below), the Company’s

cash balances on hand, cash flows expected to be generated from operations, ability to control and defer capital projects and amounts

available from the Company’s external borrowings will be sufficient to fund the Company’s net cash requirements through August

of September 30, 2021, the Company’s cash on hand was $ 37.1 million, and the Company had working capital of $ 14.7 million.

Company recorded net income of $ 25.0 million and $ 0.5 million for the three months ended September 30, 2021 and 2020, respectively.

income includes non-cash changes in fair value of warrant liability of $ 17.3 million income and $ 0.2 million income for the three months

ended September 30, 2021 and 2020, respectively, and non-cash stock-based compensation of $ 3.8 million and $ 1.1 million for the three

months ended September 30, 2021 and 2020, respectively.

The Company recorded net losses of $ 35.5 million and $ 35.5 million for the nine

months ended September 30, 2021 and 2020, respectively.

Net losses include non-cash debt fees expensed as part of the repayment of Prior

Financing (see Note 4) of $ 14.4 million and $ 0.0 million for the nine months ended September 30, 2021 and 2020, respectively, non-cash

changes in fair value of warrant liability of $ 3.8 million income and $ 6.1 million income for the nine months ended September 30, 2021

and 2020, respectively, excess depreciation and amortization over capital expenditure of $ 18.0 million and $ 17.9 million for the nine

months ended September 30, 2021, and 2020, respectively, and non-cash stock-based compensation of $ 8.6 million and $ 3.1 million for the

nine months ended September 30, 2021 and 2020, respectively.

Historically, the Company has generally had positive cash flows from operating

activities and has relied on a combination of cash flows provided by operations and the incurrence of debt and/or the refinancing of

existing debt to fund its obligations.

Cash flows provided by operations amounted to $ 7.0 million and $ 31.5 million for the nine months

ended September 30, 2021 and 2020, respectively with the change year on year due to higher debt interest payments made in the nine months

ended September 30, 2021, as there was an agreement in place to defer and capitalize such payments in the nine months ended September

Working capital of $ 14.7 million includes a non-cash settled item of $ 8.5 million of deferred income, and an item not expected

to be cash settled of $ 9.0 million comprising a warrant liability.

Management currently believes that, absent any unanticipated COVID-19

impact (see below), the Company’s cash balances on hand, cash flows expected to be generated from operations, ability to control

and defer capital projects and amounts available from the Company’s external borrowings will be sufficient to fund the Company’s

net cash requirements through November 2022.

in all of the major jurisdictions in which our land-based customers operate have now reopened land-based venues.

No restrictions remain

in the United Kingdom.

There remains an element of social distancing in venues in Greece and in Italy, there are restrictions in place

that state only fully vaccinated people can enter our venues.

It remains uncertain as to whether and when further restrictions or closures

could happen in each jurisdiction and how long they may last.

We continue to protect our existing available liquidity by pro-actively

managing capital expenditures and working capital as well as identifying both immediate and longer-term opportunities for cost savings.

As of April 12, 2021,

in the United Kingdom, licensed betting offices in England and Wales have reopened with certain restrictions including operating two

of four gaming machines per venue, limited dwell time of 15 minutes, as well as a maximum of two visits per day per patron and an 8:00pm

These restrictions remained in place until May 17, 2021.

Gaming machines in pubs, holiday parks, motorway services, Scottish

betting offices and adult gaming centers across the United Kingdom reopened on May 17, 2021, with social distancing restrictions in place.

All social distancing restrictions were removed in England as of July 19, 2021.

As of August 9, 2021, no restrictions remain in the United

There remains an element of social distancing in venues in Greece and in Italy, and there are restrictions in place that state

only fully vaccinated people can enter our venues which came into place in Italy on August 20, 2021, and in Greece on September 13, 2021.

It remains uncertain as to whether and when further restrictions or closures could happen in each jurisdiction and how long they may

We continue to protect our existing available liquidity by pro-actively managing capital expenditures and working capital as well

as identifying both immediate and longer-term opportunities for cost savings.

of Presentation

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is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K filed with

the SEC on March 29, 2021 (“the Original 10-K”), and as amended and filed on Form 10-K/A with the SEC on May 10, 2021 (“the

The interim results for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected

for the year ending December 31, 2021 or for any future interim periods.

the SEC on March 29, 2021 (the “Original 10-K”), as amended and filed on Form 10-K/A with the SEC on May 10, 2021 (the “10-K/A”).

The interim results for the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the

year ending December 31, 2021 or for any future interim periods.

of Previously Reported Information

May 7, 2021, after consultation with Marcum LLP, the Company’s independent registered public accounting firm, the Company’s

May 7, 2021, the Company’s independent registered public accounting firm, the Company’s

management and the audit committee of the Company’s Board of Directors concluded that it was appropriate to restate the Company’s

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in fair value each period reported in earnings.

effect of the restatement on previously reported information for the three months ended June 30, 2020 is as follows:

effect of the restatement on previously reported information for the three months ended September 30, 2020 is as follows:

Schedule of Restatement

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(in millions, except per share data)

Consolidated Statements of Stockholders’ Deficit as of April 1, 2020

Consolidated Statements of Stockholders’ Deficit as of July 1, 2020

Additional paid in capital

Accumulated deficit

Consolidated Statement of Operations and Comprehensive Loss for the three months ended June 30, 2020

Consolidated Statement of Operations and Comprehensive Loss for the three months ended September 30, 2020

Change in fair value of warrant liability

Comprehensive loss

Net loss per common share – basic and diluted

Consolidated Statements of Stockholders’ Deficit as of June 30, 2020

Net income per common share – basic and diluted

Consolidated Statements of Stockholders’ Deficit as of September 30, 2020

Additional paid in capital

Accumulated deficit

effect of the restatement on previously reported information for the six months ended June 30, 2020 is as follows:

effect of the restatement on previously reported information for the nine months ended September 30, 2020 is as follows:

Previously Reported

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Accumulated deficit

Consolidated Statement of Operations and Comprehensive Loss for the six months ended June 30, 2020

Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020

Change in fair value of warrant liability

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Net loss per common share – basic and diluted

Consolidated Statements of Stockholders’ Deficit as of June 30, 2020

Consolidated Statements of Stockholders’ Deficit as of September 30, 2020

Additional paid in capital

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of Previously Reported Information

prior periods, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along

three operating segments:

Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted of

the businesses acquired from the NTG Acquisition).

During the period subsequent to September 30, 2020, the Company completed the process

of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result changed the composition of its

prior periods, up to and including the interim period nine months ended September 30, 2020, the Company operated its business along three

operating segments:

The Company now operates its business along four operating segments, which are segregated on the basis of revenue

Gaming, Virtual Sports, Interactive and Leisure.

The Company believes this method of segment reporting reflects both the way

its business segments are now managed and the way the performance of each segment is now evaluated.

Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted of businesses

acquired from Novomatic UK Ltd., a division of Novomatic Group, an international supplier of gaming equipment and solutions (the “NTG

Acquisition”)).

During the period subsequent to September 30, 2020, the Company completed the process of changing its internal

structure, which had been ongoing since the NTG Acquisition, and as a result changed the composition of its operating segments.

The Company now operates its business along four operating segments, which are segregated on the basis of revenue stream:

Gaming, Virtual

Sports, Interactive and Leisure.

The Company believes this method of segment reporting reflects both the way its business segments are

now managed and the way the performance of each segment is now evaluated.

part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative Expenses have

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and similar items are reflected with other items of hardware (Product Sales).

resulting impact on previously reported information for the three months ended June 30, 2020 is as follows:

resulting impact on previously reported information for the three months ended September 30, 2020 is as follows:

Service Revenue, previously

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previously reported $ 21.9 million, now $ 21.5 million.

resulting impact on previously reported information for the six months ended June 30, 2020 is as follows:

resulting impact on previously reported information for the nine months ended September 30, 2020 is as follows:

Service Revenue, previously

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previously reported $ 20.9 million, now $ 21.8 million;

Cost of Product Sales, previously reported $ 7.3 million, now $ 6.5 million;

General and Administrative Expenses (excluding Stock-based compensation), previously reported $ 39.7 million, now $ 39.2 million.

Selling, General and Administrative Expenses (excluding Stock-based compensation),

previously reported $ 61.6 million, now $ 60.7 million.

recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three and

six months ended June 30, 2020.

nine months ended September 30, 2020.

consists of the following:

Schedule of Inventory

September 30,

(in millions)

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Included in inventory are reserves for excess and slow-moving inventory of $ 2.5 million and

$ 1.5 million as of June 30, 2021 and December 31, 2020, respectively.

Our finished goods inventory primarily consists of gaming terminals

which are ready for sale.

$ 1.5 million as of September 30, 2021 and December 31, 2020, respectively.

Our finished goods inventory primarily consists of gaming

terminals which are ready for sale.

Liabilities and Other Disclosures

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(in millions)

At June 30, 2021

At September 30, 2021

At December 31, 2020

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recognized that was included in the deferred income balance at the beginning of the period amounted to $ 8.5 million and $ 10.3 million

for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.

for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.

Term and Other Debt

Secured Notes

May 20, 2021, Inspired Entertainment (Financing) PLC, a wholly owned subsidiary of the Company, issued £ 235.0

million ($ 324.7

million, as translated at June 30, 2021)

aggregate principal amount of its 7.875 %

senior secured notes due 2026 (the “Senior Secured Notes”).

The Senior Secured Notes bear interest at a rate of 7.875 %

per annum and mature on June

Interest is payable on the Senior Secured

Notes on June 1 and December 1 of each year, commencing on December 1, 2021

May 20, 2021, Inspired Entertainment (Financing) PLC, a wholly owned subsidiary of the Company, issued £ 235.0 million ($ 316.9 million,

as translated at September 30, 2021) aggregate principal amount of its 7.875 % senior secured notes due 2026 (the “Senior Secured

The Senior Secured Notes bear interest at a rate of 7.875 % per annum and mature on June 1, 2026 .

Interest is payable on

the Senior Secured Notes on June 1 and December 1 of each year, commencing on December 1, 2021

Senior Secured Notes and related guarantees were issued under an indenture (the “Indenture”), among Inspired Entertainment

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The RCF Financial Covenant is calculated as the ratio of consolidated senior

secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest

income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling

basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date.

The RCF Agreement does

not include a minimum interest coverage ratio or other financial covenants.

secured net debt to consolidated pro forma EBITDA (defined as net income (loss) excluding depreciation and amortization, interest

expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested

quarterly on a rolling basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date.

The RCF Agreement does not include a minimum interest coverage ratio or other financial covenants.

outstanding principal amount of each advance under the RCF Loans is payable on the last day of the interest period relating to such advance,

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Schedule of Outstanding Debt and Capital Leases

September 30,

(in millions)

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Long-term debt, excluding current portion

financing charge

(in millions)

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with the underlying agreements.

term debt as of June 30, 2021 matures as follows:

term debt as of September 30, 2021 matures as follows:

Schedule of Maturities of Long-term Debt

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(in millions)

and Hedging Activities

Derivatives and Hedging Activities

Company was party to two interest rate swaps with UBS AG designed to protect the Company against adverse fluctuations in interest rates

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$ 0.7 million will be reclassified as an increase to interest expense.

of June 30, 2021, the company did not have any derivatives.

of September 30, 2021, the company did not have any derivatives.

As of December 31, 2020, the Company had the following outstanding interest

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Schedule of Outstanding Derivatives Designated as Cash Flow Hedges

Interest Rate Derivative

Interest rate swaps

£ 95 million ($ 131.3 million) at a fixed rate of 0.9255 % based on the 6-month LIBOR rate and € 60 million ($ 71.2 million) at a fixed rate of 0.102 % based on the 6-month EURIBOR rate

Company did not have any derivative financial instruments as of June 30, 2021.

Rate Derivative

million ($ 128.1 million) at a fixed rate of 0.9255 % based on the 6-month LIBOR rate and € 60 million ($ 69.5 million) at a fixed

rate of 0.102 % based on the 6-month EURIBOR rate

Company did not have any derivative financial instruments as of September 30, 2021.

The table below presents the fair value of the Company’s

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Total derivatives designated as hedging instruments

table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months

ended June 30, 2021.

table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the nine months

ended September 30, 2021.

Schedule of Accumulated Other Comprehensive Income

Amount of Gain/(Loss)

Recognized in

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Interest Expense

table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months

ended June 30, 2020.

Amount of Gain/(Loss)

table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the nine months

ended September 30, 2020.

Recognized in

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table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations

for the six months ended June 30, 2021.

for the nine months ended September 30, 2021.

Schedule of Consolidated Income Statements

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table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations

for the six months ended June 30, 2020.

for the nine months ended September 30, 2020.

(in millions)

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of Derivative Assets

Amounts Offset in the Statement

Amounts of Assets presented in the Statement

Amounts Not Offset in the Statement of Financial Position

of Recognized

Collateral Received

value of hedging instrument

Gross Amounts

Gross Amounts Offset in the

Net Amounts of Assets presented in the

Gross Amounts Not Offset in the Statement of Financial Position

Recognized Assets

Financial Position

Financial Instruments

Cash Collateral Received

(in millions)

Fair value of hedging instrument

of Derivative Liabilities

Amounts Offset in the Statement

Amounts of Assets presented in the Statement

Amounts Not Offset in the Statement of Financial Position

of Recognized Assets

Gross Amounts

Gross Amounts Offset in the

Net Amounts of Assets presented in the

Gross Amounts Not Offset in the Statement of Financial Position

Recognized Assets

Financial Position

Collateral Received

value of hedging instrument

Value Measurements

Financial Instruments

Cash Collateral Received

(in millions)

Fair value of hedging instrument

Fair Value Measurements

value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal

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Schedule of Derivative Financial Instrument Assets and Liabilities Measured at Fair Value on Recurring Basis

September 30,

(in millions)

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Derivative liability (see Note 5)

The fair value of our long-term

senior debt as of June 30, 2021, was $ 332.9 million, based upon quoted prices in the marketplace, which are considered Level 2 inputs.

fair value of our long-term senior debt as of September 30, 2021, was $ 323.2 million, based upon quoted prices in the marketplace, which

are considered Level 2 inputs.

3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value

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the Company’s Principal Financial Officer and approved by the Principal Executive Officer.

June 30, 2021 and December 31, 2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

September 30, 2021 and December 31, 2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

Stock-Based Compensation

Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other

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The 2021 Plan succeeds the Company’s 2018 Omnibus

Incentive Plan (the “2018 Plan”) such that shares available for award under the 2018 Plan would instead be available under

the 2021 Plan.

The Company has two other predecessor plans, the 2016 Long-Term Incentive Plan and the Second Long-Term Incentive Plan

(collectively, the “Prior Plans”), whose available balances were terminated in connection with approval of the 2018 Plan.

Although outstanding awards under the Prior Plans remain governed by the terms of the Prior Plans, no new awards may be granted or become

available for grant under the Prior Plans.

of June 30, 2021, there were (i) 1,408,020 shares subject to outstanding awards under the 2021 Plan, including 516,496 shares subject

Incentive Plan (the “2018 Plan”) such that shares subject to the 2018 Plan’s unused reserve (e.g., as a result of termination

or forfeiture of awards) are instead rolled over to the 2021 Plan.

The Company has two other predecessor plans, the 2016 Long-Term Incentive

Plan and the Second Long-Term Incentive Plan (collectively, the “Prior Plans”), whose available balances were terminated

in connection with approval of the 2018 Plan.

Although outstanding awards under the Prior Plans remain governed by the terms of the Prior

Plans, no new awards may be granted or become available for grant under the Prior Plans.

of September 30, 2021, there were (i) 1,628,467 shares subject to outstanding awards under the 2021 Plan, including 514,220 shares subject

to performance-based target awards, 232,500 shares subject to market-price vesting conditions and 165,000 shares subject to awards as

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23, 2021 and 1,318,686 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred

As of June 30, 2021, there were 1,726,367 shares available for new awards under the 2021 Plan (which includes shares rolled

over from the 2018 Plan) and no shares available for new awards under the Prior Plans.

All awards consist of RSUs and Restricted Stock.

As of September 30, 2021, there were 1,521,434 shares available for new awards under the 2021 Plan (which includes shares

rolled over from the 2018 Plan) and no shares available for new awards under the Prior Plans.

All awards consist of RSUs and Restricted

Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of 500,000 shares

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by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements

As of June 30, 2021, a total of 467,751 shares remain available for purchase under the ESPP.

summary of the Company’s RSU activity during the six months ended June 30, 2021 is as follows:

As of September 30, 2021, a total of 467,751 shares remain available for purchase under the ESPP.

summary of the Company’s RSU activity during the nine months ended September 30, 2021 is as follows:

Schedule of Restricted Stock Unit Activity

Unvested Outstanding at January 1, 2021

Unvested Outstanding at June 30, 2021

Company issued a total of 163,732 shares during the six months ended June 30, 2021 (such shares were issued in connection with the net

settlement of RSUs that vested on December 31, 2020).

Unvested Outstanding at September 30, 2021

Company issued a total of 324,122 shares during the nine months ended September 30, 2021, 160,390 in connection with the net settlement

of RSUs that vested on June 30, 2021 and 163,732 in connection with the net settlement of RSUs that vested on December 31, 2020.

compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period.

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value recognized on a straight-line basis over the requisite service period.

Company recognized stock-based compensation expense amounting to $ 3.4 million and $ 1.0 million for the three months ended June 30, 2021

and 2020, respectively, and $ 4.8 million and $ 2.0 million for the six months ended June 30, 2021 and 2020, respectively.

Total unrecognized

compensation expense related to unvested stock awards and unvested RSUs at June 30, 2021 amounts to $ 15.7 million and is expected to

be recognized over a weighted average period of 1.9 years.

Other Comprehensive Loss (Income)

Company recognized stock-based compensation expense amounting to $ 3.8 million and $ 1.1 million for the three months ended September 30,

2021 and 2020, respectively, and $ 8.6 million and $ 3.1 million for the nine months ended September 30, 2021 and 2020, respectively.

unrecognized compensation expense related to unvested stock awards and unvested RSUs at September 30, 2021 amounts to $ 14.6 million and

is expected to be recognized over a weighted average period of 1.7 years .

Accumulated Other Comprehensive Loss (Income)

accumulated balances for each classification of comprehensive loss (income) are presented below:

Schedule of Accumulated Other Comprehensive (Loss) Income

Foreign Currency Translation Adjustments

Change in Fair Value of Hedging Instrument

Unrecognized Pension Benefit Costs

Accumulated Other Comprehensive (Income)

Benefit Costs

Comprehensive

(in millions)

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Balance at June 30, 2021

Foreign Currency Translation Adjustments

Change in Fair Value of Hedging Instrument

Unrecognized Pension Benefit Costs

Accumulated Other Comprehensive (Income)

Change during the period

Balance at September 30, 2021

Benefit Costs

Comprehensive

(in millions)

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Balance at June 30, 2020

within accumulated other comprehensive income is an amount of $ 1.5

million relating to the change in fair value

of discontinued hedging instruments.

This amount will be amortized as a charge to income over the life of the original instruments, in

accordance with US GAAP.

Loss per Share

loss per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of

common shares outstanding during the period, excluding the effects of any potentially dilutive securities.

Diluted EPS gives effect to

all dilutive potential shares of common stock outstanding during the period, including stock options, restricted stock, RSUs and warrants,

using the treasury stock method, and convertible debt or convertible preferred stock, using the if-converted method.

Diluted EPS excludes

all dilutive potential of shares of common stock if their effect is anti-dilutive.

Change during the period

Balance at September 30, 2020

within accumulated other comprehensive income is an amount of $ 1.2 million relating to the change in fair value of discontinued hedging

This amount will be amortized as a charge to income over the life of the original instruments, in accordance with US GAAP.

Net Income (Loss) per Share

income (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders

by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities.

Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period, including stock options, restricted

stock, RSUs and warrants, using the treasury stock method, and convertible debt or convertible preferred stock, using the if-converted

Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

computation of diluted EPS excludes the common stock equivalents of the following potentially dilutive securities because their inclusion

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Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share

Three and Six Months Ended

Three Months Ended

September 30,

Nine Months Ended

September 30,

Unvested Restricted Stock

Stock Warrants

Finance (Expense) Income

finance (expense) income consisted of the following for the three and six months ended June 30, 2021 and 2020:

Number of antidilutive securities excluded

from computation of earnings per share

Other Finance Income (Expense)

finance income (expense) consisted of the following for the three and nine months ended September 30, 2021 and 2020:

Schedule of Other Finance Income (Costs)

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in millions)

3 unchanged sentences

Foreign currency translation on senior debt

Other finance income

effective income tax rate for the three months ended June 30, 2021 and 2020 was 0.7 % and 0.3 % , respectively, resulting in a $ 0.3 million

and $ 0.1 million income tax expense, respectively.

The effective income tax rate for the six months ended June 30, 2021 and 2020 was

( 0.6 % ) and 0.8 % , respectively, resulting in a $ 0.4 million income tax benefit and a $ 0.3 million income tax expense, respectively.

Company’s effective income tax rate has fluctuated primarily as a result of the income mix between jurisdictions.

income tax expense for the three and six months ended June 30, 2021 and 2020 differs from the amount that would be expected after applying

the statutory U.S.

federal income tax rate primarily due to pre-tax losses for which no tax benefit can be recorded, and foreign earnings

being taxed at rates different than the US statutory rate.

Other finance income (Costs)

effective income tax rate for the three months ended September 30, 2021 and 2020 was 1.1 % and 0.0 %, respectively, resulting in

a $ 0.3 million and a $ 0.0 million income tax expense, respectively.

The effective income tax rate for the nine months ended

September 30, 2021 and 2020 was 0.3 % and 0.7 %, respectively, resulting in a $ 0.1 million income tax benefit and a $ 0.3

million income tax expense, respectively.

The Company’s effective income tax rate has fluctuated primarily as a result of the income

mix between jurisdictions.

income tax expense for the three and nine months ended September 30, 2021 and 2020 differs from the amount that would be expected after

applying the statutory U.S.

federal income tax rate primarily due to pre-tax losses for which no tax benefit can be recorded, and foreign

earnings being taxed at rates different than the US statutory rate.

Related Parties

Vora Special Opportunities Master Fund Limited (“HG Vora”) (a purchaser of our Senior Secured Notes issued on May 20, 2021)

is the beneficial owner of approximately 13.13 %

of our common stock as of June 30, 2021, including

was the beneficial owner of approximately 13.04 %

of our common stock as of September 30, 2021, including 400,000

shares underlying warrants to purchase common

The portion of the Company’s aggregate senior debt of $ 324.8

million at June 30, 2021, and $ 313.3

million at December 31, 2020, held by HG Vora

at June 30, 2021 and December 31, 2020 was $ 55.3

stock, and such ownership level declined to below 5 % during the quarter ending December 31, 2021.

The portion of the Company’s

aggregate senior debt of $ 316.9 million

at September 30, 2021, and $ 313.3 million

at December 31, 2020, held by HG Vora at September 30, 2021 and December 31, 2020 was $ 53.9

million and $ 0.0

1 unchanged sentence

Interest expense payable

to HG Vora for the three months ended June 30, 2021 and 2020 amounted to $ 0.5

to HG Vora for the three months ended September 30, 2021 and 2020 amounted to $ 1.1

million and $ 0.0

million, respectively, and for the six months

ended June 30, 2021 and 2020 amounted to $ 0.5

million, respectively, and for the nine months

ended September 30, 2021 and 2020 amounted to $ 1.6

million and $ 0.0

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million of accrued interest payable was due to

HG Vora at June 30, 2021 and December 31, 2020, respectively.

HG Vora was also an investor in Leisure Acquisition Corp., a special purpose

acquisition company affiliated with two members of our management which completed its business combination on June 30, 2021.

Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”), (an arranger and lending party under our RCF Agreement) is

an affiliate of MIHI LLC, which beneficially owned approximately 16.61 % of

our common stock as of June 30, 2021, including 1,000,000 shares

underlying warrants to purchase common stock.

HG Vora at September 30, 2021 and December 31, 2020, respectively.

HG Vora was also an investor in Leisure Acquisition Corp., a special

purpose acquisition company affiliated with two members of our management which completed its business combination on June 30, 2021.

Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”), (an arranger and lending party under our RCF Agreement) is an

affiliate of MIHI LLC, which beneficially owned approximately 16.51 % of our common stock as of September 30, 2021, including 1,000,000

shares underlying warrants to purchase common stock.

Macquarie UK was also one of the lending parties with respect to our previous senior

secured term loans and revolving credit facility under our prior senior facilities agreement.

The portion of the Company’s

aggregate senior debt of $ 324.8 million

at June 30, 2021, and $ 313.3 million

at December 31, 2020 held by Macquarie UK at June 30, 2021 and December 31, 2020 was $ 0.0 million

and $ 30.7 million,

respectively.

Interest expense payable to Macquarie UK for the three months ended June 30, 2021 and 2020 amounted to $ 0.3 million

and $ 0.6 million,

respectively, and for the six months ended June 30, 2021 and 2020 amounted to $ 0.9 million

and $ 1.1 million,

respectively.

In addition, $ 0.0 million

and $ 0.6 million

of accrued interest payable was due to Macquarie UK at June 30, 2021 and December 31, 2020, respectively.

MIHI LLC is also a party

to a stockholders agreement with the Company and other stockholders, dated December 23, 2016, pursuant to which, subject to certain

conditions, MIHI LLC, jointly with Hydra Industries Sponsor LLC, are permitted to designate two directors to be nominated for

election as directors of the Company at any annual or special meeting of stockholders at which directors are to be elected, until

such time as MIHI LLC and Hydra Industries Sponsor LLC in the aggregate hold less than 5 % of

the outstanding shares of the Company.

The portion of the Company’s aggregate

senior debt of $ 316.9 million at September 30, 2021, and $ 313.3 million at December 31, 2020 held by Macquarie UK at September 30, 2021

and December 31, 2020 was $ 0.0 million and $ 30.7 million, respectively.

Interest expense payable to Macquarie UK for the three months

ended September 30, 2021 and 2020 amounted to $ 0.0 million and $ 0.6 million, respectively, and for the nine months ended September 30,

2021 and 2020 amounted to $ 0.9 million and $ 1.7 million, respectively.

In addition, $ 0.0 million and $ 0.6 million of accrued interest

payable was due to Macquarie UK at September 30, 2021 and December 31, 2020, respectively.

MIHI LLC is also a party to a stockholders

agreement with the Company and other stockholders, dated December 23, 2016, pursuant to which, subject to certain conditions, MIHI LLC,

jointly with Hydra Industries Sponsor LLC, are permitted to designate two directors to be nominated for election as directors of the

Company at any annual or special meeting of stockholders at which directors are to be elected, until such time as MIHI LLC and Hydra

Industries Sponsor LLC in the aggregate hold less than 5 % of the outstanding shares of the Company.

incurred certain offering expenses in connection with an underwritten public offering of shares held by a significant stockholder, the

Landgame Trust, which closed on June 1, 2021, as to which our expenses were reimbursed by the stockholder.

For the six months ended June

30, 2021, the aggregate amount invoiced for reimbursement was $ 0.2 million.

The selling stockholder sold an aggregate of 6,217,628 shares

in the offering (including 810,995 shares subject to an over-allotment option that was exercised in full) at an offering price of $ 9.25

per share, less underwriting discounts and commissions of $ 0.4625 per share.

One of the participating underwriters in the offering was

Macquarie Capital (USA) Inc., an affiliate of MIHI LLC (see paragraph above), pursuant to which it purchased 870,468 of the shares including

113,539 shares subject to the over-allotment option.

For the nine months ended

September 30, 2021, the aggregate amount invoiced for reimbursement was $ 0.2 million.

The selling stockholder sold an aggregate of 6,217,628

shares in the offering (including 810,995 shares subject to an over-allotment option that was exercised in full) at an offering price

of $ 9.25 per share, less underwriting discounts and commissions of $ 0.4625 per share.

One of the participating underwriters in the offering

was Macquarie Capital (USA) Inc., an affiliate of MIHI LLC (see paragraph above), pursuant to which it purchased 870,468 of the shares

including 113,539 shares subject to the over-allotment option.

Company is party to leases with third parties with respect to various gaming machines.

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in millions)

3 unchanged sentences

Variable income from sales type leases

and Contingencies

Commitments and Contingencies

time to time, the Company may become involved in lawsuits and legal matters arising in the ordinary course of business.

15 unchanged sentences

contributions are payable during the year ending December 31, 2022.

total amount of employer contributions paid during the six months ended June 30, 2021 amounted to $ 0.6 million relating to the six months

ended June 30, 2021, and $ 0.4 million of contributions relating to the year ending December 31, 2020 agreed with the trustees of the

scheme to be deferred into the year ending December 31, 2021.

total amount of employer contributions paid during the nine months ended September 30, 2021 amounted to $ 1.1 million relating to the

nine months ended September 30, 2021, and $ 0.4 million of contributions relating to the year ending December 31, 2020 agreed with the

trustees of the scheme to be deferred into the year ending December 31, 2021.

following table presents the components of our net periodic pension benefit cost:

Schedule of Defined Benefit Plans

Six Months Ended

Nine Months Ended

September 30,

(in millions)

6 unchanged sentences

Schedule of Pension Plans and their Reconciliation

September 30,

(in millions)

8 unchanged sentences

Fair value of plan assets at beginning of period

Actual (loss)/gain on plan assets

Actual gain on plan assets

Employer contributions

5 unchanged sentences

Net amount recognized

Reporting and Geographic Information

Segment Reporting and Geographic Information

Company operates its business along four operating segments, which are segregated on the basis of revenue stream:

3 unchanged sentences

and the way the performance of each segment is evaluated.

prior years, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along

three operating segments:

Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted of

the businesses acquired from the NTG Acquisition).

prior periods, up to and including the interim period nine months ended September 30, 2020, the Company operated its business

along three operating segments:

Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted

of the businesses acquired from the NTG Acquisition).

During the period subsequent to September 30, 2020, the Company completed the process

of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result changed the composition of its

operating segments.

of changing its internal structure, which had been ongoing since the NTG Acquisition, and as a result changed the composition

of its operating segments.

following tables present revenue, cost of sales, excluding depreciation and amortization, selling, general and administrative expenses,

depreciation and amortization, stock-based compensation expense and acquisition related transaction expenses, operating profit/(loss),

total assets and total capital expenditures for the periods ended June 30, 2021 and June 30, 2020, respectively, by business segment.

Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these

costs are not allocable and to do so would not be practical.

Corporate function costs consist primarily of selling, general and administrative

expenses, depreciation and amortization, capital expenditures, right of use assets, cash, prepaid expenses and property and equipment

and software development costs relating to corporate/shared functions.

All acquisition and integration related transaction expenses are

allocated as corporate function costs.

Amounts previously disclosed for the three and six months ended June 30, 2020 have been recharacterized

in line with the current operating segments and categories.

addition, as part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative

Expenses have been recharacterized to ensure consistency with similar items across the Group.

The revenue recharacterizations are to

ensure spares and similar items are reflected with other items of hardware (Product Sales).

resulting impact on previously reported information for the three months ended June 30, 2020 is as follows:

Service Revenue, previously

reported $ 15.2 million, now $ 15.3 million;

Product Sales Revenue, previously reported $ 0.4 million, now $ 0.3 million;

Cost of Service,

previously reported $ 3.1 million, now $ 2.5 million;

Selling, General and Administrative Expenses (excluding Stock-based compensation),

previously reported $ 10.6 million, now $ 11.2 million.

resulting impact on previously reported information for the six months ended June 30, 2020 is as follows:

Service Revenue, previously

reported $ 58.4 million, now $ 58.1 million;

Product Sales Revenue, previously reported $ 9.5 million, now $ 9.8 million;

Cost of Service,

previously reported $ 9.7 million, now $ 11.0 million;

Cost of Product Sales, previously reported $ 7.3 million, now $ 6.5 million;

General and Administrative Expenses (excluding Stock-based compensation), previously reported $ 39.7 million, now $ 39.2 million.

recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three and

six months ended June 30, 2020.

total assets and total capital expenditures for the periods ended September 30, 2021 and September 30, 2020, respectively, by business

Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because

these costs are not allocable and to do so would not be practical.

Corporate function costs consist primarily of selling, general and

administrative expenses, depreciation and amortization, capital expenditures, right of use assets, cash, prepaid expenses and property

and equipment and software development costs relating to corporate/shared functions.

All acquisition and integration related transaction

expenses are allocated as corporate function costs.

Amounts previously disclosed for the three and nine months ended September 30, 2020

have been recharacterized in line with the current operating segments and categories.

The tables also reflect the recharacterization

of previously reported information as described in Note 1.

Schedule of Segment Reporting Information By Segment

Months Ended June 30, 2021

Months Ended September 30, 2021

(in millions)

9 unchanged sentences

Segment operating income (loss)

Net operating loss

Total assets at June 30, 2021

Total goodwill at June 30, 2021

Total capital expenditures for the three months ended June 30, 2021

Months Ended June 30, 2020

Net operating income

Total assets at September 30, 2021

Total goodwill at September 30, 2021

Total capital expenditures for the three months ended September 30, 2021

Months Ended September 30, 2020

(in millions)

9 unchanged sentences

Segment operating income (loss)

Net operating loss

Net operating income

Total assets at December 31, 2020

Total goodwill at December 31, 2020

Total capital expenditures for the three months ended June 30, 2020

Months Ended June 30, 2021

Total capital expenditures for the three months ended September 30, 2020

Months Ended September 30, 2021

(in millions)

10 unchanged sentences

Net operating loss

Total capital expenditures for the six months ended June 30, 2021

Months Ended June 30, 2020

Total capital expenditures for the nine months ended September 30, 2021

Months Ended September 30, 2020

(in millions)

10 unchanged sentences

Net operating loss

Total capital expenditures for the six months ended June 30, 2020

Total capital expenditures for the nine months ended September 30, 2020

Schedule of Geographic Information

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in millions)

3 unchanged sentences

information of our non-current assets excluding goodwill is set forth below:

September 30,

(in millions)

1 unchanged sentence

development costs are included as attributable to the market in which they are utilized.

Concentration

the three months ended June 30, 2021, no customers represented at least 10% of the Company’s revenues.

Customer Concentration

the three months ended September 30, 2021, no customers represented at least 10% of the Company’s revenues.

During the three months

ended June 30, 2020, two customers represented at least 10% of revenues, accounting for 25 % and 18 % of the Company’s revenues.

The customers were served by the Gaming and Virtual Sports, and the Gaming, Virtual Sports and Interactive segments, respectively.

the six months ended June 30, 2021, one customer represented at least 10% of the Company’s revenues, accounting for 11 %

of the Company’s revenues.

This customer

was served by the Virtual Sports and Interactive segments.

During the six months ended June 30, 2020, one customer represented at least

10% of revenues, accounting for 10 %

of the Company’s revenues.

This customer

was served by the Gaming and Virtual Sports segments.

June 30, 2021 and December 31, 2020, there were no customers that represented at least 10 % of accounts receivable.

ended September 30, 2020, one customer represented at least 10% of revenues, accounting for 21 % of the Company’s revenues.

customer was served by the Gaming, Virtual Sports and Interactive segments.

the nine months ended September 30, 2021, no customers represented at least 10% of the Company’s revenues.

During the nine months

ended September 30, 2020, two customers represented at least 10% of revenues, accounting for 12 % and 10 % of the Company’s revenues.

These customers were served by the Gaming, Virtual Sports and Interactive segments, and the Gaming and Virtual Sports segments, respectively.

September 30, 2021 and December 31, 2020, there were no customers that represented at least 10 % of accounts receivable.

Subsequent Events

Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements

Based upon this review, the Company did not identify subsequent events that would have required adjustment or disclosure

in the consolidated financial statements.

Other than as described below, which would not result in adjustment or disclosure in the consolidated financial statements,

the Company did not identify subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

to the balance sheet date, holders of the Company’s public warrants exercised 109,346

warrants for a total exercise price of $ 0.6

million, resulting in the issue of 54,673

common shares.

As of November 9, 2021,

there were 23,433,386 shares of the Company’s common stock outstanding.

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

What changed 10-Q

Item 1. Financial Statements