Inspired Entertainment, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Executive Chairman and our Chief Financial Officer (together, the “Certifying Officers”), or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Certifying Officers, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective, due to the material weakness described below. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and cash flows for the periods presented. Management’s Report on Internal Control Over Financial Reporting As required by the SEC rules and regulations relating to the implementation of Section 404 of the Sarbanes-Oxley Act of 2002, our management is responsible for establishing and maintaining adequate internal control over financial reporting. This is the first year in which we are required to adopt the enhanced requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; therefore, this Annual Report on Form 10-K includes an opinion by our external auditors on the effectiveness of internal controls over financial reporting at December 31, 2021 in addition to Management’s assessment of the effectiveness of internal controls over financial reporting under the requirements of Section 404(a) of the Sarbanes-Oxley Act of 2002. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and 58 (3) provide reasonable assurance regarding prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 based on the criteria set forth in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework . Based on that assessment, we identified a material weakness (the “Risk Assessment and Response Material Weakness”) related to an ineffective risk assessment and response process. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The Company has not established an effective control environment due to the ineffective design and implementation of certain process controls, including management review controls. These controls pertain to accounting estimates, account reconciliations and approval processes of some of the Company’s significant accounts. These deficiencies represent material weaknesses in the Company’s internal control over financial reporting as there is a reasonable possibility that a material misstatement with respect to certain of the Company’s significant accounts and disclosures will not be prevented or detected on a timely basis. Factors contributing to the Risk Assessment and Response Material Weakness included the fact that during 2021, the Company centralized all its finance functions into one location and implemented a new Enterprise Resource Planning (“ERP”) System which went live much later in the year than initially planned, as it had to be put on hold due to the impact that the COVID-19 pandemic had on the Company. As a result, there was insufficient time prior to year-end to implement or operate certain controls which were newly designed or re-designed as a result of the impact of the ERP implementation. The Company has also been without its Chief Financial Officer for a period of time due to illness, which required a redistribution of roles and responsibilities, including those related to controls. Remediation of Material Weakness Management is taking steps to remediate the Material Weakness, including (1) establishing an executive steering committee to monitor the remediation of the underlying control deficiencies, (2) recruiting an additional SOX specialist to support the Chief Financial Officer and Director of Finance, and (3) process mapping each business process to identify relevant process risk points and re-designing, implementing or strengthening responsive manual and automated controls and underlying evidence of their operation. While management has begun the remediation process, these underlying control deficiencies cannot be considered remediated until the enhanced controls have been re-designed, implemented, and operated effectively for a sufficient period of time. Changes in Internal Control Over Financial Reporting Except for the changes noted above, there have been no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING To the Shareholders and Board of Directors of Inspired Entertainment, Inc. and Subsidiaries Adverse Opinion on Internal Control over Financial Reporting We have audited Inspired Entertainment, Inc. and Subsidiaries ’s (the “Company”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in “Management’s Annual Report on Internal Control Over Financial Reporting”: The Company has not established an effective control environment due to the ineffective design and implementation of process controls, including management review controls. These inadequate controls pertain to accounting estimates, account reconciliations and approval processes of the Company’s significant accounts. These deficiencies represent a material weakness in the Company’s internal control over financial reporting as there is a reasonable possibility that a material misstatement with respect to the Company’s significant accounts and disclosures will not be prevented or detected on a timely basis. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal December 31, 2021 consolidated financial statements, and this report does not affect our report dated December 31, 2021 on those financial statements. 59 We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2021 and 2020 and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2021 of the Company and our report dated March 31, 2021 expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “ Management Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate. Marcum LLP New York, NY March 31, 2021 Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 60 Part iii Item 10. Directors, Executive Officers and Corporate Governance. The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before such date, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date. Item 11. Executive Compensation. The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before such date, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before such date, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before such date, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date. Item 14. Principal Accountant Fees and Services. The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before such date, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date. Item 15. Exhibits and Financial Statement Schedules. (a) The following documents are filed as part of this report: (1) Financial Statements. The required consolidated financial statements and notes thereto are presented starting on page F-1 of this report. (2) Financial Statement Schedules. All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the consolidated financial statements and notes thereto presented starting on page F-1 of this report. (b) Exhibits listed on page 62. 61 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020 Page Report of Independent Registered Public Accounting Firm PCAOB ID # 688 F-2 Consolidated Balance Sheets F-5 Consolidated Statements of Operations and Comprehensive (Loss) Income F-6 Consolidated Statements of Stockholders’ Deficit F-7 Consolidated Statements of Cash Flows F-8 Notes to the Consolidated Financial Statements F-9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of Inspired Entertainment, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Inspired Entertainment, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 31, 2021, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F- 2 Revenue Recognition – Use of IT Systems to track and invoice revenue and the determination of the various promises in the arrangement Certain of the Company’s revenue contracts with customers include multiple promises (such as hardware, software and maintenance, among others). The Company is required to evaluate whether each promise represents a performance obligation. The evaluation of whether promises are both capable of being distinct in the context of a contract (and thus constitute performance obligations) can require significant judgment and could change the amount of revenue recognized in a given period. We identified the determination of performance obligations for contracts with higher contract values as a critical audit matter because of the judgments and estimates management makes to evaluate such contracts and the impact of such judgments on the amount of revenue recognized in a given period. This required a high degree of auditor judgment and an increased extent of testing. Addressing the matter involved performing procedures on a sample basis and evaluation of audit evidence that included, among others ● Evaluating contract terms and conditions, ● Reviewing and assessing the methodology applied and testing the reliability and mathematical accuracy of the underlying data and calculations, ● Testing management’s identification of performance obligations by evaluating whether the promises were both capable of being distinct and distinct within the context of the contract, including reading the selected contracts and inquiring of certain of the Company’s accounting and operations personnel to understand the nature of the promises and how they are delivered to the customer, and ● Evaluating and concluding on the reasonableness of management’s judgments and estimates. F- 3 We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the sufficiency of the audit evidence obtained related to: ● General IT controls and IT application controls for the relevant IT systems used to gather and process data, ● The transfer of information among the different systems used to gather the data, and ● The configuration and change management controls for the reports that were used from the various systems to determine the amount of revenue recognized. Capitalization of Internally and Externally Developed Software The Company classifies software development costs as either internal use software or external use software, any costs incurred during preliminary project stages are expensed as incurred; direct costs incurred during the application development stages are capitalized; and costs incurred during the post-implementation/operation stages are expensed. Once the software is placed in operation, the Company amortizes the capitalized cost of the software over its economic useful life, which ranges from two to five years. During the year ended December 31, 2021, the Company capitalized $9,900,000 of software development costs. We identified the evaluation of the Company’s capitalization of internal direct labor costs as a critical audit matter. There were inherent challenges in obtaining an understanding of the structure of systems and processes used to capture the large volumes of internal direct labor data. Furthermore, subjective judgement was required to evaluate the relevant data that was captured and aggregated, and to assess the sufficiency of the audit evidence obtained. The primary procedures we performed to address this critical audit matter included the following. We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the sufficiency of the audit evidence obtained related to: ● General IT controls and IT application controls for the relevant IT systems used to gather and process data, ● The transfer of information among the different systems used to gather the data, and ● The configuration and change management controls for the reports that were used from the various systems to determine the amount of internal direct labor costs to capitalize. In addition, we evaluated, on a sample basis, the Company’s manual aggregation of information from various IT systems, to determine the sufficiency of the audit evidence obtained, by: ● Inspecting the capital project codes to assess that the nature of the activity is capitalized in accordance with U.S. generally accepted accounting principles, ● Comparing salary and wage information for capitalized internal direct labor costs to employee human resource documents and system profiles, ● Comparing the hours of capitalized internal direct labor to the hours recorded to capital activities on the employees’ timesheets, ● Inquiring of employees and project managers as to the accuracy of the hours reflected as capital activities on the employee timesheets, and ● Evaluating the methodology used to determine the labor rates and comparing the cost types, dates incurred, and amounts of labor costs used to derive the labor rates to data from the source systems. /s/ Marcum llp Marcum LLP We have served as the Company’s auditor since 2016 New York, NY March 31, 2022 F- 4 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2021 December 31, 2020 Assets Cash $ 47.8 $ 47.1 Accounts receivable, net 31.7 27.5 Inventory, net 16.9 17.6 Prepaid expenses and other current assets 29.7 16.8 Corporate tax and other current taxes receivable 0.3 — Total current assets 126.4 109.0 Property and equipment, net 50.9 65.5 Software development costs, net 35.6 42.4 Other acquired intangible assets subject to amortization, net 18.9 7.7 Goodwill 82.7 83.7 Operating lease right of use asset 10.1 12.5 Other assets 7.1 3.3 Total assets $ 331.7 $ 324.1 Liabilities and Stockholders’ Deficit Current liabilities Accounts payable $ 20.8 $ 15.8 Accrued expenses 32.6 31.4 Corporate tax and other current taxes payable 12.3 14.4 Deferred revenue, current 7.7 11.5 Operating lease liabilities 3.3 3.6 Other current liabilities 3.9 4.6 Warrant liability — 13.0 Current portion of finance lease liabilities 0.9 0.6 Total current liabilities 81.5 94.9 Long-term debt 309.0 297.5 Finance lease liabilities, net of current portion 1.9 0.2 Deferred revenue, net of current portion 6.8 11.4 Derivative liability — 1.7 Operating lease liabilities 7.4 9.2 Other long-term liabilities 3.1 10.9 Total liabilities 409.7 425.8 Commitments and contingencies - - Stockholders’ deficit Preferred stock; $ 0.0001 par value; 1,000,000 shares authorized — — Common stock; $ 0.0001 par value; 49,000,000 shares authorized; 26,433,562 shares and 22,430,475 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively — — Additional paid in capital 372.3 324.6 Accumulated other comprehensive income 43.8 31.1 Accumulated deficit ( 494.1 ) ( 457.4 ) Total stockholders’ deficit ( 78.0 ) ( 101.7 ) Total liabilities and stockholders’ deficit $ 331.7 $ 324.1 The accompanying notes are an integral part of these consolidated financial statements. F- 5 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (in millions, except share and per share data) Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Revenue: Service $ 183.3 $ 178.7 $ 134.5 Product sales 25.6 21.1 18.9 Total revenue 208.9 199.8 153.4 Cost of sales, excluding depreciation and amortization: Cost of service ( 34.3 ) ( 30.1 ) ( 25.4 ) Cost of product sales ( 16.4 ) ( 14.4 ) ( 12.9 ) Selling, general and administrative expenses ( 110.2 ) ( 89.6 ) ( 79.4 ) Acquisition and integration related transaction expenses ( 1.6 ) ( 7.0 ) ( 6.7 ) Depreciation and amortization ( 47.0 ) ( 52.3 ) ( 42.0 ) Net operating (loss) income ( 0.6 ) 6.4 ( 13.0 ) Other expense Interest expense, net ( 44.3 ) ( 30.0 ) ( 27.7 ) Change in fair value of earnout liability — — ( 2.3 ) Change in fair value of derivative liability — — 3.0 Change in fair value of warrant liability 0.9 ( 3.2 ) ( 4.1 ) Loss from equity method investee — ( 0.5 ) ( 0.1 ) Other finance income (expense) 5.7 ( 4.7 ) 3.2 Total other expense, net ( 37.7 ) ( 38.4 ) ( 28.0 ) Loss before income taxes ( 38.3 ) ( 32.0 ) ( 41.0 ) Income tax benefit (expense) 1.6 ( 0.4 ) ( 0.1 ) Net loss ( 36.7 ) ( 32.4 ) ( 41.1 ) Other comprehensive income (loss): Foreign currency translation gain (loss) 0.4 ( 5.4 ) ( 2.4 ) Change in fair value of hedging instrument 0.3 ( 2.9 ) 2.9 Reclassification of loss (gain) on hedging instrument to comprehensive income 1.5 1.5 ( 4.4 ) Actuarial gains (losses) on pension plan 10.5 ( 7.2 ) ( 6.9 ) Other comprehensive income (loss) 12.7 ( 14.0 ) ( 10.8 ) Comprehensive loss $ ( 24.0 ) $ ( 46.4 ) $ ( 51.9 ) Net loss per common share – basic and diluted $ ( 1.60 ) $ ( 1.45 ) $ ( 1.88 ) Weighted average number of shares outstanding during the year – basic and diluted 22,897,997 22,399,333 21,892,964 Supplemental disclosure of stock-based compensation expense Stock-based compensation included in: Selling, general and administrative expenses $ ( 13.0 ) $ ( 4.8 ) $ ( 9.0 ) The accompanying notes are an integral part of these consolidated financial statements. F- 6 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (in millions, except share data) Shares Amount capital income deficit deficit Common stock Additional paid in Accumulated other comprehensive Accumulated Total stockholders’ Shares Amount capital income deficit deficit Balance as of January 1, 2019 20,870,397 $ — $ 303.9 $ 55.9 $ ( 383.9 ) $ ( 24.1 ) Foreign currency translation adjustments — — — ( 2.4 ) — ( 2.4 ) Actuarial losses on pension plan — — — ( 6.9 ) — ( 6.9 ) Change in fair value of hedging instrument — — — 2.9 — 2.9 Reclassification of gain on hedging instrument to comprehensive income — — — ( 4.4 ) — ( 4.4 ) Conversion of awards previously classified as derivatives — — 0.8 — — 0.8 Shares issued in earnout 1,323,558 — 8.6 — — 8.6 Shares issued upon net settlement of RSUs 36,813 — ( 0.9 ) — — ( 0.9 ) Shares issued under ESPP Shares issued under ESPP, shares Shares issued upon exercise of warrants Shares issued upon exercise of warrants, shares Stock-based compensation expense — — 8.2 — — 8.2 Net loss — — — — ( 41.1 ) ( 41.1 ) Balance as of December 31, 2019 22,230,768 — 320.6 45.1 ( 425.0 ) ( 59.3 ) Foreign currency translation adjustments — — — ( 5.4 ) — ( 5.4 ) Actuarial losses on pension plan — — — ( 7.2 ) — ( 7.2 ) Change in fair value of hedging instrument — — — ( 2.9 ) — ( 2.9 ) Reclassification of loss on hedging instrument to comprehensive income — — — 1.5 — 1.5 Shares issued upon net settlement of RSUs 192,058 — ( 0.7 ) — — ( 0.7 ) Shares issued under ESPP 7,649 — — — — — Stock-based compensation expense — — 4.7 — — 4.7 Net loss — — — — ( 32.4 ) ( 32.4 ) Balance as of December 31, 2020 22,430,475 — 324.6 31.1 ( 457.4 ) ( 101.7 ) Balance 22,430,475 — 324.6 31.1 ( 457.4 ) ( 101.7 ) Foreign currency translation adjustments — — — 0.4 — 0.4 Actuarial gains on pension plan — — — 10.5 — 10.5 Change in fair value of hedging instrument — — — 0.3 — 0.3 Reclassification of loss on hedging instrument to comprehensive income — — — 1.5 — 1.5 Reclassification of gain (loss) on hedging instrument to comprehensive income 1.5 1.5 Shares issued upon net settlement of RSUs 324,122 — ( 6.4 ) — — ( 6.4 ) Shares issued upon exercise of warrants 3,678,965 — 42.4 — — 42.4 Stock-based compensation expense — — 11.7 — — 11.7 Net loss — — — — ( 36.7 ) ( 36.7 ) Balance as of December 31, 2021 26,433,562 $ — $ 372.3 $ 43.8 $ ( 494.1 ) $ ( 78.0 ) Balance 26,433,562 $ — $ 372.3 $ 43.8 $ ( 494.1 ) $ ( 78.0 ) The accompanying notes are an integral part of these consolidated financial statements. F- 7 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 Cash flows from operating activities: Net loss $ ( 36.7 ) $ ( 32.4 ) $ ( 41.1 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 47.0 52.3 42.0 Amortization of right of use asset 3.3 3.6 1.0 Stock-based compensation expense 13.0 4.8 9.0 Change in fair value of derivative liability — — ( 3.0 ) Change in fair value of earnout liability — — 2.3 Impairment of investment in equity method investee — 0.7 — Unrealized transactional currency gain/loss on senior bank debt ( 4.6 ) 5.6 0.8 Unrealized transactional currency gain/loss on cross currency swaps — — ( 3.6 ) Change in fair value of warrant liability ( 0.9 ) 3.2 4.1 Reclassification of loss on hedging instrument to comprehensive income 1.5 0.9 — Non-cash interest expense relating to senior debt 17.2 3.4 9.0 Changes in assets and liabilities: Accounts receivable ( 4.9 ) ( 2.9 ) 3.3 Inventory 1.6 1.3 2.0 Prepaid expenses and other assets ( 13.9 ) 8.8 3.3 Corporate tax and other current taxes payable ( 9.9 ) 6.6 ( 3.6 ) Accounts payable 2.8 ( 4.8 ) 6.9 Deferred revenues and customer prepayment ( 6.7 ) ( 5.7 ) ( 9.5 ) Accrued expenses 0.7 10.9 7.2 Operating lease liabilities ( 2.9 ) ( 2.8 ) ( 1.3 ) Other long-term liabilities ( 0.4 ) ( 0.6 ) 1.9 Net cash provided by operating activities 6.2 52.9 30.7 Cash flows from investing activities: Purchases of property and equipment ( 11.6 ) ( 15.4 ) ( 10.5 ) Acquisition of subsidiary company assets ( 12.5 ) — — Cash paid for NTG Acquisition — — ( 105.9 ) Software development expenditure ( 13.8 ) ( 14.5 ) ( 17.0 ) Net cash used in investing activities ( 37.9 ) ( 29.9 ) ( 133.4 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 333.1 — 270.6 Proceeds from issuance of revolver — — 2.8 Proceeds from exercise of warrants 30.5 — — Repayments of revolver and long-term debt, including exit premium ( 320.6 ) ( 4.2 ) ( 144.2 ) Payment of financing costs — — ( 15.2 ) Payment of debt issuance costs ( 9.1 ) ( 3.1 ) — Payment in connection with terminated interest rate swaps ( 2.1 ) — — Principal payments under finance leases ( 0.6 ) ( 0.9 ) ( 0.5 ) Net cash provided by (used in) financing activities 31.2 ( 8.2 ) 113.5 Effect of exchange rate changes on cash 1.2 3.2 2.3 Net increase in cash 0.7 18.0 13.1 Cash, beginning of period 47.1 29.1 16.0 Cash, end of period $ 47.8 $ 47.1 $ 29.1 Supplemental cash flow disclosures Cash paid during the period for interest $ 30.8 $ 13.3 $ 12.6 Cash paid during the period for income taxes $ 1.2 $ 0.2 $ — Cash paid during the period for operating leases $ 4.4 $ 3.3 $ 2.2 Supplemental disclosure of noncash investing and financing activities Additional paid in capital from net settlement of RSUs $ ( 6.4 ) $ ( 0.7 ) $ ( 0.9 ) Lease liabilities arising from obtaining right of use assets $ — $ ( 6.8 ) $ ( 9.6 ) Adjustment to goodwill arising from adjustment to fair value of assets acquired $ — $ ( 0.2 ) $ — Property and equipment acquired through finance lease $ 2.6 $ 1.5 $ — Property and equipment transferred to inventory 1.3 — — Capitalized interest payments $ — $ 10.6 $ — Assets arising from asset retirement obligations $ — $ 1.0 $ — Additional paid in capital reclassified from derivative liability $ — $ — $ 0.8 The accompanying notes are an integral part of these consolidated financial statements. F- 8 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 1. Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies Company Description and Nature of Operations We are a global gaming technology company, supplying content, platform and other products and services to online and land-based regulated lottery, betting and gaming operators worldwide through a broad range of distribution channels, predominantly on a business-to-business basis. We provide end-to-end digital gaming solutions (i) on our own proprietary and secure network, which accommodates a wide range of devices, including land-based gaming machine terminals, mobile devices and online computer applications and (ii) through third party networks. Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, airports, motorway service areas and leisure parks. The Company was incorporated in Delaware on May 30, 2014 under the name Hydra Industries Acquisition Corp. (“Hydra”). We subsequently changed our name from Hydra to Inspired Entertainment, Inc. On October 1, 2019, the Company completed the acquisition of the Gaming Technology Group of Novomatic UK Ltd., a division of Novomatic Group, an international supplier of gaming equipment and solutions (the “NTG Acquisition”). Management Liquidity Plans As of December 31, 2021, the Company’s cash on hand was $ 47.8 million, and the Company had working capital of $ 44.9 million. The Company recorded net losses of $ 36.7 million, $ 32.4 million and $ 41.1 million for the year ended December 31, 2021, 2020 and 2019, respectively. Net losses include excess depreciation and amortization over capital expenditure of $ 21.4 million, $ 22.4 million and $ 14.5 million for the year ended December 31, 2021, 2020 and 2019, respectively, non-cash stock-based compensation of $ 13.0 million, $ 4.8 million and $ 9.0 million for the year ended December 31, 2021, 2020 and 2019, respectively, and non-cash changes in fair value of warrant liability of $ 0.9 , million gain and $ 3.2 million and $ 4.1 million losses for the year ended December 31, 2021, 2020, and 2019, 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 $ 6.2 million, $ 52.9 million and $ 30.7 million for the year ended December 31, 2021, 2020 and 2019, respectively. Working capital of $ 44.9 million includes a non-cash settled item of $ 7.7 million of deferred income. Management currently believes that, absent any long-term coronavirus (“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 March 2023. On March 11, 2020, the World Health Organization declared COVID-19 to be a global pandemic which affected our retail businesses throughout 2020. From mid-December 2020 to mid-April 2021, all retail venues were once again closed due to government-mandated shutdowns. Full restrictions did not fall away in the United Kingdom until July 2021 and there remains an element of social distancing in venues in Greece and in Italy. 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. F- 9 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation All monetary values set forth in these consolidated financial statements are in US Dollars (“USD”) unless otherwise stated herein. The accompanying consolidated financial statements include the results of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Foreign Currency Translation For most of our operations, the British pound (“GBP”) is our functional currency. Our reporting currency is the USD. We also have operations where the local currency is the functional currency, including our operations in mainland Europe and North America. Assets and liabilities of foreign operations are translated at period-end rates of exchange, equity is translated at historical rates of exchange and results of operations are translated at the average rates of exchange for the period. Gains or losses resulting from translating the foreign currency financial statements are recorded as a separate component of accumulated other comprehensive loss in stockholders’ deficit. Gains or losses resulting from foreign currency transactions are included in Selling, general and administrative expenses, Interest expense, net and Other finance (expense) income in the Consolidated Statement of Operations and Comprehensive Loss. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related to the revenue recognition for contracts involving software and non-software elements, allowance for doubtful accounts, inventory reserve for net realizable value, currency swaps, valuation of hedging activities, goodwill and intangible assets, useful lives of long-lived assets, stock-based compensation, valuation allowances on deferred taxes, warrant liability, pension liability, commitments and contingencies and litigation, among others. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. We regularly evaluate these significant factors and make adjustments when facts and circumstances dictate. Actual results may differ from these estimates. F- 10 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Cash We deposit cash with financial institutions that management believes are of high credit quality. Substantially all of the Company’s cash is held outside of the U.S. Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Our standard credit terms are net 30 to 60 days. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. Changes in circumstances relating to the collectability of accounts receivable may result in the need to increase or decrease our allowance for doubtful accounts in the future. We determine the allowance based on historical experience, current market trends, and our customers’ financial condition. We continually review our allowance for doubtful accounts. Past due balances and other higher risk amounts are reviewed individually for collectability. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote. Under certain contracts, the timing of our invoices does not coincide with revenue recognized under the contract. We have unbilled accounts receivable which represent revenue recorded in excess of amounts invoiced under the contract and generally become billable at contractually specified dates. These amounts consist primarily of revenue from our share of net winnings earned on a daily basis where the billing period does not fall on the last day of the period. We had $ 17.4 million and $ 8.2 million of unbilled accounts receivable as of December 31, 2021 and December 31, 2020, respectively. Inventories Inventories consist primarily of component parts and related parts used in gaming terminals. Inventories are stated at the lower of cost or net realizable value, using the first-in-first-out method. We determine the lower of cost or net realizable value of our inventory based on estimates of potentially excess and obsolete inventories after considering historical and forecasted demand and average selling prices. Demand for gaming terminals and parts inventory is also subject to technological obsolescence. Cost includes all direct costs and an appropriate proportion of fixed and variable overheads. Property and Equipment Property and equipment are recorded at cost, and when placed into service, depreciated and amortized to their residual values using the straight-line method over the estimated useful lives of the related assets as follows: Schedule of Property and Equipment Estimated Useful Lives Leasehold property Shorter of the useful life or the life of the lease Server based gaming terminals 2 – 7 years Motor vehicles 3 – 5 years Plant and machinery and fixtures and fittings 3 – 10 years Computer equipment 3 – 5 years Our policy is to periodically review the estimated useful lives of our fixed assets. We also assess the recoverability of long-lived assets (or asset groups) whenever events or changes in circumstances indicate that the carrying amount of such an asset (or asset groups) may not be recoverable. Repairs and maintenance costs are expensed as incurred. Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are written off and any resulting gain or loss is credited or charged to income. F- 11 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Software Development Costs We classify software development costs as either internal use software or external use software. We account for costs incurred to develop internal use software in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal Use Software. Consequently, any costs incurred during preliminary project stages are expensed; direct costs incurred during the application development stages are capitalized; and costs incurred during the post-implementation/operation stages are expensed. Once the software is placed in operation, we amortize the capitalized internal use software cost over its estimated economic useful life, which range from two to five years. We purchase, license and incur costs to develop external use software to be used in the products we sell or provide to customers. Such costs are capitalized under ASC 985-20, Costs of Software to Be Sold Leased or Marketed. Costs incurred in creating software are expensed when incurred as Selling, General and Administrative Expenses until technological feasibility has been established, after which costs are capitalized up to the date the software is available for general release to customers. We capitalize the payments made for software that we purchase or license for use in our products that has previously met the technological feasibility criteria prior to our purchase or license. Annual amortization of capitalized external use software development costs is recorded over the estimated economic life, which is two to five years. Research and development costs are expensed as incurred. Research and development related primarily to software product development costs is expensed until technological feasibility has been established. Research and development costs amounting to $ 3.1 million, $ 3.9 million and $ 3.8 million were expensed during the year ended December 31, 2021, 2020 and 2019, respectively. Employee related costs associated with related product development are included in Selling, general and administrative expenses in the Consolidated Statement of Operations and Comprehensive Loss. Goodwill and Other Acquired Intangible Assets Our principal acquired intangible assets relate to goodwill, trademarks and customer relationships. Goodwill represents the excess purchase price over the fair value of the identifiable net assets acquired in a business combination, and increased in 2019 due to the NTG acquisition (see Note 2). Trademarks and customer relationships were originally recorded at their fair values in connection with business combinations, and increased in 2021 due to the Sportech Acquisition (see Note 2). Goodwill and other intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. Intangible assets with finite lives are amortized on a straight-line basis over three to thirteen years to their estimated residual values and reviewed for impairment. Factors considered when assigning useful lives include legal, regulatory and contractual provisions, product obsolescence, demand, competition and other economic factors. Impairment of Goodwill and Long-Lived Assets We test for goodwill impairment at least annually on the last day of our fiscal period, and whenever other facts and circumstances indicate that the carrying value may not be recoverable. For goodwill impairment evaluations, we first make a qualitative assessment to determine if goodwill is likely to be impaired. If it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. Goodwill is carried, and therefore tested, at the reporting unit level. We have four segments, Gaming, Virtual Sports, Interactive and Leisure, as detailed in Note 26. If the fair value of the reporting unit is less than its carrying amount, the amount of the impairment loss, if any, will be measured by comparing the implied fair value of goodwill to its carrying amount and would be charged to operations as an impairment loss. A mixture of qualitative and quantitative tests were carried out as of December 31, 2021 and 2020 and no impairment was required at any of these dates. We assess the recoverability of long-lived assets and intangible assets with finite useful lives whenever events arise or circumstances change that indicate the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets (or asset groups) to be held and used is measured by a comparison of the carrying amount of the asset (or asset group) to the expected net future undiscounted cash flows to be generated by that asset (or asset group) or, for identifiable intangibles with finite useful lives, by determining whether the amortization of the intangible asset balance over its remaining life can be recovered through expected net future undiscounted cash flows. The amount of impairment of other long-lived assets and intangible assets with finite lives is measured by the amount by which the carrying amount of the asset exceeds the fair market value of the asset. F- 12 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Equity Method Investment For investments in entities over which the Company exercises significant influence, but which do not meet the requirements for consolidation, the Company uses the equity method of accounting. On October 1, 2019, the Company acquired a 40 % noncontrolling interest in Innov8 Gaming Limited in connection with the Acquisition (see Note 2), and in April 2020 this interest was disposed of. The value of the Company’s equity method investment was $ 0.7 million as of December 31, 2019, and was impaired to $Nil in March 2020 prior to disposal. The Company’s share of earnings from its equity method investee, including the impairment, is presented in Loss from equity method investee in the Consolidated Statement of Operations and Comprehensive Loss. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investment may not be recoverable. The difference between the carrying value of the equity method investment and its estimated fair value is recognized as an impairment charge when the loss in value is deemed other-than-temporary. Deferred Revenue and Deferred Cost of Sales, excluding depreciation and amortization Deferred revenue arises from the timing differences between the shipment or installation of gaming terminals and systems products and the satisfaction of all revenue recognition criteria consistent with our revenue recognition policy, as well as prepayment of contracts which are recognized ratably over a service period, such as maintenance or licensing fees. Deferred cost of sales, excluding depreciation and amortization, recorded as prepaid expenses and other assets, consists of the direct costs associated with the manufacture of gaming equipment and systems products for which revenue has been deferred. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue in current liabilities. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Debt Issuance Costs Debt issuance costs incurred in connection with the Company’s debt are capitalized and amortized as interest expense over the term of the related debt. The Company presents debt issuance costs as a reduction from the carrying amount of debt. Only costs that are wholly attributable to obtaining the related debt finance are treated as debt issuance costs. Any other costs are expenses to the Consolidated Statement of Operations and Comprehensive Loss as part of Acquisition and integration related transaction expenses. Value Added Tax The Company is subject to Value Added Tax (“VAT”) in some locations. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods and services sold less VAT paid on purchases made with the relevant supporting invoices. VAT is collected from customers by the Company on behalf of the tax authorities and is therefore not charged to the Consolidated Statement of Operations and Comprehensive Loss. Common Stock Purchase Warrants and Derivative Financial Instruments The Company reviews any common stock purchase warrants and other freestanding derivative financial instruments at each balance sheet date and classifies them on the consolidated balance sheet as: a) Equity if they (i) require physical settlement or net-share settlement, or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), or b) Assets or liabilities if they (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). F- 13 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company assesses classification of its common stock purchase warrants and other freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. During the quarter ending December 31, 2021, (i) an aggregate of 2,651,129 shares of common stock were issued pursuant to the exercise of 5,302,258 Public Warrants and (ii) an aggregate of 1,027,836 shares of common stock were issued pursuant to the exercise (on a cashless basis) of 9,049,230 Private Warrants. There were no warrants outstanding as of December 31, 2021. At December 31, 2020, the Company considered that the warrants did not meet the criteria for equity classification and must be recorded as liabilities. As the warrants met the definition of a derivative as contemplated in ASC 815, the warrants were measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Consolidated Statements of Operations and Comprehensive Loss in the period of change. From time to time we enter into foreign currency forward contracts to mitigate the risk associated with cash payments required to be made in non-functional currencies or to mitigate the risk associated with cash to be received in non-functional currencies. Accounting Policy for Derivative Instruments and Hedging Activities FASB ASC 815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance in ASU 2011-04, “Fair Value Measurements,” the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Revenue Recognition The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”) as of January 1, 2019 using the modified retrospective method. This method allows the Company to apply ASC 606 to new contracts entered into after January 1, 2019, and to its existing contracts for which revenue earned through December 31, 2018 has been recognized under the guidance in effect prior to the effective date of ASC 606. The revenue recognition processes the Company applied prior to adoption of ASC 606 align with the recognition and measurement guidance of the new standard, therefore adoption of ASC 606 did not require a cumulative adjustment to opening equity. Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: 1. identify the contracts with a customer; 2. identify the performance obligations within the contract, including whether they are distinct and capable of being distinct in the context of the contract; F- 14 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 3. determine the transaction price; 4. allocate the transaction price to the performance obligations in the contract; and 5. recognize revenue when, or as, the Company satisfies each performance obligation. Step 1 – Identify the contract The Company identifies contracts with its customers when all parties have approved the contract and are committed to perform their respective obligations, when each party’s rights and the payment terms regarding the goods or services to be transferred can be identified. The contract must also have commercial substance, and it must be probable that the Company will collect the consideration to which it will be entitled. Contracts entered into at or near the same time with the same customer or related parties of the customer are accounted for as one contract if any of the following criteria are met: a. Contracts were negotiated as a single commercial package (including whether a contract would be loss-making without taking into account the consideration received under another contract) b. Consideration in one contract depends on the other contract c. Goods or services (or some of the goods or services) are a single performance obligation. Step 2 – Identify performance obligations Performance obligations are identified by considering whether a good or service is distinct. The Company considers a good or service to be distinct only when the customer can benefit from it either on its own or together with other resources that are readily available, and when the promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. The Company applies the series guidance to its performance obligations where the following criteria apply: a. Each distinct good or service in the series meets the criteria to be a performance obligation satisfied over time. b. The same method would be used to measure progress toward complete satisfaction of the performance obligation to transfer each distinct good or service in the series to the customer. Step 3 – Determine the transaction price The Company considers all amounts to which it has rights in exchange for the goods or services transferred in determining the transaction price. This includes fixed and variable consideration. Typically, consideration is stated in the contract with the customer. The Company assesses usage-based fees to determine whether they qualify as variable consideration. It also considers the impact of any liquidated damages clauses or service level agreements. Where the Company’s performance obligations are determined to be a series, variable consideration is not estimated upfront in accordance with the exception allowed by ASC 606. Where non-refundable upfront fees are included in the Company’s contracts with customer, the Company considers whether or not they represent payment for a transferred good or service. Where they represent payment for future goods or services, the Company further considers whether they represent a material right. F- 15 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Step 4 – Allocate the transaction price The Company allocates a transaction price to each performance obligation based on the relative standalone selling prices of the goods or services being provided. Where a contract includes multiple performance obligations, the Company determines the standalone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocates the transaction price in proportion to those standalone selling prices. Where possible, the Company uses the price charged for the good or service to other customers in similar circumstances as evidence of standalone selling price. Where this is not possible, the standalone selling price is estimated by experienced management using the best available judgement. With respect to performance obligations that are considered to be a series, where appropriate and where the required criteria are met, variable consideration is allocated entirely to a distinct good or service that is part of a series. Step 5 – Recognize revenue The Company recognizes revenue over time for performance obligations that meet one of the following criteria: a. The customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. b. The Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. c. The Company’s performance does not create an asset with an alternative use to the Company, and the Company has an enforceable right to payment for performance completed to date Revenue for the Company’s remaining performance obligations that do not meet one of the above criteria is recognized at the point at which the customer obtains control of the good or service. Gaming Revenue Revenue from Gaming terminals, access to our content and platform, including electronic table gaming products is recognized in accordance with the criteria set forth in ASC 606 and is usually based upon a contracted percentage of the operator’s net winnings from the terminals’ daily use. Where this is not the case, including in the case of maintenance only contracts on self-serve betting terminals, revenue is based upon a fixed daily or weekly usage fee. We recognize revenue from these arrangements in accordance with the series guidance over time on a daily basis over the term of the arrangement, or when not specified over the expected customer relationship period. Performance obligations under these arrangements may include the delivery and installation of our terminals for use over a term, as well as service obligations related to terminal repairs and server based content and maintenance. Consideration with respect to these performance obligations typically takes the form of usage based fees, billed at the end of a set period (usually monthly) and due typically 30 days from the date of the invoice. Terminal sales take the form of a transfer of ownership of our developed gaming terminals, and are recognized as Product Sales at a point in time upon delivery as they are considered to meet the required criteria to be considered distinct. Payment for terminal sales is typically due a set number of days after delivery. Gaming arrangements typically include service level agreements, consisting of a specified amount of ‘uptime’ with financial penalties for breaches in excess of specified levels. F- 16 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Virtual Sports Revenue Revenue from licensing of our gaming software is recognized in accordance with the criteria set forth in ASC 606. Virtual sports retail revenue, which includes the provision of virtual sports content and services to retail betting outlets, and virtual sports online revenue, which includes the provision of virtual sports content and services to mobile operators, is usually based upon a contracted percentage of the operator’s net winnings or, occasionally, a fixed rental fee. We recognize revenue for these fees over time on a daily or weekly basis over the term of the arrangement, or, where appropriate when the contracted percentages vary prospectively with total operator’s net winnings generated, we estimate the amount of variable consideration to which we will be entitled, up to and including the date at which the contracted percentages reset, and recognize this estimated consideration over time. Consideration with respect to these performance obligations typically takes the form of usage based fees, billed at the end of a set period (usually monthly) and due typically 30 days from the date of the invoice. These arrangements also may include a perpetual license billed up front, granted to the customer for access to our gaming platform and content. As these up front bills represent payment for future services, revenue from the licensing of perpetual licenses is recognized ratably over time, or when not specified, over the expected customer relationship period. Upfront fees are normally billed upon signing of the relevant agreement, and become due and payable at set times thereafter. Revenue from the development of bespoke games licensed on a perpetual basis to mobile and online operators is recognized at a point in time on delivery and acceptance by the customer. We have no ongoing service obligations subsequent to customer acceptance of our bespoke games, and they meet the criteria to be considered as distinct. Payment for bespoke games is typically due a set number of days after delivery. Virtual Sports arrangements typically include service level agreements, consisting of a specified amount of ‘uptime’ with financial penalties for breaches in excess of specified levels. Interactive Revenue Interactive revenue, which includes slot and table game offerings from our Gaming segment, as well as interactive-only content, via our remote gaming servers, is based upon a contracted percentage of the operator’s net winnings or a fixed rental fee. We recognize revenue for these fees over time on a daily or weekly basis over the term of the arrangement, or, where appropriate when the contracted percentages vary prospectively with total operator’s net winnings generated, we estimate the amount of variable consideration to which we will be entitled, up to and including the date at which the contracted percentages reset, and recognize this estimated consideration over time. Consideration with respect to these performance obligations typically takes the form of usage based fees, billed at the end of a set period (usually monthly) and due typically 30 days from the date of the invoice. Leisure Revenue The Leisure segment earns revenue from providing gaming machine terminals and amusement machine terminals to pubs, holiday resorts and amusement arcades, both standalone and within motorway service stations. Revenue from these activities is based upon a contracted percentage of the operator’s net winnings from the terminals’ daily use, or a fixed daily or weekly rental fee. We jointly operate arcades within holiday resorts with the resort owners. Revenue is based on a contractually agreed share of takings. We also wholly operate a number of gaming arcades within certain motorway service stations. We recognize revenue from these arrangements, in accordance with the series guidance as set forth in ASC 606, over time over the term of the arrangement, or when not specified over the expected customer relationship period. All revenue is recognized in the period that the machine cash collections occur, with adjustments to account for the movement of income uncollected in the specific period. Performance obligations under these arrangements may include the delivery and installation of our terminals for use over a term, as well as service obligations related to terminal repairs and content and maintenance. Consideration with respect to these performance obligations typically takes the form of usage based fees, billed at the end of a set period (usually monthly) and due typically 30 days from the date of the invoice. We also provide terminal and spares management services to third parties. Revenue in respect to these services takes the form of fixed fee, either per machine or per time period, and is recognized at the point in time when control transfers to the customer, which is normally upon delivery and acceptance by the customer, or at the point that services are rendered. This revenue is recognized as Service Revenue when included as part of a larger performance obligation, and as Product Sales when it is offered as a separate distinct performance obligation. Revenue is invoiced in arrears and settled within 30 days F- 17 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Disaggregation of revenue Information on disaggregation of revenue is included in Note 26, “Segment Reporting and Geographic Information.” Shipping and Handling Costs Shipping and handling costs for products sales and terminals related to subscription services are included in cost of sales, excluding depreciation and amortization for all periods presented. Share-Based Payment Arrangements The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”). ASC 718 requires generally that all equity awards be accounted for at their “fair value.” This fair value is measured on the grant date for stock-settled awards, and at subsequent exercise or settlement for cash-settled awards. Fair value is equal to the underlying value of the stock for “full-value” awards such as restricted stock and restricted stock units that have time vesting conditions, and stock options and performance shares that have market conditions are valued using an option-pricing model with traditional inputs for “appreciation” awards. Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have no future service condition. For awards that vest over time, previously recognized compensation cost is reversed if the service or performance conditions are not satisfied and the award is forfeited. Subsequent modifications to outstanding awards result in incremental cost if the fair value is increased as a result of the modification. The incremental cost is charged over the estimated derived service period. Income Taxes Income taxes are accounted for under the asset and liability method. Our provision for income taxes is principally based on current period income (loss), changes in deferred tax assets and liabilities and changes in estimates with regard to uncertain tax positions. We estimate current tax expense and assess temporary differences resulting from differing treatments of items for tax and accounting purposes using enacted tax rates in effect for each taxing jurisdiction in which we operate for the period in which those temporary differences are expected to be recovered or settled. These differences result in deferred tax assets and liabilities. Our total deferred tax assets are principally comprised of depreciation and net operating loss carry forwards. Significant management judgment is required to assess the likelihood that deferred tax assets will be recovered from future taxable income. In assessing the realizability of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Management makes this assessment on a jurisdiction by jurisdiction basis considering the historical trend of taxable losses, projected future taxable income and the reversal of deferred tax liabilities. We evaluate income tax uncertainties, assess the probability of the ultimate settlement with the applicable taxing authority and records an amount based on that assessment. Interest and penalties, if any, associated with uncertain tax positions are included in income tax expense. Comprehensive Loss We include and separately classify in comprehensive loss unrealized gains and losses and hedges from our foreign currency translation adjustments, gains or losses associated with pension or other post-retirement benefits, prior service costs or credits associated with pension or other post-retirement benefits and transition assets or obligations associated with pension or other post-retirement benefits. F- 18 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), followed in July 2018 by ASU 2018-10, Codification Improvements to Topic 842 Leases, and ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under the new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of this adoption and the required disclosures, the Company revised its accounting policy for leases as stated below in the year ended December 31, 2019. The guidance was effective for all public business entities and certain not-for-profit entities in fiscal years beginning after December 15, 2018, and for all other entities in fiscal years beginning after December 15, 2020. As the Company was an emerging growth company until December 31, 2019 and elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act, it adopted the standard as of January 1, 2019 on December 31, 2019. We elected to adopt the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, along with the practical expedient to use hindsight when determining the lease term. We determine if an arrangement is a lease at inception of the arrangement. Once it is determined that an arrangement is, or contains, a lease, that determination should only be reassessed if the legal arrangement is modified. Changes to assumptions such as market-based factors do not trigger a reassessment. Determining whether a contract contains a lease requires judgement. In general, arrangements are considered to be a lease when all of the following apply: ● it conveys the right to control the use of an identified asset for a period of time in exchange for consideration; ● we have substantially all economic benefits from the use of the asset; and ● we can direct the use of the identified asset. The terms of a lease arrangement determine how a lease is classified and the resulting income statement recognition. When the terms of a lease effectively transfer control of the underlying asset, the lease represents an in substance financed purchase (sale) of an asset and the lease is classified as a finance lease by the lessee and a sales-type lease by the lessor. When a lease does not effectively transfer control of the underlying asset to the lessee, but the lessor obtains a guarantee for the value of the asset from a third party, the lessor would classify a lease as a direct financing lease. All other leases are classified as operating leases. Where a lease contains more than one component, the consideration in the contract is allocated on a relative standalone price basis to the separate lease components and the non-lease components. Leases – the Company as lessee Lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our operating leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at January 1, 2019 or commencement date, if later, in determining the present value of future payments. Finance leases are included using the rate implicit in the lease. The lease ROU asset includes any lease payment made and initial direct costs incurred. Our operating lease terms may include options to extend or terminate the lease which are included in the measurement of the ROU assets and lease liabilities when it is reasonably certain that we will exercise that option. F- 19 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The lease expense for minimum operating lease payments is recognized on a straight-line basis over the lease term. Finance lease assets are amortized straight-line over their useful life where the lease transfers ownership of the underlying asset, or to the earlier of the end of the useful life of the asset and the end of the lease term where ownership is not transferred. Interest on finance leases is recognized as the amount that results in a constant periodic discount rate on the remaining balance of the liability. We have operating lease agreements with lease and non-lease components. The Company did not make the election to treat the lease and non-lease components as a single component and considers the non-lease components as a separate unit of account. The Company has elected not to apply the recognition requirements of ASC 842 to short-term operating leases. We recognize the lease payments for short-term leases on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred Leases – the Company as lessor The Company’s lease arrangements are a mixture of sales-type leases and operating leases. Sales-type lease receivables are recognized based on the net investment in the lease, at the present value of future minimum lease payments receivable over the lease term, plus any guaranteed residual value of the underlying asset, at the commencement date. The discount rate used in determining the present value of the future minimum lease payments is the rate implicit in the lease. This is calculated using the fair value of the underlying asset and the present value of any unguaranteed residual value. The underlying asset is derecognized at the point of inception and a selling profit is recognized at lease commencement. Subsequent interest income is recognized over the term of the lease, at an amount that produces a constant periodic discount rate on the remaining balance of the net investment in the lease. For operating leases, we continue to recognize the underlying asset. Lease income is recognized on a straight-line basis over the lease term. Recently Issued Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2018-19”) and in November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (“ASU 2019-11”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. ASU 2016-13 requires an entity to recognize expected credit losses rather than incurred losses for financial assets. The guidance will be effective beginning on January 1, 2023, including interim periods within that year and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. Under the modified retrospective method of adoption, prior year reported results are not restated. We are still evaluating the effect of this guidance, however, the adoption of ASU 2016-13 is not expected to have a material impact on the Company’s financial statement presentation or disclosures. In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), and in January 2021 extended the scope of Topic 848 to other derivative instruments. ASU 2020-04 provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments are elective and are effective upon issuance for all entities. The Company has made certain elections in accordance with ASU 2020-04 and as a result there is no material impact on the Company’s financial statement presentations or disclosures. In July 2021, the FASB issued ASU No. 2021-05, “Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments” (“ASU 2021-05”). ASU 2021-05 amends lease classification requirements for lessors to require a lessor to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3; and 2) the lessor would have otherwise recognized a day-one loss. The guidance will be effective beginning on January 1, 2022, including interim periods within that year, and can be applied either retrospectively or prospectively to leases that commence or are modified on or after the date that the amendments are first applied. The adoption of ASU 2021-05 is not expected to have a material impact on the Company’s financial statement presentation or disclosures. In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). ASU 2021-08 requires that an acquiring entity recognizes and measures contract assets and liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts. The guidance will be effective beginning on January 1, 2023, including interim periods within that year, and should be applied prospectively to business combinations occurring on or after the effective date. In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”). ASU 2021-10 requires entities to disclose information about certain government assistance that they receive, including 1) the nature of the transactions and the related accounting policies used; 2) the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item; and 3) significant terms and conditions of the transactions. The guidance is applicable to annual periods only, and will be effective beginning on January 1, 2022. It can be applied either retrospectively or prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application. The adoption of ASU 2021-10 is not expected to have a material impact on the Company’s financial statement presentation or disclosures if applied prospectively. F- 20 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 2. Acquisitions On December 31, 2021, the Company acquired 100 % of the membership interests of Sportech Lotteries, LLC (the “Sportech Acquisition”). The Company concluded that Sportech Lotteries, LLC’s contract with its only customer represented substantially all of the fair value of the gross assets acquired and, in accordance with ASC 805, determined that the asset set did not comprise a business. The Company has therefore applied asset acquisition accounting to the transaction, and has recorded the acquisition of the customer contract as an intangible asset in the amount of $ 12.3 million. The intangible asset will be amortized over its remaining useful life of 13.2 years. On October 1, 2019, the Company’s subsidiary, Inspired Gaming (UK) Limited, completed the acquisition of the Gaming Technology Group of Novomatic UK Ltd. pursuant to the Share Purchase Agreement, dated as of June 11, 2019 (the “SPA”), comprising: (i) all of the outstanding equity interests of each of (a) Astra Games Ltd, (b) Bell-Fruit Group Limited, (c) Gamestec Leisure Limited, (d) Harlequin Gaming Limited, and (e) Playnation Limited, and (ii) 60 % of the outstanding equity interests of Innov8 Gaming Limited (“Innov8”, and together with the entities described in clause (i) and certain of their subsidiaries, the “Acquired Businesses” and the transactions contemplated by the SPA, the “NTG Acquisition”). The consideration for the NTG Acquisition totaled approximately € 107.0 million ($ 131.4 million) in cash, which was financed by the Senior Facilities Agreement discussed in Note 13. Simultaneous with the closing of the NTG Acquisition, Inspired transferred a portion of the equity interests it had acquired in Innov8 to the then-minority equity holders of Innov8 in exchange for the renegotiation of certain funding commitments. As a result, Inspired then held approximately 40 % of the outstanding equity interests of Innov8. In April 2020, this interest was disposed of. F- 21 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company incurred advisor fees, legal and other costs related to the NTG Acquisition of $ 6.7 million, which excluded the costs of refinance that were deducted from the senior debt as debt issuance costs and which were recognized in operating expenses in the accompanying consolidated statement of operations during the year ended December 31, 2019. Further such costs recognized in the accompanying consolidated statement of operations during the year ended December 31, 2020 amounted to $ 1.3 million. Total revenues and loss from operations from October 1, 2019 (the acquisition date) through December 31, 2019 amounted to $ 31.0 million and $ ( 0.4 ) million, respectively, and is included in the consolidated statements of operations and comprehensive income. Pro Forma Information (Unaudited) The following unaudited consolidated pro forma information gives effect to the transaction contemplated by the NTG Acquisition as if such transaction had occurred on January 1, 2019. The following pro forma information is presented for illustration purposes only and is not necessarily indicative of the results that would have been attained had the acquisition been completed on January 1, 2019, nor is it indicative of results that may occur in any future periods. Schedule of Pro Forma Information Year Ended December 31, 2019 Revenues $ 256.9 Net operating loss $ ( 5.8 ) Net loss $ ( 33.7 ) Loss per share: Basic and diluted $ ( 1.54 ) Weighted average shares outstanding: Basic and diluted 21,892,964 F- 22 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 3. Accounts Receivable Accounts receivable consist of the following: Schedule of Accounts Receivable December 31, 2021 December 31, 2020 (in millions) Trade receivables $ 36.2 $ 30.4 Less: long-term receivable recorded in other assets ( 3.5 ) ( 1.4 ) Finance lease receivables 0.7 0.7 Other receivables — 0.1 Allowance for doubtful accounts ( 1.7 ) ( 2.3 ) Total accounts receivable, net $ 31.7 $ 27.5 Changes in the allowance for doubtful accounts are as follows: Schedule of Changes in Allowance for Doubtful Accounts December 31, 2021 December 31, 2020 (in millions) Beginning balance $ ( 2.3 ) $ ( 0.9 ) Additional provision for doubtful accounts ( 0.6 ) ( 1.4 ) Recoveries 0.1 — Write offs 1.1 0.1 Foreign currency translation adjustments — ( 0.1 ) Ending balance $ ( 1.7 ) $ ( 2.3 ) 4. Inventory Inventory consists of the following: Schedule of Inventory December 31, 2021 December 31, 2020 (in millions) Component parts $ 10.8 $ 12.1 Work in progress 1.6 1.7 Finished goods 4.5 3.8 Total inventories $ 16.9 $ 17.6 Component parts include parts for gaming terminals. Included in inventory are reserves for excess and slow-moving inventory of $ 2.0 million and $ 1.5 million as of December 31, 2021 and 2020, respectively. Our finished goods inventory primarily consists of gaming terminals which are ready for sale. F- 23 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 5. Prepaid Expenses and Other Assets Prepaid expenses and other assets consist of the following: Schedule of Prepaid Expenses and Other Assets December 31, 2021 December 31, 2020 (in millions) Prepaid expenses and other assets $ 12.3 $ 8.6 Unbilled accounts receivable 17.4 8.2 Total prepaid expenses and other assets $ 29.7 $ 16.8 6. Property and Equipment, net Schedule of Property and Equipment December 31, 2021 December 31, 2020 (in millions) Short-term leasehold property $ 3.2 $ 3.6 Server based gaming terminals 178.8 175.9 Computer equipment 10.6 12.6 Plant and machinery 4.1 2.7 Property and equipment, gross 196.7 194.8 Less: accumulated depreciation and amortization ( 145.8 ) ( 129.3 ) Property and equipment, net $ 50.9 $ 65.5 Depreciation expense amounted to $ 25.9 million, $ 29.9 million and $ 21.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. 7. Software Development Costs, net Software development costs, net consisted of the following: Schedule of Software Development Costs December 31, 2021 December 31, 2020 (in millions) Software development costs $ 160.9 $ 149.6 Less: accumulated amortization ( 125.3 ) ( 107.2 ) Software development Costs, net $ 35.6 $ 42.4 During the years ended December 31, 2021 and 2020, the Company capitalized $ 13.6 million and $ 14.6 million of software development costs, respectively. Amounts in the above table include $ 2.2 million and $ 0.8 million of internal use software as of December 31, 2021 and 2020, respectively. The total amount of software costs amortized was $ 20.0 million, $ 20.0 million and $ 16.4 million for the years ended December 31, 2021, 2020, and 2019, respectively. Software costs written down to net realizable value amounted to $ 0.2 million, $ 0.0 million and $ 0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. The weighted average amortization period was 3.3 years, 3.2 years and 3.0 years for the years ended December 31, 2021, 2020 and 2019, respectively. F- 24 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The estimated software amortization expense for the years ending December 31 are as follows: Schedule of Estimated Software Amortization Expense Year ending December 31, (in millions) 2022 $ 15.7 2023 11.2 2024 4.9 2025 3.0 2026 0.8 Thereafter — Total $ 35.6 8. Intangible Assets and Goodwill The following tables present certain information regarding our intangible assets. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives of ten years with no estimated residual values, which materially approximates the expected pattern of use. Schedule of Intangible Assets December 31, 2021 December 31, 2020 (in millions) Trademarks $ 22.1 $ 22.4 Customer relationships 32.7 20.7 Intangible assets, gross 54.8 43.1 Less: accumulated amortization ( 35.9 ) ( 35.4 ) Intangible assets, net $ 18.9 $ 7.7 Aggregate intangible asset amortization expense amounted to $ 0.9 million, $ 2.4 million and $ 3.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. The estimated intangible asset amortization expense for the years ending December 31 are as follows: Schedule of Estimated Intangible Asset Amortization Expense Year ending December 31, (in millions) 2022 $ 1.8 2023 1.8 2024 1.8 2025 1.8 2026 1.8 Thereafter 9.9 Total $ 18.9 Goodwill Goodwill is summarized as follows: Schedule of Goodwill December 31, 2021 December 31, 2020 (in millions) Balance at beginning of period $ 83.7 $ 80.9 Foreign currency translation adjustments ( 1.0 ) 2.6 Acquisition of NTG — 0.2 Ending balance $ 82.7 $ 83.7 Amounts relating to the Acquisition of NTG for the year ended December 31, 2020 relate to asset valuations that were revised during the year. F- 25 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 9. Other Assets Other assets consist of the following: Schedule of Other Assets December 31, 2021 December 31, 2020 (in millions) Long term finance lease receivable $ 0.3 $ 0.6 Pension asset 3.0 — Long term receivables 3.5 1.4 Long term prepaid expenses and other assets 0.3 1.3 Total $ 7.1 $ 3.3 10. Accrued Expenses Accrued expenses consist of the following: Schedule of Accrued Expenses December 31, 2021 December 31, 2020 (in millions) Direct costs of sales $ 4.4 $ 4.0 Payroll and related costs 7.2 7.7 Accrued corporate cost expenses — 1.8 Interest payable - cash 2.0 6.8 Asset retirement obligations 1.1 1.6 Acquisition consideration 0.6 0.8 Contract termination costs — 0.2 Other creditors 17.3 8.5 Accrued expenses, net $ 32.6 $ 31.4 11. Contract Liabilities and Other Disclosures The following table summarizes contract related balances: Schedule of Contract Related Balances Accounts Receivable Unbilled Accounts Receivable Deferred Income Customer Prepayments and Deposits (in millions) At December 31, 2021 $ 36.2 $ 17.4 $ ( 14.5 ) $ ( 3.9 ) At December 31, 2020 $ 30.4 $ 8.2 $ ( 22.9 ) $ ( 1.6 ) At December 31, 2019 $ 24.5 $ 15.3 $ ( 27.8 ) $ ( 1.9 ) Revenue recognized that was included in the deferred income balance at the beginning of the period amounted to $ 10.9 million, $ 10.3 million and $ 9.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. F- 26 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 12. Other Liabilities Other liabilities consist of the following: Schedule of Other Liabilities December 31, 2021 December 31, 2020 (in millions) Customer prepayments and deposits $ 3.9 $ 1.6 Fair value of hedging instrument — 0.9 Total other liabilities, current 3.9 2.5 Asset retirement obligations 1.8 1.8 Other creditors 1.3 — Pension liability — 9.1 Total other liabilities, long-term 3.1 10.9 Total other liabilities $ 7.0 $ 13.4 13. Long Term and Other Debt Senior Secured Notes On May 20, 2021, Inspired Entertainment (Financing) PLC, a wholly owned subsidiary of the Company, issued £ 235.0 million ($ 316.7 million, as translated at December 31, 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 1, 2026 . Interest is payable on the Senior Secured Notes on June 1 and December 1 of each year, commencing on December 1, 2021 The Senior Secured Notes and related guarantees were issued under an indenture (the “Indenture”), among Inspired Entertainment (Financing) PLC, as issuer, the Company and certain English and U.S. subsidiaries of the Company, as guarantors (collectively and together with the Company, the “Guarantors”), GLAS Trustees Limited, as trustee, GLAS Trust Corporation Limited, as security agent and GLAS Trust Company LLC as paying agent, transfer agent and registrar. The terms of the Senior Secured Notes and related guarantees are governed by the Indenture. The Senior Secured Notes are fully and unconditionally guaranteed on a senior secured first-priority basis by the Guarantors on a joint and several basis. The Senior Secured Notes and related guarantees are secured, subject to certain permitted collateral liens, on a first-priority basis by substantially all assets of the Guarantors and all claims of the Inspired Entertainment (Financing) PLC under an intercompany loan to Gaming Acquisitions Limited, a private limited liability company incorporated under the laws of England and Wales and an indirect wholly-owned subsidiary of the Company (“GAL”), of the proceeds of the offering of the Senior Secured Notes. F- 27 The Indenture contains incurrence covenants that limit the ability of the Company and the Company’s restricted subsidiaries to, among other things, (i) incur or guarantee additional debt and issue certain preferred stock of restricted subsidiaries; (ii) create or incur certain liens; (iii) make restricted payments, including dividends or distributions to the Company’s stockholders or repurchase the Company’s stock; (iv) prepay or redeem subordinated debt; (v) make certain investments, including participating joint ventures; (vi) create encumbrances or restrictions on the payment of dividends or other distributions by restricted subsidiaries; (vii) sell assets, or consolidate or merge with or into other companies; (viii) sell or transfer all or substantially all of the Company’s assets or those of the Company’s subsidiaries on a consolidated basis; (ix) engage in certain transactions with affiliates; and (x) create unrestricted subsidiaries. Certain of these covenants will be suspended if and for so long as the Senior Secured Notes have investment grade ratings from any two of Moody’s Investors Service, Inc., Standard & Poor’s Investors Ratings Services and Fitch Ratings, Inc. These covenants are subject to exceptions and qualifications as set forth in the Indenture. Inspired Entertainment (Financing) PLC may redeem the Senior Secured Notes, in whole or in part, at any time and from time to time prior to June 1, 2023, at a redemption price equal to 100% of the principal amount thereof, plus a “make-whole” premium as set forth in the Indenture and form of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Inspired Entertainment (Financing) PLC may also redeem the Senior Secured Notes, in whole or in part, at any time and from time to time on or after June 1, 2023, at the redemption prices set forth in the Indenture and form of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to June 1, 2023, Inspired Entertainment (Financing) PLC may redeem up to 40% of the original aggregate principal amount of the Senior Secured Notes with the net cash proceeds of one or more equity offerings, as described in the Indenture, at a redemption price equal to 107.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to June 1, 2023, Inspired Entertainment (Financing) PLC may redeem up to 10% of the aggregate principal amount of the Senior Secured Notes within each 12-month period at a redemption price equal to 103% of the aggregate principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date . Revolving Credit Facility In connection with the issuance of the Senior Secured Notes on May 20, 2021, the Company and certain of our direct and indirect wholly-owned subsidiaries, entered into a Super Senior Revolving Credit Facility Agreement (the “RCF Agreement”) with Global Loan Agency Services Limited, as agent, Barclays Bank plc (“Barclays”) and Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK” and together with Barclays, the “Arrangers”) as arrangers and each lender party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide, subject to certain conditions, a secured revolving facility loan in an original principal amount of £ 20 million ($ 27.0 million) under which certain of our subsidiaries are able to draw funds (the “RCF Loan”). The RCF Loans will terminate on November 20, 2025. The funding of the RCF Loan is subject to customary conditions set forth in the RCF Agreement. The undrawn commitment of each Lender under the RCF Loan will automatically terminate, unless previously terminated by the Company, on October 20, 2025. The RCF Loans will bear interest at a rate per annum equal to (i) SONIA for borrowings in sterling, (ii) LIBOR (or, on and after December 31, 2021, SOFR) for borrowings in dollars, or (iii) EURIBOR for borrowings in Euro, as applicable, plus, in each case, a margin (based on the Company’s consolidated senior secured net leverage ratio) ranging from 4.25 % to 4.75 % per annum. With respect to the RCF Loan, a commitment fee of 30 % of the then applicable margin is payable at any time on any unutilized portion of the RCF Loan . The RCF Agreement contains various covenants (which include restrictions regarding the incurrence of liens, the incurrence of indebtedness by the Company’s subsidiaries and fundamental changes, subject in each case to certain exceptions), representations, warranties, limitations and events of default (which include non-payment, breach of obligations under the financing documents, cross-default, insolvency and litigation) customary for similar facilities for similarly rated borrowers and subject to customary carve-outs and grace periods. Following the occurrence of an event of default which has not been waived or remedied, the Lenders who represent more than 66.67 % of total commitments under the RCF may, subject to the terms of an intercreditor agreement (which governs the relationship between the Lenders and the holders of the Senior Secured Notes), instruct the agent to (i) accelerate the RCF Loans, (ii) instruct the security agent to enforce the transaction security and/or (iii) exercise any other remedies available to the Lenders. F- 28 The RCF Agreement requires that the Company maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ratio of consolidated senior 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. The outstanding principal amount of each advance under the RCF Loans is payable on the last day of the interest period relating to such advance, unless such advance is rolled over on a cashless basis in accordance with customary rollover provisions contained in the RCF Agreement, with a final repayment on November 20, 2025 . Termination of Prior Financing The Company’s previous debt consisted of two tranches of senior secured term loans in a principal amount of £ 145.8 million ($ 196.5 million) with a cash interest rate of 8.25 % plus 3-month LIBOR and € 93.1 million ($ 105.4 million) with a cash interest rate of 7.75 % plus 3-month EURIBOR, respectively and a secured revolving facility loan in a principal amount of £ 20.0 million ($ 27.0 million) with a cash interest rate on any utilization of 6.50% plus 3-month LIBOR (the “Prior Financing”).. In connection with the issuance of the Senior Secured Notes and the entry into the RCF Agreement, on May 20, 2021, the Prior Financing was repaid in full and the senior facilities agreement (dated September 27, 2019, as amended and restated on June 25, 2020, see below) relating to the Prior Financing was terminated. No prepayment premium applied to the repayment (although customary break cost provisions applied). Debt fees of $ 14.4 million were expensed to the Consolidated Statements of Operations and Consolidated Loss within Interest Expense as part of the repayment. In addition, on May 19, 2021, we terminated the interest rate swaps relating to the Prior Financing and applicable termination fees were settled on May 20, 2021 (see Note 14). Senior Facilities Agreement In connection with the NTG Acquisition, on September 27, 2019, the Company, together with certain direct and indirect wholly-owned subsidiaries, entered into a Senior Facilities Agreement with Lucid Agency Services Limited, as agent, Nomura International plc and Macquarie Corporate Holdings Pty Limited (UK Branch) as arrangers and/or bookrunners and each lender party thereto (the “Lenders”), pursuant to which the Lenders agreed to provide, subject to certain conditions, two tranches of senior secured term loans (the “Term Loans”), in an original principal amount of £ 140.0 million ($ 188.7 million) and € 90.0 million ($ 101.9 million), respectively and a secured revolving facility loan in an original principal amount of £ 20.0 million ($ 27.0 million). On October 1, 2019, the debt was funded and proceeds from the Term Loans were used to, among other things, pay the purchase price of the NTG Acquisition and to refinance existing indebtedness of the Company under the Note Purchase Agreement and prior Facility described below. The new facilities were subject to covenant testing. These tests comprised a leverage ratio (consolidated total net debt/consolidated pro forma EBITDA) and a capital expenditure level. The leverage ratio was tested quarterly with the first test date being June 30, 2020. The capital expenditure level was tested annually with the first test date being December 31, 2019. There was also an annual excess cash flow calculation required, which, if positive and over certain de minimis limits, could have required early prepayment of part of the facilities. The Term Loans had a 5 -year duration and were repayable in full on October 1, 2024. The £ 140.0 million ($ 188.7 million) loan initially carried a cash interest rate of 7.25 % plus 3-month LIBOR, the € 90.0 million ($ 101.9 million) loan initially carried a cash interest rate of 6.75 % plus 3-month EURIBOR. The £ 20.0 million ($ 27.0 million) revolving credit facility is available until September 1, 2024 and initially carried a cash interest rate on any utilization at 5.50 % plus 3-month LIBOR, with any unutilized amount initially carrying a cash interest cost at 30 % of the applicable margin on the revolving credit facility loan. F- 29 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 On June 25, 2020, the Company, certain direct and indirect subsidiaries of the Company, Lucid Agency Services Limited, and Lucid Trustee Services Limited as security agent under the SFA and the Intercreditor Agreement (as defined in the SFA), entered into an Amendment and Restatement Agreement (the “ARA”) with respect to the SFA. The ARA amended the SFA by, among other things, (i) capitalizing certain interest payments that fell due on April 1, 2020, (ii) resetting the leverage and capital expenditure financial covenants applicable under the SFA, removing certain rating requirements under the SFA, (iii) allowing the Company and its subsidiaries to incur additional indebtedness under the UK Coronavirus Large Business Interruption Loan Scheme under a stand-alone facility, which may rank pari passu or junior to the facilities under the SFA, in an amount not exceeding £ 10.0 million ($ 13.5 million), (iv) removing certain rating requirements under the SFA, (v) limiting the ability of the Company and its subsidiaries to incur additional indebtedness, including by reducing the amount of general indebtedness the Company and its subsidiaries are permitted to incur and removing the ability to incur senior secured, second lien and unsecured indebtedness in an amount not exceeding the aggregate of (A) an unlimited amount, as long as, pro forma for the utilization of such indebtedness, the consolidated total net leverage ratio does not exceed the lower of 3.4:1 and the then applicable ratio with respect to the consolidated total net leverage financial covenant summarized further below, plus (B) an amount equal to the greater of £16.0 million ($21.6 million) and 25% of the consolidated pro forma EBITDA of the Company and its subsidiaries for the relevant period (as defined in the SFA, but disregarding, for the purposes of calculating the usage of such cap, any financial indebtedness applied to refinancing other financial indebtedness, together with any related interest, fees, costs and expenses) , (vi) increasing the margin applicable to the Facilities (as defined in the SFA) by 1 %, to 8.25 % plus 3-month LIBOR on the £ 145.8 million ($ 196.5 million) loan (including capitalized interest payments of £ 5.8 million ($ 7.8 million)), and to 7.75 % plus 3-month EURIBOR on the € 93.1 million ($ 105.4 million) loan (including capitalized interest payments of € 3.1 million ($ 3.5 million)), respectively, and adding an additional payment-in-kind margin of 0.75 % payable on any principal amounts outstanding under Facility B (as defined in the SFA) after September 24, 2021 (the “Relevant Date”), (vii) adding an exit fee payable by the Company with respect to any repayment or prepayment of Facility B after the Relevant Date at the time of such repayment or prepayment in an amount equal to 0.75 % of the principal amount of Facility B being repaid or prepaid, (viii) removing any ability to carry forward or carry back any unused allowance under the capital expenditure financial covenant in the SFA and (ix) granting certain additional information rights to the Lenders under the SFA, including the provision of a budget, and certain board observation rights until December 31, 2022. All other material terms of the SFA remain unchanged in all material respects. In consideration for the amendments listed above, the Company agreed to pay the Lenders an amendment fee equal to 1% of the Total Commitments (as defined in the SFA) after giving effect to the capitalization of the interest payment described above. The amendment fee was payable to the Lenders pro rata to their commitments under the SFA. The modification to the SFA was not considered to be substantial in accordance with Topic 470-50 and was therefore not treated as a debt extinguishment. The amendment fees, amounting to $ 3.1 million, were associated with the modified debt instrument and were to be amortized along with the existing unamortized debt issuance costs. Fees payable to third parties were expensed as incurred, resulting in $ 1.0 million charged to interest expense for the year ended December 31, 2020. Termination of Note Purchase Agreement and Prior Credit Facility The Company’s previous debt included $ 140.0 million of senior notes issued under a Note Purchase Agreement and Guaranty dated August 13, 2018 (the “NPA”) with a 5 -year duration and a cash interest rate of 9 % plus 3-month LIBOR borrowings and a revolving credit facility agreement dated August 13, 2018 (the “Prior Facility”) with a 3 -year duration and a cash interest rate on any utilization at 4 % plus 3-month LIBOR, with any unutilized amount carrying a 1.4% cash interest cost. In addition, the Company also had a 3-year, fixed-rate, cross-currency swap with respect to the NPA (see Note 14). The termination of the Company’s prior existing indebtedness carried a prepayment premium of 3.00 % of the amount repaid or prepaid, or $ 4.2 million. No prepayment premium applied to the Company’s previous revolving facility Agreement. In addition, on October 1, 2019, the Company terminated the 3 -year, fixed-rate, cross-currency swap and wrote off previously unamortized debt issuance costs amounting to $ 7.3 million. F- 30 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Outstanding Debt and Finance Leases The following reflects outstanding debt and finance leases as of the dates indicated below: Schedule of Outstanding Debt and Capital Leases Principal Unamortized deferred financing charge Book value, December 31, 2021 (in millions) Senior bank debt $ 316.7 $ ( 7.7 ) $ 309.0 Finance lease liabilities 2.8 — 2.8 Total long-term debt outstanding 319.5 ( 7.7 ) 311.8 Less: current portion of long-term debt ( 0.9 ) — ( 0.9 ) Long-term debt, excluding current portion $ 318.6 $ ( 7.7 ) $ 310.9 Principal Unamortized deferred financing charge Book value, December 31, 2020 (in millions) Senior bank debt $ 313.3 $ ( 15.8 ) $ 297.5 Finance lease liabilities 0.8 — 0.8 Total long-term debt outstanding 314.1 ( 15.8 ) $ 298.3 Less: current portion of long-term debt ( 0.6 ) — ( 0.6 ) Long-term debt, excluding current portion $ 313.5 $ ( 15.8 ) $ 297.7 The Company is in compliance with all relevant financial covenants and the long-term debt portion is correctly classified as such in line with the underlying agreements. Long term debt as of December 31, 2021 matures as follows: Schedule of Maturities of Long-term Debt Fiscal period: Senior bank debt Finance leases Total (in millions) 2022 $ — $ 1.0 $ 1.0 2023 — 0.5 0.5 2024 — 0.8 0.8 2025 — 0.5 0.5 2026 316.7 — 316.7 Total $ 316.7 $ 2.8 $ 319.5 14. Derivatives and Hedging Activities On January 15, 2020, the Company entered into two interest rate swaps with UBS AG designed to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows on a portion of the previous floating rate debt facilities. The swaps fixed the variable interest rate of the debt facilities and provided protection over potential interest rate increases by providing a fixed rate of interest payment in return. The interest rate swaps were for £ 95.0 million ($ 128.0 million) at a fixed rate of 0.9255 % based on the 6-month LIBOR rate and for € 60.0 million ($ 67.9 million) at a fixed rate of 0.102 % based on the 6-month EURIBOR rate . In connection with the issuance of the Senior Secured Notes and the entry into the RCF Agreement, on May 19, 2021, the Company terminated its two interest rate swaps. The termination fees were settled on May 20, 2021, for £ 1.3 million ($ 1.9 million) and € 0.1 million ($ 0.2 million), respectively. F- 31 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 During the year ended December 31, 2019, the Company was party to a 3-year, fixed-rate, cross-currency swap with Nomura Global Financial Products Inc. which swapped the principal and interest payments that would be payable in USD under the NPA to Euros (“EUR”), in part, and GBP, in part. Specifically, with respect to the principal payments 1/3 of the payments would be swapped from USD to EUR and 2/3 of the payments from USD to GBP. Additionally, with respect to the interest payments 1/3 would be swapped from USD to GBP and 2/3 from USD to EUR. The swap provided for a foreign exchange rate of $1.13935 USD per €1 EUR and $1.27565 USD per £1 GBP. In connection with the entry into the Senior Facilities Agreement on October 1, 2019, the Company terminated the 3 -year, fixed-rate, cross-currency swap and received a settlement of $ 1.5 million . Hedges of Multiple Risks The Company’s objectives in using interest rate derivatives were to add stability to interest and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company had variable-rate borrowings denominated in currencies other than its functional currency in prior years. As a result, the Company was exposed to fluctuations in both the underlying variable interest rate and the foreign currency of the borrowing against its functional currency, GBP. During the year ended December 31, 2019, the Company used derivatives, including cross-currency interest rate swaps, to manage its exposure to fluctuations in the variable borrowing rate and the GBP-USD exchange rate. Cross-currency interest rate swaps involve exchanging fixed rate interest payments for floating rate interest receipts both of which will occur at the GBP-USD forward exchange rates in effect upon entering into the instrument. The Company designated these derivatives as cash flow hedges of both interest rate and foreign exchange risks. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in Accumulated Other Comprehensive Income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $ 0.8 million will be reclassified as an increase to interest expense. As of December 31, 2021, the Company did not have any derivatives. As of December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk: Schedule of Outstanding Derivatives Designated as Cash Flow Hedges Interest Rate Derivative Number of Instruments Notional Interest rate swaps 2 £ 95.0 million ($ 128.0 million) at a fixed rate of 0.9255 % based on the 6-month LIBOR rate and € 60.0 million ($ 67.9 million) at a fixed rate of 0.102 % based on the 6 month EURIBOR rate Non-designated Hedges Derivatives not designated as hedges were not speculative and were used during the year ended December 31, 2019 to manage the Company’s exposure to interest rate movements and other identified risks but did not meet the strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships were recorded directly in earnings. The Company did not have any derivatives that were not designated as hedges as of December 31, 2020. All derivatives as of December 31, 2020 were designated as cash flow hedges of interest rate risk. F- 32 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company did not have any derivative financial instruments as of December 31, 2021. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheet as of December 31, 2020. Schedule of Fair Value of Derivative Financial Instruments Balance Sheet Classification Asset Derivatives Fair Value Balance Sheet Classification Liability Derivatives Fair Value (in millions) (in millions) Derivatives designated as hedging instruments: Interest Rate Products Fair Value of Hedging Instruments $ — Other Current Liabilities and Long Term Derivative Liability $ ( 2.6 ) Total derivatives designated as hedging instruments $ — $ ( 2.6 ) The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the year ended December 31, 2021. Schedule of Accumulated Other Comprehensive Income Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income (in millions) (in millions) Interest Rate Products $ 0.3 Interest Expense $ ( 1.5 ) Total $ 0.3 $ ( 1.5 ) The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the year ended December 31, 2020. Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income (in millions) (in millions) Interest Rate Products $ ( 2.9 ) Interest Expense $ ( 1.5 ) Total $ ( 2.9 ) $ ( 1.5 ) The table below presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the year ended December 31, 2019. Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income (in millions) (in millions) Interest Rate and Foreign Exchange Products $ 2.9 Interest Expense $ 1.2 Foreign Currency Remeasurement 3.2 Total $ 2.9 $ 4.4 The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the year ended December 31, 2021. Schedule of Consolidated Income Statements Interest Expense (in millions) Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded $ 44.3 Gain/(loss) on cash flow hedging relationships in Subtopic 815-20 $ ( 1.5 ) F- 33 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the year ended December 31, 2020. Interest Expense (in millions) Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded $ 30.6 Gain/(loss) on cash flow hedging relationships in Subtopic 815-20 $ ( 1.5 ) The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations for the year ended December 31, 2019. Interest Expense Foreign Currency Remeasurement (in millions) Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded $ 27.8 $ ( 3.2 ) Gain/(loss) on cash flow hedging relationships in Subtopic 815-20 $ 1.2 $ 3.2 The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments in the consolidated statements of operations for the year ended December 31, 2019. Schedule of Financial Instruments Not Designated as Hedging Instruments Derivatives Not Designated as Hedging Instruments under Subtopic 815-20 Location of Income Recognized in Income on Derivative Amount of Income Recognized in Income on Derivative (in millions) Interest Rate and Foreign Exchange Products Change in fair value of derivative liability $ 2.9 The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet. The ISDA Master Agreement between Gaming Acquisitions Limited, a wholly-owned subsidiary of the Company, and UBS AG was documented using the 2002 Form and the ISDA standard set-off provision in Section 6(f) of the ISDA Master Agreement applied to both parties and was only modified to include Affiliates of the Payee. There was no CSA and thus there was no collateral posting. Schedule of Offsetting of Derivative Assets and Liabilities Offsetting of Derivative Assets December 31, 2020 Gross Amounts Gross Amounts Offset in the Statement Net Amounts of Assets presented in the Statement Gross Amounts Not Offset in the Statement of Financial Position of Recognized Assets of Financial Position of Financial Position Financial Instruments Cash Collateral Received Net Amount (in millions) Fair value of hedging instrument $ — $ — $ — $ — $ — $ — Offsetting of Derivative Liabilities December 31, 2020 Gross Amounts Gross Amounts Offset in the Statement Net Amounts of Liabilities presented in the Statement Gross Amounts Not Offset in the Statement of Financial Position of Recognized Liabilities of Financial Position of Financial Position Financial Instruments Cash Collateral Received Net Amount (in millions) Fair value of hedging instrument $ 2.6 $ — $ 2.6 $ — $ — $ — F- 34 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 15. Fair Value Measurements Fair 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 or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate the fair value of our assets and liabilities utilizing an established three-level hierarchy. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions. Level 3: Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the asset or liability. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that are unable to be corroborated with observable market data. The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments approximates their recorded values. For each period, derivative financial instrument assets and liabilities measured at fair value on a recurring basis are included in the financial statements as per the table below. Schedule of Derivative Financial Instrument Assets and Liabilities Measured at Fair Value on Recurring Basis December 31, December 31, Level 2021 2020 (in millions) Public Warrants (included in warrant liability) 1 $ — $ 3.2 Long term receivable (included in other assets) 2 3.5 1.4 Private Placement Warrants (included in warrant liability) 2 — 9.8 Derivative liability (see note 14) 2 — 2.6 F- 35 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The fair value of our long-term senior debt as of December 30, 2021, was $ 323.2 million, based upon quoted prices in the marketplace, which are considered Level 2 inputs. Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s principal financial officer, who reports to the principal executive officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Principal Financial Officer and approved by the Principal Executive Officer. At December 31, 2021 and December 31, 2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy. 16. Stockholders’ Deficit Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share in one or more series. The Company’s Board of Directors is authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. At December 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding. Common Stock The Company is authorized to issue 49,000,000 shares of common stock, par value $ 0.0001 per share. Holders of the Company’s common stock are entitled to one vote for each common share . Warrants As of December 31, 2020, the Company had 19,079,130 outstanding warrants to purchase an aggregate of 9,539,565 shares of the Company’s common stock, which included 7,999,900 warrants originally issued as part of the initial public offering (the “IPO”) (the “Public Warrants”) and 11,079,230 warrants issued in private placements in connection with the IPO and the Merger (the “Private Placement Warrants”). The warrants became exercisable 30 days after the closing of the Merger and had an expiration date of December 23, 2021. Each warrant entitled its holder to purchase one-half of one share of the Company’s common stock at an exercise price of $ 11.50 per whole share. The warrants were able to be exercised only for a whole number of shares of common stock. As of December 31, 2020, the warrants met the definition of a derivative under ASC 815 and were classified as a liability measured at fair value, with changes in fair value each period reported in earnings. During the quarter ending December 31, 2021, (i) an aggregate of 2,651,129 shares of common stock were issued pursuant to the exercise of 5,302,258 Public Warrants and (ii) an aggregate of 1,027,836 shares of common stock were issued pursuant to the exercise (on a cashless basis) of 9,049,230 Private Warrants. There were no warrants outstanding as of December 31, 2021. 17. Stock-Based Compensation The Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other equity-related awards. The Company’s 2021 Omnibus Incentive Plan (“2021 Plan”) was adopted by the Company’s Board of Directors on April 12, 2021 and approved by our stockholders on May 11, 2021. The 2021 Plan succeeds the Company’s 2018 Omnibus 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. As of December 31, 2021, there were (i) 1,552,284 shares subject to outstanding awards under the 2021 Plan, including 512,399 shares subject to performance-based target awards, 232,500 shares subject to market-price vesting conditions and 165,000 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement ; (ii) 751,934 shares subject to outstanding awards under the 2018 Plan, including 75,000 shares subject to performance-based target awards, 20,195 shares subject to awards that were previously subject to performance criteria that were determined to have been met for the applicable performance year which awards continue to remain subject to a time-based vesting schedule and 99,964 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement; and (iii) 1,318,686 shares subject to outstanding awards under the Prior Plans as to which the applicable vesting conditions have been met which remain subject to deferred settlement. As of December 31, 2021, there were 1,490,785 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 outstanding as of December 31, 2021 consisted of RSUs (including time-based RSUs, performance-based RSUs and stock price based RSUs). F- 36 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of 500,000 shares of common stock pursuant to purchases thereunder by employees. The ESPP, which was approved by stockholders in July 2017, is administered by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements of the ESPP. As of December 31, 2021, a total of 467,751 shares remained available for purchase under the ESPP. A summary of the Company’s RSU activity is as follows: Schedule of Restricted Stock Unit Activity Number of Shares Weighted Average Grant Date Fair Value Per Share Unvested Outstanding at January 1, 2021 2,149,118 $ 5.20 Granted (1) 1,728,236 $ 10.15 Forfeited (2) ( 520,227 ) $ ( 5.66 ) Vested (3) ( 1,317,873 ) $ ( 6.24 ) Unvested Outstanding at December 31, 2021 2,039,254 $ 8.60 (1) The RSUs that were granted during the year ended December 31, 2021 included: (a) 48,466 RSUs under the Board’s compensation program for non-employee directors which vest during the year of grant and remain unsettled until the director leaves the Company; (b) 658,020 RSUs under an incentive program for management and other personnel, as to which one-half was in the form of performance-based RSUs that are conditioned on attainment of performance criteria for fiscal year 2021 and subject to a time-based service period through December 31, 2023 and the other one-half vests in instalments through December 31, 2023; and (c) sign-on awards covering an aggregate of 975,000 RSUs to members of senior management in connection with their entering into new employment agreements or amendments thereof which have vesting schedules through December 31, 2025, including 750,000 RSUs to our Executive Chairman (comprised of a mix of time-based RSUs, performance-based RSUs and stock price based RSUs). (2) The RSUs that were forfeited during the year ended December 31, 2021 included 468,517 RSUs subject to market price vesting conditions that had a satisfaction deadline of December 23, 2021. The applicable market price targets were not met by the deadline. (3) The RSUs that vested during the year ended December 31, 2021 included: (a) 213,466 RSUs that remain subject to deferred settlement terms such that the awards do not settle until the participant’s services terminate; (b) 285,069 RSUs that vested June 30, 2021, resulting in 160,390 shares being issued in connection with the net settlement thereof and 124,679 withheld for taxes; and (c) 819,338 RSUs that vested on December 31, 2021, resulting in 442,817 shares being issued in settlement thereof and 376,521 withheld for taxes (the processing of the issuance and delivery of such 442,817 shares did not occur until January 2022). The Company issued a total of 324,122 shares during the year ended December 31, 2021 in connection with the vesting of RSUs, of which 160,390 were issued in net settlement of RSUs that vested on June 30, 2021 and 163,732 were issued in connection with the net settlement of RSUs that vested on December 31, 2020. A summary of the Company’s Restricted Stock activity is as follows: Schedule of Restricted Stock Activity Number of Shares Weighted Average Grant Date Fair Value Per Share Unvested Outstanding at January 1, 2021 624,116 $ 5.63 Granted — $ — Forfeited (1) ( 624,116 ) $ ( 5.63 ) Vested — $ — Unvested Outstanding at December 31, 2021 — $ — (1) Reflects forfeiture of unvested restricted stock awards which had been subject to market price vesting conditions that had a satisfaction deadline of December 23, 2021. The applicable market price targets were not met by the deadline. Stock-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. For performance awards that are contingent upon the Company achieving certain pre-determined financial performance targets, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance criteria will be met. Determining the probability of achieving a performance target requires estimates and judgment. For market-based awards that are contingent upon the Company’s stock achieving certain pre-determined price targets, compensation expense is calculated based upon the determination of the fair value of the awards as derived through multiple running of the Monte Carlo valuation model, with the fair value recognized on a straight-line basis over the requisite service period. F- 37 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company recognized stock-based compensation expense as follows: Schedule of Stock Based Compensation Expense Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Restricted Stock and RSUs $ 11.9 $ 4.6 $ 8.7 Payroll taxes on vesting of RSUs 1.1 0.2 0.3 $ 13.0 $ 4.8 $ 9.0 Total unrecognized compensation expense related to unvested stock awards and unvested RSUs at December 31, 2021 amounts to $ 11.6 million and is expected to be recognized over a weighted average period of 1.8 years. 18. Accumulated Other Comprehensive Loss (Income) The 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) (in millions) Balance at January 1, 2019 $ ( 78.9 ) $ ( 0.1 ) $ 23.1 $ ( 55.9 ) Change during the period 2.4 1.5 6.9 10.8 Balance at December 31, 2019 ( 76.5 ) 1.4 30.0 ( 45.1 ) Change during the period 5.4 1.4 7.2 14.0 Balance at December 31, 2020 ( 71.1 ) 2.8 37.2 ( 31.1 ) Change during the period ( 0.4 ) ( 1.8 ) ( 10.5 ) ( 12.7 ) Balance at December 31, 2021 $ ( 71.5 ) $ 1.0 $ 26.7 $ ( 43.8 ) Included within accumulated other comprehensive income is an amount of $ 1.0 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. 19. Net Loss per Share Basic 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, unless the inclusion would be anti-dilutive. The computation of diluted EPS excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive: Schedule of Anti-dilutive Securities Excluded from Computation of Earnings per Share Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 RSUs 3,622,904 3,522,140 2,744,842 Unvested Restricted Stock — 624,116 624,116 Stock Warrants — 9,539,565 9,539,565 Anti-dilutive securities excluded from computation of earnings per share 3,622,904 13,685,821 12,908,523 F- 38 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 20. Other Finance (Expense) Income Other finance (expense) income consisted of the following: Schedule of Other Finance Income (Costs) Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Pension interest cost $ ( 1.6 ) $ ( 2.2 ) $ ( 2.7 ) Expected return on pension plan assets 2.7 3.1 3.5 Foreign currency translation on senior bank debt 4.6 ( 5.6 ) ( 0.8 ) Foreign currency remeasurement on hedging instrument — — 3.2 Other finance income (Costs) $ 5.7 $ ( 4.7 ) $ 3.2 21. Income Taxes The effective tax rate for the years ended December 31, 2021 and 2020 were 4.2 % and ( 1.2 )% respectively. For the year ended December 31, 2021, the Company’s effective tax rate differs from the federal statutory rate primarily due to losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit and non-deductible officer’s compensation. For the year ended December 31, 2020, the Company’s effective tax rate differs from the federal statutory rate primarily due to losses in certain jurisdictions where the Company has recorded a valuation allowance against the related tax benefit. The components of earnings (loss) before income taxes on the Company’s consolidated statement of operations by the United States and foreign jurisdictions were as follows: Schedule of Earnings (Loss) Before Income Tax Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) United States $ ( 13.5 ) $ ( 14.4 ) $ ( 19.3 ) Foreign jurisdictions ( 24.8 ) ( 17.6 ) ( 21.7 ) Total loss before income taxes $ ( 38.3 ) $ ( 32.0 ) $ ( 41.0 ) Income tax provision (benefit), as reflected in the Company’s consolidated statement of operations, consists of the following: Schedule of Provision for Income Taxes Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Current (benefit) provision Federal $ — $ — $ — State — — — Foreign ( 1.6 ) 0.4 0.1 Total current $ ( 1.6 ) $ 0.4 $ 0.1 Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Deferred (benefit) provision Federal $ — $ — $ — State — — — Foreign — — — Total current $ — $ — $ — F- 39 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The differences between the federal statutory tax rate and our effective rate are reflected in the following table for the years ended December 31, 2021, 2020 and 2019: Schedule of Differences Between the Federal Statutory Tax Rate and our Effective Rate December 31, 2021 December 31, 2020 December 31, 2019 (in millions) Statutory income tax 21.0 % 21.0 % 21.0 % State taxes (net of federal) 0.0 % 0.0 % 3.3 % Non-deductible officer compensation ( 5.4 )% 0.0 % 0.0 % Tax effect of other permanent differences ( 1.5 )% ( 6.2 )% ( 11.9 )% Effect of foreign taxes ( 0.3 )% 0.5 % ( 1.5 )% True ups 4.6 % 0.1 % 3.2 % Rate change 0.0 % 0.0 % ( 0.5 )% Valuation allowance ( 14.2 )% ( 16.6 )% ( 13.8 )% Effective income tax rate 4.2 % ( 1.2 )% ( 0.2 )% The net deferred tax assets and liabilities arising from temporary differences are as follows: Schedule of Deferred Tax Assets and Liabilities December 31, December 31, 2021 2020 (in millions) Depreciation $ 71.4 $ 48.0 Net operating losses 31.6 26.5 Other temporary differences 4.4 6.2 Total gross deferred tax assets 107.3 80.7 Valuation allowance balance ( 104.5 ) ( 76.4 ) Gross deferred tax assets 2.9 4.3 Intangible assets ( 0.3 ) ( 2.2 ) Other temporary differences ( 2.5 ) ( 2.1 ) Gross deferred tax liabilities ( 2.9 ) ( 4.3 ) Net deferred tax assets $ — $ — Changes in the valuation allowance are as follows: Schedule of Changes in the Valuation Allowance December 31, 2021 December 31, 2020 (in millions) Beginning balance $ 76.4 $ 65.7 Increase (decrease) 28.1 10.7 Reversal of allowance — — Ending balance $ 104.5 $ 76.4 As of December 31, 2021 and 2020, the Company has $ 39.5 million and $ 34.8 million, respectively, of gross federal net operating loss carry forwards, the earliest of which will begin to expire in 2034. The utilization of the Company’s pre-merger net operating losses is subject to a limitation due to the “change of ownership provisions” under Section 382 of the Internal Revenue Code. As of December 31, 2021 and 2020 the Company also has gross net operating losses in foreign jurisdictions, primarily the United Kingdom, totaling $ 83.2 million and $ 89.9 million, respectively. The majority of these net operating losses have an unlimited carry forward period. It is anticipated that these losses will not be utilized due to continuing losses in these jurisdictions, as such, the losses are fully offset with a valuation allowance. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the consideration of these items, management determined that it is more likely than not that the Company will not realize the deferred income tax asset balances and therefore, recorded full valuation allowances of $ 104.5 million and $ 76.4 million as of December 31, 2021 and 2020. The Company has not recognized deferred tax liabilities in respect of unremitted earnings that are considered indefinitely reinvested in foreign subsidiaries. We do not provide for taxes on our undistributed earnings of foreign subsidiaries that have not been previously taxed because we intend to invest such undistributed earnings indefinitely outside of the United States. Currently, there are no federal, state or foreign jurisdiction tax audits pending. The Company’s corporate federal and state tax returns from 2018 to 2020 remain subject to examination by tax authorities and the Company’s foreign tax returns from 2014 to 2020 remain subject to examination by tax authorities. F- 40 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 22. Related Parties HG Vora Special Opportunities Master Fund Limited (“HG Vora”) (a purchaser of our Senior Secured Notes issued on May 20, 2021) was a significant stockholder until October 12, 2021. Interest expense payable to HG Vora while a related party for the year ended December 31, 2021 amounted to $ 1.7 million. HG Vora previously held promissory notes of the Company issued under a note purchase agreement and guaranty dated August 13, 2018 which were repaid on October 1, 2019 (see note 13). The interest expense payable with respect to the promissory notes for the year ended December 31, 2019 amounted to $ 12.3 million and the repayment of the promissory notes included an exit payment premium in the amount of $ 4.2 million for repayment on an early basis. Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”), (an arranger and lending party under our RCF Agreement), and Macquarie Capital (Europe) Limited (“Macquarie EUR”), (an arranger and initial purchaser of our Senior Secured Notes), are affiliates of MIHI LLC, which beneficially owned approximately 11.4 % of our common stock as of December 31, 2021. Macquarie UK was also one of the lending parties with respect to the Prior Financing and its associated revolving credit facility. The portion of the Company’s aggregate senior debt of $ 316.7 million at December 31, 2021, and $ 313.3 million at December 31, 2020 held by Macquarie UK at December 31, 2021 and December 31, 2020 was $ 0.0 million and $ 30.7 million, respectively. Interest expense payable to Macquarie UK for the years ended December 31, 2021, 2020 and 2019 amounted to $ 0.9 million, $ 2.2 million and $ 0.5 million, respectively. In addition, $ 0.0 million and $ 0.6 million of accrued interest payable was due to Macquarie UK at December 31, 2021 and December 31, 2020, respectively and Macquarie EUR received $ 0.6 million of $ 5.5 million of fees paid in connection with the issuance of the Senior Secured Notes and the RCF in the year to December 31, 2021, and Macquarie UK received $ 0.3 million of a total $ 3.1 million of amendment fees paid with respect to the Prior Financing in the year ended December 31, 2020. 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. We 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 year ended December 31, 2021, the aggregate amount invoiced for reimbursement was $ 0.2 million. The 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. The Company held a 40 % non-controlling equity interest in Innov8 Gaming Limited (“Innov8”) from October 2019 until April 2020 when the Company disposed of its interest. Revenue earned from Innov8 while a related party for the year ended December 31, 2020 and 2019 amounted to $ 0.6 million and $ 0.4 million, respectively and purchases from Innov8 while a related party for the year ended December 31, 2020 and 2019 amounted to $ 0.2 million and $ 0.0 million, respectively. Amounts owed by Innov8 at December 31, 2019 amounted to $ 0.9 million. The value of the investment was impaired by $ 0.7 million to $ Nil in March 2020 prior to disposal. 23. Leases The Company as Lessee The Company is party to operating leases with third parties with respect to various real estate and vehicles. Real estate leases typically include a lease (of the property) and a non-lease (provision of services) component which are accounted for separately. Where lease costs are variable due to future rent reviews, these are treated as part of the lease asset and lease liabilities as they are considered to qualify as variable lease costs which are subject to an index or rate. These costs are included at the amount prior to any reviews, as it is not permitted to estimate future rent reviews. Where real estate leases contain an option to terminate, any period beyond the option date is only included as part of the lease term if the Company is reasonably certain not to exercise the option. Vehicle leases typically contain a lease (of the vehicle) and a non-lease (provision of services) component which are accounted for separately. The leases have remaining terms of 1 to 11 years. During the year to December 31, 2021 and 2020, certain concessions were granted with respect to the Company’s operating leases in light of Covid-19. These have taken the form of lease extensions, where nothing is paid for a period of time with that same period of time and payments added onto the lease at the end, payment holidays, where payments are deferred until a later date, but with no lease extension, and discounted payments, where payments are reduced and are not repaid either at a later date or through lease extensions. The Company has elected to use the practical expedient granted by the FASB and account for the concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract for all affected operating leases. Lease extensions and discounted payments are accounted using the ‘cash basis’ approach, with the lease liability and right-of-use asset continuing to be accounted for as if payments are still being made under the original terms of the lease. Payment holidays are accounted for using the ‘remeasurement consistent with resolving a contingency’ approach, which involves remeasuring the liability and the right-of-use asset and continuing to recognize the total cost of the lease on a straight line basis over the period to which it relates. F- 41 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company is also party to finance leases with third parties, with respect to gaming machines and fit out works at the Company’s main UK office. The leases have remaining terms of between 4 and 36 months. The components of lease expense were as follows: Schedule of Lease Expenses Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Finance lease costs: Depreciation $ 0.5 $ 0.1 $ — Interest 0.2 0.1 — Operating lease costs 4.4 4.3 2.1 Short-term lease costs 1.3 1.5 0.9 Variable lease costs 2.9 1.7 0.7 Total $ 9.3 $ 7.7 $ 3.7 December 31, 2021 December 31, 2020 Weighted average remaining lease term – finance leases 39.1 months 16.0 months Weighted average remaining lease term – operating leases 69.4 months 79.2 months Weighted average discount rate – finance leases 8.9 % 7.9 % Weighted average discount rate – operating leases 8.7 % 8.6 % Assets leased under finance leases had a cost of $ 4.2 million and $ 1.7 million at December 31, 2021 and 2020, respectively, and accumulated depreciation associated with these assets was $ 0.6 million and $ 0.1 million at December 31, 2021 and 2020, respectively. Future minimum finance lease payments as of December 31, 2021 were as follows: Schedule of Future Minimum Finance Lease Payments Year ending December 31, (in millions) 2022 $ 1.2 2023 0.7 2024 1.0 2025 0.6 2026 — Thereafter — Total future minimum lease payments 3.5 Less: imputed interest ( 0.7 ) Total $ 2.8 Future minimum operating lease payments as of December 31, 2021 were as follows: Schedule of Future Minimum Operating Lease Payments Year ending December 31, (in millions) 2022 $ 3.5 2023 2.3 2024 2.1 2025 1.4 2026 1.1 Thereafter 3.8 Total future minimum lease payments 14.2 Less: imputed interest ( 3.5 ) Total $ 10.7 F- 42 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The Company as Lessor The Company is party to leases with third parties with respect to various gaming machines. Gaming machine leases typically include a lease (of the machine) and a non-lease (provision of software services) component. The leases have remaining terms of 1 to 5 years. During the year to December 31, 2021 and 2020, the Company granted concessions to customers in the form of lease extensions granted during the lockdown period, where nothing is paid during the concession period, with that same period of time and payments added onto the lease at the end. The Company has elected to use the practical expedient granted by the FASB and account for the concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract for all affected leases. Assets leased under operating leases had a cost of $ 6.8 million and $ 5.9 million at December 31, 2021 and 2020, respectively, and accumulated depreciation associated with these assets was $ 2.8 million and $ 1.8 million at December 31, 2021 and 2020, respectively. Depreciation expense for the year ended December 31, 2021, 2020 and 2019 amounted to $ 1.4 million, $ 1.5 million and $ 0.3 million, respectively. The components of lease income were as follows: Schedule of Lease Income Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Interest receivable from sales type leases $ — $ 0.1 $ 0.1 Operating lease income 3.3 2.3 0.9 Variable income from sales type leases 0.1 0.7 0.3 Total $ 3.4 $ 3.1 $ 1.3 Future minimum sales type lease receivables as of December 31, 2021 were as follows: Schedule of Future Minimum Sales Type Lease Receivables Year ending December 31, (in millions) 2022 $ 0.7 2023 0.3 2024 — 2025 — 2026 — Total future minimum lease receivables 1.0 Less: imputed interest — Total $ 1.0 Future minimum operating lease receivables as of December 31, 2021 were as follows: Schedule of Future Minimum Operating Type Lease Receivables Year ending December 31, (in millions) 2022 $ 1.1 2023 1.6 2024 2.2 2025 — 2026 — Total future minimum lease receivables $ 4.9 F- 43 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 24. Commitments and Contingencies Employment Agreements We are party to employment agreements with our executive officers and other employees of the Company and our subsidiaries which contain, among other terms, provisions relating to severance and notice requirements. Legal Matters From time to time, the Company may become involved in lawsuits and legal matters arising in the ordinary course of business. While the Company believes that, currently, it has no such matters that are material, there can be no assurance that existing or new matters arising in the ordinary course of business will not have a material adverse effect on the Company’s business, financial condition or results of operations. 25. Pension Plan We operate a defined contribution plan in the US and both defined benefit and defined contribution pension schemes in the UK. The defined contribution scheme assets are held separately from those of the Company in an independently administered fund. The defined contribution pension cost charge represents contributions payable by the Company and amounted to $ 2.4 million, $ 2.3 million and $ 2.1 million for the year ended December 31, 2021, 2020 and 2019, respectively. Contributions totaling $ 0.8 million and $ 0.3 million were payable to the fund as at December 31, 2021 and 2020, respectively. The defined benefit scheme has been closed to new entrants since April 1, 1999 and closed to future accruals for services rendered to the Company for the entire financial statement periods presented in these consolidated financial statements. Retirement benefits are generally based on a portion of an employee’s pensionable earnings during years prior to 2010. The latest triennial actuarial valuation of the scheme as at March 31, 2018 was finalized in May 2019. The actuarial valuation revealed that the statutory funding objective was not met, i.e. there were insufficient assets to cover the Scheme’s Technical Provisions and there was a funding shortfall of £ 5.6 million ($ 7.5 million) at the valuation date. Under the Recovery Plan and Schedule of Contributions agreed between the Trustee and the Company, on March 15, 2019, it was agreed that no further deficit reduction contributions shall be made to the scheme, except in the event that the scheme funding level does not progress as expected, in which case contingent contributions would be made subject to an agreed maximum amount. It was determined that contingent contributions of $ 1.2 million and expense contributions of $ 0.3 million would be payable during the year ended December 31, 2021, with an additional $ 0.4 million of contingent contributions deferred from the year ended December 31, 2020 paid during the year ended December 31, 2021. In January 2022, the funding level of the scheme has been tested against the expected position at December 31, 2021 and it has been determined that further contingent contributions of $ 1.2 million and expense contributions of $ 0.4 million will be payable during the year ending December 31, 2022. F- 44 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The trustee has made an allowance for the pension scheme liability profile when deciding the investment strategy of the pension scheme. Since the pension scheme is closed to new entrants and ceased future accrual with effect from March 31, 2010, it has continued to mature gradually. Therefore, the trustee reviews the investment strategy regularly to check whether any changes are needed. When considering the investment strategy, the trustee has taken into account the effect of any possible increases in the deficit reduction contributions on the financial position of the Company, and the extent to which the Company will be able to bear these changes. The scheme’s investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments that avoids over-concentration of investment and spreads assets both over industries and geographies. In setting investment strategy, the trustees considered the lowest risk strategy that they could adopt in relation to the scheme’s liabilities and designed an asset allocation to achieve a higher return while maintaining a cautious approach to meeting the scheme’s liabilities. The trustees undertake periodic reviews of the investment strategy and take advice from their investment advisors. They consider a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The current strategy is to hold 22% in a diversified growth fund, 12% in diversified credit, 15% in equity-linked bonds, 6% in a liability-driven investment fund and 45% in a buy-in policy. Our pension benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, inflation, expected returns on plan assets, mortality rates and other factors. The assumptions used in recording the obligations under our plans represent our best estimates, and we believe that they are reasonable, based on information as to historical experience and performance as well as other factors that might cause future expectations to differ from past trends. Differences in actual experience or changes in assumptions may affect our pension obligations and future expense. The principal factors contributing to actuarial gains and losses each year are (1) changes in the discount rate used to value pension benefit obligations as of the measurement date and (2) differences between the expected and the actual return on plan assets. Our valuation methodologies used for pension assets measured at fair value are as follows. There have been no changes in the methodologies used at December 31, 2021 and December 31, 2020. The diversified fund is valued at fair value by using the net asset value (“NAV”) of shares held by the plan at the year end. The NAV of the diversified fund is not publicly quoted. The majority of the underlying securities have observable Level 1 or 2 pricing inputs, including quoted prices for similar assets in active or non-active markets. ASC 820, Fair Value Measurements and Disclosures, allows NAV per share to serve as a practical expedient to estimate the fair value of the diversified fund. ASC 820 also states that where NAV is allowed to be used as an estimate of fair value, if the reporting entity has the ability to redeem its investment at NAV as of the measurement date, that investment shall be categorized as a Level II fair value measurement. If the investment cannot be redeemed at the measurement date, but may be redeemable in the future, but at an uncertain date, the investment shall be categorized as a Level 3 fair value measurement. As of December 31, 2021 and December 31, 2020, the diversified fund was redeemable at NAV as of the measurement dates and, therefore, classified as Level 2. With respect to the buy-in contract, it was agreed during the year ended September 27, 2014, that 281 pensioners of the plan would be insured by means of a pensioner buy-in. The liabilities and assets in respect of insured pensioners are assumed to match for the purposes of ASC 715, Pensions - Retirement Benefits, disclosures (i.e. the full benefits have been insured). The approach adopted has therefore been to include within the total value of assets, an amount equal to the calculated total liability value of the insured pensioners on the actuarial assumptions adopted for ASC 715 purposes. The buy-in contract is, therefore, classified as Level 3. F- 45 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The following table sets forth the combined funded status of the pension plans and their reconciliation to the related amounts recognized in our consolidated financial statements at the respective measurement dates: Schedule of Pension Plans and their Reconciliation December 31, 2021 December 31, 2020 (in millions) Change in benefit obligation: Benefit obligation at beginning of period $ 127.8 $ 110.4 Interest cost 1.6 2.2 Prior service cost — — Actuarial (gain) loss ( 9.8 ) 14.5 Benefits paid ( 3.5 ) ( 4.1 ) Foreign currency translation adjustments ( 1.4 ) 4.8 Benefit obligation at end of period $ 114.7 $ 127.8 Change in plan assets: Fair value of plan assets at beginning of period $ 118.7 $ 107.3 Actual gain on plan assets 2.5 9.8 Employer contributions 1.5 1.6 Benefits paid ( 3.5 ) ( 4.1 ) Foreign currency translation adjustments ( 1.5 ) 4.1 Fair value of assets at end of period $ 117.7 $ 118.7 Amount recognized in the consolidated balance sheets: Overfunded (Unfunded) status (non-current) $ 3.0 $ ( 9.1 ) Net amount recognized $ 3.0 $ ( 9.1 ) The following table presents the components of our net periodic pension (benefit) cost: Schedule of Periodic Pension (Benefit) Cost Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Components of net periodic pension (benefit) cost: Interest cost $ 1.6 $ 2.2 $ 2.7 Expected return on plan assets ( 2.7 ) ( 3.1 ) ( 3.5 ) Amortization of net loss 0.9 0.6 0.3 Net periodic (benefit) cost $ ( 0.2 ) $ ( 0.3 ) $ ( 0.5 ) The accumulated benefit obligation for all defined benefit pension plans was $ 114.7 million and $ 127.8 million as of December 31, 2021 and December 31, 2020, respectively. The overfunded (underfunded) status of our defined benefit pension plans recorded as an asset (liability) in our consolidated balance sheets as of December 31, 2021 and December 31, 2020 was $ 3.0 million and $ ( 9.1 ) million, respectively. The estimated net loss, net transition asset (obligation) and prior service cost for the plan that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year are $ 0.5 million, $ nil and $ nil , respectively. The fair value of the plan assets at December 31, 2021 by asset category is presented below: Schedule of Fair Value of Plan Assets Level 1 Level 2 Level 3 Total (in millions) Diversified fund $ — $ 79.1 $ — $ 79.1 Buy-in contract — — 38.1 38.1 Cash and other current assets 0.5 — — 0.5 Total $ 0.5 $ 79.1 $ 38.1 $ 117.7 F- 46 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The fair value of the plan assets at December 31, 2020 by asset category is presented below: Level 1 Level 2 Level 3 Total (in millions) Diversified fund $ — $ 75.1 $ — $ 75.1 Buy-in contract — — 42.9 42.9 Cash 0.7 — — 0.7 Total $ 0.7 $ 75.1 $ 42.9 $ 118.7 The table below presents the weighted-average actuarial assumptions used to determine the benefit obligation and net periodic benefit cost for the Plan. Schedule of Benefit Obligation and Net Periodic Benefit Cost for Plan December 31, 2021 December 31, 2020 Discount rate 2.00 % 1.30 % Expected return on assets 3.00 % 2.30 % RPI inflation 3.25 % 2.90 % CPI inflation – pre 2030 2.25 % 1.90 % CPI inflation – post 2030 3.05 % 2.70 % Pension increases – pre-2006 service 3.15 % 2.90 % Pension increases – post-2006 service 2.20 % 2.10 % Pension increases – post 1988 GMP – pre 2030 2.10 % 1.80 % Pension increases – post 1988 GMP – post 2030 2.60 % 2.40 % The following benefit payments are expected to be paid: Schedule of Benefit Payments are Expected to Be Paid (in millions) 2022 $ 3.1 2023 $ 3.1 2024 $ 3.1 2025 $ 3.4 2026 $ 3.6 2027 to 2031 $ 21.0 26. Segment Reporting and Geographic Information Operating segments are identified as components of an enterprise for which separate and discrete financial information is available and is used by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief decision-maker is the Office of the Executive Chairman. The Company’s chief decision-maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenue and operating profit by reporting unit. This information is used for purposes of allocating resources and evaluating financial performance. The Company 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 managed and the way the performance of each segment is evaluated. The accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies.” F- 47 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 The 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 years ended December 31, 2021, December 31, 2020 and December 31, 2019, 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. Segment Information Schedule of Segment Reporting Information By Segment Year Ended December 31, 2021 Gaming Virtual Sports Interactive Leisure Corporate Functions Total (in millions) Revenue: Service $ 58.8 $ 36.0 $ 22.8 $ 65.7 $ — $ 183.3 Product sales 22.6 — — 3.0 — 25.6 Total revenue 81.4 36.0 22.8 68.7 — 208.9 Cost of sales, excluding depreciation and amortization: Cost of service ( 12.8 ) ( 1.9 ) ( 3.7 ) ( 15.9 ) — ( 34.3 ) Cost of product sales ( 14.4 ) — — ( 2.0 ) — ( 16.4 ) Selling, general and administrative expenses ( 28.1 ) ( 7.1 ) ( 6.1 ) ( 35.1 ) ( 20.8 ) ( 97.2 ) Stock-based compensation expense ( 1.8 ) ( 0.8 ) ( 0.6 ) ( 0.6 ) ( 9.2 ) ( 13.0 ) Acquisition and integration related transaction expenses — — — — ( 1.6 ) ( 1.6 ) Depreciation and amortization ( 22.5 ) ( 3.4 ) ( 3.2 ) ( 16.1 ) ( 1.8 ) ( 47.0 ) Segment operating income (loss) 1.8 22.8 9.2 ( 1.0 ) ( 33.4 ) ( 0.6 ) Net operating loss $ ( 0.6 ) Total assets at December 31, 2021 $ 100.5 $ 61.6 $ 12.3 $ 85.7 $ 71.6 $ 331.7 Total goodwill at December 31, 2021 $ 1.4 $ 47.4 $ 0.4 $ 33.5 $ — $ 82.7 Total capital expenditures for the year ended December 31, 2021 $ 10.9 $ 3.3 $ 3.7 $ 8.9 $ 1.4 $ 28.2 Year Ended December 31, 2020 Gaming Virtual Sports Interactive Leisure Corporate Functions Total (in millions) Revenue: Service $ 92.2 $ 32.4 $ 13.3 $ 40.8 $ — $ 178.7 Product sales 18.3 — — 2.8 — 21.1 Total revenue 110.5 32.4 13.3 43.6 — 199.8 Cost of sales, excluding depreciation and amortization: Cost of service ( 15.7 ) ( 2.9 ) ( 1.9 ) ( 9.6 ) — ( 30.1 ) Cost of product sales ( 12.4 ) — — ( 2.0 ) — ( 14.4 ) Selling, general and administrative expenses ( 24.5 ) ( 4.4 ) ( 3.9 ) ( 30.8 ) ( 21.2 ) ( 84.8 ) Stock-based compensation expense ( 0.8 ) ( 0.4 ) ( 0.3 ) ( 0.1 ) ( 3.2 ) ( 4.8 ) Acquisition and integration related transaction expenses — — — — ( 7.0 ) ( 7.0 ) Depreciation and amortization ( 27.6 ) ( 3.7 ) ( 2.3 ) ( 16.9 ) ( 1.8 ) ( 52.3 ) Segment operating income (loss) 29.5 21.0 4.9 ( 15.8 ) ( 33.2 ) 6.4 Net operating income $ 6.4 Total assets at December 31, 2020 $ 93.9 $ 64.4 $ 8.5 $ 87.0 $ 70.3 $ 324.1 Total goodwill at December 31, 2020 $ 1.4 $ 48.0 $ 0.4 $ 33.9 $ — $ 83.7 Total capital expenditures for the year ended December 31, 2020 $ 8.9 $ 4.8 $ 2.7 $ 8.7 $ 4.9 $ 30.0 F- 48 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 Year Ended December 31, 2019 Gaming Virtual Sports Interactive Leisure Corporate Functions Total (in millions) Revenue: Service $ 73.8 $ 33.4 $ 4.7 $ 22.6 $ — $ 134.5 Product sales 17.7 — — 1.2 — 18.9 Total revenue 91.5 33.4 4.7 23.8 — 153.4 Cost of sales, excluding depreciation and amortization: Cost of service ( 18.1 ) ( 2.6 ) ( 0.7 ) ( 4.0 ) — ( 25.4 ) Cost of product sales ( 12.0 ) — — ( 0.9 ) — ( 12.9 ) Selling, general and administrative expenses ( 29.7 ) ( 6.0 ) ( 4.0 ) ( 12.7 ) ( 18.0 ) ( 70.4 ) Stock-based compensation expense ( 1.0 ) ( 0.6 ) ( 0.2 ) ( 0.1 ) ( 7.1 ) ( 9.0 ) Acquisition and integration related transaction expenses — — — — ( 6.7 ) ( 6.7 ) Depreciation and amortization ( 30.4 ) ( 2.6 ) ( 2.9 ) ( 3.8 ) ( 2.3 ) ( 42.0 ) Segment operating income (loss) 0.3 21.6 ( 3.1 ) 2.3 ( 34.1 ) ( 13.0 ) Net operating loss $ ( 13.0 ) Total capital expenditures for the year ended December 31, 2019 $ 14.0 $ 4.5 $ 1.4 $ 2.7 $ 2.6 $ 25.2 Geographic Information Geographic information for revenue is set forth below: Schedule of Geographic Information Year Ended December 31, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019 (in millions) Total revenue UK $ 149.1 $ 152.3 $ 103.7 Greece 18.6 17.0 20.7 Rest of world 41.2 30.5 29.0 Total $ 208.9 $ 199.8 $ 153.4 Total revenue $ 208.9 $ 199.8 $ 153.4 Geographic information of our non-current assets excluding goodwill is set forth below: December 31, 2021 December 31, 2020 (in millions) UK $ 90.0 $ 101.8 Greece 11.6 18.2 Rest of world 21.0 11.4 Total $ 122.6 $ 131.4 Total non-current assets excluding goodwill $ 122.6 $ 131.4 Software development costs are included as attributable to the market in which they are utilized. F- 49 INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2021 AND 2020, AND FOR THE YEARS ENDED DECEMBER 31, 2021, 2020 AND 2019 27. Customer Concentration During the year ended December 31, 2021, no customers represented at least 10 % of revenues. During the year ended December 31, 2020, one customer represented at least 10% of revenues, accounting for 22 % of the Company’s revenues. This customer was served by the Gaming, Virtual Sports and Interactive segments. During the year ended December 31, 2019, two customers represented at least 10% of revenues, accounting for 14 % and 13 % of the Company’s revenues. The first customer was served by the Gaming, Virtual Sports and Interactive segments, the second customer was served by the Gaming and the Virtual Sports segments. At December 31, 2021 and 2020, there were no customers that represented at least 10 % of the Company’s accounts receivable. 28. Subsequent Events The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Other than as described below, the Company did not identify subsequent events that would have required adjustment or disclosure in the consolidated financial statements. In January 2022, the Company sold its Italian VLT business, including all terminal and other assets, staff costs and facilities and contracts for total proceeds of € 1.2 million ($ 1.4 million), recognizing a profit on disposal of € 0.8 million ($ 0.9 million). The Company continues to serve these Italian markets in the form of the provision of platform and games. F- 50 Part iv Item 16. Form 10-K Summary. None. Exhibits (c) Exhibits. Exhibit Number Description 2.1 Share Sale Agreement, dated July 13, 2016, by and among Hydra Industries Acquisition Corp., the Vendors, Target Parent, DMWSL 632 Limited and Gaming Acquisitions Limited (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on July 19, 2016). 2.2 Completion Arrangements Agreement, dated December 23, 2016, between Hydra Industries Acquisition Corp. and the Vendors listed in schedule 1 to the Share Sale Agreement (incorporated herein by reference to Exhibit 10.18 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 2.3 Share Purchase Agreement, dated as of June 11, 2019, by and between Inspired Gaming (UK) Limited and Novomatic UK Ltd. (incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K of the Company, filed with the SEC on June 11, 2019). 3.1(a) Second Amended and Restated Certificate of Incorporation of Inspired Entertainment, Inc. (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 3.1(b) Certificate of Elimination of Series A Junior Participating Preferred Stock, dated August 13, 2020 (incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K of the Company, filed with the SEC on August 14, 2020). 3.2 Amended and Restated Bylaws of Inspired Entertainment, Inc. (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K Company, filed with the SEC on November 11, 2019). 4.1 Registration Rights Agreement, dated October 24, 2014, between Hydra Industries Acquisition Corp. and certain security holders (incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of the Company, filed with the SEC on October 29, 2014). 4.2 Warrant Agreement, dated October 24, 2014, between Hydra Industries Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 4.6 to the Current Report on Form 8-K of the Company, filed with the SEC on October 29, 2014). 4.3 Registration Rights Agreement, dated December 23, 2016, by and among Hydra Industries Acquisition Corp. and the Vendors (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 4.4* Description of Securities. 4.5 Indenture, dated as of May 20, 2021, among Inspired Entertainment (Financing) PLC, as issuer, the Company, as a guarantor, the subsidiaries of the Company named therein, as additional guarantors, GLAS Trustees Limited, as trustee, GLAS Trust Corporation Limited as security agent and GLAS Trust Company LLC as paying agent, transfer agent and registrar (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of the Company, filed with the SEC on May 20, 2021). 4.6 Form of 7.875% Senior Secured Notes due 2026 (included in Exhibit 4.5). 10.1 Super Senior Revolving Credit Facilities Agreement, dated as of May 20, 2021, among the Company, Gaming Acquisition Limited, Inspired Entertainment (Financing) PLC and Inspired Gaming (UK) Limited as original borrowers, the subsidiaries of the Company named therein as original guarantors, Global Loan Agency Services Limited as agent, GLAS Trust Corporation Limited as security agent and Barclays Bank plc and Macquarie Corporate Holdings Pty Limited (UK Branch) as arrangers and original lenders (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on May 20, 2021). 62 Exhibit Number Description 10.2 Form of Director and Officer Indemnity Agreement (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 10.3 Stockholders Agreement, dated December 23, 2016, by and among the Company, Hydra Industries Sponsor LLC, Macquarie Sponsor and the Vendors (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 10.4# Inspired Entertainment, Inc. 2016 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Annual Report on Form 10-K of the Company, filed with the SEC on December 4, 2017). 10.5# Inspired Entertainment, Inc. Second Long-Term Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.5 to the Post-Effective Amendment to the Registration Statement on Form S-1 of the Company, filed with the SEC on December 29, 2017). 10.6# Inspired Entertainment, Inc. 2018 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.6 to the Annual Report on Form 10-K of the Company, filed with the SEC on December 10, 2018). 10.7#* Inspired Entertainment, Inc. 2021 Omnibus Incentive Plan. 10.8# Forms of Grant Agreements for fiscal year 2019 under the Inspired Entertainment, Inc. 2018 Omnibus Incentive Plan (Time-Based Form of Agreement and Performance-Based Form of Agreement) (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 10, 2019). 10.9# Inspired Entertainment, Inc. 2021 Short-Term Incentive Bonus Plan. (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on August 12, 2021) 10.10# Employment Agreement, dated as of October 9, 2020, by and between the Company and A. Lorne Weil (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on October 13, 2020). 10.11# Letter Agreement, dated March 27, 2020, between the Company and A. Lorne Weil (incorporated by reference herein to Exhibit 10.14 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.12# Letter, dated April 21, 2021, from the Company to A. Lorne Weil (incorporated by reference herein to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 14, 2021). 63 Exhibit Number Description 10.13# Addendum, effective June 21, 2021, to the Employment Agreement dated October, 9, 2020 by and between the Company and A. Lorne Weil (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the Company on June 24, 2021). 10.14# Employment Agreement, dated February 17, 2020, between Inspired Entertainment, Inc. and Brooks H. Pierce (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.15# Letter Agreement, dated March 28, 2020, between Inspired Entertainment, Inc. and Brooks H Pierce (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.16# Letter Agreement, dated July 21, 2021, by and between the Company and Brooks H. Pierce (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on July 23, 2021). 10.17# Employment Agreement, dated December 14, 2016, between Hydra Industries Acquisition Corp. and Daniel B. Silvers (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company, filed with the SEC on December 30, 2016). 10.18# Amendment, dated December 22, 2017, to the Employee Agreement, dated December 14, 2016, between Hydra Industries Acquisition Corp. and Daniel B. Silvers (incorporated herein by reference to Exhibit 10.13 to the Post-Effective Amendment to the Registration Statement on Form S-1 of the Company, filed with the SEC on December 29, 2017). 10.19# Amendment effective January 31, 2020, to the Employment Agreement dated December 14, 2016 (as amended) by and between the Company and Daniel B. Silvers (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company, filed with the SEC on February 6, 2020). 10.20# Letter Agreement, dated March 28, 2020, between the Company and Daniel B. Silvers (incorporated herein by reference to Exhibit 10.20 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.21# Employment Agreement, dated August 3, 2021, by and between IG UK and Stewart F.B. Baker (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on August 5, 2021). 10.22# Letter Agreement, dated March 30, 2020, between the Company. and Stewart Baker (incorporated herein by reference to Exhibit 10.23 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.23# Employment Agreement, dated August 3, 2021, by and between IG UK and Carys Damon (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company, filed with the SEC on August 5, 2021). 64 Exhibit Number Description 10.24# Letter Agreement, dated March 30, 2020, between Inspired Entertainment, Inc. and Carys Damon (incorporated herein by reference to Exhibit 10.25 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 30, 2020). 10.25# Inspired Entertainment, Inc. Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of the Company, filed with the SEC on July 14, 2017). 10.26# Non-Employee Director Compensation Policy (updated effective January 1, 2019) (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on February 11, 2019). 21.1* Subsidiaries of the Company. 23.1* Consent of Marcum LLP. 31.1* Section 302 Certification of Principal Executive Officer. 31.2* Section 302 Certification of Principal Financial Officer. 32.1** Section 906 Certification of Principal Executive Officer. 32.2** Section 906 Certification of Principal Financial Officer. 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Schema 101.CAL* Inline XBRL Taxonomy Calculation Linkbase 101.DEF* Inline XBRL Taxonomy Definition Linkbase 101.LAB* Inline XBRL Taxonomy Label Linkbase 101.PRE* Inline XBRL Taxonomy Presentation Linkbase # Indicates management contract or compensatory plan. * Filed herewith. ** Furnished herewith. 65 SIGNATURES 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. INSPIRED ENTERTAINMENT, INC. Date: March 31, 2022 By: /s/ A. Lorne Weil A. Lorne Weil Executive Chairman (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: March 31, 2022 /s/ A. Lorne Weil A. Lorne Weil, Executive Chairman Date: March 31, 2022 /s/ Andrew C. Stone Andrew C. Stone, Interim Principal Financial and Accounting Officer Date: March 31, 2022 /s/ Michael R. Chambrello Michael R. Chambrello, Director Date: March 31, 2022 /s/ Ira H. Raphaelson Ira H. Raphaelson, Director Date: March 31, 2022 /s/ Desirée G. Rogers Desirée G. Rogers, Director Date: March 31, 2022 /s/ Steven M. Saferin Steven M. Saferin, Director Date: March 31, 2022 /s/ Katja Tautscher Katja Tautscher, Director Date: March 31, 2022 /s/ John M. Vandemore John M. Vandemore, Director 66