What changed in this filing

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Item 9A. Controls and Procedures

2024-02-27 compared with 2021-05-10 · 357 added, 2670 removed, 41 unchanged (99% of the section changed)

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Disclosure controls and procedures are controls and other procedures

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.

As a result of the deficiencies noted below that, in the aggregate

led to a material weakness in our internal control over financial reporting disclosed below, which management believes arose as

a result of several unusual events including but not limited to the present COVID-19 outbreak, our Certifying Officers have concluded

that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2019.

Notwithstanding the identified material weakness and management’s

assessment that our internal control over financial reporting was not effective as of December 31, 2019, management believes that

the consolidated financial statements and related disclosures included in this Annual Report on Form 10-K fairly present, in all

material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance

with generally accepted accounting principles.

Management’s Report on Internal Control Over Financial

As required by the SEC rules and regulations for 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.

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

of Prior Period Financial Statements

previously reported by the Company in a Form 8-K filed with the SEC on November 8, 2023, the Audit Committee (the “Audit Committee”)

of the Board of Directors of the Company, in consultation with the Company’s management, determined that the Company’s previously

issued audited consolidated financial statements as of December 31, 2022 and 2021 and for each of the three years in the period ended

December 31, 2022 and associated reports of the Company’s independent registered public accounting firm included in the Company’s

Annual Report on Form 10-K as well as the Company’s previously issued unaudited condensed consolidated financial statements during

those years, as well as for the first and second quarters of 2023 included in the Company’s Quarterly Reports on Form 10-Q (the

“Subject Periods”) contained accounting errors relating to compliance with U.S.

The errors related primarily to the

application of the relevant accounting standards to projects, including the categories of projects available for capitalization, the

types of costs eligible for capitalization and the timing of capitalization with respect to software development projects.

significant errors in the application of accounting were identified for goodwill and intangible assets, costs to fulfill and obtain a

contract, revenue, pensions, inventory, leases and basic and diluted EPS.

As a result of these errors, the Audit Committee determined

that the Company’s consolidated financial statements for the Subject Periods should no longer be relied upon and should be restated.

Similarly, any previously issued or filed reports, press releases, earnings releases, investor presentations or other communications

of the Company describing the Company’s financial results or other financial information relating to the Subject Periods should

no longer be relied upon.

Additionally, the reports of Marcum LLP, the Company’s independent registered public accounting firm,

on the Company’s consolidated financial statements for 2022 and 2021 likewise should no longer be relied upon.

of Disclosure Controls and Procedures.

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.

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 at December 31, 2022 were not effective, due to the material weaknesses described

light of these material weaknesses, we performed additional analyses as deemed necessary to ensure that our financial statements were

prepared in accordance with U.S.

generally accepted accounting principles.

believes that the consolidated financial statements as of as of December 31, 2022 and 2021, and for each of the three years in the period

ended December 31, 2022, and related notes, as restated, thereto included in this Annual Report on Form 10-K/A fairly present, in all

material aspects, the Company’s financial condition, results of operations and cash flows for the periods presented and restated.

Report on Internal Control Over Financial Reporting as Part of Section 404 of the Sarbanes-Oxley Act 2002 (“SOX”)

management is responsible for establishing and maintaining adequate internal control over financial reporting.

Insofar as the Company

is subject to Section 404(b) of SOX, this Annual Report on Form 10-K/A includes an opinion by our external auditors on the effectiveness

of our internal control over financial reporting at December 31, 2022 in addition to management’s assessment of the effectiveness

of internal control over financial reporting under the requirements of Section 404(a) of SOX.

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.

Our internal control over financial reporting includes

those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of

the assets of our Company;

provide reasonable assurance that transactions are recorded as necessary to permit the preparation of consolidated financial statements

in accordance with U.S.

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;

(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.

Because of its inherent limitations, 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

GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management

and directors;

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.

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 assessed the effectiveness

of our internal control over financial reporting as of December 31, 2019.

In making this assessment, management used the criteria

set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —

Framework (2013).

Based on this evaluation, management identified the following deficiencies in internal control over financial

reporting as described below.

connection with the audit of our consolidated financial statements and related disclosures as of and for the year ended December 31,

2019, we identified certain misstatements in our draft year-end footnote disclosures provided to them which were not individually material

but which in aggregate led to a material weakness in our internal control over financial reporting.

All significant identified errors

have been corrected.

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 material weakness did not result in any identified misstatements to the

current financial statements or footnote disclosures and there were no changes to previously released financial statements or footnote

disclosures apart from two immaterial account reclassifications, one on the balance sheet and one on the statement of cash flows.

has concluded that the misstatements in our footnote disclosures were the result of several unusual events occurring during the fourth

quarter 2019 and/or during the related accounting closing and reporting period leading up to our Annual Report on Form 10-K including

office closures due to the COVID-19 outbreak, a significant acquisition, first time adoption of accounting standards and which, in the

aggregate, contributed to a breakdown in related controls over footnote disclosure review.

As a result of the material weakness, management

concluded that our internal control over financial reporting was not effective as of December 31, 2019.

addition, management has identified a material weakness in internal controls related to the accounting for warrants, as described in

Note 1 to the Notes to Consolidated Financial Statements entitled “Restatement of Previously Reported Information”.

As a non-accelerated filer, the Company is not required to include

in this report a report on the effectiveness of internal control over financial reporting by the Company’s independent registered

public accounting firm.

Remediation of Material Weakness

Our Board of Directors and management take internal control

over financial reporting and the integrity of our financial statements seriously.

Prospectively and in particular while the current

remote working conditions associated with the COVID-19 outbreak remain in effect, Management intends to ensure that all reviews

are fully completed prior to issuing the draft financial statements to our external auditors (or where possible make it clear this

is the case) .

Management will also add an additional third-party external review of the financial statements to the process prior

to submission moving forward.

At this time, we cannot provide assurance that these remediation efforts will be successful or that

our internal control over financial reporting will be effective as a result of these efforts.

In addition, we continue to evaluate

and work to improve our internal control over financial reporting related to the identified deficiencies that led, in aggregate,

to a material weakness, management may determine to take additional measures to address control deficiencies or determine to modify

the remediation plan described above.

Changes in Internal Control Over Financial Reporting

Except for the changes noted above

regarding the material weakness and the implementation of internal controls over lease accounting and revenue recognition related to

our implementation of ASU No.

2016-02, Leases (Topic 842) and ASC 606, Revenue Recognition, respectively, 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, as the circumstances that led to the restatement of our financial statements described in this Annual Report

on Form 10-K had not yet been identified.

Due solely to the events that led to our restatement of our financial statements, management

has also identified a material weakness in internal controls related to the accounting for warrants, as described in Note 1 to the Notes

to Consolidated Financial Statements entitled “Restatement of Previously Reported Information”.

has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 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, our internal control over financial reporting at December 31, 2022 was not effective, based upon the material

weaknesses discussed below.

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.

effort of Previously Reported Material Weakness

previously disclosed in Item 9A of our Annual Report on Form10-K for the year ended December 31, 2021, management identified a material

weakness in internal control over financial reporting relating to an ineffective risk assessment and response process (the “Risk

Assessment and Response Material Weakness”).

Namely, the Company had not established an effective control environment due to the

ineffective design and implementation of management review controls.

These controls pertain to approval processes of accounting estimates

and account reconciliations of some of the Company’s significant accounts.

These deficiencies represented material weaknesses in

the Company’s internal control over financial reporting as there was a reasonable possibility that a material misstatement with

respect to certain of the Company’s significant accounts and disclosures would 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

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 had 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.

of December 31, 2022, the Company was of the position that their remediation efforts were successful with respect to remediating previously

reported Risk Assessment and Response Material Weakness by (1) establishing an executive steering committee to monitor the remediation

of the underlying control deficiencies, (2) hiring an additional SOX specialist in June 2022 to support the Chief Financial Officer and

Director of Finance, (3) increasing the use our outsourced SOX service provider to assist in all aspects of our SOX program, (4) providing

one-on-one training to control owners who are part of our broader accounting and operations teams on control execution and related documentation

and evidence, (5) re-mapping internal control over financial reporting to risks and financial statement assertions, (6) remediating previously

identified control gaps or deficient controls by implementing newly designed controls and/or enhancing the operation and/or underlying

evidence of existing controls, (7) expanding business process narratives with enhanced details of process flows and controls, and (8)

enhancing the documentation of the execution of management review controls.

The Company completed its testing of the effectiveness of

the remediated, newly designed, and re-designed controls and, other than those relating to the material weaknesses identified below,

initially noted no material control deficiencies.

However, because of the significant errors identified below, Management concluded that

the Risk Assessment and Response Material Weakness remained unremediated as of December 31, 2022.

Identified Material Weaknesses and Remediation

Assessment and Controls Design and Accounting Competency

Company has identified additional areas of material weakness in internal controls over financial reporting relating to an ineffective

risk assessment and appropriate design of controls process (the “Risk Assessment and Controls Design Material Weakness”)

as well as inadequate monitoring controls (the “Monitoring Controls Material Weakness”).

Namely, the Company had not established

an effective control environment due to not effectively identifying risks in the process and then had an ineffective design and implementation

of certain process controls including but not limiting the following areas:

(i) Preparation, review and approval of account analyses,

summaries and reconciliations;

(ii) documenting accounting policies and design procedures and controls to ensure compliance with Company

accounting policies and US GAAP;

(iii) review and approval of journal entries;

(iv) accuracy of information input into and output from

the financial reporting and accounting systems;

(v) accuracy and completeness of the financial statement disclosures and presentations

in accordance with GAAP.

The Company also did not maintain an effective program for monitoring the design and operational effectiveness

of internal controls over the financial close and reporting process including identification, evaluation, and timely remediation of control

deficiencies over financial reporting deficiencies throughout interim and annual financial periods.

The above deficiencies represented

material weaknesses in the Company’s internal control over financial reporting as there was a reasonable possibility that a material

misstatement with respect to certain of the Company’s significant accounts and disclosures would not be prevented or detected.

Additionally, the Company has identified a material weakness in Accounting and Reporting Competencies.

These controls relate to the Company’s

Finance function including individuals with public accounting and reporting experience, along with competency and training on U.S.

and SEC reporting to ensure compliance with reporting requirements.

These controls represent a material weakness as there is a reasonable

possibility that without the appropriate level of knowledge, a material misstatement with respect to certain of the Company’s significant

accounts or disclosures could not be prevented or detected.

contributing to these material weaknesses included the acquisition of Novomatic UK Gaming Technology in October, 2019, which approximately

doubled the size of the Company.

A new Finance and Accounting team was formed based on the acquisition with decentralized locations,

processes, and technology.

SOX controls and documentation were not reviewed and standardized across the departments in a timely manner

following the acquisition.

Additionally, sufficient personnel with U.S.

GAAP experience were not in place across the organization.

remediation for these material weaknesses includes (1) effectiveness risk assessments along with development, enhancement and implementation

of processes and controls in designated areas to evaluate, record and report transactions according to U.S.

GAAP with supporting controls.

Risk and gap assessment has commenced in all accounting areas to enhance 2024 SOX remediation program.

(2) Documentation of U.S.

accounting policies with corresponding process flows and controls.

New policy documentation covering critical areas has been developed

and new corresponding flows and controls will be documented as part of 2024 SOX remediation program.

(3) Automation and monitoring of

critical accounting transaction processing and controls to facilitate compliance.

Key changes in the financial ERP have commenced and

implementation of new revenue and lease systems is commencing.

(4) Continued advisory support from outsourced technical accounting provider

on significant and complex transactions and introduction of new SOX provider to assist in implementation, (5) Recruitment in key accounting

leadership roles of Chief Financial Officer, Global Financial Controller, and Director of Audit, SOX and Accounting Policy all with U.S.

GAAP experience.

Individuals in certain roles are already in place with needed expertise (6) Training of accounting team in relevant

GAAP areas (7) establishment of monitoring procedures for identification of control deficiencies over financial reporting throughout

interim and annual financial periods.

this deficiency, Management has corrected the resulting financial statement misstatements and Management is planning to remediate the

material weakness during 2024 by implementing the remediation plan above.

has identified internal control deficiencies due to IT program and data changes affecting the Company’s financial IT applications

and underlying accounting records, not being identified, tested, authorized, and implemented appropriately to validate that data produced

by its relevant IT system(s) was complete and accurate.

Automated process-level controls and manual controls that are dependent upon

the information derived from such financially relevant systems were also determined to be ineffective, as a result of such deficiency

and there was not appropriate segregation of duties that would adequately restrict user and privileged access to the financially relevant

systems and data to the appropriate Company personnel.

Management has concluded that these deficient controls could fail to prevent or

detect a material misstatement and as such rise to a material weakness in the aggregate.

is planning to continue remediating the design of segregation of duties during 2024 by changing access levels, and reviewers, and updating

Despite this deficiency, Management is not aware of any resulting financial statement misstatements and, additionally, management

has undertaken a retrospective analysis of 2022 transactions of individuals with such incompatibilities and our analysis indicates that

none of the changes made was incorrect or inappropriate.

respect to all deficiencies identified above, management has begun the remediation process, however the material weaknesses cannot be

considered fully remediated until it is demonstrated that the new or enhanced controls and other impacted or dependent controls have

operated effectively for a sufficient period of time.

in Internal Control Over Financial Reporting

for the changes noted above in connection with the initiatives to remediate material weaknesses, 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

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

Opinion on Internal Control over Financial Reporting

have audited Inspired Entertainment, Inc.

and Subsidiaries’ (the “Company”) internal control over financial reporting

as of December 31, 2022, 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 weaknesses described in

the following paragraphs 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, 2022, based on criteria established in Internal Control-Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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 weaknesses have been identified and are included in “Management’s Annual

Report on Internal Control Over Financial Reporting”:

controls relating to IT change management:

The Company did not design and/or implement program change management controls to ensure

the IT program and data changes affecting the Company’s financial IT applications & underlying accounting records, are identified,

tested, authorized and implemented appropriately to validate that data produced by its relevant IT systems were complete and accurate.

Automated process-level controls and manual controls that are dependent upon the information derived from such financially relevant systems

were also determined to be ineffective as a result of such deficiency.

controls relating to IT user access controls:

The Company did not design and/or implement user access controls to ensure that appropriate

segregation of duties would adequately restrict user and privileged access to the financially relevant systems and data to the appropriate

Company personnel.

Automated process-level controls and manual controls that are dependent upon the information derived from such financially

relevant systems were also determined to be ineffective as a result of such deficiency.

controls relating to Risk Assessments:

The Company has not established an effective control environment related to the Company’s

Risk Assessment and Response due to the ineffective design and implementation of process controls, including effective management review

These controls include but are not limited to accounting estimates, account reconciliations and approval processes of some

of the Company’s accounts.

documentation of accounting policies and procedures and staff training:

The Company lacks a sufficient level of formal documentation

of accounting policies and procedures that define how transactions should be initiated, recorded, processed, and reported.

has not established effective controls related to the Company’s finance function including individuals with appropriate level of

accounting and reporting experience, along with competency and training on U.S.

GAAP and SEC reporting.

In addition, the Company did

not maintain adequate segregation of duties or the appropriate level of review procedures to record amounts appropriately.

controls relating to the financial reporting and closing process:

The Company’s internal controls were not adequately designed

in a manner to effectively support the requirement of the financial reporting and closing process.

The material weakness is an aggregation

of deficiencies including but not limiting the following areas:

(i) Preparation, review and approval of account analyses, summaries and

reconciliations (including matters related to cash collections and contract approvals as previously reported);

(ii) documenting accounting

policies and design procedures and controls to ensure compliance with Company accounting policies and US GAAP;

(iii) review and approval

of journal entries;

(iv) accuracy of information input into and output from the financial reporting and accounting systems;

and completeness of the financial statement disclosures and presentations in accordance with GAAP.

Due to the significance of the financial

closing and reporting process to the preparation of reliable financial statements, and the potential pervasiveness of the deficiencies

to the Company’s account balances and disclosures, there is a reasonable possibility that a material misstatement to the annual

or interim financial statements will not be prevented or detected on a timely basis.

monitoring controls:

The Company did not maintain an effective program for monitoring the design and operational effectiveness of

internal controls over the financial close and reporting process including identification, evaluation, and timely remediation of control

deficiencies over financial reporting deficiencies throughout interim and annual financial periods.

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 the Company’s significant accounts and disclosures will not be prevented

or detected on a timely basis.

material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the December

31, 2022 consolidated financial statements, and this report does not affect our report on such financial statements.

have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the Company’s consolidated balance sheets as of December 31, 2022 and 2021 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, 2022 and our report dated March 16, 2023, except for the effects of the restatement as discussed in Note 2 to the consolidated financial

statements, and the critical audit matters related to the final bullet related to the accounting for Revenue Recognition, the final four

bullets related to the Capitalization of Internally and Externally Developed Software, and Goodwill, as to which the date is February

27, 2024, on those financial statements.

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.

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.

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.

that our audit provides a reasonable basis for our opinion.

and Limitations of Internal Control over Financial Reporting

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

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

(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.

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.

16, 2023, except for the effect of the material weaknesses described in the last sentence of the fourth paragraph as well as the fifth,

sixth, seventh and eighth paragraphs above, as to which the date is February 27, 2024

Other Information.

On March 26, 2020, Lorne Weil, our Executive

Chairman, voluntarily withdrew his Employment Agreement, dated January 31, 2020, from consideration at our upcoming annual meeting

of stockholders.

Weil remains employed under his original employment agreement, dated January 16, 2017, as amended.

In addition, the Office of the Executive Chairman

have consented to temporary reductions in base pay calculated on a percentage basis on each of the tiered stacks of the executive’s

salary ranging from 0% for the portion under £25,000 to 33.3% for the over £300,000 portion, as follows:

Lorne Weil (Executive Chairman):

Brooks Pierce (President and Chief Operating Officer):

Daniel Silvers (Executive Vice President and Chief Strategy Officer):

Stewart Baker (Executive Vice President and Chief Financial Officer):

Carys Damon (General Counsel):

Letters for Messrs.

Weil, Pierce, Silvers

and Baker and Ms.

Damon are attached as exhibits hereto, temporarily modifying their written contracts.

The Company continues

to explore additional cost saving measures.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2020

Annual Meeting of Stockholders, which will be filed with the SEC.

If such proxy statement is not filed on or before April 29,

2020, 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

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2023 Annual

Meeting of Stockholders, which was filed with the SEC on April 12, 2023 (the 2023 Proxy Statement”) .

Executive Compensation.

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2020

Annual Meeting of Stockholders, which will be filed with the SEC.

If such proxy statement is not filed on or before April 29,

2020, 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

information called for by this item is incorporated herein by reference to our 2023 Proxy Statement.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2020

Annual Meeting of Stockholders, which will be filed with the SEC.

If such proxy statement is not filed on or before April 29,

2020, 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

information called for by this item is incorporated herein by reference to our 2023 Proxy Statement.

Certain Relationships and Related Transactions, and Director Independence.

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2020

Annual Meeting of Stockholders, which will be filed with the SEC.

If such proxy statement is not filed on or before April 29,

2020, 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

PRINCIPAL ACCOUNTING FEES AND SERVICES.

information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2020

Annual Meeting of Stockholders, which will be filed with the SEC.

If such proxy statement is not filed on or before April 29,

2020, 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

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

information called for by this item is incorporated herein by reference to our 2023 Proxy Statement.

Principal Accountant Fees and Services.

information called for by this item is incorporated herein by reference to our 2023 Proxy Statement.

Exhibits and Financial Statement Schedules.

following documents are filed as part of this report:

2 unchanged sentences

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.

listed on page 77.

ENTERTAINMENT, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

OF DECEMBER 31, 2019 AND SEPTEMBER 30, 2018 AND

THE PERIODS ENDED DECEMBER 31, 2019, DECEMBER 31, 2018 AND SEPTEMBER 30, 2018

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Stockholders’

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

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, 2019 and September

30, 2018 , the related consolidated statements of operations and comprehensive (loss) income, stockholders’

deficit and cash

flows for the year ended December 31, 2019, for the three months ended December 31, 2018 and for the year ended September 30, 2018,

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, 2019 and September 30, 2018,

and the results of its operations and its cash flows for the year ended December 31, 2019, for the three months ended December

31, 2018 and for the year ended September 30, 2018, in conformity with accounting principles generally accepted in the United States

of New Accounting Standards- ASU No.

discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the

adoption of ASU No.

2016-02, Leases (Topic 842), as amended, effective January 1, 2019 using the modified retrospective approach.

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 Public Company Accounting Oversight Board (United States) ("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 and in accordance with auditing standards generally accepted in the United States of America.

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.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of

internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's

internal control over financial reporting.

Accordingly, we express no such opinion.

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.

/s/ Marcum llp

We have served as the Company’s auditor since 2016

March 30, 2020, except for the effects of the restatement discussed

in Note 1 as to which the date is May 7, 2021.

ENTERTAINMENT, INC.

AND SUBSIDIARIES

BALANCE SHEETS

millions, except share data)

September 30,

Accounts receivable, net

Inventory, net

Fair value of hedging instrument

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Software development costs, net

Other acquired intangible assets subject to amortization, net

Right of use asset

Liabilities and Stockholders’

Current liabilities

Accounts payable

Accrued expenses

Earnout liability

Corporate tax and other current taxes payable

Deferred revenue, current

Operating lease liabilities

Other current liabilities

Warrant liability

Current portion of long-term debt

Current portion of finance lease liabilities

Total current liabilities

Long-term debt

Finance lease liabilities, net of current portion

Deferred revenue, net of current portion

Derivative liability

Operating lease liabilities

Other long-term liabilities

Total liabilities

Commitments and contingencies

Stockholders’

Preferred stock;

$0.0001 par value;

1,000,000 shares authorized

Series A Junior Participating Preferred stock;

$0.0001 par value;

1,000,000 shares authorized;

49,000 shares designated;

no shares issued and outstanding at December 31, 2019 and September 30, 2018

Common stock;

$0.0001 par value;

49,000,000 shares authorized;

22,230,768 shares and 20,860,591 shares issued and outstanding at December 31, 2019 and September 30, 2018, respectively

Additional paid in capital

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

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

ENTERTAINMENT, INC.

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

millions, except share and per share data)

September 30,

Total revenue

Cost of sales, excluding depreciation and amortization:

Cost of service

Cost of hardware

Selling, general and administrative expenses

Stock-based compensation expense

Impairment expense

Acquisition and integration related transaction expenses

Depreciation and amortization

Net operating loss

Other (expense) income

Interest income

Interest expense

Change in fair value of earnout liability

Change in fair value of derivative liability

Change in fair value of warrant liability

Loss from equity method investee

Other finance income (expense)

Total other (expense) income, net

(Loss) income before income taxes

Income tax expense

Net (loss) income

Other comprehensive (loss)/income:

Foreign currency translation (loss) gain

Change in fair value of hedging instrument

Reclassification of gain on hedging instrument to comprehensive income

Actuarial (losses) gains on pension plan

Other comprehensive (loss)/income

Comprehensive (loss) income

Net (loss) income per common share –

Net (loss) income per common share - diluted

Weighted average number of shares outstanding during the period –

Weighted average number

of shares outstanding during the period –

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

ENTERTAINMENT, INC.

AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS’

millions, except share data)

comprehensive

stockholders’

Balance at October 1, 2017

Foreign currency translation adjustments

Actuarial gains on pension plan

Change in fair value of hedging instrument

Reclassification of gain on hedging instrument to comprehensive income

Shares issued on exercise of warrants

Shares of RSAs that vested and shares issued upon net settlement of RSUs

Reclassification of RSUs from derivative liability due to stockholder approval of equity plan

Stock-based compensation expense

Reclassification of RSUs to derivative liability due to modification

Balance as of September 30, 2018

Actuarial losses on pension plan

Change in fair value of hedging instrument

Reclassification of gain on hedging instrument to comprehensive income

Shares issued upon net settlement of RSUs

Stock-based compensation expense

Balance as of December 31, 2018

Foreign currency translation adjustments

Actuarial losses on pension plan

Change in fair value of hedging instrument

Reclassification of gain on hedging instrument to comprehensive income

Conversion of awards previously classified as derivatives

Shares issued in earnout

Shares issued upon net settlement of RSUs

Stock-based compensation expense

Balance as of December 31, 2019

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

ENTERTAINMENT, INC.

AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

September 30,

Cash flows from operating activities:

Net (loss) income

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

Depreciation and amortization

Amortization of right of use asset

Stock-based compensation expense

Change in fair value of derivative liability

Change in fair value of earnout liability

Impairment expense

Foreign currency translation on senior bank debt

Foreign currency translation on cross currency swaps

Change in fair value of warrant liability

Non-cash interest expense relating to senior debt

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Corporate tax and other current taxes payable

Accounts payable

Deferred revenues and customer prepayment

Accrued expenses

Operating lease liabilities

Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property and equipment

Cash paid for NTG Acquisition

Purchases of capital software

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of long-term debt

Proceeds from issuance of revolver

Repayments of revolver and long-term debt, including exit premium

Payment of financing costs

Repayments of capital leases

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash

Cash, beginning of period

Cash, end of period

Supplemental cash flow disclosures

Cash paid during the period for interest

Cash paid during the period for income taxes

Cash paid during the period for operating leases

Supplemental disclosure of noncash investing and financing activities

Additional paid in capital from net settlement of RSUs

Lease liabilities arising from obtaining right of use assets

Additional paid in capital reclassified to derivative liability

Additional paid in capital reclassified from derivative liability

Derivative liability reclassified to accrued expenses

Senior debt exit premium

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

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

of Operations, Management’s Plans and Summary of Significant Accounting Policies

Description and Nature of Operations

Entertainment, Inc.

(the “Company,”

“we,”

“our,”

and “us”) is a global business-to-business

gaming technology company, supplying Server Based Gaming (“SBG”) and Virtual Sports (which includes Interactive) systems

to regulated lottery, betting and gaming operators worldwide through an “omni-channel”

distribution strategy.

end-to-end digital gaming solutions on our proprietary and secure network, which accommodates a wide range of devices, including

land-based gaming machine terminals, mobile devices such as smartphones and tablets and online computer and social applications.

Company was incorporated in Delaware on May 30, 2014 under the name Hydra Industries Acquisition Corp.

(“Hydra”) as

a “blank check company”

for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition,

stock purchase, reorganization, recapitalization or other similar business transaction, one or more operating businesses.

23, 2016 (the “Closing Date”), the Company acquired Inspired Gaming Group (“Inspired”), pursuant to a

share sale agreement dated as of July 13, 2016 (the “Sale Agreement”).

The transaction was accounted for as a reverse

merger where Inspired was the acquirer and Hydra was the acquired company.

In connection with the acquisition, we changed our

name from Hydra to Inspired Entertainment, Inc.

We refer to the acquisition and the other transactions contemplated by the Sale

Agreement, collectively, as the “Business Combination”

or the “Merger.”

On October 1, 2019, the Company completed

the acquisition of the Gaming Technology Group of Novomatic UK Ltd., a division of Novomatic Group, a leading international supplier

of gaming equipment and solutions (the “NTG Acquisition”).

Liquidity Plans

As of December 31, 2019, the Company’s cash

on hand was $29.1 million and the Company had working capital of $7.2 million.

As of December 31, 2019, $5.0 million of our cash

on hand had arisen from our operations in Greece and was being held in local accounts.

In the ordinary course of business, we seek, from

time to time, to transfer funds earned in Greece to our accounts outside of Greece.

However, Greece imposes capital controls that can

delay or prevent the flow of capital out of the country.

The Company recorded net losses of $41.1 million, and net income of

$1.6 million and $13.3 million for the year ended December 31, 2019, the three months ended December 31, 2018 and the year

ended September 30, 2018, respectively.

Net losses and income include non-cash stock-based compensation of $9.0 million,

$1.6 million and $7.4 million for the year ended December 31, 2019, the three months ended December 31, 2018 and the year ended September

30, 2018, respectively, and non-cash changes in fair value of warrant liability of $4.1 million loss, $6.3 million income and $33.9

million income for the year ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30, 2018,

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.

capital of $7.2 million includes a non-cash settled item of $10.1 million of deferred income.

Management currently believes that,

absent any long term COVID-19 impact, 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 2021.

Our business is being and will continue to

be adversely affected by the rapidly expanding nature of the coronavirus (COVID-19) pandemic.

All venues offering land-based gaming,

including our products, are closed for an indeterminate period of time in the jurisdictions in which we operate through governmental

In addition, the extent of a significant economic impact from the pandemic may result in a decrease in the willingness

or ability of consumers to engage in gambling activities.

Land-based customers globally, and the United States, United Kingdom,

Greece and Italy specifically, are impacted by the COVID-19 pandemic due to the closure of venues.

There is also a possibility

that player behavior may change following any resolution of the pandemic, including that consumers may spend less time or wager

smaller amounts at gambling facilities.

The pandemic is adversely affecting a broad range of our operations, including our ability

to obtain and ship our products, our ability to continue to develop new products and services and the ability of our customers

to pay outstanding amounts due to us.

As a result of the significant reductions in revenue and other changes to our business, at

least in the short term (which also affects other companies in our industry), we are working 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.

We expect, due to closures of land-based venues,

that there could be a meaningful increase in our online revenues from slots and virtual sports but it is not possible to quantify

any potential impact at this time.

Prior to any COVID-19 impact, we would have expected this part of our business to account for

approximately 10% of Company revenue during 2020.

As part of these efforts to preserve liquidity, the Company drew

all remaining availability (£18.0 million ($23.8 million using rates prevailing at December 31, 2019)) under its £20

million ($26.4 million using rates prevailing at December 31, 2019) revolving credit facility on March 13, 2020.

of Presentation

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”).

September 24, 2018, the Board of Directors approved a change in the Company’s fiscal year end from September 30 to December

31 commencing with the year ending December 31, 2019.

As such, our fiscal year 2018 comprised the twelve-month period ended September

30, 2018, the three-month period from October 1, 2018 to December 31, 2018 was a transitional period and our fiscal year 2019

comprised the twelve-month period ended December 31, 2019.

of Previously Reported Information

April 12, 2021, the Securities and Exchange Commission (the “SEC”) released a public statement (the “Public Statement”)

informing market participants that warrants issued by special purpose acquisition companies (“SPACs”) may require classification

as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings.

of December 31, 2019 and September 30, 2018, the Company had 19,079,130 outstanding warrants to purchase an aggregate of 9,539,565 shares

of the Company’s common stock, which includes 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”) (see note 16).

The Company has previously classified its Public Warrants

and Private Placement Warrants (collectively, the “warrants”) as equity.

SEC’s Public Statement discussed “certain features of warrants issued in SPAC transactions”

that “may be common

across many entities.”

The Public Statement indicated that when one or more of such features is included in a warrant, the warrant

“should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.”

Following consideration of the guidance in the Public Statement, and after consultation with the Company’s independent registered

public accounting firm, Management has concluded that the warrants do not meet the conditions to be classified in equity and instead,

the warrants meet the definition of a derivative under ASC 815, under which the Company should record the warrants as liabilities on

the Company's balance sheet.

has determined that information previously reported in the Annual Report on Form 10-K of the Company, filed with the SEC on March 30,

2020, should no longer be relied upon due to changes required for alignment with the SEC’s Public Statement.

Information contained

within this Annual Report has been restated in line with this determination.

The adjustments to the financial statement items for the

affected periods are as follows:

As Previously Reported

(in millions, except per share data)

Consolidated Balance Sheet as of October 1, 2017

Warrant liability

Additional paid in capital

Accumulated deficit

Consolidated Statement of Operations and Comprehensive (Loss) Income for the year

ended September 30, 2018

Change in fair value of warrant liability

Net (loss) income

Comprehensive (loss) income

Net (loss) income per common share –

Net (loss) income per common share - diluted

Consolidated Balance Sheet as of September 30, 2018

Warrant liability

Additional paid in capital

Accumulated deficit

Consolidated Statement of Operations and Comprehensive (Loss) Income for the three

months ended December 31, 2018

Change in fair value of warrant liability

Net (loss) income

Comprehensive loss

Net (loss) income per common share –

Net (loss) income per common share - diluted

Consolidated Balance Sheet as of December 31, 2018

Warrant liability

Additional paid in capital

Accumulated deficit

Consolidated Statement of Operations and Comprehensive Loss for the year ended

December 31, 2019

Change in fair value of warrant liability

Comprehensive loss

Net loss per common share –

basic and diluted

Consolidated Balance Sheet as of December 31, 2019

Warrant liability

Additional paid in capital

Accumulated deficit

of Consolidation

monetary values set forth in these consolidated financial statements are in US Dollars (“USD”) unless otherwise stated

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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Currency Translation

most of our operations, the British pound (“GBP”) is our functional currency.

Our reporting currency is the USD.

also have operations where the local currency is the functional currency, including our operations in mainland Europe and South

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.

losses resulting from translating the foreign currency financial statements are recorded as a separate component of accumulated

other comprehensive loss in stockholders’

Gains or losses resulting from foreign currency transactions are included

in selling, general and administrative expenses, interest income (expense) and other finance (costs) income in the consolidated

statements of operations.

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.

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, earnout liability, pension liability, commitments and contingencies and litigation, among

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.

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.

receivable are recorded at the invoiced amount and do not bear interest.

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.

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.

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 $15.3 million and $10.8 million of unbilled accounts

receivable as of December 31, 2019 and September 30, 2018, respectively.

standard credit terms are net 30 to 60 days.

From time to time, we allow for certain digital customers to pay on an enhanced

revenue share basis for the software license whereby the customer pays an incremental revenue share percentage over a specific

period of time.

We consider these types of arrangements to be extended payment terms as the full consideration for the arrangement

may not be received until several years after the date of the sale depending on the net winnings from the game or application.

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 weighted average cost 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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

and Equipment

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:

of the useful life or the life of the lease

based gaming terminals

and machinery and fixtures and fittings

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.

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.

Development Costs

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”) ASC 350-40, Internal Use

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.

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.

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.

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 $3.8 million, $0.8

million and $4.8 million were expensed during the year ended December 31, 2019, the three months ended December 31, 2018 and the

year ended September 30, 2018, respectively.

Employee related costs associated with related product development are included in

Selling, General and Administrative Expenses in the consolidated statements of operations and comprehensive loss.

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 has increased in the year due to the NTG acquisition (see Note

Trademarks and customer relationships were originally recorded at their fair values in connection with business combinations.

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 ten 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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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 three segments, Server Based Gaming, Virtual Sports and Acquired Businesses, as detailed in Note

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

A qualitative test was carried out as of December 31, 2019, December 31, 2018 and September 30, 2018 and no impairment was

required at any of these dates.

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.

As a result of

the Company’s change in strategic direction of certain of its operations, the Company determined that certain of its long-lived

and other assets were impaired as of September 30, 2018.

Accordingly, the Company recorded an impairment charge of $7.7 million

for the year ended September 30, 2018, which consisted of $4.9 million of software, $1.9 million of prepaid expenses and other

current assets, $0.6 million of unbilled accounts receivable and $0.3 million of trade receivables.

Method Investment

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).

The value of the Company’s equity method investment

was $0.7 million as of December 31, 2019.

The Company’s share of earnings from its equity method investee, which was

not material for the year ended December 31, 2019, is presented in loss from equity method investee in the consolidated

statements of operations.

Company evaluates its equity method investment 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.

Revenue and Deferred Cost of Sales, excluding depreciation and amortization

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

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.

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

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

VAT is collected from customers by the Company on behalf of the tax authorities and is therefore not charged to the

consolidated statements of operations.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Stock Purchase Warrants and Derivative Financial Instruments

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:

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

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).

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.

At December 31, 2019, and September 30, 2018, the Company

considered that the warrants did not meet the criteria for equity classification and must be recorded as liabilities.

As the warrants

meet the definition of a derivative as contemplated in ASC 815, the warrants are 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.

The Company also determined that its obligation to settle certain awards in either

cash or stock satisfied the criteria for classification as a derivative financial instrument at December 31, 2019 and September 30, 2018

(see Note 17).

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.

Policy for Derivative Instruments and Hedging Activities

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.

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.

accordance with the FASB’s fair value measurement guidance in ASU 2011-04, “Fair Value Measurements,”

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.

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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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:

the contracts with a customer;

the performance obligations within the contract, including whether they are distinct and capable of being distinct in the

context of the contract;

the transaction price;

the transaction price to the performance obligations in the contract;

revenue when, or as, the Company satisfies each performance obligation.

Identify the contract

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.

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:

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)

Consideration

in one contract depends on the other contract

or services (or some of the goods or services) are a single performance obligation.

Identify performance obligations

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.

Company applies the series guidance to its performance obligations where the following criteria apply:

distinct good or service in the series meets the criteria to be a performance obligation satisfied over time.

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.

Determine the transaction price

Company considers all amounts to which it has rights in exchange for the goods or services transferred in determining the transaction

This includes fixed and variable consideration.

Typically, consideration is stated in the contract with the customer.

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.

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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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.

Allocate the transaction price

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.

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.

Recognize revenue

Company recognizes revenue over time for performance obligations that meet one of the following criteria:

customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs.

Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced.

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

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.

Based Gaming Revenue

from SBG terminals, access to our content and SBG 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’

Where this is not the case, revenue is based upon a fixed daily or weekly usage fee.

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 SBG terminals for use over a term, as well as service obligations related to hardware 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.

sometimes bill for SBG arrangements up front in order to help fund our working capital and development requirements, or at the

request of a customer.

Upfront fees on SBG arrangements are deferred and recognized ratably over time, or when not specified over

the expected customer relationship period, where they represent payment for future goods and services.

In the case where we receive

upfront fees pursuant to which there are no further obligations and no undelivered elements, we will recognize the upfront fees

upon delivery.

Upfront fees are normally billed upon signing of the relevant agreement, and become due and payable at set times

Hardware sales take the form of a transfer of ownership of our developed gaming terminals, and are recognized at a

point in time upon delivery as they are considered to meet the required criteria to be considered distinct.

Payment for hardware

sales is typically due a set number of days after delivery.

arrangements typically include service level agreements, consisting of a specified amount of ‘uptime’

with financial

penalties for breaches in excess of specified levels.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Sports 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

and mobile revenue, which includes the provision of virtual sports content and services to mobile and online operators, 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 in over the term of the arrangement.

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.

arrangements also typically include a perpetual license billed up front, granted to the customer for access to our gaming platform

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.

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.

Sports arrangements typically include service level agreements, consisting of a specified amount of ‘uptime’

financial penalties for breaches in excess of specified levels.

Acquired Businesses

Revenue from the Acquired Businesses segment

comprises of a number of different streams, recognized as follow:

Acquired Businesses earn revenue from both

gaming machine terminals and amusement machine terminals.

Revenue from terminals and access to our content and platform is recognized

in accordance with the criteria set forth in ASC 606 and is based upon a contracted percentage of the operator’s net winnings

from the terminals’

daily use, or 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 hardware repairs and content and maintenance.

Sometimes these services

are also offered without the supply of a terminal.

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

sales of terminals, terminal and component repair revenue, and sales of spare parts are recognized at the point in time when control

transfers to the customer, which is normally upon delivery and acceptance by the customer.

Payment for point-in-time revenue is

typically due a set number of days after delivery.

also provide terminal and spares management services to third parties.

Revenue with respect to these services takes the form of

both fixed and variable consideration.

Where possible, variable consideration is estimated at the contract inception and allocated

to the performance obligations to which it relates.

Revenue is recognized over time in line with the customers’

from licensing of our gaming software is earned via usage-based royalties, billed at the end of a set period (usually monthly)

and due typically 30 days from the date of the invoice.

This revenue is recognized over time as the usage occurs.

Disaggregation

on disaggregation of revenue is included in Note 28, “Segment Reporting and Geographic Information.”

and Handling Costs

and handling costs for products sales and hardware related to subscription services are included in cost of sales, excluding depreciation

and amortization for all periods presented.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Payment Arrangements

Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”

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.

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”

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.

modifications to outstanding awards result in incremental cost if the fair value is increased as a result of the modification.

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.

deferred tax assets are principally comprised of depreciation and net operating loss carry forwards.

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.

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

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

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

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.

The guidance is 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.

Early adoption is permitted.

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.

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

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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:

conveys the right to control the use of an identified asset for a period of time in exchange for consideration;

have substantially all economic benefits from the use of the asset;

can direct the use of the identified asset.

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

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.

the Company as lessee

of December 31, 2019, our impact resulting from recognition of operating leases was as follows:

have recognized right-of-use (ROU) assets of $9.4 million and lease liabilities of $8.8 million;

short-term portion of the lease liabilities amounted to $3.6 million and

long-term portion of the lease liabilities amounted to $5.2 million.

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 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.

The lease ROU

asset includes any lease payment made and initial direct costs incurred.

Our 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.

lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

have 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.

Company has elected not to apply the recognition requirements of ASC 842 to short-term 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

the Company as lessor

Company’s lease arrangements are a mixture of sales-type leases and operating leases.

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.

discount rate used in determining the present value of the future minimum lease payments is the rate implicit in the lease.

is calculated using the fair value of the underlying asset and the present value of any unguaranteed residual value.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

underlying asset is derecognized at the point of inception and a selling profit is recognized at lease commencement.

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.

operating leases, we continue to recognize the underlying asset.

Lease income is recognized on a straight-line basis over the

Issued Accounting Standards

In June 2016, the FASB issued ASU No.

“Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”

2016-13”).

In November 2018, the FASB issued ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments

- Credit Losses"

(“ASU 2018-19”).

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.

The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s

financial statement presentation or disclosures.

July 2017, the FASB issued ASU No.

2017-11, “Earnings Per Share (Topic 260);

Distinguishing Liabilities from Equity (Topic

Derivatives and Hedging (Topic 815):

(Part I) Accounting for Certain Financial Instruments with Down Round Features;

II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and

Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”

(“ASU 2017-11”).

allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature)

is considered indexed to the entity’s own stock.

As a result, financial instruments (or embedded conversion features) with

down round features may no longer be required to be accounted for as derivative liabilities.

A company will recognize the value

of a down round feature only when it is triggered and the strike price has been adjusted downward.

For equity-classified freestanding

financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income

available to common shareholders in computing basic earnings per share.

For convertible instruments with embedded conversion features

containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be

amortized to earnings.

ASU 2017-11 is effective for fiscal years beginning after December 15, 2019, and interim periods within

fiscal years beginning after December 15, 2020.

Early adoption is permitted.

The guidance in ASU 2017-11 can be applied using

a full or modified retrospective approach.

The adoption of ASU 2017-11 is not expected to have any impact on the Company’s

financial statement presentation or disclosures.

August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities”

2017-12”) to simplify the application of hedge accounting guidance and improve the financial reporting of hedging relationships

to better portray the economic results of an entity’s risk management activities in its financial statements.

In addition, ASU

2017-12 requires an entity to present the earnings effect of the hedging instrument in the same income statement line item in

which the earnings effect of the hedged item is reported.

The transition guidance provides companies with the option of early

adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update,

or alternatively requires adoption for fiscal years beginning after December 15, 2019.

This adoption method requires companies

to recognize the cumulative effect of initially applying the guidance as an adjustment to accumulated other comprehensive income

with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity

adopts the update.

The adoption of ASU 2017-12 is not expected to have any impact on the Company’s financial statement

presentation or disclosures.

On October 1, 2019, the Company’s

subsidiary, Inspired Gaming (UK) Limited, completed the acquisition of the Gaming Technology Group of Novomatic UK Ltd.

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”

the transactions contemplated by the SPA, the “NTG Acquisition”).

The consideration for the NTG Acquisition totaled

approximately €107.0 million ($116.6 million) in cash, which was financed by the Senior Facilities Agreement discussed in

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 currently holds approximately 40% of the

outstanding equity interests of Innov8.

The NTG Acquisition is expected to add increased scale to our business,

while supplementing key technologies and content within our existing portfolio.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

allocation of the purchase price is summarized as follows (in millions):

Purchase Price

Foreign exchange rate at October 1, 2019

Adjusted purchase price in US dollars

Allocated to:

Prepaid expenses and other

Property and equipment

Software development costs

Accounts payable, accrued expenses and other current liabilities

Income taxes payable

Long-term debt

Other long-term liabilities

Net assets acquired

Excess of purchase price over net assets acquired before allocation to identifiable intangible assets and goodwill

The fair value of property and equipment

was determined using the indirect cost approach which utilizes fixed asset record information including historical costs, acquisition

dates, and asset descriptions and applying asset category specific nationally recognized indices to the historical cost of each

asset to derive replacement cost new less depreciation.

Management has also made the initial determination that all other assets

and liabilities acquired are primarily estimated to be stated at their fair values, which approximates their recorded cost.

has made an initial determination that approximately $8.1 million of the excess of the purchase price over the net assets acquired

should be allocated to identifiable intangible assets.

The unidentified excess of the purchase price over the fair value of the

net assets acquired has been recorded as goodwill.

Corporate trade names and domains

Customer contracts and relationships

Intangible Assets

accordance with ASC 805, identifiable intangible assets are required to be measured at fair value.

The intangible assets identified

were valued using the income approach, either through the discounted cash flow method, the relief from royalty method or the excess

earnings method.

Determining fair value requires significant judgment concerning the assumptions used in the valuation model,

including discount rates, the amount and timing of expected future cash flows and growth rates, as well as expected royalty rates,

which are based on the estimated rates at which similar assets are being licensed in the marketplace.

The estimated weighted average

useful life of the new intangible assets identified is 10 years.

Goodwill arising from the NTG Acquisition

mainly consists of the synergies of an ongoing business.

Goodwill and intangible assets are tested for impairment on an annual

basis or sooner, if an event occurs or circumstances change that indicate that the carrying amount of the goodwill or intangible

asset may not be recoverable.

The Company incurred advisor fees, legal and other costs related to the NTG Acquisition of $6.7 million,

which excludes the costs of refinance that have been deducted from the senior debt as debt issuance costs and which have been recognized

in operating expenses in the accompanying consolidated statement of operations during the year ended December 31, 2019.

Asset valuations included

in previous SEC filings were based on a preliminary assessment, which has since been updated to an actual assessment.

certain asset valuations are now revised as follows;

Software development costs $6.0 million to $7.1 million, Other assets $1.5

million to $1.4 million, Corporate trade names and domains $3.2 million to $3.7 million, Customer contracts and relationships

$9.2 million to $4.4 million, Goodwill $28.8 million to $32.1 million.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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.

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, 2018.

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, 2018, nor is it indicative

of results that may occur in any future periods.

(in millions)

Net operating loss

Loss per share:

Basic and diluted

Weighted average shares outstanding:

Basic and diluted

receivable consist of the following:

September 30,

(in millions)

Trade receivables

long-term receivable recorded in other assets

Finance lease receivables

Receivables from affiliate

Other receivables

Allowance for doubtful accounts

Total accounts receivable, net

in the allowance for doubtful accounts are as follows:

September 30,

(in millions)

Beginning balance

Provision for doubtful accounts

Foreign currency translation adjustments

Ending balance

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

consists of the following:

September 30,

(in millions)

Component parts

Work in progress

Finished goods

Total inventories

parts include parts for gaming terminals.

Included in component parts are reserves for excess and slow-moving inventory of $0.9

million and $0.5 million as of December 31, 2019 and September 30, 2018, respectively.

Our finished goods inventory primarily

consists of gaming terminals which are ready for sale.

Expenses and Other Assets

expenses and other assets consist of the following:

September 30,

(in millions)

Prepaid expenses and other assets

Unbilled accounts receivable

Total prepaid expenses and other assets

and Equipment, net

September 30,

(in millions)

Short-term leasehold property

Video lottery terminals

Construction in progress

Computer equipment

Plant and machinery

accumulated depreciation and amortization

and amortization expense amounted to $21.7 million, $4.8 million and $20.3 million for the year ended December 31, 2019, the three

months ended December 31, 2018 and the year ended September 30, 2018, respectively.

Development Costs, net

development costs, net consisted of the following:

September 30,

(in millions)

Software development costs

accumulated amortization

ENTERTAINMENT, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

OF DECEMBER 31, 2019 AND SEPTEMBER 30, 2018 AND

THE PERIODS ENDED

31, 2019, DECEMBER 31, 2018 AND SEPTEMBER 30, 2018

the year ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30, 2018, the Company

capitalized $23.5 million, $3.6 million and $17.7 million of software development costs, respectively.

Amounts in the above table

include $0.9 million and $1.3 million of internal use software at December 31, 2019 and September 30, 2018, respectively.

total amount of software costs amortized was $16.4 million, $3.9 million and $18.1 million for the year ended December 31, 2019,

the three months ended December 31, 2018 and the year ended September 30, 2018, respectively.

Software costs written down to net

realizable value amounted to $0.4 million, $0.0 million and $5.4 million for the year ended December 31, 2019, the three months

ended December 31, 2018 and the year ended September 30, 2018, respectively.

The $5.4 million for the year ended September 30,

2018 includes $0.5 million recorded as amortization expense incurred during the normal course of business and $4.9 million recorded

as a one-time impairment expense.

The weighted average amortization period was 3.0 years, 3.1 years and 3.1 years for the year

ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30, 2018, respectively.

estimated software amortization expense for the years ending December 31 are as follows:

Year ending December 31, (in millions)

Assets and Goodwill

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.

September 30,

(in millions)

Customer relationships

accumulated amortization

intangible asset amortization expense amounted to $3.5 million, $0.8 million and $3.4 million for the year ended December 31,

2019, the three months ended December 31, 2018 and the year ended September 30, 2018, respectively.

estimated intangible asset amortization expense for the years ending December 31 are as follows:

Year ending December 31, (in millions)

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

is summarized as follows:

September 30,

(in millions)

Balance at beginning of period

Foreign currency translation adjustments

Acquisition of NTG

Ending balance

assets consist of the following:

September 30,

(in millions)

Long term finance lease receivable

Long term receivables

Pension surplus

Long term prepaid expenses and other assets

expenses consist of the following:

September 30,

(in millions)

Direct costs of sales

Payroll and related costs

Accrued corporate cost expenses

Interest payable - cash

Asset retirement obligations

Acquisition consideration

Contract termination costs

Other creditors

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Liabilities and Other Disclosures

following table summarizes the changes in contract liabilities:

Deferred Income

(in millions)

Balance at October 1, 2017

Revenue recognized

Revenue deferred

Foreign currency translation adjustments

Balance at September 30, 2018

Revenue recognized

Revenue deferred

Foreign currency translation adjustments

Balance at December 31, 2018

Revenue recognized

Revenue deferred

Foreign currency translation adjustments

Balance at December 31, 2019

Revenue recognized that was included in

the deferred income balance at the beginning of the period amounted to $9.6 million, $2.7 million and $7.7 million for the year

ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30, 2018, respectively.

following table summarizes contract related balances (other than deferred income disclosed above):

(in millions)

At September 30, 2018

At December 31, 2019

liabilities consist of the following:

September 30,

(in millions)

Customer prepayments and deposits

Fair value of hedging instrument

Total other liabilities, current

Other payables, net of current portion

Asset retirement obligations

Pension liability

Senior debt exit premium

Total other liabilities, long-term

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Term and Other Debt

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 ($172.5 million) and €90.0 million ($98.1 million), respectively and

a secured revolving facility loan in an original principal amount of £20.0 million ($24.6 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.

new facilities are subject to covenant testing.

These tests comprise a leverage ratio (consolidated total net debt/consolidated

pro forma EBITDA) and a capital expenditure level.

The leverage ratio is tested quarterly with the first test date being June

The capital expenditure level is tested annually with the first test date being December 31, 2019.

There is also an

annual excess cash flow calculation required, which, if positive and over certain de minimis limits, could require early prepayment

of part of the facilities.

Term Loans have a 5-year duration and are repayable in full on October 1, 2024.

The £140.0 million ($184.9 million) loan

carries a cash interest rate of 7.25% plus 3-month LIBOR, the €90.0 million ($101.1 million) loan carries a cash interest

rate of 6.75% plus a 3-month EUROLIBOR.

The £20.0 million ($26.4 million) revolving credit facility is available until September

1, 2024 and carries a cash interest rate on any utilization at 5.50% plus 3-month LIBOR, with any unutilized amount carrying a

cash interest cost at 30% of the applicable margin on the revolving credit facility loan.

of Note Purchase Agreement and Prior Credit Facility

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.

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, which is included

in other long-term liabilities in the comparative period in the accompanying consolidated balance sheet.

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

Debt and Capital Leases

following reflects outstanding debt and capital leases as of the dates indicated below:

financing charge

(in millions)

Senior bank debt

Finance lease liabilities

Total long-term debt outstanding

current portion of long-term debt

Long-term debt, excluding current portion

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

financing charge

September 30,

(in millions)

Senior bank debt

Finance lease liabilities

Total long-term debt outstanding

current portion of long-term debt

Long-term debt, excluding current portion

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.

term debt as of December 31, 2019 matures as follows:

Fiscal period:

Capital leases

(in millions)

and Hedging Activities

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

Additionally, with respect to the interest payments 1/3 would be swapped from USD to GBP and 2/3 from USD to EUR.

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.

of Multiple Risks

Company had variable-rate borrowings denominated in currencies other than its functional currency.

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.

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.

derivatives designated and that qualified as cash flow hedges of both interest rate risk and foreign exchange risk, the gain or

loss on the derivative was recorded in Accumulated Other Comprehensive Income and subsequently reclassified in the periods during

which the hedged transaction affected earnings within the same income statement line item as the earnings effect of the hedged

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Company did not have any derivatives as of December 31, 2019.

As of September 30, 2018, the Company had the following outstanding

derivatives designated as cash flow hedges that were used to hedge both interest rate risk and foreign exchange risk:

Foreign Currency Derivative

(in millions)

Cross currency interest rate swaps

Non-designated

not designated as hedges were not speculative and were used 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.

of September 30, 2018, the Company had the following outstanding derivatives that were not designated as hedges in qualifying

hedging relationships:

Foreign Currency Derivative

(in millions)

Cross currency interest rate swaps

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 September 30, 2018.

Balance Sheet

Classification

Balance Sheet

Classification

(in millions)

Derivatives designated as hedging instruments:

Interest Rate and Foreign Exchange Products

Fair Value of Hedging

Derivative Liability

Total derivatives designated as hedging instruments

Derivatives not designated as hedging instruments:

Interest Rate and Foreign Exchange Products

Fair Value of Hedging

Derivative Liability

Total derivatives not designated as hedging instruments

ENTERTAINMENT, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

OF DECEMBER 31, 2019 AND SEPTEMBER 30, 2018 AND

THE PERIODS ENDED

31, 2019, DECEMBER 31, 2018 AND SEPTEMBER 30, 2018

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

Recognized in

Comprehensive

Location of Gain

Reclassified from

Accumulated Other

Comprehensive

Income into Income

(in millions)

Interest Rate and Foreign Exchange Products

Interest Expense

Foreign Currency Remeasurement

The table below presents the effect of

fair value and cash flow hedge accounting on accumulated other comprehensive income for the three months ended December 31, 2018.

Amount of Gain

Recognized in

Comprehensive

Location of Gain

Reclassified from

Accumulated Other

Comprehensive

Income into Income

(in millions)

Interest Rate and Foreign Exchange Products

Interest Expense

Foreign Currency Remeasurement

The table below presents the effect of

fair value and cash flow hedge accounting on accumulated other comprehensive income for the year ended September 30, 2018.

Amount of Gain

Recognized in

Comprehensive

Location of Gain

Reclassified from

Accumulated Other

Comprehensive

Income into Income

(in millions)

Interest Rate and Foreign Exchange Products

Interest Expense

Foreign Currency Remeasurement

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,

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

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

The table below presents the effect of

the Company’s derivative financial instruments on the consolidated statements of operations for the three months ended December

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

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20

The table below presents the effect of

the Company’s derivative financial instruments on the consolidated statements of operations for the year ended September

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

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20

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.

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

Recognized in

(in millions)

Interest Rate and Foreign Exchange Products

Change in fair value of derivative liability

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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 three months ended December 31, 2018.

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

Recognized in

Interest Rate and Foreign Exchange Products

Change in fair value of derivative liability

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 September 30, 2018.

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

Recognized in

(in millions)

Interest Rate and Foreign Exchange Products

Change in fair value of derivative liability

table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives

as of September 30, 2018.

The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair

The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the

consolidated balance sheets.

ISDA Master Agreement between Gaming Acquisitions Limited and Nomura Global Financial Products, Inc.

was documented using the

2002 Form and the ISDA standard set-off provision in Section 6(f) of the ISDA Master Agreement apply to both parties and was only

modified to include Affiliates of the Payee.

There was no CSA and thus there was no collateral posting.

The only other security

for the ISDA included a guaranty of Nomura’s obligations from Nomura Holdings, Inc.

and with respect to Gaming Acquisitions

Limited, its obligations under the ISDA was cross-collateralized with the debt obligations under the Credit Agreement in the same

pool of collateral that supported the debt obligations.

Offsetting of Derivative Assets

September 30, 2018

Gross Amounts Not Offset in the

Statement of Financial Position

of Recognized

Offset in the

the Statement

(in millions)

Fair value of hedging instrument

Offsetting of Derivative Liabilities

September 30, 2018

Gross Amounts Not Offset in the

Statement of Financial Position

of Recognized

Offset in the

of Liabilities

the Statement

(in millions)

Fair value of hedging instrument

ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Value Measurements

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

the principal 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

prices in active markets for identical assets or liabilities.

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.

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.

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.

September 30,

(in millions)

Earnout liability (see Note 16)

Derivative liability (see Notes 14 and 17)

Long term receivable (included in other assets)

Private Placement Warrants (included in warrant liability)

Public Warrants (included in warrant liability)

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

3 financial liabilities consisted of the earnout liability for which there was no current market for these securities such that

the determination of fair value required significant judgment or estimation.

Changes in fair value measurements categorized within

Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate

(see Note 16).

December 31, 2019 and September 30, 2018, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

earnout payment of up to 2,500,000 shares of the Company’s common stock, subject to certain customary anti-dilution adjustments

(the “Earnout Consideration”), was payable pursuant to the Sale Agreement to the previous owners of Inspired based

on the financial performance of the Company’s businesses in six specific countries, China, Colombia, Greece, Norway, Spain

and Ukraine (collectively, the “Earnout Jurisdictions”), as measured by earnings before interest, taxes, depreciation

and amortization (“EBITDA”) for the twelve months ended September 30, 2018 (the “Earnout Period”), with

the maximum earnout payment of 2,500,000 shares issuable if such EBITDA results with respect to the Earnout Jurisdictions was

equal to or greater than £15,000.

Based on the EBITDA results for such fiscal year with respect to the Earnout Jurisdictions,

the Company issued 1,323,558 shares of common stock as Earnout Consideration in March 2019, resulting in an aggregate amount of

$8.6 million recorded upon the settlement of the earnout liability, with a corresponding credit to stockholders’

following table provides a reconciliation of the beginning and ending balances for the earnout liability measured using significant

unobservable inputs (Level 3):

(in millions)

Balance –

October 1, 2017

Change in fair value of earnout liability

Balance –

September 30, 2018

Balance –

January 1, 2019

Change in fair value of earnout liability

Settlement of earnout liability

Balance –

December 31, 2019

movements in the balance of the earnout liability were due to movements in the price of the Company’s common stock.

Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”) was adopted by the Company’s Board of Directors

in September 2018 subject to approval by the Company’s stockholders, which was obtained in May 2019.

Initial awards covering

an aggregate of 542,770 restricted stock units (“RSUs”) were approved under the 2018 Plan with respect to fiscal 2018

to members of management and other participants with a three-year vesting schedule (i.e., one-third vesting on each of December

31, 2019, 2020 and 2021).

These awards, which were subject to cancellation in the event stockholders did not approve the 2018

Plan during 2019, were initially classified as a derivative liability due to the grant terms containing a commitment by the Company

to make a liquidated damages payment to the participants in cash (with respect to the value of one-third of the award) in the

event stockholders did not approve the 2018 Plan by the first scheduled vesting date.

Such obligation was eliminated upon stockholder

approval of the 2018 Plan being obtained, which resulted in the liability being reclassified to additional paid in capital at

the fair value amount of $0.8 million during the year ended December 31, 2019.

addition, the awards of RSUs that were granted under the Company’s Second Long-Term Incentive Plan (“Second Incentive

Plan”) prior to approval by the Company’s stockholders, which was obtained in March 2018, were initially classified

as a derivative liability due to the Company’s obligation to settle those awards in cash in the event stockholders did not

approve the plan.

The awards under the Second Incentive Plan included RSUs approved at the time of the Merger and RSUs approved

in December 2017 for the Company’s Executive Chairman and Chief Strategy Officer in connection with the cancellation of

awards of restricted stock they received under the Company’s 2016 Long-Term Incentive Plan (the “First Incentive Plan”).

The awards of RSUs to such executives under the Second Incentive Plan were considered a modification that resulted in the original

classification of their awards as an equity instrument being switched to a liability instrument, and in $1.5 million of previously

recognized compensation expense being reclassified from additional paid in capital to derivative liability.

The derivative liability

associated with awards under the Second Incentive Plan was eliminated upon stockholder approval, and the liability was reclassified

to additional paid in capital at the fair value amount of $2.8 million during the year ended September 30, 2018.

Note 14, “Derivatives and Hedging Activities,”

for a discussion of the Company’s cross-currency swap.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Stockholders’

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, 2019 and September 30, 2018, there were no shares of preferred stock issued or outstanding.

A Preferred Stock

August 13, 2017, in connection with the “stockholder rights plan”

discussed below, the Company’s Board of Directors

approved a Certificate of Designation of Series A Junior Participating Preferred Stock, which designates the rights, preferences

and privileges of 49,000 shares of a series of the Company’s preferred stock, par value $0.0001 per share, designated as

Series A Junior Participating Preferred Stock (the “Series A Preferred Stock”).

The Certificate of Designation was

filed with the Delaware Secretary of State and became effective on August 14, 2017.

share of Series A Preferred Stock, if issued, will not be redeemable, and will entitle the holder thereof to cumulative quarterly

dividend payments equal to the greater of (1) $1.00 or (2) 1,000 times the aggregate per share amount of all cash dividends, plus

1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend

payable in shares of common stock of the Company.

Each share of Series A Preferred Stock shall entitle the holder to 1,000 votes

on all matters submitted to a vote of shareholders.

The Series A Preferred Stock will entitle the holder thereof to receive $1,000

per share, plus any accrued and unpaid dividends thereon, upon liquidation and, if shares of common stock are exchanged via merger,

consolidation or a similar transaction, will entitle the holder thereof to a per share payment equal to $1,000 per share.

Series A Preferred Stock will rank junior to all other series of preferred stock as to the payment of dividends and the distribution

of assets, whether or not upon the dissolution, liquidation or winding up of the Company.

August 13, 2017, the Board of Directors of the Company adopted a stockholder rights plan and declared a distribution of one right

(“Right”) for each outstanding share of the Company’s common stock to stockholders of record at the close of

business on August 25, 2017 (the “Record Date”).

Each Right entitles its holder, under the circumstances described

below, to purchase from the Company one one-thousandth of a share of Series A Preferred Stock of the Company at an exercise price

of $45.00 per Right, subject to adjustment.

The terms of the Rights are set forth in a Rights Agreement, dated as of August 13,

2017 (the “Rights Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, as rights

The Rights Agreement was approved by the Company’s stockholders at the Company’s annual meeting held on March

Rights are transferable with and only with the underlying shares of common stock.

New Rights will attach to any shares of common

stock that become outstanding after the Record Date and prior to the earlier of the distribution time and the expiration time.

to certain exceptions, the Rights become exercisable and trade separately from the common stock only upon the “distribution

which occurs upon the earlier of:

close of business on the tenth day after the first date (the “stock acquisition date”) of public announcement

that a person or group of affiliated or associated persons has acquired, or obtained the right or obligation to acquire, beneficial

ownership of 20% or more of the outstanding shares of common stock, including in the form of synthetic ownership through derivative

positions (any such person or group of affiliated or associated persons being referred to herein as an “acquiring person”)

close of business on the tenth business day (or later date if determined by the Company’s Board of Directors prior to

such time as any person or group becomes an acquiring person) following the commencement of a tender offer or exchange offer

which, if consummated, would result in a person or group becoming an acquiring person.

Rights are not exercisable until the distribution time.

earlier redeemed or exchanged by the Company as described below, the Rights will expire at the close of business on August 12,

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

the event that a person or group becomes an acquiring person (a “flip-in event”), each holder of a Right (other than

any acquiring person and certain related parties, whose Rights automatically become null and void) will have the right to receive,

upon exercise, common stock having a value equal to two times the exercise price of the Right.

If an insufficient number of shares

of common stock is available for issuance, then the Company’s board of directors would be required to substitute cash, property

or other securities of the Company for common stock.

The Rights may not be exercised following a flip-in event while the Company

has the ability to cause the Rights to be redeemed.

general, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (subject to adjustment and

payable in cash, common stock or other consideration deemed appropriate by the Company’s Board of Directors) at any time

until ten days following the stock acquisition date.

Immediately upon the action of the Board of Directors authorizing any redemption,

the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price.

any time after there is an acquiring person and prior to the acquisition by the acquiring person of 50% or more of the outstanding

shares of common stock, the Company may exchange the Rights (other than Rights owned by the acquiring person which will have become

void), in whole or in part, at an exchange ratio of one share of common stock, or one one-thousandth of a share of Series A Preferred

Stock (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences and privileges),

per Right (subject to adjustment).

a Right is exercised, its holder will have no rights as a stockholder of the Company, including, without limitation, the right

to vote or to receive dividends.

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.

of December 31, 2019 and September 30, 2018, the Company had 19,079,130 outstanding warrants to purchase an aggregate of 9,539,565

shares of the Company’s common stock, which includes 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”).

Each warrant entitles 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 and will expire on December 23,

The warrants may be exercised only for a whole number of shares of common stock.

No fractional shares will be issued upon

exercise of the warrants.

The warrants became exercisable 30 days after the Closing Date.

The Company may redeem the Public Warrants

at a price of $0.01 per warrant if the last sale price of the common stock equals or exceeds $24.00 per share for any 20 trading

days within a 30-trading day period.

The Company may not redeem the Private Placement Warrants so long as they are held by the

initial purchaser or such purchasers’

permitted transferees;

if held by other persons, the Private Placement Warrants will

be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

of December 31, 2019, and September 30, 2018, the warrants meet the definition of a derivative under ASC 815, and are classified as

a liability measured at fair value, with changes in fair value each period reported in earnings.

Company’s stock-based compensation plans authorize awards of RSUs, stock options and other equity-related awards.

2019, in conjunction with the Company’s stockholders approving the 2018 Plan, which authorizes a total of 2,550,000 shares

to be issued pursuant to awards thereunder, the balances available for awards under the Company’s predecessor plans (i.e.,

the First Incentive Plan and the Second Incentive Plan) (collectively, the “Prior Plans”) were terminated.

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

available for grant under the Prior Plans.

Awards granted under the 2018 Plan prior

to stockholder approval being obtained in May 2019 consisted of:

(1) the 542,770 RSUs approved for management and other participants

with respect to fiscal 2018 as to which the contingent cash-settlement feature lapsed upon approval of the 2018 Plan by stockholders

(see Note 17, “Derivative Liability”) and (2) 572,346 RSUs approved for management and other participants with respect

to fiscal 2019 comprised of two components:

(i) 50% represent performance-based target RSUs that require both attainment of Company

performance criteria for 2019 (i.e., Adjusted EBITDA) and the participants remaining employed for a three-year service period (under

the terms of the award, the specific number of shares that could become eligible to vest would range from 0% to 200% of the target

award depending on the level of satisfaction of the Company performance criteria);

and (ii) 50% represent service-based RSUs that

vest over a period of three years.

In addition, an aggregate of 111,500 RSUs were awarded during the year ended December 31, 2019

(following approval of the 2018 Plan by stockholders) as new hire or special recognition grants.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

As of December 31, 2019, there were (i)

2,429,011 shares subject to outstanding awards under the Prior Plans, including 1,092,633 shares subject to market-price vesting

conditions, and (ii) 939,947 shares subject to outstanding awards under the 2018 Plan, including 281,736 shares subject to performance-based

target awards (the Company has preliminarily determined that the 2019 performance criteria for these performance awards will be

met at a level of approximately 87% of the target award, such that approximately 13% of the target award would not become eligible

As of December 31, 2019, there were 1,336,737 shares available for new awards under the 2018 Plan and no shares available

for new awards under the Prior Plans.

All awards consist of RSUs and Restricted Stock.

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.

The Company began a twelve-month offering period under the ESPP on June 3, 2019 that

authorizes employees to contribute up to 10% of their base compensation to purchase a maximum of 1,000 shares.

The shares will

be purchased on the last day of the offering period at a discounted price that will equal to 85% of the lower of:

the closing price at the beginning of the offering period and (ii) the closing price at the end of the offering period.

estimates that approximately 10,000 shares will be purchased during this offering period.

As of December 31, 2019, a total of

475,400 shares remain available for purchase under the ESPP.

summary of the Company’s RSU activity is as follows:

Unvested Outstanding at January 1, 2019

Unvested Outstanding at December 31, 2019

The Company issued and withheld shares

for taxes in connection with the vesting and settlement of RSUs during the year ended December 31, 2019 as follows:

RSUs that had been granted upon the closing of the Business Combination settled on December 23, 2019, resulting in 36,813 shares

being issued and 23,373 withheld for taxes;

and (2) 273,316 RSUs that had been granted under the 2018 Plan vested on December 31,

2019, resulting in 166,959 shares being issued and 106,357 withheld for taxes (the processing of the issuance and delivery of such

166,959 shares did not occur until January 2020).

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

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.

modification of certain awards held by two executive officers of the Company in December 2017 resulted in $2.1 million of incremental

compensation cost being recognized as of the modification date.

Company recognized stock-based compensation expense as follows:

September 30,

(in millions)

RSAs and RSUs

Modification of awards

Payroll taxes on vesting of RSUs

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

unrecognized compensation expense related to unvested stock awards and unvested RSUs at December 31, 2019 amounts to $6.5 million

and is expected to be recognized over a weighted average period of 2.0 years.

Other Comprehensive Loss (Income)

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

Fair Value of

Benefit Costs

Comprehensive

(in millions)

Balance at October 1, 2017

Change during the period

Balance at September 30, 2018

Change during the period

Balance at December 31, 2018

Change during the period

Balance at December 31, 2019

Included within accumulated other comprehensive

income is an amount of $1.4 million relating to the change in fair value of hedging instruments.

These instruments were discontinued

during the year as part of the termination of the hedging instrument, as described further in note 14.

This amount will be amortized

as a charge to income over the life of the original instrument, to August 2021 in accordance with US GAAP.

Loss per Share

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

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

Diluted EPS gives

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

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

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

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

inclusion would be anti-dilutive:

September 30,

Earnout Shares

Unvested Restricted Stock

Stock Warrants

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019,

DECEMBER 31, 2018 AND SEPTEMBER 30, 2018

Finance Income (Costs)

finance income (costs) consisted of the following:

September 30,

(in millions)

Pension interest cost

Expected return on pension plan assets

Foreign currency translation on senior bank debt

Foreign currency remeasurement on hedging instrument

following comprises the loss before income taxes:

September 30,

(in millions)

North America

Mainland Europe

South America

Total (loss) income before income taxes

income tax expense consisted of the following:

September 30,

(in millions)

Income tax expense:

Mainland Europe

South America

Total current taxes

net deferred tax assets and liabilities arising from temporary differences are as follows:

September 30,

(in millions)

Net operating losses

Other temporary differences

Total deferred tax assets

Valuation allowance balance

Net deferred tax assets

Deferred tax liabilities

Intangible assets

Other temporary differences

Net deferred tax liabilities

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31,

2018 AND SEPTEMBER 30, 2018

differences between the US statutory tax rate and our effective rate are reflected in the following table:

September 30,

Statutory income tax

State taxes (net of federal)

Tax effect of permanent differences

Effect of foreign taxes

Valuation allowance

Effective income tax rate

valuation allowance on deferred tax assets has been determined by considering all available evidence, both positive and negative, in

order to ascertain whether it is more likely than not that carried forward deferred tax assets will be realized.

The Company has a total

potential net deferred tax asset carried forward of $65.7 million at December 31, 2019.

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

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 a full valuation allowance of $65.7 million as of December

there are no U.S.

federal, state or foreign jurisdiction tax audits pending.

The Company’s corporate U.S.

federal and state

tax returns from 2016 to 2018 remain subject to examination by tax authorities and the Company’s foreign tax returns from

2012 to 2018 remain subject to examination by tax authorities.

addition to the UK, the Company is subject to taxation in the US, and in certain foreign jurisdictions (primarily in Europe),

where the total of non-UK taxes payable for the year ended December 31, 2019 is $23.1 thousand.

Company has not recognized deferred tax liabilities in respect of unremitted earnings that are considered indefinitely reinvested

in foreign subsidiaries.

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 and similar state provisions.

Vora Special Opportunities Master Fund, Ltd.

(“HGV Fund”), which purchased the promissory notes issued under the NPA

(see Note 13), owns approximately 16.3% of our common stock and warrants to purchase additional shares.

HGV Fund is also a stockholder

and investor in Leisure Acquisition Corp., a special purpose acquisition company affiliated with two members of our management.

Interest expense paid to HGV Fund with respect to the promissory notes for the year ended December 31, 2019, the three months

ended December 31, 2018 and the year ended September 30, 2018 amounted to $12.3 million, $4.1 million and $2.1 million, respectively.

The promissory notes under the NPA were repaid on October 1, 2019 (see Note 13).

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Macquarie Corporate Holdings Pty Limited

(UK Branch) (“Macquarie UK”) is one of the lending parties with respect to our senior secured term loans and revolving

credit facility under our senior facilities agreement dated September 27, 2019 (see Note 13).

The portion of the total loans of

$288.6 million under these facilities held by Macquarie UK at December 31, 2019 was $25.8 million and the interest expense payable

to Macquarie UK for the year ended December 31, 2019, the three months ended December 31, 2018 and the year ended September 30,

2018 amounted to $0.5 million, $0.0 million and $0.0 million, respectively.

Macquarie UK’s affiliate, MIHI LLC, which was

a co-sponsor of our IPO, owns approximately 13.1% of our common stock and warrants to purchase additional shares.

MIHI LLC is also

a party to the stockholders agreement that we entered into on December 23, 2016 in connection with the closing of our Business

Combination under which it and the Hydra Sponsor are permitted to jointly designate two directors to the Board.

owed by Innov8 at December 31, 2019 amounted to $0.9 million and revenue receivable from Innov8 for the year ended December 31,

2019 amounted to $0.4 million.

occupied office space leased by a company affiliated with our Executive Chairman, Hydra Management LLC, and incurred amounts monthly

in maintenance expenses primarily for the lease of the office.

Expenditures amounted to $0.1 million during the year ended December

31, 2019 less than $0.1 million during the three months ended December 31, 2018 and $0.1 million for the year ended September

Company as Lessee

Company is party to 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

Vehicle leases typically contain a lease (of the vehicle) and a non-lease (provision of services) component which

are accounted for separately.

leases have remaining terms of 1 to 20 years.

December 31, 2019 the Company is party to an agreement that grants it the right to enter into a formal 12.5 year lease on a property

once practical completion of certain works at the property has been achieved.

Related to this, the Company is paying for fit out

works at the property and has recognized an asset in the course of construction as part of Property and Equipment amounting to

$0.8 million.

components of lease expense were as follows:

September 30,

(in millions)

Operating lease costs

Short-term lease costs

Variable lease costs

Weighted average remaining lease term

Weighted average discount rate

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

minimum lease payments as of December 31, 2019 were as follows:

Year ending December 31, (in millions)

Total future minimum lease payments

imputed interest

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

As of December 31, 2019, assets recorded

under operating leases were $4.1 million and accumulated depreciation associated with finance leases was $0.3 million.

expense for the year ended December 31, 2019 amounted to $0.3 million.

components of lease income were as follows:

September 30,

(in millions)

Interest receivable from sales type leases

Operating lease income

Variable income from sales type leases

minimum sales type lease receivables as of December 31, 2019 were as follows:

Year ending December 31, (in millions)

Total future minimum lease receivables

imputed interest

minimum operating lease receivables as of December 31, 2019 were as follows:

Year ending December 31, (in millions)

Total future minimum lease receivables

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019,

DECEMBER 31, 2018 AND SEPTEMBER 30, 2018

and Contingencies

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.

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

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.

operate both defined benefit and defined contributions pension schemes in the UK.

The defined contribution scheme assets are held

separately from those of the Company in an independently administered fund.

The pension cost charge represents contributions payable

by the Company and amounted to $2.1 million, $0.4 million and $2.0 million for the year ended December 31, 2019, the three months

ended December 31, 2018 and the year ended September 30, 2018, respectively.

Contributions totaling $0.5 million, $0.3 million

and $0.2 million were payable to the fund as at December 31, 2019, December 31, 2018 and September 30, 2018, respectively.

defined benefit section 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 ($7.4 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.

At December 31, 2019, it was determined that contingent contributions of $1.1

million will be payable during the year ended December 31, 2020.

The funding level of the scheme will next be tested against the

expected position as at December 31, 2020 to determine whether contingent contributions are payable over the year to December 31,

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

scheme’s investment policy is to maximize long-term financial return commensurate with security and minimizing risk.

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 undertook a review of investment strategy and took

advice from their investment advisors.

They considered 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 pension scheme

has implemented a new investment strategy over the year to reduce risk without adversely affecting return.

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.

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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.

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, 2019, December 31, 2018 and September 30, 2018.

diversified fund is valued at fair value by using the net asset value (“NAV”) of shares held by the plan at the year

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.

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.

of December 31, 2019, December 31, 2018 and September 30, 2018, the diversified fund was redeemable at NAV as of the measurement

dates and, therefore, classified as Level 2.

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).

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

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:

September 30,

(in millions)

Change in benefit obligation:

Benefit obligation at beginning of period

Interest cost

Prior service cost

Actuarial (gain)/loss

Benefits paid

Foreign currency translation adjustments

Benefit obligation at end of period

Change in plan assets:

Fair value of plan assets at beginning of period

Actual gain/(loss) on plan assets

Employer contributions

Benefits paid

Foreign currency translation adjustments

Fair value of assets at end of period

Amount recognized in the consolidated balance sheets:

Overfunded (Unfunded) status (non-current)

Net amount recognized

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

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

September 30,

(in millions)

Components of net periodic pension benefit cost:

Interest cost

Expected return on plan assets

Amortization of net loss

Net periodic (benefit) cost

accumulated benefit obligation for all defined benefit pension plans was $110.4 million and $95.8 million as of December 31, 2019

and September 30, 2018, 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, 2019 and September 30, 2018 was $(3.1) million and $5.3

million, respectively.

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 $0.6 million, $nil and $nil, respectively.

fair value of the plan assets at December 31, 2019 by asset category is presented below:

(in millions)

Diversified fund

Buy-in contract

fair value of the plan assets at September 30, 2018 by asset category is presented below:

(in millions)

Diversified fund

Buy-in contract

table below presents the weighted-average actuarial assumptions used to determine the benefit obligation and net periodic benefit

cost for the Plan.

September 30,

Discount rate

Expected return on assets

RPI inflation

CPI inflation

Pension increases –

pre-2006 service

Pension increases –

post-2006 service

following benefit payments are expected to be paid:

(in millions)

ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Reporting and Geographic Information

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.

Company’s chief decision-maker reviews financial information presented on a consolidated basis, accompanied by disaggregated

information about revenue and operating profit by operating unit.

This information is used for purposes of allocating resources

and evaluating financial performance.

The Company operates its business along

three operating segments, which are segregated based on the basis of revenue stream:

Service Based Gaming, Virtual Sports (which

includes Interactive) and Acquired Businesses.

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.

accounting policies of the segments are the same as those described in the “Summary of Significant Accounting Policies.”

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

expenses, depreciation and amortization, stock-based compensation expense and acquisition related transaction expenses, operating

profit/(loss), total assets and total capital expenditures for the periods ended December 31, 2019, December 31, 2018 and September

30, 2018, 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, cash,

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

a result of improved processes that have allowed us to more accurately allocate costs between reporting segments, we have reclassified

the previously reported segment allocation of selling, general and administrative expenses and stock-based compensation expense

for the year ended September 30, 2018.

Ended December 31, 2019

(in millions)

Total revenue

Cost of sales, excluding depreciation and amortization:

Cost of service

Cost of hardware

Selling, general and administrative expenses

Stock-based compensation expense

Acquisition and integration related transaction expenses

Depreciation and amortization

Segment operating income (loss)

Net operating loss

Total assets at December 31, 2019

Total goodwill at December 31, 2019

Total capital expenditures for the year ended December 31, 2019

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Months Ended December 31, 2018

(in millions)

Total revenue

Cost of sales, excluding depreciation and amortization:

Cost of service

Cost of hardware

Selling, general and administrative expenses

Stock-based compensation expense

Acquisition related transaction expenses

Depreciation and amortization

Segment operating income (loss)

Net operating loss

Total assets at December 31, 2018

Total goodwill at December 31, 2018

Total capital expenditures for the three months ended December 31, 2018

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Ended September 30, 2018

(in millions)

Total revenue

Cost of sales, excluding depreciation and amortization:

Cost of service

Cost of hardware

Selling, general and administrative expenses

Stock-based compensation expense

Impairment expense

Acquisition and integration related transaction expenses

Depreciation and amortization

Segment operating income (loss)

Net operating loss

Total assets at September 30, 2018

Total goodwill at September 30, 2018

Total capital expenditures for the year ended September 30, 2018

information for revenue is set forth below:

Ended December 31,

September 30,

(in millions)

Total revenue

Rest of world

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

September 30,

(in millions)

Rest of world

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

INSPIRED ENTERTAINMENT, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND SEPTEMBER

FOR THE PERIODS ENDED

DECEMBER 31, 2019, DECEMBER 31, 2018

AND SEPTEMBER 30, 2018

Concentration

the year ended December 31, 2019, two customers represented at least 10% of revenues, accounting for 14% and 13% of the Company’s

During the three months ended December 31, 2018, three customers represented at least 10% of revenues, accounting for

25%, 16% and 11% of the Company’s revenues.

During the year ended September 30, 2018, three customers represented at least

10% of revenues, accounting for 24%, 17% and 13% of the Company’s revenues.

All these customers were served by both the

Server Based Gaming and Virtual Sports segments.

December 31, 2019, no customers represented at least 10% of the Company’s accounts receivable.

At September 30, 2018, three

customers represented at least 10% of accounts receivable, accounting for 15%, 13% and 12% of the Company’s accounts receivable.

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.

As a result of the vesting on December

31, 2019 of 273,316 RSUs that had been granted under the Company’s 2018 Plan, the Company issued a total of 166,959 net shares

to participants in January 2020 and withheld the balance for taxes.

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 current floating rate debt facilities.

The swaps fix the variable

interest rate of the current debt facilities and provide protection over potential interest rate increases by providing a fixed

rate of interest payment in return.

These interest rate swaps are for £95 million at a fixed rate of 0.9255% based on the

6-month LIBOR rate and for €60 million at a fixed rate of 0.102% based on the 6 month EUROLIBOR rate and are effective until

maturity on October 1, 2023.

As a result of the spread of COVID-19 coronavirus

outbreak and subsequent government controls across the territories in which the Company operates (including, but not limited to,

the United States, United Kingdom, Greece and Italy) economic uncertainties have arisen which will negatively impact future revenues,

at least in the short term, while our customers’

respective land-based venues are closed.

Market conditions could remain

volatile for some months, and financial impacts could occur, including impairments to receivables, inventory, goodwill and other

long lived assets including assets held by the pension scheme, where it is possible that the funded status of the plan recognized

on the balance sheet has deteriorated if post balance sheet experience is taken into account.

As at the date of filing, indications

are that the value of the pension scheme benefit obligation has decreased to a greater extent to that of the assets, with the result

that, if reported now, the scheme would recognize an overfunded status.

Market conditions remain volatile, however, and any associated

actuarial loss (or gain) over the fiscal year to December 31, 2020 will be added to the net actuarial loss (or gain) in accumulated

other comprehensive income and amortized over future fiscal years.

The potential impact across all asset categories is currently

unknown, and will depend, primarily, on the extent of the length of controls.

On March 26, 2020, Lorne Weil, the Executive

Chairman of the Company, voluntarily withdrew his Employment Agreement, dated January 31, 2020, from consideration at our upcoming

annual meeting of stockholders.

Weil remains employed under his original employment agreement, dated January 16, 2017, as amended.

In addition, the Office of the Executive Chairman

and other executives have consented to temporary reductions in base pay calculated on a percentage basis on each of the tiered

stacks of the executive’s salary ranging from 0% for the portion under £25,000 to 33.3% for the over £300,000

portion, including as follows:

Lorne Weil (Executive Chairman):

Brooks Pierce (President and Chief Operating Officer):

Daniel Silvers (Executive Vice President and Chief Strategy Officer):

Stewart Baker (Executive Vice President and Chief Financial Officer):

Carys Damon (General Counsel):

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.

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 unchanged sentences

Share Purchase Agreement, dated as of June 11, 2019, by and between Inspired Gaming (UK) Limited and Novomatic UK Ltd.

(incorporated 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).

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.

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.

Certificate of Designation of the Series A Junior Participating Preferred Stock of the Company, dated August 14, 2017, incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form 8-A of the Company, filed with the SEC on August 14, 2017.

(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).

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).

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).

and Restated Bylaws 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 November 11, 2019).

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).

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.

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).

Description of Securities (incorporated herein by reference to Exhibit 4.4 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 31, 2022).

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).

Form of 7.875% Senior Secured Notes due 2026 (included in Exhibit 4.4).

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).

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).

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).

Rights Agreement, dated as of August 13, 2017, by and between the Company and Continental Stock Transfer & Trust Company, as rights agent (which includes the Form of Rights Certificate as Exhibit B thereto), incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form 8-A of the Company, filed with the SEC on August 14, 2017.

Description of Securities.

Senior Facilities Agreement, dated as of September 27, 2019, by and among Inspired Entertainment, Inc., Gaming Acquisition Limited, Nomura International plc, Macquarie Corporate Holdings Pty Limited (UK Branch), certain lenders named therein, Lucid Agency Services Limited and Lucid Trustee Services Limited, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed on October 2, 2019.

of Director and Officer Indemnity Agreement, incorporated 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.

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.

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.

of Grant Agreements under the Inspired Entertainment, Inc.

2016 Long-Term Incentive Plan and Second Long-Term Incentive Plan,

incorporated herein by reference to Exhibit 10.17 to the Current Report on Form 8-K of the Company, filed with the SEC on

December 30, 2016.

of Grant Agreements for restricted stock units awards made to A.

Lorne Weil and Daniel B.

Silvers on December 21, 2017 under

the Inspired Entertainment, Inc.

Second Long-Term Incentive Plan, as amended as of December 13, 2017, incorporated herein

by reference to Exhibit 10.7 to the Post-Effective Amendment to the Registration Statement on Form S-1 of the Company, filed

with the SEC on December 29, 2017.

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.

of Grant Agreements 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.

Entertainment, Inc.

2019 Short-Term Incentive Bonus Plan, incorporated herein by reference to Exhibit 10.4 to the Quarterly

Report on Form 10-Q of the Company, filed with the SEC on May 10, 2019.

Agreement, dated January 16, 2017 by and between Inspired Entertainment, Inc.

and Lorne Weil, incorporated herein by reference

to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 8, 2017.

dated August 24, 2018 to A.

Lorne Weil, incorporated herein by reference to Exhibit 10.10 to the Annual Report on Form 10-K

of the Company, filed with the SEC on December 10, 2018.

Agreement dated as of January 31, 2020 by and between the Company and A.

Lorne Weil, 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 5, 2020.

Withdrawal Letter, dated March 26, 2020, between Inspired Entertainment, Inc.

Letter Agreement, dated March 27, 2020, between Inspired Entertainment, Inc.

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).

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).

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).

Inspired Entertainment, Inc.

2021 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Annual Report on Form 10-K of the Company, filed with the SEC on March 31, 2022).

Forms of Grant Agreements for fiscal year 2022 under the Inspired Entertainment, Inc.

2021 Omnibus Incentive Plan (Time-Based Form of Agreement and Performance-Based Form of Agreement).

Inspired Entertainment, Inc.

2022 Short-Term Incentive Bonus Plan.

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).

Letter, dated April 21, 2021, from the Company to A.

Lorne Weil (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 14, 2021).

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).

Second Addendum, effective January 1, 2023, to the Employment Agreement dated October 9, 2020, as amended, by and between the Company and A.

Lorne Weil (incorporated herein by reference to Exhibit 10.2 to the Current Report on form 8-K of the Company, filed with the SEC on January 17, 2023).

Employment Agreement, dated February 17, 2020, between Inspired Entertainment, Inc.

and Brooks H.

Letter Agreement, dated March 28, 2020, between Inspired Entertainment, Inc.

and Brooks H Pierce.

Agreement, dated December 14, 2016, between Hydra Industries Acquisition Corp.

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).

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).

Second Addendum, effective January 1, 2023, to the Employment Agreement dated February 17, 2020, as amended, 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 January 17, 2023).

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.

dated December 22, 2017, to the Employee Agreement, dated December 14, 2016, between Hydra Industries Acquisition Corp.

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.

effective January 31, 2020 to the Employment Agreement dated December 14, 2016 (as amended) by and between the Company and

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.

Letter Agreement, dated March 28, 2020, between Inspired Entertainment, Inc.

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).

Amendment, dated December 22, 2017, to the Employee Agreement, dated December 14, 2016, between Hydra Industries Acquisition Corp.

and Daniel B.

Agreement, dated March 23, 2017, by and between Inspired Gaming (UK) Limited and Stewart Baker, incorporated herein by reference

to Exhibit 10.4 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 8, 2017.

dated October 25, 2017, to Service Agreement dated March 23, 2017, by and between Inspired Gaming (UK) Limited and Stewart

Baker, incorporated herein by reference to Exhibit 10.14 to the Annual Report on Form 10-K of the Company, filed with the

SEC on December 4, 2017.

Letter Agreement, dated March 30, 2020, between Inspired Entertainment, Inc.

and Stewart Baker.

Form of Employment Agreement of Inspired Gaming (UK) Limited, entered into by Carys Damon on January 29, 2013, and term sheet setting forth updated terms, incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on November 12, 2019.

Letter Agreement, dated March 30, 2020, between Inspired Entertainment, Inc.

and Carys Damon.

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).

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).

Separation and Release Agreement, dated January 10, 2023, between the Company and Daniel B.

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).

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).

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).

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.

Inspired Entertainment Sharesave Plan (U.K.

Appendix) (adopted as a subplan to the Inspired Entertainment Employee Stock Purchase Plan) (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on November 9, 2022).

Non-Employee Director Compensation Policy (as amended and restated) (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, filed with the SEC on May 10, 2022).

Subsidiaries of the Company.

10 unchanged sentences

XBRL Taxonomy Presentation Linkbase

Indicates management contract or compensatory plan.

Filed herewith.

Cover Page Interactive Data File (embedded within the Inline XBRL document)

management contract or compensatory plan.

as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as originally filed with the

SEC on March 16, 2023.

Furnished herewith.

Previously filed.

Form 10-K Summary.

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.

Executive Chairman

(Principal Executive Officer)

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.

Lorne Weil, Executive Chairman

/s/ Stewart F.B.

Baker, Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ Michael R.

Chambrello, Director

Raphaelson, Director

/s/ Desirée G.

Desirée G.

Rogers, Director

/s/ Steven M.

Saferin, Director

/s/ Katja Tautscher

Katja Tautscher, Director

Vandemore, Director

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.

ENTERTAINMENT, INC.

February 27, 2024

Executive Officer)

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

What changed 10-K/A

Item 9A. Controls and Procedures