☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Registrant’s telephone number, including area code: ~~(646)~~ (646) 565-3861

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~11, 2020,~~9, 2021, there were ~~23,029,492~~23,378,713 shares of the Company’s common stock issued and outstanding.


~~ITEM 6.~~	~~EXHIBITS~~	60

~~SIGNATURES~~		61

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

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in millions, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenue:
Service	$	15.2		$	25.6		$	58.4		$	56.4		$	37.5		$	15.3		$	54.6		$	58.1
Hardware		0.4			1.1			9.5			4.0
Product sales														4.0			0.3			9.7			9.8
Total revenue		15.6			26.7			67.9			60.4			41.5			15.6			64.3			67.9

Cost of sales, excluding depreciation and amortization:
Cost of service		(3.1	)		(5.3	)		(9.7	)		(10.7	)		(8.0	)		(2.5	)		(10.1	)		(11.0	)
Cost of hardware		(0.3	)		(1.0	)		(7.3	)		(2.6	)
Cost of product sales														(2.7	)		(0.3	)		(5.9	)		(6.5	)
Selling, general and administrative expenses		(10.6	)		(12.8	)		(39.7	)		(27.5	)		(28.5	)		(12.2	)		(43.7	)		(41.2	)
Stock-based compensation expense		(1.0	)		(2.3	)		(2.0	)		(4.4	)
Acquisition and integration related transaction expenses		(1.2	)		(0.7	)		(4.4	)		(1.6	)		(0.1	)		(1.2	)		(1.5	)		(4.4	)
Depreciation and amortization		(13.3	)		(9.1	)		(25.9	)		(18.8	)		(11.9	)		(13.3	)		(25.0	)		(25.9	)
Net operating loss		(13.9	)		(4.5	)		(21.1	)		(5.2	)		(9.7	)		(13.9	)		(21.9	)		(21.1	)

Other (expense) income
Interest income		0.1			0.1			0.4			0.1			0.1			0.1			0.1			0.4
Interest expense		(8.1	)		(4.0	)		(14.2	)		(8.5	)		(22.2	)		(8.1	)		(30.8	)		(14.2	)
Change in fair value of earnout liability		—			—			—			(2.3	)
Change in fair value of derivative liability		—			(1.3	)		—			(0.1	)
Change in fair value of warrant liability														(10.5	)		(1.7	)		(13.5	)		5.9
Loss from equity method investee		—			—			(0.5	)		—			—			—			—			(0.5	)
Other finance income (expense)		(2.5	)		(0.9	)		(6.2	)		0.3
Other finance (expense) income														(1.2	)		(2.5	)		5.2			(6.2	)

Total other expense, net		(10.5	)		(6.1	)		(20.5	)		(10.5	)		(33.8	)		(12.2	)		(39.0	)		(14.6	)

Loss before income taxes		(24.4	)		(10.6	)		(41.6	)		(15.7	)		(43.5	)		(26.1	)		(60.9	)		(35.7	)
Income tax expense		(0.1	)		(0.1	)		(0.3	)		—
Income tax (expense) benefit														(0.3	)		(0.1	)		0.4			(0.3	)
Net loss		(24.5	)		(10.7	)		(41.9	)		(15.7	)		(43.8	)		(26.2	)		(60.5	)		(36.0	)

Other comprehensive (loss)/income:
Foreign currency translation gain		0.4			0.7			3.5			0.2
Foreign currency translation gain (loss)														0.1			0.4			(1.0	)		3.5
Change in fair value of hedging instrument		(0.8	)		2.4			(2.3	)		0.3			(0.3	)		(0.8	)		0.3			(2.3	)
Reclassification of gain on hedging instrument to comprehensive income		0.3			(2.6	)		0.7			(1.1	)
Actuarial losses on pension plan		(8.7	)		(2.0	)		(4.3	)		(1.1	)
Other comprehensive loss		(8.8	)		(1.5	)		(2.4	)		(1.7	)
Reclassification of loss on hedging instrument to comprehensive income														0.5			0.3			1.0			0.7
Actuarial gains (losses) on pension plan														0.9			(8.7	)		5.5			(4.3	)
Other comprehensive income (loss)														1.2			(8.8	)		5.8			(2.4	)

Comprehensive loss	$	(33.3	)	$	(12.2	)	$	(44.3	)	$	(17.4	)	$	(42.6	)	$	(35.0	)	$	(54.7	)	$	(38.4	)

Net loss per common share – basic and diluted	$	(1.09	)	$	(0.48	)	$	(1.87	)	$	(0.73	)	$	(1.94	)	$	(1.15	)	$	(2.68	)	$	(1.61	)

Weighted average number of shares outstanding during the period – basic and diluted		22,400,107			22,193,955			22,392,218			21,583,648			22,594,207			22,400,107			22,589,461			22,392,218

Supplemental disclosure of stock-based compensation expense
Stock-based compensation included in:
Selling, general and administrative expenses													$	(3.4	)	$	(1.0	)	$	(4.8	)	$	(2.0	)

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

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD JANUARY 1, ~~2020~~2021 TO JUNE 30, ~~2020~~2021

(in millions, except share data)

(Unaudited)

	Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Amount		capital		income			deficit			deficit			Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’
																Shares		Amount		capital		income			deficit			deficit
Balance as of January 1, 2020		22,230,768	$	—	$	346.6	$	45.1		$	(441.2	)	$	(49.5	)

Balance as of January 1, 2021																	22,430,475	$	—	$	324.6	$	31.1		$	(457.4	)	$	(101.7	)
Foreign currency translation adjustments		—		—		—		3.1			—			3.1			—		—		—		(1.1	)		—			(1.1	)
Actuarial gains on pension plan		—		—		—		4.4			—			4.4			—		—		—		4.6			—			4.6
Change in fair value of hedging instrument		—		—		—		(1.5	)		—			(1.5	)		—		—		—		0.6			—			0.6
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		0.4			—			0.4			—		—		—		0.5			—			0.5
Shares issued in net settlement of RSUs		166,959		—		—		—			—			—			163,732		—		—		—			—			—
Stock-based compensation expense – ESPP
Stock-based compensation expense – ESPP, shares
Stock-based compensation expense		—		—		1.0		—			—			1.0			—		—		1.4		—			—			1.4
Net loss		—		—		—		—			(17.4	)		(17.4	)		—		—		—		—			(16.7	)		(16.7	)
Balance as of March 31, 2020		22,397,727	$	—	$	347.6	$	51.5		$	(458.6	)	$	(59.5	)
Balance as of March 31, 2021																	22,594,207	$	—	$	326.0	$	35.7		$	(474.1	)	$	(112.4	)
Foreign currency translation adjustments		—		—		—		0.4			—			0.4			—		—		—		0.1			—			0.1
Actuarial loss on pension plan		—		—		—		(8.7	)		—			(8.7	)
Actuarial gains on pension plan																	—		—		—		0.9			—			0.9
Change in fair value of hedging instrument		—		—		—		(0.8	)		—			(0.8	)		—		—		—		(0.3	)		—			(0.3	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		0.3			—			0.3			—		—		—		0.5			—			0.5
Stock-based compensation expense – ESPP		7,649		—		—		—			—			—
Stock-based compensation expense		—		—		1.0		—			—			1.0			—		—		3.3		—			—			3.3
Net loss		—		—		—		—			(24.5	)		(24.5	)		—		—		—		—			(43.8	)		(43.8	)
Balance as of June 30, 2020		22,405,376	$	—	$	348.6	$	42.7		$	(483.1	)	$	(91.8	)
Balance as of June 30, 2021																	22,594,207	$	—	$	329.3	$	36.9		$	(517.9	)	$	(151.7	)

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

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD JANUARY 1, ~~2019~~2020 TO JUNE 30, ~~2019~~2020

(in millions, except share data)

(Unaudited)

	Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’			Common stock				Additional paid in		Accumulated other comprehensive			Accumulated			Total stockholders’
	Shares		Amount		capital		income			deficit			deficit			Shares		Amount		capital		income			deficit			deficit

Balance as of January 1, 2019		20,870,397	$	—	$	329.9	$	55.9		$	(404.2	)	$	(18.4	)
Balance as of January 1, 2020																	22,230,768	$	—	$	320.6	$	45.1		$	(425.0	)	$	(59.3	)
Foreign currency translation adjustments		—		—		—		(0.5	)		—			(0.5			—		—		—		3.1			—			3.1
Actuarial gains on pension plan		—		—		—		0.9			—			0.9			—		—		—		4.4			—			4.4
Change in fair value of hedging instrument		—		—		—		(2.1	)		—			(2.1	)		—		—		—		(1.5	)		—			(1.5	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		1.5			—			1.5			—		—		—		0.4			—			0.4
Shares issued in earnout		1,323,558		—		8.6		—			—			8.6	)
Shares issued in net settlement of RSUs																	166,959		—		—		—			—			—
Stock-based compensation expense		—		—		1.7		—			—			1.7			—		—		1.0		—			—			1.0
Net loss		—		—		—		—			(5.0	)		(5.0	)		—		—		—		—			(9.8	)		(9.8	)
Balance as of March 31, 2019		22,193,955	$	—	$	340.2	$	55.7		$	(409.2	)	$	(13.3	)
Balance as of March 31, 2020																	22,397,727	$	—	$	321.6	$	51.5		$	(434.8	)	$	(61.7	)
Foreign currency translation adjustments		—		—		—		0.7			—			0.7			—		—		—		0.4			—			0.4
Actuarial losses on pension plan		—		—		—		(2.0	)		—			(2.0	)		—		—		—		(8.7	)		—			(8.7	)
Change in fair value of hedging instrument		—		—		—		2.4			—			2.4			—		—		—		(0.8	)		—			(0.8	)
Reclassification of loss on hedging instrument to comprehensive income		—		—		—		(2.6	)		—			(2.6	)		—		—		—		0.3			—			0.3
Conversion of awards previously classified as derivatives		—		—		0.8		—			—			0.8
Stock-based compensation expense – ESPP																	7,649		—		—		—			—			—
Stock-based compensation expense		—		—		2.1		—			—			2.1			—		—		1.0		—			—			1.0
Net loss		—		—				—			(10.7	)		(10.7	)		—		—		—		—			(26.2	)		(26.2	)
Balance as of June 30, 2019		22,193,955	$	—	$	343.1	$	54.2		$	(419.9	)	$	(22.6	)
Balance as of June 30, 2020																	22,405,376	$	—	$	322.6	$	42.7		$	(461.0	)	$	(95.7	)

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

INSPIRED ENTERTAINMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss	$	(41.9	)	$	(15.7	)	$	(60.5	)	$	(36.0	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		25.9			18.8			25.0			25.9
Amortization of right of use asset		2.0			—			1.2			2.0
Stock-based compensation expense		2.0			4.4			4.8			2.0
Change in fair value of derivative liability		—			0.1
Change in fair value of earnout liability		—			2.3
Change in fair value of warrant liability								13.5			(5.9	)
Impairment of investment in equity method investee		0.7			—			—			0.7
Foreign currency translation on senior bank debt		6.6			0.3			(4.6	)		6.6
Foreign currency translation on cross currency swaps		—			(0.6	)
Reclassification of gain on hedging instrument to comprehensive income		0.5			—
Reclassification of loss on hedging instrument to comprehensive income								1.0			0.5
Non-cash interest expense relating to senior debt		1.2			0.9			16.3			1.2
Changes in assets and liabilities:
Accounts receivable		3.7			0.8			5.5			3.7
Inventory		(1.4	)		(0.5	)		3.5			(1.4	)
Prepaid expenses and other assets		5.7			4.5			(4.1	)		5.7
Corporate tax and other current taxes payable		0.1			(0.5	)		(6.7	)		0.1
Accounts payable		0.8			4.4			3.9			0.8
Deferred revenues and customer prepayment		(3.8	)		(2.1	)		(5.7	)		(3.8	)
Accrued expenses		9.3			2.4			(4.0	)		9.3
Operating lease liabilities		(1.6	)		—			(1.2	)		(1.6	)
Other long-term liabilities		0.4			0.2			(0.7	)		0.4
Net cash provided by operating activities		10.2			19.7
Net cash (used in) provided by operating activities								(12.8	)		10.2

Cash flows from investing activities:
Purchases of property and equipment		(8.8	)		(2.2	)		(5.4	)		(8.8	)
Disposals of property and equipment		—			0.2			—			—
Purchases of capital software		(6.7	)		(7.8	)		(6.8	)		(6.7	)
Net cash used in investing activities		(15.5	)		(9.8	)		(12.2	)		(15.5	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt								333.1			—
Proceeds from issuance of revolver		22.3			9.3			—			22.3
Repayments of long-term debt								(320.7	)		—
Cash paid in connection with terminated interest rate swaps								(2.1	)		—
Debt fees incurred		(3.1	)		—			(9.1	)		(3.1	)
Repayments of finance leases		(0.6	)		(0.3	)		(0.2	)		(0.6	)
Net cash provided by financing activities		18.6			9.0			1.0			18.6

Effect of exchange rate changes on cash		(2.5	)		(1.2	)		1.4			(2.5	)
Net increase in cash		10.8			17.7
Net (decrease) increase in cash								(22.6	)		10.8
Cash, beginning of period		29.1			16.0			47.1			29.1
Cash, end of period	$	39.9		$	33.7		$	24.5		$	39.9

Supplemental cash flow disclosures
Cash paid during the period for interest	$	0.4		$	8.2		$	17.5		$	0.4
Cash paid during the period for income taxes	$	0.1		$	—		$	0.1		$	0.1
Cash paid during the period for operating leases	$	1.2		$	—		$	1.7		$	1.2

Supplemental disclosure of non-cash investing and financing activities
Property and equipment acquired through finance lease							$	1.3		$	1.5
Lease liabilities arising from obtaining right of use assets	$	(6.1	)	$	—		$	—		$	(6.1	)
Adjustment to goodwill arising from adjustment to fair value of assets acquired	$	(0.3	)	$	—		$	—		$	(0.3	)
Capitalized interest payments	$	10.6		$	—		$	—		$	10.6
Property and equipment acquired through finance lease	$	1.5		$	—
Additional paid in capital reclassified from derivative liability	$	—		$	0.8

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

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

Company Description and Nature of Operations

~~Inspired Entertainment, Inc. (the “Company,” “we,” “our,” and “us”) is~~We are a global ~~business-to-business~~ gaming technology company, supplying ~~Server Based Gaming (“SBG”)~~content, platform and ~~Virtual Sports (which includes Interactive) systems~~other products and services to online and land-based regulated lottery, betting and gaming operators worldwide through ~~an “omni-channel”~~a broad range of distribution ~~strategy.~~channels, predominantly on a business-to-business basis. We provide end-to-end digital gaming solutions (i) on our own proprietary and secure network, which accommodates a wide range of devices, including land-based gaming machine terminals, mobile devices ~~such as smartphones and tablets~~ and online computer applications and ~~social applications.~~(ii) through third party networks. Our content and other products can be found through the consumer-facing portals of our interactive customers and, through our land-based customers, in licensed betting offices, adult gaming centers, pubs, bingo halls, ~~and through our Acquired Businesses (defined herein), in UK pubs,~~ airports, motorway service areas and leisure parks.

Management Liquidity Plans

As of June 30, ~~2020,~~2021, the Company’s cash on hand was ~~$39.9~~ $24.5million, and the Company had working capital of ~~$1.3~~($17.7) million. The Company recorded net losses of ~~$41.9~~ $60.5 million and ~~$15.7~~ $36.0 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Net losses include non-cash ~~stock-based compensation~~debt fees expensed as part of ~~$2.0~~ the repayment of Prior Financing (see Note 4) of $14.4 million and ~~$4.4~~ $0.0 million for the six months ended June 30, 2021 and 2020, respectively, non-cash changes in fair value of warrant liability of $13.5 million loss and ~~2019,~~$5.9 million income for the six months ended June 30, 2021 and 2020, respectively, excess depreciation and amortization over capital expenditure of $12.8 million and $10.4 million for the six months ended June 30, 2021, and 2020, respectively, and non-cash stock-based compensation of $4.8 million and $2.0 million for the six months ended June 30, 2021 and 2020, respectively. Historically, the Company has generally had positive cash flows from operating activities and has relied on a combination of cash flows provided by operations and the incurrence of debt and/or the refinancing of existing debt to fund its obligations. Cash flows ~~provided by~~used in operations amounted to ~~$10.2~~ $12.8 million and ~~$19.7~~ $10.2 million provided by operations for the six months ended June 30, 2021 and 2020, respectively with the change year on year due to higher debt interest payments made in the six months ended June 30, 2021, as there was an agreement in place to defer and ~~2019, respectively.~~capitalize such payments in the six months ended June 30, 2020. Working capital of ~~$1.3~~($17.7) million includes a non-cash settled item of ~~$9.2~~ $9.7million of deferred ~~income.~~income, and an item not expected to be cash settled of $26.5million comprising a warrant liability. Management currently believes that, absent any unanticipated ~~coronavirus (“COVID-19”)~~COVID-19 impact (see below), the Company’s cash balances on hand, cash flows expected to be generated from operations, ability to control and defer capital projects and amounts available from the Company’s external borrowings will be sufficient to fund the Company’s net cash requirements through August ~~2021.~~2022.

Governments in all of the major jurisdictions in which our land-based customers operate have now reopened land-based venues. No restrictions remain in the United Kingdom. There remains an element of social distancing in venues in Greece and in Italy, there are restrictions in place that state only fully vaccinated people can enter our venues. It remains uncertain as to whether and when further restrictions or closures could happen in each jurisdiction and how long they may last. We continue to protect our existing available liquidity by pro-actively managing capital expenditures and working capital as well as identifying both immediate and longer-term opportunities for cost savings.

Our business is being, and will continue to be, adversely affected by the rapidly expanding nature of the COVID-19 pandemic. Whilst the majority of venues offering land-based gaming, including our products, have now re-opened, social distancing measures have impacted the ability of some venues to operate to the same capacity. In addition, the risk of there being a “second wave” or other additional periods of increases or spikes in the number of COVID-19 cases in areas in which we operate, which could see the government re-impose restrictions on, or changes to, our operations up to and including complete or partial closures of retail venues, and the long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operations, remains.

Due to the closure of land-based revenues we saw a significant increase in our online revenues from slots and virtual sports and following the success of this area of the business and the successful re-opening of various revenue streams, the Company repaid £10 million ($12.4 million) of the revolving credit facility subsequent to the end of the period, on July 14, 2020. There is a risk of further shutdowns in certain markets if COVID-19 cases increase.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, ~~2019~~2020 and ~~2018.~~2019. The financial information as of December 31, ~~2019~~2020 is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~30, 2020.~~29, 2021 (“the Original 10-K”), and as amended and filed on Form 10-K/A with the SEC on May 10, 2021 (“the 10-K/A”). The interim results for the six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~2021 or for any future interim periods.

Restatement of Previously Reported Information

On May 7, 2021, after consultation with Marcum LLP, the Company’s independent registered public accounting firm, the Company’s management and the audit committee of the Company’s Board of Directors concluded that it was appropriate to restate the Company’s previously issued audited financial statements as of December 31, 2020, and December 31, 2019, and for the years ended December 31, 2020, and December 31, 2019, which were included in the Original 10-K.

The restatement related to the SEC’s public statement released on April 12, 2021, informing market participants that warrants issued by special purpose acquisition companies may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings.

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

Schedule of Restatement

	As Previously Reported			Adjustments			As Restated
	(in millions, except per share data)
Consolidated Statements of Stockholders’ Deficit as of April 1, 2020
Additional paid in capital	$	347.6		$	(26.0	)	$	321.6
Accumulated deficit		(458.6	)		23.8			(434.8	)

Consolidated Statement of Operations and Comprehensive Loss for the three months ended June 30, 2020
Change in fair value of warrant liability	$	—		$	(1.7	)	$	(1.7	)
Net loss		(24.5	)		(1.7	)		(26.2	)
Comprehensive loss		(33.3	)		(1.7	)		(35.0	)

Net loss per common share – basic and diluted	$	(1.09	)	$	(0.06	)	$	(1.15	)

Consolidated Statements of Stockholders’ Deficit as of June 30, 2020
Additional paid in capital	$	348.6		$	(26.0	)	$	322.6
Accumulated deficit		(483.1	)		22.1			(461.0	)

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

	As Previously Reported			Adjustments			As Restated
	(in millions, except per share data)
Consolidated Statements of Stockholders’ Deficit as of January 1, 2020
Additional paid in capital	$	346.6		$	(26.0	)	$	320.6
Accumulated deficit		(441.2	)		16.2			(425.0	)

Consolidated Statement of Operations and Comprehensive Loss for the six months ended June 30, 2020
Change in fair value of warrant liability	$	—		$	5.9		$	5.9
Net loss		(41.9	)		5.9			(36.0	)
Comprehensive loss		(44.3	)		5.9			(38.4	)

Net loss per common share – basic and diluted	$	(1.87	)	$	0.26		$	(1.61	)

Consolidated Statements of Stockholders’ Deficit as of June 30, 2020
Additional paid in capital	$	348.6		$	(26.0	)	$	322.6
Accumulated deficit		(483.1	)		22.1			(461.0	)

Recharacterization of Previously Reported Information

In prior periods, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along three operating segments: Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted of the businesses acquired from the NTG Acquisition). During the period subsequent to September 30, 2020, the Company completed the process of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result changed the composition of its operating segments. The Company now operates its business along four operating segments, which are segregated on the basis of revenue stream: Gaming, Virtual Sports, Interactive and Leisure. The Company believes this method of segment reporting reflects both the way its business segments are now managed and the way the performance of each segment is now evaluated.

As part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative Expenses have been recharacterized to ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of hardware (Product Sales).

The resulting impact on previously reported information for the three months ended June 30, 2020 is as follows: Service Revenue, previously reported $15.2 million, now $15.3 million; Product Sales Revenue, previously reported $0.4 million, now $0.3 million; Cost of Service, previously reported $3.1 million, now $2.5 million; Selling, General and Administrative Expenses (excluding Stock-based compensation), previously reported $10.6 million, now $11.2 million.

The resulting impact on previously reported information for the six months ended June 30, 2020 is as follows: Service Revenue, previously reported $58.4 million, now $58.1 million; Product Sales Revenue, previously reported $9.5 million, now $9.8 million; Cost of Service, previously reported $9.7 million, now $11.0 million; Cost of Product Sales, previously reported $7.3 million, now $6.5 million; Selling, General and Administrative Expenses (excluding Stock-based compensation), previously reported $39.7 million, now $39.2 million.

The recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three and six months ended June 30, 2020.

2.	Inventory

Inventory consists of the following:

Schedule of Inventory

	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(in millions)				(in millions)
Component parts	$	13.3	$	12.7	$	11.2	$	12.1
Work in progress		1.5		2.1		0.8		1.7
Finished goods		4.2		4.0		2.3		3.8
Total inventories	$	19.0	$	18.8	$	14.3	$	17.6

Component parts include parts for gaming terminals. Included in inventory are reserves for excess and slow-moving inventory of ~~$1.2~~$1.3 million and ~~$0.9~~$1.5 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Our finished goods inventory primarily consists of gaming terminals which are ready for sale.

3.	Contract Liabilities and Other Disclosures

The following table summarizes contract related balances:

Schedule of Contract Related Balances

Accounts
Receivable Unbilled
Accounts
Receivable Deferred
Income Customer
Prepayments
and Deposits
(in millions)
At June 30, 2020 $ 19.7 $ 7.4 $ (24.0 ) $ (0.9 )
At December 31, 2019 $ 24.5 $ 15.3 $ (27.8 ) $ (1.9 )
At December 31, 2018 $ 11.5 $ 11.0 $ (32.0 ) $ (3.6 )

	Accounts Receivable		Unbilled Accounts Receivable		Deferred Income			Customer Prepayments and Deposits
	(in millions)
At June 30, 2021	$	24.1	$	14.9	$	(17.2	)	$	(2.1	)
At December 31, 2020	$	30.4	$	8.2	$	(22.9	)	$	(1.6	)
At December 31, 2019	$	24.5	$	15.3	$	(27.8	)	$	(1.9	)

Revenue recognized that was included in the deferred income balance at the beginning of the period amounted to ~~$5.9~~$6.3 million and ~~$9.6~~$10.3 million for the six months ended June 30, ~~2020~~2021 and the year ended December 31, ~~2019,~~2020, respectively.

4.	Long Term and Other Debt

Senior Secured Notes

On ~~September 27, 2019,~~May 20, 2021, Inspired Entertainment (Financing) PLC, a wholly owned subsidiary of the Company, issued £235.0 million ($324.7 million, as translated at June 30, 2021) aggregate principal amount of its 7.875% senior secured notes due 2026 (the “Senior Secured Notes”). The Senior Secured Notes bear interest at a rate of 7.875% per annum and mature on June 1, 2026. Interest is payable on the Senior Secured Notes on June 1 and December 1 of each year, commencing on December 1, 2021

The Senior Secured Notes and related guarantees were issued under an indenture (the “Indenture”), among Inspired Entertainment (Financing) PLC, as issuer, the Company and certain English and U.S. subsidiaries of the Company, as guarantors (collectively and together with the Company, the “Guarantors”), GLAS Trustees Limited, as trustee, GLAS Trust Corporation Limited, as security agent and GLAS Trust Company LLC as paying agent, transfer agent and registrar. The terms of the Senior Secured Notes and related guarantees are governed by the Indenture.

The Company used proceeds from the offering of the Senior Secured Notes to repay its £145.8 million ($201.5 million) senior secured term loan facility and €93.1 million ($110.4 million) senior secured term loan facility and accrued interest thereon (the “Prior Financing”), to close-out derivative contracts entered into in connection with the Prior Financing and to pay fees, commissions and expenses incurred in connection with the refinancing.

The Senior Secured Notes are fully and unconditionally guaranteed on a senior secured first-priority basis by the Guarantors on a joint and several basis. The Senior Secured Notes and related guarantees are secured, subject to certain permitted collateral liens, on a first-priority basis by substantially all assets of the Guarantors and all claims of the Inspired Entertainment (Financing) PLC under an intercompany loan to Gaming Acquisitions Limited, a private limited liability company incorporated under the laws of England and Wales and an indirect wholly-owned subsidiary of the Company (“GAL”), of the proceeds of the offering of the Senior Secured Notes.

The Indenture contains incurrence covenants that limit the ability of the Company and the Company’s restricted subsidiaries to, among other things, (i) incur or guarantee additional debt and issue certain preferred stock of restricted subsidiaries; (ii) create or incur certain liens; (iii) make restricted payments, including dividends or distributions to the Company’s stockholders or repurchase the Company’s stock; (iv) prepay or redeem subordinated debt; (v) make certain investments, including participating joint ventures; (vi) create encumbrances or restrictions on the payment of dividends or other distributions by restricted subsidiaries; (vii) sell assets, or consolidate or merge with or into other companies; (viii) sell or transfer all or substantially all of the Company’s assets or those of the Company’s subsidiaries on a consolidated basis; (ix) engage in certain transactions with affiliates; and (x) create unrestricted subsidiaries. Certain of these covenants will be suspended if and for so long as the Senior Secured Notes have investment grade ratings from any two of Moody’s Investors Service, Inc., Standard & Poor’s Investors Ratings Services and Fitch Ratings, Inc. These covenants are subject to exceptions and qualifications as set forth in the Indenture.

Inspired Entertainment (Financing) PLC may redeem the Senior Secured Notes, in whole or in part, at any time and from time to time prior to June 1, 2023, at a redemption price equal to 100% of the principal amount thereof, plus a “make-whole” premium as set forth in the Indenture and form of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Inspired Entertainment (Financing) PLC may also redeem the Senior Secured Notes, in whole or in part, at any time and from time to time on or after June 1, 2023, at the redemption prices set forth in the Indenture and form of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to June 1, 2023, Inspired Entertainment (Financing) PLC may redeem up to 40% of the original aggregate principal amount of the Senior Secured Notes with the net cash proceeds of one or more equity offerings, as described in the Indenture, at a redemption price equal to 107.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to June 1, 2023, Inspired Entertainment (Financing) PLC may redeem up to 10% of the aggregate principal amount of the Senior Secured Notes within each 12-month period at a redemption price equal to 103.000% of the aggregate principal amount of the Senior Secured Notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Revolving Credit Facility

In connection with the issuance of the Senior Secured Notes on May 20, 2021, the Company and certain of our direct and indirect wholly-owned subsidiaries, entered into a Super Senior ~~Facilities~~Revolving Credit Facility Agreement (the ~~“SFA”~~“RCF Agreement”) with ~~Lucid~~Global Loan Agency Services Limited, as agent, ~~Nomura International~~Barclays Bank plc (“Barclays”) and Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK” and together with Barclays, the “Arrangers”) 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 ($173.0 million) and €90.0 million ($101.1 million), respectively and~~ a secured revolving facility loan in an original principal amount of ~~£20.0~~£20 million ($~~24.7~~27.6 million) under which certain of our subsidiaries are able to draw funds (the “RCF Loan”). The RCF Loans will terminate on November 20, 2025.

~~On June 25, 2020,~~The funding of the RCF Loan is subject to customary conditions set forth in the RCF Agreement. The undrawn commitment of each Lender under the RCF Loan will automatically terminate, unless previously terminated by the Company, ~~certain direct~~on October 20, 2025.

The RCF Loans will bear interest at a rate per annum equal to (i) SONIA for borrowings in sterling, (ii) LIBOR (or, on and ~~indirect subsidiaries~~after December 31, 2021, SOFR) for borrowings in dollars, or (iii) EURIBOR for borrowings in Euro, as applicable, plus, in each case, a margin (based on the Company’s consolidated senior secured net leverage ratio) ranging from 4.25% to 4.75% per annum. With respect to the RCF Loan, a commitment fee of 30% of the ~~Company, Lucid Agency Services Limited,~~then applicable margin is payable at any time on any unutilized portion of the RCF Loan.

The RCF Agreement contains various covenants (which include restrictions regarding the incurrence of liens, the incurrence of indebtedness by the Company’s subsidiaries and ~~Lucid Trustee Services Limited as~~fundamental changes, subject in each case to certain exceptions), representations, warranties, limitations and events of default (which include non-payment, breach of obligations under the financing documents, cross-default, insolvency and litigation) customary for similar facilities for similarly rated borrowers and subject to customary carve-outs and grace periods. Following the occurrence of an event of default which has not been waived or remedied, the Lenders who represent more than 66.67% of total commitments under the RCF may, subject to the terms of an intercreditor agreement (which governs the relationship between the Lenders and the holders of the Senior Secured Notes), instruct the agent to (i) accelerate the RCF Loans, (ii) instruct the security agent ~~under~~to enforce the ~~SFA~~transaction security and/or (iii) exercise any other remedies available to the Lenders.

The RCF Agreement requires that the Company maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ~~Intercreditor Agreement~~ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Initial Facility (as defined in the ~~SFA), entered into an Amendment and Restatement~~RCF Agreement) being drawn on the relevant test date. The RCF Agreement ~~(the “ARA”) with respect to the SFA.~~

The ARA amends the SFA by, among other things, (i) capitalizing certain interest payments that fell due on April 1, 2020, (ii) resetting the leverage and capital expenditure financial covenants applicable under the SFA, removing certain rating requirements under the SFA, (iii) allowing the Company and its subsidiaries to incur additional indebtedness under the UK Coronavirus Large Business Interruption Loan Scheme under a stand-alone facility, which may rank ~~pari passu~~ or junior to the facilities under the SFA, in an amount not exceeding £10.0 million ($12.4 million), (iv) removing certain rating requirements under the SFA, (v) limiting the ability of the Company and its subsidiaries to incur additional indebtedness, including by reducing the amount of general indebtedness the Company and its subsidiaries are permitted to incur and removing the ability to incur senior secured, second lien and unsecured indebtedness in an amount not exceeding the aggregate of (A) an unlimited amount, as long as, pro forma for the utilization of such indebtedness, the consolidated total net leverage ratio does not ~~exceed the lower of 3.4:1 and the then applicable~~include a minimum interest coverage ratio with respect to the consolidated total net leverage financial covenant summarized further below, plus (B) an amount equal to the greater of £16.0 million ($19.8 million) and 25% of the consolidated pro forma EBITDA of the Company and its subsidiaries for the relevant period (as defined in the SFA, but disregarding, for the purposes of calculating the usage of such cap, any financial indebtedness applied to refinancingor other financial indebtedness, together with any related interest, fees, costs and expenses), (vi) increasing the margin applicable to the Facilities (as defined in the SFA) by 1% and adding an additional payment-in-kind margin of 0.75% payable on any principal amountscovenants.

The outstanding under Facility B (as defined in the SFA) after September 24, 2021 (the “Relevant Date”), (vii) adding an exit fee payable by the Company with respect to any repayment or prepayment of Facility B after the Relevant Date at the time of such repayment or prepayment in an amount equal to 0.75% of the principal amount of ~~Facility B being repaid or prepaid, (viii) removing any ability to carry forward or carry back any unused allowance~~each advance under the ~~capital expenditure financial covenant in~~RCF Loans is payable on the SFA and (ix) granting certain additional information rights to the Lenders under the SFA, including the provision of a budget, and certain board observation rights until December 31, 2022. All other material terms of the SFA remain unchanged in all material respects.

In consideration for the amendments listed above, the Company agreed to pay the Lenders an amendment fee equal to 1% of the Total Commitments (as defined in the SFA) after giving effect to the capitalizationlast day of the interest ~~payment described above. The amendment fee~~period relating to such advance, unless such advance is ~~payable to the Lenders pro rata to their commitments under the SFA.~~

~~The modification to the SFA is not considered to be substantial~~rolled over on a cashless basis in accordance with ~~Topic 470-50~~customary rollover provisions contained in the RCF Agreement, with a final repayment on November 20, 2025.

Termination of Prior Financing

The Company’s previous debt consisted of two tranches of senior secured term loans in a principal amount of £145.8 million ($201.5 million) with a cash interest rate of 8.25% plus 3-month LIBOR and ~~has therefore not been treated as~~€93.1 million ($110.4 million) with a ~~debt extinguishment. The amendment fees, amounting to $3.1~~cash interest rate of 7.75% plus 3-month EURIBOR, respectively and a secured revolving facility loan in a principal amount of £20.0 million ~~are associated~~($27.6 million) with a cash interest rate on any utilization of 6.50% plus 3-month LIBOR.

In connection with the ~~modified debt instrument and will be amortized along with the existing unamortized debt~~ issuance ~~costs. Fees payable to third parties are expensed as incurred, resulting in $1.0 million charged to interest expense for the three months ended June 30, 2020.~~

~~There were no breaches~~ of the ~~debt covenants~~Senior Secured Notes and the entry into the RCF Agreement, on May 20, 2021, the Prior Financing was repaid in full and the ~~periods ended~~senior facilities agreement (dated September 27, 2019, as amended and restated on June ~~30, 2020~~25, 2020) relating to the Prior Financing was terminated. No prepayment premium applied to the repayment (although customary break cost provisions applied). Debt fees of $14.4 million were expensed to the Consolidated Statements of Operations and ~~December 31, 2019.~~ Consolidated Loss within Interest Expense as part of the repayment. In addition, on May 19, 2021, we terminated the interest rate swaps relating to the Prior Financing and applicable termination fees were settled on May 20, 2021 (see Note 5).

Outstanding Debt and Finance Leases

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

Schedule of Outstanding Debt and Capital Leases

	Principal			Unamortized deferred financing charge			Book value, June 30, 2021
	(in millions)
Senior debt	$	324.7		$	(8.7	)	$	316.0
Finance lease liabilities		1.9			—			1.9
Total long-term debt outstanding		326.6			(8.7	)		317.9
Less: current portion of long-term debt		(0.9	)		—			(0.9	)
Long-term debt, excluding current portion	$	325.7		$	(8.7	)	$	317.0

	Principal			Unamortized deferred financing charge			Book value, December 31, 2020
	(in millions)
Senior debt	$	313.3		$	(15.8	)	$	297.5
Finance lease liabilities		0.8			—			0.8
Total long-term debt outstanding		314.1			(15.8	)		298.3
Less: current portion of long-term debt		(0.6	)		—			(0.6	)
Long-term debt, excluding current portion	$	313.5		$	(15.8	)	$	297.7

The Company is in compliance with all relevant financial covenants and the long-term debt portion is correctly classified as such in line with the underlying agreements.

Long term debt as of June 30, ~~2020:~~2021 matures as follows:

Schedule of Maturities of Long-term Debt

Principal Unamortized
deferred
financing charge Book value,
June 30,
2020
(in millions)
Senior bank debt $ 309.5 $ (16.4 ) $ 293.1
Finance lease liabilities 1.1 — 1.1
Total long-term debt outstanding 310.6 (16.4 ) 294.2
Less: current portion of long-term debt (25.3 ) — (25.3 )
Long-term debt, excluding current portion $ 285.3 $ (16.4 ) $ 268.9

Fiscal period:	Senior bank debt		Finance leases		Total
	(in millions)
2021	$	—	$	0.6	$	0.6
2022		—		0.5		0.5
2023		—		0.3		0.3
2024		—		0.5		0.5
2025		—		—		—
2026		324.7		—		324.7
Total	$	324.7	$	1.9	$	326.6

5.	Derivatives and Hedging Activities

~~On January 15, 2020, the~~The Company ~~entered into~~was party to 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~~previous floating rate debt facilities. The swaps ~~fix~~fixed the variable interest rate of the ~~current~~ debt facilities and ~~provide~~provided protection over potential interest rate increases by providing a fixed rate of interest payment in return. ~~These~~The interest rate swaps ~~are~~were for ~~£95~~£95 million ($131.3 million) at a fixed rate of 0.9255% based on the 6-month LIBOR rate and for ~~€60~~€60 million ($71.2 million) at a fixed rate of 0.102% based on the ~~6 month EUROLIBOR~~6-month EURIBOR rate.

In connection with the issuance of the Senior Secured Notes and the entry into the RCF Agreement, on May 19, 2021, the Company terminated its two interest rate swaps. The termination fees were settled on May 20, 2021, for £1.3 million ($1.9 million) and ~~are effective until maturity on October 1, 2023.~~€0.1 million ($0.2 million), respectively.

Hedges of Multiple Risks

The Company’s objectives in using interest rate derivatives ~~are~~were to add stability to interest and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily ~~uses~~used interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in Accumulated Other Comprehensive Income related to derivatives will be reclassified to interest expense ~~as interest payments are made on~~over the ~~Company’s variable-rate debt.~~life of the original instruments. During the next twelve months, the Company estimates that an additional ~~$1.5~~$1.0 million will be reclassified as an increase to interest expense.

As of June 30, 2021, the company did not have any derivatives. As of December 31, 2020, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Schedule of Outstanding Derivatives Designated as Cash Flow Hedges

Interest Rate Derivative		Number of Instruments				Notional
Interest rate swaps			2			£95 million ($131.3 million) at a fixed rate of ~~0.9255%~~0.9255% based on the 6-month LIBOR rate and ~~€60~~€60 million ($71.2 million) at a fixed rate of ~~0.102%~~0.102% based on the ~~6 month EUROLIBOR~~6-month EURIBOR rate

The Company did not have any derivative financial instruments as of June 30, 2021. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheet as of December 31, 2020.

Schedule of Fair Value of Derivative Financial Instruments

	Balance Sheet Classification		Asset Derivatives Fair Value		Balance Sheet Classification		Liability Derivatives Fair Value
			(in millions)				(in millions)
Derivatives designated as hedging instruments:
Interest Rate Products		Fair Value of Hedging Instruments	$	—		Other Current Liabilities and Long Term Derivative Liability	$	(2.6	)
Total derivatives designated as hedging instruments			$	—			$	(2.6	)

The table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months ended June 30, ~~2020.~~2021.

Schedule of Accumulated Other Comprehensive Income

Balance Sheet
Classification Asset
Derivatives
Fair Value Balance Sheet
Classification Liability
Derivatives
Fair Value
(in millions) (in millions)
Derivatives designated as hedging instruments:
Interest Rate Products Fair Value of Hedging Instruments $ — Other Current Liabilities and long term Derivative Liability $ (2.1 )
Total derivatives designated as hedging instruments $ — $ (2.1 )

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative			Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	(in millions)			(in millions)
Interest Rate Products	$	0.3	Interest Expense	$	(1.0	)
Total	$	0.3		$	(1.0	)

The table below presents the effect of fair value and cash flow hedge accounting on Accumulated Other Comprehensive Income for the six months ended June 30, 2020.

	Amount of Gain/(Loss) Recognized in Other Comprehensive Income on Derivative				Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Income into Income
		(in millions)				(in millions)
Interest Rate Products	$	(2.3	)	Interest Expense	$	(0.7	)
Total	$	(2.3	)		$	(0.7	)

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the six months ended June 30, 2021.

Schedule of Consolidated Income Statements

	Interest Expense
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	30.0

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(1.0	)

Amount of Gain/(Loss)
Recognized in
Other
Comprehensive
Income on
Derivative Location of
Gain/(Loss)
Reclassified
from
Accumulated Other
Comprehensive
Income into
Income
(in millions) (in millions)
Interest Rate and Foreign Exchange Products $ (2.3 ) Interest Expense $ (0.7 )
Total $ (2.3 ) $ (0.7 )

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations for the six months ended June 30, 2020.

	Interest Expense
	(in millions)
Total amounts of income and expense line items presented in the statement of operations and comprehensive loss in which the effects of fair value or cash flow hedges are recorded	$	14.2

Gain/(loss) on cash flow hedging relationships in Subtopic 815-20	$	(0.7	)

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of ~~June 30,~~December 31, 2020. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheet.

The ISDA Master Agreement between Gaming Acquisitions Limited, a wholly-owned subsidiary of the Company, and UBS AG iswas documented using the 2002 Form and the ISDA standard set-off provision in Section 6(f) of the ISDA Master Agreement ~~apply~~applied to both parties and iswas only modified to include Affiliates of the Payee. There iswas no CSA and thus there iswas no collateral posting.

Schedule of Offsetting of Derivative Assets and Liabilities

Offsetting of Derivative Assets

~~June 30,~~December 31, 2020

Gross Amounts

Gross Amounts Offset in the Statement

Net Amounts of Assets presented in the Statement

Gross Amounts Not Offset in the
Statement of Financial Position

~~Gross~~
~~Amounts~~
of Recognized
Assets

~~Gross~~
~~Amounts~~
~~Offset in the~~
~~Statement~~ of
Financial
Position

of Financial Position

Financial Instruments

Cash Collateral Received

Net ~~Amounts~~
~~of Assets~~
~~presented~~
~~in the~~
~~Statement~~
~~of Financial~~
~~Position~~Amount

~~Financial~~
~~Instruments~~

~~Cash~~
~~Collateral~~
~~Received~~

~~Net~~
~~Amount~~

(in millions)

Fair value of hedging instrument

—

Offsetting of Derivative Liabilities
June 30, 2020
Gross Amounts Not Offset in the
Statement of Financial Position
Gross
Amounts
of Recognized
Liabilities Gross
Amounts
Offset in the
Statement of
Financial
Position Net Amounts
of Liabilities
presented
in the
Statement
of Financial
Position Financial
Instruments Cash
Collateral
Received Net
Amount
(in millions)
Fair value of hedging instrument $ 2.1 $ — $ 2.1 $ — $ — $ —

Offsetting of Derivative Liabilities

December 31, 2020

	Gross		Gross Amounts Offset in the Statement		Net Amounts of Assets presented in the Statement		Gross Amounts Not Offset in the Statement of Financial Position
	Amounts of Recognized Assets		of Financial Position		of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	2.6	$	—	$	2.6	$	—	$	—	$	—

~~Credit-risk-related Contingent Features~~

The Company has entered into an industry standard ISDA Master Agreement, with a negotiated Scheduled thereto (the “ISDA Agreement”), with the counterparty to its derivative transactions and which ISDA Agreement sets forth various provisions which govern the trading relationship between the Company and its counterparty. Such provisions include certain events which, if triggered by either party, may give rise to an acceleration of the ISDA Agreement, thus triggering the exchange of a breakage payment between the parties.

The ISDA Agreement with the Company’s derivative counterparty contains a provision where the Company could be declared in default on its derivative obligations if, among others, its repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. The ISDA Agreement can also be accelerated if Lucid Trustee Services Limited requests or requires that the lender terminates or closes-out any Transaction under the ISDA Agreement pursuant to Clause 4.10 of the Intercreditor Agreement between primarily the Company, Lucid Agency Services as Senior Agent and Lucid Trustee Services Limited as Security Agent; in the event of certain refinancing circumstances; and in the event of certain reductions in the principal with respect to amounts loaned under the Senior Facilities Agreement.

As of June 30, 2020, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to the ISDA Agreements was $2.1 million. As of June 30, 2020, the Company has not posted any collateral related to the ISDA Agreement, as no collateral is required under the terms of such ISDA Agreement. If the Company had breached any of the provision under the ISDA Agreement which resulted in an acceleration of the ISDA Agreement at June 30, 2020, it could have been required to settle its obligations under the ISDA Agreement at its termination value of $2.5 million

6.	Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. We estimate the fair value of our assets and liabilities utilizing an established three-level hierarchy. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

	Level 1:	Quoted prices in active markets for identical assets or liabilities.

	Level 2:	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

	Level 3:	Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the asset or liability. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that are unable to be corroborated with observable market data.

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments approximates their recorded values.

For each period, derivative financial instrument assets and liabilities measured at fair value on a recurring basis are included in the financial statements as per the table below.

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

			June 30,			December 31,
	Level		2021			2020
			(in millions)
Public Warrants (included in warrant liability)		1	$	(8.0	)	$	(3.2	)
Long term receivable (included in other assets)		2	$	1.2		$	1.4
Private Placement Warrants (included in warrant liability)		2	$	(18.5	)	$	(9.8	)
Derivative liability (see Note 5)		2	$	—		$	(2.6	)

The fair value of our long-term senior debt as of June 30, 2021, was $332.9 million, based upon quoted prices in the marketplace, which are considered Level 2 inputs.

June 30, December 31,
Level 2020 2019
(in millions)
Derivative liability (see Note 5) 2 $ 2.1 $ —
Long term receivable (included in other assets) 2 $ 1.3 $ 1.5

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the derivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s principal financial officer, who reports to the principal executive officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Principal Financial Officer and approved by the Principal Executive Officer.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

7.	Stock-Based Compensation

The Company’s stock-based compensation plans authorize awards of restricted stock units (“RSUs”), stock options and other equity-related awards. ~~In May 2019, in conjunction with~~The Company’s 2021 Omnibus Incentive Plan (“2021 Plan”) was adopted by the Company’s Board of Directors on April 12, 2021 and approved by our stockholders ~~approving~~on May 11, 2021. The 2021 Plan succeeds the Company’s 2018 Omnibus Incentive Plan (the “2018 Plan”)~~, which authorizes a total of 2,550,000~~ such that shares ~~to be issued pursuant to awards thereunder, the balances~~ available for ~~awards~~award under the ~~Company’s~~2018 Plan would instead be available under the 2021 Plan. The Company has two other predecessor plans, ~~(i.e.,~~ the 2016 Long-Term Incentive Plan and the Second Long-Term Incentive ~~Plan)~~Plan (collectively, the “Prior Plans”), whose available balances were ~~terminated.~~terminated in connection with approval of the 2018 Plan. Although outstanding awards under the Prior Plans remain governed by the terms of the Prior Plans, no new awards ~~will~~may be granted or become available for grant under the Prior Plans.

As of June 30, ~~2020,~~2021, there were (i) ~~2,429,011~~1,408,020 shares subject to outstanding awards under the ~~Prior Plans,~~2021 Plan, including ~~1,092,633~~516,496 shares subject to performance-based target awards, 232,500 shares subject to market-price vesting conditions and 165,000 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement; (ii) ~~1,139,739~~1,479,954 shares subject to outstanding awards under the 2018 Plan, including ~~100,000~~75,000 shares subject to performance-based target awards, ~~and 241,077~~257,879 shares subject to awards that were previously subject to performance criteria that were determined to behave been met ~~in June 2020 (at a level equal to approximately 87% of~~for the ~~target awards)~~applicable performance year which awards continue to remain subject to a time-based vesting ~~schedule.~~schedule and 75,264 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement; and (iii) 2,411,319 shares subject to outstanding awards under the Prior Plans, including 1,092,633 shares subject to market-price vesting conditions that have a satisfaction deadline of December 23, 2021 and 1,318,686 shares subject to awards as to which the applicable vesting conditions have been met which remain subject to deferred settlement. As of June 30, ~~2020,~~2021, there were ~~1,136,945~~1,726,367 shares available for new awards under the 2021 Plan (which includes shares rolled over from the 2018 ~~Plan~~Plan) and no shares available for new awards under the Prior Plans. All awards consist of RSUs and Restricted Stock.

The Company also has an employee stock purchase plan (“ESPP”) that authorizes the issuance of up to an aggregate of 500,000 shares of common stock pursuant to purchases thereunder by employees. The ESPP, which was approved by stockholders in July 2017, is administered by the Compensation Committee which has discretion to designate the length of offering periods and other terms subject to the requirements of the ESPP. The Company held a twelve-month offering period under the ESPP that began on June 3, 2019 and ended on June 2, 2020. This offering period authorized employees to contribute up to 10% of their base compensation to purchase a maximum of 1,000 shares at a discounted purchase price that would be equal 85% of the lower of: (i) the closing price at the beginning of the offering period and (ii) the closing price at the end of the offering period. A total of 7,649 shares were purchased on the last day of the offering period, June 2, 2020, at a discounted price of $3.2215 per share. As of June 30, ~~2020,~~2021, a total of ~~467,751shares~~467,751 shares remain available for purchase under the ESPP.

A summary of the Company’s RSU activity during the six months ended June 30, ~~2020~~2021 is as follows:

Schedule of Restricted Stock Unit Activity

	Number of Shares

Unvested Outstanding at January 1, ~~2020~~2021		~~1,571,964~~2,149,118
Granted		~~247,405~~1,467,486
Forfeited		(~~47,613~~26,542	)
Vested		(~~198,701~~473,835	)
Unvested Outstanding at June 30, ~~2020~~2021		~~1,573,055~~3,116,227

~~In addition, the~~The Company issued a total of ~~166,959~~163,732 shares during the six months ended June 30, ~~2020~~2021 (such shares were issued in connection with the net settlement of RSUs that vested on December 31, ~~2019.~~2020).

Stock-based compensation is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. For performance awards that are contingent upon the Company achieving certain pre-determined financial performance targets, compensation expense is calculated based on the number of shares expected to vest after assessing the probability that the performance criteria will be met. Determining the probability of achieving a performance target requires estimates and judgment. For market-based awards that are contingent upon the Company’s stock achieving certain pre-determined price targets, compensation expense is calculated based upon the determination of the fair value of the awards as derived through multiple running of the Monte Carlo valuation model, with the fair value recognized on a straight-line basis over the requisite service period.

The Company recognized stock-based compensation expense ~~for Restricted Stock and RSUs~~ amounting to ~~$1.0~~$3.4 million and ~~$2.3~~$1.0 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$2.0~~$4.8 million and ~~$4.4~~$2.0 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Total unrecognized compensation expense related to unvested stock awards and unvested RSUs at June 30, ~~2020~~2021 amounts to ~~$5.9~~$15.7 million and is expected to be recognized over a weighted average period of ~~1.7~~1.9 years.

8.	Accumulated Other Comprehensive Loss (Income)

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

Schedule of Accumulated Other Comprehensive (Loss) Income

	Foreign Currency Translation Adjustments			Change in Fair Value of Hedging Instrument			Unrecognized Pension Benefit Costs			Accumulated Other Comprehensive (Income)
	(in millions)
Balance at January 1, 2021	$	(71.1	)	$	2.8		$	37.2		$	(31.1	)
Change during the period		1.1			(1.1	)		(4.6	)		(4.6	)
Balance at March 31, 2021		(70.0	)		1.7			32.6			(35.7	)
Change during the period		(0.1	)		(0.2	)		(0.9	)		(1.2	)
Balance at June 30, 2021	$	(70.1	)	$	1.5		$	31.7		$	(36.9	)

	Foreign Currency Translation Adjustments			Change in Fair Value of Hedging Instrument		Unrecognized Pension Benefit Costs			Accumulated Other Comprehensive (Income)
	(in millions)
Balance at January 1, 2020	$	(76.5	)	$	1.4	$	30.0		$	(45.1	)
Change during the period		(3.1	)		1.1		(4.4	)		(6.4	)
Balance at March 31, 2020		(79.6	)		2.5		25.6			(51.5	)
Change during the period		(0.4	)		0.5		8.7			8.8
Balance at June 30, 2020	$	(80.0	)	$	3.0	$	34.3		$	(42.7	)

Foreign Currency Translation Adjustments Change in Fair Value of Hedging Instrument Unrecognized Pension Benefit Costs Accumulated Other Comprehensive (Income)
(in millions)
Balance at January 1, 2019 $ (78.9 ) $ (0.1 ) $ 23.1 $ (55.9 )
Change during the period 0.5 0.6 (0.9 ) 0.2
Balance at March 31, 2019 (78.4 ) 0.5 22.2 (55.7 )
Change during the period (0.7 ) 0.2 2.0 1.5
Balance at June 30, 2019 $ (79.1 ) $ 0.7 $ 24.2 $ (54.2 )

Included within accumulated other comprehensive income is an amount of ~~$0.9~~ $1.5 million relating to the change in fair value of discontinued hedging instruments. This amount will be amortized as a charge to income over the life of the original ~~instrument, to August 2021~~instruments, in accordance with US GAAP. ~~The remaining $2.1 million relates to currently active hedging instruments.~~

9.	Net Loss per Share

Basic loss per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period, including stock options, restricted stock, RSUs and warrants, using the treasury stock method, and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

The computation of diluted EPS excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

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

	Three and Six Months Ended June 30,				Three and Six Months Ended June 30,
	2020		2019		2021		2020
RSUs		2,944,634		3,066,697		4,960,246		2,944,634
Unvested Restricted Stock		624,116		624,116		624,116		624,116
Stock Warrants		9,539,565		9,539,565		9,539,565		9,539,565
		13,108,315		13,230,378		15,123,927		13,108,315

10.

Other Finance (Expense) Income ~~(Costs)~~

Other finance (expense) income ~~(costs)~~ consisted of the following for the three and six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Schedule of Other Finance Income (Costs)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(in millions)						(in millions)
Pension interest cost	$	(0.4	)	$	(0.5	)	$	(0.8	)	$	(1.1	)
Expected return on pension plan assets		0.7			0.7			1.4			1.5
Foreign currency translation on senior debt		(1.5	)		(2.7	)		4.6			(6.6	)
Other finance income (Costs)	$	(1.2	)	$	(2.5	)	$	5.2		$	(6.2	)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020 2019 2020 2019
(in millions) (in millions)
Pension interest cost $ (0.5 ) $ (0.7 ) $ (1.1 ) $ (1.4 )
Expected return on pension plan assets 0.7 0.9 1.5 1.8
Foreign currency translation on senior bank debt (2.7 ) (3.2 ) (6.6 ) (0.3 )
Foreign currency remeasurement on hedging instrument — 2.1 — 0.2
$ (2.5 ) $ (0.9 ) $ (6.2 ) $ 0.3

11.

Income Taxes

The effective income tax rate for the three months ended June 30, 2021 and 2020 was 0.7%and ~~2019 was 0.4% and 0.9%~~0.3%, respectively, resulting in a ~~$0.1~~$0.3 million and $0.1 million income tax expense, ~~in both periods.~~respectively. The effective income tax rate for the six months ended June 30, 2021 and 2020 was (0.6%) and ~~2019 was 0.7% and 0.0%~~0.8%, respectively, resulting in a ~~$0.3~~$0.4 million income tax benefit and ~~$0.0~~a $0.3 million income tax expense, respectively. The Company’s effective income tax rate has fluctuated primarily as a result of the income mix between jurisdictions.

The income tax expense for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 differs from the amount that would be expected after applying the statutory U.S. federal income tax rate primarily due to pre-tax losses for which no tax benefit can be recorded, and foreign earnings being taxed at rates different than the US statutory rate.

12.

Related Parties

HG Vora Special Opportunities Master Fund Limited (“HG Vora”) (a purchaser of our Senior Secured Notes issued on May 20, 2021) is the beneficial owner of approximately 13.13% of our common stock as of June 30, 2021, including 400,000 shares underlying warrants to purchase common stock. The portion of the Company’s aggregate senior debt of $324.8 million at June 30, 2021, and $313.3 million at December 31, 2020, held by HG Vora at June 30, 2021 and December 31, 2020 was $55.3 million and $0.0 million, respectively. Interest expense payable to HG Vora for the three months ended June 30, 2021 and 2020 amounted to $0.5 million and $0.0 million, respectively, and for the six months ended June 30, 2021 and 2020 amounted to $0.5 million and $0.0 million, respectively. In addition, $0.5 million and $0.0 million of accrued interest payable was due to HG Vora at June 30, 2021 and December 31, 2020, respectively. HG Vora was also an investor in Leisure Acquisition Corp., a special purpose acquisition company affiliated with two members of our management which completed its business combination on June 30, 2021.

Macquarie Corporate Holdings Pty Limited (UK Branch) (“Macquarie UK”), (an arranger and lending party under our RCF Agreement) is an affiliate of MIHI LLC, ~~the beneficial owner of~~which beneficially owned approximately ~~16.75%~~ 16.61% of our common stock as of June 30, 2021, including 1,000,000 shares underlying warrants to purchase common stock. Macquarie UK iswas also one of the lending parties with respect to our previous senior secured term loans and revolving credit facility under our prior senior facilities ~~agreement dated September 27, 2019, as amended and restated on June 25, 2020 (the “SFA”) (see Note 4).~~agreement. The portion of the ~~total loans~~Company’s aggregate senior debt of ~~$309.5~~ $324.8 million ~~under these facilities~~at June 30, 2021, and $313.3 million at December 31, 2020 held by Macquarie UK at June 30, 2021 and December 31, 2020 was ~~$27.9 million.~~$0.0 million and $30.7 million, respectively. Interest expense payable to Macquarie UK for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 amounted to ~~$0.6~~ $0.3 million and ~~$0.0~~ $0.6 million, respectively, and for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 amounted to ~~$1.1~~ $0.9 million and ~~$0.0~~ $1.1 million, respectively. In addition, ~~$0.5~~ $0.0 million ~~of a total $6.0~~ and $0.6 million of accrued interest payable was due to Macquarie UK at June 30, 2021 and December 31, 2020, ~~and Macquarie UK received $0.3 million of the total $3.1 million of SFA amendment fees paid (see Note 4).~~respectively. MIHI LLC is also a party to a stockholders agreement with the Company and other stockholders, dated December 23, 2016, pursuant to which, subject to certain conditions, MIHI LLC, jointly with Hydra Industries Sponsor LLC, are permitted to designate two directors to be nominated for election as directors of the Company at any annual or special meeting of stockholders at which directors are to be elected, until such time as MIHI LLC and Hydra Industries Sponsor LLC in the aggregate hold less than 5% of the outstanding shares of the Company.

~~The Company~~We incurred certain offering expenses in connection with an underwritten public offering of shares held by a ~~40% non-controlling equity interest in Innov8 Gaming Limited (“Innov8”) from October 2019 until April 2020 when~~significant stockholder, the ~~Company disposed of its interest. Revenue earned from Innov8 while a related party for~~Landgame Trust, which closed on June 1, 2021, as to which our expenses were reimbursed by the stockholder. For the six months ended June 30, ~~2020~~2021, the aggregate amount invoiced for reimbursement was $0.2 million. The selling stockholder sold an aggregate of 6,217,628 shares in the offering (including 810,995 shares subject to an over-allotment option that was exercised in full) at an offering price of $9.25 per share, less underwriting discounts and 2019 amounted to $0.6 million and $0.0 million, respectively and purchases from Innov8 while a related party for the six months ended June 30, 2020 and 2019 amounted to $0.2 million and $0.0 million, respectively. ~~The value~~commissions of $0.4625 per share. One of the ~~investment~~participating underwriters in the offering was ~~impaired by $0.7 million~~Macquarie Capital (USA) Inc., an affiliate of MIHI LLC (see paragraph above), pursuant to ~~$Nil in March 2020 prior~~which it purchased 870,468 of the shares including 113,539 shares subject to ~~disposal.~~the over-allotment option.

13.

Leases

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 components of lease income were as follows:

Schedule of Lease Income


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
	(in millions)				(in millions)				(in millions)				(in millions)
Interest receivable from sales type leases	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Operating lease income		—		—		1.0		—		0.5		—		0.5		1.0
Variable income from sales type leases		—		—		0.2		—		0.1		—		0.1		0.2
	$	—	$	—	$	1.2	$	—
Total									$	0.6	$	—	$	0.6	$	1.2

14.

Commitments and Contingencies

Legal Matters

From time to time, the Company may become involved in lawsuits and legal matters arising in the ordinary course of business. While the Company believes that, currently, it has no such matters that are material, there can be no assurance that existing or new matters arising in the ordinary course of business will not have a material adverse effect on the Company’s business, financial condition or results of operations.

15.

Pension Plan

We operate a defined contribution plan in the US, and both defined benefit and defined ~~contributions~~contribution pension schemes in the UK. The defined contribution scheme assets are held separately from those of the Company in an independently administered ~~fund.~~ funds.

Defined Benefit Pension Scheme

The defined benefit ~~section~~scheme has been closed to new entrants since April 1, 1999 and closed to future accruals for services rendered to the Company for the entire financial statement periods presented. On March 15, 2019, it was agreed that no further deficit reduction contributions ~~shall~~would be made to the scheme, except in the event that the scheme funding level does not progress as expected, in which case contingent contributions would be made subject to an agreed maximum amount. It

In January 2021, the funding level of the scheme was tested against the expected position at December 31, 2020 and it was determined that further contingent contributions of ~~$1.1~~$1.2 million and expense contributions of ~~$0.4~~$0.4 million ~~would~~will be payable during the year ~~ended~~ending December 31, ~~2020, with agreement reached with the trustees of the scheme to defer $0.4 million of the contingent contributions into the year to December 31, 2021~~ 2021.

The funding level of the scheme will next be tested against the expected position at December 31, ~~2020~~2021 to determine whether further contingent contributions are payable ~~over~~during the year toending December 31, ~~2021.~~2022.

The total amount of employer contributions paid during the six months ended June 30, ~~2020~~2021 amounted to ~~$0.1 million.~~$0.6 million relating to the six months ended June 30, 2021, and $0.4 million of contributions relating to the year ending December 31, 2020 agreed with the trustees of the scheme to be deferred into the year ending December 31, 2021.

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

Schedule of Defined Benefit Plans


	Six Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2021			2020
	(in millions)						(in millions)
Components of net periodic pension benefit cost:
Interest cost	$	1.1		$	1.4		$	0.8		$	1.1
Expected return on plan assets		(1.5	)		(1.8	)		(1.4	)		(1.5	)
Net periodic benefit	$	(0.4	)	$	(0.4	)	$	(0.6	)	$	(0.4	)

The following table sets forth the estimate of the combined funded status of the pension plans and their reconciliation to the related amounts recognized in our consolidated financial statements at the respective measurement dates:

Schedule of Pension Plans and their Reconciliation

	June 30, 2021			December 31, 2020
	(in millions)
Change in benefit obligation:
Benefit obligation at beginning of period	$	127.8		$	110.4
Interest cost		0.8			2.2
Actuarial (gain)/loss		(7.1	)		14.5
Benefits paid		(1.3	)		(4.1	)
Foreign currency translation adjustments		1.6			4.8
Benefit obligation at end of period	$	121.8		$	127.8
Change in plan assets:
Fair value of plan assets at beginning of period	$	118.7		$	107.3
Actual (loss)/gain on plan assets		(0.6	)		9.8
Employer contributions		0.6			1.6
Benefits paid		(1.3	)		(4.1	)
Foreign currency translation adjustments		1.4			4.1
Fair value of assets at end of period	$	118.8		$	118.7
Amount recognized in the consolidated balance sheets:
Unfunded status (non-current)	$	(3.0	)	$	(9.1	)
Net amount recognized	$	(3.0	)	$	(9.1	)

June 30,
2020
December 31,
2019
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of period $ 110.4 $ 94.1
Interest cost 1.1 2.7
Prior service cost — —
Actuarial loss 7.2 14.1
Benefits paid (1.3 ) (4.2 )
Foreign currency translation adjustments (6.9 ) 3.7
Benefit obligation at end of period $ 110.5 $ 110.4
Change in plan assets:
Fair value of plan assets at beginning of period $ 107.3 $ 97.4
Actual gain on plan assets 4.0 10.3
Employer contributions 0.1 0.2
Benefits paid (1.3 ) (4.2 )
Foreign currency translation adjustments (6.8 ) 3.6
Fair value of assets at end of period $ 103.3 $ 107.3
Amount recognized in the consolidated balance sheets:
Unfunded status (non-current) $ (7.2 ) $ (3.1 )
Net amount recognized $ (7.2 ) $ (3.1 )

16.

Segment Reporting and Geographic Information

The Company operates its business along ~~three~~4 operating segments, which are segregated ~~based~~ on the basis of revenue stream: ~~Service Based~~ Gaming, Virtual Sports, ~~(which includes Interactive)~~Interactive and ~~Acquired Businesses.~~Leisure. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated.

In prior years, and up to and including the interim period nine months ended September 30, 2020, the Company operated its business along three operating segments: Server Based Gaming, Virtual Sports (which included Interactive) and Acquired Businesses (which consisted of the businesses acquired from the NTG Acquisition). During the period subsequent to September 30, 2020, the Company completed the process of changing its internal structure, which has been ongoing since the NTG Acquisition, and as a result changed the composition of its operating segments.

The following tables present revenue, cost of sales, excluding depreciation and amortization, selling, general and administrative expenses, depreciation and amortization, stock-based compensation expense and acquisition related transaction expenses, operating profit/(loss), total assets and total capital expenditures for the periods ended June 30, ~~2020~~2021 and ~~2019,~~June 30, 2020, respectively, by business segment. Certain unallocated corporate function costs have not been allocated to the Company’s reportable operating segments because these costs are not allocable and to do so would not be practical. Corporate function costs consist primarily of selling, general and administrative expenses, depreciation and amortization, capital expenditures, right of use assets, cash, prepaid expenses and property and equipment and software development costs relating to corporate/shared functions. All acquisition and integration related transaction expenses are allocated as corporate function costs. Amounts previously disclosed for the three and six months ended June 30, 2020 have been recharacterized in line with the current operating segments and categories.

In addition, as part of the recharacterization exercise, certain items of Revenue, Cost of Sales and Selling, General and Administrative Expenses have been recharacterized to ensure consistency with similar items across the Group. The revenue recharacterizations are to ensure spares and similar items are reflected with other items of hardware (Product Sales).

The recharacterization has no impact on the previously reported Net Operating Loss, Net Loss or Net Comprehensive Loss for the three and six months ended June 30, 2020.

Segment Information

Schedule of Segment Reporting Information By Segment

Three Months Ended June 30, 2021


	Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)
Revenue:
Service	$	12.8		$	8.2		$	5.8		$	10.7		$	—		$	37.5
Product sales		3.4			—			—			0.6			—			4.0
Total revenue		16.2			8.2			5.8			11.3			—			41.5
Cost of sales, excluding depreciation and amortization:
Cost of service		(3.6	)		(0.5	)		(0.9	)		(3.0	)		—			(8.0	)
Cost of product sales		(2.4	)		—			—			(0.3	)		—			(2.7	)
Selling, general and administrative expenses		(6.7	)		(2.7	)		(1.3	)		(8.2	)		(6.2	)		(25.1	)
Stock-based compensation expense		(0.4	)		(0.1	)		(0.1	)		(0.1	)		(2.7	)		(3.4	)
Acquisition and integration related transaction expenses		—			—			—			—			(0.1	)		(0.1	)
Depreciation and amortization		(5.8	)		(0.7	)		(0.9	)		(4.1	)		(0.4	)		(11.9	)
Segment operating income (loss)		(2.7	)		4.2			2.6			(4.4	)		(9.4	)		(9.7	)

Net operating loss																$	(9.7	)

Total assets at June 30, 2021	$	78.6		$	61.9		$	13.8		$	90.0		$	41.9		$	286.2

Total goodwill at June 30, 2021	$	1.4		$	48.6		$	0.4		$	34.4		$	—		$	84.8
Total capital expenditures for the three months ended June 30, 2021	$	3.0		$	1.1		$	0.9		$	1.7		$	0.6		$	7.3

Three Months Ended June 30, 2020


	Server Based Gaming			Virtual Sports			Acquired Businesses			Intergroup Eliminations		Corporate Functions			Total			Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)																	(in millions)
Revenue:
Service	$	3.6		$	9.8		$	1.8		$	—	$	—		$	15.2		$	4.1		$	7.6		$	3.4		$	0.2		$	—		$	15.3
Hardware		0.4			—			—			—		—			0.4
Product sales																			0.1			—			—			0.2			—			0.3
Total revenue		4.0			9.8			1.8			—		—			15.6			4.2			7.6			3.4			0.4			—			15.6
Cost of sales, excluding depreciation and amortization:
Cost of service		(1.0	)		(1.2	)		(0.9	)		—		—			(3.1	)		(1.0	)		(0.8	)		(0.4	)		(0.3	)		—			(2.5	)
Cost of hardware		(0.3	)		—			—			—		—			(0.3	)
Cost of product sales																			(0.2	)		—			—			(0.1	)		—			(0.3	)
Selling, general and administrative expenses		(2.0	)		(1.1	)		(3.6	)		—		(3.9	)		(10.6	)		(3.0	)		(0.7	)		(0.6	)		(2.6	)		(4.3	)		(11.2	)
Stock-based compensation expense		(0.1	)		(0.1	)		—			—		(0.8	)		(1.0	)		(0.1	)		(0.1	)		(0.1	)		—			(0.7	)		(1.0	)
Acquisition and integration related transaction expenses		—			—			—			—		(1.2	)		(1.2	)		—			—			—			—			(1.2	)		(1.2	)
Depreciation and amortization		(6.0	)		(1.4	)		(5.6	)		—		(0.3	)		(13.3	)		(7.0	)		(0.9	)		(0.6	)		(4.4	)		(0.4	)		(13.3	)
Segment operating income (loss)		(5.4	)		6.0			(8.3	)		—		(6.2	)		(13.9	)		(7.1	)		5.1			1.7			(7.0	)		(6.6	)		(13.9	)

Net operating loss															$	(13.9	)																$	(13.9	)

Total assets at June 30, 2020	$	64.2		$	64.7		$	135.7		$	—	$	38.7		$	303.3
Total assets at December 31, 2020																		$	93.9		$	64.4		$	8.5		$	87.0		$	70.3		$	324.1

Total goodwill at June 30, 2020	$	—		$	43.4		$	32.0		$	—	$	—		$	75.4
Total goodwill at December 31, 2020																		$	1.4		$	48.0		$	0.4		$	33.9		$	—		$	83.7
Total capital expenditures for the three months ended June 30, 2020	$	0.5		$	2.0		$	0.5		$	—	$	0.6		$	3.6		$	0.6		$	1.4		$	0.6		$	0.3		$	0.7		$	3.6

~~Three~~Six Months Ended June 30, ~~2019~~2021


	Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)
Revenue:
Service	$	18.4		$	14.5		$	11.0		$	10.7		$	—		$	54.6
Product sales		8.6			—			—			1.1			—			9.7
Total revenue		27.0			14.5			11.0			11.8			—			64.3
Cost of sales, excluding depreciation and amortization:
Cost of service		(4.2	)		(0.8	)		(1.7	)		(3.4	)		—			(10.1	)
Cost of product sales		(5.3	)		—			—			(0.6	)		—			(5.9	)
Selling, general and administrative expenses		(10.8	)		(3.8	)		(2.3	)		(11.4	)		(10.6	)		(38.9	)
Stock-based compensation expense		(0.6	)		(0.2	)		(0.2	)		(0.2	)		(3.6	)		(4.8	)
Acquisition and integration related transaction expenses		—			—			—			—			(1.5	)		(1.5	)
Depreciation and amortization		(12.4	)		(1.8	)		(1.6	)		(8.3	)		(0.9	)		(25.0	)
Segment operating income (loss)		(6.3	)		7.9			5.2			(12.1	)		(16.6	)		(21.9	)

Net operating loss																$	(21.9	)

Total capital expenditures for the six months ended June 30, 2021	$	4.2		$	1.9		$	1.8		$	4.8		$	0.8		$	13.5

Server
Based
Gaming

Virtual
Sports

Acquired
Businesses
Intergroup
Eliminations
Corporate
Functions
Total
(in millions)
Revenue:
Service $ 16.4 $ 9.2 $ — $ — $ — $ 25.6
Hardware 1.1 — — — — 1.1
Total revenue 17.5 9.2 — — — 26.7
Cost of sales, excluding depreciation and amortization: — —
Cost of service (4.4 ) (0.9 ) — — — (5.3 )
Cost of hardware (1.0 ) — — — — (1.0 )
Selling, general and administrative expenses (6.0 ) (2.1 ) — — (4.7 ) (12.8 )
Stock-based compensation expense (0.5 ) (0.3 ) — — (1.5 ) (2.3 )
Acquisition and integration related transaction expenses — — — — (0.7 ) (0.7 )
Depreciation and amortization (7.2 ) (1.4 ) — — (0.5 ) (9.1 )
Segment operating income (loss) (1.6 ) 4.5 — — (7.4 ) (4.5 )

Net operating loss $ (4.5 )

Total assets at December 31, 2019 $ 80.8 $ 66.8 $ 156.7 $ — $ 23.1 $ 327.4

Total goodwill at December 31, 2019 $ — $ 46.4 $ 34.5 $ — $ — $ 80.9
Total capital expenditures for the three months ended June 30, 2019 $ 2.1 $ 1.6 $ — $ — $ 0.5 $ 4.2

Six Months Ended June 30, 2020


	Gaming			Virtual Sports			Interactive			Leisure			Corporate Functions			Total
	(in millions)
Revenue:
Service	$	20.7		$	15.4		$	5.5		$	16.5		$	—		$	58.1
Product sales		8.4			—			—			1.4			—			9.8
Total revenue		29.1			15.4			5.5			17.9			—			67.9
Cost of sales, excluding depreciation and amortization:
Cost of service		(5.3	)		(1.5	)		(0.6	)		(3.6	)		—			(11.0	)
Cost of product sales		(5.6	)		—			—			(0.9	)		—			(6.5	)
Selling, general and administrative expenses		(11.9	)		(1.9	)		(1.8	)		(13.6	)		(10.0	)		(39.2	)
Stock-based compensation expense		(0.2	)		(0.2	)		(0.1	)		—			(1.5	)		(2.0	)
Acquisition and integration related transaction expenses		—			—			—			—			(4.4	)		(4.4	)
Depreciation and amortization		(14.4	)		(1.7	)		(1.2	)		(7.8	)		(0.8	)		(25.9	)
Segment operating income (loss)		(8.3	)		10.1			1.8			(8.0	)		(16.7	)		(21.1	)

Net operating loss																$	(21.1	)

Total capital expenditures for the six months ended June 30, 2020	$	3.3		$	2.4		$	1.2		$	5.5		$	3.0		$	15.4

Server
Based
Gaming

Virtual
Sports

Acquired
Businesses
Intergroup
Eliminations
Corporate
Functions
Total
(in millions)
Revenue:
Service $ 17.0 $ 18.8 $ 23.2 $ (0.6 ) $ — $ 58.4
Hardware 3.7 — 6.0 (0.2 ) — 9.5
Total revenue 20.7 18.8 29.1 (0.8 ) — 67.9
Cost of sales, excluding depreciation and amortization:
Cost of service (4.6 ) (2.1 ) (3.6 ) 0.6 — (9.7 )
Cost of hardware (2.1 ) — (5.2 ) — — (7.3 )
Selling, general and administrative expenses (7.0 ) (2.8 ) (20.5 ) — (9.4 ) (39.7 )
Stock-based compensation expense (0.3 ) (0.2 ) — — (1.5 ) (2.0 )
Acquisition and integration related transaction expenses — — — — (4.4 ) (4.4 )
Depreciation and amortization (12.2 ) (2.8 ) (10.4 ) — (0.5 ) (25.9 )
Segment operating income (loss) (5.5 ) 10.9 (10.5 ) (0.2 ) (15.8 ) (21.1 )

Net operating loss $ (21.1 )

Total capital expenditures for the six months ended June 30, 2020 $ 1.6 $ 3.6 $ 7.3 $ — $ 2.9 $ 15.4

~~Six Months Ended June 30, 2019~~

Server
Based
Gaming

Virtual
Sports

Acquired
Businesses
Intergroup
Eliminations
Corporate
Functions
Total
(in millions)
Revenue:
Service $ 37.2 $ 19.2 $ — $ — $ — $ 56.4
Hardware 4.0 — — — — 4.0
Total revenue 41.2 19.2 — — — 60.4
Cost of sales, excluding depreciation and amortization:
Cost of service (8.8 ) (1.9 ) — — — (10.7 )
Cost of hardware (2.6 ) — — — — (2.6 )
Selling, general and administrative expenses (12.6 ) (4.3 ) — — (10.6 ) (27.5 )
Stock-based compensation expense (0.9 ) (0.6 ) — — (2.9 ) (4.4 )
Acquisition and integration related transaction expenses — — — — (1.6 ) (1.6 )
Depreciation and amortization (14.9 ) (2.9 ) — — (1.0 ) (18.8 )
Segment operating income (loss) 1.4 9.5 — — (16.1 ) (5.2 )

Net operating loss $ (5.2 )

Total capital expenditures for the six months ended June 30, 2019 $ 5.0 $ 3.0 $ — $ — $ 0.7 $ 8.7

Geographic Information

Schedule of Geographic Information

Geographic information for revenue is set forth below:

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
	(in millions)				(in millions)				(in millions)				(in millions)
Total revenue
UK	$	9.2	$	15.5	$	47.6	$	37.7	$	29.9	$	9.2	$	40.8	$	47.6
Greece		2.6		4.8		7.4		9.6		3.9		2.6		6.2		7.4
Italy		1.4		4.2		3.6		8.4		0.9		1.4		2.2		3.6
Canada										0.3		—		2.1		—
Rest of world		2.4		2.2		9.3		4.7		6.5		2.4		13.0		9.3
Total	$	15.6	$	26.7	$	67.9	$	60.4	$	41.5	$	15.6	$	64.3	$	67.9

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

	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(in millions)				(in millions)
UK	$	101.9	$	116.1	$	93.9	$	101.8
Greece		21.4		26.5		13.3		18.2
Italy		2.2		2.3		1.8		2.1
Rest of world		7.9		6.3		9.5		9.3
Total	$	133.4	$	151.2	$	118.5	$	131.4

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

17.

Customer Concentration

During the three months ended June 30, 2021, no customers represented at least 10% of the Company’s revenues. During the three months ended June 30, 2020, two customers represented at least 10% of revenues, accounting for 25% and 18% of the Company’s revenues. The customers were served by the Gaming and Virtual Sports, and the Gaming, Virtual Sports and Interactive segments, respectively.

During the six months ended June 30, 2021, one customer represented at least 10% of the Company’s revenues, accounting for ~~25% and 18%~~ 11% of the Company’s revenues. ~~The~~This customer ~~that accounted for 25% of the Company’s revenues~~ was served by the Virtual Sports ~~segment, the customer that accounted for 10% of the Company’s revenues was served by both the Server Based Gaming~~ and ~~Virtual Sports~~Interactive segments. During the three months ended June 30, 2019, three customers represented at least 10% of revenues, accounting for 19%, 16% and 10% of the Company’s revenues. All three customers were served by both the Server Based Gaming and Virtual Sports segments.

During the six months ended June 30, 2020, one customer represented at least 10% of ~~the Company’s~~ revenues, accounting for 10% of the Company’s revenues. ~~During the six months ended June 30, 2019, three customers represented at least 10% of revenues, accounting for 21%, 15% and 11% of the Company’s revenues. All these customers were~~This customer was served by ~~both~~ the ~~Server Based~~ Gaming and Virtual Sports segments.

At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were no customers that represented at least ~~10%~~10% of accounts receivable.

18.

Subsequent Events

The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual future results could differ materially from the historical results discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included herein and in our annual report on Form ~~10-K.~~ 10-K for the fiscal year ended December 31, 2020.

~~COVID-19 Update~~

Investors and potential investors are advised to review this Form 10Q in light of ongoing events. As with other businesses worldwide, we are experiencing severe disruption to our business as a result of the COVID-19 pandemic and the far-reaching actions of the governments of various countries where we do, and hope to do, business, as well as countries sourcing our supply chain.

The World Health Organization declared COVID-19 to be a global pandemic. There were a number of government-imposed emergency measures in many of the jurisdictions in which we operate in response to the pandemic. Since the closure of all retail venues (including pubs, bookmakers, holiday parks, and adult gaming centers), restrictions on all non-essential travel, social distancing, bans on public mobility and shelter in place measures, there has been some easing of these measures during mid-May onwards but some retail venues remain closed, specifically in Scotland as well as bowling alleys and casinos in the UK.

Our business is being and will continue to be adversely affected by the rapidly expanding nature of the coronavirus (COVID-19) pandemic. Due to the speed and fluidity with which the situation continues to develop and the uncertainty on whether a “second wave” of the COVID-19 pandemic will occur later in calendar year 2020, we are not able at this time to estimate the extent of the impact of the COVID-19 pandemic on our financial results and operations in future periods. The risk of there being a “second wave” or other additional periods of increases or spikes in the number of COVID-19 cases in areas in which we operate which could see the government re-impose restrictions on or changes to our operations up to and including complete or partial closures of retail venues and the long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operation remains.

While the situation is fluid, we have already experienced adverse effects on our business, which we are currently working to mitigate. Since mid-March, we have drawn down the full amount of GBP20.0 million (equivalent to $24.8 million at current exchange rates) on our revolving credit facility to provide additional near-term liquidity and cancelled or delayed material capital expenditures. Reduced compensation levels remain in place and during the period of this Report, a number of staff remained on furlough.

Due to the closure of land-based revenues we saw a significant increase in our online revenues from slots and virtual sports and following the success of this area of the business and the successful re-opening of various revenue streams, the Company repaid GBP10.0 million (equivalent to $12.4 million at current exchange rates) of the revolving credit facility subsequent to the end of the reporting period.

On June 15, 2020, the British government re-opened betting shops and on July 4, 2020 re-opened pubs, arcades and holiday parks. Bowling alleys and casinos remain closed. On June 15, 2020, the Italian government re-opened all bricks and mortar gaming halls. On June 8, 2020, the Greek government re-opened all bricks and mortar gaming halls following closures to prevent the spread of COVID-19.

Our ability to execute our strategy is necessarily affected by the ongoing COVID-19 pandemic and it is as yet unknown effects on our business. We continue to be highly focused on managing our cash flow and liquidity, as well as focusing on the phased opening up of our businesses.

However, the dynamic nature of the pandemic and government restrictions, as well as evolving potential for relevant, government sponsored business stimuli and creditor relief plans are neither quantifiable nor predictable as of this Report.

Forward-Looking Statements

We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. For definitions of the term Forward-Looking Statements, see the definitions provided in the Cautionary Note Regarding Forward-Looking Statements at the start of the Quarterly Report on Form ~~10-Q. These forward-looking statements relate to expectations~~10-Q for ~~future financial performance, business strategies or expectations for our business, and~~ the ~~timing and ability for us to complete currently contemplated or future acquisitions. Specifically, forward-looking statements may include statements relating to:~~period ended June 30, 2021.

●

~~the future financial performance of the Company;~~

COVID-19 Update

●

restrictions in our existing borrowings, including covenants set forth in our existing debt facilities (and the recent amendment thereto), or any other indebtedness we may incur in the future, could adversely affect our business, financial condition, or results of operations, and our ability to make distributions to stockholders and the value of our common stock;

●

~~the market for the Company’s products and services;~~

●

~~expansion plans and opportunities, including currently contemplated or future acquisitions or additional business combinations; and~~

●

other statements preceded by, followed by or that include words such as “anticipate”, “believe”, “can”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “might”, “plan”, “possible”, “potential”, “predict”, “project”, “proposed”, “scheduled”, “seek”, “should”, “target”, “would” or similar expressions, among others.

~~These forward-looking statements are based on information available as~~Governments in all of the ~~date hereof, and current expectations, forecasts and assumptions that involve a number~~major jurisdictions in which our land-based customers operate have now reopened land-based venues. As of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances afterApril 12, 2021, in the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause our actual results or performance to differ include:

●

~~the effect and impact of the ongoing global coronavirus (COVID-19) pandemic on our business including whether there is a “second wave~~” or other additional periods of increases or spikes in the number of COVID-19 cases in areas in which we operate; the duration, degree and effectiveness of governmental, business or other actions in response to the pandemic, including but not limited to quarantine, shelter-in-place and social distancing measures; restrictions on or changes to our operations up to and including complete or partial closures of retail venues; the long-term impacts of the pandemic on the global economy, trade relations, consumer behavior, our industry and our business operations;

●

~~our ability to compete effectively in our industries;~~

●

~~the effect of evolving technology on our business;~~

●

~~our ability to renew long-term contracts and retain customers, and secure new contracts and customers;~~

●

~~our ability to maintain relationships with suppliers;~~

●

~~our ability to protect our intellectual property;~~

	●	~~our ability to protect our business against cybersecurity threats;~~

	●	~~government regulation of our industries;~~

●

~~our ability to successfully grow by acquisition as well as organically;~~

●

~~fluctuations due to seasonality;~~

●

~~our ability to attract and retain key members of our management team;~~

●

~~our need for working capital;~~

●

~~our ability to secure capital for growth and expansion;~~

●

~~changing consumer, technology and other trends in our industries;~~

●

~~our ability to successfully operate across multiple jurisdictions and markets around the world;~~

●

~~changes in local, regional and global economic and political conditions; and~~

●

~~other factors.~~

~~Overview~~

We are 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. We provide 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. Our products can be found inUnited Kingdom, licensed betting offices in England and Wales have reopened with certain restrictions including operating two of four gaming machines per venue, limited dwell time of 15 minutes, as well as a maximum of two visits per day per patron and an 8:00pm curfew. These restrictions remained in place until May 17, 2021. Gaming machines in pubs, holiday parks, motorway services, Scottish betting offices and adult gaming centers ~~bingo halls,~~across the United Kingdom reopened on May 17, 2021 with social distancing restrictions in place. All social distancing restrictions were removed in England as of July 19, 2021. As of August 9, 2021 no restrictions remain in the United Kingdom. There remains an element of social distancing in venues in Greece and ~~through~~in Italy, there are restrictions in place that state only fully vaccinated people can enter our ~~Acquired Businesses,~~venues. It remains uncertain as to whether and when further restrictions or closures could happen in ~~UK pubs, airports, motorway service areas,~~each jurisdiction and ~~leisure parks.~~how long they may last.

~~Our key strategic priorities are to:~~Segment Reporting Recharacterizations

●

~~Extend our strong positions in each of Virtual Sports, Interactive and SBG by developing new omni-channel products;~~

●

~~Continue to invest in games and technology in order to grow our existing customers’ revenues;~~

●

~~Add new customers by expanding into underpenetrated markets and newly regulated jurisdictions; and~~

●

~~Pursue targeted mergers and acquisitions to expand our product portfolio and/or distribution footprint.~~

~~On October 1, 2019, the Company completed the acquisition~~For full information on this, see Part IV, Item 15 of the ~~Gaming Technology Group (“NTG”) of Novomatic UK Ltd., a division of Novomatic Group, a leading international supplier of gaming equipment~~Annual Report on Form 10-K for the year ended December 31, 2020, ‘Exhibits, Financial Statement Schedules’ Note 26 ‘Segment Reporting and ~~solutions, and heretofore denoted as “Acquired Businesses.”~~Geographic Information’.

~~Business Segments~~

We report our operations in three business segments, SBG, Virtual Sports (which includes Interactive, an operating segment which does not exceed the quantitative thresholds in Accounting Standards Committee (“ASC” 280-10-50-12), and Acquired Businesses (which is comprised of the aforementioned NTG business, acquired on October 1, 2019), representing our different products and services. We evaluate our business performance, resource allocation and capital spending on an operating segment level, where possible. We use our operating results and identified assets of each of our operating segments in order to make prospective operating decisions. Although our revenue and cost of sales (excluding depreciation and amortization) are reported exclusively by segment, we do include unallocated items in our consolidated financial statements for certain expenses including depreciation and amortization as well as selling, general and administrative expenses. Unallocated balance sheet line items include items that are a shared resource and therefore not allocated between operating segments.

Our SBG business segment designs, develops, markets and distributes a broad portfolio of games through our digital network architecture. Our SBG customers include UK licensed betting offices (“LBOs”), casinos, gaming hall operators, bingo operators and regulated operators of lotteries, as well as government-affiliated operators.

Our Virtual Sports business segment designs, develops, markets and distributes ultra-high-definition games that create an always-on sports wagering experience. Our Virtual Sports customers include virtual sports retail and digital operators, including regulated betting operators, lotteries, casinos, online and social gaming operators and other gaming and lottery operators in the UK, continental Europe, Africa, Asia and North America. Our Interactive business segment (reported as part of Virtual Sports) comprises the offering of our SBG and Virtual Sports content via our remote gaming servers.

Our Acquired Businesses designs, develops, markets and distributes a broad portfolio of games through our digital network architecture. In addition, it operates analog gaming and amusement machines for certain customers, including UK pubs, adult gaming centers, motorway service stations and holiday resorts.

Revenue

We generate revenue in ~~three~~four principal ways: i) on a participation basis, ii) on a fixed rental fee basis, ~~and~~iii) through product sales and iv) through software license fees. Participation revenue generally includes a right to receive a share of our customers’ gaming revenue, generated from (i) our Virtual Sports products placed with operators; (ii) our SBG terminals placed in gaming and lottery venues; (iii) licensing our game content and intellectual property to third parties; and (iv) our games on third-party online gaming platforms that are interoperable with our game servers.typically as a share of net win but sometimes as a share of the handle or “coin in” which represents the total amount wagered.

Geographic Range

Geographically, ~~more than half~~a majority of our revenue is derived from, and ~~more than half~~majority of our non-current assets are ~~attributed~~attributable to our UK ~~operations, with the~~operations. The remainder of our revenue is derived from, and non-current assets ~~attributed~~attributable to, Greece, Canada, Italy ~~Greece~~ and the rest of the world.

For the three months ended June 30, ~~2020,~~2021, we earned approximately ~~59.0%~~72% of our revenue in the UK, ~~18.2%~~9% in Greece, ~~8.7%~~2% in Italy and the remaining ~~14.0%~~17% across the rest of the world. During the three months ended June 30, ~~2019,~~2020, we earned approximately ~~57.8%~~59%, ~~18.1%~~17%, ~~15.7%~~9% and ~~8.4%~~15% of our revenue in those regions, respectively.

For the six months ended June 30, 2021, we earned approximately 64% of our revenue in the UK, 10% in Greece, 3% in Italy and the remaining 23% across the rest of the world. During the three months ended June 30, 2020, we earned approximately ~~70.1% of our revenue in the UK, 11.3% in Greece, 5.2% in Italy~~70%, 11%, 5% and ~~the remaining 13.7% across the rest of the world. During the six months ended June 30, 2019, we earned approximately 62.3%, 16.0%, 14.0% and 7.7%~~14% of our revenue in those regions, respectively.

As of June 30, 2021, our non-current assets (excluding goodwill) attribution approximately 79% in the UK, 11% in Greece, 2% in Italy, and 8% across the rest of the world.

Foreign Exchange

Our results are affected by changes in foreign currency exchange rates as a result of the translation of foreign functional currencies into our reporting currency and the re-measurement of foreign currency transactions and balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. The largest geographic region in which we operate is the UK and the British pound (“GBP”) is considered to be our functional currency. Our reporting currency is the U.S. dollar (“USD”). Our results are translated from our functional currency of GBP into the reporting currency of USD using average rates for profit and loss transactions and applicable spot rates for period-end balances. The effect of translating our functional currency into our reporting currency, as well as translating the results of foreign subsidiaries that have a different functional currency into our functional currency, is reported separately in Accumulated Other Comprehensive Income.

During the three months ended June 30, ~~2020,~~2021, we derived approximately ~~41%~~28% of our revenue from sales to customers outside the UK, compared to ~~42%~~41% during the three months ended June 30, ~~2019.~~2020.

During the six months ended June 30, ~~2020,~~2021, we derived approximately ~~30%~~36% of our revenue from sales to customers outside the UK, compared to ~~38%~~30% during the six months ended June 30, ~~2019.~~2020.

In the section “Results of Operations” below, currency impacts shown have been calculated as the current-period average GBP:USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP:USD rate. This is not a U.S. GAAP measure, but is one which management believes gives a clearer indication of results. In the tables below, variances in particular line items from period to period exclude currency translation movements, and currency translation impacts are shown independently.

Non-GAAP Financial Measures

We use certain financial measures that are not compliant with U.S. GAAP (“Non-GAAP financial measures”), including EBITDA and Adjusted EBITDA, to analyze our operating performance. In this discussion and analysis, we present certain non-GAAP financial measures, define and explain these measures and provide reconciliations to the most comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” below.

Results of Operations

~~The following discussion and analysis of our results of operations has been organized in the following manner:~~

●

~~a discussion and analysis of the Company’s results of operations for the three-month period ended June 30, 2020, compared to the same period in 2019; and~~

●

a discussion and analysis of the results of operations of our SBG and Virtual Sports business segments for the three-month period ended June 30, 2020, compared to the same period in 2019, including KPI analysis; and

	●	~~a discussion and analysis of the results of operations of our Acquired Businesses segments for the three-month period ended June 30, 2020, including KPI analysis; and~~

	●	~~a discussion and analysis of the Company’s results of operations for the six-month period ended June 30, 2020, compared to the same period in 2019; and~~

	●	a discussion and analysis of the results of operations of our SBG and Virtual Sports business segments for the six-month period ended June 30, 2020, compared to the same period in 2019, including KPI analysis; and

	●	~~a discussion and analysis of the results of operations of our Acquired Businesses segments for the six-month period ended June 30, 2020, including KPI analysis.~~

~~Our fiscal year begins on January 1 and ends on December 31 of each calendar year. The results for the three months ended June 30, 2020 are unaudited.~~

Our results are affected by changes in foreign currency exchange rates, primarily between our functional currency (GBP) and our reporting currency (USD). InDuring the three-month periods ended June 30, ~~2020~~2021 and June 30, ~~2019,~~2020, the average GBP:USD rates were 1.40 and 1.24, ~~and 1.29,~~ respectively. InDuring the six-month periods ended June 30, ~~2020~~2021 and ~~2019,~~June 30, 2020, the average GBP:USD rates were 1.39 and 1.27, respectively.

The following discussion and ~~1.30, respectively.~~analysis of our results of operations has been organized in the following manner:

	●	a discussion and analysis of the Company’s results of operations for the three-month period and six-month period ended June 30, 2021, compared to the same periods in 2020;

	●	a discussion and analysis of the results of operations of our Gaming business segment for the three-month period and six-month period ended June 30, 2021, compared to the same periods in 2020, including KPI analysis;

Our results for the quarter ended June 30, 2020 have been impacted by the temporary closure of most non-essential businesses around the world due to the outbreak of COVID-19. The ongoing COVID-19 pandemic is expected to have far reaching impact on global commerce, with governments discouraging non-essential movement and/or ordering social distancing and sheltering-in-place in an effort to help control the transmission of COVID-19, which in some cases include the mandatory closure of spaces where the public congregates. With respect to the jurisdictions in which the Company operates, the UK, Italy, Greece, and US (Illinois) each mandated the above shutdown measures in response to COVID-19 on March 20, 2020, March 10, 2020, March 14, 2020, and March 21, 2020, respectively. These jurisdictions reopened for business, with certain limitations, on June 15, 2020, June 15, 2020, June 8, 2020, and July 1, 2020, respectively. However, due to the changing nature of the COVID-19 pandemic, there continues to be the risk of shutdowns in jurisdictions in which the Company operates. The financial results discussed herein reflect the impact of these shutdowns through June 30, 2020.

	●	a discussion and analysis of the results of operations of our Virtual Sports business segment for the three-month period and six-month period ended June 30, 2021, compared to the same periods in 2020, including KPI analysis;

	●	a discussion and analysis of the results of operations of our Interactive business segment for the three-month period and six-month period ended June 30, 2021, compared to the same periods in 2020, including KPI analysis; and

	●	a discussion and analysis of the results of operations of our Leisure business segment for the three-month period and six-month period ended June 30, 2021, compared to the same periods in 2020, including KPI analysis.

In the discussion and analysis below, certain data may vary from the amounts presented in our consolidated financial statements due to rounding.

Three Months ended June 30, ~~2020~~2021, compared to Three Months ended June 30, ~~2019~~2020

	For the Three-Month Period ended									Total
	Unaudited June 30,			Unaudited June 30,			Variance			Functional Currency			Total Variance
(In millions)	2021			2020			2021 vs 2020			%			%

Revenue:
Service	$	37.5		$	15.3		$	22.2			117.8	%		145.5	%
Product		4.0			0.3			3.7			1090.4	%		1249.6	%
Total revenue		41.5			15.6			25.9			136.3	%		166.4	%
Cost of Sales, excluding depreciation and amortization:
Cost of Service		(8.0	)		(2.5	)		(5.5	)		184.5	%		220.3	%
Cost of Product		(2.7	)		(0.3	)		(2.4	)		662.3	%		760.4	%
Selling, general and administrative expenses		(25.1	)		(11.2	)		(14.0	)		99.5	%		125.0	%
Stock-based compensation		(3.4	)		(1.0	)		(2.4	)		207.8	%		249.0	%
Acquisition and integration related transaction expenses		(0.1	)		(1.2	)		1.1			(91.5	)%		(90.4	)%
Depreciation and amortization		(11.9	)		(13.3	)		1.4			(20.7	)%		(10.7	)%
Net operating Income (Loss)		(9.7	)		(13.9	)		4.2			(38.2	)%		(30.1	)%
Other income (expense)
Interest income		0.1			0.1			0.0			14.8	%		66.0	%
Interest expense		(22.2	)		(8.1	)		(14.1	)		142.4	%		173.7	%
Change in fair value of warrant liability		(10.5	)		(1.7	)		(8.8	)		444.9	%		517.4	%
Other finance income (expense)		(1.2	)		(2.5	)		1.3			(59.0	)%		(52.9	)%
Total other income (expense), net		(33.8	)		(12.2	)		(21.5	)		143.3	%		175.7	%
Net Income (loss) from continuing operations before income taxes		(43.5	)		(26.1	)		(17.3	)		46.9	%		66.3	%
Income tax expense		(0.3	)		(0.1	)		(0.3	)		427.4	%		439.0	%

Net Income (Loss)	$	(43.8	)	$	(26.2	)	$	(17.6	)		47.8	%		67.2	%

Exchange Rate - $ to £		1.40			1.24

For the Three-Month
Period ended Variance
Unaudited Unaudited Functional
June 30, June 30, Variance Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 15.2 $ 25.6 $ (10.4 ) (40.6 )% $ (9.9 ) (38.5 )% $ (0.5 )
Hardware 0.4 1.1 (0.7 ) (67.5 )% (0.7 ) (66.8 )% (0.0 )
Total revenue 15.6 26.7 (11.1 ) (41.7 )% (10.6 ) (39.6 )% (0.5 )
Cost of sales, excluding depreciation and amortization:
Cost of service (3.1 ) (5.3 ) 2.3 (42.4 )% 2.1 (40.3 )% 0.1
Cost of hardware (0.3 ) (1.0 ) 0.6 (65.0 )% 0.6 (62.3 )% 0.0
Selling, general and administrative expenses (10.6 ) (12.8 ) 2.2 (17.3 )% 1.9 (14.5 )% 0.4
Stock-based compensation (1.0 ) (2.3 ) 1.3 (58.4 )% 1.3 (56.9 )% 0.0
Acquisition and integration related transaction expenses (1.2 ) (0.7 ) (0.5 ) 69.0 % (0.6 ) 74.0 % 0.0
Depreciation and amortization (13.3 ) (9.1 ) (4.2 ) 46.8 % (4.7 ) 52.3 % 0.5
Net operating Income (Loss) (13.9 ) (4.5 ) (9.4 ) 210.2 % (9.9 ) 221.8 % 0.5
Other income (expense)
Interest income 0.1 0.1 (0.0 ) (11.6 )% (0.0 ) (8.2 )% (0.0 )
Interest expense (8.1 ) (4.0 ) (4.1 ) 100.6 % (4.4 ) 107.9 % 0.3
Change in fair value of derivative liability - (1.3 ) 1.3 (100.0 )% 1.3 (100.0 )% (0.0 )
Other finance income (expense) (2.5 ) (0.9 ) (1.6 ) 192.3 % (1.8 ) 203.5 % 0.1
Loss from equity method investee - - - N/A - N/A -
Total other income (expense), net (10.5 ) (6.1 ) (4.4 ) 71.7 % (4.8 ) 76.9 % 0.4
Net loss from continuing operations before income
taxes (24.4 ) (10.6 ) (13.8 ) 130.1 % (14.7 ) 137.7 % 0.9

Income tax expense (0.1 ) (0.1 ) 0.0 (31.6 )% 0.0 (31.4 )% (0.0 )
Net loss $ (24.5 ) $ (10.7 ) $ (13.8 ) 128.7 % $ (14.7 ) 136.3 % $ 0.9
Exchange Rate - $ to £ 1.24 1.29

Revenue

Total reported revenue for the three months ended June 30, ~~2020 decreased~~2021, increased by ~~$11.1~~$25.9 million, or ~~41.7%~~166%, to ~~$15.6~~$41.5 million on a reported basis. ~~Revenue was significantly impacted by the shutdown~~This included an increase from Gaming of ~~non-essential businesses most~~$12.0 million, Leisure of ~~the second quarter in all~~$10.9 million, Interactive of ~~the jurisdictions in which the Company operates, due to the ongoing COVID-19 pandemic. Adverse~~$2.4 million and Virtual Sports of $0.6 million. Favorable currency movements accounted for a ~~$0.5~~$4.7 million impact. On a functional currency at(at constant ~~rate~~rate) basis, revenue ~~decreased~~increased by ~~$10.6~~$21.2 million, or ~~39.6%~~136%, ~~with service revenue decreasing~~as detailed below:

●

Gaming revenue increased by $10.2 million, comprised of an increase in Service revenue of $7.3 million and an increase in Product sales of $2.9 million. The increase in Service revenue was primarily due to reopening of retail venues.

	●	Virtual Sports revenue decreased by $0.4 million, or 4.6%. This decrease included a $1.0 million decrease in Online Virtuals, $0.7 million of which was due to a one-time sales in the prior period, which itself was driven by the lack of live sports. This was partially offset by growth in Retail Virtuals of $0.6 million as retail venues reopened during the period.

	●	Interactive revenue increased by $1.7 million, or 50.0%. This growth was driven by the addition of new customers and territories and the consistent launches of new high-quality content.

	●	Leisure revenue increased by $9.7 million, comprised of an increase in Service revenue of $9.3 million and an increase in Product sales of $0.4 million. The increase in revenue was due to the reopening of venues during the period.

Cost of Sales, excluding depreciation and amortization

Cost of Sales, excluding depreciation and amortization, increased by ~~$9.9~~$7.9 million, and hardware revenue decreasing by $0.7 million. The change in total reported revenue was comprised of a decrease of $13.5 million in SBG revenue, offset by an increase of $0.6 million in Virtual Sports revenue and an increase in revenue of $1.8 million from the Acquired Businesses segment.

~~SBG revenue, which is included in total reported revenue above, decreased by $13.5 million on a functional currency at constant rate basis,~~ or ~~77.1%~~280%, ~~comprised of a reduction in service revenue of $12.6 million, and a $0.7 million decrease in hardware sales.~~

~~SBG service revenue decreased by $12.7 million~~ on a reported basis, to $10.7 million, including the impact of ~~which $0.1~~$1.2 million from unfavorable currency movements. Of this increase, $5.5 million was attributable to ~~adverse~~cost of Service and $2.4 million was attributable to cost of Product sales. On a functional currency (at constant rate) basis, cost of sales increased by $6.7 million, or 238%, as detailed below:

	●	Gaming cost of sales increased by $4.1 million, comprised of an increase in Service costs of $2.2 million and a $1.9 million increase in Product costs. This increase was driven primarily by the reopening of retail venues.

	●	Virtual Sports cost of sales decreased by $0.4 million, or 45.0%, driven by a one-off sale in the prior period comparable.

	●	Interactive cost of sales increased by $0.4 million, or 112%. This increase was driven by the revenue growth in Interactive.

	●	Leisure cost of sales increased by $2.5 million, comprised of an increase in Service costs of $2.4 million and an increase in Product costs of $0.2 million, which was driven primarily by the reopening of retail venues.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses increased by $14.0 million, or 125%, on a reported basis, to $25.1 million. This included $2.9 million of unfavorable currency movements. On a functional currency at(at constant rate ~~basis, SBG service revenue decreased~~basis), SG&A increased by ~~$12.6~~$11.1 million, or ~~77.1%, to $3.6 million.~~

SBG hardware revenue decreased by $0.7 million to $0.4 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was $0.7 million or 67.8% with a de minimis currency impact.

Virtual Sports reported revenue increased by $0.6 million, or 6.4%, on a reported basis. This increase includes the impact of adverse currency movements of $0.4 million. On a functional currency at constant rate basis, Virtual Sports revenue increased by $1.0 million, or 10.5%100%. This increase included a $3.6 million decline in retail recurring revenue from the COVID-19 national shutdowns, predominantly driven by Italy which locked down earlier than other territories. Declines were offset by growth in Scheduled Online Virtuals of $2.9 million and Interactive of $1.3 million.

Acquired Businesses revenue accounted for $1.8 million in service revenue and nil hardware revenue. As with the Company’s other businesses in the UK, the general shutdown due to COVID-19 resulted in a cessation of gaming operations for most of the second quarter.

~~Cost of sales, excluding depreciation and amortization~~

Cost of sales, excluding depreciation and amortization, decreased by $2.9 million, or 45.9%, on a reported basis, to $3.4 million, including the impact of $0.1 million from favorable currency movements. On a functional currency at constant rate basis, cost of sales decreased by $2.8 million, or 43.8%.

Of this decrease, $4.1 million was attributable to decreased SBG service costs due to reduced consumable usage in line with the reduced machine estate due to the Triennial, and COVID-19 impact. This was offset by $0.9 million of service costs attributable to the acquisition of the Acquired Businesses.

~~Selling, general and administrative expenses~~

SG&A expenses decreased by $2.2 million, or 17.3%, on a reported basis, to $10.6 million. This included $0.4 million of favorable currency movements. On a functional currency at constant rate basis, SG&A decreased by $1.9 million, or 14.5%. The reported decrease was driven by ~~incremental SG&A expenses~~staff returning from furlough as retail venues began to reopen ($6.6 million), additional fleet costs as staff returned to work ($0.7 million), additional distribution costs as markets started to reopen ($0.6 million), plus an increase in costs of ~~$3.6~~$1.2 million ~~from~~for the ~~Acquired Businesses, offset by a $4.6~~provision following settlement with the Italian Tax Authorities in respect of an audit of the Italian Branch of Inspired Gaming (International) Limited for the period 2015-2017 in respect of the historic VAT treatment of supplies. The settlement includes an amount of $1.5 million ~~decrease~~ in ~~selling, general~~relation to VAT (of which $0.9 million had previously been provided for) plus interest of $0.3 million and ~~administrative expenses~~penalties in ~~SBG and Virtual Sports due to staff furloughs attributable to~~ the ~~COVID-19 pandemic.~~ amount of $0.3 million which were levied at the lowest rate applicable under the relevant regime. As well as refinancing costs of $0.6 million.

Stock-based compensation

During the three months ended June 30, 2021, the Company recorded an expense of $3.4 million with respect to outstanding awards. Of this expense, $1.9 million related to awards made under the 2021 Plan (including $1.4 million of upfront recognition) and $1.5 million related to awards made under the 2018 Plan. During the three months ended June 30, 2020, the ~~Company recorded an expense of~~charge for stock-based compensation was $1.0 ~~million with respect to outstanding awards.~~million. Of this expense, $0.9 million was related to awards made under the 2018 Plan and $0.1 million was related to costs from awards made under ~~the~~a 2016 Long Term Incentive Plan and $0.9 million from awards made under the 2018 Plan. The entirety of this cost related to recurring costs. During the three months ended June 30, 2019, the charge for stock-based compensation was $2.3 million. Of this expense, $1.5 million related to costs from awards made under the 2016 Long Term Incentive Plan and $0.8 million from awards made under the 2018 Plan with some of the 2018 Plan awards impacted by movements in the stock price between the award granting date and May 14, 2019, the date the scheme was formally approved by stockholders. Following approval, the cost was no longer impacted by stock price movements being charged by the same method as all other award plans.long term incentive plan.

Acquisition and integration related transaction expenses

Acquisition and integration related transaction expenses ~~increased~~decreased by ~~$0.5~~$1.1 million to ~~$1.2~~$0.1 million, on a reported basis. ~~The entirety of~~Both the ~~2020~~2021 and ~~2019 period~~2020 expenses were ~~related to work~~primarily integration costs in ~~respect of potential acquisitions with the 2019 expenses relating~~relation to the acquisition and third party integration fees linked exclusively to the acquisition and integration of Novomatic UK’s Gaming Technology Group and the 2020 expenses relating to the group integration costs following theNTG acquisition.

Depreciation and amortization

Depreciation and amortization ~~increased~~decreased by ~~$4.2~~$1.4 million, or ~~46.8%~~10.7%, to ~~$13.3~~$11.9 million on a reported basis. This included the impact of ~~favorable~~unfavorable currency movements of ~~$0.5~~$1.3 million.

On a functional currency at(at constant ~~rate~~rate) basis, depreciation and amortization ~~increased~~decreased by ~~$4.7~~$2.7 million, or ~~52.3%. This increase was~~20.7%, driven ~~by incremental depreciation and amortization of $5.6 million from the Acquired Businesses. This was partially offset~~primarily by a ~~$1.0 million~~ decrease of ~~depreciation~~$1.9 million in Gaming and ~~amortization~~$0.8 million in ~~SBG and Virtual Sports, due primarily to UK and Italy machine estates reaching full depreciation status.~~Leisure.

Net operating loss

During the period, net operating loss ~~increased by $9.4~~was $9.7 million ~~from~~compared to a ~~loss of $4.5 million to a~~net operating loss of $13.9 million ~~on a reported basis. On a functional currency at constant rate basis,~~in the prior period. The net operating loss ~~increased by $9.9~~improvement of $4.2 million aswas attributable to the ~~decline~~increase in revenue ~~related~~due to ~~COVID-19 was impacted by~~ the ~~addition~~reopening of ~~SG&A associated with~~retail venues across the ~~Acquired Businesses, only partially offset by the declines~~business as well as growth in ~~cost of sales, SG&A, and depreciation.~~Interactive. This net operating loss variance also included a $1.1 million unfavorable impact from foreign currency translation.

Interest expense

~~Interest~~Net interest expense increased by ~~$4.1~~$14.1 million in the period, to $8.1 million, on a reported basis. Of this variance $0.3 million was due to an adverse currency movement. On a functional currency at a constant rate basis, interest expense was $4.4 million (107.9%) higher than the prior year due to an increase of $2.9 million of cash interest due to a higher debt balance amount after the acquisition of Novomatic UK’s Gaming Technology Group in October 2019, a $1.0 million charge for debt fees relating to the debt restructure and an increase of $0.4 million of cash interest due to a higher revolver draw as a result of the COVID-19 pandemic.

~~Change in fair value of derivative liability~~

~~Following the termination of the cross-currency swaps on October 1, 2019, there was no change in the fair values of derivative liabilities~~ in the three months ended June 30, ~~2020. For~~2021, to $22.2 million, on a reported basis due to a $14.4 million write-off of previously capitalized debt fees following the refinancing in May 2021, a $0.7 million increase in debt interest and a $0.3 million exchange rate impact. These were offset by a $1.0m write-off of debt fees in the three months ended June 30, ~~2019,~~2020 and a $0.4 million reduction in revolver interest.

Change in fair value of warrant liability

Change in fair value of warrant liability for the three months ended June 30, 2021, resulted in a $10.5 million charge. The charge was related to changes in liability accounting pursuant to the statement made by the Office of Chief Accountant of the SEC, released on April 12, 2021, informing market participants that warrants issued by special purpose acquisition companies may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings. The $10.5 million charge reflects the increase in the value of the warrants, driven by increases in the Company’s share price from $9.29 on March 31^st, 2021 to $12.75 on June 30^th, 2021.For the three months ended June 30, 2020, the change in fair value ~~of derivative liability was~~resulted in a ~~$1.3~~$1.7 million charge.

Other finance income

Other finance income for the three months ended June 30, ~~2020 was~~2021, resulted in a $1.2 million charge ~~of $2.5 million~~ compared to a ~~$0.9~~$2.5 million charge in the three months ended June 30, ~~2019. The $2.5 million charge for~~2020. This variance was driven by movements in the ~~three months ended June 30, 2020 related~~retranslation with respect to ~~a $2.7m retranslation~~the principal balance of our senior debt offset by a $0.2m pension credit. The $0.9 million charge in the prior year related to a $3.2m retranslation of senior debt offset by a $0.2m pension credit and a $2.2 million benefit from the GBP:USD cross-currency swap which was terminated on October 1, 2019.facilities.

Income tax expense

Our effective tax rate for the period ended June 30, 2021, was 0.8% and our effective tax rate for the period ended June 30, 2020, was ~~0.3% and our effective tax rate for the period ended June 30, 2019 was (0.8)%~~0.2%.

Net loss

During the period, net loss was $43.8 million compared to a net loss of $26.2 million in the prior period. On a ~~reported~~functional currency (at constant rate) basis, net loss increased by ~~$13.8~~$12.6 million, ~~from a loss of $10.7 million to a loss of $24.5 million in the three months ended June 30, 2020. On a functional currency at constant rate basis, net loss increased by $14.7 million, mainly~~primarily due to the ~~shutdowns associated with COVID-19, as well as increases in operating expenses attributable to the Acquired Businesses, in addition to increases~~increase in interest expense ($11.5 million) and ~~other finance costs,~~increase in change in fair value of warrant liability ($7.6 million), partly offset by ~~a reduction~~the decrease in ~~earnout liability.~~net operating loss ($5.3 million).

Three Months ended June 30, ~~2020~~2021, compared to Three Months ended June 30, ~~2019~~2020 – ~~Server Based~~ Gaming Segment

We generate revenue from our Gaming segment through the selling and rental of our gaming machines. We receive rental fees for machines, typically on a long-term contract basis, on both a participation and fixed fee basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and any relevant regulatory levies) from gaming terminals placed in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our ~~SBG~~Gaming business is principally driven by the number of operator customers we have, the number of ~~SBG~~Gaming machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.

~~SBG~~Gaming Segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
SBG 2020 2019 2020 vs 2019
%
End of period installed base (# of terminals) 32,972 35,077 (2,105 ) (6.0 )%
Average installed base (# of terminals) 32,961 35,241 (2,280 ) (6.5 )%
Customer Gross Win per unit per day (1)(2) £ 11.18 £ 72.57 £ (61.38 ) (84.6 )%
Customer Net Win per unit per day (1)(2) £ 8.16 £ 51.68 £ (43.52 ) (84.2 )%
Inspired Blended Participation Rate 6.6 % 6.4 % 0.3 %

	For the Three-Month Period ended						Variance
	Unaudited Jun 30,			Unaudited Jun 30,			2021 vs 2020
Gaming	2021			2020						%

End of period installed base (# of terminals)		32,203			32,325			(122	)		(0.4	)%
Total Gaming - Average installed base (# of terminals)		31,868			32,259			(391	)		(1.2	)%
Participation - Average installed base (# of terminals)		29,180			30,392			(1,212	)		(4.0	)%
Fixed Rental - Average installed base (# of terminals)		2,687			1,867			821			44.0	%
Service Only - Average installed base (# of terminals)		21,515			21,668			(153	)		(0.7	)%
Customer Gross Win per unit per day ^{(1) (2)}	£	47.2		£	12.2		£	35.1			288	%
Customer Net Win per unit per day ^{(1) (2)}	£	36.7		£	8.9		£	27.8			313	%
Inspired Blended Participation Rate		6.0	%		6.6	%		(0.6	)%		(9.3	)%
Inspired Fixed Rental Revenue per Gaming Machine per week	£	15.4		£	0.0		£	15			N/A
Inspired Service Rental Revenue per Gaming Machine per week	£	4.1		£	1.3		£	2.8			222	%
Gaming Long term license amortization (£’m)	£	1.2		£	1.3		(£	0.0	)		(2.7	)%
Number of Machine sales		396			13			383			2946	%
Average selling price per terminal	£	5,449		£	5,672		(£	223	)		(3.9	)%

(1)	Includes all ~~SBG~~Gaming terminals in which the company takes a participation revenue share across all territories
(2)
~~(2)~~	Includes all days of the ~~quarter,~~period, including the days during which the ~~SBG~~Gaming terminals were not operating due to ~~COVID-19. As~~COVID-19, as many of our customers’ venues were closed during a ~~result, performance reflects this complete shutdown for the bulk~~portion of the ~~period.~~period (the “COVID-19 closures”).

InPlease refer to our Annual Report on Form 10-K for the ~~table above:~~

~~“End~~year ended December 31, 2020, for definitions of Period Installed Base” is equal to the number of deployed SBG terminals at the end of each period that have been placed on a participation basis. SBG participation revenue, which comprises the majority of SBG service revenue, is directly related to the terminal installed base. This is the medium by which customers generate revenue and distribute a revenue share to the Company. To the extent all other KPIs and certain other factors remain constant, the larger the installed base, the higher the Company’s revenue will be for that period. Management gives careful consideration to this KPI in terms ~~of driving growth across the segment.~~

~~Revenue is derived from the performance of the installed base as described by the Gross and Net Win KPIs.~~

If the End of Period Installed Base is materially different from the Average Installed Base (described below), we believe this gives an indication as to potential future performance. The End of Period Installed Base is particularly useful for assessing new customers or markets, to indicate the progress being made with respect to entering new territories or jurisdictions.

~~“Average Installed Base” is the average number of deployed SBG terminals during the period. Therefore, it is more closely aligned to revenue~~used in the ~~period. This measure is particularly useful for assessing existing customers or markets to provide comparisons of historical size and performance.~~above table.

“Customer Gross Win per unit per day” is a KPI used by our internal decision makers to (i) assess impact on the Company’s revenue, (ii) determine changes in the strength of the overall market and (iii) evaluate the impacts of regulatory change and our new content releases on our customers. Customer Gross Win per unit per day is the average per unit cash generated across all SBG terminals in which the Company takes a participation revenue share across all territories in the period, defined as the difference between the amounts staked less winnings to players divided by the Average Installed Base in the period, then divided by the number of days in the period.

SBG revenue share income accrued in the period is derived from Customer Gross Win accrued in the period after deducting gaming taxes (defined as a regulatory levy paid by the Customer to government bodies) and applying the Company’s contractual revenue share percentage.

Our internal decision makers believe Customer Gross Win measures are meaningful because they represent a view of customer operating performance that is unaffected by our revenue share percentage and allow management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between customers and (3) identify strategies to improve operating performance in the different markets in which we operate.

~~“Customer Net Win per unit per day” is Customer Gross Win per unit per day after giving effect to the deduction of gaming taxes.~~

“Inspired Blended Participation Rate” is the Company’s average revenue share percentage across all terminals where revenue is earned on a participation basis, weighted by Customer Net Win per unit per day.

Our overall SBG revenue from terminals placed on a participation basis can therefore be described as the product of the Average Installed Base, the Customer Net Win per unit per day, the number of days in the period, and the Inspired Blended Participation Rate, to give “participation revenue”.

~~SBG Segment, key events that affected results for the Three Months ended June 30, 2020~~

During the period Customer Gross Win per unit per day in the total UK market (including non-LBO markets) decreased by 84.1%. This was due mainly to the impact of COVID-19, with retail venues closed through April, May, and approximately half of June 2020. A significant number of retail venues reopened on or around June 15, 2020, with over 80% of shops (based on pre-COVID-19 shop count) open at the end of June 2020 and showing strong performance. Due to the shutdown period in the second quarter of 2020, Triennial impact was minimal, with improved Customer Gross Win per unit per day in 2020, versus the comparable period last year, being offset by 700 shop closures by a major customer.

In Italy, Customer Net Win per unit per day (in EUR) decreased by 93.5% due mainly to the shutdown of retail venues throughout April, May and part of June 2020 as a result of COVID-19. Approximately 50% of venues reopened on or around June 15, 2020.

Greece Customer Gross Win per unit per day (in EUR) decreased by 73.2%, due solely to the closure of retail venues throughout April, May and part of June 2020 due to COVID-19. All retail venues reopened on June 8, 2020 and performance through the end of the quarter was strong.

Customer Gross Win per unit per day (in our functional currency, GBP) decreased by £61 or 84.6% across the entire estate due to the impact of COVID-19 (as described by market above). The blended participation rate increased from 6.4% to 6.6%.

~~SBG Segment, Three Months ended June 30, 2020 compared to Three Months ended June 30, 2019~~

~~Server Based~~ Gaming

Note: Exchange rate in the table is calculated by dividing the USD total revenue by the GBP total revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

~~SBG Segment Revenue~~

In the period revenue, decreased by $13.5 million, to $4.0 million, on a reported basis. A small part of this decrease was due to adverse currency movements of $0.1 million. On a functional currency at constant rate basis, SBG revenue decreased by $13.4 million, or 76.5%.

Service revenue decreased by $12.7 million on a reported basis, and adverse currency movements accounted for $0.1 million of the decrease. On a functional currency at constant rate basis, SBG service revenue decreased by $12.6 million, or 77.1%, to $3.6 million. This was primarily due to the impact of COVID-19. The decrease by region showed $8.9 million in the UK, $1.7 million in Greece and $1.6 million in Italy. Further adverse movements came in Italy from a one-off software license sale of $0.3 million during 2019.

Hardware revenue decreased by $0.7 million to $0.4 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was $0.7 million or 67.8% with a small amount accounting for adverse currency movements. The decrease was due to the sale of 60 SSBTs (Self Service Betting Terminals) in the UK LBO market for $0.3 million and 90 “Flex Cabinets” in the UK Leisure market for $0.7 million in 2019. These were partly offset by spares sales in Italy of $0.3 million during 2020.

~~SBG Segment Operating Income~~

~~Cost of sales (excluding depreciation and amortization) decreased by $4.1 million or 75% to $1.3 million, on both a reported and functional currency at constant rate basis.~~

Service cost of sales decreased by $3.4 million or 76.8% to $1.0 million on both a reported basis and functional currency basis. This reduction was due mainly to the impact of retail venue closures attributable to COVID-19. UK LBO retail shops accounted for $2.0 million of the decrease with significant savings on consumable and third party content costs, a further $1.0 million was attributable to Greece and $0.4 million from Italy on the same basis.

~~Hardware cost of sales decreased by $0.7 million to $0.3 million on a reported basis and functional currency basis, decreasing on a similar basis as hardware sales.~~

SBG SG&A expense declined by $4.0 million on a reported basis. This decrease includes the impact of favorable currency movements of $0.2 million. On a functional currency at constant rate basis, SG&A decreased by $3.8 million, reflecting ongoing restructuring, as well as synergies associated with the acquisition of the Acquired Businesses. Of this reduction, $3.2 million is attributable to reduced staffing costs, of which $1.7 million is related to furloughs arising from the COVID-19 pandemic.

Depreciation declined by $1.2 million on a reported basis, or 17.3%. On a functional currency basis, depreciation declined by $1.1 million, reflecting $0.2 million in favorable currency impact. The decrease in depreciation expense was due to the machines in the UK estate becoming fully depreciated, offset by additional depreciation from new machines in the Greek estate.

Operating income declined by $3.7 million year over year, from a $1.6 million reported operating loss to a $5.4 million operating loss year over year, as the impact of COVID-19 significantly reduced gross profit beyond savings in SG&A and depreciation and amortization.

~~SBG~~ Segment, Recurring Revenue

Set forth below is a breakdown of our ~~SBG~~Gaming recurring revenue. ~~SBG~~Gaming recurring revenue consists principally of ~~SBG~~Gaming participation revenue and fixed rental revenue.

	For the Three-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Gaming Recurring Revenue
Total Gaming Revenue	£	11.6		£	3.4		£	8.2			241.5	%

Gaming Participation Revenue	£	6.0		£	1.6		£	4.5			285.6	%
Gaming Other Fixed Fee Recurring Revenue	£	1.6		£	0.3		£	1.2			350.0	%
Gaming Long-term license amortization	£	1.2		£	1.3		(£	0.0	)		(2.7	)%
Total Gaming Recurring Revenue	£	8.8		£	3.2		£	5.6			176.5	%
Gaming Recurring Revenue as a % of Total Gaming Revenue		76.2	%		94.1	%		(17.9	)%

For the Three-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
(In £ millions) 2020 2019 2020 vs 2019 %
SBG Recurring Revenue
Total SBG Revenue £ 3.2 £ 13.6 £ (10.4 ) (76.5 )%
SBG Participation Revenue £ 1.6 £ 10.6 £ (9.0 ) (84.6 )%
SBG Other Fixed Fee Recurring Revenue £ 0.0 £ 0.3 £ (0.1 ) (94.1 )%
Total SBG Recurring Revenue £ 1.6 £ 10.9 £ (9.3 ) (84.9 )%
SBG Recurring Revenue as a % of Total SBG Revenue 51.7 % 80.4 % (28.7 )%

InNote:- There was no VAT-related income in the ~~table above:~~period

~~“SBG Participation Revenue” includes~~Please refer to our ~~share~~Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of ~~revenue generated from (i) our SBG terminals placed~~terms used in ~~gaming and lottery venues; and (ii) licensing of our game content and intellectual property to third parties.~~the above table.

~~“SBG Other Fixed Fee Recurring Revenue” includes service revenue in which the Company earns a periodic fixed fee on a contracted basis.~~

~~“Total SBG Recurring Revenue” is equal to SBG Participation Revenue plus SBG Other Fixed Fee Recurring Revenue.~~

~~SBG~~Gaming Segment, Service Revenue by Region

Set forth below is a breakdown of our ~~SBG~~Gaming service revenue by geographic region. ~~SBG service~~Gaming Service revenue consists principally of ~~SBG~~Gaming participation revenue, Gaming other fixed fee revenue, Gaming long-term license amortization and Gaming other non-recurring revenue. See “Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review.

~~Server Based~~ Gaming Service Revenue by Region

	For the Three-Month Period ended
(In millions)	Unaudited June 30, 2021		Unaudited June 30, 2020		Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue:
UK LBO	$	8.2	$	1.4	$	6.8			405.6	%		466.8	%
UK Other		1.3		0.1		1.2			1458.0	%		1656.7	%
Italy		0.2		0.2		0.0			4.9	%		17.8	%
Greece		3.1		2.3		0.8			18.3	%		33.1	%
Rest of the World		0.0		0.1		(0.0	)		(98.4	)%		(98.2	)%

Total Service revenue	$	12.8	$	4.1	$	8.7			179.0	%		213.6	%

Exchange Rate - $ to £		1.40		1.25

Note: Exchange rate in the table is calculated by dividing the USD total service revenue by the GBP total service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

~~Virtual Sports~~Gaming Segment, key events that affected results for the Three Months ended June 30, 2021,

Total Gaming Customer Gross Win per unit per day (in our functional currency, GBP) increased by £35.08, or 288% which was due to the impact of COVID-19. In the UK, retail venues were closed for the majority of the quarter ended June 30, 2020, as compared to the current period when retail venues reopened in April and May 2021 (for further detail see segment revenue discussion below). In Greece, retail venues reopened in late May 2021 while in Italy retail venues began reopening in June 2021. The participation rate decreased from 6.6% to 6.0% primarily due to a higher proportion of UK venues operating in 2021 when compared to the same quarter in 2020 as UK share terms are lower (due to the fact we have higher gross win levels in the UK) than the total blended Gaming average.

During the period, Inspired sold 71 “Valor™” terminals to a number of customers in Illinois, increasing the total number of North American unit sales since launch in December 2019 to 540.

In the UK market, momentum was gained with our new “Community King” three-player product.

In addition, we have been upgrading our UK Gaming estate with the installation of 134 “Flex” and 57 “Prismatic” terminals on three-year lease agreements.

Three Months ended June 30, ~~2020~~2021, compared to Three Months ended June 30, ~~2019~~2020 – Gaming Segment

	For the Three-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	12.8		$	4.1		$	8.7			179.0	%		213.6	%
Product		3.4			0.1			3.2			2141.8	%		2464.0	%
Total revenue		16.2			4.2			12.0			241.5	%		283.9	%

Cost of Sales, excluding depreciation and amortization:
Cost of Service		(3.6	)		(1.0	)		(2.6	)		229.8	%		270.3	%
Cost of Product		(2.4	)		(0.2	)		(2.2	)		845.3	%		969.2	%
Total cost of sales		(6.0	)		(1.2	)		(4.8	)		345.5	%		400.8	%

Selling, general and administrative expenses		(6.7	)		(3.0	)		(3.6	)		95.6	%		120.6	%

Stock-based compensation		(0.4	)		(0.1	)		(0.3	)		67.4	%		300.0	%

Depreciation and amortization		(5.8	)		(7.0	)		1.2			(27.1	)%		(17.1	)%

Net operating Income (Loss)	$	(2.7	)	$	(7.1	)	$	4.4			(68.4	)%		(62.4	)%

Exchange Rate - $ to £		1.40			1.25

Gaming Segment Revenue

During the period, Gaming revenue increased by $12.0 million, or 284%, to $16.2 million on a reported basis. This increase included a favorable currency impact of $1.8 million. On a functional currency (at constant rate) basis, Gaming revenue increased by $10.2 million, or 242% as Gaming retail venues reopened during the period (see market information below for more detail) albeit with some restrictions for some of the period.

Service revenue increased by $8.7 million to $12.8 million on a reported basis. This increased included favorable currency movements of $1.4 million. On a functional currency (at constant rate) basis, Gaming Service revenue increased by $7.3 million, or 179%. This was driven by an increase in UK sales (including Licensed Betting Offices (“LBO”) and UK other) of $6.9 million primarily driven by the reopening of retail venues. UK LBO had additional two months trading verses quarter two 2020, albeit with one of these months at fifty percent capacity and UK other venues had an additional one month trading verses quarter two 2020. Greece revenue increased by $0.4 million, driven by the reopening of retail venues, Greece trading for an additional two weeks verses last period. Italy service revenue was unchanged as COVID-19 restrictions mostly remained in place during the period.

Product revenue increased by $3.2 million to $3.4 million on a reported basis. On a functional currency (at constant rate) basis, revenue increased by $2.9 million. This was driven by Product sales of $1.7 million in the UK markets, $1.1 million of Valor terminal sales in North America and $0.6 million of spare part sales.

Gaming Segment Operating Income

Cost of sales (excluding depreciation and amortization) increased by $4.8 million to $6.0 million on a reported basis, which included adverse currency movements of $0.7 million. On a functional currency (at constant rate) basis, Gaming cost of sales increased by $4.1 million, or 346%. Cost of Service increased by $2.2 million driven by the reopening of retail venues. Cost of Product increased by $1.9 million driven by the increase in Product revenue.

SG&A expense increased by $3.6 million on a reported basis. This increase included the impact of unfavorable currency movements of $0.7 million. On a functional currency (at constant rate) basis, Gaming SG&A increased by $2.9 million, or 95.6%. This was driven by staff returning from furlough as retail venues and markets reopened.

Depreciation and amortization declined by $1.2 million on a reported basis, or 17.1%. This included the impact of unfavorable currency movements of $0.7 million. On a functional currency (at constant rate basis), Gaming depreciation and amortization decreased by $1.9 million, or 27.1%. This was driven by a decrease in depreciation in the UK LBO and Greece markets.

Operating Loss improved by $4.4 million on a reported basis, from a loss of $7.1 million to a loss of $2.7 million. This was primarily due to the increase in revenue as retail venues reopened, partly offset by increased costs as staff returned from furlough as well as unfavorable currency movements of $0.5 million.

Three Months ended June 30, 2021, compared to Three Months ended June 30, 2020 – Virtual Sports Segment

We generate revenue from our Virtual Sports segment through the licensing of our products. We receive fees in exchange for the licensing of our products, typically on a long-term contract basis, on a participation basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and other promotional costs and any relevant regulatory levies) from Virtual Sports content placed on our customers’ websites or in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our Virtual Sports segment is principally driven by the number of customers we have, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.

Virtual Sports Segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
Virtuals 2020 2019 2020 vs 2019
%
No. of Live Customers at the end of the period 125 105 20 19.0 %
Average No. of Live Customers 125 105 20 19.0 %
Total Revenue (£‘m) £ 8.0 £ 7.2 £ 0.8 10.5 %

Total Virtual Sports Recurring Revenue (£‘m) £ 7.0 £ 6.5 £ 0.5 7.6 %
Total Revenue £‘m - Retail £ 1.0 £ 4.0 £ (3.1 ) (76.0 )%
Total Revenue £‘m - Scheduled Online Virtuals £ 5.2 £ 2.4 £ 2.8 114.4 %
Total Revenue £‘m - Interactive £ 1.8 £ 0.7 £ 1.1 145.1 %
Average Revenue Per Customer per day (£) £ 699 £ 753 £ (54 ) (7.2 )%

	For the Three-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Virtuals	2021		2020					%

No. of Live Customers at the end of the period		60		57		3			5.3	%
Average No. of Live Customers		59		58		1			1.7	%
Total Revenue (£’m)	£	5.9	£	6.1	(£	0.3	)		(4.6	)%
Total Revenue £’m - Retail	£	1.5	£	1.0	£	0.5			54.5	%
Total Revenue £’m - Online Virtuals	£	4.3	£	5.2	(£	0.8	)		(15.8	)%

~~In the table above:~~

“No. of Live Customers at the end of the period” and “Average No. of Live Customers” represent the number of customers from which there is Virtual Sports revenue at the end of the period and the average number of customers from which there is Virtual Sports revenue during the period, respectively.

~~“Total Revenue (£m)” represents total revenue~~Please refer to our Annual Report on Form 10-K for the ~~Virtual Sports segment, including recurring and upfront service revenue. Total revenue is also divided between “Total Revenue (£m) – Retail,” which consists~~year ended December 31, 2020, for definitions of revenue earned through players wagering at Virtual Sports venues, “Total Revenue (£m) – Scheduled Online Virtuals,” which consists of revenue earned through players wagering on Virtual Sports online, and “Total Revenue (£m) – Interactive,” which consists of revenue earned through our Interactive product.

“Recurring Revenue” includes our share of revenue generated from (i) our Virtual Sports products placed with operators; (ii) licensing our game content and intellectual property to third parties; and (iii) our games on third-party online gaming platforms that are interoperable with our game servers.

~~“Average Revenue per Customer per day” represents total revenue for the Virtual Sports segment~~terms used in the ~~period, divided by the Average No. of Live Customers, divided by the number of days in the period.~~above table.

Virtual Sports Segment, Recurring Revenue

Set forth below is a breakdown of our Virtual Sports recurring revenue, which consists of Retail Virtuals and Online Virtuals recurring revenue as well as long-term license amortization. See “Virtual Sports Segment Revenue” below for a discussion of Virtual Sports Service revenue between the periods under review.

	For the Three-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Virtual Sports Recurring Revenue
Total Virtual Sports Revenue	£	5.9		£	6.1		(£	0.3	)		(4.6	)%

Recurring Revenue - Retail Virtuals	£	1.4		£	0.8		£	0.6			81.0	%
Recurring Revenue - Online Virtuals	£	4.2		£	4.5		(£	0.3	)		(6.3	)%
Total Virtual Sports Long-term license amortization	£	0.2		£	0.2		(£	0.1	)		(29.7	)%
Total Virtual Sports Recurring Revenue	£	5.8		£	5.5		£	0.3			4.9	%
Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue		99.0	%		90.0	%		9.0	%

For the Three-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
(In £ millions) 2020 2019 2020 vs 2019
%
Virtual Sports Recurring Revenue
Total Virtual Sports Revenue £ 8.0 £ 7.2 £ 0.8 10.5 %

Recurring Revenue - Retail Virtuals £ 0.8 £ 3.7 £ (2.9 ) (79.3 )%
Recurring Revenue - Scheduled Online Virtuals £ 4.5 £ 2.2 £ 2.4 109.5 %
Recurring Revenue - Interactive £ 1.7 £ 0.7 £ 1.0 152.7 %
Total Virtual Sports Recurring Revenue £ 7.0 £ 6.5 £ 0.5 7.6 %
Virtual Sports Recurring Revenue as a Percentage of Total 88.1 % 90.5 % (2.4 )%
Virtual Sports Revenue

~~For~~

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of ~~the~~ terms used in the ~~table~~ above ~~see the definitions provided above.~~table.

Virtual Sports Segment, key events that affected results for the Three Months ended June 30, ~~2020~~2021

During the ~~quarter most~~three months ended June 30, 2021, our key retail territories ~~were fully offline for April~~in the UK, Ireland, Italy and ~~May with a partial month return for part of June. The exceptions to this were~~ Greece ~~which reopened in mid-May and Ireland, which~~ reopened at different stages in the ~~beginning~~quarter. In the prior year period, only Greece and Italy had reopened during June of ~~July.~~2020. As a result, ~~Retail Virtuals~~retail recurring revenues ~~have declined significantly but both Scheduled Online Virtuals and Interactive revenues have seen significant growth. There was a $3.6 million decline in Retail recurring revenue in the quarter offset~~increased by ~~$2.9 million growth in Online Scheduled Virtuals and $1.3 million growth in Interactive revenues.~~$0.9 million.

The Virtual Grand National was broadcast on prime-time UK television to replace the live race due to the COVID-19 pandemic. Over four million viewers tuned in to watch Potters Corner win the Virtual race. The event was run as a charity event, ultimately generating over $3.0 million for the National Health Service (“NHS”) COVID-19 charity from various operators.

The Virtual Kentucky Derby all-time winner race aired on the May 2, 2020 on NBC in the U.S. The race featured the 13 all-time great Triple Crown winners, with Secretariat winning the virtual race. The event was held to raise money for the COVID-19 relief effort.

During the ~~period, OPAP~~three months ended June 30, 2021, we launched three channels of our V-Play Soccer 3.0 product with Stoiximan, the largest online operator in Greece, ~~launched with~~using our brand-new proprietary V-Play soccer product with significantly improved graphics, betting markets and overall design. Performance to date has been strong, with Greece revenues hitting pre-COVID-19 levels shortly after lockdown was lifted.cloud streaming solution.

~~Our Virtual Interactive division launched V-Play Basketball and our NFL Alumni V-Play Football product with Bet365 New Jersey, both of which have performed well to date. After the end of the period,~~In Turkey we launched ~~V-Play~~our new Euro Soccer Marbles product alongside a new Parlay Boost feature with Misli via our proprietary Virtual Plug & Play^TM,(“VPP”) platform.

A suite of new products including Marbles, Matchday Soccer Ultra and the new Penalty shootout soccer product were launched in Italy on both retail and online channels.

We signed an extension to our existing agreement with Entain enabling betMGM, Borgata and PartyCasino to launch VPP into multiple U.S. states.

Updates to V-Play Soccer 3.0 and V-Play Matchday Soccer were launched in OPAP venues in Greece along with a new Euro Tournament product enabling bets to be placed on a Virtual Soccer tournament which ~~provides operators~~was launched alongside the European soccer tournament in June.

A contract extension was signed with ~~end-to-end online and mobile sportsbook functionality, on social gaming platform FendOff Sports.~~

~~The Interactive division launched with eleven new customers~~Boylesports covering the continued provision of Virtual Sports across retail betting shops in the ~~quarter including Boylesports, Lottoland, Casumo~~UK and ~~Harrah’s New Jersey. There were also major new content releases, including Reel King Megaways~~^TM ~~and Centurion Megaways~~^TM~~. Both titles have seen strong performance since launch.~~Ireland.

The Average Number of Live Customers during the period increased by twenty, from 105 to 125. Including the launch of new Interactive customers in the quarter, our Average Number of Live Interactive Customers for the period increased to 67.

~~Our average revenue per customer declined during the quarter primarily due to the timing of the addition of several Interactive customers that have not fully ramped up volume during the quarter.~~

~~Virtual Sports Segment,~~ Three Months ended June 30, ~~2020~~2021, compared to Three Months ended June 30, ~~2019~~

2020 – Virtual Sports Segment

	For the Three-Month Period ended											Variance
	Unaudited			Unaudited								Functional
	June 30,			June 30,			Variance					Currency at			Functional			Currency			For the Three-Month Period ended
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement			Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue	$	9.8		$	9.2		$	0.6		6.7	%	$	1.0			10.5	%	$	(0.4	)	$	8.2		$	7.6		$	0.6			(4.6	)%		7.5	%

Cost of Service		(1.2	)		(0.9	)		(0.3	)	33.6	%		(0.3	)		38.5	%		0.0			(0.5	)		(0.8	)		0.3			(45.0	)%		(38.1	)%

Selling, general and administrative expenses		(1.1	)		(2.1	)		1.0		(48.3	)%		0.7			(39.2	)%		0.3			(2.7	)		(0.7	)		(1.9	)		222.8	%		264.2	%

Stock-based compensation		(0.1	)		(0.3	)		0.2		(64.2	)%		0.2			(69.1	)%		0.1			(0.1	)		(0.1	)		-			68.0	%		0.0	%

Depreciation and amortization		(1.4	)		(1.4	)		0.0		2.9	%		(0.1	)		6.6	%		0.1			(0.7	)		(0.9	)		0.2			(28.0	)%		(22.2	)%
Net operating Income	$	6.0		$	4.5		$	1.5		32.6	%	$	1.5			31.8	%	$	(0.0	)

Net operating Income (Loss)																					$	4.2		$	5.1		$	(0.9	)		(28.0	)%		(17.2	)%

Exchange Rate - $ to £		1.24			1.29																	1.40			1.24

Note: Exchange rate in the table is calculated by dividing the USD service revenue by the GBP service revenue, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

Virtual Sports Segment ~~revenue.~~ revenueIn

During the period, revenue increased by $0.6 million, or ~~6.7%~~7.5%, on a reported basis. This increase ~~includes~~included the impact of ~~adverse~~favorable currency movements of ~~$0.4~~$0.9 million. On a functional currency at(at constant ~~rate~~rate) basis, ~~Virtual Sports~~ revenue ~~increased~~decreased by ~~$1.0~~$0.4 million, or ~~10.5%~~4.6%. This ~~increase included~~decrease was driven by a ~~$3.6~~$1.0 million decline in ~~retail~~Online Virtuals of which $0.7 million stemmed from one-time sales of Virtual Sports events in the prior year period and a $0.4 million decline in Online recurring revenue resulting from the high activity on Online Virtuals in the prior year period, both of which were due to the limited live sports betting available during COVID-19 ~~national shutdowns. Declines were~~lockdowns. Despite the decline in the quarter, Online revenues remain significantly higher than pre-COVID-19 levels. This was partially offset by growth in ~~Scheduled Online~~recurring Retail Virtuals of ~~$2.9~~$0.9 million ~~and Interactive of $1.3 million.~~as retail venues reopened during the period.

Virtual Sports Segment operating ~~income.~~income

Cost of ~~service increased~~Service decreased by $0.3 million to ~~$1.2 million on a reported basis.~~

~~SG&A expenses decreased by $1.0~~$0.5 million on a reported basis. This decrease ~~includes~~included the impact of $0.1 million from adverse currency movements. On a functional currency (at constant rate) basis, cost of Service decreased by $0.4 million, or 45.0%, driven by the decrease in Online Virtuals revenue.

SG&A expenses increased by $1.9 million on a reported basis. On a functional currency (at constant rate) basis, SG&A expenses increased by $1.6 million, or 223%. This was driven by a $1.2 million increase for the provision following settlement with the Italian Tax Authorities in respect of an audit of the Italian Branch of Inspired Gaming (International) Limited for the period 2015-2017 in respect of the historic VAT treatment of supplies, as well as increase in costs as staff returning from furlough as retail venues.

Depreciation and amortization decreased by $0.2 million on a reported and functional currency (at constant rate) basis.

Operating profit decreased by $0.9 million on a reported basis which included the impact of favorable currency movements of ~~$0.3~~$0.6 million. On a functional currency at(at constant ~~rate~~rate) basis, ~~SG&A~~operating profit decreased by ~~$0.7 million, driven by staff-related cost savings.~~

~~Depreciation and amortization remained substantially unchanged on a reported basis. There was de minimis impact from currency movements.~~

~~Operating profit increased by $1.5 million on a reported and functional currency at constant rate basis, to $6.0~~$1.4 million. This was primarily due to anthe $1.6 million increase in ~~revenues~~SG&A following the settlement with the Italian Tax Authorities.

Three Months ended June 30, 2021, compared to Three Months ended June 30, 2020 – Interactive Segment

We generate revenue from our Interactive segment through the licensing of our products. We receive fees in exchange for the licensing of our products, typically on a long-term contract basis, on a participation basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and ~~reduced SG&A expenses.~~ other promotional costs and any relevant regulatory levies) from Interactive content placed on our customers’ websites. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our Interactive segment is principally driven by the number of customers we have, the number of live games, the net win performance of the games and the net win percentage that we receive pursuant to our contracts with our customers.

Interactive Segment, Key Performance Indicators

	For the Three-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Interactive	2021		2020				%

No. of Live Customers at the end of the period		100		70		30		42.9	%
Average No. of Live Customers		99		70		30		42.6	%
No. of Live Games at the end of the period		218		189		29		15.3	%
Average No. of Live Games		216		187		28		15.1	%
Total Revenue (£’m)	£	4.2	£	2.8	£	1.4		50.1	%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of terms used in the above table.

~~Acquired Businesses segment,~~Interactive Segment, Recurring Revenue

Set forth below is a breakdown of our Interactive recurring revenue which consists principally of Interactive participation revenue. See “Interactive Segment Revenue” below for a discussion of Interactive service revenue between the periods under review.

	For the Three-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Interactive Recurring Revenue
Total Interactive Revenue	£	4.2		£	2.8		£	1.4			50.0	%

Total Recurring Revenue - Interactive	£	4.2		£	2.7		£	1.4			51.4	%
Interactive Recurring Revenue as a Percentage of Total Interactive Revenue		100.0	%		99.1	%		0.9	%

Interactive Segment, key events that affected results for the Three Months ended June 30, ~~2020~~2021

During the period, the North American market has grown 265% or $0.4 million in the quarter. There were seven new brand launches including BetMGM and Golden Nugget in Michigan.

We deployed seven new games in the quarter across the estate including “Big Spin Bonus” and “Cops and Robbers Megaways”. Big Spin Bonus is the biggest launch in Inspired’s history and is the first game to generate 20 million plays in a week. The product is expected to launch in all markets.

Three Months ended June 30, 2021, compared to Three Months ended June 30, 2020 – Interactive Segment

	For the Three-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue	$	5.8		$	3.4		$	2.4			50.0	%		69.0	%

Cost of Service		(0.9	)		(0.4	)		(0.5	)		111.6	%		133.1	%

Selling, general and administrative expenses		(1.3	)		(0.6	)		(0.7	)		100.2	%		125.9	%

Stock-based compensation		(0.1	)		(0.1	)		-			177.7	%		0.0	%

Depreciation and amortization		(0.9	)		(0.6	)		(0.3	)		40.4	%		47.5	%

Net operating Income (Loss)	$	2.6		$	1.7		$	0.8			21.4	%		46.8	%

Exchange Rate - $ to £		1.40			1.24

Interactive Segment revenue

During the period, revenue increased by $2.4 million, or 69.0%, on a reported basis. On a functional currency (at constant rate) basis, revenue increased by $1.7 million, or 50.0%. This was driven by recurring revenue growth due to the consistent launch of new content across the estate, growth in the customer base in new, emerging and core markets and increased promotional activity through exclusive deals with tier-one customers.

Interactive Segment operating income

Cost of Service increased by $0.5 million to $0.9 million on a reported basis. On a functional currency (at constant rate) basis, cost of Service increased by $0.4 million due to increased third party platform provider costs, in line with the revenue increase for the period.

SG&A expenses increased by $0.7 million on a reported basis. This increase included the impact of unfavorable currency movements of $0.1 million. On a functional currency (at constant rate) basis, SG&A increased by $0.6 million driven by the investment in the segment to help drive the increasing revenues.

Depreciation and amortization increased by $0.3 million on a reported basis. On a functional currency (at constant rate) basis, depreciation and amortization increased by $0.2 million.

Operating profit increased by $0.8 million on a reported basis. On a functional currency (at constant rate) basis operating profit increased by $0.4 million. This was primarily due to the increase in revenue, partly offset by the increase in cost of sales and SG&A.

Three Months ended June 30, 2021, compared to Three Months ended June 30, 2020 – Leisure Segment

We generate revenue from our ~~Acquired Businesses~~Leisure segment through the ~~manufacturing, marketing, and~~ rental of our gaming ~~machines~~ and ~~gaming software. We manufacture gaming machines for rental to UK pubs, adult gaming centers, bowling alleys, motorway service stations, and leisure parks, as well as for sale.~~amusement machines. We receive rental fees for machines, typically on a long-term contract basis, on both a participation and fixed fee basis, with our newer digital pub machines typically contracted on a fixed fee basis. Our participation contracts are typically structured to pay us a percentage of net win (defined as net revenue to our operator customers, after deducting player winnings, free bets or plays and any relevant regulatory levies) from gaming terminals placed in our customers’ facilities. Typically, we recognize revenue from these arrangements on a daily basis over the term of the contract.

Revenue growth for our ~~Acquired Businesses~~Leisure segment is principally driven by the number of ~~operator~~ customers we have, the number of gaming machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.

~~Acquired Businesses~~Leisure segment, Key Performance Indicators

For the Three-Month
Period ended
Unaudited
June 30, Unaudited
June 30, Variance
Acquired Businesses 2020 2019 2020 vs 2019
%
Pub Digital Cat C Gaming Machines - Average installed base (# of terminals) 5,773 4,633 1,140 24.6 %

Inspired Pubs Revenue per Digital Cat C Gaming Machine per week £ 0.00 £ 65.49 £ (65.49 ) (100.0 )%

Pub Analogue Digital Cat C Gaming Machines - Average installed base (# of terminals) 2,690 3,744 (1,054 ) (28.2 )%

Inspired Pubs Revenue per Analogue Cat C Gaming Machine per week £ 0.00 £ 43.44 £ (43.44 ) (100.0 )%

End of Period % of Digital Cat C Gaming Machines in Pub Market 68.2 % 57.2 % 11.0 %

Total Leisure Parks Revenue (Gaming and Non Gaming) (£‘m) £ 0.0 £ 8.2 £ (8.2 ) (100.0 )%

AGC and MSA Gaming Machines - Average installed base (# of terminals)⁽¹⁾ 5,170 5,773 (603 ) (10.4 )%

Inspired AGC and MSA Revenue per Gaming Machine per week £ 0.00 £ 66.39 £ 66.39 (100.0 )%

	For the Three-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Leisure	2021		2020					%

End of period installed base Gaming machines (# of terminals)		11,723		12,262		(539	)		(4.4	)%
Average installed base Gaming machines (# of terminals)		11,679		12,267		(588	)		(4.8	)%
End of period installed base Other (# of terminals)		7,244		8,224		(980	)		(11.9	)%
Average installed base Other (# of terminals)		7,188		8,231		(1,043	)		(12.7	)%
Pub Digital Gaming Machines - Average installed base (# of terminals)		5,895		5,773		122			2.1	%
Pub Analogue Gaming Machines - Average installed base (# of terminals)		2,233		2,690		(458	)		(17.0	)%
MSA and Bingo Gaming Machines - Average installed base (# of terminals)⁽¹⁾		3,293		3,517		(224	)		(6.4	)%
Inspired Leisure Revenue per Gaming Machine per week	£	24.4		NM		NM			NM
Inspired Pub Digital Revenue per Gaming Machine per week	£	26.0		NM		NM			NM
Inspired Pub Analogue Revenue per Gaming Machine per week	£	13.2		NM		NM			NM
Inspired MSA and Bingo Revenue per Gaming Machine per week	£	30.0	£	0.2	£	29.8			15859	%
Inspired Other Revenue per Machine per week	£	4.7		NM		NM			NM

Total Leisure Parks Revenue (Gaming and Non Gaming) (£’m)	£	3.3		NM		NM			NM

⁽¹⁾

~~Adult Gaming Centers and~~ Motorway Service Area machines

~~In the table above:~~

~~End~~

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of ~~period installed base~~terms used in the above table.

Leisure Segment, Recurring Revenue

Set forth below is a breakdown of our Leisure recurring revenue which consists principally of Leisure participation revenue and ~~Average installed base represent~~Leisure other fixed fee revenue. See “Leisure Segment Revenue” below for a discussion of leisure service revenue between the ~~number~~periods under review.

Set forth below is a breakdown of ~~gaming machines installed from which there is participation or rental revenue at the end of the period or as an average over the period.~~our Leisure recurring revenue.

	For the Three-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Leisure Recurring Revenue
Total Leisure Revenue	£	8.1		£	0.3		£	7.8			2691.7	%

Total Leisure Recurring Revenue	£	7.6		£	0.1		£	7.5			6323.0	%
Leisure Recurring Revenue as a Percentage of Total Leisure Revenue		94.8	%		41.2	%		53.6	%

~~Revenue per machine unit per week represents the average weekly participation or rental revenue recognized during the period.~~

~~The % Digital Cat C represents the percentage of the Company’s UK pub gaming machine estate located with that is digital.~~

~~Acquired Businesses segment,~~Leisure Segment, key events that affected results for the Three Months ended June 30, ~~2020~~2021

~~On October 1, 2019,~~During the ~~Company completed the acquisition~~three months ended June 30, 2021, all major sectors of the ~~Gaming Technology Group (“NTG”)~~Leisure segment (Pubs, Holiday Parks, Motorway Service Areas and Bingo Halls) remained closed due to the COVID-19 closures in the UK until May 17^th.

From May 17, 2021, venues reopened with social distancing and other restrictions imposed due to COVID-19. These restrictions remained in place for the rest of ~~Novomatic UK Ltd., a division of Novomatic Group, a leading international supplier of gaming equipment and solutions. As per ASC 280,~~ the Company reports the results of this acquisition as a business segment denoted as “Acquired Businesses.” Because the Company completed the transaction on October 1, 2019, it can only report the results since that date.period.

~~Acquired Businesses segment,~~Three Months ended June 30, 2021, compared to Three Months ended June 30, 2020 – Leisure Segment

	For the Three-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	10.7		$	0.2		$	10.5			4733.4	%		5334.6	%
Product		0.6			0.2			0.4			221.2	%		261.0	%
Total revenue		11.3			0.4			10.9			2691.7	%		3045.9	%

Cost of Sales, excluding depreciation and amortization:
Cost of Service		(3.0	)		(0.3	)		(2.7	)		731.1	%		837.5	%
Cost of Product		(0.3	)		(0.1	)		(0.2	)		202.3	%		239.3	%
Total cost of sales		(3.3	)		(0.4	)		(2.9	)		614.4	%		705.4	%

Selling, general and administrative expenses		(8.2	)		(2.6	)		(5.6	)		177.6	%		217.9	%

Stock-based compensation		(0.1	)		(0.0	)		(0.1	)		251.3	%		352.0	%

Depreciation and amortization		(4.1	)		(4.4	)		0.3			(17.3	)%		(6.8	)%

Net operating Income (Loss)		(4.4	)		(7.0	)	$	2.7			(45.7	)%		(38.2	)%

Exchange Rate - $ to £		1.40			1.25

~~Acquired Business~~

For the Three-
Month Period
ended
Unaudited
June 30,
(In millions) 2020
Revenue:
Service $ 1.8
Hardware -
Total revenue 1.8

Cost of sales, excluding depreciation and amortization:
Cost of service (0.9 )
Cost of hardware -
Total cost of sales (0.9 )

Selling, general and administrative expenses (3.6 )
Depreciation and amortization (5.6 )
Net operating Income (Loss) $ (8.3 )

Exchange Rate - $ to £ 1.24

~~Acquired Businesses~~

Leisure Segment Revenue

During the period, revenue increased by $10.9 million to $11.3 million on a reported basis, including a $1.3 million impact from favorable currency movements. On a functional currency (at constant rate) basis revenue increased by $9.7 million.

~~Acquired Businesses service~~

Service revenue increased by $10.5 million on a reported basis and $9.3 million on a functional currency (at constant rate) basis to $10.7 million. This was ~~$1.8 million~~driven by the reopening of venues in May although with some COVID-19 restriction remaining for the ~~first quarter. The shutdown~~rest of the ~~UK market because~~period.

Product revenue increased by $0.4 million to $0.6 million on a reported and functional currency (at constant rate) basis. This increase was driven by the reopening of the COVID-19 pandemic led to revenues in the pub sector reducing to zero during the period. As a result, revenue was comprised primarily of $1.2 million in online revenue and $0.2 million from servicing self-service betting terminals (“SSBTs”).venues.

The Company’s average installed base within the Pub business included 8,463 Category C gaming machines. Digital gaming machines accounted for 68.2% of the total Category C gaming machines at the end of the period, which was an increase from 57.2% at the end of the comparable period in 2019.This represents a 24.6% increase over the prior year’s installed base of digital Category C gaming machines.

In addition, Acquired Businesses includes services to Leisure Parks, motorway service areas (“MSAs”), adult gaming centers (“AGCs”) and bowling alleys as well as software license fees associated with one-time hardware sales. The shutdown of the UK market because of the COVID-19 pandemic led to all leisure parks, MSAs, AGCs and bowling alleys being closed for the whole period and associated revenue reducing to zero during the period.

~~Acquired Businesses~~Leisure Segment Operating Income

~~Acquired Businesses~~Operating loss improved by $2.7 million on a reported basis from a loss of $7.0 million to a loss of $4.4 million, which included the impact of unfavorable currency movements of $0.5 million. On a functional currency (at constant rate) basis operating income reflects cost of sales of $0.9 million (comprised of manufacturing costs, content royalties, spare parts, distribution costs, and certain gaming taxes), SG&A expenses of $3.6 million including service network costs, facilities, and staffing, and depreciation and amortization of $5.6 million, reflecting capitalized game development and machine deployment levels. SG&A expenses forloss improved by $3.2 million. This was primarily due to the ~~quarter were impacted by furloughs of all operations staff, effected to reflect the cessation of~~increase in revenue ~~from gaming operations.~~as venues reopened.

Six Months ended June 30, ~~2020~~2021, compared to Six Months ended June 30, ~~2019~~2020

	For the Six-Month Period ended									Total
	Unaudited June 30,			Unaudited June 30,			Variance			Functional Currency			Total Variance
(In millions)	2021			2020			2021 vs 2020			%			%

Revenue:
Service	$	54.6		$	58.1		$	(3.5	)		(14.1	)%		(6.0	)%
Product		9.7			9.8			(0.1	)		(8.9	)%		(0.9	)%
Total revenue		64.3			67.9			(3.6	)		(13.3	)%		(5.3	)%
Cost of Sales, excluding depreciation and amortization:
Cost of Service		(10.1	)		(11.0	)		0.8			(15.3	)%		(7.6	)%
Cost of Product		(5.9	)		(6.5	)		0.6			(17.7	)%		(9.6	)%
Selling, general and administrative expenses		(38.9	)		(39.2	)		0.3			(9.3	)%		(0.7	)%
Stock-based compensation		(4.8	)		(2.0	)		(2.8	)		118.3	%		138.6	%
Acquisition and integration related transaction expenses		(1.5	)		(4.4	)		2.9			(69.7	)%		(66.3	)%
Depreciation and amortization		(25.0	)		(25.9	)		0.9			(12.4	)%		(3.5	)%
Net operating Income (Loss)		(21.9	)		(21.1	)		(0.8	)		(6.8	)%		3.7	%
Other income (expense)
Interest income		0.1			0.4			(0.3	)		(86.7	)%		(86.0	)%
Interest expense		(30.8	)		(14.2	)		(16.6	)		95.3	%		117.1	%
Change in fair value of warrant liability		(13.5	)		5.9			(19.4	)		(301.4	)%		(328.1	)%
Other finance income (expense)		5.2			(6.2	)		11.4			(176.4	)%		(184.6	)%
Loss from equity method investee		-			(0.5	)		0.5			(100.0	)%		(100.0	)%
Total other income (expense), net		(39.0	)		(14.6	)		(24.4	)		139.6	%		166.7	%
Net Income (loss) from continuing operations before income taxes		(60.9	)		(35.7	)		(25.1	)		52.9	%		70.4	%
Income tax expense		0.4			(0.3	)		0.7			(205.8	)%		(225.7	)%

Net Income (Loss)	$	(60.5	)	$	(36.0	)	$	(24.5	)		50.9	%		67.9	%

Exchange Rate - $ to £		1.39			1.27

For the Six-Month
Period ended Variance
Unaudited Unaudited Functional
June 30, June 30, Variance Currency at Functional Currency
(In millions) 2020 2019 2020 vs 2019 Constant rate Currency Movement
Revenue:
Service $ 58.4 $ 56.4 $ 2.0 3.5 % $ 3.0 5.3 % $ (1.0 )
Hardware 9.5 4.0 5.5 139.8 % 5.7 146.0 % (0.2 )
Total revenue 67.9 60.4 7.5 12.4 % 8.7 14.4 % (1.2 )
Cost of sales, excluding depreciation and amortization:
Cost of service (9.7 ) (10.7 ) 1.0 (9.2 )% 0.8 (7.4 )% 0.2
Cost of hardware (7.3 ) (2.6 ) (4.7 ) 175.7 % (4.8 ) 183.1 % 0.2
Selling, general and administrative expenses (39.7 ) (27.5 ) (12.2 ) 44.2 % (12.8 ) 46.5 % 0.7
Stock-based compensation (2.0 ) (4.4 ) 2.4 (54.8 )% 2.4 (53.8 )% 0.0
Acquisition and integration related transaction expenses (4.4 ) (1.6 ) (2.8 ) 177.8 % (3.0 ) 189.6 % 0.2
Depreciation and amortization (25.9 ) (18.8 ) (7.1 ) 37.9 % (7.9 ) 41.9 % 0.8
Net operating Income (Loss) (21.1 ) (5.2 ) (15.8 ) 305.3 % (16.6 ) 319.1 % 0.8
Other income (expense)
Interest income 0.4 0.1 0.3 477.8 % 0.3 500.4 % 0.0
Interest expense (14.2 ) (8.5 ) (5.7 ) 66.9 % (6.1 ) 71.6 % 0.4
Change in fair value of earnout liability - (2.3 ) 2.3 (100.0 )% 2.3 (100.0 )% (0.0 )
Change in fair value of derivative liability - (0.1 ) 0.1 (100.0 )% 0.1 (100.0 )% (0.0 )
Other finance income (expense) (6.2 ) 0.3 (6.5 ) (2120.4 )% (6.8 ) (2132.7 )% 0.3
Loss from equity method investee (0.5 ) - (0.5 ) N/A (0.5 ) N/A 0.0
Total other income (expense), net (20.5 ) (10.5 ) (10.0 ) 95.2 % (10.7 ) 100.6 % 0.6
Net loss from continuing operations before income taxes (41.6 ) (15.7 ) (25.8 ) 164.5 % (27.3 ) 172.7 % 1.4
Income tax expense (0.3 ) 0.0 (0.3 ) N/A (0.3 ) N/A 0.0

Net loss $ (41.9 ) $ (15.7 ) $ (26.1 ) 166.3 % $ (27.6 ) 174.6 % $ 1.4

Exchange Rate - $ to £ 1.27 1.30

Revenue

Total reported revenue for the six months ended June 30, ~~2020 increased~~2021, decreased by ~~$7.5~~$3.6 million, or ~~12.4%~~5.3%, to ~~$67.9~~$64.3 million on a reported basis. ~~Revenue was significantly impacted~~This included an increase from Interactive of $5.5 million, offset by ~~the shutdown~~declines in Gaming of ~~non-essential businesses most~~$2.2 million, Virtual Sports of ~~the second quarter in all~~$0.9 million, and Leisure of ~~the jurisdictions in which the Company operates, due to the ongoing COVID-19 pandemic. Adverse~~$6.0 million. Favorable currency movements accounted for a ~~$1.2~~$5.5 million impact. On a functional currency at(at constant ~~rate~~rate) basis, revenue increased by $8.7 million, or 14.4%, with service revenue increasing by $3.0 million and hardware revenue increasing by $5.7 million. The change in total reported revenue was comprised of a decrease of $20.5 million in SBG revenue, a decrease of $0.4 million in Virtual Sports revenue, offset by an increase in revenue of $29.2 million from the Acquired Businesses segment. This was offset by $0.8 million in intercompany eliminations.

SBG revenue, which is included in total reported revenue, above, decreased by $20.5 million, to $20.7 million, on a reported basis. A small part of this decrease was due to adverse currency movements of $0.3 million. On a functional currency at constant rate basis, SBG revenue decreased by ~~$20.2~~$9.1 million, or ~~49.0%.~~ 13.3%, as detailed below:

●

Gaming revenue decreased by $4.3 million, comprised of a decrease in Service revenue of $3.8 million and a decrease in Product sales of $0.6 million. The decrease in Service revenue includes VAT-related revenue of $2.9 million generated in the current period (using prior year exchange rate). Excluding the VAT-related revenue, Service revenue would have declined by $6.7 million. This was primarily due to the COVID-19 closures, which effected a longer closure during the period than during the comparable prior period.

	●	Virtual Sports revenue decreased by $2.2 million, or 14.5%. This decrease included a $2.9 million decrease in retail revenue primarily as a result of the COVID-19 closures, particularly in the first quarter of 2021. This was partially offset by growth in Online Virtuals of $0.6 million.

	●	Interactive revenue increased by $4.3 million, or 78.2%. This growth was driven by the addition of new customers and territories and the consistent launch of new high-quality content

●

Leisure revenue decreased by $7.0 million, comprised of a decrease in Service revenue of $6.7 million and a decrease in Product sales of $0.3 million. The decline in revenue was due to the impact of the COVID-19 closures, as venues were closed during a longer portion of the period than in the prior comparable period.

SBG service revenue decreased by $20.2 million on a reported basis, and adverse currency movements accounted for $0.2 million of the decrease. On a functional currency at constant rate basis, SBG service revenue decreased by $20.0 million, or 53.7%, to $17.0 million. The major driver for the decrease was the impact of COVID-19.

SBG hardware revenue decreased by $0.3 million to $3.7 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was $0.2 million with adverse currency movements accounting for decreased revenue of $0.1 million.

Virtual Sports reported revenue decreased by $0.4 million, or 2.0%, on a reported basis. This decrease includes the impact of adverse currency movements of $0.5 million. On a functional currency at constant rate basis, Virtual Sports revenue increased by $0.1 million, or 0.8%. This increase included a $4.6 million decline in retail recurring revenue from the COVID-19 national shutdowns. Declines were offset by growth in Scheduled Online Virtuals of $2.8 million and Interactive of $1.7 million.

Acquired Businesses revenue accounted for $23.2 million in service revenue and $6.0 million in hardware revenue. $9.7 million was generated from UK Pub gaming machines and other rental products, including 8,483 Category C gaming machines. An additional $1.9 million in revenue was generated through the UK leisure parks business, with $5.8 million generated from machine rentals to UK motorway services and adult gaming centers. $2.1 million was generated from online gaming and $1.8 million from self-service betting terminals.

Cost of sales, excluding depreciation and amortization

Cost of sales, excluding depreciation and amortization, ~~increased~~decreased by ~~$3.7~~$1.5 million, or ~~27.5%~~8.4%, ~~to $17.0 million~~ on a reported basis, to $16.0 million, including the impact of ~~$0.4~~$1.4 million from ~~favorable~~unfavorable currency movements. Of this decrease, $0.8 million was attributable to cost of Service and $0.6 million was attributable to cost of Product sales. On a functional currency (at constant rate) basis, cost of sales decreased by $2.8 million, or 16.2%, reflecting the revenue reductions resulting from the COVID-19 closures.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses remained unchanged from the prior year on a reported basis at $38.9 million. This included $3.4 million of unfavorable currency movements. On a functional currency at(at constant rate ~~basis, cost of sales increased~~basis), SG&A decreased by ~~$4.0~~$3.7 million, or ~~30.2%~~9.3%.

~~Of this increase, $8.8 million was attributable the Acquired Businesses, comprised of $3.6 million in service costs and $5.2 million in hardware costs.~~ This ~~was offset by a $4.8 million~~ decrease ~~in SBG costs of sales due to reduced consumable usage in line with reduced machine estate due to Triennial and COVID-19 impacts.~~

~~Selling, general and administrative expenses~~

SG&A expenses increased by $12.2 million, or 44.2%, on a reported basis, to $39.7 million. This included $0.7 million of favorable currency movements. On a functional currency at constant rate basis, SG&A increased by $12.8 million, or 46.5%. The reported increase was driven primarily by ~~incremental SG&A expenses of $20.5 million from the Acquired Businesses, offset by a $6.1 million decrease in selling, general~~permanent synergy and ~~administrative expenses in SBG and Virtual Sports, due to staff furloughs attributable to the COVID-19 pandemic.~~other savings.

Stock-based compensation

During the six months ended June 30, 2021, the Company recorded an expense of $4.8 million with respect to outstanding awards. Of this expense, $1.9 million related to awards made under the 2021 Plan (including $1.4 million of upfront recognition) and $2.9 million related to awards made under the 2018 Plan. During the six months ended June 30, 2020, the ~~Company recorded an expense of~~charge for stock-based compensation was $2.0 ~~million with respect to outstanding awards.~~million. Of this expense, $1.8 million related to awards made under the 2018 Plan and $0.2 million related to costs from awards made under ~~the~~a 2016 Long Term Incentive Plan and $1.8 million from awards made under the 2018 Plan. The entirety of this cost related to recurring costs. During the six months ended June 30, 2019, the charge for stock-based compensation was $4.4 million. Of this expense, $3.0 million related to costs from awards made under the 2016 Long Term Incentive Plan and $1.4 million from awards made under the 2018 Plan with some of the 2018 Plan awards impacted by movements in the stock price between the award granting date and May 14, 2019, the date the scheme was formally approved by stockholders. Following approval, the cost was no longer impacted by stock price movements being charged by the same method as all other award plans.long term incentive plan.

Acquisition and integration related transaction expenses

Acquisition and integration related transaction expenses ~~increased~~decreased by ~~$2.8~~$2.9 million to ~~$4.4~~$1.5 million on a reported basis. ~~The entirety of~~Both the ~~2020~~2021 and ~~2019 period~~2020 expenses were ~~related to work~~primarily integration costs in ~~respect of potential acquisitions with the 2019 expenses relating~~relation to the acquisition and third party integration fees linked exclusively to the acquisition and integration of Novomatic UK’s Gaming Technology Group and the 2020 expenses relating to the group reorganization and integration costs following theNTG acquisition.

Depreciation and amortization

Depreciation and amortization ~~increased~~decreased by ~~$7.1~~$0.9 million, or ~~37.9%~~3.5%, to ~~$25.9~~$25.0 million on a reported basis. This included the impact of ~~favorable~~unfavorable currency movements of ~~$0.8 million.~~

On a functional currency at constant rate basis, depreciation and amortization increased by $7.9 million, or 41.9%. This increase was driven by incremental depreciation and amortization of $10.4 million from the Acquired Businesses. This was partially offset by a $2.8 million decrease of depreciation and amortization in SBG and Virtual Sports, due primarily to UK and Italy machine estates reaching full depreciation status.

~~Net operating loss~~

~~During the period on a reported basis, net operating loss increased by $15.8 million from a loss of $5.2 million to a loss of $21.1~~$2.3 million. On a functional currency at(at constant ~~rate~~rate) basis, depreciation and amortization decreased by $3.2 million, or 12.4%, driven primarily by a decrease of $3.2 million in Gaming due to certain assets being fully written down.

Net operating loss

During the period, net operating loss was $21.9 million compared to a net operating loss of $21.1 million in the prior period. The increase of $0.8 million in operating loss on a reported basis was attributable to a $2.2 million unfavorable impact from foreign currency translation. On a functional currency (at constant rate) basis, net operating loss improved by $1.5 million, or 6.8%. This was attributable to the cost savings across our Gaming, Virtual Sports and Leisure segments as well as the decrease in acquisition and integration related transaction expenses. This was partly offset by the decrease of revenue driven by the COVID-19 closures.

Interest expense

Net interest expense increased by $16.6 million mainly due to the impact of shutdowns related to COVID-19, increased SG&A expenses attributable to the Acquired Businesses, as well as a $0.8 million adverse currency movement, partly offset by higher revenues attributable to the Acquired Businesses.

~~Interest expense~~

Interest expense increased by $5.4 million in the period, to $13.9 million, on a reported basis. Of this variance $0.4 million was due to an adverse currency movement. On a functional currency at a constant rate basis, interest expense was $5.8 million (68.3%) higher than the prior year due to increases of $4.7 million of cash interest due to a higher debt balance amount after the acquisition of Novomatic UK’s Gaming Technology Group in October 2019, $0.7 million being the corresponding increase in the amortization of debt fees, $1.0 million relating to fees incurred for the debt restructure and $0.5 million due to a higher revolver draw as a result of the COVID-19 pandemic. These were partly offset by higher levels of interest receivable of $0.5 million.

~~Change in fair value of earnout liability~~

~~Due solely to changes in the share price ($6.51 at March 25, 2019 and $4.80 at December 31, 2018) the charge~~ in the six months ended June 30, ~~2019 from~~2021, to $30.8 million, on a ~~change~~reported basis, due to a $14.4 million write-off of capitalized debt fees on refinancing, a $2.1 million increase in ~~the~~debt interest due to capitalization of debt interest in 2020 increasing debt levels and debt margin and $0.9 million exchange rate impact.

Change in fair value of ~~earnout~~warrant liability ~~was $2.3 million. On March 25, 2019, the shares relating to the earnout~~

Change in fair value of warrant liability ~~were issued. There were no such liabilities in~~for the six months ended June 30, ~~2020.~~

~~Change~~2021, resulted in ~~fair~~a $13.5 million charge. This charge reflects the increase in the value of ~~derivative liability~~

~~Following~~ the ~~termination of the cross-currency swaps on October 1, 2019, there was no change~~warrants, driven by increases in the ~~fair values of derivative liabilities in~~Company’s share price from $6.58 on December 31^st, 2020 to $12.75 on June 30^th, 2021.For the six months ended June 30, ~~2020. For the six months ended June 30, 2019,~~2020, the change in fair value ~~of derivative liability was~~resulted in a ~~$0.1~~$5.9 million ~~charge.~~credit.

Other finance income

Other finance income for the six months ended June 30, ~~2020 was~~2021, resulted in a ~~charge of $6.2~~$5.2 million credit compared to a ~~$0.3~~$6.2 million ~~credit~~charge in the six months ended June 30, ~~2019.~~2020. This variance was ~~primarily due to an adverse foreign exchange impact of $6.2 million in retranslating the debt balance and a $0.2 million gain~~driven by movements in the ~~six months ended June 30, 2019 from~~retranslation with respect to the ~~GBP:USD cross-currency swap which was terminated on October 1, 2019.~~principal balance of the senior debt facilities.

Income tax expense

Our effective tax rate for the period ended June 30, 2021, was (0.6%) and our effective tax rate for the period ended June 30, 2020, was ~~0.7% and our effective tax rate for the period ended March 31, 2019 was 0.0%~~0.8%.

Net loss

During the period, net loss was $60.5 million compared to a net loss of $36.0 million in the prior period. On a ~~reported~~functional currency (at constant rate) basis, net loss increased by ~~$26.1~~$18.6 million, ~~from a loss of $15.7 million to a loss of $41.9 million in the six months ended June 30, 2020. On a functional currency at constant rate basis, net loss increased by $27.6 million, mainly~~primarily due to the ~~impact of the Triennial Implementation and the shutdowns associated with COVID-19, as well as increases~~decline in ~~operating expenses attributable to the Acquired Businesses, in addition to increases~~revenue, increase in interest expense and ~~other finance costs, offset by a reduction~~the increase in ~~earnout~~change in fair value of warrant liability.

Six Months ended June 30, ~~2020~~2021, compared to Six Months ended June 30, ~~2019~~2020 – ~~Server Based~~ Gaming Segment

Revenue growth for our SBG business is principally driven by the number of operator customers we have, the number of SBG machines in operation, the net win performance of the machines and the net win percentage that we receive pursuant to our contracts with our customers.

~~SBG~~Gaming Segment, Key Performance Indicators

For the Six-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
SBG 2020 2019 2020 vs 2019
%
End of period installed base (# of terminals) 32,972 35,077 (2,105 ) (6.0 )%
Average installed base (# of terminals) 32,971 35.099 (2,128 ) (6.1 )%
Customer Gross Win per unit per day (1) £ 37.97 £ 88.61 £ (50.64 ) (57.1 )%
Customer Net Win per unit per day (1) £ 28.17 £ 62.36 £ (34.18 ) (54.8 )%
Inspired Blended Participation Rate 6.1 % 6.2 % (0.1 )%

	For the Six-Month Period ended						Variance
	Unaudited Jun 30,			Unaudited Jun 30,			2021 vs 2020
Gaming	2021			2020						%

End of period installed base (# of terminals)		32,203			32,325			(122	)		(0.4	)%
Total Gaming - Average installed base (# of terminals)		31,688			32,218			(530	)		(1.6	)%
Participation - Average installed base (# of terminals)		29,372			30,387			(1,015	)		(3.3	)%
Fixed Rental - Average installed base (# of terminals)		2,316			1,831			485			26.5	%
Service Only - Average installed base (# of terminals)		21,626			20,607			1,020			4.9	%
Customer Gross Win per unit per day ^{(1) (2)}	£	23.9		£	38.3		£	(14.4	)		(37.6	)%
Customer Net Win per unit per day ^{(1) (2)}	£	18.5		£	28.2		£	(9.7	)		(34.3	)%
Inspired Blended Participation Rate		6.0	%		6.6	%		(0.5	)%		(8.3	)%
Inspired Fixed Rental Revenue per Gaming Machine per week	£	9.7		£	21.2		£	(11.5	)		(54.4	)%
Inspired Service Rental Revenue per Gaming Machine per week	£	2.4		£	2.5		£	(0.0	)		(1.8	)%
Gaming Long term license amortization (£’m)	£	2.5		£	2.5		£	0.0			0.8	%
Number of Machine sales		878			1,198			(320	)		(26.7	)%
Average selling price per terminal	£	6,270		£	4,375		£	1,895			43.3	%

(1) Includes all SBG terminals in which the company takes a participation revenue share across all territories

(1)	~~(1)~~	Includes all ~~SBG~~Gaming terminals in which the company takes a participation revenue share across all territories
(2)	Includes all days of the period, including the days during which the Gaming terminals were not operating due to COVID-19 closures.

~~SBG Segment, key events that affected results~~Please refer to our Annual Report on Form 10-K for the ~~Six Months~~year ended ~~June 30,~~December 31, 2020,

~~During the period Customer Gross Win per unit per day~~ for definitions of terms used in the total UK market (including non-LBO markets) decreased by 50.0%. This was due to both the Triennial Implementation outcome in the UK and COVID-19 impact, with retail venues closing from March 21, 2020 through to June 15, 2020, with over 80% of venues reopened at June 30, 2020.above table.

During the period, an additional 94 SSBTs (Self Service Betting Terminals) were sold and deployed in the UK LBO market. These are part of a confirmed 170 terminal order due to be completed in July and August 2020 now that retail venues have reopened. In addition to hardware sale margin, these terminals also generate a recurring service fee.

~~During the period, new market sales continued in North America, which we entered in December 2019. Hardware sales of a further 161 “Valor” terminals were sold to multiple customers in Illinois.~~

In Italy, Customer Net Win per unit per day decreased by 77.1% (in EUR), due to the closure of retail venues due to COVID-19 from March 9, 2020 through to June 15, 2020, when 50% of venues reopened, as well as an increase in the average revenue tax of 0.9% from 8.4% in 2019 to 9.3% in 2020, and the impact of card reader implementation on January 1, 2020.

Greece Customer Gross Win per unit per day (in EUR) decreased by 73.2%, due solely to the closure of retail venues as a result of COVID-19, from March 14 through to June 8, 2020 when all venues reopened.

Customer Gross Win per unit per day (in our functional currency, GBP) decreased by £51 or 57.1% across the entire estate, driven mainly by the impact of COVID-19 with the mandated shutdown of retail venues during March, April, May and part of June 2020. The overall decrease was further effected by the reduction in maximum permitted bets on B2 gaming machines in the UK in accordance with the Triennial Implementation, These impacts, along with the reduced tax in the UK LBO market post Triennial, partly offset by a 0.9% average increase in the Italy tax rate, resulted in a Net Win per unit per day decrease on total SBG of £34 or 54.8%. Our blended participation rate reduced by 0.1% to 6.1%.

~~SBG Segment, Six Months ended June 30, 2020 compared to Six Months ended June 30, 2019~~

~~Server Based~~ Gaming

~~SBG Segment Revenue~~

During the period, revenue decreased by $20.5 million, to $20.7 million, on a reported basis. A small part of this decrease was due to adverse currency movements of $0.3 million. On a functional currency at constant rate basis, SBG revenue decreased by $20.2 million, or 49.0%.

The major driver for the decrease was the impact of COVID-19. Retail shop closures during the period of March 2020 through to June 2020 drove a reduction in service revenue of $14.3 million, with revenue by region decreasing $10.0 million in the UK, $2.3 million in Greece and $1.9 million in Italy. Further declines came from the UK LBO market with $4.4 million as a result of the Triennial Implementation, increased Italy taxes of $0.4 million, the adverse impact of the introduction in Italy of player cards of $0.5 million, 2019 one-off Italy sales of $0.4 million and intercompany UK other revenue of $0.6 million. These negative impacts were partly offset by growth in the Greek market of $0.8 million because of the continued rollout of contracted VLTs.

UK LBO Customer Gross Win per unit per day decreased by approximately 50.0%. The impact of COVID-19 and the shutdown of retail venues between March and June 2020 accounted for 46.5% of the decline, the remaining 3.5% stems from the Triennial Implementation, a negative position in the first quarter 2020 due to the April 1, 2019 implementation from and a recovery in the second quarter due to content releases and closure of low performing venues.

Hardware revenue decreased by $0.3 million to $3.7 million on a reported basis. On a functional currency at constant rate basis, the revenue decrease was $0.2 million with adverse currency movements accounting for decreased revenue of $0.1 million.

~~SBG Segment Operating Income~~

~~Cost of sales (excluding depreciation and amortization) decreased by $4.7 million, or 41.4%, to $6.7 million, on a reported basis. There was de minimi~~s ~~impact from currency movements.~~

Service cost of sales decreased by $4.1 million on both a reported and functional currency basis. This reduction was due mainly to the impact of retail venue closures due to COVID-19. UK LBO retail shops accounted for $2.2 million with significant savings on consumable and 3^rd party content costs, a further $1.2 million came from Greece and $0.4 million from Italy for the same reasons. The remaining $0.4 million decrease was mainly from lower consumables spend during the three months ended March 31, 2020 on the UK LBO estate due to the Triennial Implementation.

Hardware cost of sales decreased by $0.6 million to $2.1 million on a reported basis. On a functional currency at constant rate basis, hardware cost of sales decreased by $0.5 million with some small favorable currency movements.

SBG SG&A expense declined by $5.6 million, reflecting significant staff furloughs due to COVID-19, ongoing restructuring and synergies associated with the acquisition of the Acquired Businesses. Of this reduction, $1.8 million was attributable to furloughs related to the COVID-19 pandemic and $1.9 million was related to other staff savings.

Depreciation and amortization declined by $2.7 million or 18.1%, on a reported basis. On a functional currency basis, depreciation declined by $2.4 million, reflecting $0.3 million in favorable currency impact. The decrease in depreciation expense was due to the machines in the UK estate becoming fully depreciated, offset by additional depreciation from new machines in the Greek estate.

Operating income declined by $6.8 million, declining from a $1.4 million reported operating profit to a $5.5 million operating loss year over year, as the decline in revenue related to COVID-19 was only partially offset by the declines in cost of sales, SG&A, and depreciation.

~~SBG~~ Segment, Recurring Revenue

Set forth below is a breakdown of our ~~SBG~~Gaming recurring revenue. ~~SBG~~Gaming recurring revenue consists principally of ~~SBG~~Gaming participation revenue and fixed rental revenue.

	For the Six-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Gaming Recurring Revenue
Total Gaming Revenue	£	19.4		£	22.8		£	(3.4	)		(14.9	)%

Gaming Participation Revenue	£	6.2		£	10.3		£	(4.1	)		(39.8	)%
Gaming Other Fixed Fee Recurring Revenue	£	1.8		£	2.8		£	(0.9	)		(34.1	)%
Gaming Long-term license amortization	£	2.5		£	2.5		£	0.0			0.5	%
Total Gaming Recurring Revenue *	£	10.5		£	15.5		£	(5.0	)		(32.2	)%
Gaming Recurring Revenue as a % of Total Gaming Revenue †		54.2	%		68.1	%		(13.8	)%

Total Gaming excluding VAT	£	17.1
Gaming Recurring Revenue as a % of Total Gaming Revenue (excluding VAT)		61.5	%

*	Does not reflect VAT-related revenue
†	Total Gaming Revenue for the six-month period ended June 30, 2021, includes the £2.3 million for VAT-related revenue, which is not reflected in Gaming Recurring Revenue for that period. Excluding VAT-related revenue, Gaming Recurring Revenue was 61.5% of Total Gaming Revenue for such period.

For the Six-Month
Period ended
Unaudited Unaudited
June 30, June 30, Variance
(In £ millions) 2020 2019 2020 vs 2019 %
SBG Recurring Revenue
Total SBG Revenue £ 16.2 £ 31.7 £ (15.6 ) (49.0 )%
SBG Participation Revenue £ 10.3 £ 24.6 £ (14.3 ) (58.2 )%
SBG Other Fixed Fee Recurring Revenue £ 0.2 £ 0.7 £ (0.4 ) (67.4 )%
Total SBG Recurring Revenue £ 10.5 £ 25.2 £ (14.7 ) (58.4 )%
SBG Recurring Revenue as a % of Total SBG Revenue 64.8 % 79.4 % (14.6 )%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of terms used in the above table.

~~SBG~~

Gaming Segment, Service Revenue by Region

Set forth below is a breakdown of our ~~SBG~~Gaming service revenue by geographic region. ~~SBG~~Gaming service revenue consists principally of ~~SBG~~Gaming participation revenue, Gaming other fixed fee revenue, Gaming long term license amortization and Gaming other non-recurring revenue. See “Gaming Segment Revenue” below for a discussion of gaming service revenue between the periods under review.

~~Server Based~~ Gaming Service Revenue by Region

	For the Six-Month Period ended				Variance					Variance									For the Six-Month Period ended
(In millions)	Unaudited June 30, 2020		Unaudited June 30, 2019		2020 vs 2019					Functional Currency at Constant rate			Functional Currency			Currency Movement			Unaudited June 30, 2021		Unaudited June 30, 2020		Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue:
UK LBO	$	8.4	$	21.9	$	(13.5	)	(61.6	)%	$	(13.4	)		(61.2	)%	$	(0.1	)	$	8.8	$	8.8	$	0.0			(8.5	)%		0.0	%
UK VAT - Related Income																				3.1		-	$	3.1			N/A			N/A
UK Other	$	1.0	$	2.6		(1.6	)	(61.6	)%		(1.6	)		(61.4	)%		(0.0	)		1.4	$	4.3		(2.9	)		(70.8	)%		(68.2	)%
Italy	$	0.9	$	4.3		(3.4	)	(78.0	)%		(3.4	)		(77.9	)%		(0.0	)		0.3	$	0.9		(0.6	)		(70.6	)%		(68.1	)%
Greece	$	6.5	$	8.0		(1.5	)	(19.1	)%		(1.4	)		(17.7	)%		(0.1	)		4.8	$	6.5		(1.6	)		(31.9	)%		(25.4	)%
Rest of the World	$	0.2	$	0.4		(0.2	)	(54.1	)%		(0.2	)		(53.0	)%		(0.0	)		0.0	$	0.2		(0.2	)		(89.9	)%		(88.3	)%
Total service revenue	$	17.0	$	37.2	$	(20.2	)	(54.3	)%	$	(20.0	)		(53.7	)%	$	(0.2	)

Total Service revenue																			$	18.4	$	20.7	$	(2.3	)		(18.3	)%		(11.1	)%

Exchange Rate - $ to £		1.28		1.29																1.39		1.28

Gaming Segment, key events that affected results for the Six Months ended June 30, 2021

Total Gaming Customer Gross Win per unit per day (in our functional currency, GBP) decreased by £14.39, or 37.6%, which was due to the impact of COVID-19. During the six month period ended June 30, retail venues were in operation for approximately 35% in 2021, compared to approximately 50% in 2020. The participation rate decreased from 6.6% to 6.0% primarily due to a higher proportion of UK venues operating in 2021 when compared to the same quarter in 2020 as UK share terms are lower than the total blended Gaming average.

Inspired received VAT-related revenue of $3.1 million in January 2021 from a major UK customer. This payment has been recorded as revenue in our results.

During the period, Inspired sold 111 “Valor™” terminals to a number of customers in Illinois, increasing the total number of North American unit sales since launch in December 2019 to 540. Retail venues in Illinois were shut down during January 2021, which negatively impacted sales during this period. As of February 2021, all eleven regions in Illinois had reopened.

During the period, Inspired delivered our first sales to Western Canada Lottery Corporation (“WCLC”), our second jurisdiction in North America. Inspired recorded the sale of 100 “Valor™” terminals to WCLC during March 2021, generating revenue of $1.6 million.

Inspired furthered its relationship with a major customer in the Dutch market with the sale and delivery of an additional 222 “Analogue” terminals during the period.

In the UK market, Inspired continued to upgrade the UK Gaming estate with the installation of over 220 “Flex” and 140 “Prismatic” terminals through a combination of outright sales and lease agreements. These sales also include content agreements which deliver recurring revenues for the next four to five years.

~~Virtual Sports Segment~~, Six Months ended June 30, ~~2020~~2021, compared to Six Months ended June 30, ~~2019~~2020 – Gaming Segment

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	18.4		$	20.7		$	(2.3	)		(18.3	)%		(11.1	)%
Product		8.6			8.4			0.1			(6.6	)%		1.7	%
Total revenue		27.0			29.1			(2.2	)		(14.9	)%		(7.4	)%

Cost of Sales, excluding depreciation and amortization:
Cost of Service		(4.2	)		(5.3	)		1.0			(26.7	)%		(20.0	)%
Cost of Product		(5.3	)		(5.6	)		0.3			(13.3	)%		(5.1	)%
Total cost of sales		(9.5	)		(10.9	)		1.3			(19.7	)%		(12.3	)%

Selling, general and administrative expenses		(10.8	)		(11.9	)		1.1			(17.2	)%		(9.5	)%

Stock-based compensation		(0.6	)		(0.2	)		(0.4	)		60.1	%		172.7	%

Depreciation and amortization		(12.4	)		(14.4	)		2.0			(22.0	)%		(13.9	)%

Net operating Income (Loss)	$	(6.3	)	$	(8.3	)	$	1.9			(33.4	)%		(23.5	)%

Exchange Rate - $ to £		1.39			1.28

Gaming Segment Revenue

During the period, Gaming revenue decreased by $2.2 million, or 7.4%, to $27.0 million on a reported basis. On a functional currency (at constant rate) basis, Gaming revenue decreased by $4.3 million, or 14.9%. This was partially offset by favorable currency movements of $2.2 million.

Service revenue decreased by $2.3 million on a reported basis. On a functional currency (at constant rate) basis, Gaming Service revenue decreased by $3.8 million, or 18.3%, to $18.4 million. This was driven by a decline in UK sales (including LBO and UK other) of $3.8 million primarily driven by the COVID-19 closures, with UK LBO having an additional three weeks of lockdown and a further four weeks at 50% capacity versus the prior period and UK other being closed for an additional two months in the current period. Greece and Italy experienced revenue declines of $2.1 million and $0.7 million, respectively, driven by the COVID-19 closures as both markets experienced additional three months of additional lockdowns compared to the prior period. This was partially offset by $2.9 million of VAT-related revenue and favorable currency movements of $1.5 million.

Product revenue increased by $0.1 million to $8.6 million on a reported basis. On a functional currency (at constant rate) basis, revenue decreased by $0.6 million, or 6.6%.

Gaming Segment Operating Income

Operating loss improved by $1.9 million on a reported basis, from a loss of $8.3 million to a loss of $6.3 million, including unfavorable currency movements of $0.9 million On a functional currency (at constant rate) basis, Gaming operating loss improved by $2.9 million. This was primarily due to the decrease in revenue, cost of sales, SG&A expenses driven by the COVID-19 closures, as well as a reduction in depreciation particularly in UK LBO as certain assets have been fully written down.

Six Months ended June 30, 2021, compared to Six Months ended June 30, 2020 – Virtual Sports Segment

Virtual Sports Segment, Key Performance Indicators

For the Six-Month
Period ended Variance
Virtuals
Unaudited
June 30,
2020

Unaudited
June 30,
2019
2020 vs 2019
%
No. of Live Customers at the end of the period 125 105 20 19.0 %
Average No. of Live Customers 121 102 19 18.9 %
Total Revenue (£‘m) £ 15.0 £ 14.9 £ 0.1 0.8 %

Total Virtual Sports Recurring Revenue (£‘m) £ 13.5 £ 13.6 £ (0.1 ) (0.8 )%
Total Revenue £‘m - Retail £ 4.3 £ 8.2 £ (3.8 ) (47.1 )%
Total Revenue £‘m - Scheduled Online Virtuals £ 7.9 £ 5.3 £ 2.6 48.3 %
Total Revenue £‘m - Interactive £ 2.8 £ 1.4 £ 1.4 101.5 %
Average Revenue Per Customer per day (£) £ 679 £ 797 £ (118 ) (14.8 )%

	For the Six-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Virtuals	2021		2020					%

No. of Live Customers at the end of the period		60		57		3			5.3	%
Average No. of Live Customers		59		57		2			3.8	%
Total Revenue (£’m)	£	10.4	£	12.2	£	(1.8	)		(14.5	)%
Total Revenue £’m - Retail	£	2.1	£	4.3	£	(2.2	)		(51.3	)%
Total Revenue £’m - Online Virtuals	£	8.3	£	7.9	£	0.4			5.7	%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of terms used in the above table.

Virtual Sports Segment, Recurring Revenue

For the Six-Month
Period ended Variance
Unaudited Unaudited
(In £ millions)
June 30,
2020

June 30,
2019
2020 vs 2019
%
Virtual Sports Recurring Revenue

Total Virtual Sports Revenue £ 15.0 £ 14.9 £ 0.1 0.8 %

Recurring Revenue - Retail Virtuals £ 3.7 £ 7.4 £ (3.7 ) (50.3 )%
Recurring Revenue - Scheduled Online Virtuals £ 7.1 £ 4.8 £ 2.3 47.0 %
Recurring Revenue - Interactive £ 2.7 £ 1.3 £ 1.4 103.1 %
Total Virtual Sports Recurring Revenue £ 13.5 £ 13.6 £ (0.1 ) (8.6 )%
Virtual Sports Recurring Revenue as a Percentage of Total 89.8 % 91.3 % (1.4 )%
Virtual Sports Revenue

~~For~~Set forth below is a breakdown of our Virtual Sports recurring revenue.

	For the Six-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Virtual Sports Recurring Revenue
Total Virtual Sports Revenue	£	10.4		£	12.2		£	(1.8	)		(14.5	)%

Recurring Revenue - Retail Virtuals	£	1.9		£	3.7		£	(1.8	)		(48.0	)%
Recurring Revenue - Online Virtuals	£	8.1		£	7.1		£	1.0			14.5	%
Total Virtual Sports Long-term license amortization	£	0.3		£	0.7		£	(0.3	)		(50.9	)%
Total Virtual Sports Recurring Revenue	£	10.4		£	11.4		£	(1.1	)		(9.3	)%
Virtual Sports Recurring Revenue as a Percentage of Total Virtual Sports Revenue		99.4	%		93.7	%		5.7	%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of ~~the~~ terms used in the ~~table~~ above ~~see the definitions provided above.~~table.

Virtual Sports Segment, key events that affected results for the Six Months ended June 30, ~~2020~~2021

~~The~~During the six months ended June 30, 2021, our key retail territories in the United Kingdom, Ireland, Italy, Greece, and Belgium were in full lockdown due to the COVID-19 ~~pandemic significantly~~closures for the first quarter, with Greece reopening mid-April, the UK and Ireland opening mid-May and a staged reopening in Italy throughout June. In the same period in the prior year only half of March 2020 was impacted by land-based closures in the first quarter with Greece and Italy reopening in June 2020. All periods were affected by closures during the six months ended June 30, 2021 whereas only three and a half months were affected during the six months ended June 30, 2020. In addition, the six months ended June 30, 2021 was in recovery from the previous lockdown period. As a result, retail recurring revenues ~~partially during the first quarter of 2020 and for the entirety of the second quarter of 2020. As a result, Retail Virtuals recurring revenues have~~ declined by ~~$4.6 million but partially offset by growth in both Scheduled Online Virtuals and Interactive revenues of $4.5 million~~ $2.4 million.

~~Bet365 launched with two streams of our new V-Play Basketball product and an additional stream of V-Play Cricket, both have proven to be very successful.~~

The Interactive division launched with fifteen new customers including 888, BCLC, Resorts Casino New Jersey, Harrah’s New Jersey, Casumo, Lottoland and Boylesports during the period and added the strong Sky Vegas brand to its portfolio in addition to Sky Bingo. There were also major new content releases, including Reel King Megaways^TM ~~and Centurion Megaways~~^TM~~. Both titles have seen strong performance since launch.~~

~~The Average Number of Live Customers during the period increased by nine, from 102 to 121. Our Average Number of Live Interactive Customers for the period increased to 67.~~

Our average revenue per customer declined during the quarter primarily due to the timing of the addition of several Interactive customers that have not reached their revenue potential during the period.

~~Virtual Sports Segment,~~ Six Months ended June 30, ~~2020~~2021, compared to Six Months ended June 30, ~~2019~~2020 – Virtual Sports Segment

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue	$	14.5		$	15.4		$	0.9	)		(14.5	)%		(5.7	)%

Cost of Service		(0.8	)		(1.5	)		0.7			(51.6	)%		(46.6	)%

Selling, general and administrative expenses		(3.8	)		(1.9	)		(1.9	)		71.4	%		98.2	%

Stock-based compensation		(0.2	)		(0.2	)		-			45.0	%		0.0	%

Depreciation and amortization		(1.8	)		(1.7	)		(0.1	)		0.5	%		5.9	%

Net operating Income (Loss)	$	7.9		$	10.1		$	(2.2	)		(29.1	)%		(21.4	)%

Exchange Rate - $ to £		1.39			1.26

Virtual Sports For the Six-Month
Period ended Variance Variance
(In millions)
Unaudited
June 30,
2020

Unaudited
June 30,
2019
2020 vs 2019 Functional
Currency at
Constant rate Functional
Currency Currency
Movement
Service Revenue $ 18.8 $ 19.2 $ (0.4 ) (2.0 )% $ 0.1 0.8 % $ (0.5 )
Cost of Service (2.1 ) (1.9 ) (0.2 ) 11.4 % (0.3 ) 14.5 % 0.1
Selling, general and administrative expenses (2.8 ) (4.3 ) 1.5 (34.7 )% 1.4 (33.3 )% 0.1
Stock-based compensation (0.2 ) (0.6 ) 0.4 (67.3 )% 0.5 (68.5 )% (0.0 )
Depreciation and amortization (2.8 ) (2.9 ) 0.1 (2.3 )% (0.0 ) 0.5 % 0.1
Net operating Income (Loss) $ 10.9 $ 9.5 $ 1.4 14.8 % $ 1.8 18.9 % $ (0.4 )
Exchange Rate - $ to £ 1.26 1.29

Virtual Sports Segment revenue.In

During the period, revenue decreased by ~~$0.4~~$0.9 million, or ~~2.0%~~5.7%, on a reported basis. This decrease ~~includes the impact of adverse currency movements of $0.5 million. On a functional currency at constant rate basis, Virtual Sports revenue increased by $0.1 million, or 0.8%. This decrease~~ included ~~a $4.6 million decline in retail recurring revenue from the COVID-19 national shutdowns. Declines were offset by growth in Scheduled Online Virtuals of $2.8 million and Interactive of $1.7 million.~~

~~Virtual Sports Segment operating income.~~ ~~Cost of service increased by $0.2 million to $2.1 million, on a reported basis. This increase includes~~ the impact of favorable currency movements of ~~$0.1 million.~~

~~SG&A expenses decreased by $1.5 million on a reported basis. This decrease includes the impact of adverse currency movements of $0.1~~$1.4 million. On a functional currency at(at constant ~~rate~~rate) basis, ~~SG&A~~revenue decreased by ~~$1.4~~$2.2 million, or 14.5%. This decrease was driven by ~~staff-related cost savings~~a $2.9 million decrease in retail revenue due to the COVID-19 closures and a decline of ~~$1.0~~$0.5 million from historical license fee amortization contracts reaching their expiration. This decline was partially offset by growth in recurring Online Virtuals of $1.4 million. Online revenues continue to be significantly higher than pre Covid levels.

~~Depreciation and amortization decreased by $0.1 million, to $2.8 million, on a reported basis. There was de minimis impact from currency movements.~~Virtual Sports Segment operating income

Operating profit decreased by ~~$1.4 million to $10.9~~$2.2 million on a reported basis which included anthe impact of ~~$0.4 million from adverse~~favorable currency ~~movements.~~movements of $0.8 million. On a functional currency at(at constant ~~rate~~rate) basis ~~this represented an increase of $1.8 million, or 18.9%.~~operating profit decreased by $3.0 million. This was primarily due to ~~lower~~the decrease in revenues and cost of sales resulting from COVID-19 closures and the increase in SG&A ~~expenses.~~from the settlement with the Italian Tax Authorities.

Six Months ended June 30, 2021, compared to Six Months ended June 30, 2020 – Interactive Segment

Interactive Segment, Key Performance Indicators

	For the Six-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Interactive	2021		2020				%

No. of Live Customers at the end of the period		100		70		30		42.9	%
Average No. of Live Customers		96		67		29		43.3	%
No. of Live Games at the end of the period		218		189		29		15.3	%
Average No. of Live Games		211		186		25		13.4	%
Total Revenue (£’m)	£	7.9	£	4.4	£	3.5		78.2	%

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of terms used in the above table.

Interactive Segment, Recurring Revenue

	For the Six-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Interactive Recurring Revenue
Total Interactive Revenue	£	7.9		£	4.4		£	3.5			78.2	%

Total Recurring Revenue - Interactive	£	7.9		£	4.4		£	3.5			79.2	%
Interactive Recurring Revenue as a Percentage of Total Interactive Revenue		100.0	%		99.4	%		0.6	%

~~Acquired Businesses segment,~~

Interactive Segment, key events that affected results for the Six Months ended June 30, ~~2020~~2021

There were sixteen new brand launches including BetMGM in New Jersey and Michigan, Golden Nugget in Michigan, Gamesys and Interwetten. We also launched with our first new operators in Spain, Luckia and 888.

We deployed twenty-nine new games in the period across the estate including Vegas Cash Spins, Fruity Bonanza Scatterdrops (both of which were developed with brand new game mechanics), Big Spin Bonus and Cops and Robbers Megaways.

~~Acquired Businesses segment, Key Performance Indicators~~

For the Six-Month
Period ended Variance
Unaudited
June 30, Unaudited
June 30,
Acquired Businesses 2020 2019 2020 vs 2019
%
Pub Digital Cat C Gaming Machines - Average installed base (# of terminals) 5,760 4,400 1,360 30.9 %

Inspired Pubs Revenue per Digital Cat C Gaming Machine per week £ 30.08 £ 63.30 £ (33.22 ) (52.5 )%

Pub Analogue Digital Cat C Gaming Machines - Average installed base (# of terminals) 2,714 3,924 (1,210 ) (30.8 )%

Inspired Pubs Revenue per Analogue Cat C Gaming Machine per week £ 19.10 £ 43.69 £ (24.58 ) (56.3 )%

End of Period % of Digital Cat C Gaming Machines in Pub Market 68.2 % 57.2 % 11.0 %

Total Leisure Parks Revenue (Gaming and Non Gaming) (£‘m) £ 1.5 £ 9.8 £ (8.3 ) (85.0 )%

AGC and MSA Gaming Machines - Average installed base (# of terminals)⁽¹⁾ 5,106 5,843 (737 ) (12.6 )%

Inspired AGC and MSA Revenue per Gaming Machine per week £ 26.13 £ 63.03 £ (36.90 ) (58.5 )%

⁽¹⁾

~~Adult Gaming Centers and Motorway Service Area machines~~

~~Acquired Businesses segment,~~Six Months ended June 30, 2021, compared to Six Months ended June 30, 2020 – Interactive Segment

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Service Revenue	$	11.0		$	5.5		$	5.5			78.2	%		98.5	%

Cost of Service		(1.7	)		(0.6	)		(1.1	)		141.9	%		168.1	%

Selling, general and administrative expenses		(2.3	)		(1.8	)		(0.5	)		23.7	%		28.9	%

Stock-based compensation		(0.2	)		(0.1	)		(0.1	)		103.1	%		100.0	%

Depreciation and amortization		(1.6	)		(1.2	)		(0.4	)		20.6	%		33.3	%

Net operating Income (Loss)	$	5.2		$	1.8		$	3.4			141.3	%		185.2	%

Exchange Rate - $ to £		1.39			1.25

Interactive Segment revenue

During the period, revenue increased by $5.5 million, or 98.5%, on a reported basis. On a functional currency (at constant rate) basis, revenue increased by $4.3 million, or 78.2%. This was driven by recurring revenue growth due to the increase in online demand attributable to the addition of new customers and territories and the consistent launch of quality content.

For the Six-
Acquired Business Month Period
ended
Unaudited
June 30,
(In millions) 2020
Revenue:
Service $ 23.2
Hardware 6.0
Total revenue 29.2

Cost of sales, excluding depreciation and amortization:

Cost of service (3.6 )
Cost of hardware (5.2 )
Total cost of sales (8.8 )

Selling, general and administrative expenses (20.5 )

Depreciation and amortization (10.4 )

Net operating Income (Loss) £ (10.5 )

Exchange Rate - $ to £ 1.28

Interactive Segment operating income

Operating profit increased by $3.4 million on a reported basis. On a functional currency (at constant rate) basis operating profit increased by $2.7 million. This was primarily due to the increase in revenue, partly offset by the increase in cost of sales from third party royalty costs and increase in SG&A expenses from driven by the investment in Interactive to help increase revenues.

Six Months ended June 30, 2021, compared to Six Months ended June 30, 2020 – Leisure Segment

Leisure segment, Key Performance Indicators

	For the Six-Month Period ended				Variance
	Unaudited Jun 30,		Unaudited Jun 30,		2021 vs 2020
Leisure	2021		2020					%

End of period installed base Gaming machines (# of terminals)		11,723		12,262		(539	)		(4.4	)%
Average installed base Gaming machines (# of terminals)		11,655		12,271		(617	)		(5.0	)%
End of period installed base Other (# of terminals)		7,244		8,224		(980	)		(11.9	)%
Average installed base Other (# of terminals)		7,190		8,252		(1,062	)		(12.9	)%
Pub Digital Gaming Machines - Average installed base (# of terminals)		5,848		5,759		88			1.5	%
Pub Analogue Gaming Machines - Average installed base (# of terminals)		2,234		2,714		(480	)		(17.7	)%
MSA and Bingo Gaming Machines - Average installed base (# of terminals)⁽¹⁾		3,316		3,514		(198	)		(5.6	)%
Inspired Leisure Revenue per Gaming Machine per week	£	12.2	£	26.8	£	(14.6	)		(54.5	)%
Inspired Pub Digital Revenue per Gaming Machine per week	£	13.1	£	30.1	£	(17.0	)		(56.6	)%
Inspired Pub Analogue Revenue per Gaming Machine per week	£	6.5	£	19.1	£	(12.6	)		(65.9	)%
Inspired MSA and Bingo Revenue per Gaming Machine per week	£	15.0	£	28.4	£	(13.4	)		(47.2	)%
Inspired Other Revenue per Machine per week	£	2.3	£	9.5	£	(7.1	)		(75.4	)%

Total Leisure Parks Revenue (Gaming and Non Gaming) (£’m)	£	3.3	£	0.9	£	2.4			285	%

⁽¹⁾	Motorway Service Area machines

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2020, for definitions of terms used in the above table.

Leisure Segment, Recurring Revenue

Set forth below is a breakdown of our Leisure recurring revenue which consists principally of Leisure participation revenue and Leisure other fixed fee revenue. See “Leisure Segment Revenue” below for a discussion of leisure service revenue between the periods under review.

Set forth below is a breakdown of our Leisure recurring revenue.

	For the Six-Month Period ended						Variance
	Unaudited June 30,			Unaudited June 30,			2021 vs 2020
(In £ millions)	2021			2020						%
Leisure Recurring Revenue
Total Leisure Revenue	£	8.4		£	13.8		£	(5.4	)		(39.0	)%

Total Leisure Recurring Revenue	£	7.6		£	12.8		£	(5.1	)		(40.2	)%
Leisure Recurring Revenue as a Percentage of Total Leisure Revenue		90.4	%		92.2	%		(1.8	%)

Leisure Segment, key events that affected results for the Six Months ended June 30, 2021

From Jan 1, 2021, to May 17, 2021, all major sectors of the Leisure segment (Pubs, Holiday Parks, Motorway Service Areas and Bingo Halls) remained closed due to the COVID-19 closures in the UK.

From May 17, 2021, venues reopened with social distancing and certain other restrictions imposed. These restrictions remained in place for the remainder of the period.

Six Months ended June 30, 2021, compared to Six Months ended June 30, 2020 – Leisure Segment

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2021			Unaudited June 30, 2020			Variance 2021 vs 2020			Total Functional Currency %			Total Variance %

Revenue:
Service	$	10.7		$	16.5		$	(5.7	)		(40.3	)%		(34.9	)%
Product		1.1			1.4			(0.3	)		(23.3	)%		(20.0	)%
Total revenue		11.8			17.9			(6.0	)		(39.0	)%		(33.7	)%

Cost of Sales, excluding depreciation and amortization:
Cost of Service		(3.4	)		(3.6	)		0.2			(12.5	)%		(4.4	)%
Cost of Product		(0.6	)		(0.9	)		0.4			(44.4	)%		(40.0	)%
Total cost of sales		(4.0	)		(4.5	)		0.5			(19.1	)%		(11.8	)%

Selling, general and administrative expenses		(11.4	)		(13.6	)		2.2			(24.0	)%		(16.0	)%

Stock-based compensation		(0.2	)		(0.0	)		(0.2	)		208.9	%		445.2	%

Depreciation and amortization		(8.3	)		(7.8	)		(0.5	)		(3.4	)%		7.0	%

Net operating Income (Loss)		(12.1	)		(8.0	)	$	(4.1	)		30.6	%		50.4	%

Exchange Rate - $ to £		1.40			1.29

~~Acquired Businesses~~

Leisure Segment Revenue

~~Acquired Businesses~~During the period, revenue decreased by $6.0 million, or 33.7%, to $11.8 million on a reported basis. On a functional currency (at constant rate) basis, revenue decreased by $7.0 million, or 39.0%.

Service revenue decreased by $5.7 million on a reported basis to $10.7 million. This included an adverse currency impact of $0.9 million. On a functional currency (at constant rate) basis service revenue decreased by $6.7 million. This was ~~$23.2 million for~~driven by the six months ended June 30, 2020, of which $9.7 million was generated from Pub customers for gaming machines and other rental products. Online revenue was $2.6 million for the period. The Company’s average installed base within the Pub business included 8,474 Category C gaming machines. Digital gaming machines accounted for 68.2%COVID-19 closures, with all of the ~~total Category C gaming machines at~~major sectors of the ~~end~~Leisure segment experiencing closures for a portion of the period which was an increase from 57.2% at the end of the comparable period in 2019. This represents a 30.9% increase over the prior year’s installed base of digital Category C gaming machines and reflects the continued conversion of Category C gaming machines from analog to digital in the UK Pub estate. The increase in the Company’s digital machine base was continuing to drive revenue per gaming machine per week until the shutdown of the UK market due to the COVID-19 pandemic, which led to revenues reducing to zero beginning in mid-March, resulting in a reduction in revenue per digital terminal of 52.5% for the period.

~~In addition, Acquired Businesses includes services to Leisure Parks, MSAs, AGCs and bowling alleys~~ as well as software license fees associated with one-time hardware sales. Leisure parks contributed $1.9 million in revenue, which was $10.3 million lower than the prior year, caused by the closure of all leisure parks from mid-March, as described above. Revenue from MSAs and AGCs was $5.8 million in the quarter and included 5,106 machines on a rental basis, generating an average of £26.13 per week, which was a reduction of 58.5% to the prior year.social distancing restrictions once they had reopened.

~~Acquired Businesses hardware revenue was $6.0 million and includes the sale of 963 machines as well as spare parts and repairs.~~

~~Acquired Businesses~~Leisure Segment Operating Income

~~Acquired Businesses~~Operating loss increased by $4.1 million on a reported basis from a loss of $8.0 million to a loss of $12.1 million, which included the impact of unfavorable currency movements of $1.4 million. On a functional currency (at constant rate) basis operating ~~income reflects~~loss increased by $2.6 million. This was primarily due to the decrease in revenue, offset by cost of sales ~~of $8.8 million (comprised of manufacturing costs, content royalties, spare parts, distribution costs,~~ and ~~certain gaming taxes),~~ SG&A expenses of $20.5 million including service network costs, facilities, and staffing, and depreciation and amortization of $10.4 million, reflecting capitalized game development and machine deployment levels. SG&A expenses for the period were impactedsavings all driven by ~~furloughs of all operations staff, effected to reflect the cessation of revenue from gaming operations due to the shutdown from March through June attributable to the~~ COVID-19 ~~pandemic.~~closures.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to analyze our operating performance. We use these financial measures to manage our business on a day-to-day basis. We believe that these measures are also commonly used in our industry to measure performance. For these reasons, we believe that these non-GAAP financial measures provide expanded insight into our business, in addition to standard U.S. GAAP financial measures. There are no specific rules or regulations for defining and using non-GAAP financial measures, and as a result the measures we use may not be comparable to measures used by other companies, even if they have similar labels. The presentation of non-GAAP financial information should not be considered in isolation from, or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. You should consider our non-GAAP financial measures in conjunction with our U.S. GAAP financial measures.

We define our non-GAAP financial measures as follows:

EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense.

Adjusted EBITDA is defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense, and other additional exclusions and adjustments. Such additional excluded amounts include stock-based compensation U.S. GAAP charges where the associated liability is expected to be settled in stock, and changes in the value of earnout liabilities and income and expenditure in relation to legacy portions of the business (being those portions where trading no longer occurs) including closed defined benefit pension schemes. Additional adjustments are made for items considered outside the normal course of business, including (1) restructuring costs, which include charges attributable to employee severance, management changes, restructuring, dual running costs, costs related to facility closures and integration costs, (2) merger and acquisition costs and (3) gains or losses not in the ordinary course of business. This does not include any adjustments related to COVID-19.

We believe Adjusted EBITDA, when considered along with other performance measures, is a particularly useful performance measure, because it focuses on certain operating drivers of the business, including sales growth, operating costs, selling and administrative expense and other operating income and expense. We believe Adjusted EBITDA can provide a more complete understanding of our operating results and the trends to which we are subject, and an enhanced overall understanding of our financial performance and prospects for the future. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income or loss, because it does not take into account certain aspects of our operating performance (for example, it excludes non-recurring gains and losses which are not deemed to be a normal part of underlying business activities). Our use of Adjusted EBITDA may not be comparable to the use by other companies of similarly termed measures. Management compensates for these limitations by using Adjusted EBITDA as only one of several measures for evaluating our operating performance. In addition, capital expenditures, which affect depreciation and amortization, interest expense, and income tax benefit (expense), are evaluated separately by management.

Functional Currency at Constant rate. Currency impacts ~~shown~~discussed have been calculated as the current-period average GBP: USD rate less the equivalent average rate in the prior period, multiplied by the current period amount in our functional currency (GBP). The remaining difference, referred to as functional currency at constant rate, is calculated as the difference in our functional currency, multiplied by the prior-period average GBP: USD rate, as a proxy for functional currency at constant rate movement.

Currency Movement represents the difference between the results in our reporting currency (USD) and the results on a functional currency at(at constant ~~rate~~rate) basis.

Reconciliations from net loss, as shown in our Consolidated Statements of Operations and Comprehensive Loss, to Adjusted EBITDA are shown below. ~~The 2019/2020 EBITDA comparison does not include the Acquired Businesses in the 2019 results.~~

Reconciliation to Adjusted EBITDA by segment for the Three Months ended June 30, 2021

For the Three-Month
Period ended
Unaudited Unaudited
June 30, June 30,
(In millions) 2020 2019
Net loss $ (24.5 ) $ (10.7 )

Items Relating to Discontinued Activities:
Pension charges (1) 0.2 0.1

Items outside the normal course of business:
Costs of group restructure (2) 0.3 1.1
Acquisition and integration related transaction expenses (3) 1.2 0.7
Stock-based compensation expense 1.0 2.3
Depreciation and amortization 13.3 9.1
Total other expense, net 10.5 6.1
Income tax 0.1 0.1
Adjusted EBITDA $ 2.1 $ 8.9

Adjusted EBITDA £ 1.7 £ 6.9

Exchange Rate - $ to £ (6) 1.26 1.29

	For the Three-Month Period ended
	Unaudited
(In millions)	June 30, 2021
							Virtual
	Total			Gaming			Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(43.8	)	$	(2.7	)	$	4.2	$	2.6	$	(4.4	)	$	(43.5	)

Items Relating to Legacy Activities:
Pension charges (1)		0.2													0.2

Items outside the normal course of business:
Costs of group restructure (2)		-													-
Acquisition and integration related transaction expenses (3)		0.1													0.1
Refinancing of Company Debt (4)		0.8													0.8
Italian tax related costs relating to prior years (5)		1.4						1.4							-

Stock-based compensation expense		3.4			0.4			0.1		0.1		0.1			2.7


Depreciation and amortization		11.9			5.8			0.7		0.9		4.1			0.4
Interest Income		(0.1	)												(0.1	)
Interest Expense		22.2													22.2
Change in fair value of warrant liability		10.5													10.5
Other finance expenses / (income)		1.2													1.2
Income tax		0.3													0.3
Adjusted EBITDA	$	8.0		$	3.5		$	6.4	$	3.6	$	(0.2	)	$	(5.3	)

Adjusted EBITDA	£	5.7

Exchange Rate - $ to £ (5)		1.40

Note: 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, these are shown in the Corporate category.

Reconciliation to Adjusted EBITDA by segment for the Three Months ended June 30, 2020

	For the Three-Month Period ended
(In millions)	Unaudited June 30, 2020
							Virtual
	Total			Gaming			Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(26.2	)	$	(7.1	)	$	5.1	$	1.7	$	(7.0	)	$	(18.9	)

Items Relating to Legacy Activities:
Pension charges (1)		0.2													0.2

Items outside the normal course of business:
Costs of group restructure (2)		0.3													0.3
Acquisition and integration related transaction expenses (3)		1.2													1.2


Stock-based compensation expense		1.0			0.1			0.1		0.1		0.0			0.7


Depreciation and amortization		13.3			7.0			0.9		0.6		4.4			0.4
Interest Income		(0.1	)							��					(0.1	)
Interest Expense		8.1													8.1
Change in fair value of warrant liability		1.7													1.7
Other finance expenses / (income)		2.5													2.5
Income tax		0.1													0.1
Adjusted EBITDA	$	2.1		$	(0.0	)	$	6.1	$	2.4	$	(2.6	)	$	(3.8	)

Adjusted EBITDA	£	1.7

Exchange Rate - $ to £ (5)		1.26

For the Six-Month
Period ended
Unaudited Unaudited
June 30, June 30,
(In millions) 2020 2019
Net loss $ (41.9 ) $ (15.7 )

Items Relating to Discontinued Activities:
Pension charges (1) 0.4 0.3

Items outside the normal course of business:
Costs of group restructure (2) 0.4 2.7
Acquisition and integration related transaction expenses (3) 4.4 1.6
Impairment on interest in equity method investee(4) 0.7 -
Stock-based compensation expense 2.0 4.4
Depreciation and amortization 25.9 18.8
Total other expense, net(5) 20.0 10.5
Income tax 0.3 (0.0 )
Adjusted EBITDA $ 12.1 $ 22.5

Adjusted EBITDA £ 9.5 £ 17.4

Exchange Rate - $ to £ (6) 1.27 1.30

Reconciliation to Adjusted EBITDA by segment for the Six Months ended June 30, 2021

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2021
							Virtual
	Total			Gaming			Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(60.5	)	$	(6.3	)	$	7.9	$	5.2	$	(12.1	)	$	(55.2	)

Items Relating to Legacy Activities:
Pension charges (1)		0.4													0.4

Items outside the normal course of business:
Costs of group restructure (2)		-													-
Acquisition and integration related transaction expenses (3)		1.5													1.5
Refinancing of Company Debt (4)		0.8													0.8
Italian tax related costs relating to prior years (5)		1.4						1.4							-
Impairment on interest in equity method investee(6)		-													-

Stock-based compensation expense		4.8			0.6			0.2		0.2		0.2			3.6


Depreciation and amortization		25.0			12.4			1.8		1.6		8.3			0.9
Interest Income		(0.1	)												(0.1	)
Interest Expense		30.8													30.8
Change in fair value of warrant liability		13.5													13.5
Other finance expenses / (income)		(5.2	)												(5.2	)
Income tax		(0.4	)												(0.4	)
Adjusted EBITDA	$	11.9		$	6.7		$	11.3	$	7.0	$	(3.6	)	$	(9.5	)

Adjusted EBITDA	£	8.5

Exchange Rate - $ to £ (5)		1.40

Reconciliation to Adjusted EBITDA by segment for the Six Months ended June 30, 2020

	For the Six-Month Period ended
(In millions)	Unaudited June 30, 2020
							Virtual
	Total			Gaming			Sports		Interactive		Leisure			Corporate
Net Income/ (loss)	$	(36.0	)	$	(8.3	)	$	10.1	$	1.8	$	(8.0	)	$	(31.6	)

Items Relating to Legacy Activities:
Pension charges (1)		0.4													0.4

Items outside the normal course of business:
Costs of group restructure (2)		0.4													0.4
Acquisition and integration related transaction expenses (3)		4.4													4.4
Impairment on interest in equity method investee(6)		0.7													0.7

Stock-based compensation expense		2.0			0.2			0.2		0.1		0.0			1.5

Depreciation and amortization		25.9			14.4			1.7		1.2		7.8			0.8
Interest Income		(0.4	)												(0.4	)
Interest Expense		14.2													14.2
Change in fair value of warrant liability		(5.9	)												(5.9	)
Other finance expenses / (income)		6.2													6.2
Income tax		0.3													0.3
Adjusted EBITDA	$	12.1		$	6.3		$	12.0	$	3.1	$	(0.2	)	$	(9.1	)

Adjusted EBITDA	£	9.5

Exchange Rate - $ to £ (5)		1.27

Notes to ~~table:~~Adjusted EBITDA reconciliation tables above:

(1)

~~(1)~~

“Pension charges” are profit and loss charges included within selling, general and administrative expenses, relating to a defined benefit scheme which was closed to new entrants in 1999 and to future accrual in 2010. As well as the amortization of net loss, the figure also includes charges relating to the Pension Protection Fund (which were historically borne by the pension scheme) and a small amount of associated professional services expenses. These costs are included within Corporate Functions.

(2)

~~(2)~~

“Costs of group restructure” include redundancy costs, Payments In Lieu of Notice costs, any associated employer taxes and costs associated with onerous property leases. To qualify as being an adjusting item, costs must be part of a large restructuring project, which will net save ongoing future costs. These costs were primarily incurred in connection with the property consolidation.

(3)

~~(3)~~

Acquisition and integration related transaction expenses, Stock-based compensation expense, Depreciation and amortization, Total other expense, net and Income tax are as described above in the Results of Operations line item discussions. Total expense, net includes interest income, interest expense, change in fair value of earnout liability, change in fair value of derivative liability and other finance income.

(4)	~~(4)~~In May 2021, the Company refinanced its debt. These are the one-off fees as a result of the refinance.

(5)	“Italian tax related costs relating to prior years invoicing” relate to a settlement with the Italian Tax Authorities in respect of an audit of the Italian Branch of Inspired Gaming (International) Limited for the period 2015-2017 in respect of the historic VAT treatment of supplies.

(6)	In April 2020, the Company disposed of its 40% non-controlling equity interest in Innov8 Gaming Limited which resulted in the investment of $0.7 million being written off.

(7)

~~(5)~~

~~Excludes loss from equity method investee of $0.5 million.~~

~~(6)~~

Exchange rate in the table is calculated by dividing the USD Adjusted EBITDA by the GBP Adjusted EBITDA, therefore this could be slightly different from the average rate during the period depending on timing of transactions.

Liquidity and Capital Resources

Six Months ended June 30, ~~2020~~2021 compared to Six Months ended June 30, ~~2019~~2020

6 Months ended Variance
Jun 30, Jun 30, 2020
(in millions) 2020 2019 to 2019
Net loss $ (41.9 ) $ (15.7 ) $ (26.2 )
Non-cash interest expense including amortization of fees 1.2 0.9 0.3
Change in fair value of derivative and earnout liabilities and stock-based compensation expense 2.5 6.8 (4.3 )
Impairment expense 0.7 0.0 0.7
Foreign currency translation on senior bank debt and cross currency swaps 6.6 (0.3 ) 6.9
Depreciation and amortization (incl RoU assets) 27.9 18.8 9.1
Other net cash generated/(utilized) by operating activities 13.2 9.2 4.0
Net cash provided by operating activities 10.2 19.7 (9.5 )

Net cash used in investing activites (15.5 ) (9.8 ) (5.7 )
Net cash generated by financing activities 18.6 9.0 9.6
Effect of exchange rates on cash (2.5 ) (1.2 ) (1.3 )
Net increase in cash and cash equivalents $ 10.8 $ 17.7 $ (6.9 )

	6 Months ended						Variance
(in millions)	Jun 30,			Jun 30,
	2021			2020			2021 to 2020
Net loss	$	(60.5	)	$	(36.0	)	$	(24.5	)
Amortization of debt fees		16.3			1.2			15.1
Change in fair value of derivative and warrant liabilities and stock-based compensation expense		19.3			(3.4	)		22.7
Impairment expense		0.0			0.7			(0.7	)
Foreign currency translation on senior bank debt and cross currency swaps		(4.6	)		6.6			(11.2	)
Depreciation and amortization (incl RoU assets)		26.2			27.9			(1.7	)
Other net cash (utilized)/generated by operating activities		(9.5	)		13.2			(22.7	)
Net cash (used)/provided by operating activities		(12.8	)		10.2			(23.0	)

Net cash used in investing activities		(12.2	)		(15.5	)		3.3
Net cash generated/(used) by financing activities		1.0			18.6			(17.6	)
Effect of exchange rates on cash		1.4			(2.5	)		3.9
Net (decrease)/increase in cash and cash equivalents	$	(22.6	)	$	10.8		$	(33.4	)

Net cash (used)/provided by operating ~~activities.~~activities In

For the six months ended June 30, 2021, net cash outflow used by operating activities was $12.8 million, compared to a $10.2 million inflow for the six months ended June 30, 2020, ~~net cash inflow provided by operating activities was $10.2 million, compared to~~representing a ~~$19.7 million inflow in the prior year’s six-month period, representing an $9.5~~$23.0 million decrease in cash ~~generation.~~

~~Non-cash~~generation driven by COVID-19 related closures and interest expense timing differences resulting in payments of $17.5 million compared to $0.4 million in the prior period. In addition, a larger VAT payment made in the three months ended March 31, 2021 resulted in an $7.7 million higher outflow compared to the prior period.

Amortization of debt fees increased by ~~$0.3~~$15.1 million to ~~$1.2 million.~~$16.3 million due to the write-off in May 2021 of capitalized debt fees totaling $14.4 million following the Company refinancing. The remainder of the current ~~period’s~~year’s non-cash interest expense related to amortization of debt fees incurred in relation to the business refinancing in October ~~2019.~~2019 up to the refinancing. Post refinancing the amortization of debt fees related to those incurred and capitalized as part of the May 2021 refinancing. The prior year’s non-cash interest expense related to ~~the~~ amortization of debt fees incurred in relation to the business refinancing in ~~August 2018.~~October 2019.

Change in fair value of derivative and ~~earnout~~warrant liabilities and stock-based compensation expense ~~reduced~~increased by ~~$4.3~~$22.7 million, from an ~~inflow~~outflow of ~~$6.8~~$3.4 million to an inflow of ~~$2.5~~$19.3 million. Movements in the ~~market value~~fair valuation of warrant liabilities increased the ~~stock price resulted in a $2.3~~inflow by $19.3 million, ~~higher earnout inflow in the six months ended June 30, 2019 and a $1.8~~$2.8 million ~~higher inflow relating~~related to stock-based compensation expense ~~also in the prior year. On March 25, 2019, the shares relating~~and $0.4 million related to the ~~earnout liability were issued resulting~~movement in ~~no further inflows or outflows after this date.~~cross-currency swaps.

Foreign currency translation on senior bank debt and cross currency swaps ~~following the refinancing on October 1, 2019~~ resulted in a ~~gain~~loss in the six months ended June 30, ~~2020~~2021 of ~~$6.6~~$4.6 million as a result of the movement in exchange rates during the period, compared to a ~~loss of $0.3~~$6.6 million ~~in the corresponding six months of the prior year.~~

Depreciation, amortization and impairment increased by $9.1 million to a charge of $27.9 million with increases of $5.2 million in machine asset charges and $1.7 million in development costs and licenses following the acquisition of the Acquired Businesses on October 1, 2019. In addition, a $2.0 million charge has been incurredgain in the six months toended June 30, ~~2020~~2020.

Depreciation and amortization decreased by $1.7 million to $26.2 million with reductions of a $1.5 million in amortization of intangible assets, $0.5 million in machine depreciation and $0.7 million relating to the amortization of Right of Use assets under ~~ASC842. This standard was not applied~~ASC 842 offset through an increase of $1.0 million in development costs and licenses amortization.

Other net cash utilized by operating activities decreased by $22.7 million, to a $9.5 million outflow following the ~~prior periods.~~

~~Non-cash finance lease addition~~significant impact of the COVID-19 closures. Movements in other creditor levels resulted in a $13.2 million higher outflow in the six months ended June 30, ~~2020 represented~~2021 which was largely due to the ~~capitalization~~different timing of interest payments becoming payable following the ~~new Station Street UK head office property as a finance lease.~~

~~Other net cash generated by operating activities increased by $4.0 million, to a $13.2 million inflow despite~~refinancing in May 2021. A high tax accrual level at the ~~significant impact in the most recent four months~~start of ~~the COVID-19 pandemic. Strong receipt generation~~2021 resulted in a ~~$2.9~~net $6.8 million ~~favorable~~adverse movement in the six months ended June 30, 2021. Further adverse movements were also seen on deferred revenue creditors ($3.2 million) and accounts receivable ~~and there was a $1.1 million benefit from other current asset levels. Further favorable movements were in accruals, $6.9 million, driven~~($4.8 million), caused by ~~timing~~the variability of ~~interest payments. These were~~trading levels caused by COVID-19, partly offset by ~~an outflow relating to accounts payable of $5.9 million as a direct consequence~~improved inventory ($4.8 million). Many of the operating activity movements were impacted by the COVID-19 ~~pandemic and a $1.6 million outflow relating~~closures, however, throughout the period, management have actively managed cash levels to ~~operating lease liabilities under ASC842, a standard not applied~~seek to ~~the results for the prior period.~~optimize our liquidity position.

Included within net cash provided by operating activities were $5.0 million of payments relating to transaction and integration expenses and $0.4 million of payments relating to restructuring costs. This compares to $0.5 million relating to transaction expenses and $1.4 million relating to restructuring costs in the prior year.

Net cash used in investing ~~activities.~~activities

Net cash used in investing activities ~~increased~~decreased by ~~$5.7~~$3.3 million to ~~$15.5~~$12.2 million in the six months ended June 30, 2021, with lower spend on gaming machines as a result of the COVID-19 closures.

Net cash generated by financing activities

During the six months ended June 30, 2021, net cash generated by financing activities was an inflow of $1.0 million, compared to a $18.6 million inflow in the six months ended June 30, 2020. The increase was due to a $6.7 million higher spend on property and equipment following the acquisition of Novomatic UK’s Gaming Technology Group in October 2019, offset by a $1.1 million reduction in the spend on capitalized software as a direct consequence of the COVID-19 pandemic.

~~Net cash generated by financing activities.~~ ~~In the six months ended June 30, 2020, net cash generated by financing activities was $18.6 million, compared to a $9.0 million~~ inflow in the six months ended June 30, ~~2019. An~~2021 related to the net movement from the May 2021 refinancing. During the six months ended June 30, 2020, an increase in the ~~level of~~amount drawn on the revolver ~~drawn resulted in~~provided a $22.3 million inflow which was partly offset by a $3.1 million ~~payment~~ of ~~lender~~debt fees associated with the changes made to the debt terms and covenant levels as a result of the COVID-19 pandemic and $0.6 million of finance lease payments. The prior year’s inflow was due to a $9.3 million increase in the level of revolver drawn offset by $0.3 million of finance lease payments.incurred.

Funding Needs and Sources

To fund our obligations we have relied historically ~~relied~~ on a combination of cash flows provided by operations and the incurrence of additional debt or the refinancing of existing debt. As of June 30, ~~2020,~~2021, we had liquidity of ~~$39.9~~$24.5 million in cash and cash ~~equivalents.~~equivalents and a further $27.6 million of an undrawn revolver facility. This compares to ~~$33.7~~$39.9 million of cash and cash equivalents as atof June 30, ~~2019.~~2020 but $24.7 million drawn on the revolver facility. We had a working capital ~~inflow~~outflow of ~~$13.2~~$9.5 million for the six months ended June 30, ~~2020,~~2021, compared to ~~a $9.2~~an $13.2 million inflow for the six months ended June 30, ~~2019.~~2020. The level of our working capital surplus or deficit varies with the level of machine production we are undertaking and our capitalization ~~and also with~~as well as the seasonality evident in some of the ~~companies~~businesses purchased as part of the ~~acquisition of Novomatic UK’s Gaming Technology Group in October 2019.~~NTG Acquisition. In periods with minimal machine volumes and capital spend, our working capital is more stable. In periods where significant numbers of machines are being produced, the levels of inventory and creditors are higher than typical and there is a natural timing difference between converting the stock into sellable or capitalized plant and settling payments to suppliers. These factors, along with movements in trading activity levels which have been seen during 2020 and 2021 following the COVID-19 closures, can result in significant working capital volatility. In periods of low activity, our working capital volatility is reduced. Working capital is reviewed and managed with the aim of ensuring that current liabilities are covered by the level of cash held and the expected level of short-term receipts.

Some of our business operations require cash to be held within the machines. As of June 30, ~~2020, $2.6~~2021, $4.6 million of our ~~$39.9~~$24.5 million of cash and cash equivalents were held as operational floats within the machines. ~~In addition a further $2.4 million of cash was held within a restricted bank account. This amount is expected to be released into an unrestricted account before the end of the next quarter.~~

Management currently believes that despite the reduced trading levels caused by the COVID-19 ~~pandemic,~~closures, the Company’s cash balances on hand, cash flows expected to be generated from operations, ~~the refinancing of the business following the acquisition of the Novomatic UK’s Gaming Technology Group in October 2019~~ and the ability to control and defer capital projects will be sufficient to fund the Company’s net cash requirements through August ~~2021.~~2022.

Long Term and Other Debt

See Note 4 Long Term and Other Debt of the Financial Statements for detail of the debts held during 2020 and 2021.

(In millions) June 30,
2020 June 30,
2019
Cash held £ 32.3 $ 39.9 £ 26.5 $ 33.7
Revolver drawn (20.0 ) (24.7 ) (7.3 ) (9.3 )
Original principal senior debt (230.5 ) (284.8 ) (110.0 ) (140.0 )
Cash interest accrued (4.8 ) (6.0 ) (0.1 ) (0.1 )
Finance lease creditors (0.8 ) (1.1 ) (0.1 ) (0.2 )
Total £ (223.8 ) $ (276.8 ) £ (91.0 ) $ (115.9 )

Debt Covenants

~~On October 1, 2019, pursuant to the Share Purchase Agreement, dated~~Under our debt facilities in place as of June ~~11, 2019 (the “SPA”)~~30, 2021 we are not subject to covenant testing on the Senior Secured Notes. We are, however, subject to covenant testing at the level of Inspired Entertainment Inc., ~~by and between Inspired Gaming (UK) Limited, a subsidiary of~~the ultimate holding company, on our Super Senior Revolving Credit Facility which requires the Company to maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “Buyer”), and Novomatic UK Ltd., (the “Seller”), the Buyer completed its acquisition from the Seller of (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) 40% of the outstanding equity interests of Innov8 Gaming Limited (“Innov8”, and the entities described in clauses (i) and (ii), together with certain of their subsidiaries, the “Acquired Companies” and the transactions contemplated by the SPA, the “Acquisition”“RCF Financial Covenant”). The ~~Acquired Companies comprised~~RCF Financial Covenant is calculated as the ~~Seller’s Gaming Technology Group. The consideration~~ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense) for the ~~Acquisition totaled approximately €104.6 million (USD $120.0 million) in cash.~~

~~In connection with~~12-month period preceding the ~~Acquisition,~~relevant quarterly testing date and is tested quarterly on ~~September 27, 2019, Gaming Acquisitions Limited, together with Inspired Entertainment, Inc. (“Inspired”), and certain other direct and indirect wholly-owned subsidiaries of Inspired, 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,rolling basis, subject to ~~certain conditions, two tranches of senior secured term loans (the “Term Loans”),~~the Initial Facility (as defined in ~~an original principal amount of £140.0 million and €90.0 million, respectively and a secured revolving facility loan in an original principal amount of £20.0 million. Proceeds from~~ the ~~Term Loans were used, among other things, to pay the purchase price of the Acquisition and to refinance existing indebtedness of the Company.~~

The new term loans have a five-year duration and are repayable in full on October 1, 2024. The £140.0 million loan carries a cash interest rate of 7.25% plus 3-month LIBOR, the €90.0 million loan carries a cash interest rate of 6.75% plus a 3-month EUROLIBOR. The £20.0 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 marginRCF Agreement) being drawn on the ~~revolving credit facility loan. On April 6, 2020,~~relevant test date. The RCF Financial Covenant does not include a minimum interest coverage ratio or other financial covenants. As the ~~Company entered into an Extended Grace Period Letter Agreement amendment to the Senior Facilities Agreement that provided for, among other things, an increase~~RCF has never been drawn at any point since being in the applicable margin on the term loans and revolving credit facility of 100 bps, as described in the notes to the financial statements – Note 17 Subsequent Events. On June 25, 2020, the Extended Grace Period Letter Agreement amendment became effective with the increase in the applicable margin on the terms loans and revolving credit facility being backdated to April 1, 2020. In addition, the cash interest due on the term loans at this dateplace, no covenant testing was ~~capitalized and also attracted interest at the increased margin levels.~~

In connection with the refinancing on October 1, 2019, the existing three-year, fixed-rate, cross-currency swaps were terminated and the remaining capitalized debt fees totaling $7.3 million expensed. Debt fees of approximately $16.1 million were incurred and capitalized as part of the refinancing as relating to the costs incurred in obtaining the new term loan facilities. These fees will be amortized over the length of the new term loans. On June 25, 2020 as part of the Extended Grace Period Letter Agreement becoming effective a further $3.1 million of debt fees were incurred and capitalized. These fees will also be amortized over the term loan length.

During August 2018, the Company and certain of its subsidiaries entered into a series of transactions that refinanced the Company’s external borrowings, replacing the Company’s senior term and revolving facilities, originally entered into in 2014, with senior notes of $140.0 million and a revolving credit facility of £7.5 million (equivalent to approximately $9.3 million). The senior notes had a five-year duration and carried a cash interest rate of 9% plus 3-month LIBOR, and the revolving credit facility had a three-year duration and carried a cash interest rate on any utilization at 4% plus 3-month LIBOR, any unutilized amount carried a 1.4% cash interest cost. In connection with this refinancing, the Company entered into a three-year, fixed-rate, cross-currency swap. For further information regarding the new external borrowings and the swap, see Note 12 to the Consolidated Financial Statements, “Long Term and Other Debt”.

As of June 30, 2020, and following the capitalization of the cash interest on April 1, 2020, the Company had bank facilities of £165.8 million and €93.1 million (equivalent to approximately $309.5 million), consisting of senior term loan facilities of £145.8 million and €93.1 million (equivalent to $180.2 million and $104.6 million respectively) and a revolving credit facility of £20.0 million (equivalent to approximately $24.7 million). As of June 30, 2020, the £145.8 million term loan facility had a cash interest rate on outstanding borrowings equal to the base rate margin of 8.25% per annum, plus 3-month LIBOR whichrequired at June 30, 2020 was the equivalent of 8.97% per annum. The €93.1 million term loan facility had a cash interest rate on outstanding borrowings equal to the base rate margin of 7.75% per annum, plus 3-month EUROLIBOR which at June 30, 2020 was the equivalent of 7.75% per annum. Both term loan facilities are scheduled to mature on October 1, 2024.2021.

As of June 30, 2019, the Company had bank facilities of £117.5 million (equivalent to approximately $149.5 million), consisting of a senior term loan facility of £110.0 million (equivalent to $140.0 million) and a revolving credit facility of £7.5 million (equivalent to approximately $9.5 million). As of June 30, 2019, the term loan facility imposed a cash interest rate on outstanding borrowings equal to the base rate margin of 9.00% per annum, plus 3-month LIBOR which at June 30, 2019 was the equivalent of 11.33% per annum which under the cross-currency swaps executed was reduced to a rate of 10.87%.

As of June 30, 2020, the Company had aggregate borrowings under the revolving credit facility of £20.0 million (equivalent to $24.7 million). As of June 30, 2020, the revolving credit facility imposed a cash interest rate on outstanding borrowings equal to the base rate margin of 6.50% per annum, plus LIBOR, and the current rate at which cash interest accrued was 6.59% per annum. In addition, a commitment fee was payable with respect to unutilized borrowing capacity at a rate of 1.65% per annum. The revolving credit facility is scheduled to mature on September 1, 2024.

As of June 30, 2019, the Company had aggregate borrowings under the revolving credit facility of £7.3 million (equivalent to $9.3 million). As of June 30, 2019, the revolving credit facility imposed a cash interest rate on outstanding borrowings equal to the base rate margin of 4.00% per annum, plus LIBOR, and the current rate at which cash interest accrued was 4.72% per annum. In addition, a commitment fee was payable with respect to unutilized borrowing capacity at a rate of 1.40% per annum. This facility was terminated at the time of the refinancing on October 1, 2019.

Debt issuance fees were capitalized at the time the debt was issued, with further lender debt fees capitalized on June 25, 2020 as part of the Extended Grace Period Letter Agreement becoming effective. As of June 30, 2020, the amount of debt issuance fees capitalized was $18.7 million, including $11.7 million of original issue discount and $2.2 million of structuring fees with the remainder being professional fees incurred from the refinancing. Of the total debt issuance fees capitalized, $2.4 million had been charged by June 30, 2020.

~~Debt Covenants~~

Under our debt facilities in place as of June 30, 2020 we are subject to covenant testing ~~at quarterly intervals.~~on the Senior Secured Notes. The covenant testing is set at the level of Inspired Entertainment Inc., the ultimate holding company, and consists of a test on Leverage (Consolidated Total Net Debt/Consolidated Pro Forma EBITDA) and a test on the level of capital expenditure. These are measured under U.S. GAAP. Leverage ~~is to be~~was tested at quarterly intervals commencing for the period ending June 30, 2020 and capital expenditure iswas tested annually commencing on December 31, 2019.

Prior to reaching our first leverage covenant test on June 30, 2020, the covenants were reset as a direct result of the ~~Covid19 pandemic~~COVID-19 closures and subsequent loss of trading ~~through the last few months~~ as a result of government lockdowns in many key trading countries around the world. Formal agreement of the revised covenants was achieved on June 25, 2020.

Under our debt facilities in place as of June 30, 2019, we were subject to covenant testing at quarterly intervals. The covenant testing is set at the level of Inspired Entertainment Inc., the ultimate holding company, and consists of a test on Leverage (Consolidated Total Debt/Consolidated Adjusted EBITDA) and a test of the Fixed Charge Coverage Ratio (Net Cash Provided by Operating Activities/Calculation of Consolidated Fixed Charges). These are measured under U.S. GAAP. In addition to the quarterly tests, there was the requirement that the minimum liquidity not be less than $5.0 million. With the refinancing of the Company on October 1, 2019, these tests were replaced by a revised set of covenant tests.

There were no breaches of the debt covenants in the periods ended June 30, ~~2020~~2021 and June 30, ~~2019.~~2020.

Liens and Encumbrances

As of June 30, ~~2020,~~2021, our senior bank debt was secured by the imposition of a fixed and floating charge in favor of the lender over all the assets of the Company and certain of the Company’s subsidiaries.

Contractual Obligations

As of June 30, ~~2020,~~2021, our contractual obligations were as follows:

Less than More than
Contractual Obligations (in millions) Total 1 yr 1-3 years 3-5 years 5 yrs
Operating activities
Interest on long term debt $ 109.6 $ 24.1 $ 48.8 $ 36.7 $ -

Financing activities
Revolver repayment 24.9 24.9 - - -
Senior bank debt - principal repayment 284.8 - - 284.8 -
Operating lease payments 12.6 3.2 4.4 2.4 2.6
Interest on non-utilisation fees 1.7 0.3 0.8 0.6 -
Total $ 434.6 $ 53.0 $ 54.4 $ 324.6 $ 2.6

~~Recent US Tax Law Changes~~

			Less than						More than
Contractual Obligations (in millions)	Total		1 yr		1-3 years		3-5 years		5 yrs
Operating activities
Interest on long term debt	$	128.8	$	26.3	$	51.2	$	51.2	$	-

Financing activities
Senior bank debt - principal repayment		324.7		-		-		324.7		-
Finance lease payments		1.9		0.9		0.6		0.4		-
Operating lease payments		11.6		3.6		3.8		2.1		2.2
Interest on non-utilization fees		1.8		0.4		0.8		0.6		-
Total	$	468.8	$	31.3	$	56.3	$	379.1	$	2.2

In light of the recent US tax reforms and specifically those around GILTI (Global Intangible Low Taxed Income), we may be required to pay additional US corporate income tax beginning in the year ending December 31, 2021 due to the location of assets and tax losses brought forward in the UK.

Off-Balance Sheet Arrangements

As of June 30, ~~2020,~~2021, there were no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, promulgated by the U.S. Securities and Exchange Commission.

Critical Accounting Policies

The preparation of our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenue and expenses, and our disclosure of commitments and contingencies at the date of the consolidated financial statements. On an on-going basis, we evaluate our estimates and judgments. We base our estimates and judgments on a variety of factors, including our historical experience, knowledge of our business and industry and current and expected economic conditions, that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

For a discussion of other recently issued accounting standards, and assessments as to their impacts on the Company, see Nature of Operations, Management’s Plans and Summary of Significant Accounting Policies, Note 1 to the consolidated financial statements included elsewhere in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal market risks are our exposure to changes in ~~interest rates and~~ foreign currency exchange rates.

Interest Rate Risk

~~We have~~Following the Company’s refinance in May 2021, the external borrowings ~~that are subject to the risk~~ of ~~higher interest charges associated with increases in interest rates. As of June 30, 2020, we had £145.8~~£235.0 million ($~~180.2~~324.7 million) are provided at a fixed rate. Therefore movements in rates such as LIBOR do not impact on the current borrowings and ~~€93.1 million ($104.6 million) of senior bank debt~~the only fluctuation that is ~~subject~~expected to ~~a floating interest rate charge~~be reported will be that ~~can vary with~~solely caused by movements in the ~~3-month LIBOR~~exchange rates between the Company’s functional currency and the 3-month EUROLIBOR rates. If the floating interest rates increased by 1%, the additional interest charge would be approximately $1.4 million. If the floating interest rates increased by 5%, the additional interest charge would be approximately $7.0 million.its reporting currency.

The above additional interest charges do not consider the interest rate swaps that the Company has entered into in connection with the refinancing. These swaps, which are effective until October 1, 2023 cover approximately 2/3rds of the debt level and have been designed to negate the impact of any interest rate increases and should the interest rates move as above, then the actual additional interest charge would be significantly less than shown.

Foreign Currency Exchange Rate Risk

Our operations are conducted in various countries around the world and we receive revenue and pay expenses from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than GBP, which is our functional currency, or (ii) the functional currencies of our subsidiaries, which is not necessarily GBP. Excluding intercompany balances, our Euro functional currency net ~~liabilities~~assets total approximately ~~$90.6~~$7.8 million and our US Dollar functional currency net ~~assets~~liabilities total approximately ~~$1.9~~$26.0 million. We use a sensitivity analysis model to measure the impact of a 10% adverse movement of foreign currency exchange rates against the US Dollar. A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of June 30, ~~2020~~2021 would result in translation adjustments of approximately ~~$8.1~~$0.7 million and ~~$0.2~~$2.6 million, respectively, recorded in other comprehensive loss.

Included within our trading results are earnings outside of our functional currency. Retained ~~earnings~~losses earned in Euros and in US Dollars in the ~~period~~six months ended June 30, ~~2020~~2021 were ~~€0.6~~€1.3 million and ~~a loss of $4.3~~$20.4 million, respectively. A hypothetical 10% adverse change in the value of the Euro and the US Dollar relative to GBP as of June 30, ~~2020~~2021 would result in translation adjustments of approximately ~~$0.1 million~~$0.1million and ~~$0.4~~$1.9 million, respectively, recorded in trading operations.

The majority of the Company’s trading is in GBP, the functional currency, although the reporting currency of the Company is the US Dollar. As such, changes in the GBP:USD exchange rate have an effect on the Company’s results. A 10% weakening of GBP against the US Dollar would change the trading operational results by approximately ~~$3.5~~$3.4 million and would result in translation adjustments of approximately ~~$0.1~~$13.0 million, recorded in other comprehensive loss.

For further information regarding the new external borrowings, see Note 124 to the Consolidated Financial Statements, “Long Term and Other Debt”.

ITEM 4. 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 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 principal executive officer and our principal financial officer (together, the “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 the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, ~~2020~~2021, due to the material weakness described in Item 9A of Amendment No. 1 to the Annual Report on Form ~~10-K~~10-K/A filed with the SEC on ~~March 30, 2020.~~May 10, 2021. Management ~~has~~have implemented additional controls designed to remediate this material weakness; however, these controls have not operated effectively over a sufficient period of time in order to conclude that the material weakness has been fully remediated.

Notwithstanding the identified material weakness and management’s assessment that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, ~~2020,~~2021, management believes that the interim consolidated financial statements and footnote disclosures included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, cash flows and disclosures as of and for the periods presented in accordance with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

There were no 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.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in lawsuits and legal proceedings arising in the ordinary course of business. While we believe that, currently, we have 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 our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

~~You~~Our business is subject to a high degree of risk. In addition to information set forth in this report, including the risk factors below, you should carefully consider the risk factors ~~set forth~~discussed in our Annual Report on Form 10-K for ~~the~~our fiscal year ended December 31, ~~2019, which~~2020 and Amendment No. 1 thereto. You should carefully read and assess all of these risk factors. Any of these risks could materially and adversely affect our business, operating results, financial ~~position~~condition and ~~results~~prospects, and cause the value of ~~operations. In addition, please refer~~our common stock to decline, which could cause investors in our common stock to lose all or part of their investments. Other than as set forth below, there have been no material changes to the ~~revised~~ risk ~~factor below.~~factors previously disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, 2020 and Amendment No. 1 thereto.

The ongoing coronavirus (COVID-19) pandemic is adversely affecting our business.

Our business ~~has been, and will~~continues to be affected by the ~~rapidly expanding~~ coronavirus (COVID-19) ~~pandemic. Our ability to offer land-based gaming generally has been affected by~~pandemic and future epidemics or pandemics could do the ~~closures~~same.. Governments in all of ~~all venues that offer gaming in~~ the major jurisdictions in which ~~we operate. Although such closures~~our land-based customers operate have ~~largely been lifted, they could still partially or completely reoccur~~now reopened land-based venues. No restrictions remain in the ~~event~~United Kingdom. There remains an element of ~~a “second wave” of COVID-19~~social distancing in venues in Greece and in Italy there are restrictions in place that state only fully vaccinated people can enter our venues. It remains uncertain as to whether and when further restrictions or ~~other additional periods of increases or spikes~~closures could happen in ~~the number of COVID-19 cases in areas in which we operate.~~

~~In addition, the~~each jurisdiction and how long they may last. The economic impact of the pandemic may still result in the permanent closure of certain venues and/or a decrease in the willingness or ability of consumers to engage in gambling activities or to be able to access land-based gaming to the same extent, both during and possibly after the pandemic. The pandemic may also adversely affect a broad range of our operations, including our ability to retain and recruit employees, obtain and ship our products, our ability to continue to develop new products and services as effectively when remote working as well as the ability of our customers to pay outstanding amounts due to us. The pandemic and the economic impact on employment may reduce the disposable incomes of players and may result in a decrease in the number of customers willing to visit retail locations. More information about the effect of the COVID-19 pandemic on our business can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Restrictions in our existing borrowings, including covenants set forth in our existing debt facilities, or any other indebtedness we may incur in the future, could adversely affect our business, financial condition, or results of operations, and our ability to make distributions to stockholders and the value of our common stock.

Our existing borrowings, and any other indebtedness we may enter into, may limit our ability to, among other things:

	●	incur or guarantee additional debt;

	●	make distributions or dividends on or redeem or repurchase shares of common stock;

	●	make certain investments and acquisitions;

	●	make capital expenditures;

	●	incur certain liens or permit them to exist;

	●	enter into certain types of transactions with affiliates;

	●	acquire, merge or consolidate with another company; and

	●	transfer, sell or otherwise dispose of all or substantially all of our assets.

The provisions of our existing borrowings may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions.

As of June 30, 2021, our senior debt consisted of an aggregate of £235.0 million ($324.8 million) of Senior Secured Notes (carrying an interest rate of 7.875% per annum, and maturing on June 1, 2026), and we had £20 million ($27.6 million) of credit facility borrowings available under the RCF Agreement (see Note 4).

The Indenture governing the Senior Secured Notes contains incurrence covenants that limit the ability of the Company and the Company’s restricted subsidiaries to, among other things, (i) incur or guarantee additional debt and issue certain preferred stock of restricted subsidiaries; (ii) create or incur certain liens; (iii) make restricted payments, including dividends or distributions to the Company’s stockholders or repurchase the Company’s stock; (iv) prepay or redeem subordinated debt; (v) make certain investments, including participating joint ventures; (vi) create encumbrances or restrictions on the payment of dividends or other distributions by restricted subsidiaries; (vii) sell assets, or consolidate or merge with or into other companies; (viii) sell or transfer all or substantially all of the Company’s assets or those of the Company’s subsidiaries on a consolidated basis; (ix) engage in certain transactions with affiliates; and (x) create unrestricted subsidiaries. Certain of these covenants will be suspended if and for so long as the Senior Secured Notes have investment grade ratings from any two of Moody’s Investors Service, Inc., Standard & Poor’s Investors Ratings Services and Fitch Ratings, Inc. These covenants are subject to exceptions and qualifications as set forth in the Indenture.

The RCF Agreement governing credit facility borrowings contains various covenants (which include restrictions regarding the incurrence of liens, the incurrence of indebtedness by the Company’s subsidiaries and fundamental changes, subject in each case to certain exceptions), representations, warranties, limitations and events of default (which include non-payment, breach of obligations under the financing documents, cross-default, insolvency and litigation) customary for similar facilities for similarly rated borrowers and subject to customary carve-outs and grace periods. Following the occurrence of an event of default which has not been waived or remedied, the Lenders who represent more than 66.67% of total commitments under the RCF may, subject to the terms of an intercreditor agreement (which governs the relationship between the Lenders and the holders of the Senior Secured Notes), instruct the agent to (i) accelerate the RCF Loans, (ii) instruct the security agent to enforce the transaction security and/or (iii) exercise any other remedies available to the Lenders.

The RCF Agreement requires that the Company maintain a maximum consolidated senior secured net leverage ratio of 6.25x on the test date for the relevant period ending June 30, 2021, stepping down to 6.0x on March 31, 2022, 5.75x on March 31, 2023 and 5.50x from March 31, 2024 and thereafter (the “RCF Financial Covenant”). The RCF Financial Covenant is calculated as the ratio of consolidated senior secured net debt to consolidated pro forma EBITDA (defined as net loss excluding depreciation and amortization, interest expense, interest income and income tax expense) for the 12-month period preceding the relevant quarterly testing date and is tested quarterly on a rolling basis, subject to the Initial Facility (as defined in the RCF Agreement) being drawn on the relevant test date. The RCF Agreement does not include a minimum interest coverage ratio or other financial covenants.

Sales of substantial numbers of our shares by our largest stockholders may adversely impact the market price of our shares.

Our two largest stockholders collectively hold approximately 24.5% of our outstanding common stock as of August 9, 2021. If any of our large stockholders sell substantial amounts of their shares in the public market, the market price of our common stock could decrease significantly. In addition, the ~~pandemic~~perception in the public market that our other large stockholders will sell shares of common stock could also depress our market price. A decline in the price of the shares of our common stock could impede our ability to raise capital through the issuance of additional shares or other equity securities. Moreover, any such decline could result in our common stock trading at prices significantly below the price you paid.

Material weaknesses in our internal control over financial reporting could result in errors in our reported results or disclosures that are not complete or accurate.

We are responsible for establishing and maintaining adequate internal control over financial reporting. Our management identified a material weakness in the Company’s internal control over financial reporting in connection with the restatement of our financial statements which resulted from the reconsideration of the treatment of our warrants (see Part II, Item 9A (“Controls and Procedures”) of our Annual Report on Form 10-K/A filed with the SEC on May 10, 2021). Management has implemented additional controls designed to remediate this material weakness; however, these controls have not operated effectively over a sufficient period of time in order to conclude that the material weakness has been fully remediated. In addition, the adoption of any new accounting standards may ~~have long-term impacts~~require us to add new or change existing internal controls, and we are currently undertaking an ERP system implementation, which could materially impact our internal control over financial reporting. If we cannot maintain and execute adequate internal control over financial reporting or when necessary implement new or improved controls that provide reasonable assurance of the reliability of the financial reporting and preparation of our financial statements for external use, we may suffer harm to our reputation, fail to meet our public reporting requirements on ~~the global economy, trade relations, consumer behavior,~~a timely basis or be unable to properly report on our ~~industry~~business and our ~~business operations.~~results of operations, cash flows and financial condition, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price. Additionally, the inherent limitations of internal controls over financial reporting may not prevent or detect all misstatements or fraud, regardless of the adequacy of those controls.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit Number		Description
4.1		~~Description~~Indenture, dated as of May 20, 2021, among Inspired Entertainment (Financing) PLC, as issuer, Inspired Entertainment, Inc., as a guarantor, the subsidiaries of Inspired Entertainment, Inc. 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 by reference to Exhibit 4.1 to the Current Report on Form 8-K of the Company, filed with the SEC on May 20, 2021).
4.2		Form of 7.875% Senior Secured Notes due 2026 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of the Company, filed with the SEC on May 20, 2021).
10.1		~~Extended Grace Period Letter Agreement to the~~Super Senior Revolving Credit Facilities Agreement, dated as of ~~April 6, 2020, by and between~~May 20, 2021, among Inspired Entertainment, Inc., Gaming Acquisition Limited, Inspired Entertainment (Financing) PLC and ~~Lucid~~Inspired Gaming (UK) Limited as original borrowers, the subsidiaries of Inspired Entertainment, Inc. 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 by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed with the SEC on ~~April 7, 2020)~~May 20, 2021).
~~10.2~~10.2#*		~~Letter Agreement, dated June 15, 2020, between~~ Inspired Entertainment, Inc. 2021 Omnibus Incentive Plan.
10.3#*		Inspired Entertainment, Inc. 2021 Short-Term Incentive Bonus Plan dated June 9, 2021.
10.4#		Letter dated April 12, 2021 to A. Lorne Weil (incorporated 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).
10.5#		Addendum dated June, 21, 2021 to the Employment Agreement dated October, 9, 2020 by and ~~Lucid Agency Services Limited~~between 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 SEC on June ~~16, 2020)~~24, 2021).
~~10.3~~31.1*		Letter Agreement, dated June 22, 2020, by and between Inspired Entertainment, Inc. and Lucid Agency Services Limited (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 25, 2020).
~~10.4~~		Letter Agreement, dated June 24, 2020, by and between Inspired Entertainment, Inc. and Lucid Agency Services Limited (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 25, 2020).
~~10.5~~		Amendment and Restatement Agreement, dated June 25, 2020, by and among Inspired Entertainment, Inc., certain direct and indirect subsidiaries of Inspired Entertainment, Inc., Lucid Agency Services Limited and Lucid Trustee Services Limited (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on June 25, 2020).
31.1*		Certification of Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2*		Certification of Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1**		Certification of Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2**		Certification of Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

*#	~~Filed herewith.~~
**	~~Furnished herewith.~~Indicates management contract or compensatory plan.

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INSPIRED ENTERTAINMENT, INC.

Date: August ~~13, 2020~~12, 2021		/s/ A. Lorne Weil
	Name:	A. Lorne Weil
	Title:	Executive Chairman
		(Principal Executive Officer)

Date: August ~~13, 2020~~12, 2021		/s/ Stewart F.B. Baker
	Name:	Stewart F.B. Baker
	Title:	Executive Vice President and
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Delaware		47-1025534
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

250 West 57^th57th Street, Suite 415
New York, NY		10107
(Address of principal executive offices)		(Zip Code)

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	INSE	The NASDAQ Stock Market LLC
~~Preferred Stock Purchase Rights~~		~~The NASDAQ Stock Market LLC~~

PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS	1

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss	2

	Condensed Consolidated Statement of Stockholders’ Deficit	3

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2122

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5863

ITEM 4.	CONTROLS AND PROCEDURES	5864

PART II.	OTHER INFORMATION	5964

ITEM 1.	LEGAL PROCEEDINGS	5964

ITEM 1A.	RISK FACTORS	5964

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5966

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	5966

ITEM 4.	MINE SAFETY DISCLOSURES	5966

ITEM 5.	OTHER INFORMATION	66

ITEM 6.	EXHIBITS	67

~~ITEM 5.~~SIGNATURES		~~OTHER INFORMATION~~	5968

	June 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
	(Unaudited)						(Unaudited)
Assets
Cash	$	39.9		$	29.1		$	24.5		$	47.1
Accounts receivable, net		18.6			24.2			22.3			27.5
Inventory, net		19.0			18.8			14.3			17.6
Prepaid expenses and other current assets		17.0			23.2			21.8			16.8
Total current assets		94.5			95.3			82.9			109.0

Property and equipment, net		68.4			79.3			58.4			65.5
Software development costs, net		41.0			46.9			38.9			42.4
Other acquired intangible assets subject to amortization, net		7.3			9.9			7.3			7.7
Goodwill		75.4			80.9			84.8			83.7
Right of use asset		12.7			9.4			11.4			12.5
Investment		—			0.6
Other assets		4.0			5.1			2.5			3.3
Total assets	$	303.3		$	327.4		$	286.2		$	324.1

Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	21.3		$	22.2		$	22.1		$	17.9
Accrued expenses		26.7			31.2			28.0			31.4
Corporate tax and other current taxes payable		6.0			6.6			7.7			14.4
Deferred revenue, current		9.2			10.1			9.7			11.5
Operating lease liabilities		3.3			3.6			3.6			3.6
Other current liabilities		1.4			1.9			2.1			2.5
Current portion of long-term debt		24.7			2.6
Warrant liability								26.5			13.0
Current portion of finance lease liabilities		0.6			0.1			0.9			0.6
Total current liabilities		93.2			78.3			100.6			94.9

Long-term debt		268.4			270.5			316.0			297.5
Long term finance lease liabilities		0.5			—
Finance lease liabilities, net of current portion								1.0			0.2
Deferred revenue, net of current portion		13.9			17.7			7.5			11.4
Derivative liability		1.6			—			—			1.7
Operating lease liabilities		9.2			5.2			8.0			9.2
Other long-term liabilities		8.3			5.2			4.8			10.9
Total liabilities		395.1			376.9			437.9			425.8

Commitments and contingencies

Stockholders’ deficit
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 June 30, 2020 and December 31, 2019		—			—
Common stock; $0.0001 par value; 49,000,000 shares authorized; 22,405,376 shares and 22,230,768 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		—			—
Preferred stock; $0.0001 par value; 1,000,000 shares authorized								—			—
Common stock; $0.0001 par value; 49,000,000 shares authorized; 22,594,207 shares and 22,430,475 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively								—			—
Additional paid in capital		348.6			346.6			329.3			324.6
Accumulated other comprehensive income		42.7			45.1			36.9			31.1
Accumulated deficit		(483.1	)		(441.2	)		(517.9	)		(457.4	)
Total stockholders’ deficit		(91.8	)		(49.5	)		(151.7	)		(101.7	)
Total liabilities and stockholders’ deficit	$	303.3		$	327.4		$	286.2		$	324.1

	Principal			Unamortized deferred financing charge			Book value, June 30, 2020
	(in millions)
Senior bank debt	$	309.5		$	(16.4	)	$	293.1
Finance lease liabilities		1.1			—			1.1
Total long-term debt outstanding		310.6			(16.4	)		294.2
Less: current portion of long-term debt		(25.3	)		—			(25.3	)
Long-term debt, excluding current portion	$	285.3		$	(16.4	)	$	268.9

Offsetting of Derivative Liabilities
June 30, 2020
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
	(in millions)
Fair value of hedging instrument	$	2.1	$	—	$	2.1	$	—	$	—	$	—

	For the Three-Month
	Period ended											Variance
	Unaudited			Unaudited								Functional
	June 30,			June 30,			Variance					Currency at			Functional			Currency
(In millions)	2020			2019			2020 vs 2019					Constant rate			Currency			Movement
Revenue:
Service	$	15.2		$	25.6		$	(10.4	)	(40.6	)%	$	(9.9	)		(38.5	)%	$	(0.5	)
Hardware		0.4			1.1			(0.7	)	(67.5	)%		(0.7	)		(66.8	)%		(0.0	)
Total revenue		15.6			26.7			(11.1	)	(41.7	)%		(10.6	)		(39.6	)%		(0.5	)
Cost of sales, excluding depreciation and amortization:
Cost of service		(3.1	)		(5.3	)		2.3		(42.4	)%		2.1			(40.3	)%		0.1
Cost of hardware		(0.3	)		(1.0	)		0.6		(65.0	)%		0.6			(62.3	)%		0.0
Selling, general and administrative expenses		(10.6	)		(12.8	)		2.2		(17.3	)%		1.9			(14.5	)%		0.4
Stock-based compensation		(1.0	)		(2.3	)		1.3		(58.4	)%		1.3			(56.9	)%		0.0
Acquisition and integration related transaction expenses		(1.2	)		(0.7	)		(0.5	)	69.0	%		(0.6	)		74.0	%		0.0
Depreciation and amortization		(13.3	)		(9.1	)		(4.2	)	46.8	%		(4.7	)		52.3	%		0.5
Net operating Income (Loss)		(13.9	)		(4.5	)		(9.4	)	210.2	%		(9.9	)		221.8	%		0.5
Other income (expense)
Interest income		0.1			0.1			(0.0	)	(11.6	)%		(0.0	)		(8.2	)%		(0.0	)
Interest expense		(8.1	)		(4.0	)		(4.1	)	100.6	%		(4.4	)		107.9	%		0.3
Change in fair value of derivative liability		-			(1.3	)		1.3		(100.0	)%		1.3			(100.0	)%		(0.0	)
Other finance income (expense)		(2.5	)		(0.9	)		(1.6	)	192.3	%		(1.8	)		203.5	%		0.1
Loss from equity method investee		-			-			-		N/A			-			N/A			-
Total other income (expense), net		(10.5	)		(6.1	)		(4.4	)	71.7	%		(4.8	)		76.9	%		0.4
Net loss from continuing operations before income taxes		(24.4	)		(10.6	)		(13.8	)	130.1	%		(14.7	)		137.7	%		0.9

Income tax expense		(0.1	)		(0.1	)		0.0		(31.6	)%		0.0			(31.4	)%		(0.0	)
Net loss	$	(24.5	)	$	(10.7	)	$	(13.8	)	128.7	%	$	(14.7	)		136.3	%	$	0.9
Exchange Rate - $ to £		1.24			1.29

	For the Three-
	Month Period
	ended
	Unaudited
	June 30,
(In millions)	2020
Revenue:
Service	$	1.8
Hardware		-
Total revenue		1.8

Cost of sales, excluding depreciation and amortization:
Cost of service		(0.9	)
Cost of hardware		-
Total cost of sales		(0.9	)

Selling, general and administrative expenses		(3.6	)
Depreciation and amortization		(5.6	)
Net operating Income (Loss)	$	(8.3	)

Exchange Rate - $ to £		1.24

Virtual Sports	For the Six-Month Period ended						Variance					Variance
(In millions)	Unaudited June 30, 2020			Unaudited June 30, 2019			2020 vs 2019					Functional Currency at Constant rate			Functional Currency			Currency Movement
Service Revenue	$	18.8		$	19.2		$	(0.4	)	(2.0	)%	$	0.1			0.8	%	$	(0.5	)
Cost of Service		(2.1	)		(1.9	)		(0.2	)	11.4	%		(0.3	)		14.5	%		0.1
Selling, general and administrative expenses		(2.8	)		(4.3	)		1.5		(34.7	)%		1.4			(33.3	)%		0.1
Stock-based compensation		(0.2	)		(0.6	)		0.4		(67.3	)%		0.5			(68.5	)%		(0.0	)
Depreciation and amortization		(2.8	)		(2.9	)		0.1		(2.3	)%		(0.0	)		0.5	%		0.1
Net operating Income (Loss)	$	10.9		$	9.5		$	1.4		14.8	%	$	1.8			18.9	%	$	(0.4	)
Exchange Rate - $ to £		1.26			1.29

	For the Six-
Acquired Business	Month Period
	ended
	Unaudited
	June 30,
(In millions)	2020
Revenue:
Service	$	23.2
Hardware		6.0
Total revenue		29.2

Cost of sales, excluding depreciation and amortization:

Cost of service		(3.6	)
Cost of hardware		(5.2	)
Total cost of sales		(8.8	)

Selling, general and administrative expenses		(20.5	)

Depreciation and amortization		(10.4	)

Net operating Income (Loss)	£	(10.5	)

Exchange Rate - $ to £		1.28

(In millions)	June 30, 2020						June 30, 2019
Cash held	£	32.3		$	39.9		£	26.5		$	33.7
Revolver drawn		(20.0	)		(24.7	)		(7.3	)		(9.3	)
Original principal senior debt		(230.5	)		(284.8	)		(110.0	)		(140.0	)
Cash interest accrued		(4.8	)		(6.0	)		(0.1	)		(0.1	)
Finance lease creditors		(0.8	)		(1.1	)		(0.1	)		(0.2	)
Total	£	(223.8	)	$	(276.8	)	£	(91.0	)	$	(115.9	)