Exhibit 99.3

 

The Gaming Technology Group of Novomatic UK Limited

 

Unaudited Interim Financial Statements for the nine months ended 30 September 2019

 

 

The Gaming Technology Group of Novomatic UK Limited

 

Contents

  

	Page
Unaudited condensed combined statement of profit or loss	1
Unaudited condensed combined statement of financial position	2
Unaudited condensed combined statement of changes in equity	3
Unaudited condensed combined statement of cash flows	4
Notes to the unaudited condensed combined financial statements	5

 

 

The Gaming Technology Group of Novomatic UK Limited 

Unaudited condensed combined statement of profit or loss 

For the nine months ended 30 September 2019 

 

				Nine months ended 30/09/2019				Nine months ended 30/09/2018
				£’000				£’000
		Note
Continuing operations
Revenue		7			105,292				95,306
Cost of sales					(44,358	)			(38,459	)
Gross profit					60,934				56,847
Other operating (expenses)/income					(53	)			16
Administrative expenses					(54,651	)			(58,037	)
Operating profit/(loss)					6,230				(1,174	)
Finance income – interest income					1				-
Finance costs – interest costs					(1,216	)			(895	)
Profit/(loss) before tax					5,015				(2,069	)
Income tax		8			(850	)			282
Profit/(loss) for the period					4,165				(1,787	)

 

There have been no recognised gains and losses for the current or the prior financial period other than as stated in the Income Statement and, accordingly, no separate Statement of Comprehensive Income is presented.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Unaudited condensed combined statement of financial position 

As at 30 September 2019 

 

				30/09/2019				31/12/2018
		Note		£’000				£’000
Non-current assets
Goodwill		9			4,122				4,122
Other intangible assets		10			20,135				21,405
Property, plant and equipment		11			37,327				32,470
Right of use asset		6			15,715				-
Finance lease receivables					617				7,110
Deferred tax asset					4,089				5,600
Other non-current assets					202				84
					82,207				70,791
Current assets
Inventories					12,250				19,900
Finance lease receivables					1,061				3,575
Trade and other receivables					16,646				21,887
Current tax receivables					-				236
Cash and cash equivalents					6,863				4,966
					36,820				50,564
Total assets					119,027				121,355
Current liabilities
Trade and other payables					(19,029	)			(17,317	)
Current tax liabilities					(986	)			-
Obligations under leases					(3,060	)			(99	)
Borrowings					-				(26,345	)
Provisions					(1,369	)			(1,665	)
					(24,444	)			(45,426	)
Net current assets					12,376				5,138
Non-current liabilities
Borrowings					(22,700	)			(16,050	)
Long-term provisions					(1,232	)			(1,271	)
Obligations under leases					(12,596	)			(90	)
Deferred tax liability					(842	)			(2,670	)
					(37,370	)			(20,081	)
Total liabilities					(61,814	)			(65,507	)
Net assets					57,213				55,848
Net investment by parent company					57,213				55,848

  

 

The Gaming Technology Group of Novomatic UK Limited 

Unaudited condensed combined statement of changes in equity 

For the nine months ended 30 September 2019

 

		Total Reserves
		£’000
At 1 January 2018			68,767
Loss for the period			(1,787	)
At 30 September 2018			66,980
At 1 January 2019			55,848
Profit for the period			4,165
Capital contribution			2,450
Distributions			(5,250	)
At 30 September 2019			57,213

 

Capital contributions received and distributions made represent amounts owed from/to the parent company waived during the period.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Unaudited condensed combined statement of cash flows 

For the nine months ended 30 September 2019

 

		Nine months ended 30/09/2019				Nine months ended 30/09/2018
		£’000				£’000
Profit/(loss) after tax			4,165				(1,787	)
Adjustments for:
Finance income			(1	)			-
Finance costs			1,216				895
Income tax expense			850				(282	)
Depreciation of property, plant and equipment and right-of-use asset			13,084				16,018
Impairment loss on other intangible assets			254				-
Amortisation of intangible assets			2,560				2,486
Loss on disposal of property, plant and equipment			-				1,826
Decrease in provisions			(296	)			(761	)
Operating cash flows before movement in working capital			21,832				18,395
Decrease/(increase) in inventories			7,650				(2,929	)
Decrease in finance lease receivables assets			6,493				411
(Increase)/decrease in other current assets			(118	)			66
Decrease in trade and other receivables			1,953				4,141
Increase in trade and other payables			4,305				906
Increase/(decrease) in deferred income			160				(701	)
Income taxes paid			(243	)			(128	)
Interest paid			(919	)			(886	)
Net cash flow from operating activities			41,113				19,275
Investing activities
Proceeds on disposal of property, plant and equipment			2,820				1,190
Purchases of property, plant and equipment			(18,466	)			(14,394	)
Purchases of intangible assets			(1,544	)			(1,338	)
Net cash used in investing activities			(17,190	)			(14,542	)
Financing activities
Repayments of borrowings			(19,695	)			(13,796	)
Payments of obligations under lease liability			(2,331	)			(237	)
Net cash from/(used in) financing activities			(22,026	)			(14,033	)
Net increase/(decrease) in cash and cash equivalents			1,897				(9,300	)
Cash and cash equivalents at beginning of period			4,966				9,300
Cash and cash equivalents at end of period			6,863				-

  

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

1.

General information

 

The interim condensed combined finance statements of The Gaming Technologies Business of Novomatic UK Limited represent the combined financial information of the following entities for the nine months ended 30 September 2019.

 

Subsidiary Name		Companies House Registration Number		Proportion held
Astra Games Limited		09280224		100%
Bell-Fruit Games Limited		08142284		100%
Bell-Fruit Group Limited		05015596		100%
Fun House Leisure Limited		SC326282		100%
Funhouse Leisure Sales Limited		08617078		100%
Gamestec Leisure Limited		05348584		100%
Harlequin Gaming Limited		09292082		100%
Innov8 Gaming Limited		10717040		60%
Leisure Projects Limited		05907026		100%
Playnation Limited		08258418		100%

 

These entities collectively called the “Combined Entities” or the “Group”.

 

These combined financial statements are presented in Pounds Sterling (£), which is the currency of the primary economic environment in which the Group operates and are rounded to the nearest £’000.

 

2.

Basis of preparation

 

The interim condensed combined financial statements for the nine months ended 30 September 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting.

 

The interim condensed combined financial statements do not include all the information and disclosures required in the annual financial statements, and therefore should be read in conjunction with the Group’s annual combined financial statements for the year ended 31 December 2018.

 

3.

Accounting policies

 

The accounting policies adopted in the preparation of the interim condensed combined financial statements are consistent with those followed in the preparation of the Group’s annual combined financial statements for the year ended 31 December 2018, except for the adoption of IFRS 16, Leases, effective as of 1 January 2019.

 

4.

Significant changes in the current reporting period

 

There have not been any significant changes in the current reporting period.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

5.

New standards, interpretations and amendments adopted by the Group

 

This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and discloses the new accounting policies that have been applied from 1 January 2019.

 

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. However, IFRS 16 has changed and expanded the disclosures required, in particular regarding how a lessor manages the risks arising from its residual interest in leased assets. The Group has adopted IFRS 16 by applying the modified retrospective approach and is therefore required to record any cumulative adjustment effect in equity at the time of first time application on 1 January 2019 with no restatement of comparative financial information. This chosen approach, allows the right-of-use asset to be recognised at the time of initial application in the amount corresponding to the respective lease liabilities. An adjustment is made by the amount of prepaid or deferred lease payments that are to be transferred to the right of use asset. Overall there is no effect on the equity upon first time adoption. The right-of-use asset is included as a separate balance sheet item.

 

IFRS 16 provides recognition options for short-term leases with a term of 12 months or less and lease accounting does not have to be applied to low-valued assets. The Group elected to make use of both options and has continued to recognise lease payments within the profit and loss statement.

 

The Group has applied the following practical expedients upon first time application:

 

●

Application of a single discount rate to a portfolio of leases with reasonably similar characteristics;

 

●

Leases with a remaining term of maximum 12 months from 1 January 2019 will be treated as short term;

 

●

Adjusting the right-of-use asset by the amount of the provision assessment for onerous contracts instead of applying a separate impairment test in accordance with IAS 36; and

 

●

Not to reassess whether a lease as defined by IFRS 16 contains or does not contain a lease if it already existed upon first–time adoption.

 

On adopting IFRS 16, lease liabilities related to leases previously classified as ‘operating leases’ under the principles of IAS 17 Leases were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 1.9%.

 

The following table shows the operating lease commitments disclosed applying IAS 17 at 31 December 2018, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of application:

 

		£’000
Operating lease commitments disclosed as at 31/12/18			24,402
Adjustments:
Discounted using the lessee’s incremental borrowing rate of 1.9% at date of initial application			(1,535	)
Obligations arising from time periods with reasonably certain extension and termination options			(6,407	)
Lease liability			16,460

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

5.

New standards, interpretations and amendments adopted by the Group (continued)

 

The change in accounting policy had the following effect on the Group:

 

		£’000
Depreciation charge for the right-of-use assets			(2,438	)
Interest expense on lease liabilities			294
Total cash outflow for leases			(2,331	)
Additions to the right-of-use assets			1,156
Termination of leases			(63	)
Carrying amount of the right-of-use assets at the end of the period			15,715

 

The Group’s accounting policy for leases:

 

The Group as lessee

 

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group, and each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant rate of interest on the remaining balance for the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

●

Fixed payments, less any lease incentive receivable;

 

●

Variable lease payments that are based on an index or a rate;

 

●

The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

 

●

Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

The lease payments are discounted using the interest rate implicit in the lease. If this rate cannot be determined, the lessee’s incremental borrowing rate (i.e. the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions) is used.

 

The right-of-use assets are measured at cost which comprise the following:

 

●

The initial measurement of lease liability;

 

●

Lease payments made at or before the commencement date (less lease incentives received);

 

●

Initial direct costs; and

 

●

Restoration costs.

 

Extension and termination options

 

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

 

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

 

●

The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

 

  

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

●

The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

 

●

A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

 

The Group did not make any such adjustments during the nine months ended 30 September 2019.

 

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

 

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss.

 

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

 

The Group as lessor

 

Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

 

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

 

Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

 

When a contract includes lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the contract to each component.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

6.

Revenue from contracts with customers

 

An analysis of the Group’s revenue by category is as follows:

 

		Nine months ended 30/09/2019				Nine months ended 30/09/2018
		£’000				£’000
Disaggregation of revenue
Sales of goods			37,391				31,073
Rendering of services			35,292				33,902
Royalty revenues			4,652				5,204
Rental income			27,095				24,222
Finance income			862				905
			105,292				95,306

 

All revenue is derived from contracts with customers.

 

There was no revenue recognised in the current reporting period that related to performance obligations that were satisfied in a prior reporting period.

 

7.

Income tax

 

Tax for the nine months ended 30 September is charged at 17% (2018 32%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income/(loss) for the nine month period

 

8.

Goodwill

 

		£’000
Cost
At 1 January 2019			4,122
At 30 September 2019			4,122
Carrying amount
At 30 September 2019			4,122
At 31 December 2018			4,122

 

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. At the statement of financial position date management did not identify any impairment indicators that would trigger the need to test for an impairment review.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

9.

Other intangible assets

 

		Purchased software				Capitalised development				Customer lists				Trademarks & patents				Other intangibles				Total
		£’000				£’000				£’000				£’000				£’000				£’000
Cost
At 1 January 2019			2,475				6,499				22,255				4,267				611				36,107
Additions			531				1,013				-				-				-				1,544
At 30 September 2019			3,006				7,512				22,255				4,267				611				37,651
Amortisation
At 1 January 2019			1,853				3,730				7,193				1,314				611				14,702
Charge for the period			185				791				1,392				192				-				2,560
Impairment loss			11				243				-				-				-				254
At 30 September 2019			2,049				4,764				8,585				1,506				611				17,516
Net book value
At 30 September 2019			957				2,748				13,670				2,761				-				20,135
At 31 December 2018			622				2,769				15,061				2,953				-				21,405

 

At the statement of financial position date, management reviewed all internally-generated intangible assets to assess their recoverability. Where internally-generated intangible assets were deemed irrecoverable they were impaired. Impairment of intangible assets due to development costs no longer expected to produce a viable product charged to profit and loss during the period was £254,000 (30 September 2018: £684,000).

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

10.

Property, plant and equipment

 

		Land, buildings and leasehold improvements				Technical equipment and machinery				Decommissioning and restoration costs				Slot machines				Motor vehicles				Factory and office equipment				Assets under construction				Total
		£’000				£’000				£’000				£’000				£’000				£’000				£’000				£’000
Cost
At 1 January 2019			2,258				196				1,443				58,169				87				24,196				77				86,426
Transfer to right-of-use asset			-				-								-				-				(291	)			-				(291	)
Additions			174				1				231				12,791				-				5,269				-				18,466
Disposals			(95	)			-				(10	)			(10,778	)			(43	)			(2,666	)			(72	)			(13,644	)
Reclassification			-				-								5				-				-				(5	)			-
At 30 September 2019			2,337				197				1,664				60,187				44				26,508				-				90,937
Depreciation
At 1 January 2019			1,148				103				1,075				39,843				78				11,708				-				53,955
Transfer to right-of-use asset			-				-								-				-				(147	)			-				(147	)
Charge for the period			253				19				71				7,045				5				3,253				-				10,646
Elimination on disposal			(95	)			-								(8,100	)			(43	)			(2,606	)			-				(10,844	)
At 30 September 2019			1,306				122				1,146				38,788				40				12,208				-				53,610
Net book value
At 30 September 2019			1,031				75				518				21,399				4				14,300				-				37,327
At 31 December 2018			1,110				93				368				18,326				9				12,488				77				32,470

 

At the statement of financial position date, management reviewed all of its property, plant and equipment to assess their recoverability. Based on this review, there was no impairment noted for the period.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

11.

Financial instruments

 

The following table combines information about the classes of financial instruments

 

		30/09/2019				31/12/2018
		£’000				£’000
Financial assets measured at amortised cost
Cash and bank balances			6,863				4,966
Finance lease receivables			1,678				10,685
Trade and other receivables			16,646				21,887
			25,187				37,538
Financial liabilities measured at amortised cost
Trade and other payables			19,029				17,317
Borrowings			22,700				42,395
Obligations under lease arrangements			15,656				189
			57,385				59,901

 

The directors consider that the carrying amount of all financial assets and financial liabilities approximates to their fair value.

 

12.

Related party transactions

 

Balances and transactions between the Combined Entities, which are related parties, have been eliminated on combination and are not disclosed in this note.

 

During the period, the Group entered into the following trading transactions with related parties:

 

		Sale of goods								Purchase of goods
		Nine months ended 30/09/2019				Nine months ended 30/09/2018				Nine months ended 30/09/2019				Nine months ended 30/09/2018
		£’000				£’000				£’000				£’000
Immediate parent company			-				-				2,039				1,624
Intermediate parent company			6,078				-				13,833				2,712
Other group companies			9,884				16,821				4,085				5,354
			15,962				16,821				19,957				9,690

 

Transactions with the immediate parent company of the companies within the Gaming Technology Group of Novomatic UK Limited do not eliminate on consolidation as Novomatic UK Limited is not included in the Gaming Technology Group of Novomatic UK Limited and therefore have been treated as related party transactions for the purpose of these unaudited condensed combined financial statements.

 

Transactions between the Gaming Technology Group of Novomatic UK Limited and Novomatic AG have been disclosed within ‘Intermediate parent company’.

 

Transactions between the Gaming Technology Group of Novomatic UK Limited and Novomatic companies, other than Novomatic UK Limited and Novomatic AG have been included within ‘Other group companies’.

 

 

The Gaming Technology Group of Novomatic UK Limited 

Notes to the unaudited condensed combined financial statements 

For the nine months ended 30 September 2019

 

13.

Subsequent events

 

On 1 October 2019, pursuant to a Share Purchase Agreement, dated as of 11 June 2019 (the “SPA”), by and between Inspired Gaming (UK) Limited, (the “Buyer”), and Novomatic UK Ltd., (the “Seller”), the Buyer completed its acquisition (the “Acquisition”) from the Seller of (i) all of the outstanding equity interests of each of (a) Astra Games Ltd. (“Astra”), (b) Bell-Fruit Group Limited, (c) Gamestec Leisure Limited, (d) Harlequin Gaming Limited, and (e) Playnation Limited, and (ii) 60% of the outstanding equity interests of Innov8 Gaming Limited (“Innov8”). The entities described in (i) and (ii), together with certain of their subsidiaries, comprise the “Gaming Technology Group of Novomatic UK Limited”. Prior to the completion of the Acquisition, Astra transferred to Novomatic Gaming UK Limited assets to the extent related to Astra’s casino operations. Following the completion of the Acquisition, in consideration for the re-negotiation of certain funding commitments, the Buyer transferred to the then minority equityholders of Innov8 certain of the Innov8 equity interests that the Buyer acquired in the Acquisition. Following such transfer, the Buyer held approximately 40% of the outstanding equity interests of Innov8.

 

 

13