ITEM

(a)(

). FINANCIAL STATEMENT SCHEDULES

SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

PLAYAGS, INC.

(PARENT COMPANY ONLY)

CONDENSED BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2019			2018
Assets
Current assets
Cash and cash equivalents	$	282		$	13,549
Intercompany Receivables		8			—
Prepaid expenses		26			49
Total current assets		316			13,598
Investment in subsidiaries		134,811			122,972
Other long-term assets		8			—
Total assets	$	135,135		$	136,570

Liabilities and Stockholders’ Equity
Current liabilities
Intercompany payables	$	1,351		$	766
Total current liabilities		1,351			766
Total liabilities		1,351			766
Stockholders’ equity:
Common stock		355			353
Additional paid-in capital		371,311			361,628
Retained earnings		(235,474	)		(222,403	)
Accumulated other comprehensive loss		(2,408	)		(3,774	)
Total stockholders’ equity		133,784			135,804
Total liabilities and stockholders’ equity	$	135,135		$	136,570

PLAYAGS, INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF OPERATIONS

(in thousands)

	Year ended December 31,
	2019			2018			2017
Revenue
Intercompany revenue	$	8		$	—		$	—
Total Revenue		8			—			—
Operating expenses
Selling, general and administrative		25		$	30		$	286
Total operating expenses		25			30			286
Loss from operations		(17	)		(30	)		(286	)
Other expense (income)
Equity in net loss of subsidiaries		(11,807	)		16,396			28,302
Interest expense		—			1,383			16,518
Loss on extinguishment and modification of debt		—			3,037			—
Other (Expense) Income		72			—			—
Loss before income taxes		(11,752	)		(20,846	)		(45,106	)
Income tax (expense) benefit		—			—			—
Net loss attributable to PlayAGS, Inc.		(11,752	)		(20,846	)		(45,106	)
Foreign currency translation adjustment		1,366			29			743
Total comprehensive loss	$	(10,386	)	$	(20,817	)	$	(44,363	)

PLAYAGS, INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, except per share data)

	Year ended December 31,
	2019			2018			2017
Cash flows from operating activities
Net loss	$	(11,752	)	$	(20,846	)	$	(45,106	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of deferred loan costs and discount		—			—			479
Payment-in-kind interest payments		—			(37,624	)		(1,108	)
Payment-in-kind interest capitalized		—			—			15,933
Write-off of deferred loan costs and discount		—			3,037			—
Equity income from subsidiaries		11,807			16,396			28,302
Changes in assets and liabilities that relate to operations:
Prepaid expenses		23			5			(14	)
Intercompany payable/receivable		570			365			306
Accounts payable and accrued liabilities		—			—			(36	)
Net cash provided by (used in) operating activities		648			(38,667	)		(1,244	)
Cash flows from investing activities
Investment in subsidiaries		(13,280	)		(12,100	)		(7,965	)
Distributions received from subsidiaries		—			—			8,084
Net cash (used in) provided by investing activities		(13,280	)		(12,100	)		119
Cash flows from financing activities
Repayment of seller notes		—			—			(6,870	)
Repayment of senior secured credit facilities		—			(115,000	)		—
Proceeds from employees in advance of common stock issuance		—			—			25
Repurchase of shares		(1,320	)		—			—
Proceeds from issuance of common stock		—			176,341			—
Proceeds from stock option exercise		685			774			—
Net cash (used in) provided by financing activities		(635	)		62,115			(6,845	)
(Decrease) increase in cash and cash equivalents		(13,267	)		11,348			(7,970	)
Cash and cash equivalents, beginning of period		13,549			2,201			10,171
Cash and cash equivalents, end of period	$	282		$	13,549		$	2,201

PLAYAGS, INC.

(PARENT COMPANY ONLY)

NOTES TO FINANCIAL STATEMENTS

NOTE

- BASIS OF PRESENTATION

The stand-alone parent company financial statements of PlayAGS, Inc., (the “ Parent Company”) should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes thereto. For purposes of these condensed financial statements, the Parent Company’s wholly owned and majority owned subsidiaries are recorded based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted since this information is included in the Company’s consolidated financial statements included elsewhere in this Form

-K.

NOTE

- COMMITMENTS AND CONTINGENCIES

The Parent Company is a holding company and, as a result, its ability to pay dividends is dependent on its subsidiaries’ ability to obtain funds and its subsidiaries' ability to provide funds to it. Restrictions are imposed by its subsidiaries' debt instruments, which significantly restrict certain key subsidiaries holding a majority of its assets from making dividends or distributions to the Parent Company. These restrictions are subject to certain exceptions for affiliated overhead expenses as defined in the agreements governing the debt instruments, unless certain financial and non-financial criteria have been satisfied.

Long-term debt of the Parent Company consisted of the senior secured PIK notes and the Amaya Seller Note as described below.

Senior Secured PIK Notes

January 30, 2018,

the Company used the net proceeds of the IPO and cash on hand to redeem in full its

11.25%

senior secured PIK notes due

2024

(the “PIK Notes”). On the redemption date, the aggregate principal amount of the PIK Notes outstanding was

$152.6

million (comprised of the original principal amount of

$115

million and the remaining principal amount comprised of capitalized interest) and the amount of accrued and unpaid interest was

$1.4

million. In connection with the redemption, the Company repaid all of the outstanding obligations in respect of principal, interest and fees under the PIK Notes and net deferred loan costs and discounts totaling

$3.0

million were written off and included in the loss on extinguishment and modification of debt.

Concurrently with the redemption of the PIK notes, the Company terminated its amended and restated note purchase agreement (the “A&R Note Purchase Agreement”), dated

May 30, 2017,

among the Company, AP Gaming Holdings, LLC, as subsidiary guarantor, Deutsche Bank AG, London Branch, as holder, and Deutsche Bank Trust Company Americas, as collateral agent, which governed the PIK Notes.

NOTE

- CASH FLOW STATEMENT SUPPLEMENTAL DISCLOSURES

The Parent Company charged

$9.0

million and

$10.9

million of stock-based compensation to additional paid-in capital during the year ended

December 31, 2019

and

2018,

respectively, the expense for which was contributed to the Parent Company’s subsidiaries that employ the employee recipients of the share-based awards. The Parent Company’s subsidiaries also paid for Parent Company expenses incurred in connection with the initial public offering, that occurred in

2018,

of approximately

$4.8

million that was recorded as a non-cash distribution to the Parent Company.

Prior to the consummation of the initial public offering,

170,712

shares of common stock were held by management. Pursuant to the Securityholders Agreement dated

April 28, 2014 (

the “Securityholders Agreement”), these shares were outstanding, but were

not

considered issued for accounting purposes as they contained a substantive performance condition, a “Qualified Public Offering”, as defined in the Securityholders Agreement, which had to be probable for the holders of these shares to benefit from their ownership. The initial public offering satisfied the substantive performance condition and as a result the shares and related proceeds of

$1.3

million were reclassified from other long-term liabilities to additional paid-in capital and considered issued for accounting purposes, a non-cash investing activity.