Derivative Liability

6 Months Ended

Mar. 31, 2019

Derivative Liability [Abstract]

Derivative Liability

16. Derivative Liability

The Company’s Board of Directors adopted the Inspired Entertainment, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”) in September 2018 subject to the approval by the Company’s stockholders, which is being sought at the 2019 annual meeting of stockholders. Initial awards covering an aggregate of 542,770 restricted stock units (“RSUs”) were approved under the 2018 Plan with respect to fiscal 2018 to members of management and other participants contingent on approval by the Company’s stockholders. These initial awards are scheduled to vest in one-third installments on each of December 31, 2019, 2020 and 2021; however, in the event the Company’s stockholders do not approve the 2018 Plan by December 31, 2019, the first scheduled vesting date, the awards will be cancelled and award recipients would be eligible to receive a cash payment (provided they remain service providers to the Company) with respect to the value of one-third of the RSUs (to be determined based on the volume weighted average price of the Company’s common stock over the 30 trading days prior to the date of cancellation). This contingent cash payment obligation, which is not within the Company’s control, in conjunction with the cancellation of RSUs results in the awards being classified as a derivative liability until stockholder approval is obtained with fair value changes being recorded in the consolidated statements of operations and comprehensive loss. The fair value of the liability is calculated based on the value of the underlying common stock which was $6.10 per share on the grant date. Until stockholder approval is obtained, these awards are not considered issued and outstanding equity grants. 

The Compensation Committee approved further awards under the 2018 Plan in January 2019 covering an aggregate of 572,345 RSUs subject to the approval of the Company’s stockholders, 50% of which is performance-based and requires a service period through December 31, 2021 subject to certain exceptions. The Committee did not approve a contingent cash payment obligation in connection with the RSUs awarded in 2019. As a result, such RSUs would be cancelled in full and the award recipients would not receive a cash payment in consideration thereof in the event the Company’s stockholders do not approve the 2018 Plan by December 31, 2019.

See Note 13, “Derivatives and Hedging Activities,” for a discussion of the Company’s cross-currency swap.