Inspired Compliance Plan Approved by Nasdaq

Gamblers Daily Digest -

Gaming technology and content provider Inspired Entertainment Inc. has secured approval from Nasdaq for its proposed plan to regain compliance with the US stock exchange’s listing requirements. The plan outlines Inspired Entertainment’s commitment to filing several outstanding financial reports by the end of February 2024.

This positive development follows a period of non-compliance triggered by delayed financial filings in late 2023. Inspired’s swift action and commitment to addressing the issues have paved the way for continued trading on the prestigious stock exchange.

Nasdaq contacted Inspired in November

Nasdaq first contacted Inspired in November 2023 regarding the company’s late filing of its quarterly results for the period ending September 30th. All publicly traded companies must file quarterly and annual financial reports with the SEC within strict deadlines to remain in compliance with exchange listing standards. 

Inspired’s delay in submitting its Q3 results placed the company in breach of Nasdaq’s rules. Initially, Nasdaq gave Inspired until January 22nd, 2024, to submit a formal plan detailing how it intended to regain compliance. 

However, Inspired missed this deadline by day, filing its plan on January 23rd instead. In the filing, Inspired cited accounting errors and the need to restate certain prior financial statements as the reasons for its late reports.

Inspired cited accounting errors related to capitalizing software development costs as the underlying cause of its late filings. The company said errors were first identified in financial statements dated January 1st, 2021.

 As a result, Inspired determined those prior statements could no longer be relied upon and needed to be restated. Identifying “material weaknesses” in the company’s internal financial controls also contributed to the filing delays. 

Inspired is now working to address these issues and complete the necessary restatements and regulatory filings. Thankfully, the New York-headquartered gaming technology and content provider has received approval from the Nasdaq Stock Market for its plan to regain compliance with the exchange’s listing rules. 

This approval allows Inspired to continue its listing on the Nasdaq exchange as it works to meet the minimum bid price requirement. Specifically, the gaming operator announced that it has been informed that Nasdaq has approved the company’s compliance plan to submit a Form 10-Q for the third quarter of 2023 by the end of the month.

Nasdaq accepts Inspired’s compliance plan

On February 5th, Inspired announced that the Nasdaq Hearings Panel had accepted the company’s plan to regain compliance with the $1.00 minimum bid price per share listing requirement. Inspired has been given until July 31st to evidence a closing bid price of $1.00 or more for a minimum of ten consecutive trading days.

The delisting process was initiated last August when Inspired was notified that it did not comply with the minimum bid price rule. Companies listed on Nasdaq are required to maintain a minimum bid price of $1.00 per share. 

Inspired now has additional time to implement its compliance plan while retaining its Nasdaq listing. The company aims to emulate the strategy employed by Esports Entertainment Group to remain compliant following their approval for continued Nasdaq listing last year.

Strategies for regaining compliance

Inspired Entertainment stated that its plan to regain compliance focuses on short-term and long-term strategies. In the company’s recent earnings announcement, it outlined initiatives to expand market penetration of its gaming content and improve financial performance.

The near-term strategy centers on cost control measures and adjusting capital expenditure outlays to improve liquidity. These steps are expected to enhance the operator’s financial flexibility and robustness, helping improve its outlook on the stock market.

Inspired Entertainment’s recently approved plan also commits the company to filing several outstanding financial reports with Nasdaq and the SEC by February 28th, 2024. More specifically, the company intends to submit several important reports to address its non-compliance with Nasdaq’s listing rules and regain its position on the exchange. 

These reports include the Form 10-Q for the quarter that ended September 30th, 2023, the Form 10-K/A for the fiscal year that ended December 31st, 2022, with restated financial statements, and Forms 10-Q/A for the first and second quarters of 2023 with restated financial statements. By filing these reports, Inspired aims to rectify any discrepancies and ensure compliance with Nasdaq’s regulations, ultimately restoring its standing on the exchange.

Over the longer term, Inspired aims to increase revenue and profitability through content launches across new markets along with additional functionalities for its virtual sports products. Expanding its US footprint also features prominently in strategic plans.

Virtual sports growth potential for recovery

As highlighted during Inspired’s latest earnings call, virtual sports remains a key focal point given the segment’s growth prospects.

The company achieved strong virtual sports revenue during 2022, reaching $15.8 million for the year. This represented a 23.3% increase compared to the previous year, outpacing the overall revenue expansion rate.

Inspired attributed the momentum of the virtual sport to new deployments and recently integrated products like virtual basketball and virtual cycling.

The pipeline of new virtual sports launches encompasses cricket, table tennis, and winter sports offerings. These upcoming product introductions align with Inspired’s strategy to continually enhance its virtual sports content portfolio.

Interactive business development

Inspired aims to increase market penetration for its interactive games through new customer acquisitions alongside virtual sports expansion efforts. Of course, it won’t be easy, considering that the company is competing against well-oiled casino operators, including gaming heavyweights such as Wynn Resorts, Penn Entertainment, and MGM.

During 2022, Inspired’s interactive business gained additional licenses for distribution in selective jurisdictions. The company also secured a landmark agreement with William Hill to deliver interactive content spanning virtual sports, slots, and table games.

This deal and other commercial agreements have Inspired Entertainment well-positioned to capitalize on interactive gaming growth opportunities in areas such as Latin America.

Wrapping Up

With Nasdaq’s approval of its compliance plan, Inspired Entertainment has averted the imminent threat of exchange delisting while charting a course to regain acceptable share price levels.

Effective execution of strategic plans focused on virtual sports, interactive gaming, and financial discipline could place Inspired on solid footing to achieve sustained profitability gains. If Inspired meets the minimum $1.00 bid price criteria for ten straight trading days before next July, its Nasdaq listing will be secured.

Author: Bryan Cook