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Independent Auditors Report ................................................

TABLE OF CONTENTS

Consolidated Financial Statements (Audited) ........................ 2


Consolidated Statements of Financial Position........................................ 2 Consolidated Statements of Changes in Equity........................................ 3 Consolidated Statements of Comprehensive Loss ................................... 4 Consolidated Statements of Cash Flows ................................................... 5

Notes to Consolidated Financial Statements........................... 6


1. 3. 5. 7. Nature of business ............................................................................. 6 Summary of significant accounting policies ..................................... 7 Cash and cash equivalents............................................................... 22 Accounts receivable ......................................................................... 23 2. Private Placement .............................................................................. 6 4. Recent Accounting Pronouncements .............................................. 21 6. Investment tax credits receivable ................................................... 22 8. Investment in marketable securities............................................... 23 9. Inventories ....................................................................................... 23 10. Receivable under finance lease ....................................................... 23 11. Restricted cash................................................................................. 24 12. Goodwill and intangible assets ....................................................... 25 13. Property and equipment ................................................................. 26 14. Income taxes .................................................................................... 27 15. Bank indebtedness ..........................................................................28 16. Accounts payable and accrued liabilities ........................................28 17. Provisions ........................................................................................28 18. Long-term debt ................................................................................ 29 19. Equipment Financing ...................................................................... 31 20. Convertible Debentures................................................................... 31 21. Commitments .................................................................................. 32 22. Share capital .................................................................................... 33 23. Contributed surplus......................................................................... 34 24. Major customers .............................................................................. 36 25. Financial instruments ..................................................................... 36 26. Fair value ......................................................................................... 39 27. Capital management........................................................................ 39 28. Geographic information ................................................................. 40 29. Statement of cash-flows ................................................................. 40 30. Related party transactions .............................................................. 41 31. Contingency ..................................................................................... 41 32. Subsequent Events .......................................................................... 41 33. Revenues .......................................................................................... 42 34. Business Combination ..................................................................... 42 35. Expenses Classified By Nature ........................................................ 45 36. Net earnings per share .................................................................... 46

Independent Auditors Report


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 1

TO THE SHAREHOLDERS OF AMAYA GAMING GROUP INC.


We have audited the accompanying consolidated financial statements of Amaya Gaming Group Inc. and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2012 and December 31, 2011 and the consolidated statements of comprehensive loss, changes in equity and cash flows for the years ended December 31, 2012 and December 31, 2011, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements


Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Amaya Gaming Group Inc. and its subsidiaries as at December 31, 2012 and December 31, 2011 and their financial performance and their cash flows for the years ended December 31, 2012 and December 31, 2011 in accordance with International Financial Reporting Standards. Signed Richter LLP1 Chartered Professional Accountants Montral, Qubec April 29, 2013
1

CPAauditor,CApermitnoA112505

2 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Consolidated Financial Statements (Audited)


Consolidated Statements of Financial Position
December 31, 2012 $ December 31, 2011 $

ASSETS Current Cash and cash equivalents (note 5) Investment tax credits receivable (note 6) Accounts receivable (note 7) Investment in marketable securities (note 8) Income tax receivable Inventories (note 9) Current maturity of receivable under finance lease (note 10) Prepaid expenses and deposits Restricted cash (note 11) Goodwill and intangible assets (note 12) Property and equipment (note 13) Deferred development costs (net of accumulated amortization of $1,314,318 ; 2011 - $1,036,521) Receivable under finance lease (note 10) Investment tax credit receivable long-term (note 6) Deferred income taxes (note 14) LIABILITIES Current Bank indebtedness (note 15) Accounts payable and accrued liabilities (note 16) Provisions (note 17) Customer deposits Income tax payable Current maturity of long-term debt (note 18) Current maturity of equipment financing (note 19) Deferred revenue Convertible debentures (note 20) Long-term debt (note 18) Equipment financing (note 19) Provisions (note 17) Holdback of purchase price (note 34) Deferred income taxes (note 14) Commitments (note 21) and contingency (note 31) SHAREHOLDERS EQUITY Share capital (note 22) Contributed surplus (note 23) Accumulated other comprehensive income (loss) Deficit

31,327,745 787,449 45,235,016 422,368 7,530,793 3,611,295 8,809,827 97,724,493 5,093,108 180,732,715 36,674,350 1,485,824 10,764,292 2,350,386 14,249,436 349,074,604

3,049,387 433,595 4,732,500 2,331,999 178,704 983,246 2,269,924 2,348,144 16,327,499 118,585 10,370,957 6,779,715 668,943 8,292,839 1,215,487 3,427,448 47,201,473

32,451,222 7,539,742 13,902,892 1,498,596 6,133,862 1,019,985 62,546,299 149,320 23,118,845 99,366,585 1,114,925 5,260,235 4,974,500 6,964,418 203,495,127 154,771,764 2,351,415 (835,371) (10,708,331) 145,579,477 349,074,604

2,096,656 2,403,427 300,000 4,800,083 46,719 725,000 5,571,802 42,921,994 1,814,990 363,021 (3,470,334) 41,629,671 47,201,473

See accompanying notes Approved and authorized for issue on behalf of the Board on April 29, 2013

(Signed) Daniel Sebag, Director Daniel Sebag, CFO

(Signed) David Baazov, Director David Baazov, CEO

Consolidated Statements of Changes in Equity


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 3 For the year ended December 31, 2012
Share capital Amount $ Contributed Surplus $ Accumulated Other Comprehensive Income (loss) $ Total Shareholders Equity $

Number

Deficit $

Balance January 1, 2011 Issue of common shares in relation to private placement Issue of common shares in relation to Chartwell Technologies purchase Transaction costs relating to the issue of units Deferred income taxes in relation to transaction costs Issue of warrants in relation to private placement Issue of common shares in relation to exercised warrants Issue of common shares in relation to exercised employee stock options Stock based compensation Net loss Other comprehensive income (loss) Balance December 31, 2011 Balance January 1, 2012 Deferred income taxes in relation to transaction costs Issue of equity component of convertible debentures and warrants, net of transaction costs Issue of common shares in relation to exercised warrants Issue of common shares in relation to exercised employee stock options Stock based compensation Issue of common shares in relation to conversion of convertible debentures Issue of equity in relation to private placement Transaction costs in relation to private placement Net effect of transactions with noncontrolling interest (note 34) Net loss Other comprehensive income (loss) Balance December 31, 2012

39,544,923 3,300,000

18,743,763 10,230,000

1,261,344

(1,544,309)

18,460,798 10,230,000

2,779,356 4,321,668

7,921,165 (947,930) 500 (132,858) 6,890,092

132,858 (522,960)

7,921,165 (947,930) 500 6,367,132

172,000 50,117,947 50,117,947

217,262 42,921,994 42,921,994 490,000

(45,262) 989,010 1,814,990 1,814,990 (384,000)

(1,926,025) (3,470,334) (3,470,334)

363,021 363,021 363,021

172,000 989,010 (1,926,025) 363,021 41,629,671 41,629,671 106,000

717,534

1,411,107

685,925 (270,603)

685,925 1,140,504

730,450

1,321,206

(292,806) 880,825

1,028,400 880,825

1,273,228 26,520,600 79,359,759

4,137,999 107,408,430 (2,918,972) 154,771,764

(82,916) 2,351,415

(77,041) (48,604) (7,112,352) (10,708,331) (1,198,392) (835,371)

3,978,042 107,408,430 (2,918,972) (48,604) (7,112,352) (1,198,392) 145,579,477

See accompanying notes

Consolidated Statements of Comprehensive Loss


4 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.
2012 $ For the year ended December 31, 2011 $

Revenues (note 33) Cost of products (note 35) Gross profit Expenses Selling (note 35) General and administrative (note 35) Financial (note 35) Acquisition-related costs (note 34) Realized gain on sale of marketable securities Loss before income taxes Current income taxes (note 14) Deferred income taxes (note 14) Net loss Other Comprehensive income (loss), net of tax Unrealized gain on marketable securities Foreign currency translation loss Total Comprehensive Loss Basic and diluted earnings per common share (note 36)

76,435,009 1,224,795 75,210,214 11,683,890 61,676,556 6,816,527 6,028,339 86,205,312 (913,352) (10,081,746) 807,336 (3,776,730) (7,112,352) (1,198,392) (1,198,392) (8,310,744) $(0.11)

18,375,249 1,357,225 17,018,024 6,481,209 13,743,139 679,820 20,904,168 (3,886,144) 42,833 (2,002,952) (1,926,025) 596,189 (233,168) 363,021 (1,563,004) $ (0.04)

See accompanying notes

Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 5

Consolidated Statements of Cash Flows


2012 $ For the year ended December 31, 2011 $

Operating activities Net loss Interest accretion on promissory notes Interest accretion on convertible debentures Interest accretion on long term debt Gain on sale of property and equipment Unrealised loss on foreign exchange Unrealised gain on marketable securities Depreciation of property and equipment Amortization of intangible assets Amortization of deferred development costs Transfer of inventory to property and equipment Deferred income taxes Stock-based compensation Finance lease Accrued acquisition-related costs Accrued transaction costs Research and development tax credits Changes in non-cash operating elements of working capital (note 29) Financing activities Bank indebtedness Repayment of promissory notes Proceeds from special warrants Issuance of capital stock Transaction costs relating to the issuance of capital stock Issuance of capital stock in relation with exercised warrants Issuance of capital stock in relation with exercised ESOP Repayment of long-term debt Investing activities Deferred development costs Additions to property and equipment Acquired intangible assets Disposal of license and software Proceeds from sale of property and equipment Proceeds from sale of marketable securities Investment in marketable securities Investment in subsidiaries (net of cash acquired) (note 29) Increase (decrease) in cash and cash equivalents Cash and cash equivalents beginning of year Unrealized foreign exchange difference in cash and cash equivalents Cash and cash equivalents end of year

(7,112,352) 1,185,219 274,937 (87,597) (319,659) (913,352) 3,486,934 6,156,877 314,967 (1,710,701) (3,776,730) 880,825 (3,812,824) 800,000 (118,137) 441,031 (4,310,562) (22,105,906) (26,416,468) (2,096,656) 26,597,603 107,408,430 (2,918,972) 1,140,504 1,028,400 (300,000) 130,859,309 (1,572,361) (6,685,044) (2,659,425) 1,004,940 352,668 (66,415,043) (75,974,265) 28,468,576 3,049,387 (190,218) 31,327,745

(1,926,025) 9,280 (262,633) 797,804 978,696 383,504 (2,002,952) 989,009 (7,783,408) 579,517 (8,237,208) (2,960,495) (11,197,703) (250,008) (460,443) 10,230,000 (947,930) 6,367,132 172,000 (300,000) 14,810,751 (960,246) (2,323,390) (3,810,702) 12,204,566 (1,166,424) (13,737,675) (9,793,871) (6,180,823) 9,260,960 (30,750) 3,049,387

See accompanying notes

Notes to Consolidated Financial Statements


1. Nature of business
Founded in 2004, Amaya Gaming Group Inc. (Amaya or Corporation) is engaged in the design, development and distribution of technology-based gaming solutions for the regulated gaming industry worldwide. Amayas solutions include a lottery gaming system, an online gaming platform, a hospitality entertainment system, a multi-gaming platform and a central reporting module. The Corporation is listed on the TSX Venture Exchange and is incorporated and domiciled in Canada. The Corporations head and registered office is located at 7600 Trans Canada, Pointe-Claire, Quebec, H9R 1C8. On July 14, 2011, the Corporation acquired Chartwell Technology Inc. (Chartwell). Chartwell, headquartered in Calgary, Alberta, develops, markets, licenses, implements and supports gaming applications and entertainment content for the internet and remote platforms. The software products and games are designed for deployment in gaming, entertainment and promotional applications. On April 2, 2012 the Corporation acquired 80.79% of the issued share capital of CryptoLogic Ltd (CryptoLogic). CryptoLogic is a software developer and supplier of interactive gaming software and solutions servicing the regulated gaming market worldwide. CryptoLogic, through its wholly-owned subsidiaries, provides software licensing, e-cash management, marketing support and customer support services to an international client base who operate solely under government authority in regulated gaming jurisdictions. By July 30, 2012 the Corporation, through the Compulsory Acquisition, had control of 100% of the issued share capital of CryptoLogic. On November 1, 2012 the Corporation acquired Ongame Network Ltd. (Ongame). Ongame is a leading business-to-business online poker network. Ongame's global online poker network includes 25 of the e-gaming industry's strongest brands, owned by a total of 19 operators in regulated jurisdictions, and currently reaches more than 20 million customers in over 25 markets. Ongame also operates regional networks in France, Italy and Spain. On November 5, 2012 the Corporation acquired Cadillac Jack Inc. (Cadillac Jack). Cadillac Jack is a leading supplier of products and technologies for the global gaming market with gaming machine placements in more than 200 venues in the United States and Mexico. Cadillac Jack focuses on serving small to medium-sized casinos and bingo halls including Native American Class II and Class III, and commercial locations with a highly diversified Class II presence in 13 jurisdictions. Cadillac Jack's gaming machines consist of server-based and stand-alone video reels, multilevel and wide-area progressive products, video lottery terminals, and slot management systems, supported by a library of more than 100 proprietary titles

6 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

2. Private Placement
On June 15, 2011, the Corporation completed a private placement offering of 3,300,000 common shares at a price of $3.10 per common share for aggregate gross proceeds of $10,230,000. The offering was conducted through a syndicate of underwriters that were paid an aggregate underwriting commission of $613,800 and granted compensation warrants to purchase an aggregate number of 198,000 common shares at a price of $3.10 per common share. The compensation warrants expire on June 15, 2013. The total transaction costs of the offering, including the underwriters compensation warrants, amounted to $947,930.

On June 27, 2012, the Corporation completed a private placement offering of 25,568,400 common shares at a price of $4.05 Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 7 per common share for aggregate gross proceeds of $103,552,020. On July 12, 2012 the Corporation completed the final closing under its private placement financing issuing 952,200 additional common shares at $4.05 per common share, for additional gross proceeds of $3,856,410. Gross proceeds raised under the Private Placement, including proceeds raised under the first closing, is $107,408,430. The total transaction costs of the offering, including underwriters compensation, amounted to $2,918,972.

3. Summary of significant accounting policies


BASIS OF PRESENTATION
These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and interpretations of the International Financial Reporting Standards Interpretations Committee (IFRIC). These consolidated financial statements were prepared on a going concern basis, under the historical cost convention, except for the revaluation of certain financial instruments.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries. A wholly owned subsidiary is an entity over which the Corporation has control, where control is defined as the power to govern financial and operating policies. On consolidation, all significant inter-entity transactions and balances have been eliminated. As at December31, 2012, the consolidated financial statements included fifty-three wholly owned subsidiaries. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity which is subject to joint control. The Corporations interests in jointly controlled entities are accounted for by proportionate consolidation. The Corporation combines its share of the joint ventures individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Corporations financial statements. At December 31, 2012, the joint-venture has no significant impact on the Corporations consolidated financial statements.

REVENUE RECOGNITION
8 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Revenue is recognized when all the following criteria are met: the Corporation has transferred to the buyer the significant risks and rewards; the amount of revenue can be reliably measured; it is probable that the economic benefits associated with the transaction will flow to the Corporation; and the costs incurred or to be incurred in respect of the transaction can be reliably measured.

Multiple-element revenue arrangements


Certain of the Corporations contracts include license fees, training, installation, consulting, maintenance, product support services and periodic upgrades. Where such agreements exist, the amount of revenue allocated to each element is based upon the relative fair values of the various elements. The fair values of each element are determined based on current market price of each of the elements when sold separately. Revenue is only recognized when, in managements judgment, the significant risks and rewards of ownership have been transferred or when the obligation has been fulfilled. In addition to the aforementioned general policies, the following are the specific revenue recognition policies for each major category of revenue:

Product Sales
Revenue from product sales is generally recognized when the product is shipped to the customer and when there are no unfulfilled Corporation obligations that affect the customers final acceptance of the arrangement. Any cost of warranties and remaining obligations that are inconsequential or perfunctory are accrued when the corresponding revenue is recognized.

Participation arrangements
In contracts that stipulate profit sharing arrangements, revenues are earned based on revenue splits established in the contracts and can vary depending on the contracts. Revenues are recognized when performance has been achieved and collectability is reasonably assured.

Service fees
Service fees are made up of network administration and hosting. The Corporation provides continuing services for a fixed monthly rate and fees are reported on an accrual basis during the period of service.

Software Licensing
License fees, including fees from master license agreements, most of which are contingent upon licensees customer usage, are calculated as a percentage of each licensees level of activity. The license fees are recognized on an accrual basis as earned.

Hosted Casino
Revenues from Hosted Casino are recognized as the services are performed, on a daily basis, at the time of the gambling transactions.

Lease revenues
In the course of its normal business the Corporation enters into lease agreements for its gaming equipment.

Assets subject to finance leases are initially recognized at an amount equal to the net investment in the lease, which is the fair Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 9 value of the asset, or, if lower, the present value of the minimum lease payments. Revenue is recognized on the basis of policy for product sales. Interest income is subsequently recognized over the term of the applicable leases based on the effective interest rate method. Interest income is grouped with the revenues, in the statement of comprehensive income (loss). Assets under operating leases are included in property and equipment. Lease income from operating leases is recognized on a straight-line basis over the term of the lease and is included in revenues, in the statement of comprehensive income (loss).

TRANSLATION OF FOREIGN OPERATIONS AND FOREIGN CURRENCY TRANSACTIONS

Functional and presentation currency


IAS 21 (Effects of Changes in Foreign Currency Rates) requires entities to consider primary and secondary indicators when determining the functional currency. Primary indicators are closely linked to the primary economic environment in which the entity operates and are given more weight. Secondary indicators provide supporting evidence to determine an entitys functional currency. Once the functional currency of an entity is determined, it should be used consistently, unless significant changes in economic facts, events and conditions indicate that the functional currency has changed. A change in functional currency is accounted for prospectively from the date of change by translating all items into the new functional currency using the exchange rate at the date of change. Based on an analysis of the primary and secondary indicators, the functional currency of each of the groups entities have been determined. These consolidated financial statements are presented in Canadian dollars, which in the opinion of management is the most appropriate presentation currency in view of its operations in the global marketplace, user needs and a comparison with its major competitors.

Transactions and balances


Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of comprehensive income (loss).

Group companies
Each foreign operation determines its own functional currency and items included in the financial statements of each foreign operation are measured using that functional currency. The results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each statement of comprehensive income (loss)are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (iii) all resulting exchange differences are recognized in other comprehensive income (loss). The following functional currencies are referred to herein below:

10 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Currency Symbol

Currency Description

CAD USD EUR KES UGX GBP AMD MDL DOP AUS CHF DKK JPY NOK MXN SEK

Canadian Dollar United States Dollar Euro Kenyan shilling Ugandan shilling Pound Sterling Armenian Dram Moldovan Leu Dominican Peso Australian Dollar Swiss Franc Danish Krone Japanese Yen Norwegian Kroner Mexican Pesos Swedish Krona

BUSINESS COMBINATION
Business combinations are accounted for using the acquisition method. Under this method, the identifiable assets acquired and liabilities assumed, including contingent liabilities, are recognized, regardless of whether they have been previously recognized in the acquirees financial statements prior to the acquisition. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated statement of financial position at their fair values. Goodwill is recorded when the identifiable intangible assets have been determined. Goodwill is the excess of the fair value of the consideration transferred over the fair value of the Corporations share in the acquirees net identifiable assets on the date of acquisition. Any excess of the identifiable net assets over the consideration transferred is recognized in income immediately. The consideration transferred by the Corporation to acquire control of a subsidiary is calculated as the sum of the acquisitiondate fair values of the assets transferred, liabilities incurred and equity interests issued by the Corporation, including the fair value of all the assets and liabilities resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred.

OPERATING SEGMENTS
The Corporations operating segments are organized around the markets it serves and are reported in a manner consistent with the internal reporting provided to the Chairman and Chief Executive Officer, the Corporations chief operating decisionmaker. An operating segment is a component of the Corporation that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the Corporation. Currently the Corporation has only one operating segment, Diversified Gaming Solutions.

FINANCIAL INSTRUMENTS

Financial assets
Financial assets are initially recognized at fair value and are classified either as fair value through profit and loss; availablefor-sale; held-to-maturity; or loans and receivables. The classification depends on the purpose for which the financial instruments were acquired and their characteristics. Except in very limited circumstances, the classification is not changed subsequent to initial recognition.

Fair Value through Profit or Loss


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 11 Financial assets at fair value through profit or loss are financial assets held-for-trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by Management. Financial assets classified at fair value through profit or loss are measured at fair value, with the realized and unrealized changes in fair value recognized each reporting period on the consolidated statement of comprehensive income (loss). No financial assets are classified as fair value through profit or loss.

Available-for-sale
Available-for-sale assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in other non-current financial assets unless management intends to dispose of the investment within twelve months of the consolidated statements of financial position date. Financial assets classified as available-for-sale are carried at fair value with the changes in fair value recorded in other comprehensive income (loss), except for investments in equity instruments that do not have a quoted market price in an active market which are measured at cost. Interest on available-for-sale assets is calculated using the effective interest rate method and is recognized in the net income (loss). When a decline in fair value is determined to be other-than-temporary, the cumulative loss included in accumulated other comprehensive income (loss) is removed and recognized in the consolidated statement of comprehensive income (loss). Gains and losses realized on disposal of available-for-sale securities are recognized in comprehensive income (loss). Investments in marketable securities were classified as available-for-sale.

Held-to-maturity and loans and receivables


Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the intention and ability to hold to maturity. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than twelve months after the consolidated statements of financial position date, which are classified as non-current assets. Financial instruments classified as held-to-maturity and loans and receivables are initially recorded at fair value and subsequently measured at amortized cost using the effective interest method. No financial assets are held-tomaturity. Cash and cash equivalents, restricted cash, receivable under finance lease, accounts receivable are classified as loans and receivables.

Impairment
At the end of each reporting period, the Corporation assesses whether a financial asset or a group of financial assets, other than those classified as fair value through profit and loss, is impaired. If there is objective evidence that impairment exists, the loss is recognized in the consolidated statements of comprehensive income (loss). The impairment loss is measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the consolidated statement of comprehensive income (loss).

Financial Liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss, or other financial liabilities. Financial liabilities are initially measured at fair value and subsequently measured at amortized cost using the effective interest rate method for liabilities that are not hedged and fair value for liabilities that are hedged. All financial liabilities are classified as other liabilities.

Transaction costs
12 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities that are classified as Through Profit or Loss) are added to or deducted from the fair value of the financial instrument on initial recognition. These costs are expensed to interest on the consolidated statement of comprehensive income (loss) over the term of the related financial asset or financial liability using the effective interest method. When a debt facility is retired by the Corporation, any remaining balance of related debt transaction costs is expensed to interest on the consolidated statement of comprehensive income (loss) in the period that the debt facility is retired. Transactions costs related to financial instruments at fair value through profit or loss are expensed when incurred.

Compound Financial Instruments


The Corporations compound financial instruments comprise of its special warrants that entitle the holder to receive a unit composed of one convertible debenture and warrants. The convertible debentures can be converted to common shares at the option of the holder, and the number of shares to be issued does not vary with changes in fair value. As a result the instrument is composed of one liability component, one equity component for the conversion option and warrants. The liability component of the convertible debentures is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The residual amount between the total fair value of the special warrants and the fair value of the liability component has been allocated on initial recognition to the equity component for conversion and the warrants. The allocation between the two equity components was based on a relative fair value method. Any directly attributable transaction costs are allocated to the liability, the conversion option and the warrants in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of the convertible debentures is measured at

amortized cost using the effective interest method. The equity components of the convertible debentures are not re-measured subsequent to initial recognition.

Embedded derivatives
Derivatives may be embedded in other financial and non-financial instruments (the host instrument). Embedded derivatives are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host instrument, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not held-for-trading or designated at fair value. These embedded derivatives are measured at fair value with subsequent changes recognized in the consolidated statement of comprehensive income (loss). The Corporation has no embedded derivatives.

Determination of fair value


The fair value of a financial instrument on initial recognition is the transaction price, which is the fair value of the consideration given or received. Subsequent to initial recognition, fair value is determined by management using available market information or other valuation methodologies. For the Corporations financial instruments which are recognized in the statement of financial position at fair value, the inputs used in measuring fair values are classified in the following levels in the fair value hierarchy: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 Inputs for the asset or liability that are not based on observable market data.

The Corporation estimates the fair value of its financial instruments based on current interest rates, market values and Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 13 pricing of financial instruments with comparable terms. Fair value estimates are made as of a specific point in time, using available information about the financial instrument. These estimates are subjective in nature and may not be determined with precision.

Comprehensive income (loss)


Comprehensive income (loss) is composed of the Corporations net earnings and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized effect of (i) foreign currency translation of foreign operations; and (ii) gain or loss on investment in marketable securities, all net of income taxes. The components of comprehensive income (loss) are presented in the consolidated statements of changes in equity.

RESEARCH AND DEVELOPMENT INVESTMENT TAX CREDITS


The Corporation claims research and development investment tax credits as a result of incurring scientific research and experimental development expenditures. Research and development investment tax credits are recognized when the related expenditures are incurred, and there is reasonable assurance of their realization. Investment tax credits are accounted for by the cost reduction method, whereby the amounts of tax credits are applied as a reduction of the cost of the deferred development costs.

INVENTORY VALUATION
Inventories are priced at the lower of cost or net realizable value. Cost is determined on a weighted average basis. The cost of inventories comprises all costs of purchase and other costs incurred in bringing the inventory to its present location and condition. Raw materials and purchased finished goods are valued at purchase cost. Net realizable value represents the estimated selling price for inventory less all estimated costs necessary to make the sale.

PREPAID EXPENSES
Prepaid expenses consist of amounts paid in advance or deposits made for which the Corporation will receive goods or services within the next normal operating cycle.

PROPERTY AND EQUIPMENT


Property and equipment which have a finite life are recorded at cost less accumulated depreciation and impairment losses. Depreciation is expensed from the month the corresponding assets are available for use over the estimated useful lives at the following rates, which are intended to reduce the carrying value to the estimated residual value: Revenue-producing assets Machinery and equipment Furniture and fixtures Computer equipment Declining balance Declining balance Declining balance Declining balance 20% 20% 20% 20%

INTANGIBLE ASSETS
Software Licenses Declining balance Straight-line 20% Over the term of licenses

ACQUISITION-RELATED INTANGIBLES
14 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Software Technology Customer Relationships

Straight-line Straight-line

5 years 15 years

The depreciation method, useful life and residual values are assessed annually and the assets are tested for impairment, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in earnings. Expenditures for repairs and maintenance are expensed as incurred.

GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business acquisition. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment at least annually or more frequently if circumstances such as significant declines in expected sales, earnings or cash flows indicate that it is more likely than not that the asset might be impaired.

RESEARCH AND DEVELOPMENT


Research and development costs are expensed except in cases where development costs meet certain identifiable criteria for deferral. Development costs, which have probable future economic benefit, can be clearly defined and measured, and are incurred for the development of new products or technologies, are capitalized. These development costs net of related research and development investment tax credits are not amortized until the products or technologies are commercialized, at which time, they are amortized over the estimated life of the commercial production. The amortization method and the life of the commercial production are assessed annually and the assets are tested for impairment.

IMPAIRMENT OF NON-CURRENT ASSETS


At the end of each reporting period, the carrying amounts of property, plant and equipment and intangible assets with finite useful lives are assessed to determine if there is any evidence that an asset is impaired. If there is such evidence, the recoverable amount of the asset is estimated. The recoverable amount of intangible assets with indefinite useful lives or those are not ready for use is estimated on the same date each year. The recoverable amount of an asset or a cash generating unit is the higher of value-in-use and fair value less costs to sell. Assets that cannot be tested individually for the impairment test are grouped into the smallest group of assets that generates cash inflows through continued use that are largely independent of the cash inflows from other assets or groups of assets (cash-generating unit or CGU). For the impairment test of goodwill, goodwill has been allocated to one group of CGUs, so that the level at which the impairment is tested represents the lowest level at which management monitors goodwill for internal management purposes, in accordance with operating segment. Goodwill acquired in a business combination is allocated to the group of CGUs that is expected to benefit from synergies of the related business combination. The Corporations corporate assets do not generate separate cash flows. If there is evidence that a corporate asset is impaired, the recoverable amount is determined for the CGU to which the corporate asset belongs. Impairments are recorded when the carrying amount of an asset or its CGU is higher than its recoverable amount. Impairment charges are recognized in income or loss.

Impairment losses recognized for a CGU (or group of CGU) first reduce the carrying amount of any goodwill allocated to that Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 15 CGU and then reduce the carrying amounts of the other assets of the CGU (or group of CGU) pro rata on the basis of the carrying amount of each asset in the CGU (or group of CGU). An impairment loss recognized for goodwill may not be reversed. On each reporting date, the Corporation assesses if there is an indication that impairment losses recognized in previous periods for other assets have decreased or no longer exist. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The increased carrying amount of an asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized.

TAXATION
Income tax expense represents the sum of current and deferred taxes. Current and deferred taxes are recognized in the consolidated statement of comprehensive income (loss), except to the extent it relates to items recognized in other comprehensive income (loss) or directly in equity.

Current tax
The tax currently payable is based on taxable income for the year. Taxable income differs from earnings as reported in the consolidated statements of comprehensive income (loss) because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Corporations liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable income will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable income nor the accounting earnings. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable income against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
16 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Corporation intends to settle its current tax assets and liabilities on a net basis.

STOCK-BASED COMPENSATION
The Corporation has one share option plan and accounts for grants under this plan in accordance with the fair value-based method of accounting for stock-based compensation. Compensation expense for equity settled stock options awarded to employees under the plan is measured at the fair value at the grant date using the Black-Scholes valuation model and is recognized using the graded vesting method over the vesting period of the options granted. Compensation expense recognized is adjusted to reflect the number of options that has been estimated by management for which conditions attaching to service will be fulfilled as of the grant date until the vesting date so that the ultimately recognize expense corresponds to the options that have actually vested. The compensation expense credit is attributed to contributed surplus when the expense is recognized in income or loss. When options are exercised or shares are purchased, any consideration received from employees as well as the related compensation cost recorded as contributed surplus are credited to share capital. Non-employee equity-settled share-based payments are measured at the fair value of the goods and services received, except where that fair value cannot be estimated reliably. If the fair value cannot be measured reliably, non-employee equity-settled share-based payments are measured at the fair value of the equity instrument granted, measured at the date the entity obtains the goods or the counterparty renders the service. The Corporation subsequently measures non-employee equitysettled share-based payments at each vesting period and settlement date, with any changes in fair value recognized in the consolidated statement of comprehensive income (loss). Stock-based compensation expense is recognized over the contract life of the options or the option settlement date, whichever is earlier.

EARNINGS PER SHARE


Basic earnings per common share are computed by dividing the earnings for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the treasury stock method by dividing the earnings for the period applicable to common shares by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued. Dilutive earnings per share comprise of employee share-based compensation and broker warrants and common shares issuable upon the exercise of the conversion option of the convertible debentures.

LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the arrangement conveys a right to use the asset. When substantially all risks and rewards of ownership are transferred from the lessor to the lessee, lease transactions are accounted for as finance leases. All other leases are accounted for as operating leases.

Corporation is the lessee


Leases of assets classified as finance leases are presented in the consolidated statements of financial position according to their nature. The interest element of the lease payment is recognized over the term of the lease based on the effective interest rate method and is included in financial expense, in the statement of comprehensive income (loss). Payments made under operating leases are recognized in the consolidated statement of comprehensive income (loss) on a straight-line basis over the term of the lease.

PROVISIONS
Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 17 Provisions represent liabilities to the Corporation for which the amount or timing is uncertain. Provisions are recognized when the Corporation has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the present value of the expected expenditures required to settle the obligation using a discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provisions due to the passage of time is recognized in interest on the consolidated statement of comprehensive income (loss). Provisions are not recognized for future operating losses. The Corporations current product warranty includes a twelve month warranty period for defects in design, materials and workmanship. Provisions for product warranties are recorded at the time of shipment of products to customers. The Corporation accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Corporation periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve for actual historical experience. As at December 31, 2012, the Corporation did not have any significant provision for product warranty (December 31, 2011 $nil).

Provision for jackpot


Several of the Corporations licensees participate in progressive jackpot games. Each time a progressive jackpot game is played, a preset amount is added to a jackpot for that specific game or group of games. Once a jackpot is won, the progressive jackpot is reset with a predetermined amount. The Corporation maintains a provision for the reset for each jackpot and the progressive element added as the jackpot game is played. The provision for jackpots at the reporting date is included in provisions (see note 17). The provision is sufficient to cover the full amount of any required payout.

ROYALTIES
The Corporation licenses various royalty rights from several owners of intellectual property rights. These rights are used to produce games for use in Hosted Casino and Branded Games. Generally, the arrangements require material prepayments of minimum guaranteed amounts which have been recorded as prepayments in the consolidated statements of financial position. These prepaid amounts are amortized over the life of the arrangement as gross revenue is generated or on a straightline basis if the underlying games are expected to have an effective royalty rate greater than the agreed amount. The amortization of these amounts is recorded as royalty expense. The Corporation regularly reviews its estimates of future revenues under its license arrangements.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS


The preparation of financial statements in conformity with IFRS requires Management to make estimates and assumptions that can have a significant effect on the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are significant when: the outcome is highly uncertain at the time the estimates are made; or if different estimates or judgments could reasonably have been used that would have had a material impact on the consolidated financial statements.

The consolidated financial statements include estimates based on currently available information and Managements
18 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

judgment as to the outcome of future conditions and circumstances. Management uses historical experience, general economic conditions and trends, as well as assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their underlying assumptions are reviewed on a regular basis and the effects of any changes are recognized immediately. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions. The following areas require managements most critical estimates and judgments.

ESTIMATES

Identifiable intangible assets and goodwill


In the consolidated statement of financial position, the Corporation recorded during the year an additional amount of $172,010,110 related to identifiable intangible assets and goodwill that arise out of business combinations during the year (note 34). The Corporation applied the acquisition method of accounting to these transactions. In measuring the fair value of the assets acquired and the liabilities assumed and estimating their useful lives, Management used significant estimates and assumptions regarding cash flow projections, economic risk and weighted cost of capital. These estimates and assumptions determine the amount allocated to identifiable intangible assets and goodwill, as well as the amortization period for identifiable intangible assets with finite lives. If results differ from estimates, the Corporation may increase amortization or impairment charges.

Goodwill
The recoverable amount of the operating segment, representing the group of CGUs to which goodwill is allocated, is based on the higher of fair value less costs to sell and value in use. The recoverable amount was calculated as at December 31, 2012 based on fair value less costs to sell. The fair value less cost to sell is the amount for which the CGU could be exchanged between knowledgeable willing parties in an arms length transaction, less cost to sell. Management undertakes an assessment of relevant market data, which is the market capitalization of the Corporation and in addition use a discounted cash flow model. Estimated future cash flows for the first five years were based on the budget and strategic plans. A growth rate of 2.5% was applied to the last year of the strategic plan to derive estimated cash flows beyond the initial five-year period. The post-tax discount rate is also a key estimate in the discounted cash flow model and is based on a representative weighted average cost of capital. The pre-tax discount rate used to calculate the recoverable amount as at December 31, 2012 was 12.00%. As at December 31, 2012 and 2011 there was no need for impairment.

Impairment of other long-lived assets


The determination of other long-lived asset impairment requires significant estimates and assumptions to determine the recoverable amount of an asset and/or CGU, wherein the recoverable amount is the higher of fair value less costs to sell and value in use. The value in use method involves estimating the net present value of future cash flows derived from the use of the asset and/or CGU, discounted at an appropriate rate.

The key assumptions utilized in the determination of future cash flows represent managements best estimate of the range of Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 19 economic conditions relating to the CGU, and are based on historical experience, economic trends, and communications with other key stakeholders of the Corporation. These key assumptions include the revenue growth rate, EBITDA margin as a percentage of revenues, capital expenditures as a percentage of revenues, and the inflation growth rate. Significant changes in the key assumptions utilized in the determination of future cash flows could result in an impairment charge or reversal of an impairment loss. As at December 31, 2012 and 2011, there was no need for an impairment charge.
1

Stock-based compensation and warrants


The Corporation estimates the expense related to stock-based compensation and the value of warrants using the BlackScholes valuation model. The model takes into account Managements best estimate of the exercise price of the stock option/warrant, an estimate of the expected life of the option/warrant, the current price of the underlying stock, an estimate of the stocks/warrants volatility, an estimate of future dividends on the underlying stock/warrant, the risk-free rate of return expected for an instrument with a term equal to the expected life of the option/warrant, and the expected forfeiture rate of stock options granted (see Note 23).

Inventory write-down
Periodical reviews of the inventory are performed for excess inventory, obsolescence and declines in net realizable value below cost and allowances are recorded against the inventory balance for any such declines. The Corporation writes down the value of ending inventory for obsolete and unmarketable inventory equal to the difference between the cost of inventory and the net realizable value. These reviews require Management to estimate future demand for products and evaluate market conditions. Possible changes in these estimates could result in a write-down of inventory. If actual market conditions are less favourable than those projected, additional inventory write-downs may be required.

Research and development investment tax credits


Management has made a number of estimates and assumptions in determining the expenditures eligible for the research and development investment tax credit claim. Tax credits are available based on eligible research and development expenses consisting of direct expenditures and including a reasonable allocation of overhead expenses. It is possible that the allowed amount of the research and development investment tax credit claim could be materially different from the recorded amount upon assessment by the Canada Revenue Agency and the Minister of Revenue of Quebec and Alberta Finance.

Income taxes
Deferred tax assets and liabilities are due to temporary differences between the carrying amount for accounting purposes and the tax basis of certain assets and liabilities, as well as undeducted tax losses. Estimation is required for the timing of the reversal of these temporary differences and the tax rate applied. The carrying amounts of assets and liabilities are based on amounts recorded in the financial statements and are subject to the accounting estimates inherent in those balances. The tax basis of assets and liabilities and the amount of undeducted tax losses are based on the applicable income tax legislation, regulations and interpretations. The timing of the reversal of the temporary differences and the timing of deduction of tax losses are based on estimations of the Corporations future financial results.

1 EBITDA as defined by the Corporation means earnings before interest and financing costs (net of interest income), income taxes, depreciation

and amortization, stock-based compensation, restructuring and other non-recurring costs, and non-controlling interests. EBITDA is a nonIFRS measure.

The Corporation recognizes an income tax expense in each of the jurisdictions in which it operates. However, actual amounts
20 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

of income tax expense only become final upon filing and acceptance of the tax return by the relevant authorities, which occur subsequent to the issuance of the financial statements. Additionally, estimation of income taxes includes evaluating the recoverability of deferred tax assets based on an assessment of the ability to use the underlying future tax deductions before they expire against future taxable income. The assessment is based upon enacted or substantively enacted tax laws and estimates of future taxable income. To the extent estimates differ from the actual amounts determined when preparing the final tax returns, earnings would be affected in a subsequent period. As at December31, 2012 and 2011, it was determined that no valuation allowance was necessary. Changes in the expected operating results, enacted tax rates, legislation or regulations, and the Corporations interpretations of income tax legislation, will result in adjustments to the expectations of future timing difference reversals, and may require material deferred tax adjustments. To the extent that forecasts differ from actual results, adjustments are recognized in subsequent periods.

JUDGMENTS

Finance leases
Judgement is required in the initial classification of leases as either operating leases or finance leases and, in respect of finance leases, determining the appropriate discount rate implicit in the lease to discount minimum lease payments. The useful life of the leased property is determined by Management at the inception of the lease. The useful life is based on historical experience with similar products as well as anticipation of future events, which may impact their useful economic life, such as changes in technology. The estimated fair values established at lease inception is periodically reviewed to determine if values are realizable, which depends on the credit risk of the lessee, market conditions and other subjective and qualitative factors.

Deferred Development Costs


Amounts capitalized include the total cost of any external products or services and labour costs directly attributable to development. Managements judgement is involved in determining the appropriate internal costs to capitalise. The useful life represents managements view of the expected period over which the Corporation will receive benefits from the software based on historical experience with similar products as well as anticipation of future events, which may impact their useful economic life, such as changes in technology.

Estimated useful lives of long-lived assets


Judgment is used to estimate each component of an assets useful life and is based on an analysis of all pertinent factors including, but not limited to, the expected use of the asset and in the case of an intangible asset, contractual provisions that enable renewal or extension of the assets legal or contractual life without substantial cost, and renewal history. If the estimated useful lives were incorrect, this could result in an increase or decrease in the annual amortization expense, and future impairment charges.

4. Recent Accounting Pronouncements


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 21

FINANCIAL INSTRUMENTS
In October 2010, the IASB issued IFRS 9, Financial Instruments (IFRS 9), which is the result of the first phase of the IASBs project to replace IAS 39, Financial Instruments: Recognition and measurement (IAS 39). IFRS 9 uses a single model approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classification and measurement models in IAS 39. In December 2011, the IASB amended the transition date of IFRS 9, which requires the application of IFRS 9 for periods beginning on or after January 1, 2015. The previous transition date was January 1st, 2013. The Corporation has not yet assessed the impact of the adoption of this standard on its consolidated financial statements

CONSOLIDATION
In May 2011, the IASB released IFRS 10, Consolidated Financial Statements, which replaces SIC-12, Consolidation Special Purpose Entities, and parts of IAS 27, Consolidated and Separate Financial Statements. The new standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included in a Corporations consolidated financial statements. The standard provides additional guidance to assist in the determination of control where it is difficult to assess. IFRS 10 will be effective for the Corporations fiscal years beginning on January 1, 2013, with earlier application permitted. The Corporation is currently assessing the impact of the adoption of this standard, and does not expect material changes on its consolidated financial statements.

JOINT ARRANGEMENTS
In May 2011, the IASB released IFRS 11, Joint Arrangements, which supersedes IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entities Non-monetary Contributions by Venturers. IFRS 11 focuses on the rights and obligations of a joint arrangement, rather than its legal form as is currently the case under IAS 31. The standard addresses inconsistencies in the reporting of joint arrangements by requiring the equity method to account for interests in joint ventures. IFRS 11 will be effective for the Corporations fiscal years beginning on January 1, 2013, with earlier application permitted. The Corporation currently uses proportionate consolidation to account for its interests in a joint venture, but may have to apply the equity method under IFRS 11. The Corporation is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

DISCLOSURE OF INTERESTS IN OTHER ENTITIES


In May 2011, the IASB released IFRS 12, Disclosure of Interests in Other Entities. IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. The standard requires an entity to disclose information regarding the nature and risks associated with its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. IFRS 12 will be effective for the Corporations fiscal years beginning on January 1, 2013, with earlier application permitted. The Corporation is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

FAIR VALUE MEASUREMENT


22 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

In May 2011, the IASB released IFRS 13, Fair Value Measurement. IFRS 13 will improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The standard will be effective for the Corporations fiscal years beginning on January 1, 2013, with earlier application permitted. The Corporation is currently assessing the impact of the adoption of this standard on its consolidated financial statements.

FINANCIAL STATEMENT PRESENTATION


In June 2011, the IASB amended IAS 1, Presentation of Financial Statements. The principal change resulting from the amendments to IAS 1 is a requirement to group together items within other comprehensive income (loss) that may be reclassified to the statement of comprehensive income (loss). The amendments also reaffirm existing requirements that items in OCI and net income should be presented as either a single statement or two consecutive statements. The amendment to IAS 1 will be effective for the Corporations fiscal years beginning on January 1, 2013, with earlier application permitted. The Corporation does not expect significant changes to its consolidated financial statement presentation.

REVISED IAS 19, EMPLOYEE BENEFITS


The IASB has issued an amended version of IAS 19, Employee Benefits. The key amendments include elimination of the option to defer the recognition of actuarial gains and losses, known as the corridor method, modification of accounting for termination benefits and improvement of the recognition and disclosure requirements for defined benefit plans. The amendments to IAS 19 are effective for annual periods beginning on or after January 1, 2013. Early adoption is permitted. The Corporation is currently assessing the impact of the adoption of these amendments on its consolidated financial statements.

5. Cash and cash equivalents


For the purposes of the statement of cash flows, cash and cash equivalents include the following:
December 31, 2012 $ December 31, 2011 $

Cash in bank Guaranteed investment certificate (Yield of 0.9%; maturing January 19, 2012)

31,327,745 31,327,745

2,699,600 349,787 3,049,387

6. Investment tax credits receivable


December 31, 2012 $ December 31, 2011 $

Research and development investment tax credits 2007 2008 2009 2010 2011 2012 Investment tax credit receivable Investment tax credit receivable long-term

13,274 345,629 523,363 339,685 1,915,884 3,137,835 787,449 2,350,386

175,072 354,456 619,615 499,939 1,649,082 433,595 1,215,487

7. Accounts receivable
Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 23 The Corporations accounts receivable include the following:
December 31, 2012 Amount CAD equivalent Amount December 31, 2011 CAD equivalent

CAD USD EUR KES GBP UGX DOP MDL AMD AUS CHF JYP NOK MXN SEK

983,258 34,498,906 4,448,520 42,120,595 759,513 74,317,796 5,723,818 246,492 4,480,428 25,333 7,128 478,756 229 20,115,421 6,548,387

983,258 34,321,504 5,851,654 490,566 1,221,191 28,024 143,028 20,477 11,069 26,147 7,765 5,525 41 1,543,510 581,257 45,235,016

444,732 2,534,235 870,077 42,199,028 2,976 100,396,519

444,732 2,577,317 1,149,198 514,749 4,692 41,812 4,732,500

8. Investment in marketable securities


The marketable securities consisted of investments made in the listed securities of CryptoLogic Limited, (see note 34).As a result of the acquisition of CryptoLogic as described in note 34, the unrealized gain and loss in respect of the previous equity interest in CryptoLogic recorded in the other comprehensive income (loss) were recycled to the statement of comprehensive loss at the date of the acquisition, and a realized gain of $913,352 is recorded as of December 31, 2012.

9. Inventories
December 31, 2012 $ December 31, 2011 $

Raw materials Finished goods

5,844,219 1,686,574 7,530,793

279,120 704,126 983,246

The cost of inventory recognized as an expense during the year ended December 31, 2012 was approximately $1,224,795 (2011 $1,357,000). The amount of inventory write-downs recognized as an expense in the cost of products for the same period was $nil (2011 $61,000). In 2012 and 2011 there were no reversals of write-downs from the previous years.

10. Receivable under finance lease


The Corporations receivable under finance lease includes the following:
December 31, 2012 $ December 31, 2011 $

Total minimum lease payments receivable Unearned finance income Current maturity of receivable under finance lease

19,466,213 (5,090,626) 14,375,587 3,611,295 10,764,292

13,750,860 (3,188,097) 10,562,763 2,269,924 8,292,839

Finance income recognized in revenue for year ended December 31, 2012 amounted to $300,716 (2011 $59,818).

The present value of minimum lease payments receivable, unearned finance income and future minimum lease payments
24 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

receivable under the finance leases are as follows:


Present Value of Minimum Lease Payments Receivable $ Unearned Finance Income $ Future Minimum Lease Payments Receivable $

2013 2014 2015 2016 2017

3,611,295 3,611,295 3,555,396 2,942,243 655,358 14,375,587

1,295,552 1,295,552 1,270,864 1,015,469 213,189 5,090,626

4,906,847 4,906,847 4,826,260 3,957,712 868,547 19,466,213

11. Restricted cash


(a) An amount of $118,608 (2011 $118,585) is being held by the Courts of Malta pending the outcome of two separate lawsuits filed by one former client (see note 31). (b) Of the approximately $137 million consideration paid by Amaya in connection with the acquisition of Cadillac Jack, there is a holdback of US$5 million (CAD$4,974,500) which is payable on the second anniversary of the closing of the acquisition (see note 34).

12. Goodwill and intangible assets


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 25

COST
AcquisitionRelated Intangibles $

Software $

Licenses $

Goodwill $

Total $

Balance January 1, 2011 Additions Disposals Reclassifications Translation Balance December 31, 2011 Additions Additions from business combinations Disposals Reclassifications Translation Balance December 31, 2012

1,440,420 49,526 1,489,946 2,224,496 165,263 (952,870) 109,456 2,486 3,038,777

162,355 3,761,175 4,532,332 (176,058) 13,703 (3,910) 3,757,265 4,532,332 434,929 2,531,106 79,373,257 (52,071) (109,456) (41,058) 273,941 6,520,715 84,179,530

1,602,775 1,401,572 9,744,605 (176,058) 13,703 (3,910) 1,401,572 11,181,115 2,659,425 92,286,732 174,356,358 (1,004,941) 276,171 511,540 93,964,475 187,703,497

ACCUMULATED AMORTIZATION AND IMPAIRMENTS


AcquisitionRelated Intangibles $

Software $

Licenses $

Goodwill $

Total $

Balance January 1, 2011 Amortization Disposals Translation Balance December 31, 2011 Amortization Translation Balance December 31, 2012

143,290 143,290 352,271 (128) 495,433

4,042 428,669 (176,058) 3,478 260,131 1,923,887 (4) 2,184,014

406,737 406,737 3,880,719 3,879 4,291,335

4,042 978,696 (176,058) 3,478 810,158 6,156,877 3,747 6,970,782

CARRYING AMOUNT
AcquisitionRelated Intangibles $

Software $

Licenses $

Goodwill $

Total $

At December 31, 2011 At December 31, 2012

1,346,656 2,543,344

3,497,134 4,336,701

4,125,595 79,888,195

1,401,572 10,370,957 93,964,475 180,732,715

13. Property and equipment


COST
RevenueProducing Assets $ Machinery and Equipment $ Furniture and Fixtures $ Computer Equipment $

26 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Total $

Balance January 1, 2011 Additions Reclassifications Translation Balance December 31, 2011 Additions Additions from business combinations Additions from inventory Disposals Reclassifications Translation Balance December 31, 2012

3,232,247 1,610,616 (61,315) 4,781,548 4,777,033 17,435,604 1,710,701 (170,563) 169,905 671,898 29,376,126

764,250 160,556 (4,042) (15,485) 905,279 533,921 1,958,690 (52,225) (13,346) 3,332,319

92,608 460,015 552,623 150,352 2,477,242 (2,980) 17,425 3,194,662

349,399 4,438,504 1,711,343 3,942,530 (65,357) (15,485) 2,060,742 8,300,192 1,223,738 6,685,044 3,655,535 25,527,071 1,710,701 (232,316) (455,104) 166,925 75,253 751,230 6,782,952 42,686,059

ACCUMULATED AMORTIZATION AND IMPAIRMENTS


RevenueProducing Assets $ Machinery and Equipment $ Furniture and Fixtures $ Computer Equipment $

Total $

Balance January 1, 2011 Depreciation Reclassifications Translation Balance December 31, 2011 Depreciation Disposals Reclassifications Translation Balance December 31, 2012

541,226 353,407 (61,315) 833,318 1,673,077 (77,142) 131,599 1,044,742 3,605,594

79,113 153,159 (3,316) 228,956 292,038 (36,628) 3,638 488,004

22,550 62,807 85,357 615,286 (249) 700,394

144,415 228,431 372,846 906,533 (165,452) 103,790 1,217,717

787,304 797,804 (61,315) (3,316) 1,520,477 3,486,934 (279,222) 131,599 1,151,921 6,011,709

CARRYING AMOUNT
RevenueProducing Assets $ Machinery and Equipment $ Furniture and Fixtures $ Computer Equipment $

Total $

At December 31, 2011 Balance December 31, 2012

3,948,230 25,770,532

676,323 2,844,315

467,266 2,494,268

1,687,896 5,565,235

6,779,715 36,674,350

14. Income taxes


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 27 Income taxes reported differ from the amount computed by applying the statutory rates to incomes (loss) before income taxes. The reasons are as follows:
December 31, 2012 $ December 31, 2011 $

Statutory income taxes Non-taxable income Non-deductible expenses Differences in effective income tax rates in foreign jurisdictions Decrease in valuation allowance Acquisition of subsidiaries Non-capital losses for which no tax benefit has been recorded Change in tax rates Other Income taxes

(2,756,000) (273,000) 1,383,000 (1,414,000) (1,009,000) (245,000) 1,345,000 (2,969,000)

(1,120,500) 302,184 (127,623) (575,000) (245,452) (193,728) (1,960,119)

Significant components of the Corporations deferred income tax assets at December 31, 2012 were as follows:

Deferred development costs $

Property & Equipment $

Share issuance costs $

Finance Lease $

Intangibles $

Tax Losses $

Investment in marketable securities $

Investment tax credits $

Foreign tax credits $

Other $

Total $

At January 1, 2011 Charged / (credited) to the income statement Charged / (credited) to other comprehensive income Charged / (credited) directly to equity Acquisition of subsidiary At December 31, 2011 Charged / (credited) to the income statement Charged / (credited) to other comprehensive income Charged / (credited) directly to equity Acquisition of subsidiary At December 31, 2012

100,000 59,000

470,500

533,000

(568,000) (1,792,000)

52,000

1,115,000 2,968,000

1,180,000 1,757,500

27,000 186,000 165,000 351,000

(138,000) 332,500 2,530,000 1,579,000 4,441,500

134,000 667,000 473,500 106,500 1,247,000

(2,360,000) (1,664,000)

(1,031,000) (979,000) 723,000 (19,700,000)

1,872,000 5,955,000 2,794,500 5,352,500 14,102,000

(219,000) (219,000) 219,000

(155,000) (155,000) 154,000

317,500

(1,717,000) 2,069,000

(219,000) 134,000 575,000 3,427,500 3,776,500 219,000 106,500 (244,500)

10,455,000 (1,000) 10,772,500

(4,024,000) (19,956,000)

352,000 7,285,000

As at December 31, 2012, the Corporation had Federal and Provincial non-capital losses of approximately $27,759,378 and $21,803,836 respectively (December 31, 2011 $19,385,000; $8,847,000) that may be applied against earnings of future years, not later than 2031. The Corporations foreign subsidiaries have non-capital losses of approximately $26,115,176 (December 31, 2011 - $1,578,000) that may be applied against earnings in future years, no later than 2016. The possible income tax benefit of these losses has been recognized in the accounts. As at December 31, 2012, the Corporation had undeducted research and development expenses of approximately $1,156,500 federally and $2,898,670 provincially (December 31, 2011 $656,518; $2,807,307) with no expiration date. The deferred income tax benefits of these deductions are recognized in the accounts.

15. Bank indebtedness


The Corporations credit facility includes a revolving demand credit facility of $3,000,000 and a demand export loan facility of $2,000,000. The revolving demand credit facility can be used for general working capital purposes and the demand export loan facility can be used to finance specific export contracts. The facilities bear interest at the Banks prime rate plus between 1.25% and 2% depending on the Corporations fixed charge coverage ratio. To secure the full repayment of advances (December 31, 2012 - $nil), the Corporation has provided the Bank a first ranking security interest over all of the movable/personal property of the Corporation. As at December 31, 2012, the outstanding amount of the revolving demand credit facility is $nil (December 31, 2011- $nil) and the demand export loan facility is $nil (December 31, 2011 - $1,680,000). Under the terms of the credit facility arrangement with the Bank, the Corporation is required amongst other conditions, to maintain at all times certain ratios and a minimum level of net worth. As at December 31, 2012 and 2011, the Corporation was not in breach of the terms of the credit facility agreement.

28 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

16. Accounts payable and accrued liabilities


The Corporations accounts payable include the following:
December 31, 2012 Amount CAD equivalent Amount December 31, 2011 CAD equivalent

CAD USD EURO KES UGX GBP AMD MDL DOP SEK MXN DKK TOTAL

3,646,172 13,902,136 6,405,161 12,721,417 47,484,212 828,516 19,205,345 688,294 906,696 31,961,465 449,575 27,882

3,646,172 13,831,439 8,424,696 148,162 17,906 1,333,163 47,445 57,180 22,604 4,883,040 34,497 4,918 32,451,222

1,283,934 94,798 655,936 8,160,874 39,972,320 25,804

1,283,934 96,410 866,212 99,547 16,647 40,677 2,403,427

17. Provisions
The provision in the statement of financial position is for the provision for jackpots and estimate of contingent consideration in connection with the acquisition of OnGame (see note 34). The carrying amounts and the movements in the provision are as follows:
December 31, 2012

Balance January 1, 2012 Additional provision for jackpots Contingent consideration in connection with OnGame acquisition Jackpot provision amounts utilised Balance December 31, 2012 Short-term portion Long-term portion

8,037,725 5,260,235 (497,983) 12,799,977 (7,539,742) 5,260,235

18. Long-term debt


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 29 The following is a summary of long-term debt outstanding at December 31, 2012 and 2011:
December 31, 2012 $ December 31, 2011 $

Current maturity Long-term debt

6,133,862 99,366,585 105,500,447

300,000 725,000 1,025,000

(a)

Subordinated Debt

On April 29, 2010 the Corporation entered into a subordinated debt agreement in the amount of $3,000,000 which is disbursable in two tranches of $1,500,000 each, closing no later than April 30, 2010 and twelve months after the first drawing respectively, pursuant to the conditions of the related loan agreement. On April 30, 2010 the first tranche amounting to $1,500,000 was disbursed. The Corporation did not draw on the second $1,500,000 tranche and has waived its rights to draw on the second tranche. The subordinated debt is repayable in equal monthly instalments over a five-year period. The loan bears interest at the annual rate of 14% plus an additional interest representing 1% of yearly gross sales of the Corporation for the first $25,000,000 of sales and an additional 0.20% for sales over $25,000,000. In the event that only the first drawing is disbursed by the lender, the calculation of the additional interest shall be adjusted to 0.5% of the first $25,000,000 of the Corporations gross sales for a given year, and to 0.1% of the Corporations gross sales exceeding $25,000,000 for a given year. Any amount, principal or interest, which is not paid when due will bear interest at the annual rate of 25% until it is paid in full. Under the terms of the subordinated debt agreement with the lender, the Corporation is required, amongst other conditions, to maintain at all times certain ratios. As at December 31, 2012, the Corporation was in breach of the Fixed Charge Coverage ratio but had previously received a waiver from the lender that the breach of the ratio will not result in default. Subsequent to year end, the Corporation received a waiver from the lender that a breach of the ratio in 2013 will not result in default. The subordinated debt is convertible into voting and participating shares of the Corporation upon an event of default by the Corporation under the terms of the related loan agreement, at the discretion of the lender. In the event the lender exercises the conversion privilege as a result of an event of default, the conversion is based on the greater of (i) the book value of the common shares of the Corporation on the basis of the most recent audited consolidated financial statements or, at the lenders sole discretion, the most recent unaudited consolidated quarterly financial statements of the Corporation, provided that such book value shall not be less than one cent per share, and (ii) the minimum price authorized by the applicable policies of the TSX Venture Exchange if the Corporation is listed on such Exchange. The fair value of the long-term debt was established using information for comparative debt instruments and the Corporation concluded that there was no significant equity component. During the year ended December 31, 2012, the Corporation incurred $121,033 (2011 $162,659) in interest.
December 31, 2012 $ December 31, 2011 $

Subordinated loan bearing interest at 14% per annum plus additional interest, maturing in 2015 and payable in monthly instalments of $25,000 plus interest Current maturity

725,000 (300,000) 425,000

1,025,000 (300,000) 725,000

Long-term debt principal repayments over the next three years amount to the following:
30 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.
$

2013 2014 2015

300,000 300,000 125,000

(b)

Senior secured term loan

On November 5, 2012, in connection with the agreement and plan of merger dated September 25, 2012 to acquire Cadillac Jack, the Corporation entered into a credit agreement with a syndicate of lenders securing a USD$110.0 million nonconvertible senior secured term loan secured by Cadillac Jacks assets and guaranteed by the Corporation. The term loan is amortized over the three-year term as follows: 5% in year one, 10% in year two, 15% in year three with the balance payable at maturity. The term loan bears interest at the annual rate of LIBOR plus a margin of 7.75%, with a LIBOR floor of 1.25%. The term loan has maintenance covenants based on maximum leverage and minimum coverage, for which the Corporation was in compliance with as of December 31, 2012. During the year ended December 31, 2012, the Corporation incurred $1,807,624 (2011 $nil) in interest.
December 31, 2012 $ December 31, 2011 $

Principal Transaction costs Accretion (effective interest rate of 11.21%) Current maturity

109,439,000 (5,685,053) 275,325 (5,471,950) 98,557,322

Term loan principal repayments over the next three years amount to the following:
$

2013 2014 2015

5,471,950 10,943,900 93,023,150

(c)

Other long-term debt

Other long-term debt is comprised of a long-term debt in the amount of USD $750,000 bearing interest at 6.0% per annum, repayable in equal semi-annual instalments over a two-year term. During the year ended December 31, 2012, the Corporation incurred $6,859 (2011 $nil) in interest.
December 31, 2012 $ December 31, 2011 $

Loan bearing interest at 6% per annum repayable in equal semi-annual instalments over a two year term Current maturity

746,175 (361,912) 384,263

Long-term debt principal repayments over the next two years amount to the following:
$

2013 2014

361,912 384,263

19. Equipment Financing


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 31 During the year ended December 31, 2012 the Corporation entered into agreements to purchase equipment in the amount of $2,134,910 which is payable in monthly instalments of $70,174 including interest. The agreements are repayable in equal monthly instalments over a three-year period. The agreements bear interest at annual rates of between 1.11% and 18%. During the year ended December 31, 2012, the Corporation incurred $32,231 (2011 $nil) in interest.
December 31, 2012 $ December 31, 2011 $

Agreements bear interest at between 1.11% and 18% per annum, all maturing in 2015 and payable in monthly instalments of $70,174 including interest Current maturity

2,134,910 (1,019,985) 1,114,925

Principal repayments over the next three years amount to the following:
$

2013 2014 2015

1,019,985 848,755 266,170 2,134,910

20. Convertible Debentures


During the year, the Corporation issued special warrants through a private placement in the amount of $28.75 million. Each special warrant entitles the warrant holder to receive a unit for no additional consideration. Each unit consists of a convertible unsecured subordinate debenture and 50 share purchase warrants. The convertible debentures bear interest at a rate of 10.50% per annum payable semi-annually in arrears on April 30 and October 31 in each year commencing October 31, 2012. The convertible debentures are convertible at the option of the holder into common shares of the Corporation at a conversion price of $3.25 per common share (being a conversion rate of approximately 308 common shares per $1,000 principal amount of convertible debentures) and have a maturity date of April 30, 2014. Each warrant entitles its holder to acquire one common share at a price of $3.00 per common share until April 30, 2015. At any time, the convertible debentures may be redeemed at the option of the Corporation at the redemption price equal to the principal amount of the Convertible Debentures provided, among other things, the current market price is not less than 150% of the conversion price and, in addition thereto, at the time of redemption, the Corporation shall pay to the holder accrued and unpaid interest. The special warrant is a compound financial instrument and consists of a liability, an equity component for the holder conversion option and warrants. The fair value of the liability component of the convertible debenture was recognized on the date that the holders of the special warrants were entitled to receive the unit, and was determined using a market interest rate for an equivalent non-convertible unsecured debt. This amount is subsequently measured on an amortized cost basis using the effective interest rate method, until the liability is extinguished on conversion or maturity of the convertible debentures. The residual amount was then allocated to the equity component for the holder conversion option and the warrants using a relative fair value method. The fair value of the equity component of the convertible debenture and the warrants was determined using the Black-Scholes option pricing model and the residual amount was allocated to the equity components on a pro-rata basis.

March 27, 2012

32 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Fair Value of Liability component of Convertible Debenture Fair Value of Equity component of Convertible Debenture Fair Value of Warrants Face Value Transaction costs

28,008,567 622,700 118,733 28,750,000 2,152,398

The following table reflects movements recognized during the period ended December 31, 2012:
Liability component of Convertible Debenture Equity component of Convertible Debenture

Face Value

Warrants

Opening Balance (net of transaction costs) Accretion of liability component of Convertible Debenture (effective interest rate of 16.74%) Conversion of Convertible Debentures Balance at December 31, 2012

28,750,000

25,911,670 1,185,219

576,081

109,844

(4,138,000) 24,612,000

(3,978,044) 23,118,845

(82,916) 493,165

109,844

21. Commitments
LEASES
The Corporations commitment under lease agreements for premises, exclusive of occupancy and escalation charges aggregate to approximately $20,770,000.
$

Within one year Later than one year but not later than 5 years More than 5 years

6,411,000 14,058,000 301,000

22. Share capital


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 33 The authorized share capital of the Company consists of an unlimited number of common shares, with no par value, and an unlimited number of preferred shares, with no par value, issuable in series. During the year ended December 31, 2012: the Corporation issued 717,534 common shares for cash consideration of $1,140,504 as a result of the exercise of warrants. Initially the 717,534 warrants were valued at $270,603 using the Black-Scholes valuation model. On the exercise of the warrants, the value originally allocated to contributed surplus was reallocated to the common shares. the Corporation issued 730,450 common shares for cash consideration of $1,028,400 as a result of the exercise of stock options. Initially the 730,450 stock options were valued at $292,806 using the Black-Scholes valuation model. On the exercise of the stock options, the value originally allocated to contributed surplus was reallocated to the common shares. the Corporation issued 1,273,228 common shares in relation to conversion of convertible debentures at the conversion price of $3.25. the Corporation completed a private placement offering of 25,568,400 common shares at a price of $4.05 per common share for aggregate gross proceeds of $103,552,020. The Corporation also completed the final closing under its private placement financing issuing 952,200 additional common shares at $4.05 per common share, for additional gross proceeds of $3,856,410. Gross proceeds raised under the Private Placement, including proceeds raised under the first closing, is $107,408,430. During the year ended December 31, 2011: the Corporation issued 1,144,923 common shares for a cash consideration of $1,717,385 as a result of the exercise of 1,144,923 warrants granted on July 21, 2010. Initially the 1,144,923 warrants were valued at $124,264 using the Black-Scholes valuation model. On the exercise of the 1,144,923 warrants, the value of $124,264 originally allocated to contributed surplus was reallocated to the common shares. the Corporation closed a private placement of 3,300,000 common shares for aggregate gross proceeds in the amount of $10,230,000. The total transaction costs of the offering, including the underwriters compensation warrants, amounted to $947,930. the Corporation issued 4,321,668 common shares for cash consideration of $6,367,132 as a result of the exercise of warrants granted on July 21, 2010. Initially the 4,321,668 warrants were valued at $522,960 using the BlackScholes valuation model. On the exercise of the warrants, the value originally allocated to contributed surplus was reallocated to the common shares. the Corporation issued 2,779,356 common shares at a price of $2.85 in connection with the acquisition of Chartwell Technologies Inc.

23. Contributed surplus


STOCK OPTIONS
The aggregate number of common shares of the Corporation reserved for issuance on the exercise of all stock options granted under the Plan at any time cannot exceed 10% of the issued and outstanding common shares of the Corporation at any such time. The exercise price of the share options shall not be less than the discounted market price of the common shares of the Company on the TSX Venture Exchange. The options have a maximum term of five years. Options issued in 2012 vest in equal increments over four years. Options issued in prior years vested in equal increments over two years. The following table provides information about outstanding stock options at December 31, 2012:
For the year ended December 31, 2012 Weighted average exercise price Number of options $ For the year ended December 31, 2011 Weighted average exercise price $ Number of options

34 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Beginning balance Transactions during the period: Issued Exercised Expired / forfeited Ending balance

3,336,500 3,253,500 (730,450) (411,750) 5,447,800

1.44 4.22 1.41 2.90 3.00

2,667,500 1,101,000 (172,000) (260,000) 3,336,500

0.92 2.70 1.00 1.67 1.44

During the year ended December 31, 2012, the Corporation granted 3,253,500 stock options to employees to purchase common shares. The stock options are exercisable at prices ranging from $0.001 to $4.35 per share and have a weighted average contractual term of 3.91 years.
Outstanding options Weighted average outstanding maturity period (years) Exercisable options Exercise price $

Exercise prices $

Number of options

Number of options

0.001 1.00 1.25 1.30 2.16 2.50 2.60 2.61 2.63 2.71 2.85 3.38 4.20 4.24 4.35

350,000 1,206,500 42,500 50,000 70,750 165,000 65,000 30,000 10,000 65,000 202,500 65,000 1,376,000 1,659,550 90,000 5,447,800

2.55 2.55 2.67 2.70 3.73 3.04 3.00 3.27 3.15 3.50 3.53 3.41 4.53 4.92 4.92 3.91

350,000 1,206,500 42,500 50,000 35,375 123,750 65,000 22,500 7,500 32,500 101,250 48,750 2,085,625

0.001 1.00 1.25 1.30 2.16 2.50 2.60 2.61 2.63 2.71 2.85 3.38 4.20 4.24 4.35 1.20

The weighted-average share price of options exercised during fiscal year 2012 was $1.41 ($1.00 during fiscal year 2011). The Corporation recorded a compensation expense of $880,822 for the year period ended December 31, 2012 (2011 $989,010). The Corporation has $3,197,976of stock option expense to be recorded in future periods.

As part of the Corporations management option plan, the expected life of the options had to be determined. The expected life Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 35 is estimated using the average of the vesting period and the contractual life of the options. The volatility is estimated based on stock prices of comparable companies, as adjusted to take into account the Corporations public trading history. Forfeiture rate is estimated based on a combination of historical forfeiture rates and expected turnover rates. The stock options were accounted for at their fair value of $3,738,709, as determined by the Black-Scholes valuation model using the following weighted-average assumptions:
2012 2011

Expected volatility Expected life Expected forfeiture rate Risk-free interest rate Dividend yield Weighted average share price Weighted average fair value of options at grant date

60% 3.75 years 17% 1.07% Nil $4.22 $1.15

57%-60% 3.25 years 17% 1.07 % - 2.15% Nil $2.70 $0.47

WARRANTS
A summary of the activity in the Corporations issued warrants during the year is presented below: The following table provides information about outstanding warrants at December 31, 2012:
For the year ended December 31, 2012 Weighted average exercise price Number of warrants $ For the year ended December 31, 2011 Weighted average exercise price Number of warrants $

Beginning balance Transactions during the period: Issued Exercised Expired Ending balance

908,004 1,437,500 (717,504) 1,628,000

1.91 3.00 1.00 3.01

5,033,021 198,000 (4,321,668) (1,349) 908,004

1.49 3.10 1.47 1.47 1.91

Grant date

Expiry date

Number of warrants

Exercise price

15-Jun-11 28-Mar-12

15-Jun-13 30-Apr-15

198,000 1,430,000 1,628,000

3.10 3.00 3.01

During the year ended December 31, 2012, the Corporation received $1,140,504 for the exercise of 717,504 warrants. On the exercise of 717,504 warrants, the value of $270,603 originally allocated to contributed surplus was reallocated to the share capital. During the year ended December 31, 2011, the Corporation received $6,367,132 for exercise of 4,321,668 warrants granted on July 21, 2010. On the exercise of 4,321,668 warrants, the value of $522,960 originally allocated to contributed surplus was reallocated to the share capital. During the year ended December31, 2012, 1,437,500 warrants were issued in connection with the 28,750 special warrants issued by the Corporation, representing an allocated fair value of $109,844 (see note 20).

The following weighted average assumptions were used in the Black-Scholes valuation model:
36 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.
2012 2011

Expected volatility Expected life Expected forfeiture rate Risk-free interest rate Dividend yield Weighted average fair value of warrants at grant date

60% 3 years 0% 1.07% Nil $0.08

57% 2 years 0% 1.35% Nil $0.17

CONVERSION OPTION
In connection with 28,750 special warrants issued by the Corporation, an amount of $576,081 was recorded in the contributed surplus (see note 20). The following assumptions were used in the Black-Scholes valuation model underlying the fair value allocated to the conversion option: Expected volatility Expected life Expected forfeiture rate Risk-free interest rate Dividend yield 52% 2 years 0% 1.17% Nil

24. Major customers


Revenues from three major customer accounted for approximately 33% of revenues for year ended December 31, 2012 (2 customers accounted for approximately 52% of revenues year ended December 31, 2011). Outstanding accounts receivable from the three major customers at December 31, 2012 accounts for approximately 26% of total trade accounts receivable (December 31, 2011 2 customers accounted for approximately 53%).

25. Financial instruments


FOREIGN EXCHANGE RISK
The Corporation is mainly exposed to foreign currency fluctuations on its accounts receivable, receivable under finance lease, cash, restricted cash, customer deposits, and accounts payable and accrued liabilities. As at December 31, 2012, the Corporations significant foreign exchange currency exposure on these financial instruments by currency was as follows:

Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 37

Analysis by currency in Canadian equivalent


Accounts payable and accrued liabilities $

Cash $

Restricted Cash $

Accounts receivable $

Receivable under finance lease $

Income tax receivable $

Income tax payable $

Customer deposits $

EUR KES USD GBP UGX AMD MDL DOP AUS CHF DKK JPY NOK MXN SEK

4,274,000 19,198,000 2,029,000 15,000 131,000 12,000 13,000 100,000 38,000 57,000 133,000 56,000 373,000 1,723,000

105,000 4,975,000

5,852,000 491,000 34,322,000 1,221,000 28,000 11,000 20,000 143,000 26,000 8,000 6,000 1,544,000 581,000

14,376,000

420,000 3,000

(8,425,000) (148,000) (13,831,000) (1,333,000) (18,000) (47,000) (57,000) (23,000) (5,000) (34,000) (4,883,000)

(260,000) (1,065,000) (144,000) (12,533,000) (11,000) (291,000) (98,000) (14,000)

A ten percent increase (decrease) in the strengthening or weakening of the following currencies versus the Canadian dollar at the end of the year would have increased (decreased) net loss for the year, all other variables held constant, by:
Currency 10% Increase (Decrease)

USD EUR KES UGX GBP AMD MDL DOP AUS CHF DKK JPY NOK MXN SEK

4,636,404 90,038 34,239 2,509 161,522 9,454 (2,507) 11,915 12,615 4,576 5,208 13,853 5,604 188,161 (267,678)

The Corporation does not hedge these exposures. This exposure is monitored by the Corporations reporting system and is reviewed by management on a monthly basis.

INTEREST RATE RISK


The Corporation is exposed to fair value interest rate risk with respect to its subordinated debt, other long-term debt and convertible debentures which bear a fixed rate of interest. The Corporation is exposed to cash flow interest rate risk on its bank indebtedness and senior secured term loan, which bears interest at variable rates. A one percentage point increase (decrease) in interest rates would have decreased (increased) pre-tax earnings by approximately $175,400 in the period, with all other variables held constant. Management monitors movements in the interest rates by reviewing the Bank of Canada prime rate and LIBOR on a quarterly basis.

CREDIT RISK
38 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

The Corporation, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. The Corporation establishes an allowance for doubtful accounts that corresponds to the credit risk of its specific customers, historical trends and economic circumstances. The Corporation is exposed to credit risk in the event of non-payment by certain customers for their accounts receivable. The Corporation has focused on reducing customer concentration and growing its base of Tier 1 operators. Details of the Corporations accounts receivable were as follows:
December 31, 2012 $ December 31, 2011 $

Not past due Past due 1-30 days Past due 31-60 days Past due 61-90 days Past due 91-120 days Past due 121-150 days Past due 151-180 days Past due more than 181 days Allowance for doubtful accounts Outstanding, end of period

35,939,224 2,627,740 1,112,108 1,173,991 2,183,792 233,809 831,754 1,132,598 45,235,016

3,335,390 606,254 137,655 64,694 63,749 205,607 319,151 4,732,500

The Corporations maximum exposure to credit risk is equal to the carrying value of accounts receivable as set out on the statement of financial position.

LIQUIDITY RISK
Liquidity risk is the Corporations ability to meet its financial obligations when they come due. The Corporation is exposed to liquidity risk with respect to its contractual obligations and financial liabilities. The Corporation manages liquidity risk by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities. The Corporations objective is to maintain a balance between continuity of funding and flexibility through borrowing facilities available through the Corporations bank and other lenders. The Corporations policy is to ensure adequate funding is available from operations, established lending facilities and other sources as required. The Corporation believes that future cash flows generated by operations and availability under its borrowing facility will be adequate to meet its financial obligations.
On Demand $ Less than 3 months $ 3 to 6 Months $ 6 to 9 Months $ 9 to 12 months $ Greater than 1 year $

Accounts payable and accrued liabilities Provisions Customer Deposits Income tax payable Holdback on purchase price Convertible debentures* Equipment financing* Long-term debt* Total
*includescapitalandinterest

32,451,222 7,539,742 13,902,892 1,498,596 55,392,452

324,785 4,001,170 4,325,955

1,292,130 270,791 3,913,653 5,476,574

264,909 3,908,169 4,173,078

1,292,130 264,909 3,900,724 5,457,763

5,260,235 4,974,500 25,904,130 1,159,979 121,765,302 159,064,146

26. Fair value


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 39 The Corporation has determined that the carrying values of its short-term financial assets and liabilities approximate their fair value because of the relatively short periods to maturity of these instruments. The carrying amount of receivable under finance leases approximates their fair value since the interest rate approximates current market rates. On initial recognition the fair value of amounts receivable under finance leases and long-term debt was established using a discounted cash-flow model. The carrying amounts of long-term debts approximate their fair value since the interest rates on these instruments either approximate the current market rates offered to the Corporation or the interest rates in these instruments change with market interest rates. On initial recognition the fair value of long-term debt and convertible debentures was established based on current interest rates, market values and pricing of financial instruments with comparable terms. As of December 31, 2012, the Corporation has no financial instruments measured at fair value. As of December 31, 2011, the investment in marketable securities was measured at fair value, using quoted prices in active markets (level 1).

27. Capital management


The Corporations objective in managing capital is to ensure a sufficient liquidity position to market its products, to finance its sales and marketing activities, research and development activities, general and administrative expenses, working capital and overall capital expenditures, including those associated with property and equipment. The ability to fund these requirements in the future depends on the Corporations ability to access additional capital and generate additional cash flow from its operations. Since inception, the Corporation has financed its liquidity needs, primarily through bank indebtedness, borrowings, hybrid instruments such as special warrants and issuance of capital stock. When possible, the Corporation tries to optimize its liquidity needs by non-dilutive sources, including loans payable and promissory notes. The Corporation defines capital as its total shareholders equity. To date, the Corporations policy is to maintain a minimum level of debt, although debt will be considered as part of financing initiatives in the future. The Corporation's credit facility includes a revolving demand credit facility of $3,000,000 and a demand export loan facility of $2,000,000. As at December 31, 2012 $nil (December 31, 2011 $2,096,656) has been used to finance the Corporations daily operations. The capital management objectives listed above have not changed since the previous fiscal year. The Corporation believes that funds from operations, as well as existing and future financial resources should be sufficient to meet the Corporations requirements until December 31, 2013.

28. Geographic information


The Corporation operates within one dominant segment, the marketing, production and distribution of Diversified Gaming Solutions. Revenues from external customers, attributed to countries based on location of the customer, are approximately as follows:
December 31, 2012 $ December 31, 2011 $

40 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Geographic Area North America Caribbean Africa Europe Other

11,666,835 12,680,998 1,185,614 50,341,748 559,814 76,435,009

9,930,485 2,439,145 5,806,456 199,163 18,375,249

The distribution of the Corporations non-current assets (consisting of goodwill and intangible assets and property and equipment) by geographical location is approximately as follows:
December 31, 2012 $ December 31, 2011 $

Geographic Area North America Caribbean Africa Europe Other

148,322,912 8,081,833 60,866,559 135,761 217,407,065

11,636,366 4,372,982 135,951 1,005,373 17,150,672

29. Statement of cash-flows


Changes in non-cash operating elements of working capital is as follows:
For the year ended December 31, 2012 $ For the year ended December 31, 2011 $

Investment tax credits receivable Accounts receivable Prepaid expenses Inventories Income taxes receivable Income taxes payable Equipment financing Accounts payable and accrued liabilities Provisions Deferred revenue Customer deposits Supplemental information Interest received Interest paid

(1,079,248) (19,594,444) (2,445,299) 1,518,568 626,913 (110,808) 785,643 305,399 2,018,625 196,898 (4,328,153) (22,105,906) 322,393 3,441,480

385,746 (2,014,403) (265,746) (6,997) (30,812) (974,753) (53,530) (2,960,495) 57,483 786,056

Non-cash transaction Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 41 Pursuant to the terms of the credit agreement entered into, the merger consideration funded by the lenders to acquire Cadillac Jack was disbursed directly to the sellers. A portion of the amount was also directly allocated to the repayment of Cadillac Jacks debt.
For the year ended December 31, 2012 $ For the year ended December 31, 2011 $

Gross Investment in subsidiaries (net of cash acquired) Net Proceeds from senior secured term loan Repayment of long-term debt Investment in subsidiaries (net of cash acquired)

150,180,149 (103,753,947) 19,988,841 66,415,043

13,737,675

13,737,675

30. Related party transactions


Key management of the Corporation are the members of the Board of Directors, which includes the Chairman and Chief Executive Officer, and Chief Financial Officer. Their compensation includes the following:
December 31, 2012 $ December 31, 2011 $

Salaries, bonuses and short term employee benefits Share based payments

606,000 96,000 702,000

483,000 219,000 702,000

Short-term employee benefits consist of directors fees. The remuneration of the Chairman and Chief Executive Officer and the Chief Financial Officer consists primarily of a salary and share based payments.

31. Contingency
As a result of two separate lawsuits filed by one of the Corporations former clients in the Courts of Malta, a combined total of $114,324 Canadian Dollar Equivalent is currently being held by the Courts (see note 11). Management is of the opinion that these claims are unfounded and that the possibility of a material liability is unlikely. As a result, no provision has been recorded.

32. Subsequent Events


Subsequent to year end, all the convertible debentures were converted to common shares in accordance with the terms of the initial agreement. The Corporation issued 7,572,912 shares at the conversion price of $3.25. On February 7, 2013, the Corporation completed a private placement offering units at a price of $1,000 per unit for aggregate gross proceeds of $30,000,000, including the base amount of $20,000,000 plus an additional $10,000,000 as a result of the underwriters exercising their option in full. Amaya has paid the underwriters an aggregate commission of $1.35 million in connection with the Offering. Each unit consists of: (i) $1,000 principal amount of unsecured non-convertible subordinated debentures; and (ii) 48 non-transferable common share purchase warrants. The debentures will bear interest at a rate of 7.50% per annum payable semi-annually in arrears on January 31 and July 31 in each year commencing July 31, 2013. The first payment will include accrued interest from and including the closing date but excluding July 31, 2013. Interest payments will be satisfied through cash payment and the debentures will have a maturity date of January 31, 2016. Each nontransferable warrant entitles the holders thereof to acquire one common share of the Corporation at a price per common share equal to $6.25 at any time up to a period ending January 31, 2016.

33. Revenues
The Corporation revenues consist of the following major categories:
December 31, 2012 $ For the year ended December 31, 2011 $

42 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Finance income Finance leases Software licensing Sales Participation arrangements Hosted casino

366,164 8,036,399 40,116,990 4,519,551 10,917,551 12,478,354 76,435,009

60,000 8,576,249 6,670,746 2,897,254 171,000 18,375,249

34. Business Combination


CRYPTOLOGIC
On April 2, 2012 the Corporation acquired 80.79% of the issued share capital of CryptoLogic. By July 30, 2012 the Corporation, through the Compulsory Acquisition, had control of 100% of the issued share capital of CryptoLogic. The acquisition of CryptoLogic has been accounted for using the acquisition method and the results of operations are included in the consolidated statement of comprehensive loss from the date of acquisition, which is April 2, 2012. The acquisition was accounted for as a step acquisition, using the full goodwill method, which required the Corporation to revalue its original 7.02% interest at fair value. The following table summarizes the preliminary estimated fair value of the identifiable assets and a liability acquired at the date of acquisition and is subject to change:

Fair value on Acquisition $


Cash and cash equivalents Accounts receivable Income tax receivable Investment tax credit receivable Prepaid expenses and deposits Property and equipment Goodwill Purchase price allocation intangibles Accounts payable and accrued liabilities Provisions Income taxes payable Customer deposits Deferred income tax liability Total consideration Cash consideration Fair value of equity interest held before business combination Total consideration 20,333,407 2,418,311 290,872 230,769 1,773,861 1,575,762 7,344,224 15,752,333 (4,816,309) (2,755,746) (1,366,917) (2,502,508) (3,184,746) $35,093,313 32,664,241 2,429,072 $35,093,313

The main factors leading to the recognition of goodwill are the synergistic growth and revenues expected to be created from Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 43 the strong strategic fit between Amaya and CryptoLogic. CryptoLogics international capabilities, existing customer relationships, together with the breadth and scale of Amaya's business, provide a strong platform to maximize the potential of CryptoLogic's business. If the acquisition had occurred on January 1, 2012, CryptoLogic would have contributed $35.13 million and $1.94 million to consolidated revenues and net losses respectively. Since the date of acquisition, CryptoLogic has contributed $27.46 million and $6.81 million to consolidated revenues and net income respectively. Acquisition-related costs directly related to the CryptoLogic acquisition were $2,421,320 and is expensed in the consolidated statement of comprehensive loss.

ONGAME
The acquisition of OnGame has been accounted for using the acquisition method and the results of operations are included in the consolidated statement of comprehensive loss from the date of acquisition, which is November 1, 2012. The following table summarizes the preliminary estimated fair value of the identifiable assets and liabilities acquired, at the date of acquisition, and is subject to change: Fair value on Acquisition $
Cash and cash equivalents Income taxes receivable Trade and other receivables Prepaid expenses Property and equipment Trade payables and accrued liabilities Provisions Income tax payable User funds held on deposit Purchase price allocation intangibles Goodwill Deferred income tax liability Total consideration Cash consideration Contingent consideration Total consideration 4,886,486 757,524 4,233,714 1,322,320 1,727,823 (8,810,670) (2,770,980) (320,873) (15,748,490) 15,712,968 18,705,887 (3,928,242) 15,767,467 10,606,267 5,161,200 15,767,467

The price includes a contingent consideration of up to 10 million, which will become payable by Amaya if there is regulated online gaming in the United States within five years of completion of the acquisition. The exact amount of the contingent consideration will depend upon the extent of U.S. regulation of online gaming, including the number of states that regulate it and the total population living in those regulated states. The Corporation has estimated the contingent consideration to be approximately 4 million ($5,260,235), which amount is recorded in Provisions in the consolidated statement of financial position. The maximum undiscounted amount of future payment that the Corporation could be required to make under the arrangement is 10 million ($13.12 million). The main factors leading to the recognition of goodwill are the synergistic growth and revenues expected to be created from the strong strategic fit between Amaya and OnGame. OnGame positions Amaya to participate in the U.S. market as regulation online poker evolves, complements and strengthens Amaya's B2B interactive product portfolio and provides Amaya with the ability to deliver complementary and value added services to its existing and new licensees.

If the acquisition had occurred on January 1, 2012, OnGame would have contributed $18.58 million and $18.86 million to
44 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

consolidated revenues and net losses respectively. Since the date of acquisition, OnGame has contributed $2.99 million and $3.53 million to consolidated revenues and net loss respectively. Acquisition-related costs directly related to the OnGame acquisition was $481,438, and is expensed in the consolidated statement of comprehensive loss

CADILLAC JACK
The acquisition of Cadillac Jack has been accounted for using the acquisition method and the results of operations are included in the consolidated statement of comprehensive loss from the date of acquisition, which is November 5, 2012. The following table summarizes the preliminary estimated fair value of the identifiable assets and liabilities acquired at the date of acquisition and is subject to change: Fair value on acquisition
$ Cash and cash equivalents Inventory Trade and other receivables Prepaid expenses Deferred tax assets Intangible assets Property, plant and equipment Trade payables and accrued liabilities Provisions Income tax payable Long term debt Purchase price allocation Intangibles Goodwill Deferred income tax liability Total consideration Cash consideration Total consideration 4,726,626 8,080,721 14,168,760 986,500 19,067,148 2,310,195 21,955,901 (14,282,321) (2,308,021) (177,505) (19,988,841) 48,213,067 66,281,631 (12,053,268) 136,980,593 136,980,593 136,980,593

Of the approximately $137 million consideration paid by Amaya in connection with the acquisition of Cadillac Jack, there is a holdback of US$5 million (CAD$4,974,500) which is payable on the second anniversary of the closing of the acquisition (see note 11). The main factors leading to the recognition of goodwill are the synergistic growth and revenues expected to be created from the strong strategic fit between Amaya and Cadillac Jack. Cadillac Jack presents a variety of opportunities to leverage each business' product and intellectual property suite across a broader combined platform with greater geographic presence and creates revenue synergies by accelerating Amaya's penetration in the United States and extending Cadillac Jack's offering beyond the United States and Mexico to new markets in Canada and Europe. If the acquisition had occurred on January 1, 2012, Cadillac Jack would have contributed $79.31 million and $5.21 million to consolidated revenues and net losses respectively. Since the date of acquisition, Cadillac Jack has contributed $11.67 million and $1.51 million to consolidated revenues and net loss respectively. Acquisition-related costs directly related to the Cadillac Jack acquisition was $3,125,581, and is expensed in the consolidated statement of comprehensive loss.

35. Expenses Classified By Nature


Amaya Gaming Group Inc. | For the year Ended December 31, 2012 | Annual Financial Statements | 45
December 31, 2012 $ For the year ended December 31, 2011 $

Cost of Products Inventories, beginning of period Purchases Transfer to revenue producing assets Inventories, end of period

9,039,640 1,474,128 1,767,901 7,521,072 1,224,795 6,816,527

976,249 1,364,222 983,246 1,357,225 679,820

Financial General and administrative Utilities Office Foreign exchange Taxes and licenses Insurance Salaries and fringe benefits Non-recurring bonuses Termination of employment agreement Stock-based compensation Amortization of property and equipment Amortization of deferred development costs Amortization of intangible assets Consulting fees General Donations Maintenance and repairs Professional fees Termination of agency agreement Communications Automobile Bad Debt Rent Other Selling Donations Royalties Advertising and promotion Travel and entertainment Shipping Acquisition-related costs Underwriter fees Professional fees

139,202 942,586 (979,195) 1,099,214 553,986 20,094,753 5,367,280 3,367,001 880,825 3,486,934 314,967 6,156,877 6,453,099 75,489 839,287 3,883,889 749,000 3,599,925 118,323 697,232 3,182,622 653,260 61,676,556 218,193 3,708,708 4,997,378 2,282,944 476,667 11,683,890 691,972 5,336,367 6,028,339

200,261 583,673 (195,587) 124,271 181,221 5,198,249 989,010 797,804 383,504 978,696 2,062,859 42,035 72,016 1,423,379 106,579 34,441 760,728 13,743,139 564,469 553,195 3,951,175 1,184,231 228,139 6,481,209

36. Net earnings per share


The following table sets forth the computation of basic and diluted earnings per common share from continuing operations for the years ended December 31, 2012 and 2011.
December 31, 2012 $ December 31, 2011 $

46 | Annual Financial Statements | For the year Ended December 31, 2012 | Amaya Gaming Group Inc.

Numerator Numerator for basic and diluted earnings (loss) per common share net loss Denominator Denominator for basic earnings (loss) per common share weighted average number of common shares Effect of dilutive securities Stock options Warrants Convertible debentures Dilutive potential common shares Denominator for diluted earnings (loss) per common share adjusted weighted number of shares Basic and diluted earnings (loss) per common share

(7,112,352)

(1,926,025)

64,415,123 968,758 465,861 (1,224,482) 210,771 64,625,694 64,415,123 (0.11)

45,305,445 435,514 238,239 673,753 45,979,198 45,305,445 (0.04)

For the year ended December 31, 2012 and 2011, the diluted loss per share was the same as the basic net loss per share since the dilutive effect of stock options, warrants and other convertible instruments was not included in the calculation; otherwise the effect would have been anti-dilutive. Accordingly, the diluted loss per share for the period was calculated using the basic weighted average number of common shares outstanding. For the year ended December 31, 2011, the dilutive effect of convertible instruments was not significant.