Quarterly report pursuant to Section 13 or 15(d)

Sale of WPT

v3.21.2
Sale of WPT
9 Months Ended
Sep. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Sale of WPT

Note 3 – Sale of WPT

 

Transaction

 

During the first quarter of 2021, AESE entered into the SPA to sell the equity interests of its subsidiaries that own and operate its WPT business (the “Sale Transaction”), subject to shareholder and regulatory approvals, for a total base purchase price of $105 million. This base purchase price was adjusted to reflect the amount of CSI’s cash (less cash required to satisfy employee payment obligations), indebtedness and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. The WPT business has been recast as discontinued operations, and the assets and liabilities of WPT are classified as assets and liabilities of discontinued operations. See Note 1 – Business Organization and Nature of Operations.

 

In reaching its decision to enter into the SPA, the Company’s Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing the WPT business in the future as compared to the opportunities available to the WPT business in the future, and the availability of strategic alternatives. After careful consideration, the Board of Directors unanimously approved the SPA.

 

On July 12, 2021, the Company consummated the sale of the WPT business. Immediately prior to the Sale Transaction, WPT forgave $9,370,261 of amounts due from affiliates, which was recorded as an equity transaction on the stand-alone books of WPT and its affiliates and did not have an effect on the consolidated financial statements. The Company recorded a gain on the sale of the WPT business in the amount of $80,429,729, as follows:

 

Cash consideration for sale of WPT (1)   $ 106,155,004  
         
Less:  book value of assets sold:        
Cash     3,579,988  
Accounts receivable     2,999,352  
Restricted cash     100,000  
Prepaid expenses and other assets     264,385  
Property and equipment, net     1,429,706  
Goodwill     4,083,621  
Intangible assets, net     10,986,463  
Deposits     79,500  
Deferred production costs     12,684,054  
Net book value of assets sold     36,207,069  
         
Add: Liabilities assumed by buyer        
Accounts payable     487,579  
Accrued expenses and other liabilities     5,567,072  
Deferred revenue     1,807,176  
Deferred rent     2,619,967  
Total liabilities assumed     10,481,794  
Gain on Sale of WPT   $ 80,429,729  

 

(1) Subject to post-closing adjustments.

 

Management has determined that there are no current federal or state income taxes payable in connection with the sale of WPT, after considering the Company’s tax basis in the stock of WPT, as well as the Company’s projected tax losses for the 2021 tax year. Further, if needed, the Company has net operating loss carryforwards that are available to offset any tax liability.

 

About WPT

 

WPT is an internationally televised gaming and entertainment company with brand presence in land-based tournaments, television, online and mobile applications. WPT has been involved in the sport of poker since 2002 and created a television show based on a series of high-stakes poker tournaments. WPT also operates ClubWPT.com, a subscription-based site that offers its members inside access to the WPT content database, as well as sweepstakes-based poker product that allows members to play for real cash and prizes. WPT also participates in strategic brand licensing, partnership, and sponsorship opportunities. 

 

Results of Discontinued Operations

 

Net income from discontinued operations details are as follows:

 

    For the Three Months Ended     For the Nine Months Ended  
    September 30,     September 30,  
    2021(1)     2020     2021(1)     2020  
                         
Revenues   $ 839,005     $ 5,291,419     $ 13,017,362     $ 14,240,556  
Operating costs and expenses     3,990,745       4,798,588       14,805,920       13,613,988  
(Loss) income from operations     (3,151,740 )     492,831       (1,788,558 )     626,568  
Gain on sale of WPT     80,429,729      
-
      80,429,729      
-
 
Other (expense) income, net    
-
      (1,693 )     689,525       4,110  
Net income from discontinued operations, before tax     77,277,989       491,138       79,330,696       630,678  
Income tax    
-
     
-
     
-
     
-
 
Income from discontinued operations, net of tax provision   $ 77,277,989     $ 491,138     $ 79,330,696     $ 630,678  

 

(1) Through the date of the Sale Transaction on July 12, 2021.