Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v3.21.1
Discontinued Operations
12 Months Ended
Dec. 31, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

Note 4 – Discontinued Operations

 

Transaction

 

During 2021, AESE entered into the Stock Purchase Agreement 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 purchase price of $105 million. This base purchase price will be adjusted to reflect the amount of CSI’s cash, indebtedness (other than indebtedness related to an outstanding $685,300 Paycheck Protection Program loan) and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. Management committed to a plan to sell the WPT business prior to December 31, 2020. Accordingly, the WPT business has been recast as discontinued operations, and the assets and liabilities of WPT are classified as held for sale. See Note 1 – Background and Basis of Presentation and Note 17 – Subsequent Events.

 

In reaching its decision to enter into the Stock Purchase Agreement, 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 Stock Purchase Agreement and determined that the Sale Transaction is in the best interests of the Company and its stockholders, and that the Sale Transaction and the Stock Purchase Agreement reflect the highest value for the WPT business reasonably attainable for the Company’s stockholders.

 

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 has broadcasted globally in more than 150 countries and territories and its shows are sponsored by established brands in many areas, including watches, crystal, playing cards and online social poker operators. 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 in 36 states and territories across the United States and 4 foreign countries. WPT also participates in strategic brand licensing, partnership, and sponsorship opportunities.

 

Results of Discontinued Operations

 

Results and net income (loss) from discontinued operations are as follows, reflecting the results and net income (loss) of the WPT business:

 

    For the Years Ended
December 31,
 
    2020     2019  
Revenues   $ 20,149,042     $ 18,523,632  
Operating costs and expenses     19,425,951       19,709,567  
Income (loss) from operations     723,091       (1,185,935 )
Other income (expense)     2,417       (97,467 )
Net income (loss) from discontinued operations, before tax     725,508       (1,283,402 )
Income tax    
-
     
-
 
Income (loss) from discontinued operations, net of tax provision   $ 725,508     $ (1,283,402 )

 

Assets and liabilities held for sale as of December 31, 2020 are classified as current because the Sale Transaction is expected to close during 2021. The details are as follows:

 

Assets      
Cash   $ 3,633,292  
Accounts receivable     1,804,627  
Prepaid expenses and other assets     289,968  
Property and equipment, net     1,674,355  
Goodwill     4,083,621  
Intangible assets, net     12,305,887  
Deposits     79,500  
Deferred production costs     12,058,592  
Due from affiliates     9,433,975  
Current assets held for sale   $ 45,363,817  
         
Liabilities        
Accounts payable   $ 211,228  
Accrued expenses and other liabilities     3,804,301  
Accrued interest     4,224  
Deferred revenue     1,970,668  
Deferred rent     2,493,526  
Loans payable (1)     685,300  
Current liabilities held for sale   $ 9,169,247  

 

(1) Represents principal balance of PPP Loan. On January 26, 2021, WPT received notice from its lender that the entirety of the $685,300 of outstanding principal of the PPP Loan was forgiven.

 

Assets and liabilities held for sale as of December 31, 2019 are as follows:

 

Assets      
Cash   $ 5,163,156  
Accounts receivable     1,491,939  
Prepaid expenses and other current assets     283,143  
Current assets held for sale     6,938,238  
Property and equipment, net     2,470,293  
Goodwill     4,083,621  
Intangible assets, net     14,755,867  
Deposits     79,500  
Deferred production costs     10,962,482  
Due from affiliates     3,375,875  
Non-current assets held for sale     35,727,638  
Total assets held for sale   $ 42,665,876  
         
Liabilities        
Accounts payable   $ 748,118  
Accrued expenses and other current liabilities     2,776,256  
Deferred revenue     3,762,221  
Current liabilities held for sale     7,286,595  
Deferred rent     1,230,224  
Non-current liabilities held for sale     1,230,224  
Total liabilities held for sale   $ 8,516,819