Table ofContents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

**(Mark One)**

 

**x****           QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the quarterly period endedJune 28, 2009**

 

**OR**

** **

**o****              TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the transition period from                  to                  **

 

**Commission File No. 0-50848**

** **

**WPTENTERPRISES, INC.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                | ** ** | **77-0639000**      |
|---------------------------------------------|------------|---------------------|
| (State or other jurisdiction                |       | (I.R.S. Employer    |
| of incorporation or organization)           |       | Identification No.) |
|                                        |       |                |
| **5700 Wilshire Boulevard, Suite 350** | ** ** | ** **          |
| **Los Angeles, California**                 | ** ** | **90036**           |
| (Address of principal executive offices)    |       | (Zip Code)          |

 

Registrant’s telephonenumber, including area code:**(323) 330-9900**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x   No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T during thepreceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes o   No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer o                |   | Accelerated filer o         |
|-----------------------------------------------|--------|----------------------------------|
|                                          |   |                             |
| Non-accelerated filer o                  |   | Smaller reporting company x |
| (Do not check if a smaller reporting company) |   |                             |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).   Yes o   No x

 

As of August 12,2009, there were 20,603,333 shares of Common Stock, $0.001 par value per shareoutstanding.

 

 

 

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**WPT ENTERPRISES, INC.**

 

**INDEX**

 
| ** **    | ** **            | ** **                                                                                                                                                                           | **Page of**   |
|---------------|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|
| ** **    | ** **            | ** **                                                                                                                                                                           | **Form 10-Q** |
| PART I.  | FINANCIAL INFORMATION |                                                                                                                                                                                 |
|          |                  |  

                                                                                                                                                                        |               |
|          | ITEM 1.               | FINANCIAL STATEMENTS                                                                                                                                                                 |               |
|          |                  |                                                                                                                                                                                 |               |
|          |                  | Unaudited Condensed  Consolidated Balance Sheets as of June 28, 2009 and December 28,  2008                                                                                | 1                  |
|          |                  |                                                                                                                                                                                 |               |
|          |                  | Unaudited Condensed  Consolidated Statements of Net Earnings (Loss) and Comprehensive Earnings  (Loss) for the three and six months ended June 28, 2009 and  June 29, 2008 | 2                  |
|          |                  |                                                                                                                                                                                 |               |
|          |                  | Unaudited Condensed  Consolidated Statements of Cash Flows for the six months ended June 28,  2009 and June 29, 2008                                                       | 3                  |
|          |                  |                                                                                                                                                                                 |               |
|          |                  | Notes to  Unaudited Condensed Consolidated Financial Statements                                                                                                                      | 4                  |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 2.               | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                                          | 12                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 3.               | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                                                                          | 19                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 4.               | CONTROLS AND  PROCEDURES                                                                                                                                                             | 19                 |
|          |                  |                                                                                                                                                                                 |               |
| PART II. | OTHER INFORMATION     |                                                                                                                                                                                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 1.               | LEGAL PROCEEDINGS                                                                                                                                                                    | 20                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 1A.              | RISK FACTORS                                                                                                                                                                         | 20                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 4.               | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                                                                 | 21                 |
|          |                  |                                                                                                                                                                                 |               |
|          | ITEM 6.               | EXHIBITS                                                                                                                                                                             | 22                 |
|          |                  |                                                                                                                                                                                 |               |
| SIGNATURES    |                  | 23                                                                                                                                                                                   |

 

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**PART 1 — FINANCIALINFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS**

 

**WPT ENTERPRISES, INC.**

**Condensed Consolidated BalanceSheets**

(Unaudited)

 
| ** **                                                                                                                | ** ** | **June 28, 2009**                                        | ** ** | **December 28, 2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                | ** ** | **(In thousands, except par value data)** | ** ** |
| **Assets**                                                                                                                |       |                                                               |       |                            |       |
| Current assets:                                                                                                           |       |                                                               |       |                            |       |
| Cash and cash equivalents                                                                                                 |       | $                                                                  | 13,434     |                            | $          | 11,497 |   |
| Investments in debt securities                                                                                            |       | 2,540                                                              |       | 2,088                           |       |
| Accounts receivable, net of allowances of $662 and  $158                                                                  |       | 2,037                                                              |       | 2,099                           |       |
| Deferred television costs                                                                                                 |       | 1,529                                                              |       | 2,285                           |       |
| Other                                                                                                                     |       | 231                                                                |       | 666                             |       |
| Current assets of discontinued operations                                                                                 |       | —                                                             |       | 401                             |       |
|                                                                                                                      |       | 19,771                                                             |       | 19,036                          |       |
|                                                                                                                      |       |                                                               |       |                            |       |
| Investments in debt securities and put rights                                                                             |       | 5,342                                                              |       | 3,900                           |       |
| Property and equipment, net                                                                                               |       | 971                                                                |       | 1,293                           |       |
| Investment in Cecure Gaming                                                                                               |       | —                                                             |       | 1,000                           |       |
| Other                                                                                                                     |       | 483                                                                |       | 537                             |       |
| Long-term assets of discontinued operations                                                                               |       | —                                                             |       | 115                             |       |
|                                                                                                                      |       | $                                                                  | 26,567     |                            | $          | 25,881 |   |
|                                                                                                                      |       |                                                               |       |                            |       |
| **Liabilities and Stockholders’  Equity**                                                                            |       |                                                               |       |                            |       |
| Current liabilities:                                                                                                      |       |                                                               |       |                            |       |
| Accounts payable                                                                                                          |       | $                                                                  | 158        |                            | $          | 487 |   |
| Accrued payroll and related                                                                                               |       | 399                                                                |       | 269                             |       |
| Operating lease reserve                                                                                                   |       | 464                                                                |       | 456                             |       |
| Other accrued expenses                                                                                                    |       | 523                                                                |       | 693                             |       |
| Line of credit                                                                                                            |       | 2,647                                                              |       | —                          |       |
| Deferred revenue                                                                                                          |       | 1,228                                                              |       | 1,913                           |       |
|                                                                                                                      |       | 5,419                                                              |       | 3,818                           |       |
|                                                                                                                      |       |                                                               |       |                            |       |
| Commitments and Contingencies                                                                                             |       |                                                               |       |                            |       |
|                                                                                                                      |       |                                                               |       |                            |       |
| Stockholders’ equity:                                                                                                |       |                                                               |       |                            |       |
| Preferred stock, $0.001 par value; authorized  20,000 shares; none issued or outstanding                                  |       | —                                                             |       | —                          |       |
| Common stock, $0.001 par value; authorized 100,000  shares; 20,603 and 20,492 shares issued and outstanding, respectively |       | 21                                                                 |       | 20                              |       |
| Additional paid-in capital                                                                                                |       | 44,685                                                             |       | 44,561                          |       |
| Deficit                                                                                                                   |       | (23,550                                                            | )          | (22,521                         | )          |
| Accumulated other comprehensive gain (loss)                                                                               |       | (8                                                                 | )          | 3                               |       |
|                                                                                                                      |       | 21,148                                                             |       | 22,063                          |       |
|                                                                                                                      |       | $                                                                  | 26,567     |                            | $          | 25,881 |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**WPT ENTERPRISES, INC.**

**CondensedConsolidated Statements of Net Earnings (Loss) and Comprehensive Earnings(Loss)**

(Unaudited)

 
| ** **                                                                                                | ** ** | **Three months ended**                                   | ** ** | **Six months ended** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                | ** ** | **June 28, 2009**                                        | ** ** | **June 29, 2008**    | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** |
| ** **                                                                                                | ** ** | **(In thousands, except per share data)** | ** ** |
| **Revenues:**                                                                                             |       |                                                               |       |                           |       |   |   |   |   |
| Television                                                                                                |       | $                                                                  | 3,040      |                           | $          | 3,402 |   | $ | 6,605 |   | $ | 7,002 |   |
| ClubWPT                                                                                                   |       | 585                                                                |       | 54                             |       | 1,115 |   | 73 |   |
| Product licensing                                                                                         |       | 366                                                                |       | 573                            |       | 1,043 |   | 1,260 |   |
| Event hosting and sponsorship                                                                             |       | 448                                                                |       | 691                            |       | 1,021 |   | 1,018 |   |
| Other                                                                                                     |       | 134                                                                |       | 352                            |       | 315 |   | 681 |   |
|                                                                                                      |       | 4,573                                                              |       | 5,072                          |       | 10,099 |   | 10,034 |   |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Cost of revenues**                                                                                      |       | 1,637                                                              |       | 2,784                          |       | 3,702 |   | 5,454 |   |
| Gross profit                                                                                              |       | 2,936                                                              |       | 2,288                          |       | 6,397 |   | 4,580 |   |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Selling, general and  administrative expense**                                                          |       | 2,277                                                              |       | 5,838                          |       | 5,460 |   | 10,794 |   |
| **Asset impairment**                                                                                      |       | —                                                             |       | —                         |       | 1,000 |   | — |   |
| Earnings (loss) from operations                                                                           |       | 659                                                                |       | (3,550                         | )          | (63 | ) | (6,214 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Other income:**                                                                                         |       |                                                               |       |                           |       |   |   |   |   |
| Gain on sale of investment                                                                                |       | —                                                             |       | —                         |       | — |   | 11 |   |
| Interest, net                                                                                             |       | 31                                                                 |       | 248                            |       | 103 |   | 601 |   |
| Earnings (loss) from continuing operations before  income taxes                                           |       | 690                                                                |       | (3,302                         | )          | 40 |   | (5,602 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Income taxes**                                                                                          |       | (117                                                               | )          | —                         |       | 12 |   | — |   |
| Earnings (loss) from continuing operations                                                                |       | 573                                                                |       | (3,302                         | )          | 52 |   | (5,602 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Loss from discontinued  operations, net of income taxes (including $95 and $306 for shutdown in 2009)** |       | (97                                                                | )          | (581                           | )          | (1,081 | ) | (1,109 | ) |
| **Net earnings (loss)**                                                                                   |       | 476                                                                |       | (3,883                         | )          | (1,029 | ) | (6,711 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| Unrealized gain (loss) on securities                                                                      |       | (4                                                                 | )          | 40                             |       | (11 | ) | (1,045 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Comprehensive earnings (loss)**                                                                         |       | $                                                                  | 472        |                           | $          | (3,843 | ) | $ | (1,040 | ) | $ | (7,756 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| Earnings (loss) per common share from continuing  operations - basic and diluted                          |       | $                                                                  | 0.03       |                           | $          | (0.16 | ) | $ | — |   | $ | (0.27 | ) |
| Loss per common share from discontinued operations  - basic and diluted                                   |       | (0.01                                                              | )          | (0.03                          | )          | (0.05 | ) | (0.06 | ) |
| **Net earnings (loss) per common  share - basic and diluted**                                             |       | $                                                                  | 0.02       |                           | $          | (0.19 | ) | $ | (0.05 | ) | $ | (0.33 | ) |
|                                                                                                      |       |                                                               |       |                           |       |   |   |   |   |
| **Weighted-average common shares  outstanding - basic**                                                   |       | 20,603                                                             |       | 20,603                         |       | 20,603 |   | 20,603 |   |
| Common stock equivalents                                                                                  |       | 468                                                                |       | —                         |       | 209 |   | — |   |
| **Weighted-average common shares  outstanding - diluted**                                                 |       | 21,071                                                             |       | 20,603                         |       | 20,812 |   | 20,603 |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**WPT ENTERPRISES, INC.**

**Condensed Consolidated Statementsof Cash Flows**

(Unaudited)

 
| ** **                                                                                                          | ** ** | **Six months ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                          | ** ** | **June 28, 2009**    | ** ** | **June 29, 2008** | ** ** |
| ** **                                                                                                          | ** ** | **(In thousands)**        | ** ** |
| **Operating Activities:**                                                                                           |       |                           |       |   |   |
| Net loss                                                                                                            |       | $                              | (1,029     | ) | $ | (6,711 | ) |
| Adjustments to reconcile net loss to net cash  provided by (used in) operating activities of continuing operations: |       |                           |       |   |   |
| Loss from discontinued operations                                                                                   |       | 1,081                          |       | 1,109 |   |
| Depreciation and amortization                                                                                       |       | 368                            |       | 339 |   |
| Share-based compensation                                                                                            |       | 124                            |       | 617 |   |
| Asset impairment                                                                                                    |       | 1,000                          |       | — |   |
| Loss on sale of assets                                                                                              |       | 22                             |       | — |   |
| Change in value of put rights                                                                                       |       | 150                            |       | — |   |
| Change in value of ARS portfolio                                                                                    |       | (150                           | )          | — |   |
| Bad debt provision                                                                                                  |       | 504                            |       | — |   |
| Change in operating assets and liabilities:                                                                         |       |                           |       |   |   |
| Accounts receivable                                                                                                 |       | (442                           | )          | 1,395 |   |
| Deferred television costs                                                                                           |       | 756                            |       | 1,336 |   |
| Other                                                                                                               |       | 489                            |       | 61 |   |
| Accounts payable                                                                                                    |       | (329                           | )          | 202 |   |
| Accrued expenses                                                                                                    |       | (43                            | )          | (714 | ) |
| Deferred revenue                                                                                                    |       | (685                           | )          | (1,745 | ) |
| Net cash provided by (used in) operating  activities of continuing operations                                       |       | 1,816                          |       | (4,111 | ) |
| Net cash used in operating activities of  discontinued operations                                                   |       | (565                           | )          | (983 | ) |
| Net cash provided by (used in) operating  activities                                                                |       | 1,251                          |       | (5,094 | ) |
|                                                                                                                |       |                           |       |   |   |
| **Investing Activities:**                                                                                           |       |                           |       |   |   |
| Purchase of property and equipment                                                                                  |       | (68                            | )          | (373 | ) |
| Purchases of available for sale debt securities                                                                     |       | (1,894                         | )          | (11,187 | ) |
| Sales/redemptions of available for sale debt  securities                                                            |       | —                         |       | 18,475 |   |
| Net cash provided by (used in) investing  activities of continuing operations                                       |       | (1,962                         | )          | 6,915 |   |
| Net cash used in investing activities of  discontinued operations                                                   |       | —                         |       | (100 | ) |
| Net cash provided by (used in) investing  activities                                                                |       | (1,962                         | )          | 6,815 |   |
|                                                                                                                |       |                           |       |   |   |
| **Financing Activities:**                                                                                           |       |                           |       |   |   |
| Increase in restricted cash                                                                                         |       | —                         |       | (136 | ) |
| Borrowing under line of credit                                                                                      |       | 2,661                          |       | — |   |
| Repayments under line of credit                                                                                     |       | (14                            | )          | — |   |
| Proceeds from exercise of stock options                                                                             |       | 1                              |       | — |   |
| Net cash provided by (used in) financing  activities                                                                |       | 2,648                          |       | (136 | ) |
|                                                                                                                |       |                           |       |   |   |
| **Net increase in cash and cash  equivalents**                                                                      |       | 1,937                          |       | 1,585 |   |
| Cash and cash equivalents at beginning of period                                                                    |       | 11,497                         |       | 3,852 |   |
| Cash and cash equivalents at end of period                                                                          |       | $                              | 13,434     |   | $ | 5,437 |   |
|                                                                                                                |       |                           |       |   |   |
| **Supplemental Cash Flow  Information:**                                                                            |       |                           |       |   |   |
| Cash paid for interest                                                                                              |       | $                              | 11         |   | $ | — |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited CondensedConsolidated Financial Statements**

 

**1. BUSINESS AND BASIS OF PRESENTATION**

 

These condensed consolidatedfinancial statements have been prepared by management of WPT Enterprises, Inc.(the “Company”) pursuant to the rules and regulations of the Securitiesand Exchange Commission applicable to interim financial information.Accordingly, certain information normally included in annual financialstatements prepared in accordance with accounting principles generally acceptedin the United States of America has been condensed or omitted. For furtherinformation, please refer to the annual audited financial statements of theCompany, and the related notes, included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 28, 2008, from which the information asof that date is derived. Events through August 12, 2009 were evaluated todetermine if adjustments to or disclosure in these condensed consolidatedfinancial statements were necessary. Prior period revenues for ClubWPT andonline gaming were reclassified in order to conform to the current periodpresentation.

 

In the opinion ofmanagement, all adjustments considered necessary for a fair presentation havebeen included. The results for the current interim periods are not necessarilyindicative of the results to be expected for the full year. The accounting estimates that requirethe most significant, difficult and subjective judgments include:

 

·                  the valuation of investments in debt securities andput rights;

·                  the valuation of non-marketable equity investments;

·                  the determination of current and deferred incometaxes;

·                  the ultimate amount of estimated television revenuesand costs;

·                  the recognition of revenues; and

·                  the valuation of share-basedcompensation.

 

TheGame Show Network licensed Season Six of the World Poker Tour (“WPT”) andrepresented 0% and 41% of the Company’s total revenue for the three monthsended June 28, 2009 and June 29, 2008, respectively and 0% and 45% ofthe Company’s total revenue for the six months ended June 28, 2009 and June 29,2008, respectively. Fox Sports Net (“FSN”) is broadcasting Season Seven of theWPT television series in 2009 and FullTiltPoker.net is the sponsor of thetelevision series in the U.S. and Mexico. FullTiltPoker.net represented 30% and0% of the Company’s total revenue for the three months ended June 28, 2009and June 29, 2008, respectively and 29% and 0% of the Company’s totalrevenue for the six months ended June 28, 2009 and June 29, 2008,respectively. PartyGaming Plc (“PartyGaming”) is one international sponsor ofthe Season One of the Professional Poker Tour (“PPT”) and Seasons Four throughSix of the WPT. PartyGaming represented 35% and 12% of the Company’s totalrevenue for the three months ended June 28, 2009 and June 29, 2008,respectively and 30% and 13% of the Company’s total revenue for the six monthsended June 28, 2009 and June 29, 2008.

 

Includedin accounts receivable at June 28, 2009 are amounts billed toFullTiltPoker.net, PartyGaming and Hands-On Mobile that are 28%, 32% and 16% ofthe total balance, respectively. Included in accounts receivable at December 28,2008 are amounts billed to FullTiltPoker.net, PartyGaming and Hands-On Mobilethat are 39%, 24% and 15% of the total balance, respectively.

 

**2.RECENT ACCOUNTING PRONOUNCEMENTS**

 

In February 2008, the FASB issued FSP 157-1,*Application of FASB Statement No. 157 to FASBStatement No. 13 and Other Accounting Pronouncements That Address FairValue Measurements for Purposes of Lease Classification or Measurement underStatement* *13* andFSP 157-2, *Effective Date of FASB Statement No. 157*.FSP 157-1 amends SFAS 157 to remove certain leasing transactions fromits scope and was effective upon initial adoption of SFAS 157.FSP 157-2 delays the effective date of SFAS 157 for all non-financialassets and non-financial liabilities, except for items that are recognized ordisclosed at fair value in the financial statements on a recurring basis (atleast annually) until the first quarter of 2009. FSP 157-1, FSP 157-2and SFAS 157 for all non-financial assets and non-financial liabilitieswere adopted in the first quarter of 2009 and the adoption of these newaccounting standards did not have a significant impact on the consolidatedfinancial statements.

 

In April 2009, the FASB issued FSP 157-4, *Determining Fair Value When the Volume and Level of Activity for theAsset or Liability Have Significantly Decreased and Identifying TransactionsThat are Not Orderly*. FSP 157-4 provides guidance in theapplication of SFAS 157 when the volume and level of activity for an assetor liability have significantly decreased and when circumstances indicate thata transaction is not orderly. In April 2009, the FASB also issuedFSP 115-2 and FSP 124-2, *Recognition andPresentation of Other-Than-Temporary-Impairments*. FSP 115-2 andFSP 124-2 amend the other-than-temporary impairment guidance for debtsecurities and the presentation and disclosure requirements ofother-than-temporary impairments of debt and equity securities. In April 2009,the FASB also issued FSP 107-1 and APB 28-1, *InterimDisclosures about Fair Value of Financial Instruments*.FSP 107-1 amends SFAS 107 to require disclosures about the fair valueof financial instruments for interim reporting periods and in annual financialstatements and also amends APB Opinion 28 to require disclosures insummarized financial information for interim reporting periods. FSP 157-4,FSP 115-2 and FSP 124-2, and FSP 107-1 and APB 28-1 wereadopted in the second quarter of 2009 and the adoption of these new accountingstandards did not have a significant impact on the consolidated financialstatements.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

In December 2007, the FASB issued SFAS No. 160,*Noncontrolling Interests in**Consolidated Financial Statements — an Amendment ofARB No. 51* which establishes accounting and reporting standardsfor the noncontrolling or minority interest in a subsidiary and for thedeconsolidation of a subsidiary. Among the effects of SFAS 160 is theexclusion from net income (loss) of the noncontrolling or minority interesttherein and the relocation of such noncontrolling or minority interest to thestockholders’ equity section of the balance sheet. SFAS 160 was adopted inthe first quarter of 2009 and the new accounting standard did not have asignificant impact on the consolidated financial statements.

 

In March 2008, the FASB issued SFAS No. 161,*Disclosures About Derivative Instruments andHedging Activities — an amendment of FASB Statement No. 133*.SFAS 161 expands the disclosure requirements in SFAS 133, *Accounting for Derivative Instruments and Hedging Activities*,regarding derivative instruments and hedging activities. SFAS 161 wasadopted in the first quarter of 2009 and the new accounting standard did nothave a significant impact on the consolidated financial statements.

 

In May 2009, the FASB issued SFAS No. 165, *Subsequent Events*. SFAS 165 establishes generalstandards of accounting for and disclosure of events that occur after thebalance sheet date but before financial statements are issued. SFAS 165 iseffective for interim periods ending after June 15, 2009. SFAS 165was adopted in the second quarter of 2009 and the new accounting standard didnot have a significant impact on the consolidated financial statements.

 

In June 2009, theFASB issued SFAS No. 168, *The FASB AccountingStandards Codification**TM** and the Hierarchy of Generally AcceptedAccounting Principles—a replacement of FASB Statement No. 162*. The FASB Accounting StandardsCodification (the “Codification”) will become the authoritative source of U.S.accounting standards and is effective in the third quarter of 2009. TheCodification changes the referencing of U.S. accounting standards but is notintended to change existing U.S. accounting standards.

 

**3. INVESTMENTS IN DEBT SECURITIESAND PUT RIGHTS**

 

As of June 28, 2009,investments in debt securities and put rights consist of the following (inthousands):

 
| **Description**                                                             | ** ** | **Cost**   | ** ** | **Unrealized  Gains/(Losses)** | ** ** | **Fair Value** | ** ** |
|-----------------------------------------------------------------------------|------------|------------|------------|--------------------------------|------------|---------------------|------------|
| **Maturity less than 1 year  (all available for sale)** | ** ** | ** ** | ** ** | ** **                     | ** ** | ** **          | ** ** |
| Short-term municipal bonds                                                  |       | $          | 800        |                           | $          | 2                   |       | $ | 802 |   |
| Corporate preferred securities                                              |       | 726        |       | (2                             | )          | 724                 |       |
| Certificates of deposit                                                     |       | 1,014      |       | —                         |       | 1,014               |       |
|                                                                        |       | $          | 2,540      |                           | $          | —              |       | $ | 2,540 |   |

 
| **Description**                                      | ** ** | **Cost** | ** ** | **Realized/********Unrealized  Gains/(Losses)** | ** ** | **Fair Value** | ** ** |
|------------------------------------------------------|------------|----------|------------|-------------------------------------------------|------------|---------------------|------------|
| **Maturity 1 year  to 5 years**  |       |     |       |                                            |       |                |       |
| Auction rate securities (trading securities)         |       | $        | 3,295      |                                            | $          | 150                 |       | $ | 3,445 |   |
| Put rights (trading securities)                      |       | 605      |       | (150                                            | )          | 455                 |       |
| Corporate preferred securities (available for  sale) |       | 534      |       | (6                                              | )          | 528                 |       |
| Certificates of deposit (available for sale)         |       | 916      |       | (2                                              | )          | 914                 |       |
|                                                 |       | $        | 5,350      |                                            | $          | (8                  | )          | $ | 5,342 |   |

 

Investments in debt securities and put rights that areclassified as available for sale or trading securities are the only assets orliabilities that the Company is required to measure at their estimated fairvalue on a recurring basis. The estimated fair value is determined using inputsfrom among the three levels of the fair value hierarchy set forth inSFAS 157 as follows:

 

Level 1 inputs —Unadjusted quoted prices in active markets for identical assets or liabilities,which prices are available at the measurement date.

 

Level 2 inputs — Quoted prices for similar assets andliabilities in active markets, quoted prices for identical or similar assetsand liabilities in markets that are not active, inputs other than quoted pricesthat are observable for the asset or liability (*i.e.*,interest rates, yield curves, *etc.*) andinputs that are derived principally from or corroborated by observable marketdata by correlation or other means (market corroborated inputs).

 

Level 3 inputs — Unobservable inputs that reflectmanagement’s estimates about the assumptions that market participants would usein pricing the asset or liability in an orderly market. Management developsthese inputs based on the best information available, includinginternally-developed data and third party valuation models.

 

In estimating fair value, the Company utilizesvaluation techniques that maximize the use of observable inputs and minimizethe use of unobservable inputs to the extent possible. None of the Company’sfinancial instruments are measured based on Level 2 inputs.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

As of June 28, 2009, financial assets that aremeasured and recorded at fair value on a recurring basis consist of thefollowing (in thousands):

 
| **Description**                      | ** ** | **Level 1** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|------------------|------------|------------------|------------|-----------|------------|
| Short-term municipal bonds           |       | $                | 802        |             | $          | —    |       | $ | 802 |   |
| Corporate preferred securities       |       | 1,252            |       | —           |       | 1,252     |       |
| Certificates of deposit              |       | 1,928            |       | —           |       | 1,928     |       |
| Auction rate securities              |       | —           |       | 3,445            |       | 3,445     |       |
| Put rights                           |       | —           |       | 455              |       | 455       |       |
| Total assets at estimated fair value |       | $                | 3,982      |             | $          | 3,900     |       | $ | 7,882 |   |

 

For financial assets thatutilize Level 1 inputs, the Company utilizes direct observable price quotes inactive markets for identical assets. Due to the lack of observable marketquotes on the Company’s auction rate securities (“ARS”) portfolio and relatedput rights, the Company utilizes valuation models that rely exclusively onLevel 3 inputs including those that are based on management’s estimates ofexpected cash flow streams and collateral values, default risk underlying thesecurity, long term broker credit rating, discount rates and overall capitalmarket liquidity. The valuation of the Company’s ARS portfolio and related putrights is subject to uncertainties that are difficult to predict. Factors thatmay affect the estimated fair value include changes to credit ratings of ARS aswell as to the assets collateralizing the securities, rates of default of theunderlying assets and collateral value, broker default risk, discount rates,and evolving market conditions affecting the liquidity of ARS.

 

The following table summarizes activity in the Company’sARS portfolio and put rights (in thousands):

 
| **Description**                                         | ** ** | **ARS** | ** ** | **Put Rights** | ** ** | **Total** | ** ** |
|---------------------------------------------------------|------------|---------|------------|---------------------|------------|-----------|------------|
| Balance — December 28, 2008                   |       | $       | 3,295      |                | $          | 605       |       | $ | 3,900 |   |
| Change in value of put rights, included in  earnings    |       | —  |       | (150                | )          | (150      | )          |
| Change in value of ARS portfolio, included in  earnings |       | 150     |       | —              |       | 150       |       |
| Settlements, net of purchases                           |       | —  |       | —              |       | —    |       |
| Balance — June 28, 2009                       |       | $       | 3,445      |                | $          | 455       |       | $ | 3,900 |   |

 

In November 2008, the Company accepted an offerfrom UBS AG (“UBS”) that created new rights and obligations related to the ARSportfolio (the “Put Rights”). The Put Rights permit the Company to require UBSto purchase the ARS at par value, at any time during the period of June 30,2010 through July 2, 2012. UBS also has the right, in its discretion, topurchase or sell the ARS at any time until July 2, 2012, so long as parvalue is received. The Company expects to sell the ARS under the Put Rights.However, if the Put Rights are not exercised before July 2, 2012 they willexpire and UBS will have no further obligation to buy the ARS.

 

UBS’s obligations under the Put Rights are not securedby its assets and do not require UBS to obtain any financing to support its performanceobligations under the Put Rights. UBS has disclaimed any assurance that it willhave sufficient financial resources to satisfy its obligations under the PutRights and UBS’s obligations are not guaranteed by any other party.

 

The Put Rights represent an asset that is separatefrom the ARS. The Company initially recorded $605,000 as the fair value of thePut Rights asset in interest income. The Company also elected to measure thePut Rights at fair value under SFAS 159, which permits an entity to electthe fair value option for recognized financial assets. As a result, unrealizedgains and losses are included in interest income and the value of the PutRights increased by $61,000 in the three months ended June 28, 2009 anddecreased by $150,000 in the six months ended June 28, 2009. The Companydid not elect the fair value option for its other financial assets andliabilities.

 

In connection with the acceptance of the UBS offer in November 2008,the Company transferred the ARS from investments available-for-sale to tradingsecurities in accordance with SFAS 115. The transfer to trading securitiesreflects management’s intent to exercise the Put Rights during the period June 30,2010 to July 3, 2012. Prior to the agreement with UBS, the Company’s intentwas to hold the ARS until the market recovered. At the time of transfer, the$605,000 unrealized loss on ARS was included in accumulated other comprehensivegain (loss). Upon transfer to trading securities, the Company recognized a$605,000 reduction in interest income. Unrealized gains and losses are includedin interest income and the value of the ARS portfolio decreased by $61,000 inthe three months ended June 28, 2009 and increased by $150,000 in the sixmonths ended June 28, 2009. Prior to accepting the UBS offer, the ARS wererecorded as investments available-for-sale.

 

UBS provided the Companywith a line of credit, secured by ARS held by UBS, equal to 75% of theestimated fair value of the ARS. The Company borrowed $2,661,000 under the lineof credit from UBS in February 2009. Interest is charged at the actualinterest rate earned by the ARS. The line of credit is due upon demand. At June 28,2009, $2,647,000 was outstanding under the line of credit.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

**4. FAIR VALUES OF FINANCIAL INSTRUMENTS**

 

The carrying amount ofcash equivalents and restricted cash approximates fair value as measured usinglevel 1 inputs due to the short period of time to maturity. Investments in debtsecurities and put rights are measured and recorded at fair value on arecurring basis and information about these investments is in Note 3. Theinvestment in Cecure Gaming was fully impaired in the first quarter of 2009 andinformation about the impairment of this investment is in Note 5. The fairvalue of the Company’s line of credit is not practicable to estimate becausethe line of credit, the ARS collateral, the Put rights and the settlement ofcertain litigation rights are all interrelated and result from a settlement byUBS with regulators, attorneys general and others.

 

As of June 28, 2009,the estimated fair values of financial instruments are as follows (inthousands):

 
| ** **                                    | ** ** | **Carrying********Amount** | ** ** | **Fair********Value** | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|-----------------------|------------|
| Cash equivalents                              |       | $                          | 12,140     |                  | $          | 12,140 |   |
| Investments in debt securities and put rights |       | 7,882                      |       | 7,882                 |       |
| Investment in Cecure Gaming                   |       | —                     |       | —                |       |
| Restricted cash                               |       | 384                        |       | 384                   |       |
| Line of credit                                |       | (2,647                     | )          | Not estimated         |       |
|                                               |            |                            |            |                       |            |  |  |

 

**5. ASSET IMPAIRMENT**

** **

In 2006, the Company paid $2,923,000 for an interest(currently 8%) in Cecure Gaming Ltd., a developer and operator of mobile phonecasino games. The Company recorded a $1,923,000 impairment charge in the thirdquarter of 2008 related to difficulties Cecure was having in obtaining workingcapital to finance its business development that resulted in a significantreduction in staffing. Cecure’s financing difficulties continued into 2009 andthe Company recorded an additional $1,000,000 impairment charge in the firstquarter of 2009. This investment was measured at implied fair value resulting in another-than-temporary impairment charge. The implied fair value measurement wascalculated using financial metrics and ratios of comparable public companiesand was measured using Level 3 inputs unobservable inputs with significantmanagement judgment to value this investment due to the absence of quotedmarket prices, inherent lack of liquidity, and the long-term nature of thisinvestment.

 

**6.SHARE-BASED COMPENSATION**

 

Share-based compensation expense was $64,000 and$124,000 for the three and six months ended June 28, 2009, respectivelyand $303,000 and $617,000 for the three and six months ended June 29,2008, respectively.

 

The Company uses theBlack-Scholes option-pricing model to estimate the fair value and compensationcost associated with employee incentive stock options which requires theconsideration of historical employee exercise behavior data and the use of anumber of assumptions including volatility of the Company’s stock price, theweighted-average risk-free interest rate and the weighted-average expected lifeof the options.

 

The following valuesrepresent the average per grant assumptions used to value options grantedduring the three and six months ended June 28, 2009 and June 29,2008. There have been no significant changes to the assumptions thus far in2009 and none are expected during the remainder of 2009.

 
| **Key valuation assumptions** | ** ** | **Three months ended  June 28, 2009** | ** ** | **Three months ended  June 29, 2008** | ** ** | **Six months ended  June 28, 2009** | ** ** | **Six months ended  June 29, 2008** | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| Risk-free interest rate                 |       | 2.47                                                      | %          | 3.38                                                      | %          | 2.27                                                    | %          | 3.38                                                    | %          |
| Expected term                           |       | 6.25 years                                                |       | 6 years                                                   |       | 6.25 years                                              |       | 6 years                                                 |       |
| Expected dividend yield                 |       | 0                                                         | %          | 0                                                         | %          | 0                                                       | %          | 0                                                       | %          |
| Expected volatility                     |       | 88.42                                                     | %          | 69.95                                                     | %          | 87.85                                                   | %          | 69.95                                                   | %          |
| Forfeiture rate                         |       | 24.11                                                     | %          | 14.14                                                     | %          | 24.11                                                   | %          | 14.14                                                   | %          |
| Weighted-average fair value             |       | $                                                         | 0.57       |                                                      | $          | 0.82                                                    |       | 0.38                                                    |       | $ | 0.82 |   |
|                                         |            |                                                           |            |                                                           |            |                                                         |            |                                                         |            |  |  |  |

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

The following tablesummarizes stock option activity during the six months ended June 28,2009:

 
| ** **                        | ** ** | ** **      | ** ** | **Number of Common Shares** | ** ** |
|-----------------------------------|------------|-----------------|------------|--------------------------------------------|------------|
| ** **                        | ** ** | **Options**     | ** ** | ** **                                 | ** ** | **Available** | ** ** | **Weighted-avg.** | ** ** |
| ** **                        | ** ** | **outstanding** | ** ** | **Exercisable**                            | ** ** | **for grant** | ** ** | **exercise price** | ** ** |
| Balance at December 28, 2008 |       | 2,314,589       |       | 1,106,921                                  |       | 873,418 |   | $ | 3.83 |   |
| Granted                           |       | 529,000         |       | —                                     |       | (529,000 | ) | 0.50 |   |
| Forfeited/canceled/exchanged      |       | (1,238,333      | )          | —                                     |       | 1,238,333 |   | 5.55 |   |
| Exercised                         |       | (111,340        | )          | —                                     |       | — |   | 0.0049 |   |
| Balance at June 28, 2009     |       | 1,493,916       |       | 189,677                                    |       | 1,582,751 |   | $ | 1.51 |   |

 

The following tablesummarizes significant ranges of outstanding and exercisable options as of June 28,2009**:**

 
| ** **                              | ** **            | **Options outstanding** | ** ** | **Options exercisable**                                         | ** ** |
|-----------------------------------------|-----------------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Range of  exercise prices** | ** **            | **Number  outstanding**      | ** ** | **Weighted-avg.  remaining  contractual  life (in years)** | ** ** | **Weighted-avg.  exercise  price** | ** ** | **Aggregate  intrinsic  value** | ** ** | **Number  exercisable** | ** ** | **Weighted-avg.  exercise  price** | ** ** | **Aggregate  intrinsic  value** | ** ** |
| $                                       | 0.37 — 1.87 |                         | 1,257,250  |                                                                 | 9.53       |   | $ | 0.52 |   | $ | 907,660 |   | 9,746 |   | $ | 1.37 |   | $ | — |   |
| 4.26 — 8.00                   |                  | 223,666                      |       | 6.36                                                                 |       | 6.26 |   | — |   | 166,931 |   | 6.49 |   | — |   |
| 14.51 — 19.50                 |                  | 13,000                       |       | 5.45                                                                 |       | 14.89 |   | — |   | 13,000 |   | 14.89 |   | — |   |
|                                    |                  | 1,493,916                    |       | 9.02                                                                 |       | $ | 1.51 |   | $ | 907,660 |   | 189,677 |   | $ | 6.81 |   | $ | — |   |
|                                         |                       |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The aggregate intrinsicvalue in the preceding table****representsthe total pre-tax intrinsic value, based on the Company’s closing stock priceof $1.25 on June 28, 2009, which would have been received by the option holdershad they exercised their options as of that date. As of June 28, 2009,there were no exercisable “in-the-money” stock options. The total intrinsicvalue of options exercised during the three and six months ended June 28,2009 was $0 and $44,000, respectively.

 

Asof June 28, 2009, total unrecognized compensation cost related tonon-vested options was $690,000, which is expected to be recognized over thenext 40 months on a weighted-average basis.

 

**7.DISCONTINUED WPT CHINA OPERATIONS**

 

In January 2009, theCompany began searching for a strategic partner to invest in the WPT Chinabusiness. The cash needs to support the growth in that business was greaterthan the Company was willing to expend. In March 2009, the Company shutdown the operations of WPT China while continuing to look for a strategicpartner to acquire the WPT China assets. The financial results of WPT Chinahave been reclassified as discontinued operations.

 

The Company incurred$306,000 of costs to shutdown the WPT China business during the six monthsended June 28, 2009, consisting of $30,000 of employee severance, $170,000of contract termination costs and $106,000 of software write down costs. Duringthe three months ended June 28, 2009, the Company incurred $95,000 ofshutdown costs.

 

Summarized operating results information for the WPTChina business is as follows (in thousands):

 
| ** **                        | ** ** | **Three months ended** | ** ** | **Six months ended** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                        | ** ** | **June 28, 2009**           | ** ** | **June 29, 2008**         | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** |
| Revenues                          |       | $                                | —     |                           | $          | — |   | $ | — |   | $ | — |   |
| Loss before income taxes          |       | (95                              | )          | (581                           | )          | (1,113 | ) | (1,109 | ) |
| Income taxes                      |       | (2                               | )          | —                         |       | 32 |   | — |   |
| Loss from discontinued operations |       | (97                              | )          | (581                           | )          | (1,081 | ) | (1,109 | ) |
|                                   |            |                                  |            |                                |            |  |  |  |  |  |  |  |  |

 

Summarized balance sheetinformation for the WPT China business is as follows (in thousands):

 
| ** **                               | ** ** | **June 28, 2009** | ** ** | **December 28, 2008** | ** ** |
|------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| Cash and cash equivalents |       | $                      | —     |                       | $          | 168 |   |
| Other current assets                     |       | —                 |       | 233                        |       |
| Property and equipment, net              |       | —                 |       | 115                        |       |
|                                          |            |                        |            |                            |            |  |  |

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

**8. INCOME TAXES**

 

The Company expects to pay federal alternativeminimum tax on the utilization of federal net operating lossesin 2009 and California income taxes due to the suspension of the availabilityof California net operating losses in 2009. The Company utilizes net operatinglosses from operations before utilizing net operating losses generated from theexercise of stock options. The income tax benefit/provision for the three andsix months ended June 28, 2009 is based on the estimated effective incometax rate for 2009. There was no income tax benefit for the three and six monthsended June 29, 2008 due to the net losses for the periods. Based on theCompany’s relatively limited and volatile earnings history, the Company recorded a full valuationallowance for the net deferred tax assets as management currently believes it ismore likely than not that deferred tax assets will be realized in theforeseeable future.

 

**9. NETEARNINGS (LOSS) PER COMMON SHARE**

 

Basicnet earnings (loss) per common share is calculated by dividing net earnings(loss) by the weighted-average number of common shares outstanding during theperiod. Shares for certain stock options granted to Company employees areincluded in the computation after the options have vested when the shares areissuable for minimal cash consideration in relation to the fair value of theoptions. Diluted earnings per common share is calculated by adjustingweighted-average outstanding shares, assuming the conversion of all potentiallydilutive stock options and awards (common stock equivalents). However, commonstock equivalents are not used to calculate diluted earnings per share for lossperiods because the effect would be anti-dilutive. There were 468,000 and 1,000common stock equivalents for the three months ended June 28, 2009 and June 29,2008, respectively. There were 209,000 and 2,000 common stock equivalents forthe six months ended June 28, 2009 and June 29, 2008, respectively. The Company excluded 274,000 and2,916,000 of weighted average outstanding stock options for the three monthsended June 28, 2009 and June 29, 2008, respectively, and excluded569,000 and 2,921,000 of weighted average outstanding stock options for the sixmonths ended June 28, 2009 and June 29, 2008, respectively, from thecalculation of diluted net earnings (loss) per common share because the exerciseprices of these stock options were greater than the average market value of theCompany’s common stock. These stock options could be included in thecalculation in the future if the average market value of the Company’s commonstock exceeds the exercise price of these stock options.

 

**10.CONTINGENCIES**

 

TheCompany is involved in various inquiries, administrative proceedings andlitigation relating to matters arising in the normal course of business. TheCompany is not currently a defendant in any material litigation and is notaware of any threatened litigation that could have a material effect on theCompany. Management is not able to estimate the minimum loss to be incurred, ifany, as a result of the final outcome of these matters but believes they arenot likely to have a material adverse effect upon the Company’s financialposition or results of operations and, accordingly, no provision for loss hasbeen recorded.

 

**11. SEGMENTINFORMATION**

 

Theoperating segments reported below are the segments of the Company for whichseparate financial information is available and for which operating results areevaluated by the chief operating decision maker in deciding how to allocateresources and assess performance.

 

**Three months ended June 28,2009 (in thousands):**

 
| ** **                    | ** ** | **WPT**     | ** ** | **WPT Online** | ** ** | **WPT Global** | ** ** | ** **    | ** ** | ** **    | ** ** |
|-------------------------------|------------|-------------|------------|---------------------|------------|---------------------|------------|---------------|------------|---------------|------------|
| ** **                    | ** ** | **Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming**      | ** ** | **Marketing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                     |       |        |       |                |       |                |       |          |       |          |       |   |   |
| Television                    |       | $           | 3,040      |                | $          | —              |       | $             | —     |          | $          | — |   | $ | — |   | $ | 3,040 |   |
| ClubWPT                       |       | —      |       | —              |       | 585                 |       | —        |       | —        |       | 585 |   |
| Product licensing             |       | —      |       | —              |       | —              |       | 366           |       | —        |       | 366 |   |
| Event hosting and sponsorship |       | 225         |       | —              |       | —              |       | 223           |       | —        |       | 448 |   |
| Other                         |       | —      |       | 108                 |       | 3                   |       | 23            |       | —        |       | 134 |   |
|                          |       | 3,265       |       | 108                 |       | 588                 |       | 612           |       | —        |       | 4,573 |   |
| Cost of revenues              |       | 1,285       |       | —              |       | 310                 |       | 42            |       | —        |       | 1,637 |   |
| Gross profit                  |       | 1,980       |       | 108                 |       | 278                 |       | 570           |       | —        |       | 2,936 |   |
| Total assets                  |       | 3,012       |       | 70                  |       | 718                 |       | 445           |       | 22,322        |       | 26,567 |   |
| Depreciation and amortization |       | 55          |       | —              |       | 73                  |       | —        |       | 45            |       | 173 |   |
|                               |            |             |            |                     |            |                     |            |               |            |               |            |  |  |  |  |  |  |  |  |

 

Revenues attributed todomestic and international operations were $2.7 million and$1.9 million, respectively.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

**Three months ended June 29,2008 (in thousands):**

 
| ** **                        | ** ** | **WPT**     | ** ** | **WPT Online** | ** ** | **WPT Global** | ** ** | ** **    | ** ** | ** **    | ** ** |
|-----------------------------------|------------|-------------|------------|---------------------|------------|---------------------|------------|---------------|------------|---------------|------------|
| ** **                        | ** ** | **Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming**      | ** ** | **Marketing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                         |       |        |       |                |       |                |       |          |       |          |       |   |   |
| Television                        |       | $           | 3,402      |                | $          | —              |       | $             | —     |          | $          | — |   | $ | — |   | $ | 3,402 |   |
| ClubWPT                           |       | —      |       | —              |       | 54                  |       | —        |       | —        |       | 54 |   |
| Product licensing                 |       | —      |       | —              |       | —              |       | 573           |       | —        |       | 573 |   |
| Event hosting and sponsorship     |       | 625         |       | —              |       | —              |       | 66            |       | —        |       | 691 |   |
| Other                             |       | —      |       | 320                 |       | 16                  |       | 16            |       | —        |       | 352 |   |
|                              |       | 4,027       |       | 320                 |       | 70                  |       | 655           |       | —        |       | 5,072 |   |
| Cost of revenues                  |       | 2,473       |       | 203                 |       | 44                  |       | 64            |       | —        |       | 2,784 |   |
| Gross profit                      |       | 1,554       |       | 117                 |       | 26                  |       | 591           |       | —        |       | 2,288 |   |
| Total assets (1)                  |       | 1,629       |       | 327                 |       | 935                 |       | 694           |       | 28,622        |       | 32,207 |   |
| Depreciation and amortization (1) |       | 64          |       | —              |       | 41                  |       | —        |       | 78            |       | 183 |   |
|                                   |            |             |            |                     |            |                     |            |               |            |               |            |  |  |  |  |  |  |  |  |

 

----

(1)         The total excludes $94 of total assetsand $8 of depreciation and amortization for discontinued WPT China operations.

 

Revenues attributed to domestic and internationaloperations were $3.8 million and$1.3 million,respectively.

 

**Six months ended June 28, 2009 (in thousands):**

 
| ** **                        | ** ** | **WPT**     | ** ** | **WPT Online** | ** ** | **WPT Global** | ** ** | ** **    | ** ** | ** **    | ** ** |
|-----------------------------------|------------|-------------|------------|---------------------|------------|---------------------|------------|---------------|------------|---------------|------------|
| ** **                        | ** ** | **Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming**      | ** ** | **Marketing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                         |       |        |       |                |       |                |       |          |       |          |       |   |   |
| Television                        |       | $           | 6,605      |                | $          | —              |       | $             | —     |          | $          | — |   | $ | — |   | $ | 6,605 |   |
| ClubWPT                           |       | —      |       | —              |       | 1,115               |       | —        |       | —        |       | 1,115 |   |
| Product licensing                 |       | —      |       | —              |       | —              |       | 1,043         |       | —        |       | 1,043 |   |
| Event hosting and sponsorship     |       | 575         |       | —              |       | —              |       | 446           |       | —        |       | 1,021 |   |
| Other                             |       | —      |       | 244                 |       | 18                  |       | 53            |       | —        |       | 315 |   |
|                              |       | 7,180       |       | 244                 |       | 1,133               |       | 1,542         |       | —        |       | 10,099 |   |
| Cost of revenues                  |       | 2,975       |       | —              |       | 607                 |       | 120           |       | —        |       | 3,702 |   |
| Gross profit                      |       | 4,205       |       | 244                 |       | 526                 |       | 1,422         |       | —        |       | 6,397 |   |
| Depreciation and amortization (1) |       | 130         |       | —              |       | 147                 |       | —        |       | 91            |       | 368 |   |
|                                   |            |             |            |                     |            |                     |            |               |            |               |            |  |  |  |  |  |  |  |  |

 

----

(1)         The total excludes $8 of depreciation andamortization for discontinued WPT China operations.

 

Revenues attributed todomestic and international operations were $5.9 million and$4.2 million, respectively.

 

**Six months ended June 29,2008 (in thousands):**

 
| ** **                        | ** ** | **WPT**     | ** ** | **WPT Online** | ** ** | **WPT Global** | ** ** | ** **    | ** ** | ** **    | ** ** |
|-----------------------------------|------------|-------------|------------|---------------------|------------|---------------------|------------|---------------|------------|---------------|------------|
| ** **                        | ** ** | **Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming**      | ** ** | **Marketing** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                         |       |        |       |                |       |                |       |          |       |          |       |   |   |
| Television                        |       | $           | 7,002      |                | $          | —              |       | $             | —     |          | $          | — |   | $ | — |   | $ | 7,002 |   |
| ClubWPT                           |       | —      |       | —              |       | 73                  |       | —        |       | —        |       | 73 |   |
| Product licensing                 |       | —      |       | —              |       | —              |       | 1,260         |       | —        |       | 1,260 |   |
| Event hosting and sponsorship     |       | 725         |       | —              |       | —              |       | 293           |       | —        |       | 1,018 |   |
| Other                             |       | —      |       | 567                 |       | 32                  |       | 82            |       | —        |       | 681 |   |
|                              |       | 7,727       |       | 567                 |       | 105                 |       | 1,635         |       | —        |       | 10,034 |   |
| Cost of revenues                  |       | 4,844       |       | 384                 |       | 73                  |       | 153           |       | —        |       | 5,454 |   |
| Gross profit                      |       | 2,883       |       | 183                 |       | 32                  |       | 1,482         |       | —        |       | 4,580 |   |
| Depreciation and amortization (1) |       | 129         |       | —              |       | 52                  |       | —        |       | 158           |       | 339 |   |
|                                   |            |             |            |                     |            |                     |            |               |            |               |            |  |  |  |  |  |  |  |  |

 

----

(1)         The total excludes $17 of depreciationand amortization for discontinued WPT China operations.

 

Revenues attributed to domestic and international operationswere $6.9 million and$3.1 million,respectively.

 

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**WPT ENTERPRISES, INC.**

**Notes to Unaudited Condensed Consolidated Financial Statements**

 

**12. SUBSEQUENT EVENTS**

 

Gamynia Limited (“Buyer”)and the Company entered into an asset purchase agreement, dated as of July 28,2009, pursuant to which the Company will, subject to specified terms andconditions, including approval of the asset sale by the Company’s stockholdersat a Special Meeting of Stockholders, sell substantially all of the Company’soperating assets other than cash, investments and certain other assets toBuyer. Buyer will assume from the Company specified liabilities including oneof the two corporate leases. Buyer has agreed to pay the Company $9,075,000 forits operating assets. Buyer has also agreed to pay the Company 4% of futurerevenues, as defined, from using the World Poker Tour brands in online gamingand 5% of future revenues, as defined from sponsorship and other activities.Buyer has agreed to spend at least $666,666 per year in the three years afterthe launch of World Poker Tour and Professional Poker Tour branded onlinegaming website(s) to market the Company’s brands.

 

TheCompany entered into two international sponsorship agreements with a non-U.S.online gaming company (“Sponsor”) on August 3, 2009. Sponsor will be theexclusive online gaming partner and satellite provider for televised andnon-televised World Poker Tour events in Europe. The contract term is for twotour seasons over 27 months beginning in October 2009 and contains anoption for a third tour season. Sponsor will also be a sponsor of WPT SeasonSeven across more than 30 European territories.

 

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Business Overview**

 

We create internationally branded entertainment andconsumer products driven by the development, production and marketing oftelevised programming based on gaming themes. Our current season of the WorldPoker Tour®,or WPT® television series - Season Seven, based on aseries of high-stakes poker tournaments, currently airs on Fox Sports Net inthe United States, and has been licensed for broadcast globally. In January 2008,we launched ClubWPT.com, an innovative subscription-based online poker clubtargeted to the estimated 60 million poker players in the United States,which is currently offered in 38 states. Through November 2008, weoffered a real-money online gaming website which prohibited wagers from playersin the U.S. and other restricted jurisdictions. We also license our brand tocompanies in the business of poker equipment and instruction, apparel,publishing, electronic and wireless entertainment, DVD/home entertainment,casino games and giftware and are engaged in the sale of corporatesponsorships. Through March 2009, we developed and marketed online andmobile games supporting the WPT China National Traktor Poker TourTM.

 

We operate through four business segments, WPTStudios, WPT Online, WPT Global Marketing and WPT China, described in greaterdetail below:

 

*WPT Studios*, ourmulti-media entertainment division, generates revenue through domestic andinternational television licensing, domestic and international televisionsponsorship, as well as host fees from casinos and card rooms that host ourtelevised events.

 

*WPT Online*includes the online poker club ClubWPT.com that generates revenue fromsubscriptions, our international poker and casino real money gaming websiteswhich were terminated in November 2008 and an online merchandise store.

 

*WPT Global Marketing* includes branded consumerproducts, sponsorships and event management. Branded consumer products generaterevenue from the licensing of our brand to companies seeking to use the WorldPoker Tour brand and logo in the retail sales of their consumer products.Sponsorship and event management generates revenue through corporatesponsorship and management of televised and live events.

 

*WPT China* produced third-party branding at WPT ChinaNational Traktor Poker Tour events, licensed the television broadcast of theWPT China National Traktor Poker Tour and marketed the popular Chinese nationalcard game “Tuo La Ji” or “Traktor Poker”TM in online and mobile games. In January 2009,the Company began searching for a strategic partner to invest in the WPT Chinabusiness. The cash needs to support the growth in this business were greaterthan the Company was willing to expend. In March 2009, the Company decidedto shut down the operations of WPT China while continuing to look for astrategic partner to acquire the WPT China assets. The historical results ofWPT China have been reclassified as a discontinued operation.

 

**Results of Operations**

 

**Three Months Ended June 28, 2009 Compared to the ThreeMonths Ended June 29, 2008**

 

Thefollowing table sets forth revenue and cost of revenue information for our threecontinuing business segments (amounts in thousands):

 
| ** **                    | ** ** | **Three months ended** | ** ** |
|-------------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **June 28, 2009** | ** ** | **% of  Revenues** | ** ** | **June 29, 2008** | ** ** | **% of  Revenues** | ** ** |
| WPT Studios:                  |       |                   |       |   |   |   |   |   |   |
| Domestic sponsorship          |       | $                      | 1,375      |   | 42 | % | $ | — |   | — | % |
| Domestic license              |       | —                 |       | — | % | 2,400 |   | 60 | % |
| International sponsorship     |       | 1,587                  |       | 49 | % | 599 |   | 15 | % |
| International license         |       | 78                     |       | 2 | % | 403 |   | 10 | % |
| Event hosting and sponsorship |       | 225                    |       | 7 | % | 625 |   | 15 | % |
|                          |       | 3,265                  |       | 100 | % | 4,027 |   | 100 | % |
| Cost of revenues              |       | 1,285                  |       | 39 | % | 2,473 |   | 61 | % |
| Gross profit                  |       | $                      | 1,980      |   | 61 | % | $ | 1,554 |   | 39 | % |

 

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| ** **                    | ** ** | **Three months ended** | ** ** |
|-------------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **June 28, 2009** | ** ** | **% of  Revenues** | ** ** | **June 29, 2008** | ** ** | **% of  Revenues** | ** ** |
| WPT Online:                   |       |                   |       |   |   |   |   |   |   |
| Online gaming                 |       | $                      | 108        |   | 16 | % | $ | 320 |   | 82 | % |
| Non-gaming                    |       | 588                    |       | 84 | % | 70 |   | 18 | % |
|                          |       | 696                    |       | 100 | % | 390 |   | 100 | % |
| Cost of revenues              |       | 310                    |       | 45 | % | 247 |   | 63 | % |
| Gross profit                  |       | $                      | 386        |   | 55 | % | $ | 143 |   | 37 | % |
|                          |       |                   |       |   |   |   |   |   |   |
| WPT Global Marketing:         |       |                   |       |   |   |   |   |   |   |
| Product licensing             |       | $                      | 366        |   | 60 | % | $ | 573 |   | 88 | % |
| Event hosting and sponsorship |       | 223                    |       | 36 | % | 66 |   | 10 | % |
| Other                         |       | 23                     |       | 4 | % | 16 |   | 2 | % |
|                          |       | 612                    |       | 100 | % | 655 |   | 100 | % |
| Cost of revenues              |       | 42                     |       | 7 | % | 64 |   | 10 | % |
| Gross profit                  |       | $                      | 570        |   | 93 | % | $ | 591 |   | 90 | % |

 

***WPT Studios. ***Combined domestic and foreign televisionrevenues decreased $362,000 to $3,040,000 in 2009, from $3,402,000 in 2008.Domestic television revenues decreased $1,025,000 and international televisionrevenues increased $663,000 in 2009 compared to 2008. The sponsorship feesreceived per episode in 2009 for Season Seven of the WPT television series werelower than the license fees received for Season Six in 2008. The sponsorshipfee per one-hour episode for Season Seven was $125,000 compared to a licensefee of $300,000 per two-hour episode for Season Six. In the second quarter of2009, we aired 11 one-hour episodes of Season Seven compared to the delivery ofeight two-hour episodes of Season Six in 2008. International televisionsponsorship revenues increased $988,000 in 2009 compared to 2008 as we hadgreater distribution of Seasons Four, Five and Six of the WPT television seriesand PPT Season One in territories covered by the PartyGaming sponsorshipcontract. International television licensing revenues decreased $325,000 in2009 compared to 2008 as a result of fewer international territories acceptinglicense arrangements and the substitution of sponsorship arrangements forlicense arrangements in many territories. WPT television series hosting feesdecreased by $400,000 in 2009 due to lower per episode hosting fees in SeasonSeven.

 

During2009, our sources of revenue changed from primarily licensed-based revenuesfrom the sale of our programming to television networks to primarilysponsorship-based revenues. Sponsors pay to appear in the show and televisionnetworks air the program for free or we pay a fee to television networks to airthe program. In addition, in recent television seasons, foreign televisionrevenues increased and domestic television revenues decreased. We expect thesetwo trends to continue in 2009.

 

Televisioncost of revenues decreased $1,188,000 in 2009compared to 2008 due to higher gross margins for Season Seven of the WPTtelevision series compared to Season Six and lower revenues in 2009 compared to2008. Television gross profit margins were 61% in the quarter compared to 39%in the same period 2008.

 

***WPT Online. ***Online revenues increased $306,000 to$696,000 in 2009, from $390,000 in 2008. Online gaming revenues decreased$212,000 between years. In 2009, our online gaming revenues were derived fromaffiliate revenues whereas in 2008 our online gaming revenues were derived fromthe WPT-branded online gaming website. In November, 2008, we terminated theWPT-branded online gaming website. Affiliate revenues in 2009 had no costof revenues whereas the WPT-branded online gaming website had $203,000 of costof revenues in the second quarter of 2008.

 

Non-gaming revenues increased $518,000 between yearsdue to increased membership in ClubWPT.com which was launched in the firstquarter of 2008. ClubWPT.com cost of revenues increased $276,000 to $310,000 in2009 from $33,000 in the same period 2008 due to increased revenues.ClubWPT.com gross profit margins increased to 47% in 2009 from 40% in 2008. Astotal membership increased, we realized improved gross profit margins fromeconomies of scale.

 

***WPT Global Marketing. ***Global marketing revenues decreased$43,000 to $612,000 in 2009, from $655,000 in 2008. A decrease in productlicensing revenues was offset by an increase in hosting and sponsorshiprevenues. There was a decrease in product licensing revenues from onesignificant licensee in 2009. Hosting and sponsorship revenues increased in2009 due to the addition of non-televised sponsored events internationally.Global marketing gross profit margins increased to 93% in 2009 from 90% in2008.

 

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***Selling, General and Administrative Expense. ***The following table sets forth selling, general andadministrative expense information for our three continuing business segments(amounts in thousands):

 
| ** **                          | ** ** | **Three months ended** | ** ** |
|-------------------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** | **% Change** | ** ** |
| Operational expenses                |       | $                      | 114        |   | $ | 416 |   | (73 | )% |
| Selling and marketing expenses      |       | 216                    |       | 1,905 |   | (89 | )% |
| General and administrative expenses |       | 1,947                  |       | 3,517 |   | (45 | )% |
|                                |       | $                      | 2,277      |   | $ | 5,838 |   | (61 | )% |
|                                     |            |                        |            |  |  |  |  |  |  |  |  |  |

 

Selling,general and administrative expense decreased $3,561,000 to $2,277,000 in 2009,from $5,838,000 in 2008. Selling, general and administrative expense consistsof operational costs to manage websites and software, sales and marketingexpenses and general and administrative expenses.

 

Operationalexpenses decreased $302,000 in 2009. Costs associated with our domestic websitedecreased $137,000 in 2009 due to lower maintenance costs. Costs associatedwith our WPT-branded online gaming website decreased $154,000 in 2009 becausewe terminated our WPT-branded online gaming website November 2008.

 

Salesand marketing expenses decreased $1,689,000 in 2009. Costs decreased primarilydue to the shutdown of our WPT-branded online gaming website. In the first halfof 2008, we heavily marketed our WPT-branded online gaming website and costsassociated with advertising, content, promotions, sponsorship and affiliatesfor online gaming decreased $1,410,000 in 2009.

 

Generaland administrative expenses decreased $1,570,000 in 2009. The decrease wasprimarily due to personnel reductions in 2008 that resulted in $1,192,000 inlower payroll and related costs in 2009. Travel expense decreased $132,000 alsoas a result of personnel reductions. Professional and consulting expenses werereduced by $184,000 in the 2009 period. Offsetting these lower 2009 costs was$199,000 of higher bad debt expense primarily due to the third party systemprovider for ClubWPT.

 

***Other Income.***  Net interestincome decreased $217,000 in 2009 compared to 2008, primarily due to lowerinterest rates. We recorded a $61,000 decrease in interest income during thesecond quarter of 2009 in marking our ARS portfolio to fair value and acorresponding increase in interest income in marking to fair value the rightsthat our broker gave us to compel them to repurchase our auction ratesecurities.

 

***Income Taxes. ***TheCompany expects to pay federal alternative minimum tax on the utilization ofnet operating losses in 2009 and California income taxes due to the suspensionof the availability of net operating losses in 2009. The income tax expense forthe three months ended June 28, 2009 is based on the estimated annualeffective income tax rate for 2009. There was no income tax benefit for thethree months ended June 29, 2008 due to the loss for the period.

 

***DiscontinuedWPT China Operations. ***The followingtable sets forth selling, general and administrative expense information forour discontinued business segment (amounts in thousands):

 
| ** **                          | ** ** | **Three months ended** | ** ** |
|-------------------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** | **% Change** | ** ** |
| Operational expenses                |       | $                      | —     |   | $ | 61 |   | — | % |
| Selling and marketing expenses      |       | —                 |       | 126 |   | — | % |
| General and administrative expenses |       | —                 |       | 394 |   | — | % |
| Shut down provision                 |       | 95                     |       | — |   | — | % |
|                                |       | $                      | 95         |   | $ | 581 |   | (84 | )% |

 

Weincurred $95,000 of shut down costs in 2009 and $581,000 in operating costs inthe same period 2008. The 2008 operating costs consisted of $275,000 of payrollcosts, $61,000 of website costs and $79,000 of television production costs.

 

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**Six Months Ended June 28, 2009 Compared to the SixMonths Ended June 29, 2008**

 

Thefollowing table sets forth revenue and cost of revenue information for ourthree continuing business segments (amounts in thousands):

 
| ** **                    | ** ** | **Six months ended**   | ** ** |
|-------------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **June 28, 2009** | ** ** | **% of  Revenues** | ** ** | **June 29, 2008** | ** ** | **% of  Revenues** | ** ** |
| WPT Studios:                  |       |                   |       |   |   |   |   |   |   |
| Domestic sponsorship          |       | $2,875                 |       | 40 | % | $— |   | — | % |
| Domestic license              |       | —                 |       | — | % | 4,500 |   | 58 | % |
| International sponsorship     |       | 3,071                  |       | 43 | % | 1,330 |   | 17 | % |
| International license         |       | 659                    |       | 9 | % | 1,172 |   | 15 | % |
| Event hosting and sponsorship |       | 575                    |       | 8 | % | 725 |   | 10 | % |
|                          |       | 7,180                  |       | 100 | % | 7,727 |   | 100 | % |
| Cost of revenues              |       | 2,975                  |       | 41 | % | 4,844 |   | 63 | % |
| Gross profit                  |       | $4,205                 |       | 59 | % | $2,883 |   | 37 | % |
|                          |       |                   |       |   |   |   |   |   |   |
| WPT Online:                   |       |                   |       |   |   |   |   |   |   |
| Online gaming                 |       | $244                   |       | 18 | % | $567 |   | 84 | % |
| Non-gaming                    |       | 1,133                  |       | 82 | % | 105 |   | 16 | % |
|                          |       | 1,377                  |       | 100 | % | 672 |   | 100 | % |
| Cost of revenues              |       | 607                    |       | 44 | % | 457 |   | 68 | % |
| Gross profit                  |       | $770                   |       | 56 | % | $215 |   | 32 | % |
|                          |       |                   |       |   |   |   |   |   |   |
| WPT Global Marketing:         |       |                   |       |   |   |   |   |   |   |
| Product licensing             |       | $1,043                 |       | 68 | % | $1,260 |   | 77 | % |
| Event hosting and sponsorship |       | 446                    |       | 29 | % | 293 |   | 18 | % |
| Other                         |       | 53                     |       | 3 | % | 82 |   | 5 | % |
|                          |       | 1,542                  |       | 100 | % | 1,635 |   | 100 | % |
| Cost of revenues              |       | 120                    |       | 8 | % | 153 |   | 9 | % |
| Gross profit                  |       | $1,422                 |       | 92 | % | $1,482 |   | 91 | % |

 

***WPT Studios. ***Combined domestic and foreign televisionrevenues decreased $397,000 to $6,605,000 in 2009, from $7,002,000 in 2008.Domestic television revenues decreased $1,625,000 and international televisionrevenues increased $1,228,000 in 2009 compared to 2008. The sponsorship feesreceived per episode in 2009 for Season Seven of the WPT television series werelower than the license fees received for Season Six in 2008. The sponsorshipfee per one-hour episode for Season Seven was $125,000 compared to a licensefee of $300,000 per two-hour episode for Season Six. In 2009, we aired 24one-hour episodes of Season Seven compared to the delivery of 15 two-hour episodesof Season Six in 2008. International television sponsorship revenues increased$1,741,000 in 2009 compared to 2008 as we had greater distribution of SeasonsFour, Five and Six of the WPT television series and PPT Season One interritories covered by the PartyGaming sponsorship contract. Internationaltelevision licensing revenues decreased $513,000 in 2009 compared to 2008 as aresult of fewer international territories accepting license arrangements andthe substitution of sponsorship arrangements for license arrangements in manyterritories. WPT television series hosting fees decreased by $150,000 in 2009due to lower per episode hosting fees in Season Seven.

 

During2009, our sources of revenue changed from primarily licensed-based revenuesfrom the sale of our programming to television networks to primarilysponsorship-based revenues. Sponsors pay to appear in the show and televisionnetworks air the program for free or we pay a fee to television networks to airthe program. In addition, in recent television seasons, foreign televisionrevenues increased and domestic television revenues decreased. We expect thesetwo trends to continue in 2009.

 

Televisioncost of revenues decreased $1,869,000 in 2009compared to 2008 due to higher gross margins for Season Seven of the WPTtelevision series compared to Season Six and lower revenues in 2009 compared to2008. Television gross profit margins were 59% in 2009 compared to 37% in 2008.

 

***WPT Online. ***Online revenues increased $705,000 to$1,377,000 in 2009, from $672,000 in 2008. Online gaming revenues decreased$323,000 between years. In 2009, our online gaming revenues were derived fromaffiliate revenues whereas in 2008 our online gaming revenues were derived fromthe WPT-branded online gaming website. In November, 2008, we terminated theWPT-branded online gaming website. Affiliate revenues in 2009 had no costof revenues whereas the WPT-branded online gaming website had $384,000 of costof revenues in 2008.

 

Non-gaming revenues increased $1,028,000 between yearsdue to increased membership in ClubWPT.com which was launched in the firstquarter of 2008. ClubWPT.com cost of revenues increased $557,000 to $601,000 in2009 from $44,000 in 2008 due to 

 

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increased revenues. ClubWPT.com gross profit marginsincreased to 46% in 2009 from 39% in 2008. As total membership increased, werealized improved gross profit margins from economies of scale.

 

***WPT Global Marketing. ***Global marketing revenues decreased$93,000 to $1,542,000 in 2009, from $1,635,000 in 2008. A decrease in productlicensing revenues in 2009 was partially offset by an increase in hosting andsponsorship revenues. There was a decrease in product licensing revenues in2009 from one significant licensee that was partially offset by higher productlicensing revenues from another significant licensee. Hosting and sponsorshiprevenues increased in 2009 due to the addition of increased non-televisedsponsored events internationally. Other global marketing revenues decreased$29,000 in 2009 due to the expiration of a DVD distributor agreement in 2008.Global marketing gross profit margins increased to 92% in 2009 from 91% in2008.

 

***Selling, General and Administrative Expense. ***The following table sets forth selling, general andadministrative expense information for our three continuing business segments(amounts in thousands):

 
| ** **                          | ** ** | **Six months ended**   | ** ** |
|-------------------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** | **% Change** | ** ** |
| Operational expenses                |       | $                      | 265        |   | $ | 872 |   | (70 | )% |
| Selling and marketing expenses      |       | 1,011                  |       | 3,077 |   | (67 | )% |
| General and administrative expenses |       | 4,184                  |       | 6,845 |   | (39 | )% |
|                                |       | $                      | 5,460      |   | $ | 10,794 |   | (49 | )% |

 

Selling,general and administrative expense decreased $5,334,000 to $5,460,000 in 2009,from $10,794,000 in 2008. Selling, general and administrative expense consistsof operational costs to manage websites and software, sales and marketingexpenses and general and administrative expenses.

 

Operationalexpenses decreased $607,000 in 2009. Costs associated with our domestic websitedecreased $243,000 in 2009 due to lower maintenance costs. Costs associatedwith our WPT-branded online gaming website decreased $348,000 in 2009 becausewe terminated our WPT-branded online gaming website in November 2008.

 

Salesand marketing expenses decreased $2,066,000 in 2009. Costs decreased primarilydue to the shutdown of our WPT-branded online gaming website. In the first halfof 2008, we heavily marketed our WPT-branded online gaming website and costsassociated with advertising, promotions and affiliates for online gamingdecreased $1,622,000 in 2009. Other sponsorship costs decreased $91,000 in 2009due to the termination of our spokesperson contract with Antonio Esfandiari.

 

Generaland administrative expenses decreased $2,661,000 in 2009. The decrease wasprimarily due to personnel reductions in 2008 that resulted in $2,097,000 inlower payroll and related costs in 2009. Travel expense decreased $204,000 alsoas a result of personnel reductions. Legal expense decreased $247,000 in 2009 as litigation was settled inthe second quarter of 2008. Professional and consulting expenses were reducedby $150,000 in the 2009 period. Offsetting these lower 2009 costs was $459,000of higher bad debt expense that was primarily due to the third party systemprovider for ClubWPT.

 

***Asset Impairment. ***We recorded an impairment charge against ourinvestment in Cecure Gaming in the third quarter of 2008 due to difficultiesCecure Gaming was having in obtaining working capital to finance their businessdevelopment over the next several years that resulted in a significantreduction in staffing. Financing difficulties continued into 2009 and we recorded an additional $1,000,000 impairmentcharge in first quarter of 2009. This investment was measured at implied fairvalue resulting in an other-than-temporary impairment charge.

 

***Other Income.***  Net interestincome decreased $498,000 in 2009 compared to 2008, primarily due to lower interestrates and lower balances of investments in cash equivalents and debtsecurities. We recorded a $150,000 increase in interest income in 2009 inmarking our ARS portfolio to fair value and a corresponding decrease ininterest income in marking to fair value the rights that our broker gave us tocompel them to repurchase our auction rate securities.

 

***Income Taxes. ***TheCompany expects to pay federal alternative minimum tax on the utilization ofnet operating losses in 2009 and California income taxes due to the suspensionof the availability of net operating losses in 2009. The income tax benefit forthe six months ended June 28, 2009 is based on the estimated annualeffective income tax rates for the first and second quarters of 2009. There wasno income tax benefit for the six months ended June 29, 2008 due to theloss for the period.

 

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***DiscontinuedWPT China Operations. ***The followingtable sets forth selling, general and administrative expense information forour discontinued business segment (amounts in thousands):

 
| ** **                          | ** ** | **Six months ended**   | ** ** |
|-------------------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **June 28, 2009** | ** ** | **June 29, 2008** | ** ** | **% Change** | ** ** |
| Operational expenses                |       | $                      | 57         |   | $ | 86 |   | (34 | )% |
| Selling and marketing expenses      |       | 247                    |       | 258 |   | (4 | )% |
| General and administrative expenses |       | 503                    |       | 765 |   | (34 | )% |
| Shut down provision                 |       | 306                    |       | — |   | — | % |
|                                |       | $                      | 1,113      |   | $ | 1,109 |   | — | % |

 

In January 2009, the Company began searching for a strategicpartner to invest in the WPT China business. The cash needs to support thegrowth in this business were greater than the Company was willing to expend. InMarch 2009, the Company shut down the operations of WPT China andcontinues to look for a strategic partner to acquire the WPT China assets.

 

Weincurred $807,000 in 2009 and $1,109,000 in 2008 of selling, general andadministrative expenses. We also incurred $306,000 of costs in 2009 to shutdown the WPT China operations.  Higher2008 expenses resulted from $537,000 of higher payroll costs and $157,000 ofhigher Traktor Poker Tour fees.

 

**Business Outlook**

 

Forthe third quarter and full year 2009, we expect:

 

·                    FSN to air 26 all-newepisodes of Season Seven of the WPT television series: 13 episodes aired in thefirst quarter, eleven episodes aired in the second quarter and two episodesaired in the third quarter.

 

·                    To recognize foreignsponsorship revenues for Season Seven of the WPT television series beginning inthe fourth quarter. If Season Seven episodes are delivered to a foreign sponsorahead of planned delivery, then revenues and profits from the fourth quarterwill be shifted into the third quarter of 2009. Foreign sponsorship revenuesfor the PPT television series and Seasons Four through Six of the WPTtelevision series will also be recognized in 2009.

 

·                    To begin production ofSeason Eight of the WPT television series for broadcast on FSN. Season Eightwill be filmed in high definition television. Season Eight production costsshould be lower than Season Seven production costs.

 

·                    Lower general andadministrative expenses compared to the same period in 2008.

 

·                    Lower selling and marketingcosts compared to the same period in 2008.

 

**Liquidity and Capital Resources**

 

During the six months ended June 28, 2009, cashand cash equivalents and investments in debt securities and put rightsincreased $3.8 million to a combined balance of $21.3 million. Weborrowed $2.7 million from the broker that holds our ARS portfolio andthis source of cash was a significant part of the increase in cash andinvestment balances. Cash flows from operating activities of continuingoperations were $1,816,000 in 2009 compared to ($4,111,000) in 2008. Reductionsin production costs and selling, general and administrative expenses in 2009were the primary reasons for the improvement between years. Our principaloperating cash requirements consist of payroll and benefits, office leases,television production, professional and consulting fees, business insurance andsales and marketing costs. Cash flows from investing activities of continuingoperations decreased to ($1,962,000) in 2009 from $6,915,000 in 2008. Thedecrease was caused by fewer net redemptions of investments in 2009. Cash flowsfrom financing activities increased to $2,648,000 from ($136,000) in 2008. The2009 cash flows were from the draw down of the line of credit in February 2009.

 

We intend to use funds currently on hand for workingcapital and capital expenditures associated with the expansion of the WPTtelevision series, ClubWPT and WPT Global Marketing, and for general corporatepurposes. We anticipate our overall selling, general and administrativeexpenses will decrease in future periods compared to the same periods in 2008.We eliminated sales and marketing expenditures related to our online gamingwebsite and WPT China and we significantly reduced payroll and related costs in2008 and the first quarter of 2009. We expect to continue to benefit from thesecost reductions throughout the remainder of 2009.

 

As of June 28, 2009, we had $3.9 million investedin ARS and rights to put the ARS back to UBS. Historically, ARS had been liquidwith interest rates resetting every 7 to 35 days by an auction process.However, beginning in February 2008, auctions for ARS held by us failed asa result of liquidity issues experienced in the global credit and capitalmarkets. An auction failure means that the amount of securities submitted forsale exceeds the amount of purchase orders and the parties wishing to sell thesecurities are instead required to hold the investment until a successfulauction is completed. The ARS continue to pay interest in accordance with theterms of the underlying security; however, liquidity will continue to belimited until there is a successful auction or until such time as other marketsfor ARS develop.

 

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We entered into anagreement with UBS that requires UBS to buy the ARS from us at par during theperiod June 30, 2010 to July 2, 2012. We are required to sell the ARSto UBS prior to that period if they decide to buy the ARS at par value for anyreason. UBS provided us with a line of credit, secured by ARS held by UBS,equal to 75% of the fair value of the ARS. We borrowed $2,661,000 under theline of credit agreement in February 2009. At June 28, 2009, $2,647,000was outstanding under the line of credit.

 

We expect that cash, cash equivalents, investments indebt securities and put rights and borrowings on the credit line secured by ourARS portfolio will be sufficient to fund our working capital and capitalexpenditure requirements for the next twelve months even considering thecurrent liquidity issues with the ARS. We preparequarterly cash flow projections in order to operate our business and to makeforward looking statements about our cash flow expectations. General economicand capital market conditions are rapidly changing, are unpredictable and theimpact on our business is not within our control. If we need to raise workingcapital, we may need to seek to sell additional equity securities, issue debtor convertible securities or seek to obtain credit facilities through financialinstitutions, the availability of which is highly uncertain.

 

**ContractualObligations, Commitments and Off-balance Sheet Arrangements**

 

The table below sets forth our contractual obligations asof June 28, 2009 (in thousands):

 
| ** **                       | ** ** | **Payments due by period (in thousands)** | ** ** |
|----------------------------------|------------|--------------------------------------------------------------------|------------|
| **Contractual obligations** | ** ** | **Total**                                                          | ** ** | **Year 1** | ** ** | **Years 2-3** | ** ** | **Years 4-5** | ** ** | **Years 6  and Beyond** | ** ** |
| Operating leases (1)             |       | $                                                                  | 1,785      |   | $ | 900 |   | $ | 885 |   | $ | — |   | $ | — |   |
| Broadcaster placement fees (2)   |       | 790                                                                |       | 790 |   | — |   | — |   | — |   |
| Purchase obligations (3)         |       | 177                                                                |       | 105 |   | 72 |   | — |   | — |   |
|                             |       | $                                                                  | 2,752      |   | $ | 1,795 |   | $ | 957 |   | $ | — |   | $ | — |   |

 

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(1)             Operatinglease obligations include rent payments for our corporate offices pursuant totwo lease agreements. For the first lease, monthly lease payments areapproximately $43,000 and escalate to approximately $45,000 over the remaininglease term. For the second lease, monthly lease payments are approximately$32,000 and escalate up to approximately $33,000 over the remaining lease term.The amounts set forth in the table above include monthly lease payments throughJune 2011.

 

(2)             Wepay fees to certain broadcasters to place the WPT and PPT television series ontheir television network. The placement fees are generally due when the showairs, provided the terms and conditions of airing were met. We have projectedthe period that the placement fee will be due based on information provided bythe television networks.

 

(3)             Purchaseobligations do not include future amounts to be paid to produce Season Eight ofthe World Poker Tour because these amounts are generally not payable unless thetour event is filmed or the service is provided after the tour event is filmed.

 

We have no off-balancesheet arrangements that have or are reasonably likely to have a current orfuture material effect on our financial condition, changes in financialcondition, revenues or expenses, results of operations, liquidity, capitalexpenditures or capital resources.

 

**NasdaqStock Market Listing Compliance**

 

On August 14, 2008,The Nasdaq Stock Market notified us that we were not in compliance with theminimum stock listing price requirements of Nasdaq Marketplace Rule 5810(c)(3)(A) (nowRule 5450(a)(1)) as a result of the closing bid price for the Company’scommon stock being below $1.00 for 30 consecutive business days. On October 16,2008, Nasdaq announced the suspension of the enforcement of the rules requiringa minimum $1.00 closing bid price. The term of the suspension was extended byNasdaq on December 19, 2008 and again on March 23, 2009. Thestockholders have granted the Board the authority to effect a reverse stocksplit to regain compliance with the minimum $1.00 closing bid price rule shouldthe Board determine that the reverse stock split is in the best interests ofstockholders.

 

On July 1, 2009, we received a letter from theListing Qualifications Department of The NASDAQ Stock Market stating that theCompany had regained compliance with Marketplace Rule 5450(a)(1) becausethe closing bid price of the Company’s common stock had been at $1.00 per shareor greater for 10 consecutive business days. The delisting proceeding relatedto the Company’s closing bid price compliance is now closed.

 

**CriticalAccounting Estimates**

 

The methods, estimatesand judgments that we use in applying our accounting policies have asignificant impact on the results that we report in our financial statements.Some of our accounting policies require us to make difficult and subjectivejudgments, often as a result of the need to make estimates regarding mattersthat are inherently uncertain. Management believes that there have been nosignificant changes during the six months ended June 28, 2009 to the itemsthat we disclosed as our critical accounting policies and estimates in Management’sDiscussion and Analysis of Financial Condition and Results of Operations in ourAnnual Report on Form 10-K for the fiscal year ended December 28,2008.

 

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##### **Recently Issued AccountingPronouncements**

#####  

See “Note 2. RecentAccounting Pronouncements” for information about recently issued accountingpronouncements.

 

**Private Securities Litigation Reform Act**

** **

Theforegoing discussion and other statements in this report contain various “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934,as amended. Forward-looking statements are based on our current expectations orbeliefs concerning future events. These statements can be identified by the useof terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,”“may,” “could,” “possible,” “plan,” “project,” “will,” “forecast” and similarwords or expressions.

 

Forward-lookinginformation involves important risks and uncertainties that could significantlyaffect our anticipated future results and, accordingly, actual results maydiffer materially from those expressed in any forward-looking statement. Ourforward-looking statements generally relate to expectations about futureoperating results and other business development activities, expected levels ofcapital spending, potential sources of future financing and the possibleeffects on our business of gaming, tax and other regulation and of competition.Although it is not possible to foresee all of the factors that may cause actualresults to differ from our forward-looking statements, see “Part II —Other Information, Item 1A. Risk Factors” and the risk factors described in ourForm 10-K for the year ended December 28, 2008 for risk factors thatmay impact our forward-looking statements.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

Our financial instrumentsinclude cash and cash equivalents, short-term municipal bonds, corporatepreferred securities, certificates of deposit and ARS, including related putrights. Our main investment objectives are the preservation of investment capitaland the maximization of after-tax returns on our investment portfolio.Consequently, we invest with only high-credit-quality issuers and limit theamount of credit exposure to any one issuer. We do not use derivativeinstruments for speculative or investment purposes.

 

Our cash equivalents andrestricted cash are not subject to significant interest rate risk due to theshort maturities of these instruments, or for our ARS portfolio becauseinterest rates reset to market rates frequently. As of June 28, 2009, thecarrying value of our cash equivalents and restricted cash approximated fairvalue. We have in the past and our investment strategy for the future is toobtain marketable debt securities (principally consisting of governmentsecurities, municipal bonds, corporate preferred securities and certificates ofdeposit) having a weighted average duration of one year or less. Consequently,such securities would not be subject to significant interest rate risk.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

**Underthe supervision and with the participation of our management, including ourChief Executive Officer and President, and Interim Chief Financial Officer, weconducted an evaluation of our disclosure controls and procedures, as such termis defined under Rules 13a-15(e) or 15d-15(e) promulgated underthe Exchange Act, as of the end of the period covered by this report. Based onthis evaluation, our management has concluded that our disclosure controls andprocedures are effective.**

** **

There have been nosignificant changes (including corrective actions with regard to significantdeficiencies of material weaknesses) in our internal controls or in otherfactors that could significantly affect these controls subsequent to the dateof the evaluation referenced above.

 

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**PART II — OTHER INFORMATION**

 

**ITEM 1. LEGAL PROCEEDINGS**

 

See “Note10. Contingencies” for information about legal proceedings.

 

**ITEM 1A. RISK FACTORS**

 

Inaddition to the other information set forth in this report, the risk factorsset forth below include any material changes to the risk factors that youshould carefully consider as discussed in Part I, “Item 1A. Risk Factors”in our Annual Report on Form 10-K for the year ended December 28,2008. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial may also materially adversely affect ourbusiness, financial condition and/or operating results.

 

***Our broadcast agreement with FSN does not provide for anybroadcast fees to be paid to us, which could materially and adversely affectour results of operations.***

 

Over the years, licensefees received from U.S. broadcasters have been our most significant source ofrevenue. Our distribution agreement with FSN to broadcast Season Seven of theWPT television series does not provide for any license fees to be paid to usfor the broadcast rights. We generate fees from sponsors by integrating sponsorlogos and other advertising materials into our programs and around thebroadcast of the shows. The Season Seven sponsors are FullTiltPoker.net in theU.S. and Mexico and Poker Stars in Canada, certain European countries, Mexicoand South America. We recently sold Season Seven in European countries that arenot covered by the Poker Stars agreement. In January 2009, we entered intoa distribution agreement with FSN to broadcast Season Eight of the WPTtelevision series on terms that are similar to the season Seven agreement. Wedo not yet have any sponsors for Season Eight. We may be required to pay thecost to produce Season Eight shows for FSN and depending on the amount ofsponsor revenues we are able to generate, the lack of license fees in ourSeason Eight FSN agreement could have a material adverse effect on ourfinancial condition, results of operations and cash flows.

 

***Our ClubWPT.com business iscurrently heavily dependent upon television as a primary source for thegeneration of new subscribers and we need to find a more cost effectivemarketing tool to generate new subscribers, which if not achieved couldmaterially and adversely affect our results of operations.***

 

We spent $927,000 in the fourth quarter of 2008 and$220,000 in the first quarter of 2009 to produce 13 one-hour ClubWPT.comtelevision shows to build awareness and drive traffic to our onlinesubscription website ClubWPT.com. We were disappointed with the rate at whichwe converted ClubWPT.com television viewers to paying subscription customers atClubWPT. In order for the ClubWPT business to become a viable business, we needto identify a more cost efficient marketing tool to generate new subscribersfor ClubWPT. The number of paid subscribers at ClubWPT was constant throughoutthe second quarter of 2009 and increased in July 2009 as a result of asignificant promotion by FSN. The number of paid subscribers could decrease infuture quarters due to the lack of current spending on marketing for newplayers.

 

***Our reliance onCentaurus Games, LLC as a third party systems provider is subject to systemsecurity risks and business viability risks that could disrupt servicesprovided to ClubWPT.com customers, and any such disruption could reduce ourrevenue, increase our expenses and harm our reputation.***

 

Experienced computer programmers and hackers may beable to penetrate Centaurus’ network security and misappropriate confidentialinformation, create system disruptions or cause shutdowns. In addition,computer programmers and hackers may be able to develop and deploy viruses,worms and other malicious software programs that attack their products orotherwise exploit security vulnerabilities in their products. As a result, wecould lose existing or potential customers. Furthermore, we are Centaurus’primary source of revenue. If we or other Centaurus customers do not providesufficient business to them, they will face significant financial pressures. Inthe fourth quarter of 2008 and the first and second quarters of 2009, Centaurusexperienced a cash flow shortfall and we agreed to defer the payment of certainamounts owed by Centaurus to us. It is possible that the deferral of thepayment of amounts owed by Centaurus to us will continue throughout 2009. IfCentaurus is not able to raise additional funding to finance their business, orif we or other Centaurus customers are not able to generate sufficient businessfor Centaurus, then Centaurus may not be able to continue to be a viable vendorfor us. Our efforts to address these risks could result in businessinterruptions or delays, or the cessation of service and result in the loss ofexisting or potential customers that would reduce our revenues, increase ourexpenses and harm our reputation.

 

***We are dependent on UBS AG to repurchase our auction ratesecurities portfolio from us.***

 

As of June 28, 2009, we had $3,900,000 ofprincipal invested in auction rate securities. The types of ARS investmentsthat we own are backed by student loans, are guaranteed under the FederalFamily Education Loan Program and are AAA or Aaa rated. The estimated fairvalue of our ARS holdings at June 28, 2009 was $3,455,000, which reflectsa $445,000 impairment loss.

 

We entered into anagreement with UBS that requires UBS to buy our ARS at par value during theperiod June 30, 2010 through July 2, 2012. We have valued that rightat $445,000 at June 28, 2009. We have given UBS the right to sell our ARSbefore that period if they are able to find a buyer that is willing to pay parvalue for our ARS. UBS has provided a $2,661,000 line of credit to us, 

 

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secured by the ARS held by them, which we drew down inFebruary 2009. At June 28, 2009, $2,647,000 was outstanding under theline of credit.

 

UBS’s obligation to repurchase our ARS is not securedby their assets and does not require UBS to obtain any financing to supporttheir performance obligations. UBS has disclaimed any assurance that they willhave sufficient financial resources to satisfy their obligations and theobligations are not guaranteed by any other party.

 

If uncertainties in the capital and credit marketscontinue, these markets deteriorate further or we experience any ratingsdowngrades on any ARS investments in our portfolio, the fair market value ofour ARS portfolio could decline, which could negatively affect our financialcondition and results of operations. We are also dependant on UBS to repurchaseour ARS portfolio at par value and that obligation is subject to performancerisk on the part of UBS.

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

** **

Weheld our annual stockholders meeting on May 20, 2009. At the meeting, ourstockholders took the following actions:

 

(i)                Thestockholders elected seven directors to serve as members of our Board ofDirectors until the next annual meeting of stockholders. The stockholderspresent in person or by proxy cast the following numbers of votes in connectionwith the election of directors, resulting in the election of all nominees:

 
| **Nominee**             | ** ** | **Votes For** | ** ** | **Votes Withheld** | ** ** |
|-------------------------|------------|---------------|------------|--------------------|------------|
| Lyle Berman             |       | 15,134,861    |       | 1,156,956          |       |
| Steven Lipscomb         |       | 15,185,411    |       | 1,106,406          |       |
| Michael Beindorff       |       | 15,276,573    |       | 1,015,244          |       |
| Bradley Berman          |       | 15,226,737    |       | 1,065,080          |       |
| Joseph Carson, Jr. |       | 14,937,854    |       | 1,353,963          |       |
| Ray Moberg              |       | 14,932,736    |       | 1,359,081          |       |
| Mimi Rodgers            |       | 14,930,599    |       | 1,361,218          |       |

 

(ii)             The stockholders authorizedthe Board of Directors to amend the Company’s Restated Certificate ofIncorporation to accomplish a reverse stock split of the Company’s common stockat a ratio within a range of 1:5 to 1:10 and a reduction in the number ofauthorized shares of common stock at a corresponding ratio. There were15,671,219 votes cast forthe proposal, 523,744 votes were castagainst the proposal, 96,854 votes abstained and there were no broker non-votes.

 

(iii)          The stockholders ratifiedthe appointment of Piercy, Bowler, Taylor & Kern as our independentregistered public accounting firm for 2009. There were 16,027,728 votes cast for the proposal,122,305 votes were castagainst the proposal, 141,783 votes abstained and there were no broker non-votes.

 

(iv)         The stockholders approvedthe transaction of any other business as may properly come before thestockholders’ meeting and any adjournments thereof. There were 14,307,483 votes cast for the proposal,1,623,841 votes were castagainst the proposal, 360,492 votes abstained and there were no broker non-votes.

 

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**ITEM 6. EXHIBITS**

 
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Securities Exchange Act  Rules 13a-15(e) and 15d-15(e) as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                           |
| 31.2   |   | Certification of  Interim Chief Financial Officer pursuant to Securities Exchange Act  Rules 13a-15(e) and 15d-15(e) as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |
|   |   |                                                                                                                                                                                                           |
| 32.1   |   | Certification of Chief  Executive Officer and Interim Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002             |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report on Form 10-Q to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| Dated: August 12,  2009 | WPT ENTERPRISES, INC.            |
|------------------------------|----------------------------------|
|                         | Registrant                       |
|                         |                             |
|                         |                             |
|                         | /s/ *Steven Lipscomb*            |
|                         | Steven Lipscomb                  |
|                         | Chief Executive Officer          |
|                         |                             |
|                         |                             |
|                         | /s/ *Thomas Flahie*              |
|                         | Thomas Flahie                    |
|                         | Interim Chief Financial  Officer |

 

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