** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

----

 

**FORM 10-Q**

 

**(Mark One)**
| **x** | ** ** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|----------------------------------------------------------------------------------------------|

** **

**For the quarterly period endedMarch 30, 2008**

** **

**OR**

** **
| **o** | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|------------|-----------------------------------------------------------------------------------------------|

 

**For thetransition period from                                  to**

 

**Commission File No. 0-24993**

** **

**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)          |

 

**(323) 330-9900**

(Registrant’stelephone number, including area code)

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past90 days.

 

| Yes x |   | No o |
|-------|--------|------|

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the ExchangeAct).   Yes o   No x

 

As of  May 9,2008 there were 20,491,993 shares of Common Stock, $0.001 par value per share,outstanding.

 

 

----

 

**WPT ENTERPRISES, INC.**

 

**INDEX**

 
| ** **    | ** **            | ** **         | ** **                                                                                                                                       | ** ** | **Page of**  |
|---------------|-----------------------|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| ** **    | ** **            | ** **         | ** **                                                                                                                                       | ** ** | **Form 10Q** |
| PART I.  | FINANCIAL INFORMATION |               |                                                                                                                                             |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 1.            | FINANCIAL STATEMENTS                                                                                                                             |       |              |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  |               | Condensed  Consolidated Balance Sheets as of March 30, 2008 (unaudited) and December 30,  2007                                                   | 3          |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  |               | Unaudited Condensed Consolidated Statements of Loss  and Comprehensive Loss for the three months ended March 30, 2008 andApril 1, 2007 | 4          |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  |               | Unaudited Condensed Consolidated Statements of  Stockholders’ Equity for the three months ended March 30, 2008 and  April 1, 2007 | 5          |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  |               | Unaudited Condensed Consolidated Statements of Cash  Flows for the three months ended March 30, 2008 and April 1, 2007                 | 6          |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  |               | Notes to Unaudited Condensed Consolidated Financial  Statements                                                                                  | 7          |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 2.            | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                      | 13         |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 3.            | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                                      | 21         |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 4.            | CONTROLS AND  PROCEDURES                                                                                                                         | 21         |
|          |                  |               |                                                                                                                                             |       |              |
| PART II. |                  | OTHER  INFORMATION |                                                                                                                                             |       |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 1.            | LEGAL PROCEEDINGS                                                                                                                                |       | 22                |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 1A.           | RISK FACTORS                                                                                                                                     |       | 22                |
|          |                  |               |                                                                                                                                             |       |              |
|          |                  | ITEM 6.            | EXHIBITS                                                                                                                                         |       | 23                |
|          |                  |               |                                                                                                                                             |       |              |
| SIGNATURES    |                  |               | 24                                                                                                                                               |

 

2

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**WPTENTERPRISES, INC.**

**Condensed Consolidated Balance Sheets**

** **
| ** **                                                                                        | ** ** | **March 30, 2008** | ** ** | **December 30, 2007** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                        | ** ** | **(unaudited)**              | ** ** | ** **                      | ** ** |
| ** **                                                                                        | ** ** | **(In thousands)**      | ** ** |
| **Assets**                                                                                        |       |                         |       |                            |       |
| Current assets:                                                                                   |       |                         |       |                            |       |
| Cash and cash  equivalents                                                                        |       | $                            | 5,027      |                            | $          | 3,852 |   |
| Investments in  marketable securities                                                             |       | 8,511                        |       | 22,971                          |       |
| Accounts  receivable, net of allowances of $18                                                    |       | 1,805                        |       | 2,758                           |       |
| Deferred  television costs                                                                        |       | 1,830                        |       | 2,198                           |       |
| Other                                                                                             |       | 989                          |       | 830                             |       |
|                                                                                              |       | 18,162                       |       | 32,609                          |       |
|                                                                                              |       |                         |       |                            |       |
| Investments in  marketable securities                                                             |       | 13,386                       |       | 4,200                           |       |
| Property and  equipment, net                                                                      |       | 1,622                        |       | 1,462                           |       |
| Investment in  unconsolidated investee                                                            |       | 2,923                        |       | 2,923                           |       |
| Other                                                                                             |       | 503                          |       | 503                             |       |
|                                                                                              |       | $                            | 36,596     |                            | $          | 41,697 |   |
|                                                                                              |       |                         |       |                            |       |
| **Liabilities  and Stockholders’ Equity**                                                    |       |                         |       |                            |       |
| Current  liabilities:                                                                             |       |                         |       |                            |       |
| Accounts payable                                                                                  |       | $                            | 847        |                            | $          | 736 |   |
| Accrued payroll  and related                                                                      |       | 466                          |       | 988                             |       |
| Other accrued  expenses                                                                           |       | 1,103                        |       | 1,308                           |       |
| Deferred revenue                                                                                  |       | 1,984                        |       | 2,870                           |       |
|                                                                                              |       | 4,400                        |       | 5,902                           |       |
|                                                                                              |       |                         |       |                            |       |
| **Commitments  and Contingencies**                                                                |       |                         |       |                            |       |
|                                                                                              |       |                         |       |                            |       |
| Stockholders’  equity:                                                                       |       |                         |       |                            |       |
| Preferred stock,  $0.001 par value; authorized 20,000 shares; none issued and outstanding         |       | —                       |       | —                          |       |
| Common stock,  $0.001 par value; authorized 100,000 shares; 20,492 shares issued and  outstanding |       | 20                           |       | 20                              |       |
| Additional  paid-in capital                                                                       |       | 44,147                       |       | 43,833                          |       |
| Deficit                                                                                           |       | (10,900                      | )          | (8,072                          | )          |
| Accumulated  other comprehensive earnings (loss)                                                  |       | (1,071                       | )          | 14                              |       |
|                                                                                              |       | 32,196                       |       | 35,795                          |       |
|                                                                                              |       | $                            | 36,596     |                            | $          | 41,697 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

3

----

 

**WPT ENTERPRISES, INC.**

**CondensedConsolidated Statements of Loss and Comprehensive Loss**

**(unaudited)**

 
| ** **                                                          | ** ** | **Three months ended**                                   | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                          | ** ** | **March 30, 2008**                                       | ** ** | **April 1, 2007** | ** ** |
| ** **                                                          | ** ** | **(In thousands, except per share data)** | ** ** |
| **Revenues:**                                                       |       |                                                               |       |   |   |
| License fees:                                                       |       |                                                               |       |   |   |
| Domestic  television                                                |       | $                                                                  | 2,100      |   | $ | 2,402 |   |
| International  television                                           |       | 770                                                                |       | 455 |   |
| Product  licensing                                                  |       | 687                                                                |       | 879 |   |
|                                                                |       | 3,557                                                              |       | 3,736 |   |
|                                                                |       |                                                               |       |   |   |
| Online gaming                                                       |       | 240                                                                |       | 550 |   |
| Event hosting  and sponsorship fees                                 |       | 1,057                                                              |       | 125 |   |
| Other                                                               |       | 108                                                                |       | 80 |   |
|                                                                |       | 4,962                                                              |       | 4,491 |   |
|                                                                |       |                                                               |       |   |   |
| **Cost of  revenues**                                               |       | 2,670                                                              |       | 2,152 |   |
|                                                                |       |                                                               |       |   |   |
| **Gross  profit**                                                   |       | 2,292                                                              |       | 2,339 |   |
|                                                                |       |                                                               |       |   |   |
| **Selling,  general and administrative expense**                    |       | 5,484                                                              |       | 5,267 |   |
|                                                                |       |                                                               |       |   |   |
| **Loss  from operations**                                           |       | (3,192                                                             | )          | (2,928 | ) |
|                                                                |       |                                                               |       |   |   |
| **Other  income:**                                                  |       |                                                               |       |   |   |
| Gain on sale of  investment                                         |       | 11                                                                 |       | — |   |
| Interest                                                            |       | 353                                                                |       | 663 |   |
|                                                                |       |                                                               |       |   |   |
| **Loss  before income taxes**                                       |       | (2,828                                                             | )          | (2,265 | ) |
|                                                                |       |                                                               |       |   |   |
| **Income  taxes**                                                   |       | —                                                             |       | (14 | ) |
|                                                                |       |                                                               |       |   |   |
| **Net  loss**                                                       |       | (2,828                                                             | )          | (2,279 | ) |
|                                                                |       |                                                               |       |   |   |
| **Unrealized  gain (loss) on securities**                           |       | (1,085                                                             | )          | 23 |   |
|                                                                |       |                                                               |       |   |   |
| **Comprehensive  loss**                                             |       | $                                                                  | (3,913     | ) | $ | (2,256 | ) |
|                                                                |       |                                                               |       |   |   |
| **Net  loss per common share - basic and diluted**                  |       | $                                                                  | (0.14      | ) | $ | (0.11 | ) |
|                                                                |       |                                                               |       |   |   |
| **Weighted-average  common shares outstanding - basic and diluted** |       | 20,603                                                             |       | 20,603 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

4

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**WPT ENTERPRISES, INC.**

**Condensed Consolidated Statements of Stockholders’Equity**

**Three Months ended March 30, 2008 and April 1, 2007**

**(unaudited)**

** **
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **              | ** ** | **Accumlated**  | ** **  | ** **  | ** ** |
|--------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|-------------------------|------------|-----------------|-------------|-------------|------------|
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | **Retained**            | ** ** | **Other**       | ** **  | ** **  | ** ** |
| ** **                           | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Earnings**   | ** ** | **Comprehensive**       | ** ** | ** **      | ** **  |
| ** **                           | ** ** | **Shares**            | ** ** | **Dollars** | ** ** | **Capital**    | ** ** | **(Deficit)**           | ** ** | **Gain/(Loss)** | ** **  | **Total**   | ** ** |
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | **(in thousands)** | ** ** | ** **      | ** **  |
| **2008**                             | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **              | ** ** | ** **      | ** **  | ** **  | ** ** |
| **BALANCES  AT DECEMBER 31, 2007**   | ** ** | **20,492**            | ** ** | **$**       | **20**     | ** **     | **$**      | **43,833**              | ** ** | **$**           | **(8,072**  | **) ** | **$**      | **14** | ** ** | **$** | **35,795** | ** ** |
| Share-based  compensation            |       |                  |       |        |       | 314            |       |                    |       |            |        | 314         |       |
| Other  comprehensive loss            |       |                  |       |        |       |           |       |                    |       | (1,085          | )           | (1,085      | )          |
| Net loss                             |       |                  |       |        |       |           |       | (2,828                  | )          |            |        | (2,828      | )          |
|                                 |       |                  |       |        |       |           |       |                    |       |            |        |        |       |
| **BALANCES  AT MARCH 30, 2008** | ** ** | **20,492**            | ** ** | **$**       | **20**     | ** **     | **$**      | **44,147**              | ** ** | **$**           | **(10,900** | **)**       | **$**      | **(1,071** | **)** | **$** | **32,196** | ** ** |
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **              | ** ** | ** **      | ** **  | ** **  | ** ** |
| **2007**                             | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **              | ** ** | ** **      | ** **  | ** **  | ** ** |
| **BALANCES  AT JANUARY 1, 2007**     | ** ** | **20,378**            | ** ** | **$**       | **20**     | ** **     | **$**      | **41,719**              | ** ** | **$**           | **1,561**   | ** **  | **$**      | **(49** | **)** | **$** | **43,251** | ** ** |
| Share-based  compensation            |       |                  |       |        |       | 588            |       |                    |       |            |        | 588         |       |
| Other  comprehensive gain            |       |                  |       |        |       |           |       |                    |       | 23              |        | 23          |       |
| Net loss                             |       |                  |       |        |       |           |       | (2,279                  | )          |            |        | (2,279      | )          |
| **BALANCES  AT APRIL 1, 2007**       | ** ** | **20,378**            | ** ** | **$**       | **20**     | ** **     | **$**      | **42,307**              | ** ** | **$**           | **(718**    | **)**       | **$**      | **(26** | **)** | **$** | **41,583** | ** ** |

 

See notes to unauditedcondensed financial statements

 

5

----

 

**WPT ENTERPRISES, INC.**

**Condensed Consolidated Statements of Cash Flows**

**(unaudited)**

** **
| ** **                                                                     | ** ** | **Three months ended** | ** ** |
|--------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                     | ** ** | **March 30, 2008**     | ** ** | **April 1, 2007** | ** ** |
| ** **                                                                     | ** ** | **(In thousands)**          | ** ** |
| **OPERATING  ACTIVITIES:**                                                     |       |                             |       |   |   |
| Net losses                                                                     |       | (2,828                           | )          | $ | (2,279 | ) |
| Adjustments to  reconcile net losses to net cash used in operating activities: |       |                             |       |   |   |
| Depreciation and  amortization                                                 |       | 165                              |       | 181 |   |
| Share-based  compensation                                                      |       | 314                              |       | 588 |   |
| Increase in  operating (assets) and liabilities:                               |       |                             |       |   |   |
| Accounts  receivable                                                           |       | 953                              |       | 394 |   |
| Deferred  television costs                                                     |       | 368                              |       | (247 | ) |
| Other                                                                          |       | (159                             | )          | (485 | ) |
| Accounts payable                                                               |       | 111                              |       | 35 |   |
| Accrued expenses                                                               |       | (727                             | )          | (834 | ) |
| Deferred revenue                                                               |       | (886                             | )          | 402 |   |
| Net cash used in  operating activities                                         |       | (2,689                           | )          | (2,245 | ) |
|                                                                           |       |                             |       |   |   |
| **INVESTING  ACTIVITIES:**                                                     |       |                             |       |   |   |
| Purchase of  property and equipment                                            |       | (325                             | )          | (355 | ) |
| Purchases of  marketable securities                                            |       | (11,187                          | )          | (20,831 | ) |
| Sales/redemptions  of marketable securities                                    |       | 15,376                           |       | 22,435 |   |
| Net cash  provided by investing activities                                     |       | 3,864                            |       | 1,249 |   |
|                                                                           |       |                             |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                          |       | 1,175                            |       | (996 | ) |
| Cash and cash  equivalents - beginning of period                               |       | 3,852                            |       | 8,360 |   |
| **Cash  and cash equivalents - end of period**                                 |       | $                                | 5,027      |   | $ | 7,364 |   |
|                                                                                |            |                                  |            |  |  |  |  |

 

See notes tounaudited condensed consolidated financial statements.

 

6

----

 

 

**WPT ENTERPRISES, INC.Notes to Unaudited Condensed Consolidated Financial Statements**

** **

**1. BASIS OF PRESENTATION**

 

These condensedconsolidated financial statements have been prepared by the Company pursuant tothe rules and regulations of the Securities and Exchange Commission (the “SEC”)applicable to interim financial information. Accordingly, certain informationnormally included in the annual financial statements prepared in accordancewith accounting principles generally accepted in the United States of Americahas been condensed or omitted.  Forfurther information, please refer to the annual audited financial statements ofthe Company, and the related notes, included in the Company’s Annual Report on Form 10-Kfor the fiscal year ended December 30, 2007, previously filed with theSEC, from which the information as of that date is derived.

 

In theopinion of management, all adjustments considered necessary for a fairpresentation have been included. The results for the current interim period arenot necessarily indicative of the results to be expected for the full year.

 

**2. LOSSPER SHARE**

 

Basic loss per common share is calculated by dividingnet loss by the weighted-average number of common shares outstanding during theperiod. Shares for certain stock options granted to employees and consultantsof the Company are included in the computation after the options have vestedwhen the shares are issuable for relatively minimal cash consideration inrelation to the fair value of the options (Note 3). Diluted earnings per commonshare is ordinarily calculated by adjusting weighted-average outstandingshares, assuming conversion of all potentially dilutive stock options andawards (common stock equivalents). However, an immaterial amount of commonstock equivalents are not included in the calculation for loss periods becauseto do so would be anti-dilutive due to losses.

 

**3.SHARE-BASED COMPENSATION**

 

The table below summarizes share-based compensationexpense, net of tax, related to employee stock options was allocated as follows(in thousands):

 
| ** **                                        | ** ** | **Three months ended  March 30, 2008** | ** ** | **Three months ended  April 1, 2007** | ** ** |
|---------------------------------------------------|------------|------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| Total cost of  share-based payment plans          |       | $                                                          | 314        |                                                      | $          | 588 |   |
| Amounts  capitalized in deferred television costs |       | —                                                     |       | 6                                                         |       |
| Amounts charged  against income                   |       | $                                                          | 314        |                                                      | $          | 582 |   |

 

For the three-monthperiods ended March 30, 2008 and April 1, 2007, no income tax benefitwas recognized in the statement of loss for share-based compensationarrangements (Note 6).  Managementassessed the likelihood that the deferred tax assets relating to future taxdeductions from share-based compensation will be recovered from future taxableincome and determined that a valuation allowance is necessary to the extentthat management currently believes it is more likely than not that tax benefitswill not be realized. Management’s determination is based primarily onhistorical earnings volatility and forecasted taxable losses for fiscal 2008.

 

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 companies’ stock prices, theweighted-average risk-free interest rate, and the weighted-average expectedlife of the options.

 

The following valuesrepresent the average per grant assumptions used to value options grantedduring the three months ended March 30, 2008 and April 1, 2007, respectively.There have been no significant changes to the assumptions thus far in 2008 andnone are expected during the remainder of 2008.

 
| **Key valuation assumptions** | ** ** | **Three months ended  March 30, 2008 (*)** | ** ** | **Three months ended  April 1, 2007** | ** ** |
|-------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| Risk free  interest rate      |       | —                                                              | %          | 4.47                                                      | %          |
| Expected term                 |       | 0 years                                                             |       | 6 years                                                   |       |
| Expected  dividend yield      |       | —                                                              | %          | 0                                                         | %          |
| Expected  volatility          |       | —                                                              | %          | 73.84                                                     | %          |
| Forfeiture rate               |       | —                                                              | %          | 12.16                                                     | %          |
| Weighted-average  fair value  |       | $                                                                   | —     |                                                      | $          | 3.27 |   |
|                               |            |                                                                     |            |                                                           |            |  |  |

 

7

----

 

----

(*) There were no stockoption grants during the first quarter of 2008

 

·                  Risk free interest rate — For periods within theexpected term of the share option, risk free interest rate is based on the U.S.Treasury yield curve in effect at the time of grant.

 

·                  Expected term — Due to the Company’s limited operatinghistory including stock option exercises and forfeitures, the Companycalculated expected term for each grant using the “Simplified Method” inaccordance with SAB 107 and 110.

 

·                  Expected dividend yield — As the Company does notpay dividends, the dividend rate variable in the Black-Scholes model is zero.

 

·                  Expected volatility — As the Company has a relativelyshort operating history and no definitive peer or peer groups, expectedvolatility was based on historical volatility of the Company’s stock since itbegan trading in August 2004.

 

·                  Forfeiture rate — As share-based compensation expenserecognized is based on awards ultimately expected to vest, the Company useshistorical data to estimate employee departure behavior in estimating futureforfeitures.

 

The following tablesummarizes stock option activity through the three-month periods ended March 30,2008 and April 1, 2007:

 
| ** **                             | ** ** | ** **      | ** ** | **Number of Common Shares** | ** ** |
|----------------------------------------|------------|-----------------|------------|--------------------------------------------|------------|
| ** **                             | ** ** | **Options**     | ** ** | ** **                                 | ** ** | **Available** | ** ** | **Weighted-avg.** | ** ** |
| ** **                             | ** ** | **outstanding** | ** ** | **Exercisable**                            | ** ** | **for grant** | ** ** | **exercise price** | ** ** |
|                                   |       |            |       |                                       |       |   |   |   |   |
| **2008**                               |       |            |       |                                       |       |   |   |   |   |
| **Balance  at December 31, 2007** |       | 2,920,857       |       | 1,322,206                                  |       | 267,150 |   | $ | 5.66 |   |
|                                   |       |            |       |                                       |       |   |   |   |   |
| Forfeited  /cancelled/expired          |       | (83,600         | )          |                                       |       | 83,600 |   | $ | 4.33 |   |
|                                   |       |            |       |                                       |       |   |   |   |   |
| **Balance  at March 30, 2008**    |       | 2,837,257       |       | 1,412,373                                  |       | 350,750 |   | $ | 5.70 |   |
|                                   |       |            |       |                                       |       |   |   |   |   |
| **2007**                               |       |            |       |                                       |       |   |   |   |   |
| **Balance  at January 1, 2007**   |       | 2,318,166       |       | 1,050,200                                  |       | 983,501 |   | $ | 6.76 |   |
|                                   |       |            |       |                                       |       |   |   |   |   |
| Granted                                |       | 287,000         |       |                                       |       | (287,000 | ) | $ | 4.80 |   |
| Forfeited  /cancelled/expired          |       | (90,466         | )          |                                       |       | 90,466 |   | $ | 8.49 |   |
| **Balance  at April 1, 2007**     |       | 2,514,700       |       | 1,010,533                                  |       | 786,967 |   | $ | 6.47 |   |

 

The following tablesummarizes significant ranges of outstanding and exercisable options as of March 30,2008**:**

 
| **Options outstanding**            | ** **              | **Options exercisable** | ** ** |
|-----------------------------------------|-------------------------|------------------------------|------------|
| **Range of  exercise prices** | ** **              | **Number  outstanding**      | ** ** | **Weighted-avg.  remaining  contractual  life** | ** ** | **Weighted-avg.**

**exercise  price** | ** ** | **Aggregate  intrinsic**

**value** | ** ** | **Number  exercisable** | ** ** | **Weighted-avg.  price** | ** ** | **Aggregate  intrinsic  value** | ** ** |
| $                                       | 0.0049                  |                         |       | 111,340 |   | 3.91 |   | $ | 0.0049 |   | $ | 168,691 |   | 111,340 |   | $ | 0.0049 |   | $ | 168,691 |   |
| $                                       | 1.87 — 4.80   |                         |       | 1,260,350 |   | 9.25 |   | 3.43 |   | — |   | 119,533 |   | 4.44 |   | — |   |
| $                                       | 5.18 — 9.92   |                         |       | 1,305,566 |   | 6.73 |   | 7.56 |   | — |   | 1,107,166 |   | 7.86 |   | — |   |
| $                                       | 11.95 — 14.51 |                         |       | 154,000 |   | 7.37 |   | 12.18 |   | — |   | 70,000 |   | 12.47 |   | — |   |
| $                                       | 15.05 — 19.50 |                         |       | 6,001 |   | 7.31 |   | 15.79 |   | — |   | 4,334 |   | 16.08 |   | — |   |
|                                    |                    | 2,837,257                    |       | 7.77 |   | $ | 5.70 |   | $ | 168,691 |   | 1,412,373 |   | $ | 7.20 |   | $ | 168,691 |   |

 

8

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The aggregate intrinsicvalue in the preceding table****representsthe total pre-tax intrinsic value, based on the Company’s closing stock priceof $1.52 on March 28, 2008, which would have been received by the optionholders had they exercised their options as of that date. As of March 30,2008 and April 1, 2007, the total number of “in-the-money” optionsexercisable was 111,340 and 225,000, respectively.  No options were exercised during the threemonths ended March 30, 2008 and April 1, 2007.

 

As of March 30, 2008, total unrecognizedcompensation cost related to non-vested options was $2.4 million, which isexpected to be recognized over the next 32 months on a weighted-average basis.

 

**4. FAIR VALUE MEASUREMENT**

 

On December 31, 2007(the first day of fiscal 2008), the Company adopted the provisions of theFinancial Accounting Standards Board Statement of Financial Accounting Standard157, *Fair Value Measurements*(“SFAS No. 157”).  The adoption of SFAS No. 157 in thefirst quarter of 2008 did not impact net income.

 

The Company’s financialinstruments that are measured at fair value use inputs from among the threelevels of the fair value hierarchy set forth in SFAS No. 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 – Includequoted prices for similar assets and liabilities in active markets, quotedprices for indentical or similar assets and liabilities in markets that are notactive, inputs other than quoted prices that are observable for the asset orliability (*i.e.* interest rates, yield curves, *etc.*) and inputs that are derived principally from orcorroborated by observable market data by correlation or other means (marketcorroborated inputs).

 

Level 3 inputs –Unobservable inputs that reflect management’s estimates about the assumptionsthat market participants would use in pricing the asset or liability.Management develops these inputs based on the best information available,including internally-developed data.

 

None of theCompany’s financial instruments are measured based on Level 2 inputs.

 

In accordance with theaforementioned fair value hierarchy, the estimated fair value of the Company’sinvestments in marketable securities is as follows (in thousands):

 
| ** **                      | ** ** | **Fair Value Measurements as of March 30, 2008** | ** ** |
|---------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| **Description**                 | ** ** | **3/30/2008**                                                                       | ** ** | **Level 1** | ** ** | **Level 3** | ** ** |
| Municipal bonds                 |       | $                                                                                   | 1,807      |   | $ | 1,807 |   |   |   |
| Auction rate  securities        |       | 11,293                                                                              |       |   |   | $ | 11,293 |   |
| Corporate  preferred securities |       | 7,837                                                                               |       | 7,837 |   |   |   |
| Certificates of  deposit        |       | 960                                                                                 |       | 960 |   |   |   |
|                            |       | $                                                                                   | 21,897     |   | $ | 10,604 |   | $ |  11,293 |   |

 

The Company chose not to elect the fair value optionas offered by Statement of Financial Accounting Standards No. 159, *The Fair Value Option for Financial Assets and Financial Liabilities —including an amendment of FAS 115,* for its financial assets andliabilities that had not been previously carried at fair value. Therefore,material financial assets and liabilities not carried at fair value are stillreported at carrying values.

 

For financial assets that utilize Level 1 inputs, theCompany utilizes direct observable price quotes in active markets (corporatepaper, municipal bond and certificate of deposit markets) for identical assets.

 

Due to the lack of observable market quotes on theCompany’s auction rate securities (“ARS”) portfolio, the Company utilizesvaluation models that rely exclusively on Level 3 inputs including those thatare based on expected cash flow streams and collateral values, default riskunderlying the security, discount rates and overall capital market liquidity.  The valuation of the Company’s ARS investmentportfolio is subject to uncertainties that are difficult to predict.  Factors that may impact the Company’svaluation include changes to credit ratings of the securities as well as to theunderlying assets supporting those securities, rates of default of theunderlying assets, underlying collateral value, discount rates, and ongoingstrength and quality of market credit and liquidity.

 

Other than marketable securities that are classifiedas available for sale, the Company does not have any non-financial assets orliabilities that are required to be measured at their estimated fair value on arecurring basis.

 

9

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The following table summarizes the changes in fair valueof the Company’s ARS, which are measured at fair value using Level 3 inputs (inthousands):

 
| Balance at  December 31, 2007           |   | 7,825  |   |
|----------------------------------------------|--------|--------|--------|
|                                         |   |   |   |
| Total gains or  losses (realized/unrealized) |   |   |   |
| Included in  other comprehensive income      |   | (1,107 | )      |
|                                         |   |   |   |
| Purchases,  issuances and settlements        |   | 4,575  |   |
|                                         |   |   |   |
| Balance at  March 30, 2008              |   | 11,293 |   |

 

The Companyconsiders the decline in the estimated fair value of its ARS to be temporary.Accordingly, the related unrealized loss is included in accumulated othercomprehensive loss in the shareholders’ equity section of the balance sheet asof March 30, 2008.

 

**5. INVESTMENTS**

 

As of March 30, 2008and December 30, 2007, investments consist of the following (inthousands):

 

**March 30, 2008 (unaudited)**

 
| ** **                                        | ** ** | **Cost** | ** ** | **Unrealized  Gains/(Losses)** | ** ** | **Fair Value** | ** ** |
|---------------------------------------------------|------------|----------|------------|--------------------------------|------------|---------------------|------------|
| **Maturity less than 1 year** |       |     |       |                           |       |                |       |
| Short-term  municipal bonds                       |       | 1,000    |       | 2                              |       | 1,002               |       |
| Corporate  preferred securities                   |       | 6,814    |       | 23                             |       | 6,837               |       |
| Certificates of  deposit                          |       | 672      |       | —                         |       | 672                 |       |
|                                              |       | 8,486    |       | 25                             |       | 8,511               |       |
| **Maturity  1 to 5 years**                        |       |     |       |                           |       |                |       |
| Municipal bonds                                   |       | 800      |       | 5                              |       | 805                 |       |
| Auction rate  securities                          |       | 12,400   |       | (1,107                         | )          | 11,293              |       |
| Corporate  preferred securities                   |       | 994      |       | 6                              |       | 1,000               |       |
| Certificates of  deposit                          |       | 288      |       | —                         |       | 288                 |       |
|                                              |       | $        | 14,482     |                           | $          | (1,096              | )          | $ | 13,386 |   |
|                                                   |            |          |            |                                |            |                     |            |  |  |  |

 

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**December 30, 2007 (audited)**

 
| ** **                                        | ** ** | **Cost**   | ** ** | **Unrealized  Gains/(Losses)** | ** ** | **Fair Value** | ** ** |
|---------------------------------------------------|------------|------------|------------|--------------------------------|------------|---------------------|------------|
| **Maturity less than 1 year** | ** ** | ** ** | ** ** | ** **                     | ** ** | ** **          | ** ** |
| US treasury and  agency securities                |       | $          | 1,000      |                           | $          | —              |       | $ | 1,000 |   |
| Short-term  municipal bonds                       |       | 1,000      |       | 1                              |       | 1,001               |       |
| Auction rate  securities                          |       | 7,825      |       | —                         |       | 7,825               |       |
| Corporate  preferred securities                   |       | 12,464     |       | 9                              |       | 12,473              |       |
| Certificates of  deposit                          |       | 672        |       | —                         |       | 672                 |       |
|                                              |       | 22,961     |       | 10                             |       | 22,971              |       |
| **Maturity  1 to 5 years**                        |       |       |       |                           |       |                |       |
| Municipal bonds                                   |       | 1,827      |       | (3                             | )          | 1,824               |       |
| Corporate  preferred securities                   |       | 1,985      |       | 7                              |       | 1,992               |       |
| Certificates of  deposit                          |       | 384        |       | —                         |       | 384                 |       |
|                                              |       | $          | 4,196      |                           | $          | 4                   |       | $ | 4,200 |   |

 

During the first quarterof 2008 and the first quarter of 2007 the amount of unrealized gains (losses)previously reported as other comprehensive income that were realized andincluded in the statement of earnings (loss) and comprehensive earnings (loss)were not material.

 

**6. INCOME TAXES**

 

Due toactual and forcasted net losses, the income tax provision was $0 for thethree-month periods ended in 2008 and 2007, and the effective tax rate wasapproximately 0%. Basedon the Company’s limited and volatile earnings history, the Company has recorded a full valuation allowance for the net deferredtax assets as management currently believes it is more likely than not that deferredtax assets will not be recovered in the foreseeable future.

 

**7. CONTINGENCIES**

 

In 2006, a legal actionwas commenced against the Company by seven poker players that alleged, amongother things, an unfair business practice of the Company.   On April 18, 2008, the Company settledthe lawsuit without cost by agreeing to implement a new standard player releaseform to be provided to all players at all future WPT tournaments and events.

 

The Company is currentlyinvolved in various inquiries, administrative proceedings and litigationrelating to other matters arising in the normal course of the Company’sbusiness.  Management is unable to estimate the minimum loss to beincurred, if any, as a result of the final outcome of these matters butbelieves it is not likely to have a material adverse effect upon the Company’sfuture financial position or results of operations; accordingly, no provisionfor loss has been recorded in connection therewith.

 

**8. SEGMENT INFORMATION**

 

The operating segmentsreported below are the segments of the Company for which separate financialinformation is available and for which operating results are evaluated by thechief operating decision maker in deciding how to allocate resources and inassessing performance.

 

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**Three months ended March 30,2008 (in thousands):**

 
| ** **                     | ** ** | ** **       | ** ** | **WPT Online** | ** ** | ** **     | ** ** | ** **                     | ** ** | ** **     | ** ** | ** **    | ** ** |
|--------------------------------|------------|------------------|------------|---------------------|------------|----------------|------------|--------------------------------|------------|----------------|------------|---------------|------------|
| ** **                     | ** ** | **WPT  Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming** | ** ** | **WPT Global  Marketing** | ** ** | **WPT  China** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                      |       |             |       |                |       |           |       |                           |       |           |       |          |       |   |   |
| Domestic  television           |       | $                | 2,100      |                | $          | —         |       | $                              | —     |           | $          | —        |       | $ | — |   | $ | — |   | $ | 2,100 |   |
| International  television      |       | 770              |       | —              |       | —         |       | —                         |       | —         |       | —        |       | 770 |   |
| Product  licensing             |       | —           |       | —              |       | —         |       | 687                            |       | —         |       | —        |       | 687 |   |
| Online gaming                  |       | —           |       | 240                 |       | —         |       | —                         |       | —         |       | —        |       | 240 |   |
| Event hosting  and sponsorship |       | 830              |       | —              |       | —         |       | 227                            |       | —         |       | —        |       | 1,057 |   |
| Other                          |       | 6                |       | —              |       | 42             |       | 60                             |       | —         |       | —        |       | 108 |   |
| Total Revenues                 |       | 3,706            |       | 240                 |       | 42             |       | 974                            |       | —         |       | —        |       | 4,962 |   |
| Cost of revenues               |       | 2,121            |       | 181                 |       | 30             |       | 338                            |       | —         |       | —        |       | 2,670 |   |
| Gross profit                   |       | 1,585            |       | 59                  |       | 12             |       | 636                            |       | —         |       | —        |       | 2,292 |   |
| Total assets                   |       | 3,151            |       | 373                 |       | 560            |       | 829                            |       | 248            |       | 31,435        |       | 36,596 |   |
| Depreciation and  amortization |       | 65               |       | 1                   |       | 11             |       | —                         |       | 8              |       | 80            |       | 165 |   |
|                                |            |                  |            |                     |            |                |            |                                |            |                |            |               |            |  |  |  |  |  |  |  |  |  |

 

Revenues attributed todomestic and foreign operations were $3.2 million and $1.8 million,respectively.

 

**Three months ended April 1,2007 (in thousands):**

 
| ** **                     | ** ** | ** **       | ** ** | **WPT Online** | ** ** | ** **     | ** ** | ** **                     | ** ** | ** **     | ** ** | ** **    | ** ** |
|--------------------------------|------------|------------------|------------|---------------------|------------|----------------|------------|--------------------------------|------------|----------------|------------|---------------|------------|
| ** **                     | ** ** | **WPT  Studios** | ** ** | **Gaming**          | ** ** | **Non-gaming** | ** ** | **WPT Global  Marketing** | ** ** | **WPT  China** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
| Revenues:                      |       |             |       |                |       |           |       |                           |       |           |       |          |       |   |   |
| Domestic  television           |       | $                | 2,402      |                | $          | —         |       | $                              | —     |           | $          | —        |       | $ | — |   | $ | — |   | $ | 2,402 |   |
| International  television      |       | 455              |       | —              |       | —         |       | —                         |       | —         |       | —        |       | 455 |   |
| Product  licensing             |       | —           |       | —              |       | —         |       | 879                            |       | —         |       | —        |       | 879 |   |
| Online gaming                  |       | —           |       | 550                 |       | —         |       | —                         |       | —         |       | —        |       | 550 |   |
| Event hosting  and sponsorship |       | —           |       | —              |       | —         |       | 125                            |       | —         |       | —        |       | 125 |   |
| Other                          |       | 11               |       | —              |       | 48             |       | 21                             |       | —         |       | —        |       | 80 |   |
| Total Revenues                 |       | 2,868            |       | 550                 |       | 48             |       | 1,025                          |       | —         |       | —        |       | 4,491 |   |
| Cost of revenues               |       | 1,669            |       | 301                 |       | 26             |       | 156                            |       | —         |       | —        |       | 2,152 |   |
| Gross profit                   |       | 1,199            |       | 249                 |       | 22             |       | 869                            |       | —         |       | —        |       | 2,339 |   |
| Total assets                   |       | 3,261            |       | 2,912               |       | 55             |       | 1,273                          |       | —         |       | 41,477        |       | 48,978 |   |
| Depreciation and  amortization |       | 85               |       | 12                  |       | —         |       | —                         |       | —         |       | 84            |       | 181 |   |
|                                |            |                  |            |                     |            |                |            |                                |            |                |            |               |            |  |  |  |  |  |  |  |  |  |

 

Revenues attributed todomestic and foreign operations were $3.5 million and $1.0 million,respectively.

 

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**WPTENTERPRISES, INC.Management’s Discussion and Analysis of Financial ConditionAnd Results of Operations**

 

**ITEM 2.****      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF    OPERATIONS**

 

**Financial Overview**

 

We had a net loss in thefirst three months of 2008 of $2.8 million, or $0.14 per fully diluted share,compared to a net loss of $2.3 million, or $0.11 per fully diluted share, inthe 2007 period. The primary reasons for the increase in the net loss in the2008 period compared to the 2007 period are as follows:

 

·                  Revenuesincreased by $0.5 million, primarily as a result of a $0.9 million increase in hostingand sponsorship revenues, primarily driven by international televisionsponsorship revenues that did not exist in the prior year. The increase was offsetby a $0.3 million decrease in domestic television license fees, which is due tolower per episode license fees under the GSN contract in effect during the 2008period, as compared to the Travel Channel agreement which was in effect duringthe 2007 period.

 

·                  Cost of revenuesincreased by $0.5 million, primarily a result of the delivery of seven episodes of Season VI in the periodversus the delivery of five episodes of Season V in the prior year period.

 

·                  Selling, generaland administrative expense increased quarter-over-quarter by $0.2 million,primarily due to the Company’s increased efforts in marketing its online gamingoperations and ClubWPT.com, offset by decreased headcount expenses Company-wide.

 

·                  Interest incomedecreased by $0.3 million in the 2008 period versus the 2007 period due tolower cash balances combined with lower interest rates available.

 

**Business Overview**

 

We create internationallybranded entertainment and consumer products driven by the development,production and marketing of televised programming based on gaming themes. OurWorld Poker Tour®, or WPT, television series, based on a series ofhigh-stakes poker tournaments, currently airs on GSN and the Travel Channel inthe United States, and has been licensed for broadcast globally.  We offer a real-money online gaming website,which prohibits wagers from players in the U.S. and other restrictedjurisdictions.  We also have operationsin mainland China, pursuant to our agreement with the China Leisure SportsAdministrative Center (the “CLSAC”) where we are developing and marketing theWPT China National Traktor Poker Tour. In January 2008, we launchedClubWPT.com, an innovative subscription-based online poker club targeted to theestimated 60 million poker players in the United States and currently offeredin 38 States. We currently license our brand to companies in the business ofpoker equipment and instruction, apparel, publishing, electronic and wirelessentertainment, DVD/home entertainment, casino games and giftware and are engagedin the sale of corporate sponsorships. We have four business segments:

 

*WPTStudios*, our multi-media entertainment division, generatesrevenue through the domestic and international licensing of televisionbroadcasts, international television sponsorship revenue and through casinohost fees. Since our inception, the WPT Studios division has been responsiblefor approximately 73% of our total revenue. We licensed Seasons One throughFive of the WPT series to The Travel Channel, L.L.C. (“TRV” or “Travel Channel”)for telecast in the United States under an exclusive license agreement (the “TRVAgreement”). Prior to 2007, we also licensed Season One of the ProfessionalPoker Tour (“PPT”) television series to TRV. On April 2, 2007, we enteredinto an agreement (the “GSN Agreement”) with Game Show Network, LLC (“GSN”),pursuant to which GSN agreed to license from us the sixth season of the WPTseries for the payment of a $300,000 license fee per episode.  Under the TRV agreement, we received anaverage of $477,000 per episode for Season Five.  We have license agreements for thedistribution of our WPT and PPT episodes into international territories forwhich we receive license fees, net of our agent’s sales fee and agreed uponsales and marketing expenses.  We alsocollect annual host fees from the member casinos that host World Poker Tourevents (our member casinos).

 

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Since our inception,domestic television distribution fees from the TRV Agreement, an agreement withTRV relating to the PPT series and the GSN agreement have been responsible forapproximately 56% of our total revenue. For each season covered by the TRVAgreement and related options, TRV has exclusive rights to exhibit the episodesin that season an unlimited number of times on its television network in theU.S. for four years, or three years in the case of Season One of the WPT.

 

Under both the TRV andGSN Agreements, TRV and GSN pay fixed license fees for each episode we produce,which are payable at various times during the pre-production, production andpost-production process and revenues are recognized upon receipt and acceptanceof the completed episode. Television production costs related to WPT episodesare generally capitalized and charged to cost of revenues as revenues arerecognized. Therefore, the timing and number of episodes involved in thevarious seasons of the series affect the timing of the revenues and expenses ofthe WPT Studios business. For Season Six of the WPT series, we are scheduled toproduce a total of 23 episodes, production of which began in May of 2007and we expect to be completed by July 2008, with telecasts of the episodesscheduled to air between March 2008 and August 2008.  Pursuant to the GSN Agreement, GSN has anexclusive option to license Season Seven of the WPT series which expires on May 24,2008.

 

From 2004 until December 2006,we licensed our shows internationally through an exclusive agreement with Alfred HaberDistribution, Inc. In December 2006, we notified Alfred Haber thatthey would no longer be the international distributor for our shows, since theCompany began utilizing its internal staff and resources to distribute ourshows into the international marketplace. During 2007, we came to an arrangementwith Alfred Haber whereby they provide non-exclusive assistance oninternational licensing matters on a case-by-case basis based on substantiallythe same terms as our previous relationship with them.

 

In December 2006, wesigned a multi-year agreement with PartyGaming Plc, owner of PartyPoker.com,pursuant to which they sponsor certain international television broadcasts ofthe WPT and PPT.  PartyGaming pays usfixed fees for entering into broadcast sponsorship arrangements that meetcertain requirements, with maximum payment levels for each of the coveredseasons of each series. For the quarter ended March 30, 2008 we recognizedrevenues of $0.7 million from the PartyGaming agreement. No revenues wererecognized for the quarter ended April 1, 2007.

 

*WPT Global Marketing* includes branded consumer products, sponsorship andpartnerships, and event management divisions. Our branded consumer productsdivision generates revenue principally through royalties from the licensing ofour brand to companies seeking to use the World Poker Tour brand and logo inthe retail sales of their consumer products.

 

Our domestic sponsorship and event management divisiongenerates revenue through corporate sponsorship and management of televised andlive events. During 2007, we signed a three-year agreement with Blue DiamondAlmonds to sponsor Seasons Six, Seven and Eight of the WPT. In return foronline and event presence, Blue Diamond will pay $150,000 per season.  We also signed an agreement with SouthwestAirlines to be the official airline of the World Poker Tour for Season Six.

 

In February 2006, welaunched an events division offering help in designing special programs forcorporations, meeting planners and charitable organizations for entertainmentpurposes only.

 

*WPT Online* includes theinternational real money gaming website at WorldPokerTour.com and contentwebsite at WorldPokerTour.com, which includes poker tournament coverage andlive updates thereof, statistics, poker player information, an onlinemerchandise store, and ClubWPT.com which launched in January 2008.

 

In 2006, wedecided to commission the development of our own software for our online pokerroom. We licensed a software platform from CyberArts Licensing, LLC, and hiredapproximately thirty employees in Israel to develop the software and supportinfrastructure. However, the development of the Cyberarts-based site ceased on April 23,2007, when we entered into a three year software supply and support agreement(the “Agreement”) with CryptoLogic Inc., and its wholly-owned subsidiaryWagerLogic Limited, (collectively referred to as “CryptoLogic”). As a result ofthe decision to utilize CryptoLogic and move away from the internally-developedonline gaming platform based on CyberArts software, we wrote off certain propertyand equipment and related capitalized costs of approximately $2.3 millionduring the second quarter of 2007. In addition to the write off of assets, wecurtailed our Israel operations and closed one of our two offices during thesecond quarter of 2007, and in the fourth quarter of 2007, we closed theremaining office in Israel.

 

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Pursuant to theAgreement, CryptoLogic operates an online gaming site for us featuring a pokerroom and casino games utilizing its proprietary software, in exchange for apercentage of the revenue generated from the site.  We are entitled to approximately 80% of netgaming revenues, as defined below, from the operation of the site. Under theAgreement, we are also a member in a centralized online gaming network (the “Network”)with several other licensees of CryptoLogic pursuant to which players are ableto play on our branded gaming site on the Network.

 

On June 14,2007, CryptoLogic delivered the poker software to us and the online poker roombecame operational on June 28, 2007; on July 26, 2007, CryptoLogicdelivered ten casino games (the “Initial Casino”).  Effective March 5, 2008, we executed anamendment to the Agreement, exercising our option for a full suite of casinogames (the “Full Casino”) with an annual minimum guarantee payable toCryptoLogic from us of $750,000, and we exercised our option to haveCryptologic develop two additional poker language rooms in Spanish and Germanfor $100,000. In a separate amendment to the Agreement dated March 5,2008, we agreed to extend the Term of the License Agreement with CryptoLogic anadditional year through June 30, 2011.

 

As a result of theamendments, we are now entitled to the following percentages of net gamingrevenue: (a) One Hundred percent (100%) of the first $37,500 per month, (b) Seventy-ninepercent (79%) of revenue in excess of $37,500 but less than $500,000 per month;and (d) Eighty percent (80%) of the revenue in excess of $500,000 permonth.  CryptoLogic is entitled to earnminimum guaranteed revenue associated with the Initial Casino of $500,000 peryear or $125,000 per quarter and upon launch of the Full Casino, CryptoLogicwill be entitled to a minimum revenue guarantee of $750,000 per year or$187,500 per quarter. For the quarter ended March 30, 2008, the minimumrevenue guarantee to CryptoLogic exceeded our share of net revenues byapproximately $101,000, which will be netted against future settlements duefrom CryptoLogic.

 

If, at any timeafter the nine-month anniversary of the go-live date, monthly gaming revenuesfall below $500,000 for three (3) consecutive months, CryptoLogic has theright to terminate the Agreement on ninety (90) days written notice.  However, we may prevent any such terminationthrough payment of the shortfall of CryptoLogic’s percentage of such gamingrevenue within 30 days of receipt of CryptoLogic’s notice of termination.

 

For the three months ended March 30, 2008, our onlinegaming business generated approximately $240,000 in net revenues, compared tocosts of revenues of approximately $181,000. Online revenues are presentedgross of CryptoLogic costs and net of network promotions, bonuses, and cashincentives provided to patrons.

 

The non-gaming website at WorldPokerTour.com includespoker tournament coverage and live updates thereof, statistics, poker playerinformation, an online merchandise store and ClubWPT.com.  ClubWPT.com offers a monthly subscriptionpackage for $19.95 per month, as well as discounted quarterly and annual options.In return, members receive exclusive club benefits and points which make themeligible to enter into over 5,000 live poker and elimination black jacktournaments, sit-n-go poker tournaments and poker ring games for a chance towin over $100,000 in cash and prizes each month, which could include a $10,000seat into a WPT televised main event. Non-subscribers who do not wish topurchase the other club benefits are offered a free or alternative means ofentry.

 

We use a third partyservice provider, Ultimate Blackjack Tour, LLC (“UBT”), to operate oursubscription-based online service for ClubWPT.com, which includes supportingthe software, technical operations and customer service.  In return for UBT’s services, UBT earns apercentage of net revenues which is calculated as subscriber fees less certaincosts (which are allocated on a customer-by-customer basis) includingchargebacks, prize pool, Club content, financial charges and compliance fees.

 

*WPT China.* On August 6,2007, we entered into a Cooperation Agreement (the “Cooperation Agreement”)with the China Leisure Sports Administrative Center (the “CLSAC”), a Chinesegovernment-sanctioned body with authority over certain leisure sports,including the popular Chinese national card game “Traktor Poker” or “Tuo La Ji.”Pursuant to the Cooperation Agreement, we have the right to brand and exploitthe WPT China National Traktor Poker Tour (the “Traktor Poker Tour”) during thefive (5) year term of the Cooperation Agreement. Additionally, we areafforded certain marketing and sponsorship rights in conjunction with the WPTChina National Traktor Poker Tour, including the right to sanction and deriverevenue from third-party branding at tour events, the right to exploit filmsand other content generated in conjunction with the WPT China National TraktorPoker Tour in all media and we expect the largest opportunities to stem fromonline and mobile subscriptions. Furthermore, the CLSAC agreed to organize noless than fifteen (15) Traktor Poker Tour events each year during the term, tosecure placement of the championship finals on a major Chinese televisionstation, and to promote the WPT China National Traktor Poker Tour. In exchange,we pay a yearly fee to the CLSAC, which started at Five Hundred and Five ThousandDollars ($505,000) for the first year and increases by ten percent (10%)annually for the 

 

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remaining fouryears of the term.  We also have aunilateral option to extend the agreement for an additional five years,provided that the yearly fee, for the first year of the renewed term, willincrease by 25% from the fifth year of the term.

 

On October 12, 2007, we officially launched theinaugural season of the WPT China National Traktor Poker Tour in Lanzhou,Gansu, and to date, we have completed the 15 regional preliminarytournaments.   The WPT China NationalTraktor Poker Tour Season One champion will be crowned at the championshipevent in mid-2008 where we expect the event to be televised on a major Chinesebroadcaster.

 

**Results of Operations**

 

**Three Months Ended March 30,2008 Compared to the Three Months Ended April 1, 2007**

 

*Revenues.*Ourtotal revenues increased by $0.5 million (10%) during the three months ended March 30,2008, compared to the three months ended April 1, 2007. Eventhosting and sponsorshiprevenues increased $0.9 million (747%), due primarily to internationaltelevision sponsorship revenues from Party Gaming that did not exist in the2007 period. Internationaltelevision licensing revenues increased by $0.3 million (69%), a result oflower than expected third party distribution costs (as international televisionrevenues are recognized net of distributor’s costs).   Domestic television licensing revenuesdecreased $0.3 million (13%) in the first quarter of 2008 compared to the 2007period. The decrease was a result of the lower per episode license feeunder the GSN contract, as compared to the Travel Channel agreement.  Productlicensing revenues decreased by approximately $0.2 million (17%) in the firstquarter of 2008 compared to the 2007 period. The decrease was primarily due tolower license revenues from Hands-On Mobile and MDI.  Online gaming decreased $0.3 million (56%)primarily a result of lower levels of player activity on our site on theCryptoLogic network in the 2008 period versus the site operated by WagerWorksin the 2007 period.

 

*Cost of revenues*. Cost of revenues increasedby approximately $0.5 million (24%) in the first quarter of 2008 compared tothe 2007 period.  The increase wasprimarily a result of the delivery of seven episodes of Season VI in thecurrent period versus the delivery of five episodes of Season V in the prioryear period.

 

*Gross margins.*  Overall gross margins were 46% in the first quarter of 2008compared to 52% in the first quarter of 2007. Domestic television licensing margins were 6% in the first quarter of2008 compared to 37% in the same period in 2007.  This decrease was principally becauseof the lower fees per episode under the GSN contract.  Thelower domestic television margins in the 2008 period were partially offset byincreased margin contribution from international television and sponsorship.

 

*Selling, general and administrativeexpense.*Selling, general and administrative expenseincreased $0.2 million (4%) quarter-over-quarter to $5.5 million. The increasewas primarily due to the Company’s increased efforts in marketing its onlinegaming, WPT China and ClubWPT.com businesses, offset by decreased headcountexpenses Company-wide.

 

*Other income.*Other income decreased in 2008, a result of decreased interest income of $0.3million primarily due to lower cash balances and lower interest rates in themarketplace.

 

**Liquidity and Capital Resources**

 

During the first quarterof 2008, cash and cash equivalents and investments in marketable securitiesdecreased by $4.1 million to a combined balance of $26.9 million. Cash was usedto support operating activities and to purchase property and equipment. Ourprincipal cash requirements consist of the following costs:

 

·                  onlinegaming operations,

 

·                  televisionproduction,

 

·                  payrolland benefits,

 

·                  professionaland consulting fees,

 

·                  salesand marketing,

 

·                  businessinsurance and

 

·                  officeleases

 

We intend to use fundscurrently on hand for working capital and capital expenditures associated withthe expansion of our online gaming, media and other businesses and for generalcorporate purposes. We anticipate that sales and marketing 

 

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costs willincrease significantly in upcoming quarters as we market our real money onlinegaming website and our subscription-based online site, ClubWPT.com. Inaddition, we intend to invest significantly in international expansion,including developing and marketing the WPT China National Traktor Poker Tour.

 

As of March 30,2008, we had approximately $11.3 million invested in auction rate securities (“ARS”)after a $1.1 million writedown for what we believe is a temporary decline infair value.  Historically, these types ofARS investments have been liquid, with interest rates resetting every 7 to 35days by an auction process.  As a resultof the recent liquidity issues experienced in the global credit and capitalmarkets, since February 2008, auctions for ARS investments held by usfailed.  An auction failure means thatthe amount of securities submitted for sale exceeds the amount of purchaseorders, and the parties wishing to sell the securities are instead required tohold the investment until a successful auction is completed. The ARS continueto pay interest in accordance with the terms of the underlying security;however, liquidity will be limited until there is a successful auction or untilsuch time as other markets for these ARS investments develop.

 

We hold ARS withunderlying collateral of student loans that had AAA or Aaa ratings at the timeof purchase and maintain these ratings through the date of this filing.  The majority of our ARS are guaranteed underthe Federal Family Education Loan Program (“FFELP”). We believe that the creditquality of these assets has not been impacted; however, at the end of the firstquarter of 2008, it was determined that the estimated fair value of these ARShad temporarily declined due to the current lack of liquidity in themarketplace.  As a result, as of March 30,2008, we have classified all ARS as non-current investments in marketablesecurities, with the estimated decline in fair value recorded as unrealizedlosses on securities of $1.1 million, which is included in comprehensive losson the balance sheet.

 

We expect that cash, cashequivalents and our short-term investments in marketable securities on handwill be sufficient to fund our working capital and capital expenditurerequirements for at least the next year even considering the current liquidityissues with the ARS.  If these securitiesremain illiquid for a period greater than one year, then we may be required to seek additional workingcapital to fund our operations or fund our expansion plans. To raise workingcapital, we may seek to sell additional equity securities, issue debt orconvertible securities, or seek to obtain credit facilities through financialinstitutions.

 

The table below sets forth our known contractualobligations as of March 30, 2008 (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)             |       | $                                                                  | 2,894      |   | $ | 890 |   | $ | 1,816 |   | $ | 188 |   | $ | — |   |
| Purchase  obligations(2,3,4)     |       | 4,281                                                              |       | 2,802 |   | 1,479 |   | — |   | — |   |
| Employee  obligation(5)          |       | 375                                                                |       | 375 |   | — |   | — |   | — |   |
|                             |       | $                                                                  | 7,550      |   | $ | 4,067 |   | $ | 3,295 |   | $ | 188 |   | $ | — |   |

 

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| (1)    |   | Operating lease  obligations include rent payments for our corporate offices pursuant to two  lease agreements. For the first lease, monthly lease payments are  approximately $40,000 and escalate to approximately $45,000 over the  remaining lease term. For the second lease, monthly lease payments are  approximately $31,000 and escalate up to approximately $33,000 over the  remaining lease term. The lease obligations presented also include rent  payments for our office facility in London. The amounts set forth in the  table above include monthly lease payments through June 2011. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (2)    |   | Includes the  operational expenses associated with the development of WorldPokerTour.com.  These expenses relate to the gaming and non-gaming aspects of the website.  Operational expenses associated with WPT China are also included.  Additionally, included in purchase obligations are open purchase orders of  approximately $580,000 as of March 30, 2008. These liabilities are  included in Other Accrued Expenses.                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (3)    |   | Includes a three year  base retainer with Antonio Esfandiari, who serves as our spokesperson for  both online gaming and ClubWPT.com.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (4)    |   | Includes minimum  guaranteed revenue to CryptoLogic associated with the Initial Casino of  $500,000 per year or $125,000 per quarter. Upon launch of the Full Casino,  projected to be delivered by June 2008, CryptoLogic will be entitled to  a minimum revenue guarantee of $750,000 per year or $187,500 per quarter.                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (5)    |   | Employee obligations  include the base salary payable to Steven Lipscomb under his employment  agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

 

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**Critical Accounting Estimates and Policies**

 

Although our financialstatements necessarily make use of certain accounting estimates by management,except as described below, we believe there are no matters that are the subjectof such estimates that are so highly uncertain or susceptible to change as topresent a significant risk of a material impact on our financial condition oroperating performance. Moreover, except as described below, we do not employany critical accounting policies that are selected from among availablealternatives or require the exercise of significant management judgment toapply.

 

*Revenue recognition.* Revenue from thedomestic and international distribution of our television series is recognizedas earned under the following criteria established by the American Institute ofCertified Public Accountants Statement of Position (“SOP”) No. 00-2, *Accounting by Producers or Distributors of Films*(“SOP 00-2”):

 

·                                          Persuasiveevidence of an arrangement exists;

 

·                                          Theshow/episode is complete, and in accordance with the terms of the arrangement,has been delivered or is available for immediate and unconditional delivery;

 

·                                          Thelicense period has begun and the customer can begin its exploitation,exhibition or sale;

 

·                                          Theseller’s price to the buyer is fixed and determinable; and

 

·                                          Collectibilityis reasonably assured.

 

In accordance with theterms of the WPT agreements, we recognized domestic television license revenuesupon the receipt and acceptance of completed episodes by the Travel Channel andGSN. However, due to restrictions and practical limitations applicable to ouroperating relationships with foreign networks, we do not considercollectibility of international television license revenues to be “reasonablyassured,” and accordingly, we do not recognize such revenue unless payment hasbeen received. Additionally, we presentcertain international distribution license fee revenues net of the distributor’sfees, as the distributor is the primary obligor in the transaction with theultimate customer pursuant to Emerging Issues Task Force (“EITF”) 99-19, *Reporting Revenue Gross as a Principal versus Net as an Agent*(“EITF 99-19”).

 

Product licensingrevenues are recognized when the underlying royalties from the sales of therelated products are earned. We recognize minimum revenue guarantees, if any,ratably over the term of the license or as earned royalties based on actualsales of the related products, if greater. We present product licensing feesgross of licensing commissions, which are recorded as selling andadministrative expenses as we are the primary obligor in the transaction withthe ultimate customer pursuant to EITF 99-19.

 

Online gaming revenuesare recognized monthly based on detailed statements received from CryptoLogic,our online gaming service provider for online poker and casino activity. Inaccordance with EITF 99-19, we present online gaming revenues gross of serviceprovider costs (including the service provider’s management fee, royalties andcredit card processing that are recorded as cost of revenues) as we have theability to adjust price and specifications of the online gaming site, we bearthe majority of the credit risk and we are responsible for the sales andmarketing of the gaming site.**We include certain cashpromotional expenses related to free bets and deposit bonuses along withcustomer chargebacks as direct reductions of revenue. All other promotionalexpenses are generally recorded as sales and marketing expenses.

 

Event hosting fees arepaid by host casinos for the privilege of hosting the events and are recognizedas the episodes that feature the host casino are aired. Sponsorship revenuesare recognized as the episodes that feature the sponsor are aired. Licensingadvances and guaranteed payments collected, but not yet earned, by us, as wellas casino host fees and sponsorship receipts collected prior to the airing ofepisodes, are classified as deferred revenue in the accompanying balancesheets.

 

*Travel Channel participation.***We account forroyalty payments to the Travel Channel (“TRV”) in accordance with the WPTagreement, pursuant to which TRV retains a right to 15% of adjusted grossrevenues from the exploitation of the World Poker Tour brand, after specifiedminimum amounts are met. We record these amounts in cost of revenues asrevenues from international television, consumer products licensing, homeentertainment and merchandise are recognized.

 

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*Deferred television costs.* We account fordeferred television costs in accordance with SOP 00-2. Deferred televisioncosts include direct production, overhead and development costs stated at thelower of cost or net realizable value based on anticipated revenue. Productionoverhead includes incremental costs associated with the productions such asoffice facilities and insurance. Shared facilities costs are allocated toepisodes based on headcount. Production overhead insurance costs are allocatedto television costs based on number of episodes. We have not currentlyanticipated any revenues in excess of those subject to existing contractualrelationships. Capitalized television production costs for each episode areexpensed as revenues are recognized upon delivery and acceptance of thecompleted episode. Management currently estimates that 100% of the $1.8 millionin capitalized deferred television costs at March 30, 2008, are expectedto be expensed in connection with episode deliveries by the end of fiscal 2008,and are therefore presented as current assets.

 

*Investment in unconsolidated investee.***On July 31, 2006, wepaid approximately $2.9 million in cash to acquire an approximate 10% ownershipinterest in Cecure Gaming, Inc. (“Cecure”). Cecure has developed software and other productswhich enable Cecure or its licensees to offer real money gaming services tocustomers via mobile devices. As we have less then 20% ownership interest anddo not have the ability to exercise significant influence over Cecure, weaccount for this investment under the cost method and adjust the carrying valueonly for other-than-temporary declines in fair value, in accordance with EITF03-1, *The Meaning of Other-Than-Temporary Impairment andIts Application to Certain Investments*. Management is currentlyunaware of any circumstances that might trigger such an adjustment.

 

*Share-based compensation.**On January 2, 2006, we adoptedSFAS No. 123(R) using the*“modified prospectivetransition” method, which requires recognition of expense for all awardsgranted after the date of adoption and for the unvested portion of previouslygranted awards outstanding as of the date of adoption.

 

##### **RecentlyIssued Accounting Pronouncements**

#####  

In December 2007,the FASB issued FASB Statement (“SFAS”) No. 141 (Revised 2007),*Business Combinations*(“SFAS 141R”)*.* SFAS 141R will significantly change the accountingfor business combinations and certain other transactions. SFAS 141R will applyprospectively to business combinations and certain other transactions for whichthe acquisition date is on or after the start of the first annual reportingperiod beginning on or after December 15, 2008, and early adoption isprohibited*.* Since we are not nowcontemplating any covered transactions after its effective date, we currentlyexpect that SFAS 141R will only have an impact on our financial statements ifwe are involved in a business combination in fiscal 2009 or later.

 

In December 2007,the FASB also issued SFAS No. 160,*Noncontrolling Interests in Consolidated Financial Statements - An Amendment ofARB No. 51*(“SFAS 160”)*.* SFAS 160 establishes newaccounting and reporting standards for the noncontrolling interest in asubsidiary and for the deconsolidation of a subsidiary. In addition, thisstatement requires that a parent recognize a gain or loss in net income when asubsidiary is deconsolidated. Such gain or loss will be measured using the fairvalue of the noncontrolling equity investment on the deconsolidation date. SFAS160 is effective for fiscal years, and interim periods within those fiscalyears, beginning on or after December 15, 2008, and earlier adoption isprohibited.  Since we do not now have anddo not contemplate acquiring any interests in subsidiaries or variable interestentities with noncontrolling interests, we currently expect that SFAS 160 willnot have an impact on our future financial position, results of operations andoperating cash flows.

 

**Off-Balance Sheet Arrangements**

 

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.

 

**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.

 

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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.  Our forward-looking statements generallyrelate to plans for future expansion and other business development activities,expected levels of capital spending, potential sources of future financing andthe possible effects on our business of gaming, tax and other regulation and ofcompetition.  Although it is not possibleto foresee all of the factors that may cause actual results to differ from ourforward-looking statements, these factors include, among others, the followingrisks:

 

·                We remain heavilyreliant upon our agreement with GSN as a source of revenue and any terminationor impairment of this agreement would materially and adversely affect theresults of our operations;

 

·                The change of lawsin various states or countries in regard to sweepstakes, promotions andgiveaways or a negative finding of law regarding the characterization of thetype of online activity carried out on ClubWPT.com could result in ourinability to take subscribers in those jurisdictions, which in turn couldsignificantly impact our ability to generate revenue;

 

·                Our businessarrangements with CryptoLogic (with respect to online gaming), Ultimate BlackjackTour, LLC (with respect to our online subscription model at ClubWPT.com) andGSN (with respect to the broadcast of the WPT television series) are newarrangements that will likely be the main source of our future revenue, andthere is no guarantee that our relationships with any of them will besuccessful or long-term;

 

·                The termination orimpairment of our relationships with key licensing and strategic partners couldharm our business performance;

 

·                Our televisionprogramming may fail to maintain a sufficient audience for a variety ofreasons, many of which are beyond our control;

 

·                Our ability tocreate and license our television programming profitably may be negativelyaffected by adverse trends that apply to the television production businessgenerally;

 

·                 Our competitors(many of whom have greater financial resources or marketplace presence) havedeveloped television programming that directly competes with our televisionprogramming;

 

·                 A decline ingeneral economic conditions or the popularity of our brand of televised pokertournaments may negatively impact our business;

 

·                 We may be unableto protect our entertainment concepts, our current and future brands and ourother intellectual property rights;

 

·                    We depend onthird parties to develop and market our operations in China, and we have littlecontrol over their day-to-day operations and have no way to ensure that we canmonetize our China operations effectively;

 

·                 We may be unableto successfully expand into foreign markets or into new or complementarybusinesses;

 

·                 The regulatoryenvironment for online gaming is currently uncertain, and despite our effortsto comply with applicable laws, we may be unable to pursue this business fullyor our activities may be claimed or found to be in violation of applicableUnited States or foreign regulations;

 

·                 It is difficultfor us to predict the growth of our online gaming business, which is arelatively new industry with an increasing number of market entrants; and

 

·                 The loss of ourPresident and Chief Executive Officer or another member of our seniormanagement team may negatively impact the success of our business.

 

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**WPT ENTERPRISES, INC.Quantitative and Qualitative Disclosures about Market Risk; Controls andProcedures**

 

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

 

Our financial instrumentsinclude cash and cash equivalents, U.S. Treasury and Agency securities,corporate bonds, auction rate securities and short-term municipal securities.Our main investment objectives are the preservation of investment capital andthe 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 and cashequivalents are not subject to significant interest rate risk due to the shortmaturities of these instruments. As of March 30, 2008, the carrying valueof our cash and cash equivalents approximated fair value. We have in the pastand may in the future obtain marketable debt securities (principally consistingof commercial paper, corporate bonds and government securities) having aweighted average duration of one year or less. Consequently, such securitieswould 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 Chief Financial Officer, we conducted an evaluationof our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) orRule 15d – 15(e) promulgated under the Securities Exchange Act of1934, as amended, as of the end of the period covered by this quarterly report.Based on their evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures are effective.

 

Therehave been no significant changes (including corrective actions with regard tosignificant deficiencies or material weaknesses, if any) in our internalcontrols or in other factors that could significantly affect these controlssubsequent to the date of the evaluation referenced above.

 

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**WPT ENTERPRISES, INC.Part IIOther Information**

 

**ITEM 1. LEGAL PROCEEDINGS**

 

On July 19,2006, a legal action was commenced against us by seven poker players thatalleges, among other things, an unfair business practice of the Company.  On April 18, 2008, we settled thelawsuit by agreeing to implement a new standard player release form that willbe provided to all players at all WPT tournaments and events goingforward.  No monetary compensation wasexchanged between the parties as a result of the settlement.  We are also involved in various inquiries,administrative proceedings, and litigation relating to other matters arising inthe normal course of our business. While any proceeding or litigation has anelement of uncertainty, management currently believes that the final outcome ofthese matters is not likely to have a material adverse effect upon our futurefinancial position or results of operations.

 

**ITEM 1A. RISK FACTORS**

 

In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the year ended December 30, 2007. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operating results.

 

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**ITEM 6.EXHIBITS**

 
| 10.1   |   | Amendment One to the  Software Supply and Support Agreement, dated April 27, 2007, by and  between WPT Enterprises, Inc., Cryptologic, Inc. and WagerLogic  Limited, effective as of February 1, 2008, executed March 5, 2008 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                   |
| 10.2   |   | Amendment Two to the Software Supply and Support  Agreement, dated April 27, 2007, by and between WPT  Enterprises, Inc., Cryptologic, Inc. and WagerLogic Limited, dated  March 5, 2008                                           |
|   |   |                                                                                                                                                                                                                                                   |
| 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 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 pursuant to  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                                                          |
|   |   |                                                                                                                                                                                                                                                   |
| 32.2   |   | Certification of 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: May 9, 2008 |   | WPT ENTERPRISES, INC.   |
|-------------------------|--------|-------------------------|
|                    |   | Registrant              |
|                    |   |                    |
|                    |   |                    |
|                    |   | / s/ Steven Lipscomb    |
|                    |   | Steven Lipscomb         |
|                    |   | Chief Executive Officer |
|                    |   |                    |
|                    |   |                    |
|                    |   | /s/ Scott A. Friedman   |
|                    |   | Scott A. Friedman       |
|                    |   | Chief Financial Officer |

 

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