Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by Simon Worldwide, Inc. (the “Company” or “Simon”) pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes in accordance with accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The Company consolidates all entities that we control by ownership of a majority voting interest as well any variable interest entities (“VIEs”) for which the Company is the primary beneficiary. We eliminate from our financial results all intercompany transactions, including the intercompany transactions with any consolidated VIEs.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those considered necessary for fair presentation of the Company’s financial position, results of operations, and cash flows at the dates and for the periods presented.

Prior to August 2001, the Company was a multi-national, full service promotional marketing company. In August 2001, McDonald’s Corporation (“McDonald’s”), the Company’s principal customer, terminated its 25-year relationship with the Company as a result of the embezzlement by a former Company employee of winning game pieces from McDonald’s promotional games administered by the Company. Other customers also terminated their relationships with the Company, resulting in the Company no longer having a business. By April 2002, the Company had effectively eliminated a majority of its ongoing promotions business operations and was in the process of disposing of its assets and settling its liabilities related to the promotions business and defending and pursuing litigation with respect thereto. As a result of these efforts, the Company has been able to resolve a significant number of outstanding liabilities that existed in August 2001 or arose subsequent to that date.

The Company is currently managed by the Chief Executive Officer and principal financial officer, Greg Mays, together with an acting general counsel. The Board of Directors has considered various alternative courses of action for the Company, including possibly acquiring or combining with one or more operating businesses. The Board of Directors has reviewed and analyzed a number of proposed transactions. On March 22,2013, the Company announced in a current report of Form 8-K that it, together with Richard Beckman, Joel Katz and OA3 had entered into the limited liability company agreement (the “Operating Agreement”) of Three Lions Entertainment, LLC (“Three Lions”) on March 18, 2013. Pursuant to the Operating Agreement, the Company made an initial capital contribution of $3.15 million with respect to membership units representing 60% of the interest in the economic returns of Three Lions, a variable interest entity, including certain preferences with respect to common holders on operating returns and on a liquidation or sale of Three Lions. The Company has the ability to, but is not required to, make certain additional capital contributions. If the Company does not make additional contributions, OA3 is obligated to make such contributions in the amounts that would otherwise be made by the Company. If OA3 makes such contributions, OA3 will receive a proportionate interest in Three Lions, subject to certain exceptions. The Company cannot predict whether such course of action will be successful. The business and operations of Three Lions is managed and directed by a five person Executive Board, three of whom the Company has the power to designate. The Executive Board governs under majority vote, subject to certain major decisions that require the unanimous approval of either the members of Three Lions or its Executive Board (“Special Approval”).

The operating results for the three months ended March 31, 2013, are not necessarily indicative of the results to be expected for the full year.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

Under certain criteria as provided for in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, “Consolidation,” the Company may consolidate a partially-owned affiliate. To determine whether to consolidate a partially-owned affiliate, the Company first determines if the entity is a variable interest entity (VIE). An entity is considered to be a VIE if it has one of the following characteristics: 1) the entity is thinly capitalized; 2) residual equity holders do not control the entity; 3) equity holders are shielded from economic losses or do not participate fully in the entity’s residual economics; or 4) the entity was established with non-substantive voting. If the entity meets one of these characteristics, the Company then determines if it is the primary beneficiary of the VIE. The party with the power to direct activities of the VIE that most significantly impact the VIE’s economic performance and the potential to absorb benefits or losses that could be significant to the VIE is considered the primary beneficiary and consolidates the VIE.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in financial statements. Instead, the new amendments require an organization to: 1) Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income—but only if the item reclassified is required under U.S. generally accepted accounting principles (U.S. GAAP) to be reclassified to net income in its entirety in the same reporting period; and 2) Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet instead of directly to income or expenses.

ASU No. 2013-02 was effective for the Company beginning January 1, 2013, and its adoption did not have a material effect on the Company’s consolidated statements of financial position or results of operations.