3. Variable Interest Entity (“VIE”)

Three Lions meets the definition of a variable interest entity as the total equity investment at risk in Three Lions is not sufficient to permit Three Lions to finance its activities without further subordinated financial support by any parties, including the equity holders. Management determined at the date of the Company’s third contribution that the entity was a variable interest entity primarily based on the current equity investment at risk in Three Lions totaling $9.0 million, which consists of three contributions by the Company of $3.1 million on March 18, 2013, $1.9 million on April 26, 2013, and $3.5 million on October 2, 2013, and founder contributions of $.5 million, compared to capital in excess of that amount deemed necessary to develop and produce content, market and air the first revenue-generating event in 2014. The Company’s contributions total $8.5 million and the founders’ contributions total $.5 million. As the Company did not have sufficient cash on hand to make its third contribution, the Company raised capital through an offering of its common stock to its shareholders.

The Company’s equity interest in Three Lions represents a variable interest in a VIE. Due to certain requirements under the LLC Agreement of Three Lions, the Company, through its voting rights associated with its LLC units, does not have the sole power to direct the activities of Three Lions that most significantly impact Three Lion’s economic performance and the obligation to absorb losses of Three Lions that could potentially be significant to Three Lions or the right to receive benefits from Three Lions that could potentially be significant to Three Lions. Specifically, the Company shares power with the founders who control the common units of Three Lions to approve budgets and business plans and make key business decisions all of which require unanimous consent from all the executive board members. As a result, the Company is not the primary beneficiary of Three Lions and thus does not consolidate it. However, the Company has significant influence over Three Lions and therefore, accounts for its ownership interest in Three Lions under the equity method of accounting.

Through December 31, 2013, the Company’s total contributions of $8.5 million are reduced by Simon’s absorption of its share of Three Lions’ operating losses from the period March 18 to September 30, 2013, which brings the carrying value of its Three Lions investment to $6.0 million including transaction costs. The Company’s contributions to Three Lions is greater than its share of Three Lions’ net assets. This excess represents equity method goodwill which totaled $3.8 million at December 31, 2013. Also, the Company was required to issue a cash collateralized bank letter of credit on April 12, 2013 in the amount of $.2 million with an expiration date of April 15, 2014, to guarantee payments on an office lease obtained by Three Lions. The Company’s investment, and guarantee, related to Three Lions totaled $8.7 million at December 31, 2013, representing the Company’s maximum exposures to loss.

A summary of the assets and liabilities as of December 31, 2013 and operating results for the nine months and 13 days then ended (since March 18, 2013, the date of the LLC Agreement), related to Three Lions are as follows (in thousands):


Current assets:
Cash	$	4,311
Prepaid expenses and other current assets		619

Total current assets		4,930
Non-current assets		325

Total assets		5,255
Accounts payable and other current liabilities		931

Total liabilities		931

Net assets	$	4,324


Revenue	$	—
General and administrative expenses		4,647
Depreciation and amortization		31

Operating loss		(4,678	)
Interest income		2

Net loss	$	(4,676	)

Creditors of Three Lions do not have recourse against the general credit of the Company, regardless of whether Three Lions is accounted for as a consolidated entity.