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WWE is a privately held company and its ability to make the license payments due to us and to honor the minimum purchase requirements under the licenses is dependent on the success of its continued efforts to raise new equity capital. Thus far, WWE has made nonrefundable payments to the Company totaling $1.5 million in prior years and $525,000 in April and May 2008, leaving a remaining balance of the Release Payment of $8,975,000. This amount will be recognized as revenue as payments are received. To the extent that WWE is not successful or experiences delays in raising such additional new equity capital, the Company’s cash flow, results of operations and financial position could be adversely affected.
Under the Escrow Agreement, WWE is required to remit the full amount of the Release Payment by June 30, 2008 (the “Payment Period”). Should WWE be unable to make the Release Payment within the Payment Period, the Canadian license agreement shall automatically become non-exclusive. However, as provided for in the Escrow Agreement since WWE has already paid more than $500,000 on account of the Release Payment, the Payment Period is automatically extended, if necessary, until September 30, 2008 (the “Extended Payment Period”). Should WWE be able to make the entire Release Payment within the Extended Payment Period, the exclusivity of the Canadian license agreement shall be reinstated.
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