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IFL 10k report (4/15/08)

By Zach Arnold | April 17, 2008

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Quietly, the IFL filed their 10k SEC report on tax day. Of note, the following items in the report:

  1. Since the company’s inception, they have suffered a net loss of $31 million USD. Revenues are currently insufficient to run operations past Q3 if things do not change.
  2. Costs to promote events in 2007 were $15.9 million USD. The companie received $1.6 million USD from MyNetworkTV for 2007 programming.
  3. There will be no IFL PPVs in 2008.
  4. The company generated $498,000 USD in sponsorship revenue and $117,544 USD in branded merchandise sales for 2007.

Here’s a paragraph from the 10k filing:

As a result of our continued losses, our independent auditors have included an explanatory paragraph in our financial statements for the fiscal year ended December 31, 2007, expressing doubt as to our ability to continue as a going concern. The inclusion of a going concern explanatory paragraph in the report of our independent auditors could make it more difficult for us to secure additional financing or enter into strategic relationships with distributors on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we may obtain. If revenues grow slower than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, we may not achieve profitability and the value of your investment could decline significantly.

Topics: IFL, MMA, Media, Zach Arnold | 16 Comments » | Permalink | Trackback |

16 Responses to “IFL 10k report (4/15/08)”

  1. JudgeIto says:

    It’s a shame that the IFL is going to declare bankruptcy. I think they have developed a great talent base. I also enjoy that they focused on having fighters staying active and fighting a number of time throughout the year.

    For some reason, the hardcores looked solely at the IFL’s faults and missed the great aspects of their product. At the end of the day, it was free MMA, and for the most part, of a high quality. I’ll be sad to see it go.

  2. 45 Huddle says:

    I always thought it felt like a light version of the UFC due to the 4 minute rounds and no elbows.

    The question becomes… Where do there fighters go? A lot of the fighters have no place in the major organizations. However, there is about 15 fighters who I think should be in the UFC/EliteXC/Strikeforce….

  3. Dave2 says:

    They lost $31 million USD in two years while the UFC lost $44 million in about four years? That’s pretty crazy.

  4. Jeremy says:

    Actually, both the IFL and Pro-Elite released their 10K reports.

    Elite lost 27 million in 2007.

  5. Jeremy says:

    If anyone had any doubts that the first CBS show will make or break Pro-Elite, their latest 10K should erase them.

    They also have lost about 31 million over the last two years.

  6. I haven’t read the 10k report for Pro-Elite. Can anyone give me a link?

    What did the 10K say about the revenues for Pro-Elite? Especially compared to their previous fiscal year? Did the rate of increase with revenues (if any) surpass their rate of losses from the previous year?

  7. Jeremy says:

    Since Elite did not run shows in 06, there is not too much to compare.

    They did spend/lose 4 million on 06.

    http://forums.mmaweekly.com/showthread.php?t=2368

    Above is a link to an overall breakdown I posted on the MMAWeekly forum on Tuesday night.

    Here is a link to the entire document:
    http://www.sec.gov/Archives/edgar/data/1015789/000114420408022539/v110558_10ksb.htm

  8. Dave2 says:

    Explain to me how ProElite and IFL are burning money at this pace when the UFC was burning money at a rate of only $11 million/year or so (early 2001 to early 2005 right)? How are ProElite and IFL blowing this money so fast? Even with the $44 million the Fertittas burned, they were close to calling it quits.

  9. What’s sad here is that IFL’s last event was actually entertaining, and they were beginning to really build some stars there.

  10. cyph says:

    Explain to me how ProElite and IFL are burning money at this pace when the UFC was burning money at a rate of only $11 million/year or so (early 2001 to early 2005 right)? How are ProElite and IFL blowing this money so fast? Even with the $44 million the Fertittas burned, they were close to calling it quits.

    First mover advantage. IFL and EliteXC are both fighting up hill against a dominant competitor. When the UFC was struggling, they were losing money in a market they control. IFL and EliteXC are losing money in a market where they are fighting over a 10% and trying to a piece of the other 90%.

    EliteXC and IFL thought the MMA market would continue to grow… except it hasn’t, or any growth has been grown on the UFC’s side.

    The CBS deal is a make or break deal for EliteXC. There is no way they can continue sustaining the losses. Incidentally, if EliteXC does do well in bringing new fans in, it would help the UFC rather hurt them. I disagree with Cuban about his comment that fans would go away from PPV when there’s free MMA. Fans will always gravitate to the best product, regardless if it’s free or not. However, you need to offer free MMA to get the exposure and bring in new fans in the first place. That’s why MMA on network tv is great for MMA, great for EliteXC, and also good for the UFC.

  11. 45 Huddle says:

    I expected the IFL to be out of business last year, so the fact they have stayed around this long is a miracle. They won’t make it until the end of the year. I doubt any money mark would bail the company out.

    I have to admit I am a little surprised at how much EliteXC has lost. That is a lot of money to burn through with such few shows. One fo the main reasons is how much they are paying guys like Gary Shaw and other top executives within the company. Those guys aren’t fans of the sport. They are just trying to make a profit, and if the company does poorly, they don’t care.

    The thing with EliteXC is that they do have Showtime backing them. And after their current contract is up, Showtime could support the company, just like how HBO supports boxing through the revenues it generates. However, HBO has PPV to generate income, along with a huge subscriber base. And I can’t see Showtime putting in $25 Million a year into EliteXC. It just doesn’t make sense financially.

  12. Jeremy says:

    We talked about Elite on TAGG radio yesterday. It is pretty shocking to look at the amount of money Elite is spending on the administrative end of things.

    They blew through 20 million on that end. Their web site has indeed cost them a fortune, but this total seems awfully high.

    Shaw made 435K in 2007.

  13. Jeremy (not that Jeremy) says:

    Five million of Pro Elite’s losses are composed of the amounts that they’re having to recognize as expense related to all the warrants and options that they are issuing.

    They have another million and a half that’s related to depreciation and amortization, most of which is associated with the excess that they paid over the assessable value of the net assets of the entities that they acquired (“goodwill”).

    They expensed a quarter mil for some fixed asset that they determined had no value (no idea what that is, but it’s probably a contract, I would guess).

    So that gives you an idea of where about seven million in what could be termed paper losses went to. I’m guessing that all of those items are part of what composes their income statement item titled “General and administrative expenses,” which is odd, since they’re all (except d/a, which is normally broken out after profit/loss as well) what I would normally consider non-operating, and I would expect them to be broken out AFTER operating profit/loss.

    That still leaves you with more than seven million in cash or equivalent expenses that are in general and administrative expenses. Typically that would be management salaries, insurance, etc. That’s a lot of money for a company that doesn’t make any money to be spending on that sort of stuff.

  14. Dave2 says:

    I really think there is a UFC boom, not a MMA boom. The sport itself isn’t anywhere as mainstream as the promotion. The casual fan doesn’t love MMA, they love the UFC and its household names. If you want proof of this, just look at how fans boo whenever a fight hits the ground. Americans aren’t as receptive to ground fighting as they are striking.

    The only reason why the UFC is a hit in the PPV market is because of the household names and brand recognition (they have a monopoly on mma brand recognition). Look at every PPV without Chuck Liddell, Randy Couture or Tito Ortiz in 2007 and what you’ll find are PPV buys that never go above 400,000 (and average even less). In the TV market, the UFC’s Spike TV ratings are much more inferior to the WWE’s ratings when they used to be on Spike TV. And why? Because the fighters on Spike have less name recognition while the WWE tends to have the big names on RAW and Smackdown programing weekly (the biggest matches are reserved for PPV though).

  15. Jeremy says:

    Dave,

    I have to disagree with your comments about fights on the ground. There have been plenty of fights that got strong responses even when on the ground.

    Go back and watch Griffin/Tavarez, Huerta/Guida, Griffin/Guida, Sanchez/Diaz, Diaz/Gomi, Forrest/Shogun, Griffin/Edgar, Lesner/Mir, GSP/Hughes, GSP/Koscheck…if there is action on the ground, most audiences respond well. I say most, because there is the occasional crowd that turns on the ground fights. But the Vegas crowds are almost always good crowds.

  16. The Gadget Link says:

    Turn off the lights, the party is almost over. Unless CBS can turn around the fortunes of Pro-Elite, they’ll have a hard enough time to make it to 2009 or beyond. Gary Shaw better have some investors with heavy pockets to keep the boat afloat.

    I can understand that businesses incur a net look in their first year operations but losing $27 million is a pretty hefty sum, unless they see it as a sizable cost to gain entry into a market already dominated by Zuffa.

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