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The financial status of Pro Elite (EXC)
By Zach Arnold | August 15, 2008
Pro Elite stock update today from the SEC: Notification of inability to timely file Form 10-Q or 10-QSB (NT 10-Q, 8/15)
The Company is spending significant time and resources seeking required financing, including significant efforts by the financial and accounting staff, and as a result is unable to complete the consolidated financial reporting needed to file our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008 with the Securities and Exchange Commission by the deadline without unreasonable effort and expense. Such efforts include analysis of impairment of goodwill and acquired intangible assets, as described further below.
Therefore, the Company requests additional time to file its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008. The Company expects to file its Quarterly Report by August 19, 2008.
The Company is actively negotiating to consummate a financing of approximately $3.5 million in secured debt (with a funded amount of $3.0 million after an original issue discount of $0.5 million) and believes a successful closing is reasonably likely, but there is no assurance that it will be successful in doing so at all or on a timely basis. Any such failure to obtain financing in the immediate future would also have a material adverse effect on the Company’s liquidity and capital resources and ability to continue as a going concern.
Even if the Company successfully closes on such financing, it expects to report in its Quarterly Report on Form 10-Q that its capital resources are sufficient only until the end of the year, and only if the Company makes significant reductions in operations and expenditures. The Company is also actively seeking additional financing beyond the $3.0 million to enable the Company to execute its operating plans without significant reductions in operations, but there is no assurance as to whether any such financing will be available on reasonable terms or at all.
The IFL is dead, and both Elite XC & DREAM are heading into dangerous territory. The MMA business at the end of this year may very well look exactly like the professional wrestling business on a worldwide scale — one major company (UFC… like WWE) and everyone else not even close.
When Pro Elite made the move to buy out a lot of B-level MMA companies, I thought it was a volatile and unwise move. How can you possibly manage four or five different MMA organizations by sitting in an office in Los Angeles? Impossible to do. By buying out all of the major B-level promotions (except Strikeforce), Elite XC has basically accomplished what UFC could never have dreamed possible of doing — potentially killing off an entire farm system of promotions for building new MMA fighters. Essentially put, if Pro Elite goes out of business soon then it can be fairly stated that the company negatively impacted the business by paying off so many upstarts and not doing anything with those promoters they paid off. Remember — promoters like Terry Trebilcock signed multi-year deals, so they will be on the sidelines in the foreseeable future if Pro Elite tanks and goes out of business.
There is something curious, however, going on with the Pro Elite stock. It was down to $2.50 USD/share and it jumped up $5.50 USD/share today to reach $8.00 USD/share. Why on earth would this happen, given that Pro Elite filed this new financial report today with the SEC?
Topics: Media, MMA, Pro Elite, Zach Arnold | 34 Comments » | Permalink | Trackback |
I don’t think EXC will tank any time soon. That Showtime and CBS money is almost limitless. EXC will be fine for a while. The company I would be most worried about would be Affliction. mWith the money they spent, how the fuck are they going to turn a profit?
And good for Strikeforce for not being bought out by EXC. When it comes to making actual profits Strikeforce is the second biggest money maker in American MMA. Unlike EXC and that first Afflistion show Strikeforce actually makes profits. Scott Coker knows what he is doing.
Investors hoping that either CBS will up their stake as a takeover or that “someone” will buy them out.
Buy on rumors, sell on news.
Take a look at the volume though. Someone bought 5,300 shares today. That’s pretty much all that’s happened in the last week.
The why of it is that someone was willing to sell at $8 a share that wasn’t willing to sell at $2.50 a share, and someone wanted to buy 5,300 shares, the last one of which (at least), cost $8 per share. The earlier shares may have cost less than $8 per share, we don’t know. His broker is going to go out and solicit sellers, and he’ll buy them as cheaply as possible from the list of possible sellers.
That’s how it works, asking the “why” is just kind of misleading when you’re talking about stocks.
It’ll be disappointing if Pro Elite failed because then we’ll be left without Cage Rage (which has admittedly been shit after being bought out), ROTR (when was their last event anyways), Spirit and KOTC, in addition to EXC.
I don’t believe that Spirit MC is directly owned by ProElite, I think they only have some kind of partnership with them.
They own a portion of the company. Not enough to consolidate, they account for them as an investment.
Further proof that the UFC has become popular and not MMA.
My biggest concern is what will happen to all of this top level talent if even 2 out of the 3 companies (EliteXC, DREAM, & Affliction) go out of business? While the UFC has a lot of cards, they will be unable to give all of these people jobs. Forget about the payscale for a moment. Just from a marketing perspective, the UFC will not want to introduce so many new fighters in a short period of time.
Then there is Strikeforce. They are supposedly making money. I question their long term ability to be successful as well. One company can only go to the same market so many times before tht well dries up. And with Cung Le & Frank Shamrock getting older, I can’t see the gravey train lasting forever.
Things are not looking good for the industry.
A side note, the September 20th EliteXC show has been cancelled. No quarterly financials and then cancelled shows means it is the beginning of the end. It also means the October CBS Show is really their last hope.
“It also means the October CBS Show is really their last hope.”
Looks like it. Unfortunately if the rumors are true and Kimbo fights Brett Rogers, their biggest cash-cow will probably be exposed as a fraud.
The JT fight hurt Kimbo, by how much we will see in October. A similar performance, or KO loss will derail the wagon for good.
I’m not sure if I necessarily agree with the idea of MMA not being popular so much as it is the UFC being popular.
I think it just comes down to poor business planning on the part of these upstart companies. You can’t just throw together a card, pay everyone tons of money and expect to come out in the black. This is a long-term business and I don’t think these guys get that, which is a shame.
Stock price jumps for no apparent reason? That’s insider trading and they know something we don’t. I expect news to filter out soon, though.
It’d be a shame that they’d go under with the CBS deal they have right now. However, they have made too many blunders. They bought too many organizations too fast but yet they don’t merge them together. Furthermore, that money could have been better spent on signing former UFC fighters like Arlovski (although I can’t imagine they be able to compete with the Affliction).
MMA isn’t mainstream enough to support two organizations. A UFC monopoly will help MMA grow until there is a sufficient market for two organizations. Right now, there isn’t, and outside of the MMA Internet bubble, nobody really cares about MMA. The Internet MMA blogosphere gives us all a false sense of popularity, but really, we’re just more vocal, and there just aren’t enough interest in MMA to support the number of organizations coming out.
The UFC took 10 years and a lot of luck to build their brand. Unfortunately for most of these companies, 10 years is too long a time frame to keep losing money.
The September 20 EXC event got canceled? I checked both proelite.com and sho.com and they both say the show is a go. But I didn’t see a fight card, so I don’t know what to say.
MMA Junkie has an article on the cancelled show.
I can’t believe that some people are referring to Lizama/Berry as a possible Fight of the Year candidate. I thought Lizama/Berry was a sloppy fight with no defense. Great heart showed by both men, but not much else.
I agree with Ivan. It’s the same reason why Condit vs. Miura is not a FOTY candidate. Just too sloppy to get a nomination.
Here’s a question: What if the UFC decides to buy Pro Elite? Given their gigantic debt and multitude of problems, the investors would likely be willing to sell, and it seems to me that there would be a lot of value for very little money in a purchase of Pro Elite.
Knowing the way that Pink Sheets works, I’d say the jump was either somebody inside of the company trying to bolster the stock and make things look good, or somebody doing what people do with Pink Sheets companies all the time; building the stock up so people invest, and then sell a little while later, making some money in the process.
What would the UFC gain from buying Pro Elite? They would have control of so many farm systems that are losing money that they wouldn’t know what to do with.
Furthermore, they would control three brands on three separate networks. The WEC hasn’t done that well and they’re owned by Zuffa. It would be hard to shake the inferiority perception of anything non-UFC. Finally, CBS owns probably half of Pro-Elite now, or perhaps all of it based on the new stock prices. CBS also controls the production and direction of the show, something the UFC doesn’t want to cede control of.
In my opinion, the UFC wouldn’t touch this one. It’s a bad deal and it makes no sense strategically.
“I can’t believe that some people are referring to Lizama/Berry as a possible Fight of the Year candidate. I thought Lizama/Berry was a sloppy fight with no defense. Great heart showed by both men, but not much else.”
What do you expect? This generation of fans thinks that Bonnar/Griffin 1 was the best fight ever.
By the way, does anyone know the TV rating for the last WEC card?
Payout is saying that Meltzer says it was 0.5
So down from Faber, but that’s kind of to be expected given the MASSIVE amount of advertising that fight had.
http://www.mmapayout.com/2008/08/wec-35-ratings/
UFC might buy them if there was a bargain basement price in it and the no-competes were for real and included in the deal, just so that they could get Cage Rage. That’s about all that I could see about it that they would be interested in, other than the international recognition of the KoTC name in Australia and Asia for their grassroots events. They definitely wouldn’t want to run KoTC shows in the US, and I’m not sure they would really prefer running KoTC overseas either given that they want to run UFC out there.
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There are fights where guys are showing off their technique and there are fights where guys are showing off their hearts. Either one can be great.
You cannot compare MMA business and pro-wrestling business right now. MMA is hot right now, while pro-wrestling is cold. Once a company like Affliction dies there will be another Affliction that will come along under MMA is not hot anymore. When WCW and ECW died, the pro-wrestling boom was at an end.
There are lots of stars that still have potential money making years ahead of them that are not signed to UFC (Arlovski, Ortiz). Unlike in pro-wresling where there has been very few since WCW and ECW closed (unless you think Sting and Nash are stars).
The WEC rating cannot be good. Even if it is good for Versus. You would have thought the last card got people hooked. This is very disappointing.
Is there anything that would account for this? Was there some other blockbuster event going on at the same time?
More importantly, is there a chance that Versus could get into more homes in the near future?
All the same, pro wrestling is at least in a solid holding pattern. They have no stars, per you, but they aren’t in any sort of financial trouble. Their PPVs are down, but stable, they have a large number of available venues and sell tickets at decent levels still.
There is plenty there to keep one very large and very rich company rolling in it, even with massive media strikes against them such as the double murder suicide, deaths in the ring, and the ongoing steroid scandals related to the early deaths of former talent.
MMA isn’t that stable yet, and I’m not certain that any company even on their own, would be able to survive over the long term as things stand now. The ongoing promotion cannibalism is good for the fighters, at least in the very short term for those few who are already considered in the elite ranks at least in terms of marketability or according to internet pundits, but there are legitimate questions as to whether it’s good for the sport.
I think Strikeforce is probably a better example than EliteXC right now. They have their TV deal, their ratings are good, even on prerecorded material in very late time slots, they have their region, and they continue to run satisfactory shows on what really counts as a shoestring.
UFC is still the 1000 pound gorilla, but anyone can die the death of 1000 cuts.
Versus is splitting their HD channel right now with Golf TV and those two networks are going to split soon into two HD networks. Their HD channels are getting much better penetration on cable, fiber, and satellite now that the analog shut off is upon us. This is freeing up about four slots for HD channels for every analog station that is turned off.
That’s going to allow Versus to get into more homes, but how many more is an open question. The fact that they already have an HD package available is a good thing because a lot of providers are going to be competing on the number of HD networks available over the coming year, and the first channels with their feet in the pool are going to get the most exposure.
If you read their filings you see some hilarious shit they spend money on. 724k on that awful website? CHECK. How much did they make off of it? 28k?
I mean, how can you operate like that?
Thanks for the rating Jeremy. My WO is late this week (I usually get it on Friday but it still hasn’t come yet.)
Is there anything that would account for this?
Yeah, no one gives a shit about Carlos Condit. That’s what accounts for the WEC rating being like all the others sans one. Notice that in spite of the WEC rating being pretty mediocre, no one is flipping out about the WEC being killed off or losing its TV time on Versus or whatever else.
As for EliteXC, if Kimbo Slice does a big rating again, Viacom will buy the company outright and Kimbo Slice will be the first network contracted fighter in MMA history. And he probably will, and that will probably happen.
Fight Opinion.com: Redefining optimism
Kimbo’s the guy on Nike commercials. CBS and Showtime are networks that have contracted fighters exclusively to compete for them. But then again, its not a pro wrestling style of business to do that sort of thing, and we know how people cope with talking about MMA as it relates to actual sports.
I think there’s one major difference in the MMA/pro wrestling comparison and that is the B level promotions. In MMA’s case the IFL’s, WFA’s and now maybe the EXC’s can’t even operate for any amount of impactful time. A few years max seems to be the going rate.
While, the B leagues in pro wrestling like ROH and TNA, can seem to stay operating even in money-sucking businesses and with the major league shadow (the WWE) over it.
Profitability on the otherhand is a different story. But there’s no chance to get to that goal if a company can’t stay around longer than 24 months.
I think there’s one major difference in the MMA/pro wrestling comparison and that is the B level promotions. In MMA’s case the IFL’s, WFA’s and now maybe the EXC’s can’t even operate for any amount of impactful time. A few years max seems to be the going rate.
Apart from the UFC (which itself has nearly collapsed god knows how many times now), very few organizations anywhere, regardless of scope or success, have survived significant periods of time. Pancrase is still around but has as much relevance now as ZST. Who else then? RINGS and PRIDE are dead, and there’s a billion organizations who’ve come and gone. Battlecade? WCC? WEF?
Who has stayed around without being bought out? HookNShoot, Gladiator Challenge, and Extreme Challenge?
While, the B leagues in pro wrestling like ROH and TNA, can seem to stay operating even in money-sucking businesses and with the major league shadow (the WWE) over it.
Both ROH and TNA make money, the latter much to the chagrin of fans of fake fighting. ROH also has a business model that is impossible to replicate in MMA that is successful for them. Why even compare it?
Profitability on the otherhand is a different story. But there’s no chance to get to that goal if a company can’t stay around longer than 24 months.
People jumped in with money into MMA when there was no boom. Now that there is one and clear interest from network TV, they’re not going to any longer because, uhhh, the pro wrestling business dictates it?
“What do you expect? This generation of fans thinks that Bonnar/Griffin 1 was the best fight ever.”
I think this generation of enthusiasts understands that this fight helped the UFC begin their slow penetration of households containing those 18-35 year old casual fans.
elite xc is in big trouble. I don’t know if they can hold the company any longer. MMA is very competitive and complex sports so I think it is going to take a while for people to get familiar with the sport. Plus, a lot of investor are scared because this market is still unknown and many up and coming MMA companies don’t know how to run the business. UFC is a exception because they started this MMA business, they got the best fighters and anybody that will argue is dumb and it took UFC more than 10 years before they started making big money, so this MMA business doesn’t become a success over night. Elite XC need to hire real promoters and fire their fake promoters. Like in the NFL if a team is not winning, they start cleaning the house by firing the weakest link of the company. They need to create exciting match-up to get this company going or they will sink.
Well after the deal with strikeforce and selling a part of their assests, proelite is debt free and in the works of creating something it seems… the stock dropped to one penny… i’m buying them up