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Showtime gives EXC $1 million USD; EXC fails to get $3.5 million USD in financing

By Zach Arnold | September 18, 2008

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There are two new SEC filings by Pro Elite (form 8k & form SC 13D) that discuss the financial details regarding the company getting a Senior Secured Note with Showtime for $1 million USD. That money was issued on September 11th.

On September 10, 2008, ProElite, Inc. (the “Company”) entered into a Senior Secured Note (“Note”) payable to Showtime Networks, Inc. (“Showtime”) and a first amendment to the security agreement dated June 18, 2008 with Showtime (“Amendment No. 1 to Security Agreement”), copies of which agreements are attached hereto as Exhibits 2.6 to 2.7 and incorporated herein by reference. The Company received the note proceeds of $1,000,000 (one million) on September 11, 2008. The note bears interest at ten percent (10.0%) per annum, payable at maturity, and matures on June 18, 2009. The Note is secured by a first priority interest in the assets of the Company. The Note and accrued interest may be repaid, in whole or in part, without penalty at anytime prior to maturity. Mandatory repayment of the Note will be made from any license fees due to the Company under the Exclusive Distribution Agreement dated November 16, 2006 between the Company and Showtime.

However, if you read the rest of the 8k filing, you will see the following:

The Company previously reported in its most recent quarterly report on Form 10-Q (and an immediately preceding current report on Form 8-K) that the Company was 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 believed a successful closing was reasonably likely, but there was no assurance that it would be successful in doing so at all or on a timely basis. Such reports further stated, among other things, that any failure to obtain the needed 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.

The Company no longer believes that a successful closing of the $3.5 million secured debt (with a funded amount of $3.0 million) will occur. Although the Company has received $1 million pursuant to the Note, such funds are less than the $3.0 million needed to avoid the consequences described in the preceding paragraph and in the Company’s prior reports filed with the Securities and Exchange Commission. The $1 million funding defers such consequences only for a brief period of time while the Company continues to evaluate its options on how to respond to its severe liquidity problem.

In other words, the financial end game is very near here for Elite XC. Will Showtime/CBS pull the trigger and purchase the assets of Pro Elite if the company financially fails soon? If CBS network executives do buy the assets and run their own MMA organization, it will be fascinating to see who they hire and who they would keep on-board to run the operations.

During the Japanese MMA boom period a few years ago, it was the TV network executives and chief producers (think: Kunio Kiyohara of Fuji TV) who controlled a lot of the shots for PRIDE & K-1’s matchmaking. How would the landscape look with an American TV executive calling the shots in terms of booking?

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

16 Responses to “Showtime gives EXC $1 million USD; EXC fails to get $3.5 million USD in financing”

  1. 45 Huddle says:

    So basically they are putting just enough money into the company to help keep it afloat through the October show.

    Having a network own an MMA company is like putting your kid in daycare. Sure, it will be okay, but it won’t be treated as if it was being raised by the parents (or true MMA people in this case).

    In terms of long-term, it likely means EliteXC is done with. CBS won’t want to keep this thing going long term. It just doesn’t make sense. The entire purpose of getting EliteXC was to get a YOUNGER demographic to their channel. so while the ratings have been decent, it is the demographic ratings that have likely made CBS miserable. When SpikeTV drew more young males to a UFC replay, that was the writing on the wall.

    Basically, EliteXC isn’t serving it’s purpose. And in NetworkTV, if a show can’t do that, it will eventually be gone.

  2. Gygax says:

    Loretta Hunt is reporting that Showtime has already entered into talks to buy EliteXC/ProElite.

  3. David says:

    Supposedly Showtime filed that to the SEC. I think they are going to be the new “business optimizers” because it would not be beneficial to EXC as they are in debt so much, to get corporate assistance.

    On the other hand, Showtime is connected to CBS, a big corporation. This is a sign that corporations are entering into MMA underlined/bold/italic FOR THE MONEY .

    I have read some interesting comments on your page lately Mr. Arnold and I think a lot of typers are not recognizing the potential of this buyout.

    This is the sign of success, that Gary Shaw and Jared Shaw and Jeremy Lappen, former USA Pride exec who did a great job and continues like the rest to do so at promoting, matchmaking, and helping the sport.

    The corporate connections are going to start networking like a Bush-Al Qaeda social network. While Dana White is trying to “get in bed” with the British by doing the next season of TUF a natioalistic competition to flare both countries in hopes of getting a FEW TOO MANY fans across seas (hating America, and I am not trying to be too political at this point sorry), Elite XC will be taking over the less than 50% stateside preferred market share of MMA consumers.

    Hope yall enjoyed.

  4. Michaelthebox says:

    I’d laugh at David, but its too easy.

  5. David says:

    Great comment Michaelthebox, thanks for your addition.

  6. JMan says:

    Holy shit is this guy for real?

    So EXC is jumping in bed with BIG CBS/Showtime$$!! The Elite execs have done a great job? Networking = Al Qaeda WTF?
    Then to top it off Dana White is running scared to the UK ,and it won’t work because they hate America. All of this equals Elite XC taking over.

    I enjoyed your comment I laughed my ass off.

  7. Jeremy (not that Jeremy) says:

    Media companies owning sports ventures has historically not been a good idea. NBC owned a huge chunk of the XFL, several media companies owned teams in the WUSA (you may not remember them, they were a women’s soccer league that lasted all of three seasons), Disney dumped their sports franchises with all due haste as soon as they figured out that they weren’t very good at managing sports teams, News Corp sold the Dodgers (which they had just spent a billion dollars on) to some guy from Boston, and the Tribune Company has been attempting to unload the Cubs for some time now.

    EXC being bought by Showtime or CBS is not a good indicator of future success based on past results.

  8. Zack says:

    How does Lappen stay employed? Wasn’t he the face of the 2nd coming of the WFA?

  9. David says:

    Yes, Lappen was the promoter for WFA but he has been in the business for a long time and puts on great cards at EliteXC along with JD, Turi, and Gary the mobster.

    “Then to top it off Dana White is running scared to the UK ,and it won’t work because they hate America. All of this equals Elite XC taking over.”

    I am saying Dana White is smart for marketing the next TUF as a country vs. country theme. More so, considering he has already done several shows in that region of the world, the sport probably has a fast growing following which is good because all of the neighbors to the UK (to the east), hopes Dana White, will adopt UFC.

    I am also using the nationalism, not to name some brilliant new marketing strategy, but to point fun at the monopolistic, capitalistic, SUCCESSFUL f’in promoter that Dana White is, but how he in some ways resembles George Bush who the international community has come to hate. I am stating the facts so any people with other political views can pacifically keep them to yourself.

    In conclusion, adopting the UK as its central international presence, and using the nationalism theme to (as I can assure you they will exploit) promote turf feuds, he will gain MORE ratings, MORE international market share, and soon to be much more money.

    I think this is good for UFC and EliteXC because Showtime could easily KEEP THE WHOLE EliteXC team!

    You guys really don’t get my stream of thought but that’s understandable as I’ve been tokin’ all day.

    Finally, I am saying that corporate backing to an already keen marketing force will most likely lead to more promotional power in pushing big cards, feeding more money (which could also be problematic) to the sport, and pushing competition into UFC territory.

    I think Affliction can put on a great show if they have Oscar De La Mota and Fedor on the same card. I wouldn’t be interested as a fan of MMA but it would definitely get media buzz and a bigger increase in viewership since their premier show.

    Thanks all for reading and hope to hear more thoughts now that I have explained myself clearly.

  10. D.Capitated says:

    Media companies owning sports ventures has historically not been a good idea. NBC owned a huge chunk of the XFL, several media companies owned teams in the WUSA (you may not remember them, they were a women’s soccer league that lasted all of three seasons), Disney dumped their sports franchises with all due haste as soon as they figured out that they weren’t very good at managing sports teams, News Corp sold the Dodgers (which they had just spent a billion dollars on) to some guy from Boston, and the Tribune Company has been attempting to unload the Cubs for some time now.

    You just talked about a whole bunch of team sports, which MMA isn’t. On the other hand, boxers have been getting signed specifically to HBO for 20 years now, and its been a wildly successful marriage. Somehow, I see what boxing did to be far more applicable than the XFL. However, if this leads to more people posting about how the UFC is a “league” for my entertainment, I’m all for it.

  11. Jeremy (not that Jeremy) says:

    Fair enough, D.

    I’ve already noted on many occasions that I know nothing about boxing, so you’re even odds in my book.

    Since David has just admitted that he’s high, I won’t waste any more effort trying to prove that he is.

  12. DannyD says:

    Just a point on the Cubbies. The trib. in a business sense actually did quite amazing in terms or revenue with the Cubs. Not so much for us fans who can’t stand them. Having someone like John McDunna as VP of marketing ect… made the Cubs into the 1.3 Bil. team it is today. But like I said as a fan it was absolutely terrible and for D. cap I think the MMA promoters as they operate today are much more akin to a “pro league” than you realize maybe.

  13. David says:

    I really think I am spot on with my analysis of the possible Showtime buyout of ProElite.

    Why is nobody with me on this? Zach..?!

  14. Jeremy (not that Jeremy) says:

    Well, the other counter-example, at least for the moment, is Rogers and the Jays. They bought them, bought their stadium, rehabbed the stadium, poured a lot of money into the team…it’s a lot more similar to the new ownership at the Red Sox than the Disney, Comcast, or Metromedia cases for sure.

  15. David says:

    Thanks Jeremy, but I am just not too familiar with those examples you gave.

  16. Chuck says:

    “You guys really don’t get my stream of thought but that’s understandable as I’ve been tokin’ all day.”

    Okay, new rule! If you are high (on anything, whether it’s weed or paint thinner, or whatever) and you are about to post on a message board or comment section. Do the following:

    1.) Stop yourself, breathe in, breathe out, count to ten
    2.) Click out of the website and wait until you sobered up so you don’t waste valuable web space on your pot-induced drivel.

    Anywho, I am really worrying about the future of EXC. I think they will last longer than IFL has, but man did Proelite blow away tons of money. And most of what management, right? Gary Shaw should stick to boxing and bithc about fighters not making weight and how it “hurts his business and financial well-being” (even though he makes a manatee look like a flamingo in comparison).

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