By Zach Arnold | September 18, 2008
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?