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« | Home | »

Pro Elite’s SEC 10QSB quarterly report

By Zach Arnold | June 29, 2007

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Breaking down the numbers in full detail.

Source: http://biz.yahoo.com/e/070628/pele.pk10qsb.html

Beginning talking points:

  1. ProElite.com has grown to over 30,000 registered members since its launch on February 1, 2007.
  2. Our business model includes partnering with (and creating) the best distribution channels for the video content created by our live events and on-line products. The distribution channels include Showtime, CBS Sportsline, other major portals as well as additional television network and cable channels.
  3. As a result of this reverse merger transaction, Real Sport is now our wholly owned subsidiary, though from an historical perspective it was deemed to have been the acquirer in the reverse merger and the survivor of the reorganization. Concurrently with the closing of the reverse merger, we completed a private placement of our securities with gross proceeds of $10,000,000.
  4. In exchange for the right to use Rumble World’s intellectual property, the Company issued to Rumble World a five-year warrant to purchase 750,000 shares of our common stock at an exercise price of $2.00 per share, which vests over a term of three years in three equal installments.

Now, onto the red meat portion of the filing.

  1. Revenue for Q1 2007: $314,064.
  2. Gross loss for Q1 2007: $2,085,630 (admitting that the Feb. ’07 show in Southaven, MS. was a money-loser).
  3. Marketing expenses: $103,529.
  4. Web site expenses for Q1 2007: $415,170.
  5. Administrative expenses for Q1 2007: $2,064,842.
  6. Loss from operations in Q1 2007: $4,669,171.
  7. Net loss in Q1: $4,552,947 ($0.11/share).
  8. Net cash used for Q1 2007 operations: $2,563,703.
  9. Cash and cash equivalents on hand: $9,072,290.

Important statement to focus on:

Our cash and cash equivalents are not expected to be sufficient to fully execute our three year business plan. As such, we actively seek to raise additional financing. If we are unable to raise sufficient additional financing, our growth may be limited. Management believes that we currently have sufficient cash to finance our current operations for the next twelve months.

When you break down the numbers, the Pro Elite/Elite XC deal has more big names involved in the project (Mark Burnett, Showtime, etc.) but right now seems to be in a similar financial shape as the IFL. The question is whether or not Pro Elite can convert their big web site numbers and their backers into making this into a serious money operation.

Topics: Media, MMA, Pro Elite, Zach Arnold | 13 Comments » | Permalink | Trackback |

13 Responses to “Pro Elite’s SEC 10QSB quarterly report”

  1. Pierre-Luc Allie says:

    JD Penn must be praying every night for the stock price to go up.

  2. Jeremy (not that Jeremy) says:

    There’s quite a bit of interesting stuff in the actual full 10Q.

    Of particular interest are the legal matters that they disclose (suits or settlements with Wallid, Frank Shamrock, and Zuffa), and the stock and warrant issues to Showtime. For five million dollars, Showtime purchased a big chunk of the company, and has options to pick up even more over the next few years. Right now, those options seem to be underwater, but it’s not beyond the realm of possibility that the price could go up enough to make them worth exercising.

    Net loss includes quite a bit of expense related to all these options and warrants that have been issued since they present using the fair value method. Previously, all that stuff wouldn’t have shown up on the face of the financials.

    They also issued 320,000 shares to Shamrock’s company to basically settle their dispute AND to be involved in their reality television series over the next three years.

    FEG owed ProElite 700k for the LA Colosseum event. ProElite’s only gotten 500k of it.

    The 664k of related party expenses included in gross loss is the amount that ProElite owes Showtime for production of their February show.

    Overall, I’d say that their cash position is good looking forward to the next 12 months or so. There are some expenses that they may be able to capitalize or put off indefinitely as long term payables related to show production, and if they can continue teaming up with other companies for event promotions, then I think they can turn this into a break even enterprise within 18 months. Cash is more than sufficient to cover short term liabilities and forecasted expenses for 12 months.

    I’m a bit concerned about all the shares that are changing hands, because it reminds me of IFL. However, if they are breaking even and producing events, and the reality show goes off as planned, then they really are going to get that stock price up, and the options will all be exercised.

    I’m much more comfortable giving ProElite the thumbs up as a serious UFC competitor than anyone else right now.

  3. Jeremy (not that Jeremy) says:

    Combine that with the Ken Shamrock interview, and wouldn’t it be a gas to have Frank Shamrock coaching one team and Ken Shamrock coaching the other in ProElite’s reality show? I’d definitely watch that.

  4. Dave says:

    “Combine that with the Ken Shamrock interview, and wouldn’t it be a gas to have Frank Shamrock coaching one team and Ken Shamrock coaching the other in ProElite’s reality show? I’d definitely watch that.” – Sure hope Gary Shaw does his homework!

    Great point Jeremy (not that Jeremy)

  5. MMA Fan says:

    i doubt ken will go to pro elite.

  6. 45 Huddle says:

    Pride FC used Royce Gracie and Ken Shamrock and couldn’t get beyond 50,000 PPV Buys. Plus, Elite XC will look like the minor leagues if they use him now.

    Based on the revenues and pay for the Strikeforce/Elite XC Card, it is almost certain that the event also lost money. So no matter ow you cut it, the current America MMA Lanscape is:

    1. Zuffa dominating.
    2. IFL losing money.
    3. Elite XC losing money.
    4. Strikeforce not having any type of TV unless they go through Elite XC.
    5. Bodog losing money. In fact, they only got 15,000 PPV Buys for Fedor Emelianenko.

    And the 30,000 user base for the internet site sounds about right. That is about the number of hardcore fans out there. Doesn’t mean they can make money off of all of them. I am a member, but they are losing money on me because I use their bandwidth and don’t buy anything from them. And if they did make it a pay service, almost nobody would use it.

  7. lordschroeder says:

    it’s no different than the internet stock craze of the 90’s. companies seemed to think that it was more important to be popular than to actually, dare i say it, make money. people may bash the ufc whenever they get the opportunity, or claim that their fighters don’t get paid what they “deserve”, but at least the ufc will be around a year from know to continually employ their fighters.

  8. I’d be interested to know what the daily login rate is like. I signed up, but haven’t gone to the site since.

  9. Stevie J says:

    I consider myself a heavy follower of MMA and I’ve never even signed up for their website AT ALL.

  10. 45 Huddle says:

    I am like Fightlinker, I went once to sign up and never went back. I have a Mac, and their video’s aren’t compatible, so it is useless to me.

    I find it funny that people think the UFC is just pooring all their money back to the owners. This just isn’t true. The IFL & Pro Elite financials show us this. It is expensive to run MMA shows. Just the expenses to have 40+ employees is expensive enough. You figure with benefits and health insurance that they are paying out a lot. Then you have the advertising costs. The costs of running a website with huge hit numbers. The UFC’s overhead is very large.

    Take all that into mind, then factor in $40 Million in the hole, $65 Million to get better fights for the fans, a money losing WEC, and various other costs…. And they really aren’t paying out badly at all. Especially when every other organization is paying out equivalent and going under.

  11. Lynchman says:

    They are stating that Shamrock/Baroni drew over 10,000.

    The CSAC has released the actual numbers that show that statement to be incorrect.

  12. Jeremy (not that Jeremy) says:

    45 Huddle, I can feel your pain.

    I’m on Vista 64 and it’s astonishing the number of websites that are totally broken, largely because the plugins that you need to view them are only available in 32bit versions and sometimes won’t install at all (flash in particular), even when you’re using 32 bit browsers.

    I typically don’t even bother going to video sites anymore unless I know that there is the option to actually download the file to my system.

    I wouldn’t take a money-losing WEC as a basic assumption. I’m sure it was losing money, but I don’t think Zuffa would operate it for more than a year if they couldn’t do it on a break even basis, because they could roll those guys into a UFC branded show and probably do better if necessary.

    The lightweight matchups are definitely a good fight. Really the trick is the WEC brand not holding much cachet yet.

    But I do think that ProElite has a better approach than anyone else, they seem to have that key combination of free television, pay television, and pay per view, they have some good names, and alliances with some of the current big boys, even if those entities are having some significant problems of their own. They have smart guys running the company who actually have experience running MMA promotions in the US.

    My biggest concern is that, like IFL, they seem to be basically paying for the operation on confidence-man like faith tricks. When people are getting paid in stock options that might never be able to be executed…that’s just not a good sign. As pointed out, that strategy was one of the defining hallmarks of the dot.bomb era.

    The other concern is far more general, and that’s a question of just how much of a market is out there for MMA. I think there’s a lot of room for growth, but UFC just dominates the market in terms of revenue, coverage, and “mindshare” (I hate that word). Everyone else is kind of fighting for scraps until they can establish their brand, and Ken’s approach of building a promotion based on the existing fan bases of self-professed MMA “legends” is pretty risky in my view, because you’re talking both about the uber-hardcore AND fairweather fans. Sure, they’ll follow Ken Shamrock to ProElite, or wherever, but they’re also going to LEAVE when he does.

  13. 45 Huddle says:

    The IFL tried to capitalize on the “legends” of MMA, and we have quickly seen how much drawing power they have outside of the UFC.

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