Showtime Networks signaled through a filing with the Securities and Exchange Commission on Thursday its intentions to commence formal negotiations towards an acquisition of ProElite, Inc.
ProElite is the parent company of EliteXC, King of the Cage, Cage Rage, and ICON Sport and has television deals with Showtime, CBS, and Fox Sports Net but has also absorbed losses of approximately $55 million since its inception in late 2006. Showtime is a subsidiary of CBS Corp. and owns an existing 20 percent stake in ProElite.
ProElite warned investors of financial instability in an SEC filing this past August, stating that the company did not have enough resources to function into next year without securing additional financing.
“(The company) 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,” ProElite warned in a Aug. 15 NT filing that announced to investors and government officials that it would be late in filing its second quarter fiscal report.
The filing also indicated that ProElite believed it was close to securing an additional $3.0 million in financing needed to allow it to operate through the remainder of 2008. However, the filing also cautioned that the deal to raise the additional capital was not finalized and there was no guarantee that the deal would be closed.
“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,” the filing stated. “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 have a material adverse effect on the Company’s liquidity and capital resources and ability to continue as a going concern.”
On Wednesday, the company issued another filing revealing that it had been unable to close the deal and that it instead had received a $1 million loan from Showtime.
“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,” the 8-K filing states. “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.”
Indications that ProElite was looking for either a merger or acquisition partner came to light in a Sept. 11 column by CBS and SHOWTIME broadcaster Mauro Ranallo on the website for The Fight Network.
“I contacted Pro Elite head honcho (CEO and Chairman) Chuck Champion and he told me that he had held preliminary talks with a variety of promotions including Affliction,” wrote Ranallo in a blog entry that speculated on a promised major announcement by Affliction last week.
.....can't see how this would be bad for EliteXC!!
