EX-99.1 2 v095437_ex99-1.htm
EX-99.1 UNAUDITED PRO FORMA CONDENSED COSOLIDATED FINANCIAL STATEMENTS
Exhibit 99.1


ProElite, Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements

The following unaudited pro forma condensed consolidated financial statements as of September 30, 2007 and for the year ended December 31, 2006 and the nine months ended September 30, 2007 are based on the historical financial statements of ProElite, Inc. after giving effect to the acquisitions of King of the Cage, Inc. (“KOTC”) on September 11, 2007, Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. on September 12, 2007 (together “Cage Rage”) and investment in Entlian Co. (“SpiritMC”) on September 18, 2007. The proforma condensed consolidated balance sheet as of September 30, 2007 presents the historical financial position of ProElite, Inc., which had consolidated King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. and recorded the investment in Entlian Co. as of that date. The proforma condensed consolidated statement of operations for the nine months ended September 30, 2007 presents ProElite, Inc.’s results of operations as if the acquisitions of King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. and investment in Entlian Co. had occurred on January 1, 2007. The pro forma condensed consolidated statement of operations for the year ended December 31, 2006 presents ProElite, Inc.’s historical financial position and results of operations as if the acquisitions of King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. and investment in Entlian Co. had occurred on January 1, 2006. ProElite, Inc. began its current business in August 2006 and was considered a development stage company until the first quarter of 2007 when revenues were first recognized. The pro forma condensed consolidated statement of operations for the year ended December 31, 2006 includes ProElite, Inc.’s operations from August 10, 2006 (inception).

The pro forma condensed consolidated financial statements include, in our opinion, all material adjustments necessary to reflect acquisitions of King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. and investment in Entlian Co. The pro forma condensed consolidated financial statements do not represent the Company’s actual results of operations, including the acquisitions, nor do they purport to predict or indicate our financial position or results of operations at any future date or for any future period.

The pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of ProElite, Inc. in our registration statement on Form SB-2 for the period from August 10, 2006 (inception) through December 31, 2006 and quarterly reports on Form 10-QSB.

ProElite, Inc.’s historical condensed consolidated financial statements include the assets, liabilities and operating results of ProElite, Inc. and its wholly-owned subsidiaries since formation or acquisition of these entities (“ProElite” or the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. The equity method of accounting is used for its investment in Entlian Co. in which ProElite has significant influence.

1

PRO ELITE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet


   
 September 30, 2007
  
   
Historical ProElite, Inc.
  
Pro Forma Adjustments
  
Pro Forma Balance Sheet
  
               
ASSETS
              
CURRENT ASSETS
              
Cash and cash equivalents
  
$
10,536,648
  
$
-
  
$
10,536,648
  
Restricted cash
    
277,500
    
-
    
277,500
  
Accounts receivable, net
    
1,222,573
    
-
    
1,222,573
  
Accounts receivable - Showtime
    
240,133
    
-
    
240,133
  
Prepaid expenses
    
238,889
    
-
    
238,889
  
Other current assets
    
175,630
    
-
    
175,630
  
Total current assets
    
12,691,373
    
-
    
12,691,373
  
Fixed assets, net
    
1,330,931
    
-
    
1,330,931
  
OTHER ASSETS
                    
Acquired intangible assets, net
    
912,777
    
-
    
912,777
  
Goodwill
    
12,197,363
    
-
    
12,197,363
  
Investment in Entlian Co.
    
1,955,049
    
-
    
1,955,049
  
Prepaid distribution costs, net
    
834,604
    
-
    
834,604
  
Prepaid license fees, net
    
121,148
    
-
    
121,148
  
Prepaid services, net
    
462,222
    
-
    
462,222
  
Rent deposit
    
122,796
    
-
    
122,796
  
Total other assets
    
16,605,959
    
-
    
16,605,959
  
Total assets
  
$
30,628,263
  
$
-
  
$
30,628,263
  
                     
LIABILITIES AND SHAREHOLDERS’ EQUITY
                    
CURRENT LIABILITES
                    
Current liabilities
                    
Accounts payable
 
$
1,165,212
  
$
-
  
$
1,165,212
  
Accrued expenses
    
212,364
    
-
    
212,364
  
Accounts payable and accrued expense - Showtime
    
1,830,195
    
-
    
1,830,195
  
Future payments due for acquired companies
    
1,500,000
    
-
    
1,500,000
  
Other accrued liabilities from predecessor company
    
346,572
    
-
    
346,572
  
Other current liabilities
    
151,226
    
-
    
151,226
  
West Coast settlement
    
150,000
    
-
    
150,000
  
Total current liabilities
    
5,355,569
    
-
    
5,355,569
  
Deferred rent and lease incentive
    
140,598
    
-
    
140,598
  
Total liabilities
    
5,496,167
    
-
    
5,496,167
  
Commitments and contingencies
                    
SHAREHOLDERS’ EQUITY
                    
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, 0 shares issued
    
-
    
-
    
-
  
Common stock, $0.0001 par value, 250,000,000 shares authorized, 46,421,491 shares issued and outstanding at September 30, 2007
    
4,642
    
-
    
4,642
  
Common stock to be issued
    
4,749,997
    
-
    
4,749,997
  
Additional paid-in-capital
    
43,727,095
    
-
    
43,727,095
  
Accumulated deficit
    
(23,349,638
)
  
-
    
(23,349,638
)
Total shareholders’ equity
    
25,132,096
    
-
    
25,132,096
  
Total liabilities and shareholders’ equity
  
$
30,628,263
  
$
-
  
$
30,628,263
  
                     
 
2

PRO ELITE, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations

Nine months ended September 30, 2007
                           
   
Historical ProElite, Inc.
  
King of the Cage, Inc.
  
Mixed Martial Arts Promotions Ltd. and Mixed Martial Arts Productions Ltd.
  
Entlian Co.
  
Pro Forma
Adjustments
  
Pro Forma Statement of Operations
  
                               
Revenue
  
$
3,101,807
  
$
1,660,811
  
$
1,030,889
  
$
-
  
$
(338,113
)
  
(A)
 
$
5,455,394
  
Revenue - Showtime
    
240,133
    
-
    
-
    
-
    
-
          
240,133
  
 
                                            
Total revenue
    
3,341,940
    
1,660,811
    
1,030,889
    
-
    
(338,113
)
        
5,695,527
  
 
                                            
Cost of revenue
    
6,761,560
    
908,362
    
2,380,034
    
-
    
(624,679
)
  
(A)
 
  
9,425,277
  
Cost of revenue - Showtime
    
2,594,705
    
-
    
-
    
-
    
-
          
2,594,705
  
 
                                            
Total cost of revenue
    
9,356,265
    
908,362
    
2,380,034
    
-
    
(624,679
)
        
12,019,982
  
 
                                            
Gross profit (loss)
    
(6,014,325
)
  
752,449
    
(1,349,145
)
  
-
    
286,566
          
(6,324,455
)
 
                                            
Operating expenses
                                            
Marketing
    
246,049
    
-
    
-
    
-
    
-
          
246,049
  
Website operations
    
2,351,429
    
-
    
-
    
-
    
-
          
2,351,429
  
                              (121,591
)
  
(A)
      
General and administrative expenses
    
10,834,775
    
405,962
    
449,140
    
-
    
177,777
    
(B)
 
  
11,746,063
  
Loss from investment in Entlian Co.
    
44,951
    
-
    
-
    
380,570
    
(44,951
)
  
(A)
 
  
380,570
  
 
                                            
Total operating expenses
    
13,477,204
    
405,962
    
449,140
    
380,570
    
11,235
          
14,724,111
  
 
                                            
Operating income (loss)
    
(19,491,529
)
  
346,487
    
(1,798,285
)
  
(380,570
)
  
275,331
          
(21,048,566
)
 
                                            
Other income (expense)
                                            
Interest income (expense), net
    
391,746
    
(2,476
)
  
622
    
-
    
(10
)
  
(A)
 
  
389,882
  
Other income (expense), net
    
-
    
4,606
    
-
    
-
                
4,606
  
                                             
Total other income (expense)
    
391,746
    
2,130
    
622
    
-
    
(10
)
        
394,488
  
                                             
Income (loss) before income taxes
    
(19,099,783
)
  
348,617
    
(1,797,663
)
  
(380,570
)
  
275,321
          
(20,654,078
)
                                             
Income taxes
    
-
    
(2,850
)
  
-
    
-
    
-
          
(2,850
)
                                             
Net income (loss)
  
$
(19,099,783
)
$
345,767
  
$
(1,797,663
)
$
(380,570
)
$
275,321
        
$
(20,656,928
)
                                             
Net loss per share - basic and diluted
  
$
(0.44
)
                              
$
(0.47
)
                                             
Weighted average shares outstanding - basic and diluted
    
43,689,176
                     
95,185
          
43,784,361
  
                                             
 
3


Year ended December 31, 2006 or the period from August 10, 2006 (inception) to December 31, 2006.
                           
   
Historical ProElite, Inc. from August 10, 2006 (inception) to December 31, 2006
  
King of the Cage, Inc.
  
Mixed Martial Arts Promotions Ltd. and Mixed Martial Arts Productions Ltd.
  
Entlian Co.
  
Pro Forma
 Adjustments
  
Pro Forma Statement of Operations
  
                               
Revenue
  
$
-
  
$
1,470,756
  
$
1,820,382
  
$
-
  
$
-
        
$
3,291,138
  
 
                                            
Cost of revenue
    
-
    
713,068
    
2,594,129
    
-
    
-
          
3,307,197
  
 
                                            
Gross profit (loss)
    
-
    
757,688
    
(773,747
)
  
-
    
-
          
(16,059
)
 
                                            
Operating expenses
                                            
Software development costs
    
143,445
    
-
    
-
    
-
    
-
          
143,445
  
General and administrative expenses
    
3,801,143
    
481,950
    
376,934
    
-
    
266,667
    
(C)
    
4,926,694
  
Loss from investment in Entlian Co.
    
-
    
-
    
-
    
421,960
                
421,960
  
 
                                            
Total operating expenses
    
3,944,588
    
481,950
    
376,934
    
421,960
    
266,667
          
5,492,099
  
 
                                            
Operating income (loss)
    
(3,944,588
)
  
275,738
    
(1,150,681
)
   (421,960
)
  
(266,667
)
        
(5,508,158
)
 
                                            
Other income (expense)
                                            
Interest income (expense), net
    
(305,267
)
  
(7,016
)
  
507
    
-
    
-
          
(311,776
)
Other income (expense), net
    
-
    
-
    
947,350
    
-
    
(947,350
)
  
(D)
    
-
  
                                             
Total other income (expense)
    
(305,267
)
  
(7,016
)
  
947,857
    
-
    
(947,350
)
        
(311,776
)
                                             
Income (loss) before income taxes
    
(4,249,855
)
  
268,722
    
(202,824
)
  
(421,960
)
  
(1,214,017
)
        
(5,819,934
)
                                             
Income taxes
    
-
    
(3,737
)
  
-
    
-
    
-
          
(3,737
)
                                             
Net income (loss)
  
$
(4,249,855
)
$
264,985
  
$
(202,824
)
$
(421,960
)
$
(1,214,017
)
      
$
(5,823,671
)
                                             
Net loss per share - basic and diluted
  
$
$(0.13
)
                              
$
(0.18
)
                                             
Weighted average shares outstanding - basic and diluted
    
32,812,499
                     
100,000
          
32,912,499
  
 
4

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Pro Forma Adjustments

The unaudited pro forma condensed consolidated financial statements have been adjusted for items related to the acquisitions of King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., Mixed Martial Arts Productions Ltd. and investment in Entlian Co. as set forth below:

Statement of Operations for the Nine Months Ended September 30, 2007

(A) Eliminate operations of acquired entities. The amounts below were included in both the historical consolidated results of ProElite, Inc. for the month of September 2007 and the individual operations of the acquired companies.

   
KOTC
  
Cage Rage
  
Entlian Co.
  
Total
  
Revenue
  
$
(96,854
)
$
(241,259
)
$
-
  
$
(338,113
)
Cost of revenue
  
$
(99,143
)
$
(525,536
)
$
-
  
$
(624,679
)
General and administrative expense
  
$
(66,141
)
$
(55,450
)
$
-
  
$
(121,591
)
Loss from investment in Entlian Co.
  
$
-
  
$
-
  
$
(44,951
)
$
(44,951
)
Interest income
  
$
-
  
$
(10
)
$
-
  
$
(10
)
                           

(B) Activity recorded in general and administrative expense

Record amortization of intangible
assets acquired in KOTC acquisition
  
$
143,333
  
Record amortization of intangible
assets acquired in Cage Rage acquisition
    
34,444
  
         
   
$
177,777
  
 
Statement of Operations for the Year Ended December 31, 2006

The pro forma condensed consolidated statement of operations for the year ended December 31, 2006 includes ProElite, Inc.’s historical operations from August 10, 2006 (inception).

(C) Activity recorded in general and administrative expense

       
Record amortization of intangible
assets acquired in KOTC acquisition
  
$
215,000
  
Record amortization of intangible
assets acquired in Cage Rage acquisition
    
51,667
  
         
   
$
266,667
  

(D) Eliminate one-time gain on sale of assets by Cage Rage $947,350

5

Note 2 Purchase Price Allocations are Estimates

The purchase price allocations for the acquisitions of King of the Cage, Inc. and two related entities: Mixed Martial Arts Promotions Limited and Mixed Martial Arts Productions Limited (collectively “Cage Rage”) are preliminary and subject to revision as more detailed analyses are completed and additional information on the fair value of the acquired assets and liabilities becomes available. Any change in the fair value of the net assets of the acquired companies will change the amount of the purchase price allocable to goodwill and/or other tangible and intangible assets.

The allocations above were based on the discounted expected cash flow or replacement cost, whichever is more readily evident, of assets and the carrying value of liabilities. The Company intends to engage a valuation specialist to ascertain the value of the assets acquired in accordance with the applicable provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations.”

Additionally, the maintenance of goodwill on the Company’s balance sheet requires management to achieve improvements in and expansion of the acquired entities’ operations. Should operations not improve to desired levels, the Company may be required to record a charge to operations for impairment of goodwill.
 
6