ProElite Purchased for $2 million

Stratus Media Group, Inc. has announced that it has reached an agreement to acquire a 95% stake in ProElite, Inc. for $2 million.

Stratus Media Group, Inc. (OTCBB: SMDI ), a live entertainment company, announced today that it has entered into an agreement to acquire a 95% interest in ProElite, Inc. (PK: PELE), a sports, entertainment and media company that has produced arena-based mixed martial arts (MMA) events.

 
Prior to the sale of significant revenue-generating assets, ProElite recorded $13.5 million in MMA event and television revenues during the 18 months ended June 2008. ProElite has engaged in an extensive restructuring that included the sales of these revenue-generating assets for cash and a share of future revenues, significant expense reductions, the elimination of $12 million of direct and contingent liabilities and the shedding of unprofitable subsidiaries.

 

“ProElite, a globally recognized brand, is a great addition to our portfolio of companies and live entertainment events and provides an experienced management team with demonstrated success in operating MMA events and generating broadcast revenues,” stated Paul Feller, President of Stratus. “By combining ProElite with sufficient capital and Stratus’ strengths in event production and sponsorship sales, we intend to re-establish ProElite as a leading international MMA company.”

 

Stratus will purchase Series A Preferred Stock of ProElite, convertible into 95% of the outstanding Common Stock of ProElite, for $2,000,000. The acquisition will be closed when certain conditions have been met, which the company expects will occur within the upcoming weeks. Upon closing, all of the current directors of ProElite will resign and the board of directors of ProElite will consist of Paul Feller and Glenn Golenberg, both current members of Stratus’ board of directors, and a third director to be announced. Paul Feller, Stratus’ Chief Executive Officer, will become ProElite’s Chief Executive Officer. Certain present and former key ProElite executives will continue employment with ProElite or will enter into employment agreements with Stratus.

Payout Perspective:

The purchase is a little surprising, because there’s not much left to ProElite other than some brand recognition in the name and certain elements of the former management team.

The acquisition certainly begs a number of questions:

• Without the revenue-generating assets that essentially made ProElite/EliteXC, is the company really worth paying $2 million dollars for?

• One could quite fairly question whether ProElite’s experienced management team is really the right group to lead an MMA company to profitability.

• Lastly, what does Stratus know about MMA, and how can they make a difference to ProElite? Stratus has yet to turn a profit since they recommenced operations in 2006 off of a 5-year hiatus (the company only made $40k in revenue last year). Not surprisingly, they’ve also got substantially negative cashflows from operations – nearly $500,000 in the first six months of 2009. They’re a company planning to host a series of vintage car shows in the future; that’s hardly the same expertise needed to target, attract, and cater to the MMA demographic.