**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**




(Mark
      One)




x
            
            **Annual
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934**




**For
      the year ended December 31, 2007**




o
            
            **Transition
                report under Section 13 or 15(d) of the Exchange
                Act**




**For
      the transition period from** **** **To** **** ****




**Commission
      file number 000-31573**




**ProElite,
      Inc.**


(Exact
      Name of Small Business Issuer as Specified in its Charter)




New
                Jersey
            
            22-3161866(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            
            (I.R.S.
                Employer
              Identification
                No.)




12121
      Wilshire Blvd., Suite 1001


Los
      Angeles, CA 90025


(Address
      of Principal Executive Offices)


(310)
      526-8700


(Issuer’s
      Telephone Number, Including Area Code)




(Former
      Name, Former Address and Former Fiscal Year,


if
      Changed Since Last Report)




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act o





Check
      whether the issuer: (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past
      90 days.  Yes x No o




Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).


Yes o No x




As
      of the
      close of trading on March 31, 2008 there were 51,938,057 shares of Common Stock
      outstanding, 10,814,008 shares of which were held by non-affiliates. The
      aggregate market value of common shares held by non-affiliates, based on the
      average closing bid and asked prices on March 28, 2008, was approximately $81.1
      million.





State
      issuer’s revenue for its most recent fiscal year: $5,291,570





Transitional
      Small Business Disclosure Format (check one): Yes o No x







**ProElite,
      Inc.**


**INDEX**




**Page**
              **No.****PART
                I**Item 1
            
            Description
                of Business
            
            2Item 2
            
            Description
                of Property
            
            21Item 3
            
            Legal
                Proceedings
            
            21Item 4
            
            Submission
                of Matters to a Vote of Security Holders
            
            22**PART
                II**Item 5
            
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            
            23Item 6
            
            Management
                Discussion and Analysis
            
            24Item 7
            
            Financial
                Statements
            
            31Item 8
            
            Changes
                In And Disagreements With Accountants On Accounting And Financial
                Disclosure
            
            31Item 8A
            
            Controls
                and Procedures
            
            31Item 8B
            
            Other
                Information
            
            33**PART
                III**Item 9
            
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance,
                Compliance with Section 16(A) Of The Exchange Act
            
            34Item 10
            
            Executive
                Compensation
            
            36Item 11
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            38Item 12
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            41Item 13
            
            Exhibits
            
            42Item 14
            
            Principal
                Accountant Fees and Services
            
            42





302
                Certification of Chief Executive Officer302
                Certification of Chief Financial Officer906
                Certification of Chief Executive Officer906
                Certification of Chief Financial
                Officer







**PART
      I.**




***Forward
      Looking and Cautionary Statements***





*This
      Form 10-KSB contains certain forward-looking statements. For example, statements
      regarding our financial position, business strategy and other plans and
      objectives for future operations, and assumptions and predictions about future
      product demand, supply, manufacturing, costs, marketing and pricing factors
      are
      all forward-looking statements. These statements are generally accompanied
      by
      words such as “intend,” “anticipate,” “believe,” “estimate,” “potential(ly),”
“continue,” “forecast,” “predict,” “plan,” “may,” “will,” “could,” “would,”
“should,” “expect” or the negative of such terms or other comparable
      terminology. We believe that the assumptions and expectations reflected in
      such
      forward-looking statements are reasonable, based on information available to
      us
      on the date hereof, but we cannot assure you that these assumptions and
      expectations will prove to have been correct or that we will take any action
      that we may presently be planning. However, these forward-looking statements
      are
      inherently subject to known and unknown risks and uncertainties. Actual results
      or experience may differ materially from those expected or anticipated in the
      forward-looking statements. Factors that could cause or contribute to such
      differences include, but are not limited to, regulatory policies, competition
      from other similar businesses, and market and general policies, competition
      from
      other similar businesses, and market and general economic factors. This
      discussion should be read in conjunction with the consolidated financial
      statements and notes thereto included in this report.*




*If
      one or more of these or other risks or uncertainties materialize, or if our
      underlying assumptions prove to be incorrect, actual results may vary materially
      from what we project. Any forward-looking statement you read in this report
      reflects our current views with respect to future events and is subject to
      these
      and other risks, uncertainties and assumptions relating to our operations,
      results of operations, growth strategy, and liquidity. All subsequent
      forward-looking statements attributable to us or individuals acting on our
      behalf are expressly qualified in their entirety by this paragraph. You should
      specifically consider the factors identified in this report, which would cause
      actual results to differ before making an investment decision. We are under
      no
      duty to update any of these forward-looking statements after the date of this
      report or to conform these statements to actual results.*





*Overview*





*You
      should read the information in this Item 1 together with our financial
      statements and notes thereto that appear elsewhere in this report.*





**Item
      1. Description of Business**





Mixed
      Martial Arts, commonly referred to as MMA, is a sport growing in popularity
      around the world. In MMA matches, athletes use a combination of a variety of
      fighting styles, including boxing, judo, jiu jitsu, karate, kickboxing, muy
      thai, tae kwon do, and wrestling. Typically, MMA sporting events are promoted
      either as championship matches or as vehicles for well-known individual
      athletes. Professional MMA competition conduct is regulated primarily by rules
      implemented by state athletic commissions and is currently permitted in over
      thirty states. Athletes win individual matches by knockout, technical knockout
      (referee or doctor stoppage), submission, or judges’ decision.





ProElite,
      Inc., a New Jersey corporation (the “Company”) is a holding company for entities
      that (a) organize and promote mixed martial arts matches, and (b) create an
      internet community for martial arts enthusiasts and practitioners. On October
      3,
      2006, pursuant to a Share Exchange Agreement dated concurrently between us
      and
      the shareholders of Real Sport, Inc., a California corporation, we issued
      25,000,000 shares of our common stock in exchange for all of the issued and
      outstanding shares of Real Sport. 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. Real Sport is the holding company of ProElite.com
      (formerly EliteXC.com and I-Fight, Inc.) and EliteXC Live (formerly MMA Live,
      Inc. and Jungle Fight, Inc.), which were formed on August 10, 2006 and September
      13, 2006, respectively.




2





Our
      business plan is to capitalize on the popularity and growth of mixed martial
      arts in building an “elite” fight brand, EliteXC, while also taking advantage of
      the Internet to capture fans, fighters and organizations in combat sports with
      its ProElite.com social networking web site. We plan on reaching MMA fans and
      participants through normal marketing channels (print, television, radio) and
      harnessing the efficient networking available over the Internet. We are in
      the
      process of acquiring multiple on- and off-line brands to increase our
      entertainment properties, content libraries and tool set offerings for fighters,
      fans and organizations in and around MMA. EliteXC, our fight brand, produces
      and
      promotes live events featuring the top fighters in MMA while ProElite.com has
      created an MMA grassroots online social network. We cross-promote our Internet
      and live properties so that each can strengthen the other.





Our
      business model includes partnering with (and creating) distribution channels
      for
      the video content created by our live events and on-line products. The
      distribution channels include CBS, Showtime, CBS Sportsline, other major portals
      as well as additional television network and cable channels. Each live event
      may
      generate up to fifty hours of MMA video footage, and we have finalized licensing
      deals for the right to thousands of hours of MMA and other combat footage.
      This
      footage can be edited into videos or other formats that can be sold or used
      to
      market our fighters and future events.


Since
        the
        Company’s formation in August 2006, we have established ourselves as a leading,
        global promoter of live MMA events and provider of a social-networking website
        focused exclusively on MMA. We have agreements to distribute content by
        television and DVD throughout the world. To date, we have focused our efforts
        primarily on events in the United States and United Kingdom and on our website.
 
 In
        2007,
        we accomplished several strategic objectives. We acquired or invested in
        well-regarded MMA live event brands throughout the world, and launched our
        social-networking MMA community website, www.proelite.com, for
        use.




Through
      December 31, 2007, the Company and its subsidiaries have promoted 18 events,
      including two events featured on pay-per-view. EliteXC and our affiliates
      currently plan to run significantly more events during 2008.





ProElite.com
      has grown to over 90,000 registered members since its launch on February 1,
      2007. ProElite.com now attracts over 200,000 unique visitors per month who
      generate more than 1,000,000 page views. ProElite.com has streamed 14 events
      online of the Company’s live events as well as other fight brands including
      EliteXC, Cage Rage (London), ICON Sports (Hawaii), No Limits Gym (California),
      Fury Fighting Championship (Brazil), Ring of Fire (Philippines) and Abu Dhabi
      (worlds’ most prestigious grappling tournament). Online
      revenue lines began in 2007 include advertising and sponsorships, gym/school
      pay
      for placement in the ProElite.com gym directory, e-commerce from the
      ProElite.com store, pay-per-view and video on demand. ProElite.com also generates revenue by repurposing its existing technology
      for
      third party companies who want to create social networking environments around
      their properties.




We
        have
        incurred losses and negative cash flows from operations since inception and
        have
        limited cash. As a result, our auditors have expressed substantial doubt
        about
        our ability to continue as a going concern. Although we have generated revenue,
        we are still operating at a net loss. We cannot assure you that we will be
        able
        to obtain sufficient funds from our operating or financing activities to
        support
        our continued operations. If we cannot continue as a going concern, we may
        need
        to substantially revise our business plan or cease operations, which may
        reduce
        or negate the value of your investment.




Reverse
      Split




The
      Company effected a 1 for 500 reverse split on October 27, 2006. Unless otherwise
      indicated, information with respect to the issued and outstanding shares of
      the
      Company’s common stock and shares issuable upon the exercise of any warrants is
      based on the reverse split.





Bridge
      Loans in October 2006





In
      August
      2006, the Company entered into a bridge loan transaction with an affiliate
      of
      the placement agent for $350,000 and shareholders for $250,000. As payment
      for
      interest, the loan holders received $75,000, which was paid from the proceeds
      of
      the October 2006 private placement. The loan principal was also repaid in
      October 2006 from the proceeds of the private placement. The Company also issued
      to the lenders warrants with a three-year term to purchase an aggregate of
      600,000 common shares at $0.60 per share. The value of these warrants of $0.53
      per warrant, or $318,000, was charged to interest expense during the period
      ended December 31, 2006.





Private
      Placement of Securities in October 2006





On
      October 3, 2006, we sold an aggregate of 3,333,333 units, each unit consisting
      of three shares of common stock and a three-year warrant to purchase one share
      of common stock at a per share exercise price of $2.00, to accredited investors
      at a per unit price of $3.00, resulting in aggregate gross proceeds of
      approximately $10,000,000. We paid to Hunter World Markets, Inc. as placement
      agent, a commission of 10% on the gross proceeds of the private placement and
      issued five year warrants to purchase common stock equal to 30% of the number
      of
      shares included in the units sold in the private placement offering, exercisable
      at $2.00 per share. The Company agreed to appoint a designee of Hunter World
      to its board of directors for a two-year period ending October 3,
      2008. This period was subsequently extended to September 5, 2009 in
      connection with the company's private placement of securities in
      2007.  On January 12, 2007, we filed a registration statement to
      register 13,273,999 of these shares. This registration statement was declared
      effective on May 14, 2007.




3





Showtime





On
      November 8, 2006, the Company entered into a television distribution agreement
      with Showtime Networks to televise the Company’s live events. The agreement
      provides that the Company will provide a minimum number of events for the years
      2007 through 2009. There was no license fee payable by Showtime on account
      of
      Showtime events in 2007 and the Company bore all costs and expenses for the
      events. License fees in 2008 and 2009 will be split between the Company and
      Showtime. For each event featured on pay-per-view, the Company will receive
      the
      proceeds received by Showtime, less the distribution fee and advances made
      by
      Showtime on the Company’s behalf for marketing, public relations and television
      production. Any revenues derived from the sale of the Company’s merchandise by
      Showtime, or through Showtime Networks’ website or telecasts will be split 70%
      to the Company and 30% to Showtime. In connection with this agreement, the
      Company issued a warrant to purchase 2.5 million shares of common stock at
      a per
      share exercise price of $2.00. These warrants were valued at $606,579, were
      recorded in prepaid distribution costs, and are being amortized into operations
      over a three-year period commencing November 2006.





On
      January 5, 2007, pursuant to a Securities Purchase Agreement the Company entered
      into with Showtime, the Company issued an aggregate of 1,666,667 units for
      $5
      million in cash, each unit consisting of 3 shares of common stock and a
      three-year warrant to purchase 1 share of common stock at a per share exercise
      price of $2.00 to Showtime, at a per unit price of $3.00. These warrants have
      been valued at $345,000 and were recorded in additional paid-in capital.
      Additionally, the Company issued a seven-year warrant to purchase 2.5 million
      shares of common stock to Showtime at a per share exercise price of $2.00,
      in
      consideration of the funding and the exclusive distribution agreement provided
      to the Company. These warrants have been valued at $608,000 and will be
      amortized into operations over a three-year period commencing January 5, 2007.
      The Showtime warrants were exercisable as of the date of grant, January 5,
      2007.




Pursuant
      to the investor rights agreement entered into with Showtime, the Company granted
      Showtime the right to appoint one member to the Board of Directors, and Santa
      Monica Capital Partners II, LLC, the Company’s largest shareholder, has agreed
      to vote all shares it owns or over which it has voting control in whatever
      manner necessary to ensure that the Showtime designee will be elected to the
      Board of Directors at each annual or special meeting of shareholders at which
      an
      election of directors is held or pursuant to any written consent of the
      shareholders.





Private
      Placement of Securities in July 2007





Effective
      July 12, 2007, the Company entered into a Securities Purchase Agreement
      (“SPA”), dated June 29, 2007, with four institutional investors,
      whereby the Company issued and sold in a private placement 3,214,285 units
      for an aggregate purchase price of approximately $22,500,000. Each unit
      consisted of one share of the Company’s common stock and one-half of a five-year
      warrant to purchase one share of the Company’s common stock for $7.00 per share.
      An additional 357,143 units were also purchased by the investors under the
      SPA,
      consisting of 357,143 shares sold by certain shareholders of the Company and
      warrants to purchase an additional 178,571 shares of common stock to be issued
      by the Company. The Company’s agreement to issue the additional warrants was in
      consideration of the selling shareholders’ entering into a lock-up agreement,
      which terms are described below. The selling shareholders included directors,
      executive officers, shareholders holding at least 5% of the outstanding shares
      of common stock of the Company, and their affiliates. The Company also entered
      into a Registration Rights Agreement with the investors.




*Securities
      Purchase Agreement*




The
      Securities Purchase Agreement contains a number of covenants by the Company
      that
      are outlined below in this paragraph. The Company will not file any registration
      statements on Form S-8, or other registration statements covering securities
      issued or that may be issued to its employees, directors, consultants or others
      for services, for a two-year period following July 31, 2007, subject to certain
      exceptions. The Company also provided the investors with anti-dilution coverage
      for a period ending on the second anniversary of the effective date of the
      Registration Statement, which was declared effective on September 5, 2007.
      Subject to certain exclusions, the anti-dilution coverage provides for the
      issuance of additional shares of common stock and adjustments to the exercise
      price of the warrants issued to the investors of the July 2007 private placement
      if the Company issues additional securities, including convertible securities,
      options or other rights to acquire securities, that exceed an aggregate of
      200,000 shares of common stock at a price or exercise price per share of common
      stock less than $7.00 (subject to a floor of $2.00 per share and adjustment
      for
      splits, recapitalizations, reorganizations).




4





*Investor
      Warrants*




The
      warrants issued to the investors in the private placement are exercisable at
      any
      time and expire June 29, 2012. The exercise price of these investor warrants
      is
      $7.00 per share, subject to adjustments for stock splits, combinations, stock
      dividends or distributions, reclassification, conversion, capital
      reorganization, merger or consolidation. The investor warrants contain a
      provision providing for full anti-dilution coverage on the same terms as
      provided in the Securities Purchase Agreement for a period ending on September
      5, 2009. A holder may also exercise its warrants at any time by means of a
      cashless exercise in which the holder shall be entitled to receive shares of
      common stock for the number of shares underlying the warrants equal to the
      appreciation in the warrants above the exercise price at the time of the
      exercise. The amount of the appreciation will be determined against a referenced
      per share price that in no event may exceed $15. The warrants do not confer
      upon
      holders any voting or other rights as stockholders of the
      Company.





*Registration
      Rights Agreement*




Pursuant
      to the Registration Rights Agreement, the Company filed a Registration Statement
      with the Securities and Exchange Commission. The Registration Statement, which
      was declared effective on September 5, 2007, covered the resale of: (i) all
      of
      the securities underlying the units sold in or in connection with the July
      2007
      private placement, and (ii) any securities not already registered that were
      issued in connection with the Company’s private placement on October 3, 2006.
      The Company may also be required, under certain circumstances, to pay the
      investors and Hunter World Markets, Inc., the placement agent in the private
      placement offering, specified liquidated damages if it is unable to maintain
      the
      effectiveness of the Registration Statement.




*Placement
      Agent Agreement*




Pursuant
      to a placement agent agreement dated June 25, 2007, Hunter World Markets, Inc.,
      an NASD member firm, acted as the exclusive placement agent in the private
      placement on July 12, 2007, and received: (i) a fee of $2,500,000 (ii) warrants
      to purchase 3,571,428 shares of common stock, which expires on July 31, 2012,
      and (iii) subject to certain terms and conditions, the right to prominent
      signage at three of the Company’s scheduled events per year for a two year
      period commencing August 1, 2007, subject to certain exceptions. The placement
      agent warrants have the same exercise price, cashless exercise feature and
      full
      anti-dilution coverage as the warrants issued to investors. The placement agent
      warrants do not confer upon its holder or holders any voting or other rights
      as
      stockholder of the Company. The Company conferred upon Hunter the right to
      nominate up to two members of the Company’s Board of Directors, including
      Hunter’s existing designee, and for a period ending on September 5, 2009, the
      right of first refusal for any equity, convertible debt or debt financing
      entered into by the Company, other than certain financings with strategic
      investors.  The Company has undertaken to indemnify Hunter for certain
      claims and liabilities that may arise in connection with the offer and sale
      of
      the units. The Company has also agreed to pay for one or more tombstone ads
      not
      to exceed $50,000 and to reimburse Hunter for fees of its counsel subject to
      a
      minimum of $25,000. The Company has further covenanted with Hunter to use best
      efforts as soon as practicable following July 31, 2007, subject to certain
      exceptions to apply for listing of the Company’s shares for trading on, and
      diligently attempt to be listed on, the Nasdaq Stock Market or the American
      Stock Exchange.





*Lock-Up
      Agreements*





As
      a
      condition to closing under the placement agent agreement, the Company’s
      officers, directors and principal shareholders, including without limitation,
      Santa Monica Capital Partners II, LLC and its principals, Showtime Networks,
      Inc., Lifelogger, LLC, and other persons who may be identified by Hunter,
      entered into agreements whereby each agreed not to sell any shares owned
      directly or indirectly by any of them for a period of 18 months ending on March
      5, 2009.




5





Waiver
      of Liquidation Fees and Amendment to the Registration Rights Agreement from
      the
      October 2006 private placement offering





Pursuant
      to a Waiver and Amendment to Registration Rights Agreement, dated as of
      June 27, 2007, Hunter World Markets and the subscribers to the Company’s private
      placement offering on October 3, 2006 waived the liquidated damage payments
      owed
      by the Company, in accordance with the Registration Rights Agreement, dated
      October 3, 2006, and the Company agreed to file a registration statement
      covering the resale of the remaining shares of its common stock underlying
      the
      warrants previously issued to Hunter and the subscribers in connection with
      its
      private placement in October 2006, which was declared effective on
      September 5, 2007.





Mark
      Burnett and JMBP, Inc.




The
      Company entered into an agreement with Mark Burnett and JMBP, Inc., a California
      corporation wholly-owned by Mark Burnett, in connection with a television series
      involving MMA for the initial exhibition during prime time on one of the
      specified networks or cable broadcasters. JMBP (or a separate production
      services entity owned or controlled by JMBP) will render production services
      in
      connection with the series and will be solely responsible for and have final
      approval regarding all production matters, including budget, schedule and
      production location. It is anticipated that, as a condition to involvement
      in
      the series, each of the series contestants will sign a separate agreement with
      us or one of our affiliates for services rendered outside of the series. JMBP
      will own all rights to the series. The Company and JMBP will jointly exploit
      the
      Internet rights in connection with the series on ProElite.com and other websites
      controlled by the ProElite.com website. The Company is entitled to a certain
      share of JMBP’s proceeds from the series. Subject to specified exceptions, JMBP
      and Mark Burnett have agreed to exclusivity with respect to mixed martial arts
      programming. The term of the agreement extends until the earlier of the end
      of
      the term of the license agreement with the broadcast of the series or the
      failure of JMBP to enter into such a license agreement by June 15,
      2008.




In
      connection with the agreement, we issued to Burnett warrants to purchase up
      to
      17,000,000 shares of the Company's common stock. The warrants are divided into
      nine tranches with varying vesting dates. The warrants have an exercise price
      of
      $3.00 per share (subject to adjustment) as set forth in the warrant. The
      expiration date for a particular tranche of warrants is the latest to occur
      of
      (i) June 15, 2013; (ii) the date which is one year after the vesting date of
      any
      such tranche, and (iii) one year after the expiration of the term of the license
      agreement entered into with a broadcaster. The Company, Burnett and Santa Monica
      Capital Partners II, LLC, one of the Company's shareholders, entered into an
      Investor Rights Agreement providing certain registration rights with respect
      to
      the shares underlying the warrants, co-sale rights with Santa Monica Capital
      Partners II, LLC, restrictions on resale and board observation rights. The
      Subscription Agreement and warrant was amended on July 16, 2007 to, among other
      things, provide that 1,000,000 of the shares of common stock of the Company
      included in the warrant will not be subject to forfeiture under any
      circumstances, irrespective of whether or not a license agreement with a
      broadcaster is entered into.





The
      Company subsequently entered into an Amendment to Warrant and Related
      Agreements, dated June 28, 2007, with JMBP, Inc. and Mark Burnett, pursuant
      to
      which:





(i)
            The
                agreement between the parties related to a reality TV show and the
                warrant
                issued pursuant to such agreement, both dated June 15, 2007, now
                provides
                that 1,000,000 shares of Common Stock included in the warrant will
                not be
                subject to forfeiture under any circumstances (irrespective of whether
                or
                not a license agreement with a broadcaster is entered
                into);




(ii)
            Mr.
                Burnett will not sell any shares of Common Stock or shares of Common
                Stock
                underlying the warrants for a period of 18 months from the effective
                date
                of the Registration Statement, under the Investor Rights Agreement,
                dated
                June 15, 2007; and




6




(iii)
            The
                provision regarding the termination of the Investor Rights Agreement
                if a
                license agreement with a broadcaster is not entered into within one
                year
                after the effective date of the Investor Rights Agreement was
                removed.




Entlian
      Corporation





The
      Company entered into an investment agreement with Entlian Corporation, a Korean
      corporation, and CJ Media Inc., a Korean corporation, pursuant to which the
      Company purchased a 32% interest in Entlian on September 18, 2007 (assuming
      the
      mandatory conversion of certain debt owed by Entlian to CJ Media into shares
      of
      capital stock of Entlian), for an aggregate purchase price of US$1,000,000
      and
      100,000 restricted shares of the Company’s common stock. These shares are
      subject to a lock-up for a period ending 18 months after September 5, 2007.





King
      of the Cage





Pursuant
      to a purchase agreement dated September 11, 2007 among King of the Cage,
      Inc. (“KOTC”), Terry Trebilcock and Juliemae Trebilcock, the selling
      shareholders of KOTC, and the Company, on September 11, 2007 the Sellers sold
      to
      the Company all of the shares of capital of KOTC. The consideration for such
      shares is the payment to the shareholders of KOTC of $3,250,000 cash at closing;
      a minimum of 178,571 restricted shares of the Company’s common stock expected to
      be delivered in April 2008 to the KOTC shareholders and/or their designees;
      and
      $500,000 in cash to be paid sixty days from closing subject to any offset for
      any indemnity claims by the Company. Additionally, the Company has agreed to
      make contingent payments over a five-year period of up to an additional
      $5,000,000 (payable in part in cash and in part in shares of the Company’s
      common stock, as provided in the purchase agreement) in accordance with a
      schedule based on the number of events produced under the supervision of Terry
      Trebilcock under the KOTC name and earnings before interest, taxes, depreciation
      and amortization for KOTC’s operations during such period. As security for these
      contingent payments, the Company agreed to grant to the shareholders of KOTC
      a
      first priority security interest in the KOTC shares. The Company also agreed
      to
      enter into a five-year employment agreement with Trebilcock pursuant to which
      Mr. Trebilcock will serve as President of KOTC and supervise the production
      of live mixed martial events under the KOTC brand and such other duties as
      may
      be assigned to him by the Company. In addition to a salary of $150,000,
      Trebilcock is to receive a share of KOTC’s EBITDA over specified
      levels.





CageRage





Pursuant
      to a purchase agreement dated September 12, 2007 among Belgravia
      Entertainment International Limited, John Faraday and the Company, on September
      12, 2007 Belgravia sold to the Company all of the share capital of Mixed Martial
      Arts Promotions Limited, an English company, and the Mixed Martial Arts
      Productions Limited, an English company (together referred to as “CageRage”).
      The consideration for the shares of capital stock of the two companies is the
      payment to Belgravia of $1,219,000, the issuance of 500,000 restricted shares
      of
      the Company’s common stock and the payment of an additional $1,000,000 within
      three business days of the first anniversary of the closing of the transactions,
      as contemplated in the purchase agreement (subject to any offset for breach
      of
      warranty). Additionally, the Company repaid at closing (a) a loan by
      Integrated Technologies and Systems Limited in the amount of $2,600,000 and
      (b) a loan by Andrew Gear of $181,000, each made to Mixed Martial Arts
      Promotions Limited.





Future
      Fight Productions





Pursuant
      to an Asset Purchase Agreement consummated on December 7, 2007, among Future
      Fight Productions, Inc. (“FFP”), the shareholders of FFP, and the Company, FFP
      agreed to sell to the Company all of the assets of FFP relating to the mixed
      martial arts business. The consideration for these assets was $350,000 cash
      at
      the closing; and 200,000 restricted shares of the Company’s common stock.
      100,000 shares of the Company’s common stock were delivered on the closing,
      and the remaining 100,000 of such shares are to be delivered in equal
      installments on each of the first three anniversaries of the closing. A portion
      of the Company’s common stock is subject to forfeiture in the event of the
      occurrence of certain events. Additionally, the Company will pay an additional
      $100,000 in cash if FFP’s EBITDA for a certain 12 month period
      exceeds a given threshold. The purchase agreement also contemplates a five-year
      Consultation Agreement between the Company and FFP, including the payment to
      FFP
      of a portion of FFP’s EBITDA.




7





CBS
      Distribution Agreement, Warrant Issuance and Showtime Warrant
      Exercise





The
      Company and CBS Entertainment (“CBS”) entered into an agreement dated as of
      February 22, 2008 (the “Broadcast Agreement”) pursuant to which CBS has the
      right to place an order for four two-hour mixed martial arts fight programs
      (the
“Events”) for live broadcast during a period of one year. CBS was also granted
      four subsequent, consecutive annual options to order four additional two-hour
      Events and to order Events other than two-hours in length. In addition to the
      Events, CBS may order derivative type programs based on the Events. CBS will
      pay
      to the Company a per Event license fee. During the term, subject to limited
      exceptions, the Company’s ProElite and EliteXC brands will be exclusive to CBS
      in broadcast television and premium cable in the United States (excluding Puerto
      Rico) and Bermuda.





In
      connection with the Broadcast Agreement, the Company and Showtime Networks
      Inc.
      (SNI”), an affiliate of CBS, entered into a Subscription Agreement dated as of
      February 22, 2008 pursuant to which the Company agreed to issue two Warrants
      to
      SNI (the “New Warrants”) each for the purchase of 2,000,000 shares of the
      Company’s Common Stock at an exercise price of $2.00 per share. The first
      Warrant vests immediately and is for a term of five years from February 22,
      2008. The second Warrant vests in four equal tranches of 500,000 shares with
      each respective tranche to vest if an Event is broadcast pursuant to the
      Broadcast Agreement. The term of each tranche is five years from the date that
      such tranche vests. Pursuant to an Investor Rights Agreement between the Company
      and SNI dated as of February 22, 2008, the Company granted to SNI certain
      registration rights with respect to the shares issuable upon exercise of the
      New
      Warrants, and SNI agreed that such shares and the New Warrants are subject
      to
      certain transfers restrictions until March 5, 2009.





Pursuant
      to the Subscription Agreement, effective February 22, 2008, the Company issued
      the New Warrants to SNI. Additionally, SNI exercised part of the warrants
      previously issued to SNI in January 2007. The exercise was for an aggregate
      of
      2,000,000 shares of the Company’s Common Stock (the “Warrant Shares”) resulting
      in proceeds to the Company of $4,000,000. The issuance of the New Warrants
      and
      the Warrant Shares are exempt from the registration requirements of the
      Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. SNI has
      represented that it was acquiring the Warrants for investment purposes only.
      The
      Company will place appropriate restrictions on transfer of the securities
      issued, and the certificates evidencing the New Warrants and the Warrant Shares
      will bear a restricted legend.





Website
      Operations





We
      have
      established an online community of MMA fans, fighters and organizations on
      our
      ProElite.com website. Our website includes forums, chats, message boards,
      internal communications, the ability to post photos, videos and other content,
      e-commerce and transaction engines. Our websites also feature footage from
      our
      live events, webcast events, and post-fight interviews with MMA fighters. We
      cross-promoted both our ProElite.com and EliteXC.com websites at all of our
      events, and will continue to cross-promote the websites at our live events
      in
      order to drive increased viewership and activity in both media.




The
      ProElite.com website features events and is a social networking website for
      MMA
      fans and fighters. The EliteXC.com website publicizes only our events and
      promotes our fighters.




The
      Internet website ProElite.com is built upon the intellectual property and tools
      that were acquired as part of the asset purchase from Lifelogger LLC. Online
      revenue lines began in 2007 include advertising and sponsorships, gym/school
      pay
      for placement in the ProElite.com gym directory, e-commerce from the
      ProElite.com store, pay-per-view and video on demand. ProElite.com also
      generates revenue by repurposing its existing technology for third party
      companies who want to create social networking environments around their
      properties.




8


**RISK
        FACTORS**
  An
        investment in our securities involves a high degree of risk. You should
        carefully consider the risks described below before deciding to invest in
        or
        maintain your investment in our Company. The risks described below are not
        intended to be an all-inclusive list of all of the potential risks relating
        to
        an investment in our securities. If any of the following or other risks actually
        occur, our business, financial condition or operating results and the trading
        price or value of our securities could be materially adversely
        affected.
  Our
        actual results could differ materially from those anticipated in these
        forward-looking statements as a result of certain factors, including the
        risks
        faced by us described below and elsewhere in this report.
  **RISKS
        RELATED TO OUR BUSINESS**
  **We
        have a limited operating history, which makes it difficult to evaluate our
        business and our ability to achieve our business
        objectives.**
  We
        have a
        limited operating history in the mixed martial arts business. Since we have
        a
        short operating history, you will have little basis upon which to evaluate
        our
        ability to achieve our business objectives. Our revenues do not cover our
        cost
        of sales to date, and we cannot guarantee that we will produce revenues that
        will exceed our cost of sales or total operating expense. Our prospects must
        be
        considered in light of the risks, expenses and difficulties frequently
        encountered by companies entering a new and rapidly evolving
        business.
  **Our
        limited operating history makes forecasting our revenues and expenses difficult,
        and we may be unable to adjust our spending in a timely manner to compensate
        for
        unexpected revenue shortfalls.**
  As
        a
        result of our limited operating history, it is difficult to accurately forecast
        our future revenues. We have limited meaningful historical financial data
        upon
        which to base planned operating expenses. Current and future expense levels
        are
        based on our operating plans and estimates of future revenues. Revenues and
        operating results are difficult to forecast because they generally depend
        on our
        ability to promote events and the growth in popularity of our franchise.
        As a
        result, we may be unable to adjust our spending in a timely manner to compensate
        for any unexpected revenue shortfall, which would result in further substantial
        losses. We may also be unable to expand our operations in a timely manner
        to
        adequately meet demand to the extent it exceeds expectations.
  **We
        may be unable to compete successfully with our
        competitors.**
  We
        face
        competition from existing international organizations such as the Ultimate
        Fighting Championship and Pride Fighting. Both Ultimate Fighting Championship,
        or UFC, and Pride Fighting are owned by Zuffa, LLC, a widely known MMA promoter
        in the United States. UFC produces MMA events for cable television through
        its
        agreement with Spike TV and for pay-per-view audiences. Other U.S. based
        MMA
        competitors include Strikeforce and International Fight League. Most promoters
        operate on an event-by-event basis and rely on the presence of a few well-known
        athletes to promote their events. Pride Fighting is a Japan-based organization
        that draws significant live event and television audiences. Pride hosted
        its
        first event in Tokyo in 1997. Pride organized U.S.-based events in October
        2006
        and February 2007. Pride is only available via pay-per-view, and makes available
        its old library content on the FOX Sports channel. Pride draws upon a global
        talent pool for its events with many fighters coming from the United States,
        Brazil, Asia and Europe. In addition to these larger organizations that enjoy
        global followings, we will compete with local market based
        organizations.
  9
  For
        our
        live and television audiences, we face competition from other professional
        and
        college sports as well as from other forms of live, filmed and televised
        entertainment and other leisure activities. We compete with entertainment
        companies, professional and college sports leagues and other makers of branded
        apparel and merchandise for the sale of our branded merchandise, including
        hats,
        t-shirts, sweatshirts, fight apparel, gloves, jackets and other similar
        items.
  Many
        of
        our competitors have greater technical and financial resources than we do.
        Some
        of these competitors have also been in operation for a period of time and
        have
        accumulated an installed base of fans. If we are unable to distinguish our
        mixed
        martial arts events and products from competing events, or if competing products
        reach the market first, we may be unable to compete successfully with current
        or
        future competitors. This would cause our revenues to decline and affect our
        ability to achieve profitability.
  **We
        may be unable to compete with new competitors with greater resources that
        enter
        into the mixed martial arts industry.**
  As
        the
        mixed martial arts industry continues to grow and gain mainstream popularity,
        new competitors with superior resources will enter the MMA market. The Company
        may not have the resources necessary to compete with these new competitors,
        nor
        is there any guarantee that these new competitors will not prevent the Company
        from accomplishing its goals.
  **The
        Internet side of our business, ProElite.com, may have difficulty gathering
        market momentum.**
  A
        significant part of our business depends on our ability to attract a customer
        base to drive revenues on the Internet side, as described in Business, above.
        There is no guarantee that we will be able to create a compelling product
        that
        will attract a significant customer base. Accordingly, we have generated
        less
        revenue than our costs and we cannot predict this will change in the relevant
        future period.
  **The
        Internet side of our business could take significant capital and time to
        develop.**
  Developing
        the Internet side of our business will take significant capital outlays.
        If we
        are not initially successful in gathering an installed customer base we may
        either have to spend additional money or raise additional capital to fund
        the
        added expenditures. Additionally, it could take extra time to develop the
        Internet model that could affect the timing of our projected revenue
        stream.
  **The
        establishment of relationships with advertisers is necessary for us to achieve
        significant revenues.**
  Our
        revenue model includes significant revenues from advertising. If we are unable
        to develop sufficient relationships with key advertisers, we might not be
        able
        to achieve the revenues that we are projecting.
  **Our
        success depends on fan interest, so our business could fail if there is not
        a
        continued interest in our sport.**
  Mixed
        martial arts is a relatively new sport, so its continued popularity cannot
        be
        assumed, like baseball, basketball, football, golf, or boxing. As public
        tastes
        change frequently, interest in MMA may decline in the future. Such decline
        would
        threaten our ability to generate revenue and earn profits.
  **The
        success of our live events depends upon our ability to recruit and develop
        relationships with key fighters.**
  10
  The
        success of our live events depends upon the ability of our production and
        management team to find, attract, and schedule fighters that are appealing
        to
        the paying public. The fighter’s audience appeal is critical to maintaining
        interest in our events. There is no guarantee that: (1) we can sign, attract
        and
        retain popular fighters; (2) the various state athletic commissions will
        certify
        a fighter once we have retained the fighter; (3) the fighter will pass various
        drug screening tests that state commissions may require post event; and (4)
        due
        to the violent nature of this industry, we have no guarantee a fighter will
        be
        injury free at the time of an event which could cause the fighter to not
        fight.
        Any of the above-mentioned risks can negatively impact a given live
        event.
  **We
        may be subject to claims that fighters we sign up do not have the right to
        participate in our events.**
  Fighters
        we sign up may be subject to prior contractual commitments that prevent them
        from participating in all or certain of our events. This will negatively
        impact
        our live events if we are unable to resolve such conflicts prior to the live
        event or are unable to find an equally popular fighter of equal or substantially
        similar ability to replace the original fighter whose contractual commitment
        prevents him from participating in our event.
  **Our
        failure to develop creative and entertaining programs and events would likely
        have a significant negative impact on our bottom line.**
  The
        creation, marketing and distribution of our live entertainment, including
        our
        pay-per-view events, are at the core of our business and are critical to
        our
        ability to generate revenues across our media platforms and product outlets.
        Our
        failure to create popular and compelling live events could adversely affect
        our
        operating results.
  **There
        could be unexpected costs associated with our live events.**
  We
        may
        incur unexpected costs associated with promoting large-scale events. These
        costs
        could be related to, among other factors, production, distribution, or marketing
        overruns. These unexpected costs could significantly affect our
        profits.
  **We
        may enter into agreements with other mixed martial arts organizations or
        promotion companies to co-promote or co-produce a live event. We cannot
        guarantee that any revenues or fees we receive in connection with such events
        will exceed our costs, nor can we guarantee that such events will increase
        our
        popularity in the mixed martial arts community.**
  We
        may
        enter into agreements with other mixed martial arts organizations or promotion
        companies to co-promote or co-produce a live mixed martial arts event. We
        will
        have limited control over the promotion or production aspects of the event,
        which may impact the gate ticket sales at the event and affect gate revenues.
        We
        cannot guarantee that any revenues or fees we receive in connection with
        such
        events will exceed our costs. We cannot guarantee that promoting or producing
        a
        live event with another MMA organization or promotion company will not
        negatively impact our image in the mixed martial arts community.
  **A
        decline in general economic conditions could adversely affect our
        business.**
  Our
        operations are affected by general economic conditions, which generally may
        affect consumers’ disposable income and the level of advertising spending. The
        demand for entertainment and leisure activities tends to be highly sensitive
        to
        the level of consumers’ disposable income. A decline in general economic
        conditions could reduce the level of discretionary income that our fans and
        potential fans have to spend on our live and televised entertainment and
        consumer products, which could adversely affect our revenues.
  11
  **We
        face uncertainties associated with international markets.**
  We
        expect
        to produce events outside of the United States. Our production of live events
        overseas will subject us to the risks involved in foreign travel, local
        regulations, including regulations requiring us to obtain visas for our
        fighters, and political instability inherent in varying degrees in those
        markets. In addition, the licensing of our television and consumer products
        in
        international markets exposes us to some degree of currency risk. These risks
        could adversely affect our operating results and impair our ability to pursue
        our business strategy as it relates to international markets.
  **We
        may be prohibited from promoting and conducting our live events if we do
        not
        comply with applicable regulations.**
  In
        various states in the United States and some foreign jurisdictions, athletic
        commissions and other applicable regulatory agencies require us to obtain
        licenses for promoters, medical clearances and/or other permits or licenses
        for
        performers before we can promote and conduct our live events. In the event
        that
        we fail to comply with the regulations of a particular jurisdiction, we may
        be
        prohibited from promoting and conducting our live events in that jurisdiction.
        The inability to present our live events over an extended period of time
        or in a
        number of jurisdictions could lead to a decline in the various revenue streams
        generated from our live events, which could adversely affect our operating
        results.
  **Fighters
        scheduled to participate in our events may not be able to get the required
        clearances, which could adversely affect the success of the
        event.**
  It
        is
        possible that fighters who are scheduled to participate in our events may
        not
        received clearances, such as medical evaluations, required by state athletic
        commissions and, therefore, would not be able to compete in our events. We
        attempt to mitigate this risk by arranging back up fighters to be available
        on a
        stand-by basis. However, cancellation of a fighter’s appearance could adversely
        affect ticket buyers’ or television viewers’ experience, and require us to
        cancel an event or refund sales amounts.
  **Liability
        claims in excess of our planned insurance coverage could adversely affect
        our
        business, financial condition and results of operations.**
  The
        nature of our live actions events could expose us to significant liability
        claims. These claims might be made directly by participants, attendees or
        our
        customers. A liability claim or other claim, as well as any claims for uninsured
        liabilities or in excess of insured liabilities, could result in substantial
        costs to us, divert management attention from our operations and generate
        adverse publicity. This could harm our reputation, result in a decline in
        revenues and increase expenses.
  **Our
        products could give rise to claims that our technology infringes on the rights
        of others.**
  We
        are
        potentially subject to claims and litigation from third parties claiming
        that
        our products or processes infringe their patent or other proprietary rights.
        If
        any such actions are successful, in addition to any potential liability for
        damages, we could be required to obtain a license in order to continue to
        manufacture, use or sell the affected product or process. Litigation, which
        could result in substantial costs to us, may also be necessary to enforce
        our
        patent and proprietary rights and/or to determine the scope and validity
        of the
        patents or proprietary rights of others. Any intellectual property litigation
        would be costly and could divert the efforts and attention of our management
        and
        technical personnel, which could have a material adverse effect on our business,
        financial condition and results of operations.
  12
  We
        cannot
        assure you that infringement claims will not be asserted in the future or
        that
        such assertions, if proven to be true, will not prevent us from selling our
        products or materially and adversely affect our business, financial condition
        and results of operations. If any such claims are asserted against us, we
        may
        seek to enter into a royalty or licensing arrangement. We cannot assure you
        that
        a license will be available on commercially reasonable terms, if at
        all.
  **We
        may be subject to claims of trademark infringement, which may harm our
        business.**
  We
        may be
        subject to legal proceedings alleging claims of trademark infringement in
        the
        future. If we must rebrand, it may result in significant marketing expenses
        and
        additional management time and resources, which may adversely affect our
        business.
  **Because
        we expect to depend upon our intellectual property rights, our inability
        to
        protect those rights or prevent their infringement by others could adversely
        affect our business.**
  We
        anticipate that intellectual property will be material to all aspects of
        our
        operations, and we may expend substantial cost and effort in an attempt to
        maintain and protect our intellectual property. We plan to have a portfolio
        of
        registered trademarks and service marks and maintain a catalog of copyrighted
        works, including copyrights to television programming and photographs. Our
        inability to protect this portfolio of trademarks, service marks, copyrighted
        material, trade names and other intellectual property rights from piracy,
        counterfeiting or other unauthorized use could negatively affect our business.
        If others infringe our trademarks, it may cause harm to our brand and
        ultimately, to us, and we could be forced to spend additional time and resources
        fighting such infringement.
  **We
        may be unable to scale our operations successfully.**
  Our
        plan
        is to grow rapidly. Our growth will place significant demands on our management
        and technology development, as well as our financial, administrative and
        other
        resources. We cannot guarantee that any of the systems, procedures and controls
        we put in place will be adequate to support the commercialization of our
        operations. Our operating results will depend substantially on the ability
        of
        our officers and key employees to manage changing business conditions and
        to
        implement and improve our financial, administrative and other resources.
        If we
        are unable to respond to and manage changing business conditions, or the
        scale
        of our products, services and operations, then the quality of our services,
        our
        ability to retain key personnel and our business could be harmed.
  **We
        depend on certain key executive personnel and other key managerial personnel
        for
        our success, the loss of whom could adversely affect our business, financial
        condition and results of operations.**
  Our
        success depends on the continued availability and contributions of members
        of
        our senior management teams and other key personnel. The loss of services
        of any
        of these persons could delay or reduce our product development commercialization
        efforts, event management, and promotions and advertising efforts. Furthermore,
        recruiting and retaining qualified personnel will be critical to our success.
        The loss of members of our management team, key advisors or personnel, or
        our
        inability to attract or retain other qualified personnel or advisors, could
        significantly weaken our management, harm our ability to compete effectively
        and
        harm our business.
  **Our
        limited operating history makes management’s future performance difficult to
        assess.**
  ProElite.com
        and EliteXC Live were organized in August 2006 and September 2006, respectively,
        and we began operations in the mixed martial arts business in October 2006,
        so
        there is only a very limited track record upon which investors can assess
        management’s effectiveness. Consequently, investors are likely to have greater
        difficulty in accurately predicting whether an investment in the Company
        will be
        profitable.
  13
  **Our
        limited operating history makes us highly reliant on
        management.**
  We
        lack
        the goodwill of an established business and therefore rely on individual
        members
        of current management to create business strategies and relationships, attract
        sponsors, and develop tournament formats and operating procedures necessary
        for
        us to expand and develop our business. The departure of one or more of our
        executives could impair our operations. If we are unable to find suitable
        replacements for departed management, we might incur losses that impair
        investors’ investments in the Company.
  **We
        may be unable to compete with larger or more established sports leagues for
        corporate advertising budgets.**
  We
        face a
        large and growing number of competitors in the sports and entertainment
        industry. Many of these competitors have substantially greater financial,
        technical and marketing resources, larger customer bases, longer operating
        histories, greater name recognition, and more established relationships in
        the
        industry than does the Company. As a result, certain of these competitors
        may be
        in better positions to obtain corporate advertising. We cannot be sure that
        we
        will be able to compete successfully with existing or new
        competitors.
  **Only
        a few major broadcast and cable networks can distribute our programming to
        a
        sufficiently large audience, and thus we have limited alternatives available
        if
        one or more of our television distributors performs unsatisfactorily, insists
        on
        unfavorable contract terms, or elects not to carry our
        programming.**
  We
        require widespread distribution of our programming to interest sponsors and
        other advertisers. We have entered into an exclusive distribution agreement
        to
        air our programs on Showtime, one of only several major cable networks and
        four
        major broadcast networks that include sports programming and provide sufficient
        market reach. Our choices are limited, and our future ability to continue
        to
        enter into distribution agreements with major broadcast and/or cable networks
        cannot be assured. If we are unable to continue to make such suitable
        distribution arrangements, we may incur losses that impair investors’
investments in the Company.
  **Difficulty
        in retaining current fighters or recruiting future fighters could impair
        our
        prospects.**
  The
        number of professional mixed martial arts fighters is small in relation to
        other
        professional sports, as is the number of first-rate, non-pro fighters who
        might
        fight professionally in the future. Our prospects could decline and investors’
investments in the Company be impaired if our fighters are recruited by
        competitors or decide to pursue other occupations.
  **The
        markets in which we operate are highly competitive and rapidly changing,
        and we
        may not be able to compete effectively, especially against competitors with
        greater financial resources or marketplace presence.**
  For
        our
        live and television audiences, we face competition from professional and
        college
        sports, as well as from other forms of live and televised entertainment and
        other leisure activities in a rapidly changing and increasingly fragmented
        marketplace. Many of the companies with which we compete have greater financial
        resources than are currently available to us. Our failure to compete effectively
        could result in a significant loss of viewers, venues, distribution channels
        or
        athletes and fewer advertising dollars spent on our form of sporting events,
        any
        of which could adversely affect our operating results.
  14
  **If
        we are unable to hire additional needed personnel, our growth prospects will
        be
        limited, or our operations may be impaired.**
  Our
        business requires uniquely trained and experienced professionals, and our
        success depends in large part upon our ability to attract, develop, motivate,
        and retain highly skilled personnel. Qualified employees will be a limited
        resource for the foreseeable future. As a new company with little history,
        we
        may have particular difficulty hiring qualified personnel. If we are unable
        to
        retain necessary personnel, our business will probably suffer, and investors
        may
        incur losses on their investment in the Company. Furthermore, our limited
        operating history may require the Company to pay above market salaries in
        order
        to attract qualified personnel, which could impair our
        profitability.
  **Our
        insurance may not be adequate to cover liabilities resulting from accidents
        or
        injuries that occur during our physically demanding
        events.**
  We
        plan
        to hold numerous live events each year. This schedule exposes our athletes
        who
        are involved in the production of those events to the risk of travel and
        event-related accidents, the consequences of which may not be fully covered
        by
        insurance. The physical nature of our events exposes athletes and coaches
        to the
        risk of serious injury or death. Although we plan to provide the necessary
        and
        required health, disability and life insurance for our athletes on an
        event-by-event basis, this coverage may not be sufficient to cover all injuries
        they may sustain. Liability extending to us resulting from any death or serious
        injury sustained by one of the athletes during an event, to the extent not
        covered by our insurance, could adversely affect our operating
        results.
  **Changes
        in the regulatory atmosphere and related private-sector initiatives could
        adversely affect our business.**
  Although
        the production and distribution of television programming by independent
        producers is not directly regulated by the federal or state governments in
        the
        United States, the marketplace for television programming in the United States
        is affected significantly by government regulations applicable to, as well
        as
        social and political influences on, television stations, television networks
        and
        cable and satellite television systems and channels. We plan to voluntarily
        designate the suitability of each of our television programs for audiences
        using
        standard industry practices. A number of governmental and private sector
        initiatives relating to the content of media programming in recent years
        have
        been announced in response to recent events unrelated to us or mixed martial
        arts. Changes in governmental policy and private sector perceptions could
        further restrict our program content and adversely affect our viewership
        levels
        and operating results, as well as the willingness of broadcasters to distribute
        our programming.
  **We
        face a variety of risks as we expand into new and complementary
        businesses.**
  We
        are a
        new company and are rapidly entering into new and complementary businesses.
        Risks of expansion may include:
  
 ·
              potential
                  diversion of management’s attention and other resources, including
                  available cash, from our existing
                  business;
 
 ·
              unanticipated
                  liabilities or contingencies;
 
 ·
              reduced
                  earnings due to increased costs;
  15
   ·
              failure
                  to retain and recruit MMA athletes;
 
 ·
              failure
                  to maintain agreements for
                  distribution;
 
 ·
              inability
                  to protect intellectual property
                  rights;
 
 ·
              competition
                  from other companies with experience in such businesses;
                  and
 
 ·
              possible
                  additional regulatory requirements and compliance
                  costs.
  **We
        might encounter difficulty integrating assets that we
        acquire.**
  We
        have
        acquired the stock of King of the Cage, Inc., Mixed Martial Arts Promotions
        Ltd.
        and Mixed Martial Arts Productions Ltd., the assets of Future Fight Promotions,
        Inc., the tangible and intellectual property assets of Lifelogger LLC, and
        plan
        to acquire additional assets or businesses that we feel will help us achieve
        our
        goals. These acquisitions may become difficult to integrate into our Company,
        and may impede our growth and future plans.
  **RISKS
        RELATED TO CAPITAL STRUCTURE**
 
 **Our
        auditors have expressed substantial doubt regarding our ability to continue
        as a
        going concern. If we are unable to continue as a going concern, we may be
        required to substantially revise our business plan or cease operations.**
 
 We
        have
        incurred losses and negative cash flows from operations since inception and
        have
        limited cash. As a result, our auditors have expressed substantial doubt
        about
        our ability to continue as a going concern. Although we have generated revenue,
        we are still operating at a net loss. We cannot assure you that we will be
        able
        to obtain sufficient funds from our operating or financing activities to
        support
        our continued operations. If we cannot continue as a going concern, we may
        need
        to substantially revise our business plan or cease operations, which may
        reduce
        or negate the value of your investment.
  **We
        need to raise additional funds, which may not be available to us on favorable
        terms, if at all, thereby potentially disrupting the growth of our business
        and
        ability to generate revenues.**
  The
        Company incurred losses of approximately $4.2 million in fiscal year 2006
        and
        $27.1 million during 2007. These losses are due largely to compensation expense,
        acquisitions of assets, production and production support in connection with
        the
        promotion of live mixed martial arts events. In 2007, we generated approximately
        $5.3 million of revenue. As of December 31, 2007, the Company had working
        capital of $0.4 million with monthly net cash expenditures of approximately
        $1.0
        million
  While
        we
        have scheduled live MMA events as part of our plan of operations, these events
        will not likely result in profits during 2008. While funds may be available
        to
        the Company, we may experience significant dilution if a transaction is
        completed. Therefore, we may not accept terms as presented, resulting in
        a
        discontinuation of operations.
  **Insiders
        have substantial control over us, and they could delay or prevent a change
        in
        our corporate control even if our other shareholders wanted it to
        occur.**
  As
        of
        December 31, 2007, our executive officers, directors, and principal shareholders
        who hold 5% or more of our outstanding common stock beneficially owned, in
        the
        aggregate, approximately 80% of our outstanding common stock. These shareholders
        are able to exercise significant control over all matters requiring shareholder
        approval, including the election of directors and approval of significant
        corporate transactions. This could delay or prevent an outside party from
        acquiring or merging with us even if our other shareholders wanted it to
        occur.
  16
  **In
        the event that we raise additional capital through the issuance of equity
        securities, or securities exercisable for or convertible into our equity
        securities, our shareholders could experience substantial
        dilution.**
  If
        we
        raise additional capital by issuing equity securities or convertible debt
        securities, our existing shareholders may incur substantial dilution. Further,
        any shares so issued may have rights, preferences and privileges superior
        to the
        rights, preferences and privileges of our outstanding common stock.
  **The
        market price of our common stock may be volatile.**
  The
        market price of our common stock has been and will likely continue to be
        highly
        volatile, as is the stock market in general. Some of the factors that may
        materially affect the market price of our common stock are beyond our control,
        such as changes in financial estimates by industry and securities analysts,
        conditions or trends in the MMA and entertainment industries, announcements
        made
        by our competitors or sales of our common stock. These factors may materially
        adversely affect the market price of our common stock, regardless of our
        performance.
  In
        addition, the public stock markets have experienced extreme price and trading
        volume volatility. This volatility has significantly affected the market
        prices
        of securities of many companies for reasons frequently unrelated to the
        operating performance of the specific companies. These broad market fluctuations
        may adversely affect the market price of our common stock.
  **There
        is no assurance of an established public trading market, and the failure
        to
        establish one would adversely affect the ability of our investors to sell
        their
        securities in the public market.**
  At
        present, there is no active trading market for the Company’s securities, and
        there can be no assurance that a trading market will develop. Our common
        stock
        is traded on the Pink Sheets. We intend to seek approval for trading on the
        NASDAQ Stock Market or the American Stock Exchange, but no assurance can
        be
        given that such trading will be approved, or if so approved, whether a viable
        trading market will develop. Even if such listing is obtained, we cannot
        assure
        you that our securities upon listing will continue to be listed on the NASDAQ
        Stock Market or the American Stock Exchange.
  **Factors
        which may adversely affect market prices of the Company’s common
        stock.**
  Market
        prices for our common stock will be influenced by a number of factors,
        including:
 
 ·
              the
                  issuance of new equity securities pursuant to a future offering
                  or
                  acquisition;
 
 ·
              changes
                  in interest rates;
  ·
              competitive
                  developments, including announcements by competitors of new products
                  or
                  services or significant contracts, acquisitions, strategic partnerships,
                  joint ventures or capital
                  commitments;
 
 ·
              variations
                  in quarterly operating results;
 
 ·
              changes
                  in financial estimates by securities
                  analysts;
   17
  ·
              the
                  depth and liquidity of the market for our common
                  stock;
 
 ·
              investor
                  perceptions of our company and the mixed martial arts industry
                  generally;
                  and
 
 ·
              general
                  economic and other national
                  conditions.
  **The
        Company may issue securities to strategic investors, which will be reported
        as a
        loss in our financial statements. This increase in reported loss in our
        financial statements may negatively impact the market price of the Company's
        common stock.**
  From
        time
        to time, we may enter into discussions with strategic investors, pursuant
        to
        which we will issue securities on terms that may be more favorable than the
        securities registered or sold pursuant to this registration statement. The
        issuance of such securities will be reported as a loss on our financial
        statements. The additional reported loss from the issuance of such securities,
        if material, may negatively impact the market price of the Company's common
        stock.
  **Shares
        eligible for future sale may adversely affect the market price of our common
        stock.**
  The
        Company’s previous registration statements on Form SB-2 were declared effective
        on May 14, 2007 and September 5, 2007. The shares of common stock covered
        by
        those registration statement are freely tradable. Furthermore, commencing
        in
        October 2007, our founding shareholders who received shares of our common
        stock
        in our reverse merger in October 2006 will be eligible to sell all or some
        of
        their shares of common stock, subject to certain limitations, by means of
        ordinary brokerage transactions in the open market pursuant to Rule 144
        promulgated under the Securities Act of 1933, as amended. In general, pursuant
        to Rule 144, a shareholder (or shareholders whose shares are aggregated)
        who has
        satisfied a one-year holding period may, under certain circumstances, sell
        to
        the public within any three-month period a number of securities which does
        not
        exceed the greater of 1% of the then outstanding shares of common stock or
        the
        average weekly trading volume of the class during the four calendar weeks
        prior
        to such sale if the shares are listed on a national exchange or on NASDAQ.
        Rule
        144 also permits, under certain circumstances, the sale of securities, without
        any limitations, by a non-affiliate that has satisfied a two-year holding
        period. While our founding shareholders are subject to a lock-up of their
        shares, such lock-up may be waived by Hunter World Markets, Inc. or may not
        apply. Any substantial resale, and the possibility of substantial resales,
        of
        the common stock sold pursuant to this registration statement or under Rule
        144
        may have an adverse effect on the market price of our common stock by creating
        an excessive supply.
 **Investors
          in our prior financing have certain price protections, which may further
          dilute
          our existing shareholders.**
 
 In
          connection with our prior financings, the investors have been granted price
          protection provisions if the Company raises capital or issues derivative
          securtieis at less than the effective per share price paid by such investors.
          These provisions could require the Company to issue additional shares of
          its
          Common Stock, resulting in further dilution to our existing shareholders.
 **Our
        common stock is considered a “penny stock” and may be difficult to
        sell.**
  Our
        common stock is considered to be a “penny stock” since it meets the definition
        in Rule 3a-51-1 of the Securities Exchange Act of 1934. These include but
        are
        not limited to the following: (i) the stock trades at a price less than $5.00
        per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) the
        stock is NOT quoted on the NASDAQ Stock Market, or even if so, has a price
        less
        than $5.00 per share; or (iv) it is issued by a company with net tangible
        assets
        less than $2.0 million, if in business more than a continuous three years,
        net
        tangible assets less than $5.0 million, if in business for more than a
        continuous three years, or with average revenues of less than $6.0 million
        for
        the past three years. The principal result or effect of being designated
        a
“penny stock” is that securities broker-dealers cannot recommend the stock but
        must trade in it on an unsolicited basis.
  Additionally,
        Section 15(g) of the Securities Exchange Act of 1934 and Rule 15g-2 promulgated
        thereunder by the SEC require broker-dealers dealing in penny stocks to provide
        potential investors with a document disclosing the risks of penny stocks
        and to
        obtain a manually signed and dated written receipt of the document before
        effecting any transaction in a penny stock for the investor’s
        account.
  18
  Potential
        investors in our common stock are urged to obtain and read such disclosure
        carefully before purchasing any shares that are deemed to be “penny stock.”
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
        account of any investor for transactions in such stocks before selling any
        penny
        stock to that investor. This procedure requires the broker-dealer to (i)
        obtain
        from the investor information concerning his or her financial situation,
        investment experience and investment objectives; (ii) reasonably determine,
        based on that information, that transactions in penny stocks are suitable
        for
        the investor and that the investor has sufficient knowledge and experience
        as to
        be reasonably capable of evaluating the risks of penny stock transactions;
        (iii)
        provide the investor with a written statement setting forth the basis on
        which
        the broker-dealer made the determination in (ii) above; and (iv) receive
        a
        signed and dated copy of such statement from the investor, confirming that
        it
        accurately reflects the investor’s financial situation, investment experience
        and investment objectives. Compliance with these requirements may make it
        more
        difficult for holders of our common stock to resell their shares to third
        parties or to otherwise dispose of them in the market or otherwise.
  **If
        we fail to implement and maintain effective internal controls over financial
        reporting, the price of our common stock may be adversely
        affected.**
  We
        are
        required to establish and maintain appropriate internal controls over financial
        reporting. Failure to establish those controls, or any failure of those controls
        once established, could adversely impact our public disclosures regarding
        our
        business, financial condition or results of operations. In addition,
        management’s assessment of internal controls over financial reporting identified
        weaknesses and conditions that need to be addressed in our internal controls
        over financial reporting that may raise concerns for investors. Any actual
        or
        perceived weaknesses and conditions that need to be addressed in our internal
        control over financial reporting, disclosure of management’s assessment of our
        internal controls over financial reporting or disclosure of our public
        accounting firm’s attestation to or report on management’s assessment of our
        internal controls over financial reporting may have an adverse impact on
        the
        price of our common stock.
  As
        of
        December 31, 2007, the Company’s Chief Executive Officer and Chief Financial
        Officer had evaluated the effectiveness of the Company’s disclosure controls and
        procedures, and based on such evaluation, such officers have concluded that,
        the
        Company’s disclosure controls and procedures were not effective in ensuring that
        (i) information required to be disclosed by the Company in the reports that
        it
        files or submits under the Exchange Act is recorded, processed, summarized
        and
        reported, within the time periods specified in the SEC’s rules and forms and
        (ii) information required to be disclosed by the Company in the reports that
        it
        files and submits under the Exchange Act is accumulated and communicated
        to the
        Company’s management, including its principal executive and principal financial
        officers, or persons performing similar functions, as appropriate to allow
        timely decisions regarding required disclosure. The deficiencies in disclosure
        controls and procedures were related to the deficiencies in our internal
        control
        over financial reporting. In 2006, our auditors noted several material
        weaknesses and a significant deficiency, which we are working to address.
        The
        material weaknesses noted were: (1) the Company inadequately maintained
        accounting records, (2) accounting policies and procedures were not formally
        documented, and (3) the accounting department did not have sufficient technical
        accounting knowledge. The significant deficiency noted was that an affiliate
        did
        not provide adequate accounting for funds advanced by the Company.
 
 While
        the
        Company has begun taking remediation steps to enhance its internal control
        over
        financial reporting and reduce control deficiencies, our stock price could
        be
        adversely affected if we are unable to implement and maintain controls.
  19
  **Provisions
        in our certificate of incorporation and bylaws and under New Jersey law may
        discourage, delay or prevent a change of control of our company or changes
        in
        our management and, therefore, depress the trading price of our common
        stock.**
  Our
        certificate of incorporation and bylaws contain provisions that could depress
        the trading price of our common stock by acting to discourage, delay or prevent
        a change of control of our company or changes in our management that the
        shareholders of our company may deem advantageous. These
        provisions:
  ·
              authorize
                  the issuance of “blank check” preferred stock that our board of directors
                  could issue to increase the number of outstanding shares to discourage
                  a
                  takeover attempt;
 
 ·
              allow
                  shareholders to request that we call a special meeting of our shareholders
                  only if the requesting shareholders hold of record at least a majority
                  of
                  the outstanding shares of common
                  stock;
 
 ·
              provide
                  that the board of directors is expressly authorized to make, alter,
                  amend
                  or repeal our bylaws; and
 
 ·
              provide
                  that business to be conducted at any special meeting of shareholders
                  be
                  limited to matters relating to the purposes stated in the applicable
                  notice of meeting.
  **We
        do not foresee paying cash dividends in the foreseeable
        future.**
  We
        have
        not paid cash dividends on our stock and do not plan to pay cash dividends
        on
        our common stock in the foreseeable future.
 
 20




**Item
      2. Description of Property**





We
      currently maintain our corporate office in 12121 Wilshire Blvd., Suite 1001,
      Los
      Angeles, CA 90025 under a long-term lease running through July 2012. Monthly
      rent payments began at $25,176 and escalate to $36,472. We also maintain a
      small
      office in the United Kingdom with monthly payments of approximately
      $2,000.





While
      we
      believe our office space is adequate for our current operations, we may seek
      to
      reduce our monthly rent payments, for example by reducing the total square
      footage we occupy.





**Item
      3. Legal Proceedings**





On
      December 14, 2006, the Company received a demand letter (the “Demand Letter”)
      from counsel for Wallid Ismail Promocoes E Eventos LTDA EPP and Wallid Ismail
      (collectively “Wallid”). The Demand Letter alleges that the Company entered into
      a “fully enforceable agreement” to compensate Wallid for allegedly assisting the
      Company in raising financing, and that the Company or its directors committed
      unspecified fraudulent acts, misappropriated Wallid’s “confidential and
      proprietary information,” and engaged in an “intentional and well-orchestrated
      scheme to wrongfully remove Wallid” as a principal of the Company. Wallid did
      not specify the damages he claims to have sustained as a result of these
      acts.





The
      Company denies Wallid’s allegations, and denies that it has, or has breached,
      any obligations to Wallid. On January 2, 2007, the Company filed a lawsuit
      against Wallid in the Superior Court for the State of California, County of
      Los
      Angeles, LASC Case No. BC 364204 (the “California Lawsuit”). In the California
      Lawsuit, the Company seeks a judicial declaration that the allegations in the
      Demand Letter are false. In addition, the California Lawsuit alleges that Wallid
      has misappropriated the Company’s business plan and other confidential and
      proprietary information, that Wallid has been unjustly enriched at the Company’s
      expense, that Wallid is engaging in unfair competition with the Company , and
      that Wallid’s actions violate California Business and Professions Code sections
      17200, et seq. Wallid answered the complaint on March 22, 2007, and then
      transferred the case to federal court. The case will be litigated in federal
      court, discovery is underway and the case is set for trial on September 16,
      2008.





On
      January 10, 2007, Wallid filed suit against the Company, among others, in
      federal court in New Jersey (the “New Jersey Lawsuit”). He amended his complaint
      on February 1, 2007. On April 18, 2007, the Company filed a motion to dismiss
      or
      stay the New Jersey Lawsuit because the California Lawsuit was filed first,
      or
      in the alternative to transfer the case to the federal court in California
      where
      the California Lawsuit is pending. On June 26, 2007, the court granted the
      Company’s motion and ordered the New Jersey Lawsuit transferred to the federal
      court in California.





On
      November 5, 2007, the federal court in the California lawsuit approved a
      stipulation by Wallid and the Company granting Wallid leave to file a
      Counterclaim and Third Party Complaint in the California Lawsuit, and providing
      for dismissal of the New Jersey Lawsuit without prejudice upon completion of
      the
      transfer of that action to California. The Counterclaim and Third Party
      Complaint asserts substantially the same claims Wallid asserted in the New
      Jersey Lawsuit. Wallid seeks: a 23.25% to 26.67% equity interest in the Company;
      damages for his losses in an amount to be determined at trial, but no less
      than
      $75,000; punitive damages of no less than $10,000,000; an imposition of a
      receiver to oversee the assets of the Company; an accounting on all income
      earned by the Company; and attorneys’ fees and costs of suit. The Company denies
      Wallid’s allegations and intends to assert a vigorous defense.





On
      January 23, 2007, West Coast filed a civil action against Frank “Shamrock”
Juarez (“Shamrock”), and sought and obtained a temporary restraining order which
      prohibited Shamrock from fighting in the Company’s February 10, 2007 event. The
      Company subsequently entered into a settlement agreement on February 5, 2007,
      pursuant to which West Coast dismissed its civil action and agreed to permit
      Shamrock to fight in the February 10, 2007 event. The Company agreed to pay
      an
      aggregate of $250,000 to West Coast, out of future compensation due to Shamrock
      from the Company under the personal services agreement. The Company also entered
      into a co-promotion agreement with West Coast, pursuant to which it agreed
      to
      co-promote up to three live MMA events that feature Shamrock. To date the
      Company has paid West Coast $100,000 of the $250,000 owed. The remaining portion
      totaling $150,000 will be paid to West Coast from future co-produced events.
      A
      liability has been accrued for the $150,000 at December 31, 2007.




21





On
      March
      22, 2007, Zuffa, LLC filed a complaint against Showtime Networks, the Company
      and a subsidiary in which it alleges that the defendants infringed Zuffa’s
      copyrights by airing footage from certain Ultimate Fighting Championship events
      and alleges that the defendants utilized portions of Zuffa’s copyrights in the
      televised broadcast of the February 10, 2007 MMA event that was held at the
      Desoto Civic Center in Southaven, Mississippi. Zuffa has alleged causes of
      action for copyright infringement and unfair competition, and seeks injunctive
      relief, compensatory damages or statutory damages, and litigation expenses.
      Zuffa has not specified the amount of monetary damages it seeks. The Company
      and
      Showtime have filed a motion to dismiss the case, and the parties to the lawsuit
      are currently waiting for a decision from the court.




On
        December 28, 2007, the Company filed suit against its insurer, XL Specialty
        Insurance Company ("XL"), in the United States District Court for the Central
        District of California for declaratory relief and breach of contract. The
        Company seeks a judicial declaration that Wallid's counterclaim against the
        Company in the California Lawsuit asserts claims covered by the Company's
        Errors
        and Omissions Policy, effective October 3, 2006 (the "Policy"), and damages
        for
        breach of contract based on XL's refusal to advance defense expenses under
        the
        Policy. XL has filed a counterclaim against the Company seeking rescission
        of
        the Policy based on the allegation that the Company's application for the
        Policy
        contained material misrepresentations or concealments of fact regarding Wallid's
        claims. XL also seeks indemnification from the Company to the extent that
        XL is
        required to indemnify the Company's officers and directors under the Policy,
        and
        a judicial declaration that XL is not required to indemnify or defend the
        Company or its officers and directors under the Policy with regard to Wallid's
        claims. The Company denies that its application for the Policy contains any
        misrepresentations or concealments of fact and intends to vigorously prosecute
        its action against XL for insurance coverage. A scheduling conference in
        the
        case is set for May 12, 2008. No trial date is set.


**Item
      4. Submission of Matters to a Vote of Securities Holders**





There
      were no submissions of matters to a vote of shareholders during the year ended
      December 31, 2007.




22


**Part
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters**





**Market
      Information**





The
      Company’s common stock is not trading on any stock exchange. Shares of our
      Common Stock are quoted on Pink Sheets LLC under the symbol “PELE.pk”. On March
      26, 2008, the last sales price for our stock quoted on Pink Sheets LLC was
      $7.50
      per share.





There
      is
      little or no trading in our common stock. The following closing price
      information reflects inter-dealer prices, without retail mark-up, mark-down
      or
      commission and may not represent actual transactions:





**Period**
            
            **High**
            
            **Low**August
                10, 2006 - June 30, 2007 (1)
            
            $
            15.00
            
            $
            12.00July
                1, 2007 - September 30, 2007
            
            $
            15.00
            
            $
            14.90October
                1, 2007 - December 31, 2007
            
            $
            15.00
            
            $
            7.50January
                1, 2008 - March 31, 2008
            
            $
            7.50
            
            $
            2.95





(1)
      To
      our knowledge, quoted trading activity first commenced during the calendar
      quarter ended June 30, 2007.





**Holders**





As
      of
      December 31, 2007 there were 120 holders of our common stock.





**Dividends**





We
      have
      not paid any dividends on our common stock to date and do not intend to pay
      dividends for the foreseeable future. The payment of dividends in the future
      will be contingent upon our revenues and earnings, if any, capital requirements
      and general financial condition. The payment of any dividends will be within
      the
      discretion of our then board of directors. It is the present intention of our
      board of directors to retain all earnings, if any, for use in our business
      operations and, accordingly, our board does not anticipate declaring any
      dividends in the foreseeable future.





**Equity
      Compensation Plan Information**




The
      only
      equity compensation plan approved by our security holders is the 2006 Stock
      Option Plan (the “2006 Plan”). The Company has also issued equity compensation
      outside of the 2006 Plan in connection with the services provided by Hunter
      World Markets for the Company’s private placement of its common stock and
      various other consultants. A table of the equity compensation issued by the
      Company is included with “Item 11. Security Ownership of Certain Beneficial
      Owners and Management and related Stockholder Matters” of this Annual
      Report.




**Recent
      Sales of Unregistered Securities**





Showtime





On
      January 5, 2007, pursuant to a Securities Purchase Agreement the Company entered
      into with Showtime, the Company issued an aggregate of 1,666,667 units for
      $5
      million in cash, each unit consisting of 3 shares of common stock and a
      three-year warrant to purchase 1 share of common stock at a per share exercise
      price of $2.00 to Showtime, at a per unit price of $3.00. These warrants have
      been valued at $345,000 and will be amortized into operations over a three-year
      period commencing January 5, 2007. Additionally, the Company issued a seven-year
      warrant to purchase 2.5 million shares of common stock to Showtime at a per
      share exercise price of $2.00, in consideration of the funding and the exclusive
      distribution agreement provided to the Company. These warrants have been valued
      at $608,000 and will be amortized into operations over a three-year period
      commencing January 5, 2007. The Showtime warrants were exercisable as of the
      date of grant, January 5, 2007. The agreement provides that the Company will
      provide a minimum number of events for the years 2007 through 2009. There will
      be no license fee payable by Showtime on account of Showtime events in 2007
      and
      the Company will bear all costs and expenses for the events. License fees in
      2008 and 2009 will be split between the Company and Showtime. For each event
      featured on pay-per-view, the Company will receive the proceeds received by
      Showtime, less the distribution fee and advances made by Showtime on the
      Company’s behalf for marketing, public relations and television production. Any
      revenues derived from the sale of the Company’s merchandise by Showtime, or
      through Showtime Networks’ website or telecasts will be split 70% to the Company
      and 30% to Showtime.




23




Pursuant
      to the investor rights agreement entered into with Showtime, the Company granted
      Showtime the right to appoint one member to the Board of Directors, and Santa
      Monica Capital Partners II, LLC, the Company’s largest shareholder, has agreed
      to vote all shares it owns or over which it has voting control in whatever
      manner necessary to ensure that the Showtime designee will be elected to the
      Board of Directors at each annual or special meeting of shareholders at which
      an
      election of directors is held or pursuant to any written consent of the
      shareholders.





CBS
      Distribution Agreement, Warrant Issuance and Showtime Warrant
      Exercise





The
      Company and CBS Entertainment (“CBS”) entered into an agreement dated as of
      February 22, 2008 (the “Broadcast Agreement”) pursuant to which CBS has the
      right to place an order for four two-hour mixed martial arts fight programs
      (the
“Events”) for live broadcast during a period of one year. CBS was also granted
      four subsequent, consecutive annual options to order four additional two-hour
      Events and to order Events other than two-hours in length. In addition to the
      Events, CBS may order derivative type programs based on the Events. CBS will
      pay
      to the Company a per Event license fee. During the term, subject to limited
      exceptions, the Company’s ProElite and EliteXC brands will be exclusive to CBS
      in broadcast television and premium cable in the United States (excluding Puerto
      Rico) and Bermuda.





In
      connection with the Broadcast Agreement, the Company and Showtime Networks
      Inc.
      (SNI”), an affiliate of CBS, entered into a Subscription Agreement dated as of
      February 22, 2008 pursuant to which the Company agreed to issue two Warrants
      to
      SNI (the “New Warrants”) each for the purchase of 2,000,000 shares of the
      Company’s Common Stock at an exercise price of $2.00 per share. The first
      Warrant vests immediately and is for a term of five years from February 22,
      2008. The second Warrant vests in four equal tranches of 500,000 shares with
      each respective tranche to vest if an Event is broadcast pursuant to the
      Broadcast Agreement. The term of each tranche is five years from the date that
      such tranche vests. Pursuant to an Investor Rights Agreement between the Company
      and SNI dated as of February 22, 2008, the Company granted to SNI certain
      registration rights with respect to the shares issuable upon exercise of the
      New
      Warrants, and SNI agreed that such shares and the New Warrants are subject
      to
      certain transfers restrictions until March 5, 2009.





Pursuant
      to the Subscription Agreement, effective February 22, 2008, the Company issued
      the New Warrants to SNI. Additionally, SNI exercised part of the warrants
      previously issued to SNI in January 2007. The exercise was for an aggregate
      of
      2,000,000 shares of the Company’s Common Stock (the “Warrant Shares”) resulting
      in proceeds to the Company of $4,000,000. The issuance of the New Warrants
      and
      the Warrant Shares are exempt from the registration requirements of the
      Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. SNI has
      represented that it was acquiring the Warrants for investment purposes only.
      The
      Company will place appropriate restrictions on transfer of the securities
      issued, and the certificates evidencing the New Warrants and the Warrant Shares
      will bear a restricted legend.





**Item
      6. Management’s Discussion and Analysis of Operations**





**Overview**





Since
      the
      Company’s formation in August 2006, we have established ourselves as a leading,
      global promoter of live MMA events and provider of a social-networking website
      focused exclusively on MMA. We have agreements to distribute content by
      television and DVD throughout the world. To date, we have focused our efforts
      primarily on events in the United States and United Kingdom and on our website.





In
      2007,
      we accomplished the following strategic objectives:





·
            Acquired
                well-regarded MMA live event brands throughout the world:






24




·
            King
                of the Cage, Inc., a promoter of live MMA events, that has historically
                produced in excess of 20 events per year.


·
            Acquired
                Mixed Martial Arts Promotions, Ltd. and Mixed Martial Arts Productions,
                Ltd. (together “CageRage”), a UK-based promoter of live MMA
                events.


·
            Acquired
                the assets of Future Fight Promotions, Inc., a Hawaii-based promoter
                of
                live MMA events.


·
            Invested
                in Entlian Co., a Korea-based promoter of live MMA
                events.


·
            Launched
                our social-networking MMA community website, www.proelite.com, for
                use.





**Results
      of Operations for the Year Ended December 31, 2007, Compared to the Period
      from
      August 10, 2006 to December 31, 2006**





The
      Company was formed in 1992 and began operations after a reverse merger in August
      2006. Therefore, the Company has only insignificant financial results,
      consisting of nominal general and administrative expenses and a non-cash
      interest charge, for the period from August 10, 2006 (inception) to December
      31,
      2006. The Company was considered in the development stage until February 2007
      when we first earned revenue.





***Revenue***





Revenue
      from live events, consisting primarily of ticket sales, site fees and
      sponsorship, was $4,560,917 for the year ended December 31, 2007 compared to
      $0
      for the period from August 10, 2006 (inception) to December 31, 2006. The
      increase was the result of the Company commencing operations in February 2007.





Revenue
      from pay-per-view programming (PPV) and television licensing was $477,679
      (including $240,133 earned from Showtime) for the year ended December 31, 2007
      compared to $0 for the period from August 10, 2006 (inception) to December
      31,
      2006. The PPV revenue was earned from Showtime and from our recently-acquired
      King of the Cage subsidiary.





Revenue
      from our website was $68,782 for the year ended December 31, 2007 compared
      to $0
      for the period from August 10, 2006 (inception) to December 31, 2006. This
      revenue consisted primarily of online advertising, online store sales and video
      subscriptions.





Other
      revenues, which includes merchandise and DVD sales and fees for licensing
      fighters under contract, was $184,192 for the year ended December 31, 2007
      compared to $0 for the period from August 10, 2006 (inception) to December
      31,
      2006 as these were new activities in 2007.





***Cost
      of revenue***





Cost
      of
      revenue for live event production was $9,619,606 for the year ended December
      31,
      2007 compared to $0 for the period from August 10, 2006 (inception) to December
      31, 2006. Live event production costs consist principally of fighters purses,
      production of “Barker shows” (i.e., event-specific promotional videos), arena
      rental and related expenses, event-specific marketing expenses (e.g., Internet,
      radio and television advertising, posters and street teams), and travel.
      Additionally, we incurred related-party production costs from Showtime of
      $2,855,723 in 2007 for television production. We expect cost of revenue for
      live
      events will increase in 2008 as we promote more events. However, we expect
      television production costs from Showtime to decrease in 2008 in accordance
      with
      the terms of the distribution agreement.





Cost
      of
      revenue for our website was $234,295 for the year ended December 31, 2007
      compared to $0 for the period from August 10, 2006 (inception) to December
      31,
      2006 and consists principally of video production costs related to live event
      streaming.





***Gross
      margin***





The
      Company incurred a negative gross margin of $7,435,118 for the year ended
      December 31, 2007 compared to $0 for the period from August 10, 2006 (inception)
      to December 31, 2006. The gross loss was primarily attributable to our Fight
      operations’ live events. Management expects gross margins to improve in 2008
      primarily due to (1) the nature of the distribution agreement with Showtime
      and
      (2) plans to improve our operations in the UK. In 2007, Showtime paid no
      television license fee to the Company, and the Company was obligated to pay
      Showtime’s production expenses (ranging from approximately $30,000 to
      approximately $400,000 per event). In 2008, Showtime began paying the Company
      a
      television license fee (ranging from $50,000 to $500,000 per event), and the
      Company no longer pays Showtime’s production costs. Additionally in 2008,
      management began to reduce costs associated with US live event operations by
      better matching fight purses and expected event revenues and by reducing the
      number of staff and guests traveling to events. In 2008, management has more
      actively monitored the planning and preparations for our March 2008 UK event.
      Additionally, management is seeking to reduce venue costs and increase ticket
      sales, television licensing and sponsorship for UK events.




25





***Marketing
      expenses***





Marketing
      expenses primarily consist of marketing, advertising and promotion expenses
      not
      directly related to MMA events. Marketing, advertising and promotion expenses
      related directly to MMA events are charged to cost of revenue. Marketing
      expenses were $952,520 for the year ended December 31, 2007 compared to $101,156
      for the period from August 10, 2006 (inception) to December 31, 2006 and
      primarily consisted of Internet and print advertising, public relations and
      marketing consultants. We expect marketing expenses, particularly for
      advertising, will increase in 2008 as we promote more events and expand Internet
      advertising campaigns related to new revenue streams.





***Website
      operations***





Website
      operations expenses were $3,341,291 for the year ended December 31, 2007
      compared to $171,329 for the period from August 10, 2006 (inception) to December
      31, 2006. The increase was due primarily to hiring employees and consultants
      to
      develop and maintain our website and conduct business development
      activities.





***Fight
      Operations***





Fight
      operations expenses for promotion of our live events were $2,379,891 for the
      year ended December 31, 2007 compared to $205,825 for the period from August
      10,
      2006 (inception) to December 31, 2006. Fight operations expenses consist
      primarily of wages and consultants’ fees related to day-to-day administration of
      the Company’s live events, travel and fighter recruiting and signing bonuses.
      The increase was primarily the result of higher staffing levels in 2007 due
      to
      operations starting and to acquisitions in 2007.





In
      2008,
      we expect expenses related to our fight operations to increase for higher
      average staffing levels in 2008 than 2007, increased fighter signing bonuses
      and
      recruiting and inclusion of a full year of operations of companies acquired
      in late 2007.





***General
      and administrative expenses***





General
      and administrative expenses were $13,475,680 for the year ended December 31,
      2007 compared to $3,466,278 for the period from August 10, 2006 (inception)
      to
      December 31, 2006. The increase was primarily related to increased option and
      warrant grants resulting in non-cash, stock-based compensation expense of
      approximately $5.2 million in 2007 versus approximately $0.2 million in 2006.
      We
      also incurred higher non-cash depreciation and amortization expenses of
      approximately $1.4 million in 2007 versus $0.1 million in 2006 due to capital
      expenditures and to amortization of capitalized values of warrants and common
      stock issued for prepaid services. The increase in general and administrative
      expenses was also due to higher employee head count resulting in wages of
      approximately $2.3 million in 2007 versus $0.1 million in 2006, increased use
      of
      consultants resulting in expenses of approximately $1.1 million in 2007 versus
      $0.1 million in 2006; higher fees for professional services due primarily to
      our
      financing and acquisition activities of approximately $1.2 million in 2007
      versus $0.3 million in 2006; and higher travel expenses related to increased
      operations of approximately $0.8 million in 2007 versus $0.1 million in
      2006




26





In
      January 2008, Management began cost reductions through a lay off. We expect
      annualized savings from this layoff of approximately $1 million. However, we
      expect 2008 general and administrative expenses will increase over 2007
      primarily due to higher average staffing levels.





***Loss
      from operations***





Loss
      from
      operations was $27,584,500 for the year ended December 31, 2007 compared to
      $4,249,855 for the period from August 10, 2006 (inception) to December 31,
      2006
      as the Company incurred expenses in advance of revenues expected once brands
      and
      operations are established.





**Liquidity
      and Capital Resources**





Net
      cash
      used in operating activities was $17,173,363 during the year ended December
      31,
      2007 compared to $1,441,658 for the period from August 10, 2006 (inception)
      to
      December 31, 2006. The use of cash was primarily the result of the Company
      being
      in the early phases of executing its business plan and incurring expenses in
      advance of establishing its brand and operations.





Net
      cash
      used in investing activities was $10,626,880 during the year ended December
      31,
      2007 compared to $212,517 for the period from August 10, 2006 (inception) to
      December 31, 2006 due primarily to the cash consideration of $3.25 million
      paid
      for the acquisition of King of the Cage, Inc., $4.1 million paid for the
      acquisition of Mixed Martial Arts Productions, Ltd., $0.4 million paid for
      the purchase of assets from Future Fight Promotions, Inc. (ICON), and $1
      million paid to purchase a partial ownership interest in Entlian Corp.
      (SpiritMC) and to the purchase of equipment, furniture and leasehold
      improvements.





Net
      cash
      provided by financing activities was $25,018,514 during the year ended December
      31, 2007 compared to $8,950,000 for the period from August 10, 2006 (inception)
      to December 31, 2006 due primarily to the issuance of common stock and warrants
      for $20.2 million in a private placement and to the issuance of common stock
      and
      warrants to Showtime for $5 million. The proceeds from the Showtime stock was
      used primarily for general operations, and the proceeds from the private
      placement were used to fund acquisitions, an investment and general
      operations.





In
      September and December 2007, the Company acquired the stock of two fight
      promotion companies, purchased the assets of a fight-promotion company, and
      made
      a significant investment in a fourth. Additionally, the Company’s business plan
      calls for expanding the scale of live events and Internet operations. As a
      result, the need for cash has correspondingly increased. Although the Company
      had approximately $4 million of cash at December 31, 2007 and received $4
      million from warrant exercises in February 2008, additional financing is needed
      to continue to grow the operations to their desired levels over the next 12
      months. We are currently seeking additional financing. However, there can be
      no
      assurances that we will be able to raise sufficient financings on favorable
      terms and conditions.





If
      we are
      unable to raise sufficient financing, we will be required to reduce our
      expansion programs, dramatically reduce costs and growth may be limited. If
      sufficient additional financing cannot be obtained, the Company may have to
      curtail or reduce operations. There is no guarantee that we will succeed in
      accomplishing our objectives. The auditor's opinion states there is substantial
      doubt exists about our ability to continue as a going concern. These financial
      statements do not contain any adjustments that may be required should we be
      unable to continue as an on-going concern.





**Capital
      Expenditure Commitments**





As
      of
      December 31, 2007, we had commitments for capital expenditures of approximately
      $600,000 for software development. In early 2008, our vendor agreed to cancel
      the commitment.





**Off
      Balance Sheet Arrangements**





None.




27





**Contractual
      Obligations, Contingent Liabilities and Commitments**





We
      have
      contractual obligations and commitments primarily with regard to facilities
      leases, employment contracts and deferred consideration payable for
      acquisitions. A non-cancelable office leases in the United States requires
      monthly payments of $31,176 in January 2008 escalating to $36,472 through July
      2012. Our United Kingdom office lease requires monthly payments of approximately
      $2,580 through July 2017. Employment contracts with officers and key employees
      require annual payments of approximately $2.4 million in 2008, $2.1 million
      in
      2009, $0.7 million in 2010, $0.4 million in 2011 and $0.2 million in 2012.
      Under
      the terms of the King of the Cage purchase agreement, we are obligated to issue
      a minimum of 178,571 shares of common stock in 2008. Additionally, if King
      of
      the Cage achieves specified performance goals, we could be required to make
      contingent payments over five years of as much as $3.8 million in cash and
      $1.3
      million in stock (assuming a $7 per share value). Additionally, we are required
      to pay 20% of earnings before interest, taxes, depreciation and amortization
      (“EBITDA”) in excess of $850,000, and increasing to $1,650,000 over five years
      to the former owners of King of the Cage. Under the terms of the CageRage
      acquisition, we have a liability to pay $1 million in October 2008. Under the
      terms of the asset purchase agreement with Future Fight Productions, we are
      required to issue 100,000 shares of common stock and could be required to pay
      an
      additional $100,000 if the Future Fight Productions achieves EBITDA in excess
      of
      $195,000 for the twelve months ended November 30, 2008. Additionally, we have
      contracts with venues and other vendors requiring payments of approximately
      $0.7
      million in 2008 and $0.1 million in 2009.





**Critical
      Accounting Estimates and Policies**





Critical
      accounting policies are those that are important to the portrayal of our
      financial condition and results, and which require management to make difficult,
      subjective or complex judgments. Critical accounting policies cover accounting
      matters that are inherently uncertain because the future resolution of such
      matters is unknown. We have made critical estimates in the following areas.
      We
      also believe the following critical accounting policies affect our more
      significant judgments and estimates used in the preparation of our consolidated
      financial statements.





*Revenue*





We
      earn
      revenue primarily from ticket sales, events broadcast on pay-per-view television
      and sponsorship at live events. We also earn incidental revenue from event
      merchandise and video sales. Ticket sales are managed by third-parties, ticket
      agencies and live event venues. Revenue from ticket sales is recognized at
      the
      time of the event when the venue provides estimated or final attendance
      reporting to the Company. Revenue from merchandise and video sales is recognized
      at the point of sale at live event concession stands. Revenue from sponsorship
      and distribution agreements is recognized in accordance with the contract terms,
      which are generally at the time events occur.




28





On
      our
      websites, we earn revenue from online advertising and subscription services.
      Revenue is recognized at the time advertising is run or subscription terms
      are
      met.





*Significant
      estimates for events*





The
      Company is required to estimate significant components of live event revenues
      and costs because actual amounts may not become available until one or more
      months after an event date. Pay-per-view revenue for live events is estimated
      based upon projected sales of pay-per-view presentations. These projections
      are
      based upon information provided from distribution partners. The amount of final
      pay-per-view sales is determined after intermediary pay-per-view distributors
      have completed their billing cycles. The television production costs of live
      events are based upon the television distribution agreement with Showtime,
      event-specific production and marketing budgets and historical experience.
      Should actual results differ from estimated amounts, a charge or benefit to
      the
      statement of operations would be recorded in a future period.





*Valuation
      of long-lived and intangible assets*





Long-lived
      assets consist primarily of property, plant and equipment, goodwill and
      intangibles.





Long-lived
      assets, including goodwill and indefinite-lived intangible assets, are reviewed
      for impairment annually or whenever events or changes in circumstances have
      indicated that their carrying amounts may not be recoverable, but no more than
      12 months following the acquisition date. Recoverability of these assets is
      measured by comparing the carrying amount of an asset to its fair value in
      a
      current transaction between willing parties, other than in a forced liquidation
      sale. Recorded fair value was estimated by independent appraisals and other
      valuation techniques.





Factors
      we consider important which could trigger an impairment review include the
      following:





·
            Significant
                underperformance relative to expected historical or projected future
                operating results;




·
            Significant
                changes in the manner of our use of the acquired assets or the strategy
                of
                our overall business;




·
            Significant
                negative industry or economic
                trends;




·
            Significant
                decline in our stock price for a sustained period;
                and




·
            Our
                market capitalization relative to net book
                value.





If
      we
      determine that the carrying value of long-lived assets and related goodwill
      may
      not be recoverable based upon the existence of one or more of the above
      indicators of impairment, we would measure any impairment based on comparing
      the
      carrying amount of the asset to its fair value in a current transaction between
      willing parties or, in the absence of such measurement, on a projected
      discounted cash flow method using a discount rate determined by our management
      to be commensurate with the risk inherent in our current business model. Any
      amount of impairment so determined would be written off as a non-cash charge
      to
      the income statement, together with an equal reduction of the related
      asset.





Our
      acquisitions in 2007 resulted in us recording goodwill and intangible assets
      with indefinite lives of approximately $2.6 million and $3.8 million,
      respectively, for CageRage, approximately $2.4 million and $1.7 million,
      respectively, for King of the Cage and approximately $1.8 million and $0.6
      million, respectively, for the purchase of assets from Future Fight Productions
      (ICON). Maintaining these amounts is predicated upon us substantially improving
      the operations of CageRage and maintaining profitable operations of the other
      acquisitions. We have developed plans to increase the revenue and profitability
      of CageRage. Similarly, maintaining the goodwill and indefinite-lived intangible
      assets related to the ICON purchase requires us to improve the profitability
      and/or increase the number of ICON events. If we do not execute successfully
      against these plans, we will be required to record a non-cash charge to
      operations to reduce the amount of these assets.




29





*Stock-based
      compensation and warrant valuation*





We
      record
      stock-based compensation expense for options and warrants issued to employees
      and consultants in accordance with Statement of Financial Accounting Standards
      No. 123R, "Share-Based Payment" using a Black-Scholes option pricing model.
      Calculating stock-based compensation expense requires the input of highly
      subjective assumptions, including the expected term of the stock-based awards,
      stock price volatility and fair value of our stock. Due to our short history,
      we
      do not have reliable information about employee exercise behavior. Therefore,
      we
      estimate the expected life of options and warrants granted based on an average
      of the vesting terms and the term of the grant in accordance with guidance
      in
      the SEC’s Staff Accounting Bulletins No. 107 and 110. We estimate the volatility
      of our common stock on the date of grant based on the historical volatility
      of
      the stock of other publicly traded companies in the general entertainment
      industry. We believe the industry historical volatility is currently a better
      indicator of expected volatility and future stock price trends than the
      historical volatility of our stock because our stock has had limited or no
      trading volume. Additionally, due to the lack of trading in our stock, we
      estimate fair value using consummated transactions such as private placements
      of
      common stock and significant warrant grants where terms were negotiated.





The
      assumptions used in calculating the fair value of stock-based awards represent
      our best estimates, but these estimates involve inherent uncertainties and
      the
      application of management judgment. As a result, if factors change and we use
      different assumptions, our stock-based compensation expense could be materially
      different in the future.





**Recent
      Accounting Pronouncements**





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value
      Measurements”. SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles, and expands
      disclosures about fair value measurements. It applies under other accounting
      pronouncements that require or permit fair value measurements, the FASB having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this statement does not require
      any
      new fair value measurements. This statement is effective for all financial
      instruments issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. The Company has not yet determined
      the effect of SFAS No. 157 on its financial position, operations or cash
      flows.




In
      December 2007, the FASB issued SFAS 141(R), “Business Combinations”, replacing
      SFAS 141, “Business Combinations”. This statement retains the fundamental
      requirements in SFAS 141 that the acquisition method of accounting (which SFAS
      141 termed the purchase method) be used for all business combinations and for
      an
      acquirer to be identified for each business combination. This Statement also
      establishes principles and requirements for how the acquirer: a) recognizes
      and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any noncontrolling interest in the acquiree; b)
      recognizes and measures the goodwill acquired in the business combination or
      a
      gain from a bargain purchase; and c) determines what information to disclose
      to
      enable users of the financial statements to evaluate the nature and financial
      effects of the business combination. This Statement clarifies that acquirers
      are
      required to expense costs related to any acquisitions. SFAS 141R will apply
      prospectively to business combinations for which the acquisition date is on
      or
      after fiscal years beginning December 15, 2008. Early adoption is prohibited.
      The Company believes that SFAS 141R could have a significant impact on the
      Company’s future operations. Determination of the ultimate effect of this
      statement will depend on the Company’s acquisition plans at the date of
      adoption.




30




**Item
      7. Financial Statements**





Please
      see the financial statements beginning on page F-1 located elsewhere in this
      annual report on Form 10-KSB and incorporated herein by reference.





**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      8A. Controls and Procedures**





**Disclosure
      Controls and Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in the Company's Exchange Act reports
      is
      recorded, processed and summarized and is reported within the time periods
      specified in the SEC's rules and forms, and that such information is accumulated
      and communicated to the Company's management, including our Chief Executive
      Officer and Chief Financial Officer, as appropriate, to allow timely decisions
      regarding required disclosure. No matter how well designed and operated,
      disclosure control procedures can provide only reasonable assurance of achieving
      the desired control objectives, and management is required to apply its judgment
      in evaluating the cost-benefit relationship of possible controls and
      procedures.





The
      evaluation of our disclosure controls and procedures included a review of their
      objectives and design, our implementation of the controls, and any past
      instances of data errors, control problems or acts of fraud.





Our
      chief
      executive officer and chief financial officer have concluded, based on the
      evaluation of the effectiveness of the disclosure controls and procedures by
      our
      management, that as of December 31, 2007, our disclosure controls and procedures
      were not effective due to the material weaknesses described in Management’s
      Report on Internal Control over Financial Reporting below.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





As
      of the
      date of this report, the Company's management, including the Chief Executive
      Officer and interim Chief Financial Officer, carried out an evaluation of the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon the
      evaluation, the Chief Executive Officer and interim Chief Financial Officer
      concluded that the Company's disclosure controls and procedures are not
      effective in timely alerting them to material information required to be
      included in the Company's periodic SEC filings.




31





Our
      management, with the participation of our Chief Executive Officer and interim
      Chief Financial Officer, has evaluated our internal control over financial
      reporting as of December 31, 2007, based on the control criteria established
      in
      a report entitled Internal Control—Integrated Framework, issued by the Committee
      of Sponsoring Organizations of the Treadway Commission (COSO). That framework
      defines a material weakness as a control deficiency, or combination of control
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. Based on such evaluation, we have concluded that our internal
      control over financial reporting was not effective and contained significant
      deficiencies which represent a material weakness in the Company’s internal
      control over financial reporting as of December 31, 2007.





**Management’s
      Discussion of Material Weakness**





Management
      has identified the following groups of control deficiencies, each of which
      represents a material weakness in the Company’s internal control over financial
      reporting as of December 31, 2007:





·
            The
                Company’s accounting records, policies and procedures were not adequately
                maintained or documented, and the accounting department did not have
                sufficient technical accounting
                knowledge.


·
            Due
                to a lack of resources, the Company did not analyze financial and
                operating results in a timely manner, including spending by management
                and
                other officers. Additionally, the Company did not proactively review
                the
                legal contracts entered into for financial
                implications.


·
            Departments
                did not always work in a cohesive manner, particularly in regards
                to
                required disclosures, due diligence and acquisitions, and grants
                of
                options and warrants.


·
            A
                portion of the Company’s expenditures for live events are paid by and
                reimbursed to an executive/director in advance of review and approval
                of
                the charges.  ·
            The
                Company’s executives, directors and shareholders have business
                relationships requiring them to advise, manage and/or provide services
                to
                other businesses. The Company has engaged in transactions with some
                of
                these businesses. Due to the wide-ranging network of contacts and
                business
                relationships of our executives, directors and shareholders, the
                Company
                was not always able to devote sufficient resources to identify, monitor
                and report all transactions with such businesses in a timely
                manner.




Management
      of the Company takes very seriously the strength and reliability of the internal
      control environment of the Company. During 2007 and continuing in 2008, the
      Company dedicated resources to improve the control environment. Progress was
      made with respect to deficiencies that included:





·
            Implementation
                of new accounting and analysis systems. We implemented a new and
                more
                robust accounting software system and began a budgeting, planning
                and
                analysis process. Additionally, we hired new accounting and finance
                department personnel with experience and skills appropriate for a
                publicly
                traded company.


·
            Creating
                an in-house legal department by hiring two
                attorneys.


·
            Installing
                a new Chief Executive Officer in March 2008 with experience and skills
                appropriate for a publicly traded company. Also in March 2008, we
                engaged
                a human resources consultant to assess and improve our human resources
                policies, practices and procedures.





Additionally,
      the Company has plans to continue addressing deficiencies,
      including:





·
            Initiation
                of a cascading sub-certification process among all process owners
                and
                managers.


·
            Implementing
                a software-based purchase order and approval
                system.


·
            Documentation
                and testing of the IT general control structure and process
                controls.


·
            Focus
                on developing a top-down, risk-based approach to SOX compliance that
                focuses on key controls.


·
            More
                actively engaging the Audit and Compensation Committees of the Board
                of
                Directors.





Management
      acknowledges its responsibility for internal controls over financial reporting
      and seeks to continually improve those controls. In order to achieve compliance
      with Section 404 of the Act, we are currently performing the system and process
      documentation and evaluation needed to comply with Section 404, which is both
      costly and challenging. We believe our process for documenting, evaluating
      and
      monitoring our internal control over financial reporting is consistent with
      the
      objectives of Section 404 of the Act.




32





This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this annual report.





**Changes
      in Internal Controls**





The
      Company has begun taking remediation steps to enhance its internal control
      over
      financial reporting and reduce control deficiencies. We are actively working
      to
      eliminate the internal control weaknesses and deficiencies noted by
      strengthening management and by documenting and testing the control environment
      and process controls.





**Item
      8B. Other Information**





None.




33


**Part
      III**





**Item
      9. Directors, Executive Officers, Promoters, Control Persons and Corporate
      Governance, Compliance with Section 16(A) Of The Exchange
      Act**





The
      following table and text set forth the names of all directors and executive
      officers of our Company as of December 31, 2007. All of the directors will
      serve
      until the next annual meeting of shareholders and until their successors are
      elected and qualified, or until their earlier death, retirement, resignation
      or
      removal. There are no family relationships between or among the directors,
      executive officers or persons nominated by our Company to become directors
      or
      executive officers. The brief descriptions of the business experience of each
      director and executive officer and an indication of directorships held by each
      director in other companies subject to the reporting requirements under the
      Federal securities laws are provided herein below.





Our
      directors and executive officers are as follows:





**Name**
            
            **Age**
            
            **Position**Douglas
                DeLuca
            
            41
            
            Chairman
                of the Board, Chief Strategy OfficerCharles
                Champion
            
            54
            
            Chief
                Executive Officer, DirectorDavid
                M. Marshall
            
            45
            
            DirectorGary
                Shaw
            
            63
            
            President
                of EliteXC Live, DirectorKen
                Hershman
            
            44
            
            DirectorClifford
                Hyatt
            
            50
            
            DirectorWilliam
                Kelly
            
            44
            
            Chief
                Operating OfficerKurt
                Brendlinger
            
            46
            
            Secretary,
                DirectorKelly
                Perdew
            
            41
            
            President
                of ProElite.comGary
                Margolis
            
            44
            
            DirectorDale
                Bolen
            
            39
            
            Interim
                Chief Financial Officer





**Biographies
      of Directors and Executive Officers**





Douglas
      DeLuca joined us in October 2006. From May 2002 to the present, Mr. DeLuca
      is a
      co-executive producer for ABC’s high profile, late-night vehicle, “Jimmy Kimmel
      Live.” From January 1998 to May 2002, Mr. DeLuca co-executive produced the first
      four seasons of Comedy Central’s original sketch comedy series, “The Man Show,”
which starred Jimmy Kimmel and Adam Corolla.





Charles
      Champion joined us in March 2008. In March 2002, Charles Champion, age 54,
      joined Youbet.com, Inc. (“Youbet”), a provider of technology and pari-mutual
      content and services for horse racing, as President and was promoted to Chief
      Executive Officer in September 2002. He was elected to the additional position
      of Chairman of the Board of Youbet in August 2003. In August 2005, Mr. Champion
      also assumed the responsibilities of Chief Operating Officer. On November 28,
      2007 Mr. Champion stepped down as President, Chief Executive Officer and
      Chairman of the Board of Youbet. From December 12, 2007 to March 3, 2008, Mr.
      Champion worked as an independent consultant.





David
      Marshall joined us in October 2006, and is a co-founder of Youbet.com, Inc.
      (NASDAQ:UBET), the largest legal online gaming company in the U.S. based on
      total wagers. Mr. Marshall has served as Vice Chairman of the Youbet Board
      since
      September 2002. Youbet currently processes over $7 billion of wagering annually.
      Since December 1999, Mr. Marshall has also been a financial principal and/or
      consultant to various emerging growth companies providing finance, acquisition
      and operational expertise. In September 2005, Mr. Marshall founded NUI, LLC,
      a
      food and beverage, media and entertainment company focused solely on encouraging
      children to be smart, fit and happy. Mr. Marshall is also the Chief Executive
      Officer and Chairman of the Board of Directors of Santa Monica Media Corporation
      (AMEX:MEJ), a special purpose acquisition corporation.




Gary
      Shaw
      joined us in October 2006, and is currently President and Chief Executive
      Officer of Gary Shaw Productions, LLC, which he founded in 2002. Since 1999,
      Mr.
      Shaw has served as the Chief Operating Officer of Main Events, a boxing
      promotional company, in the position of Chief Operating Officer. Mr. Shaw began
      his professional affiliation with boxing in 1971, when he was appointed
      Inspector to the New Jersey State Athletic Control Commission.




34





Ken Hershman
        joined us in April 2008 as a Director. Mr. Hershman is Senior Vice President,
        General Manager, of Showtime Sports and Event Programming. He is responsible
        for
        the acquisition and licensing of network and pay-per-view sports and event
        programming on a worldwide basis. Previously, from 2001 to 2003, Mr. Hershman
        served as Senior Vice President, Corporate Strategy/Showtime Sports and Event
        Programming. From 1997 to 2000, he served as Senior Vice President, Associate
        General Counsel for Showtime Networks He joined Showtime Networks Inc. in
        July
        1992 as Counsel.





Clifford
      Hyatt joined us in April 2008 as a Director. Mr. Hyatt is a Partner at the
      law
      firm of Pillsbury Winthrop Shaw Pittman LLP and specializes in securities
      regulation and litigation. Since 2002, Mr. Hyatt has represented public
      companies, broker-dealers, investment companies, investments advisors, and
      their
      officers and directors in matters before the SEC, NASD, NYSE, and state
      securities agencies and in federal and state court. His practice also involves
      providing compliance advice and services to regulated businesses within the
      securities industry. From 1990-2001, Mr. Hyatt was an enforcement attorney
      for
      the United States Securities and Exchange Commission.





William
      Kelly joined us in October 2006 as Chief Operating Officer. Mr. Kelly also
      served ProElite.com as its President until January 8, 2007. Prior to joining
      us,
      Mr. Kelly served as Chief Operating Officer of Television Korea 24 Inc., a
      company he co-founded in June 2003. From May 2001 to June 2003, Mr. Kelly served
      the Extreme Sports Channel in the capacity of International Chief Operating
      Officer, tasked with launching the network in international
      markets.





Kurt
      Brendlinger joined us in October 2006. Mr. Brendlinger has been a partner of
      Santa Monica Capital Partners, LLC, a consulting firm, since June 2005, where
      he
      is responsible for corporate and business development and strategy, capital
      raising, and seeking investment opportunities. Since July 2004, Mr. Brendlinger
      has been the Managing Director of Aaron Fleck & Associates, LLC, a
      registered investment advisor where he is responsible for deal sourcing, capital
      raising, venture capital and private equity investments and asset management.
      From January 2002 to June 2004, Mr. Brendlinger was Chief Executive Officer
      and
      President of Rainmakers, Inc., an Internet marketing services company for the
      entertainment industry and currently serves as its Chief Executive Officer.
      Mr.
      Brendlinger is the Chief Financial Officer and a Director of Santa Monica Media
      Corporation (AMEX:MEJ), a special purpose acquisition corporation, and is also
      the Chief Financial Officer and Chairman of the Board of Directors of NuRX
      (OTCBB:NURX), a biotechnology company.





Kelly
      Perdew joined our subsidiary, ProElite.com, in January 2007. Mr. Perdew has
      been
      the Managing Director of Angel Venture Partners, LP, a venture capital firm,
      since June 2006, which requires less than ten hours a week of Mr. Perdew’s time.
      Since January 2004, Mr. Perdew has provided executive advisory and consulting
      services for Perdew Properties, LLC. From February 2001 to December 2004, Mr.
      Perdew served as President and Chief Executive Officer of The Layoff Lounge,
      an
      event production company that he co-founded. Mr. Perdew served as the President
      of CoreObjects Software, Inc., an offshore software developer, from March 2001
      to December 2004. Mr. Perdew served as the CEO of MotorPride, LLC, an online
      community for motor enthusiasts that he co-founded, from January 2004 to January
      2006 when he sold it to ZAG.com. Mr. Perdew was also the winner of Season 2
      of
      the reality show, The Apprentice, and served as an Executive Vice President
      in
      The Trump Organization from January 2005 to February 2006.




Gary
      Margolis joined us in April 2007. Mr. Margolis has been a Certified Public
      Accountant in the state of California for over 15 years and specializes in
      income tax. Mr. Margolis has been the Chief Executive Officer of Gary A.
      Margolis Accountancy Corporation since December 1994, which currently has over
      4,500 clients. Mr. Margolis has been the Chief Executive Officer of Athlete’s
      Exclusive Inc., which provides industry talent books for clients such as ESPN.
      From August 1991 to December 1994, Mr. Margolis has worked as the controller
      for
      Beverly Hills Sports Council, Inc., a baseball sports agent based in Beverly
      Hills, California.




Dale
      Bolen joined us as Controller in July 2007. In March 2008, Mr. Bolen was
      appointed Interim Chief Financial Officer. Prior to joining us, Mr. Bolen served
      as Director of Finance for TagWorld, Inc., social networking Internet website,
      from February 2006 to June 2007. From May 2002 through February 2006, Mr. Bolen
      co-founded and served as Chief Financial Officer of BioRenew Labs, LLC, which
      designs, manufactures and markets consumer products. Mr. Bolen has been a
      Certified Public Accountant in the state of California since July
      1995.




35





**Audit
      Committee**





Our
      directors, Gary Margolis, Ken Hershman, Clifford Hyatt and David Marshall,
      are
      members of our audit committee. Mr. Margolis is the audit committee financial
      expert serving on our audit committee. Mr. Margolis and Mr. Hyatt would be
      considered “independent directors” as defined for members of the Audit Committee
      by NASDAQ Marketplace Rules.





**Compensation
      Committee**





Our
      directors, Gary Margolis, Ken Hershman, Clifford Hyatt and David Marshall,
      are
      members of our compensation committee. Mr. Margolis and Mr. Hyatt would be
      considered “independent directors” as defined for members of the Compensation
      Committee by NASDAQ Marketplace Rules.





**Executive
      Committee**





Our
      directors, David Marshall (Chairman), Doug DeLuca, Gary Shaw, Kurt Brendlinger
      and Charles Champion, are members of our executive committee.





**Committees**





Our
      Board
      of Directors has no committees other than the Audit Committee, the Compensation
      Committee and the Executive Committee.





**Director
      Independence**





Gary
      Margolis and Clifford Hyatt would be considered “independent directors” as
      defined by NASDAQ Marketplace Rules.





**Resignation**





James
      Kimmel served on our Board of Directors from January 8, 2007 through January
      22,
      2007.





**Item
      10. Executive Compensation**





**Compensation
      of Executive Officers**





The
      following table summarizes compensation paid or, or earned by our former Chief
      Executive Officer and current Chairman of the Board, President of the EliteXC
      Live division and President of the ProElite.com division.





**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Option**
              **Awards**
              **($)****(1)**
            
            **Non-Equity**
              **Incentive
                Plan Compensation**
              **($)**
            
            **Non-qualified
                Deferred**
              **Compensation
                Earnings**
              **($)**
            
            **All**
              **Other**
              **Compensation**
              **($)**
            
            **Total**
              **($)**Doug
                DeLuca, former Chief Executive Officer
            
            
            2007
            
            $
            200,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            $
            200,0002006
            
            $
            51,026
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            $
            51,026Gary
                Shaw, President of EliteXC Live (2)
            
            
            2007
            
            $
            270,833
            
            
            -
            
            
            
            
            $
            -
            
            
            -
            
            $
            164,891
            
            $
            435,7242006
            
            $
            61,857
            
            
            -
            
            $
            84,556
            
            
            -
            
            
            -
            
            $
            34,733
            
            $
            181,146Kelly
                Perdew, President of ProElite.com (3)
            
            
            2007
            
            $
            221,875
            
            
            -
            
            $
            253,349
            
            
            -
            
            
            -
            
            
            -
            
            $
            475,2242006
            
            $
            25,000
            
            
            -
            
            $
            6,819
            
            
            -
            
            
            -
            
            
            -
            
            $
            31,819





(1)
      This
      value represents the dollar amount recognized for financial statement reporting
      purposes with respect to the year ended December 31, 2007 and the period from
      August 10, 2006 (inception) to December 31, 2006 for the fair value of stock
      options granted, in accordance with SFAS 123R. Pursuant to SEC rules, the
      amounts shown exclude the impact of estimated forfeitures related to
      service-based vesting conditions. For additional information on the valuation
      assumptions with respect to these grants, refer to Note 11 of our financial
      statements in this Annual Report. These amounts reflect our accounting expense
      for these awards, and do not correspond to the actual value that will be
      recognized from these awards by the named director.




36





(2)
“All
      Other Compensation” for Mr. Shaw includes housing allowances and reimbursement
      of office fees.





(3)
      The
      amount in 2006 Salary includes $25,000 for services provided by Mr. Perdew
      as a
      consultant in 2006.





**Employment
      Agreements and Severance Agreements**





The
      Company entered into several new employment agreements with newly appointed
      executive officers and key employees of the Company.





Charles
      Champion. The Company agreed to employ Mr. Champion as the Company’s Chief
      Executive Officer effective March 3, 2008. The term of the Champion Agreement
      is
      for two years. Mr. Champion is to receive an annual salary of $240,000, with
      bonuses at the discretion of the Board. Mr. Champion was granted five-year
      options to purchase 1,000,000 shares of the Company’s Common Stock at an
      exercise price of $2.00 per share.





**Stock
      Option Grants**





The
      following table sets forth information as of December 31, 2007 concerning
      unexercised options, unvested stock and equity incentive plan awards for the
      executive officers named in the Summary Compensation Table.





**OUTSTANDING
      EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 2007**




**Option
                Awards****Name**
            
            **Number
                of Securities Underlying Unexercised Options**
              **(#)
                Exercisable**
            
            **Number
                of Securities Underlying Unexercised Options**
              **(#)
                Unexercisable**
            
            **Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options**
              **(#)**
            
            **Option
                Exercise Price**
              **($)**
            
            **Option
                Expiration Date**Doug
                DeLuca, former Chief Executive Officer
            
            
            25,000
            
            
            -
            
            
            -
            
            $
            0.60
            
            
            10/03/09Gary
                Shaw, President of EliteXC Live
            
            
            250,000
            
            
            -
            
            
            -
            
            $
            2.00
            
            
            11/25/11Kelly
                Perdew, President of ProElite.com
            
            
            658,146
            
            
            1,020,000
            
            
            -
            
            $
            2.00
            
            
            01/07/17Kelly
                Perdew, President of ProElite.com
            
            
            15,000
            
            
            -
            
            
            -
            
            $
            2.00
            
            
            10/16/11Kelly
                Perdew, President of ProElite.com
            
            
            5,000
            
            
            -
            
            
            -
            
            $
            2.00
            
            
            12/15/11




37





**OPTION
      EXERCISES DURING THE YEAR**





The
      following table sets forth information as of December 31, 2007 concerning
      exercised options, unvested stock and equity incentive plan awards for the
      executive officers named in the Summary Compensation Table.





**Option
                Awards****Name**
            
            **Number
                of Shares Acquired on Exercise**
            
            **Value
                Realized on Exercise**Doug
                DeLuca, former Chief Executive Officer
            
            
            -
            
            
            -Gary
                Shaw, President of EliteXC Live
            
            
            -
            
            
            -Kelly
                Perdew, President of ProElite.com
            
            
            22,111
            
            $
            95,077




**Stock
      Option Plan**




In
        2006,
        the Company adopted its 2006 Stock Option Plan (the “2006 Plan”) and amended the
        plan in 2007, pursuant to which the Company is authorized to grant awards
        of up
        to 8,000,000 shares of common stock to employees, officers, directors,
        consultants and advisors. The 2006 Plan is to be administered by the Board
        of
        Directors or a committee to whom the Board of Directors has delegated some
        or
        all of the administration of the plan. As of the date of this Annual Report,
        the
        Board of Directors administers the 2006 Plan. The Board of Directors may
        also
        delegate nondiscretionary administrative duties to such employees of the
        Company
        as it deems proper.
 
 The
        Board
        of Directors will determine the persons to whom awards shall be made, the
        number
        of shares to be covered by each award, and the terms thereof. In doing so,
        the
        Board of Directors shall take into account the duties of the respective persons,
        their present and potential contributions to the success of the Company and
        such
        other factors as the Board of Directors shall deem relevant in connection
        with
        accomplishing the purposes of the 2006 Plan. Under the 2006 Plan, the Board
        of
        Directors can make awards of options. Unless otherwise determined by our
        Board
        of Directors, awards granted under the 2006 Plan are not transferable other
        than
        by will or by the laws of descent and distribution. No award shall have a
        term
        exceeding ten years, measured from the date of the grant.
 
 In
        the
        event that the Company or the division, subsidiary or other affiliated entity
        for which a 2006 Plan participant performs services is sold, merged,
        consolidated, reorganized or liquidated, and the Plan is not continued, all
        unvested options immediately vest.
 
 The
        Board
        of Directors may amend, suspend or terminate the 2006 Plan or any portion
        thereof at any time; provided, however, that no amendment shall be made without
        stockholder approval if such approval is necessary to comply with any applicable
        tax or regulatory requirement.
  During
        of
        2007, we granted 3,745,000 options under the 2006 Plan to purchase shares
        at
        exercise prices from $2.00 to $7.00 per share. As of December 31, 2007, there
        were outstanding options under the 2006 Plan to purchase approximately 4,875,859
        shares of our common stock at a weighted- average exercise price of
        approximately $2.18 per share.





**Compensation
      of Directors**





During
      the year ended December 31, 2007 and the period from August 10, 2007 (inception)
      to December 31, 2006, we did not pay any of our directors any cash compensation
      for serving on the Board of Directors of Directors.





The
      following table sets forth information concerning the compensation paid to
      each
      of our directors during 2007 for their services rendered as
      directors.





**DIRECTOR
      COMPENSATION FOR FISCAL YEAR ENDED DECEMBER 31, 2007**




**Name**
            
            
            **Fees
                Earned or Paid in Cash**
              **($)**
            
            
            **Stock
                Awards**
              **($)**
            
            
            **Option
                Awards ($)****(1)**
            
            
            **Non-Equity
                Incentive Plan Compensation ($)**
            
            
            **Nonqualified
                Deferred Compensation Earnings**
              **($)**
            
            
            **All
                Other Compensation**
              **($)**
            
            
            **Total**
              **($)**David
                Marshall
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Kurt
                Brendlinger
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Doug
                DeLuca
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Gary
                Shaw
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Gary
                Margolis
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Bryon
                Rubin
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**





The
      following table sets forth, as of December 31, 2007, certain information
      regarding beneficial ownership of our common stock by (i) each person or entity
      who is known by us to own beneficially more than 5% of the outstanding shares
      of
      common stock, (ii) each of our directors, and (iii) all directors and executive
      officers as a group. As of December 31, 2007, there were 56,297,483 shares
      of
      our common stock issued and outstanding. In computing the number and percentage
      of shares beneficially owned by a person, shares of common stock that a person
      has a right to acquire within sixty (60) days of December 31, 2007, pursuant
      to
      options, warrants or other rights are counted as outstanding, while these shares
      are not counted as outstanding for computing the percentage ownership of any
      other person. Unless otherwise indicated, the address for each shareholder
      listed in the following table is c/o ProElite, Inc., 12121 Wilshire Boulevard,
      Suite 1001, Los Angeles, California 90025. This table is based upon information
      supplied by directors, officers and principal shareholders.




38





**Name
                of Beneficial Owner**
            
            **Shares
                Beneficially Owned**
            
            **Percent
                of Total****Officers,
                Directors, and 5% Shareholders**Douglas
                DeLuca (1)
            
            
            4,466,830
            
            
            6.3
            %Charles
                Champion
            
            
            -
            
            
            *David
                Marshall (2)(3)(5)
            
            
            4,447,028
            
            
            6.3
            %Kurt
                Brendlinger (2)(4)(5)
            
            
            4,414,946
            
            
            6.3
            %Gary
                Shaw (6)
            
            
            2,708,220
            
            
            3.8
            %William
                Kelly (7)
            
            
            183,061
            
            
            *Kelly
                Perdew (8)
            
            
            779,889
            
            
            1.1
            %Dale
                Bolen (9)
            
            
            25,000
            
            
            *Gary
                Margolis (15)
              343
                N. Lima Street
              Sierra
                Madre, CA 91024
            
            
            -
            
            
            *Clifford
                Hyatt (15)
              c/o
                Pillsbury Winthrop Shaw Pittman LLP
              725
                South Figueroa Street, Suite 2800
              Los
                Angeles, CA 90017
            
            
            -
            
            
            *Ken
                Hershman (10)
              c/o
                Showtime Networks
              51
                W. 52nd St
              New
                York, NY 10019
            
            
            -
            
            
            *All
                Officers and Directors as a group (ten persons)
            
            
            17,024,974
            
            
            24.2
            %Lifelogger
                LLC (5)
              11845
                W. Olympic Blvd., #1125W
              Los
                Angeles, CA 90064
            
            
            3,948,579
            
            
            5.7
            %Santa
                Monica Capital Partners II, LLC (3)(5)
              11845
                W. Olympic Blvd., #1125W
              Los
                Angeles, CA 90064
            
            
            11,780,410
            
            
            16.7
            %Eric
                Pulier (2)(5)(11)
              11845
                W. Olympic Blvd., #1125W
              Los
                Angeles, CA 90064
            
            
            4,445,054
            
            
            6.3
            %Hunter
                World Markets, Inc. (13)
              9300
                Wilshire Blvd., Penthouse
              Beverly
                Hills, CA 90212
            
            
            5,652,949
            
            
            8.0
            %Absolute
                Return Europe Fund (14)
              c/o
                Hunter World Markets, Inc.
              9300
                Wilshire Blvd., Penthouse
              Beverly
                Hills, CA 90212
            
            
            4,291,579
            
            
            6.1
            %Showtime
                Networks Inc.(11)(12)
              1633
                Broadway
              New
                York, NY 10019
            
            
            9,166,668
            
            
            13.0
            %





*
      Less
      than 1%.





(1)
      Douglas DeLuca also holds a warrant to purchase 25,000 shares of common stock
      at
      an exercise price of $0.60 per share, which expires on October 3,
      2009.




39





(2)
      3,205,665 of the shares reported by each of David Marshall, Kurt Brendlinger,
      and Eric Pulier are owned through their beneficial ownership of Santa Monica
      Capital Partners II, LLC. Messrs. Marshall, Brendlinger and Pulier each
      beneficially own 33 1/3% of Santa Monica Capital Partners II, LLC. 721,155
      of
      the shares reported by each of David Marshall, Kurt Brendlinger, and Eric Pulier
      are owned through their beneficial ownership of Lifelogger, LLC, which is
      beneficially owned through their ownership of Santa Monica Capital Partners
      II,
      LLC. Each of Messrs. Marshall, Brendlinger and Pulier disclaims beneficial
      ownership of shares of our common stock in excess of his percentage ownership
      of
      Santa Monica Capital Partners II, LLC.





(3)
      Mr.
      Marshall’s interest in Santa Monica Capital Partners II, LLC is held indirectly
      by Santa Monica Capital, LLC, of which he is the sole member. The remaining
      395,225 shares are owned through Santa Monica Capital, LLC. Mr. Marshall is
      also
      the sole shareholder of David Marshall, Inc., which owns a warrant to purchase
      125,000 shares of common stock at an exercise price of $0.60 per share, which
      expires on October 3, 2009.





(4)
      Mr.
      Brendlinger’s interest in Santa Monica Capital Partners II, LLC is held
      indirectly by E’s Holdings, Inc., of which he is the sole shareholder. The
      remaining 413,143 shares are owned through E’s Holdings, Inc. Mr. Brendlinger
      also owns a warrant to purchase 75,000 shares of common stock at an exercise
      price of $0.60 per share, which expires on October 3, 2009.





(5)
      Santa
      Monica Capital Partners II, LLC is the record owner of 9,616,994 shares of
      our
      common stock and beneficially owns 2,163,466 shares of our common stock by
      reason of its 54.8% ownership interest of Lifelogger, LLC. Santa Monica Capital
      Partners II disclaims beneficial ownership of shares of our common stock in
      excess of its percentage ownership of Lifelogger LLC. As described above in
      notes 2 thru 4, Messrs. Marshall, Brendlinger and Pulier beneficially own shares
      of our common stock by reason of their membership ownership of Santa Monica
      Capital Partners II, LLC.





(6)
      Gary
      Shaw holds a warrant to purchase 250,000 shares of common stock at $2.00 per
      share, which expires on November 25, 2011.




(7)
      William Kelly does not own any shares of common stock. The number of shares
      reported as beneficially owned by Mr. Kelly are shares of common stock
      underlying the options granted to Mr. Kelly pursuant to his employment
      agreement. Mr. Kelly holds an option to purchase 393,894 shares of common stock
      at $2.00 per share with vesting over three years ending October 2, 2009, and
      was
      granted an option in April 2007 to purchase 75,000 shares of common stock at
      $3.25 per share with vesting over three years ending April 30,
      2010.





(8)
      Kelly
      Perdew does not own any shares of common stock. The number of shares reported
      as
      beneficially owned by Mr. Perdew are shares of common stock underlying the
      options granted to Mr. Perdew pursuant to his employment agreement. Mr. Perdew
      holds an option to purchase 1,678,146 shares of common stock at $2.00 per share,
      of which 760,146 have vested or will vest within the next 60 days. Mr. Perdew
      also holds warrants to purchase 15,000 and 5,000 shares of common stock at
      $2.00
      per share, which expire on October 15, 2011 and December 15, 2011,
      respectively.





(9)
      Dale
      Bolen does not own any shares of common stock. The number of shares reported
      as
      beneficially owned by Mr. Bolen are shares of common stock underlying an option
      grant. Mr. Bolen holds an option to purchase 200,000 shares of common stock
      at
      $6.00 per share, of which 25,000 have vested or will vest within the next 60
      days.




(10)
      Ken
      Hershman was appointed to the Board of Directors pursuant to the exclusive
      distribution agreement with Showtime Networks, Inc., dated November 8, 2006
      and
      the investor rights agreement entered into with SNI, dated January 3,
      2007.





(11)
      Mr.
      Pulier’s interest in Santa Monica Capital Partners II, LLC is held indirectly by
      New Vision Ventures, LLC, of which he is Manager. The remaining 493,251 shares
      are owned through New Vision Ventures, LLC. Mr. Pulier also owns a warrant
      to
      purchase 25,000 shares of common stock at an exercise price of $0.60 per share,
      which expires on October 3, 2009.




40





(12)
      Consists of 5,000,001 shares of our common stock and warrants to purchase up
      to
      1,166,667 shares of our common stock at $2.00 per share, owned of record by
      Showtime Networks Inc., a wholly owned subsidiary of CBS Corporation. Showtime
      also has a warrant to purchase an additional 2,500,000 shares of our common
      stock at $2.00 per share upon the earlier of November 8, 2009 and the date
      when
      the Exclusive Distribution Agreement, described above under Description of
      Business, is terminated due to a breach on our part, if any. Showtime also
      has a
      warrant to purchase 2,500,000 shares of our common stock at $2.00 per share
      with
      vesting over three years ending November 8, 2009.





(13)
      Includes 2,522,949 shares of common stock owned by Hunter World Markets, Inc.
      and 30,000 shares of common stock controlled by a principal of Hunter World
      Markets, Inc. Includes a warrant to purchase 350,000 shares of common stock
      at
      an exercise price of $0.60 per share. The number of shares reported includes
      a
      warrant to purchase 2,750,000 shares of common stock at an exercise price of
      $2.00 per share, which is not exercisable until October 3, 2007.





(14)
      Includes 3,291,579 shares of common stock and warrants to purchase 1,000,000
      shares of common stock at exercise prices of $7.00 per share.




(15)
      Mr. Margolis and Mr. Hyatt were appointed directors
      pursuant to the Placement Agent Agreement with Hunter World Markets,
      Inc.   **Equity
        Compensation Plan Information**
  The
        following table summarizes as of December 31, 2007, the number of securities
        to
        be issued upon the exercise of outstanding derivative securities (options
        and
        rights); the weighted-average exercise price of the outstanding derivative
        securities; and the number of securities remaining available for future issuance
        under our equity compensation plans.
 
 
 Plan
                  Category
              
              Number
                  of securities to be issued upon exercise of outstanding options,
                  and
                  rights
              
              Weighted-average
                  exercise price of outstanding options, and rights
              
              Number
                  of securities remaining available for future issuance under equity
                  compensation plansEquity
                  compensation plans approved by security holders
              
              4,875,859
              
              $2.77
              
              3,439,270Equity
                  compensation plans not approved by security holders (a)
              
              30,500,137
              
              $2.85
              
              -35,375,996
              
              $2.83
              
              3,439,270
 
 (a)
        Amount represents warrants issued outside of the 2006 Stock Option
        Plan.
 
 The
        Company adopted its 2006 Stock Option Plan and amended the plan in 2007,
        reserving a total of 8,000,000 shares. The plan provides for the issuance
        of
        statutory and non-statutory stock options to employees, directors and
        consultants, with an exercise price equal to the fair market value of the
        Company’s common stock on the date of grant.


**Item
      12. Certain Relationships and Related Transactions**





This
      section describes the transactions we have engaged in with persons who were
      directors, officers or affiliates at the time of the transaction, and persons
      known by us to be the beneficial owners of 5% or more of our common stock as
      of
      December 31, 2007.




During
      the period ended December 31, 2006, we borrowed and repaid $250,000 from certain
      of our shareholders, David Marshall, Inc., Eric Pulier, Douglas DeLuca and
      Kurt
      Brendlinger, under a bridge loan agreement, pursuant to which we issued warrants
      for an aggregate number of 250,000 shares of our common stock to these
      shareholders. David Marshall, Inc., an affiliate of our Chairman and director,
      David Marshall, received a warrant for 125,000 shares of our common stock;
      Eric
      Pulier, a major shareholder through his ownership interest in Santa Monica
      Capital Partners II, LLC, received a warrant for 25,000 shares of our common
      stock; Douglas DeLuca, our Chief Executive Officer, received a warrant for
      25,000 shares of our common stock; and Kurt Brendlinger, our Secretary and
      a
      Director, received a warrant for 75,000 shares of our common stock. The warrants
      have an exercise price of $0.60 per share. The deemed annual interest rate
      on
      this loan was 393%. The interest rate is calculated based on the fair value
      of
      the warrants using the Black-Scholes model, the cash paid as interest, and
      the
      number of days the loan was outstanding. The loan was payable at the earlier
      of
      a closing of a private placement or six months from date of issuance. The
      private placement closed approximately 60 days after the date of issuance,
      at
      which time the loan was repaid.





During
      the period ended December 31, 2006, we borrowed and repaid $350,000 from Hunter
      World Markets, Inc., under the placement agent agreement, dated August 15,
      2006,
      pursuant to which Hunter World received a bridge warrant for 350,000 shares
      of
      our common stock, which has an exercise price of $0.60 per share. The deemed
      annual interest rate on this loan was 393%. The interest rate is calculated
      based on the fair value of the warrants using the Black-Scholes model, the
      cash
      paid as interest, and the number of days the loan was outstanding. The loan
      was
      payable at the earlier of a closing of a private placement or six months from
      date of issuance. The private placement closed approximately 60 days after
      the
      date of issuance, at which time the loan was repaid. In connection with its
      services as a placement agent in our October 2006 private placement offering,
      we
      paid to Hunter a commission of $1,000,000 and issued a five-year warrant to
      purchase up to 3,000,000 shares of common stock at an exercise price of $2.00
      per share. In connection with its services as a placement agent in our July
      2007
      private placement offering, we paid to Hunter a commission of $2,250,000 and
      issued a five-year warrant to purchase up to 3,517,428 shares of common stock
      at
      an exercise price of $7.00 per share. Hunter also has the right to nominate
      up
      to 2 members to our Board of Directors, including Hunter’s existing
      designee.





We
      have
      entered into a three-year term consulting agreement ending on September 30,
      2009, with Santa Monica Partners II, LLC, a Delaware limited liability company
      whose members include Kurt Brendlinger, our Secretary and a director, David
      Marshall, our Chairman and a director, and Eric Pulier. Pursuant to this
      agreement, we pay a monthly consulting fee of $30,000 to Santa Monica Capital
      Partners II, LLC for services relating to strategic planning, investor
      relations, acquisitions, corporate governance and financing. Additionally,
      we
      incurred costs of approximately $200,000 for services paid on behalf of Santa
      Monica Capital Partners II, LLC.




41





We
      have
      entered into an exclusive distribution agreement with Showtime Networks, Inc.





We
      have
      acquired certain assets from Lifelogger LLC, a Delaware limited liability
      company, in exchange for 4,000,000 shares of our common stock. Santa Monica
      Capital Partners II, LLC, a limited liability company, indirectly owns
      approximately 61% in membership interest in Lifelogger LLC through SASHC, LLC,
      a
      California limited liability company. Santa Monica Capital Partners II owns
      a
      68.75% membership interest in SASHC, LLC, which owns approximately 88.9% in
      membership interests in Lifelogger LLC.





In
      July
      2007, four institutional investors purchased $22.5 million of our units, as
      described earlier under Private Placements. Each unit consisted of one share
      of
      our common stock and one half of a five-year warrant to purchase one share
      of
      our common stock. In addition, on or about August 23, 2007, the investors
      purchased an additional 357,143 shares of common stock from certain selling
      shareholders, including executive officers, directors, shareholders holding
      more
      than 5% of the outstanding shares of common stock of the Company, and their
      affiliates. In connection with the sale of shares by the selling shareholders,
      we issued warrants to purchase an additional 178,571 shares of our common stock.
      We agreed to issue the additional warrants in consideration of the selling
      shareholders' entering into a lock-up agreement, whereby each of the
      shareholders agreed to not sell any shares owned directly or indirectly by
      any
      of them for a period of 18 months from the date of this prospectus.
      Approximately 27 security holders participated in the August sale, and no one
      shareholder received more than $833,921.





**Item
      13. Exhibits**





See
      the
      attached exhibit index.





**Item
      14. Principal Accountant Fees and Services**





Gumbiner
      Savett, Inc. audited our financial statements for the year ended December 31,
      2007 and the period from inception (August 10, 2006) to December 31, 2006.
      The
      following table shows amounts billed by Gumbiner Savett, Inc. during the periods
      ended December 31, 2007 and 2006:


2007
              
              2006Audit
                  fees
              
              $
              464,870
              
              $
              25,000Audit-related
                  fees
              
              
              -
              
              
              -Tax
                  fees
              
              
              -
              
              
              -All
                  other fees
              
              
              -
              
              
              -





Audit
      fees represent amounts billed for professional services rendered for the audit
      of our annual financial statements, the review of our interim financial
      statements, review of our filings on Form SB-2 for securities registrations,
      and
      the audit of financial statements of King of the Cage, an acquisition closed
      in
      September 2007.




42


**SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
        the
        registrant caused this report to be signed on its behalf by the undersigned,
        thereunto duly authorized.
 ProElite,
                Inc.Date: April
                15, 2008
              By:
              /s/ Charles
                ChampionCharles
                ChampionChief
                Executive Officer
  In
        accordance with the Securities Exchange Act of 1934, this Annual Report has
        been
        signed below by the following persons on behalf of the registrant in the
        capacities and on the dates indicated.
 Signature
                Title
                Date/s/
                    Charles Champion
                Chief
                    Executive Officer
                April
                    15, 2008Charles
                    ChampionInterim
                    Chief Financial Officer/s/
                    Dale Bolen
                (Principal
                    Financial and Accounting Officer)
                April
                    15, 2008Dale
                    Bolen/s/
                    Doug DeLuca
                Director
                April
                    15, 2008Doug
                    DeLuca/s/
                    David Marshall
                Director
                April
                    15, 2008David
                    Marshall/s/
                    Kurt Brendlinger
                Director
                April
                    15, 2008Kurt
                    Brendlinger/s/
                    Gary Shaw
                Director
                April
                    15, 2008Gary
                    Shaw/s/
                    Ken Hershman
                Director
                April
                    15, 2008Ken
                    Hershman


43




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




PageReport
                  of Independent Registered Public Accounting Firm
              
              F-2Consolidated
                  Balance Sheets
              
              F-3Consolidated
                  Statements of Operations
              
              F-4Consolidated
                  Statements of Shareholders’ Equity
              
              F-5Consolidated
                  Statements of Cash Flows
              
              F-6Notes
                  to Consolidated Financial Statements
              
              F-8







**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors


ProElite,
      Inc.




We
      have
      audited the accompanying consolidated balance sheets of ProElite, Inc. and
      subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related
      consolidated statements of operations, shareholders' equity and cash flows
      for
      the year ended December 31, 2007 and the period from August 10, 2006 (inception)
      through December 31, 2006. These consolidated financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these consolidated financial statements based on our
      audit.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audits included consideration of internal control
      over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of ProElite, Inc. and
      subsidiaries as of December 31, 2007 and 2006, and the results of their
      operations and their cash flows for the year ended December 31, 2007 and the
      period from August 10, 2006 (inception) through December 31, 2006 in conformity
      with United States generally accepted accounting principles.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company has suffered losses from
      operations and negative cash flows from operations that raise substantial doubt
      about its ability to continue as a going concern. Management's plan in regard
      to
      these matters is also described in Note 2. The consolidated financial statements
      do not include adjustments that might result from the outcome of this
      uncertainty.








/s/
      GUMBINER SAVETT INC.





GUMBINER
      SAVETT INC.





April
      14,
      2008


Santa
      Monica, California




F-2


ProElite,
      Inc.


Consolidated
      Balance Sheets




December 31,
              2007
            
            December 31,
              2006AssetsCurrent
                assetsCash
                and cash equivalents
            
            $
            4,427,303
            
            $
            7,295,825Restricted
                cash
            
            
            277,500
            
            
            -Accounts
                receivable, net of allowance of $255,901 and $0,
                respectively
            
            
            338,596
            
            
            -Prepaid
                expenses
            
            
            133,673
            
            
            165,745Other
                current assets
            
            
            1,077,896
            
            
            82,564Total
                current assets
            
            
            6,254,968
            
            
            7,544,134Fixed
                assets, net
            
            
            1,428,548
            
            
            157,733Other
                assetsAcquired
                intangible assets, net
            
            
            9,022,181
            
            
            -Goodwill
            
            
            6,238,652
            
            
            -Investment
                in Entlian/SpiritMC
            
            
            1,848,003
            
            
            -Prepaid
                distribution costs, net
            
            
            764,109
            
            
            572,880Prepaid
                license fees, net
            
            
            111,052
            
            
            176,677Prepaid
                services, net
            
            
            408,889
            
            
            -Rent
                deposit
            
            
            143,915
            
            
            33,294Total
                other assets
            
            
            18,536,801
            
            
            782,851Total
                assets
            
            $
            26,220,317
            
            $
            8,484,718Liabilities
                and Shareholders’ EquityCurrent
                liabilitiesNote
                payable - Showtime
            
            $
            1,822,086
            
            $
            -Accounts
                payable
            
            
            1,531,342
            
            
            121,980Accrued
                expenses
            
            
            733,638
            
            
            86,303Accounts
                payable and accrued expense - Showtime
            
            
            125,000
            
            
            -Future
                payments due for acquired companies
            
            
            1,162,500
            
            
            -Other
                accrued liabilities from predecessor company
            
            
            346,572
            
            
            346,572Registration
                rights liability
            
            
            -
            
            
            300,000West
                Coast settlement
            
            
            150,000
            
            
            -Total
                current liabilities
            
            
            5,871,138
            
            
            854,855Deferred
                rent and lease incentive
            
            
            153,309
            
            
            -Total
                liabilities
            
            
            6,024,447
            
            
            854,855Commitments
                and contingenciesShareholders’
                equityPreferred
                stock, $0.0001 par value, 20,000,000 shares authorized, 0 shares
                issued
            
            
            -
            
            
            -Common
                stock, $0.0001 par value, 250,000,000 shares authorized, 51,659,488
                and
                37,499,999 shares issued and outstanding at December 31, 2007 and
                December 31, 2006, respectively
            
            
            5,166
            
            
            3,750Common
                stock to be issued
            
            
            2,249,997
            
            
            -Additional
                paid-in-capital
            
            
            49,404,897
            
            
            11,875,968Accumulated
                other comprehensive loss
            
            
            (86,793
            )
            
            -Accumulated
                deficit
            
            
            (31,377,397
            )
            
            (4,249,855
            )Total
                shareholders’ equity
            
            
            20,195,870
            
            
            7,629,863Total
                liabilities and shareholders’ equity
            
            $
            26,220,317
            
            $
            8,484,718




See
      Notes
      to Consolidated Financial Statements




F-3


ProElite,
      Inc.


Consolidated
      Statements of Operations




Year
                Ended December 31,
              2007
            
            August
                10, 2006 (Inception) to December 31,
              2006RevenueLive
                events
            
            $
            4,560,917
            
            $
            -Pay
                per view and television licensing
            
            
            237,546
            
            
            -Pay
                per view - Showtime
            
            
            240,133
            
            
            -Internet
            
            
            68,782
            
            
            -Other
            
            
            184,192
            
            
            -Total
                revenue
            
            
            5,291,570
            
            
            -Cost
                of revenueLive
                events
            
            
            9,581,296
            
            
            -Pay
                per view and television licensing
            
            
            17,064
            
            
            -Showtime
            
            
            2,855,723
            
            
            -Internet
            
            
            234,295
            
            
            -Total
                cost of revenue
            
            
            12,688,378
            
            
            -Gross
                loss
            
            
            (7,396,808
            )
            
            -Operating
                expensesMarketing
            
            
            1,017,201
            
            
            101,156Website
                operations
            
            
            3,341,291
            
            
            171,329Live
                event operations
            
            
            2,428,808
            
            
            205,825General
                and administrative expenses
            
            
            13,400,392
            
            
            3,466,278Total
                operating expenses
            
            
            20,187,692
            
            
            3,944,588Operating
                loss
            
            
            (27,584,500
            )
            
            (3,944,588
            )Other
                incomeInterest
                income (expense), net
            
            
            456,958
            
            
            (305,267
            )Loss
                before income taxes
            
            
            (27,127,542
            )
            
            (4,249,855
            )Income
                taxes
            
            
            -
            
            
            -Net
                loss
            
            $
            (27,127,542
            )
            $
            (4,249,855
            )Net
                loss per share - basic and diluted
            
            $
            (0.59
            )
            $
            (0.13
            )Weighted
                average shares outstanding - basic and diluted
            
            
            45,660,279
            
            
            32,812,499





See
      Notes
      to Consolidated Financial Statements




F-4


**ProElite,
      Inc.**


**Consolidated
      Statement of Shareholders’ Equity**


**August
      10, 2006 (Inception) through December 31, 2007**





AccumulatedCommon
                Stock
            
            
            
            Additional
            
            Other
            
            
            
            TotalIssuable
            
            Common
                Stock
            
            Paid-
            
            Comprehensive
            
            Accumulated
            
            Shareholders’Shares
            
            Amount
            
            Shares
            
            Amount
            
            In
                Capital
            
            Loss
            
            Deficit
            
            EquityShares
                issued upon formation
            
            
            -
            
            $
            -
            
            
            21,000,000
            
            $
            2,100
            
            $
            (1,115
            )
            $
            -
            
            $
            -
            
            $
            985Shares
                issued for acquisition of assets
            
            
            -
            
            
            -
            
            
            4,000,000
            
            
            400
            
            
            51,600
            
            
            -
            
            
            -
            
            
            52,000Warrants
                issued in connection with bridge loans
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            318,000
            
            
            -
            
            
            -
            
            
            318,000Equity
                of Pro Elite, Inc., the registrant, at the time of reverse
                merger
            
            
            -
            
            
            -
            
            
            37,073
            
            
            4
            
            
            (346,576
            )
            
            -
            
            
            -
            
            
            (346,572
            )Shares
                issued for services relating to reverse merger
            
            
            -
            
            
            -
            
            
            2,462,927
            
            
            246
            
            
            2,293,232
            
            
            -
            
            
            -
            
            
            2,293,478Shares
                issued in private placement, net of offering costs
            
            
            -
            
            
            -
            
            
            9,999,999
            
            
            1,000
            
            
            8,949,000
            
            
            -
            
            
            -
            
            
            8,950,000Compensation
                expense for stock options and warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            123,523
            
            
            -
            
            
            -
            
            
            123,523Warrants
                issued for distribution costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            606,579
            
            
            -
            
            
            -
            
            
            606,579Warrants
                issued for license fees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            181,725
            
            
            -
            
            
            -
            
            
            181,725Registration
                rights liability
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (300,000
            )
            
            -
            
            
            -
            
            
            (300,000
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,249,855
            )
            
            (4,249,855
            )Balance
                at December 31, 2006
            
            
            -
            
            $
            -
            
            
            37,499,999
            
            $
            3,750
            
            $
            11,875,968
            
            $
            -
            
            $
            (4,249,855
            )
            $
            7,629,863Common
                stock and warrant issued for cash - Showtime
            
            
            -
            
            
            -
            
            
            5,000,001
            
            
            500
            
            
            4,999,500
            
            
            -
            
            
            -
            
            
            5,000,000Warrant
                issued to Showtime
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            608,000
            
            
            -
            
            
            -
            
            
            608,000Shares
                issued to MMA Live Entertainment, Inc.
            
            
            -
            
            
            -
            
            
            320,000
            
            
            32
            
            
            639,968
            
            
            -
            
            
            -
            
            
            640,000Warrants
                exercised on a cashless basis by private placement investors and
                placement
                agents
            
            
            -
            
            
            -
            
            
            4,846,330
            
            
            485
            
            
            (485
            )
            
            -
            
            
            -
            
            
            -Common
                stock and warrants issued for cash in private placement
            
            
            -
            
            
            -
            
            
            3,214,286
            
            
            321
            
            
            20,137,145
            
            
            -
            
            
            -
            
            
            20,137,466Options
                and warrants exercised
            
            
            -
            
            
            -
            
            
            78,872
            
            
            8
            
            
            158,540
            
            
            -
            
            
            -
            
            
            158,548Common
                stock to be issued for purchase of King of the Cage, Inc.
            
            
            178,571
            
            
            1,249,997
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,249,997Common
                stock issued for purchase of “Cage Rage”
            
            
            -
            
            
            -
            
            
            500,000
            
            
            50
            
            
            3,499,950
            
            
            -
            
            
            -
            
            
            3,500,000Common
                stock issued for investment in Entlian Corp.
            
            
            -
            
            
            -
            
            
            100,000
            
            
            10
            
            
            999,990
            
            
            -
            
            
            -
            
            
            1,000,000Common
                stock issued and to be issued for ICON asset purchase
            
            
            100,000
            
            
            1,000,000
            
            
            100,000
            
            
            10
            
            
            999,990
            
            
            -
            
            
            -
            
            
            2,000,000Compensation
                expense for stock options and warrants
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,186,331
            
            
            -
            
            
            -
            
            
            5,186,331Reduction
                of registration rights liability
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            300,000
            
            
            -
            
            
            -
            
            
            300,000Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (86,793
            )
            
            -
            
            
            (86,793
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (27,127,542
            )
            
            (27,
                127,542
            )Balance
                at December 31, 2007
            
            
            278,571
            
            $
            2,249,997
            
            
            51,659,488
            
            $
            5,166
            
            $
            49,404,897
            
            $
            (86,793
            )
            $
            (31,377,397
            )
            $
            20,195,870





See
      Notes
      to Consolidated Financial Statements




F-5


ProElite,
      Inc.


Consolidated
      Statements of Cash Flows




Year
                Ended
              December 31,
              2007
            
            August
                10, 2006 (Inception) to December 31,
              2006Cash
                flows from operating activitiesNet
                loss
            
            $
            (27,127,542
            )
            $
            (4,249,855
            )Adjustments
                to reconcile net loss to net cash used in operating
                activitiesStock
                and warrant based compensation
            
            
            5,186,331
            
            
            123,523Depreciation
                and amortization
            
            
            1,374,138
            
            
            46,356Loss
                on abandonment of fixed assets
            
            
            241,798
            
            
            -Provision
                for doubtful accounts
            
            
            255,901
            
            
            -Loss
                in equity interest
            
            
            151,997
            
            
            -Shares
                issued for reverse merger services
            
            
            -
            
            
            2,293,478Warrants
                issued with bridge loans
            
            
            -
            
            
            318,000Change
                in operating assets and liabilities:Increase
                in accounts receivable
            
            
            (542,052
            )
            
            -Increase
                in prepaid expense and other assets
            
            
            (177,721
            )
            
            (181,443
            )Increase
                in accounts payable, accrued expenses and other
                liabilities
            
            
            3,463,787
            
            
            208,283Net
                cash used in operating activities
            
            
            (17,173,363
            )
            
            (1,441,658
            )Cash
                flows from investing activitiesPurchase
                of fixed assets
            
            
            (1,588,494
            )
            
            (113,342
            )Acquisition
                of King of the Cage, Inc.
            
            
            (3,587,988
            )
            
            -Acquisition
                of Cage Rage, net of cash acquired
            
            
            (4,100,398
            )
            
            -Investment
                in Entlian Corp.
            
            
            (1,000,000
            )
            
            -Purchase
                of assets from ICON
            
            
            (350,000
            )
            
            -Purchase
                of domain name
            
            
            -
            
            
            (33,294
            )Advance
                to Orientations Networks
            
            
            -
            
            
            (65,881
            )Net
                cash used in investing activities
            
            
            (10,626,880
            )
            
            (212,517
            )Cash
                flows from financing activitiesIssuance
                of common stock and warrants for cash, net of offering
                costs
            
            
            25,137,466
            
            
            8,950,000Proceeds
                from exercise of options and warrants
            
            
            158,548
            
            
            -Cash
                pledged as collateral for credit card facility
            
            
            (277,500
            )
            
            -Proceeds
                from bridge loans
            
            
            -
            
            
            600,000Repayment
                of bridge loans
            
            
            -
            
            
            (600,000
            )Net
                cash provided by financing activities
            
            
            25,018,514
            
            
            8,950,000Effect
                of exchange rates on cash and cash equivalents
            
            
            (86,793
            )
            
            -Net
                (decrease) increase in cash and cash equivalents
            
            
            (2,868,522
            )
            
            7,295,825Cash
                and cash equivalents at beginning of period
            
            
            7,295,825
            
            
            -Cash
                and cash equivalents at end of period
            
            $
            4,427,303
            
            $
            7,295,825




F-6




Supplemental
      disclosures of non-cash investing and financing activities:





In
      connection with the warrant issued to Showtime on January 5, 2007, the Company
      recorded $608,000, the value of the warrant, as prepaid distribution
      costs.





During
      2007, the Company reduced its registration rights liability related to the
      shares issued in the October 2006 private placement by $300,000, with a
      corresponding increase to paid-in capital.





On
      April
      3, 2007, the Company issued 320,000 shares to MMA Live Entertainment, Inc.
      for
      future services. The Company recorded the $640,000 value of these shares as
      prepaid services in the other assets section of the balance sheet.





In
      May
      2007 in connection with a new office lease, the Company recorded leasehold
      improvements of $115,650 for design and modifications to the new office space.
      This amount was paid by the Company’s landlord directly to a third-party
      architect and has been recorded as deferred rent liability.





On
      June
      20, 2007, an unrelated party in the Company’s October 2006 private placement
      exercised, on a cashless basis, 250,000 warrants and received 208,333 shares
      of
      common stock.





In
      August
      2007, investors in the Company’s October 2006 and July 2007 private placements
      exercised, on a cashless basis, 3,246,333 warrants and received 2,790,707 shares
      of common stock. Also in August 2007, the placement agent for the Company’s
      October 2006 and July 2007 private placements exercised, on a cashless basis,
      3,571,428 warrants and received 1,847,290 shares of common stock.





In
      September 2007, the Company recorded its obligation for the acquisition of
      King
      of the Cage of 178,571 shares of common stock valued at $1.25 million in common
      stock issuable in equity.





In
      September 2007, the Company recorded the issuance of 500,000 shares of common
      stock valued at $3.5 million for the acquisition of Cage Rage in
      equity.





In
      September 2007, the Company issued to Entlian Corp. 100,000 shares of restricted
      common stock valued at $1 million and recorded this amount in
      equity.





During
      September 2007 in accordance with the stock purchase agreement, the Company
      recorded a distribution of approximately $240,000 of accounts receivable in
      an
      acquired subsidiary to the subsidiary’s selling shareholders. At December 31,
      2007, the balance payable was approximately $225,000.





In
      December 2007, the Company recorded the issuance of 100,000 shares of common
      stock valued at $1 million in equity and an obligation to issue 100,000 shares
      valued at $1.0 million for the purchase of assets from Future Fight Productions
      (ICON acquisition) in common stock issuable.





See
      Note
      5 for non-cash disclosure of assets and liabilities acquired in business
      combinations in 2007.





See
      Notes
      to Consolidated Financial Statements




F-7


ProElite,
      Inc.


Notes
      to
      Consolidated Financial Statements





Note
      1    Basis of Presentation and Summary of Significant
      Accounting Policies





**The
      Company**





ProElite,
      Inc. (“ProElite”), formerly Real Sport, Inc. and its subsidiaries (“Real
      Sport”), (together the “Company”) produces and promotes live mixed martial arts
      fighting (“MMA”) events and operates a social networking website focused
      exclusively on MMA. Real Sport, Inc. was formed on September 19, 2006 as a
      holding company for two wholly-owned subsidiaries, ProElite.com (formerly
      EliteXC.com and I-Fight, Inc.), which was formed on August 10, 2006 and EliteXC
      Live (formerly MMA Live, Inc. and Jungle Fight, Inc.), which was formed on
      September 13, 2006. The Company also has wholly-owned operating subsidiaries,
      King of the Cage, Inc., Mixed Martial Arts Promotions Ltd., and Mixed Martial
      Arts Productions Ltd., promoting live MMA events in the United States and the
      United Kingdom, which were acquired during 2007. The Company has set up a
      wholly-owned subsidiary, Online Winners Sdn. Bhd., in Malaysia for the purposes
      of hiring computer programming employees to support the Company’s website; the
      Company expects this subsidiary to begin its operations in 2008. The
      accompanying financial statements include the consolidated results of operations
      since inception of ProElite.com. The Company 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.





Pro
      Elite, Inc., a predecessor company, was incorporated during 1992 in New Jersey.
      The Company marketed and distributed premium branded apparel such as shirts,
      hats and sweaters with a sports or corporate logo, name or slogan applied by
      means of embroidering to the apparel. Pro Elite ceased operations in early
      2004
      and has since then been inactive.





On
      October 3, 2006, Pro Elite, Inc., the predecessor company, entered into a Share
      Exchange Agreement (the “Combination Agreement”) with Real Sport. Pursuant to
      the Combination Agreement, Pro Elite, Inc. acquired all of the outstanding
      common stock of Real Sport for 25,000,000 shares of Pro Elite’s common stock,
      and Real Sport became a subsidiary of Pro Elite. Included in the 25,000,000
      shares were 4,000,000 shares, which Real Sport issued to Lifelogger LLC, and
      were exchanged for the Company’s common stock as part of the reverse merger. The
      former directors and officers of Pro Elite resigned, and the directors and
      officers of Real Sport became the directors and officers of the Company.
      Following the acquisition, the former shareholders of Real Sport held
      approximately 99% of the outstanding common stock of the Company on a
      fully-diluted basis. The acquisition was accounted for as a reverse acquisition
      because the former shareholders of Real Sport owned a majority of the Company’s
      outstanding stock subsequent to the acquisition. Accordingly, Real Sport is
      deemed to be the accounting acquirer. The reverse acquisition was treated as
      a
      recapitalization because Pro Elite (the public shell) had no operations since
      early 2004 and nominal assets.





In
      May
      2007, the Company, by consent of its shareholders, changed its name from “Pro
      Elite, Inc.” to “ProElite, Inc.”





Principles
      of Consolidation





The
      Company’s consolidated financial statements include the assets, liabilities and
      operating results of ProElite and its wholly-owned subsidiaries since formation
      or acquisition of these entities. All significant intercompany accounts and
      transactions have been eliminated in consolidation. The equity method of
      accounting is used for its investment in Entlian in which ProElite has
      significant influence; this represents common stock ownership of at least 20%
      and not more than 50%.





Revenue
      Recognition





The
      Company recognizes revenue in accordance with Securities and Exchange Commission
      Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
      Statements modified by Emerging Issues Task Force ("EITF") No. 00-21 and SAB
      No.
      104 which requires that four basic criteria must be met before revenue can
      be
      recognized: (1) persuasive evidence of an arrangement exists; (2) delivery
      has
      occurred or services rendered; (3) the fee is fixed and determinable; and (4)
      collectibility is reasonably assured.




F-8





The
      Company earns revenue primarily from live event ticket sales, site fees and
      sponsorship and pay per view fees for events broadcast on television. The
      Company also earns incidental revenue from merchandise and video sales and
      from
      online advertising, subscriptions and online store sales. Ticket sales are
      managed by third-parties, ticket agencies and live event venues. Revenue from
      ticket sales is recognized at the time of the event when the venue provides
      estimated or final attendance reporting to the Company. Revenue from merchandise
      and video sales is recognized at the point of sale at live event concession
      stands. Revenue from sponsorship, and television distribution agreements is
      recognized in accordance with the contract terms, which are generally at the
      time events occur. Website revenue is recognized as advertisements are shown,
      as
      subscription terms are fulfilled, and as products are shipped.





Cost
      of Revenue





Costs
      related to live events are recognized when the event occurs. Event costs
      incurred prior to an event are capitalized to prepaid costs and then charged
      to
      expense at the time of the event. Costs primarily include: TV and Internet
      production, fighter purse, arena, officiating, and the set design. Cost of
      other
      revenue streams are recognized at the time the related revenues are
      realized.





Significant
      Estimates for Events





The
      Company is required to estimate significant components of live event revenues
      and costs because actual amounts may not become available until one or more
      months after an event date. Pay-per-view revenue is estimated based upon
      projected sales of pay-per-view presentations. These projections are based
      upon
      information provided from distribution partners. The amount of final
      pay-per-view sales is determined after intermediary pay-per-view distributors
      have completed their billing cycles. The television production costs of live
      events are based upon the television distribution agreement with Showtime,
      event-specific production and marketing budgets and historical experience.
      Should actual results differ from estimated amounts, a charge or benefit to
      the
      statement of operations would be recorded in a future period.




Advertising
      Expenses




Advertising
      is expensed as incurred. Total
      advertising expense was $1,728,166 during the year ended December 31, 2007
      and
      $24,351 for the period from August 10, 2006 (inception) to December 31,
      2006.




Cash
      and Cash Equivalents





Cash
      and
      cash equivalents include deposit accounts and debt instruments of the United
      States government and its agencies and high-quality corporate issuers. All
      highly liquid investments with an original maturity of three months or less
      are
      considered cash equivalents. The Company maintains cash and cash equivalents
      with a commercial bank. These accounts are generally guaranteed by the Federal
      Deposit Insurance Corporation (“FDIC”) up to $100,000 or by the Securities
      Investor Protection Corporation (“SIPC”) up to $500,000. At times, balances at
      any single bank may be in excess of the FDIC or SIPC insurance limit. The
      deposits are made with reputable financial institutions, and the Company does
      not anticipate realizing any losses from these deposits.





Accounts
      Receivable





Accounts
      receivable relate principally to amounts due from television networks for
      pay-per-view presentations and from live event venues for ticket sales. Amounts
      due for pay-per-view programming are based primarily upon estimated sales of
      pay-per-view presentations and are adjusted to actual after intermediary
      pay-per-view distributors have completed their billing cycles. If actual sales
      differ significantly from the estimated sales, the Company records an adjustment
      to sales. Accounts receivable from foreign television distribution is generally
      based upon contracted fees per event or showing. Accounts receivable from venues
      for ticket sales to live events are generally received within 30 days of an
      event date.





An
      allowance for uncollectible receivables is estimated each period. This estimate
      is based upon historical collection experience, the length of time receivables
      are outstanding and the financial condition of individual
      customers.




F-9





Fixed
      Assets





Fixed
      assets primarily consist of computer, office, and video production equipment;
      furniture and fixtures; leasehold improvements; computer software; Internet
      domain names purchased from others; and website development costs. Fixed assets
      are stated at historical cost less accumulated depreciation and amortization.
      Depreciation and amortization are computed on a straight-line basis over the
      estimated useful lives of the assets or, when applicable, the life of the lease,
      whichever is shorter. Equipment is depreciated over estimated useful lives
      ranging from three to five years. Furniture, fixtures and leasehold improvements
      are depreciated over estimated useful lives ranging from five to seven years.
      Computer software is amortized over estimated useful lives ranging from one
      to
      five years. Internet domain names are amortized over ten years. Website
      development costs are amortized over three years. During 2007, the Company
      capitalized $349,976 of website development costs, which were included in
      property and equipment at December 31, 2007.





Goodwill
      and Intangible Assets





Statement
      of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
      Assets” (“SFAS No. 142”), requires purchased intangible assets other than
      goodwill to be amortized over their useful lives unless these lives are
      determined to be indefinite. During 2007, the Company acquired amortizable
      intangible assets consisting of non-compete agreements, fighter contracts,
      merchandising rights and distribution agreements and indefinite-lived intangible
      assets consisting of brands and trademarks. The Company amortizes the cost
      of
      acquired intangible assets over their estimated useful lives, which range from
      one to five years.





SFAS
      No.
      142 requires goodwill and other indefinite-lived intangible assets to be tested
      for impairment at least on an annual basis and more often under certain
      circumstances, and written down by a charge to operations when impaired. An
      interim impairment test is required if an event occurs or conditions change
      that
      would more likely than not reduce the fair value of the reporting unit below
      the
      carrying value. The Company does not believe the goodwill and indefinite-lived
      intangible assets were impaired at December 31, 2007.





However,
      maintaining the goodwill and indefinite-lived intangible assets is predicated
      upon the Company substantially improving the operations of CageRage and
      maintaining profitable operations of the other acquisitions. The Company has
      developed plans to increase the revenue and profitability of CageRage.
      Similarly, maintaining the goodwill related to the ICON purchase requires the
      Company to improve the profitability and/or increase the number of ICON events.
      If the Company does not execute successfully against these plans, it will be
      required to record a non-cash charge to operations to reduce the amount of
      goodwill and indefinite-lived intangible assets.





Valuation
      of Long-Lived Assets





The
      carrying amounts of long-lived assets are periodically evaluated for impairment
      when events and circumstances warrant such a review. During 2007, live event
      set
      design costs and other equipment were determined to be impaired and the Company
      recorded a charge to operations of approximately $242,000 during the year ended
      December 31, 2007.





Prepaid
      Distribution Costs





Prepaid
      distribution costs represent the value of warrants issued to Showtime in
      November 2006 and January 2007 in connection with a television and pay-per-view
      distribution agreement. The value of the warrants is being amortized to expense
      over the three-year term of the distribution agreement.





Prepaid
      Services





Prepaid
      services included in other assets represent the value of shares issued to MMA
      Live Entertainment, Inc. for fighter services. The value of the shares is being
      amortized to expense over the three-year term of the related
      agreement.




F-10





Fair
      Value of Financial Instruments





The
      Company measures its financial assets and liabilities in accordance with the
      requirements of Statement of Financial Accounting Standards (“SFAS”) No. 107,
“Disclosures about Fair Value of Financial Instruments.” The carrying values of
      cash equivalents, accounts receivable, accounts payable, and payments due for
      acquired companies approximate fair value due to the short-term maturities
      of
      these instruments.





Foreign
      Currency





The
      functional currencies of the Company’s international subsidiary and investee are
      the local currency. The financial statements of the foreign subsidiary are
      translated into United States dollars using period-end rates of exchange for
      assets and liabilities and average rates of exchange for the period for revenues
      and expenses. Foreign currency transaction gains and losses were insignificant
      during the period. Foreign currency translation adjustments are shown as other
      comprehensive income in the accompanying consolidated balance
      sheet.





Income
      Taxes





The
      Company accounts for income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, “Accounting for Income Taxes.” As such, deferred
      income taxes are recognized for the tax consequences in future years of
      differences between the tax basis of assets and liabilities and their financial
      report amounts at each period end, based on enacted tax laws and statutory
      tax
      rates applicable to the periods in which the differences are expected to affect
      taxable income. Valuation allowances are established, when necessary, to reduce
      deferred tax assets to the amount expected to be realized. The provision for
      income taxes represents the tax payable for the period, if any, and the change
      during the period in deferred tax assets and liabilities.





Loss
      per Share





The
      Company utilizes Statement of Financial Accounting Standards No. 128, “Earnings
      per Share.” Basic earnings (loss) per share are computed by dividing earnings
      (loss) available to common shareholders by the weighted-average number of common
      shares outstanding. Diluted earnings (loss) per share is computed similar to
      basic earnings (loss) per share except that the denominator is increased to
      include the number of additional common shares that would have been outstanding
      if the potential common shares had been issued and if the additional common
      shares were dilutive. Potential common shares include stock that would be issued
      on exercise of outstanding options and warrants reduced by the number of shares
      which could be purchased from the related exercise proceeds. For the year ended
      December 31, 2007 and the period from August 10, 2006 (inception) to December
      31, 2006, 35,375,997 and 12,023,333, respectively, potentially dilutive
      securities, which represent all the outstanding options and warrants, are
      excluded from the computation because they are anti-dilutive.





Recent
      Accounting Pronouncements





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes
      a framework for measuring fair value in generally accepted accounting
      principles, and expands disclosures about fair value measurements. It applies
      under other accounting pronouncements that require or permit fair value
      measurements, the FASB having previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute.
      Accordingly, this statement does not require any new fair value measurements.
      This statement is effective for all financial instruments issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years. The Company has not yet determined the effect of SFAS No. 157 on its
      financial position, operations or cash flows.




F-11





In
      December 2007, the FASB issued SFAS 141(R), “Business Combinations”, replacing
      SFAS 141, “Business Combinations”. This statement retains the fundamental
      requirements in SFAS 141 that the acquisition method of accounting (which SFAS
      141 termed the purchase method) be used for all business combinations and for
      an
      acquirer to be identified for each business combination. This Statement also
      establishes principles and requirements for how the acquirer: a) recognizes
      and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any noncontrolling interest in the acquiree; b)
      recognizes and measures the goodwill acquired in the business combination or
      a
      gain from a bargain purchase; and c) determines what information to disclose
      to
      enable users of the financial statements to evaluate the nature and financial
      effects of the business combination. This Statement clarifies that acquirers
      are
      required to expense costs related to any acquisitions. SFAS 141R will apply
      prospectively to business combinations for which the acquisition date is on
      or
      after fiscal years beginning December 15, 2008. Early adoption is prohibited.
      The Company believes that SFAS 141R could have a significant impact on the
      Company’s future operations. Determination of the ultimate effect of this
      statement will depend on the Company’s acquisition plans at the date of
      adoption.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - An Amendment of ARB No. 51”. SFAS 160
      establishes new accounting and reporting standards for the noncontrolling
      interest in a subsidiary and for the deconsolidation of a subsidiary.
      Specifically, this statement requires the recognition of a noncontrolling
      interest (minority interest) as equity in the consolidated financial statements
      and separate from the parent’s equity. The amount of net income attributable to
      the noncontrolling interest will be included in consolidated net income on
      the
      face of the income statement. SFAS 160 clarifies that changes in a parent’s
      ownership interest in a subsidiary that do not result in deconsolidation are
      equity transactions if the parent retains its controlling financial interest.
      In
      addition, this statement requires that a parent recognize a gain or loss in
      net
      income when a subsidiary is deconsolidated. Such gain or loss will be measured
      using the fair value of the noncontrolling equity investment on the
      deconsolidation date. SFAS 160 also includes expanded disclosure requirements
      regarding the interests of the parent and its noncontrolling interest. SFAS
      160
      is effective for fiscal years beginning on or after December 15, 2008, with
      retrospective presentation and disclosure for all periods presented. Early
      adoption is prohibited. The Company does not expect it will be affected
      by the adoption of SFAS 160.





Reclassifications





Certain
      prior year amounts have been reclassified to conform to the current year
      presentation.





Note
      2    Going Concern





The
      Company has incurred losses from operations and negative cash flows from
      operations since its inception. These factors raise substantial doubt about
      the
      Company’s ability to continue as a going concern. The Company’s business plan
      calls for expanding the scale of live events and Internet operations. As a
      result, the need for cash has correspondingly increased. Although the Company
      had approximately $4 million of cash at December 31, 2007 and received $4
      million from warrant exercises in February 2008, additional financing is needed
      to continue to grow the operations to their desired levels over the next 12
      months.





The
      Company is currently seeking additional financing. However, there can be no
      assurances that it will be able to raise sufficient financing on favorable
      terms
      and conditions. There can be no assurances that the Company will raise
      sufficient financings on favorable terms and conditions.




F-12





If
      the
      Company is unable to raise sufficient financing, it will be required to reduce
      its expansion programs and dramatically reduce costs by reducing administrative
      expenses and some lines of business. Such actions would limit its potential
      for
      growth. If sufficient additional financing cannot be obtained, the Company
      may
      have to curtail or reduce operations. Because there is no guarantee that the
      Company will succeed in accomplishing its objectives, substantial doubt exists
      about the Company’s ability to continue as a going concern. These financial
      statements do not contain any adjustments that may be required should the
      Company be unable to continue as an on-going concern.





3.
      Lifelogger LLC





Effective
      November 30, 2006, Real Sport acquired tangible and intellectual property assets
      from Lifelogger LLC (an entity 61% owned by an affiliate of the Company) for
      4,000,000 common shares of the Company. The shares exchanged for the assets
      purchased had a fair value of $3.7 million. Lifelogger LLC acquired these assets
      from Orientations Network SDN BHD (“Orientations”), an unrelated Malaysian
      entity, pursuant to a Contribution Agreement dated October 3, 2006 in exchange
      for member’s interest in Lifelogger LLC.





The
      intellectual property assets acquired consisted of a set of advanced networking
      tools, an online depository, domain names and a personalized content tool that
      is to be used, among other things, as the backbone of the Company’s website
      (ProElite.com) and online Internet community. These software assets were in
      development on the date of acquisition. In accordance with the guidance of
      Staff
      Accounting Bulletin Topic 5:G, Transfers of Nonmonetary Assets By Promoters
      or
      Shareholders, the Company recorded the acquisition of these assets at the
      historical cost basis of the seller, Lifelogger LLC. The cost basis of the
      acquired intellectual property assets was determined to be zero pursuant to
      the
      provisions of Emerging Issues Task Force Abstracts Issue No. 00-02, Accounting
      for Web Site Development Costs, which requires web site development costs that
      have not reached technological feasibility to be recorded at zero. The seller’s
      historical cost basis of the tangible assets acquired, which consisted primarily
      of computer equipment, was $52,000. The cost of producing the software acquired
      was expensed as incurred.





In
      a
      letter agreement, effective November 30, 2006, between the Company and
      Orientations, the Company contracted Orientations to develop and market the
      acquired intellectual property assets. The Company pays Orientations a monthly
      amount equal to the aggregate of consulting fees, reimbursement of budgeted
      expenses, and the purchase of computer hardware as deemed necessary and approved
      by the Company’s management. The Company owns the computer hardware purchased.
      The cost of these purchased assets is included in fixed assets on the
      consolidated balance sheet. The parties may terminate the contract at any time
      without notice. For the year ended December 31, 2007, the Company paid
      Orientations approximately $523,000 for consulting services. For the period
      from
      August 10, 2006 (inception) through December 31, 2006, the Company paid
      Orientations $228,986, consisting of consulting and related costs of $143,445,
      capital expenditures of $19,660, and an advance of $65,881. The Company expensed
      the consulting and related costs as the software was still under development
      as
      of December 31, 2006 and had not reached technological feasibility.
      Technological feasibility was reached on February 1, 2007.





Note
      4    Net Loss Per Share





Net
      loss
      per share was calculated by dividing the net loss by the weighted average number
      of shares outstanding during the period. The following table summarizes the
      shares of stock included in calculating earnings per share for the year ended
      December 31, 2007 and the period from August 10, 2006 (inception) to December
      31, 2006 in accordance with FASB Statement 128 (“SFAS 128”), *Earnings
      per Share* :





Year
              Ended
              December
                31,
              2007
            
            August
                10, 2007 (Inception) to
              December
                31
              2006Net
                loss
            
            $
            (27,127,542
            )
            $
            (4,249,855
            )Weighted-average
                common shares outstanding - basic
            
            
            45,660,279
            
            
            32,812,499Dilutive
                effect of stock options and warrants
            
            
            -
            
            
            -Weighted-average
                common shares outstanding - diluted
            
            
            45,660,279
            
            
            32,812,499Net
                loss per share - basic and diluted
            
            $
            (0.59
            )
            $
            (0.13
            )




F-13




The
      effect of options and warrants on the computation of diluted net loss per share
      is excluded for the year ended December 31, 2007 and the period from August
      10,
      2007 (inception) to December 31, 2006 (35,375,977 and 12,023,333, respectively)
      because their effect is anti-dilutive.





Note
      5    Acquisitions and Investments





*King
      of the Cage*





On
      September 11, 2007, the Company acquired the outstanding capital stock of King
      of the Cage, Inc. (“KOTC”), a promoter of MMA events primarily in the United
      States. The acquisition was made in order to increase the Company’s event
      activity. The total purchase price, not including contingent consideration,
      was
      $5.0 million consisting of: $3,250,000 cash paid at closing, $500,000 cash
      paid
      in November 2007, 178,571 restricted shares of common stock valued at
      $1,249,997, or $7 per share that were to be issued in January 2008, plus nominal
      direct, capitalizable transaction costs. Under the stock purchase agreement,
      the
      calculation of the number of common shares to be issued is based upon the quoted
      market price of the Company’s common stock subject to a maximum per share price
      of $7.00 and a minimum price of $2.00. The Company has recorded the minimum
      number of shares issuable based on the $7.00 per share price, or 178,571 shares,
      and expects to issue these shares in April 2008. Additionally, the Company
      entered into a five year employment contract with one of the selling
      shareholders. (See Note 10.)





The
      stock
      purchase agreement also calls for contingent consideration to be paid annually
      if certain operating results are achieved by KOTC over five years. Contingent
      consideration performance thresholds and payment amounts are as follows:





Performance
                Thresholds
            
            Annual
                Contingent Consideration PayableYears
                Ending September 11,
            
            Number
                of Live Events Produced per Year
            
            Annual
                EBITDA
              (as
                defined in Stock Purchase Agreement)
            
            Cash
            
            Common
                Stock2008
                to 2012
            
            
            15
            
            
            n/a
            
            $
            500,000
            
            
            -2008
                to 2012
            
            
            22
            
            
            n/a
            
            
            75,000
            
            $
            75,0002008
                to 2012
            
            
            22
            
            
            Increasing
                from $700,000 to $1,500,000
            
            
            175,000
            
            
            175,000





The
      maximum additional contingent consideration is $3.75 million in cash and $1.25
      million in common stock. At December 31, 2007, the Company has accrued a
      liability of $162,500 for estimated contingent consideration payable.





As
      security for the contingent consideration, the Company granted the former KOTC
      shareholders a first priority security interest in the shares of
      KOTC.




F-14





The
      purchase price was allocated approximately $0.1 million to tangible assets,
      $1.1
      million to amortizable intangible assets, $1.7 million to non-amortizable
      intangible assets, $0.1 million to liabilities and $2.4 million to
      goodwill.





The
      Company’s results of operations include those of KOTC since the date of
      acquisition. For the period from the date of acquisition to December 31, 2007,
      KOTC recognized revenue of approximately $800,000 and, after amortization of
      acquired intangibles, a net loss of approximately $50,000.





*Cage
      Rage*





On
      September 12, 2007, the Company acquired the outstanding capital stock of two
      entities that promote MMA events: Mixed Martial Arts Promotions Limited, a
      British domiciled company (“MMAP”), and Mixed Martial Arts Productions Limited,
      a British domiciled company (“MMAD”) (collectively “Cage Rage”). The acquisition
      gives the Company an event promotion business in the UK. The transaction was
      treated as a business combination. The total purchase price was $8.6 million
      consisting of: $4,000,000 cash paid at closing, 500,000 shares of restricted
      common stock issued in October 2007, $1,000,000 cash to be paid in September
      2008 plus $100,398 of direct transaction costs. The Company valued the common
      stock to be issued at $3.5 million, or $7.00 per share.





The
      Company acquired a balance due of approximately $940,000 from a business owned
      by a selling shareholder of CageRage. This amount was due primarily for event
      sponsorship prior to the Company’s acquisition of CageRage. If the Company is
      unable to collect this amount or offset it against the liability for future
      acquisition purchase price payable, it will be reserved with the offset
      increasing the goodwill from the purchase of CageRage.





The
      purchase price was allocated approximately $0.9 million to accounts receivable,
      $0.1 million to tangible assets, $1.7 million to amortizable intangible assets,
      $3.8 million to non-amortizable intangible assets, $0.5 million to accounts
      payable and $2.6 million to goodwill.





The
      Company’s results of operations include those of Cage Rage since the date of
      acquisition. For the period from the date of acquisition to December 31, 2007,
      Cage Rage recognized revenue of approximately $521,000 and a net loss of
      approximately $1.5 million.





*Future
      Fight Productions, Inc.*





On
      December 7, 2007, the Company acquired substantially all the assets of Future
      Fight Productions, Inc., (“ICON”) a promoter of MMA events primarily in Hawaii.
      The acquisition gives the Company additional promotion talent and access to
      fighters and venues. The assets acquired consisted primarily of a brand name.
      Additionally the owner of ICON. signed a consulting contract with the Company
      to
      continue promoting ICON and other Company-run events. The total purchase price
      was $2.35 million consisting of: $350,000 cash paid at closing and 200,000
      shares of restricted common stock, 100,000 of which were issued at closing
      and
      the remaining 100,000 are issuable over 3 years. Additionally, the Company
      will
      issue, in three equal installments, 50,000 shares of restricted common stock
      in
      connection with the consulting agreement with the seller. The shares were valued
      at $10 per share. The purchase price was allocated approximately $0.4 million
      to
      amortizable intangible assets, $0.6 million to non-amortizable assets and $1.3
      million to goodwill. The value of the shares to be issued for the consulting
      agreement, $500,000, will be recorded into expense ratably over the service
      period.





The
      Company’s first event using the ICON brand occurred in March 2008.




F-15





*Detail
      of Acquisitions*





The
      following table details the fair value of assets and liabilities acquired at
      the
      date of acquisition:





KOTC
            
            Cage
                Rage
            
            ICON
            
            TotalCurrent
                assets, exclusive of cash
            
            $
            -
            
            $
            904,000
            
            $
            -
            
            $
            904,000Fixed
                assets
            
            
            30,000
            
            
            61,000
            
            
            -
            
            
            91,000Intangible
                assets with indefinite lives
            
            
            1,700,000
            
            
            3,800,000
            
            
            628,000
            
            
            6,128,000Other
                intangible assets
            
            
            1,110,000
            
            
            1,723,000
            
            
            410,000
            
            
            3,243,000Goodwill
            
            
            2,356,000
            
            
            2,571,000
            
            
            1,312,000
            
            
            6,239,000Current
                liabilities
            
            
            (34,000
            )
            
            (459,000
            )
            
            -
            
            
            (493,000
            )Consideration
            
            $
            5,162,000
            
            $
            8,600,000
            
            $
            2,350,000
            
            $
            16,112,000




The
        Company allocated purchase prices to amortizable intangible assets of $1.9
        million to noncompete agreements (with a weighted average amortization period
        of
        3.9 years), fighter contracts of $1.2 million (with a weighted average
        amortization period of 2 years), and $0.1 million to distribution contracts
        (with a weighted average amortization period of 2.4 years). The Company recorded
        amortization expense of $355,694 related to these intangible assets during
        the
        year ended December 31, 2007. The Company expects to incur amortization expense
        of approximately $1.2 million, $1.0 million, $0.4 million, $0.2 million and
        $0.1
        million for the years ending December 31, 2008 through 2012.




*Purchase
      Price Allocations are Estimates*





The
      purchase price allocations for the acquisitions were based upon discounted
      expected cash flow models. Valuation methods including relief from royalty,
      excess earnings/contributory asset charges, lost profits, and with and without
      competition, were applied to the discounted expected cash flow models to
      determine the value of the intangible assets acquired. The purchase prices
      of
      the acquisitions were then allocated based upon the values of intangible assets
      calculated and the carrying values of assets and liabilities acquires.





Additionally,
      the maintenance of goodwill and indefinite-lived intangible assets 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 these assets.





*SpiritMC*





On
      September 18, 2007, the Company made an investment in Entlian Corporation
      (“SpiritMC”), a Korean company promoting MMA events in Korea. The investment
      gives the Company access to event promotion in Korea and to fighters and venues
      under contract with SpiritMC. The cost of the investment was $2 million
      consisting of $1 million cash and $1 million in restricted common shares
      (100,000 common shares valued at $10.00 per share). The $10.00 per share
      valuation resulted from the Company’s guarantee of a minimum per share value of
      $10.00 to Entlian. If the Company’s quoted market price is below $10 per share
      on the date the lock up period expires in March 2009, the Company is required
      to
      issue up to 100,000 additional common shares.





The
      Company acquired approximately 54% of SpiritMC’s common stock. This ownership
      percentage will dilute down to approximately 32% when SpiritMC’s existing debt
      facility with a third party mandatorily converts to common stock at any time
      but
      no later than January 2010. The Company has one third of the seats on SpiritMC’s
      Board of Directors, and therefore will not exercise control over SpiritMC.
      The
      Company has also determined that it is not the primary beneficiary. As such,
      the
      Company accounts for the investment in SpiritMC using the equity method. In
      the
      year ended December 31, 2007, the Company recorded a charge of approximately
      $152,000, representing the Company’s share of SpiritMC’s loss for the period
      since the date of investment.





The
      following is condensed financial information of SpiritMC
      (unaudited):





December
                31,
              2007
                (unaudited)Cash
                and cash equivalents
            
            $
            616,000Other
                current assets
            
            
            67,000Other
                assets
            
            
            155,000Current
                liabilities
            
            
            32,000Non-current
                liabilities
            
            
            1,122,000Stockholders’
                deficit
            
            
            (316,000
            )




F-16




Year
                Ended
              December
                31,
              2007
                (unaudited)Revenue
            
            $
            597,000Gross
                loss
            
            $
            (190,000
            )Operating
                loss
            
            $
            (867,000
            )Net
                loss
            
            $
            (879,000
            )





*Proforma
      Disclosures*





The
      unaudited financial information in the table below summarizes the combined
      results of King of the Cage, CageRage and SpiritMC as though the companies
      had
      been combined as of the beginning of 2007. The pro forma financial information
      is presented for informational purposes only and is not indicative of the
      results of operations that would have been achieved if the acquisitions and
      investment had taken place at the beginning of 2007. The pro forma financial
      information includes adjustments for amortization charges from acquired
      intangible assets.





Year
                Ended
              December
                31, 2007
            
            Year
                Ended or the period from August 10, 2006 (inception) December 31,
                2006Total
                revenues
            
            $
            7,703,000
            
            $
            3,291,000Net
                loss
            
            $
            (29,451,000
            )
            $
            (5,820,000
            )Basic
                and diluted net loss per share
            
            $
            (0.65
            )
            $
            (0.18
            )





Note
      6  Other
      Current Assets





Other
      current assets includes a balance due of approximately $940,000 from a business
      owned by a former shareholder of CageRage. This amount was due primarily for
      event sponsorship prior to the Company’s acquisition of CageRage. If the Company
      is unable to collect this amount or offset it against the liability for future
      acquisition purchase price payable, it will be reserved with the offset
      increasing the goodwill from the purchase of CageRage.





Note
      7    Income Taxes





As
      a
      result of the Company’s losses, no income taxes were due for 2007 or 2006. The
      provision for income taxes was offset by an increase in the deferred tax asset
      valuation allowance.





As
      of
      January 1, 2007, the Company implemented FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes—an Interpretation of FASB Statement 109 (“FIN
      48”)* ,
      which
      clarifies the accounting for uncertainty in tax positions. This Interpretation
      provides that the tax effects from an uncertain tax position can be recognized
      in the financial statements, only if the position is more likely than not of
      being sustained on audit, based on the technical merits of the position. The
      provisions of FIN 48 are effective as of the beginning of fiscal 2007, with
      the
      cumulative effect of the change in accounting principle recorded as an
      adjustment to opening retained earnings. The adoption on FIN 48 did not have
      an
      effect on the net loss for the year ended December 31, 2007 nor the period
      from
      August 10, 2006 (inception) to December 31, 2006, and no adjustment was made
      to
      opening retained earnings. The total amount of unrecognized tax benefits that
      if
      recognized would affect the Company’s effective tax rate is zero based on the
      fact that the Company currently has a full reserve against its unrecognized
      tax
      benefits and has not and does not expect to take any uncertain tax positions
      as
      of December 31, 2007.




F-17





Current
      income taxes (benefits) are based upon the year’s income taxable for federal,
      state and foreign tax reporting purposes. Deferred income taxes (benefits)
      are
      provided for certain income and expenses, which are recognized in different
      periods for tax and financial reporting purposes.





Deferred
      tax assets and liabilities are computed for differences between the financial
      statements and tax bases of assets and liabilities that will result in taxable
      or deductible amounts in the future based on enacted tax laws and rates
      applicable to the period in which the differences are expected to affect taxable
      income.





The
      significant components of the Company’s net deferred tax asset at December 31,
      2007 and 2006 are as follows:





Year
                Ended
              December
                31, 2007
            
            August
                10, 2006 (Inception) to
              December
                31, 2006Net
                operating loss
            
            $
            8,664,000
            
            $
            1,486,000Options
                and warrants
            
            
            2,428,000
            
            
            205,000Allowance
                for uncollectible accounts
            
            
            107,000
            
            
            -Accrued
                expenses
            
            
            1,023,000
            
            
            -Valuation
                allowance
            
            
            (12,222,000
            )
            
            (1,691,000
            )$
            -
            
            $
            -





In
      assessing the realizability of deferred tax assets of $12,222,000 and $1,691,000
      at December 31, 2007 and 2006, respectively, management considered whether
      it is
      more likely than not that some portion or all of the deferred tax assets will
      be
      realized. The ultimate realization of deferred tax assets is dependent upon
      the
      generation of future taxable income during the periods in which those temporary
      differences become deductible. Management considers the scheduled reversal
      of
      deferred tax liabilities, the projected future taxable income and tax planning
      strategies in making this assessment. A valuation allowance has been recorded
      to
      offset the deferred tax assets as it is currently more likely than not that
      the
      assets will not be utilized. The valuation allowance increased approximately
      $10.5 million and $1.7 million in the year ended December 31, 2007 and the
      period from August 10, 2006 (inception) to December 31, 2006,
      respectively.





A
      reconciliation of the expected tax computed at the U.S. statutory federal income
      tax rate to the total benefit for income taxes at December 31, 2007 and 2006
      is
      as follows:





Year
                Ended
              December
                31, 2007
            
            August
                10, 2006 (Inception) to
              December
                31, 2006Expected
                benefit at 34%
            
            $
            9,223,000
            
            $
            1,445,000State
                benefit, net of federal tax
            
            
            1,499,000
            
            
            246,000Foreign
                tax benefit
            
            
            (206,000
            )
            
            -Other
            
            
            15,000
            
            
            -Change
                in valuation allowance
            
            
            (10,531,000
            )
            
            (1,691,000
            )Benefit
                for income taxes
            
            $
            -
            
            $
            -





At
      December 31, 2007, the Company had net operating loss carryforwards of
      approximately $21.6 million for federal tax purposes, expiring through 2027.
      In
      addition, the Company had net operating loss carryforwards of approximately
      $21.6 million for state tax purposes, which expire through 2017. However, a
      change in ownership could result in an “ownership change” under Internal Revenue
      Code Section 382 which restricts the ability of a corporation to utilize
      existing net operating losses. The Company also had net operating carryforwards
      of approximately $1.5 million for UK tax purposes that had been accumulated
      since acquisition of CageRage.




The
      Company is subject to Federal and state tax in the
      United States and tax in the United Kingdom. The tax years 2006 and 2007 of
      the
      parent company remain open to examination by the major taxing jurisdictions
      to
      which the Company is subject. The acquired subsidiaries may have earlier years
      subject to examination. The Company is not currently under examination by any
      tax authorities.




F-18





Note
      8    Fixed Assets, Net





Fixed
      assets, net consisted of the following:





December 31,
              2007
            
            December 31,
              2006Computer,
                office and video production equipment
            
            $
            535,581
            
            $
            94,380Furniture
                and fixtures
            
            
            325,481
            
            
            -Live
                event set costs
            
            
            236,780
            
            
            70,962Leasehold
                improvements
            
            
            231,335
            
            
            -Computer
                software
            
            
            66,193
            
            
            -Internet
                domain names
            
            
            28,280
            
            
            -Website
                development costs
            
            
            349,976
            
            
            -1,773,626
            
            
            165,342Accumulated
                depreciation and amortization
            
            
            (345,078
            )
            
            (7,609
            )$
            1,428,548
            
            $
            157,733





Note
      9    Liabilities





*Other
      Accrued Liabilities*





In
      connection with the reverse merger of the Company and the predecessor
      registrant, the Company assumed accounts payable of approximately $210,000
      and
      notes payable of approximately $137,000, which existed at the time the
      predecessor registrant ceased operations. At December 31, 2007, these liability
      balances remained unchanged from the date of the reverse merger.





*Registration
      Rights Liability*





In
      connection with the October 2006 private placement, the Company entered into
      a
      Registration Rights Agreement with its investment banker. The agreement called
      for the Company to pay monthly “liquidated damages” to the investment banker if
      the Company’s registration statement was not declared effective by the
      Securities and Exchange Commission by March 15, 2007. The liquidated damages
      commenced on March 16, 2007 and were calculated at 1% per month of the gross
      private placement proceeds ($10 million) for up to 24 months for each month
      that
      the registration statement was not declared effective. The registration
      statement was ultimately declared effective on May 14, 2007, two months after
      the liquidated damages commenced. At March 31, 2007, the liability was reduced
      by $100,000 to $200,000 (two months of liquidated damages) with a corresponding
      increase to additional paid-in capital.





On
      June
      27, 2007, an agreement was entered into whereby the investment banker agreed
      to
      waive the liquidated damages if the Company files a registration statement
      covering the resale of the shares underlying the warrants issued in the October
      2006 private placement within 45 days of closing another private placement
      that
      was in-process at June 30, 2007. The registration statement was declared
      effective within the specified timeframe on September 5, 2007. Therefore, the
      Company reclassified the remaining $200,000 liability to paid-in
      capital.





*Bridge
      Loans*





In
      August
      2006, the Company entered into a bridge loan transaction with an affiliate
      of
      the placement agent for $350,000 and shareholders of a subsidiary of Real Sport
      for $250,000. As payment for interest, the loan holders received $75,000, which
      was paid from the proceeds of the October private placement. The loan principal
      was repaid in October 2006 from the proceeds of the private placement. The
      Company also issued to the lenders warrants with a three-year term to purchase
      600,000 common shares at $0.60 per share. The value of these warrants of
      approximately $0.60 per warrant, or approximately $360,000, was charged to
      interest expense during 2006.




F-19





Note
      10    Commitments





In
      March
      2007, the Company entered into a non-cancelable lease for office space and
      paid
      a deposit of $109,415 to the landlord. The Company took possession of the office
      space and began paying rent in June 2007. The lease agreement specifies monthly
      payments starting at $25,176 and increasing to $36,472, and the lease expires
      on
      July 31, 2012. The Company also leases additional satellite office space
      requiring monthly payments of approximately $2,600 through 2017.




Year
                ending December 31,
            
            Amount2008
            
            $
            414,0002009
            
            
            429,0002010
            
            
            445,0002011
            
            
            462,0002012
            
            
            286,000Thereafter
            
            
            142,000$
            2,178,000




The
      Company incurred rent expense of $349,357 and $22,317, respectively for the
      year
      ended December 31, 2007 and the period from August 10, 2006 (inception) to
      December 31, 2006.




The
      Company has contracts with vendors, including a live events venue. The minimum
      payments under these contracts are approximately $716,000, and $54,000 in the
      years ending December 31, 2008 and 2009, respectively.





The
      Company entered into contracts with executives, key employees and consultants.
      These contracts call for following minimum annual payments:





Year
                ending December 31,
            
            Amount2008
            
            $
            2,357,0002009
            
            
            2,135,0002010
            
            
            740,0002011
            
            
            438,0002012
            
            
            229,000$
            5,899,000





Additionally,
      some employment contracts include performance bonuses related to the operations
      of recently acquired businesses. In regards to the King of the Cage subsidiary,
      the Company pays a bonus equal to 20% of the subsidiary’s earnings before
      interest, taxes, depreciation and, amortization (“EBITDA”) in excess of
      specified amounts, escalating from $850,000 to $1.6 million for each of the
      twelve-month periods ending September 30, 2008 through 2012. In regards to
      the
      ICON asset purchase, the Company pays a bonus of $100,000 if the subsidiary’s
      EBITDA exceeds $196,000 for the twelve-month period ending November 30, 2008.





Note
      11    Litigation and Potential Claims





On
      December 14, 2006, the Company received a demand letter (the “Demand Letter”)
      from counsel for Wallid Ismail Promocoes E Eventos LTDA EPP and Wallid Ismail
      (collectively “Wallid”). The Demand Letter alleges that the Company entered into
      a “fully enforceable agreement” to compensate Wallid for allegedly assisting the
      Company in raising financing, and that the Company or its directors committed
      unspecified fraudulent acts, misappropriated Wallid’s “confidential and
      proprietary information,” and engaged in an “intentional and well-orchestrated
      scheme to wrongfully remove Wallid” as a principal of the Company. Wallid did
      not specify the damages he claims to have sustained as a result of these
      acts.





The
      Company denies Wallid’s allegations, and denies that it has, or has breached,
      any obligations to Wallid. On January 2, 2007, the Company filed a lawsuit
      against Wallid in the Superior Court for the State of California, County of
      Los
      Angeles, LASC Case No. BC 364204 (the “California Lawsuit”). In the California
      Lawsuit, the Company seeks a judicial declaration that the allegations in the
      Demand Letter are false. In addition, the California Lawsuit alleges that Wallid
      has misappropriated the Company’s business plan and other confidential and
      proprietary information, that Wallid has been unjustly enriched at the Company’s
      expense, that Wallid is engaging in unfair competition with the Company , and
      that Wallid’s actions violate California Business and Professions Code sections
      17200, *et
      seq* .
      Wallid
      answered the complaint on March 22, 2007, and then transferred the case to
      federal court. The case will be litigated in federal court, discovery is
      underway and the case is set for trial on September 16, 2008.




F-20





On
      January 10, 2007, Wallid filed suit against the Company, among others, in
      federal court in New Jersey (the “New Jersey Lawsuit”). He amended his complain
      on February 1, 2007. On April 18, 2007, the Company filed a motion to dismiss
      or
      stay the New Jersey Lawsuit because the California Lawsuit was filed first,
      or
      in the alternative to transfer the case to the federal court in California
      where
      the California Lawsuit is pending. On June 26, 2007, the court granted the
      Company’s motion and ordered the New Jersey Lawsuit transferred to the federal
      court in California.





On
      November 5, 2007, the federal court in the California lawsuit approved a
      stipulation by Wallid and the Company granting Wallid leave to file a
      Counterclaim and Third Party Complaint in the California Lawsuit, and providing
      for dismissal of the New Jersey Lawsuit without prejudice upon completion of
      the
      transfer of that action to California. The Counterclaim and Third Party
      Complaint asserts substantially the same claims Wallid asserted in the New
      Jersey Lawsuit. Wallid seeks: a 23.25% to 26.67% equity interest in the Company;
      damages for his losses in an amount to be determined at trial, but no less
      than
      $75,000; punitive damages of no less than $10,000,000; an imposition of a
      receiver to oversee the assets of the Company; an accounting on all income
      earned by the Company; and attorneys’ fees and costs of suit. The Company denies
      Wallid’s allegations and intends to assert a vigorous defense.





West
      Coast filed a civil action against Frank “Shamrock” Juarez (“Shamrock”) on
      January 23, 2007, and sought and obtained a temporary restraining order which
      prohibited Shamrock from fighting in the Company’s February 10, 2007 event. The
      Company subsequently entered into a settlement agreement on February 5, 2007,
      pursuant to which West Coast dismissed its civil action and agreed to permit
      Shamrock to fight in the February 10, 2007 event. The Company agreed to pay
      an
      aggregate of $250,000 to West Coast, out of future compensation due to Shamrock
      from the Company under the personal services agreement. The Company also entered
      into a co-promotion agreement with West Coast, pursuant to which it agreed
      to
      co-promote up to three live MMA events that feature Shamrock. To date the
      Company has paid West Coast $100,000 of the $250,000 owed. The remaining portion
      totaling $150,000 will be paid to West Coast from future co-produced events.
      A
      liability of $150,000 has been accrued at December 31, 2007.





On
      March
      22, 2007, Zuffa, LLC filed a complaint against Showtime Networks, the Company
      and Cage Rage in which it alleges that the defendants infringed Zuffa’s
      copyrights by airing footage from certain Ultimate Fighting Championship events
      and alleges that the defendants utilized portions of Zuffa’s copyrights in the
      televised broadcast of the February 10, 2007 MMA event that was held at the
      Desoto Civic Center in Southaven, Mississippi. Zuffa has alleged causes of
      action for copyright infringement and unfair competition, and seeks injunctive
      relief, compensatory damages or statutory damages, and litigation expenses.
      Zuffa has not specified the amount of monetary damages it seeks. The Company
      and
      Showtime have filed a motion to dismiss the case, and the parties to the lawsuit
      are currently waiting for a decision from the court.





Management
      does not believe that the outcome of the above mentioned litigation,
      individually or in the aggregate, will have an adverse effect on the Company’s
      financial position.





Note
      12    Shareholders’ Equity





*Common
      stock activity*





On
      August
      10, 2006, I-Fight, Inc., a subsidiary of Real Sport, issued 390 shares of its
      common stock at $1.50 per share to its investors for $585. In addition, Real
      Sport issued 450 shares of its common stock in exchange for all of the
      outstanding shares of I-Fight, Inc and all of the outstanding shares of Jungle
      Fight Championship, Inc. for $400. Payment for these shares was received on
      January 5, 2007. No other common stock transactions occurred until October
      3,
      2006.




F-21





On
      October 3, 2006, Pro Elite, Inc., the predecessor company, entered into a Share
      Exchange Agreement (the “Combination Agreement”) with Real Sport. Pursuant to
      the Combination Agreement, Pro Elite acquired all of the outstanding common
      stock of Real Sport, and Real Sport became a subsidiary of Pro Elite for
      25,000,000 shares of Pro Elite common stock. Included in the 25,000,000 shares
      were 4,000,000 shares, which Real Sport issued to Lifelogger LLC, and were
      exchanged for Company’s common stock as part of the reverse merger. The former
      directors and officers of Pro Elite resigned, and the directors and officers
      of
      Real Sport became the directors and officers of the Company. Following the
      acquisition, the former shareholders of Real Sport held approximately 99% of
      the
      outstanding common stock of the Company on a fully-diluted basis. The
      acquisition was accounted for as a reverse acquisition because the former
      shareholders of Real Sport owned a majority of the Company’s outstanding stock
      subsequent to the acquisition. The reverse acquisition was treated as a
      recapitalization because the public shell had no operations and nominal assets.
      As such, costs of the reverse merger were charged to operations. Accordingly,
      from a historical perspective, Real Sport was deemed to have been the survivor
      of the reorganization. As a result, the financial statements of the Company
      presented reflect the historical results of Real Sport prior to the merger
      and
      following the merger, and do not include the historical financial results of
      the
      predecessor company. Common stock, issued upon formation, has been retroactively
      restated to reflect the number of shares received from the predecessor company.
      The equity of the Company survives the reorganization.





On
      October 3, 2006, the Company issued 3,333,333 units at a price of $3.00 per
      unit
      in a private placement. Each unit consisted of three common shares and a three
      year warrant to purchase one share of common stock. The proceeds of the offering
      were allocated $688,000, or $0.2064 per share, to warrants based upon a
      Black-Scholes model valuation, using a volatility of 60%, and the balance of
      $9,312,000, or $0.9312 per share, less offering costs of $1,050,000, was
      allocated to common stock.





In
      connection with the private placement, the Company paid a commission of
      $1,000,000 to its investment banker and issued a five-year warrant to purchase
      3,000,000 shares of common stock at $2.00 per share to the placement agent.
      These items were charged against equity. The Black-Scholes value of the warrants
      issued, using a volatility of 60%, was $0.34 per warrant, or
      $1,015,000.





On
      October 3, 2006, the Company issued 2,462,927 shares of common stock to its
      investment banker for services related to the reverse merger into Pro Elite,
      Inc. (the registrant). The common stock issued was valued at $0.9312 per common
      share, or $2,293,478, based on the value of the shares issued in the
      aforementioned private placement, which occurred on the same day. This amount
      was charged to expense.





On
      October 27, 2006, the Company authorized a 1-for-500 share reverse stock split.
      All share amounts presented in these financial statements and footnotes have
      been adjusted to retroactively reflect this split unless specifically noted
      otherwise.





*Common
      Stock Issued to MMA Live Entertainment, Inc.*





On
      April
      3, 2007, the Company issued 320,000 shares of restricted common stock to MMA
      Live Entertainment, Inc., an affiliate of Frank Juarez “Shamrock” in connection
      with an agreement to provide MMA-related services. Under this agreement,
      Shamrock granted the Company the right to promote Shamrock as a fighter and
      provide other promotional services. The shares were valued at $640,000, based
      on
      a fair value of $2.00 per share, and recorded in prepaid services. The value
      of
      the shares is being amortized over the three year term of the
      agreement.





*SHOWTIME
      Securities Purchase*





On
      January 5, 2007, pursuant to a Securities Purchase Agreement the Company entered
      into with Showtime, the Company issued an aggregate of 1,666,667 units for
      $5
      million in cash, each unit consisting of 3 shares of common stock and a
      three-year warrant to purchase 1 share of common stock at a per share exercise
      price of $2.00 to Showtime, at a per unit price of $3.00. The warrants were
      valued at $345,000. Additionally, the Company issued a seven-year warrant to
      purchase 2.5 million shares of common stock to Showtime at a per share exercise
      price of $2.00, as additional consideration of the exclusive distribution
      agreement entered into in November 2006. These warrants have been valued at
      $608,000 and are being amortized into operations over a three-year period
      commencing January 5, 2007. The Showtime warrants were exercisable as of the
      date of grant.




F-22





The
      values of the Showtime warrants were estimated using the Black-Scholes option
      pricing model with the following assumptions: dividend yield of 0%, expected
      volatility of 60%, risk free interest rate of 4.7%, and expected lives of 3
      years.





*Private
      Placement of Common Stock and Warrants*





In
      the
      third quarter of 2007, the Company and selling shareholders finalized a private
      placement of common stock and warrants. Investors in the private placement
      purchased 3,571,429 units for $25,000,000 of which the Company received $22.5
      million. Each unit was priced at $7.00 and consisted of one share of common
      stock and one-half warrant to purchase one share of common stock at $7.00 per
      share. The warrants have a term of five years and a cashless exercise feature.
      The warrants were determined to have a value of $4.9 million, or $2.74 per
      warrant, using a Black-Scholes pricing model. The Company and selling security
      holders paid the placement agent a fee of 10% of gross proceeds, or $2,500,000.
      Additionally, the Company issued to the underwriter five-year, cashless-exercise
      warrants to purchase 3,571,428 shares of common stock at $7.00 per share. The
      value of the warrants given to the placement agent were $2.74 per warrant,
      or
      $9.8 million. The value of all warrants issued was charged to
      equity.





As
      part
      of the private placement, the Company provided investors and the underwriter
      with anti-dilution coverage through September 5, 2009. The anti-dilution
      coverage provides for the issuance of additional shares of common stock and
      adjustments to the exercise price of the warrants if the Company issues
      additional securities that exceed an aggregate of 200,000 shares of common
      stock
      at a price or exercise price per share less than $7.00 (subject to a floor
      of
      $2.00 per share and subject to adjustments for splits, recapitalizations and
      reorganizations). The agreement provides some exceptions to the anti-dilution
      provisions for issuances of stock, options or warrants to employees or for
      certain strategic transactions.





Under
      the
      agreement with the placement agent, the Company granted the placement agent
      the
      right to nominate two members to the Board of Directors (including the placement
      agent’s existing nominee) and signage rights at three of the Company’s events
      per year for two years. The Company indemnified the placement agent for certain
      claims that may arise in connection with the private placement, agreed to pay
      up
      to $50,000 in costs for tombstone ads, and agreed to pay the placement agents
      legal costs, subject to a minimum of $25,000.





Holders
      of the Company’s common stock, options and warrants were allowed to sell 10% of
      the shares in the placement for $2,500,000. The placement was comprised of
      3,214,286 shares of common stock from the Company, 357,143 shares of common
      stock from selling security holders and 1,785,715 investor warrants from the
      Company. The Company received net proceeds from the investors of $20.2 million
      which was allocated $4.4 million to warrants and the residual of $15.8 million
      to common shares, or $5.48 per share. The Company also received $100,214 from
      the selling security holders who exercised warrants and stock options in order
      to participate in the offering.





The
      Company registered the resale of the shares of common stock sold in the above
      offering along with warrants issued to investors and underwriters of the
      Company’s private placement in October 2006 with the Securities and Exchange
      Commission in a registration statement declared effective on September 5,
      2007.





*Stock-Based
      Compensation*




The
        Company adopted its 2006 Stock Option Plan and amended the plan in 2007,
        reserving a total of 8,000,000 shares. The plan provides for the issuance
        of
        statutory and non-statutory stock options to employees, directors and
        consultants, with an exercise price equal to the fair market value of the
        Company’s common stock on the date of grant. Options granted under the plan
        generally vest quarterly over four years and have a life of 10 years. As
        of
        December 31, 2007, options to purchase 4,560,730 shares of common stock had
        been
        granted under these plans.


The
      Company accounts for stock-based compensation arrangements with its employees,
      consultants and directors in accordance with SFAS No. 123 (revised),
“Share-Based Payment” (SFAS No. 123R). Under the fair value recognition
      provisions of SFAS No. 123R, the Company measures stock-based compensation
      cost
      at the grant date based on the fair value of the award and recognizes
      compensation expense over the requisite service period, which is generally
      the
      vesting period. For the year ended December 31, 2007 and the period from August
      10, 2006 (inception) to December 31, 2006, the Company incurred approximately
      $1.0 million and $0.1 million, respectively, of expense related to stock based
      compensation under this plan and approximately $3.7 million and $0.4 million
      respectively, of expense related to warrants.




F-23





*Stock
      Options*





The
      Company uses a Black-Scholes option pricing model to estimate the fair value
      of
      stock-based awards with the assumptions noted in the following table.





Year
                Ended
              December 31,
              2007
            
            August
                10, 2006 (Inception) to
              December
                31, 2006Risk-free
                interest rate
            
            
            4.07%
                - 5.09
            %
            
            4.5
                - 4.80
            %Expected
                life, in years
            
            
            5.0
                - 6.5
            
            
            5.0
                - 6.3Expected
                volatility
            
            
            60%
                - 96
            %
            
            60.0
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %





Expected
      volatility is based on the historical volatility of the share price of companies
      operating in similar industries. The expected term is based on management’s
      estimate of when the option will be exercised which is generally consistent
      with
      the vesting period. The risk-free interest rate for periods within the
      contractual life of the option is based on the U.S. Treasury yield curve in
      effect at the time of grant.





The
      following table represents stock option activity for the year ended December
      31,
      2007 and the period from August 10, 2006 (inception) to December 31, 2006:





Plan
              Options
            
            Weighted
              Average
              Exercise
              PriceOutstanding
                at beginning of period
            
            
            -
            
            $
            2.00Granted
            
            
            1,570,000
            
            
            2.00Outstanding
                at December 31, 2006
            
            
            1,570,000
            
            
            2.00Granted
            
            
            3,745,000
            
            $
            3.00Expired
            
            
            -
            
            $
            -Cancelled
            
            
            -
            
            $
            -Forfeited
            
            
            (364,014
            )
            $
            2.00Exercised
            
            
            (75,127
            )
            $
            2.01Outstanding
                at December 31, 2007
            
            
            4,875,859
            
            $
            2.77Exercisable
                at December 31, 2007
            
            
            1,380,894
            
            $
            2.18





At
      December 31, 2007 the aggregate intrinsic value of options outstanding and
      the
      aggregate intrinsic value of options exercisable was approximately $12.0 million
      and $3.9 million, respectively. The weighted-average grant-date fair value
      of
      options granted during 2007 was $1.22.  The total intrinsic value of
      options exercised in 2007 was approximately $213,000. The weighted-average
      remaining life of outstanding and exercisable options at December 31, 2007 
was 9.0 years and 8.64 years, respectively.




A
        summary
        of the status of the Company’s nonvested shares as of December 31, 2007 and
        changes during the year ended December 31, 2007 is presented below:
 Shares
              
              Weighted
                    Average
                    Grant-Date
                      Fair
                        ValueNonvested
                  at January 1, 2007
              
              
              1,570,000
              
              $
              0.56Granted
              
              
              3,745,000
              
              $
              1.22Vested
              
              
              (1,456,021
              )
              $
              0.64Forfeited/expired
              
              
              (364,014
              )
              $
              0.55Nonvested
                  at December 31, 2007
              
              
              3,494,965
              
              $
              1.24




F-24





At
      December 31, 2007 there was approximately $4.6 million of unrecognized
      compensation cost related to non-vested options, which is being expensed through
      2012.





On
      January 8, 2007, the Company granted stock options to a new director to purchase
      100,000 shares of common stock with an exercise price of $2.00 per share. The
      options have a fair value of approximately $55,000, which was charged to expense
      in January 2007 as the options vested immediately and the director subsequently
      resigned from the board of directors in the month of issuance. The options
      have
      a term of 10 years.





On
      January 8, 2007, the Company issued to an officer, an option to purchase
      1,700,000 shares of common stock at $2.00 per share. The options vested 340,000
      shares immediately with the remainder vesting over four years. The term of
      the
      option is 10 years. The option has a fair value of approximately $1,075,000,
      and
      approximately $229,000 was amortized in January 2007 with the balance being
      amortized on a straight-line basis over the vesting period. In September 2007,
      the service period of these options was shortened to four years. The remaining
      compensation expense is being recognized over the shortened term.





During
      the quarter ended March 31, 2007, the Company granted 840,000 options to
      employees in individual grants ranging from 10,000 to 300,000 options. The
      options have exercise prices from $2.00 to $2.50, vest over 1.75 to four years
      and have terms of 10 years. The aggregate fair value of these options at the
      dates of grant was approximately $500,000 and is being amortized on a
      straight-line basis over the vesting period.





During
      the quarter ended June 30, 2007, the Company granted 495,000 options to
      employees in individual grants ranging from 10,000 to 100,000 options, with
      exercise prices ranging from $2.00 to $6.00, vesting over three to four years
      and terms of 10 years. The aggregate fair value of these options at the dates
      of
      grant was approximately $408,000 and is being amortized on a straight-line
      basis
      over the vesting period.





During
      the quarter ended September 30, 2007, the Company granted 340,000 options to
      employees in individual grants ranging from 10,000 to 200,000 options, with
      exercise prices ranging from $6.00 to $7.00, vesting over four years and terms
      of 10 years. The aggregate fair value of these options at the dates of grant
      was
      approximately $1.1 million and is being amortized on a straight-line basis
      over
      the vesting period.





During
      the quarter ended September 30, 2007, option holders, including those who
      participated in the private placement described above, exercised 75,127 options
      and paid the Company exercise proceeds of approximately $151,000.





During
      the quarter ended December 31, 2007, the Company granted 270,000 options to
      employees in individual grants ranging from 20,000 to 50,000 options, with
      exercise prices of $7.00, vesting over four years and terms of 10 years. The
      aggregate fair value of these options at the dates of grant was approximately
      $1.4 million and is being amortized on a straight-line basis over the vesting
      period.





*Warrants*





The
      Company uses a Black-Scholes option pricing model to estimate the fair value
      of
      warrants with the assumptions noted in the following table.





Year
                Ended
              December 31,
              2007
            
            August
                10, 2006 (Inception) to
              December
                31, 2006Risk-free
                interest rate
            
            
            3.91%
                - 5.11
            %
            
            4.57
                - 4.87
            %Expected
                life, in years
            
            
            1.5
                - 6.0
            
            
            1.5
                - 5.0Expected
                volatility
            
            
            60%
                - 96
            %
            
            60.0
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %




F-25




The
      following table represents warrant activity for the year ended December 31,
      2007
      and the period from August 10, 2006 (inception) to December 31,
      2006:





Warrants
            
            Weighted
              Average
              Exercise
                PriceOutstanding
                at beginning of period
            
            
            -
            
            $
            -Granted
            
            
            10,453,333
            
            $
            1.92Outstanding
                at December 31, 2006
            
            
            10,453,333
            
            $
            1.92Granted
            
            
            27,123,310
            
            $
            3.64Expired
            
            
            (5,000
            )
            $
            3.00Exercised
            
            
            (7,071,506
            )
            $
            4.53Outstanding
                at December 31, 2007
            
            
            30,500,137
            
            $
            2.85Exercisable
                at December 31, 2007
            
            
            12,329,554
            
            $
            2.83





At
      December 31, 2007 the aggregate intrinsic value of warrants outstanding and
      the
      aggregate intrinsic value of warrants exercisable was approximately $69.9
      million and $30.9 million, respectively.





At
      December 31, 2007 there was approximately $27.9 million of unrecognized cost
      related to non-vested warrants (including approximately $23.7 million of
      unrecognized cost related to Burnett warrant tranches three through nine, which
      is discussed below), which is being expensed through 2012.





During
      the quarter ended March 31, 2007, the Company issued 390,000 warrants with
      exercise prices ranging from $2.00 to $3.25 to consultants for services and
      4,166,667 warrants to Showtime, as discussed elsewhere in this footnote. The
      value of the warrants issued to consultants was calculated as approximately
      $107,000.





During
      the quarter ended June 30, 2007, the Company issued 157,000 warrants with
      exercise prices ranging from $2.00 to $6.00 to consultants for services. The
      value of the warrants issued to consultants was calculated as approximately
      $54,000.





On
      June
      20, 2007, an unrelated party in the Company’s October 2006 private placement
      exercised, on a cashless basis, 250,000 warrants and received 208,333 shares
      of
      restricted common stock. These shares were registered for resale in September
      2007.




During
      the quarter ended September 30, 2007, other warrant holders, who participated
      in
      the private placement described above, exercised 3,745 warrants and paid the
      Company exercise proceeds of approximately $7,000.





During
      the quarter ended September 30, 2007, the Company issued 52,000 warrants with
      exercise prices ranging from $6.00 to $7.00 to consultants for services. The
      value of the warrants issued to consultants was calculated as approximately
      $125,000. The value of these warrants was fully expensed during the quarter
      ended September 30, 2007 based on the expected service period.





During
      the quarter ended September 2007, the Company issued a total of 5,357,143
      warrants to investors and its placement agent in connection with a private
      placement. See *Private
      Placement of Common Stock and Warrants* aforementioned in this footnote.





During
      the quarter ended September 30, 2007, investors in the Company’s private
      placements exercised 3,246,333 warrants on a cashless exercise basis for
      2,790,707 shares of common stock. These shares have not yet been issued by
      the
      transfer agent.




F-26





During
      the quarter ended December 31, 2007, the Company issued 52,500 warrants with
      exercise prices of $7.01 to consultants for services. The value of the warrants
      issued to consultants was calculated as approximately $239,000. The value of
      these warrants is being expensed over service periods ranging from one to four
      years.





During
      the quarter ended December 31, 2007, the Company’s private placement agent
      exercised 3,571,428 warrants on a cashless exercise basis for 1,847,290 shares
      of common stock.





*Burnett
      Warrants*





Effective
      June 15, 2007 (and as amended on June 28, 2007), the Company entered into an
      agreement (the "Series Agreement") with JMBP, Inc. ("MBP"), wholly-owned by
      Mark
      Burnett ("Burnett") in connection with a possible television series involving
      mixed martial arts ("Series"). It is anticipated that, as a condition to
      involvement in the Series, each of the Series contestants will sign a separate
      agreement with the Company or an affiliate of the Company for services rendered
      outside of the Series. MBP will own all rights to the Series. The Company and
      MBP will jointly exploit the Internet rights in connection with the Series
      on
      ProElite.com and other websites controlled by ProElite.com. The Company will
      be
      entitled to a share of MBP's Modified Adjusted Gross Proceeds, as defined.
      Subject to specified exceptions, MBP and Mark Burnett have agreed to exclusivity
      with respect to mixed martial arts programming. The term of the Agreement
      extends until the earlier of the end of the term of the license agreement with
      the broadcaster of the Series (the “License Agreement”) or the failure of MBP to
      enter into a License Agreement by June 15, 2008.





Pursuant
      to the Series Agreement, the Company and Burnett entered into a Subscription
      Agreement (the “Subscription Agreement”) relating to the issuance to Burnett of
      warrants to purchase up to 17,000,000 shares of the Company's common stock.
      The
      warrants are divided into nine tranches as follows:





Tranche
            
            Number
                of Shares
              under
                Warrants
            
            Vesting
                DateOne
            
            2,000,000
            
            June
                15, 2007Two
            
            2,000,000
            
            500,000
                shares to be vested on each of June 15, 2008, 2009, 2010 and
                2011.Three
            
            2,000,000
            
            Date
                of execution of a License AgreementFour
            
            1,000,000
            
            The
                date that the first episode of the Series is broadcast on a network
                or
                cable broadcaster.Five
            
            1,000,000
            
            The
                last day of the first season.Six
            
            2,000,000
            
            The
                last day of the second season.Seven
            
            4,000,000
            
            1,333,333
                shares to be vested on the last day of each of third, fourth and
                fifth
                seasons, respectively.Eight
            
            2,000,000
            
            1,000,000
                shares to be vested on the date of broadcast of each of the first
                two
                derivative pay-per-view events.Nine
            
            1,000,000
            
            500,000
                shares to be vested on the date of broadcast of each of the next
                two
                derivative pay-per-view events.





The
      vesting date of each tranche is subject to acceleration under certain
      circumstances. However, the warrants are not exercisable if a License Agreement
      is not entered into by June 15, 2008, except for 1,000,000 warrants from tranche
      one. Additionally, the warrants and any shares purchased through exercise of
      the
      warrants are subject to forfeiture, except for 1,000,000 warrants from tranche
      one, if a License Agreement is not entered into within one year of the effective
      date.





The
      warrants have an exercise price of $3.00 per share. The exercise price is
      reduced if the Company issues or sells shares of its common stock, excluding
      shares issued as compensation for services or in connection with acquisitions,
      for less than $3.00 per share. The expiration date for a particular tranche
      of
      Warrants is the latest to occur of (i) June 15, 2013; (ii) the date which is
      one
      year after the vesting date of any such tranche, and (iii) one year after the
      expiration of the term of the License Agreement.




F-27





The
      value
      of the warrants was calculated as approximately $2,637,000 for tranche one
      and
      $2,880,000 for tranche two using a Black-Scholes option pricing model with
      the
      following assumptions: expected term of 3 years (for tranche one) and from
      3 to
      4 years (for separate 500,000 vesting blocks of tranche two), expected
      volatility of 60%, risk-free interest rate of 4.7% and dividend yield of 0%.
      The
      value of the tranche one warrants was charged to expense in June 2007. The
      value
      of the tranche two warrants is being amortized to expense over the vesting
      period of each 500,000 warrant vesting block (i.e., from 1 to 4
      years).





The
      value
      of warrants in tranches three through nine was calculated as approximately:
      $3.7
      million (tranche three), $1.8 million (tranche four), $1.8 million (tranche
      five), $3.6 million (tranche six), $7.2 million (tranche seven), $3.6 million
      (tranche eight), and $1.8 million (tranche nine) or approximately $23.5 million
      in aggregate. The values were calculated using a Black-Scholes option pricing
      model with an expected term of 6 years, expected volatility of 60%, risk-free
      interest rate of 4.7% and dividend yield of 0%. The Company will begin expensing
      the value of these tranches once there is a reasonable likelihood of achieving
      the performance criteria of each tranche (as described above) and would be
      based
      on the current values at that time. At December 31, 2007, the Company has
      recognized no expense related to tranches three through nine.





The
      Company, Burnett and Santa Monica Capital Partners II LLC, ("SMCP"), one of
      the
      Company's shareholders, entered into an Investor Rights Agreement providing
      certain registration rights with respect to the shares purchasable under the
      warrants, co-sale rights with SMCP, restrictions on resale and board observation
      rights.





Note
      13    Related Party Transactions





The
      Company entered into a television production and distribution agreement with
      Showtime, which is also an investor in the Company. The Company earns revenue
      from and incurs expenses to Showtime in connection with this agreement. During
      the year ended December 31, 2007, the Company recorded revenue of approximately
      $240,000 from the pay-per-view broadcast of the Company’s June 22, 2007 event.
      During the year ended December 31, 2007, the Company incurred approximately
      $2.9
      million of television production expenses charged by Showtime to the Company.
      In
      February 2008, subsequent to year end, the Company and Showtime offset
      approximately $2 million of the amount due to Showtime and $240,133 of accounts
      receivable due from Showtime into a note payable of $1,822,086 due on December
      15, 2008. The note bears interest at the daily prime rate as published by
      JPMorganChase bank. Because the note was executed prior to issuance of the
      financial statements, the amounts due to and from Showtime are offset on the
      financial statements at December 31, 2007.





The
      Company entered into a three-year term consulting agreement and pays a monthly
      fee of $30,000 to Santa Monica Capital Partners II (“SMCP”) for services
      relating to strategic planning, investor relations, acquisitions, corporate
      governance and financing. SMCP is a shareholder in the Company and is
      partially-owned by Directors of the Company. The Company paid $390,000 to SMCP
      during the year ended December 31, 2007. Additionally, the Company incurred
      costs of approximately $200,000 for services paid on behalf
      of SMCP.





The
      Company engaged Orientations Networks, a company partially-owned by stockholders
      of the Company, to provide computer programming services. The Company paid
      approximately $523,000 to Orientations Networks for these services during 2007.





In
      2007,
      the Company engaged in a dual branded advertising and promotion campaign with
      a
      company partially-owned by stockholders of the Company. In 2007, the Company
      paid $40,000 to the related party for this campaign.





The
      Company used travel and event organizing services provided by a company that
      was
      partially-owned by stockholders of the Company. In 2007, the Company paid
      approximately $135,000 for these services.





In
      July
      2007, the Company co-promoted a live event in the UK with CageRage prior to
      the
      Company’s acquisition of CageRage. From the event, the Company recorded revenue
      of approximately $350,000, expenses of approximately $706,000. Upon the
      acquisition of CageRage, the net liability payable to CageRage of approximately
      $356,000 was reclassified an intercompany liability which was eliminated in
      consolidation.




F-28




Note
        14  Segment
        Information
 
 The
        Company operates and tracks its results in three reportable segments to reflect
        the manner in which management analyzes performance. The Company does not
        allocate corporate overhead to segments and as a result, corporate overhead
        is a
        reconciling item in the table below. There were no intersegment
        revenues.
 
 Revenues
        by reportable segment were as follows:


Year
                  ended
                December
                  31, 2007
              
              Period
                  from
                August
                  10, 2007
                (inception)
                  to
                December
                  31, 2006Revenues:Live
                  events - US
              
              $
              4,701,723
              
              $
              -Live
                  events - UK
              
              
              521,065
              
              
              -Website
              
              
              68,782
              
              
              -Total
                  revenues
              
              $
              5,291,570
              
              $
              -Operating
                  loss:Live
                  events - US
              
              $
              8,250,151
              
              $
              205,825Live
                  events - UK
              
              
              1,474,636
              
              
              -Website
              
              
              3,506,804
              
              
              171,329Corporate
              
              
              14,352,909
              
              
              3,567,434Total
                  operating loss
              
              $
              27,584,500
              
              $
              3,944,588Fixed
                  assets:US
              
              $
              1,413,992
              
              $
              157,733UK
              
              
              14,556
              
              
              -Total
                  assets
              
              $
              1,428,548
              
              $
              157,733




Note
      15          Subsequent Events
      (unaudited)





CBS
      Entertainment ("CBS") and the Company entered into an agreement dated as of
      February 22, 2008 (the "Broadcast Agreement") pursuant to which CBS has the
      right to place an order for four two-hour mixed martial arts fight programs
      (the
      "Events") for live broadcast during a period of one year. CBS was also granted
      four subsequent, consecutive annual options to order four additional two-hour
      Events and to order Events other than two-hours in length. In addition to the
      Events, CBS may order derivative type programs based on the Events. CBS will
      pay
      to the Company a per event license fee. During the term, subject to limited
      exceptions, the Company's ProElite and EliteXC brands will be exclusive to
      CBS
      in broadcast television and premium cable in the United States (excluding Puerto
      Rico) and Bermuda.





In
      connection with the Broadcast Agreement, the Company and Showtime, an affiliate
      of CBS, entered into a Subscription Agreement dated as of February 22, 2008
      pursuant to which the Company agreed to issue two Warrants to Showtime (the
      "New
      Warrants") each for the purchase of 2,000,000 shares of the Company's Common
      Stock at an exercise price of $2.00 per share. The first Warrant vests
      immediately and is for a term of five years from February 22, 2008. The second
      Warrant vests in four equal tranches of 500,000 shares with each respective
      tranche to vest if an Event is broadcast pursuant to the Broadcast Agreement.
      The term of each tranche is five years from the date that such tranche vests.
      Pursuant to an Investor Rights Agreement between the Company and Showtime dated
      as of February 22, 2008, the Company granted to Showtime certain registration
      rights with respect to the shares issuable upon exercise of the New Warrants,
      and Showtime agreed that such shares and the New Warrants are subject to certain
      transfers restrictions until March 5, 2009. The value of the first warrant
      computed using a Black-Scholes model was approximately $2.3 million and will
      be
      charged as an expense to operations in February 2008. The value of the second
      warrant computed using a Black-Scholes model was approximately $2.4 million
      and
      will be charged to operations through the expected dates of broadcasts.
      Currently, the entire value of this warrant is expected to be charged to
      operations during 2008.





Pursuant
      to the Subscription Agreement, effective February 22, 2008, the Company issued
      the New Warrants to Showtime. Additionally, Showtime exercised part of the
      warrants previously issued to Showtime in January 2007. The exercise was for
      an
      aggregate of 2,000,000 shares of the Company's Common Stock (the "Warrant
      Shares") resulting in proceeds to the Company of $4,000,000.





Effective
      March 3, 2008, the Company hired a new Chief Executive Officer (“CEO”). Under
      the employment agreement with the new CEO, the Company pays an annual salary
      of
      $240,000 and granted 1,000,000 options to purchase common stock at an exercise
      price of $2.00 per share. The options have a five year term, vest monthly over
      two years and have a change in control provision. The value of these options
      computed using a Black-Scholes model was approximately $1.2 million and is
      expected to be charged to operations over two years.




F-29





**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.


PROELITE,
                INC.Date:
                April 15, 2008
            By:
            /s/ Charles
                ChampionCharles
                Champion, Chief Executive Officer(Principal
                Executive Officer)






And:
            /s/ Dale
                BolenDale
                  Bolen, Interim Chief Financial Officerand
                Chief Accounting Officer
              (Principal
                Financial and Accounting Officer)





31




**EXHIBIT
      INDEX**




Exhibit
                No.
            
            Exhibit
                Description2.1
            
            Share
                Exchange Agreement dated as of October 3, 2006 among the Company,
                Santa
                Monica Capital Partners II, LLC, Douglas DeLuca, Gary Shaw, Lifelogger,
                LLC, Pro Camp Enterprises LLC, Jarred Shaw, Hunter World Markets,
                Inc.,
                and David Ficksman. (1)4.1
            
            Amendment
                to Warrant and Related Agreements by and between JMBP, Inc., Mark
                Burnett
                and ProElite, Inc. dated June 28, 2007. (3)4.2
            
            Form
                of Warrant issued to Mark Burnett on June 15, 2007. (2)4.3
            
            Form
                of Investor Warrant dated as of June 29, 2007. (3)4.4
            
            Form
                of Registration Rights Agreement dated as of June 29, 2007 between
                ProElite, Inc. and the Purchasers named therein and Hunter World
                Markets,
                Inc. (3)4.5
            
            Placement
                Agent Warrant issued to Hunter World Markets, Inc. dated as of June
                29,
                2007. (3)4.6
            
            Form
                of Lock-Up Agreement. (5)4.7
            
            Form
                of Vested Warrant issued to CBS Entertainment dated February 22,
                2008.4.8
            
            Form
                of Broadcast Warrant issued to CBS Entertainment dated February 22,
                2008.10.1
            
            Form
                of Securities Purchase Agreement dated as of June 29, 2007, by and
                among
                ProElite, Inc. and the Purchasers named therein. (3)10.2
            
            Placement
                Agent Agreement dated as of June 25, 2007, between ProElite, Inc.
                and
                Hunter World Markets, Inc. (3)10.3
            
            Form
                of Agreement between Company and Selling Shareholder.
                (5)10.4
            
            Waiver
                and Amendment to Registration Rights Agreement, dated as of June
                27, 2007.
                (4)10.5
            
            Investment
                Agreement dated August 24, 2007, by and among ProElite, Inc., Entlian
                Corporation and CJ Media Inc. (7)10.6
            
            Purchase
                Agreement dated September 11, 2007, by and among ProElite, Inc.,
                Belgravia
                Entertainment International Limited and John Faraday.
                (6)10.7
            
            Stock
                Purchase Agreement dated as of September 11, 2007, by and among ProElite,
                Inc., King of the Cage, Inc., and the shareholders of King of the
                Cage.
                (6)




32




10.8
            
            Employment
                Agreement dated as of September 11, 2007, by and between ProElite,
                Inc and
                Terry Trebilcock. (6)10.9
            
            Stock
                Pledge Agreement dated as of September 11, 2007, between ProElite,
                Inc.,
                as pledgor and Terry Trebilcock and Juliemae Trebilcock, as pledges.
                (6)10.10
            
            Asset
                Purchase Agreement dated as of September 21, 2007, by and among ProElite,
                Inc., Future Fight Productions, Inc., and the shareholders of Future
                Fight
                Productions, Inc.*10.11
            
            Amendment
                to Asset Purchase Agreement, dated December 7, 2007, by and among
                ProElite, Inc., Future Fight Productions, Inc., Thomas Jay Thompson
                and
                Odd Haugen.*10.12
            
            Consulting
                Agreement, dated December 7, 2007, by and among ProElite, Inc., FFP,
                Inc.
                and Thomas Jay Thompson.*10.13
            
            Subscription
                Agreement dated as of February 22, 2008 between ProElite, Inc. and
                Showtime Networks Inc.*10.14
            
            Investor
                Rights Amendment dated as of February 22, 2008 between ProElite,
                Inc. and
                Showtime Networks Inc.*10.15
            
            CBS
                Broadcast Agreement
              
              Portions of this exhibit have been deleted and
                filed
                separately with the Securities and Exchange Commission pursuant to
                a
                request for confidential treatment.31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.




(1)
            Previously
                filed in connection with the Company’s registration statement on Form
                SB-2, originally filed on January 7, 2007 and declared effective
                on May
                14, 2007.




(2)
            Previously
                filed on June 18, 2007 with the current report on Form 8-K.




(3)
            Previously
                filed on July 18, 2007 with the current report on Form 8-K.




(4)
            Previously
                filed on July 16, 2007 with the current report on Form 8-K.




(5)
            Previously
                filed in connection with the Company’s registration statement on Form
                SB-2, originally filed on August 24, 2007 and declared effective
                on
                September 5, 2007.




(6)
            Previously
                filed on September 17, 2007 with the current report on Form 8-K.




(7)
            Previously
                filed on September 21, 2007 with the current report on Form 8-K.*
            Previously
              filed.




33