**SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-Q**
  (Mark
        One)
  x
              **Quarterly
                  report under Section 13 or 15(d) of the Securities Exchange Act of
                  1934**
  **For
        the quarterly period ended March 31, 2008**
  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 registrant 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
 (Registrant’s
        telephone number, including area code)
  Indicate
        by check mark whether the registrant: (1) has filed all reports required to
        be filed by Section 13 or 15(d) of the Securities Exchange Act during the
        preceding 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 checkmark whether the registrant is a large accelerated filer, an accelerated
        filer, a non-accelerated filer, or a smaller reporting company. See the
        definitions of “large accelerated filer,” an “accelerated filer,” a
“non-accelerated filer,” or a “smaller reporting company” in Rule 12b-2 of the
        Exchange Act.
 
 Large
                  accelerated filero
              
              Accelerated
                  fileroNon-accelerated
                  filero
              (Do
                  not check if a smaller reporting company)
              Smaller
                  reporting companyx
 
 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 May 19, 2008 there were 55,854,724 shares of Common Stock outstanding.
  
  **ProElite,
        Inc.**
 **INDEX**
  **Page**
                **No.****PART
                  I. FINANCIAL INFORMATION**Item 1
              Condensed
                  Consolidated Financial Statements
              3Condensed
                  Consolidated Balance Sheets as of March 31, 2008 and
                  December 31, 2007
              3Condensed
                  Consolidated Statements of Operations for the three month periods
                  ended
                  March 31, 2008 and 2007
              4Condensed
                  Consolidated Statement of Changes in Shareholders’ Equity for the three
                  month period ended March 31, 2008
              5Condensed
                  Consolidated Statements of Cash Flows for the three month periods
                  ended
                  March 31, 2008 and 2007
              6Notes
                  to Condensed Consolidated Financial Statements
              8Item 2
              Management’s
                  Discussion and Analysis of Operations
              24Item 3
              Quantitative
                  and Qualitative Disclosures about Market Risk
              27Item 4
              Controls
                  and Procedures
              27**PART
                  II. OTHER INFORMATION**Item 1
              Legal
                  Proceedings
              29Item 1A
              Risk
                  Factors
              29Item 2
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              29Item 3
              Defaults
                  Upon Senior Securities
              29Item 4
              Submission
                  of Matters to a Vote of Security Holders
              29Item 5
              Other
                  Information
              29Item 6
              Exhibits
              29Signatures
              30Exhibit Index
              31
  302
                  Certification of Chief Executive Officer302
                  Certification of Chief Financial Officer906
                  Certification of Chief Executive Officer906
                  Certification of Chief Financial
                  Officer
  
  **PART
        I. FINANCIAL INFORMATION**
 **Item 1.
        Condensed Consolidated Financial Statements.**
  ProElite,
        Inc.
 Condensed
        Consolidated Balance Sheets
  March 31,
                2008
              
              December 31,
                2007(unaudited)AssetsCurrent
                  assetsCash
                  and cash equivalents
              
              $
              3,686,654
              
              $
              4,427,303Restricted
                  cash
              
              
              400,803
              
              
              277,500Accounts
                  receivable, net of allowance of $207,500 and $255,901,
                  respectively
              
              
              1,055,495
              
              
              338,596Accounts
                  receivable - Showtime
              
              
              45,820
              
              
              -Prepaid
                  expenses
              
              
              156,663
              
              
              133,673Other
                  current assets
              
              
              1,014,681
              
              
              1,077,896Total
                  current assets
              
              
              6,360,116
              
              
              6,254,968Fixed
                  assets, net
              
              
              1,369,028
              
              
              1,428,548Other
                  assetsAcquired
                  intangible assets, net
              
              
              8,681,446
              
              
              9,022,181Goodwill
              
              
              6,445,795
              
              
              6,238,652Investment
                  in Entlian/SpiritMC
              
              
              1,732,306
              
              
              1,848,003Prepaid
                  distribution costs, net
              
              
              2,897,479
              
              
              764,109Prepaid
                  license fees, net
              
              
              95,908
              
              
              111,052Prepaid
                  services, net
              
              
              337,778
              
              
              408,889Deposits
                  and other assets
              
              
              148,915
              
              
              143,915Total
                  other assets
              
              
              20,339,627
              
              
              18,536,801Total
                  assets
              
              $
              28,068,771
              
              $
              26,220,317Liabilities
                  and Shareholders’ EquityCurrent
                  liabilitiesNote
                  payable and accrued interest - Showtime
              
              $
              1,855,757
              
              $
              1,822,086Accounts
                  payable
              
              
              1,259,974
              
              
              1,531,342Accrued
                  expenses
              
              
              632,984
              
              
              733,638Accounts
                  payable and accrued expense - Showtime
              
              
              -
              
              
              125,000Future
                  payments due for acquired companies
              
              
              1,325,000
              
              
              1,162,500Other
                  accrued liabilities from predecessor company
              
              
              346,572
              
              
              346,572Other
                  accrued liabilities
              
              
              31,918
              
              
              -Deferred
                  revenue
              
              
              162,300
              
              
              -West
                  Coast settlement
              
              
              150,000
              
              
              150,000Total
                  current liabilities
              
              
              5,764,505
              
              
              5,871,138Deferred
                  rent and lease incentive
              
              
              154,019
              
              
              153,309Total
                  liabilities
              
              
              5,918,524
              
              
              6,024,447Commitments
                  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, 55,676,155
                  and
                  51,659,488 shares issued and outstanding at March 31, 2008 and
                  December 31, 2007, respectively
              
              
              5,568
              
              
              5,166Common
                  stock to be issued
              
              
              2,312,470
              
              
              2,249,997Additional
                  paid-in-capital
              
              
              56,864,624
              
              
              49,404,897Accumulated
                  other comprehensive income (expense)
              
              
              15,854
              
              
              (86,793
              )Accumulated
                  deficit
              
              
              (37,048,269
              )
              
              (31,377,397
              )Total
                  shareholders’ equity
              
              
              22,150,247
              
              
              20,195,870Total
                  liabilities and shareholders’ equity
              
              $
              28,068,771
              
              $
              26,220,317
 
 See
        Notes
        to Condensed Consolidated Financial Statements
  3
  ProElite,
        Inc.
 Condensed
        Consolidated Statements of Operations
 (Unaudited)
  Three
                Months
                Ended
                March 31,
                2008
              
              Three
                Months
                Ended
                March 31,
                2007RevenueLive
                  events
              
              $
              2,974,564
              
              $
              311,104Pay
                  per view and television licensing
              
              
              135,275
              
              
              -Showtime
              
              
              1,200,000
              
              
              -Internet
              
              
              26,464
              
              
              3,500Other
              
              
              119,471
              
              
              -Total
                  revenue
              
              
              4,455,774
              
              
              314,604Cost
                  of revenueLive
                  events
              
              
              4,027,894
              
              
              1,509,939Pay
                  per view and television licensing
              
              
              24,354
              
              
              -Showtime
                  (including non-cash warrant amortization expense of $122,075 and
                  $104,193)
              
              
              122,075
              
              
              935,933Internet
              
              
              28,902
              
              
              58,555Other
              
              
              39,394
              
              
              -Total
                  cost of revenue
              
              
              4,242,619
              
              
              2,504,427Gross
                  profit (loss)
              
              
              213,155
              
              
              (2,189,823
              )Operating
                  expensesMarketing
              
              
              121,025
              
              
              103,529Website
                  operations
              
              
              724,264
              
              
              415,170Live
                  events
              
              
              1,326,123
              
              
              339,390General
                  and administrative expenses
              
              
              3,698,629
              
              
              1,621,259Total
                  operating expenses
              
              
              5,870,041
              
              
              2,479,348Operating
                  loss
              
              
              (5,656,886
              )
              
              (4,669,171
              )Other
                  incomeInterest
                  income (expense), net
              
              
              (13,986
              )
              
              116,224Loss
                  before income taxes
              
              
              (5,670,872
              )
              
              (4,552,947
              )Income
                  taxes
              
              
              -
              
              
              -Net
                  loss
              
              $
              (5,670,872
              )
              $
              (4,552,947
              )Net
                  loss per share - basic and diluted
              
              $
              (0.11
              )
              $
              (0.11
              )Weighted
                  average shares outstanding - basic and diluted
              
              
              52,915,349
              
              
              42,277,778
 
 See
        Notes
        to Condensed Consolidated Financial Statements
  4
  ProElite,
        Inc.
 Condensed
        Consolidated Statement of Changes in Shareholders’ Equity
 (Unaudited)
 
 AccumulatedCommon
                  Stock
              
              
              
              Additional
              
              Other
              
              
              
              TotalIssuable
              
              Common
                  Stock
              
              Paid-
              
              Comprehensive
              
              Accumulated
              
              Shareholders’Shares
              
              Amount
              
              Shares
              
              Amount
              
              In
                  Capital
              
              Income
                  (Expense)
              
              Deficit
              
              EquityBalance
                  at December 31, 2007
              
              
              278,571
              
              $
              2,249,997
              
              
              51,659,488
              
              $
              5,166
              
              $
              49,404,897
              
              $
              (86,793
              )
              $
              (31,377,397
              )
              $
              20,195,870Common
                  stock issuable in connection with acquisitions and for
                  services
              
              
              39,280
              
              
              62,473
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              62,473Common
                  stock issued in connection with warrant exercise by
                  Showtime
              
              
              -
              
              
              -
              
              
              2,000,000
              
              
              200
              
              
              3,999,800
              
              
              -
              
              
              -
              
              
              4,000,000Warrant
                  issued to Showtime
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,255,446
              
              
              -
              
              
              -
              
              
              2,255,446Warrants
                  exercised on a cashless basis by private placement investors and
                  placement
                  agent
              
              
              -
              
              
              -
              
              
              2,016,667
              
              
              202
              
              
              (202
              )
              
              -
              
              
              -
              
              
              -Compensation
                  expense for stock options and warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,204,683
              
              
              -
              
              
              -
              
              
              1,204,683Cumulative
                  translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              102,647
              
              
              -
              
              
              102,647Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,670,872
              )
              
              (5,670,872
              )Balance
                  at March 31, 2008
              
              
              317,851
              
              $
              2,312,470
              
              
              55,676,155
              
              $
              5,568
              
              $
              56,864,624
              
              $
              15,854
              
              $
              (37,048,269
              )
              $
              22,150,247
 
 See
        Notes
        to Condensed Consolidated Financial Statements
  5
  ProElite,
        Inc.
 Condensed
        Consolidated Statements of Cash Flows
 (Unaudited)
  Three
                  Months
                Ended
                  March 31,
                2008
              
              Three
                  Months
                Ended
                  March 31,
                2007Cash
                  flows from operating activitiesNet
                  loss
              
              $
              (5,670,872
              )
              $
              (4,552,947
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activitiesStock
                  and warrant based compensation
              
              
              1,204,683
              
              
              462,715Stock
                  issued for services
              
              
              17,830
              
              
              -Depreciation
                  and amortization
              
              
              654,084
              
              
              144,484Loss
                  in equity interest in Entlian Co.
              
              
              115,697
              
              
              -Change
                  in operating assets and liabilities:Increase
                  in accounts receivable
              
              
              (762,719
              )
              
              (12,250
              )(Increase)
                  decrease in prepaid expense and other assets
              
              
              35,224
              
              
              (86,595
              )Increase
                  (decrease) in accounts payable, accrued expenses and other
                  liabilities
              
              
              (139,756
              )
              
              1,230,890Increase
                  in deferred revenue
              
              
              95,500
              
              
              250,000Net
                  cash used in operating activities
              
              
              (4,450,329
              )
              
              (2,563,703
              )Cash
                  flows from investing activitiesPurchase
                  of fixed assets
              
              
              (45,500
              )
              
              (584,832
              )Net
                  cash used in investing activities
              
              
              (45,500
              )
              
              (584,832
              )Cash
                  flows from financing activitiesIssuance
                  of common stock and warrants for cash
              
              
              -
              
              
              5,000,000Proceeds
                  from exercise of options and warrants
              
              
              4,000,000Additional
                  cash pledged as collateral for credit card facility
              
              
              (123,303
              )
              
              (75,000
              )Payments
                  related to acquisitions
              
              
              (224,164
              )
              
              -Net
                  cash provided by financing activities
              
              
              3,652,533
              
              
              4,925,000Effect
                  of exchange rates
              
              
              102,647
              
              
              -Net
                  increase (decrease) in cash and cash equivalents
              
              
              (740,649
              )
              
              1,776,465Cash
                  and cash equivalents at beginning of period
              
              
              4,427,303
              
              
              7,295,825Cash
                  and cash equivalents at end of period
              
              $
              3,686,654
              
              $
              9,072,290
  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 the $608,000 value of the warrant as prepaid distribution
        costs.
 
 At
        March
        31, 2007, the Company reduced its registration rights liability related to
        the
        shares issued in a October 2006 private placement by $100,000, with a
        corresponding increase to paid-in capital.
 
 In
        January 2008, the Company recorded 35,714 issuable shares of restricted common
        stock for an acquisition in 2007 of website related assets. These shares
        were
        valued at $44,643, and this amount was recorded in goodwill.
 
 On
        February 21, 2008, the Company issued 4,000,000 warrants to purchase common
        stock at $2.00 per share to Showtime Networks in connection with a television
        distribution agreement with CBS Entertainment. At the grant date, 2,000,000
        of
        these warrants were vested, and the $2.3 million value of the vested warrants
        was recorded as prepaid distribution costs.
 
 On
        March
        15, 2008, the Company’s placement agent exercised 2,750,000 warrants with a
        strike price of $2.00 per share on a cashless basis and received 2,016,667
        shares of common stock.
 
 See
        Notes
        to Condensed Consolidated Financial Statements
  7
  ProElite,
        Inc.
 Notes
        to
        Condensed Consolidated Financial Statements
 (Unaudited)
 
 Note
        1    Basis of Presentation and Summary of Significant
        Accounting Policies
 
 Financial
        Statement Presentation
  The
        accompanying unaudited condensed consolidated financial statements of ProElite,
        Inc., a New Jersey company and its subsidiaries (“ProElite” or the “Company”),
        have been prepared in accordance with the rules and regulations of the
        Securities and Exchange Commission for Form 10-Q. Accordingly, certain
        information and footnote disclosures, normally included in financial statements
        prepared in accordance with generally accepted accounting principles, have
        been
        condensed or omitted pursuant to such rules and regulations.
 
 In
        the
        opinion of management, these financial statements reflect all adjustments,
        consisting of normal recurring accruals, which are considered necessary for
        a
        fair presentation. These financial statements should be read in conjunction
        with
        the audited consolidated financial statements included in our annual report
        on
        Form 10-KSB for the year ended December 31, 2007. Operating results for interim
        periods are not necessarily indicative of operating results for an entire
        fiscal
        year or any other future periods.
 
 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.
 
 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% (see Note 4).
 
 Revenue
        Recognition
  In
        general, 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.
 
 The
        Company earns revenue primarily from live event ticket sales, site fees,
        sponsorship, television license fees and pay per view fees. 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.
  8
  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: fighter purse,
        travel, arena costs, television production and amortization of capitalized
        value
        of warrants issued to Showtime. 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 $315,309 and $162,381
        during the quarters ended March 31, 2008 and 2007, respectively.
 
 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.
 
 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.
 
 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.
  9
  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 March 31, 2008.
 
 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.
 
 Prepaid
        Distribution Costs
 
 Prepaid
        distribution costs represent the value of warrants issued to Showtime Networks
        in November 2006 and January 2007 and to CBS Entertainment in February 2008
        in
        connection with television and pay-per-view distribution agreements. The
        value
        of the warrants is being amortized to expense over the three-year term of
        the
        distribution agreement with Showtime and at the time of broadcast of the
        first
        four events under the CBS 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.
 
 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 (expense) in the accompanying consolidated balance
        sheet.
  10
  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.
 
 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 adopted SFAS No. 157 as of January 1, 2008 and it had
        no
        effect on the Company’s 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.
        Determination of the ultimate effect of this statement will depend on the
        Company’s acquisitions, if any, subsequent to December 15, 2008.
 
 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.
  11
  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 $3.7 million of cash at March 31, 2008, additional financing
        is needed to maintain operations and 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.
 
 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. The auditor’s report for the year ended
        December 31, 2007 states that 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.
 
 Note
        3    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 three
        months
        ended March 31, 2008 and 2007:
 
 Three
                  Months
                Ended
                March
                  31,
                2008
              
              Three
                  Months
                Ended
                March
                  31,
                2007Weighted-average
                  common shares outstanding - basic
              
              
              52,915,349
              
              
              42,277,778Dilutive
                  effect of stock options and warrants
              
              
              -
              
              
              -Weighted-average
                  common shares outstanding - diluted
              
              
              52,915,349
              
              
              42,277,778Net
                  loss per share - basic and diluted
              
              $
              (0.11
              )
              $
              (0.11
              )
  The
        effect of options and warrants (together 35,935,184 and 19,070,000,
        respectively) on the computation of diluted net loss per share is excluded
        for
        the three months ended March 31, 2008 and 2007 because their effect is
        anti-dilutive.
  12
 
 Note
        4    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. In April 2008, the Company issued
        178,571
        shares at $7.00 per share. Additionally, the Company entered into a five
        year
        employment contract with one of the selling shareholders. (See Note
        9.)
 
 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 March 31, 2008, the Company has accrued a liability
        of $325,000 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.
 
 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.
 
 For
        the
        quarter ended March 31, 2008, KOTC recognized revenue of approximately $500,000
        and after expenses, including amortization of approximately $105,000 related
        to
        acquired intangible assets, a net loss of approximately $105,000.
 
 *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.
  13
  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.
 
 For
        the
        quarter ended March 31, 2008, Cage Rage recognized revenue of approximately
        $465,000 and after expenses, including amortization of approximately $216,000
        related to acquired intangible assets, a net loss of approximately
        $787,000.
 
 *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.
 
 *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 approximately $341,000 related to these intangible
        assets during the quarter ended March 31, 2008.
  14
  *Purchase
        Price Allocations*
 
 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 acquired.
 
 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.
        The
        Company recorded a charge of approximately $116,000, representing the Company’s
        share of SpiritMC’s loss for the quarter ended March 31, 2008.
 
 Note
        5    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
        6    Fixed Assets, Net
 
 Fixed
        assets, net consisted of the following:
 
 March 31,
                2008
              
              December 31,
                2007Computer,
                  office and video production equipment
              
              $
              563,823
              
              $
              514,114Transportation
                  equipment
              
              
              17,500
              
              
              -Furniture
                  and fixtures
              
              
              340,717
              
              
              337,629Live
                  event set costs
              
              
              172,737
              
              
              56,000Leasehold
                  improvements
              
              
              232,835
              
              
              231,335Computer
                  software
              
              
              73,247
              
              
              63,482Internet
                  domain names
              
              
              29,320
              
              
              24,933Website
                  development costs
              
              
              349,976
              
              
              349,9761,780,155
              
              
              1,577,469Accumulated
                  depreciation and amortization
              
              
              (411,127
              )
              
              (246,538
              )$
              1,369,028
              
              $
              1,330,931
  15
  Note
        7    Liabilities
 
 *Note
        Payable - Showtime*
 
 The
        Company earned revenue from and incurred expenses to Showtime in connection
        with
        the television distribution 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,
        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.
 
 *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. These liability balances remained
        unchanged from the date of the reverse merger.
 
 Note
        8    Income Taxes
 
 As
        a
        result of the Company’s losses, no income taxes were due for the three months
        ended March 31, 2008 and 2007. 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
        adoption on FIN 48 did not have an effect on the Company’s consolidated
        financial statements. 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.
 
 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
        Company had a full valuation allowance against deferred tax assets at March
        31,
        2008.
  16
  At
        March
        31, 2008, the Company had net operating loss carryforwards of approximately
        $25.1 million for federal tax purposes, expiring through 2028. In addition,
        the
        Company had net operating loss carryforwards of approximately $25.1 million
        for
        state tax purposes, which expire through 2018. 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 loss carryforwards of approximately
        $2.3 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.
 
 Note
        9    Commitments
 
 The
        Company’s lease agreement for office space 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 office space requiring monthly payments
        of
        approximately $2,600 through 2017. Future minimum annual payments due under
        these leases are as follows:
 
 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 $104,755 and $48,581, respectively for the
        quarter ended March 31, 2008 and 2007, respectively.
  The
        Company has contracts with vendors, including a live events venue. The minimum
        annual 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.
  17
  Note
        10    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.
  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.
 
 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 March 31, 2007.
  18
  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.
 
 Note
        11    Shareholders’ Equity
 
 *CBS
        Entertainment*
 
 In
        connection with a television distribution 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 is
        expected to be charged as an expense to operations on the dates of the first
        four broadcasts under the television distribution agreement. The value of
        the
        second warrant computed using a Black-Scholes model was approximately $2.5
        million and will be charged to operations, if an event is broadcast pursuant
        to
        the Broadcast Agreement, on the dates of the first four broadcasts under
        the
        television distribution agreement.
 
 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.
 
 *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
        March 31, 2008, options to purchase 5,943,464 shares of common stock had
        been
        granted under the plan.
 
 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 quarters ended March 31, 2008 and 2007, the Company
        incurred approximately $0.5 million and $0.3 million, respectively, of expense
        related to stock based compensation under this plan and approximately $0.5
        million and $0.1 million respectively, of expense related to
        warrants.
  19
  *Stock
        Options*
 
 The
        Company uses a Black-Scholes option pricing model to estimate the fair value
        of
        stock-based awards with the weighted average assumptions noted in the following
        table.
 
 Three
                  Months
                Ended
                March 31,
                2008
              
              Three
                  Months
                Ended
                March 31,
                2007Black-Scholes
                  Model:Risk-free
                  interest rate
              
              
              1.84%
                  - 3.41
              %
              
              4.50
                  - 4.84
              %Expected
                  life, in years
              
              
              3.0
                  - 6.0
              
              
              6.5Expected
                  volatility
              
              
              96.0
              %
              
              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 three months ended
        March 31, 2008:
 
 Plan
                Options
              
              Weighted
                Average
                Exercise
                PriceOutstanding
                  at December 31, 2007
              
              
              4,875,859
              
              $
              2.77Granted
              
              
              1,260,000
              
              $
              2.29Forfeited
              
              
              (192,396
              )
              $
              2.91Exercised
              
              
              -
              
              $
              -Outstanding
                  at March 31, 2008
              
              
              5,943,463
              
              $
              2.66Exercisable
                  at March 31, 2008
              
              
              1,999,193
              
              $
              2.30
 
 At
        March
        31, 2008 the aggregate intrinsic value of options outstanding and the aggregate
        intrinsic value of options exercisable was approximately zero and zero,
        respectively. The weighted-average grant-date fair value of options granted
        during the quarter ended March 31, 2008 and 2007 was $1.50 and $0.60,
        respectively. The weighted-average remaining life of outstanding and exercisable
        options at March 31, 2008 was 8.12 years and 8.45 years,
        respectively.
 
 At
        March
        31, 2008 there was approximately $5.0 million of unrecognized compensation
        cost
        related to non-vested options, which is being expensed through 2011.
 
 During
        the quarter ended March 31, 2008, the Company granted 1,260,000 options to
        employees in an individual grants ranging from 10,000 to 1,000,000 options.
        The
        options have exercise prices ranging from $2.00 to $7.01, vest over two or
        four
        years and have terms of 10 years. The aggregate fair value of these options
        at
        the dates of grant was approximately $1.8 million and is being amortized
        on a
        straight-line basis over the vesting period.
 
  20
  *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.
 
 Three
                  Months
                Ended
                March 31,
                2008
              
              Three
                Months
                Ended
                March 31,
                2007Risk-free
                  interest rate
              
              
              2.11%
                  - 2.23
              %
              
              4.48
                  - 4.78
              %Expected
                  life, in years
              
              
              2.5 –
                  3.1
              
              
              5.0Expected
                  volatility
              
              
              96
              %
              
              60.0
              %Dividend
                  yield
              
              
              0.0
              %
              
              0.0
              %
 
 The
        following table represents warrant activity for the three months ended March
        31,
        2008:
 
 Warrants
              
              Weighted
                Average
                Exercise
                PriceOutstanding
                  at December 31, 2007
              
              
              30,500,137
              
              $
              2.85Granted
              
              
              4,289,500
              
              
              2.32Expired
              
              
              (47,917
              )
              
              4.96Exercised
              
              
              (4,750,000
              )
              
              2.00Outstanding
                  at March 31, 2008
              
              
              29,991,720
              
              $
              2.90Exercisable
                  at March 31, 2008
              
              
              10,000,554
              
              $
              3.16
 
 At
        March
        31, 2008 the aggregate intrinsic value of warrants outstanding and the aggregate
        intrinsic value of warrants exercisable was approximately $0.8 million and
        $0.8
        million, respectively. The weighted-average remaining life of outstanding
        and
        exercisable warrants at March 31, 2008 was 4.9 years and 4.6 years,
        respectively.
 
 At
        March
        31, 2008 there was approximately $30.3 million of unrecognized cost related
        to
        non-vested warrants (including approximately $23.5 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, 2008, the Company issued 4,000,000 warrants with
        exercise prices of $2.00 to Showtime, as discussed above. Also during the
        quarter ended March 31, 2008, the Company’s placement agent for prior financings
        exercised on a cashless basis 2.75 million warrants at $2.00 per share for
        2,016,667 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") for initial exhibition during prime time on
        one of
        specified networks or cable broadcasters. MBP (or a separate production services
        entity owned or controlled by MBP) 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 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.
  21
  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.
  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
        current 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
        September 30, 2007, the Company has recognized no expense related to tranches
        three through nine.
  22
  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
        12    Related Party Transactions
 
 The
        Company earns revenue from and incurs expenses to Showtime in connection
        with a
        television production and distribution agreement. During the quarters ended
        March 31, 2008 and 2007, the Company recorded revenue of $1.2 million and
        $0,
        respectively, for television license fees. During the quarters ended March
        31,
        2008 and 2007, the Company incurred approximately $0.1 million and $0.9 million
        of television production expenses charged by Showtime to the Company. These
        television production expenses included $0.1 million and $0.1 million of
        non-cash amortization of prepaid distribution costs for the quarters ended
        March
        31, 2008 and 2007, respectively.
 
 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. The Company paid $90,000 to SMCP for this monthly
        fee
        during the three months ended March 31, 2008. Additionally, the Company incurred
        costs of approximately $28,000 for free services to SMCP.
  23
  **Item 2.
        Management’s Discussion and Analysis of Operations.**
 
 ***Forward
        Looking and Cautionary Statements***
 
 *This
        Form 10-Q 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 financial statements and
        notes
        thereto included in our annual report on Form 10-KSB.*
  *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*
 
 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
        twenty-one states. Athletes win individual matches by knockout, technical
        knockout (referee or doctor stoppage), submission, or judges’ decision.
 
 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:
  ·
              King
                  of the Cage, Inc., a promoter of live MMA events, that has historically
                  produced in excess of 20 events per
                  year.
  24
  ·
              Mixed
                  Martial Arts Promotions, Ltd. and Mixed Martial Arts Productions,
                  Ltd.
                  (together “CageRage”), a UK-based promoter of live MMA
                  events.
 
 ·
              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.
 
 **Results
        of Operations**
 
 ***For
        the three months ended March 31, 2008.***
 
 ***Revenue***
 
 Revenue
        from live events, consisting primarily of ticket sales, site fees and
        sponsorship, was $2,974,564 for the three months ended March 31, 2008
        compared to $311,104 for the three months ended March 31, 2007. The
        increase was due to higher operating activity in the first quarter of 2008
        compared to the first quarter of 2007 when the Company commenced operations.
        The
        Company’s EliteXC subsidiary earned revenue of $2,575,978 from promoting five
        events in the first quarter of 2008 compared to one event in the first quarter
        of 2007. Also, the Company’s King of the Cage and Cage Rage subsidiaries, which
        were acquired in September 2007, earned live event revenues of $402,764 and
        $247,895, respectively.
 
 Revenue
        from pay-per-view programming (PPV) and television licensing (excluding
        Showtime) was $135,275 for the three months ended March 31, 2008 compared
        to $0 for the three months ended March 31, 2007. Additionally, the Company
        began earning television license fees in 2008 under the distribution agreement
        with Showtime. In 2007, the Company earned no television license fees from
        Showtime. In the first quarter of 2008, the Company received television license
        fees of $1,200,000 from Showtime.
 
 Revenue
        from our website was $26,464 for the three months ended March 31, 2008
        compared to $3,500 for the three months ended March 31, 2007. This revenue
        consisted primarily of online advertising, online store sales and video
        subscriptions.
 
 Other
        revenues, which includes DVD sales and fees for licensing fighters under
        contract, was $119,471 for the three months ended March 31, 2008 compared
        to $0 for the three months ended March 31, 2007. The increase was due to
        the Company releasing its first DVD titles for sale during the quarter ended
        March 31, 2008 and to the acquisition of King of the Cage, which had DVD
        distribution agreements in place at acquisition.
 
 ***Cost
        of revenue***
 
 Cost
        of
        revenue for live event production was $4,027,894 for the three months ended
        March 31, 2008 compared to $1,509,939 for the three months ended
        March 31, 2007. Live event production costs increased primarily due to our
        EliteXC subsidiary promoting five events in the first quarter of 2008 compared
        to one in the first quarter of 2007. 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 $122,075 in 2008, which
        consisted entirely of non-cash amortization of prepaid distribution costs,
        and
        $935,933, which included $104,193 of non-cash amortization of prepaid
        distribution costs, in 2007 for television production. The decrease in
        television production costs payable to Showtime was a result of the terms
        of the
        distribution agreement with Showtime. This agreement called for the Company
        to
        pay production expenses in 2007 but not in 2008. We expect cost of revenue
        for
        live events will increase in 2008 as we promote more events. However, we
        expect
        television production costs payable Showtime to decrease in 2008 in accordance
        with the terms of the distribution agreement.
  25
  Cost
        of
        revenue for our website was $28,902 for three months ended March 31, 2008
        compared to $58,555 for the three months ended March 31, 2007 and consisted
        primarily of merchandise sold through our online store and Internet streaming
        expenses.
 
 ***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 $121,025 for the quarter ended March 31, 2008 compared to
        $103,529 for the quarter ended March 31, 2007 and primarily consisted of
        Internet and print advertising, public relations and marketing consultants.
        We
        anticipate sales and marketing expenses to increase as we promote our Company
        and brands.
 
 ***Website
        operations***
 
 Website
        operations expenses were $724,264 for the three months ended March 31, 2008
        compared to $415,170 for the three months ended March 31, 2007. 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 $1,326,123 for
        the
        three months ended March 31, 2008 compared to $339,390 for the three months
        ended March 31, 2007. 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 2008 due to operations
        starting and to acquisitions in late 2007.
 
 In
        2008,
        we expect expenses related to our fight operations to increase due to higher
        average staffing levels 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 $3,698,629 for the three months ended March
        31,
        2008 compared to $1,621,259 for the three months ended March 31, 2007. The
        increase was primarily related to increased option and warrant grants resulting
        in non-cash, stock-based compensation expense of approximately $1.2 million
        in
        2008 versus approximately $0.5 million in 2007. We also incurred higher non-cash
        depreciation and amortization expenses of approximately $0.7 million in 2008
        versus $0.1 million in 2007 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 $0.8 million in 2008 versus
        $0.3
        million in 2007.
 
 In
        January 2008, management began cost reductions through a reduction of staff.
        We
        expect annualized savings from this reduction of approximately $1 million.
        However, we expect 2008 general and administrative expenses will increase
        over
        2007 primarily due to higher average staffing levels.
 
 **Liquidity
        and Capital Resources**
 
 Net
        cash
        used in operating activities was $4,450,329 during the three months ended
        March 31, 2008 compared to $2,563,703 during the three months ended
        March 31, 2007. The use of cash was primarily the result of a net loss in
        the quarter ended March 31, 2008. The Company is currently working to improve
        event profitability and decrease overhead. The loss incurred in the quarter
        ended March 31, 2007 resulted from the Company devoting resources to building
        its brands and pursuing longer-term strategic goals in advance of related
        revenues.
  26
  Net
        cash
        used in investing activities was $45,500 during the three months ended
        March 31, 2008 compared to $584,832 during the three months ended
        March 31, 2007. The decrease was due to less need for capital expenditures
        in the current quarter compared to the prior when the Company was developing
        its
        social networking website.
 
 Net
        cash
        provided by financing activities was $3,652,533 during the three months ended
        March 31, 2008 compared to $4,925,000 during the three months ended
        March 31, 2007. In the quarter ended March 31, 2008, the Company received
        $4.0 million from Showtime from the exercise of 2.0 million warrants at $2.00
        per share. In the quarter ended March 31, 2007, the Company received $5.0
        million from Showtime for the issuance of 5 million shares of common stock
        and
        6.7 million warrants exercisable at $2.00 per share.
 
 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.
 
 **Item 3.** **Quantitative
        and Qualitative Disclosures about Market Risk** .
 
 Not
        applicable.
 
 **Item 4.
        Controls and Procedures.**
 
 (a) *Evaluation
        of disclosure controls and procedures.* The
        Company’s Chief Executive Officer and Chief Financial Officer have evaluated the
        effectiveness of the Company’s disclosure controls and procedures as of
        March 31, 2008. Based on such evaluation, such officers have concluded
        that, as of March 31, 2008, 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
        evaluating our internal controls as of December 31, 2007, our auditors noted
        several material weaknesses and a significant deficiency which we are working
        to
        address. The material weaknesses noted were: (1) 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. (2) 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. (3) 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.
        (4) 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. (5) 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. (6) The Company did
        not
        have an active audit committee.
  27
  (b) *Changes
        in internal controls* .
        The
        Company has continued taking remediation steps to enhance its internal control
        over financial reporting and reduce control deficiencies. We have been and
        are
        actively working to eliminate the internal control weaknesses noted by taking
        the following measures: We are working to bring all accounting and record
        maintenance in-house and creating centralized, on-site document repositories;
        We
        hired personnel in the accounting department with technical accounting and
        financial reporting experience suitable for a public company. Additionally,
        we
        also hired personnel in our legal department; We have implemented Microsoft
        Dynamics/Great Plains accounting software;
 We
        are
        formally documenting Company policies and procedures; We are implementing
        a
        purchase order and approval system and system of managerial approval prior
        to
        disbursement of funds; We have implemented reviews of budget and actual results
        by department managers; In order to improve communication throughout the
        Company
        and to identify transactions that may require disclosure, we implemented
        twice
        weekly meetings of department heads to communicate financial results and
        operational activities; We have added new Directors to our Board and Audit
        Committee.
 
 As
        noted
        above, there were changes in our internal controls over financial reporting
        that
        occurred during the period covered by this report that have materially affected
        our internal controls over financial reporting. It is expected that
        implementation of the above described remediation steps will have a significant
        impact on enhancing our internal control over financial reporting during
        2008.
   28
  **PART
        II. OTHER INFORMATION**
 
 **Item 1.
        Legal Proceedings.**
 
 None.
        There have been no material developments since the date of our previously
        filed
        annual report.
 
 **Item
        1A. Risk Factors.**
 
 Not
        applicable.
 
 **Item 2.
        Unregistered Sales of Equity Securities and Use of Proceeds**
 
 None
  **Item 3.
        Defaults Upon Senior Securities**
 
 None
 
 **Item 4.
        Submission of Matters to a Vote of Security Holders**
 
 None
 
 **Item 5.
        Other Information**
 
 None.
 
 **Item 6.
        Exhibits.**
 
 See
        the
        attached exhibit index.
  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.
 
 Date:
                  May 20, 2008
              PROELITE,
                  INC.By:
              /s/ Charles
                  ChampionCharles
                  Champion, Chief Executive Officer
                (Principal
                  Executive Officer)And:
              /s/ Dale
                  BolenDale
                  Bolen, Interim Chief Financial Officer
                and
                  Chief Accounting Officer
                (Principal
                  Financial and Accounting Officer)
  30
  **EXHIBIT
        INDEX**
  Exhibit
                  No.
              
              Exhibit
                  Description31.1
              
              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
              
              Certification
                  of Chief Executive Officer and Chief Financial Officer Pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act of
                  2002.
  31