As filed with the Securities and Exchange Commission on August 16, 2016.

 

Registration No. 333-    

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

ALLIANCE MMA, INC.

 

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   7389   47-5412331

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

 

 

590 Madison Avenue, 21 st Floor

New York, New York 10022

(212) 739-7825

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Paul K. Danner, III

Chief Executive Officer

590 Madison Avenue, 21st Floor

New York, New York 10022

(212) 739-7825

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

 

Robert L. Mazzeo, Esq.

Mazzeo Song P.C.

444 Madison Avenue, 4th Floor

New York, NY 10022

(212) 599-0700

Philip Magri, Esq.

Magri Law, LLC

2642 NE 9th Avenue

Fort Lauderdale, FL 33334

(646) 502-5900  

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

Indicate by check mark 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,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨   Accelerated filer ¨
Non-Accelerated filer ¨ (Do not check if a smaller reporting company)   Smaller reporting company x

 

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered   Proposed Maximum
Aggregate
Offering Price (1)
    Amount of
Registration Fee
 
Common Stock, par value $0.001 per share   $ 15,000,000     $ 1,510.50  
Selling Agent Warrants (2)(3)     -       -  
Common Stock issuable upon exercise of Selling Agent Warrants   $ 2,475,000     $ 249.23  
Total           $ 1,759.73  

 

(1) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2)

Pursuant to Rule 416 under the Securities Act, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued pursuant to the exercise of the Selling Agent Warrants after the date hereof as a result of stock splits, stock dividends or similar transactions.

(3) No separate fee is required pursuant to Rule 457(g) under the Securities Act.

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED August   , 2016

    

Up to 3,333,333 Shares

 

 

Common Stock

 

 

 

This is an initial public offering of shares of common stock of Alliance MMA, Inc., a Delaware corporation.

 

We are offering a minimum of 1,111,111 up to a maximum of 3,333,333 shares of our common stock.

 

Prior to this offering, there has been no public market for our common stock. We have applied to list the common stock on the Nasdaq Capital Market under the symbol “AMMA.” We anticipate that trading of our common stock on the Nasdaq Capital Market will commence on the business day following the completion of this offering, subject to final listing approval from Nasdaq.

 

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and we have elected to comply with certain reduced public company reporting requirements.

 

An investment in our common stock involves significant risks. You should carefully consider the risk factors beginning on page 7 of this prospectus before you make your decision to invest in shares of our common stock.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

    Public Offering
Price
    Selling Agent
Commission (1)
    Proceeds to Us,
Before Expenses (2)
 
Per share   $ 4.50     $ 0.34      $ 4.16   
Total, minimum offering   $ 5,000,000     $ 375 ,000      $ 4,625,000   
Total, maximum offering   $ 15,000,000     $ 1,125,000      $ 13,875,000   

 

(1)           Consists of a selling agent commission of 6.5% and an advisory fee of 1.0% of the gross proceeds of this offering. The selling agent will also be entitled to reimbursement of out-of-pocket expenses incurred in connection with this offering, including fees and expenses of its counsel, in an aggregate amount not to exceed $50,000.

  

 

 

 

(2)           We estimate that the total expenses of this offering, excluding selling agent commissions, will be approximately $400,000 if all 3,333,333 shares are sold. Because this is a best efforts offering, the number of shares actually sold and the proceeds to us are not presently determinable and may be substantially less than the total maximum offering amount set forth in the table above. See “Plan of Distribution” beginning on page 71 of this prospectus for more information on this offering and the selling agent arrangements.

 

We plan to market this offering to potential investors through Network 1 Securities, Inc., acting as selling agent. The selling agent is selling shares of our common stock in this offering on a best efforts basis and is not required to sell any specific number or dollar amount of shares.

 

We do not intend to complete this offering unless we sell at least a minimum of 1,111,111 shares of common stock, at the price per share set forth in the table above, and satisfy the listing conditions to trade our common stock on the Nasdaq Capital Market.

 

The gross proceeds of this offering will be deposited in an escrow account at Signature Bank, and will be held there until we have sold a minimum of 1,111,111 shares of common stock and satisfied the listing conditions to trade our common stock on the Nasdaq Capital Market. Once we sell the minimum number of shares and satisfy the Nasdaq listing conditions, we may complete sales of the shares, at which time the funds held at Signature Bank will be released to us. Pursuant to Rule 15c2-4, we will not have any access to the funds held in the escrow account until we have sold the minimum amount of shares and satisfied the Nasdaq listing conditions. In the event we do not sell a minimum of 1,111,111 shares of common stock and satisfy the Nasdaq listing conditions by October 31, 2016, all funds held in escrow will be promptly returned to investors without interest or offset. See “Prospectus Summary - The Offering” on page 5.

 

 

 

 

Prospectus dated [    ] , 2016

 

 

 

 

TABLE OF CONTENTS

 

  Page
Important Introductory Information   1
Prospectus Summary   2
Risk Factors   7
Special Note Regarding Forward-Looking Statements   17
Use of Proceeds   18
Dividend Policy   18
Capitalization   19
Dilution   20
Unaudited Pro Forma Financial Information   22
Management’s Discussion and Analysis of Financial Condition and Results of Operations   28
Business   41
Management   52
Certain Relationships and Related Party Transactions   63
Principal Stockholders   64
Description of Our Capital Stock   65
Shares Eligible for Future Sale   68
Plan of Distribution   71
Legal Matters   73
Experts   73
Where You Can Find More Information   73
Index to Financial Statements   F- 1

 

Dealer Prospectus Delivery Obligation

 

Through and including [    ]  , 2016 (the 25 th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

 

Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

 

 

 

We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

 

 

 

 

IMPORTANT INTRODUCTORY INFORMATION

 

In this prospectus, unless the context otherwise requires, we use the terms “Alliance,” “we,” “us,” “the Company” and “our” to refer to Alliance MMA, Inc., a Delaware corporation that will acquire the businesses of the following companies, which we refer to as the “Target Companies,” upon the completion of this offering:

 

  CFFC Promotions, LLC (“CFFC”);
  Hoosier Fight Club Promotions, LLC (“Hoosier Fight Club” or “HFC”);
  Punch Drunk, Inc. d/b/a COmbat GAmes MMA (“COGA”);
  Bang Time Entertainment LLC d/b/a Shogun Fights (“Shogun”);
  V3, LLC  (“V3 Fights”);
  Go Fight Net, Inc. (“GoFightLive” or “GFL”); and
  CageTix LLC (“CageTix”).

  

In addition to the businesses of the Target Companies, upon the completion of this offering, we will acquire all rights in the existing MMA and kickboxing video libraries of Louis Neglia’s Martial Arts Karate, Inc. (“Louis Neglia”) related to the Louis Neglia’s Ring of Combat and Louis Neglia’s Kickboxing events and shows, a right of first refusal to acquire the rights to all future Louis Neglia MMA and kickboxing events, and the MMA and video library of Hoss Promotions, LLC (“Hoss”) related to certain CFFC events. The aggregate purchase price for the video libraries we will purchase from Louis Neglia and Hoss, which we refer to as the “Target Assets,” is $455,000, of which $255,000 is payable in cash and the balance in shares of our common stock valued at the initial public offering price of $4.50 per share for the shares sold in this offering.

 

We will acquire the businesses of the Target Companies, other than GFL, through the purchase of the operating assets and the assumption of certain liabilities of each Target Company. GFL will be merged into a wholly-owned subsidiary of Alliance, with GFL being the surviving company in such merger. The aggregate consideration we will pay to acquire the businesses of the Target Companies and the Target Assets will be approximately $7.8 million, consisting of cash in the amount of approximately $1.6 million, and shares of our common stock with a market value of approximately $6.2 million, based on the initial public offering price of $4.50 per share for the shares sold in this offering. The purchase price being paid for each Target Company business consists, on average, of 21% in cash and 79% in shares of our common stock valued at the initial public offering price for the shares sold in this offering.

 

The purchase price for each business we are acquiring from the Target Companies will be subject to upward adjustment in the event that such business exceeds certain gross profit thresholds over the twelve-month period following the completion of this offering. The upward adjustment to the purchase price will be equal to seven times the amount by which actual gross profit of the business of the Target Company exceeds the applicable threshold. We will pay any additional purchase price amounts resulting from this adjustment promptly following the filing of the Company’s quarterly report on Form 10-Q for the quarter immediately following such twelve-month period, such payment to be made in shares of our common stock valued at the lesser of (i) the initial public offering price for the shares sold in this offering, or (ii) the average of the last sale prices for our common stock over the twenty (20) trading days occurring immediately prior to the filing of such Form 10-Q. Please see “Notes to Pro Forma Financial Statements – Note 4 – Pro forma adjustments” below for more information concerning the gross profit thresholds for the Target Companies.

 

We valued the business of each Target Company using a number of factors, including historical and projected future profitability and expectations of the business of each Target Company under the Alliance brand. Other factors we considered include, but are not limited to, current financial position, professional fighter rosters, customer and venue arrangements, media library and other intellectual property rights, prominence in the MMA industry, the nature and extent, if any, of sponsorships, television and pay-per-view arrangements, and other relevant characteristics. In assessing the value of each Target Company, we recognized that much of that value resides in the ability of the Target Companies to establish credible customer and venue relationships, the breadth of their video libraries and related intellectual property rights, and in the case of CageTix, its proprietary ticketing software.

 

For accounting and reporting purposes, Alliance has been identified as the accounting acquirer of each of the Target Companies. In addition, each of the Target Companies has been identified as an accounting co-predecessor to the Company.

 

Unless we close the acquisition of all of the Target Companies, we will not close any of those acquisitions and we will not complete this offering. See “Business — Acquisitions” for further information on our acquisition of the Target Companies.

 

Unless otherwise indicated, all share, per share and financial data set forth in this prospectus have been adjusted to give effect to the closing of the acquisition of the Target Companies.

 

  1  

 

 

PROSPECTUS SUMMARY

 

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus including, but not limited to, the risk factors beginning on page 7.

 

Our Company

 

Alliance MMA, Inc. was formed to acquire the businesses of the Target Companies and the media libraries of two prominent mixed martial arts, or MMA, promotions. By combining the Target Companies, Alliance intends to create a developmental league for professional MMA fighters and a feeder organization to the Ultimate Fighting Championship, or the UFC, the sport’s largest mixed martial arts promotion company featuring most of the top-ranked fighters in world. We also intend to serve as a developmental organization for other premier MMA promotions such as Bellator MMA. Under the Alliance MMA umbrella, we expect that our regional MMA promotions will identify and cultivate the next generation of UFC and other premier MMA promotion champions, while at the same time generating live original media content, attracting an international fan base, and generating sponsorship revenue for our live MMA events and professional fighters.

 

The Target Companies comprise many of the leading regional MMA promotions in the United States, with CFFC and Hoosier Fight Club ranked among the top 40 of all regional MMA promotions internationally according to MMA industry site, Sherdog.com. Collectively, the Target Companies have sent over 50 professional MMA fighters to the UFC, have signed over 65 professional MMA fighters to multi-fight contracts and, in 2015, conducted more than 50 professional MMA events. We anticipate that the Target Companies’ promotions will conduct a total of over 65 events in 2016 (pre- and post-acquisition) and approximately 90 in 2017. Many of these events are televised or streamed live on cable and network stations. In 2015, the Target Companies on a collective basis generated $2.4 million in gross revenue and $0.127 million in net income.

 

Our operations will be centered on the following three business components:

 

· Live MMA Event Promotion, which will consist of generating revenue from ticket sales and providing a foundation for national sponsorship and national and international media distribution for our live MMA events.

 

· MMA Content Distribution, which will consist of paid distribution of original content on television, cable networks, pay-per-view broadcasts, and over the Internet, in the United States and through international distribution agreements.

 

· Sponsorships and Promotions, which will consist of sponsorships for live MMA events and televised productions and related advertising and promotional opportunities.

 

In addition, we are evaluating the profitability of other revenue sources, such as merchandising, ticketing, and fighter agency and management services.

 

Our Strategy

 

Our growth strategy includes:

 

· Leveraging the Target Assets and the existing media libraries of the Target Companies along with the production of new, original live MMA programming created at our ongoing professional MMA events and monetizing both through domestic and international distribution arrangements;

 

  2  

 

 

· Developing national sponsorship arrangements, or expanding existing regional sponsorship arrangements, in support of the Company’s network of live MMA events;

 

· Aggregating control of the sales chain through ownership of CageTix and instituting the use of CageTix across all the Target Companies, potentially capturing additional profit margin;

 

· Migrating certain of the Target Companies from paid event venue arrangements to venues that will compensate the promotions for hosting events; and

 

· Securing highly-regarded professional fighters to multi-fight agreements, which will enhance our reputation and the value of our live MMA programming content.

 

In addition, following the completion of this offering, we intend to acquire additional regional MMA promotions in markets in which the Target Companies currently do not promote events. We believe that the regional MMA industry is oriented toward consolidation and that we can achieve significant growth through further acquisitions as well as by organically growing the Target Companies’ promotions. According to Tapology.com, a leading MMA industry online forum, as of May, 2016, there were 597 MMA promotions being operated domestically and 1,025 internationally. We estimate that no one regional promotion accounts for more than 1% of the market. We further believe that it is becoming increasingly difficult for regional MMA promotion companies to attract the best prospects given the increased level of competition among regional MMA promoters to secure fighters for multiple bouts. By conducting over 65 events annually, which would enhance our ability to guarantee multiple fights, and by sending a number of fighters to elite promotions such as the UFC and Bellator, we expect to be able to attract high-quality fighters.

 

The MMA Industry

 

In less than a quarter century, modern day Mixed Martial Arts has developed from a pariah banned in most U.S. states to an international sports phenomenon that some believe will be an Olympic event within the next two decades. MMA is a full contact sport that permits fighters to use techniques from both striking and grappling martial arts such as Boxing, Wrestling, Taekwondo, Karate, Brazilian jiu-jitsu, Muay Thai, and Judo. The “MMA industry” generates revenues by promoting live MMA bouts, and through Pay-Per-View, video-on-demand and televised MMA event programming, merchandise sales, event and fighter sponsorships, and the monetization of MMA-related intellectual property royalties.

 

Led by the UFC in terms of prominence and market share on a national level, there are approximately 600 domestic regional MMA promotion companies promoting approximately 40,000 male and female professional and amateur fighters, according to Tapology.com. On an international basis, Tapology.com reports that the number of MMA promotions exceeds 1,000 with over 90,000 professional and amateur MMA fighters being promoted. The UFC states on its website that its live MMA events are currently televised in over 129 countries and territories and watched by approximately 800 million households in 28 languages.

 

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Risk Affecting Us

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described in “Risk Factors” beginning on page 7 of this prospectus before making a decision to invest in our common stock. These risks represent challenges to the successful implementation of our strategy and the growth of our business. If any of these risks occurs, our business financial condition and results of operations would likely be negatively affected. In such case, the trading price of our common stock would likely decline, and you may lose part, or all, of your investment. Below is a summary of some of the principal risks we believe we face:

 

· Our business represents a new business model for the MMA industry;

 

· Many of the Target Companies who will comprise our business have historically been competitors, and we may experience difficulties integrating these businesses;

 

· We may be perceived as a competitive threat to the UFC and to other premier MMA promotions who may use their significantly greater resources to frustrate our business and growth strategy;

 

· The popularity of mixed martial arts may decline;

 

· Our limited operating history on a combined basis makes forecasting our revenues and expenses difficult;

 

· We may not be able to attract and retain key professional MMA fighters;

 

· We may not be able to attract national promotional and advertising sponsorships;

 

· Our failure to obtain and maintain key agreements and arrangements with television and other media outlets could adversely affect our ability to distribute original MMA programming;

 

· We may be unable to manage our growth effectively and our pro forma results may not be indicative of our future performance;

 

· We may be unable to implement our strategy of acquiring additional companies and such acquisitions may subject us to additional unknown risks;

 

· Future acquisitions may result in potentially dilutive issuances of equity securities; and

 

· An active trading market for our common stock may not develop, and you may not be able to resell your shares of our common stock at or above the initial public offering price.

 

For further discussion of these and other risks you should consider before making an investment in our common stock, see “Risk Factors” beginning on page 7.

 

Corporate Information

 

We were incorporated in Delaware on February 12, 2015. Our principal executive offices are located at 590 Madison Avenue, 21 st Floor, New York, New York 10022, and our telephone number is (212) 739-7825. Our website address is www.alliancemma.com. Information contained on, or that can be accessed through, our website or the website of any Target Company shall not be deemed incorporated into, or to constitute part of, this prospectus.

 

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Alliance MMA, AllianceMMA.com and other trademarks and service marks of Alliance appearing in this prospectus are the property of Alliance. Trade names, trademarks and service marks of other companies, including the marks of any Target Company, appearing in this prospectus are the property of their respective holders.

 

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of the last day of the fiscal year following the fifth anniversary of the completion of this offering, the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion (as indexed for inflation), the date on which we are deemed to be a large accelerated filer (this means the market value of our common stock that is held by non-affiliates is at least $700 million as of the last business day of the second quarter of a fiscal year), or the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

 

We will present only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations.
   
We will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.
   
We will provide less extensive disclosure about our executive compensation arrangements.
   
We will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.

 

The Offering

 

Common stock offered by us   1,111,111 shares (minimum) to 3,333,333 shares (maximum)
     
Common stock outstanding immediately before this offering   5,289,136 shares
     
Common stock to be issued to Target Companies and for Target Assets   1,377,531 shares
     
Total shares of common stock to be outstanding immediately after this offering   10,000,000 shares, assuming the maximum amount is sold in the offering.*
     
Use of proceeds  

Based on an offering price of $4.50 per share, we expect our net proceeds from this offering will be $13,498,240, assuming the maximum number of shares is sold in the offering, after deducting selling agent commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering to fund the cash portion of the purchase price for the Target Assets and the businesses of the Target Companies in the amount of approximately $1.6 million, and for working capital and general corporate purposes. We may also use a portion of the net proceeds for future acquisitions of or investments in other regional MMA promotion companies. Since, however, this offering is being conducted on a “best efforts” basis, there is no assurance that we will sell any shares or receive any proceeds. See “Use of Proceeds” for a more complete description of the principal purposes for which the net proceeds of this offering are intended to be used and the priority of such purposes in the event that less than the maximum offering amount is raised.

 

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Escrow  

The gross proceeds of this offering will be deposited at Signature Bank in an escrow account established by us. Purchasers are to make payment for the shares they purchase by (i) delivering to the escrow agent, Signature Bank, at 950 Third Avenue, New York, New York 10022, checks made payable to the order of  “Signature Bank, as escrow agent for Alliance MMA, Inc.,” or (ii) wire transfer to Signature Bank, ABA No. 026013576, Account No. 1502649902, 950 Third Avenue, New York, New York 10022 for credit Signature Bank, as escrow agent for Alliance MMA, Inc.  All checks received by the selling agent will be delivered to Signature Bank for deposit into the escrow account not later than 12:00 p.m. on the business day immediately following receipt. The funds will be held in escrow until we sell a minimum of 1,111,111 shares at an offering price of $4.50 per share and otherwise satisfy the listing conditions to trade our common stock on the Nasdaq Capital Market, following which the funds will be released to us.  Any funds received upon a sale of shares in excess of the foregoing minimum amount and following the satisfaction of the Nasdaq listing requirements will immediately be available to us. If we do not sell the minimum number of shares, or if we do sell such minimum number but fail to satisfy the Nasdaq listing conditions, by October 31, 2016, this offering will terminate and all funds will be returned to the purchasers in this offering on the next business day, without charge, deduction or interest, and without any further obligation on the part of the Company or any such purchaser.

     
Dividend policy    We do not anticipate paying cash dividends on our common stock in the foreseeable future. See “Dividend Policy.”
     
Proposed Nasdaq listing symbol   “AMMA”
     
Risk factors   Please read the section entitled “Risk Factors” beginning on page 7 for a discussion of some of the factors you should carefully consider before deciding to invest in our common stock.

 

* Unless the context indicates otherwise, the number of shares of our common stock deemed to be outstanding after this offering:

 

· excludes 825,000 shares of common stock reserved for issuance under the Company’s 2016 Equity Incentive Plan;
   
· excludes 159,198 shares of common stock reserved as contingent consideration to be paid if the businesses of the Target Companies exceed certain gross profit thresholds;
   
· excludes 111,111 shares (assuming the minimum offering is completed) and up to 333,333 shares (assuming the maximum offering is completed) of common stock issuable upon the exercise of the warrants issued to the selling agent; and
   
· assumes that the shares of our common stock to be sold in this offering are sold at $4.50 per share.

 

  6  

 

 

RISK FACTORS

 

If you purchase our securities, you will assume a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors, as well as the other information contained elsewhere in this prospectus. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our securities to decline, which could cause you to lose all or part of your investment.

 

Risks Related to Our Business

 

Our business represents a new business model for the MMA industry .

 

Our business model focuses on creating a developmental feeder organization for the UFC and other premier MMA promotions by combining many leading regional MMA promotions under one umbrella organization. Our business model is unique to the MMA industry and may not prove to be successful. We have a limited operating history upon which you can evaluate our business. Although each of the Target Companies has operated independently, in some cases for many years, they will commence combined operations only upon the closing of the offering and the integration of those businesses by Alliance. The MMA industry is also rapidly growing and evolving and may develop in a way that is detrimental to our business model. You must consider the challenges, risks and difficulties frequently encountered by early stage companies using new and unproven business models in new and rapidly evolving markets. Some of these challenges relate to our ability to:

 

•             establish or increase our brand name recognition;

 

•             expand our popularity and fan base;

 

•             successfully produce live events;

 

•             manage existing relationships with broadcast television outlets and create new relationships to broadcast and distribute our televised content domestically and internationally;

 

•             manage sponsorship, advertising, licensing and branding activities; and

 

•             create new outlets for our content and new marketing opportunities.

 

Our business strategy may not successfully address these and the other challenges, risks and uncertainties that we face, which could adversely affect our overall success and delay or prevent us from achieving profitability.

 

We may be perceived as a competitive threat to the UFC and to other premier MMA promotions that may use their significantly greater resources to frustrate our business and growth strategy.

 

It is our intention to serve as a developmental organization for the UFC and other premier national MMA promotions in the same fashion as college athletic programs serve as “feeders” to professional sports leagues. Although we do not intend to compete with these promotions, since we will promote live events, televise and distribute MMA media and related content, solicit sponsorship revenues and seek to secure professional MMA fighters to multi-fight contracts, we may be perceived as a competitor by these organizations. Should the UFC or another premier national MMA promotion view us as a threat they could use their significantly greater resources to frustrate our business and growth strategy and materially and adversely affect our business.

 

  7  

 

 

Many of the Target Companies who comprise our business have historically been competitors, and we may experience difficulties integrating these businesses.

 

We intend to operate the business of each Target Company as a distinct regional MMA promotion, with daily operations overseen by a regional vice president who, prior to the acquisition, operated the Target Company. Although the MMA market is highly fragmented, many of the Target Companies have competed with one another in the past to sign top professional MMA fighter prospects, for television and broadcast opportunities, and for sponsors. As our strategy involves leveraging the relationships and skills of our regional vice presidents, it will be important for them to collaborate effectively in order to achieve profitability for our company as a whole rather than focusing solely on profits for the individual Target Company businesses. The continuation of past competitive behaviors, and the failure to integrate these businesses under a cohesive umbrella organization, will likely have a material adverse effect on our business.

 

A future decline in the popularity of mixed martial arts could adversely affect our business.

 

Our operations are affected by consumer tastes and sports and entertainment trends, which are unpredictable and subject to change, and may be affected by changes in the social and political climate. We believe that MMA is growing in popularity in the United States and around the world, but a change in our fans’ tastes or a material change in the perceptions of the MMA industry, whether due to social or political issues or otherwise, could adversely affect our operating results and have a material adverse effect on our business.

 

We may not be able to attract and retain key professional MMA fighters.

 

Our business is dependent upon identifying, recruiting and retaining highly regarded professional MMA fighters for our promotions. Fans and sponsors are attracted to events featuring top fighters, and the value placed on a promotion’s television and other media rights is dependent to a great extent on the quality of the promotion’s fighter roster. We may not be able to attract and retain key professional MMA fighters due to competition with other regional promoters for the same fighters. Failing to put on events featuring top professional fighters could adversely affect our operating results and have a material adverse effect on our business.

 

We may not be able to attract national promotional and advertising sponsorships or maintain such arrangements.

 

Our business strategy involves developing national sponsorship arrangements, or expanding existing regional sponsorship arrangements, in support of our network of live MMA events. We will compete with larger more established sports and entertainment organizations and media outlets for sponsorship and advertising revenue. While many of our Target Companies have existing local and regional sponsorship arrangements with large advertisers who advertise on a national basis in our target markets and demographic, they currently have no national sponsorships. Should we be able to secure national promotional and advertising arrangements following the proposed acquisition, there is no assurance that we will be able to maintain these arrangements. Many factors, including the popularity and perception of MMA and the perceived quality of our promotions, will significantly affect our ability to secure and maintain important advertising and promotional arrangements. If we are unable to generate sponsorship and promotional revenue and increase that revenue over time, our operating results and business will be adversely affected.

 

The economic uncertainty impacts our business and financial results and a renewed recession could materially affect us in the future.

 

Any significant decrease in consumer confidence, or periods of economic slowdown or recession, could lead to a curtailing of discretionary spending, which in turn could reduce our revenues and results of operations and adversely affect our financial position. Our business will be dependent upon consumer discretionary spending and therefore will be affected by consumer confidence as well as the future performance of the United States and global economies. As a result, our results of operations will be susceptible to economic slowdowns and recessions. Increases in job losses, home foreclosures, investment losses in the financial markets, personal bankruptcies, credit card debt and home mortgage and other borrowing costs, declines in housing values and reduced access to credit, among other factors, may result in lower levels of ticket sales, sponsorship and distribution revenue.

 

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We depend on the services of key executives, the loss of whom could materially harm our business and our strategic direction if we were unable to replace them with executives of equal experience and capabilities.

 

Our future success significantly depends on the continued service and performance of our key management personnel, including our Chairman and Chief Executive Officer, Paul Danner, our Chief Financial Officer, John Price and, following the closing of the proposed acquisitions, our President, Robert Haydak. We have negotiated employment agreements with all members of senior management, which we will execute at the closing of the proposed acquisition; however, we cannot prevent members of senior management from terminating their employment with us. Losing the services of members of senior management could materially harm our business until a suitable replacement is found, and such replacement may not have equal experience and capabilities. We have not purchased life insurance covering any members of our senior management.

 

The markets in which we operate are highly competitive, rapidly changing and increasingly fragmented, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence.

 

For our live and television audiences, we will face competition from, in addition to other MMA promotions, professional and college sports, as well as from other forms of live and televised entertainment and other leisure activities that are offered in a rapidly changing and increasingly fragmented marketplace. Many of the companies with which we will compete have greater financial resources than will be available to us immediately following the proposed acquisition. Our failure to compete effectively could result in a significant loss of viewers, venues, distribution channels or athletes and fewer advertising dollars spent on our form of sporting events, any of which could adversely affect our operating results.

 

Our expansion into new markets may present increased risks due to our unfamiliarity with the area, different rules and regulations and challenging operating environments.

 

Some of our future acquisitions may be located in geographic areas where we have little or no meaningful experience. Those markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets, which may cause our promotions to be less successful than promotions in the Target Companies’ existing markets. Acquisitions in new markets may not generate the same level of revenues and may have higher operating expense ratios than the Target Companies’ promotions.

 

Some of our future acquisitions may occur outside the United States. Beyond the risks posed by new markets generally, the operating conditions in overseas markets may vary significantly from those the Target Companies experienced in the past, including in relation to consumer preferences, regulatory environment, currency risk, the presence and cooperation of suitable local partners and availability of vendors or commercial and physical infrastructure, among others. There is no guarantee that we will be successful in integrating these acquisitions into our operations, achieving market acceptance, operating these acquisitions profitably, and maintaining compliance with the rapidly changing business and regulatory requirements of new markets. Our inability to do so could result in a material adverse effect on our business, financial condition and results of operations.

 

Our failure to obtain and maintain key agreements and arrangements with television and other media outlets could adversely affect our ability to distribute our original MMA programming.

 

Our business strategy is dependent upon monetizing the media content we intend to create at our live MMA events through live television and cable broadcasts and the distribution of live and historical video content through a variety of media outlets such as Internet pay-per-view and video on demand. We also anticipate that our growth will be dependent on securing international distribution arrangements for our content. There is significant competition for television and other distribution arrangements from within the MMA industry and from other sports and entertainment companies who offer these media outlets programming alternatives to our MMA content. Our failure to obtain and maintain key agreements and arrangements with television and other media outlets could adversely affect our ability to distribute our original MMA programming, which could have a material adverse effect on our business, financial condition and results of operations.

 

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Our limited operating history makes forecasting our revenues and expenses difficult.

 

As a result of our limited operating history as a combined business, it is difficult to forecast accurately our future revenues. Current and future expense levels are based on our operating plans and estimates of future revenues after we achieve the anticipated synergies of combining the Target Companies’ businesses into one company. Revenues and operating results are difficult to forecast because they generally depend on our ability to promote events, secure national sponsorships and advertising arrangements for our regional promotions, and enter into television and media distribution arrangements. As a result, we may be unable to adjust our spending appropriately to compensate for any unexpected revenue shortfall, which may result in substantial losses and a lower market price for our common stock.

 

If we do not manage our growth effectively, our revenue, business and operating results may be harmed.

 

Our expansion strategy includes the acquisition of additional regional MMA promotion companies and organic growth. At the completion of the offering made by this prospectus we will acquire five regional MMA promotions, and two related businesses, GFL and CageTix. These acquisitions may not be indicative of our ability to identify, secure and manage future acquisitions successfully. Our acquisition of the Target Companies and any future acquisitions may require a greater than anticipated investment of operational and financial resources as we seek to institute uniform standards and controls across promotions. Acquisitions may also result in the diversion of management and resources, increases in administrative costs, including those relating to the assimilation of new employees, and costs associated with any debt or equity financings undertaken in connection with such acquisitions. We cannot assure you that any acquisition we undertake, including the acquisition of the Target Companies, will be successful. Future growth will also place additional demands on our management, sales, and marketing resources, and may require us to hire and train additional employees. We will need to expand and upgrade our systems and infrastructure to accommodate our growth, and we may not have the resources to do so in the time frames required. The failure to manage our growth effectively will materially and adversely affect our business, financial condition and results of operations.

 

We may be unable to implement our strategy of acquiring additional companies and such acquisitions may subject us to additional unknown risks.

 

We anticipate making future acquisitions of regional MMA promotions in markets that the Target Companies do not serve. We may not be able to reach agreements with such promotions on favorable terms or at all. In completing the acquisition of the Target Companies or any future acquisition, we will rely upon the representations and warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot assure you that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their businesses. To the extent that we are required to pay for undisclosed obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected economic benefit from such acquisition and our ability to seek legal recourse from the seller may be limited.

 

Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.

 

Future acquisitions may result in issuances of equity securities, which may be dilutive to the equity interests of existing stockholders, the incurrence of debt, which will require us to maintain cash flows sufficient to make payments of principal and interest, the assumption of known and unknown liabilities, and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition and results of operations.

 

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We may need additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all.

 

In order for us to grow and successfully execute our business plan, we may require additional financing which may not be available or may not be available on acceptable terms. If such financing is available, it may dilute your ownership interest in our common stock. Failure to obtain financing may have a material adverse effect on our financial position. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.

 

Our Independent Registered Public Accounting Firm has expressed substantial doubt as to our ability to continue as a going concern.

 

Our audited financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments that might result if we cease to continue as a going concern. To date we have not generated any revenue. Consequently, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern.

 

From our inception in February of 2015 through June 30, 2016, we have incurred a net operating loss of $610,397. This loss relates primarily to expenses incident to this offering and those related to the acquisition of the Target Companies and Target Assets. We believe that in order to continue as a going concern, including the costs of being a public company, we will need approximately $200,000 per year simply to cover administrative, legal and accounting fees. We plan to fund these expenses primarily through cash flow from operations and the proceeds from the offering made by this prospectus. Our continued operations are highly dependent upon our ability to increase revenues, decrease operating costs, and if needed complete equity and/or debt financings.

 

One of the Target Companies, V3 Fights, also received an opinion from their independent accountants in their audit report that expressed substantial doubt about V3 Fight’s ability to continue as a going concern. As of June 30, 2016, V3 Fights had an accumulated net operating loss of $49,511 and net operating income of $3,357 for the six months ended June 30, 2016.

 

We believe if we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our planned operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

 

We may be prohibited from promoting and conducting our live events if we do not comply with applicable regulations.

 

In various states in the United States and in some foreign jurisdictions, athletic commissions and other applicable regulatory agencies will require us to obtain licenses for promoters, medical clearances and/or other permits or licenses for athletes and/or permits for events in order for us to promote and conduct our live events. If we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting live events in that jurisdiction. The inability to present live events over an extended period of time or in a number of jurisdictions could lead to a decline in the revenue streams generated from our live events, in which case our operating results would be adversely affected.

 

We could incur substantial liability in the event of accidents or injuries occurring during our events .

 

We intend to hold numerous live MMA events each year. Each live event will expose our employees who are involved in the production of those events to the risk of travel and match-related accidents, the costs of which may not be fully covered by insurance. The physical nature of our events will expose our professional MMA fighters to the risk of serious injury or death. Although our fighters, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we insure medical costs for injuries that a fighter may suffer at our events. Any liability we incur as a result of the death of or a serious injury sustained by one of our fighters while fighting in a match at our events, to the extent not covered by our insurance, could adversely affect our business, financial condition and operating results.

 

Our live events will entail other risks inherent in public live events, including air and land travel interruption or accidents, the spread of illness, injuries resulting from building problems, equipment malfunction, terrorism or other violence, local labor strikes and other force majeure type events. These circumstances could result in personal injuries or deaths, canceled events and other disruptions to our business for which we do not carry business interruption insurance, or result in liability to third parties for which we may not have insurance. The occurrence of any of these circumstances could adversely affect our business, financial condition and results of operations.

 

We may be unable to establish, protect or enforce our intellectual property rights adequately.

 

Our success will depend in part on our ability to establish, protect and enforce our intellectual property and other proprietary rights, particularly rights to our video fight libraries. We have an application pending with the United States Patent and Trademark Office (USPTO) to register “Alliance MMA” as a tradename and, following the proposed acquisition, will maintain a catalog of copyrighted works, including copyrights covering television programming and photographs. Our inability to protect our portfolio of copyrighted material, trade names and other intellectual property rights from infringement, piracy, counterfeiting or other unauthorized use could negatively affect our business. We have received an initial office action from the USPTO contesting our application to register the Alliance MMA name on the basis that the name appears descriptive. We are contesting this initial office action and believe we will ultimately prevail in securing a registration, although there can be no assurance we will. If we fail to establish, protect or enforce our intellectual property rights, we may lose an important advantage in the market in which we compete. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages. Monitoring unauthorized uses of and enforcing our intellectual property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful, and may require a substantial amount of resources and divert our management’s attention.

 

Changes in laws, regulations and other requirements could adversely affect our business, results of operations or financial condition.

 

We are subject to the laws, regulations and other requirements of the jurisdictions in which we operate. Changes to these laws could have a material adverse impact on the revenue, profit or the operation of our business.

 

In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, as well as other healthcare reform legislation being considered by Congress and state legislatures, may have an adverse effect on our business. The Affordable Care Act assesses penalties on employers who do not offer health insurance meeting certain affordability or benefit coverage requirements. While we believe our plans will meet these requirements, changes to the law or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, could have a material adverse effect on our business.

 

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Failure to establish and maintain effective internal control over financial reporting could have a material adverse effect on our business and operating results.

 

Maintaining effective internal control over financial reporting is necessary for us to produce accurate and complete financial reports and to help prevent financial fraud. In addition, such control is required in order to list our common stock on the Nasdaq Capital Market. If we are unable to maintain adequate internal controls or fail to correct deficiencies in our controls noted by our management or our independent registered public accounting firm, our business and operating results could be adversely affected, we could fail to meet our obligations to report our operating results accurately and completely, and our continued listing on the Nasdaq Capital Market could be jeopardized.

 

Disruptions in our information technology systems or security breaches of confidential customer information or personal employee information could have an adverse impact on our operations.

 

Our operations are dependent upon the integrity, security and consistent operation of various information technology systems and data centers, including our ticketing system, data centers that process transactions, communication systems and various other software applications used throughout our operations. Disruptions in these systems could have an adverse impact on our operations. We could encounter difficulties in developing new systems or maintaining and upgrading existing systems. Such difficulties could lead to significant expenses or to losses due to disruption in our business operations.

 

In addition, our information technology systems are subject to the risk of infiltration or data theft. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage information technology systems change frequently and may be difficult to detect or prevent over long periods of time. Moreover, the hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise the security of our information systems. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud or deception aimed at our employees, contractors and temporary staff. In the event that the security of our information systems is compromised, confidential information could be misappropriated and system disruptions could occur. Any such misappropriation or disruption could cause significant harm to our reputation, lead to a loss of sales or profits or cause us to incur significant costs to reimburse third parties for damages.

 

Our current insurance policies may not provide adequate levels of coverage against all claims and we may incur losses that are not covered by our insurance.

 

We believe we maintain insurance coverage that is customary for businesses of our size and type; however, we may be unable to insure against certain types of losses or claims, or the cost of such insurance may be prohibitive. For example, although we carry insurance for breaches of our computer network security, there can be no assurance that such insurance will cover all potential losses or claims or that the dollar limits of such insurance will be sufficient to provide full coverage against all losses or claims. Uninsured losses or claims, if they occur, could have a material adverse effect on our financial condition, business and results of operations.

 

Risks Related to this Offering and Ownership of Shares of Our Common Stock

 

There is no existing market for our common stock and a trading market that will provide you with adequate liquidity may not develop for our common stock.

 

No public market for buying or selling our common stock currently exists. Although the listing of our common stock on the Nasdaq Capital Market is a condition to the completion of this offering, a liquid trading market for our common stock may not develop or be sustained after this offering. The initial public offering price of the shares of our common stock sold in this offering has been determined by negotiations between the selling agent and our Board of Directors and may not be representative of the market price at which shares of our common stock will trade after this offering. In particular, we cannot provide assurances that you will be able to resell your shares at or above the initial public offering price or at all.

 

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The best efforts structure of this offering may yield insufficient gross proceeds to execute fully on our business plan .

 

Our selling agent is offering shares of our common stock in this offering on a best efforts basis. This means that the selling agent is not required to buy or sell any specific number or dollar amount of common stock, but will use its best efforts to sell the shares offered by us. The amount of proceeds available to us upon the completion of this offering will significantly affect our ability to finance our growth over the next 12 to 24 months. If we sell only the minimum number of shares contemplated by this offering, we may be unable to execute fully on our business plan, which could materially and adversely affect our business, prospects, financial condition and results of operations.

 

Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline.

 

Variations in our quarterly and year-end operating results are difficult to predict and may fluctuate significantly from period to period. If our revenues or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Specific factors that may cause fluctuations in our operating results include:

 

  attendance at our live events and demand for our original programming content;
  emergence, growth and popularity of competing MMA promotions;
  fluctuations in our operating expenses due to the growth of our business;
  timing and size of any new acquisitions we may complete; and
  changes in sponsorship or advertising revenues.

 

Once our common stock begins trading, the market price of our shares may fluctuate widely, and you could lose all or part of your investment.

 

We cannot predict the prices at which our common stock may trade after this offering. The market price of our common stock may fluctuate widely, depending upon many factors. These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the market price of our common stock include the following:

 

  a shift in our investor base;
  quarterly or annual results of operations that fail to meet investor or analyst expectations;
  actual or anticipated fluctuations in our operating results due to factors related to our business;
  changes in accounting standards, policies, guidance, interpretations or principles;
  changes in earnings estimates by securities analysts or our inability to meet those estimates;
  the operating and stock price performance of other comparable companies;

 

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  overall market fluctuations; and
  general economic conditions.

 

Stock markets in general frequently experience volatility that is often unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

 

Future sales of shares of our common stock could depress the market price of our common stock.

 

Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

 

Upon completion of this offering (assuming the maximum amount is sold) 10,000,000 shares of our common stock will be outstanding. Of these shares, the 3,333,333 shares sold in this offering (except for shares purchased by affiliates) will be freely tradable immediately following issuance (although a liquid trading market for our common stock may not develop for some time following completion of this offering, or at all). The remaining 6,666,667 shares of common stock are, and the approximately 1,377,531 shares to be issued to the Target Companies (based on an initial public offering price of $4.50 per share) will be, restricted as a result of securities laws or lock-up agreements but will be able to be sold after the offering as described in the section of this prospectus entitled “Shares Eligible For Future Sale.”

 

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our common stock or if our results of operations do not meet their published expectations, our stock price and trading volume could decline.

 

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their published expectations, our stock price could decline materially.

 

You will experience immediate and substantial dilution.

 

The initial public offering price is substantially higher than the net tangible book value of each outstanding share of our common stock. Purchasers of common stock in this offering will experience immediate and substantial dilution on a book value basis. The dilution per share in the net tangible book value per share of common stock will be $4.25 per share if the minimum number of shares are sold and $3.38 per share if the maximum number of shares are sold, based on an initial public offering price of $4.50 per share. See the section in the prospectus entitled “Dilution.”

 

Your percentage ownership will be further diluted in the future.

 

Your percentage ownership will be diluted in the future as a result of equity awards that we expect to grant to our directors, officers and employees. Prior to the completion of this offering, it is expected that our Board of Directors will approve our 2016 Equity Incentive Plan, which provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and consultants. Although no awards will have been granted at the completion of this offering, we anticipate granting equity awards in the future, subject to the approval of the plan by our stockholders. The 2016 Equity Incentive Plan authorizes 825,000 shares of common stock that may be awarded under the Plan.

 

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We will have broad discretion in using the proceeds of this offering, and we may not effectively expend the proceeds.

 

We intend to use approximately $1.6 million of the net proceeds of this offering to fund the cash portion of the purchase price for the Target Companies. We expect to use the balance for working capital and general corporate purposes, which may include financing our growth, developing new services, and funding capital expenditures, acquisitions and investments. We will have significant flexibility and broad discretion in applying the net proceeds of this offering after paying the cash purchase price for the acquisition of the Target Companies, and we may not apply these proceeds effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

 

Provisions of Delaware law, and of our certificate of incorporation and bylaws may make a takeover more difficult, which could cause our stock price to decline.

 

Provisions in our certificate of incorporation and bylaws and in the Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt that is opposed by management and the Board of Directors. As a result, public stockholders who might wish to participate in such a transaction may not have an opportunity to do so. These and other anti-takeover provisions could substantially impede the ability of public stockholders to change our management and Board of Directors. Such provisions may also limit the price that investors might be willing to pay for shares of our common stock in the future.

 

Any issuance of preferred stock in the future may dilute the rights of our common stockholders.

 

Under our certificate of incorporation, our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, liquidation preference, priority, dividend and voting rights, conversion features (if any) and other terms of these shares. Our Board of Directors may approve the issuance of preferred stock without any further approval of our stockholders. If preferred stock is issued, the rights of holders of our common stock, including the right to receive the proceeds of a liquidation of Alliance, may be adversely affected.

 

We do not intend to pay cash dividends on our common stock.

 

We do not anticipate paying cash dividends to holders of our common stock. If we do not declare or pay dividends on shares of our common stock, the market value of our common stock may be adversely affected.

 

Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.

 

As a public company, and particularly after we cease to qualify as an “emerging growth company,” we will incur significant legal, accounting and other expenses that the businesses we acquired from the Target Companies, which were all privately-held, did not incur prior to the acquisition. The Sarbanes-Oxley Act and the rules subsequently adopted by the SEC and FINRA to implement the Act impose a number of requirements on public companies, including changes in corporate governance practices. As a result, our management team and other personnel will need to devote a substantial amount of time and resources to adopting, implementing and auditing procedures designed to satisfy these requirements. The rules adopted under the Act will increase our legal, accounting and financial compliance costs, making some activities more time-consuming and costly. For example, we expect that, as a result of these rules, director and officer liability insurance will be difficult and expensive for us to obtain, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors or our board committees or as executive officers.

 

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Among its other provisions, the Sarbanes-Oxley Act requires that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, we will need to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. As an “emerging growth company” we will avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. However, this exemption will no longer be available to us when we cease to be an “emerging growth company”, at which time the cost of our compliance with Section 404 will correspondingly increase.

 

If we are unable to comply with the requirements of the Sarbanes-Oxley Act and the rules adopted under the Act, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to constitute material weaknesses, investor perceptions of our company may suffer, leading to a potential decline in the market price of our common stock. In such event, we could be subject to sanctions (including monetary fines or penalties) or investigations by the SEC or other regulatory authorities, our operations, financial reporting, or financial results could be harmed, and we could receive an adverse opinion from our independent registered public accounting firm.

 

The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations and to reduce the amount of information provided in reports filed with the SEC. We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We qualify as and will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed a “large accelerated filer” under the Securities Exchange Act of 1934, as amended. For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, will be subject to the same new or revised accounting standards at the same time as other public companies that are not emerging growth companies.

 

We cannot predict whether investors will find our common stock less attractive because we rely on some of the exemptions available to us under the JOBS Act. If investors find our common stock less attractive as a result, the trading market for our common stock may be less active and our stock price may be more volatile. If we avail ourselves of certain exemptions from various reporting requirements, our reduced disclosure may make it more difficult for investors and securities analysts to evaluate us and may result in reduced investor confidence.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus, including the sections entitled “Important Introductory Information,” “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to:

 

  Our ability to manage our growth;
  Our ability effectively to manage the businesses of the Target Companies, to create synergies among the businesses, and to leverage these synergies to achieve our business objective of creating a developmental league for the MMA industry;
  Our ability to compete with other regional MMA promotions for top ranked professional MMA fighters and for television and other content distribution arrangements;
  Sustained growth in the popularity of MMA among fans;
  Our ability to protect or enforce our intellectual property rights; and
 

Other statements made elsewhere in this prospectus.

 

These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. The “Risk Factors” section of this prospectus sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements. Moreover, we operate in a changing regulatory environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus.

 

We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the U.S., we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events. Other than with respect to the acquisition of the Target Assets and the businesses of the Target Companies, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or other investments or strategic transactions we may engage in.

 

  17  

 

 

USE OF PROCEEDS

 

Based on an initial public offering price of $4.50 per share, we estimate that the net proceeds from this offering, after deducting selling agent commissions and expenses payable by us, will be approximately $4,249,413 if we sell a minimum of 1,111,111 shares and approximately $13,498,240 if we sell all 3,333,333 shares of our common stock in this offering. A potential investor in this offering should not that this is a best efforts offering and there is no assurance that we will sell any shares or receive any proceeds.

 

We intend to use the net proceeds of this offering to fund the cash portion of the purchase price for the Target Assets and the businesses of the Target Companies in the amount of approximately $1.6 million, and to repay indebtedness in the aggregate amount of approximately $727,005 due to Ivy Equity Investors, LLC, an affiliate of a member of our Board of Directors, Joseph Gamberale, bearing interest at an annual rate of 6% and maturing on January 1, 2017. Such indebtedness was incurred to finance the expenses of this offering as well as for working capital. We will use the remaining proceeds of this offering for working capital and other general corporate purposes as indicated below.

 

The following table presents the principal intended uses of the net proceeds of this offering in order of priority:

 

INTENDED USE OF PROCEEDS

 

    MINIMUM           MAXIMUM        
PROCEEDS:                                
                                 
GROSS OFFERING   $ 5,000,000       100 %   $ 15,000,000       100 %
   LESS ESTIMATED OFFERING EXPENSES AND COMMISSIONS   $ 750,587       15 %   $ 1,501,760       10 %
NET PROCEEDS   $ 4,249,413       85 %   $ 13,498,240       90 %
                                 
PLANNED USE OF PROCEEDS:                                
                                 
NOTE PAYABLE                                
Retire Ivy Equity Investors Note   $ 727,005       17 %   $ 727,005       5 %
Total proceeds for note payable   $ 727,005       17 %   $ 727,005       5 %
                                 
BUSINESS ACQUISITIONS                                
Target Company Asset Purchases   $ 1,640,000       39 %   $ 1,640,000       12 %
Total proceeds for business acquisitions   $ 1,640,000       39 %   $ 1,640,000       12 %
                                 
CAPITAL EXPENDITURES                                
IT Equipment   $ 50,000       1 %   $ 250,000       2 %
Purchased Software   $ 20,000       0 %   $ 100,000       1 %
Furniture & Fixtures   $ 20,000       0 %   $ 250,000       2 %
Leasehold Improvements   $ 50,000       1 %   $ 100,000       1 %
Total proceeds for capital expenditures   $ 140,000       3 %   $ 700,000       5 %
                                 
WORKING CAPITAL                                
Brand Marketing   $ 150,000       4 %   $ 2,500,000       19 %
Professional Services - Public Relations, Investor Relations, Legal & Accounting   $ 400,000       9 %   $ 1,000,000       7 %
Salaries   $ 700,000       16 %   $ 700,000       5 %
Travel   $ 167,408       4 %   $ 200,000       1 %
Rent   $ 100,000       2 %   $ 100,000       1 %
Reserve   $ -       0 %   $ 4,931,235       37 %
Total proceeds for working capital and reserve   $ 1,517,408       36 %   $ 9,431,235       70 %
                                 
POTENTIAL FUTURE BUSINESS ACQUISITIONS                                
Potential Asset Purchases   $ 225,000       5 %   $ 1,000,000       7 %
Total proceeds for potential business acquisitions   $ 225,000       5 %   $ 1,000,000       7 %
                                 
TOTAL USE OF PROCEEDS   $ 4,249,413       100 %   $ 13,498,240       100 %

 

The foregoing presentation is based on reasonable estimates made by our management; it should be noted, however, that, except with respect to the purchase price for the Target Assets and the businesses of the Target Companies, our management will have the discretion to allocate such net proceeds as it determines. Further, the amount and timing of our actual expenditures will depend on numerous factors, including the cash used in or generated by our operations, the pace of the integration of the Target Companies’ businesses, the level of our sales and marketing activities and the attractiveness of any additional acquisitions or investments. We believe that, in the event only the minimum amount of this offering is completed, we will have sufficient proceeds nonetheless to fund all of the uses described in the table above under “Minimum”. If, however, we begin to experience an operating loss, we will be required to fund that loss out of such proceeds. In such event, we will reconsider our use of up to $225,000 for potential future business acquisitions and reallocate such amount to working capital. Until we use the proceeds from this offering as described above, we plan to invest such proceeds in highly liquid short-term interest-bearing obligations, investment grade investments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

 

DIVIDEND POLICY

  

We have never declared or paid cash dividends on our common stock and do not expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will be dependent on a number of factors, including our earnings, capital requirements, overall financial condition and other factors that our Board of Directors considers relevant.

 

  18  

 

 

CAPITALIZATION

 

The following table sets forth our cash and our capitalization as of June 30, 2016:

 

· On an actual basis for Alliance (the designated accounting acquirer); and

 

· On a pro forma as adjusted basis after giving effect to:

 

- the sale of a minimum of 1,111,111 shares of our common stock in this offering at an offering price of $4.50 per share and our receipt of the estimated $4,249,413 in net proceeds from this offering, after deducting selling agent commissions and estimated offering expenses payable by us;

 

- the sale of all 3,333,333 shares of our common stock in this offering at an offering price of $4.50 per share and our receipt of the estimated $13,498,240 in net proceeds from this offering, after deducting selling agent commissions and estimated offering expenses payable by us; and

 

- the planned acquisitions of the Target Companies (the designated accounting co-predecessors).

 

    As of June 30, 2016  
    (In thousands, except share information)  
    Actual     Pro Forma
As Adjusted
Minimum
    Pro Forma
As Adjusted
Maximum
 
                   
Cash and cash equivalents   $ 16       2,494       11,742  
Notes payable, affiliates     615       -       -  
Contingent liability                        
Earn-out provisions of respective Target Companies at closing.     -       716       716  
Stockholders' Equity                        
Preferred Stock, $0.001 par value; 5,000,000 shares authorized and no shares issued and outstanding actual or as adjusted Common stock, $0.001 par value, authorized 45,000,000 shares, 5,289,136 shares issued and outstanding, actual; authorized 45,000,000 shares, 7,777,778 and 10,000,000 shares issued and outstanding, pro forma as adjusted - minimum and pro forma as adjusted - maximum, respectively (1)     5       8       10  
Accumulated deficit     (610 )     (2,659 )     (2,659 )
Additional paid-in-capital     -       10,174       19,421  
Total Stockholders' (deficit) equity     (605 )     7,523       16,772  
Total Capitalization   $ 10       8,239       17,488  

 

(1)    The number of shares of common stock to be outstanding after this offering includes 1,377,531 shares of common stock to be issued in connection with the acquisition of the Target Assets and the businesses of the Target Companies.

 

The number of shares does not give effect to:

 

  · 825,000 shares of common stock available for issuance under the 2016 Equity Incentive Plan; and

 

  · 159,198 shares of common stock reserved as contingent consideration to be paid if the businesses of the Target Companies exceed certain gross profit thresholds;

 

  19  

 

 

  · between 111,111 shares (assuming the minimum offering is completed) and 333,333 shares (assuming the maximum offering is completed) of common stock issuable upon the exercise of the warrants issued to the selling agent.

 

DILUTION

 

Purchasers of our common stock in this offering will experience an immediate dilution of net tangible book value per share from the offering price. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of shares of common stock and the net tangible book value per share immediately after this offering.

 

As of June 30, 2016, our pro forma net tangible book value before the offering was $(630,108), or $(0.1191) per share of common stock. Net tangible book value per share represents our total tangible assets, less our total liabilities, divided by the number of outstanding shares of our common stock.

 

After giving effect to the sale of 1,111,111 shares of common stock (minimum) and 3,333,333 shares of common stock (maximum) in this offering at an offering price of $4.50 per share, and after deducting selling agent commissions and estimated offering expenses payable by us, our pro forma net tangible book value would have been $0.2545 (minimum) and $1.1228 (maximum) per share. This represents an immediate increase in pro forma net tangible book value of $0.3736 (minimum) and $1.2419 (maximum) per share to our existing stockholders and immediate dilution of $4.2455 (minimum) and $3.3772 (maximum) per share to new investors purchasing shares at the proposed public offering price.

 

The following table illustrates the dilution in pro forma net tangible book value per share to new investors as of June 30, 2016:

 

    Minimum     Maximum  
Assumed initial public offering price per share   $ 4.5000     $ 4.5000  
                 
Net tangible book value per share at June 30, 2016   $ (0.1191 )   $ (0.1191 )
                 
Increase in tangible book value per share to the existing stockholders attributable to this offering   $ 0.3736     $ 1.2419  
                 
Adjusted net tangible book value per share after this offering   $ 0.2545     $ 1.1228  
                 
Dilution in net tangible book value per share to new investors   $ 4.2455     $ 3.3772  

 

The following tables set forth, as of the date of this prospectus, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by the existing holders of our common stock and the price to be paid by new investors at an offering price of $4.50 per share.

 

Minimum Offering

 

    Shares Purchased     Total Consideration     Average
Price Per
Share
 
    Number     Percent     Amount     %        
Existing stockholders before this offering     5,289,136       82.6     $ 5,289       0.1     $ 0.00  
New investors     1,111,111       17.4     $ 5,000,000       99.9     $ 4.50  
      6,400,247       100.0     $ 5,005,289       100.0          

 

  20  

 

  

Maximum Offering

 

    Shares Purchased     Total Consideration     Average
Price Per
Share
 
    Number     Percent     Amount     %        
Existing stockholders before this offering     5,289,136       61.3     $ 5,289       0.0     $ 0.00  
New investors     3,333,333       38.7     $ 15,000,000       100.0     $ 4.50  
      8,622,469       100.0     $ 15,005,289       100.0          

 

The outstanding share information in the tables above assumes that 5,289,136 shares of our common stock are outstanding as of June 30, 2016, and excludes:

 

  (i)

1,377,531 shares of common stock to be issued in connection with the acquisition of the Target Assets and the businesses of the Target Companies;

 

  (ii)

159,198 shares of common stock reserved as contingent consideration to be paid if the businesses of the Target Companies exceed certain gross profit thresholds; and

 

  (iii) 825,000 shares of common stock to be reserved for issuance under our 2016 Equity Incentive Plan.

 

  21  

 

 

UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

We prepared the following unaudited pro forma financial statements by applying certain pro forma adjustments to the historical financial statements of Alliance. The pro forma adjustments give effect to the following transactions (the “Transactions”):

 

  · Our planned acquisition of the assets of CFFC Promotions, LLC (“CFFC”);
  · Our planned acquisition of the assets of Hoosier Fight Club Promotions, LLC (“Hoosier Fight Club” or “HFC”);
  · Our planned acquisition of the assets of Punch Drunk, Inc. d/b/a COmbat GAmes MMA (“COGA”);
  · Our planned acquisition of the assets of Bang Time Entertainment, LLC d/b/a Shogun Fights (“Shogun”);
  · Our planned acquisition of the assets of V3, LLC  (“V3 Fights”);
  · Our planned merger with Go Fight Net, Inc. (“GoFightLive” or “GFL”);
  · Our planned acquisition of the assets of CageTix LLC (“CageTix”);
  · The estimated net proceeds from our initial public offering and the application of such proceeds.

 

For accounting and reporting purposes, Alliance has been identified as the accounting acquirer of each of the Target Companies. In addition, each of the Target Companies has been identified as an accounting co-predecessor to the Company.

 

The unaudited pro forma statements of operations for the year ended December 31, 2015 and for the six months ended June 30, 2016 give effect to the Transactions as if each of them had occurred on January 1, 2015. The unaudited pro forma balance sheet as of June 30, 2016 gives effect to the Transactions as if each of them had occurred on June 30, 2016.

 

These pro forma financial statements include adjustments for our planned acquisitions because we believe each of these acquisitions is probable under the standards of Rule 8-04 of Regulation S-X. We determined that each acquisition shown will involve the acquisition of a business, considering the guidance in Rule 11-01(d) of Regulation S-X, and individually as well as in aggregate met the significance test of Rule 8-04 of Regulation S-X. The acquisitions of certain assets of Louis Neglia and Hoss related to copyrights in the Ring of Combat and CFFC MMA and kickboxing fight video libraries did not, individually or in aggregate, meet the significance test in Rule 8-04 of Regulation S-X and are therefore not included in the pro forma financial statements.

 

The historical financial statements of Alliance, and each of the businesses whose acquisition is planned, appear elsewhere in this prospectus.

 

We have based the pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. We describe in greater detail the assumptions underlying the pro forma adjustments in the accompanying notes, which you should read in conjunction with these unaudited pro forma financial statements. In many cases, we based these assumptions on preliminary information and estimates. The actual adjustments to our audited consolidated financial statements will depend upon a number of factors and additional information that will be available on or after the completion of our initial public offering. Accordingly, the actual adjustments that will appear in our financial statements will differ from these pro forma adjustments, and those differences may be material.

 

We account for our proposed acquisitions, including our merger with GFL, using the acquisition method of accounting for business combinations under GAAP, with Alliance being considered the acquiring entity. Under the acquisition method of accounting, the total consideration paid is allocated to an acquired company’s tangible and intangible assets, net of liabilities, based on their estimated fair values as of the acquisition date. We have not completed the acquisition of the Target Companies and therefore the estimated purchase price and fair value of the Target Companies’ assets to be acquired and liabilities assumed are preliminary. Once we complete our final valuation processes for our planned acquisitions, we may report changes to the value of the assets acquired and liabilities assumed, as well as the amount of goodwill, and those changes could differ materially from what we present herein.

 

  22  

 

 

We provide these unaudited pro forma financial statements for informational purposes only. These unaudited pro forma financial statements do not purport to represent what our results of operations or financial condition would have been had the Transactions actually occurred on the assumed dates, nor do they purport to project our results of operations or financial condition for any future period or date. You should read these unaudited pro forma financial statements in conjunction with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the historical financial statements of Alliance and the Target Companies, including the related notes thereto, appearing elsewhere in this prospectus.

 

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the period commencing January 1, 2015 to December 31, 2015

( In thousands, except share information)

 

    Target Companies - Actual Results                            
    Shogun     CageTix     CFFC     GFL     HFC     COGA     V3 Fights     Target Companies Subtotal     Alliance MMA     Total Results     Pro Forma Adjusting Entries       Pro Forma Results  
Revenue   $ 538     $ 72     $ 709     $ 496     $ 172     $ 285     $ 160     $ 2,432     $ -     $ 2,432     $ -       $ 2,432  
Cost of revenues     372       0       534       318       115       111       123       1,573       -       1,573       -         1,573  
Gross profit     166       72       175       178       57       174       37       859       -       859       -         859  
Operating expenses                                                                                                  
General and administrative expenses     24       34       107       170       8       127       36       506       42       548       -         548  
Professional and consulting fees     27       -       49       24       22       28       28       178       344       522       (311 ) 4(iii)     211  
Depreciation     1       -       3       36       0       9       -       49       -       49       -         49  
Amortization     -       -       -       -       -       -       -       -       -       -       1,412   4(iv)     1,412  
Total operating expenses     52       34       159       230       30       164       64       733       386       1,119       1,101         2,220  
Net income (loss)   $ 114     $ 38     $ 16     $ (52 )   $ 27     $ 10     $ (27 )   $ 126     $ (386 )   $ (260 )   $ (1,101 )     $ (1,361 )
                                                                                                   
Weighted average common shares outstanding                                                                                               10,000  
Net loss per common share                                                                                             $ (0.1361 )

 

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the six months ended June 30, 2016

( In thousands, except share information)

 

    Target Companies - Actual Results                            
    Shogun     CageTix     CFFC     GFL     HFC     COGA     V3
Fights
    Target
Companies
Subtotal
    Alliance
MMA
    Total
Results
    Pro
Forma
Adjusting
Entries
      Pro
Forma Results
 
Revenue     302       57       312       277       140       59       77       1,224       -       1,224               $ 1,224  
Cost of revenues     204       -       229        165       100       26       52       776       -       776                 776  
Gross profit     98       57       83       112       40       33       25       448       -       448                 448  
Operating expenses                                                                                                  
General and administrative expenses     13       17       47       85       9       13       13       197       42       239                 239  
Professional and consulting fees     8       -       8       10       8       9       9       52       182       234       (142 )4(iv)       92  
Depreciation     -       -       1       14       -       4       -       19       -       19       -         19  
Amortization     -       -       -       -       -       -       -       -         -     -       707  4(v)        707  
Total operating expenses     21       17       56       109       17       26       22       268       224       492       565         1,057  
Net income (loss)     77       40       27       3       23       7       3       180       (224)       (44)       (565 )     $ (609)  
                                                                                                   
Weighted average common shares outstanding                                                                                               10,000  
Net loss per common share                                                                                             $ (0.0609)  

 

 

  23  

 

 

UNAUDITED PRO FORMA BALANCE SHEET

For the six months ended June 30, 2016

( In thousands, except share information)

 

    Target Companies - Actual Results                    
    Shogun     CageTix     CFFC     GFL     HFC     COGA     V3 Fights     Target
Companies
Subtotal
    Actual
Alliance
MMA
    Pro Forma
Adjusting
Entries
    Pro Forma
Results
 
Cash & cash equivalents   $ 79     $ 61     $ 8     $ 83     $ 11     $ 7     $ 1     $ 250     $ 16     $ 11,476  4(i)   $ 11,742  
Accounts receivable and other assets, net     24       -       5       5       -       -       -       34       16       -       50  
Deferred offering costs     -       -       -       -       -       -       -       -       25       -       25  
   Current assets     103       61       13       88       11       7       1       284       57       11,476       11,817  
Property, plant and equipment, net     -       -       5       23       -       4       -       32       -       -       32  
Intangible assets, net     -       -       -       -       -       -       -       -       -       3,389  3,4(iv)     3,389  
Goodwill     -       -       -       -       -       -       -       -       -       2,596  2     2,596  
   Total assets     103       61       18       111       11       11       1       316       57       17,461       17,834  
Accounts payable and accrued expenses     28       123       24       24       16       29       51       295       47       (22)       320  
Deferred revenue     -       -       -       -       9       -       -       9       -       -       9  
401K payable     -       -       -       17       -       -       -       17       -       -       17  
Related party note payable - short term     -       -       67       -       -       -       -       67       615       (682)  4(ii, iii)     -  
   Total current liabilities     28       123       91       41       25       29       51       388       662       (704)       346  
Contingent earnout                                                                             716  4(v)     716  
   Total liabilities     28       123       91       41       25       29       51       388       662       12       1,062  
Stockholders' Equity                                                                                        
Retained earnings /(deficit)     75       (62)       (73)       70       (14)       (18)       (50)       (72)       (610)       (1,977)       (2,659)  
Common stock                                                                     5       5       10  
Additional paid-in-capital                                                                             19,421  2,3,4(i-v)     19,421  
   Total stockholders' equity     75       (62)       (73)       70       (14)       (18)       (50)       (72)       (605)       17,449       16,772  
Total Liabilities and Stockholders' Equity   $ 103     $ 61     $ 18     $ 111     $ 11     $ 11     $ 1     $ 316     $ 57     $ 17,461     $ 17,834  

  

Notes to Unaudited Pro Forma Financial Information

 

Note 1 — Basis of presentation

 

The unaudited pro forma balance sheet as of June 30, 2016, and the unaudited pro forma statement of operations for the period commencing January 1, 2015 to December 31, 2015 and for the six months ended June 30, 2016 are based on the historical financial statements of Alliance MMA, Inc. after giving effect to our planned acquisition of the Target Assets and the businesses of the Target Companies and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma financial information. The acquisitions of the Target Assets and the businesses of the Target Companies will be concurrent with the successful completion of this offering and the listing of our common stock on the Nasdaq Capital Market.

 

We account for business combinations pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) 805, Business Combinations . In accordance with ASC 805, we use reasonable estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.

 

The fair values assigned to Alliance’s tangible assets acquired and liabilities assumed are considered preliminary and are based on the information and the account balances that were available as of June 30, 2016. We believe that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. We expect to finalize the valuation of the net tangible and intangible assets as soon as practicable, but not later than one year from the acquisition date.

 

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The unaudited pro forma financial information is not intended to represent or be indicative of our results of operations or financial position that would have been reported had the acquisitions been completed as of the date presented, and should not be taken as a representation of our future results of operations or financial position.  

 

For purposes of these unaudited pro forma statements of operations, the acquisitions of the Target Assets and the businesses of the Target Companies are assumed to have occurred on June 30, 2016, the date of our most recent balance sheet. The pro forma statement of operations for the year ended December 31, 2015 and for the six months ended June 30, 2016 aggregate the results of Alliance and the Target Companies for the period commencing on January 1, 2015 through December 31, 2015 and for the six months ended June 30, 2016.

 

The unaudited pro forma balance sheet as of June 30, 2016 is presented as if the acquisitions had occurred on January 1, 2015.

 

Note 2 – Preliminary purchase price allocation

 

The Company intends to acquire the Target Assets and the businesses of the Target Companies concurrent with the completion of the offering made by this prospectus. As consideration for the acquisitions, Alliance will deliver the following amounts of cash and shares of common stock, and will record a contingent liability related to the specified earn outs.

  

Target Company   Cash     Shares     Consideration
Paid
    Contingent
Consideration
    Total
Shares
    Total
Consideration
 
Shogun   $ 250,000       111,111     $ 750,000     $ 174,219       149,826     $ 924,219  
CageTix   $ 150,000       38,889     $ 325,000     $ 75,621       55,694     $ 400,621  
CFFC Promotions   $ 235,000       470,000     $ 2,350,000     $ 184,632       511,029     $ 2,534,632  
GFL   $ 450,000       419,753     $ 2,338,889     $ -       419,753     $ 2,338,889  
HFC   $ 120,000       106,667     $ 600,000     $ 60,170       120,038     $ 660,170  
COGA   $ 80,000       75,556     $ 420,000     $ 182,890       116,198     $ 602,890  
V3 Fights   $ 100,000       111,111     $ 600,000     $ 38,862       119,747     $ 638,862  
Total Target Companies   $ 1,385,000       1,333,087     $ 7,383,889     $ 716,394       1,492,285     $ 8,100,283  
                                                 
Hoss   $ 100,000       44,444     $ 300,000     $ -       44,444     $ 300,000  
Louis Neglia   $ 155,000       -     $ 155,000     $ -       -     $ 155,000  
Total Target Assets   $ 255,000       44,444     $ 455,000     $ -       44,444     $ 455,000  
Total   $ 1,640,000       1,377,531     $ 7,838,889     $ 716,394       1,536,729     $ 8,555,283  

 

The amount of consideration paid in shares was calculated based on the public offering price of $4.50 per share.

 

Under acquisition accounting, we recognize the assets and liabilities acquired at their fair value on the acquisition date, with any excess in purchase price over these values being allocated to identifiable intangible assets and goodwill at June 30, 2016.

 

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The respective asset purchase agreements for the Target Companies other than GFL, and the agreement and plan of merger for GFL, contemplate that we will acquire certain assets and assume certain liabilities. We believe that, due to the short-term nature of many of the assets acquired, their carrying values, as shown in the historical financial statements of the entities, approximate their respective fair values. In addition, we have assigned value to those intangible assets related to intellectual property rights to video libraries, ticketing software and customer and venue relationships of each Target Company. The goodwill recognized for these acquisitions is related primarily to synergies with our combined businesses and assembled workforce.

 

The following table reflects the preliminary allocation of the purchase price for the businesses of the Target Companies to identifiable assets, liabilities assumed and pro forma intangible assets and goodwill:

 

    Total     Shogun     CageTix     CFFC     GFL     HFC     COGA     V3 Fights  
Cash and equivalents   $ 250,351     $ 79,332     $ 60,506     $ 7,916     $ 83,148     $ 11,038     $ 7,118     $ 1,293  
Accounts receivable and other assets, net     32,968       23,400       -       5,068       4,500       -       -       -  
Property and equipment, net     32,523       -       -       4,901       23,166       400       4,056       -  
Intangible assets, net     5,508,436       52,500       360,559       1,437,000       2,041,677       653,775       519,300       443,625  
Goodwill, net     2,595,883       796,964       101,610       1,103,397       226,853       20,406       101,905       244,748  
Total identifiable assets     8,420,161       952,196       522,675       2,558,282       2,379,344       685,619       632,379       689,666  
Accounts payable and accrued expenses     319,878       27,977       122,054       23,650       40,455       25,449       29,489       50,804  
Total identifiable liabilities     319,878       27,977       122,054       23,650       40,455       25,449       29,489       50,804  
Total purchase price   $ 8,100,283     $ 924,219     $ 400,621     $ 2,534,632     $ 2,338,889     $ 660,170     $ 602,890     $ 638,862  

 

The unaudited pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed of Target Companies based on management’s best estimates of fair value. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary and have been made solely for illustrative purposes.

 

Note 3 – Identifiable intangible assets

 

We based our preliminary estimates of each intangible asset type/category that we expect to recognize as part of the planned acquisitions on the nature of the businesses and the contracts that we have entered into with the Target Companies. The planned acquisitions bring value to our business platform through their exceptional reputations as premier MMA promotional companies and their extensive video libraries, ticketing platforms, and customer and venue relationships. As such, the intellectual property rights of video libraries, ticketing software, and customer and venue relationships comprise the significant majority of intangible assets for these acquisitions

 

We based the preliminary estimated useful lives of intangible assets on the basis of each asset’s contribution to our business platform and growth strategy. However, all of these estimates are preliminary, as we have not completed these acquisitions or analyzed all the facts surrounding the businesses to be acquired.

 

The information set forth below reflects the preliminary fair value of intangible assets of the businesses we plan to acquire, and their estimated useful lives. All preliminary estimates for the fair value of intangibles will be refined once the acquisitions are completed and final valuations are ascribed to each intangible asset.

 

Intangible assets   Total     Sho
Gun
    CageTix     CFFC     GFL     HFC     COGA     V3
Fights
 
Video library, intellectual property   $ 3,181     $ 52     $ -     $ 397     $ 2,042     $ 197     $ 352     $ 141  
Venue contracts     1,967       -       -       1,040       -       457       167       303  
Ticketing software     360       -       360       -       -       -       -       -  
Total intangible assets   $ 5,508     $ 52     $ 360     $ 1,437     $ 2,042     $ 654     $ 519     $ 444  

 

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Note 4 – Pro forma adjustments

 

The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma financial information:

 

  i.

Net proceeds from IPO . Reflects the issuance of 3,333,333 common shares (maximum offering) at $4.50 per share the price of our common stock sold in this offering, less offering expenses totaling approximately $1,501,760. We expect our net proceeds for this offering will approximate $13,498,240. We anticipate that these proceeds will be further reduced by the cash portion paid our Target Companies at the closing of our IPO and repayment of an outstanding note payable to Ivy Equity Investors, LLC in the amount of $637,373 which is the outstanding balance including accrued interest at June 30, 2016.

 

The total cash component of our acquisitions accounted for as a business combination pursuant to ASC 805 is estimated at $1,385,000.

 

  ii. Elimination of Assets/Liabilities not acquired . We have adjusted the unaudited pro forma statements of operations and balance sheet for the period ended June 30, 2016 to eliminate nonrecurring expenditures and those assets and liabilities not purchased or assumed by Alliance from the Target Companies pursuant to the terms of the respective asset purchase agreements. The following liabilities were specifically excluded from the Transactions:

 

    Period ended June 30, 2016  
Liabilities excluded from Target purchases   CFFC     Total  
Short-term note payable   $ 67,000     $ 67,000  
Total   $ 67,000     $ 67,000  

 

iii. Note payable and expenses directly attributable to the Transactions . In February 2015, Alliance entered into a loan agreement with Ivy Equity Investors, LLC, pursuant to which Ivy agreed to advance up to $500,000 to satisfy the Company’s startup expenses, including professional fees incurred with this offering and expenses incident to the acquisitions of the Target Companies.

 

This loan is evidenced by an unsecured promissory note that bears interest at an annual rate of 6%. The principal amount owing under the note, plus accrued interest, as of June 30, 2016 was $637,373.  The note matures on the earlier of the closing of the offering made by this prospectus or January 1, 2017. On May 10, 2016, the note was amended and restated to provide for borrowings up to $600,000. On July 20, 2016, the note was amended and restated a second time to provide for borrowings up to $1,000,000. At August 12, 2016, the principal amount owing under the amended and restated note, plus accrued interest, was $727,005. We anticipate paying off the note in full at the completion of the offering from the net proceeds available to us, which is an assumption we have made for pro forma purposes. Additionally, actual expenses incurred that were related to the offering totaled $25,000 as of December 31, 2015 and were reclassified from capitalized offering expenses, and $310,929 of professional and consulting fees that were directly related to the acquisition of prospective targets have been removed from the pro forma results. For the six months ended June 30, 2016, $142,422 of professional and consulting fees that were directly related to the acquisition of prospective targets has been removed from the pro forma results.

 

  iv. Amortization of intangible assets . We amortize intangible assets over their estimated useful lives. We based the estimated useful lives of acquired intangible assets on the economic benefit we expect to receive and the period during which we expect to receive that benefit. We assigned a useful life of five years to the intellectual property rights of our video libraries and three years to the acquired ticketing software and customer and venue relationships based on a number of factors, including contractual agreements, estimated production hours available on video libraries and economic factors pertaining to the combined companies.

 

The estimates of fair value and weighted-average useful lives could be affected by a variety of factors including legal, regulatory, contractual, competitive, economic or other factors. Increased knowledge about these factors could result in a change to the estimate fair value of these intangible assets and/or the weighted-average useful lives from what we have assumed in these unaudited pro forma financial statements. In addition, the combined effect of any such changes could result in a significant increase or decrease to the related amortization expense estimates. 

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The amortization of intangible assets of the Target Companies, shown below, assumes that such assets were acquired on January 1, 2015 and amortized over the period associated with each statement of operations.

 

Video Libraries   Basis     Useful
Life
  Annual
Amortization
    Accumulated
Amortization
    Net Balance  
CFFC   $ 397,500     5 yrs.   $ 79,500     $ 119,250     $ 278,250  
COGA     352,500     5 yrs.     70,500       105,750       246,750  
GFL     2,041,676     5 yrs.     408,335       613,770       1,427,907  
HFC     196,875     5 yrs.     39,375       59,063       137,813  
V3 Fights     140,625     5 yrs.     28,125       42,188       98,438  
Shogun     52,500     5 yrs.     10,500       15,750       36,750  
Total value of Video Libraries   $ 3,181,676         $ 636,335     $ 955,771     $ 2,225,908  

 

    Basis     Useful
Life
  Annual
Amortization
    Accumulated
Amortization
    Net Balance  
Customer and Venue Relationships                                    
CFFC   $ 1,039,500     3 yrs.   $ 346,500     $ 519,750     $ 519,750  
HFC     456,900     3 yrs.     152,300       228,450       228,450  
COGA     166,800     3 yrs.     55,600       83,400       83,400  

V3 Fights

    303,000     3 yrs.     101,000       151,500       151,500  
Total value of Customer and Venue Relationships   $ 1,966,200         $ 655,400     $ 983,100     $ 983,100  

 

Ticketing Software   Basis     Useful
Life
  Annual
Amortization
    Accumulated
Amortization
    Net Balance  
CageTix   $ 360,559     3 yrs.   $ 120,186     $ 180,279     $ 180,279  
Total value of Ticketing Software   $ 360,559         $ 120,186     $ 180,279     $ 180,279  

 

v. Contingent Consideration . We will pay additional consideration to each Target Company, other than GFL, if the gross profit of the related business for the twelve months following the closing of the related acquisition exceeds an agreed upon gross profit threshold.  This “earn out” requires us to increase the purchase price we agreed to pay for each such business by $7.00 dollars for each $1.00 by which actual gross profit exceeds the gross profit threshold.  The “earn out” will be paid in shares of our common stock that will be valued at the lesser of (i) the initial public offering price of the shares sold in this offering, or (ii) the volume weighted average closing price of our common stock over the 20 trading days prior to the date on which we file our quarterly report on Form 10-Q for the first quarter following the full calendar year following the completion of this offering.

 

The gross profit threshold for each Target Company is as follows:

 

Target Company   Gross Profit Threshold  
CFFC   $ 350,000  
COGA   $ 80,000  
CageTix   $ 100,000  
HFC   $ 100,000  
V3 Fights   $ 100,000  
Shogun   $ 50,000  

 

We expect that each Target Company will exceed its gross profit threshold by an amount that would result in a weighted average increase in the aggregate consideration paid of 15% for all of the Target Companies, or an additional $716,394 in the aggregate, payable in common stock as described above. We prepared this estimate on the basis of our overall growth strategy and our expectation that the gross revenues of the Target Companies will increase by 10-30% during the applicable period.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the consolidated historical and pro forma financial statements and related notes thereto included in this prospectus. In addition, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” We assume no obligation to update any of these forward-looking statements.

 

We are presenting the following discussion with respect to each Target Company individually, then for Alliance, both individually and on a pro forma basis for the period covered by the pro forma financial statements included in this prospectus.

 

Business Overview

 

Alliance MMA, Inc. was incorporated in the state of Delaware on February 12, 2015 for the purpose of acquiring businesses that engage in the promotion of mixed martial arts, or MMA, events. Through our acquisition of the Target Companies, Alliance will create a regional venue for the development and showcasing of professional MMA fighters. We intend to operate as a “feeder” organization by which our fighters will advance to the Ultimate Fighting Championship, or UFC, and other premier MMA organizations. Our operations will be centered on three primary business segments: live MMA event promotions, MMA content distribution, and sponsorships and promotion.

 

For accounting and reporting purposes, Alliance has been identified as the accounting acquirer of each of the Target Companies. In addition, each of the Target Companies has been identified as an accounting co-predecessor to the Company.

 

Shogun

 

Based in Baltimore, Maryland, Shogun is a mid-Atlantic regional MMA promotion company founded in 2008 and has promoted 13 fights at the Royal Farms Arena in Baltimore. Shogun currently promotes two large events per year with attendance figures typically exceeding 4,500 fans. We expect to build on Shogun’s existing business and to expand its presence and number of promotions throughout the mid-Atlantic region following the proposed acquisition.

 

For the twelve months ended December 31, 2015, Shogun’s promotions generated revenue totaling $537,872 with a gross profit of $165,923, reflecting a gross profit margin of 30.8%. Shogun generated substantially all of that revenue from ticket sales at its live events.

 

The tables below summarize Shogun’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31,  
    2015     2014  
Net revenue   $ 537,872       100.0 %   $ 488,791       100.0 %
Cost of revenues     371,949       69.2 %     344,173       70.4 %
Gross profit     165,923       30.8 %     144,618       29.6 %
Operating expenses                                
General and administrative     24,424       4.5 %     23,298       4.8 %
Professional and consulting     26,791       5.0 %     2,010       0.4 %
Depreciation     595       0.1 %     658       0.1 %
Total operating expenses     51,810       9.6 %     25,966       5.3 %
Net income   $ 114,113       21.2 %   $ 118,652       24.3 %

 

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Revenue in 2015 grew by $49,081 to $537,872, a 10.0% increase, compared to revenue of $488,791 in 2014. The increase reflected the sale of a greater number of admission tickets at Shogun’s events.

 

Operating expenses rose in 2015 by approximately $25,844, or 99.5%, compared to operating expenses of $25,966 in 2014, as a result of legal and accounting expenses incurred in connection with the contemplated sale of the Shogun business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 302,274       100.0 %   $ 275,938       100.0 %
Cost of revenues     203,810       67.4 %     187,616       68.0 %
Gross profit     98,464       32.6 %     88,322       32.0 %
Operating expenses                                
General and administrative     12,675       4.2 %     11,154       4.0 %
Professional and consulting     7,500       2.5 %     -       0.0 %
Depreciation     142       0.0 %     297       0.1 %
Total operating expenses     20,317       6.7 %     11,451       4.1 %
Net income   $ 78,147       25.9 %   $ 76,871       27.9 %

 

The increase in net revenues of $26,000 for the six months ended June 30, 2016 over the same period in 2015 resulted from increased volumes in sponsorship sales of $16,000, ticket sales of approximately $8,000, and food and beverage sales of approximately $2,000.

 

The increase in operating expenses of approximately $9,000 for the six months ended June 30, 2016 compared to the same period in 2015 was attributable primarily to legal and accounting expenses incurred in connection with the contemplated sale of the Shogun business to Alliance.

 

CageTix

 

Founded in 2009, CageTix is an established ticketing agency for combat sports, including mixed martial arts, boxing, jiu jitsu, and Muay Thai, and is the first ticket sales service to focus specifically on the MMA industry. CageTix’s ticketing platform offers Alliance the opportunity to expand ticket sales and event attendance throughout its promotions.

 

For the twelve months ended December 31, 2015, CageTix generated revenues totaling $72,020 with a net profit of 52.6% or $37,918. The revenue generated by CageTix is booked as commission income on ticket sales for client-promoted sporting events.

 

The tables below summarize CageTix’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31  
    2015     2014  
Net revenue   $ 72,020       100.0 %   $ 53,548       100.0 %
Cost of revenues             0.0 %             0.0 %
Gross profit     72,020       100.0 %     53,548       100.0 %
Operating expenses                                
General and administrative     34,102       47.4 %     15,055       28.1 %
Total operating expenses     34,102       47.4 %     15,055       28.1 %
Net income   $ 37,918       52.6 %   $ 38,493       71.9 %

 

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Revenue in 2015 grew by $18,472, or 34.5%, compared to revenue of $53,548 in 2014. Increased ticket sales for MMA events was the driving factor behind this increase.

 

Operating expenses increased in 2015 by approximately $19,047, or 126.52%, compared to $15,055 in 2014, primarily as a result of accounting expenses incurred in connection with the contemplated sale of the CageTix business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 57,428       100.0 %   $ 35,673       100.0 %
Cost of revenues     -       0.0 %     -       0.0 %
Gross profit     57,428       100.0 %     35,673       100.0 %
Operating expenses                                
General and administrative     17,371       30.2 %     4,778       13.4 %
Total operating expenses     17,371       30.2 %     4,778       13.4 %
Net income   $ 40,057       69.8 %   $ 30,895       86.6 %

 

Net revenue for the six months ended June 30, 2016 increased by more than $21,000, or 61%, while net income increased by approximately $9,000 or 30%. This increase reflects the expansion of ticket sales to combat sporting venues outside of mixed martial arts. Alliance anticipates that the expansion of the CageTix ticketing platform into these and other venues will continue following the proposed acquisition.

 

The increase in operating expenses for the six months ended June 30, 2016 resulted from additional accounting expenses of $7,500 incurred in connection with the contemplated sale of the CageTix business to Alliance, coupled with an increase in advertising and marketing expenses totaling approximately $4,000.

 

CFFC

 

Based in Atlantic City, New Jersey, CFFC was founded in 2011 and has promoted over 57 professional MMA events, primarily in New Jersey and Pennsylvania. CFFC holds, on average, 12 events per year, and maintains extensive venue relationships. It has also built a stable of well-known MMA fighters, many of which have advanced to premier MMA promotions such as the UFC, Bellator and the World Series of Fighting.

 

For the twelve months ended December 31, 2015, CFFC generated revenues of $709,468 with a gross profit of 24.8% or $175,840. Revenues were generated from ticket sales, venue site fees and sponsorship royalties.

 

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The tables below summarize CFFC’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31  
    2015     2014  
Net revenue   $ 709,468       100.0 %   $ 626,835       100.0 %
Cost of revenues     533,628       75.2 %     532,761       85.0 %
Gross profit     175,840       24.8 %     94,074       15.0 %
Operating expenses                                
General and administrative     84,584       11.9 %     108,525       17.3 %
Professional and consulting     22,625       3.2 %     -       0.0 %
Depreciation     49,300       6.9 %     18,721       3.0 %
Total operating expenses     156,509       22.1 %     127,246       20.3 %
Net income (loss)   $ 19,331       2.7 %   $ (33,172 )     (5.3 )%

 

Revenue in 2015 increased $82,633, or 13.2%, compared to revenue of $626,835 in 2014. An increase in the number of events held by CFFC during 2015 and a trend toward site fees being paid by the event venues fueled this growth in revenue.

 

Operating expenses increased in 2015 by approximately $29,263, or 23.0%, compared to operating expenses of $127,246 in 2014. The increase reflected depreciation expense pertaining to new cage equipment, and accounting expenses relating to the proposed sale of CFFC’s business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 311,907       100.0 %   $ 416,111       100.0 %
Cost of revenues    

229,343

     

73.5

%     281,479       67.6 %
Gross profit    

82,564

     

26.5

%     134,632       32.4 %
Operating expenses                                
General and administrative    

47,211

     

15.1

%     56,539       13.6 %
Professional and consulting     7,500       2.4 %     -       0.0 %
Depreciation     906       0.3 %     1,340       0.3 %
Total operating expenses    

55,617

     

17.8

%     57,879       13.9 %
Net income   $ 26,947       8.6 %   $ 76,753       18.4 %

 

CFFC’s revenues for the six months ended June 30, 2016 decreased by $104,000, or 25%, and gross profit decreased by $52,000, or 39%, over the same period in 2015. These variances resulted from a reduction in paying venue locations from two in 2015 to one in 2016. In addition, CFFC held one less event in the first half of 2016 than it did in 2015, which resulted in lower than expected ticket and sponsorship revenues. Gross profit was directly impacted by the loss of site fees and by higher fighter costs.

 

The increase in operating expenses was attributable to accounting expenses of $7,500 incurred in connection with the contemplated sale of the CFFC business to Alliance.

 

GFL

 

Founded in 2010, GFL is a sports media and technology platform focusing exclusively on the combat sports industry. In addition to its extensive video library, GFL uses its proprietary technology platform to offer online streaming media content, televised events and social media access to MMA fans world-wide.

 

For the twelve months ended December 31, 2015, GFL generated revenues totaling $496,233, with a gross profit of $177,646, or 35.8%.

 

The tables below summarize GFL’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31  
    2015     2014  
Net revenue   $ 496,233       100.0 %   $ 624,142       100.0 %
Cost of revenues     318,587       64.2 %     410,814       65.8 %
Gross profit     177,646       35.8 %     213,328       34.2 %
Operating expenses                                
General and administrative     169,708       34.2 %     157,724       25.3 %
Professional and consulting     23,580       4.8 %     7,965       1.3 %
Depreciation     36,299       7.3 %     32,516       5.2 %
Total operating expenses     229,587       46.3 %     198,205       31.8 %
Net income (loss)   $ (51,941 )     (7.3 )%   $ 15,123       2.4 %

 

  31  

 

 

Revenue in 2015 decreased by $127,909, or 20.5%, compared to revenue of $624,142 in 2014. The decrease reflected increased pricing pressure on production services, and a general decline in boxing events filmed and produced.

 

Operating expenses increased in 2015 by approximately $31,382, or 15.8%, compared to $198,205 in 2014, primarily as a result of accounting expenses incurred in connection with the contemplated merger of GFL with a wholly-owned subsidiary of Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 276,657       100.0 %   $ 315,935       100.0 %
Cost of revenues     164,854       59.6 %     177,440       56.2 %
Gross profit     111,803       40.4 %     138,495       43.8 %
Operating expenses                                
General and administrative     84,999       30.7 %     83,142       26.3 %
Professional and consulting     10,180       3.7 %     4,335       1.4 %
Depreciation     13,872       5.0 %     18,244       5.8 %
Total operating expenses     109,051       39.4 %     105,721       33.5 %
Net income   $ 2,752       1.0 %   $ 32,774       10.4 %

 

For the six months ended June 30, 2016, revenue decreased by $39,000, or 12%, over the six months ended June 30, 2015. This decrease was the result of the expiration of GFL’s overseas licensing deal and lower broadcast revenue from its promotions. To counter this loss, GFL sought out alternative revenue streams from non-MMA promotional events such as boxing, jiu jitsu, and lacrosse. GFL offered these newer services at slightly reduced rates, which resulted in a decline in profit margins.

 

Operating expenses remained relatively flat for the six months ended June 30, 2016, with the exception of accounting expenses incurred in connection with the contemplated merger of GFL with a wholly-owned subsidiary of Alliance.

 

HFC

 

Based in the Chicago metropolitan area, HFC was founded in 2009 and has promoted over 25 events primarily in the Chicago metropolitan area. We expect HFC to provide Alliance with a valuable foothold in the Midwest region.

 

For the twelve months ended December 31, 2015, HFC generated revenues of $172,315 with a gross profit of $57,305, or 33.3%.

 

  32  

 

 

The tables below summarize HFC’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31,  
    2015     2014  
Net revenue   $ 172,315       100.0 %   $ 183,195       100.0 %
Cost of revenues     115,010       66.7 %     119,114       65.0 %
Gross profit     57,305       33.3 %     64,081       35.0 %
Operating expenses                                
General and administrative     8,218       4.8 %     9,025       4.9 %
Professional and consulting     21,800       12.7 %     -       0.0 %
Depreciation     267       0.2 %     267       0.1 %
Total operating expenses     30,285       17.6 %     9,292       5.1 %
Net income   $ 27,020       15.7 %   $ 54,789       29.9 %

 

Revenue in 2015 decreased slightly to $172,315, or 5.9%, compared to $183,195 in 2014. The decline was due to lower ticket sales.

 

Operating expenses increased in 2015 by $20,993, or 225.9%, compared to $9,292 in 2014, as a result of accounting expenses incurred in connection with the contemplated sale of the HFC business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 140,362       100.0 %   $ 87,770       100.0 %
Cost of revenues     100,814       71.8 %     59,639       67.9 %
Gross profit     39,548       28.2 %     28,131       32.1 %
Operating expenses                                
General and administrative     8,901       6.3 %     4,358       5.0 %
Professional and consulting     7,790       5.5 %     11,800       13.4 %
Depreciation     134       0.1 %     134       0.2 %
Total operating expenses     16,825       12.0 %     16,292       18.6 %
Net income   $ 22,723       16.2 %   $ 11,839       13.5 %

 

HFC’s revenues increased $53,000 or 60% for the six months ended June 30, 2016 over the same period in 2015. This growth was the result of holding one more event in the first six months of 2016 compared to the same period in 2015, resulting in ticket sale increases of approximately $43,000, sponsorship fee increases of approximately $7,000 and venue site fee increases of $3,000. While net revenue increased, HFC’s gross profit margin suffered slightly due to higher fighter expenses and venue production fees.

 

Operating expenses for the period, with the exception of accounting expenses incurred in connection with the contemplated sale of the HFC business to Alliance, were relatively flat.

 

COGA

 

Based in Kirkland, Washington, COGA was founded in 2009 and has promoted over 46 MMA events, primarily in Washington State. The promoters of COGA will spearhead Alliance’s efforts to launch additional promotions and attract top talent on the west coast utilizing their long-standing relationships throughout the region.

 

For the twelve months ended December 31, 2015, COGA generated revenues totaling $285,415 with a gross profit of $174,181, or 61.0%.

  33  

 

 

The tables below summarize COGA’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31,  
    2015     2014  
Net revenue   $ 285,415       100.0 %   $ 197,968       100.0 %
Cost of revenues     111,234       39.0 %     83,758       42.3 %
Gross profit     174,181       61.0 %     114,210       57.7 %
Operating expenses                                
General and administrative     127,111       44.5 %     83,399       42.1 %
Professional and consulting     27,780       9.7 %     7,343       3.7 %
Depreciation     9,183       3.2 %     9,563       4.8 %
Total operating expenses     164,074       57.5 %     100,305       50.7 %
Net income   $ 10,107       3.5 %   $ 13,905       7.0 %

 

Revenue in 2015 increased $87,447, or 44.2%, compared to revenue of $197,968 in 2014, as a result primarily of COGA holding more events, thereby generating greater ticket sales, compared to 2014.

 

Operating expenses increased in 2015 by $63,769, or 63.6%, compared to operating expenses of $100,305 in 2014. This increase reflected event expenses related to the additional shows held in 2015, together with accounting expenses incurred in connection with the contemplated sale of the COGA business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 59,025       100.0 %   $ 165,505       100.0 %
Cost of revenues     26,128       44.3 %     59,964       36.2 %
Gross profit     32,897       55.7 %     105,541       63.8 %
Operating expenses                                
General and administrative     12,983       22.0 %    

67,202

     

40.6

%
Professional and consulting     8,900       15.1 %     2,280       1.4 %
Depreciation    

4,084

     

6.9

%     4,869       2.9 %
Total operating expenses    

25,967

     

44.0

%     75,004       44.9 %
Net income   $

6,930

     

11.7

%   $ 31,190       18.8 %

 

During the periods covered by the financial statements presented, COGA has held one event in the first quarter of each year. Due to scheduling conflicts at COGA’s main venue, this event was not held and is the primary reason for the large decrease in revenues for the six months ended June 30, 2016 compared to the same period in 2015. The missed event was subsequently booked for the third quarter of 2016 and COGA anticipates meeting its revenue goals for the year.

 

V3 Fights

 

Based in Memphis, Tennessee, V3 Fights was founded in 2009 and has promoted 45 events primarily at event centers in Memphis, Tennessee and elsewhere in Tennessee, Mississippi and Alabama. V3 typically holds between 6-8 events per year.

 

For the twelve months ended December 31, 2015, V3 generated revenues of $159,575 with a gross profit of $37,011, or 23.2% .

 

  34  

 

 

The tables below summarize V3’s results of operations for the years ended December 31, 2015 and 2014, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    Periods ended December 31,  
    2015     2014  
Net revenue   $ 159,575       100.0 %   $ 174,967       100.0 %
Cost of revenues     122,564       76.8 %     145,010       82.9 %
Gross profit     37,011       23.2 %     29,957       17.1 %
Operating expenses                                
General and administrative     35,845       22.5 %     32,489       18.6 %
Professional and consulting     28,210       17.7 %     -       0.0 %
Depreciation     -       0.0 %     1,464       0.8 %
Total operating expenses     64,055       40.1 %     33,953       19.4 %
Net (loss)   $ (27,044 )     (16.9 )%   $ (3,996 )     -2.3 %

 

Revenue in 2015 decreased by $15,392, or 8.8%, compared to revenue of $174,967 in 2014. The decrease was primarily due to reduced attendance at an underperforming outdoor MMA promotion as a result of severe weather conditions.

 

Operating expenses increased in 2015 by approximately $30,102, or 88.7%, compared to operating expenses of $33,953 in 2014, as a result of increased accounting expenses incurred in connection with the contemplated sale of the V3 business to Alliance.

 

    Six Months Ended  
    June 30,     June 30,  
    2016     2015  
Net revenue   $ 76,946       100.0 %   $ 95,500       100.0 %
Cost of revenues     51,516       67.0 %     81,008       84.8 %
Gross profit     25,430       33.0 %     14,492       15.2 %
Operating expenses                                
General and administrative     12,923       16.8 %     20,728       21.7 %
Professional and consulting     9,150       11.9 %     1,470       1.5 %
Depreciation     -       0.0 %     -       0.0 %
Total operating expenses     22,073       28.7 %     22,198       23.2 %
Net income (loss)   $ 3,357       4.4 %   $ (7,706 )     (8.1 )%

 

The decrease in revenue of $19,000, or 19%, for the six months ended June 30, 2016 over the same period in 2015, is directly related to the promotion of one less event during the period. Slightly lower operating expenses for the period compared to 2015 were the result of promoting one less event and by an increase in accounting expenses in connection with the contemplated sale of the V3 business to Alliance.

 

Alliance MMA

 

Alliance was formed on February 12, 2015 for the purposes of identifying and acquiring businesses that promote or support mixed martial art events and programming. For the twelve months ended December 31, 2015, Alliance MMA incurred operating expenses of $386,456, of which $310,929 was directly related to non-recurring professional service expenses related to the contemplated acquisitions of the Target Assets and the businesses of the Target Companies. Such expenses were incurred in identifying and conducting due diligence on the Target Companies and prospective MMA promotions, as well as management consulting and legal fees, and travel and entertainment expenses related to the acquisitions.

 

  35  

 

 

    Period ended December 31,  
    2015  
Net revenue   $ -       0.0 %
Cost of revenues     -       0.0 %
Gross profit     -       0.0 %
Operating expenses                
General and administrative     42,027       0.0 %
Professional and consulting     344,429       0.0 %
Total operating expenses     386,456       0.0 %
Net loss   $ (386,456 )     0.0 %

 

The tables below summarize Alliance’s results of operations for the years ended December 31, 2015, and for six months ended June 30, 2016 and 2015, in both absolute terms and as a percentage of revenue for the periods indicated:

 

    2016     2015  
Net revenue   $ -       0.0 %   $ -       0.0 %
Cost of revenues     -       0.0 %     -       0.0 %
Gross profit     -       0.0 %     -       0.0 %
Operating expenses                                
General and administrative     41,530       0.0 %     5,476       0.0 %
Professional and consulting     182,411       0.0 %     126,500       0.0 %
Total operating expenses     223,941       0.0 %     131,976       0.0 %
Net loss   $ (223,941 )     0.0 %   $ (131,976 )     0.0 %

 

Of the total expenses incurred of $224,000 and $132,000 for the six months ended June 30, 2016 and 2015, respectively, $142,000 and $112,000 were directly related to non-recurring professional service expenses pertaining to the offering.

 

Pro Forma Results of Operations

 

The following table sets forth unaudited results of operations on a pro forma basis for Alliance and the Target Companies in both absolute terms and as a percentage of revenue for the periods indicated.

 

                            Six Months Ended  
    Year ended December 31     June 30,     June 30,  
    2015     2015     2014     2014     2016     2015  
Net revenue   $ 2,432,898       100.0 %   $ 2,349,446       100.0 %   $ 1,224,599       100.0 %   $ 1,392,432       100.0 %
Cost of revenue     1,572,972       64.7 %     1,635,630       69.6 %     776,465       63.4 %     847,146       60.8 %
Gross profit     859,926       35.3 %     713,816       30.4 %     448,134       36.6 %     545,286       39.2 %
Operating expenses                                                                
General and administrative     548,644       22.6 %     429,515       18.3 %     238,593       19.5 %     253,377       18.2 %
Professional and consulting     521,890       21.5 %     36,039       1.5 %     233,431       19.1 %     146,385       10.5 %
Depreciation     49,023       2.0 %     46,068       2.0 %     19,138       1.6 %     24,884       1.8 %
Total operating expenses     1,119,557       46.0 %     511,622       21.8 %     491,162       40.1 %     424,646       30.5 %
Net (loss) income   $ (259,631 )     (10.7 )%   $ 202,194       8.6 %   $ (43,028 )     (3.5 )%   $ 120,640       8.7 %

 

 

  36  

 

 

Revenue

 

The Target Companies collectively promoted a combined 50-60 MMA events in each of 2014 and 2015. We expect to increase the number of events and to introduce opportunities such as national sponsorships, “in-cage” marketing and branding, television programing and access to international video content distribution, which we anticipate will lead to significant growth in revenues year to year.

 

On an actual and pro forma basis, the aggregate revenue of the Target Companies in 2015 was $2,432,898, a 3.55% increase from revenue of $2,349,446 during 2014. Revenues remained relatively flat year-to-year for each of the Target Companies, with GFL, a sports media and technology platform company, experiencing the largest variance, a 20.5% decrease, which amounted to $127,909. The decrease was a result of a decline in boxing events and the introduction of price reductions to garner additional market share.

 

    Years Ended December 31,     Change  
    2015     2014     Amount     %  
Shogun   $ 537,872       488,791     $ 49,081       10.0 %
Cagetix     72,020       53,548       18,472       34.5 %
CFFC     709,468       626,835       82,633       13.2 %
GFL     496,233       624,142       (127,909 )     (20.5 )%
HFC     172,315       183,195       (10,880 )     (5.9 )%
COGA     285,415       197,968       87,447       44.2 %
V3     159,575       174,967       (15,392 )     (8.8 )%
Total   $ 2,432,898       2,349,446     $ 83,452       3.55 %

 

For the six months ended June 30, 2016, the revenue of the Target Companies on a combined basis was $1,224,599, a 12.1% decrease from revenue of $1,392,432 reported for the six months ended June 30, 2015. The primary reasons for this reduction were changes to the CFFC venue mix and fewer promotional events being held in the first six months of 2016 compared to the same period in 2015, delays experienced by COGA in the timing of its promotions, and GFL, which saw slower than usual content distribution.

 

    Six Months Ended     Change  
    2016     2015     Amount     %  
Shogun   $ 302,274       275,938     $ 26,336       9.5 %
Cagetix     57,428       35,673       21,755       61.0 %
CFFC     311,907       416,111       (104,204 )     (25.0 )%
GFL     276,657       315,935       (39,278 )     (12.4 )%
HFC     140,362       87,770       52,592       59.9 %
COGA     59,025       165,505       (106,480 )     (64.3 )%
V3     76,946       95,500       (18,554 )     (19.4 )%
Total   $ 1,224,599       1,392,432     $ (167,833 )     (12.1 )%

 

Cost of Revenues/Gross Profit

 

The following table sets forth a breakdown of our cost of sales and gross profit for the fiscal years ending December 31, 2014 and 2015, respectively.

 

    Years ended December 31     Change  
    2015     2014     Amount     %  
Net revenue   $ 2,432,898     $ 2,349,446     $ 83,452       3.55 %
Cost of revenues     1,572,972       1,635,630       (62,658 )     (3.8 )%
Gross profit   $ 859,926     $ 713,816     $ 146,110       20.47 %

 

The cost of revenues consists of all expenses associated with running and distributing the Target Companies’ MMA events and content, including but not limited to venue and site fees, fighter compensation, ticket sale expenses, video production and content distribution expenses, merchandise costs and promotional expenses associated with our live events. Costs associated with generating revenues have remained relatively flat, decreasing slightly from 2014 to 2015 by $62,658 or 3.8%.

 

The following table sets forth a breakdown of cost of revenues and gross profit for the six months ended June 30, 2016 and 2015, respectively. 

 

    Six Months Ended     Change  
    June 30,     June 30,        
    2016     2015     Amount     %  
Net revenue   $ 1,224,599     $ 1,392,4327     $ (167,833 )     (12.1 )%
Cost of revenues     776,465       847,146       (70,681 )     (8.3 )%
Gross profit   $ 448,134     $ 545,286     $ (91,152 )     (17.8 )%

 

The $91,152 decrease in gross profit for the six months ended June 30, 2016 compared to the same period in 2015 was the result of lower live event revenues for CFFC, COGA and GFL. The gross margin on a combined basis for the periods remained substantially the same averaging approximately 38%.

 

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Operating Expenses 

 

For the year ended December 31, 2015, the combined operating expenses for Alliance and the Target Companies were $1,119,557, as compared with operating expenses of $511,622 in 2014, an increase of 118.83%. For the six months ended June 30, 2016, combined operating expenses were 270,638, and increase of $61,921 or 29.7% over the six months ended June 30, 2015.

 

    Years ended December 31     Change  
    2015     2014     Amount     %  
Operating Expenses                                
General and administrative   $ 548,644     $ 429,515     $ 119,129       27.74 %
Professional and consulting     521,890       36,039       485,851       1348.13 %
Depreciation     49,023       46,068       2,955       6.41 %
Total operating expenses   $ 1,119,557     $ 511,622     $ 607,935       118.83 %

 

    Six Months Ended     Change  
    June 30,     June 30,     Change  
    2016     2015     Amount     %  
Operating Expenses                                
General and administrative   $ 238,593     $ 253,377     $ (14,784 )     (5.8 )%
Professional and consulting     233,431       146,385       87,046       59.5 %
Depreciation     19,138       24,884       (5,746 )     (23.1 )%
Total operating expenses   $ 491,162     $ 424,646     $ 66,516       15.7 %

 

The increase in operating expenses in 2015 is attributable primarily to legal, accounting and other professional services incurred by Alliance MMA for the acquisition of the Target Companies and the commencement of this offering in the amount of approximately $336,000 ($25,000 directly related to offering expenses incurred for this offering which have been capitalized, and $311,000 related to professional expenses related to consulting, accounting and legal services associated with the diligence and acquisition of prospective target companies).

 

For the six months ended June 30, 2016, the $66,516 increase in operating expenses was primarily due to additional accounting-related services that were required for the acquisition of the Target Companies and commencement of this offering in the amount of approximately $75,000. While we don’t expect these expenses to recur, we do anticipate that general and administrative expenses will increase following the acquisition of the Target Companies as we incur costs for marketing and other initiatives that are intended to drive revenues.

 

The following table sets forth a breakdown of operating expenses for the six months ending June 30, 2015 and 2016, respectively, for each of the Target Companies.

 

Shogun   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 12,675       11,154     $ 1,521       13.6 %
Professional and consulting     7,500       -       7,500       100.0 %
Depreciation     142       297       (155 )     (52.2 )%
Total operating expenses   $ 20,317       11,451     $ 8,866       77.4 %

 

CageTix   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 17,371       4,778     $ 12,593       263.6 %
Professional and consulting     -       -       -       0.0 %
Depreciation     -       -       -       0.0 %
Total operating expenses   $ 17,371       2,342     $ 12,593       263.6 %

 

CFFC   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 47,211       56,539     $ (9,328 )     (16.5 )%
Professional and consulting     7,500       -       7,500       100.0 %
Depreciation     906       1,340       (434 )     100.0 %
Total operating expenses   $ 55,617       57,879     $ (2,262 )     (3.9 )%

 

  38  

 

 

GFL   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 84,999       83,142     $ 1,857       2.2 %
Professional and consulting     10,180       4,335       5,845       100.0 %
Depreciation     13,872       18,244       (4,372 )     (24.0 )%
Total operating expenses   $ 109,051       105,721     $ 3,330       3.1 %

 

HFC   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 8,901       4,358     $ 4,543       104.2 %
Professional and consulting     7,790       11,800       (4,010 )     100.0 %
Depreciation     134       134       -       0.0 %
Total operating expenses   $ 16,825       16,292     $ 533       3.3 %

 

COGA   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 12,983       67,202     $ (54,219 )     (80.7 )%
Professional and consulting     8,900       2,280       6,620       100.0 %
Depreciation     4,084       4,869       (785 )     (16.1 )%
Total operating expenses   $ 25,967       74,351     $ (44,168 )     (65.1 )%

 

V3   Six Months Ended June 30,     Change  
    2016     2015     Amount     %  
Operating expenses                                
General and administrative   $ 12,923       20,728     $ (7,805 )     (37.7 )%
Professional and consulting     9,150       1,470       7,680       100.0 %
Depreciation     -       -       -       0.0 %
Total operating expenses   $ 22,073       22,198     $ (125 )     (0.6 )%

 

It should be noted that we will incur costs as a public company, including increased legal fees, accounting fees, and investor relations expenses, that were not borne by the Target Companies prior to the proposed acquisition.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of employee-related costs, including compensation, benefits, travel and insurance, as well as selling and marketing expenses for regional MMA events. For the year ended December 31, 2015, general and administrative expenses increased by 27.74%, primarily as a result of increased expenses associated with Go Fight Net (increase of $15,000 related to increased employee compensation and benefits expenses); CageTix (increase of $24,000 related to increased accounting and audit related services); Punch Drunk (increase of $47,00 related to increase employee compensation and benefits, and travel related expenses) and Alliance MMA (increase of $42,000 directly related to travel, marketing and web development expenses).

 

For the six months ended June 30, 2016, general and administrative expenses were $238,593 compared to $253,377 for the six months ended June 30, 2015 a decrease of approximately $15,000, or 5.8%. The decrease was primarily driven by lower venue expenses related to CFFC promotions and lower administrative changes due to less promotions held in the first quarter of 2016 compared to the same period in 2015.

 

Professional and Consulting Expenses

 

Professional and consulting expenses relate primarily to accounting and tax-related expenses for each regional MMA promotion. During 2015, Alliance MMA incurred approximately $336,000 in expenses related to this IPO offering and structuring and negotiating acquisitions with the Target Companies and the owners of the Target Assets.

 

This amount accounted for approximately 66% of the increase in professional and consulting expenses in 2015 which, as noted above, are not expected to be recurring.

 

For the six months ended June 30, 2016, the increase in professional and consulting expenses of approximately $87,000, or 60%, related primarily to accounting and audit expenses for each regional MMA promotion and fees associated with this offering.

 

Depreciation Expense

 

Assets are depreciated using the straight-line method over the estimated lives of the assets ranging from three to five years. Vehicles, general office equipment, computers and production equipment are depreciated over three years, while video library equipment is depreciated over five years.

 

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Liquidity/Capital Resources

 

The following table summarizes cash flows for the periods presented.

 

    December 31,     December 31,     June 30,  
    2014     2015     2016  
Net cash (used in) provided by operating activities   $ 308     $ (16 )   $ 1  
Net cash used in investing activities     (49 )     -       -  
Net cash provided by (used in) financing activities     (200 )     41       101  
Net increase in cash     59       25       102  
Cash at beginning of year     80       139       164  
Cash at end of year   $ 139     $ 164     $ 266  

 

We intend to finance our business operations using the proceeds of this offering, cash on hand and cash provided by our operating activities. While profit/loss of Alliance and the Target Companies in 2014, 2015, and the first six months of 2016, respectively, was close to break even, our expenses may increase more quickly than our revenues as we execute our business plan to acquire additional regional MMA promotion companies, increase our marketing expenditures and hire additional employees. If we begin to operate at a material loss, it will be necessary to fund that loss out of cash on hand, consisting primarily of the net proceeds of this offering. Please see “Use of Proceeds.”

 

Critical Accounting Policies and Estimates

 

The financial statements contained in this prospectus have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires certain estimates and assumptions to be made about future events, and judgments that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures to be applied. These estimates, assumptions and judgments are based on historical experience, current trends and various other factors that we believe to be reasonable under the circumstances. Following the acquisition of the Target Assets and the businesses of the Target Companies, we will review our accounting policies, estimates, assumptions and judgments on a regular basis to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from those anticipated on the basis of our assumptions and estimates, and such differences could be material.

 

Our significant accounting policies are described in Note 1 to the audited financial statements included in this prospectus, and, of those policies, we believe that the accounting policies discussed below involve the greatest degree of complexity and exercise of judgment. The methods, estimates and judgments used in applying our accounting policies have a significant impact on the results of operations shown in the financial statements. Accordingly, we believe the policies described below are the most critical for understanding and evaluating the financial information contained in this prospectus.

 

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Business Combinations

 

We account for the acquisition of the businesses of the respective Target Companies, under the provisions of ASC 805-10, Business Combinations, which requires that the purchase method of accounting be used for all business combinations. We have concluded that each of the businesses of the Target Companies constitutes a business in accordance with ASC 805-10-55.

 

We will record assets acquired and liabilities assumed at their respective fair values as of the date of acquisition/assumption. ASC 805-10 specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the amount by which the purchase price for a business exceeds the fair value of the tangible and intangible assets acquired. We recognize acquisition-related expenses separately from the business combinations and expense these amounts as they are incurred. If a business combination provides for contingent consideration, such as the earn-out portion of the purchase price being paid to each Target Company, we record the contingent consideration at fair value as of the acquisition date, and adjust our earnings to the extent of changes in that fair value following the acquisition date. Changes in deferred tax asset valuation allowances and income tax uncertainties after the measurement period will affect income tax expense.

 

Impairment of Long-Lived Assets and Goodwill

 

We will record intangible assets, including video libraries, customer relationships and the value of agreements not to compete arising from our various acquisitions, at cost less accumulated amortization, and we will amortize such assets using a method which reflects the period(s) in which the economic benefit of the asset is utilized, which has been estimated to be three to five years. For intangible assets subject to amortization, impairment is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible asset.

 

We expect to record goodwill in connection with the acquisition of the businesses of the Target Companies. The goodwill generated by those acquisitions will be evaluated at least annually, or whenever events or circumstances indicate that impairment may have occurred. There are many assumptions and estimates that directly impact the results of impairment testing, including an estimate of future expected revenues, earnings and cash flows, and discount rates applied to such expected cash flows in order to estimate fair value. We have the ability to influence the outcome and ultimate results based on the assumptions and estimates we choose for testing. To mitigate undue influence, we will set criteria that are reviewed and approved by senior management. The determination of whether or not goodwill or acquired intangible assets have become impaired involves a significant level of judgment in the assumptions underlying the approach used to determine the value of our reporting unit. Changes in our strategy or market conditions could significantly impact these judgments and require adjustments to recorded amounts of intangible assets.

 

BUSINESS

 

Industry Overview

 

In less than a quarter century, modern day mixed martial arts has developed from a pariah banned in most U.S. states to an international sports phenomenon that some believe will be an Olympic event within the next two decades. As it is practiced today, MMA evolved directly from a Brazilian combat sport known as vale tudo , Portuguese for ‘anything goes,’ which was popular in the 1920’s. MMA is a full contact sport that permits fighters to use techniques from both striking and grappling martial arts such as Boxing, Wrestling, Taekwondo, Karate, Brazilian jiu-jitsu, Muay Thai, and Judo. The “MMA Industry” generates revenues by promoting live MMA bouts, and through Pay-Per-View, video-on-demand and televised MMA event programming, merchandise sales, event and fighter sponsorships, and the monetization of MMA-related intellectual property royalties.

 

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The MMA industry in its current form traces its origins to the founding of the Ultimate Fighting Championship (“UFC”) in 1993. Initially, the UFC struggled to gain acceptance from the general public, which perceived the sport as excessively violent. Politicians including Senator John McCain of Arizona and New York state assemblyman Bob Reilly led the charge to ban MMA competitions from cable television. When their cable contracts were terminated in 1997, MMA events survived underground through internet and word of mouth promotions until their organizers agreed to a change of rules that allowed the Nevada State Athletic Commission and the New Jersey State Athletic Control Board to sanction the competitions in 2001. In 2006 Johns Hopkins University Medical School commissioned a study published in the Journal of Sports Science and Medicine which concluded that the injury rate in sanctioned MMA events is comparable to other combat sports involving striking and that in fact there are lower knockout rates in MMA compared to boxing. According to a study from The British Journal of Sports Medicine , only 28 percent of MMA bouts ended with a blow to the head, as most fights are decided by a tactical wrestling match where one opponent forces the other into submission.

 

Today, the sport is legal and regulated in all 50 states. Interest and participation in the sport is growing at a rapid pace. There were over 1,160 professional and pro-am events held in the United States in 2014, and over 3,050 such events in 2015, according to the National MMA Registry , a proprietary database maintained by the Association of Boxing Commissions. The Association is operated by members from commissions from the United States and internationally. According to the National MMA Registry , in 2015 there were a total of 15,105 professional MMA bouts and 12,190 amateur bouts.

 

Led by the UFC in terms of prominence and market share on a national level, there are in excess of 600 domestic regional MMA promotion companies promoting approximately 40,000 male and female professional and amateur fighters, according to Tapology.com, a leading online MMA forum. On an international basis, Tapology.com reports that the number of MMA promotions exceeds 1,025 with in excess of 90,000 professional and amateur MMA fighters. The UFC states on its website that its live MMA events are currently televised in over 129 countries and territories in approximately 800 million households in 28 languages.

  

Fueled in part by the notoriety of celebrity MMA athletes, including Olympic medalist Rhonda Rousey, Irish sensation Conor McGregor and legends Anderson Silva, Jose Aldo and Chris Weidman, among others, UFC events are held before crowds routinely averaging 15,000 with several live gates exceeding 50,000, according to the UFC and Tapology.com.

 

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Our Business

 

Our operations will be centered on the following three business components: 

 

  · Live MMA Event Promotion, which will consist of generating revenue from ticket sales and providing a foundation for national sponsorship and national and international media distribution for our live MMA events.
     
  · MMA Content Distribution, which will consist of paid distribution of original content on television, cable networks, pay-per-view broadcasts, and over the Internet, in the United States and through international distribution agreements.
     
  · Sponsorships and Promotions, which will consist of sponsorships for live MMA events and televised productions and related advertising and promotional opportunities.

 

In addition, we are evaluating the profitability of other revenue sources, such as merchandising, ticketing, and fighter agency and management services.

 

Our Strategy

 

Our objective is to enhance the collective market share and profitability of the businesses of the Target Companies, and to become the premier feeder organization to the UFC, Bellator MMA and other prestigious MMA promotions worldwide. To achieve this objective, we intend to employ the following strategies:

 

Distributing our Original Content . We intend to leverage the existing MMA fight media libraries of the Target Companies, including the GFL media library which has over 10,000 hours of original fight content, to create programming that we will offer through the www.gfl.tv website as well as through other distribution arrangements. We believe this content has value that has not been monetized primarily due to the limited financial resources of the Target Companies on a stand-alone basis. On a collective basis, the media libraries of the Target Companies comprise one of the largest MMA video archives in existence and contain valuable footage of the determining bouts of many MMA stars from early in their professional careers. The UFC has recognized the value in historic MMA content and recently launched its UFC Fight Pass subscription service which is intended to complement its live event and pay-per-view business. We also intend to produce original MMA programming at MMA events that we promote, and monetize this content through domestic and international distribution arrangements. Several of the Target Companies have established live and delayed television arrangements with a variety of networks, including CBS Sports Network and Comcast Sports Net. CFFC’s agreement with CBS Sports Network provides for eight prime time televised events in 2016 with each event being rebroadcast at least once. We are in discussions with several major networks in anticipation of extending our broadcast opportunities to more Target Company promotions following the acquisition.

 

Obtaining National Sponsorships . We are in discussions with several prominent brands that we intend to secure as national sponsors for our live promotion events. Presently, the Target Companies rely primarily on local and regional sponsors for their live events, although several have established sponsorship and advertising arrangements with larger organizations such as Adidas, MHP and Bud Light. We are in discussions with several prominent sports marketing agencies experienced in identifying, negotiating and procuring sponsorship agreements between mixed martial arts fighters and prospective sponsors, and are presently working to increase sponsorship revenue at each Target Company event in anticipation of our acquisition of the Target Companies. We are also interviewing several prominent sports marketing and advertising firms with a view towards increasing or expanding existing regional sponsorship arrangements.

 

Increasing Profitability Through the CageTix Ticketing Platform . As is customary in the MMA industry, the fighters appearing on an event fight card will sell a majority of the tickets sold for that event, an amount that routinely exceeds 70% of total live gate ticket sales. Referred to as “fighter consigned” tickets, sales are generally made in face-to-face cash transactions. Often, ticket proceeds are delivered to the regional MMA promoter on or close to the day of the event, making forecasting and budgeting difficult. Upon the acquisition of CageTix, we intend to aggregate control of the ticketing sales chain by instituting the use of the CageTix platform across all of the Target Companies. We believe that using CageTix will allow us to increase the profitability of the Target Companies’ events, while capturing valuable demographic customer information that will facilitate subsequent sales and marketing efforts. Utilizing proprietary software that is formatted to accommodate a range of mobile devices (iPhone, iPad, Android), the CageTix platform can significantly enhance promoter profitability by offering the security of credit/debit card sales processing; immediate revenue recognition; real time sales reporting; and sales audit and compliance tracking for taxing and regulatory authorities.

 

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Securing More Favorable Event Venues . We intend to migrate the businesses of certain Target Companies from paid event venue arrangements to venues that will compensate the promotions for hosting events, such as community sponsored civic auditoriums. In 2015, approximately 55% of the events promoted by the Target Companies were hosted in venues where the promotion paid to appear at the venue. We expect that the relocation of the Target Companies to paid venues will increase our profitability. By way of example, CFFC’s agreement with the Borgata Hotel Casino & Spa in Atlantic City, New Jersey, provides for six paid events in 2016 (with site fees of $15,000 for each pro event), sound, lighting and engineering support, ushers and security, advertising and promotional support (including local radio and television ads), and hotel rooms and suites with an equivalent of 114 room nights. Hoosier’s agreements for Caesars Entertainment Corp.’s Horseshoe Casino and Blue Chip Casino both provide Hoosier with similar support services as well as paid site fees for the event venues. Both V3 and COGA are in negotiations with casino venues in their respective markets to secure valuable promotion arrangements.

 

Identifying and Signing Top Prospects . We intend to continue the Target Companies’ history of securing highly-regarded professional fighters to multi-fight agreements, arrangements which will enhance our reputation and the value of our live MMA programming content. By conducting a great number of professional MMA events than other regional promotions, and by televising these events, we are able to provide prospects with multi-fight opportunities and the visibility they seek when affiliating with a promotion. Currently, CFFC has over 50 professional fighters signed to exclusive multi-fight contracts including Shane Burgos, Jared Gordon, and Dominic Mazzotta, whose professional records are 7-0, 10-1, and 11-1, respectively. Hoosier presently has over ten professional fighters signed to exclusive multi-fight promotional agreements, including top prospects Nick Krauss, Kevin Nowaczyk, Joey Diehl and Cole Wilken. By leveraging the relationships of our management team and members of our Board of Directors with top training camps, including Blackhouse MMA, American Top Team, Blackzilians, the Gracie family, Jacksons MMA, Chute Boxe, Octagon MMA, and 4oz Fight Club, we anticipate that we will be able to identify top prospects who will help ensure successful events and establish long-term relationships with the UFC and other leading MMA promotions.

 

Following the completion of this offering, we intend to acquire on a selective basis additional profitable regional MMA promotions in markets where we currently do not promote events. We believe that the regional MMA industry is oriented toward consolidation and that we can achieve significant growth through further acquisitions as well as by organically growing our existing MMA promotions. According to the Association of Boxing Commissions, there are presently more than 1,160 registered MMA promoters in the United States and we believe this number exceeds 8,000 worldwide. We estimate that no one promotion has more than a 1% share of the market. We further believe that regional MMA promoters are finding it increasingly difficult to attract the best prospects given the level of competition among regional MMA promoters to secure the best fighters. Since we anticipate promoting over 65 events annually and sending a significant number of fighters to elite promotions such as the UFC and Bellator, we expect to be able to guarantee multiple fights to top prospects, thereby attracting high-quality fighters.

 

Competition

 

The market for live and televised MMA events and for historical MMA video content is extremely competitive.

 

The principal competitive factors in our industry include:

 

· The ability to attract and retain successful professional fighters in order to promote events that are appealing to fans and sponsors.

 

· The ability to promote a large number of events and bouts so that fighters are willing to commit to multi-fight agreements.

  

  · The ability to command the attention of the UFC and other premier MMA promotions seeking professional fighters to promote on a national and/or international platform.

 

  · The ability to produce high-quality media content on a consistent basis to secure television and other media distribution arrangements.

 

  · The ability to generate brand awareness in the relevant geographic market.

 

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Despite the competition we face, we believe that our approach of combining multiple regional MMA promotions under one umbrella organization enables us to leverage the collective resources and relationships of these promotions to address these competitive factors more effectively. In addition, our multi-regional and, over time, international, presence will enable us to offer sponsors and media outlets a broad geographic footprint in which to market products, services and content.

 

Acquisition of Target Assets and Target Companies’ Businesses

 

We will acquire the businesses of the Target Assets and the businesses of the Target Companies upon the completion of the offering made by this prospectus, through a series of asset purchase agreements and, in the case of GFL, through a merger agreement. Unless we are able to close all of these acquisitions, we will not close any of the acquisitions and will not complete this offering.

 

The Target Companies

 

The Target Companies consist of five regional MMA promotion companies, a live MMA video promotion and content distribution company, and an electronic ticketing platform serving MMA and other combat sports events. The Target Companies comprise many of the premier regional MMA promotions in the United States, with CFFC and Hoosier Fight Club ranked among the top 40 of all regional MMA promotions internationally. On a collective basis, these promotions have sent over 50 professional MMA fighters to the UFC, have over 65 professional MMA fighters under multi-fight contracts, and conducted more than 50 professional MMA events in 2015. Many of the Target Companies’ events are televised or streamed live on cable and network stations. In 2015, the Target Companies collectively generated $2.4 million in gross revenue and $0.127 million in net income.

 

The Target Companies are as follows:

 

*            CFFC Promotions, LLC (“CFFC”) based in Atlantic City, New Jersey, CFFC was founded in 2011 and has promoted over 57 professional MMA events, primarily in New Jersey and Pennsylvania. Ranked in the top 10 of all regional MMA promotions, CFFC currently airs on the CBS Sports Network as well as www.gfl.tv. and has sent 23 fighters to the UFC, including Aljamain Sterling (11-0), Jimmie Rivera (15-1), Lyman Good (13-3), and Paul Felder (10-2). CFFC’s Robert Haydak and Mike Constantino will serve as our President and Regional Vice President, respectively, for the Northeast region. CFFC has approximately 52 fighters under multi-fight contracts and is scheduled to promote 12 events in 2016. Robert Haydak and Mike Constantino have each been inducted into the New Jersey State Martial Arts Hall of Fame.

 

*            Hoosier Fight Club Promotions, LLC (“Hoosier Fight Club” or “HFC”) – based in the Chicago metropolitan area, HFC was founded in 2009 and has promoted over 25 events, including the first sanctioned event in Indiana in January, 2010. HFC has sent or promoted eight fighters to the UFC and several to Invicta Fighting Championships (the premier all-female MMA promotion) including Neil Magny (16-5), Felice Herrig (10-6), Phillipe Nover (12-5), Josh Sampo (11-5), and Barb Honchak (10-2), the Invicta FC Flyweight Champion and third-ranked pound-for-pound female MMA fighter in the world by MMARising.com. HFC has 11 fighters under multi-fight contracts and is scheduled to promote eight events in 2016. HFC is now available on www.gfl.tv. HFC’s Danielle Vale will serve as Regional Vice President in the Chicago area market.

 

*            Punch Drunk, Inc. d/b/a COmbat GAmes MMA (“COGA”) – based in Kirkland, Washington, COGA was founded in 2009 and has promoted over 46 shows primarily in Washington State. COGA frequently airs on ROOT Sports Pacific Northwest regional network as well as www.gfl.tv. Voted “Best Fight Promotion of the Year” for 2011 and 2012 by NW FightScene Magazine, COGA is recognized as the premier MMA promotion in Washington State. COGA has sent 10 fighters to the UFC, including bantam weight champion Demetrious Johnson (26-2-1), Ultimate Fighter winner Michael Chiesa (12-2), light heavy weight Trevor Smith (13-6), and heavy weight Anthony Hamilton (14-4). COGA is scheduled to promote eight events in 2016. COGA’s founder Joe DeRobbio will serve as our Regional Vice President for the Pacific Northwest region.

 

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*             Bang Time Entertainment LLC (d/b/a “Shogun Fights”) – based in Baltimore, Maryland, Shogun was founded in 2008 and has promoted 13 fights at the Royal Farms Arena in Baltimore, the same venue that hosted UFC 174 in April of 2014. A premier mid-Atlantic regional MMA promotion, Shogun Fights currently airs on Comcast Sportsnet as well as www.gfl.tv and is scheduled to promote two events in 2016. Shogun has sent three fighters to the UFC including Jim Hettes (11-3), Dustin Pague (11-10), and Zach Davis (9-2), with numerous others having fought for Bellator as well. In its past six events, Shogun Fights has had the opportunity to have four UFC veterans, three Ultimate Fighter reality series contestants, ten Bellator Fighting championship veterans and one Strikeforce veteran fight on its professional MMA card. A champion for the legalization of MMA in Maryland, Shogun Fights’ John Rallo will serve as our Regional Vice President for the mid-Atlantic region and is scheduled to promote two events in 2016.

 

*             V3, LLC (“V3 Fights”) – based in Memphis, Tennessee, V3 Fights was founded in 2009 and has promoted 45 events primarily at event centers in Memphis, Tennessee and elsewhere in Tennessee, Mississippi and Alabama. V3Fights is the mid-South’s premier MMA promotion and has been broadcast live on Comcast Sports South as well as www.ustream.com, www.YouTube.com. V3Fights is now available on www.gfl.tv. Notable fighters who have fought for V3Fights are Bellator number one heavyweight contender, Tony Johnson (9-2), Bellator fighter, Jonny Bonilla-Bowman (2-0), and Invicta FC star, Andrea “KGB” Lee (3-1). V3Fights currently has 4 fighters under multi-fight contracts and will play host to 10 events in 2016. V3Fights founder Nick Harmeier will serve as our Regional Vice President for the mid-South region and is scheduled to promote 12 events in 2016.

 

*            Go Fight Net, Inc. – founded in 2010, Go Fight Net operates “GoFightLive” or “GFL” a sports media and technology platform focusing exclusively on the combat sports marketplace. With a media library containing 11,000 titles comprising approximately 10,000 hours of unique video content, and the addition of approximately 1,200 hours of new original content annually, GFL maintains the largest continuously growing database of MMA events, fighters, and fight videos in the world. The GFL fighter database contains information on over 25,000 professional and amateur combat sports fighters and over 18,000 fights. GFL combines proprietary technology with content production and acquisition to deliver diverse and compelling content to a global audience. GFL’s content is distributed globally in all broadcast media through its proprietary distribution platform via cable/satellite, Internet, IPTV and mobile protocols. The GFL platform utilizes GFL’s proprietary scalable online master control technology that enables viewers using a broad range of devices and formats to obtain large amounts of video and other content. GFL broadcasts an average of 450 live events annually (having broadcast 2,500 events since inception) to viewers in over 175 countries. GFL has produced 150 episodes of the GoFightLiveTM “real fights” series airing weekly on Comcast Sports Net, SNY and other networks globally.

 

*            Cagetix LLC “CageTix” – founded in 2009 by Jay Schneider, a seasoned MMA event promoter, CageTix is the first group sales service to focus specifically on the MMA industry. CageTix is intended to be complementary to any existing ticket service used by a promotion such as Ticketmaster or box office sales. CageTix presently services the industry’s top international mixed martial arts events including Legacy, RFA, Bellator MMA, King of the Cage, and Glory. Since its inception, CageTix has sold tickets for over 1200 MMA events and currently services 64 MMA promotions operating in 106 cities. In 2014, CageTix sold 15,883 tickets to 6,391 customers. Formerly the founder of Victory Fighting Championships, Jay Schneider is a member of the Nebraska Athletic Commission and was a senior columnist for Ultimate MMA magazine under the pen name ‘Victory Jay’ for over a decade. Jay Schneider will serve as our Vice President following the acquisition.

 

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Acquisition of the Target Assets

 

In addition to the acquisition of the Target Companies, we are also acquiring the MMA video libraries of two prominent regional promotions. The fighter libraries consist of the following:

 

*             Ring of Combat, LLC “Ring of Combat” – based in Brooklyn, New York, and founded by MMA icon and three-time World Kickboxing Champion Louis Neglia (34-2), Ring of Combat is currently ranked as the No. 4 regional promotion in the world by Sherdog.com, a website devoted to the sport of mixed martial arts that is owned indirectly by Evolve Media, LLC. According to Sherdog.com, its rankings are determined by several factors including (i) the size of the shows put on by the regional promotion, (ii) the quality of fighters affiliated with the promotion, (iii) the number of fighters that matriculate to the UFC and other premier promotions such as Bellator MMA, (iv) the success those fighters have once elevated to the UFC and such other premier promotions, and (v) whether the promotion has a television or other media arrangement in place.

 

At the completion of the offering made by this prospectus, we will acquire the exclusive rights to the Ring of Combat fighter library, which includes professional MMA, amateur, and kickboxing events and covers approximately 200 hours of video content. Ring of Combat has sent approximately 90 fighters to the UFC including UFC World Champions Matt Serra (11-7), Frankie Edgar (19-4), and Chris Weidman (13-0), whose fights are included in the Ring of Combat fighter library. We have also secured the media rights to all future Ring of Combat promotions.

 

*             Hoss Promotions, LLC “Hoss” – an affiliate of CFFC, Hoss owns the intellectual property rights to approximately 30 MMA events promoted by CFFC. We have acquired the exclusive rights to the Hoss fighter library, which covers approximately 100 hours of video content.

 

Consideration to be Paid to Target Companies, Hoss and Louis Neglia

 

The aggregate consideration we will pay to acquire the businesses of the Target Companies and the MMA fighter libraries of Hoss and Louis Neglia will be approximately $7.8 million, consisting of cash in the amount of $1.6 million, and shares of our common stock with a market value of $6.2 million based on an offering price of $4.50 per share for the shares sold in this offering. With respect to each Target Company other than GFL, the purchase price will be adjusted upward in the event that, during the twelve-month period following the completion of the offering, such Target Company exceeds certain gross profit thresholds agreed upon by us and the Target Company. The upward adjustment to the purchase price will be a multiple of seven times the amount by which actual gross profit exceeds the agreed-upon gross profit threshold. Any increase in the purchase price will be paid following the filing of our quarterly report on Form 10-Q for the quarter immediately following the first full calendar year after the completion of this offering and will be paid in shares of our common stock valued at the lesser of (i) the initial public offering price at which shares are sold in this offering, or $4.50 and (ii) the average of the closing trading price for our stock over the 20 trading days prior to the date on which we file such Form 10-Q. The purchase price that will be paid for the business of each Target Company on average will consist of 21% cash and 79% shares of our common stock valued at the per share price of the shares sold in this offering, and with respect to GFL, 90% of the per share price of the shares sold in this offering.

 

We valued the business of each Target Company using a number of factors including historical and projected future profitability and expectations of the business of each Target Company under the Alliance brand. Factors we considered include, but are not limited to, current financial position, professional fighter rosters, customer and venue arrangements, media library and other intellectual property rights, prominence in the MMA industry, nature and extent, if any, of sponsorships, television and pay-per-view arrangements, and other relevant characteristics. During our assessment of each Target Company, we recognized that the majority of value resided in the ability of the promoters to establish credible customer and venue relationships, the breadth of each promotion’s video library and related intellectual property rights and, in the case of CageTix, its proprietary ticketing software which we intend to leverage across our platform. While each promotion brings a unique value proposition on a stand-alone basis, we believe that on a combined basis significantly greater value can be realized, particularly in the areas of television and media sponsorship.

 

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Structure of Acquisitions

 

Although each acquisition agreement contains slightly different terms, we will generally acquire the MMA video library and tangible assets of each of the Target Companies, but not their cash or debt. We will, however, acquire the working capital of each Target Company in an amount sufficient to conduct each Target Company’s next scheduled promotional event. The acquisition of GFL is structured as a merger and we will acquire all of the outstanding capital stock of GFL in consideration for cash and shares of our common stock. We will license the trademarks of the Target Companies under perpetual, royalty-free licenses that may be terminated only in the event of a material uncured breach of the respective agreement by us.

 

Summary of the Terms of the Acquisition Agreements

 

Although the following summarizes the material terms of the acquisition agreements, it does not purport to be complete in all respects and is subject to, and qualified in its entirety by, the full text of the acquisition agreements, a copy of each of which is filed as an exhibit to the registration statement of which this prospectus forms a part. Additionally, the following summary discusses the acquisition agreements in general terms and does not identify the instances where one acquisition agreement may differ from another. Other than the amount of consideration to be received, all of the acquisition agreements are substantially similar.

 

Timing of Closing

 

We expect that the acquisitions will close concurrently with the completion of this offering. Unless we close all of the acquisitions, we will not close any of the acquisitions and we will not complete this offering.

 

Representations and Warranties

 

Alliance and each Target Company each make representations to the other in the respective acquisition agreements covering, among other things, its authority and approval to enter into the agreement; non-contravention with other agreements and applicable law; and the accuracy and completeness of its financial statements. In addition, the Target Companies and their equityholders made representations to Alliance, including, among others, representations concerning due organization; title to assets; equipment and other purchased assets; intellectual property; litigation; consents; absence of any brokers; undisclosed liabilities; assumed contracts; tax matters; scope of rights to the purchased assets; compliance with laws; financial statements; absence of any material changes from the date of the financial statements; employees and employment benefit plans; labor relations; sponsors, vendors and suppliers; conflicts of interest; fighters under contract; inventories; accounts receivable; insurance; liabilities; sufficiency of assets; and certain other representations made by each Target Company’s equityholders regarding the transaction.

 

These representations and warranties were made as of the date of the acquisition agreement or, in some cases, as of a date specified in the representation, and may be qualified by reference to knowledge, materiality or schedules to the acquisition agreement disclosing exceptions to the representations and warranties. The matters covered by the representations and warranties reflect the results of arms’ length negotiations between the parties regarding their contractual rights. Based upon our due diligence investigation of the Target Companies and review of the schedules to the acquisition agreements, we do not believe there are any material exceptions to the Target Company’s representation and warranties.

 

Indemnification

 

Each Target Company and certain of their equityholders have agreed to indemnify and hold us harmless from a breach by them of their representations and warranties or covenants contained in the acquisition agreement to which they are a party. Losses for a breach of a representation and warranty generally may be indemnified if asserted prior to two years from the closing date, except that breaches of certain fundamental representations, such as the Target Companies’ title to their assets may be asserted at any time, and breaches of tax, ERISA, financial statements, and litigation may be asserted at any time prior to the expiration of the applicable statute of limitations.

 

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Executive Employment Agreement and Non-Competition and Non-Solicitation Agreements

 

In connection with the acquisitions of the Target Companies, each of the principal equityholders of the Target Companies will enter into an executive employment agreement with us where such individuals will serve as our regional vice presidents and, in the case of CFFC’s Rob Haydak, will serve as our President. Each executive employment agreement is for a three-year term, and provides for guaranteed base compensation and discretionary bonuses. We may terminate an executive employment agreement for cause, which includes gross negligence or willful misconduct, or without cause. Where the executive elects to terminate the agreement, where he or she is terminated by us for cause, or in the event of his or her death or disability, we will provide salary and benefits under the terms of the agreement up to the date of termination. In circumstances where we elect to terminate an executive’s employment agreement without cause we will continue to pay his or her salary through the end of the term of the applicable agreement in accordance with our customary payroll practices.

 

In addition to executive employment agreements, each regional vice president and our President will enter into a non-competition and non-solicitation agreement that contains restrictions prohibiting such person from soliciting our employees or conducting a competitive business in the MMA industry for a period ranging from one to three years after the termination of such executive’s employment with us for any reason. With respect to the non-competition and non-solicitation agreement we entered into with COGA’s Joe DeRobbio, the non-competition and non-solicitation prohibitions continue for a period of two years after termination of employment other than where we terminate Mr. DeRobbio without cause. With respect to the non-competition and non-solicitation agreement we entered into with Shogun’s John Rallo, the non-competition and non-solicitation prohibitions are for a period of one year after termination of employment with cause.

 

Trademark License Agreement

 

At the closing of the acquisition of the Target Companies, we will enter into a trademark license agreement with each Target Company, other than CageTix whose trademark rights we will purchase, pursuant to which we will license the trademarks used by the Target Company in connection with the MMA promotion business we are acquiring. Each agreement will provide that the trademarks are licensed on an exclusive, perpetual, fully-paid, royalty-free basis and may be terminated by the licensor only in the event of our material uncured breach or under circumstances where we terminate the regional vice president tasked with overseeing the relevant promotion without cause.

 

Closing Conditions

 

The respective obligations of Alliance, the Target Companies and each of its equity holders to complete a particular acquisition are subject to the satisfaction of certain conditions, including, among others:

 

  · the material accuracy as of closing of the respective representations and warranties made by Alliance and the Target Company and each of its equityholders in the acquisition agreement;
  · material compliance with or performance of the respective covenants and agreements of each of Alliance and the Target Company and each of its equityholders  to be complied with or performed on or prior to closing; and
  · the completion of the offering contemplated by this prospectus.

 

In addition, our obligation to complete a particular acquisition is subject to the satisfaction of other conditions including:

 

  · receipt by the Target Company of third-party consents;
  · execution and delivery of all related agreements including the trademark license agreement and executive employment agreements;
  · no material adverse change in the business or operations of the Target Company;
  · the closing of each other acquisition contemporaneously with the closing of that acquisition; and
  · no action or proceeding by or before any government authority shall have been instituted or threatened to restrain or prohibit the consummation of the acquisition.

 

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Termination of the Acquisition Agreements

 

Each agreement relating to an acquisition may be terminated, under certain circumstances, prior to the closing of this offering, including:

 

  · by the mutual consent of Alliance and the Target Company;
  · by either Alliance or the Target Company if this offering and the acquisition of the Target Company is not closed by September 30, 2016; or
  · by either Alliance or the Target Company if a material breach or default under the acquisition agreement by the other party occurs and is not cured within the applicable cure period.

 

No acquisition agreement provides for a termination fee for the benefit of any party thereto if such acquisition agreement is terminated by any party thereto. No assurance can be given that the conditions to the closing of all of the acquisitions will be satisfied or waived. Unless we close all of the acquisitions, we will not close any of the acquisitions and will not complete this offering.