Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed on April 15, 2008. In addition to historical information, this discussion and analysis contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance and the industries in which we operate as well as on our management's assumptions. These forward-looking statements involve risks and uncertainties. When used in this Quarterly Report on Form 10-Q the words "anticipate," "objective," "may," "might," "should," "could," "can," "intend," "expect," "believe," "estimate," "predict," "targets," "goals," "projects," "seeks," "potential," "plan," "is designed to" or the negative of these and similar expressions identify forward-looking statements. While we believe our plans, intentions and expectations reflected in those forward-looking statements are reasonable, we cannot assure you that these plans, intentions or expectations will be achieved. Other than as required by applicable securities laws, we are under no obligation to update any forward-looking statement, whether as result of new information, future events or otherwise. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to, those set forth under Item 1A, "Risk Factors," and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2007. Bankruptcy and Sale of Assets
Our business was founded in 2005 to organize, host and promote live and televised professional mixed martial arts ("MMA") sporting events under the name "International Fight league" or "IFL" and to capitalize on the growing popularity of MMA in the United States and around the world. In June 2008 we announced that our event scheduled for August 15, 2008 had been canceled and on September 15, 2008, our wholly-owned subsidiary IFLC, through which we conducted our operations and which held substantially all of our assets, voluntarily filed a petition for reorganization relief under chapter 11 of the Bankruptcy Code in the Court. IFLC's bankruptcy case is docketed as In re IFL Corp., Case No. 08-13589 (MG). On November 17, 2008, IFLC sold substantially all of its assets to HDNet pursuant to a sale under Section 363 of the Bankruptcy Code which was approved by the Bankruptcy Court on October 28, 2008. IFLC plans to file a plan of liquidation with the Court to pay off creditors and to orderly wind down its affairs.
With the sale of substantially all of our assets to HDNet and with no active business operations or business assets, we are essentially a "shell" corporation. Our board of directors, on a time available basis, will search for, review and engage in due diligence for potential merger or acquisition proposals for which the Board would deem to be suitable acquisition candidates. To date, no such acquisition or merger proposal has been identified.
We will continue to incur ongoing losses, which are expected to be greatly reduced due to the substantially inactive nature of our business following the sale of our assets to HDNet and the winding down of IFLC. However, losses will be incurred to pay ongoing reporting expenses, including legal and accounting, as necessary to maintain the Company as a public entity, as well as some minimal operating expenses and insurance premiums for general liability, directors' and officers' liability and other insurance, while searching for merger or acquisition candidates. In addition, we will incur costs related to the termination of our remaining employees and satisfying our pre-existing severance obligations with these employees.
In connection with the sale of substantially all of our assets to HDNet, the Purchased Assets included the name "International Fight League," our corporate name. We have entered into a name use agreement with HDNet which will permit us to continue using "International Fight League" for general corporate purposes until the earlier of (a) two years or (b) becoming involved in any active trade or business (other than the use of the name for general corporate purposes). Corporate History
Prior to November 29, 2006, we were known as Paligent Inc., a Delaware corporation ("Paligent"). On November 29, 2006, we acquired IFLC, then known as International Fight League, Inc., a privately held Delaware corporation, pursuant to an agreement and plan of merger, dated as of August 25, 2006, as amended (the "Merger

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Agreement"), by and among us, our wholly owned subsidiary ("Merger Sub"), and IFLC, providing for the merger of Merger Sub and IFLC, with IFLC being the surviving corporation and becoming our wholly-owned subsidiary (the "Merger"). Immediately following the Merger, we changed our name to International Fight League, Inc. and IFLC changed its name to IFL Corp. and continued to operate the business of organizing and promoting a mixed martial arts sports league under the name "International Fight League."
The Merger has been accounted for as a reverse acquisition under the purchase method of accounting for business combinations in accordance with generally accepted accounting principles in the United States of America. Reported results of operations of the combined group reflect the operations of the Company and IFLC.
IFLC's predecessor, International Fight League, LLC (the "LLC"), was organized on March 29, 2005 as a New Jersey limited liability company. On January 11, 2006, the LLC merged into IFLC, whereupon the existence of the LLC ceased, and at which time the members of the LLC received an aggregate of 18,000,000 shares of IFLC common stock, par value $0.0001 per share, in exchange for their membership interests in the LLC. IFLC operated as a development stage enterprise through March 31, 2006.
Results of Operations
From inception through September 30, 2008, we have incurred costs and expenses significantly in excess of revenues. On September 15, 2008, our wholly-owned subsidiary, IFLC, through which we conducted our operations and which owned substantially all of our assets, voluntarily filed a petition for reorganization relief under chapter 11 of the Bankruptcy Code in the Court. On November 17, 2008, IFLC sold substantially all of its assets to HDNet pursuant to a sale under Section 363 of the Bankruptcy Code which was approved by the Court on October 28, 2008. Furthermore, we have terminated all but three of our employees and have no business assets or business operations and no future source of revenues. Accordingly, a comparison with prior periods is not meaningful and is not included. Similarly, an analysis of the nine month period ended September 30, 2008 is not relevant because the Company had operations during the first six months of 2008, but ceased operations during the quarter ended September 30, 2008. Therefore, the foregoing discussion and analysis is for the three month period ended September 30, 2008 only.
During the three months ended September 30, 2008, IFL incurred a net loss of $1.3 million, or $0.02 per common share. During the period, we had revenues of $133,000, which consisted primarily of the final $40,000 of television rights revenue from our agreement with FSN and $78,000 of international television rights revenue under our agreement with Alfred Haber Distribution, Inc. All future international television rights revenue has been assigned to HDNet pursuant to the sale of substantially all of our assets to HDNet.
For the three months ended September 30, 2008, cost of revenues was $161,000, consisting primarily of accrued fees under team manager agreements and some residual costs of our final event in May 2008 and television production costs. Selling, General and Administrative Expenses:
For the three months ended September 30, 2008, selling, general and administrative expenses were $843,000. The primary components of these expenses were $148,000 in real estate lease costs, including costs to terminate the lease in New York, $357,000 of payroll and benefits costs, including $74,000 of employee severance costs, $94,000 of professional fees for legal, accounting, SEC filing and financial advisory fees, $42,000 of costs for contract terminations and $151,000 of net loss and write downs of leasehold improvements and office furniture and equipment.
Share-based Compensation:
Share-based compensation expense for the three months ended September 30, 2008 was $141,000.
Reorganization Expenses:
During the three months ended September 30, 2008, we paid $285,000 of professional fees in connection with the chapter 11 reorganization of IFLC, consisting of $250,000 in legal fees and $35,000 of financial advisory fees. All of these amounts have been charged to reorganization expenses (professional fees) during the period.

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Other Income (Expense):
During the three months ended September 30, 2008 interest income of $3,000 was earned on available cash balances.
Liquidity, Capital Resources and Going Concern At September 30, 2008, our cash and cash equivalents were $360,000. On November 17, 2008, we received $650,000 from the sale of substantially all of our assets to HDNet. The cash proceeds from the sale to HDNet as well as the cash balances held by IFLC as of September 30, 2008 of $114,000 must be used to satisfy all of the claims in the IFLC bankruptcy proceedings, including all costs to administer the case, and none of this cash may be available for us as the parent company. As of September 30, 2008, we the parent company had a separate cash balance of $247,000.
We are exploring options to realize value for our stockholders, which may include seeking a reverse merger transaction with a party having ongoing operations. We have no present avenues of financing, no source of revenues and no present plans to obtain interim financing while continuing to explore our options.
As a result of the foregoing, our lack of liquidity and funding sources pose a substantial risk to our ongoing viability. The condensed consolidated financial statements in this report have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The forgoing conditions raise substantial doubt about our ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Off-Balance Sheet Arrangements
As of September 30, 2008, we had no off-balance sheet arrangements.