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Former NFL star Shawne Merriman founded Lights Out Xtreme Fighting in April 2019 with hopes of building a mixed martial arts brand that differentiates itself from global companies like the UFC, Bellator and the like.
Lights Out made strides in doing just that. The company used innovative AI technology to bring more advertising options to its matches and signed a distribution rights deal with ESPN to broadcast in Latin American countries.
On January 8, everything changed.
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Former NFL and Maryland Terrapins linebacker Shawne Merriman is recognized on the field for his charity Lights On Foundation’s during the second half of the game against the George Washington Colonials at Xfinity Center on Nov. 11, 2021. (Tommy Gilligan/USA TODAY Sports)
Lights Out Sports announced that Applied Real Intelligence (ARI), described as a “leading alternative investment firm and provider of growth capital to North American innovators,” acquired a “majority interest in the company.”
A press release at the time said that Lights Out Sports “appointed Dr. Zack Ellison as Chairman, President and CEO effective immediately” and that Ellison would “lead the next phase of growth with responsibility for strategy, management, capital allocation and execution.”
“Assets don’t scale themselves. Leadership does,” Ellison said in the release. “There is a huge opportunity at Lights Out to expand the platform across live events, streaming TV and partnerships to create lasting enterprise value.”
Merriman told Pakinomist Digital that the announcement came as a surprise to him.
“It was immediate. I was literally removed from the board and just strong-armed,” Merriman said. “Like I said, we had every intention of making things right, it just wasn’t even an option. This is unnecessary, and even as I’m talking to you today, we’re looking for a solution, and we have the options for a solution, but it’s not an option. I understand, we have some signed papers that maybe allow them to do some things, but not this. It’s just unfortunate, and I think about my team and every day. the fighters.”
Merriman said the problem between the two companies stemmed from a loan from ARI. A lawsuit was filed against ARI Agent, LLC and ARI Senior Secured Growth on January 26.
Lights Out secured an agreement to borrow $2.1 million in May 2024 and missed three interest payments between October and December 2025, totaling approximately $50,000, according to court documents filed in Nevada. The court filing said the “loan was secured by the company’s assets, including intellectual property,” but ARI did not have “management or ownership rights” in Lights Out.
Shawne Merriman is the founder of Lights Out Xtreme Fighting and Lights Out Sports TV. (Robert Hanashiro, USAT, USA TODAY via Imagn Content Services, LLC)
Merriman’s attorney said in a court filing of the loan agreement, Lights Out and Merriman’s “retain ownership of shares and voting rights and are considering remedies for secured lenders.” The filing said ARI “issued a notice purporting to exercise default powers under the loan agreement and concurrently invoking power of attorney and attorney provisions” on Jan. 2.
The filing said ARI allegedly removed Merriman from the board, changed the company’s incorporation, “installed” Ellison as a director of the board and “paved the way for stock conversion and dilution.”
The former NFL star’s representatives argued that “the power of attorney and attorney provisions in the loan agreement are security devices intended to protect collateral value, not grants of management authority or ownership rights” and “do not authorize the defendants to operate the business, act as officers, displace management or appropriate management without legal foreclosure.”
Merriman sought a declaration that ARI was not a director of Lights Out and had no valid reason to cancel matches or terminate contracts with vendors, as well as seeking attorneys’ fees and costs.
ARI’s counsel filed a motion to remove the case from the District Court of Clark County to the US District Court for the District of Nevada due to the diversity of citizenship of the plaintiff and defendant, and the current controversy exceeded a value of $75,000.
On Feb. 17, U.S. District Judge Andrew P. Gordon granted ARI’s request to have the case remanded to state court. He said in his decision that ARI must respond to Lights Out’s request to pay their legal fees, which sparked new filings between the two sides on Monday.
Between the decision and the new filings, Lights Out said in a Feb. 20 press release a temporary restraining order (TRO) in federal court.
“I’m hoping to pay the money back like we intended to do and move on and get started right away,” Merriman told Pakinomist Digital. “That’s what I’m hoping for. I’m not someone who wants to fight because fighting is time and money, and that affects a lot of people, too. I’ve had staff that have had opportunities to go elsewhere for more money, and they didn’t do it because they believed in me. They believed in what I built. It’s just a shame that so many people are affected by this.”
Shawne Merriman attends Michael Rubin’s Fanatics Super Bowl Party at Marquee Nightclub at The Cosmopolitan of Las Vegas on February 10, 2024 in Las Vegas, Nevada. (Ethan Miller/Getty Images)
ARI’s attorneys filed a response to Merriman’s TRO request on Wednesday, saying the case did not involve a “wrongful takeover” of a corporation, but instead involved “distressed borrowers” in Lights Out XF and Lights Out Enterprises. The court filing said ARI “voluntarily and knowingly executed guarantees and warrants that gave ARI management rights over the company.”
If Merriman defaulted on the loan, ARI said in its lawsuit, it allowed ARI to “exercise all voting, corporate and other rights” as if it were the absolute owner.”
ARI’s lawyers added that the company lawfully exercised control over the company “pursuant to default-triggered proxies and then became a majority owner through the exercise of the previously granted warrant rights.”
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“Ultimately, this case is about whether Merriman, a borrower who admitted default and contractually relinquished control of a corporation, can use injunctive relief to undo the consequences of its own agreements,” the filing said. “Under settled principles of contract enforcement and equitable relief, he must not. Merriman’s application for a temporary restraining order and motion for a preliminary injunction should be denied.”
A decision could come as early as Friday.
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