SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1994
Commission File No. 1-9264
CAROLCO PICTURES INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4046437
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8800 Sunset Blvd., Los Angeles, CA 90069
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 859-8800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of registrant's Common Stock, $.01 par
value, at May 11, 1994 was 140,015,109 shares, including 2,327,381
shares of treasury stock.
<PAGE>
CAROLCO PICTURES INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - December 31, 1993 and
March 31, 1994 (unaudited)
Condensed Consolidated Statements of Operations - Three months
ended March 31, 1993 and 1994 (unaudited)
Condensed Consolidated Statements of Cash Flows - Three months
ended March 31, 1993 and 1994 (unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 3. Defaults upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
CAROLCO PICTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
A S S E T S
<TABLE>
December 31, March 31,
1993 1994
(Unaudited)
(In Thousands)
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,697 $33,368
Restricted cash (Note D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,255 --
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,837 12,036
Accounts receivable, related parties . . . . . . . . . . . . . . . . . . . . . . 4,877 4,777
Film costs, less accumulated amortization (Note C) . . . . . . . . . . . . . . . 78,427 66,861
Property and equipment, at cost, less accumulated depreciation and
amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,925 19,611
Other assets (Note C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,053 30,784
---------- -------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $188,071 $167,437
========== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . $21,041 $16,602
Accrued residuals and participations . . . . . . . . . . . . . . . . . . . . 23,312 22,172
Income taxes, current and deferred . . . . . . . . . . . . . . . . . . . . . 11,365 11,365
Debt (Note E). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,580 93,706
Advance collections on contracts . . . . . . . . . . . . . . . . . . . . . . 20,012 6,954
Contractual obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,180 1,180
Notes and amounts payable, related parties (Note D). . . . . . . . . . . . . 35,656 37,308
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,995 1,251
---------- -------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,141 190,538
COMMITMENTS AND CONTINGENCIES - (Note F)
STOCKHOLDERS' DEFICIENCY - (Note G)
Preferred stock - $1.00 par value, 10,000,000 shares authorized:
Series A Convertible Preferred Stock, 120,000 shares authorized,
82,500 shares issued and outstanding ($84,360,000 aggregate
liquidation preference) . . . . . . . . . . . . . . . . . . . . . . . 83 84
Common stock - $.01 par value, 650,000,000 shares authorized,
140,015,109 shares issued and outstanding, including 2,327,381
shares in treasury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400 1,400
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 297,931 298,975
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,920) (5,920)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (314,564) (317,640)
----------- ---------
TOTAL STOCKHOLDERS' DEFICIENCY. . . . . . . . . . . . . . . . . . . . . (21,070) (23,101)
----------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY. . . . . . . . . . . . . $188,071 $167,437
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CAROLCO PICTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months ended
March 31,
1993 1994
(Unaudited)
(In Thousands,
Except per Share Data)
<S> <C> <C>
Revenues:
Feature films . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,114 $20,279
Other income (Note H). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,498 2,724
----------- -------
TOTAL REVENUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,612 23,003
Costs and expenses:
Amortization of film costs, residuals and participations. . . . . . . . . . . . 27,623 16,046
Selling, general and administrative. . . . . . . . . . . . . . . . . . . . . . . 6,746 5,260
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,661 3,981
----------- -------
TOTAL COSTS AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . 42,030 25,287
----------- -------
LOSS FROM CONTINUING OPERATIONS BEFORE
EQUITY IN INCOME OF AFFILIATED COMPANY
AND BENEFIT FROM INCOME TAXES. . . . . . . . . . . . . . . . . . . . . (6,418) (2,284)
Equity in income from continuing operations of affiliated company. . . . . . . . 170 ---
----------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE
BENEFIT FROM INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . (6,248) (2,284)
Benefit from income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 253
------------ --------
LOSS FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . . (6,248) (2,031)
Equity in loss from discontinued operations of affiliated company, net of
income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (533) ---
------------ -------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(6,781) $(2,031)
=========== ========
Per Common Share:
Loss from continuing operations. . . . . . . . . . . . . . . . . . . . . . . $(0.21) $(0.02)
Loss from discontinued operations. . . . . . . . . . . . . . . . . . . . . . (.02) ---
------------ --------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(0.23) $(0.02)
============ ========
Weighted average shares outstanding. . . . . . . . . . . . . . . . . . . . . 30,087,131 137,687,728
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
CAROLCO PICTURES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
March 31,
1993 1994
(Unaudited)
(In Thousands)
<S> <C> <C>
Net cash flow from operating activities:
NET CASH PROVIDED BY (USED IN) OPERATIONS . . . . . . . . . . . . . . . $ 529 $(25,964)
Cash flow from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (165) (226)
Acquisition of common stock of LIVE Entertainment Inc. . . . . . . . . . . . (1,266) ---
Decrease in cash as a result of deconsolidation of LIVE Entertainment Inc.. . (11,043) ---
Proceeds from sale of aircraft, net of costs . . . . . . . . . . . . . . . . --- 1,775
---------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES . . . . . . . . . . (12,474) 1,549
Cash flow from financing activities:
Payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,555) (1,176)
Increase in notes payable to related parties. . . . . . . . . . . . . . . . . 2,099 1,653
Decrease in receivables from related parties . . . . . . . . . . . . . . . . 5,057 100
Increase in debt acquisition costs . . . . . . . . . . . . . . . . . . . . . (3,967) ---
Decrease in restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . --- 1,255
Repurchase of Vista shares and Vista Partnership Units . . . . .. . . . . . . --- (744)
Repayment of Pioneer Bridge Loan . . . . . . . . . . . . . . . . . . . . . . (3,681) ---
Showtime Receivable Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 25,896 ---
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 (2)
---------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . 5,888 1,086
---------- --------
DECREASE IN CASH. . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,057) (23,329)
Cash and cash equivalents at beginning of period. . . . . . . . . . . . 24,202 56,697
---------- --------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . $18,145 $33,368
========== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized in 1994). . . . . . . . . . . . . . . $880 $572
========== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $229 $73
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
Note A - Basis of Presentation and Significant Account Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Carolco Pictures Inc. and its
wholly-owned subsidiaries including Carolco International Inc. ("CII")
and Carolco Television Inc.; The Vista Organization Partnership, L.P.;
The Vista Organization, Ltd. ("Vista"); and Carolco Studios Inc.
(Delaware) (collectively, the "Company" or "Carolco"), after
elimination of material intercompany accounts and transactions. The
Company is engaged in the entertainment industry and its principal
activities include the production and distribution of feature films.
From January 1, 1993 through October 20, 1993, the Company
accounted for its investment in LIVE Entertainment Inc. ("LIVE") using
the equity method. In connection with the Company's October 20, 1993
financial restructuring ("the Restructuring"), the Company transferred
all of its ownership interest in LIVE to Pioneer LDCA, Inc.
("Pioneer"), Cinepole Productions B.V. ("Cinepole"), a wholly-owned
subsidiary of Le Studio Canal+ S.A. and RCS International
Communications N.V. ("RCS Communications"), an affiliate of RCS
Editori S.p.A. See Note B for a description of more recent
developments concerning the Company and LIVE.
The accompanying unaudited, condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, the
accompanying unaudited condensed consolidated financial statements
contain all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the Company's financial position
as of March 31, 1994 and the results of its operations for the three
months ended March 31, 1993 and 1994. The result of operations for the
period ended March 31, 1994 are not necessarily indicative of the
results to be expected for the year ending December 31, 1994. Certain
reclassifications have been made in the amounts for 1993 to conform to
1994 presentation.
For further information, refer to the Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
At March 31, 1994, Pioneer, Cinepole, and RCS Communications,
owned approximately 33.7%, 19.0% and 11.5%, respectively, of the issued
and outstanding Common Stock of the Company. At March 31, 1994, New
Carolco Investments B.V. ("New CIBV"), a corporation incorporated in
The Netherlands, owned approximately 5.8% of the issued and outstanding
Common Stock of the Company. Mario F. Kassar, Chairman of the Board of
Directors and Chief Executive Officer of the Company ("Mr. Kassar"),
may be deemed to own beneficially the shares of the Company's Common
Stock owned by New CIBV. In addition, as a result of the consummation
of the Restructuring, Pioneer, Cinepole and MGM Holdings Corporation
("MGM Holdings") own 40,000, 12,500 and 30,000 shares, respectively of
Series A Convertible Preferred Stock, not including accrued "in-kind"
dividends. MGM Holdings also owns $30,000,000 in aggregate principal
amount of 5% Payment-In-Kind Convertible Subordinated Notes due 2002
(the "5% Notes"), not including accrued "in-kind" interest.
<PAGE>
Significant Accounting Policies
Net Loss Per Common Share: Net loss per share is based on the
weighted average number of common and common equivalent shares
outstanding during the period, after appropriate inclusion in net loss
of preferred dividends of $1,045,000 in 1994. Common equivalent shares,
consisting of outstanding stock options and warrants, the Series A
Convertible Preferred Stock in 1994, and, in 1993, the Series B
Convertible Preferred Stock, Series C Convertible Exchangeable
Preferred Stock, Series D Convertible Exchangeable Preferred Stock, and
Series E Convertible Preferred Stock, were excluded because the effect
of their inclusion would be antidilutive. Other potentially dilutive
securities, including the 10% Convertible Subordinated Debentures due
2006 in 1993, and the 5% Notes in 1994, were excluded because the
effect of their inclusion would be antidilutive.
Income Taxes: Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standard (SFAS) No. 109 "Accounting
for Income Taxes". Previously, the Company used SFAS No. 96 "Accounting
for Income Taxes". The adoption of SFAS No. 109 had no material effect
on the Company's financial position or results of operations for the
year ended December 31, 1993. Current and deferred federal income taxes
are provided based on the Company and its U.S. subsidiaries owned 80%
or more, filing a consolidated tax return.
Deferred taxes have been determined by applying the current tax
rate to the cumulative temporary differences between the recorded
carrying amounts and corresponding tax basis of assets and liabilities
at the respective dates. Deferred income taxes principally relate to
the differences in accounting for film and video rights and the related
amortization for financial statement and tax return purposes as well as
from financial statement reserves not currently deductible for tax
purposes.
On October 18, 1993, the Company's wholly-owned subsidiary,
Carolco International N.V. ("CINV") was domesticated as a Delaware
corporation and its name was changed to CII. Due to the domestication
of CINV, in future periods, foreign source income of the Company will
be subject to United States income taxation which could result in a
significant increase in the Company's effective tax rate.
Note B - Proposed Business Combination with LIVE
On March 24, 1994, the Company and LIVE announced that they have
agreed in principle to a combination of the two companies (the
"Business Combination"). The Business Combination will be structured as
a tax free exchange whereby each Carolco stockholder will receive one
share of newly issued LIVE common stock for each 5.5 shares of Carolco
common stock currently held. The exchange ratio will be adjusted based
on the market price of Carolco common stock prior to the consummation
of the Business Combination subject to two limitations designed to
limit the effect of market fluctuations on both Carolco and LIVE
stockholders. The number of Carolco shares to be exchanged for each
share of LIVE will be adjusted upward, if necessary, so that the market
value of Carolco shares to be exchanged for one share of LIVE is at
least $3.00, but in no event will more than 6.5 shares of Carolco be
exchanged for each share of LIVE. Likewise, the number will be adjusted
downward, if necessary, so that the market value of Carolco shares to
be exchanged is no more than $4.00, but in no event will fewer than 4.5
shares of Carolco be exchanged for each share of LIVE. As a result, the
current LIVE stockholders will own between approximately 22% and 29% of
the surviving corporation and the remainder will be owned by the
current Carolco stockholders. Therefore, the Business Combination, if
consummated, will be treated as a reverse merger/acquisition of LIVE by
Carolco for accounting and financial reporting purposes and the
purchase method of accounting will be applied to the historical values
of LIVE's assets and liabilities. Additionally, to the extent of
common ownership between LIVE and Carolco, (54.6% of LIVE's Common
Stock is owned by significant shareholders of Carolco), a portion of
the transaction will be treated as a combination of companies under
common control, similar to a pooling. The corporation resulting from
the Business Combination will be named Carolco Entertainment Inc.
The Business Combination is subject to a number of conditions,
including the redemption of LIVE's Series B Cumulative Convertible
Preferred Stock, certain amendments to various public and private
securities of LIVE and the availability of certain financing
commitments prior to the combination. The Business Combination is also
subject to the execution of a definitive Business Combination
agreement, the approval of the combination by the non-affiliated common
stockholders of both companies and other customary conditions to
closing. The definitive agreement will be subject to approval by both
companies' boards of directors and the receipt of fairness opinions
from independent investment firms for both companies. On March 17,
1994, The Seidler Companies Incorporated advised the Carolco Board of
Directors that, based on then current conditions, it would be prepared
to deliver its opinion that the financial terms of the Business
Combination are fair to the unaffiliated stockholders of Carolco.
Chemical Securities Inc., an affiliate of Chemical Bank, has delivered
its opinion to the LIVE Board of Directors that, based on the
conditions and assumptions contained therein, the financial terms of
the Business Combination are fair to the unaffiliated stockholders of
LIVE. There can be no assurances that the Business Combination will be
consummated, or, if consummated, will be consummated on the terms set
forth above.
Note C - Film Costs
<TABLE>
December 31, March 31,
1993 1994
(Unaudited)
(In Thousands)
<S> <C> <C>
Film costs are comprised of the following:
Released, less amortization. . . . . . . . . . . . $ 57,696 $38,690
In process and development . . . . . . . . . . . . 20,731 28,171
-------- -------
Total film costs . . . . . . . . . . . . . . . . $ 78,427 $66,861
======== =======
</TABLE>
Interest and production overhead capitalized to film costs during
the three months ended March 31, 1994 totaled $156,000 and $833,000,
respectively. No interest or production overhead was capitalized to
film costs during the three months ended March 31, 1993.
In December 1993, an affiliate of the Company commenced principal
photography of Wagons East, starring John Candy and Richard Lewis. As
a result of the untimely death of Mr. Candy, the Company entered into
an arrangement with the insurance carrier and an affiliate of LIVE
pursuant to which the Company will receive substantially all of the
costs incurred by the Company on the film. LIVE agreed to fund
completion of the film in exchange for certain rights in the film and
engaged Carolco to complete production and to service of certain pre-
existing distribution agreements. In April 1994, the Company received
approximately $13,876,000 representing partial payments under the
multi-party arrangement. The balance will be paid to the Company upon
completion of the final audit of the applicable production costs. The
total amount of costs to be reimbursed is included in Other Assets.
Note D - Related Party Transactions
Pursuant to the Restructuring, MGM Holdings purchased from the
Company $30,000,000 in aggregate principal amount of 5% Payment-In-Kind
Convertible Subordinated Notes due 2002 (the "5% Notes") in exchange
for $30,000,000. The $30,000,000 in principal amount of 5% Notes will
mature in October 2002 and bears interest at 5% per annum, payable
quarterly. Consistent with the treatment of MGM Holdings as a
"principal shareholder," the Company recorded the 5% Notes in Notes and
Amounts Payable, Related Parties, at its present value of $21,361,000
to yield a fair market interest rate of 10%. The discount of $8,639,000
was recorded as an increase to equity. The Company will recognize
additional interest expense of approximately $960,000 per year related
to the amortization of this discount. Interest accruing on or prior to
the fifth anniversary of the date of issuance may be paid in cash or by
payment in-kind of additional 5% Notes with a principal amount equal to
the amount of such interest, or a combination thereof, at the election
of the Company. Thereafter, interest shall be paid in cash. Through
March 31, 1994, interest of approximately $354,000 has been paid in
additional 5% Notes and interest of approximately $316,000 has been
accrued. The 5% Notes, and any accrued and unpaid interest thereon,
will automatically be converted into Common Stock of the Company on the
20th business day following the date on which MGM shall have received
an aggregate of $100,000,000 in distribution fees under the MGM
Distribution Agreement. This conversion rate will be equal to 1,667
shares of Common Stock for each $1,000 principal amount of 5% Notes and
each $1,000 of accrued and unpaid interest, subject to certain
adjustments. Alternatively, the 5% Notes may be converted into Common
Stock of the Company at the aforementioned conversion rate (subject to
certain adjustments,) effective on the maturity date (October 2002); or
in the event that the Company (i) declares a dividend on its Common
Stock in excess of $.05 per share, (ii) offers to redeem or repurchase
Common Stock, (iii) merges or consolidates, unless the Company is the
surviving corporation, or (iv) undertakes to sell all or substantially
all its assets. As of March 31, 1994, approximately 51,117,000 shares
of Common Stock of the Company would be issued upon conversion of the
5% Notes and accrued interest.
At December 31, 1993, the Company had $1,255,000 of restricted
cash. This amount was due to Mr. Kassar in connection with the
Restructuring. During the quarter ended March 31, 1994, such amount,
including accrued interest, was paid to Mr. Kassar.
Note E - Debt
Pursuant to the 13% Note Indenture, since the Company's
consolidated net worth was less than $33,334,000 on September 30,1993,
the Company was obligated to offer to purchase $5,000,000 in aggregate
principal amount of its 13% Notes on March 31, 1994. Pursuant to the
terms of the 13% Note Indenture, the Company credited a portion of the
13% Notes acquired as part of the Restructuring against this obligation
and was therefore not required to purchase any additional 13% Notes.
As a result of certain amendments to the 13% Note Indenture resulting
from the Restructuring, the Company has no further obligation to
purchase the balance of the 13% Notes prior to maturity in 1996.
In September 1988, the Company entered into a 10.75% term loan
agreement with John Hancock Leasing. The purpose of the loan was for
the purchase of an aircraft and its refurbishment and was secured by
the aircraft. Interest and principal of approximately $141,000 were
payable monthly for five years. In 1993, the Company negotiated a
reduction of the monthly payment, pending the sale of the aircraft. On
February 3, 1994, the Company sold the aircraft for $1,925,000 and the
remaining loan balance of $900,000, including accrued interest, was
paid in full. The Company recognized a gain of $1,275,000 in 1994
related to the sale of the aircraft.
Note F - Commitments and Contingencies
As of March 31, 1994, the Company has received approximately
$1,930,000 in deposits on cancelled licensing agreements and on certain
films which the Company may not produce. Traditionally, the Company
has been able to allocate advances of this nature to other pictures
being produced by the Company which contain elements similar to the
original film. However as a result of reduced production commitments,
the Company may be required to return these deposits.
In June 1993, the Company entered into a non-exclusive consulting
agreement with Anthony J. Scotti, the Chairman of the Board of LIVE,
for the period commencing immediately after the Restructuring and
ending twelve months thereafter. Pursuant to the agreement, Mr. Scotti
shall consult with management of the Company with respect to the
operation of the Company's business and such other matters as may be
agreed upon between the Company and Mr. Scotti. In consideration for
the services to be provided by Mr. Scotti, the Company will pay Mr.
Scotti $40,000 per month plus reimbursement of all expenses incurred by
Mr. Scotti in connection with the services to be provided by him under
the agreement. Mr. Scotti will be entitled to participate in any and
all of the Company's employee stock option plans during the term of the
agreement, and will be granted options to purchase shares of the
Company's Common Stock (the terms and number of options to be
negotiated in the future) at an exercise price per share equal to the
market price of the Common Stock at the date of commencement of the
consulting period. In addition, Mr. Scotti will be indemnified against
certain liabilities in connection with the performance of his duties
under the agreement. In the three months ended March 31, 1994, the
Company paid approximately $132,300 in fees and expenses to Mr. Scotti
pursuant to this agreement.
Spiderman Litigation:
On April 20, 1993, 21st-Century Film Corporation ("21st") and
Menahem Golan ("Golan") filed an action against the Company, CINV and
Spiderman Productions, Ltd. in Los Angeles County Superior Court
purporting to allege claims for breach of contract, anticipatory breach
of contract and fraud relating to the motion picture project Spiderman.
Plaintiffs allege that on or about May 19, 1990, 21st entered into an
agreement with the Company whereby 21st transferred to the Company
literary rights relating to Spiderman, and the Company agreed, among
other things, to accord credit to Golan as a producer of the picture
both on screen and in paid advertisements, with the obligations to 21st
to be guaranteed by the Company and by CINV. Plaintiffs further allege
that on or about June 19, 1992, the parties entered into a second
agreement settling certain other litigation and wherein it was agreed
that the Company and CINV could assign the May 19, 1990 agreement to
RCS NV, provided that RCS NV assume in writing the obligations
thereunder and provided that the Company and CINV remain jointly and
severally liable with RCS NV under the May 19, 1990 agreement.
Plaintiffs allege that the Company and the other defendants breached
the foregoing agreements by denying any obligation to accord producer
credit to Golan, by assigning the May 19, 1990 agreement to a party
other than RCS NV, and by failing to provide plaintiffs with a writing
showing that the Company and the other defendants have assumed the
obligations of the May 19, 1990 agreement. Finally, plaintiffs allege
that the Company and the other defendants entered into the foregoing
agreements fraudulently in that they did not intend to perform their
alleged promises at the time they entered into the agreements.
Based on the foregoing allegations, plaintiffs sought compensatory
damages in excess of $5,000,000, unspecified punitive damages,
attorneys' fees, rescission of the May 19, 1990 agreement, a
declaration as to the plaintiffs' alleged rights, and a preliminary and
permanent injunction preventing the Company and the other defendants
from distributing Spiderman without according producer screen credit to
Golan and from issuing press releases or other information to the media
without according producer credit to Golan.
On October 22, 1993, the plaintiffs, following several successful
demurrers by the defendants to the plaintiffs' previous complaints,
filed a Third Amended Complaint against the Company, CINV, Spiderman
Productions Ltd. and RCS NV. On November 19, 1993, all four defendants
filed an answer to the Third Amended Complaint in which they agreed
that the May 19, 1990 agreement was rescinded, thereby accepting the
demand and offer of rescission contained in the Third Amended
Complaint, and filed a cross-complaint seeking restitution of the more
than $5,000,000 that plaintiffs were paid under the rescinded
agreement. The plaintiffs contend that assuming they make such
restitution to the Company and its co-defendants and
co-cross-complainants, the plaintiffs would be entitled to recover the
rights, or the monetary value of the rights, that were transferred
under the May 19, 1990 agreement.
On December 14, 1993, the plaintiffs became debtors under
Chapter 7 of the bankruptcy laws as a result of petitions for
involuntary bankruptcy that were filed by various creditors of the
plaintiffs (other than the parties to the above-described litigation).
On December 15, 1993, the bankruptcy proceedings were converted to
voluntary reorganization proceedings under Chapter 11 of the bankruptcy
laws. The bankruptcy filings have resulted in an automatic stay of the
Los Angeles Superior Court litigation for the time being. There have
been no other procedural developments in that litigation since the
bankruptcy filings.
On February 3, 1994, the Company, CII, Spiderman Productions Ltd.
and RCS NV filed declaratory relief actions against Viacom
International Inc., its division, Viacom Enterprises, and various Doe
defendants (collectively "Viacom"), and against CPT Holdings, Inc. and
Columbia Pictures Home Video, Inc. jointly doing business as Columbia
Tri-Star Home Video, and various Doe defendants (collectively "Columbia
Tri-Star"), seeking declarations that such defendants do not have
certain distribution rights in Spiderman. Both Viacom and Columbia
Tri-Star contend that they acquired certain distribution rights from
21st prior to the Company's and 21st's entering into the May 19, 1990
agreement, and allegedly continue to hold such rights after the May 19,
1990 agreement was entered into and after it was rescinded on
November 19, 1993 as described above.
Viacom and Columbia Tri-Star each have answered the Company's
complaints against them, denying the material allegations of the
complaints. In addition, on April 8, 1994, Columbia Tri-Star served a
cross-complaint on the Company and its co-plaintiffs for anticipatory
repudiation of contract, specific performance of contract, breach of
the implied covenant of good faith and fair dealing, and declaratory
relief. Columbia Tri-Star is seeking a judicial declaration that the
Company and its co-plaintiffs are contractually obligated to accord to
Columbia Tri-Star the distribution rights that Columbia Tri-Star
alleges it has, an order commanding the performance of those alleged
obligations, and, alternatively, damages "in a sum not less than
$5,000,000" if those alleged obligations are not performed.
Although the Company and others are plaintiffs and neither
defendants nor cross-defendants in the declaratory relief action
against Viacom, a ruling in favor of Viacom could significantly
encumber certain of the rights the Company and its co-plaintiffs
contend they have. The Company is unable to place a monetary value on
these rights. Viacom asserts that it paid 21st $2,000,000 for the
domestic television distribution rights that it contends it still
holds.
Purported Class Action Litigation:
On March 24, 1994, the same day the Business Combination was
announced, a purported class action lawsuit was filed in the Court of
Chancery of the State of Delaware in and for New Castle County, by an
alleged stockholder of LIVE against the Company, LIVE, certain of the
Company's and LIVE's past and present executive officers and directors,
Pioneer and Cinepole. The complaint alleges, among other things, that
the defendants have violated their fiduciary duties owed to LIVE
stockholders in connection with the Business Combination. Plaintiff
seeks a preliminary and permanent injunction enjoining the Business
Combination under its current financial terms, an open market auction
of LIVE, to the extent the Business Combination is consummated prior to
the entry of a final judgment in the action, rescission of the Business
Combination, repayment of profits and benefits obtained as a result of
defendant's alleged conduct and attorney's fees and expenses.
Class Action Litigation:
On January 9, 1992, a purported class action lawsuit was filed in the
U.S. District Court, Central District of California, by alleged
stockholders of LIVE against the Company, LIVE and certain of the
Company's and LIVE's past and present executive directors. The
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder
(i) by concealing the true value of certain of Carolco's and LIVE's
assets, and overstating goodwill, stockholders' equity, operating
profits and net income in Carolco's and LIVE's Forms 10-K for the year
ended December 31, 1990, in their 1990 Annual Reports and in their
Forms 10-Q for the quarters ended March 31, 1991 and June 30, 1991, and
(ii) by materially understating the true extent of the write-off of
goodwill in connection with the sale of Lieberman to Handleman in
July 1991. In addition, the complaint alleges that certain of the
defendants are liable as controlling persons under Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") and alleges that
certain other defendants are liable for aiding and abetting the primary
violations. Subsequently, two additional lawsuits were filed in the
U.S. District Court, Central District of California, by alleged
stockholders of LIVE against the same persons and entities who were
defendants in the original action, making substantially the same
allegations as were made in the first lawsuit. On March 30, 1992, these
lawsuits were consolidated. Further in April 1992, an amended complaint
was filed in the consolidated action, (the "Amended Complaint"). The
Amended Complaint contains substantially the same allegations as the
three original complaints. In addition, the Amended Complaint
lengthened the alleged class period and added as defendants certain
substantial shareholders (New CIBV, Pioneer and Canal+), directors of
Carolco (Messrs. Afman, Bonnell, Matsumoto, and Noda) and a lender to
the Company. In addition to the claims asserted in the individual
actions, a claim for respondeat superior liability was added. On
June 17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to
possible decertification after discovery is completed. On or about
January 27, 1993, a second amended complaint was filed in the
consolidated action expanding the allegations against certain
directors, a lender to the Company and Pioneer. On April 19, 1993, the
Court granted Pioneer's Motion to Dismiss the second amended complaint
as against Pioneer.
In February 1992, a purported class action lawsuit was filed in the
U.S. District Court, District of Delaware, by an alleged holder of the
Company's public debt, against the Company, LIVE and certain executive
officers and directors of the Company and LIVE. The Delaware complaint
alleges, among other things, that the defendants violated Section
10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by
concealing the true value of certain of LIVE's assets, and overstating
goodwill, stockholders' equity, operating profits and net income in
LIVE's Form 10-K for the year ended December 31, 1990 and in its Forms
10-Q for the quarters ended March 31, 1991 and June 30, 1991. In
April 1992, this lawsuit was transferred to the U.S. District Court,
Central District of California. The proceedings are being coordinated
with the consolidated action described in the preceding paragraph. On
June 17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to
possible decertification after discovery is completed. The purported
class action complaints do not contain a damage claim of any specific
dollar amount. To date, there has been only preliminary discovery in
these actions.
Other Litigation:
On July 13, 1992, 20th Century Fox ("Fox") filed a lawsuit in Los
Angeles County Superior Court, against the Company and CINV a
wholly-owned subsidiary of the Company, for breach of contract and an
accounting relating to amounts allegedly owed by the Company and CINV
with respect to the motion picture Dice Rules. Fox claimed that a total
of $1,750,000 was due under an agreement in which Fox licensed all
rights to the film to the Company and CINV. Pursuant to a settlement
agreement between a subsidiary of the Company, CINV and Fox, the
Company agreed to pay Fox $1,200,000, payable (i) $200,000 on
December 18, 1992; (ii) $300,000 on January 21, 1993; and
(iii) $700,000 in nine monthly installments of $77,778 each beginning
on February 21, 1993. The final payment of $550,000 would be waived by
Fox if all payments are made on the dates specified. On October 21,
1993, the Company made the final monthly installment scheduled to be
made under the settlement Agreement. Therefore, the final payment of
$550,000 was waived pursuant to the Agreement and such amount was
included as an extraordinary gain on extinguishment of debt.
On December 1, 1992, Parafrance Communication, S.A. and Paravision
International S.A. filed identical lawsuits in Los Angeles County
Superior Court and the United States Bankruptcy Court, Central District
of California, against the Company and certain of its affiliates for
(i) breach of contract, (ii) fraud and (iii) unjust enrichment with
respect to the motion pictures The Producers, Darling and Bill and
Ted's Excellent Adventure as a result of the alleged failure by DEG to
deliver certain rights in such pictures to the plaintiffs under a 1990
Asset Purchase Agreement. The State Court action was removed to the
Bankruptcy Court and consolidated with the other action. Plaintiffs
allege damages in excess of $3,000,000. The Company believes that any
judgment against it in this action will be satisfied from a reserve
fund of the DEG Liquidation Estate set aside for such claims, which is
also named as a defendant in this action.
On December 10, 1992, Lang Elliott Entertainment Inc. ("Lang
Elliott") filed a lawsuit in Los Angeles County Superior Court against
the Company, CTI, Vista and certain affiliates of the Company for
breach of contract and an accounting relating to amounts allegedly owed
by Vista to Lang Elliott with respect to the motion picture Cage. In
addition, the complaint alleges claims for conversion, constructive
trust, intentional misrepresentation, breach of covenant of good faith
and fair dealing, interference with prospective business advantage,
unfair competition and anti-trust violations. In addition to monetary
damages, the suit also seeks rescission and restitution. The suit
arises out of a 1989 distribution agreement under which the Vista
Partnership, of which an affiliate of the Company is the general
partner, acquired all distribution rights to the picture. The complaint
seeks damages of $1,350,000 (which claim includes $1,000,000 of
punitive damages) for (i) license fees allegedly due to Lang Elliott
under a rescinded agreement between a Company affiliate and CTI and
(ii) alleged damage to the home video and free television value of Cage
due to a nine month extension by the Vista Partnership of the pay
television rights of HBO and Showtime to the film for which the Vista
Partnership received no fee. The Company has successfully demurred to
parts of Lang Elliott's complaint resulting in dismissal of the
antitrust and breach of covenant of good faith and fair dealing causes
of action. The Vista Partnership previously defended itself
successfully against Lang Elliott in a recent arbitration which raised
some of the same issues. The Company and the other defendants have
filed an answer denying the allegations in Lang Elliott's complaint and
both sides are engaging in discovery.
Management and counsel to the Company are unable to predict the
ultimate outcome of this action at this time. However, the Company and
the other defendants believe that this lawsuit is without merit and are
defending it vigorously. Accordingly, no provision for any liability
which may result has been made in the Company's consolidated financial
statements. In the opinion of management, this action, when finally
concluded and determined, will not have a material adverse effect upon
the Company's financial position or results of operations.
For additional information regarding other material legal
proceedings to which the Company or any of its subsidiaries are a
party, see the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
Note G - Stockholders' Deficiency
Pursuant to the terms of the Restructuring, Pioneer, Cinepole and
MGM Holdings purchased from the Company 40,000, 12,500 and 30,000
shares, respectively, of Series A Convertible Preferred Stock, ("New
Preferred"), in exchange for cash payments of $40,000,000, $12,500,000
and $30,000,000, respectively. The New Preferred bears an annual
dividend rate of 5%. Dividends are payable when, as and if declared by
the Company's Board of Directors, either (a) out of any funds legally
available therefore, or (b) for the first five years after issuance, to
the extent legally available therefore, in additional shares of New
Preferred. Through March 31, 1994, approximately $1,860,000 in
dividends had been accrued, thereby increasing the aggregate
liquidation preference of the New Preferred to $84,360,000. However,
since the Company did not have sufficient "surplus" as defined in the
provisions of the General Corporation Law of the State of Delaware, the
Company was unable to pay such dividends. Each share of New Preferred,
when issued, will be convertible at the option of the holder into
Common Stock of the Company at $.60 per share. As of March 31, 1994,
140,600,000 shares of Common Stock of the Company would be issuable
upon conversion of the New Preferred.
Note H - Other Income
Other income in 1993 consists primarily of revenues from the
operations of the Company's film studio in North Carolina ("Carolco
Studios") rental income and foreign currency exchange gains. Other
income in 1994 includes revenues from the operations of Carolco
Studios, interest income, rental income and a gain of $1,275,000
recognized upon the sale of the Company's aircraft (see Note E). Other
income in 1994 also includes producers fees of approximately $500,000
related to the motion picture Stargate, paid to the Company pursuant to
an agreement entered into with Hexagon Films (U.S.), an indirect,
wholly-owned subsidiary of Canal+.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Carolco is an entertainment company which finances, produces and
leases motion pictures for exhibition in domestic and foreign
theatrical markets and for later worldwide release in all media
including home video and pay and free television. The Company
anticipates that it will produce a limited number of "event" motion
pictures per year, with commercial subject matter and well-known
creative elements, provided that the Company is able to obtain
sufficient funds to enable it to do so. In 1993, the Company produced
and released one film, Cliffhanger, which was financed through a
co-production arrangement with Pioneer, Cinepole and RCS. Feature film
revenues are derived primarily from the distribution of feature films
in both domestic and foreign markets. The Company recognizes minimum
guaranteed amounts from theatrical exhibition and revenues from home
video and pay television license agreements when the license period
begins for each motion picture and such motion pictures are available
pursuant to the terms of the license agreement. Revenues from
theatrical exhibition in excess of minimum guaranteed amounts
("overages") are recognized ratably during the period of exhibition.
Results of Operation
Three Months Ended March 31, 1993 as Compared to Three Months Ended
March 31, 1994
Feature film revenues decreased from $34,114,000 for the three
months ended March 31, 1993 to $20,279,000 for the three months ended
March 31, 1994. This represents a decrease of $13,835,000, or
approximately 40.6%. The Company had no theatrical releases during the
first quarter of 1993 or the first quarter of 1994. Therefore,
revenues for both periods principally represent license fees from
exploitation in secondary markets (i.e. pay television, video, free
television, etc.) of films released theatrically in prior years.
Feature film revenues for the three months ended March 31, 1993 include
approximately $10,870,000 from the domestic pay television availability
of Basic Instinct, released theatrically in 1992; approximately
$7,700,000 from the foreign pay television availability of Terminator
2: Judgement Day, released theatrically in 1991; $6,000,000 from the
domestic network television availability of Total Recall, released
theatrically in 1990; and $3,791,000 from the foreign television
availability of Rambo III, Air America, and Narrow Margin, released
theatrically in 1988 and 1989. Feature film revenues for the three
months ended March 31, 1994 include approximately $8,250,000 from the
domestic network television availability of Terminator 2: Judgment Day,
released theatrically in 1991; $2,984,000 from the domestic syndication
television availability of Rambo III, released theatrically in 1988;
and $1,417,000 in foreign theatrical overages related to the 1992
theatrical release of Basic Instinct.
Amortization of film costs, residuals and participations decreased
by $11,577,000, or 41.9%, from $27,623,000 for the three months ended
March 31, 1993 to $16,046,000 for the comparable period in 1994.
Amortization of film costs, as a percentage of the Company's feature
film revenues, remained fairly constant at 79.1% for the three months
ended March 31, 1994 as compared to 81.0% for the three months ended
March 31, 1993.
Selling, general and administrative ("SG&A") expenses (which
caption also includes production overhead costs), decreased by
$1,486,000 or 22.0%, from $6,746,000 during the first quarter of 1993
to $5,260,000 during the first quarter of 1994. Of this decrease,
$653,000 is the result of reductions in the Company's work force and
the downsizing of the operations of the Company. In addition, in 1994,
the Company capitalized approximately $833,000 of production overhead
to film costs. In 1993, the Company had no films in production and
was, therefore, unable to capitalize any production overhead to film
costs.
Interest expense decreased by $3,680,000, or 48.0%, from
$7,661,000 during the first quarter of 1993 to $3,981,000 during the
first quarter of 1994. This decrease is the result of lower debt
levels and reduced interest rates. The Company capitalized $156,000 of
its interest costs to film costs in the first quarter of 1994. The
Company had no films in production in the first quarter of 1993 and,
therefore, was unable to capitalize any of its interest costs to film
costs.
On February 3, 1994, the Company sold its aircraft for $1,925,000
and the remaining loan balance of $900,000, including accrued interest,
was paid in full. (See Note E.) The Company recognized a gain of
$1,275,000 in 1994 as a result of the sale of the aircraft.
The Company incurred a consolidated net loss for the three months
ended March 31, 1993 of $6,781,000, including $363,000 attributable to
its ownership interest in LIVE . The Company incurred a consolidated
net loss for the three months ended March 31, 1994 of $2,031,000. At
March 31, 1994, the Company had a deficiency in assets of $23,101,000.
Liquidity and Capital Resources
The Company has outstanding borrowings under the CLBN Facility.
The CLBN Facility was originally scheduled to mature November 29, 1992.
The maturity date of the loans under the CLBN Facility has been
extended to September 30, 1994 provided certain events of default do
not occur. At March 31, 1994, approximately $14,000,000 was outstanding
under the CLBN Facility. CLBN has also agreed to remit to CII all
collections from accounts receivable pledged to CLBN, so long as
certain defaults do not occur. The CLBN Facility is secured by
substantially all of the Company's assets.
CLBN has committed to use its best efforts to organize a syndicate
of lenders (in which CLBN will participate) to provide a revolving
corporate and production credit facility (the "New Credit Facility")
However, negotiations between the Company and CLBN with respect to the
New Credit Facility have been temporarily postponed, pending the
consummation of the Business Combination. Subsequent to the Business
Combination, the Company intends to pursue a thru-year $50,000,000
revolving credit facility and a separate production credit facility.
Company's intention to refinance the $14,000,000 balance of the CLBN
Facility with proceeds provided by the New Credit Facility. However,
there is no assurance that the New Credit Facility will be negotiated.
In that event, the Company believes it can negotiate a further
extension of the maturity date of the CLBN Facility. If the Company is
unable to negotiate such an extension, the Company believes it will be
able to repay the CLBN Facility from its working capital.
Pursuant to the 13% Note Indenture, since the Company's
consolidated net worth was less than $33,334,000 on September 30,1993,
the Company was obligated to offer to purchase $5,000,000 in aggregate
principal amount of its 13% Notes on March 31, 1994. Pursuant to the
terms of the 13% Note Indenture, the Company credited a portion of the
13% Notes acquired as part of the Restructuring against this obligation
and was therefore not required to purchase any additional 13% Notes.
As a result of the Amendments to the 13% Note Indenture resulting from
the Restructuring, the Company has no further obligation to purchase
the balance of the 13% Notes prior to maturity in 1996.
Shortly after the consummation of the Restructuring, the Company
began the process of preparing certain of its motion picture projects
for eventual production, including the contracting of artists,
directors and other production executives with respect to an
anticipated production slate for calendar year 1994. In December
1993, an affiliate of the Company commenced principal photography of
Wagons East, starring John Candy and Richard Lewis. As a result of the
untimely death of Mr. Candy, the Company entered into an arrangement
with the insurance carrier and an affiliate of LIVE pursuant to which
the Company will receive substantially all of the costs incurred by the
Company on the film. LIVE agreed to fund completion of the film in
exchange for certain rights in the film and engaged Carolco to complete
production and servicing of certain pre-existing distribution
agreements. In April 1994, the Company received approximately
$13,876,000 representing partial payments under the multi-party
arrangement. The balance will be paid to the Company upon completion
of the final audit of the applicable production
costs.
The Company currently has two motion pictures in pre-production:
Crusade starring Arnold Schwarzenegger and directed by Paul Verhoeven;
and Cutthroat Island starring Michael Douglas and Geena Davis, and
directed by Renny Harlin. Both pictures are currently scheduled to
commence principal photography in the third quarter of 1994, and be
completed and available for release in mid-1995. However, there can be
no assurances that both films will begin principal photography, be
completed or be released according to this production schedule.
As a result, the Company will not generate revenues from new
production in of 1994 and will continue to experience losses through
1994 and much of 1995. Moreover, because of the substantial capital
requirements involved in the pre-production and principal photography
stages of Crusade and Cutthroat Island, (the combined direct negative
costs of Crusade and Cutthroat Island is estimated to be in excess of
$150,000,000) the Company expects it will experience significant
liquidity constraints in the third and fourth quarters of 1994 prior to
the January 1, 1995 funding of up to $47,500,000 in co-production
investments and 7% Convertible Subordinated Notes due 2006 (the "7%
Notes") arranged pursuant to the Restructuring. The Company currently
believes that although it may have to adjust some of its discretionary
spending plans in the latter half of 1994, a combination of bank
financing based on presales of foreign distribution rights and the
funding of the co-production investments and 7% Notes should provide
sufficient resources to continue financing the production of Crusade
and Cutthroat Island and meet its other obligations as they come due
during the next 12 months..
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CAROLCO PICTURES INC.
Registrant
Date: May 11, 1994
/s/ William A. Shpall
William A. Shpall,
Executive Vice President and
Chief Financial Officer
<PAGE>
CAROLCO PICTURES INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to PART I - FINANCIAL INFORMATION, Item 1.
Financial Statements, Note F - Commitments and Contingencies which is
incorporated herein by reference.
Item 3. Defaults Upon Senior Securities
Because the Company did not have sufficient "surplus" as defined
in and computed in accordance with the provisions of the General
Corporation Law of the State of Delaware, the Company was unable to pay
the dividends in the amount of $1,860,000 due January 1, 1994, on its
Series A Convertible Preferred Stock. As a result, as of March 31,
1994, approximately $1,860,000 in unpaid dividends had been accrued.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The Exhibits listed below are filed as part of this Report.
Sequentially
Exhibit No. Description of Exhibit Numbered Page
10.1 Amendment to Letter of 20
Intent dated March 23, 1994
between LIVE Entertainment
Inc. and Carolco Pictures Inc.
11.1 Computation of Loss per 22
Common Share
(b) No Reports on Form 8-K were filed during the quarter ended
March 31, 1994.
<TABLE>
EXHIBIT 11.1
CAROLCO PICTURES INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended
March 31,
1993 1994
--------------------
<S> <C> <C>
Weighted average shares outstanding 30,623,569 140,015,109
Less Treasury shares (536,438) (2,327,381)
---------- -----------
Total 30,087,131 137,687,728
========== ===========
Income (oss from continuing operations $(6,781,000) $(2,031,000)
Preferred Dividends 0 (1,046,000)
---------- ----------
Income (loss) from continuing operations
attributable to common shares $(6,781,000) $(3,077,000)
========== =========
Income (loss) from continuing operations
per common share $(0.23) $(0.02)
========== =========
Extraordinary gain $0 0
========== =========
Income per share from extraordinary gain $0.00 $0.00
========== =========
Net income (loss) $(6,781,000) $(2,031,000)
Preferred Dividends 0 (1,046,000)
---------- ---------
Net income (loss) attributable to common shares $(6,781,000) $(3,077,000)
========== ==========
Net income (loss) per common share $(0.23) $(0.02)
========== ==========
</TABLE>
April 18, 1994
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Re: Amendment to Letter of Intent
Gentlemen:
The parties hereto have entered into a letter
agreement dated March 23, 1994, in connection with a
proposed business combination (the "Letter of Intent").
The parties desire to enter into this amendment (the
"Amendment") to the Letter of Intent on the following
terms:
1. Amendment to Paragraph 10.
Clause (i) of Paragraph 10 of the Letter of
Intent is hereby amended and restated in its entirety as
follows: "(i) May 23, 1994 or".
2. Miscellaneous.
(a) This Amendment shall be effective as of the
date set forth above when the parties hereto shall have
executed and delivered the Amendment. This Amendment may
be executed in any number of counterparts, and by the
parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an
original, but all such counterparts together shall
constitute but one and the same instrument.
(b) On and after the date hereof, each reference
in the Letter of Intent to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to
the Letter of Intent shall mean and be a reference to the
Letter of Intent as amended by this Amendment.
(c) It is hereby agreed that, except as
specifically provided herein, this Amendment does not in
any way affect or impair the terms and conditions of the
Letter of Intent, and all terms and conditions of the
Letter of Intent are to remain in full force and effect
unless otherwise specifically amended, waived or changed
pursuant to the terms and conditions of this Amendment.
(d) This Amendment shall be governed by, and
construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
(e) This Amendment is entered into for the
express benefit of the parties hereto only and is not
intended, and shall not be deemed, to create in any other
person any rights or interest whatsoever, including any
rights as third party beneficiary.
Please acknowledge your agreement to, and
acceptance of, the foregoing, by executing a copy of this
Amendment in the appropriate space set forth below and
returning the same to the undersigned, whereupon it will
constitute our agreement with respect to the matters
contained herein.
Very truly yours,
CAROLCO PICTURES INC.
By:/s/ Robert Goldsmith
Name: Robert Goldsmith
Title: Senior Vice President and General Counsel
Agreed to and accepted as of
the date first written above:
LIVE ENTERTAINMENT INC.
By:/s/ Michael J. White
Name: Michael J. White
Title: Executive Vice President
