-206-
to expire, and low-budget exploitation-genre films. Mr. Peters
selected only the “U.S. Video Film Rights” for the EBD film
titles. Mr. Peters testified that many of the physical materials
for the EBD film titles were stored at the Epic warehouse, a
facility that was not secured and was not temperature- or
humidity-controlled. Mr. Peters’s testimony and his unique
knowledge of the nature and condition of the EBD film titles
seriously undermine petitioner’s position that the EBD film
titles had a value in the range of $6.9 to $9 million.
The veracity of Mr. Peters’s testimony is confirmed by
SMHC’s treatment of the EBD film titles following their
contribution. SMHC, as the purported owner of the EBD film
rights, did not regard those film rights as having any value.
Indeed, following CLIS’s contribution of the EBD film library to
SMHC, SMHC reported on its draft financial statements for the
period ended December 10, 1996, that the value of the EBD film
library was not material to its financial statements.151 In a
151 Petitioner contends that SMHC’s financial statements are
not relevant to the valuation of the EBD film rights, because the
financial statements were completed after Dec. 11, 1996. SMHC’s
financial statements correspond to the period ended Dec. 10,
1996, and presumably reflect SMHC’s treatment of the EBD film
rights during that time period. Although the financial
statements were completed after Dec. 10, 1996, financial
statements are invariably completed after the financial period to
which they relate. Petitioner points to no event that changed
the value of the film rights between Dec. 10, 1996, and the date
the financial statements were completed. We find that SMHC’s
treatment of the EBD film library on its financial statements is
(continued...)
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