-209-
the Carolco securities had no value. As explained below, we
agree with respondent.
By November 1995, Carolco faced serious financial
problems.155 Once a powerhouse in motion picture production, in
1995 and 1996 Carolco was insolvent and unable to continue movie
production. Its 1993 financial restructuring had proven
unsuccessful, and Carolco decided to sell its film library,
certain projects, and its movie studio. In the fall of 1995,
Carolco accepted a $47.5 million offer from Twentieth Century
Fox, foreclosing any possibility of Carolco’s continuing as a
going concern. On November 10, 1995, Carolco filed a chapter 11
bankruptcy petition.156
Prior to December 11, 1996, the Debtors’ and Creditors’
Committee had filed its first and second plans of
155 For example, Carolco’s consolidated balance sheets for
1993 and 1994, show that liabilities exceeded assets, thereby
indicating negative net worth. These balance sheets also show
that the total stockholders’ deficiency (negative net worth)
increased from $21.07 million in 1993 to $64,521,000 million in
1994. Carolco’s consolidated statements of operations for 1993
and 1994, show net losses of $63,958,000 million in 1993 and
$43,451,000 million in 1994. Carolco’s consolidated statements
of cashflows for 1993 and 1994, show that net operating cashflow
was negative $6,322,000 for 1993 and negative $47,113,000 for
1994.
156 In the bankruptcy proceedings, Canal+ made a $58 million
offer for Carolco’s assets, which the bankruptcy court
subsequently approved on Mar. 21, 1996.
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