UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

Form 10-K

 

(Mark One)

   

[ ]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December   31, 2014

Or

 

   

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from  ______  to

 

Commission file number 333-176093

 

 

Carolco Pictures, Inc.

(Exact name of registrant as specified in its charter)

 

     

Florida

 

26-4330545

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

5550 Glades Road, Ste. 500, Boca Raton, Florida

 

33431

(Address of principal executive offices)

 

(Zip Code)

 

 

Registrant s telephone number  (561) 826-9307

 

Securities registered pursuant to Section   12(b) of the Act:

None

 

Securities registered pursuant to Section   12(g) of the Act:

None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    [ ]  Yes    [X]  No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section   13 or Section   15(d) of the Act.      [ ]  Yes    [X]  No

 

 

 
1

 

 

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 a 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.   [X]  Yes    [ ]  No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    [X]  Yes    [ ]  No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    [   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of  large accelerated filer accelerated filer non-accelerated filer , and  smaller reporting company ”  in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

[  ]

 

Accelerated filer

[  ]

  

  

  

 

  

Non-accelerated filer

[  ]

  

Smaller reporting company

[X]

   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)     [ ]  Yes    [X]  No

 

There was no trading market for the voting and non-voting common equity held by non-affiliates on the last business day of the registrant s most recently completed second fiscal quarter.

 

The number of shares outstanding of the registrant s common stock as of March 31, 2015 is 56,967,000.

 

DOCUMENTS INCORPORATED BY REFERENCE  —  NONE

 

 

 
2

 

   

TABLE OF CONTENTS

FORM 10-K

 

PART I

 

PAGE NO.

 

 

 

Item 1.

Business.

4

Item 1A.

Risk Factors.

10

Item 1B.

Unresolved Staff Comments.

10

Item 2.

Properties.

10

Item 3.

Legal Proceedings.

10

Item 4.

Removed and Reserved.

10

 

 

 

PART II

 

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

11

Item 6.

Selected Financial Data.

11

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

11

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

15

Item 8.

Financial Statements and Supplementary Data.

15

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

16

Item 9A.

Controls and Procedures.  

16

Item 9B.

Other Information.

16

 

 

 

PART III

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance.

16

Item 11.

Executive Compensation.

22

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

23

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

24

Item 14.

Principal Accounting Fees and Services.

24

 

 

 

PART IV

 

 

 

 

 

Item 15.

Exhibits, Financial Statement Schedules.

24

 

Signatures

26

 

 

 

 

 

 
3

 

 

Part I

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Information contained in this Form 10-K contains  forward-looking statements. ”  These forward-looking statements are contained principally in the sections titled  Business, ”  and  Management s Discussion and Analysis of Financial Condition and Results of Operations, ”  and are generally identifiable by use of the words  may, ” “ will, ” “ should, ” “ expect, ” “ anticipate, ” “ estimate, ” “ believe, ” “ intend ”  or  project ”  or the negative of these words or other variations on these words or comparable terminology.    The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our future financial performance; the continuation of historical trends; the sufficiency of our cash balances for future needs; our future operations; the relative cost of our operation methods as compared to our competitors; new production projects, entry and expansion into new markets; achieving status as an industry leader; our competitive advantages over our competitors; brand image; our ability to meet market demands; the sufficiency of our resources in funding our operations; our intention to engage in mergers and acquisitions; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to:    the risks of limited management, labor and financial resources; the risks generally associated with develop stage companies; our ability to establish and maintain adequate internal controls; our ability to develop and maintain a market in our securities; and our ability obtain financing, if and when needed, on terms that are acceptable.     Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

As used in this Form 10-K  we our us the Company ”  and  Carolco ”  refer to Carolco Pictures, Inc. and its subsidiary unless the context requires otherwise.

 

Item   1.

BUSINESS

Overview

 

We are an award winning feature film and television specials production company. We seek to finance, produce and distribute one or more television series and feature films to be licensed for exploitation in domestic and international theatrical, television, cable, home video and pay per view markets. Through our subsidiary High Five Entertainment, we specialize in the development and presentation of quality television programming including series, specials, pilots, live events and award shows. We seek to combine modern business strategy with old-fashioned industry experience by bringing together highly trained relative newcomers and entertainment industry stalwarts to create low risk, high profit and artistically acclaimed feature film and television projects.

 

Corporate History Summary

 

We were incorporated on February 20, 2009, in the State of Florida, under the name York Entertainment, Inc. On October 5, 2010, we amended our articles of incorporation to change our name to Brick Top Productions, Inc. Effective December 31, 2014, we amended our articles of incorporation to change our name to Carolco Pictures, Inc. For a complete history of our operations since we were incorporated in February 2009, please refer to our reports and documents filed with SEC at www.sec.gov.

 

Business Plan, Objectives and Recent Developments

 

Carolco Pictures creates feature films and television entertainment content.

 

As disclosed in our Form 8-K filed with the SEC on November 24, 2014, we entered into an Executive Services Agreement with Mario Kassar, the producer and executive producer of world-wide blockbuster films for over 30 years, to deliver future films. We did this after acquiring the right to use the then defunct name “Carolco” and our contemporaneous name change from Brick Top Productions, Inc. to Carolco Pictures, Inc. We did so because we believe in Mario Kassar's talent and penchant for making profitable feature length films.

 

 

 
4

 

 

As previously disclosed, we appointed Mario Kassar as our Chairman of the Board of Directors and entered into an Executive Services Agreement with him to deliver future films. Mr. Kassar has been a producer and executive producer of world-wide blockbuster feature films for over 30 years and is expected to build an entirely new library of memorable films for today’s generation under the Carolco Pictures brand

 

As disclosed in our Form 8-K filed with the SEC on December 17, 2014, we entered into an Executive Services Agreement with Harrison Smith and Felissa Rose, pursuant to which, in part, Mr. Smith and Ms. Rose will become co-heads of our Independent Genre Film Development with each to be billed separately. This agreement becomes effective when we allocate an equity investment of at least $1,000,000 for the film “ Love Bites ” no later than July 31, 2015.

 

We believe that the track record of our stellar management team speaks for itself. Their collective accomplishments and projects are substantial as they have been nominated for, and won, Academy Awards, Emmy Awards, Lumiere Awards and other such awards. As members of the Hollywood film community, they are considered business leaders and visionaries with experience and ambition relevant thereto.

 

The business side of our management team is disciplined in financial risk mitigation techniques. Aside from the commercialization of our management team's past successes, which cannot in themselves necessarily predict future success, we are experienced at balancing projects, budgets and growth to effectively manage risk in light of our business objectives.

 

We have unique access to Hollywood talent, scripts and third parties ripe for acquisition. The reputation of our management team in producing some of the most-well known, talked about and socially ingrained entertainment opens doors for us that are closed to others. In addition to our combined networks and contacts, our team is particularly adept at choosing the most commercially viable projects - that are also the most fun.

 

We represent the newest thinking in entertainment industry profitability. Utilizing an amalgam of business philosophies from its impressive management team, we will focus on growth and efficiency. Our development plan combines modern business strategy with old-fashioned industry experience. Our early acquisition, High Five Entertainment, has given us highly regarded, industry leading talent. We have matched that talent with new and existing property development. By targeting additional revenue positive entertainment projects and companies, we expect to achieve increased profitability and efficiency through scale.

 

After acquiring the rights to the name “Carolco”, we rebranded ourselves. We then brought on some of the biggest names in entertainment. We are now prepared to move forward with our next group of projects.

 

Film Production

 

The Filmmaking Process . The filmmaking process starts with an idea, from freelance writers or from existing literary or other works. Successful ideas are generally written up as a treatment (or story description) and then proceed to a screenplay, followed by the storyboarding process and then finally into the production process. Excluding the script and early development phase, the production process, from storyboarding to filming out the final image, for a full-length feature film can take approximately two to four years. We outsource individuals that are responsible for preparing and offering story-lines and ideas for the initial stages of development. These individuals, through creative development controls, are responsible for ensuring that ideas follow the best creative path within a desired budget and schedule. The complexity of each project, the background locations, the characters and all of the elements in a project create a very intricate and time-consuming process that differs from project-to-project. The four general phases for development of a full-length feature film include (1) the development phase which consists of story and visual development, (2) the pre-production phase which involves final refinement of the script and story, (3) the production phase which involves the actual filming and (4) the post-production phase where elements such as sound effects and the music/score are added.

 

 

 
5

 

 

Films in Production and Development

 

We are currently in negotiations to produce, in contract to produce or have acquired the rights to screenplays to produce several feature films for release in 2016 and 2017. In addition, we have a number of projects in development and negotiation that are expected to fill our release schedule in 2018 and beyond. The table below lists all of our potential films which may be released through the end of 2017.

 

Title

 

Expected Release Date*

Audition

 

October, 2017

Bless Me

Father

 

To be determined

Love

Bites

 

October, 2016

 

*Release dates are tentative. Due to the release slate of competitive films and the uncertainties involved in the development and production of feature films, the release date can be significantly delayed or otherwise changed.

 

Audition. We plan to invest up to $4,000,000 of the proceeds from this offering to partially finance the production of a feature film entitled Audition, based on a screenplay written by Richard Gray, by acquiring a membership interest in Audition Productions, LLC (“Audition Productions”). Audition is a psychological horror-drama based on Ryu Murakami's best-selling novel. It tells the story of a widower who takes an offer to screen girls at a special audition, arranged for him by a friend to find him a new wife. The one he fancies is not who she appears to be.

 

The screenplay author and proposed director, Richard Gray, has directed four feature films, two feature-length documentaries for FOX, a comedy series pilot for The Movie Network, and an eight-part reality I drama series for FOX. Mr. Gray is a graduate of The Victorian College of the Arts School of Film and Television (AUS).

 

The producer and managing member of Audition Productions, Mario Kassar, is a major innovator in international motion picture productions, financing and distribution. Mr. Kassar's decades of experience as both producer and executive producer of worldwide blockbusters can be characterized like his movies as action-packed. Mr. Kassar has released 36 motion pictures, which have been nominated for 16 Academy Awards, is largely considered to be the godfather of international film distribution and marketing. Renowned for his talent for green-lighting projects that go on to become worldwide blockbusters, Kassar served as Executive Producer of such hits as the Rambo films, Terminator 2: Judgment Day, Basic Instinct, Total Recall, Terminator 3: Rise of the Machines, Cliffhanger and Stargate, among others. In total, his films as producer and executive producer have grossed more than $3 billion (today's value) in worldwide theatrical box office. Mario Kassar hand picked Audition and Richard Gray.

 

Bless Me Father. In June 2013, we acquired the rights to a screenplay written by Nicholas Turturro titled “ Bless Me Father .”  Set in Manhattan’s West Village in the late 1970s to early 1980s, ‘Bless Me Father’, written by Emmy-nominated actor, Nicholas Turturro, is an urban drama and coming-of-age story of Nicky Battaglia, a 16-year-old kid growing up and navigating adolescence in his predominately Italian neighborhood. Following the mysterious and monumental loss of Buddy Battaglia, his elder brother, best friend and ultimate protector, Nicky must come to terms with himself, his flawed family marked by an overly controlling Mafiosi father, and his neighborhood on the cusp of change.

 

We intend to finance, produce and sell the distribution rights once we have the additional capital necessary to do so. We expect total project costs to be approximately $500,000. We may begin development as soon as we raise the additional necessary capital required to fund this project. This project would take approximately 6 months from acquisition of the rights to completion of post-production. Upon completion we would attempt to pre-sell the distribution rights abroad, at no additional cost to us in order to generate revenue and fully or partially cover the costs of the project. This phase of the project would take approximately 90 - 120 days to complete if successful.

 

The rights to Bless Me Father are owned by our subsidiary York Productions II. We manage and control York Productions II’s financing and day to day operations.

 

 

 
6

 

 

Love Bites . On December 15, 2014, we entered into an Executive Services Agreement with Harrison Smith and Felissa Rose (individually “Smith” and “Rose”) in connection with our plans to produce a movie titled “ Love Bites ” based on the best-selling book by famed horror actress Adrienne Barbeau (The Fog, Creepshow, Swamp Thing, Escape From New York). Smith and Rose expect to take the popular novel and rework it into a feature length film. Based on the popularity of the book, we expect Love Bites to be a commercial success.

 

Pursuant to the terms of the Executive Services Agreement, Smith and Rose will become co-heads of the our Independent Genre Film Development with each to be billed separately as Head of Independent Genre Film Development. The agreement becomes effective when we complete an equity investment of at least $1,000,000 for the film “Love Bites” no later than July 31, 2015. As compensation for their services, we agreed to issue to each of Smith and Rose 25,000 shares of our common stock when the agreement becomes effective.

 

Producer/Director Harrison Smith is well-known in the horror genre. He has worked with Academy Award nominee Eric Roberts and Academy Award winner Cloris Leachman as well as Billy Zane, Dee Wallace, Danielle Harris, Mischa Barton and many others. Through his production company, Class of '85, Smith has had remarkable success with independent genre films. Most recently, he produced and directed Zombie Killers: Elephant's Graveyard which was acquired by Anchor Bay Entertainment and Red Sea Media. It is set for wide release in February 2015 and is expected to be a box office winner.

 

Legendary Actress / Producer Felissa Rose has been transforming the horror genre since she pioneered the role of Angela in the cult classic Sleepaway Camp series. After attending NYU's Tisch School of the Arts, Felissa appeared in countless movies, turning more recently to production of film and television content. A talented fan favorite on both sides of the screen, Felissa brings incredible buzz to her projects.

 

Television Production

 

Through our subsidiary High Five Entertainment, an Emmy Award-winning entertainment production company based in Nashville, Tennessee, we specialize in the development and presentation of quality television programming including series, specials, pilots, live events and award shows. Founded in Los Angeles, California in 1983, High Five Entertainment’s unwavering commitment to excellence in entertainment production for more than 30 years continues to foster an impressive legacy of unsurpassed client satisfaction through collaborative creative development, meticulous planning and flawless delivery of world-class entertainment properties. High Five Entertainment generates revenue from advertising sales and distribution of content through media channels such as theatrical, home entertainment and television.

 

High Five Entertainment is synonymous with groundbreaking music television events (“The Women of Country” CBS, “This Is Garth Brooks” NBC, “At the Ryman” CMT and “The Road” Tribune Entertainment). Today, High Five Entertainment continues to be one of the premiere producers of quality music-television entertainment with ongoing episodes of Opry Live quality music-television entertainment. High Five Entertainment’s successful foray into the world of motorsports entertainment, included producing SPEED Channel’s (soon to be Fox Sports One) top-rated series ”Pass Time”, a riveting, fast-paced game show for gear heads. High Five Entertainment produced more than 150 episodes of the show from February 2008 to May 2012. Also for SPEED Channel, from February 2008 to April 2009, High Five Entertainment produced two seasons of the popular unscripted series "Drag Race High" pitting two area high school motor-shop classes in direct head to head competition building and racing their own dragsters. High Five Entertainment followed this with the series “Burnout – The Ultimate Drag Race Challenge” in Phoenix, AZ which aired on MTV2. High Five Entertainment also produced a PBS pledge special with Dr. Daniel Amen, iChange Your Brain, Change Your Life”, and the follow-up special “A Magnificent Mind At Any Age”.

 

High Five Entertainment plans to collaborate with television maverick, Rich Christensen, the creator, producer and host of several successful car racing television show franchises, to exclusively produce the television and internet show projects that he is presently developing. 

 

 

 
7

 

 

High Five Entertainment, produced television's first ever live musical performances weaved throughout a previously recorded network television premiere. On September 24, 2014, in connection with ABC's  Nashville premieres on both the East Coast and West Coast, High Five Entertainment mixed fantasy and reality as it brought together the  Nashville  stars with actual country music legends, broadcasting two concerts directly from the Bluebird Café set. Receiving real life acclaim for the innovation and quality, High Five Entertainment continues its ground breaking work. The progressive mixture of live and taped footage comes immediately after High Five Entertainment produced the Americana Music Honors & Awards, another in a series of well received accomplishments.

 

High Five Entertainment again produced the Country Music Awards Red Carpet event for the CMT network, leading in to the 48th Annual CMA Awards. We believe High Five Entertainment will continue to produce its ground breaking and well received programming in the immediate future.

 

Other television productions include:

 

The television pilot titled “ Nick The Doorman ” which was completed by our subsidiary York Productions in 2010. Nick The Doorman is an urban dramatic comedy set in New York City. It is centered on the life experiences of a doorman at a historic and upscale Central Park South hotel. The doorman and his colorful cast of friends, through interactions with one another and the hotel’s upper class celebrity and high society guests, provide a unique perspective of everyday life in the big city and of the similarities and distinctions between the classes. The screenplay was written by Nicholas Turturro, who was involved in the development and production of the project, and is involved in its marketing. Mr. Turturro is an accomplished American film, television and on-stage character actor. He has garnered an Emmy nomination for a role played on the TV program NYPD Blue, and has acted in numerous feature films. Mr. Turturro plays the lead character in the pilot The Doorman which he produced.

 

We are actively interviewing persons to serve as a show runner for the pilot. A “show runner” is a person that is responsible for presenting a television pilot or idea for sale to major television networks through his or her professional industry contacts. Show runners are only paid if and when a show is sold to a network, at which point we would receive revenue. The show runner’s compensation would be a predetermined fee set in his or her agreement with the company. This fee will be anywhere from 3 to 5% of the total commitment that the network will pay for the project. This process can take anywhere from approximately 3 months to as long as 36 months from the date of project completion. Nicholas Turturro, the writer and producer of the pilot, has estimated that the project will be marketable for several years after its completion, at which point the market demand for the actors associated with the project may become stale. We intend to market the project over this time period. We are also considering expanding the pilot as a full length feature film. We have a letter of intent from a distributor that is interested in distributing this pilot as a full length feature film. This would require us to shoot an additional 90 minutes of footage to combine with the existing 90 minutes. Mr. Turturro believes this will increase the projects marketability and would cost an additional $100,000.

 

We continue to actively seek additional opportunities to finance television and film projects. Ultimately, our goal is to pursue the production of several feature films utilizing prominent actors, beyond those described above.  The costs of such projects typically range from approximately $200,000 to as much as $20,000,000 and can take as little as 3 months to as long as 1 year to complete. Major television and film projects often provide the opportunity to pre-sell exclusive distribution rights to overseas territories, thereby hedging part of the project cost.  At any given time there are thousands of scripts for screenplays that are circulating throughout the motion picture industry, all of which are seeking financing, production and/ or distribution. Overseas territories will pay for the exclusive rights to distribute a particular film. These rights can be pre-sold to hedge the cost of the film. There is no determining body that sets the pricing. There is a constantly changing guideline that is determined by an actor’s marketability and what his or her films have recently commanded for distribution rights. This merely represents a set of guidelines that is a starting point for negotiations. Initially this will be our primary method of distribution. In the event we are able to pre-sell international distribution rights for a project we will then look to secure domestic distribution of the project. Our goal is to raise capital through an equity offering which will enable us to acquire the rights to finance, produce and contract distribution of these projects. The costs will vary per project, determined by the level of talent, location and scope of the production. The pre-sale of distribution rights is applicable only to full length feature film projects and does not apply to television projects such as  The Doorman .

 

 

 
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We have explored and negotiated an agreement for the construction of a platform necessary to disseminate content (a series of 5-10 minute shorts) via a smart phone application.  We already have over 90 minutes of completed footage from filming “ Nick The Doorman ”.  The estimated cost is approximately $50,000. The first step is analysis and design which will cost $6,000 and take approximately 2 weeks. The development (coding) will cost $30,000 and take approximately 2 months to complete. The quality control will cost $10,000 and take approximately 1 week. The final step is deployment which will cost $4,000 and will be completed in three days. We will require additional capital to complete this project. Our goal is to advertise our link through various social networking sites which will drive traffic to our site which in turn will create a desirable advertising venue. This part of the project will not require additional capital and will take approximately 3 to 5 months. We anticipate this entire process to take approximately 6 to 8 months from start to completion at which time we would expect it to begin generating revenue.

 

In September, 2014 we acquired intellectual property rights in relation to the trademarked Carolco Pictures, a name synonymous with high quality blockbuster films from the Terminator series, Rambo series and Basic Instinct to Total Recall and the Doors, amongst many others, as described herein. The Company believes it will successfully leverage the name that brought the public such noteworthy films and capitalize on this acquisition. We are actively seeking to acquire the rights to the concomitant service mark and believe we will do so within the next 90-120 days.

 

On December 24, 2013, the Company entered into a Stock Purchase Agreement with Martin Fischer (the “SPA”), pursuant to which the Company acquired from Mr. Fischer seventy-five (75%) percent of the issued and outstanding stock (the “Shares”) of S&G Holdings, Inc., a Tennessee corporation doing business as High Five Entertainment (“High Five”), making High Five a majority owned subsidiary of the Company. Under the terms of the SPA, the Company paid Mr. Fischer Two Hundred Ten Thousand ($210,000) Dollars at closing, made a capital contribution to High Five in the amount of One Hundred Thousand ($100,000) Dollars at closing, and agreed to make additional capital contributions of Three Hundred Sixty Five Thousand ($365,000) Dollars to High Five over the first nine (9) months of 2014, to fund business operations. In the event the Company fails to make the required capital contributions to High Five, the Company will be required to return certain of the Shares to Mr. Fischer.

 

High Five Entertainment

 

As briefly described above, High Five Entertainment is an internationally recognized, Emmy Award-winning entertainment production company based in Nashville, Tennessee specializing in the development and presentation of quality television programming including series, specials, pilots, live events and award shows.

 

Founded in Los Angeles, California in 1983, High Five’s unwavering commitment to excellence in entertainment production for more than 30 years continues to foster an impressive legacy of unsurpassed client satisfaction through collaborative creative development, meticulous planning and flawless delivery of world-class entertainment properties.

 

Relocating to Nashville in the early nineties, High Five Entertainment became synonymous with the presentation of groundbreaking music television events (“The Women of Country” CBS, “This Is Garth Brooks” NBC, “At the Ryman” CMT and “The Road” Tribune Entertainment). Today, High Five continues to be one of the premiere producers of quality music-television entertainment with ongoing episodes of Opry Live quality music-television entertainment with ongoing episodes of ame synonymous with the presentation of groundbreaking music television events mber of PBS Specials ranging from the legendary “Levon Helm - Ramble At The RymanRymanon entertainment with ongoing episodes of ame synonymous with the presentation of groundbreaking music television events mber of PBS Specials

 

High Five made an extremely successful foray into the fascinating world of motorsports entertainment, producing SPEED Channel’s (soon to be Fox Sports One) top-rated series tPass Time”, a riveting, fast-paced game show for gear heads. HFE produced more than 150 episodes of the show. Also for SPEED Channel, High Five produced two seasons the popular unscripted series "Drag Race High" pitting two area high school motor-shop classes in direct head to head competition building and racing their own dragsters. HFE followed this with the series “Burnout –uThe Ultimate Drag Race Challenge” in Phoenix, AZ which aired on MTV2.

 

 

 
9

 

 

HFE also recently produced a record-breaking PBS pledge special with Dr. Daniel Amen, iChange Your Brain, Change Your Life”, and the follow-up special “A Magnificent Mind At Any Age”.  

 

Item   1A.

Risk Factors.

 

Not required for smaller reporting companies.

 

Item   1B.

Unresolved Staff Comments.

 

None.

 

Item   2.

Properties.

 

We do not own any real property. We maintain office space at 5550 Glades Road, Suite 516, Boca Raton, Florida 33431 under a one year rental agreement, which commenced on April 1, 2014, providing for rental payments of $700 per month.

 

Item   3.

Legal Proceedings.

 

None.

 

Item   4.

Removed and Reserved

 

 

 
10

 

 

Part II

 

Item   5.

Market for the registrant s common equity, related stockholder matters and Issuer purchases of equity securities.

 

Our common stock is quoted on the OTCQB and has traded under the symbol “CRCO”. On March 30, 2015, the closing sale price for our common stock was $0.45. Our stock has been thinly traded and there can be no assurance that a liquid market for our common stock will ever develop.

 

  The following table sets forth the range of high and low bid prices for our common stock for the periods indicated. The information reflects inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

 

             

Year

 

Quarter Ending

 

High

 

Low

2014

 

December 31

 

$1.50

 

$0.20

 

 

September 30

 

$4.75

 

$0.25

 

 

June 30

 

$5.00

 

$0.05

 

 

March 31

 

$5.00

 

$5.00

2013

 

December 31

 

$5.00

 

$5.00

 

 

September 30

 

$5.00

 

$5.00

 

 

June 30

 

$5.00

 

$5.00

 

As of March 31, 2015, there were approximately 107 record holders, an unknown number of additional holders whose stock is held in “street name” and 56,967,000 shares of common stock issued and outstanding. 

 

Equity Compensation Plan Information

 

The Company has adopted a 2014 Equity Incentive Stock Plan (the “Plan”). The Plan provides for the issuance of up to 5,000,000 incentive stock options and nonqualified stock options to the Company’s employees, officers, directors, and certain consultants. The Plan is administered by the Company’s Board, and has a term of 10 years.

 

Dividend Policy

 

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

 

Issuance of Unregistered Securities

 

24,125,000 shares of common stock were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act. The purchasers received current information relating to the Company and had the ability to ask questions about the Company. Certificates representing the shares of Common Stock have been issued with appropriate restrictive legends.

 

Item   6.

Selected Financial Data.

 

Not required for smaller reporting companies.

 

Item   7.

Management s Discussion and Analysis of Financial Condition and Results of Operations.

 

 

 
11

 

 

Overview

 

We were incorporated on February 20, 2009, in the State of Florida, under the name York Entertainment, Inc. On October 5, 2010, we amended our articles of incorporation to change our name to Brick Top Productions, Inc. Effective December 31, 2014, we amended our articles of incorporation to change our name to Carolco Pictures, Inc.

 

We are an award winning feature film and television specials production company. We seek to finance, produce and distribute one or more television series and feature films to be licensed for exploitation in domestic and international theatrical, television, cable, home video and pay per view markets. Through our subsidiary High Five Entertainment, we specialize in the development and presentation of quality television programming including series, specials, pilots, live events and award shows. We seek to combine modern business strategy with old-fashioned industry experience by bringing together highly trained relative newcomers and entertainment industry stalwarts to create low risk, high profit and artistically acclaimed feature film and television projects.

 

Recent Developments

 

On February 13, 2015 we appointed Mario Kassar as our Chairman of the Board of Directors and entered into an Executive Services Agreement with him to deliver future films. Mr. Kassar has been a producer and executive producer of world-wide blockbuster feature films for over 30 years and is expected to build an entirely new library of memorable films for today’s generation under the Carolco Pictures brand.

 

On December 15, 2014 we entered into an Executive Services Agreement with Harrison Smith and Felissa Rose, whereby they will become co-heads of our Independent Genre Film Development with each to be billed separately. This agreement becomes effective when we allocate an equity investment of at least $1,000,000 for the film “ Love Bites ” no later than July 31, 2015. As compensation for the their services, the Company agreed to issued to each of Smith and Rose 25,000 shares of the Company’s common stock when it becomes effective.

 

Most recently, on February 10, 2015, Carolco Pictures, Inc. announced that it has begun pre-production on the Motion Picture “Audition”, a psychological horror-drama based on Ryu Murakami's bestselling novel to be directed by Richard Gray.

 

Private Unit Offering

 

On March 2, 2015, we commenced an offering to sell to certain “accredited investors” up to 31,250,000 units (each, a “Unit”) at a price per Unit of $0.50, each Unit consisting of one share of our common stock, one Class A Common Stock Purchase Warrant (the “Class A Warrant”) and one Class B Common Stock Purchase Warrant (the “Class B Warrant”). Each Class A Warrant entitles the holder to purchase one share of our common stock at an exercise price of $3.00 per share for a period of two years after its issuance and each Class B Warrant entitles the holder to purchase one share of our common stock at an exercise price of $6.00 per share for a period of two years after its issuance. The minimum investment amount per investor is $100,000 for 125,000 Units subject to our right to accept subscriptions in a lesser amount. We to invest up to $4,000,000 of the proceeds from this offering to partially finance the production of a motion picture based on the screenplay titled “Audition” written by Richard Gray. In addition, we plan to continue use the balance of the offering proceeds in our feature film and television production business.

   

Critical Accounting Policies

 

Principles of Consolidation. The consolidated financial statements of Company include the accounts of Carolco Pictures and its majority-owned subsidiaries, York Productions, LLC, York Productions II, LLC, and S&G Holdings, Inc. All significant intercompany balances and transactions have been eliminated.

 

 

 
12

 

 

Income Taxes. The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.    Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.    Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.    Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.    The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date. The Company adopted   section 740-10-25 of the FASB Accounting Standards Codification ( Section 740-10-25 ). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.    Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.    The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.    Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

Capitalized Pilot Costs - Film Property and Screenplay Rights.   The Company capitalizes costs it incurs to buy film or transcripts that will later be marketed or be used in the production of films according to ASC 926, Entertainment  –  Films . The Company will begin to amortize capitalized film cost when a film is released and it begins to recognize revenue from the film.

 

Non-Controlling Interest.   The Company follows paragraph 810-10-65-1 of the FASB Accounting Standards Codification to report the non-controlling interest in York Productions, LLC, York Productions II, LLC, and S&G Holdings, Inc., its majority owned subsidiary in the consolidated statements of balance sheets within the equity section, separately from the Company s stockholders ’  equity.    Non-controlling interest represents the non-controlling interest holder s proportionate share of the equity of the Company s majority-owned subsidiary, York Productions, LLC and S&G Holdings, Inc.    Non-controlling interest is adjusted for the non-controlling interest holder s proportionate share of the earnings or losses and other comprehensive income (loss) and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

 

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Jumpstart Our Business Startups Act of 2012. The JOBS Act permits an  emerging growth company ”  such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards for an  emerging growth company. ”  This election will permit us to delay the adoption of new or revised accounting standards that will have different effective dates for public and private companies until such time as those standards apply to private companies.     Upon the issuance of a new or revised accounting standard that applies to our financial statements and has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt said accounting standard.    We may take advantage of the extended transition period until the first to occur of the date we (i) are no longer an  emerging growth company ”  or (ii) affirmatively and irrevocably opt out of the extended transition period.    Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.   

 

 

 
13

 

 

For additional discussion regarding the JOBS Act and the exemptions available to  emerging growth companies ”  thereunder, please refer to the risk factor entitled  We are an  emerging growth company ”  and we cannot be certain if we will be able to maintain such status or if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors ”  contained in the section of this Prospectus entitled  Risk Factors.

 

Results of Operations for the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

 

   

Year

Ended December 31,

 
   

2014

   

2013

 

Revenue

  $ 790,467     $ Nil  

Cost of goods sold

  $ 631,326          

Operating expenses

  $ (2,899,574 )   $ (428,738 )

Net Loss from Operations before non-controlling interest

  $ (2,676,941 )   $ (430,007 )

Net Loss attributable to non-controlling interest

  $ (56,745 )   $ (1,343 )

Net Loss attributable to Carolco Pictures stockholders

  $ (2,620,196 )   $ (428,664 )

 

Revenues for the year ended December 31, 2014 were $790,467 as compared to $0 for the year ended December 31, 2013. The increase in revenue is due to the acquisition of S & G Holdings, Inc. Our future revenue plan is dependent on our ability to effectively market The Doorman pilot and close new viable acquisitions of film rights.

 

Cost of goods sold for the year ended December 31, 2014 were $631,326 as compared to $0 for the year ended December 31, 2013. The increase in cost of goods sold is due to the acquisition of S & G Holdings, Inc.

 

Operating expenses for the year ended December 31, 2014 were $2,620,196 compared to $428,738 for the year ended December 31, 2013. The increase in operating expenses is primarily due to the acquisition of S & G Holdings, Inc.

 

The Company has realized a net loss of $2,676,941 for the year ended December 31, 2014 compared to a net loss of $430,007 for the year ended December 31, 2013. The increase in net loss is primarily due to the acquisition of S & G Holdings, Inc.

 

Liquidity and Capital Resources

 

   

Year

Ended

December 31, 2014

   

Year

Ended

December 31, 2013

 

Net Cash (Used In) Provided by Operating Activities

  $ (462,868 )   $ (181,369 )

Net Cash Used in Investing Activities

  $ (51,203 )   $ (156,223 )

Net Cash (Used In) Provided by Financing Activities

  $ 538,836     $ 470,050  

Net Change in Cash

  $ 24,765     $ 132,458  

   

As of December 31, 2014, our total assets were $548,763 and our total liabilities were $519,806 and we had negative working capital of $(292,801). Our financial statements report a net loss of $2,676,941 for the year ended December 31, 2014 and a net loss of $430,007 for the year ended December 31, 2013.

 

 

 
14

 

 

Pursuant to the terms of our employment agreement with Mr. Bafer, we are obligated to pay Mr. Bafer $150,000 per year. On October 1, 2011, Mr. Bafer agreed to waive future base salary under his employment agreement, until further notice, in an effort to reduce our operating expenses.    Prior to that, we did not have sufficient cash flows to make the required payments under the agreement and therefore accrued all unpaid salary until such time we generate revenues from operations or raise additional capital through one or more financing transactions.

 

As part of the Company s acquisition of S&G Holdings, Inc. (doing business as High Five Entertainment), the Company entered into an Executive Employment Agreement with Mr. Martin Fischer, pursuant to which Mr. Fischer will serve as High Five s president for an initial term of five years with an initial base salary of $144,000.  He will also be entitled to an annual bonus of up to $100,000 and a monthly car allowance of $500.  In addition, the Company awarded Mr. Fischer an option to purchase 1,491,351 shares of common stock, these options vest throughout 2014.

 

We have suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have raised additional capital through equity offerings and loan transactions, and, in the short term, will seek to raise additional capital in such manners to fund our operations.    We do not currently have any third party financing available in the form of loans, advances, or commitments.    Our officers and shareholders have not made any written or oral agreement to provide us additional financing.    There can be no assurance that we will be able to continue to raise capital on terms and conditions that are deemed acceptable to us.

 

Off Balance Sheet Arrangements

 

As of December 31, 2014, there were no off balance sheet arrangements.

 

Jumpstart Our Business Startups Act of 2012

 

The JOBS Act permits an  emerging growth company ”  such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards for an  emerging growth company. ”  This election will permit us to delay the adoption of new or revised accounting standards that will have different effective dates for public and private companies until such time as those standards apply to private companies. Consequently, our financial statements may not be comparable to companies that comply with public company effective dates.  

 

Item   7A.

Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.

 

Item   8.

Financial Statements and Supplementary Data.

 

The financial statements required by this Item   8 are included at the end of this Report beginning on page F-1 as follows:

 

 

PAGE NO.

AUDITED FINANCIAL STATEMENTS:

 

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheets as of December 31, 2013 and 2012.

F-2

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012.

F-3

Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2013 and 2012.

F-4

Consolidated Statement of Cash Flows for the years ended December 31, 2013 and 2012

F-5

Notes to Consolidated Audited Financial Statements

F-6

 

 

 

 

 
15

 

   

Item   9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item   9A.

Controls and Procedures.

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We carried out an evaluation as required by paragraph (b)   of Rule 13a-15 and 15d-15 of the Exchange Act, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules   13a-15(e) and 15d-15(e) under the Exchange Act as of December   31, 2014. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December   31, 2014.

 

Report of Management on Internal Controls over Financial Reporting.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management conducted an assessment of the effectiveness of the Company s internal control over financial reporting as of December   31, 2014, utilizing the framework established in Internal Control  –  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company s internal control over financial reporting as of December   31, 2014, was not effective, primarily as a result of the fact that the Company has few employees, only one of whom has a background in accounting, and lacks segregation of duties.

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management necessarily applied its judgment in assessing the benefits of controls relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected.

 

Changes in Internal Control over Financial Reporting.

 

There have been no changes in our internal controls over financial reporting that occurred during the fourth fiscal quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item   9B.  

Other Information.

 

None.

Part III

 

Item   10.

Directors, Executive Officers and Corporate Governance.  

 

 
16

 

 

Set forth below is the name, age, and positions held by our executive officers and directors:

 

         

Name

 

Age

 

Position(s) and Office(s) Held

Mario Kassar (1)

 

63

 

Chairman of the Board of Directors

Alexander Bafer

 

43

 

Chief Executive Officer, Chief Financial Officer, and Director

Frank Esposito (2)

 

42

 

Chief Legal Officer and Director

Martin Fischer

 

59

 

Director, and President of High Five Entertainment

         

Jason Goodman (3)

 

42

 

Director

Donovan J. Leitch (4)  

 

46

 

Director

Robert Ortiz (5)  

 

43

 

Director

 

(1) Mr. Kassar was appointed as a director effective as of February 13, 2015.

(2) Mr. Esposito was appointed as Chief Legal Officer on July 14, 2014 and as a director on October 20, 2014.

(3) Mr. Goodman was appointed as a director effective as of November 21, 2014.

(4) Mr. Leitch was appointed as a director effective as of April 4, 2014.

(5) Mr. Ortiz was appointed as a director effective as of December 15, 2014

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. Our board of directors appoints officers annually and each executive officer serves at the discretion of our board of directors.

 

Set forth below is a brief description of the background and business experience of our current executive officers and directors.

 

Mario Kassar . Mr. Kassar was appointed as a director effective as of February 13, 2015.

 

Mr. Kassar is a major innovator in international motion picture productions, financing and distribution. He developed many of the methods still used by studios today. In total, his films have grossed more than $3 billion (today's value) in worldwide theatrical box office.

 

Mario Kassar, as an independent filmmaker, began with a small-scale release film entitled The Amateur , followed by Victory a large-scale release. In 1976, Kassar co-founded the original Carolco Pictures with Andrew Vajna, which became a major force among independent production companies. Carolco's first production venture made motion picture history when a new American hero, John Rambo, was introduced to audiences in First Blood . This Sylvester Stallone action adventure became an international success, grossing $120 million worldwide. Three years later, in 1985, the company released Rambo: First Blood Part II , which grossed $300 million worldwide. With Carolco, Kassar was executive producer on such films as Alan Parker's Angel Heart , Rambo III , and Johnny Handsome . Other projects included Music Box , Mountains of the Moon , Total Recall , Air America , Narrow Margin , and Jacob's Ladder .

 

In late 1989, Kassar became the sole shareholder and Chairman of the original Carolco Pictures. He subsequently produced such films as the critically acclaimed Rambling Rose (which received two Academy Award nominations for Best Actress and Best Supporting Actress), The Doors , LA Story , Terminator 2: Judgement Day (which grossed over $500 million worldwide, was nominated for six 6 Academy Awards and won four), the erotic thriller Basic Instinct (which garnered two Oscar nominations for best editing and best original score), Universal Soldier , and Cliffhanger (1994, which earned three Oscar nominations).

 

 

 
17

 

 

The success of the sci-fi film Stargate established a cable series in 1997 entitled Stargate SG-1 . Further, Chaplin with Robert Downey Jr. playing the life of legendary actor Charlie Chaplin, directed by Lord Richard Attenborough, was honored with three Academy Award nominations, including one for Robert Downey Jr. for Best Actor and three Golden Globe nominations.

 

In 1998, Kassar re-teamed with Andrew Vajna to form C-2 Pictures. They produced I-Spy (with Eddie Murphy) for Sony Pictures and Terminator 3: Rise of the Machines (2003), which allowed a window for the franchise to gain new-life during (2008-2009) with: Terminator: The Sarah Connor Chronicles .

 

Alexander Bafer . Mr. Bafer is a founder of the Company and has served as its Chief Executive Officer, Chief Financial Officer and a Director since February 2009. Mr. Bafer began his career in the financial industry in mid-1990's and joined Merrill Lynch in New York, NY in 1996 where he assisted in the management of a $500 million portfolio, and acquired a Series 7 license, Series 63 license, Series 65 license, and health and life insurance licenses. Thereafter Mr. Bafer accepted employment as a Senior Account Executive with Preferred Securities Group in Boca Raton, Florida, where he was ultimately promoted to President and Managing Director of the Firm's 3 trading offices, 50 registered representatives, and numerous support personnel. Mr. Bafer then accepted a position as a fund manager with United Capital Management in Ft. Lauderdale, Florida, where he was closely involved in all aspects of organizing and managing a hedge fund. Mr. Bafer then served as the Vice President of Guaranteed Mortgage Bankers where he was responsible for managing and training a sales staff of 75 in 6 separate multi-state offices. After a brief period as a mortgage banker with Royal Bank of Canada, Mr. Bafer assumed the role of Executive Vice President of Investor Relations with Digikidz, a children's media company, where he was involved in raising capital for the company. In addition, for much of his career Mr. Bafer has been involved with Investment Management of America, a venture capital firm and incubator, where he has been instrumental in raising capital for several start-up ventures. For the last five years Mr. Bafer has focused his attention on the operations of the Company and trading securities for his own account. Mr. Bafer received a B.S. degree in Pre-Law from St. John's University in 1995, graduating in the top four percent of his class. Mr. Bafer has voluntarily allowed his securities licenses to expire.

 

Frank Esposito . Mr. Esposito was appointed as Chief Legal Officer on July 14, 2014 and as a director on October 20, 2014.

 

Mr. Esposito, former general counsel to several notable production companies and previously counsel to software development and social media companies has also represented myriad artists, including a Grammy Award nominee and feature film directors. He has been serving as our Chief Legal Officer since July, 2014. Mr. Esposito will continue to participate in creating, communicating and sustaining our corporate vision and strategic initiatives.

 

Mr. Esposito began his legal career as an Assistant Corporation Counsel for the City of New York. Representing Mayor Rudolph Giuliani and other high level officials in litigation centering on the policies and practices of New York City, Mr. Esposito functioned as lead counsel for several high profile litigations. Bringing a tremendously successful public sector litigation practice to conclusion, Mr. Esposito left the Corporation Counsel's Office for a preeminent private sector litigation firm. After that firm merged with a leading international law firm, Mr. Esposito continued his representation of Fortune 500 and other multi-national corporations on an international level.

 

Mr. Esposito has spent nearly two decades working in the legal profession representing a diverse array of clients from public officials to public corporations in nearly every business sector, including the financial services, transportation, banking, security and defense sectors. He has tried both federal and state cases, has appeared before judges, commissioners and arbitrators around the country and has argued innumerable matters before courts of varying jurisdictions. Likewise, he has counseled clients on highly capitalized transactions, joint ventures, distribution deals and business arrangements of all types. He has drafted contracts of nearly every form and successfully negotiated agreements covering a range of commercial and individual matters. During his legal career he has developed an extensive network of individuals in nearly every type of business. Furthermore, aside from myriad professional memberships and accolades, he is the Acting Village Justice in his hometown.

 

 

 
18

 

 

Martin Fischer. Mr. Fischer serves as President and co-founder of High Five Entertainment and a director. Mr. Fischer is the guiding force in the continuing evolution behind High Five. He is responsible for overseeing all areas of production and development across High Five’s diverse programming slate. Martin graduated from USC's School of Cinema in 1982 and co-founded High Five Entertainment in 1983. He worked diligently in Los Angeles for the next 10 years producing more than 300 music videos for artists of all genres, along with commercials and short form programming. In 1994, High Five's production of the critically acclaimed syndicated series "The Road" brought him to Nashville, where he and the rest of the HFE executive brain trust became enchanted with southern hospitality and the quality of life. Mr. Fischer continues to lead the company in the development and production of series, long form and large scale music events for a wide range of clients, including CMT, NBC, CBS, ABC, HBO, PBS, TLC, FOX SPEED Channel, VH1 and GAC. In addition to hundreds of domestic projects, he has produced numerous specials in Germany, Ireland, England and around the world. Mr. Fischer’s credit list is synonymous with High Five's own. He’s received numerous industry awards and recognition throughout the course of his career. Mr. Fischer is a native of Munich, Germany and holds an M.F.A. degree from the world- renowned University of Southern California School of Cinema, as well as an undergraduate degree from Hampshire College. He is a board member of the W.O. Smith School of Music.

 

Jason Goodman . Mr. Goodman was appointed as a director effective as of November 21, 2014.

 

Mr. Goodman, a three time Lumiere Award winning Innovator of motion picture capture, Stereographer, Director of Photography, inventor and well-known speaker, is at the vanguard of modern filmmaking. Having graduated from New York University's renowned Tisch Film School, Jason honed his familiarity with successful film projects during a flourishing run that started more than 20 years ago. From Cannes Film Festival favorites to innovative brand campaigns, as the Chief Executive Officer of leading production company, 21st Century 3D, Jason has created an oeuvre as substantial as some of the other great cinematographers. His advancements in the field of virtual reality and unmanned aerial cinematography are as ground breaking as they are well-documented. He routinely speaks around the world about modernization and disruptive filming techniques. As a board member, Mr. Goodman will bring this knowledge to our upcoming projects and add cutting edge methods to our filmmaking process.

 

Donovan Leitch Mr. Leitch) Mr. Leitch was appointed as a director effective as of April 4, 2014. He has spent his entire life in the entertainment industry. His Father and namesake Donovan is a Rock-n-Roll Hall of Fame inductee. Mr. Leitch grew up in the heart of Hollywood, starting his acting career as a teenager. He then moved to New York to pursue a career as a musician and worked for 10 years in the fashion industry. Setting his sights on becoming a producer, he made 6 feature documentary films. Mr. Leitch spent six years as a Senior Account Executive at the PR and marketing firm PMK/BNC helping to create and oversee Entertainment Marketing for such brands as Playstation, T-Mobile, GM, and Samsung, This marriage of art and commerce led to development deals at MTV Networks, Electus, and Maker Studios. Mr. Leitch has created and produced web content for Microsoft, YouTube, Vogue.com, and MySpace. He is also the co-founder of Hollywood’s first co-work/incubator space, io/LA. Mr. Leitch co-founded the All-Star rock n roll cover band Camp Freddy and is also the lead singer. Camp Freddy has played over 200 shows over the last 12 years and has featured many of today’s leading rock stars including Ozzy Osbourne, Billy Idol, Scott Weiland, Dave Navarro, and Tommy Lee. With a keen understanding of all things creative and deep ties to industry leaders in Film and TV, Music, Fashion, Technology, Branding, Hospitality, and Nightlife, Mr. Leitch provides personal relationships with industry leaders and top talent. Mr. Leitch produced the feature Documentaries “The Last Party”, “The Party’s Over”, “The After Party”, “Schmatta”, and “Sunset Strip."

 

Robert Ortiz . Mr. Ortiz, an industry veteran who has worked on such Academy Award winning films as Slingblade and Monster's Ball, is one of the most innovative producers currently working in both film and television. As the Unit Production Manager on top rated NCIS: New Orleans, as well as Co-Producer of past box office hits like Texas Chainsaw Massacre 3D and Homefront, Mr. Ortiz knows how to create notable, and profitable, content. Mr. Ortiz learned successful filmmaking and television production from some of the best in the business. His IMDB page spans twenty years and myriad accomplishments. As the head of Extra Crispy Films, he has been responsible for helping to produce some of the most noted content in the industry. He brings a skill set to the Board that dovetails well with the other members.

 

Committees of our Board of Directors

 

Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors, nor are we required to establish or maintain an audit committee or other committee of our board of directors.

 

 

 
19

 

 

At a board meeting held on February 4, 1015, the board created the following committees and appointed the following directors to them:

 

 

1.

Nomination Committee

     
   

Alexander Bafer, Chairman

Frank Esposito

Donovan Leitch

 

 

2.

Audit Committee

     
   

Alexander Bafer, Chairman

Frank Esposito

Robert Ortiz

 

 

3.

Compensation Committee

     
   

Alexander Bafer, Chairman

Frank Esposito

Jason Goodman

 

 

4.

Corporate Governance Committee

     
   

Alexander Bafer, Chairman

Frank Esposito

Martin Fischer

 

Candidates for director nominees are reviewed in the context of the current composition of the board and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the Board of Directors considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the board and the Company, to maintain a balance of knowledge, experience and capability.

 

The board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

 

Through their own business activities and experiences each of directors have come to understand that in today’s business environment, development of useful products and identification of undervalued real estate, along with other related efforts, are the keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current and proposed business activities.

 

Director Compensation

 

We have granted each of our non-employee directors (Messrs. Goodman, Ortiz and Leitch) and Mr. Esposito 50,000 shares of our unregistered common stock and agreed to issue each of these directors an additional 50,000 shares on each anniversary of their appointment as compensation for their services as a director of our company. Certain directors who are employees (Messrs. Bafer and Fischer) are not paid for board service in addition to their regular compensation.

 

 

 
20

 

 

As compensation for serving as our Chairman of the Board of Directors, we have granted Mr. Kassar 500,000 shares of our unregistered shares of common stock and the option to purchase all or any part of 400,000 shares of common stock at an exercise price of $1.00 per share, exercisable until 10 years after the effective date of his appointment.  We also assumed an obligation to pay Mr. Kassar $500,000 to cover taxes with respect to compensation paid to him as Chairman.   In addition, we agreed to reimburse Mr. Kassar for all business expenses incurred or paid by him in the performance of his duties on behalf of the Company including, without limitation, all required travel and lodging expenses. We also agreed to indemnify Mr. Kassar against any and all losses, liabilities, damages, expenses (including outside attorneys’ fees), judgments, fines and amounts incurred by Mr. Kassar in connection with any claim, action, suit or proceeding (whether civil, criminal, administrative or investigative), including any action by or in the right of the Company, by reason of any act or omission to act in connection with the performance of his duties under the agreement to the fullest extent that we are permitted to indemnify him under our Articles of Incorporation in effect as of the date of his appointment and applicable law.  During the term of this agreement, we are required to obtain and maintain Directors and Officers Insurance in a form acceptable to Mr. Kassar naming him as an additional named insured. Further, provided that Mr. Kassar has neither voluntarily resigned nor been terminated under the terms of the agreement, the majority shareholders who are a party to the agreement agreed to vote all their shares in the Company over which they have voting control and agreed to promptly take all other necessary or desirable actions within their control (including in their capacity as shareholder, director, member of a board committee or officer of the Company or otherwise, and whether at a regular or special meeting or by written consent in lieu of a meeting) to reelect Mr. Kassar as Chairman of Board of the Company.

 

In addition, we entered into an Executive Services Agreement with Mr. Kassar, subject to a condition precedent, to become our Chief Development Executive. As the Chief Development Executive, Mr. Kassar will render non-exclusive services to us in providing advice on any film projects that we acquire or are considering acquiring. The agreement will become effective when we obtain, no later than March 30, 2015, at least $4 million of equity investment (on terms approved by Mr. Kassar) for a project currently titled “Audition.”

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Since none of our securities had been registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 during the fiscal year ended December 31, 2014, our officers and directors and persons who own more than 10% of our common stock were not required to file Section 16(a) beneficial ownership reports during that period.

 

 

 
21

 

 

Item   11.

Executive Compensation.

 

Summary Compensation Table

 

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.

 

SUMMARY COMPENSATION TABLE

 

Name and

principal position

 

Year

 

Salary

($)

   

Bonus

($)

   

Stock Awards

($)

   

Option

Awards

($)

   

Non-Equity

Incentive Plan

Compensation

($)

   

Nonqualified

Deferred

Compensation

Earnings ($)

   

All Other

Compensation

($)

   

Total

($)

 

Alexander Bafer,

 

2014

    0       0       0       0       0       0       0       0  

CEO, CFO, & Director

 

2013

    0       0       0       0       0       0       0       0  

Gary D. Alexander,

 

2014

    0       0       0       0       0       0       0       0  

Vice President & Director *

 

2013

    0       0       0       0       0       0       0       0  

* Mr. Alexander resigned all positions with the Company on February 6, 2014.

 

Employment Agreements

 

On September 21, 2010, we entered into an employment agreement with Alexander Bafer under which he agreed to serve as our Chief Executive Officer.    The employment agreement provides for three year term, subject to Mr. Bafer s option to extend the term by an additional three year period.    The agreement provides for a base salary of $150,000 per year and a discretionary bonus in the amount of up to 150% of the base salary, payable quarterly.    The agreement is subject to termination by the Company for cause and also in the event of Mr. Bafer s death or disability.   Mr. Bafer may terminate the agreement if within two years of a change in control any of the following events occurs: (i) a material diminution of the employee's responsibilities, as compared with the employee s responsibilities immediately prior to the change in control; (ii) any reduction in the sum of employee's base salary or bonus as of the date immediately prior to the change in control; (iii) any failure to provide the employee with benefits at least as favorable as those enjoyed by similarly situated senior corporate officers at the Company under the Company's pension, life insurance, medical, health and accident, disability or other written employee plans under which the form and/or amounts of benefits are prescribed in applicable documents; (iv) any relocation of the employee's principal site of employment to a location more than 25 miles from the employee's principal site of employment as of the date immediately prior to the change in control; or (v) any material breach of the agreement on the part of the Company.   In the event of a termination as a result of a change of control, Mr. Bafer would be entitled to the following:    (i) a lump sum payment within ninety (90) days of such termination in an amount equal to 2.9 times the base salary; (ii) reimbursement for expenses accrued through the date of termination; (iii) a bonus within ninety (90) days of such termination in an amount equal to 150% of the bonus received by employee, if any, during the year immediately prior to such termination; (iii) all benefits as would have been awarded under the agreement    through the expiration of the term thereof; and (iv) payment sufficient to provide for a gross-up of any excise, income, and other taxes resulting from imposition of the parachute penalties of the Internal Revenue Code or applicable state tax laws.    The agreement contains customary confidentiality and indemnification provisions.    For the fiscal year ending December 2011, Mr. Bafer has been paid $25,000 in salary, has an additional $87,500 of salary accrued, and has not received a bonus. As of October 1, 2011, Mr. Bafer agreed to waive future base salary under his employment agreement, until further notice, in an effort to reduce our operating expenses. Mr. Bafer was not been paid any salary in 2013 or 2012.

 

Frank Esposito . Effective as of July 14, 2014, we agreed to pay Mr. Esposito’s law firm a base retainer of $5,000 per month for legal services provide to us.  

 

 
22

 

   

Effective December 24, 2013, as part of the Company s acquisition of S&G Holdings, Inc. (doing business as High Five Entertainment), the Company entered into an Executive Employment Agreement with Mr. Martin Fischer, pursuant to which Mr. Fischer will serve as High Five s president for an initial term of five years with an initial base salary of $144,000.  He will also be entitled to an annual bonus of up to $100,000 and a monthly car allowance of $500.  In addition, the Company awarded Mr. Fischer an option to purchase 1,491,351 shares of common stock, these options vest throughout 2014.

 

Outstanding Equity Awards At Fiscal Year-end Table

 

At the end of our last completed fiscal year, our named executive officers did not have any outstanding unexercised options, stock that has not vested, or equity incentive plan awards.

 

Background and Qualifications of Directors.

 

When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company s business and structure, the Board of Directors focuses primarily on each person s background and experience as reflected in the information discussed in each of the directors ’  individual biographies set forth above.   We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.   As more specifically described in the biographies set forth above, our directors possess relevant knowledge and experience in the finance, accounting and business fields generally, which we believe enhances the Board s ability to oversee, evaluate and direct our overall corporate strategy.

 

Item   12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth as of December   31, 2014 the number of the Company s common stock beneficially owned by persons who own five percent or more of the Company s voting stock, by each director, by each executive officer, and by all executive officers and directors as a group. The table presented below includes shares issued and outstanding and options exercisable within 60 days.

 

Name and address of beneficial owner

 

Amount of

beneficial ownership

   

Percent

of class*

 

Alexander Bafer, CEO, CFO, and Director

    21,220,000       68.6 %

Donovan Leitch, Director

    50,000       * %

Martin Fischer, Director

    1,491,350 (1)     4.6 %

William K. Walden and Florence A. Walden, TEN ENT

    1,750,000       5.7 %

Total all executive officers and directors

    22,761,350       70.2 %

*

Less than 1.0%.

(1)   Constitutes options to purchase 1,491,350 shares of common stock of the Company, which options vest throughout 2014.  

 

 
23

 

 

Item   13. Certain Relationships and Related Transactions, and Director Independence.

 

On April 1, 2014, the Company’s CEO loaned the Company $150,000, in consideration for which the Company issued to its CEO a Promissory Note in the principal amount of $150,000, with interest at 5.0% per annum maturing on October 1, 2015, at which time a balloon payment of all outstanding principal and interest shall be due. During the year ended December 31, 2014, the Company repaid $50,000 and converted the remaining principal balance of $100,000 into 20,000,000 shares of common stock.

 

On October 1, 2014, the Company’s CEO loaned the Company $150,000, in consideration for which the Company issued to its CEO a Promissory Note in the principal amount of $150,000, with interest at 5.0% per annum maturing on October 1, 2015, at which time a balloon payment of all outstanding principal and interest shall be due.

 

Item   14. Principal Accountant Fees and Services.

 

The following table shows what Li & Company, PC billed for the audit and other services for the years ended December   31, 2014 and 2013.  

 

   

Year Ended 12/31/14

   

Year Ended 12/31/13

 

Audit Fees

  $ 45,355     $ 26,500  

Audit-Related Fees

           

Tax Fees

           

All Other Fees

           

Total

  $ 45,355     $ 26,500  

 

Audit Fees This category includes the audit of the Company s annual financial statements, review of financial statements included in the Company s Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those years.

 

Audit-Related Fees  N/A

 

Tax Fees N/A

 

Overview  — The Company s Board reviews, and in its sole discretion pre-approves, our independent auditors annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under  Audit Fees, ” “ Audit-Related Fees, ”  and  Tax Fees ”  were pre-approved by our Company s Board. The Board may not engage the independent auditors to perform the non-audit services proscribed by law or regulation.

 

Part IV

 

Item   15.     Exhibits and Financial Statement Schedules.

 

(a) Financial Statements.

 

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheets as of December 31, 2014 and 2013

F-2

Consolidated Statements of Operations for the years ended December 31, 2014 and 2013

F-3

Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2014 and 2013

F-4

Consolidated Statement of Cash Flows for the years ended December 31, 2014 and 2013

F-5

Notes to Consolidated Audited Financial Statements

F-6

 

 

 
24

 

 

(b) Exhibits

 

Exhibit

Number

 

Description

3.1(i)

 

Articles of Incorporation (Incorporated by reference to Exhibit 3.1(i) to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).

     

3.1(ii)

 

Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 3.1(ii) to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).

     

3.1(iii)+

 

Amendment to Articles of Incorporation filed with the Secretary of State of Florida on December 31, 2014.

     

3.2

 

By-Laws (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011).

     

4.1+

 

2014 Incentive Stock Plan (Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2015).

     

10.1+

 

Employment Agreement with Alexander Bafer (Incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (Commission File No. 333-176093) filed with the SEC on August 5, 2011)

     

10.2

 

Production Services Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-176093) filed with the SEC on December 29, 2011).

     

10.3

 

Operating Agreement to York Productions, LLC (Incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-176093) filed with the SEC on December 29, 2011).

     

10.4

 

Stock Purchase Agreement between Brick Top Productions, Inc. and Martin Fischer dated December 24, 2013 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2013).

     

10.5+

 

Executive Employment Agreement between S&G Holdings, Inc. and Martin Fischer (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2013).

     

10.7+

 

Brick Top Chief Development Executive Services Agreement between Brick Top Productions, Inc. and Mario Kassar dated November 20, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2014).

     

10.8+

 

Brick Top Productions Executive Services Agreement between Brick Top Productions, Inc. and Harrison Smith and Felissa Rose dated December 15, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 17, 2014).

     

10.9

 

Debt Conversion Agreement dated as of December 29, 2014 between Brick Top Productions, Inc. and Alexander Bafer (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 30, 2014).

     

10.10+

 

Agreement for Chairman of Board of Directors among Carolco Pictures, Inc., certain shareholders of the Company and Mario Kassar dated as of February 13, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 17, 2015).

     

21.1

 

Subsidiaries of the Registrant ( Previously filed as an exhibit to the Company’ s S-1 Registration Statement filed with the SEC on August 5, 2011).

 

 

 
25

 

 

31.1

 

Section 302 Certificate of Chief Executive Officer and Chief Financial Officer*

     

32.1

 

Section 1350 Certification of Chief Executive Officer and Chief Financial Officer *

     

101.INS

 

XBRL INSTANCE DOCUMENT**

 

 

 

101.SCH 

 

XBRL TAXONOMY EXTENSION SCHEMA**

     

101.CAL 

 

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE**

 

 

 

101.DEF 

 

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE**

 

 

 

101.LAB 

 

XBRL TAXONOMY EXTENSION LABEL LINKBASE**

 

 

 

101.PRE 

 

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE**

 

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15 (d) 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.

 

 

 

 

 

 Dated: March 31, 2015

By:

/s/ Alexander Bafer 

 

 

 

Alexander Bafer

 

 

 

Chief Executive Officer, Chief Financial Officer,

 

 

 

Principal Accounting Officer and Chairman

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

       

 Dated: March 31, 2015

By:

/s/ Alexander Bafer 

 

 

 

Alexander Bafer

 

 

 

Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial and Accounting Officer) and Director

 

       
Dated: March 31, 2015 By:    /s/ Frank Esposito  
    Frank Esposito, Director  

 

 

 
26

 

 

Carolco Pictures, Inc.

 

December 31, 2014 and 2013

 

Index to the Consolidated Financial Statements

 

   

Contents

Page(s)

 

 

Report of Independent Registered Public Accounting Firm

F-1

  

  

Consolidated Balance Sheets at December 31, 2014 and 2013

F-2

  

  

Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013

F-3

  

  

Consolidated Statement of Equity for the Years Ended December 31, 2014 and 2013

F-4

  

  

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013

F-5

  

  

Notes to the Consolidated Financial Statements

F-6

 

 

 

 
27

 

   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Board of Directors and Stockholders of

Carolco Pictures Inc.

 

We have audited the accompanying consolidated balance sheets of Carolco Pictures Inc. (the “Company”) as of December 31, 2014 and 2013 and the related consolidated statements of operations, equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amount and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2014 and 2013, and the related consolidated statements of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has an accumulated deficit at December 31, 2014, a net loss and net cash used in operating activities for the year then ended which raises substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/Li and Company, PC

Li and Company, PC

 

Skillman, New Jersey

March 31, 2015

 

 
F-1

 

 

Carolco Pictures Inc.

Consolidated Balance Sheet s

 

    December 31, 2014     December 31, 2013  
                 

ASSETS

               

Current Assets

               

Cash

  $ 160,377     $ 135,612  

Accounts receivable

    11,248       -  

Prepaid expenses and other current assets

    55,380       14,513  
                 

Total current assets

    227,005       150,125  
                 

Computer Equipment

               

Computer equipment

    12,217       11,015  

Accumulated depreciation

    (9,697 )     (6,558 )

Computer equipment, net

    2,520       4,457  
                 

Deposits

    -       1,985  
                 

Other Assets

               

Goodwill

    319,237       319,237  
                 

Total other assets

    319,237       319,237  
                 

Total assets

  $ 548,762     $ 475,804  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current Liabilities

               

Accounts payable

  $ 17,328     $ 92,496  

Accrued interest

    7,292       -  

Accrued payroll

    150,000       149,000  

Deferred revenue

    63,699       -  

Advances from related parties

    110,847       60,847  

Acquisition payable - S&G

    -       50,000  

Notes payable

    20,340       55,300  

Note payable-related party

    150,300       -  
                 

Total current liabilities

    519,806       407,643  
                 

Total liabilities

    519,806       407,643  
                 

Commitments and Contingencies

               
                 

Stockholders' Equity

               

Preferred stock: $0.0001 par value, 10,000,000 shares authorized; none issued or outstanding

    -       -  

Common stock par value $0.0001: 100,000,000 shares authorized; 54,239,500 and 30,114,500 shares issued and outstanding, respectively

    5,424       3,011  

Additional paid-in capital

    4,134,442       1,491,104  

Common stock receivable

    (8,015 )     -  

Accumulated deficit

    (4,016,719 )     (1,396,523 )
                 

Total Carolco Pictures Inc. Stockholders' Equity

    115,132       97,592  
                 

Non-Controlling Interest in Subsidiaries

               

Noncontrolling interest - capital stock in consolidated subsidiaries

    250       250  

Noncontrolling interest - additional paid-in capital in conolidated subsidiaries

    37,500       37,500  

Noncontrolling interest - accumulated deficit in consolidated subsidiaries

    (123,926 )     (67,181 )
                 

Non-Controlling Interest in Subsidiaries

    (86,176 )     (29,431 )
                 

Total Equity

    28,956       68,161  
                 

Total liabilities and stockholders' equity (deficit)

  $ 548,762     $ 475,804  

 

See accompanying notes to the consolidated financial statements.

 

 
F-2

 

 

Carolco Pictures Inc.

Consolidated Statement s of Operations

 

    For the Year's Ended  
    December 31, 2014     December 31, 2013  
                 

Revenue

               

License fees

  $ 790,467     $ -  
                 

Total revenue

    790,467       -  
                 

Cost of goods sold

    631,326       -  
                 

Gross margin

    159,141       -  
                 

Operating expenses

               

Compensation

    2,143,742       -  

Professional fees

    581,375       104,994  

Rent

    48,397       2,757  

General and administrative

    126,061       28,057  

Impairment of capitalized pilot costs

    -       292,930  
                 

Total operating expenses

    2,899,574       428,738  
                 

Loss from operations

    (2,740,433 )     (428,738 )
                 

Other (income) epxense

               

Interest expense

    13,849       1,269  

Bad debt recovery

    (75,000 )     -  

Other (income) expense

    (2,341 )     -  
                 

Other (income) expense, net

    (63,492 )     1,269  
                 

Loss before income tax provision and non-controlling interest

    (2,676,941 )     (430,007 )
                 

Income tax provision

    -       -  
                 

Net loss

               

Net loss before non-controlling interest

    (2,676,941 )     (430,007 )

Net loss attributable to non-controlling interest

    (56,745 )     (1,343 )
                 

Net loss attributable to Brick Top Productions, Inc. stockholders

  $ (2,620,196 )   $ (428,664 )
                 

Net loss per common share - basic and diluted

  $ (0.08 )   $ (0.01 )
                 

Weighted Average Common Shares Outstanding - basic and diluted

    31,223,345       29,728,539  

 

See accompanying notes to the consolidated financial statements.

 

 
F-3

 

 

Carolco Pictures Inc.

Statement s of Stockholders’ Equity

For the years ended December 31, 201 4 and 201 3

 

   

CAROLCO Stockholders' Equity

    Non-controlling Interest  
   

Common Stock, Par Value $0.0001

                                                                         
   

Number of Shares

    Amount     Additional Paid-in Capital     Common Stock Receivable     Accumulated Deficit     Carolco Pictures Inc. Stockholders' Equity     Common stock     Additional Paid-in Capital     Accumulated Deficit     Non Controlling Interest    

Total Equity (Deficit)

 
                                                                                         

Balance, December 31, 2012

    29,692,000     $ 2,969     $ 1,021,146     $ -     $ (967,859 )   $ 56,256     $ -     $ -     $ (9 )   $ (9 )   $ 56,247  
                                                                                         

Stock issued for cash at $1.00 per share,

    422,500       42       422,458                       422,500                                       422,500  
                                                                                         

Capital contribution from shareholder

                    47,500                       47,500                                       47,500  
                                                                                         

Acquisition of S&G Holdings

                                                    250       37,500       (65,829 )     (28,079 )     (28,079 )
                                                                                         

Net loss

                                    (428,664 )     (428,664 )                     (1,343 )     (1,343 )     (430,007 )
                                                                                         

Balance, December 31, 2013

    30,114,500       3,011       1,491,104       -       (1,396,523 )     97,592       250       37,500       (67,181 )     (29,431 )     68,161  
                                                                                         

Common stock issued for cash

    3,325,000       333       205,178       (8,015 )             197,496                                       197,496  
                                                                                         

Common stock issued for non-employee services

    400,000       40       399,960                       400,000                                       400,000  
                                                                                         

Common stock issued for employee services

    350,000       35       349,965                       350,000                                       350,000  
                                                                                         

Common stock issued for employee services

    50,000       5       49,995                       50,000                                       50,000  
                                                                                         

Common stock issued for employee services

                    (50,000 )                     (50,000 )                                     (50,000 )
                                                                                         

Amortization of common stock issued for employee services

                    37,505                       37,505                                       37,505  
                                                                                         

Warrant issued for employee services

                    1,476,735                       1,476,735                                       1,476,735  
                                                                                         

Common stock issued for conversion of note payable

    20,000,000       2,000       98,000                       100,000                                       100,000  
                                                                                         

Capital contribution from shareholder

                    76,000                       76,000                                       76,000  
                                                                                         

Net loss

                                    (2,620,196 )     (2,620,196 )                     (56,745 )     (56,745 )     (2,676,941 )
                                                                                         

Balance, December 31, 2014

    54,239,500     $ 5,424     $ 4,134,442     $ (8,015 )   $ (4,016,719 )   $ 115,132     $ 250     $ 37,500     $ (123,926 )   $ (86,176 )   $ 28,956  

 

See accompanying notes to the consolidated financial statements.

 

 
F-4

 

 

Carolco Pictures Inc.

Consolidated Statements of Cash Flows

 

    For the Year's Ended  
    December 31, 2014     December 31, 2013  
                 

Cash flows from operating activities:

               

Net loss before non-controlling interest

  $ (2,676,941 )   $ (430,007 )

Adjustments to reconcile net loss to net cash used in operating activities

               

Impairment of capitalized pilot costs

    -       292,930  

Depreciation expense

    3,139       2,624  

Stock compensation

    2,264,240       -  

Changes in operating assets and liabilities:

               

Accounts receivable

    (11,248 )     -  

Prepayments and other current assets

    (38,881 )     11,200  

Deposits

    -       229  

Accounts payable

    (67,178 )     (58,345 )

Accrued expenses and other current liabilities

    64,001       -  
                 

Net cash used in operating activities

    (462,868 )     (181,369 )
                 

Cash flows from investing activities:

               

Cash acquired from business acquisitions

    -       28,777  

Investment

    (50,000 )     (235,000 )

Purchase of computer equipment

    (1,203 )     -  

Acquisition payable

    -       50,000  

Net cash used in investing activities

    (51,203 )     (156,223 )
                 

Cash flows from financing activities:

               

Advances from (repayments to) related parties

    50,000       50  

Proceeds from note payable

    20,000       -  

Repayments of note payable

    (54,660 )     -  

Proceeds from note payable - related party

    361,000          

Repayment for note payable - related party

    (111,000 )        

Proceeds from sale of common stock and warrants, net of issuance cost

    197,496       422,500  

Contribution to capital

    76,000       47,500  
                 

Net cash provided by financing activities

    538,836       470,050  
                 

Net change in cash

    24,765       132,458  
                 

Cash at beginning of the period

    135,612       3,154  
                 

Cash at end of the period

  $ 160,377     $ 135,612  
                 

Supplemental disclosure of cash flows information:

               

Interest paid

  $ 2,722     $ -  

Income tax paid

  $ -     $ -  
                 

Non cash financing and investing activities:

               

Issuance of common stock for services