Borislav Tonev

Carolco Pictures Inc (OTCMKTS:CRCO) Shoots for the Stars Again

by Borislav Tonev February 3, 2016

Carolco Pictures Inc (OTCMKTS:CRCO, CRCO message board)'s history is a very long one. Over the years, the company has produced many blockbuster movies, but it has also pushed out an equal amount of complete commercial failures.

In 2015, when it was announced that the creator of Terminator 2 and Rambo is about to be resurrected as an OTC company, penny stock investors reckoned that lessons have been learned and that this was the creation of a new, better Carolco. Sadly, about a year later, we can safely say that their enthusiasm might have been a bit premature.

During its first few months on the OTC, the stock was thinly traded and in October 2015, it was hovering quietly around the $0.15 mark. On Monday, it barely managed to stay out of the triple-zero levels. Yesterday, however, CRCO was transformed from the proverbial hibernating bear into the equally proverbial raging bull.

The ticker gained a whopping 266% and closed the day at $0.0044 after more than 20.6 million shares changed hands in a matter of just six and a half hours.

Pinpointing the reason for the sudden surge in volume and price is not that easy, but we can see that Leonard Lauren, a former VP of Polo Ralph Lauren Corporation, was recently appointed to the Board of Directors and we can also see that an article is circulating the message boards. The article in question talks about the upcoming Terminator movie and investors are speculating on the potential revenues that CRCO might get from it. The company has yet to announce any involvement in the sixth movie of one of the world's best known sci-fi franchises, but, as we all know, this will never be enough to stop investors from being hopeful.

There's nothing wrong with that... as long as they bear all the risks in mind. There are a few of them.

The latest 10-Q, for example, suggests that CRCO is still a long way away from what it used to be when it was producing some of Hollywood's most profitable movies:

  • cash: $163 thousand
  • current assets: $555 thousand
  • current liabilities: $2.2 million
  • quarterly revenues: $366 thousand
  • quarterly net loss: $989 thousand

Most people don't seem to be paying attention to the figures above. They are also ignoring the fact that in a series of peculiar transactions, CRCO went through not one, but two changes in control in a matter of a few short months.

More worryingly, investors don't seem to be bothered about the toxic debt. According to the latest report, at the end of Q3, certain unaffiliated parties were holding $335 thousand worth of notes which are convertible into shares at discounts ranging from 39% to 50%. CRCO recently raised the number of authorized common shares from 350 million to 5 billion, so there will be little to stop the aforementioned unaffiliated parties from converting the debt and releasing the stock on the open market.

The effects on CRCO could be as apocalyptic as the battle scenes between Skynet and the Resistance.

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