Scanbox shareholder Kevin Cox has filed his account of a typically interesting AGM and sees some glimmer of hope under the new leadership following a colourful history.

The fifth annual general meeting of Scanbox Asia Pacific was eventful, as is every annual meeting of this unfortunate company.

In previous meetings, we have had:

– the company report annual profits of $9M on a then existing capitalisation of $20M;

– an AGM attended by reporters from Denmark looking for a story on the tax evading Danish chief executive;

– another where a new chairman reported that most of the assets of the company had been ‘blown’ by the previous administration and the only assets left were a couple of film libraries brought at bankruptcy sales; and

– last year’s AGM where the company reported that they had title to 100+ films but only had a few physical films.

This year’s meeting was relatively tame but was interesting as it was attended by a liquidator of the majority shareholder and the Hollywood movie producer Steve Stabler with credits such as The Wedding Planner (2001), Thomas and the Magic Railroad (2000), Dumb and Dumber (1998) and Beverly Hills Ninja (1997). [CRIKEY: What a contribution to the cultural advancement of society!]

What was Steve doing there?

Well, the majority shareholder in Scanbox Asia Pacific is the liquidator of Scanbox Denmark and they want to sell their 40%+ shareholding. Steve Stabler is one of several motion picture people who think that the libraries Scanbox Australia own are worth something.

Some of the tiles that Scanbox has are interesting reading as well. They include American Cyborg, American Ninja, The Mummy Lives and Chain of Command.

The true history of Scanbox is not one that we can produce in a family newsletter like Crikey but suffice it to say that the major part of the last two years’ expenditure has been on legal matters with previous directors ‘threatening’ the company and the company responding in kind with matters being referred to police.

Add in locations such as the Cannes, Venice film festivals and LA, interesting financiers like the Imperial Bank, CEOs who end up behind bars, movies such as “Komodo the Living Dragon”, characters who hunt down missing films for a bounty and common and garden film pirates and you have the material for an interesting film script.

As a bemused shareholder of this company I have been attempting to find out for the past few years just what the company is worth. I still don’t know as it is hard for the company to find out what it has.

Scanbox started off with great hopes to ride the wave of the Australian movie business and to make films in Australia for world-wide distribution in such a way that it would make money. The formula that was proposed was one that seemed to be successful in Denmark where the company made its money with Claude Van Dam and action movies that appealed the 18 to 25 year old male group.

The formula was to make cheap action movies – and only to make them when presales equaled the cost of production.

Unfortunately the original Australian management did not stick to this formula and made two movies which failed to satisfy the formula because they cost too much, they were not action movies and they had no presales. They made Komodo the Living Dragon and The Shrink is In. Both movies were made and financed in such a way that all profits, if they ever were any, would go to the other financiers.

In other words the people doing the deals appeared to have other plans than those presented to shareholders. (They also spent money on the German and French rights to a movie called “the kids world” which was not a good idea and they spent money on getting a flock of ducks in SA trained to do something?)

In two years, the money that Australian investors put into the company (about $16M) was largely gone. In the early years the company kept reporting extraordinary profits but these were on the basis of “sales” and valuation of inventory that had little basis in fact.

Where were the auditors when this was going on?

All this came to light when the Danish parent company of Scanbox ran into trouble.

The founder and MD of both Scanbox Denmark and Scanbox Australia was Anders Jensen. He was deposed by the Danish shareholders and a lawyer, Bo Norholm, took over to sort things out. Bo managed to interest a Sydney lawyer and company “doctor” Michael Rhodes in the company. Michael took over as Chairman of Scanbox Australia Pacific to sort out the Australian mess.

Luckily for shareholders Michael is a ‘good guy’, lawyer and a genuine company doctor and has managed to save what was left of the company. But what is left of the company has proved to be difficult to figure out.

By some quirk Scanbox Asia Pacific managed to acquire the rights to a few films out of Australia, another set of films called the “Cannon library’ and another set of films called the ’21st Century’ library. How they managed to get the rights of these films is still beyond my understanding but I suspect it was an ‘accident’ and someone thought they might be able to park the films with Scanbox Asia Pacific and then pick them up later.

Whatever the reason, it gives Scanbox some value.

Michael Rhodes and John Stone (the current MD of Scanbox) have managed to get rid of all the law suits, get rid of all debts, find many of the movies, digitise at least 20, and make sales such that today Scanbox is cash flow positive. Scanbox has the rights to at least 120 movies – even though it doesn’t have most of the physical movies in Australia.

The best 20 of the movies have been estimated to be worth about $4M Australian. The rest have no valuation in the books and no one is prepared to even hazard a guess. However, one of the movies is ’36 Crazy Fists’ by Jackie Chan, it is rumoured that there is an unreleased Bruce Lee movie hidden in the list (but we have not seen it) and there is a Kylie Minogue movie “Sample People”.

The last sale of Scanbox was 6 cents which values the company at a little less than $2.4 million dollars.

The company has $10 million in tax losses, no debts, is cash flow positive and a library worth between $4M and $10+M.

The next few weeks will be interesting as the major shareholder tries to get rid of his shares because of the Danish liquidation event. The guess is that one of the interested movie industry parties will pick up the shares for a relatively low price and will have to offer the same price to other shareholders. What will then happen is certain to keep shareholders amused.

The company name is now “The Motion Picture Company of Australia”. The name was changed at the last AGM. When asked why change the name, the chairman said that the company was known by the names reported above (plus some others which he would not repeat) and it was probably time for a change.

Rhodes and Stone have saved this company. Unfortunately from the body language of people at the meeting their efforts do not seem to have been appreciated by the current major shareholder. As a minority shareholder I appreciate what they have done and have my fingers crossed that their work will turn into a return for existing shareholders.

Peter Fray

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