SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
[ ] 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 2-98997-NY
NOVA INTERNATIONAL FILMS, INC. (Exact name of
Registrant as specified in its charter)
Delaware 11-2717273
(State or other jurisdiction I.R.S. Employer
of incorporation or Identification
organization) Number)
501 S.E. Columbia Shores Boulevard
Suite 350
Vancouver, Washington 98661
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (360)737-6800
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 such 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.
Yes X No
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date:
Common, $.00001 par value per share: 73,583,000 outstanding as of
September 1, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NOVA INTERNATIONAL FILMS, INC.
Index to Financial Information
Period Ended July 31, 1996
Item Page
Item 1 - Financial Statements
Balance Sheets 3
Statements of Operations 4-5
Statements of Cash Flows 6-7
Notes to Financial Statements 8-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
<PAGE>
<TABLE>
<CAPTION>
NOVA INTERNATIONAL FILMS, INC.
BALANCE SHEETS
(Unaudited)
JULY 31, OCTOBER 31,
1996 1995
ASSETS
<S> <C> <C>
Cash $ 16,343 $ 23,619
Furniture and equipment at cost,
less accumulated depreciation 488 781
Total assets $ 16,831 $ 24,400
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
LIABILITIES:
Accounts payable and accrued
expenses $ 5,000 $ 5,936
Debt - 3,375,119
Total liabilities $ 5,000 $ 3,381,055
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock, $.00001 par value;
100,000,000 shares authorized,
73,583,000 shares issued
and outstanding, respectively. $ 736 $ 736
Additional paid-in capital 8,197,260 8,197,260
Accumulated deficit (8,186,165) (11,554,651)
Total stockholders' equity
(deficit) $ 11,831 $ (3,356,655)
Total liabilities and
stockholders' equity (deficit) $ 16,831 $ 24,400
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter For the Quarter
Ended Ended
July 31, 1996 July 31, 1995
<S> <C> <C>
REVENUES $ - $ -
COSTS AND EXPENSES:
General and administrative 1,466 3,926
Depreciation and amortization 98 563
1,564 (4,489)
OPERATING LOSS (1,564) (4,489)
OTHER INCOME:
Interest income 78 194
78 194
OTHER EXPENSES:
Interest expense - 80,345
- 80,345
LOSS BEFORE PROVISION FOR
INCOME TAXES (1,486) (84,640)
PROVISION FOR INCOME TAXES - -
NET LOSS BEFORE EXTRAORDINARY
INCOME (1,486) (84,640)
EXTRAORDINARY INCOME:
Forgiveness of Debt - -
NET INCOME (LOSS) $ (1,486) $ (84,640)
Net income (loss) per share (.00002) $ (0.0012)
Average no. of shares
outstanding 73,583,000 73,583,000
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS (CONT'D.)
(Unaudited)
For the Nine For the Nine
Mos. Ended Mos. Ended
July 31, 1996 April 30, 1995
<S> <C> <C>
REVENUES $ - $ -
COSTS AND EXPENSES:
General and administrative 6,649 10,944
Depreciation and amortization 293 1,691
6,942 12,635
OPERATING LOSS (6,942) (12,635)
OTHER INCOME:
Interest income 309 645
309 645
OTHER EXPENSES:
Interest expense - 233,280
- 233,280
LOSS BEFORE PROVISION FOR
INCOME TAXES (6,633) (245,270)
PROVISION FOR INCOME TAXES - -
NET LOSS BEFORE EXTRAORDINARY
INCOME (6,633) (245,270)
EXTRAORDINARY INCOME:
Forgiveness of Debt 3,375,119 -
NET INCOME (LOSS) $ 3,368,486 $ (245,270)
Net income (loss) per share $ .04578 $ (0.0033)
Average no. of shares
outstanding 73,583,000 73,583,000
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Unaudited)
For the For the
Quarter Ended Quarter Ended
July 31, 1996 July 31,1995
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (1,486) $ (84,640)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 98 563
Net changes in assets and
liabilities:
Accounts payable - -
Total adjustments 98 563
Net cash provided (used) by
operating activities (1,388) (84,077)
Cash flows from financing
activities:
Net proceeds from debt financing - 80,345
Net cash provided (used) by
financing activities - 80,345
Net (decrease) increase in cash (1,388) (3,732)
Cash at beginning of period 17,731 32,374
Cash at end of period $ 16,343 $ 28,642
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CASH FLOWS (CONT'D.)
INCREASE (DECREASE) IN CASH
(Unaudited)
For the For the
Nine Mos. Nine Mos.
Ended Ended
July 31, 1996 July 31, 1995
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (6,633) $ (245,270)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 293 1,691
Net changes in assets and
liabilities:
Accounts payable (936) (26)
Total adjustments (643) 1,665
Net cash provided (used) by
operating activities (7,276) (243,605)
Cash flows from financing
activities:
Net proceeds from debt financing - 233,280
Net cash provided (used) by
financing activities - 233,280
Net (decrease) increase in cash (7,276) (10,325)
Cash at beginning of period 23,619 38,967
Cash at end of period $ 16,343 $ 28,642
</TABLE>
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
1) Nature of Business and Organization
Nova International Films, Inc. (the Company) was incorporated on
November 27, 1984 in the State of Delaware. The Company was
formed for the purpose of financing and producing motion pictures
for distribution in the theatrical, home video and pay and free
television markets throughout the world.
a. Issuance of Common Stock
On January 2, 1986, the Company completed a public offering,
whereby ten million (10,000,000) units were sold at $.10 per
unit, each unit consisting of one (1) share of Common Stock,
$.00001 par value, and one (1) Redeemable Common Stock Purchase
Warrant. These warrants have now lapsed.
b. Disposition of Assets
On May 12, 1993 (the "Closing"), the stockholders of the Company
approved an Acquisition Agreement dated March 3, 1993 (the
"Acquisition Agreement") by and between the Company and Epic
Productions, Inc. ("Epic"), pursuant to which the Company sold,
assigned, transferred and conveyed to Epic and Epic acquired from
the Company (i)all of the issued and outstanding shares of
capital stock of each of Byzantine Fire, Inc. a California
corporation, Wings of the Apache, Inc., a California corporation,
and A/R Productions, Ltd., a California corporation
(collectively, the "Subsidiary Corporations"); (ii) all rights
to the completed films "Triumph of the Spirit", "Firebirds" and
"Why Me?", (sometimes collectively herein the "Completed Films");
and (iii) the Company's rights related to the film project
"Carlito's Way" and Jean Claude Van Damme. In exchange therefor,
Epic assumed all debts and liabilities of the Company with
respect to the assets acquired, paid the Company the sum of
$50,000, acquired the Bank Loan from the Bank as described in
Note #5 "Debt" and modified the loan arrangements thereafter plus
other indebtedness due Epic from the Company.
2) General
The financial statements for the year ended October 31, 1995 are
unaudited. However, it is management's opinion that all
adjustments necessary for fair presentation of these financial
statements have been made and are included herein.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
3) Summary of Significant Accounting Policies
a. Financial Statement Presentation
In accordance with the provisions of Statement of Financial
Accounting Standards No. 53, the Company has elected to present
an unclassified balance sheet.
b. Film Costs
Film costs, including related interest and production overhead,
are capitalized as incurred. Film costs also include costs
associated with film promotion and distribution. The individual
film forecast method is used to amortize film costs based upon
the revenue recognized in proportion to management's estimate of
ultimate revenues to be received. Estimated future revenues are
reviewed periodically by management and revised when appropriate.
Profit participation, if any, are accrued in the same manner.
Unamortized film costs are compared with net realizable values on
a film-by-film basis and losses are provided when appropriate.
c. Revenue Recognition
Film rental revenues are recognized in accordance with the
provisions of Statement of Financial Accounting Standards No. 53.
Revenues from theatrical distribution of films in the United
States and Canada are recognized on the dates of exhibition.
Revenues from foreign, home video, television and pay television
license agreements are recognized when the license period begins
and the film is available for release pursuant to the terms of
the license agreement between the distributor and the
sub-distributor. Amounts received from the distributor prior to
the availability of the films are recorded as deferred revenue.
Once completed, a typical theatrical film will generally be made
available for license as follows:
<TABLE>
<CAPTION>
Months After
Market place Initial Release Period
<S> <C> <C>
Domestic theatrical 6 months
All foreign markets 2 to 5 years
Domestic home video 6 months 6 months
Domestic cable/pay
television 12 to 18 months 1 to 2 years
Domestic syndication
television 30 to 60 months 5 to 7 years
</TABLE>
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
d. Depreciation and Amortization
Furniture and equipment is recorded at cost and is depreciated on
a straight-line basis over the estimated useful lives of the
related assets, which is typically five years.
e. Per Share Amounts
Per share amounts are based on the weighted average number of
shares outstanding during the period.
4) Furniture and Equipment
The following is a summary of Furniture and Equipment at cost,
less accumulated depreciation:
<TABLE>
<CAPTION>
July 31, October 31,
1996 1995
<C> <S> <S>
Office/Computer Equipment $38,153 $38,153
Telephone Equipment 10,934 10,934
Furniture & Equipment
at cost 49,087 49,087
Accumulated Depreciation 48,599 48,306
$ 488 $ 781
</TABLE>
5) Debt
In connection with the financing of the film "Triumph of the
Spirit", the Company was unable to pay Credit Lyonnais Bank
Nederland N.V. (the "Bank") the note payable (the "Bank Loan")
incurred to finance such film at its original maturity date of
March 31, 1991. The Company was able to negotiate an extension
of the maturity date of this note until September 30, 1991, but
thereupon the Company became in default of its obligation.
Upon the Closing of the Acquisition Agreement, Epic acquired the
Bank Loan from the Bank and modified the payment terms of the
Bank Loan assigned to it and other indebtedness of the Company to
Epic. In October 1993, Epic assigned and contributed to the
capital of the Company all of such indebtedness of the Company to
Epic plus accrued and unpaid interest. In addition, at the
Closing, $3 million of indebtedness (plus interest thereon) under
the Bank Loan was not acquired by Epic, pursuant to which the
Bank, Epic and the Company agreed that such portion of the Bank
Loan (The "Nonrecourse Obligations") be payable interest and then
principal only from operating receipts from "Triumph of the
Spirit" which was acquired by Epic pursuant to the Acquisition
Agreement.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
As of November 30, 1996, Nova assigned to Epic and Epic
assumed the remaining $3 million Nonrecourse Obligations plus
interest thereon. As such no interest was accrued for Fiscal Year
Ended October 31, 1995.
7) Liquidity and Capital Resources
At the current time, the Company's sole means to pay for its
overhead operations is its existing cash reserves in the total
amount of $16,343 as of July 31, 1996. Accordingly, the Company
has significantly reduced its overhead.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
During the fiscal quarter ended July 31, 1996, the Company
had a net loss of $(1,486) as compared to a net loss of $(84,640)
for the fiscal quarter ended July 31, 1995. For the nine months
ended July 31, 1996, the Company had net income of $3,368,486 as
compared to a net loss of $(245,270) for the nine months ended
July 31, 1995. The net income for the nine months ended July 31,
1996 is principally due to the forgiveness of debt of $3,375,119
resulting from Epic assuming as of November 30, 1995 the
remaining $3 million Nonrecourse Obligations. As a result of the
foregoing, the Company has eliminated its bank indebtedness.
Liquidity and Capital Resources
At the current time, the Company's sole means to pay for its
overhead operations is its existing cash reserves in the total
amount of $16,343 as of July 31, 1996. Accordingly, the Company
has significantly reduced its overhead.
In addition, as a result of the closing of the Acquisition
Agreement (see Notes to the Financial Statements included
herein), the Company has no current business operations and has
begun and will continue to seek another business opportunity
which may or may not be in the film industry. As of the date of
this report, the Company has no agreement, understanding or
arrangement to acquire or participate in any specific business
opportunity. No assurance can be given that the Company will be
able to consummate any such arrangements or, if consummated, that
such business opportunity will be successful.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
There are no exhibits applicable to this Form 10-Q.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the
quarter for which this report is filed:
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NOVA INTERNATIONAL FILMS, INC.
(Registrant)
Dated: September 6, 1996 By: /s/William Rifkin William
Rifkin, Chairman of the
Board (Principal
Executive Officer)
Dated: September 6, 1996 By: /s/William Rifkin William
Rifkin, Principal
Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM NOVA INTERNATIONAL FILSM, INC.'S QUARTERLY REPORT FOR THE
QUARTER ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 16,343
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,831
<PP&E> 488
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,831
<CURRENT-LIABILITIES> 5,000
<BONDS> 0
<COMMON> 736
0
0
<OTHER-SE> 8,197,260
<TOTAL-LIABILITY-AND-EQUITY> 11,831
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,633)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,633)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,375,119
<CHANGES> 0
<NET-INCOME> 3,368,486
<EPS-PRIMARY> .046
<EPS-DILUTED> .046
</TABLE>
