SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended OCTOBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
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 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 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 the 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. [X] (NOT APPLICABLE)
As of January 23, 1996, the aggregate market value of the Common Stock held by
non-affiliates of the Registrant (15,083,000 shares) was approximately $82,957
(based upon the average bid and asked prices of such stock on January 23,
1996). The number of shares outstanding of the Common Stock ($.00001 par
value) of the Registrant as of the close of business on January 23, 1996 was
73,583,000.
Documents Incorporated by Reference: None
<PAGE>
PART I
ITEM 1. BUSINESS.
(a) General development of business.
Nova International Films, Inc. (the "Company" or the "Registrant") was
incorporated in the State of Delaware on November 27, 1984. The Company
was principally engaged in the business of developing, financing and
producing motion pictures (sometimes herein "film(s)") for distribution.
On January 2, 1986, the Company completed an initial public offering
and raised gross proceeds of $1 million.
During fiscal 1990, the Company was able to complete and release two
films it placed into production in fiscal 1989. These films were entitled
"Triumph of the Spirit" and "Firebirds". Additionally, in January 1990,
the Company acquired from Epic Productions, Inc. ("Epic") all of the issued
and outstanding capital stock of Byzantine Fire, Inc. which at the time
owned the rights to the completed film property "Why Me?". This film was
also released during fiscal year 1990. Other than the foregoing, the
Company has not been involved in the release of any other films.
The Company also had previously entered into an agreement in principle
with Epic, whereby the Company had the option, should Epic produce, to co-
produce a motion picture entitled "Carlito's Way" (the "Carlito's Way
Rights").
The Company also had the contractual right (the "Van Damme Rights") to
engage Jean Claude Van Damme as the lead actor in a motion picture subject
to meeting certain terms and conditions set forth in an agreement between
the parties.
These two film rights, together with the three films described above,
represented as of March 1993 all of the Company's interests in various film
properties.
Pursuant to an Acquisition Agreement dated March 3, 1993 (the
"Acquisition Agreement") by and between the Company and Epic, the Company
on May 12, 1993 (the "Closing") 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; (ii) all
rights to the completed films "Triumph of the Spirit", "Firebirds" and "Why
Me?", (iii) the Carlito's Way Rights and (iv) the Van Damme Rights. See
Part III, Item 13.
As a result of the foregoing, 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.
In addition, as a result of other transactions described in Part III,
Item 13(a), the Company has eliminated its bank indebtedness.
(b) Financial information about industry segments.
The Company, which has no current business operations, was engaged
solely in the film industry. There are no separate industry segments in
connection with the business of the Company. For financial information,
reference is made to the financial statements included elsewhere herein.
(c) Narrative description of business.
The Company was principally engaged in the business of developing,
financing and producing motion pictures for distribution.
The Company was involved in various phases of exploration, acquisition,
and development of properties with the primary intention of producing
theatrical motion pictures. From this development process, the Company was
able to complete and release during fiscal 1990 the two films it placed
into production in fiscal 1989. These films were entitled "Triumph of the
Spirit" and "Firebirds". Additionally, as more fully described in Part I,
Item 1(a), the Company acquired in January 1990 all of the issued and
outstanding capital stock of Byzantine which at the time owned the rights
to the completed film property "Why Me?". This film was also released
during fiscal year 1990. See Part I, Item 1(a), however, for information
on the sale of all of the Company's film properties. As a result, the
Company has no current business operations.
MOTION PICTURE INDUSTRY OVERVIEW
The procedures and practices described in the following generalized
discussion are intended only to provide a background against which the
previous business of the Company may be evaluated. There can be no
assurance that the procedures and practices described in the following
generalized discussion has applied (or will ever apply) in any particular
instances to the business of the Company.
PRODUCTION
The process by which an idea or a story becomes a finished motion
picture includes several distinct steps, which are described in
chronological sequence below. The "producer" is primarily responsible for
the execution and implementation of this process.
First, a producer acquires the rights to an existing literary property,
e.g., a novel, play or short story, or the producer commissions the
preparation of a story outline based on an original concept or idea. Next,
the producer, with his own funds or funds obtained from others, finances
the first draft of a screenplay based on the literary material and also
finances any additions, revisions or redrafts that may be required. After
a screenplay has been prepared, the producer options or otherwise assembles
the director, principal actors and other key creative personnel, and
prepares a budget. This phase of making a film is known as "development".
Once the project is fully developed, and if not already arranged, the
producer must provide or locate financing. The number and combination of
financing sources and vehicles is limited only by the imagination.
Once the financing has been arranged or committed, the project is ready
for "pre-production". During the following approximately three months,
locations are secured, casting is completed and the shooting schedule is
planned. Next, the principal photography, or the actual "shooting" of the
motion picture is commenced. Principal photography is usually ten to
twelve weeks in duration.
During the "post-production" phase, the film is edited, music and
special effects are added, and the sound-track and film are synchronized to
produce the master negative from which the prints for the theater
projection are made. The post-production phase may take from four to eight
months.
DISTRIBUTION
Arrangements for the distribution of a motion picture vary greatly.
Typically, a motion picture will be released to theaters in the United
States and Canada for exhibition first - the "domestic" theatrical market;
usually, thereafter, the film is distributed abroad - the "foreign" market.
Following domestic and foreign exhibition of a film, the motion picture is
distributed further by release of video cassettes, by exhibition on pay
television (principally cable and subscription TV), by release to non-
theatrical markets (including airlines, ships and schools) and then by
exhibition on network and/or syndicated television. Depending upon the
actual film product, it is sometimes necessary to alter the foregoing steps
in distributing a film.
The revenues available from these markets, the time of the receipt of
revenues and the relative importance of the various markets have changed
dramatically in recent years with the growth of pay television and home
video and the increased demand for projects created by and for these
markets.
The profits of an enterprise involved in the motion picture industry
are greatly dependent upon public taste, which is both unpredictable and
susceptible to change without warning or explanation. As a result, it is
impossible to predict accurately the success or failure of a motion
picture. The success of a project may also be significantly affected by
the popularity of other motion pictures then being distributed.
Moreover, significant problems are often encountered during the
production of a motion picture which cannot be reliably ascertained in
advance and which are beyond the control of the entities involved. Such
problems may include cost overruns, labor problems, delays or inabilities
to obtain supplies, props or costumes, equipment breakdowns, injury,
illness or death to cast members or the director and weather delays.
Accordingly, no assurances can be made that a project will ever be
completed, or if completed, that it can be done so in a timely manner. As
a result, enterprises involved in the motion picture industry may,
therefore, experience delays in generating revenues, if any. In addition,
even if a project is completed, any problem encountered during the
production of a motion picture may add to the costs of the project which
could significantly affect a project's chances of achieving financial
success.
EMPLOYEES
Other than its two officers, the Company currently has no employees.
COMPETITION
Competition in the motion picture industry is intense. Many companies
compete to obtain the literary properties, creative personnel, talent,
production personnel and financing which are essential to the motion
picture industry. Many of such companies are organizations of
substantially larger size and capacity, with far greater financial and
personal resources and longer operating history and may, therefore, be
better able to acquire properties, personnel and financing.
In connection with its search for another business opportunity, the
Company will remain an insignificant participant among firms which engage
in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company.
In view of the Company's limited financial resources and limited management
availability, the Company will continue to be at a significant competitive
disadvantage compared to the Company's competitors.
(d) Financial information about foreign and domestic operations and
export sales.
See the financial statements included elsewhere herein.
ITEM 2. PROPERTIES.
The Company maintains its offices on a rent-free month-to-month basis
in office space provided by one of its officers. The office is located at
501 S.E. Columbia Shores Boulevard, Suite 350, Vancouver, Washington 98661.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been named co-defendant in a lawsuit commenced by an
individual alleging breach of an oral agreement regarding the rights to
"Triumph of the Spirit". The claim is for damages in excess of $20
million. Such action was commenced in September 1990 and was dismissed by
the Superior Court for the State of California for the County of Los
Angeles. This dismissal has been appealed and is currently pending. The
Company believes the suit is without merit and is accordingly defending its
position. The lawsuit is covered by an errors and omissions insurance
policy up to $5 million. The deductible portion of the policy totaling
$25,000 was paid in fiscal 1990. Management believes that there will be no
further material adverse effect on the financial position or results of
operations of the Company from this lawsuit. In addition, see Part III,
Item 13 for information on the indemnification to be provided by Epic.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) The Company's Common Stock is traded in the over-the-counter
market and is listed on the OTC Bulletin Board and quoted in the "pink
sheets" promulgated by the National Quotation Bureau, Incorporated. To
date, there has been only sporadic trading of the Company's Common Stock.
The high and low bid quotations for the Company's Common Stock tabulated
below represent prices between dealers and do not include retail markups,
markdowns, commissions or other adjustments and may not represent actual
transactions.
<TABLE>
<CAPTION>
Bid Prices
High Low
Period
<S> <C> <C>
Fiscal Year Ended October 31, 1994:
Nov. 1, 1993 to Jan. 31, 1994 $.01 $.01
Feb. 1, 1994 to April 30, 1994 $.01 $.001
May 1, 1994 to July 31, 1994 $.01 $.001
Aug. 1, 1994 to Oct. 31, 1994 $.01 $.001
Fiscal Year Ended October 31, 1995:
Nov. 1, 1994 to Jan. 31, 1995 $.01 $.001
Feb. 1, 1995 to April 30, 1995 $.01 $.001
May 1, 1995 to July 31, 1995 $.01 $.001
Aug. 1, 1995 to Oct. 31, 1995 $.01 $.001
</TABLE>
(b) As of January 23, 1996, there were approximately 625 record
holders of the Company's Common Stock.
(c) No dividends have been declared or paid on the Company's Common
Stock since inception. The Company presently intends to retain earnings,
if ever achieved, for use in its business and, therefore, there is no
assurance when, or if ever, dividends may be paid.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below is derived from the
Company's financial statements and should be read in conjunction with such
statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
Fiscal year ended October 31:
1995 1994 1993
<S> <C> <C> <C>
Net Revenues (Negative) $ - $ - $ (12,547)
Operating (Loss) (17,329) (16,075) (660,390)
Net (Loss) (16,512) (247,111) (1,259,975)
Net (Loss) per Share (.0002) (.0034) (.0171)
Total Assets 24,400 42,002 56,277
Long Term Debt 3,375,119 3,375,119 3,148,814
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended October 31:
1992 1991
<S> <C> <C>
Net Revenues (Negative) $ 214,070 $ 3,843,994
Operating (Loss) (147,477) (1,488,072)
Net (Loss) (767,879) (2,341,697)
Net (Loss) per Share (.0104) (.0318)
Total Assets 3,443,411 4,896,767
Long Term Debt 8,852,277 8,321,528
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
During the fiscal year ended October 31, 1995, the Company incurred a
net loss of $16,512 as compared to a net loss of $247,111 for the year
ended October 31, 1994. This decrease in net loss of $230,599 is
principally due to no interest being accrued for fiscal 1995 on the $3
million Nonrecourse Obligations (defined in Part III, Item 13(a)) which was
assigned to and assumed by Epic as of November 30, 1995. As a result of the
foregoing, the Company has eliminated its bank indebtedness.
During the fiscal year ended October 31, 1995, interest expense was
zero as compared to $231,309 for fiscal 1994. This is also due to no
interest being accrued for fiscal 1995 on the Nonrecourse Obligations.
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 $23,619 as
of October 31, 1995. 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 elsewhere 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Part IV, Item 14 for the Company's financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors.
Set forth below are the present directors of the Company. There are
no other persons who have been nominated or chosen to become directors nor
are there any arrangements or understandings between any of the directors
and other persons pursuant to which he was selected as a director.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have
qualified.
<TABLE>
<CAPTION>
PRESENT POSITIONS
NAME AGE AND OFFICES DIRECTOR SINCE
<S> <C> <C> <C>
William Rifkin 75 Chairman of the Board, December 1984
Secretary and Director
Martin Rifkin 34 President, Treasurer April 1985
and Director
</TABLE>
(b) Identification of Executive Officers.
Set forth below are the present executive officers of the Company.
Note that there are no other persons who have been chosen to become
executive officers nor are there any arrangements or understandings between
any of the executive officers and other persons pursuant to which he was
selected as an officer. Officers are appointed to serve until the meeting
of the Board of Directors following the next annual meeting of stockholders
and until their successors have been elected and qualified.
<TABLE>
<CAPTION>
NAME AGE OFFICES
<S> <C> <C>
William Rifkin 75 Chairman of the Board,
Secretary and Director
Martin Rifkin 34 President, Treasurer and
Director
</TABLE>
(c) Identification of Certain Significant Employees.
None
(d) Family Relationships.
Martin Rifkin, President, Treasurer and a Director of the Company, is
the son of William Rifkin, Chairman of the Board, Secretary and a Director
of the Company.
(e) Business Experience.
Set forth below are brief accounts of the business experience during
the past five years of each director and executive officer of the Company.
WILLIAM RIFKIN is the Chairman of the Board, Secretary and a Director
of the Company. From 1985 through 1991, Mr. Rifkin was a Director of
Memory Sciences Corporation, a public company involved in the computer
industry, and was its Treasurer from April 1987 to January 1990. Since
1984, he has also been President and a director of Profit Merchandising
Corp., a public company engaged in the distribution of weatherstripping
products. Mr. Rifkin is the father of Martin Rifkin.
MARTIN RIFKIN is the Company's President, Treasurer and a Director.
Since December 1985, Mr. Rifkin has been a Director of Nutrition Now
Incorporated, a public company which manufactures and markets nutritional
supplements and since November 1987, he has been its Secretary and
Treasurer and since February 1992, its President. Also, from August 1988
to February 1992, he was its Vice President. In addition, Mr. Rifkin has
been Treasurer and Director of Profit Merchandising Corp. (see biography of
William Rifkin above) since September 1983 and Vice President since June
1985. Since February 1994, Mr. Rifkin has also been President, Secretary
and Treasurer and sole Director of NW Venture Corp. Martin Rifkin is the
son of William Rifkin.
(f) Involvement in Certain Legal Proceedings.
None
(g) Promoters and Control Persons.
None
ITEM 11. EXECUTIVE COMPENSATION.
(a) Cash Compensation.
For the fiscal year ended October 31, 1995, none of the Company's
executive officers received compensation from the Company.
(b) Compensation Pursuant to Plans.
None
(c) Other Compensation.
None
(d) Compensation of Directors.
Since inception, no director has received any compensation for his
services as such. However, in the past, directors have been and will
continue to be reimbursed for reasonable expenses incurred on the Company's
behalf.
(e) Termination of Employment and Change of Control Arrangements.
None
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth, as of January 23, 1996, certain
information as to those persons known to the Company to be beneficial
owners of more than five (5%) percent of the common stock of the Company:
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
OF BENEFICIAL OWNERSHIP
Percent
Nature of of
NAME AND ADDRESS OWNERSHIP AMOUNT CLASS
<S> <C> <C> <C>
William Rifkin Record and 53,050,000(1) 72.1%
501 S.E. Columbia Beneficial
Shores Blvd.
Vancouver, WA
Martin Rifkin Record and 5,450,000(2) 7.4%
501 S.E. Columbia Beneficial
Shores Blvd.
Vancouver, WA
</TABLE>
(1) Includes 2,000,000 shares owned of record by the wife of William
Rifkin, which shares may be deemed to be beneficially owned by him.
(2) Includes 850,000 shares owned of record by the wife of Martin Rifkin,
which shares may be deemed to be beneficially owned by him, and
150,000 shares held by Martin Rifkin as custodian for his daughter
under the Uniform Gifts to Minors Act.
(b) Security Ownership of Management.
The following table sets forth, as of January 23, 1996, certain
information concerning the number of shares of Common Stock of the Company
owned by all of the directors of the Company and by all of the directors
and officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
OF BENEFICIAL OWNERSHIP
Percent
Nature of of
NAME AND ADDRESS OWNERSHIP AMOUNT CLASS
<S> <C> <C> <C>
William Rifkin Record and 53,050,000(1) 72.1%
501 S.E. Columbia Beneficial
Shores Blvd.
Vancouver, WA
Martin Rifkin Record and 5,450,000(2) 7.4%
501 S.E. Columbia Beneficial
Shores Blvd.
Vancouver, WA
All Officers and Record and 58,500,000(1)(2) 79.5%
Directors as a Group Beneficial
(consisting of
2 persons)
</TABLE>
(1) Includes 2,000,000 shares owned of record by the wife of William
Rifkin, which shares may be deemed to be beneficially owned by him.
(2) Includes 850,000 shares owned of record by the wife of Martin Rifkin,
which shares may be deemed to be beneficially owned by him, and
150,000 shares held by Martin Rifkin as custodian for his daughter
under the Uniform Gifts to Minors Act.
(c) Changes in Control.
See Part III, Item 13(a) for information on the transfer of 40,000,000
shares of Common Stock by Epic to William Rifkin.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others.
Prior to December 27, 1995, Epic Productions, Inc. ("Epic") owned
40,000,000 shares of Common Stock of the Company which represented
approximately 54% of the outstanding shares of the Company's Common Stock.
On December 27, 1995, Epic sold all of such shares to William Rifkin. As a
result, Epic is no longer a stockholder of the Company.
Pursuant to an Acquisition Agreement dated March 3, 1993 (the
"Acquisition Agreement") by and between the Company and Epic, the Company
on May 12, 1993 (the "Closing") 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"), (iii) the Carlito's
Way Rights (as defined in Part I, Item 1(a)) and (iv) the Van Damme Rights
(as defined in Part I, Item 1(a)).
In connection with the financing of the film "Triumph of the Spirit",
the Company was unable to pay to 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. As of April 30, 1993, such
indebtedness totalled $9,188,864. The Company was able to negotiate an
extension of the maturity date of this note until September 30, 1991, but
since then the Company has been in default of its obligation.
Pursuant to the Acquisition Agreement, at Closing, (a) 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 the Subsidiary Corporations, (ii) the Completed Films, (iii) the
Carlito's Way Rights and (iv) the Van Damme Rights, and in exchange
therefor, (b) Epic assumed all debts and liabilities of the Company with
respect to the assets acquired, paid the Company the sum of $50,000,
acquired a substantial portion of the Bank Loan from the Bank as described
below and modified the loan arrangements thereunder plus other indebtedness
due Epic from the Company.
At Closing, Epic acquired all but $3 million of the indebtedness under
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 (which other
indebtedness was $983,069 as of April 30, 1993). All of such indebtedness
acquired by Epic is hereinafter referred to as the "Primary Obligations".
The terms of such modification were as follows: (i) principal shall be due
and payable 18 years from Closing, and (ii) interest shall be 6% per annum
payable within 45 days following the close of each fiscal year of the
Company, payable in arrears commencing October 31, 1993, not to exceed 20%
of the net profits of the Company during the applicable year.
On October 29, 1993, the Company and Epic entered into an agreement
whereby Epic assigned and contributed to the capital of the Company the
indebtedness described above as the Primary Obligations of the Company to
Epic of $7,171,933 plus accrued and unpaid interest of $201,600.
As indicated above, $3 million of indebtedness under the Bank Loan was
not acquired by Epic. In connection therewith, the Bank, Epic and the
Company entered into an agreement at Closing which provided that such
portion of the Bank Loan (the "Nonrecourse Obligations") be nonrecourse to
the Company and payable interest and then principal only from operating
receipts from "Triumph of the Spirit"which was acquired by Epic pursuant to
the Acquisition Agreement.
As of November 30, 1995, the Company assigned to Epic and Epic assumed
the remaining $3 million Nonrecourse Obligations plus interest thereon.
Each of the Company and Epic have agreed to indemnify the other in
respect of any claims, demands and losses (collectively, "Losses") that may
be asserted against, imposed upon and incurred by the other resulting from
the breach of any representations, warranties and obligations of the other
as contained in the Acquisition Agreement. In addition, Epic has agreed to
indemnify the Company for any Losses that arise out of or in any way are
connected to or result from the assets being acquired by Epic or any of the
Subsidiary Corporations, including without limitation, any claims arising
under or with respect to the business, operations and assets of each of the
Subsidiary Corporations. Excluded from the foregoing indemnity shall be
Losses attributable to fraud or willful misconduct. Also, the Company has
agreed to defend and hold Epic harmless against and in respect of any and
all liabilities and costs attributable to the litigation which is being
assumed by Epic described in the Acquisition Agreement, but only to the
extent such liabilities and costs are covered by applicable insurance.
(b) Certain Business Relationships.
See Item 13(a) above.
(c) Indebtedness of Management.
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) and (2) Financial Statements and Financial Statement
Schedules
The financial statements and schedules hereinafter listed are annexed
hereto and filed as part of this annual report:
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introductory Comment 17
Balance Sheets 18
Statements of Operations 19
Statements of Cash Flows 20
Statements of Stockholders' Equity (Deficit) 21
Notes to Financial Statements 23
</TABLE>
(3) EXHIBITS
3.1 Certificate of Incorporation of Registrant with filing
receipt(1)
3.2 Certificate of Amendment of Certificate of Incorporation with
filing receipt (filed November 17, 1989)(1)
3.3 By-Laws of Registrant(1)
4.1 Specimen of Common Stock Certificate of Registrant(1)
4.2 Promissory Note in the principal amount of $7,171,933(1)
4.3 Promissory Note in the principal amount of $3,000,000(1)
10.1 Loan Agreement and Security Assignment (for the film
"Triumph of the Spirit")(1)
27.1 Financial Data Schedule
99.1 Acquisition Agreement dated as of March 3, 1993 by and between
Nova International Films, Inc. and Epic Productions, Inc.(1)
99.2 Amendment to Loan Agreement and Security Assignment dated as of
May 12, 1993 by and between Credit Lyonnais Bank Nederland, N.V.,
Nova International Films, Inc. and Epic Productions, Inc.(1)
99.3 Amendment to Loan Agreement dated as of May 12, 1993 by and
between Epic Productions, Inc. and Nova International Films,
Inc.(1)
99.4 Assignment Agreement/Contribution to Capital dated October 29,
1993(1)
99.5 Letter Agreement dated November 30, 1995 (re: Nonrecourse
Obligations)
(1) Previously filed and incorporated herein by reference.
(b) Reports on Form 8-K
Listed below are reports on Form 8-K filed during the last quarter of
the period covered by this report:
None
(c) Exhibits
See Item 14(a)(3) above.
(d) See list of financial statements and
schedules under Item 14(a)(1) and (2) above.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
OCTOBER 31, 1995
The financial information for the fiscal year ended October 31, 1995
is unaudited. However, in the opinion of management the accompanying
Balance Sheet of Nova International Films, Inc. as of October 31, 1995 and
1994, and the related Statements of Operations, Cash Flows and
Stockholders' Equity (Deficit) for the periods ended October 31, 1995,
1994, and 1993, present fairly, in all material respects, the financial
position of Nova International Films, Inc. as of October 31, 1995 and 1994,
and the results of operations, cash flows and its stockholders' equity
(deficit) for the periods ended October 31, 1995, 1994, and 1993, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred losses
in each of the last three fiscal years which have severely depleted its
working capital and have raised doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations". The financial statements do not
include adjustments that might result from the outcome of this uncertainty.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
October 31, October 31,
1995 1994
<S> <C> <C>
ASSETS
Cash $ 23,619 $ 38,967
Furniture and equipment
at cost, less
accumulated depreciation 781 3,035
Total assets $ 24,400 $ 42,002
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
LIABILITIES:
Accounts payable and accrued
expenses $ 5,936 $ 7,026
Debt 3,375,119 3,375,119
Total liabilities $ 3,381,055 $ 3,382,145
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 (11,554,651) (11,538,139)
Total stockholders' equity
(deficit) $ (3,356,655) $ (3,340,143)
Total liabilities and
stockholders' equity (deficit) $ 24,400 $ 42,002
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Year For the Year For the Year
Nov. 1, 1994 Nov. 1, 1993 Nov. 1, 1992
Through Through Through
Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
<S> <C> <C> <C>
REVENUES:
Domestic theatrical $ - $ - $ -
Domestic home video - - (71,301)
Domestic pay tv - - 32,790
Foreign - - -
Other - - 25,964
- - (12,547)
COST AND EXPENSES:
Film costs - - 582,990
Selling, general
and admin. 15,075 11,105 56,271
Depreciation and
amortization 2,254 4,970 8,582
17,329 16,075 647,843
OPERATING LOSS (17,329) (16,075) (660,390)
OTHER INCOME:
Interest income 817 273 1,100
(16,512) 273 1,100
OTHER EXPENSES:
Interest expense - 231,309 600,685
- 231,309 600,685
LOSS BEFORE PROVISION
FOR INCOME TAXES (16,512) (247,111) (1,259,975)
PROVISION FOR INCOME
TAXES - - -
NET LOSS ($16,512) $(247,111) ($1,259,975)
Net loss per share ($0.0002) ($0.0034) ($0.0171)
Average no. of
shares outstanding 73,583,000 73,583,000 73,583,000
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Unaudited)
<TABLE>
<CAPTION>
For the Year For the Year For the Year
Nov. 1, 1994 Nov. 1, 1993 Nov. 1, 1992
Through Through Through
Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
<S> <C> <C> <C>
Cash flows from
operating activities:
Net loss $ (16,512) $(247,111) ($1,259,975)
Adjustments to
reconcile net loss
to net cash provided
by operating
activities:
Amortization of
film costs - - 582,990
Depreciation and
amortization 2,254 4,970 8,582
Net changes in assets
and liabilities:
Cash - restricted - - -
Accounts receivable - - 1,533
Accounts payable (1,090) 1,531 (352,158)
Due to shareholder - - 942,665
Deferred revenue - - (215,000)
Total adjustments 1,164 6,501 968,612
Net cash provided
(used) by operating
activities (15,348) (240,610) (291,363)
Cash flows from
investing activities:
Increase in film costs - - (441,858)
Net cash provided
(used) in investing
activities - - (441,858)
Cash flows from financing
activities:
Net proceeds from sale
of assets and
restructuring of debt - - 50,000
Net proceeds from debt
financing - 231,305 705,117
Net reduction of debt
from repayments - - -
Net cash provided (used)
by financing activities - 231,305 755,117
Net (decrease)
increase in cash (15,348) (9,305) 21,896
Cash at beginning
of period 38,967 48,272 26,376
Cash at end of period $23,619 $38,967 $48,272
Supplementary schedule
of non-cash financing
activities:
Assignment and
contribution of debt
to additional
paid-in capital - - $ 7,373,533
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
$00001 Par Value
No. Additional
of Paid-in
Shares Amount Capital
<S> <C> <C> <C>
Balance at October 31, 1992 73,583,000 $736 $ 1,805,727
Effect of Acquisition
with Epic (982,000)
Epic's assignment and
contribution of debt
to capital 7,373,533
Net Loss from 11/1/92
thru 10/31/93
Balance at October 31, 1993 73,583,000 736 8,197,260
Net Loss from 11/1/93
thru 10/31/94
Balance at October 31, 1994 73,583,000 736 8,197,260
Net Loss From 11/1/94
thru 10/31/95
73,583,000 $736 $ 8,197,260
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
YEARS ENDED OCTOBER 31, 1992, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
Accumulated
Deficit Total
<S> <C> <C>
Balance at October 31, 1992 $(10,031,053) $ (8,224,590)
Effect of Acquisition with Epic (982,000)
Epic's assignment and
contribution of debt
to capital 7,373,533
Net Loss from 11/1/92
thru 10/31/93 (1,259,975) (1,259,975)
Balance at October 31, 1993 (11,291,028) (3,093,032)
Net Loss from 11/1/93
thru 10/31/94 (247,111) (247,111)
Balance at October 31, 1994 (11,538,139) (3,340,143)
Net Loss From 11/1/94
thru 10/31/95 (16,512) (16,512)
$(11,554,651) $ (3,356,655)
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
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
As noted elsewhere, the financial statements for the years ended October
31, 1995, 1994 and 1993 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
October 31, 1995
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>
<S> <C> <C>
Months After
Market place Initial Release Period
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
October 31, 1995
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>
October 31, October 31,
1994 1995
<S> <C> <C>
Office/Computer Equipment $38,153 $38,153
Telephone Equipment 10,934 10,934
Furniture & Equipment
at cost 49,087 49,087
Accumulated Depreciation 46,052 48,306
$ 3,035 $ 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
October 31, 1995
As of November 30, 1995, 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) Commitments and Contingencies
The Company has been named co-defendant in a lawsuit commenced by an
individual alleging breach of an oral agreement regarding the rights to
"Triumph of the Spirit." The claim is for damages in excess of $20
million. Such action was dismissed by the jurisdictional court. This
dismissal has been appealed and is currently pending. The Company believes
the suit is without merit and is accordingly defending its position. The
lawsuit is covered by an errors and omissions insurance policy up to $5
million. The deductible portion of the policy totaling $25,000 was paid in
fiscal 1990. Management believes that there will be no further material
adverse effect on the financial position or results of operations of the
Company from this lawsuit. In addition, pursuant to the acquisition
agreement, Epic has agreed to indemnify the Company for any losses arising
out of the assets acquired thereunder by Epic.
8) Amortization of Film Costs
Unamortized film costs are compared with net realizable values on a
film-by-film basis and losses are provided for when appropriate. On the
accompanying statements of operations, film costs for the year ended
October 31, 1993 include a provision of $582,990 to state films at their
net realizable values.
9) 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 $23,619 as
of October 31, 1995. Accordingly, the Company has significantly reduced
its overhead.
<PAGE>
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.
NOVA INTERNATIONAL FILMS, INC.
By:/S/MARTIN RIFKIN
Martin Rifkin, President
Date:JANUARY 29, 1996
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.
SIGNATURE TITLE DATE
/S/WILLIAM RIFKIN Chairman of the Board, 1/29/96
William Rifkin Secretary and Director
(Principal Executive Officer
and Principal Financial Officer)
/S/MARTIN RIFKIN President, Treasurer 1/29/96
Martin Rifkin and Director
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
No annual report covering the Registrant's last fiscal year or proxy
material has been sent to security holders of the Registrant.
<PAGE>
Commission File No. 2-98997-NY
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
EXHIBITS
filed with
ANNUAL REPORT
ON FORM 10-K
FOR THE
FISCAL YEAR ENDED OCTOBER 31, 1995
NOVA INTERNATIONAL FILMS, INC.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
PAGE
<S> <C> <C>
3.1 Certificate of Incorporation of Registrant
with filing receipt(1)
3.2 Certificate of Amendment of Certificate
of Incorporation with filing receipt
(filed November 17, 1989)(2)
3.3 By-Laws of Registrant(1)
4.1 Specimen of Common Stock Certificate
of Registrant(1)
4.2 Promissory Note in the principal amount
of $7,171,933(3)
4.3 Promissory Note in the principal amount
of $3,000,000(3)
10.1 Loan Agreement and Security Assignment
(for the film "Triumph of the Spirit")(4)
27.1 Financial Data Schedule
99.1 Acquisition Agreement dated as of March 3,
1993 by and between Nova International
Films, Inc. and Epic Productions, Inc.(3)
99.2 Amendment to Loan Agreement and Security
Assignment dated as of May 12, 1993 by
and between Credit Lyonnais Bank Nederland,
N.V., Nova International Films, Inc. and
Epic Productions, Inc.(3)
99.3 Amendment to Loan Agreement dated as of
May 12, 1993 by and between Epic Productions,
Inc. and Nova International Films, Inc.(3)
99.4 Assignment Agreement/Contribution to Capital
dated October 29, 1993(5)
99.5 Letter Agreement dated November 30, 1995
(re: Nonrecourse Obligations)
</TABLE>
(1) Incorporated herein by reference from Registrant's Registration
Statement on Form S-18, effective November 12, 1985.
(2) Incorporated herein by reference from Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1989.
(3) Incorporated herein by reference from Registrant's Current Report on
Form 8-K (dated: May 12, 1993).
(4) Incorporated herein by reference from Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1990.
(5) Incorporated herein by reference from Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1993.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NOVA
INTERNATIONAL FILMS, INC.'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER
31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 23,619
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,619
<PP&E> 781
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,400
<CURRENT-LIABILITIES> 5,936
<BONDS> 3,375,119
<COMMON> 736
0
0
<OTHER-SE> 8,197,260
<TOTAL-LIABILITY-AND-EQUITY> 24,400
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,512)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,512)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,512)
<EPS-PRIMARY> (.001)
<EPS-DILUTED> (.001)
</TABLE>
EXHIBIT 99.5
November 30, 1995
Nova International Films, Inc.
501 S.E. Columbia Shores Boulevard
Suite 350
Vancouver, Washington 98661
Attention: William Rifkin, Chairman
Gentlemen:
We refer to the Acquisition Agreement between Nova International
Films, Inc. ("Nova") and Epic Productions, Inc. ("Epic") dated as of March
3, 1993 (the "Acquisition Agreement"). Pursuant to the terms of the
Acquisition Agreement, Epic acquired Nova's debt to Credit Lyonnais Bank
Nederland N.V. ("CLBN"), except $3,000,000 of such indebtedness which was
restructured and converted to nonrecourse debt payable only from operating
receipts from the motion picture entitled "Triumph of the Spirit". The
$3,000,000 indebtedness was evidenced by a promissory note dated May 12,
1993 executed by Nova in favor of CLBN. All obligations evidenced by such
promissory note are herein referred to as the "Nonrecourse Obligations".
All agreements, documents and instruments related to the Nonrecourse
Obligations including, without limitation, those evidenced by that certain
Loan Agreement and Security Assignment dated as of December 21, 1989, as
amended to date, between CLBN and Nova and all security agreements related
thereto are herein referred to as the "Loan Documents".
As further consideration of the transaction contemplated by the
Acquisition Agreement, the parties hereto agree as follows:
1. ASSIGNMENT; CONSENT.
(a) ASSIGNMENT OF NON-RECOURSE OBLIGATIONS. Nova hereby assigns
the Nonrecourse Obligations to Epic.
(b) ASSIGNMENT OF LOAN AGREEMENTS. Nova hereby assigns all
rights and delegates all obligations under the Loan Documents to Epic.
(c) ACCEPTANCE OF ASSIGNMENT. Epic hereby accepts the assignment
of the Nonrecourse Obligations and the assignment and delegation of all
rights and obligations under the Loan Documents.
(d) CONSENT. CLBN hereby consents to the foregoing assignment
and delegation.
(e) RETURN OF NOTE. CLBN hereby agrees to return the promissory
note (the "Existing Note") evidencing the $3,000,000 Nonrecourse
Obligations to Nova.
(f) NEW NOTE. Epic agrees to execute and deliver to CLBN a note
in the form and substance attached hereto as Exhibit "A" to replace the
Existing Note.
(g) FURTHER ASSURANCES. Nova and Epic hereby each agree to take
such further acts and execute such documents, agreements and instruments as
shall be necessary or appropriate to effectuate any of the foregoing
assignments and delegations and to maintain all security interests in favor
of CLBN in full force and effect.
2. RELEASES.
(a) Reference is made to the following releases, each dated May
12, 1993:
(i) the release executed by 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"), and Epic in favor of Nova,
William Rifkin, Martin Rifkin and Nova's attorneys (the "Epic Release");
(ii) the release executed by Nova in favor of Epic and each
of the Subsidiary Corporations, their respective direct and indirect
shareholders, attorneys, officers and directors (the "Nova Release"); and
(iii) the release executed by William Rifkin in favor of
Epic and each of the Subsidiary Corporations, their respective direct and
indirect shareholders, attorneys, officers and directors (the "Rifkin
Release");
The Epic Release, the Nova Release and the Rifkin Releases are herein
referred to as the "Releases".
(b) AMENDMENT TO RELEASES. The second to the last paragraph on
page 2 of each of the Releases is hereby amended to read in full as
follows:
"This Release shall not apply to the obligations set forth in the
Acquisition Agreement."
<PAGE>
Kindly confirm your agreement to the foregoing by executing a copy of
this letter where indicated below. This agreement will become effective
when executed by all parties and may be executed in counterparts.
Very truly yours,
Epic Productions, Inc.,
a California corporation
By: S/
John Peters, President
Byzantine Fire, Inc.,
a California corporation
By: S/
Wings of The Apache, Inc.,
a California corporation
By: S/
A/R Productions, Ltd.,
a California corporation
By: S/
Credit Lyonnais Bank
Nederland N.V.
By: S/
Agreed and accepted as of
the date set forth above.
Nova International Films, Inc.
a Delaware corporation
By: S/
William Rifkin, Chairman
S/
William Rifkin, an individual
<PAGE>
