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 April 30, 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
(Address of principal 98661
executive offices) (Zip Code)
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
June
1, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NOVA INTERNATIONAL FILMS, INC.
Index to Financial Information
Period Ended April 30, 1996
<TABLE>
<CAPTION>
Item Page
<S> <C>
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
</TABLE>
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
<S> <C> <C>
ASSETS
Cash $ 17,731 $ 23,619
Furniture and equipment at
cost, less accumulated
depreciation 586 781
Total assets $ 18,317 $ 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 CONTINGENCIE - -
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 (8,184,679) (11,554,651)
Total stockholders' equity
(deficit) $ 13,317 $ (3,356,655)
Total liabilities and
stockholders' equity
(deficit) $ 18,317 $ 24,400
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter For the Quarter
Ended Ended
April 30, 1996 April 30, 1995
<S> <C> <C>
REVENUES $ - $ -
COSTS AND EXPENSES:
General and administrative 3,843 2,563
Depreciation and
amortization 98 563
3,941 3,126
OPERATING LOSS (3,941) (3,126)
OTHER INCOME:
Interest income 108 201
108 201
OTHER EXPENSES:
Interest expense - 77,191
- 77,191
LOSS BEFORE PROVISION FOR
INCOME TAXES (3,833) (80,116)
PROVISION FOR INCOME TAXES - -
NET LOSS BEFORE EXTRAORDINARY
INCOME (3,833) (80,116)
EXTRAORDINARY INCOME:
Forgiveness of Debt - -
NET INCOME (LOSS) $ (3,833) $ (80,116)
Net income (loss) per share (.00005) $ (0.0011)
Average no. of shares
outstanding 73,583,000 73,583,000
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS (CONT'D.)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Mos. For the Six Mos.
Ended Ended
April 30, 1996 April 30, 1995
<S> <C> <C>
REVENUES $ - $ -
COSTS AND EXPENSES:
General and administrative 5,183 7,018
Depreciation and
amortization 195 1,127
5,378 8,145
OPERATING LOSS (5,378) (8,145)
OTHER INCOME:
Interest income 231 451
231 451
OTHER EXPENSES:
Interest expense - 152,936
- 152,936
LOSS BEFORE PROVISION FOR
INCOME TAXES (5,147) (160,630)
PROVISION FOR INCOME TAXES - -
NET LOSS BEFORE EXTRAORDINARY
INCOME (5,147) (160,630)
EXTRAORDINARY INCOME:
Forgiveness of Debt 3,375,119 -
NET INCOME (LOSS) $ 3,369,972 $ (160,630)
Net income (loss) per share .04580 $ (0.0022)
Average no. of shares
outstanding 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 Quarter For the Quarter
Ended Ended
Apr. 30, 1996 Apr. 30, 1995
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (3,833) $ (80,116)
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 (3,735) (79,553)
Cash flows from financing
activities:
Net proceeds from debt
financing - 77,191
Net cash provided
(used) by financing
activities - 77,191
Net (decrease) increase
in cash (3,735) (2,362)
Cash at beginning of
period 21,466 34,736
Cash at end of period $ 17,731 $ 32,374
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CASH FLOWS (CONT'D.)
INCREASE (DECREASE) IN CASH
(Unaudited)
<TABLE>
<CAPTION>
For the Six Mos. For the Six Mos.
Ended Ended
Apr. 30, 1996 Apr. 30, 1995
<S> <C> <C>
Cash flows from operating
activities:
Net loss $ (5,147) $ (160,630)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization 195 1,127
Net changes in assets
and liabilities:
Accounts payable (936) -
Total adjustments (741) 1,127
Net cash provided
(used) by operating
activities (5,888) (159,529)
Cash flows from financing
activities:
Net proceeds from debt
financing - 152,936
Net cash provided (used)
by financing activities - 152,936
Net (decrease) increase
in cash (5,888) (6,593)
Cash at beginning of
period 23,619 38,967
Cash at end of period $ 17,731 $ 32,374
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
April 30, 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
April 30, 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
April 30, 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>
April 30, October 31,
1996 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 48,501 48,306
$ 586 $ 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
April 30, 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 $17,731 as of April 30, 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 April 30, 1996, the Company
had a net loss of $(3,833) as compared to a net loss of $(80,116)
for the fiscal quarter ended April 30, 1995. For the six months
ended April 30, 1996, the Company had net income of $3,369,972 as
compared to a net loss of $(160,630) for the six months ended
April 30, 1995. The net income for the six months ended April
30, 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 $17,731 as of April 30, 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: June 10, 1996 By: /s/William Rifkin
William Rifkin,
Chairman of the Board
(Principal Executive
Officer)
Dated: June 10, 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 FILMS, INC.'S QUARTERLY REPORT FOR THE
QUARTER ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 17,731
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,731
<PP&E> 586
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,317
<CURRENT-LIABILITIES> 5,000
<BONDS> 0
<COMMON> 736
0
0
<OTHER-SE> 8,197,260
<TOTAL-LIABILITY-AND-EQUITY> 18,317
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,147)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,147)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,375,119
<CHANGES> 0
<NET-INCOME> 3,369,972
<EPS-PRIMARY> .046
<EPS-DILUTED> .046
</TABLE>
