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, 1997
[ ] 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)
Delawae 11-2717273
(State or other jurisdiction I.R.S. Employer
of incorporation or Identification
organization) Number)
6350 N.E. Campus Drive
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 December 31, 1997, the aggregate market value of the Common Stock held
by non-affiliates of the Registrant (15,083,000 shares) was approximately
$226,245 (based upon the average bid and asked prices of such stock on
December 31, 1997). The number of shares outstanding of the Common Stock
($.00001 par value) of the Registrant as of the close of business on
December 31, 1997 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. 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
6350 N.E. Campus Drive, Vancouver, Washington 98661.
Item 3. Legal Proceedings.
At the present time, there is no material litigation pending or, to
management's knowledge, threatened against the Company.
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.
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.
Bid Prices
High Low
Period
Fiscal Year Ended October 31, 1996:
Nov. 1, 1995 to Jan. 31, 1996 $.01 $.0025
Feb. 1, 1996 to April 30, 1996 $.02 $.0025
May 1, 1996 to July 31, 1996 $.01 $.0001
Aug. 1, 1996 to Oct. 31, 1996 $.01 $.0001
Fiscal Year Ended October 31, 1997:
Nov. 1, 1996 to Jan. 31, 1997 $.03 $.01
Feb. 1, 1997 to April 30, 1997 $.02 $.01
May 1, 1997 to July 31, 1997 $.03 $.01
Aug. 1, 1997 to Oct. 31, 1997 $.01 $.01
(b) As of December 31, 1997, 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.
Fiscal year ended October 31:
1997 1996 1995
Net Revenues (Negative) $ - $ - $ -
Operating (Loss) (3,791) (8,864) (17,329)
Net (Loss)
Before Extraordinary Income (3,661) (8,477) (16,512)
Net (Loss) per Share (.00005) .0458 (.0002)
Total Assets 9,126 15,187 24,400
Long Term Debt - 3,375,119
Fiscal year ended October 31:
1994 1993
Net Revenues (Negative) $ - $ (12,547)
Operating (Loss) (16,075) (660,390)
Net (Loss) (247,111) (1,259,975)
Net (Loss) per Share (.0034) (.0171)
Total Assets 42,002 56,277
Long Term Debt 3,375,119 3,148,814
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The Company had no revenues for the fiscal years ended October 31, 1996 and
1997. During the fiscal year ended October 31, 1997, the Company had a net
loss of $(3,661) compared to net income of $3,366,642 for the year ended
October 31, 1996. The net income for the year ended October 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 $9,126 as
of October 31, 1997. Accordingly, the Company has significantly reduced
its overhead. In connection therewith, the Company does not pay any
officer salaries and rent. Its costs primarily include only those costs
necessary to retain its corporate charter, file necessary tax returns and
report to the Securities and Exchange Commission, and certain expenses in
seeking business opportunities.
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. 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.
Present Positions
Name Age and Offices Director Since
William Rifkin 77 Chairman of the Board, December 1984
Secretary and Director
Martin Rifkin 36 President, Treasurer April 1985
and Director
(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.
Name Age Offices
William Rifkin 77 Chairman of the Board, Secretary and Director
Martin Rifkin 36 President, Treasurer and Director
(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 has been Chairman of the Board and a Director of the
Company since December 1984. Since October 1994, he has also been
Secretary of the Company. From March 1990 to October 1994, he was also the
Company's President. 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 has been President and Treasurer of the Company since
October 1994 and a Director since April 1985. In addition, from April 1985
to October 1994, he was Vice President of the Company. 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 been a Director of Cyberia
Holdings, Inc., formerly known as NW Venture Corp. Also, from February
1994 to January 1997, he was its President, Secretary and Treasurer.
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, 1997, 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 December 31, 1997, 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:
Amount and Nature
of Beneficial Ownership
Percent
Nature of of
Name and Address Ownership Amount Class
William Rifkin Record and 53,050,000(1) 72.1%
6350 N.E. Campus Drive Beneficial
Vancouver, WA
Martin Rifkin Record and 5,450,000(2) 7.4%
6350 N.E. Campus Drive Beneficial
Vancouver, WA
(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 December 31, 1997 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:
Amount and Nature
of Beneficial Ownership
Percent
Nature of of
Name and Address Ownership Amount Class
William Rifkin Record and 53,050,000(1) 72.1%
6350 N.E. Campus Drive Beneficial
Vancouver, WA
Martin Rifkin Record and 5,450,000(2) 7.4%
6350 N.E. Campus Drive Beneficial
Vancouver, WA
All Officers and Record and 58,500,000(1)(2) 79.5%
Directors as a Group Beneficial
(consisting of
2 persons)
(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:
Page
Introductory Comment 17
Balance Sheets 18
Statements of Operations 19
Statements of Stockholders' Equity (Deficit) 20
Statements of Cash Flows 22
Notes to Financial Statements 23
(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)(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)
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)(6)
(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.
(6) Incorporated herein by reference from Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1995.
(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.
NOVA INTERNATIONAL FILMS, INC.
OCTOBER 31, 1997
The financial information for the fiscal year ended October 31, 1997
is unaudited. However, in the opinion of management the accompanying
Balance Sheet of Nova International Films, Inc. as of October 31, 1997 and
1996, and the related Statements of Operations, Cash Flows and
Stockholders' Equity (Deficit) for the periods ended October 31, 1997,
1996, and 1995, present fairly, in all material respects, the financial
position of Nova International Films, Inc. as of October 31, 1997 and 1996,
and the results of operations, cash flows and its Stockholders' equity
(deficit) for the periods ended October 31, 1997, 1996, and 1995, 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
before extraordinary income 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)
October 31, October 31,
1997 1996
ASSETS
Cash $ 9,126 $ 14,797
Furniture and equipment at cost, less
accumulated depreciation - 390
Total assets $ 9,126 $ 15,187
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
LIABILITIES:
Accounts payable and accrued expenses $ 2,800 $ 5,200
Debt - -
Total liabilities $ 2,800 $ 5,200
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 (8,191,670) (8,188,009)
Total stockholders' equity (deficit) $ 6,326 $ 9,987
Total liabilities and stockholders'
equity (deficit) $ 9,126 $ 15,187
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Year For the Year For the Year
Nov. 1, 1996 Nov. 1, 1995 Nov. 1, 1994
Through Through Through
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995
REVENUES $ - $ - $ -
COST AND EXPENSES:
Selling, general and admin. $ 3,401 $ 8,473 $ 15,075
Depreciation and
amortization 390 391 2,254
$ 3,791 $ 8,864 $ 17,329
OPERATING LOSS $ (3,791) $ (8,864) $ (17,329)
OTHER INCOME
Interest income $ 130 $ 387 $ 817
LOSS BEFORE PROVISION FOR
INCOME TAXES $ (3,661) $ (8,477) $ (16,512)
PROVISION FOR INCOME TAXES - - -
NET LOSS BEFORE
EXTRAORDINARY INCOME $ (3,661) $ (8,477) $ (16,512)
EXTRAORDINARY INCOME:
Forgiveness of Debt - 3,375,119 -
NET INCOME (LOSS) $ (3,661) 3,366,642 $ (16,512)
Net loss per share $ (.00005) $ .0458 $ (0.0002)
Average no. of
share outstanding 73,583,000 73,583,000 73,583,000
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
YEARS ENDED OCTOBER 31, 1992, 1993, 1994, 1995, 1996 AND 1997
Common Stock
$.00001 Par Value Additonal
No. of Paid-in
Shares Amount Capital
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
Balance at October 31, 1995 73,583,000 $736 $ 8,197,260
Net Income from 11/1/95
thru 10/31/96
Balance at October 31, 1996 73,583,000 $736 $ 8,197,260
Net Income from 11/1/96
thru 10/31/97
Balance at October 31, 1997 73,583,000 $736 $8,197,260
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, 1995, 1996 AND 1997
Accumulated
Deficit Total
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)
Balance at October 31, 1995 $(11,554,651) $(3,356,655)
Net Income from 11/1/95
thru 10/31/96 3,366,642 3,366,642
Balance at October 31, 1996 $ (8,188,009) $ 9,987
Net loss from 11/1/96
thru 10/31/97 (3,661) (3,661)
Balance at October 31, 1997 $ (8,191,670) $ 6,326
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Unaudited)
For the Year For the Year For the Year
Nov. 1, 1996 Nov. 1, 1995 Nov. 1, 1994
Through Through Through
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995
Cash flows from
operating activities:
Net loss $(3,661) $(8,477) $(16,512)
Adjustments to
reconcile net loss
to net cash
provided by
operating
activities:
Depreciation and
amortization $ 390 $ 391 $ 2,254
Net changes in
assets and
liabilities:
Accounts payable (2,400) (736) (1,090)
Total adjustments $(2,010) $ (345) $ 1,164
Net cash provided
(used) by
operating
activities $(5,671) $(8,822) $(15,348)
Net (decrease)
increase in cash $(5,671) $(8,822) $(15,348)
Cash at beginning
of period 14,797 23,619 38,967
Cash at end of period $ 9,126 $14,797 $23,619
The accompanying notes are an integral part of these statements.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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 years ended October 31, 1997 and October
31, 1996 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.
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.
<PAGE>
NOVA INTERNATIONAL FILMS, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
b. 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 year.
c. 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:
October 31, October 31,
1997 1996
Office/Computer Equipment $38,153 $38,153
Telephone Equipment 10,934 10,934
Furniture & Equipment
at cost 49,087 49,087
Accumulated Depreciation 49,087 48,697
$ -0- $ 390
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, 1997
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 Years Ended October 31, 1996 and 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 $9,126 as
of October 31, 1997. 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 28, 1998
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, 01/28/98
William Rifkin Secretary and Director
(Principal Executive Officer,
Principal Financial Officer
and Principal Accounting
Officer)
/s/Martin Rifkin President, Treasurer 01/28/98
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>
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 9,126
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,126
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,126
<CURRENT-LIABILITIES> 2,800
<BONDS> 0
<COMMON> 736
0
0
<OTHER-SE> 8,197,260
<TOTAL-LIABILITY-AND-EQUITY> 9,126
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,661)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,661)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,661)
<EPS-PRIMARY> .000
<EPS-DILUTED> .000
</TABLE>
