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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 2001
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to _________
Commission file number 0-18954
Odyssey Pictures Corporation
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(Exact name of registrant as specified in its charter)
Nevada 95-4269048
- ------------------------------- ----------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)
16910 Dallas Parkway, Suite 104, Dallas, Texas 75248
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 818-7990
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value.
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 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.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of June 30, 2001 was approximately $8,469,736 (based on the
mean between the closing bid and asked prices of the Common Stock on such date),
which value, solely for the purposes of this calculation, excludes shares held
by Registrant's officers and directors. Such exclusion should not be deemed a
determination by Registrant that all such individuals are, in fact, affiliates
of the Registrant.
As of June 30, 2001 there were outstanding 21,174,340 shares of Odyssey
Pictures Corporation's common stock, par value $.01 per share (the "Common
Stock").
ODYSSEY PICTURES CORPORATION
Form 10-K Report for the Fiscal Year
Ended June 30, 2001
TABLE OF CONTENTS
Page
PART I
Item 1. Business..................................................... 2
Item 2. Properties................................................... 9
Item 3. Legal Proceedings............................................ 10
Item 4. Submission of Matters to a Vote of Security Holders.......... 12
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters.................................. 12
Item 6. Selected Financial Data...................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 14
Item 8. Financial Statements and Supplementary Data.................. 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................... 15
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 16
Item 11. Executive Compensation...................................... 17
Item 12. Security Ownership of Certain Beneficial
Owners and Management...................................... 21
Item 13. Certain Relationships and Related Transactions.............. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................................ 24
1
PART I
Item 1. Business
(a) General Development of Business
Odyssey Pictures Corporation ("Odyssey" or the "Company"), formerly known
as Communications and Entertainment Corp., was formed in December 1989 as a
holding company. At such time, the Company had no material assets. In September
1990, Double Helix Films, Inc. ("Double Helix"), a producer of low budget films,
and Odyssey Entertainment Ltd. ("OEL"), an international film distribution
company, were merged with wholly-owned subsidiaries of the Company (the
"Mergers"). Subsequent to the Mergers, each of Double Helix and OEL became a
wholly-owned subsidiary of the Company. In June 1991, the Company sold Double
Helix and thereafter began to focus on the distribution of motion pictures in
overseas markets as its primary business.
A change in the entire Board of Directors of the Company (the "Board")
occurred on April 12, 1995 pursuant to the terms of a Settlement Agreement,
dated as of March 31, 1995 (the "Settlement Agreement"), by and among Robert
Hesse, Shane O'Neil, Lawrence I. Schneider, Henry N. Schneider, Robert E.
Miller, Jr., Russell T. Stern, Jr. (collectively, a group of shareholders
originally formed to effect a change in management control of the Company and
known as the "CECO Shareholders Committee"), the Company, OEL, Global
Intellicom, Inc., each of Jerry Silva, Robert Ferraro, N. Norman Muller, Thomas
W. Smith and David A. Mortman (constituting all the directors of the Company at
the time of the execution of the Settlement Agreement and hereinafter referred
to collectively as the "Former Directors"), and others.
As contemplated by the Settlement Agreement, on April 11, 1995, the Former
Directors increased the size of the Board from five to six directors and elected
Henry N. Schneider, a designee of the CECO Shareholders Committee, a new
director effective upon the closing of the Settlement Agreement. The closing of
the Settlement Agreement occurred on April 12, 1995 and, upon the closing, the
resignations of the Former Directors became effective. After the closing, Henry
N. Schneider, as sole remaining director of the Company, elected Lawrence I.
Schneider, Russell T. Stern, Jr., Patrick J. Haynes, III and Robert E. Miller,
Jr. as new directors of the Company. In addition to the change in the
composition of the Board, the Settlement Agreement provided for the settlement
of all outstanding litigation between the Company and the CECO Shareholders
Committee. The CECO Shareholders Committee disbanded upon the closing of the
Settlement Agreement. Effective September 8, 1995, each of Messrs. Haynes, Stern
and Henry N. Schneider resigned as directors of the Company and were replaced by
Stephen R. Greenwald and Ira N. Smith, each of whom was appointed to the Board
and, together with Lawrence Schneider, elected to executive management positions
to operate the business and affairs of the Company on a day-to-day basis.
On March 6, 1996, the Company declared a reverse one-for-six stock split of
its Common Stock (the "Reverse Split"), effective March 18, 1996. All share
amounts and per share prices reflected in this Report have been adjusted to give
effect to the Reverse Split.
Mr. Schneider resigned his executive position in September, 1997, and in
March, 1998, the Board of Directors appointed Mr. Johan Schotte as Chief
Executive Officer and Chairman of the Board of the Company. At the same time,
Mr. Pierre Koshakji was appointed to the Board and elected as President of the
Company. Mr. Johan Schotte expanded the Board to include additional independent
directors and Messrs. Greenwald and Smith agreed to terminate their existing
employment agreements in exchange for revised employment and consulting
agreements. In connection with the change in management, an affiliate of Mr.
Schotte purchased convertible deferred compensation notes from former management
and converted a portion of these notes into 667,648 shares of the Company's
common stock in April, 1998. The balance of these notes were converted into
176,050 shares of common stock in October, 1998.
2
During the early 1990s, the Company developed an excellent reputation in
overseas markets for the distribution of quality motion picture entertainment, a
reputation which the Company's management believes it continues to enjoy despite
its recent difficulties. However, due to the changes in management control and
disruptions in the continuity of the Company's business following the change in
control in 1995, the Company was unable to sustain any substantial activities in
the international distribution of motion pictures.
Under the leadership of Mr. Schotte, the Company sought to re-establish its
position as a significant distributor of quality motion pictures by establishing
relationships and strategic alliances with independent and major film studios
along with successful writers, directors and producers. The Company also made
efforts to establish a permanent presence in Europe through select joint-venture
partners. In August of 1998, the Company purchased the assets of Sweden-based
Kimon Mediaright KB ("Kimon"), consisting of a film library with worldwide
and/or Scandinavian distribution rights and Scandinavian video distribution
rights to certain Hallmark Entertainment products.
While continuing to develop and re-establish the Company's film
distribution business, management's objective was to aggressively build a
diverse, global media company independent in ownership from the major film and
music companies. Management also sought to establish a group of domestic and
international companies providing both content and distribution in film, music,
publishing, sports, merchandising and other multimedia outlets. See "Business -
Narrative Description of Business - Business Strategy."
(b) Financial Information About Industry Segments
Since the sale of its Double Helix subsidiary in 1991, the Company has been
engaged in only one industry segment and line of business, the international
distribution of motion pictures. In addition, in 1999 and 2000 the company
acquired interests in other technology segments of the communications industry
and, more specifically, formed a subsidiary (wholly owned) entitled Odyssey
Ventures Online Holding S.A., in Luxembourg. See "Selected Financial Data."
(c) Narrative Description of Business
Foreign Sales and Distribution Operations
General.
The foreign distribution of films involves two principal activities - the
acquisition of rights from the licensor or the seller, usually the producer or
writer of the film, and the licensing of the distribution rights to
subdistributors in foreign markets. In general, the rights obtained from the
producer relate to all media, including theatrical distribution, video and all
forms of television. In some cases, the licensing of rights to subdistributors
may exclude certain territories and/or media.
It is unlikely that subdistributors would bypass the Company and deal
directly with the licensors of film rights. Historically, independent licensors
of film rights prefer to deal with a single sales agent/distributor rather than
deal with various subdistributors in foreign markets. Consequently, even if a
particular subdistributor attempted to perform the function of the Company, it
is unlikely that the film's licensor would be willing to deal with such
subdistributor due to detailed servicing requirements. Furthermore, with respect
to any particular film, the Company typically enters into exclusive
distributorship arrangements, thereby precluding others from competing with the
Company with respect to that film. Moreover, in certain circumstances, the
Company may also provide a financing function for the production of a film which
a subdistributor would generally be unable to provide. See "Terms of
Distribution Agreements."
3
Terms of Distribution Agreements. Foreign distribution is generally handled
by a distributor such as the Company which coordinates worldwide sales in all
territories and media. Overseas film sales companies rely on local
subdistributors to physically deliver the motion picture and related marketing
materials and to collect revenues from local exhibitors and other local
distributors of the film. Typically, the territorial rights for a specific
medium such as television exhibition are sold for a "cycle" of approximately
seven years, after which the rights become available for additional cycles.
The film distribution business breaks down into two broad categories:
o Sales Agency Representation. As a sales agent, the Company undertakes to
represent and license a motion picture in all markets and media on a
best-efforts basis, with no guarantees or advances, for a fee ranging from
15% to 25%, and typically for a term ranging from seven to fifteen years.
o Distribution. As a distributor, the Company may provide the producer of the
film a guarantee of a portion of the budget of the project. This guarantee
may be in the form of a bank commitment to the producer, secured by license
agreements with foreign licensees, which is used by the producer to finance
the production. Typically, a distributor would receive a distribution fee
ranging from 25% to 35% over a term ranging from 15 years to perpetuity. In
addition, the distributor may negotiate, or otherwise acquire, a profit
participation in the film project.
Once the rights to a picture are obtained (either as sales agent or
distributor with minimum guarantee), the Company then seeks to license its
rights to subdistributors in the territories for which it has acquired
distribution rights. In general, the grant of rights to the subdistributors
includes all media other than satellite, although satellite is included in some
subdistributors' territories. The subdistributor in each territory generally
pays for its distribution rights with a down payment at the time the contract is
executed with the balance due upon delivery of the picture to the
subdistributor. (Delivery occurs upon the Company's acceptance of the master
negative and its obtaining access to certain items necessary for the
distribution of the film). In some instances, the subdistributors' obligations
for the payment due on delivery are secured by a letter of credit. Although
there are a number of markets each quarter, major sales take place primarily at
three film markets:
1)"MIF" in Cannes, France each May; 2)"MIFED" in Milan, Italy each October; and,
3)"AFM" in Los Angeles each February.
In general, after financing (if any) is repaid, the Company applies the
distribution receipts from its subdistributors in the following manner:
1)First to the payment of commissions due to the Company,
2)The recovery of certain distribution expenses advanced
3)To the reimbursement of the Company for its guarantee or advance, if any,
4)To the producer.
Additional distribution receipts, if any, are shared by the Company and the
producer according to the percentages negotiated in the agreement between the
Company and the producer.
Independent Film Production and Product Acquisition
Film distribution companies such as the Company primarily represent
independent producers of motion pictures (rather than motion picture studios) in
all related markets and all media, including theatrical release, television and
home video/DVD distribution, and cable or satellite-distributed media.
Producers seek to be independent producers of motion pictures for a variety
of reasons, including greater creative control of a project and potentially a
greater profit participation through the retention of the copyright or the
ability to sell the film directly in particular markets. Often, young, new
directors and producers have no choice but to independently produce their
projects, and the motion picture industry has a long history of "breakthrough"
4
films produced at a low cost by first-time producers and directors which
subsequently achieve considerable revenues. The Company has generally obtained
its product from among these independently produced films rather than from major
motion picture studios which typically have their own in-house distribution
networks. Nevertheless, from time to time, the Company has entered into "split
rights", or shared, arrangements with studios to represent a film in certain
markets.
The Company's management seeks to identify attractive projects very early
in their development, either through relationships with producers, directors and
agents or other known suppliers of product, or through industry announcements of
new productions. In addition, the Company attends independent festivals and film
markets, such as the Sundance Film Festival and the Cannes Film Festival, in
order to locate new product.
Business Strategy
The Company's strategy is to capitalize on the reputation and the
experience of its management team to package, produce and distribute independent
feature films and expand its growth and infrastructure through acquiring other
related entities, also utilizing the industry to obtain certain financing for
projects. The execution of the Company's strategy comes from operating the
following activities within each service it provides which, in turn, will
generate revenues from both fees and commissions.
1) Packaging - The Company expects to become involved with packaging (the
process by which one undertakes a particular film project in screenplay
form and assembles cast, crew, financing, introduces banks and other
institutions to the "package" (either for the company or for the producer)
and may establish partnerships from contributing buyers in order to secure
the distribution and market position for the film, if actually produced.
For this activity, the company shall receive a percentage of the budget of
the film and perhaps an equity interest as well.
2) Produce - For film projects in script form that may be acquired exclusively
for the company, a separate schedule is provided which will enable the
packaging on an "in house" basis. That is, to hire all crew members,
contract a director, and assemble all necessary elements for production and
financing of the proposed project. The Company, in this case, is also able
to partner with other production teams or distribution companies for added
security and in reducing risk in order for the project to have market
interest early on. The Company shall retain percentages of the budget as
well as receive fees as a producer and shall also control a major portion
of the equity resulting in an increased chance for higher revenue portions
from sales in the world and US markets.
3) Distribute - The Company plans to acquire a certain number of films per
year as well as assemble a distribution package for other films that are
completed. This will generate commission revenues from sales and marketing
income for which the Company can achieve its buyers' interest.
4) Related Entities - From time to time, the Company may be asked to engage in
financing and/or distribution activities for companies that could fill the
need for continued product. If conditions were of a financially secure
nature, management would attempt to acquire or otherwise partner with these
potential target companies in order to expand its base and diversity as a
supplier.
5) Industry Financing - Certain arrangements will be sought whereby the
markets can provide financing in advance for feature film product. It is
the Company's intention to seek alternate methods of this "off-balance
sheet" financing in order to secure more product under its control.
5
Strategic Objectives
The above strategies are selected out of necessity in the operations of a
business such as Odyssey. Certain revenue periods are realized at different
times. By accommodating the above mentioned strategies, the Company will
recognize revenues at different points of the processing. This will create more
opportunity for revenues to the Company and not just focus on one area of
revenue as historically produced. Management must select from the following
areas of daily management to accomplish this strategy:
- - Follow similar guidelines from other companies that have proven this
process to be fruitful and incorporate them into management's
infrastructure;
- - Properly capitalize the Company for its basic costs of seeing the
implementation begun and make sales contacts regularly;
- - Begin the various stages of strategy in order to create a small, but secure
level of income in each area;
- - Enhance the Company relationships with its investors and investment bankers
to focus on their participation as income and Company performance improves.
- - Seek assistance from outside sources on shared management of libraries of
films or limited exposure on new product to key selected buyers for a
reduced commission in order to attract producers and new projects.
- - Avoid risk-oriented projects and acquisitions with long startup periods to
revenue.
- - Maintain a budget for operations and fixed overheads as well as utilizing
revenues from sales to finance future marketing and distribution
activities.
Subsidiary Operations
During the year 2000 and into 2001, Odyssey has completed the acquisition
of Filmzone.com, an informational entertainment resource site which presently
serves the public for retrieval of current film information. The acquisition was
added as a subsequent part of the earlier announced Kimon acqusition. Odyssey
plans on renovating the site to serve the buyer markets in order to access the
films it acquires. The site will offer pricing and a high grade of technology
where the viewer can access the commercials, trailers and artwork as well as the
territories open for sale.
During the first part of 2001, along with the assistance of the Kimon Group
and Filmzone.com, Odyssey has developed its web-site which will announce its
activities and news, as well as its new films coming out in the future. The web
site address is noted as "Odysseypix.com" and is expected to be "live" in the
latter part of 2001.
In March of 2000, the Company formed Odyssey Ventures Online Holding S.A.,
a Luxembourg corporation ("OVO"), for the purpose of making investments in
various technology-related entities. OVO's strategy is to invest and co-invest
with venture capital investment and management groups, with the intention of
developing products and services related to digital commerce, content and the
distribution thereof.
During the course of the fourth quarter of the fiscal year ending June 30,
2001, management determined that the maintenance and costs of overseeing the
assets of OVO, with the long term benefits in technology business having to be
revised significantly, require a change in the earlier plans to pursue added
investments in related technological ("Tech") companies. Recent down-grades of
outside investments have affected the growth plans of many companies. The fact
that the Company has had numerous difficulties in securing its long term
investment capital and has had little or no financial activity, the prospects of
future investments and growth plans of subsidiary operations need to be
discontinued.
6
Odyssey has an affiliated interest in another company (Media Trust S.A.),
which has offered to manage and maintain the OVO assets for a period of time. It
is contemplated that there may be an acquisition or assumption, or a trade of
debts in order to best accommodate the present market changes and to save
Odyssey from having to spend money to support the subsidiary operation. This
would leave the Company free to focus on generating and maintaining its own
resources for revenues and overheads as it became clear that outside financing
was going to be more difficult to secure, if at all.
To accommodate the maintenance and operations of OVO, a separate agreement
shall be negotiated in the first fiscal quarter ending September 30, 2001.
See "Recent Acquisitions" below for a description of investments made by
OVO.
Recent Acquisitions
Since the formation of OVO in March, 2000, the Company has made the
following investments: (i)an investment of $500,000 for a 6.25% equity interest
in PurchasePooling.com, Inc., a web-based demand aggregating service developed
to enable government entities and businesses to realize significant cost savings
by combining their purchasing power on large-ticket capital equipment, as well
as other goods and services; (ii) an investment of $136,668 for a 25% equity
interest in Webtelemarketing.com, an Internet-based company specializing in
online recruiting by linking the supply and demand sides of the employment
industry; (iii)an investment of $25,000 for a 1% equity interest in Exchange
Enterprises, Inc., a privately-held company that has developed a patent-pending
internet cash card that allows consumers to purchase products and services
online without the use of credit cards or bank accounts. In September, 2000, OVO
sold 30% of its investment in Purchase Pooling to Edge Technology Group, Inc.
(OTC Bulletin Board: EDGE) in return for 264,000 shares of the company.
Development
In April, 1999, the Company purchased an option with the right of first
refusal to be the exclusive worldwide distributor of a motion picture entitled
"HARA." The film is an action-packed semi-biographical martial arts love story.
Prior management owned an indirect 50% equity interest, through its affiliated
companies, in Red Sun Productions, Inc., the rights holder of "HARA". In April
of 2000, the Company made a refundable advance towards the acquisition of the
distribution rights to the film with the intention of producing it into a
feature length movie based upon the prospects of new financing for productions
becoming available. As of June 30, 2001, the financing has not become available
and the project remains in script form, but is registered as an asset of the
Company.
Library Films
In August, 1998, the Company completed the acquisition of the assets of
Sweden-based Kimon, valued at $4,500,000, in exchange for 4,500,000 shares of
the Company's subordinated convertible Preferred Stock, Series B, having a value
for conversion purposes of $1.00 per share. Kimon had the right to convert to
Odyssey common stock between June 30, 2000 and December 31, 2000 on a
dollar-for-dollar basis based on the price of the Company's common stock at the
time of conversion. Kimon assets purchased consist of a film library with
worldwide and/or Scandinavian distribution rights and Scandinavian video
distribution rights to certain Hallmark Entertainment products.
In connection with the change of control in March, 1998, the Company
acquired an 18% equity interest in each of two corporations affiliated with Mr.
Schotte, one of which is the owner of the Albuquerque Geckos, a second division
professional soccer team in New Mexico (subsequently transferred to Sacramento),
and the other of which is a media production company in Luxembourg ("Media
Trust"). The Company issued one-year notes in the aggregate amount of $450,000
in consideration of the purchase of the equity interests in these companies. (In
7
June, 1999, the Company satisfied $135,000 of these notes, and the accrued
interest thereon of $27,225, by the issuance of 348,721 shares of the Company's
restricted common stock valued at $.465 per share). The Company's equity
interest in the entity which owns the professional soccer team has been diluted
by half, or to 9%, as a result of a capital increase/call in which the Company
did not participate.
Sales of Library Films
On January 2, 1996, the Company entered into an agreement with Regency
International Pictures, B.V. ("Regency"), the Company's joint venture partner,
to sell the Company's interest in the related joint ventures through which it
held approximately 50% ownership interests in four theatrical motion pictures,
entitled "Switch", "Q & A," "Guilty by Suspicion" and "This Boy's Life".
Pursuant to the agreement with Regency, the Company received $1,000,000 on
January 23, 1996 and $500,000 on February 14, 1996, in exchange for all of the
Company's interests in the joint ventures. In addition, the Company retained a
contingent interest in certain receivables, not to exceed $212,500, and a
contingent interest in future revenues from the pictures.
On August 29, 1996, the Company entered into an agreement with Kinnevik
Media Properties, Ltd. ("Kinnevik"), pursuant to which the Company agreed to
grant to Kinnevik subdistribution rights in, and to sell to Kinnevik other
distribution rights to, certain films in the Company's film library. In exchange
for these rights, the Company received a total cash consideration of $1,075,000,
payable $500,000 on closing, $275,000 six months after closing, and $300,000
eighteen months after closing. In addition, the Company retained a continuing
right to receive revenues from certain of the films, valued by management at a
minimum of approximately $150,000. As part of the transaction, the Company
granted 100,000 stock options to Kinnevik, exercisable over a three year period
at the bid price of the Company's common stock in effect on August 5, 1996
($.625). The transaction with Kinnevik closed on October 7, 1996.
Recent Financings
In August, 1998, three unaffiliated investors loaned 4,000,000 Belgian
Francs (approximately $100,000) and received one year convertible notes with
interest at 10% per annum (the notes are convertible at a 15% discount to the
market price). The notes have been extended through to September 30, 2001
In September 1998 an unaffiliated third party loaned $25,000 to the Company
and received a six-month note with interest at 10% per annum. Thereafter, the
lender agreed to a six-month extension on the note (through September, 1999) in
consideration of an increase in the interest rate on the loan to 12% per annum,
and the issuance of 12,500 common stock purchase warrants at $1.00 per share,
exercisable through the year 2004.
In November 1998, the Company issued 200,000 common shares to an
unaffiliated party in exchange for $88,000 of barter credits.
In December 1998, (i) an unaffiliated party purchased 625,000 common shares
at $.30 per share for a total purchase price of $187,500 (see "Certain
Relationships and Related Transactions"); and (ii) counsel to the Company
converted $40,000 of accrued legal fees into 100,000 shares of common stock of
the Company.
During the period between April, 1999 and September, 1999, the Company
completed four private placements to offshore investors, the first of which was
completed for 575,000 shares of common stock at a purchase price of $.30 per
share (resulting in gross proceeds to the Company of $172,500), and the latter
three of which were completed for an aggregate of 1,600,000 shares of common
stock at a purchase of $.40 per share (resulting in gross proceeds to the
Company of $400,000).
8
In August, 1999, three unaffiliated investors loaned 4,000,000 Belgian
Francs (approximately $100,000) and received one year convertible notes with
interest at 10% per annum (the notes are convertible at a 15% discount to the
market price). The notes have been extended through to September 30, 2001.
During the period between September, 1999 and October, 2000, the Company
completed two series of private placements to offshore investors, the first of
which was completed for an aggregate of 3,000,000 shares of common stock at a
purchase price of $.40 per share (resulting in gross proceeds to the Company of
$1,200,000), and the second of which was completed for an aggregate of 960,000
shares of common stock at a purchase price of $1.00 per share (resulting in
gross proceeds to the Company of $960,000).
In August, 2000, two unaffiliated investors loaned 4,000,000 Belgian Francs
(approximately $100,000) and received one year convertible notes with interest
at 10% per annum (the notes are convertible at a 15% discount to the market
price). The notes have been extended through to September 30, 2001.
Competition
The entertainment industry generally, and the film industry in particular,
are highly competitive. The Company's competition includes the smaller
independent producers as well as motion picture studios. Many of the Company's
competitors have financial and other resources which are significantly greater
than those available to the Company.
Operations
The Company's operations have been greatly reduced as a result of the
restructuring of the Company by new management. The Company's principal office
is located in Dallas, Texas (see "Properties") and, as of June 30, 2001, the
Company had three full-time employees, consisting of Mr. Schotte and Mr. John
Foster, the CEO and President of the Company, respectively, along with an
administrative assistant in the Dallas office.
Tax Loss Carryforward
The Company is entitled to the benefits of certain net operating loss
carryforwards to reduce its tax liability. The utilization by the Company of
such tax loss carryforwards is limited under applicable provisions of the
Internal Revenue Code of 1986, as amended, and the applicable regulations
promulgated thereunder. As of June 30, 2001, there were approximately
$33,783,061 in net operating loss carryforwards remaining to be used to reduce
tax liability. The utilization of approximately $4.9 million of these losses in
future periods will be limited to approximately $350,000 per year.
Item 2. Properties
The Company presently conducts its operations out of leased premises at
16910 Dallas Parkway, Dallas, Texas, consisting of approximately 2,500 square
feet. The premises are presently being made available to the Company through a
sublease agreement with JL Media Services LLC, an affiliated party to Mr.
Foster. Rent expense for each of the fiscal years are as follows:
June 30, 2001 - $34,094
June 30, 2000 - $17,649
June 30, 1999 - $84,939
Commencing in January of 2000, the Company has accrued rent expense at the rate
of $1,000 per month for the use of office space in Luxembourg which is owned by
Media Trust, S.A, a company affiliated with Mr. Schotte.
9
Item 3. Legal Proceedings
On or about May 15, 1995, Credit Lyonnais Bank Nederland N.V. and Cinecom
Entertainment Group, Inc. filed a Complaint in the Superior Court for the State
of California, County of Los Angeles, captioned Credit Lyonnais Bank Nederland
N.V. and Cinecom Entertainment Group, Inc. v. Odyssey Distributors, Ltd. and
Does 1 through 100 (No. BC 127790). They allege that Odyssey Distributors, Ltd.
(a subsidiary of the Company) collected but failed to remit to them assigned
distribution proceeds in the amount of $566,283.33 from the foreign distribution
of "Aunt Julia and the Scriptwriter" and "The Handmaid's Tale." The Complaint
alleges claims for breach of contract and breach of fiduciary duty and demands
damages in excess of $566,283, attorney's fees, an accounting, a temporary
restraining order and a preliminary injunction. In June 1995, the Court denied
plaintiffs an attachment and stayed the action pending arbitration in New York.
In September, 1996, the Court dismissed the Complaint. In December, 1996, the
Company settled the outstanding litigation with Generale Bank ("Generale")
(formerly known as Credit Lyonnais Bank Nederland N.V.) and Cinecom
Entertainment Group Inc. Pursuant to the settlement agreement, the Company
agreed to pay to Generale the sum of $275,000 in complete settlement of the
claim, payable $25,000 upon execution of the settlement agreement, $25,000 on
each of June 30 and December 31 in the years 1997, 1998 and 1999, and $100,000
on June 30, 2000. The Company and Generale later agreed upon a new payment
schedule as follows: $25,000 on or before October 15, 1997 (payment was made);
$30,000 on each of April 15, 1998, June 30, 1998, December 31, 1998, June 30,
1999, and December 31, 1999; and $100,000 on June 30, 2000. The Company is in
default of this payment schedule. The consequences of not curing a default is
the entry of a confession of judgment already executed by the Company for the
amount of $275,000. This confession of Judgment is against Odyssey Distributors,
Ltd., a wholly owned but non-operating, non-active subsidiary of the Company.
In August 1995, G.P. Productions, Inc. ("GP") and Greenwich Subject Films,
Inc. ("Greenwich") commenced an action entitled G.P. Productions, Inc. and
Greenwich Studios, Inc. v. Double Helix Films, Inc., Communications and
Entertainment, Inc., Krishna Shaw, Gerald Muller and Norman Muller in the United
States District Court, Southern District of Florida (Case No. 95-1188). Mr.
Muller has demanded that the Company indemnify him against any expenses,
judgments and amounts paid in settlement of the action. The Company contends
that, by virtue of Mr. Muller's breaches of fiduciary duty and violation of his
obligations to the Company, it is not required to provide indemnification.
GP and Greenwich allege that they are the exclusive owners of the films
"The Gallery" and "South Beach". They assert claims for copyright infringement,
unfair competition, breach of contract, accounting, conversion, civil theft,
conspiracy and fraudulent conveyance. The Complaint demands a recall of the
films, an attachment, preliminary and permanent injunctive relief, an
accounting, and unspecified compensatory, punitive and treble damages. The
Company's motion to transfer venue of the action was granted in November, 1995,
and the case was transferred to the United States District Court for the
Southern District of New York. There has been no activity in this matter since
the transfer of venue in 1995.
In October, 1995, Canon Financial Services filed a Complaint in the
Superior Court of New Jersey entitled Canon Financial Services, Inc. v.
Communications and Entertainment Corp. The plaintiff is claiming that it is due
$47,499.83, plus damages, pursuant to a lease agreement. The Company has filed
an Answer in this action and plaintiff's motion for summary judgment has been
denied by the Court. No trial date has yet been set in this matter.
In December, 1995, Robert F. Ferraro, a former director of the Company,
brought an action against the Company in the Supreme Court of the State of New
York, New York County. The action was brought on a promissory note in the amount
of $25,000 and plaintiff obtained a judgment on a summary judgment motion. The
plaintiff has not yet moved to enforce the judgment and the Company is
considering whether or not it has a claim for indemnification against prior
management in connection with the issuance of the note. The judgment, in the
meantime, has been assigned to an outside collection agency who has been in
contact with Management of Odyssey and Odyssey has made payments in keeping the
matter form accelerating.
10
In March, 1996, an action was filed against the Company in Los Angeles
Municipal Court by Judy Hart, in which the plaintiff claims that she is due
$17,920 pursuant to a promissory note. The Company has filed a cross-claim
seeking offsets against the amount due and other damages. On May 21, 1998, a
default judgment was entered on behalf of plaintiff in the amount of $22,261.
Subsequently, plaintiff filed a motion to include attorneys fees and costs in
the aggregate amount of approximately $17,000. The Company is attempting to
reach a settlement with plaintiff. As of this year, there has been no contact
with the plaintiff and no indication of any activity.
In March, 1996, a class action complaint was filed against the Company
entitled Dennis Blewitt v. Norman Muller, Jerry Minsky, Dorian Industries, Inc.
and Communications and Entertainment Corp. The complaint seeks damages in
connection with the Company's treatment in its financial statements of the
disposition of its subsidiary, Double Helix Films, Inc. in June, 1991. The
complaint seeks unspecified damages on behalf of all persons who purchased
shares of the Company's common stock from and after June, 1992. A second action,
alleging substantially similar grounds, was filed in December 1996 in Federal
Court in the United States District Court for the Southern District of
California under the caption heading "Diane Pfannebecker v. Norman Muller,
Communications and Entertainment Corp., Jay Behling, Jeffrey S. Konvitz, Tom
Smith, Jerry Silva, David Mortman, Price Waterhouse & Co., Todman & Co., and
Tenato Tomacruz." Following the filing of the second action, the first action
was dismissed by stipulation in May 1997. The Company filed a motion to dismiss
the complaint in the second action and after a hearing on the motion in July,
1997, the Court dismissed the federal securities law claims as being time-barred
by the applicable statute of limitations, and dismissed the state securities law
claims for lack of subject matter jurisdiction. The lower court's dismissal of
this action was upheld on appeal by the Ninth Circuit. The case was refiled in
California state court in August 1998. The Court granted motions to dismiss two
of the complaints filed by the Plaintiff, whereupon a third complaint was filed.
More recently, a fourth amended complaint has been filed adding claims that the
defendants, including the Company, violated provisions of the California
Securities Laws. There is no trial date set in this matter. In a related action,
Thomas Smith and Norman Muller, former directors of the Company and
co-defendants in the Pfannebecker matter, filed an action against the Company in
the Los Angeles Superior Court seeking indemnification from the Company in
connection with their status as defendants in the Pfannebecker matter. The
Company intends to defend this action on the grounds that Messrs. Smith and
Muller committed wrongful acts as directors of the Company and failed to comply
with various obligations to the Company. The Company has met on several
occasions, through its legal counsel, to discuss and answer certain attempts at
settlement. Due to the nature and complications of this suit, matters have
generally been very slow to receive response to.
The Screen Actors Guild ("SAG") has also asserted that there are amounts
owing to several actors arising out of "Down Range." In September, 1999, SAG
obtained an arbitration award against Down Range for a total amount of $96,183,
inclusive of salaries to the actors, pension and health contributions and late
fees. Down Range was also ordered to pay $200 to the arbitrator. Additionally,
there were two actors, Corbin Bernsen and Jeff Fahey, who had pay-or-play
contracts. The outcome of these contracts and the actors' claims have not been
resolved.
Mr. Ian Jessel entered into a three year employment agreement with the
Company, commencing November 9, 1998 and continuing through November 9, 2001.
Mr. Jessel's responsibilities included management of the Company's Motion
Picture & Television Division. Mr Jessel's compensation was set at a rate equal
to $300,000 per annum for the first year, $350,000 per annum for the second
year, and $400,000 per annum for the third year. The agreement also provided for
a yearly bonus based upon the net profits of the film division and the Company.
The Company paid the sum of $50,000 to Mr. Jessel in fiscal 1999 and deferred
payment of the balance of the compensation due to him. In June, 1999, Mr. Jessel
notified the Company that he was suspending services to the Company for failure
to pay his compensation on a timely basis. The Company believes it was justified
in deferring certain payments due to Mr. Jessel. Mr. Jessel commenced an action
against the Company in November, 1999 in the Los Angeles Superior Court, seeking
the salary and other benefits he claims he is entitled to under his three-year
11
employment agreement. The Company intends to vigorously defend the action on
several grounds, including Mr. Jessel's breach of his obligations under the
agreement. Discovery was ongoing in this matter and a trial date was set for
April 30, 2001. Included in accrued wages is a contingent amount for Ian Jessel,
In December of 2000, management requested mediation talks to begin and has made
efforts to settle the ongoing litigation matters. A settlement has been reached
and has been voted as accepted by the Board. All settlement discussion and
offers have been reserved and are within the reserved amount(s).
Dennis Morgan commenced an action against the Company in December, 1999 in
the Los Angeles Superior Court alleging that he was promised a position as head
of a music division to be established by the Company and that such oral
agreement was intended to be confirmed in writing but never was. Mr. Morgan
brought claims against the Company and others for the purported breach of an
oral agreement, purported breach of an implied agreement, fraud and fraudulent
conveyances. The Company has served written discovery and is awaiting responses
to interrogatories and the production of documents. The Company contends that
there was no employment relationship with, nor any monetary commitments to, Mr.
Morgan, and that it committed no breach or wrongdoing. A trial; date was set for
this matter. The parties began discussing settlement terms in order to alleviate
the costs of ongoing litigation. As of the end of June, 2001, the Company
entered into preliminary settlement and expects satisfy any outstanding
complaints.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
---------------------------------------------------------------------
The following table sets forth the range of high and low bid information
for the Common Stock of the Company as reported by the Nasdaq Stock Market, Inc.
("Nasdaq") on a quarterly basis for each of the two preceding fiscal years. On
May 1, 1996, Nasdaq notified the Company that its shares of Common Stock were
being deleted from Nasdaq's SmallCap Market, effective May 2, 1996, because the
Company did not maintain a combined capital and surplus of $1,000,000, as
required by Section 1(c)(3) of Schedule D of the NASD By-Laws. Since May 2,
1996, the Company's shares have traded in the over-the-counter market on the OTC
Bulletin Board. The Company's Common Stock trades under the symbol OPIX.
No dividends have been declared or paid with respect to the Common Stock.
12
The bid quotations represent inter-dealer prices and do not include retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
Common Stock
------------
Fiscal 1999 High Low
- ----------- ---- ---
First Quarter $.94 $ .37
Second Quarter .70 .26
Third Quarter .66 .30
Fourth Quarter .51 .25
Fiscal 2000 High Low
- ----------- ---- ---
First Quarter $ .69 $ .49
Second Quarter 1.11 .45
Third Quarter 1.19 .75
Fourth Quarter 1.55 .94
Fiscal 2001 High Low
- ----------- ---- ---
First Quarter $1.52 $1.09
Second Quarter 1.38 .50
Third Quarter 1.00 .34
Fourth Quarter .45 .33
As of June 30, 2001, there were approximately 5,542 record holders of the
Company's Common Stock.
13
Item 6. Selected Financial Data (in thousands, except per share data).
-------------------------------------------------------------
The following table sets forth the selected financial data for the Company
and should be read in conjunction with the Consolidated Financial Statements and
Notes thereto, and with Management's Discussion and Analysis of Financial
Condition and Results of Operations which appear elsewhere in this report.
For the Years Ended June 30,
----------------------------------------------
2001 2000 1999 1998 1997
Income Statement Data
Revenues......................................... $ 4 $146 $288 $ 42 $141
Income(loss) from continuing operations.......... (1,449) (1,208) (1,388) (1,119) 69
Income(loss)from discontinued operations......... -- -- -- -- --
Net income (loss)................................ (1,449) (1,208) (1,388) (1,119) 69
Per Share Data*
Income(loss) from continuing operations.......... (.08) (.09) (.22) (.25) .02
Income(loss) from discontinued operations........ -- -- -- -- --
Net income (loss)................................ (.08) (.09) (.22) (.25) .02
Cash dividends................................... -- -- -- -- --
Weighted average shares.......................... 17,214 11,093 6,459 4,403 2,294
Balance Sheet Data
Film costs....................................... 3,923 4,095 4,378 110 120
Total assets..................................... 5,796 5,936 5,439 675 740
Indebtedness..................................... 3,743 2,869 1,192 1,079 962
Shareholders' equity............................. 2,053 3,067 2,161 (2,083) (2,226)
- ------------------------------------
NOTE: Per share data and weighted average shares for all periods have been
restated to reflect the effect of a one-for-six reverse stock split in March
1996.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
-------------------------------------------------
Results of Operations
Years Ended June 30, 2001 and 2000
Net loss for the year ended June 30, 2000 was due mainly to the fact that
the Company did not release any new films nor receive any income from its
investments through its subsidiary. Revenues for the twelve months ended June
30, 2001 decreased to $3,706 compared to $146,844 for the twelve months ended
June 30, 2000. No new films became available for delivery during either period,
although the company is in post production for one film project recently
acquired.
14
Costs related to the revenues increased to $ 152,953 for the twelve months
ended June 30, 2001 as compared to $140,580 for the twelve months ended June 30,
2000. The relative increase costs are primarily related to depreciation costs
associated with the earlier acquisition of the Kimon library and Hallmark film
assets.
Selling, general and administrative expenses increased by $106,120 to
$1,242,737 for the twelve month period ended June 30, 2001 from $ 1,136,617 for
the comparable period ending June 30, 2000. This increase is primarily due to
increases in allowances for settlement and excessive interest and professional
fee charges relating to litigation settlement.
There was no other income recognized in the twelve-month period ended June
30, 2001 and June 30, 2000.
Since the change in management control in March of 1998, new management has
undertaken several steps to reverse unfavorable results. The company embarked
on, and still is in progress with, a recapitalization program with positive
results. The Company purchased a feature film, in post production, and is
seeking an equity interest in another company in addition to its acquisitions of
the twelve-month period ended June 30, 2000. The Company has also engaged new
managerial staff to further assist in its future performance.
Liquidity and Capital Resources
The Company's continued existence is dependent upon its ability to resolve
its liquidity problems. The company must achieve and sustain a profitable level
of operations with positive cash flows and must continue to obtain financing
adequate to meet its ongoing operation requirements. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
At June 30, 2001, the Company held approximately $1,163 of cash.
In the past fiscal year, management has taken steps to fund the Company's
operations primarily through private placements of the Company's common stock
with offshore investors.
During the period between April, 1999 and September, 1999, the Company
completed four private placements to offshore investors, the first of which was
completed for 575,000 shares of common stock at a purchase price of $.30 per
share (resulting in gross proceeds to the Company of $172,500), and the latter
three of which were completed for an aggregate of 1,600,000 shares of common
stock at a purchase of $.40 per share (resulting in gross proceeds to the
Company of $400,000).
During the period between September, 1999 and October, 2000, the Company
completed two series of private placements to offshore investors, the first of
which was completed for an aggregate of 3,000,000 shares of common stock at a
purchase price of $.40 per share (resulting in gross proceeds to the Company of
$1,200,000), and the second of which was completed for an aggregate of 960,000
shares of common stock at a purchase price of $1.00 per share (resulting in
gross proceeds to the Company of $960,000).
Item 8. Financial Statements and Supplementary Data.
The response to this Item is submitted as an exhibit to this report
commencing on page F-1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
-------------------------------------------------
Reference is made to the Company's Reports on Form 8-K, dated September 24,
1997, and February 13, 1998, with respect to a change in accountants for the
Company.
15
PART III
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Johan Schotte 40 Chairman of the Board
& Chief Executive Officer
John Foster 48 Director, President, Secretary
Patrick Speeckaert 54 Director
Jean-Marie Carrara 43 Director
Pierre Koshakji 39 Director
Set forth below is information regarding the business experience of the
current Directors and executive officers of the Company.
Johan Schotte is Founder and Chairman of Media Trust S.A. and Entertainment
Education Enterprises Corporation. Mr. Schotte has an extensive background in
banking and management, and holds an M.B.A. degree from the University of Dallas
in Irving, Texas. Before joining Odyssey in 1998, he served as Managing Director
of Rocket Pictures, an international film production and distribution company,
for whom he produced the satirical comedy "Cannes Man" in 1996. Mr. Schotte has
served as Chairman and CEO of the Company since March, 1998.
John Foster for more than the past five years has been an independent financial
consultant, investment analyst and investment banker, specializing in turnaround
situations and management restructuring in specific industries such as
technology, insurance and the entertainment and communications industry. He has
extensive background in information systems and data processing, and is
presently a consultant and investment advisor in determining strategies of
financing and investments in motion picture projects for investors, distributors
and producers.
Mr. Foster served as interim President of the Company from January, 2000 through
June 2000, and has been extended through 2001, and is currently serving as
President of the Company.
Patrick Speeckaert for more than the past five years has served as Managing
Director of Morrow & Co., Inc. in New York City. Morrow & Co., Inc. is a leading
company specializing in advising international corporations with respect to
issues involving corporate governance, shareholder relations and solicitations.
Jean-Marie Carrara is an international corporate strategist and technology
consultant. His areas of expertise include management of decision information
and data transmission safety and expertise in various technologies in the
telecommunications, textiles and recycling industries. Mr. Carrara serves as an
expert to the International Chamber of Commerce and continues to publish, teach,
and lecture at the university level in France. He holds a doctorate degree in
pharmacy, advanced degrees in biology, biochemistry and hematology, and advanced
degrees in management and finance.
Pierre R. Koshakji co-founder, and former President and director of,
Entertainment Education Enterprises Corporation (E3 Corporation), an
international sports, entertainment, and investment group. E3 Corporation has
offices in Dallas, Luxembourg and Los Angeles and has a professional affiliation
with the Lamar Hunt group of companies, Unity Hunt. Prior to E3 Corporation, Mr.
16
Koshakji served as Director of Business Development with Unity Hunt/Hunt Sports
Enterprises where he evaluated, negotiated, and implemented targeted
acquisitions and projects. He played a development role in establishing major
league soccer (MLS) and in establishing the two Hunt MLS teams in Columbus, Ohio
and in Kansas City, Missouri, and served as Senior Vice-President of Marketing
on the Las Vegas domed Stadium project as well as marketing consultant to the
San Francisco Giants new ball park at China Basin. Other positions and titles
Mr. Koshakji has held during his professional career include Deputy Executive
Director of the 1994 World Cup, Dallas Venue, including the responsibility of
liaison with the European Broadcast Union and International Broadcast Center,
the position of Director at KMPG Management Consulting in the country of Kuwait,
and electrical engineer at Chrysler Technologies Airborne Systems. Mr. Koshakji
graduated from Vanderbilt University BSEE with honors and received his Masters
of Business Administration at Southern Methodist University. Mr. Koshakji served
as President of the Company from March, 1998 through February, 2000.
Meetings and Committees of the Board of Directors
For the fiscal year ended June 30, 2000, there were six meetings and/or
written consents in lieu of meetings of the Board of Directors. All Directors
attended or consented to in excess of 75% of the meetings (and consents in lieu
of meetings) of the Board of Directors during said fiscal year. The Board of
Directors does not presently have any standing nominating, audit or compensation
committees, the customary functions of such committees being performed by the
entire Board of Directors.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% stockholders are
required by the Commission's regulations to furnish the Company with copies of
all section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of reports furnished to the Company during the fiscal year
ended June 30, 2001, the Company's officers, directors and greater than 10%
stockholders complied with all filing requirements under section 16(a) except
that Messrs. Carrara and Foster did not file Form 3 Reports.
Item 11. Executive Compensation.
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer of the
Company, the four most highly compensated executive officers who were executive
officers as of June 30, 2001, and other significant employees for whom inclusion
in the following table would be required but for the fact that such employees
were not executive officers of the Company at the end of the most recently
completed fiscal year:
17
Summary Compensation Table
Annual Compensation Long-Term
-------------------------------- Securities
Name and Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
- -------- ---- ------ ----- ------------ ------- ------------
Johan Schotte 2001 260,000 -- -- -- --
Chief Executive 2000 6,860 -- -- -- 161,140(1)
Officer; Chariman 1999 29,050 -- -- -- 138,950(1)
1998 5,000 -- -- -- 43,000(1)
Pierre Koshakji 2001 -- -- -- -- --
2000 -- -- -- -- 114,000(1)
1999 36,750 -- -- -- 131,250(1)
1998 5,000 -- -- -- 43,000(1)
John Foster 2001 156,000 -- -- -- --
President 2000 49,250 -- -- -- 12,312
(1) Represents deferred compensation which accrued during the fiscal years
indicated. Mr.Schotte received $$181,950 in the fiscal year ended June 30,
2000 in respect of the deferred salary for the prior two fiscal years. Mr.
Koshakji received $135,310 in the fiscal year ended June 30, 2000 in
respect of a portion of the deferred salary for the prior two fiscal years.
Mr. Koshakji is no longer an employee of the company for the year ended
June 30, 2001. See "Compensation Arrangements, Termination of Employment
and Change-in-Control Arrangements" for a more detailed explanation of the
terms of the compensation agreements between the Company and its executive
officers.
Options/Stock Appreciation Rights
The following table provides information with respect to stock options and
stock appreciation rights ("SARs") granted to the named executive officers
during the fiscal year ended June 30, 2001.
Individual Grants(1)
----------------------------------------
% of Total
Number of Options Potential Realized Value at
Securities Granted to Exercise Assumed Annual Rates of
Underlying Employees Price Stock Price Appreciation
Options in Fiscal Per Expiration For Option Terms
Granted Year Share Date 5% 10%
------- ---- ----- ---- -- ---
None (1)
- ---------------------------
(1)The foregoing table does not include 500,000 warrants held by an affiliate of
Mr. Schotte which were extended in February, 2000 for an additional seven-year
period at the original exercise price of $1.06 per share. See "Certain
Relationships and Related Transactions."
18
Aggregated Option/SAR Exercises and Fiscal Year-End Options/SAR Value Table
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Year End In-the-Money Options
------------------- ----------------------
Shares
Name Acquired Value
Unexercisable On Exercise Realized Exercisable Unexercisable Exercisable
- ------------- ----------- -------- ---------- ------------- -----------
Johan Schotte(1) __ __ 103,385 $ 49,624 __
Pierre Koshakji(1) __ __ 103,385 $ 49,624 __
(1) The chart does not include 5,000 stock options for Mr.Schotte, and 1,350
stock options for Mr. Koshakji, in each case issued in connection with personal
loans made to the Company. See "Certain Relationships and Related Transactions."
The table also does not include warrants held by affiliates of Mr.Schotte. See
"Security Ownership of Certain Beneficial Owners and Management."
Note: No bonus has been paid or distributed in the past four quarters.
Director Compensation
The Company does not have any standard arrangements pursuant to which
directors of the Company are compensated for services provided as a director.
All directors are entitled to reimbursement for expenses reasonably incurred in
attending Board of Directors' meetings. In the period ending 2000, each Board
Member received 2000 shares of Common Stock in consideration for their
participation. There have been no other distributions of Stock to the Board
Members.
Compensation Agreements, Termination of Employment and Change-in-Control
Arrangements
In March, 1998, Mr. Stephen Greenwald stepped down as CEO of the Company in
connection with a change in management control of the Company. In connection
with such change of management, Mr. Greenwald terminated his existing employment
agreement and entered into a new compensation arrangement with the Company. Mr.
Greenwald agreed to serve as managing director of the Company through December
31, 1999, and was to receive the sum of $130,000 during such period in varying
monthly payments. In addition, in consideration of terminating his existing
employment agreement, Mr. Greenwald was to receive an additional $130,000, also
payable in varying monthly amounts during the two-year period ending December
31, 1999. In September, 1999, Mr. Greenwald resigned as a Director of the
Company to pursue other interests. He also agreed to settle all outstanding
payments due to him under his employment agreement, and to resign as a Managing
Director of the Company, in consideration of receiving a settlement payment of
$100,000, together with 200,000 shares of restricted common stock.
19
In connection with the change in management control of the Company in
March, 1998, Mr. Ira Smith, a former officer and director of the Company
(through S.F.H. Associates, Inc.), agreed to serve in a consulting capacity to
the Company for the period from March, 1998 through December 31, 1999. Pursuant
to such consulting agreement, Mr. Smith's consulting company was entitled to
receive the sum of $160,000 during such period, payable at the rate of $8,000
per month, commencing May, 1998. In addition, in consideration of terminating
his then existing employment agreement with the Company, Mr. Smith was entitled
to receive an additional $100,000, payable in varying monthly amounts during the
term of the consulting agreement. Following a default by the Company under the
consulting agreement, Mr. Smith agreed to terminate his consulting agreement
with the Company in consideration of receiving a settlement payment of $100,000,
together with 200,000 shares of restricted common stock.
In connection with the change of control in the Company in March, 1998,
Johan Schotte entered into a two-year employment agreement with the Company,
commencing as of January 1, 1998 and continuing through December 31, 1999. Mr.
Schotte's compensation was fixed at $150,000 per year during such period. Mr.
Koshakji also entered into a two-year employment agreement with the Company at
the rate of $150,000 per annum. The agreement with Mr. Schotte was extended for
an additional period of one year at the rate of $250,000 per year, and the
agreement with Mr. Koshakji was extended for a period of six months at the rate
of $5,000 per month. As of June 30, 2000, a substantial portion of the
compensation due to Messrs. Smith and Koshakji under their respective agreements
was past due for the period from January 1, 1998 through the fiscal year ended
June 30, 2000. Mr. Koshakji resigned his position as President of the Company on
September 30, 2000.
In connection with the change of management, an affiliate of Mr. Schotte
purchased a total of $230,000 of deferred compensation notes from Messrs.
Greenwald and Smith, and converted approximately 75% of these notes into 667,648
shares of the Company's common stock in April, 1998. The balance of these notes
were converted into 176,050 shares of common stock in October, 1998.
In November, 1998, the Board of Directors of the Company authorized the
following bonus incentive compensation package for each of Messrs. Schotte and
Koshakji:
(I) Warrants: 2% of the Company's total outstanding stock each year,
beginning with the fiscal year commencing July 1, 1998, and each year
thereafter. Warrants shall be priced at the average bid price for the
10 consecutive trading days preceding the issue date each year, and
exercisable at any time following the issue date. Messrs. Schotte and
Koshakji were each issued 103,385 warrants as of July 1, 1998 at an
exercise price of $.74 per share. Messrs. Schotte and Koshakji each
waived their right to receive a warrant bonus for the fiscal year
commencing July 1, 1999.
(II) Performance Bonus: Each year beginning with the fiscal year ending
June 30, 1999, and each year thereafter, if the Company's gross
revenues increase by 20% or more over the gross revenues of the
preceding year, the performance bonus shall be the greater of either
1% of the revenue differential or 2.5% of the EBITDA. No performance
bonuses have been awarded under this plan.
(III)Market Cap Bonus: At the end of each fiscal year, beginning with the
fiscal year commencing July 1, 1998, if the Company's market
capitalization increases from the preceding year based on the average
closing price for the 30 previous consecutive trading days, the market
capitalization bonus shall equal 1% of the differential. Messrs.
Schotte and Koshakji each waived their right to receive a market cap
bonus for the fiscal year commencing July 1, 1999.
20
John Foster served as interim President of the Company from January, 2000
through June, 2000 at the rate of $9,850 per month. In July 2000, he became
President of the Company and agreed to a one-year extension of his agreement at
the rate of $12,000 per month. Mr. Foster's accrued salary has gone unpaid and
remains as a payable of the Company as of the end of June 30, 2001.
Compensation Committee Report and Compensation Committee Interlocks and Insider
Participation
Executive officer compensation is determined by the entire Board of
Directors. The Board has not appointed or designated a separate compensation
committee to determine or set executive compensation. The Board's executive
compensation policy is intended to attract and retain key executives, compensate
them at appropriate levels and provide them with both cash and equity incentives
to enhance the Company's value for all of its stockholders. Item 12. Security
Ownership of Certain Beneficial Owners and Management.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information concerning ownership of common
stock, as of September 25, 2000, by each person known by the Company to be the
beneficial owner of more than 5% of the common stock, each director and
executive officer, and by all directors and executive officers of the Company as
a group.
Name of Shares Percentage of
Beneficial Owner Status Beneficially Owned Class
- ---------------- ------ ------------------ --------------
Johan Schotte CEO and 233,385(1) 1.4%
Chairman
Lecoutere Finance S.A. ___ 2,012,734(2) 11.8%
Patrick Speeckaert Director 2,000 Less than 1%
John Foster Director, 2,000 Less than 1%
President
Jean-Marie Carrara Director 2,000 Less than 1%
Pierre Koshakji Director, 104,735(3) Less than 1%
Treasurer
All Executive
Officers &
Directors As
A Group (5 Persons) ___ 344,120(4) 2.1%
(1) Includes presently exercisable options to purchase 108,385 shares of common
stock; does not include 1,486,134 shares of common stock and 526,600 common
stock purchase warrants held by a corporate affiliate of Mr. Schotte,
Lecoutere Finance S.A.; also does not include 111,285 shares of common
stock and 2660 common stock purchase warrants held by E3 Capital, and
29,537 common stock purchase warrants held by Media Trust S.A., both
corporate affiliates of Mr. Schotte. (Mr. Schotte disclaims beneficial
ownership of all shares and warrants held by affiliated entities, although
based on Mr.Schotte's close business relationship with the other principal
shareholders of these entities, there exists the possibility that these
shareholders may act in concert with Mr. Schotte with respect to the voting
of these shares in the Company).
(2) Includes presently exercisable options to purchase 526,600 shares of common
stock. See note (1).
(3) Includes presently exercisable options to purchase 104,735 shares of common
stock.
(4) Includes presently exercisable options to purchase 213,120 shares of common
stock.
21
Item 13. Certain Relationships, Related and Subsequent Transactions.
In April, 1997, Robert E. Miller, Jr.(who resigned as a Director during the
fiscal year ended June 30, 2000) made a loan to the Company in the amounts of
$25,000. The loan was payable on demand, accrued interest at the rate of 9.25%
per annum, and was secured by a collateral assignment of the Company's $300,000
receivable due from Kinnevik. See "Business-Sales of Distribution Rights." In
consideration of making the loan, the lender received a five-year warrant to
purchase 25,000 shares of common stock of the Company, exercisable at $1.00 per
share. Mr. Miller agreed to a rollover of his loan to be paid from the proceeds
of a second Kinnevik receivable due in September, 1998. In consideration of the
rollover, Mr. Miller received 12,500 warrants, exercisable over a five-year
period at $1.00 per share. Mr. Miller's loan was rolled over for a subsequent
six month period on an unsecured basis with interest at the rate of 10% per
annum. Mr. Miller thereafter agreed to another six-month rollover (through
September, 1999), in consideration of which he received an additional 12,500
warrants exercisable over a five-year period at $1.00 per share, an increase in
the interest rate on his loan to 12% per annum, and an extension on the
expiration date of all warrants issued in connection with his loan to the year
2004. In December, 1999, Mr. Miller converted his $25,000 loan into 57,876
shares of common stock of the Company at a conversion price of approximately
$.43 per share.
In June, 1998, the Company entered into the following related party
transactions with E3 Sports New Mexico, Inc., a company which is an affiliate of
Mr. Schotte and Mr. Koshakji and in which the Company holds a minority interest:
(i) the Company purchased a $25,000 sponsorship from the Albuquerque Geckos, the
professional soccer team owned by the affiliate; and (ii) the Board authorized
the Company to loan up to $100,000 to the affiliate, payable no later than July
15, 1999 with interest at 15% per annum (the loan is secured by 10,000 shares of
E3 Sports new Mexico, Inc.). The loan is currently outstanding.
In July, 1998, the Company entered into the following related party
transactions with Media Trust S.A., a company which is an affiliate of Mr.
Schotte and in which the Company holds a minority interest: (i) the Company
agreed to make a $2,500 loan to the affiliate, payable in one year with interest
at 15% per annum; (ii) the Company engaged the affiliate to introduce
prospective investors to the company, in exchange for which the affiliate will
receive 10% of any investments made in the Company by persons or entities
introduced by the affiliate, together with five-year warrants (100 warrants per
$1,000 invested) at an exercise price equal to the market price of the Company's
stock on the date of the investment. In connection with convertible loans made
to the Company in 1998 by Belgian investors in the aggregate amount of
approximately $100,000, and the purchase of 625,000 shares of common stock of
the Company by Lecoutere Finance, S.A. in December, 1998 (see below), a total of
29,540 five-year warrants have been issued to Media Trust, S.A. with exercise
prices ranging from $.38 per share to $.98 per share. The $2,500 loan to Media
Trust S.A. is currently outstanding as of June 30, 2001 along with the
reconciliation of commissions which may be due to Media Trust.
During the fiscal year ended June 30, 2000, Mr. Koshakji loaned the Company
approximately $2,500, with such loan bearing interest at the rate of 18% per
annum (the same interest rate being charged to Mr. Koshakji for such funds).
In April, 1999, the Company purchased a refundable option for $60,000 to be
the exclusive worldwide distributor of a motion picture entitled "HARA." The
film is an action martial arts love story and was expected to start
pre-production in January, 2001. Management of the Company owns an indirect 50%
equity interest in Red Sun Productions, Inc., a production company, which owns
all rights to the film "HARA."
Commencing in January of 2000, the Company has accrued additional rent
expense at the rate of $1,000 per month for the use of office space in
Luxembourg which is owned by Media Trust, S.A, a company affiliated with Mr.
Schotte, the CEO and Chairman of the Company.
22
In February, 2000, the maturity date of 500,000 common stock purchase
warrants held by Lecoutere Finance S.A. (an affiliate of Mr. Schotte) was
extended for an additional seven-year period through February 25, 2007. The
warrants were originally issued to Mr. Schotte and other investors in February,
1997 in connection with a capital investment in the Company of $375,000. The
warrants were originally scheduled to expire on February 25, 2000. At the time
of the original investment, Mr. Schotte was not affiliated with the Company. The
warrants will continue to have the same exercise price of $1.06 per share.
In April of 2001, the Company's subsidiary, Odyssey Ventures Online Holding
S.A. formulated a subscription document in Luxembourg, specific to non-US
investors in seeking a capital amount totaling 5.0 million US Dollars. As of the
close of business on June 30, 2001, there were no subscribers or participants in
the subscription document and non were expected to participate in the near
future.
In May of 2001, management entered into discussion regarding the possible
restructure of the present management for and in consideration of certain
adjustments to the operational direction of company. It is contemplated that
certain assets and liabilities would be taken over by Mr. Schotte in an effort
to streamline the debts of Odyssey and the directions of its subsidiary, Odyssey
Ventures Online Holding S.A. During such a transition, Mr. Schotte would step
down as an employee of the Corporation to manage the subsidiary. The intention
would be to transact the eventual purchase or split of the subsidiary for
certain consideration. Such a transaction would be noted in forthcoming
quarterly reports, if approved and enacted upon. This transition would place Mr.
Foster in the position of CEO and Chairman of the Board. The Board has scheduled
such a meeting to occur on or before the end of November 2001.
On July 6th of 2001, the Board voted on the assignment of Mr. Foster to CEO
and Chairman of the Board of Odyssey Pictures Corporation. Mr. Schotte resigned
as CEO and Chairman and was appointed the position of Executive Vice Chairman on
the Board. This change was due to the approved transition by the Board for the
further growth plans of Odyssey.
23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- -------------------------------------------------------------------------
(a)(1) The response to this portion of Item 14 is submitted as a separate
section of this report commencing on page F-1.
(a)(2) See (a)(1) above.
(a)(3) Exhibits
3.1 Articles of Incorporation, as amended through June 30, 1995(1)
3.2 Amendments to Articles of Incorporation filed in March and June, 1996(8)
3.3 Amendment to Articles of Incorporation filed in January, 1997 (9)
3.4 By-laws(1)
4.1 Indenture between Odyssey and Continental Stock Transfer and Trust
Company ("Continental") dated as of July 15, 1987(1)
4.2 Form of Supplemental Indenture between Continental and the Company(1)
4.3 Form of Common Stock Certificate(1)
4.4 Form of options granted of officers, directors and 5% stockholders(2)
4.5 Form of Warrant issued to purchasers parties to the 1995 Private
Placement completed September 30, 1995(5)
4.6 Form of 12% Unsecured Promissory Note issued to purchasers parties
to the 1995 Private Placement completed September 30, 1995(5)
4.7 Form of Stock Option Agreement by and between the Company and officers
and directors of the Company,for stock options issued in April 1995(5)
4.8 Form of Common Stock Purchase Warrant by and between the Company and
officers, directors, employees and consultants of the Company for
warrants issued during the fiscal year ended June 30, 1996(8)
4.9 Common Stock Purchase Warrant, dated March 6, 1996, between the Company
and G & H Media, Ltd. (assignee of Stephen R. Greenwald)(7)
4.10 Common Stock Purchase Warrant, dated March 6, 1996, between the Company
and Lawrence I.Schneider(7)
4.11 Common Stock Purchase Warrant, dated March 6, 1996, between the Company
and Ira N. Smith(7)
4.12 Form of Common Stock Purchase Warrant by and between the Company and
officers, directors,employees and consultants of the Company for
warrants issued during the fiscal year ended June 30, 1997(9)
4.13 Preferred Stock Certificate, Series A, issued to Kinnevik Media
Properties, Ltd. in September, 1997 (10)
4.14 Convertible Note issued to Augustine Fund L.P. in July, 1998 (12)
4.15 Preferred Stock Certificate, Series B, issued to Kimon, Inc.
in September, 1998 (10)
10.1 1989 Long Term Incentive Plan(1)
10.02 Lease for office premises at 16910 Dallas Parlway, Suite 104, Dallas
Texas dated February 1, 2001(8)
24
10.03 Settlement Agreement and Release between Paramount Pictures Corporation
and Odyssey Distributors , Ltd. (a wholly owned subsidiary of the
Company), and Guarantee agreement of the Company, each dated as of
September 26, 1996 (9)
10.04 Stock Purchase Agreement between the Company and Flanders Film S.A.
relating to purchase of minority stock interest in E3 Sports New
Mexico, Inc. and Media Trust S.A., and related promissory notes for
$135,000 and $315,000, dated March 2, 1998 (10)
10.05 Employment Agreement with Johan Schotte, dated March 2, 1998 (10)
10.31 Convertible Note issued to Augustine Fund, L.P. in July, 1998 (12)
10.32 Asset Purchase Agreement between the Company and Kimon Mediabright KB,
a Swedish limited partnership, dated July 14, 1998 (10)
10.33 Employment Agreement with Pierre Koshakji, dated March 2, 1998 (11)
10.34 Employment Agreement with Ian Jessel, dated December, 1998 (13)
10.35 Settlement Agreement with Stephen Greenwald, dated September, 1999(13)
21.1 Subsidiaries of the Registrant(3)
- -----------------------------------------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-4, File No. 33-34627.
(2) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, File No. 33-43371.
(3) Incorporated herein by reference to the Company's Current Report on Form
8-K filed April 12, 1995, File No. 0-18954.
(4) Incorporated herein by reference to the Company's Current Report on Form
8-K filed August 30, 1995, File No. 0-18954.
(5) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, File No. 0-18954.
(6) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1995, File No. 0-18954.
(7) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, File No. 0-18954.
(8) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1996, File No. 0-18954.
(9) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, File No. 333-20701.
25
(10) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1997, File No. 0-18954
(11) Incorporated herein by reference to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended June 30, 1997, File No.
0-18954
(12) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1998, File No. 0-18954
(13) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1999, File No. 0-18954
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this Report.
(c) See (a)(3) above.
(d) None.
26
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.
ODYSSEY PICTURES CORPORATION
Dated: November 8, 2001 By: /s/ John Foster
-----------------------------
John Foster, President
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/ Johan Schotte CEO and Chairman 11/8/01
- ---------------------- (Principal Executive &
Johan Schotte Financial Officer)
/s/ John Foster Director, President 11/8/01
- ----------------------
John Foster
/s/ Jean-Marie Carrara Director 11/8/01
- ----------------------
Jean-Marie Carrara
/s/ Patrick Speeckaert Director 11/8/01
- ----------------------
Patrick Speeckaert
/s/ Pierre Koshakji Director 11/8/01
- ----------------------
Pierre Koshakji
27