SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From _______ to _______
Commission File No. 0-18954
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ODYSSEY PICTURES CORPORATION
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(Exact name of registrant as specified in charter)
Nevada 95-4269048
- ------------------------- -------------------
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
16910 DALLAS PARKWAY, SUITE 104, DALLAS, TEXAS 75248
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including area code: (972) 818-7990
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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 the filing
requirement for at least the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 31,036,628 outstanding shares as of
March 31, 2003.
ODYSSEY PICTURES CORPORATION
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2003, June 30, 2002, 2001 2
Consolidated Statements of Operations
for the Nine and Three Month Period Ended
March 31, 2003, 2002 3
Consolidated Statements of Cash Flows
for the Nine and Three Month Period Ended
March 31, 2003 and 2002 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 4. Controls and Procedures 9
PART II - OTHER INFORMATION 9-12
Item 1. Legal proceedings.
Item 2. Changes in securities and use of proceeds.
Item 3. Defaults upon senior securities
Item 4. Submission of matters to a vote of security holders
Item 5. Certain relationships and related transactions
Item 6. Events subsequent to the fiscal quarter
Item 7. Exhibits and report
Signatures 12
1
ODYSSEY PICTURES CORPORATION
Consolidated Balance Sheets
March 31, June 30, June 30, June 30,
Assets 2003 2002 2001 2000
- ------ ------------- --------------- -------------- --------------
Cash $ 1,238 $ 3,675 $ 1,163 $ 31,215
Accounts receivable (Less allowances
reserved for bad debt) 265,120 272,087 87,406 208,511
Notes receivable - - - 149,296
Film costs, net 3,428,761 3,637,896 3,923,405 4,095,824
Prepaid expenses and other 426,777 422,206 409,705 450,906
Investments 545,771 584,916 1,374,517 1,001,100
------------- --------------- -------------- --------------
TOTAL ASSETS $ 4,667,666 $ 4,920,780 $ 5,796,196 $ 5,936,852
============= =============== ============== ==============
Liabilities and Shareholders' Equity (Deficit)
- ----------------------------------------------
Liabilities
Accounts payable and accrued expenses $ 1,056,763 1,300,769 $ 674,997 $ 819,038
Structured payments and management contracts 1,008,391 847,061 1,074,930 709,545
Accrued interest 234,421 228,021 226,414 226,414
Due to producers and participants 230,584 230,584 250,000 250,000
Deferred revenues - 0 0 29,000
Notes and loans payable 1,617,067 1,118,851 1,517,134 835,680
------------- --------------- -------------- --------------
Total Liabilities 4,147,226 $ 3,725,286 3,743,475 2,869,678
------------- --------------- -------------- --------------
Commitments and contingencies
Shareholders' Equity (Deficit)
Preferred stock, Series A, par value $.10;
Authorized - 10,000,000 shares
Issued - 0 shares - - - -
Preferred stock, Series B, par value $.10
Authorized - 10,000,000 shares
Issued - 0 shares - - - 450,000
Common stock, par value $.01;
Authorized - 40,000,000 shares
Issued and outstanding -
31,036,628 (Current) 24,674,340 (2002),
and 21,467,043 (2001) 310,366 298,038 211,743 135,731
36,694,955 36,597,743 35,624,038 34,815,747
Accumulated deficit (36,484,880) (35,700,287) (33,783,060) (32,334,304)
------------- --------------- -------------- --------------
Total shareholders' equity (deficit) 520,441 1,195,494 2,052,721 3,067,174
------------- --------------- -------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 4,667,667 $ 4,920,780 $ 5,796,196 $ 5,936,852
============= =============== ============== ==============
The accompanying notes are an integral part of these financial statements.
2
ODYSSEY PICTURES CORPORATION
Consolidated Statements of Operations
For the Three Months Ended March 31: For the Nine Months Ended March 31:
2,003 2002 2001 2003 2002 2001
------------ ------------ ----------- ---------- ---------- ----------
Revenue
4,500 $ 166,167 $ 2,275 $ 62,215 $ 167,082 $ 3,706
Expenses
Costs related to revenues 53,429 14,608 104,996 54,291
Selling, general and
administrative expenses 78,766 135,809 145,436 636,944 593,049 432,108
------------ ------------ ----------- ---------- ---------- ----------
Total 78,766 189,238 145,436 651,553 698,045 486,399
------------ ------------ ----------- ---------- ---------- ----------
Operating income (loss) (74,266) (23,071) (143,160) (589,338) (530,963) (482,693)
Other income (expenses)
Interest income - - - - - 12,001
Interest expense (8,799) (57,003) (8,755) (62,759) (102,953) (17,510)
Gains (Losses) from Litigation
and offsets (19,116) - - - (97,134) -
Other income (expense) (180,000) - - (180,000) - -
------------ ------------ ----------- ---------- ---------- ----------
Income (loss) from operations
before provision for income taxes (263,064) (99,190) (151,915) (832,096) (731,050) (488,202)
Provision / Benefit for income taxes - - - - - -
NET INCOME (LOSS) $ (263,064) $ (99,190) $ (151,915) $(832,096) $(731,050) $ (488,202)
============ ============ =========== ========== ========== ==========
Basic income (loss) per share (0.01) (0.00) (0.01) $ (0.03) $ (0.03) $ (0.04)
Weighted average common
shares outstanding 29,803,821 24,196,562 12,403,675 29,803,821 22,340,398 12,403,675
============ ============ =========== ========== ========== ==========
Diluted income (loss) per share $ (0.01) $ (0.00) $ (0.01) $ (0.03) $ (0.03) $ (0.04)
Weighted average common
shares outstanding 29,803,821 24,196,562 12,403,675 29,803,821 22,340,398 12,403,675
============ ============ =========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
3
ODYSSEY PICTURES CORPORATION
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31,
2003 2002 2001
--------------- ------------- ------------
Cash Flows From Operating Activities:
Net income (loss) $ (832,097) $ (731,050) $ (488,202)
Adjustments to reconcile net income (loss)
to net cash used in operating activities: -
Amortization of film costs 77,238 76,949 44,492
Other depreciation and amortization 74,997 25,000 -
Changes in assets and liabilities:
Accounts receivable, net (24,254) (184,681) (164,746)
Notes receivable and advances (13,279) - (5,755)
Prepaid expenses and other (Film) (79,456) (12,501) (43,000)
Accounts payable and accrued expenses 366,960 625,772 297,972
Structured Payments and Accrued Management Fees 127,650 (227,869) (305,000)
Accrued interest 6,400 1,607 8,755
--------------- ------------- ------------
Net cash provided (used) in operating activities (295,840) (426,773) (655,484)
--------------- ------------- ------------
Cash Flows From Investing Activities:
Investments - 160,883 (197,642)
--------------- ------------- ------------
Net cash provided (used) in investing activities - 160,883 (197,642)
--------------- ------------- ------------
Cash Flows From Financing Activities: - -
Net proceeds from private placement sale of common stock 3,000 590,000 405,000
Net proceeds/payments - notes and loans payable 290,402 (398,283) 505,283
Issuance of shares of preferred stock to equity investors - - -
------------- ------------
Net cash provided by financing activities 293,402 191,717 910,283
--------------- ------------- ------------
Net increase (decrease) in cash (2,438) (74,173) 57,157
--------------- ------------- ------------
Cash at beginning of period 3,675 1,163 31,215
Cash at end of period 1,237 (73,010) 88,372
=============== ============= ============
The accompanying notes are an integral part of these financial statements.
4
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
March 31, 2003
1. Basis of Financial Statement Preparation
The Consolidated Financial Statements for Odyssey Pictures Corporation and
subsidiaries (collectively the "Company"), included herein, have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the consolidated audited financial statements and the
notes thereto included in the Company's Report on Form 10-K for the period
ended June 30, 2002.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly (a) the financial position as of
March 31, 2003, (b) the results of operations for the nine and three month
periods ended March 31, 2003, 2002 and 2001 and, (c) cash flows for the
nine and three month periods ended March 31, 2003, 2002, and 2001.
2. General Management Overview and Summary
The company, although it has begun collecting from exploitation and sales
of its films, has not yet achieved sufficient cash flow to accommodate its
past nor current needs. There are benefits that have been recognized in the
past year of redeveloping the company and its position in the market,
however, the company will still be in need of additional capital in order
to maintain its business direction for the near future.
Of the company's needs, there are critical accounts that need to be
maintained with an additional input of capital. These are mainly company
payments for repeating costs as well as results of legal settlements from
past issues.
Product that the company has begun marketing is of independent producers
and the success of the exploitation of these films cannot be readily
determined and only based upon actual performance, The company believes
that the market impact of both its selling efforts plus the new releases
forthcoming will achieve a renewed interest in the product and fulfillment
services Odyssey offers. Some of the product information is as follows:
"Trance" in the New York Film Festival and won an award for best fantasy
feature. Odyssey has recreated its own motion logo for the credit
presentation of each of its films and has begun selling this film
worldwide. Odyssey estimates commission income will be in the range of
350,000 USD.
"Liars Club" had its first theatrical venue in Chicago, where it played
well and received very good reviews. Odyssey has begun selling this film
worldwide. Odyssey estimates commission will be in the range of 275,000
USD.
"Certain Guys" in a recent local festival and received an award for story
originality. Odyssey has begun selling this film worldwide. Odyssey
estimates commission will be in the range of 250,000 USD.
In addition, the company has been in discussion with other suppliers of
film and broadcast product and has intentions of forming certain alliances
in order to recognize a revenue-generating product.
5
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
March 31, 2003
3. Litigation - Accrued Settlements - Structured Payments
Included in structured payments and accrued liabilities are agreed amounts
for the settlements with Ian Jessel, Dennis Morgan, and some Pfannebecker
related settlements, and other reserves for additional litigation-related
settlements.
4. Private Placement Information
During the quarter ended March 31, 2003, the Company did not raise any
funds through private placement(s) of the Company's common stock.
5. Related Transactions and Majority Owned Subsidiary
During the quarter ended June 30, 2001, the Company capitalized a venture
capital company domiciled in Luxembourg, named Odyssey Ventures Online
Holding, S.A. (OVO) with an issuance of 2 million shares of restricted
Odyssey Pictures Corporation stock. The Company then made cash available
for OVO's investments and expenses in excess of one million dollars in
replacement of its stock capitalization. Since the formation of OVO in
March, 2000, the Company 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. 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 have been
discontinued. It is the intention of the Company to liquidate the assets of
the subsidiary in an orderly manner. The company, as of June 30, 2002, has
begun writing down these investments. Charges to the company's operations
in the period ending March 31, 2003 were $180,000.
6
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
March 31, 2003
On April 19, 2002 the Company entered in a Joint Venture with a private
company, Kasstech, Inc., to exclusively sell its patent-pending
digitization services for a period of ten years. These services are
believed to be technically the most efficient available service for
transmission of picture and sound through normal phone lines with a
possible 900 to 1 compression ratio. The Company is the managing partner of
the Joint Venture with all administrative and sales duties. Originally
Odyssey agreed to reserve shares of stock for possible funding into the
Joint Venture and to pay Kasstech and its owner for some of the rights and
services. On October 9th Odyssey and Kasstech agreed to discontinue the
share contribution and reserves of stock.
The company signed an arrangement with Orpheus Entertainment, a
manufacturer of Video, DVD product and a distributor for all North American
markets. In this arrangement, the company shall pay a number of registered
shares for the consultation and advice of marketing and placement of
product into all markets. The result of this type of stock arrangement will
allow the Company to have a higher margin on product it delivers to the
market from the retail level for video and DVD sales in North America on a
direct basis. In addition, the Company also signed an arrangement for
distribution of its soundtracks and original audio works with the same
company for international distribution. Most of the assets that will be
acquired or distributed through this arrangement are from JL Media Services
LLC, from a related party transaction entered into in November 2001 (The
Master Distribution Agreement). The Company has seven films to release in
the coming months for this outlet.
6. Capital
In September of 2002, the company borrowed $50,000 for working capital
needs in a sixty-day note at 12% per annum. The loan also re-priced certain
warrants already outstanding to a price of six cents per share. The total
warrants affected 306,666 shares and extended the final exercise date of
all certificates to September 23, 2005. Additional warrants could be
required if the loan is not paid per its terms.
The company also borrowed funds from an Officer during the course of this
current quarter on terms to be repaid as anticipated funds are received.
From October to December, the company borrowed additional capital from
private sources in order to accommodate certain necessary expenses and
overheads. These short term amounts total $51,000 and carry an interest of
12% per annum.
From January through March, the company received additional borrowings
totaling $35,000 in order to secure additional necessary costs and
overheads while the company expected a completion of private placement of
added equity.
7. Contingent Liabilities
In September of 2002, the company entered into an arrangement to
post-produce and distribute the project entitled "FREE", a feature length
motion picture. In the agreement for this film, the company has the right
to acquire the asset for a sum of money and may obtain further rights
through the exercise of an option. As of March 31, 2003, the option period
for the Company has been extended due to excessive delays in delivery from
the producer and added time needed to complete the project.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months Ended March 31, 2003 and 2002
Revenues for the nine and three months ended March 31, 2003 decreased to
$62,215 from $167,082 for the comparable period ended March 31, 2002. This
decrease is due to changes in the Company's method of selling and attention to
creating additional inventories as well as renovations to the present film
library and more activity in the acquisition of additional film product, several
of which are in final stages of production. In addition, the Company has been in
development for its business plan and market entry strategy in order to fully
exploit its library and new product effectively. Five new films became available
for delivery during this period and they are being marketed at present.
Costs related to revenues decreased to $14,422 for the nine and three month
period ended March 31, 2003 from $51,516 for the comparable nine and three
months ended March 31, 2002. This is mainly due to the adjustment of expensing
the depreciation of the Kimon library assets acquired in 1998 within operations.
The company made this change to state its margins on new sales more fairly.
Selling, general and administrative expenses decreased by $46,492 to
$651,553 for the nine and three month periods ended March 31, 2003, from
$698,045 for the comparable period in 2002. The decrease in costs is primarily
attributed to the decrease in officer salaries as well as an overall reduction
in the operating expenses. In addition, the company still continues to
experience a significant expense for its legal costs, mainly due to the
settlement efforts underway as well as costs related to seeking alternate
financing resources.
Interest expense decreased to $62,759 for nine and three month period ended
March 31, 2003, from $102,953 for the comparable period ending March 31, 2002.
This is due to the relief from one-time charges on interest on settlements and
interim notes that were used for adherence to certain settlements.
The Company did not recognize any tax benefits related to its losses from
operations for either period due to its inability to carry-back such losses to
prior years.
As of March 31, 2003, the Company had a net operating loss carryforward of
approximately $36,484,880 expiring through 2014, some that may be available to
be used to reduce future tax liability. Due to limitations imposed by the
Internal Revenue Service, the utilization of approximately $4,900,000 of these
net operating losses will be limited to approximately $350,000 per year.
The Company's principal activities have been the acquisition of rights in
either completed or incomplete motion pictures and the licensing of these rights
to sub-distributors in foreign countries. As of March 31, 2002, the Company had
no agreements with sub-distributors relating to distribution commitments or
guarantees that had not been recognized in the statement of operations.
Liquidity and Capital Resources
At March 31, 2003, the Company had a cash position of $1,238.
The Company had no material commitments for capital expenditures as of
March 31, 2003.
Compensation Committee Report and Compensation Committee Interlocks
and Insider Participation
Executive officer compensation is determined by the entire Board of Directors.
Subsequent to the period ending June 30, 2002, the Board appointed a separate
compensation committee to determine or set future 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 4. CONTROLS AND PROCEDURES
a. Evaluation of Disclosure Controls and Procedures: Based upon the evaluation
of disclosure controls and procedures as of November 19, 2002, the
evaluation date, the Company's Chief Executive Officer indicates that
controls and procedures of the Registrant designed to ensure that
information required to be disclosed by it in this report filed pursuant to
the Securities Exchange Act of 1934 as amended, are in place.
b. Changes in Internal Controls: In order to facilitate the control of
information through the Company's Chief Executive Officer, its certifying
officer under this Item, additional restrictions on changes to existing
relationships, new relationships and flow of funds have been instituted as
of the evaluation date.
8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Lawsuit - Ian Jessel v. Odyssey Pictures Corp., Johan Schotte and Does 1 through
5 - Los Angeles Superior Court, State of California - Filed November 9, 2000.
Complaint for alleged breach of employment contract, fraud and fraudulent
conveyance - Plaintiff alleges breach of an employment contact where Plantiff
sought unspecified compensatory damages. Although the company was advised that
there are substantial defenses to this action, in December of 2001, the Company
entered into mediation talks for a settlement, which was later entered into and
accepted in February of 2001. In June of 2001, the first payment was made with
subsequent payments thereafter.
As of the period ending December 31, 2002, The "Jessel Agreement" (the lawsuit
filed in 1999 by Ian Jessel) has been settled and is required to have a payment
arrangement adhered to as well as a continuing consulting agreement. The prompt
payment of this agreement will keep a judgment of over $500,000 being filed
against the company (and former officers of the company). As of March 31, 2003,
there have been no payments made towards the agreement. The condition of this
settlement, and lack of any payments (unless other arrangements are made) could
result in either a 1) reinstatement of the lawsuit against the Company (and
former officers individually, as well as affiliated companies of the former
officers) or 2) the filing of a judgment against the Company (et. al.) with any
enforcement rights that a judgment may carry.
Lawsuit - Dennis Morgan v. Odyssey Pictures Corp., Johan Schotte, Johan Schotte
Productions, Inc., Red Sun Productions, Inc., Media Trust, S.A. and Does 1
through 100 - Complaint filed December 15, 2000, Los Angeles Superior Court,
State of California.
Plaintiff alleged unspecified damages for alleged breach of oral contract,
breach of written contract, breach of implied contract, fraud, and negligent
misrepresentation of conveyance. The action had been served and the company
filed a demurrer to the Complaint. Although the company advised previously that
Mr. Morgan was not an employee of the company and there were substantial
defenses to the action, as of the end of October 2001, the company entered into
a settlement agreement to satisfy all outstanding complaints.
In the "Morgan Settlement" (the lawsuit filed in 1999 by Dennis Morgan), the
Parties have reached a settlement and have constructed a payment arrangement.
The prompt payment of this agreement will keep a judgment of over $250,000 being
filed against the company (and former officers of the company). As of March 31,
2003, there have been no payments made towards the agreement. The condition of
this settlement, and lack of any payments (unless other arrangements are made)
could result in either a 1) reinstatement of the lawsuit against the Company
(and former officers individually, as well as affiliated companies of the former
officers) or 2) the filing of a judgment against the Company (et. al.) with any
enforcement rights that a judgment may carry.
Lawsuit - Watson, Farley and Williams v. Odyssey Pictures Corp., Gold Leaf
Pictures, Belgium, Johan Schotte, Chardonnay Enterprise Ltd, and A Hero From
Zero N.V. Complaint filed April 30, 2001, New York Supreme Court, New York
County.
Complaint for balance owing of services rendered from the period beginning 1997
through to April of 2001. Odyssey has answered this complaint, although it was
not notified until August 10, 2001 denying its position in the named defendants.
Odyssey contends that it did, in fact, pay any and all outstanding related legal
bills related to the Plaintiff's corporate involvement. Odyssey has offered a
settlement on behalf of the remaining defendants. No response has been made from
the Plaintiff on this matter as of the close of business on March 31, 2003.
Lawsuit - The "Pfannebecker Case" (lawsuit filed in 1996 seeking class action
status) has been dismissed. This lawsuit was the reason for the auditor's note
in their certification letter of Odyssey's past financials stating "all
liabilities cannot be known" for the company since this was ongoing and its
status a threat to the company. Odyssey is released from this claim in full with
the final declarations being distributed in court in January 2003.
The "Mortman Settlement" (claim for indemnification and reimbursement of legal
fees regarding the Pfannebecker Case) has been settled and Odyssey was released
from any claims Mortman would purport to have with respect to reimbursement of
legal fees from the company.
The "Muller & Smith Case" (lawsuit filed for indemnification and reimbursement
of legal fees regarding the Pfannebecker Case), at the close of business on
March 31, 2003, still was an outstanding litigation with a trial date set.
Odyssey plans to file a motion against the Plaintiffs on specific grounds and is
vigorously defending its position. Odyssey contends that Muller and Smith are
not entitled to indemnification arising out of the Pfannebecker case.
9
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In March of 2001 the Board of Directors approved a $5 million US dollar
denominated Senior Secured debt issue (the "Senior Debt") with convertible
rights to common stock at maturity and in certain circumstances (such as
bankruptcy and/or financial defaults on other significant debt). Reserves of
shares for the potential conversion have been made. The Senior Debt requires
that the company not pledge any significant assets and gives the bondholders a
pledge on the "Kimon Library" assets. The Senior Debt carries an 8% interest
rate and matures on April 15, 2006. The Senior Debt is not registered in the
United States and is only available to non-US citizens. The Trustee received the
first subscription on August 29, 2001 for $160,000. The funds after financing
expenses of $14,364 were used to pay off two loans of 4 million Belgian francs
and some rent expenses of an office recently closed in Luxembourg. A previous
officer used the remaining funds for claimed expenses.
Odyssey is pursuing additional subscriptions to this Bond and expects to
renew its offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
An interest payment was due on April 12, 2002 and was made by a third
party, therefore the Senior Secured Bond was in compliance with its
requirements. The company did not have sufficient cash to make its next
semi-annual payment (due October 15, 2002) and therefore, risks the Bond being
placed in default. The company has received demand from its agent (Investment
Bank Luxembourg) for immediate payment. As of March 31, 2003, no payment has
been made against the bond, but management is making plans to address the
restructuring of any amounts due as soon as possible.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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. On December 9, 2001 Mr. Schotte resigned from
the board of directors to focus on the Company's two related entities and other
interests. Mr. Schotte lives in Luxembourg and was the managing director of the
Company's 99% subsidiary that is headquartered there, Odyssey Ventures Online
Holding, S.A. He is also the controlling shareholder and director general of
Media Trust, S.A. of which the Company owns 18%. Recently the company held a
shareholders' election for the removal of its three directors, which included
Media Trust, SA. The Company demanded documentation of disbursements and
expenses previously reported in the accounts of the Company. The Company pursued
the control of the subsidiary and a settlement of all accounts underway. The
Company has offset all undocumented expenses from prior management contracts and
the resulting amounts were booked as part of extraordinary gains and losses.
While the Company expects full recovery, a reserve for losses has been taken.
The Company in March gave notice to the Managing Director of its 99% owned
Luxembourg subsidiary, Odyssey Ventures Online Holdings, S.A ("OVO")., that it
was removing all Directors and replacing them with members of the Odyssey
Pictures Corporation Board. The Company has hired legal counsel in Brussels to
recover the assets of the subsidiary for orderly liquidation. While the Company
was advised that the action in March was legally binding, the Company's legal
counsel delivered formal notice to further formalize the actions taken in July
of 2002. The company, as of June 30, 2002, reduced is valuation of the OVO
assets mainly due to their determination of liquidity. In addition, the company
wrote off all of the development expense relating to the OVO initial startup.The
Company is in the process of exploring all avenues for full recovery of these
assets. A reserve has been taken against any potential losses and, although the
Company expects full recovery, this resulted in $180,000 contribution of losses
for the period ending March 31, 2003. Further meetings have been scheduled to
attempt collections and satisfaction of these outstanding amounts.
The Company reversed some expenses claimed by the former officer due to
lack of documentation. The Company seeks the recoupment of an advance on a film
project made. The Company wrote off this prior entry as the item was carried as
a prepaid asset. This item will appear in Non-recurring items.
The Company, as of June 30, 2002, reduced its valuation of the Media Trust
SA investment and note receivable due to undeterminable recovery.
The Company, as of June 30, 2002, wrote off its loan to the Geckos Soccer
team, a once partially owned affiliate of E3 Sports New Mexico, Inc., due to its
unexpected recovery.
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ITEM 6. EVENTS SUBSEQUENT TO THE FISCAL QUARTER
An affiliate of the Company's CEO, JL Media Services, advanced substantial funds
for the overhead and operations of the Company from January to October of 2001,
and continuing through to March 2003. The Company began repaying these advances
in October of 2001 but has not made significant payment since. There is a
secured note and interest is being accrued on a monthly basis. In addition, the
company remains in default on its lease agreement with JL Media Services.
Extraordinary costs associated with the litigation settlements, including legal
fees and interest on legal fees, were $48,636 for the period ending March 31,
2003.
The Company continues (since of June 30, 2002), to reserve an additional amount
of funds for possible settlements of past disputes referring to various
lawsuits, specifically the "Muller and Smith" case.
In April 2003, the Company was notified that the "Morgan Case" was issued a
judgment in the amount of $250,000. The Company is and has been in contact with
counsel and has an agreement on enforcement pending a continued payment plan
being made.
The company added an accelerated depreciation amount for Filmzone due to its
development and reposturing of the sales purpose for the website.
A former officer of the company, Frank Cole, granted an option to the Company in
fulfillment of its contractual Obligations. This resulted in an issue (to be
completed) of common shares and a small remaining balance to be paid out by
mutual agreement.
Odyssey has had to make numerous changes in its business, and to its own
structure of board members, while launching new business. As of October of 2002,
one board member (Jean-Marie Carrara) has been removed by unanimous vote and
another member (Gordon Guiry, a well experienced person in international sales)
has been appointed. As of March 31, 2003, Mr. Guiry accepted a position as an
advisor to the Board of Directors of Odyssey and is not an official Board
Member.
In April of 2003, referring to the "Muller and Smith" case, the judge ruled in
favor of the indemnification claim. Odyssey will now have to make a payment in
excess of 300,000 and possibly an additional 100,000 in later fees incurred by
Muller and Smith. Whereas a judgment has been entered in favor of Muller and
Smith, management has met with the former plaintiffs and is attempting to
determine an acceptable arrangement. Among the options that Odyssey has would be
to issue payment in full, make a payment arrangement, file an appeal, or
countersue the former plaintiffs for just cause. The Company is in discussion in
determining the above options.
In May of 2003, the Company successfully completed an equity placement from a
new investment firm which will significantly assist Odyssey in achieving its
goals. Further relations with this Company are in planning stages.
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits. None
Reports on Form 8-K. None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ODYSSEY PICTURES CORPORATION
By: /s/ John W. Foster
------------------------
John W. Foster
CEO and Chairman
DATED: May 22, 2003
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350, AS ADOPTED PURSUANT TO
SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John W. Foster, certify that,
1. I have reviewed this quarterly report on Form 10-Q of Odyssey Pictures
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 22, 2003 /s/ John W. Foster
----------------------------
John W. Foster
Chief Executive Officer
12