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 September 30, 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 32,436,206 outstanding shares as of
September 30, 2003.
ODYSSEY PICTURES CORPORATION
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2003, June 30, 2003, and 2002 2
Consolidated Statements of Operations
for the Three Month Period Ended
Month Period Ended September 30, 2003, 2002 and 2001 3
Consolidated Statements of Cash Flows
for the Three Month Period Ended
Month Period Ended September 30, 2003, 2002 and 2001 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 13
ODYSSEY PICTURES CORPORATION
Consolidated Balance Sheets
September 30, 2003 June 30, 2003 June 30, 2002
==================== ============== ===============
Assets
Cash $ 3,964 948 3,675
Accounts Receivable, net of allowances
of 41,408, and 58,415, and -0-. 193,379 229,326 267,587
Notes Receivable, net of allowances
of 17,007, and -0-, and -0- 68,030 - -
Advances in Films and Ventures 118,151 108,151 56,900
Other Assets, Prepaids and Deposits 122,642 100,142 166,500
Total Current Assets 506,166 438,567 494,662
-------------------- -------------- ---------------
Film Properties
Filmzone, Hallmark and Kimon Assets 4,055,318 4,055,318 4,311,024
Amortization and Depreciation (916,047) (865,302) (474,322)
Total Film Properties 3,139,271 3,190,016 3,836,702
-------------------- -------------- ---------------
Other Assets
Production in Progress 61,533 61,533 4,500
Affiliates and Subsidiaries 584,916 584,916 584,916
Total Other Assets 646,448 646,449 589,416
-------------------- -------------- ---------------
Total Assets 4,291,886 4,275,032 4,920,780
==================== ============== ===============
Liabilities
Current Liabilities
Accounts Payable 1,160,289 1,187,416 890,037
Structured Payments and Other Payables 556,301 717,776 503,910
Accrued Interest Accumulated 240,821 240,821 228,021
Deposits and Other 235,584 235,584 235,584
Other Accrued Liabilities and Reserves 421,201 419,265 360,733
Total Current Liabilities 2,614,195 2,800,862 2,218,285
-------------------- -------------- ---------------
Other Liabilities
Short Term Loans 113,462 113,462 45,000
Other Notes Payable 1,401,475 1,188,950 1,118,851
Contract Liabilities 675,824 625,515 343,151
Long Term Debt 210,235 100,000 -
Total Other Liabilities 2,400,995 2,027,927 1,507,002
-------------------- -------------- ---------------
Total Liabilities 5,015,191 4,828,789 3,725,287
==================== ============== ===============
Shareholders' Equity
Preferred Stock, par value .10, Authorized
10,000,000 shares - - -
Preferred Stock, Series B, par value .10,
Authorized 10,000,000 shares - -
Common stock, par value $.01; Authorized
40,000,000 shares (net of treasury shares)
32,436,206; 28,033,705 328,938 323,938 298,038
Accumulated deficit (37,552,537) (35,700,284) (33,780,164)
Capital in excess of par value 36,709,843 36,674,843 36,597,743
Current net income (209,550) (1,852,253) (1,920,123)
Total shareholders' equity (deficit) (723,306) (553,756) 1,195,494
-------------------- -------------- ---------------
Total Liabilities and
Shareholders' Equity (Deficit) 4,291,885 4,275,033 4,920,781
==================== ============== ===============
The accompanying notes are an integral part of these financial statements.
2
Odyssey Pictures Corporation
Consolidated Statements of Operations
For The Three-Month Period Ending September 30, 2003, 2002, 2001
September 30,
2003 2002 2001
==================== =================== ===================
Revenue $ 54,355 $ 56,304 $ 495
Expenses
Costs related to revenues 0 9,670 25,746
Selling, General and administrative expenses 197,464 227,372 84,141
-------------------- ------------------- -------------------
197,464 237,041 109,887
-------------------- ------------------- -------------------
Operating income (loss) (143,109) (180,737) (109,392)
Other income (expenses)
Litigation and Settlements (28,400) (13,490)
Interest income - - -
Interest expense (38,040) (39,138) (27,034)
Foreign Currency translations - - -
-------------------- ------------------- -------------------
Income (loss) from operations before
provision for income taxes (209,550) (233,365) (136,426)
Provision / Benefit for income taxes
NET INCOME (LOSS) $ (209,550) $ (233,365) $ (136,426)
==================== =================== ===================
Basic income (loss) per share (0.01) (0.01) (0.01)
Weighted average common shares outstanding 31,450,212 22,540,417 21,174,340
==================== =================== ===================
Diluted income (loss) per share (0.01) (0.01) (0.01)
Weighted average common shares outstanding 31,450,212 22,540,417 21,174,340
==================== =================== ===================
The accompanying notes are an integral part of these financial statements.
3
Odyssey Pictures Corporation
For the Three Month Periods Ended September 30,
2003 2002 2001
------------------ ----------------- ---------------
Cash Flows From Operating Activities:
Net income (loss) $ (209,550) $ (233,365) $ (136,426)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Amortization of film costs 24,999 24,999 25,746
Additions to film costs - (71,557)
Other depreciation and amortization 25,746 25,746 -
Issuance of shares of common stock in consideration
for services rendered 35,000 - -
Changes in assets and liabilities:
Accounts receivable, net (30,139) (29,303) 8,755
Notes receivable and advances (54,143) (6,600) 112,682
Prepaid expenses and other (22,500) - -
Accounts payable and accrued expenses 186,231 110,554 89,600
Accrued wages and Taxes 19,781 81,961 12,665
Accrued interest 6,400 6,400 -
------------------ -----------------
Net cash used in operating activities (18,176) (91,165) 113,022
------------------ ----------------- ---------------
Cash Flows From Investing Activities:
Acquisition of fixed assets - - -
Subsidiairy Activity - - (112,682)
---------------
------------------ -----------------
Net cash used in investing activities - - (112,682)
------------------ ----------------- ---------------
Cash Flows From Financing Activities:
-
Net proceeds from private placement sale of common stock -
(excluding stock issued for services) - -
Net proceeds/payments - notes and loans payable 21,191 89,106
---------------
------------------ -----------------
Net cash provided by financing activities 21,191 89,106 -
------------------ ----------------- ---------------
Net increase (decrease) in cash 3,015 (2,059) 340
Cash at beginning of period 948 2,867 1,163
------------------ ----------------- ---------------
Cash at end of period $ 3,963 $ 808 $ 1,503
================== ================= ===============
The accompanying notes are an integral part of these financial statements.
4
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
September 30, 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, 2003.
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
September 30, 2003, (b) the results of operations for the three month periods
ended September 30, 2003, 2002 and 2001 and, (c) cash flows for the three month
periods ended September 30, 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
September 30, 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 September 30, 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 September
30, 2003 were $180,000.
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
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
September 30, 2003
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 September 30, 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 September 30, 2003 and 2002
Revenues for the three months ended September 30, 2003 decreased to $54,355
from $56,304 for the comparable period ended September, 30 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 $-0- for the three month period
ended September 30, 2003 from $9,670 for the comparable three months ended
September 30, 2002. This was due to the fact that the revenues reported were due
form licensing renewals, for which the costs have already been amortized.
Selling, general and administrative expenses decreased by $39,577 to
$197,464 for the three month period ended September 30, 2003, from $227,372 for
the comparable period in 2002. The decrease in costs is primarily attributed to
the decrease in salary and employee overhead 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 settlement efforts
underway as well as costs related to seeking alternate financing resources.
Interest expense decreased to $38,040 for three-month period ended
September 30, 2003, from $39,138 for the comparable period ending September 30,
2002.
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 September 30, 2003, the Company had a net operating loss carryforward
of approximately $37,762,087 expiring through 2015, 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 could 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 September 30, 2003, 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 September 30, 2003, the Company had a cash position of $3,964.
The Company had no material commitments for capital expenditures as of
September 30, 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.
8
Recent Accounting Pronouncements
- --------------------------------
In May 2003,the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (hereinafter
"SFAS No. 150"). SFAS No. 150 establishes standards for classifying and
measuring certain financial instruments with characteristics of both liabilities
and equity and requires that those instruments be classified as liabilities in
statements of financial position. Previously, many of those instruments were
classified as equity. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
has not yet determined the impact of the adoption of this statement.
In April 2003,the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 149").
SFAS No. 149 amends and clarifies the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement is effective for contracts entered into
or modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of SFAS No. 149 is not expected to have a material
impact on the financial position or results of operations of the Company.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" (hereinafter "FIN 46"). FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. The provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The Company does not have any entities that require disclosure or new
consolidation as a result of adopting the provisions of FIN 46.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," ("SFAS No. 148"). SFAS 148 amends
SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for an entity that voluntarily changes to the fair value
based method of accounting for stock-based employee compensation. In addition,
it also amends the disclosure provisions of SFAS 123 to require prominent
disclosure about the effects on reported results of an entity's accounting
policy decisions with respect to stock-based employee compensation. The
provisions of the statement are effective for financial statements for fiscal
years ending after December 15, 2002. Prior to the issuance of SFAS No. 148, the
Company adopted the fair value based method of accounting for stock-based
employee compensation. Thus, the Company's financial reporting will not be
significantly effected by SFAS 148.
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.
9
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 September 30,
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 September
30, 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 September 30, 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.
10
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 filled for indemnification and reimbursement
of legal fees regarding the Pfannebecker Case) is, at the close of business on
September 30, 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.
The Company continues to experience business interruption from additional
motions and discoveries from these lawsuits. Results of these motions and
discoveries have not yet been decided. Due to the inherent uncertainties of
litigation and because the litigation is not at a final or "controllable" stage,
Company cannot accurately predict the ultimate outcome of the litigation
processes.
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 September 30, 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.
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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 September 30, 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.
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 September
30, 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 September 30, 2003, Mr. Guiry accepted a position a
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: November 21, 2003
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