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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, 2002
|_| 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
ODYSSEY PICTURES CORPORATION
(Exact name of registrant as specified in charter)
Nevada 95-4269048
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16910 DALLAS PARKWAY, SUITE 104, DALLAS, TEXAS 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including area code (972) 818-7990
FAX (972) 818-7829
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 29,932,664 outstanding shares as of
September 30, 2002.
ODYSSEY PICTURES CORPORATION
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 2002, June 30, 2002, 2001 and 2000 1
Consolidated Statements of Operations
for the Three Month Period Ended
September 30, 2002, 2001 and 2000 2
Consolidated Statements of Cash Flows
for the Three Month Period Ended
September 30, 2002 and 2001 and 2000 3
Consolidated Statements of Changes In
Shareholders' Equity (Deficit) for the
Three Month Period Ended September 30, 2002 4
Notes to Consolidated Financial Statements 5-7
Item 2. Management's discussion and analysis of
Financial Condition and Results of Operations 8-10
PART II - OTHER INFORMATION 11-14
1. Legal proceedings.
2. Changes in securities and use of proceeds.
3. Defaults upon senior securities
4. Submission of matters to a vote of security holders
5. Certain relationships and related transactions
6. Events subsequent to the fiscal quarter
7. Exhibits and report
Signatures 15
ODYSSEY PICTURES CORPORATION
Consolidated Balance Sheets
September 30, June 30, June 30, June 30,
Assets 2002 2002 2001 2000
------------- ------------ ------------ ------------
Cash $ (27,447) $ 3,675 $ 1,163 $ 31,215
Accounts receivable, net of allowances
of $0 and $0 202,754 272,087 87,406 208,511
Notes receivable 85,037 0 153,774 149,296
Film costs, net 3,530,251 3,637,896 3,923,405 4,095,824
Prepaid expenses and other 513,963 422,206 409,706 450,906
Investments 641,815 584,916 1,220,742 1,001,100
------------ ------------ ------------ ------------
TOTAL ASSETS $ 4,946,373 $ 4,920,780 $ 5,796,195 $ 5,936,852
============ ============ ============ ============
Liabilities and Shareholders' Equity (Deficit)
Liabilities
Accounts payable and accrued expenses 945,628 1,300,769 699,563 819,038
Accrued wages/management contracts/structured payments 938,892 847,061 1,050,368 709,545
Accrued interest 234,421 228,021 226,414 226,414
Due to producers and participants 235,584 230,584 250,000 250,000
Deferred revenues 0 0 0 29,000
Notes and loans payable 1,581,606 1,118,851 1,517,135 835,680
------------ ------------ ------------ ------------
Total Liabilities $ 3,936,131 $ 3,725,286 $ 3,743,480 $ 2,869,678
============ ============ ============ ============
Shareholders' Equity (Deficit)
Preferred stock, Series B, par value $.10 0 0 0 450,000
Authorized - 10,000,000 shares
Common stock, par value $.01;
Authorized - 40,000,000 shares
Issued and outstanding -
29,932,664; 21,174,340; and 13,103,428 298,038 298,038 211,743 131,034
Capital in excess of par value 36,597,743 36,597,743 35,624,038 34,820,443
Accumulated deficit (35,885,539) (35,700,287) (33,783,061) (32,334,304)
------------ ------------ ------------ ------------
Total shareholders' equity (deficit) 1,010,242 1,195,494 2,052,720 3,067,173
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 4,946,373 $ 4,920,780 $ 5,796,200 $ 5,936,850
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
1
Consolidated Statements of Operations
Odyssey Pictures Corporation
Period Ending September 30, 2002, 2001, 2000
For the Periods Ended September 30,
2002 2001 2000
------------ ------------ ------------
Revenue $ 56,304 $ 495 $ 1,431
Expenses
Costs related to revenues 9,670 25,746 27,621
Selling, general and
administrative expenses 227,372 84,141 151,950
------------ ------------ ------------
237,041 109,887 179,571
------------ ------------ ------------
Operating income (loss) (180,737) (109,392) (178,140)
Other income (expenses)
Litigation and Settlements (13,490)
Interest income -- -- 6,012
Interest expense (39,138) (27,034) (8,755)
Foreign Currency translations -- -- --
------------ ------------ ------------
Income (loss) from operations
before provision for income taxes (233,365) (136,426) (180,883)
Provision / Benefit for income taxes --
NET INCOME (LOSS) $ (233,365) $ (136,426) $ (180,883)
============ ============ ============
Basic income (loss) per share (0.01) (0.01) (0.02)
Weighted average common
shares outstanding 22,540,417 21,174,340 11,589,301
============ ============ ============
Diluted income (loss) per share (0.01) (0.01) (0.02)
Weighted average common
shares outstanding 22,540,417 21,174,340 11,589,301
============ ============ ============
The accompanying notes are an integral part of these financial statements.
2
Odyssey Pictures Corporation
FYE 9/30/2002 and Two Years Prior
Consolidated Statements of Cash Flows
For the Periods Ended September 30,
2002 2001 2000
--------- --------- ---------
Cash Flows From Operating Activities:
Net income (loss) $(233,365) $(136,426) $(166,072)
Adjustments to reconcile net income (loss)
to net cash used in operating actvities:
Amortization of film costs 24,999 25,746 25,746
Additions to film costs (71,557)
Other depreciation and amortization 25,746 --
Issuance of shares of common stock in consideration
for services rendered -- -- (6,445)
Changes in assets and liabilities: -- (65,006)
Accounts receivable, net (29,303) 8,755 (21,728)
Notes receivable and advances (6,600) 112,682 6,445
Prepaid expenses and other -- -- 88,000
Accounts payable and accrued expenses 110,554 89,600 (5,989)
Accrued wages and Taxes 81,961 12,665
Accrued interest 6,400
---------
Net cash used in operating activities (91,164) 113,022 (145,049)
--------- --------- ---------
Cash Flows From Investing Activities: (7,000)
Acquisition of fixed assets -- 44,500
Subsidairy Activity -- (112,682) (220,755)
--------- --------- ---------
Net cash used in investing activities -- (112,682) (183,255)
--------- --------- ---------
Cash Flows From Financing Activities:
Net proceeds from private placement sale of common stock
(excluding stock issued for services) -- -- 297,838
Net proceeds/payments - notes and loans payable 60,850 25,000
--------- --------- ---------
Net cash provided by financing activities 60,850 -- 322,838
--------- --------- ---------
Net increase (decrease) in cash (30,314) 340 (5,466)
Cash at beginning of period 2,867 1,163 31,215
--------- --------- ---------
Cash at end of period $ (27,447) $ 1,503 $ 25,749
========= ========= =========
The accompanying notes are an integral part of these financial statements.
3
Odyssey Pictures Corporation
Consolidated Changes of Shareholder's Equity (Deficit) for
Period Ending September 30, 2002
Preferred Stock-Series A Preferred Stock-Series B
Shares Amount Shares Amount
------- -------- --------- ----------
Balances - June 30, 1998 500,000 50,000 -- --
Issuance of shares of common stock as partial
consideration for loans made to company
Issuance of shares of preferred stock for
purchase of Kimon film library and other assets 4,500,000 450,000
Issuance of shares to officers in payment of notes
Issuance of shares of common stock in consideration
for barter services to be rendered
Issuance of shares in consideration for legal
services rendered
Issuance of shares of common stock to equity
investors
Issuance of shares of common stock to officer
as contract signing bonus
Issuance of shares in consideration for services
to be rendered
Issuance of shares of common stock in full
satisfaction of a loan and accrued interest
Net loss -- -- --
-------- -------- ---------- ----------
Balances - June 30, 1999 500,000 $ 50,000 4,500,000 $ 450,000
======== ======== ========== ==========
Issuance of shares of common stock as partial
consideration for loans made to company
Issuance of shares of common stock to equity (500,000) (50,000)
investors
Net loss
Balances - June 30, 2000 -- -- 4,500,000 $ 450,000
======== ======== ========== ==========
Issuance of shares of common stock to equity (4,500,000) $ (450,000)
investors
Net loss
Balances - June 30, 2001 -- -- -- --
======== ======== ========== ==========
Issuance of shares in consideration for financial
services rendered
Issuance of shares of common stock to equity
investors
Net loss
Balances - June 30, 2002 -- -- -- --
======== ======== ========== ==========
Issuance of shares in consideration for financial
services rendered
Issuance of shares of common stock to equity
investors
Prior Period Accounting Reversals
Net loss
Balances - September 30, 2002 -- -- -- --
======== ======== ========== ==========
Common Stock Capital in Total
Excess of Accumulated Shareholders'
Shares Amount Par Value Deficit Equity (Deficit)
--------- ---------- ------------ ------------ ----------------
Balances - June 30, 1998 5,617,503 $ 50,293 $27,552,973 $(29,736,698) $(2,083,432)
Issuance of shares of common stock as partial
consideration for loans made to company 45,000 $ 450 $ 19,350 $ 19,800
Issuance of shares of preferred stock for
purchase of Kimon film library and other assets $ 4,050,000 $ 4,500,000
Issuance of shares to officers in payment of notes 830,055 $ 8,301 $ 251,943 $ 260,244
Issuance of shares of common stock in consideration
for barter services to be rendered 200,000 $ 2,000 $ 86,000 $ 88,000
Issuance of shares in consideration for legal
services rendered 100,000 $ 1,000 $ 39,000 $ 40,000
Issuance of shares of common stock to equity
investors 1,500,000 $ 15,000 $ 425,693 $ 440,693
Issuance of shares of common stock to officer
as contract signing bonus 50,000 $ 500 $ 16,500 $ 17,000
Issuance of shares in consideration for services
to be rendered 181,667 $ 1,816 $ 104,000 $ 105,816
Issuance of shares of common stock in full
satisfaction of a loan and accrued interest 348,721 $ 3,487 $ 158,738 $ 162,225
Net loss $ (1,389,773) $(1,388,946)
----------- ---------- ----------- ------------ -----------
Balances - June 30, 1999 8,872,946 $ 82,847 $32,704,197 $(31,126,471) $ 2,161,400
=========== ========== =========== ============ ===========
Issuance of shares of common stock as partial 3,000,000 $ 30,000 $ 1,170,000 $ 1,200,000
consideration for loans made to company
Issuance of shares of common stock to equity $ (50,000)
investors 1,818,700 $ 18,187 $ 946,246 $ 964,433
Net loss $ (1,207,831) $(1,207,831)
Balances - June 30, 2000 13,691,646 $ 131,034 $34,820,443 $(32,334,302) $ 3,067,175
=========== ========== =========== ============ ===========
Issuance of shares of common stock to equity 4,101,239 $ 41,012 $ 408,988
investors 3,969,673 $ 39,697 $ 394,607 $ 434,304
Net loss $ (1,448,150) $(1,448,150)
Balances - June 30, 2001 21,762,558 $ 211,743 $35,624,038 $(33,782,452) $ 2,053,329
=========== ========== =========== ============ ===========
Issuance of shares in consideration for financial
services rendered 690,000 $ 6,900 $ 137,100 $ 144,000
Issuance of shares of common stock to equity
investors 7,939,481 $ 79,395 $ 836,605 $ 916,000
Net loss $ (1,920,123) $(1,920,123)
Balances - June 30, 2002 30,392,039 $ 298,038 $36,597,743 $(35,702,575) $ 1,193,205
=========== ========== =========== ============ ===========
Issuance of shares in consideration for financial
services rendered 0 $ -- $ -- $ --
Issuance of shares of common stock to equity
investors 0 $ -- $ -- $ --
Prior Period Accounting Reversals $ 50,400 $ 50,400
Net loss $ (233,365) $ (233,365)
Balances - September 30, 2002 30,392,039 $ 298,038 $36,597,743 $(35,885,540) $ 1,010,240
=========== ========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
Odyssey Pictures Corporation
Consolidated Changes of Shareholder's Equity (Deficit) for
FYE 6/30/01 and 6/30/00
Preferred Stock-Series A Preferred Stock-Series B
Date Shares Amount Shares Amount
------- ------- ---------- --------
Balances - June 30, 2000 -- -- 4,500,000 450,000
======= ======= ========== ========
Issuance of shares of common stock as partial
consideration for loans made to company
Issuance of shares to officers in payment of notes
Issuance of shares of common stock in consideration
for barter services to be rendered
Issuance of shares in consideration for legal
services rendered
Issuance of shares of common stock to equity
investors
Lot 201 7/14/2000
Lot 202 7/20/2000
UBS DE 7/21/2000
Brown Bros 7/24/2000
Koby 7/27/2000
Odyssey 8/4/2000
CLSA 8/10/2000
Kerker 8/21/2000
CLSA 8/29/2000
CLSA 9/6/2000
BFC Banque 9/7/2000
Ferrier 9/27/2000
CLSA 10/2/2000
Reittman 10/4/2000
Lot 207 10/26/2000
Fondren 10/27/2000
Frank 10/27/2000
CLSA 10/19/2000
COMM 10/19/2000
COMM 10/19/2000
FARD 11/2/2000
Miller 11/8/2000
Kimon 4/1/2001 (4,500,000) (450,000)
Visilit 4/1/2001
Issuance of shares of common stock to officer
as contract signing bonus
Issuance of shares in consideration for services
to be rendered
Issuance of shares of common stock in full
satisfaction of a loan and accrued interest
Net loss
Balances - June 30, 2001 -- -- -- --
======= ======= ========== ========
Common Stock Capital in Total
Excess of Accumulated Shareholders'
Date Shares Amount Par Value Deficit Equity (Deficit)
---------- ------- ----------- ------------- ----------------
Balances - June 30, 2000 13,103,428 131,034 34,820,443 (32,334,302) 3,067,175
========== ======= =========== ============ ===========
Issuance of shares of common stock as partial
consideration for loans made to company
Issuance of shares to officers in payment of notes
Issuance of shares of common stock in consideration
for barter services to be rendered
Issuance of shares in consideration for legal
services rendered
Issuance of shares of common stock to equity
investors
Lot 201 7/14/2000 8 0 0 0
Lot 202 7/20/2000 5 0 0 0
UBS DE 7/21/2000 1000000 10,000 0 10,000
Brown Bros 7/24/2000 300000 3,000 0 3,000
Koby 7/27/2000 10000 100 0 100
Odyssey 8/4/2000 2006000 20,060 (66,841) (46,781)
CLSA 8/10/2000 24 0 0 0
Kerker 8/21/2000 13889 139 0 139
CLSA 8/29/2000 11 0 0 0
CLSA 9/6/2000 1127 11 0 11
BFC Banque 9/7/2000 100000 1,000 0 1,000
Ferrier 9/27/2000 100000 1,000 99,000 100,000
CLSA 10/2/2000 27 0 27 27
Reittman 10/4/2000 25000 250 24,750 25,000
Lot 207 10/26/2000 27 0 27 27
Fondren 10/27/2000 50,000 500 49,500 50,000
Frank 10/27/2000 30,000 300 29,700 30,000
CLSA 10/19/2000 127 1 126 127
COMM 10/19/2000 657 7 650 657
COMM 10/19/2000 271 3 268 271
FARD 11/2/2000 200,000 2,000 198,000 200,000
Miller 11/8/2000 72,500 725 0 725
Kimon 4/1/2001 4,101,239 41,012 408,988 n/c
Visilit 4/1/2001 60,000 600 59,400 60,000
Issuance of shares of common stock to officer
as contract signing bonus
Issuance of shares in consideration for services
to be rendered
Issuance of shares of common stock in full
satisfaction of a loan and accrued interest
Net loss $ (1,448,758) $(1,448,758)
Balances - June 30, 2001 21,174,340 211,743 35,624,038 (33,783,061) 2,052,720
========== ======= =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
4
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
September 30, 2002
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
September 30, 2002, (b) the results of operations for the three month
periods ended September 30, 2002, 2001 and 2000 (c) cash flows for the
three periods ended September 30, 2002, 2001, and 2000 and (d) statements
of changes in shareholders' equity (deficit) for the three month period
ended September 30, 2002.
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.
5
"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.
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, 2002, 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,
6
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.
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).
6. Capital
In September or 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.
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.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months Ended September 30, 2002 and 2001
Revenues for the three months ended September 30, 2002 increased to $
56,304 from $495 for the comparable three month period ended September 30, 2001.
This decrease is due to more aggressive exploitation of the 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. Three new films became
available for delivery during this period and they are being marketed at
present.
Costs related to revenues decreased to $ 9,670 for the three month period
ended September 30, 2002 from $ 25,746 for the comparable three months ended
September 30, 2001. 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 increased significantly by $
143,231 to $ 227,372 for the three month period ended September 30, 2002, from $
84,141 for the comparable three month period in 2001. The increase in costs is
primarily attributed to the increase in officer salaries as well as a higher
amortization costs for the assets of Filmzone and the Kimon library being
recorded. In addition, the company has experienced 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 increased to $ 39,138 for three month period ended
September 30, 2002, from $ 27,034 for the comparable three month period ending
September30, 2001. This is due to the addition of 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 September 30, 2002, the Company had a net operating loss
carryforward of approximately $35,652,174 expiring through 2014, some that may
be available to be used to reduce future tax liability. Due to limitations
imposed by the Internal Revenue
8
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 September 30, 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 September 30, 2002, the Company had a negative cash position of
($27,447).
The Company had no material commitments for capital expenditures as of
September 30, 2002.
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.
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 September 30, 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).
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).
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
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response has been made from the Plaintiff on this matter as of the close of
business on June 30, 2002.
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 filled for indemnification and reimbursement
of legal fees regarding the Pfannebecker Case) is, at the close of business on
September 30, 2002, still an outstanding litigation and discovery is underway.
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.
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 due on April 12, 2002 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 transfer agent (Investment Bank Luxembourg)
for immediate payment.
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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 is in the process of exploring all avenues for full
recovery of these assets. A reserve has been taken against any potential losses
although the Company expects full recovery.
ITEM 6. EVENTS SUBSEQUENT TO THE FISCAL QUARTER
An affiliate of the Company's CEO, JL Media advanced substantial funds for
the overhead and operations of the Company from January to October of 2001. The
Company began repaying these non-interest accruing advances in October of 2001.
The company reversed some expenses claimed by a previous officer due to lack of
documentation. The Company seeks the recoupment of an advance on a film project
made. If no recoupment is made, the company will write off this prior entry. The
item is
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carried as a prepaid asset. This item will appear in Non-recurring items if a
write-off is taken.
Extraordinary costs associated with the litigation settlements, including legal
fees and interest on legal fees, were $52,600 for the period ending September
30, 2002.
The Company expensed $16,000 in consulting fees tied to current film packaging
and marketing services. The contract for services extends to the end of the year
2002 and has a ninety day termination clause.
The Company, as of June 30, 2002, reserved an additional amount of funds for
possible settlement of past disputes referring to various lawsuits.
The company added an accelerated depreciation amount for Filmzone due to its
development and reposturing of the sales purpose for the website.
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, 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.
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.
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 8, 2002
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