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EX-31.1 - CERTIFICATION - ODYSSEY PICTURES CORPopix_10q-ex3101.htm
EX-32.1 - CERTIFICATION - ODYSSEY PICTURES CORPopix_10q-ex3201.htm


SECURITIESAND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934

For  the quarterly period ended December 31, 2010

o TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From_______ to _______

0-18954
Commission file number
 
ODYSSEY PICTURES CORPORATION
(Exact name of small business issuer as specified in its charter)

Nevada
 
95-4269048
(State of incorporation)
 
(IRS Employer Identification Number)

2321 Coit Rd. Suite E,  Plano, TX 75075
(Address of principal executive office)

(972) 867-0055
(Issuer's telephone number)
 
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 o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ¨ Yes     ¨ No
 
Large accelerated filer  o    Accelerated filer  ¨
Non-accelerated filer  (Do not check if a smaller reporting company)  o   Smaller reporting company  x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

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 68,150,888  outstanding  shares as of December 31, 2010.
 


 
 

 
 
 
ODYSSEY PICTURES CORPORATION
 
Part I - FINANCIAL INFORMATION
 
   
Item 1.
Financial Statements-unaudited
 
 
Balance Sheets as of December 31, 2010 and June 30, 2010
 
 
Statements of Operations for the Three Month Periods  Ended December 31, 2009 and 2010 and  Statement of Operations for the Six Month Periods Ended December 31, 2009 and 2010
 
 
Statements of Cash Flows for the Six Month Periods  Ended December 31, 2009 and 2010
 
 
Statement of Stockholders’ Deficiency for the period ended December 31, 2010
 
 
Notes to Interim Financial Statements 
 
Item 2. 
 Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
Item 4. 
Controls and Procedures
 
   
PART II – OTHER INFORMATION
 
   
Item 1.
Legal Proceedings.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
 
Item 3.
Defaults Upon Senior Securities
 
Item 4.
Other Information
 
Item 5. 
Exhibits
 
     
Signatures
 
 
 

 
 

 
 
Odyssey Pictures Corporation
Balance Sheet

Assets
 
Dec. 31, 2010
   
June 30, 2010
 
   
(unaudited)
       
             
Current Assets
           
Cash & cash equivalent's
  $ 1,000     $ 19,900  
Accounts receivable
    500       0  
Prepaid expenses
    37,200       40,100  
Total current assets
    38,700       60,000  
                 
Property & equipment (net)
    1,600       2,100  
Production advances
    185,500       0  
Other
    2,600       2,600  
                 
Total assets
  $ 228,400     $ 64,700  
                 
Liabilities and Stockholders' Deficiency
               
                 
Current Liabilities:
               
Accounts payable
  $ 81,800     $ 20,600  
Accounts payable-related parties
    194,600       261,000  
Accrued interest
    828,600       818,800  
Other accrued expenses
    698,200       781,800  
Legal settlements & judgments
    161,500       216,900  
Current debt obligations due within one year
    199,900       213,900  
Debt obligations in default
    330,000       339,000  
Liability to issue common stock
    495,000       0  
Deferred income
    255,000       655,000  
Total current liabilities
    3,244,600       3,307,000  
                 
Related parties
    118,500       128,500  
Reserve for loss contingencies
    110,000       110,000  
                 
Stockholders' Deficiency:
               
common stock-110,000,000 authorized $0.01 par value
               
68,150,888 issued & outstanding
    681,500       681,500  
Additional paid in capital
    38,995,400       38,744,900  
Unamortized deferred compensation
    (216,500 )     0  
Accumulated deficit
    (42,705,100 )     (42,907,200 )
Total Stockholders' Deficiency
    (3,244,700 )     (3,480,800 )
                 
Total Liabilities and Stockholders' Deficiency
  $ 228,400     $ 64,700  
 
See notes to unaudited interim financial statements.
               

 
 

 

Odyssey Pictures Corporation
Statement of Operations
(unaudited)
 
 
 
Quarter Ended December 31,
   
Six Months Ended Dec 31,
 
 
 
2010
   
2009
   
2010
   
2009
 
                         
Net Sales of services
  $ 751,300     $ 325,000     $ 1,201,300     $ 626,900  
Costs Applicable to Sales & Revenue
    149,800       81,800       240,800       160,100  
                                 
Gross Profit
    601,500       243,200       960,500       466,800  
                                 
Selling, General & Administrative Expenses
    658,900       163,300       780,100       288,900  
Settlements, net
    0       4,900       200       8,400  
Derivative valuation charges
    0       0       0       0  
Total Operating Expenses
    658,900       168,200       780,300       297,300  
Income (Loss) Before Other Income & Income Taxes
    (57,400 )     75,000       180,200       169,500  
                                 
Other Income (Expense)
                               
Excess carrying value of renegotiated payables
    0       28,700       56,700       36,500  
Interest (Expense)
    (17,200 )     (33,200 )     (34,600 )     (66,400 )
Income (Loss) Before Income Taxes
    (74,600 )     70,500       202,300       139,600  
                                 
Income Taxes
    0       0       0       0  
                                 
Net Income available to common shareholders
  $ (74,600 )   $ 70,500     $ 202,300     $ 139,600  
                                 
Basic and Diluted Net Income Per Common Share
 
Nil
   
Nil
   
Nil
   
Nil
 
Weighted Average Common Shares Outstanding (Basic)
    65,150,888       65,952,990       68,150,888       65,516,001  
 
See notes to unaudited interim financial statements.
                               

 
 

 
Odyssey Pictures Corporation
Statement of Cash Flows
(unaudited)

 
 
Six Months Ended Dec. 31,
 
 
 
2010
   
2009
 
   
 
       
Cash Flows from Operating Activities:
 
 
       
Net Income
  $ 202,300     $ 139,600  
Adjustments required to reconcile net loss to cash flows
from operating activities:
               
Excess carrying value of renegotiated payables
    (56,700 )     0  
Amortization of deferred compensation
    34,000       0  
Depreciation & impairment
    500       0  
Expenses paid by the issuance of common stock
    495,000       0  
Changes in Operating Assets & Liabilities:
               
Prepaid expenses
    (5,600 )     (4,200 )
(Decrease) in deferred income
    (400,000 )     60,000  
(Decrease) in payables to affiliates
    (76,300 )     (47,000 )
Accounts Payable & Other
    11,900       (400 )
Net cash generated by operating activities
    171,000       148,000  
                 
                 
Cash Flows from Investing Activities:
               
   Investment in production inventory
    (143,400 )     0  
  Net cash used by investing activities
    (143,400 )     0  
                 
Cash Flows from Financing Activities:
               
Payments made on long term debt
    (23,000 )     (19,100 )
Payments made on settlements & judgments
    (23,500 )     (124,500 )
Net cash used by financing activities
    (46,500 )     (143,600 )
                 
Net Change In Cash
    (18,900 )     4,400  
Cash-Beginning
    19,900       2,500  
Cash-Ending
  $ 1,000     $ 6,900  
 
See notes to unaudited interim financial statements.
               

 
 

 

ODYSSEY PICTURES CORP
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 2010

1. Basis of Presentation

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our June 30, 2010 Annual Report on Form 10-K and should be read in conjunction with the notes to financial statements which appear in that report.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and six-month periods ended December 31, 2010 and 2009. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include some information and notes necessary to conform to annual reporting requirements.

2. Earnings/Loss Per Share

Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assume that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
 
3. Revenues & Economic Dependency:

We earn revenue under a three year “Branding & Services” agreement that provides for a monthly licensing fee. Revenue is recognized monthly on a straight line basis over the term of the agreement. The Revenues recognized under this agreement were $350,000 through December 31, 2010 and $300,000 during the same period in 2009.  In addition, Odyssey recognized an additional $550,000 in revenues during the reported period from FilmZone, LLC, a limited liability company in which Odyssey holds a non-operating 50% interest.  Odyssey has undertaken to provide graphic design and integration services; website functionality development; website content and marketing services to expand brand awareness to three client companies of FilmZone.

4. Equity Based Compensation

Effective January 1, 2011 and retroactive to January 1, 2010, the Company granted John Foster option to purchase 4 million shares of common stock. 1 million shares vest at each anniversary date through January, 1, 2014.  The option exercise price increases each year beginning with $0.25 in 2011 and increasing to $0.50, $1.00 and $2.00 for years 2012, 2013 and 2014 respectively.


 
 

 

The fair value of each option award is estimated on the date of grant utilizing the Black Scholes Option Pricing Model using the assumptions noted in the following table:

Risk-free interest rate
   
4.4
%
Dividend yield
   
0.00
%
Expected volatility
   
212
%
Expected term (in years)
   
3.0
 

The compensation cost that has been charged against income for options was $34,000 for the three-month period ended December 31, 2010 based on the requisite service period for unvested options as of that date as well as options granted during the period. The weighted-average grant date fair value of options granted during the three-month period ended December 31, 2010 was $0.06 (none were granted during the three-month period ended December 31, 2009). As of December 31, 2010, there was approximately $216,500 of unrecognized compensation cost related to non-vested options. The Company expects to recognize the cost over a weighted average period of 1.45 years. The total fair value of shares vested during the three-month period ended December 31, 2010 was $34,000.

In addition to options granted under Mr. Foster’s employment agreement, we are obligated to issue 5 million shares of common stock. The shares will be fully vested and were valued at $375,000 and taken as a current period charge to earnings. As of December 31, 2010 the shares have not been issued and are carried on the balance sheet as “liability to issue common stock. Also included in that account is the fair value of 2 million additional shares to be issued to two individuals as part of a debt restructuring agreement. The fair value of these shares was estimated at $120,000 and was also recognized as a charge against current period earnings.

5. Related Party Transactions not Disclosed Elsewhere:

Due Related Parties: Amounts due related parties consist of corporate operating expenses and advances paid by affiliates. Such items totaled $313,100 at December 31, 2010. We also continue to owe $681,900 in accrued compensation to John Foster, our current CEO.

In January, 2011 the company executed a long term employment agreement with Mr. Foster. The term of the agreement is four years beginning retroactively at January 1, 2010 and requires an annual salary of $250,000 throughout its term. In addition to the salary component the agreement entitles Mr. Foster to receive 5 million shares of common stock immediately and 4 million options vesting in equal annual amounts at the successive anniversary dates of the agreement.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated.  The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein.  In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed in this Form 10-Q. 

Overview and Financial Condition

During the six months ended December 31, 2010, the Company realized revenues from the sale of branding and image design products and media placement services.  As of the date of this report, the Company’s ongoing operations have consisted of the sale of these branding and image design products and increasing media inventory and development of IPTV technology and related services. 

Results of Operations for the six months ended December 31, 2010 and 2009

The Company had revenues for the six months ended December 31, 2010 of $1,201,300 up from $626,900 for the period ended December 31, 2009.  The increase in revenues included $550,000 in revenues from FilmZone, LLC, a limited liability company in which Odyssey holds a non-operating 50% interest.  During the six months ended December 31, 2010, the Company derived revenues from the sale of branding and image design products and media placement services.  The Company has traditionally derived revenues from license renewals and residual payments received, the timing of which are typically paid at the discretion of the counter party and are outside the control of the Company. 
 
 
 

 

Amortizable capitalized film costs related to revenues on licensees and the receipt of payments on residuals have been fully amortized or impaired in prior periods.  We expense all current costs as incurred.

Selling, general and administrative expenses increased to $780,100 for the six month period ended December 31, 2010, up from $626,900 for the comparable period in 2009.  The additional expenses included $495,000 paid by the issuance of common stock. Net Income per common share remains nil in six months ended December 31, 2010 and for the same period the prior year.

As of December 31, 2010, the Company had no agreements with sub-distributors relating to distribution commitments or guarantees that had not been recognized in the statement of operations.

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated material revenues and limited revenues are anticipated. Accordingly, we must raise cash from sources other than operations.

Liquidity and Capital Resources

    Cash Flows  
   
Six Months Ended
 
   
December 31, 2010
   
December 31, 2009
 
   
 
       
Net Cash Generated by Operating Activities
  $ 171,000     $ 148,000  
Net Cash Used by financing Activities
  $ 46,500     $ 143,600  
Cash Ending
  $ 1,000     $ 6,900  

"The Company generated $171,000  in cash from operating activities for the six months ended December 31, 2010 compared with $148,000  for the same period the previous year.  The Company  funds operations through revenues,  trade payables, the issuance of stock and the proceeds of short term borrowings. Our access to capital resources is limited to obtaining small loans with short term maturities and to use the value of our common stock as currency to settle existing obligations in such situations where the stock is acceptable by the counter party."  

Financing Activities:

During the six months ended December 31, 2010, the Company made payments to settlements and judgments and payments on long term debt of $23,500 down from $124,500 for the period ended December 31, 2009 and continued to renegotiate Company obligations and apply resources to reduce or eliminate such items.  Payments against long term debt for the six months ended December 31, 2010 were $23,000 up from $19,100 for the same period in 2009.

Commitments and Capital Expenditures

The Company had no material commitments for capital  expenditures. During this period, the Company obtained $171,000 cash through revenues.  Subsequent to December 31, 2010, the company executed a long term employment agreement with it CEO, Mr. Foster. The term of the agreement is four years beginning retroactively at January 1, 2010 and requires an annual salary of $250,000 throughout its term. In addition to the salary component the agreement entitles Mr. Foster to receive 5 million shares of common stock immediately and 4 million options vesting in equal annual amounts at the successive anniversary dates of the agreement

The Company's continued existence is dependent upon its ability to resolve its liquidity problems.  The Company must achieve and sustain a profitable level of operations with positive cash flows and must continue to obtain financing at terms acceptable to adequately to meet its ongoing operational requirements.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our operations. Equity financing could result in additional dilution to existing shareholders.

 
 

 

Off-Balance Sheet Arrangements

Odyssey does not have any relationships with entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

ITEM 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. John Foster, our Chief Executive Officer and our Principal Accounting Officer, is responsible for establishing and maintaining disclosure controls and procedures for our company.
 
Our management has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2010 (under the supervision and with the participation of the Chief Executive Officer and the Principal Accounting Officer), pursuant to Rule13a-15(b) promulgated under the Exchange Act. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation, our Company's Chief Executive Officer and Principal Accounting Officer have concluded that our Company's disclosure controls and procedures were not effective as of December 31, 2010 due to the lack of sufficient personnel to assure segregation of duties and lack of a GAAP accounting professional on staff.   Management with the assistance of its Securities Counsel will closely monitor all future filings to ensure completeness of all company filings.
 
The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
 
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
 
 
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements.

Changes in Internal Controls

We have also evaluated our internal control for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.

PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings

On March 22, 2005 a judgment was entered against the Company in favor of Distinct Web Creations, Inc. and Denise K. Houston in the amount of $32,000 plus pre judgment interest in the amount of $6,291.50, plus attorneys fees in the Circuit Court in Volusia County, Florida.  The matter was settled by the Company with final payment made on this settlement after the end of the reported period.   On April 25, 2006, a judgment was entered in favor of the Carlton Fields law firm in the amount of $21,848.12 in the Circuit Court in and for Hillsborough County, Florida for legal services in representing the Company in the Distinct Web Creations, Inc. matter.


 
 

 

The Company is subject to other legal proceedings that arise in the ordinary course of its business and from prior management activities.  Other than that as disclosed above, in the opinion of present management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect our financial position, results of operations or cash flows.

ITEM 1A. Risk Factors

Not required for smaller reporting companies.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of equity securities by the company completed during the six months ended December 31, 2010.

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to security holders for a vote during the six months ending December 31, 2010.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

a)
Exhibits

31.1
 
Section 302 Certification By Chief Executive Officer and Principal Financial Officer
32.1
 
Section 906 Certification of Principal Executive Officer and Principal Financial Officer
 
 
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

/s/ John W. Foster

John W. Foster
Chairman and CEO