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EX-32.1 - CERTIFICATION - ODYSSEY PICTURES CORP | opix_10q-ex3201.htm |
EX-31.1 - CERTIFICATION - ODYSSEY PICTURES CORP | opix_10q-ex3101.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 March 31, 2011
o TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _______ to _______
0-18954
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Commission file number
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ODYSSEY PICTURES CORPORATION
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(Exact name of small business issuer as specified in its charter)
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Nevada
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95-4269048
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(State of incorporation)
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(IRS Employer Identification Number)
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2321 Coit Rd. Suite E, Plano, TX 75075
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(Address of principal executive office)
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(972) 867-0055
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(Issuer's telephone number)
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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 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 o No o
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 71,850,888 outstanding shares as of March 31, 2011.
ODYSSEY PICTURES CORPORATION
TABLE OF CONTENTS
Part I – FINANCIAL INFORMATION
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3 | |
Item 1.
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Financial Statements-unaudited
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3 |
Balance Sheets as of March 31, 2011 and June 30, 2010
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3 | |
Statements of Operations for the Three Month Periods Ended March 31, 2011 and 2010 and Statement of Operations for the
Nine Month Periods Ended March 31, 2011 and 2010
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4 | |
Statements of Cash Flows for the Nine Month Periods Ended March 31, 2011 and 2010
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Notes to Interim Financial Statements
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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Item 4.
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Controls and Procedures
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10 |
PART II – OTHER INFORMATION
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11 | |
Item 1.
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Legal Proceedings.
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11 |
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds.
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11 |
Item 3.
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Defaults Upon Senior Securities
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11 |
Item 4.
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Other Information
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11 |
Item 5.
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Exhibits
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11 |
Signatures
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12 |
2
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
Odyssey Pictures Corporation
Balance Sheet
Assets
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March 31, 2011
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June 30, 2010
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(unaudited)
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||||||||
Current Assets
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Cash & cash equivalent's
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$ | 1,400 | $ | 19,900 | ||||
Accounts receivable
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9,700 | 0 | ||||||
Prepaid expenses
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52,700 | 40,100 | ||||||
Total current assets
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63,800 | 60,000 | ||||||
Property & equipment (net)
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1,400 | 2,100 | ||||||
Production advances
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232,100 | 0 | ||||||
Other
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2,600 | 2,600 | ||||||
Total assets
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$ | 299,900 | $ | 64,700 | ||||
Liabilities and Stockholders' Deficiency
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||||||||
Current Liabilities:
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Accounts payable
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$ | 75,800 | $ | 20,600 | ||||
Accounts payable-related parties
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132,300 | 261,000 | ||||||
Accrued interest
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845,800 | 818,800 | ||||||
Other accrued expenses
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687,200 | 781,800 | ||||||
Legal settlements & judgments
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155,000 | 216,900 | ||||||
Current debt obligations due within one year
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199,900 | 213,900 | ||||||
Debt obligations in default
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322,000 | 339,000 | ||||||
Liability to issue common stock
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247,500 | 0 | ||||||
Deferred income
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350,000 | 655,000 | ||||||
Total current liabilities
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3,015,500 | 3,307,000 | ||||||
Related parties
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118,100 | 128,500 | ||||||
Reserve for loss contingencies
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110,000 | 110,000 | ||||||
Stockholders' Deficiency:
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Common stock-110,000,000 authorized $0.01 par value 71,850,888 issued & outstanding
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718,500 | 681,500 | ||||||
Additional paid in capital
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39,205,900 | 38,744,900 | ||||||
Unamortized deferred compensation
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(199,500 | ) | 0 | |||||
Accumulated deficit
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(42,668,600 | ) | (42,907,200 | ) | ||||
Total Stockholders' Deficiency
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(2,943,700 | ) | (3,480,800 | ) | ||||
Total Liabilities and Stockholders' Deficiency
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$ | 299,900 | $ | 64,700 |
See notes to unaudited interim financial statements.
3
Odyssey Pictures Corporation
Statement of Operations
(unaudited)
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Quarter Ended March 31,
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Nine Months Ended March 31,
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2011
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2010
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2011
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2010
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Net Sales of services
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$ | 444,000 | $ | 300,500 | $ | 1,645,300 | $ | 927,400 | ||||||||
Costs Applicable to Sales & Revenue
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147,300 | 150,100 | 388,100 | 310,200 | ||||||||||||
Gross Profit
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296,700 | 150,400 | 1,257,200 | 617,200 | ||||||||||||
Selling, General & Administrative Expenses
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240,500 | 129,500 | 1,020,600 | 418,400 | ||||||||||||
Settlements, net
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2,400 | 0 | 2,600 | 8,400 | ||||||||||||
Derivative valuation charges
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0 | 0 | 0 | 0 | ||||||||||||
Total Operating Expenses
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242,900 | 129,500 | 1,023,200 | 426,800 | ||||||||||||
Income (Loss) Before Other Income & Income Taxes
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53,800 | 20,900 | 234,000 | 190,400 | ||||||||||||
Other Income (Expense)
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Excess carrying value of renegotiated payables
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0 | 0 | 56,700 | 36,500 | ||||||||||||
Interest (Expense)
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(17,300 | ) | (33,100 | ) | (51,900 | ) | (99,500 | ) | ||||||||
Income (Loss) Before Income Taxes
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36,500 | (12,200 | ) | 238,800 | 127,400 | |||||||||||
Income Taxes
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0 | 0 | 0 | 0 | ||||||||||||
Net Income available to common shareholders
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$ | 36,500 | $ | (12,200 | ) | $ | 238,800 | $ | 127,400 | |||||||
Basic and Diluted Net Income Per Common Share
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Nil
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Nil
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Nil
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Nil
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Weighted Average Common Shares Outstanding (Basic)
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70,035,332 | 65,985,388 | 68,769,866 | 65,670,851 |
See notes to unaudited interim financial statements.
4
Odyssey Pictures Corporation
Statement of Cash Flows
(unaudited)
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Nine Months Ended March 31,
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2011
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2010
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Cash Flows from Operating Activities:
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Net Income
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$ | 238,800 | $ | 127,500 | ||||
Adjustments required to reconcile net loss to cash flows from operating activities:
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Excess carrying value of renegotiated payables
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(56,700 | ) | (36,500 | ) | ||||
Amortization of deferred compensation
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51,000 | 0 | ||||||
Depreciation & impairment
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700 | 0 | ||||||
Expenses paid by the issuance of common stock
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495,000 | 0 | ||||||
Changes in Operating Assets & Liabilities:
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Prepaid expenses
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(32,600 | ) | 0 | |||||
(Decrease) in deferred income
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(305,000 | ) | 110,000 | |||||
Decrease in payables to affiliates
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(139,100 | ) | (88,900 | ) | ||||
Accounts Payable & Other
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12,200 | 94,000 | ||||||
Net cash generated by operating activities
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216,800 | 206,100 | ||||||
Cash Flows from Investing Activities:
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Investment in production inventory
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(174,300 | ) | 0 | |||||
Net cash used by investing activities
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(174,300 | ) | 0 | |||||
Cash Flows from Financing Activities:
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Payments made on long term debt
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(31,000 | ) | (26,500 | ) | ||||
Payments made on settlements & judgments
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(30,000 | ) | (149,300 | ) | ||||
Net cash used by financing activities
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(61,000 | ) | (175,800 | ) | ||||
Net Change In Cash
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(18,500 | ) | 30,300 | |||||
Cash-Beginning
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19,900 | 2,500 | ||||||
Cash-Ending
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$ | 1,400 | $ | 32,800 |
See notes to unaudited interim financial statements.
5
ODYSSEY PICTURES CORP
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
MARCH 31, 2011
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 nine-month periods ended March 31, 2011 and 2010. 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 $300,000 through December 31, 2010 and 2009. In addition, Odyssey recognized an additional $150,000 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
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4.4
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%
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Dividend yield
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0.00
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%
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Expected volatility
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212
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%
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Expected term (in years)
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3.0
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6
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 and nine-month period ended March 31, 2011 was $17,000 and $51,000 respectively.
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. We issued 2 million additional shares 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.
7
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 nine months ended March 31, 2011, 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 increasing media inventory and development of IPTV Technology and related services.
Results of Operations for the nine months ended March 31, 2011 and 2010
The Company had revenues for the nine months ended March 31, 2011 of $1,645,300 up from $927,400 for the same period ended March 31, 2010. During the period, 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 $1,020,600 for the nine months ended March 31, 2011, up from $418,400 for the comparable period in 2010 associated primarily with the increase in gross revenues. Liabilities for Legal Settlements and Judgments at March 31, 2011 were $155,000 , down from $225,200 for March 31, 2010. This reduction was due to a reduction in amounts due brought about by negotiated settlements and amounts paid in settlement of litigation and claims.
As of March 31, 2011, the Company had no agreements with sub-distributors relating to distribution commitments or guarantees that had not been recognized in the statement of operations.
Our auditors have issued a going concern opinion indicating that because the Company may not have readily available resources to fund the Company through June 30, 2011, there is a substantial doubt as to the Company’s ability to continue as a going concern. The Company is dependent upon the continued payment of contract obligations from a single customer and while payments have been made under the terms of the contract through the date of this filing, there is no other assurance that such payments will be paid when due. The company has no liquid reserves from which to fund operations in the event that such payments are not made.
This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we collect contract payments due us and obtain additional capital from sources other than operations.
8
Liquidity and Capital Resources
Cash Flows | ||||||||
Nine Months Year Ended
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March 31, 2011
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March 31, 2010
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Net Cash Generated by Operating Activities
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$ | 216,800 | $ | 206,100 | ||||
Net Cash Used by financing Activities
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$ | 61,000 | $ | 175,800 | ||||
Cash Ending
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$ | 1,400 | $ | 32,800 |
Net Cash Generated from Operating Activities for the nine months ended March 31, 2011 was $216,800 down from $206,100 for the same period the prior year.
Net Cash used by financing activities for the period decreased in 2011 to $61,000 over $175,800. The Company had $1,400.00 in cash as of March 31, 2011.
The Company continues to fund operation through revenues, trade payables, the issuance of stock and the proceeds of short term borrowings. Although the Company expects to focus on expansion of its customer base and service offerings, revenue for 2011 has been from limited contract sources and there is no assurance that the revenues will continue to be generated in the future without expansion of the Company’s customer base.
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 situation where the stock is acceptable by the counter party.
The Company generated $216,800 in cash from operating activities for the nine months ended March 31, 2011 compared with $206,100 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 nine months ended March 31, 2011 the Company exchanged 2,000,000 shares of its common stock for the satisfaction of $120,000 of debt which was recognized as a charge against current period earnings as was $375,000 for 5,000,000 shares pursuant to an executive compensation agreement with the Company’s CEO Mr. Foster.
Commitments and Capital Expenditures
The Company had no material commitments for capital expenditures. During this period, the Company obtained $216,800 cash through revenues. The Company also has a long-term employment agreement with our President which was approximately $250,000 per year. This agreement has been extended and renewed .
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.
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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
We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our Disclosure Controls were not effective as of the end of the period covered by this report.
The limited size of the company including a limited staff makes it extremely difficult to segregate duties in a way that will allow disclosure controls and procedures to be implemented in an effective way. The company continues to rely on contract and external professionals to assist in various tasks for disclosure. To the extent that the Company is able to add executive and professional staff with increased business, it will continue its efforts to create an effective system of disclosure controls and procedures.
a)
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The Company lacks the financial infrastructure to account for complex transactions which may result in a greater than normal risk that material errors may occur in the financial statements and not be detected timely.
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b)
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The Company currently relies upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.
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Lack of sufficient segregation of duties. Specifically, this material weakness is such that management must rely primarily on detective controls and controls could be strengthened by adding preventative controls to properly safeguard company assets.
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.
10
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. This matter was settled and paid during the reported period.
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
During the nine months ended March 31, 2011 the Company exchanged 2,000,000 shares of its common stock for that satisfaction of $120,000 debt. In addition it issued 1,700,000 shares pursuant to the Executive Compensation Agreement with Mr. Foster.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Other Information
None
ITEM 5. Exhibits
a)
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Exhibits
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31.1
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Section 302 Certification By Chief Executive Officer and Principal Financial Officer
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32.1
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Section 906 Certification of Principal Executive Officer and Principal Financial Officer
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11
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
12