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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, 2011

[ ]  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 [ ]

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  ý

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

 

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 72,850,888  outstanding  shares as of December 31, 2011.

 
 

 

ODYSSEY PICTURES CORPORATION

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements-unaudited
            Balance Sheets as of December 31, 2011 and June 30, 2011   
            Statements of Operations for the Three Month Periods Ended December 31, 2010 and 2011 and Statement of Operations for the Six Month Periods Ended December 31, 2010 and 2011
            Statements of Cash Flows for the Six Month Periods Ended December 31, 2010 and 2011

            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                                                                

 
 

Item 1. Financial Statements

Odyssey Pictures Corporation
Consolidated Balance Sheet
     
Assets Dec 31, 2011 June 30, 2011
  (unaudited)  
     
Current Assets    
Cash & cash equivalent's $14,000 $6,500
Accounts receivable 34,100 12,100
Prepaid expenses 47,200 57,100
  Total current assets 95,300 75,700
     
Property & equipment (net) 6,800 1,200
Capitalized production costs 548,300 274,300
Other 2,600 2,600
     
Total assets $653,000 $353,800
     
Liabilities and Stockholders' Deficiency    
     
Current Liabilities:    
Accounts payable $183,500 $52,800
Accounts payable-related parties 47,700 104,500
Accrued interest 419,400 377,900
Other accrued expenses 782,600 672,100
Legal settlements & judgments 155,000 155,000
Current debt obligations due within one year 109,000 112,000
Debt obligations in default 97,900 97,900
Liability to issue common stock 250,000 250,000
Deferred income 182,500 225,200
Convertible debt derivative liability 147,400 0
  Total current liabilities 2,375,000 2,047,400
     
Related parties 985,800 987,000
Reserve for loss contingencies 110,000 110,000
     
Stockholders' Deficiency:    
common stock-110,000,000 authorized $0.01 par value    
72,850,888 issued & outstanding 728,500 728,500
Additional paid in capital 39,509,300 39,509,300
Unamortized deferred compensation (149,500) (181,600)
Accumulated deficit (42,906,100) (42,846,800)
Total Stockholders' Deficiency (2,817,800) (2,790,600)
     
Total Liabilities and Stockholders' Deficiency $653,000 $353,800
See notes to unaudited interim financial statements.    
 
 
Odyssey Pictures Corporation
Consolidated Statement of Operations
(unaudited)
           
  Quarter Ended Dec 31,   Six Months Ended Dec 31,
  2011 2010   2011 2010
           
Net Sales of services $450,400 $751,300   $698,800 $1,201,300
Costs Applicable to Sales & Revenue 103,900 149,800   234,000 240,800
           
Gross Profit 346,500 601,500   464,800 960,500
           
Selling, General & Administrative Expenses 209,400 658,900   420,600 780,100
Settlements, net 0 0   200 200
Derivative valuation charges 61,900 0   61,900 0
  Total Operating Expenses 271,300 658,900   482,700 780,300
Income (Loss) Before Other Income & Income Taxes 75,200 (57,400)   (17,900) 180,200
           
Other Income (Expense)          
Excess carrying value of renegotiated payables 0 0   0 56,700
Interest (Expense) (32,400) (17,200)   (41,400) (34,600)
Income (Loss) from continuing operation before income taxes 42,800 (74,600)   (59,300) 202,300
Income Taxes 0 0   0 0
  Net Income (Loss) $42,800 ($74,600)   ($59,300) $202,300
           
Basic and Diluted Net Income Per Common Share Nil Nil   Nil Nil
Weighted Average Common Shares Outstanding (Basic) 72,850,888 65,150,888   72,850,888 68,150,888
See notes to unaudited interim financial statements.          

 

 
 
Odyssey Pictures Corporation
Consolidated Statement of Cash Flows
(unaudited)
  Six Months Ended Dec 31,
  2011 2010
     
Cash Flows from Operating Activities:    
Net Loss ($59,300) $202,300
Adjustments required to reconcile net loss to cash flows    
from operating activities:    
   Excess carrying value of renegotiated payables 0 (56,700)
   Amortization of deferred compensation 32,000 34,000
   Depreciation & impairment 900 500
   Expenses paid by the issuance of common stock 0 495,000
   Change in value of derivatives 61,900 0
Changes in Operating Assets & Liabilities:    
   Accounts Receivable (22,100) (34,100)
    Prepaid expenses 9,900 (5,600)
   Increase in deferred income (42,700) (400,000)
   Decrease in payables to affiliates (58,000) (76,300)
   Accounts Payable & Other 283,000 11,900
  Net cash generated by operating activities 205,600 171,000
     
Cash Flows from Investing Activities:    
   Investment in production inventory (274,000) (143,400)
  Purchase of fixed assets (6,600) 0
  Net cash used by investing activities (280,600) (143,400)
     
Cash Flows from Financing Activities:    
  Loan proceeds 85,500 0
  Payments made on long term debt (3,000) (23,000)
  Payments made on settlements & judgments 0 (23,500)
  Net cash used by financing activities 82,500 (46,500)
     
Net Change In Cash 7,500 (18,900)
Cash-Beginning 6,500 19,900
Cash-Ending $14,000 $1,000
See notes to unaudited interim financial statements.    

 

 

 

 

 

 

 

 

 

 

 

 

 

ODYSSEY PICTURES CORP

Notes To UNAUDITED CONSOLIDATED INTERIM Financial Statements

DECEMBER 31, 2011

 

 

1. Basis of Presentation

 

The Consolidated Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our June 30, 2011 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, 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:

 

Our “Branding & Services” agreements with Unilistings BV resulted in $407,000 in revenue in 2011 ($1,200,000 from Unilistings UK in 2010). Unilistings are companies owned or controlled by current and former directors of the company..

 

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. The compensation cost that has been charged against income for options was $32,000 for the six-month period ended December 31, 2011 based on the requisite service period for unvested options as of that date as well as options granted during the period. As of December 31, 2011, there was approximately $149,500 of unrecognized compensation cost related to non-vested options. The Company expects to recognize the cost over a weighted average period of .95 years.

 

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 $157,000 at December 31, 2011. We also continue to owe $657,000 in accrued compensation to John Foster, our current CEO.

In June, 2011 we became sole member and manager of FilmZone, LLC and agreed to repay distributions received from FilmZone in excess of our allocable portion of 2011 profits. The total due under this agreement is $876,226 and is recorded as a note payable to related parties. The note accrues interest at 3% and is due in full by June 30, 2013.

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. Odyssey remains obligated to issue an additional 3.3 million shares to Mr. Foster and has accrued the $250,000 fair value of these additional shares as a current liability. The new agreement continues in effect until January 1, 2014.

 

6. New Notes and Loans Payable:

Convertible Debt treated as a Derivative Instrument:

In October and November, 2011 we issued an aggregate of $85,500 in convertible promissory notes. The notes bear interest at 8% per annum until paid or converted. $53,000 is due July 19, 2012 and $32,500 becomes due August 28, 2012. The notes were classified as derivative instruments due to a 42% discount to fair value conversion rate formula. The conversion formula results in a potential conversion to a number of shares of common stock that is not fixed or determinate. Accordingly, the convertible debt instruments have been accounted for as derivative instruments and recorded at fair value. As of December 31, 2011 the fair value exceeded the face value of the notes by $61,900 and resulted in a carrying value of $147,400.

 

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, 2011, the Company realized revenues from production fees and producer representation services from new production projects such as Hank the Cow Dog as well as from recognition of deferred income from branding and image design contracts.  As of the date of this report, the Company’s ongoing operations have consisted production fees and from 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, 2011 and 2010

The Company had  revenues for the six months ended December 31, 2011 of $698,800 down from $1,201,300 for the period ended December 31, 2010. The revenues in the comparable 2010 period 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, 2011, 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  decreased to $420,600  for the six month period ended December 31, 2011, down from $780,100 for the comparable period in 2010. 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, 2011 and for the same period the prior year.

Results of Operations for the Three months ended December 30, 2011 and 2010

The Company had revenues for the three months ended December 31, 2011 of $450,400 down from $751,300 for the same period ended December 31, 2010.  During the three months ended December 31, 2011, 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 decreased to $209,400 for the three months ended December 31, 2011, down from $658,900 for the comparable period in 2010. This number included $495,000 of additional expenses paid by the issuance of common stock during the comparable 2010 period.

As of December 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. 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.

Convertible Debt treated as a Derivative Instrument:

 

In October and November, 2011 we issued an aggregate of $85,500 in convertible promissory notes. The notes bear interest at 8% per annum until paid or converted. $53,000 is due July 19, 2012 and $32,500 becomes due August 28, 2012. The notes were classified as derivative instruments due to a 42% discount to fair value conversion rate formula. The conversion formula results in a potential conversion to a number of shares of common stock that is not fixed or determinate. Accordingly, the convertible debt instruments have been accounted for as derivative instruments and recorded at fair value. As of December 31, 2011 the fair value exceeded the face value of the notes by $61,900 and resulted in a carrying value of $147,400

 

 

Cash Flows

Six Months Ended

December 31, 2010 December 31, 2010

 

Net Cash Generated by Operating Activities $205,600 $171,000

Net Cash Used by financing Activities ($82,500) $46,500

Cash Ending $14,000 $1,000

 

 

The Company generated $205,600 in cash from operating activities for the six months ended December 31, 2011 compared with $171,000 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 has been 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:

As of October 26, 2011, Odyssey Pictures Corporation finalized a Securities Purchase Agreement dated October 17, 2011 (the “Agreement”), in connection with the issuance of an 8% convertible note of the Corporation, in the aggregate principal amount of $53,000.00 (the “Note”), convertible into shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note, along with an irrevocable letter agreement with Interwest Transfer Co., Inc., the Corporation’s transfer agent, with respect to the reserve of shares of common stock of the Corporation to be issued upon any conversion of the Note; the issuance of such shares of common stock in connection with a conversion of the Note; and the indemnification of Interwest Transfer Co., Inc. for all loss, liability, or expense in carrying out the authority and direction contained in the irrevocable letter agreement (the “Letter Agreement”);

Commitments and Capital Expenditures

 The Company had no material commitments  for capital  expenditures. During this period, the Company obtained $205,600 cash through revenues. During the previous fiscal year, 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 December 31, 2011 (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, 2011 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

There was no activity regarding any legal proceedings involving the Company 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

There were no sales of equity securities by the company completed during the six months ended December 31, 2011.

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, 2011.

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