<PAGE>
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 MARCH 31, 1997
[ ] 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 juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
1875 CENTURY PARK EAST, SUITE 2130, LOS ANGELES, CA 90067
- --------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including area code (310) 229-2430
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 --
3,279,515 outstanding shares as of July 2, 1997.
<PAGE>
ODYSSEY PICTURES CORPORATION
INDEX
PAGE
Part I - Financial Information
Consolidated Balance Sheets as of 1
March 31, 1997 and June 30, 1996
Consolidated Statements of Operations 2
for the Nine and Three Month Periods Ended
March 31, 1997 and 1996
Consolidated Statements of Changes In Shareholders' Equity 3
(Deficit) for the Nine and Three Month Periods Ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows 4
for the Nine and Three Month Periods Ended
March 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II - Other Information 12
Signatures 15
<PAGE>
ODYSSEY PICTURES CORPORATION
CONSOLIDATED BALANCE SHEETS
------- ----------------------------
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30, 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Cash $ 79,260 $ 462,971
Accounts receivable, net 818,825 996,574
Note receivable 300,000
Film costs, net 786,615 1,000,968
Other assets 20,848 27,945
-------------- -------------
$ 2,005,548 $ 2,488,458
-------------- -------------
-------------- -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Liabilities:
Accounts payable and accrued expenses $ 1,643,205 $ 912,629
Due to producers and participants 1,339,177 3,760,142
Deferred revenues 21,933 3,000
Notes and loans payable 836,500 561,500
-------------- -------------
Total liabilities 3,840,815 5,237,271
-------------- -------------
Shareholders' deficit:
Preferred stock, par value $.10;
Authorized - 10,000,000 shares
Issued - none
Common stock, par value $.01;
Authorized - 6,666,666 shares
Issued - 3,279,515 and 2,591,242
Shares 32,796 25,913
-------------- -------------
Capital in excess of par value 26,358,583 25,911,366
Accumulated deficit (28,226,646) (28,686,092)
-------------- -------------
Total shareholders' deficit (1,835,267) (2,748,813)
-------------- -------------
$ 2,005,548 $ 2,488,458
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
ODYSSEY PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended March 31, Ended March 31,
--------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES: $130,226 $744,374 $42,051 $636,352
---------- ---------- --------- ----------
EXPENSES:
Costs related to revenues 391,406 795,618 263,508 636,423
Selling, general and
administrative expenses 1,477,677 1,009,795 601,781 280,107
---------- ---------- --------- ----------
1,869,083 1,805,413 865,289 916,530
---------- ---------- --------- ----------
Operating loss (1,738,857) (1,061,039) (823,238) (280,178)
OTHER INCOME (EXPENSES):
Other income 2,263,101 0 0 0
Interest income 1,212 0 157
Interest expense (64,798) (59,594) (18,017) (24,674)
Loss on sale of joint
venture interest (3,262,478) (186,415)
---------- ---------- --------- ----------
Net income (loss) $459,446 ($4,381,899) ($841,255) ($491,110)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Net income (loss) per share $0.16 ($1.92) ($0.29) ($0.22)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Weighted average common shares outstanding * 2,898,573 2,282,294 2,898,573 2,282,484
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Fully diluted net income (loss) per share $0.14 ($1.92) ($0.25) ($0.22)
---------- ---------- --------- ----------
---------- ---------- --------- ----------
Weighted average common shares outstanding * 3,398,573 2,282,294 3,398,573 2,282,484
---------- ---------- --------- ----------
---------- ---------- --------- ----------
</TABLE>
* Shares outstanding for all periods have been adjusted to give effect to
a 1 for 6 reverse stock split on March 18, 1996.
The accompanying notes are an integral part of these statements.
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<PAGE>
ODYSSEY PICTURES CORPORATION
Consolidated Statements Of Changes In Shareholders' Equity (Deficit)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Amount Capital In Shareholders'
Common Stock ($.01 Par Excess Of Accumulated Equity
Shares Value) Par Value Deficit (Deficit)
------------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balances - June 30, 1995 13,693,218 136,932 25,568,727 (23,726,376) 1,979,283
One-for-six reverse stock split (11,409,029) (114,090) 114,090
Issuance of shares to officers
In payment of notes 307,053 3,071 228,949 232,020
Cash payments in lieu of
Fractional shares on
Conversion of class a stock (400) (400)
Net loss (4,959,716) (4,959,716)
----------- ---------- ---------- ----------- -----------
Balances - June 30, 1996 2,591,242 25,913 25,911,366 (28,686,092) (2,748,813)
Re-issue of unexchanged
Shares previously cancelled 65,825 659 (659) -
Issuance of shares to officers
In payment of notes 78,948 789 44,211 45,000
Issuance of shares in consideration
For services rendered 43,500 435 33,665 34,100
Sale of shares to equity investors 500,000 5,000 370,000 375,000
Net income 459,446 459,446
----------- ---------- ---------- ----------- -----------
Balances - March 31, 1997 3,279,515 $32,796 $26,358,583 ($28,226,646) ($1,835,267)
----------- ---------- ---------- ----------- -----------
----------- ---------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
ODYSSEY PICTURES CORPORATION
Consolidated Statements Of Cash Flows
---------------------------------------
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED MARCH 31,
------------------------------------------
1997 1996
---------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income income (loss) $459,446 ($4,381,899)
Adjustments to reconcile net income
To net cash provided by (used in)
Operating activities:
Amortization of film costs 951,711 3,815,641
Decrease in (additions to) film costs (737,358) 5,790,699
Other depreciation and amortization 16,082 28,439
Equity in loss of subsidiary held for sale --
Issuance of shares of stock to officers in payment
Of deferred compensation 45,000 --
Issuance of shares of stock in consideratio
For services rendered 34,100 --
Decrease (increase) in assets:
Funds held in joint venture accounts -- 3,836,732
Accounts receivable, net 177,749 (239,498)
Note receivable (300,000) --
Other (505) 2,616
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 730,576 (203,111)
Due to producers and participants (2,420,965) (7,559,458)
Deferred revenues 18,933 (520,000)
------------- -------------
Net cash used in
Operations (1,025,231) 570,161
------------- -------------
Cash flows from investing activitieS:
Acquisition of fixed assets (8,480) (5,312)
------------- -------------
Net cash used in investing
Activities (8,480) (5,312)
------------- -------------
Cash flows from financing activities:
Net proceeds from sale of senior notes 270,000
Note payable in settlement of generale bank
Complaint 275,000 --
Net proceeds from private placement sale
Of common stock 375,000 --
------------- -------------
Net cash provided by
Financing activities 650,000 270,000
------------- -------------
Net (decrease) increase in cash and equivalents (383,711) 834,849
Cash and equivalents at beginning of period 462,971 43,491
------------- -------------
Cash and equivalents at end of period $79,260 $878,340
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
ODYSSEY PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------
<TABLE>
<CAPTION>
For the nine months
March 31,
------------- -----------
1997 1996
------------- -----------
<S> <C> <C>
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the period for-
Interest $42,870 $10,778
---------- ----------
---------- ----------
Income taxes -- --
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements
MARCH 31, 1997
1. - BASIS OF FINANCIAL STATEMENT PREPARATION:
The Consolidated Financial Statements for Odyssey Pictures Corporation
and subsidiaries (collectively "Odyssey" or 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 financial statements and the notes thereto
included in the Company's Report on Form 10-K for the period ended
June 30, 1996.
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 March 31, 1997, (b) the results of operations for the
nine and three month periods ended March 31, 1997 and 1996 and (c)
cash flows for the nine month periods ended March 31, 1997 and 1996.
2. - SALE OF COMMON STOCK:
On February 26, 1997, the Company issued 500,000 shares of Common
Stock to Equity Investors for an aggregate consideration of $375,000.
It also granted warrants to purchase 500,000 shares of Common Stock at
an exercise price of $1.06 per share to these Equity Investors. The
Common Stock and warrants were issued in reliance on Regulation S
under the Securities Act.
3. - FAIR VALUE OF FINANCIAL INSTRUMENTS:
NOTE RECEIVABLE
The carrying amount approximates fair value because of the short
maturity of this instrument.
NOTES AND LOANS PAYABLE
The Company was unable to determine a reasonable
estimate of the fair value of Notes and Loans Payable without
incurring excessive costs due to the nature of these liabilities and
due to the financial condition of the Company at this time.
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<PAGE>
4. - SUBSEQUENT EVENTS
On September 25, 1996, the Company entered into an agreement with an
unaffiliated third party for the purchase of 1,000,000 shares of the
Company's common stock in consideration of $750,000, or $.75 per
share, payable all cash at closing. In addition, the investor will
receive 1,000,000 class A warrants and 1,000,000 class B warrants,
each set of warrants being exercisable over a three year period for
the purchase of 1,000,000 shares of common stock at the respective
exercise prices of $.75 and $1.00 per share. Following the purchaser's
indication of an unwillingness to consummate this transaction, the
parties reached a settlement in principle in June 1997, pursuant to
which the purchaser agreed to purchase 66,667 shares of common stock
of the company for $50,000, or $.75 per share.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE AND THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues for the nine month and three month periods ended March 31, 1997
decreased to $130,226 and $42,051 from $744,374 and $636,352 for the comparable
nine and three month periods ended March 31, 1996. There were no new films
which became available for delivery in either periods.
Costs related to revenues decreased to $391,406 and $263,508 respectively,
for the nine and three month periods ended March 31, 1997 from $795,618 and
$636,423 for the comparable nine and three month periods ended March 31, 1996.
The decrease is primarily related to lower revenues in the current nine and
three month periods than in the comparable nine and three month period.
Additionally, in the nine and three month period ended March 31, 1997 the
Company wrote off $165,425 of unrecoupable film costs. It also expensed $76,297
resulting from the settlement of the litigation with Film Bridge. (see ITEM 1.
Legal Proceedings, "Film Bridge")
Selling, general and administrative expenses increased by $467,882 (46.3%)
to $1,477,677 for the nine month period from $1,009,795 for the comparable 1996
period. For the 1997 three month period such expenses increased by $321,674
(114.8%) to $601,781 from $280,107 for the comparable 1996 three month period.
The increase is primarily related to higher salaries, legal and accounting fees
and because, in the comparable nine and three month period there were
significant decreases in personnel and related expenses, due to the closure of
the Company's New York office and the relocation of its Los Angeles office.
Other income for the nine month period ended March 31, 1997 consisted of a
$818,776 gain from the sale of certain distribution and subdistribution rights
in certain films to a third party, recognition of a $1,345,758 gain from the
cancellation of a contractual obligation related to the Company's distribution
rights in "Wuthering Heights", and recognition of a gain in the amount of
$198,567 from the settlement of an outstanding litigation with Generale Bank
(formerly known as Credit Lyonnais Bank Nederland N.V.) and Cinecom
Entertainment Group Inc. There was no other income recognized in the respective
nine month period ended March 31, 1996.
On January 2, 1996 the Company entered into an agreement with its joint venture
partner to sell its related joint ventures through which it held approximately
50% ownership interests in four theatrical motion pictures. As a result of this
the company incurred a loss of $3,262,478 and $186,415 respectively in the nine
and three month period ended March 31, 1996.
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<PAGE>
Interest expense increased by $5,204 to $64,798 for the nine month period
ended March 31, 1997 from $59,594 for the comparable 1996 period. Interest
expense decreased by $6,657 to $18,017 for the three month period ended March
31, 1997 from $24,674 for the comparable 1996 period.
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 March 31, 1997, the Company had a federal net operating loss
carryforward, for tax purposes, of approximately $26,000,000, expiring through
2010, available to be used to reduce future tax liability. Due to limitations
imposed by the Internal Revenue Service, the utilization of approximately
$4,900,000 of these net operating losses will be limited to approximately
$350,000 per year.
The Company's principal activities have been the acquisition of rights in
either completed or to be completed motion pictures and the licensing of these
rights to sub-distributors in foreign countries. As of March 31, 1997, the
Company had agreements in principle with sub-distributors relating to
distribution commitments or guarantees of approximately $3.7 million that had
not been recognized in the statement of operations. The Company will recognize
these guarantees in revenues and the costs related to such revenues when motion
pictures are completed and available for delivery. It is possible that changes
in schedules and cancellations of pictures may defer and/or reduce the amounts
of revenues that will be recognized in later periods.
Included in the Company's film costs is approximately $683,000 related to a
film project entitled "Downrange". Pre-production on the picture was suspended
in April, 1997 due to the lack of adequate production financing. Pre-production
on the picture is scheduled to resume in the Fall of 1997, subject to completion
of financing. Although no assurance can be given, the Company believes that it
will be able to secure the necessary funding to resume pre-production on the
picture. However, in the event that the Company cannot arrange such financing,
the project would be terminated and the Company would be required to take a
write down on film costs associated with the picture in the amount of
approximately $683,000.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company held approximately $79,000 of cash.
Net increase (decrease) in cash were $(383,711) and $834,849 for the nine
months ended March 31, 1997 and 1996, respectively. Net cash provided by (used
in) operations was $(1,025,231) and $570,161 for the nine months ended March 31,
1997 and 1996 respectively. Net cash used in investing activities was $8,480
and $5,312 for the nine months ended March 31, 1997 and 1996,
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<PAGE>
respectively. The net cash decrease for the nine months ended March 31, 1997
was primarily related to the use of funds in order to sustain the Company's
current operations. This was partially offset by proceeds from the private
placement sale of common stock in the amount of $375,000 and from the receipt of
the $500,000 initial payment related to the granting to Kinnevik Media
Properties, Ltd. of certain subdistribution rights in, and other distribution
rights to, certain films for which the Company was acting as distribution agent,
and from receipt of a second installment from Kinnevik in the amount of $266,826
($275,000 minus a discount of $8,174 for early payment). The net cash increase
for the nine months ended March 31, 1996 was primarily related to the sale of
the Company's approximately 50% interests in four theatrical motion pictures, of
which the proceeds were $1,500,000, and from the sale of Senior Notes in the
gross amount
In many instances, the Company acquires the rights to motion picture
productions prior to their completion. As a result, there may be a substantial
delay between the time the Company enters into distribution agreements with
producers and sub-distribution agreements with foreign sub-distributors and the
time it recognizes revenues and generates cash from each production.
In the past, the Company has been dependent on obtaining outside financing
to acquire distribution rights to films. New management has reduced the
Company's reliance on outside financing by placing more emphasis on acquiring
distribution rights through arrangements which require lower or no advance
payments. At present, the Company may not be able to secure distribution rights
by issuing letters of credit or advancing significant production funds, as it
has in the past.
The Company presently has outstanding a note receivable from Kinnevik Media
Properties, Ltd. ("Kinnevik") in the amount of $300,000 which is due on April 7,
1998 (the "Kinnevik Note"). Through June 16, 1997, the Company has secured
interim financing against the Kinnevik Note in the amount of $125,000. Such
interim financing has been provided on a demand loan basis primarily from
certain officers and directors of the Company. Although no assurance can be
given, the Company anticipates that within the next 60 days it will be able to
discount the Kinnevik Note with Kinnevik for approximately $285,000, thereby
generating net proceeds to the Company of approximately $160,000 (after payment
of the interim financing). In the event the Kinnevik Note is not discounted by
the issuer, the Company will seek additional interim financing against the
balance of the Kinnevik Note from third parties, although no assurance can be
given that such financing could be arranged.
The Company has also received a written proposal from Kinnevik for
additional financing in the amount of $500,000 (the "Kinnevik Financing"), the
terms of which are currently being negotiated by the Company. Such additional
financing would be in the form of a long term loan or convertible preferred
stock which
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<PAGE>
could be prepaid or redeemed upon the occurrence of certain events. Although
there can be no assurance that this transaction will be consummated, the Company
anticipates that the financing will be completed prior to September 1, 1997. If
completed, the proceeds of this financing, together with the net proceeds
generated from the financing or discounting of the Kinnevik Note, would provide
the Company with approximately $650,000 in additional funding. Such additional
funding (if available) would be used to pay a long term note of the Company in
the amount of $179,000 which matures in July, 1997, and to fund the Company's
operating costs over a period of four to six months. However, even if the
Kinnevik Financing is completed (as to which there can be no assurance), since
the Company does not anticipate that it will be generating sufficient revenues
to sustain its operations until approximately July, 1998, the Company will
require substantial additional financing to fund its operations over the next
fiscal year. Accordingly, if the Company fails to consummate either the
Kinnevik Financing or any alternative or additional financing which would be
required to fund the Company's operations over such period of time, there is
substantial doubt that the Company would have the ability to continue as a going
concern throughout the next fiscal period.
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<PAGE>
Part II - OTHER INFORMATION
ITEM 1. Legal Proceedings
On September 18, 1996, Film Bridge International, Inc. ("Film Bridge")
filed a complaint in Los Angeles County Superior Court, entitled "Film Bridge
International v. Communications and Entertainment Corp., and Does 1 through 50,
Inclusive," contending that the Company had breached the terms of an alleged
joint venture agreement between the parties regarding the distribution rights to
certain films. On December 19, 1996, the Company filed a cross-complaint against
Film Bridge alleging that, since the end of June, 1996, Film Bridge had failed
to furnish the Company with a proper accounting of its revenues and expenses in
connection with the sale to foreign licensees of various films in which the
Company had an interest and had failed to make payment of at least $450,000 to
the Company for monies due and owing to the Company from the foreign sales of
such films. An agreement was reached between the parties in May, 1997, as a
result of which the Company received $336,000 of the monies being held by Film
Bridge, with the balance being retained by Film Bridge as sales commissions and
in full settlement of the litigation.
On or about March 25, 1996, a class action complaint was filed in Los
Angeles Superior Court entitled "Dennis Blewitt v. Norman Muller, Jerry Minsky,
Dorian Industries, Inc. and Communications and Entertainment Corp." The
complaint seeks damages in connection with the Company's treatment in its
financial statements of the disposition of its Double Helix subsidiary in June,
1991. The complaint seeks unspecified damages on behalf of all persons who
purchased shares of the Company's common stock from and after June 1992. A
second action, alleging substantially similar grounds, was filed in December
1996 in Federal court in the United States District Court for the Southern
District of California under the caption heading of "Diana Pfannebecker v. N.
Norman Muller, Communications and Entertainment Corp., Jay Behling, Jeffrey S.
Konvitz, Tom Smith, Jerry Silva, David Mortman, Price Waterhouse & Co., Todman &
Co., and Renato Tomacruz." Following the filing of the second action, the first
action was dismissed by stipulation in May 1997. The Company has filed a motion
to dismiss the complaint in the second action and a hearing on the motion has
been scheduled for July 21, 1997. Messrs. Muller, Smith and Mortman, former
directors of the Company, have asserted claims for indemnification against the
Company. The Company has advised the claimants that it will not provide such
indemnification, based on their wrongful actions and failure to comply with
various obligations to the Company.
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<PAGE>
On or about January 23, 1996, an action was filed in the Los Angeles
Superior court entitled "Greenberg, Glusker, Fields, Claman & Machtinger v.
Odyssey Distributors, Ltd., Odyssey Entertainment Ltd. and Communications and
Entertainment Corporation," in which the plaintiff seeks damages in the amount
of $33,849.98 for legal services rendered to the Company and its subsidiaries.
The parties have reached a tentative settlement in the matter, pursuant to which
the Company will pay $7,000 to plaintiff, deliver 40,000 freely tradeable shares
of the Company's Common Stock to plaintiff, and deliver an additional cash
amount to the extent that the aggregate market value of the shares on the date
of delivery is less than $40,000. The settlement is contingent on the Company's
ability to deliver fully registered shares to plaintiff on or before August 15,
1997.
The Company has also reached tentative settlements in the matters entitled
"Joseph P. Day Realty Corp. v. Communications and Entertainment Corp.," pursuant
to which plaintiff (as landlord) was seeking damages in connection with a lease
for premises formerly occupied by the Company at 800 Third Avenue in New York
City. The plaintiff had secured a judgment for $74,142 representing a portion of
the lease term and had commenced a second action seeking additional damages for
the period from October, 1995 through July, 1996. Pursuant to the settlement
agreement, the Company will be required to deliver 177,500 shares of the
Company's Common Stock to each of the landlord and its agent in full settlement
of the actions, provided the shares are fully registered and delivered prior to
August 15, 1997.
In the proceeding entitled "In The Private Lessons Partnership v. Carnegie
Film Group, Inc., Monogram Pictures Corp., Filmways Entertainment Corp., ATC,
Inc., Krishnah Shah, Lonnie Romati, Gerald Muller, Jerry Minsky and Does 1-100,"
a cross complaint filed by Mr. Shah against the Company in August, 1995 has been
dismissed.
ITEM 3. Defaults Upon Senior Securities.
In August and October of 1995, the Company concluded a private placement
pursuant to which it issued unsecured promissory notes to unaffiliated investors
in the aggregate amount of $312,500. The notes were due in one year but were not
paid on their respective due dates on August 28 and October 3, 1996. The Company
has made alternative proposals to the noteholders, one of which involves the
exchange of notes for registered shares of the Company in an amount equal to
150% of the principal amount of the notes, with shares valued either at $.75 per
share or the market value on the date of delivery of the shares. Noteholders
representing $262,500 in notes have accepted this proposal (with all but a
$50,000 noteholder electing to value their shares at $.75 per share), subject to
the delivery of
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<PAGE>
fully registered shares. The remaining note for $50,000 (held by a single
noteholder) has not been paid and remains in default.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
4.1 Form of Common Stock Purchase Warrant
issued to each of Johann Schotte, A
Hero from Zero N.V., Gold Leaf Pictures
Belgium bvba, and Chardonnay
Enterprises, Ltd., on February 26, 1997.
4.2 Form of Common Stock Purchase Warrant
issued to each of Lawrence I. Schneider,
Robert E. Miller, Jr. and Aaron Richard
Golub, on April 29, April 29 and June 6,
1997, respectively.
4.3 Form of Common Stock Purchase Warrant
issued to G & H Media, Ltd. on April 29,
1997
4.4 Form of Promissory Note issued to each
of LawrenceI.Schneider,Robert E.
Miller, Jr. and Aaron Richard
Golub, on April 23, April 23 and June
16,1997, respectively.
4.5 Form of Promissory Note issued to
Stephen R. Greenwald on April 23, 1997.
(b) Reports on Form 8-K.
On April 18, 1997, the Company filed a Report on Form 8-K (under
"Item 9. Sales of Equity Securities Pursuant to Regulation S") with respect to
the sale and issuance of 500,000 shares of the Company's common stock and
500,000 common stock purchase warrants to four (4) offshore investors pursuant
to Rules 901 and 903(c)(2) of Regulation S.
ITEMS 2, 4 AND 5 OF PART II ARE NOT APPLICABLE
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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
/s/ Stephen R. Greenwald
By:
---------------------------
Stephen R. Greenwald
Chief Executive Officer
/s/ Marvin N. Grossman
By:
---------------------------
Marvin N. Grossman,
Exec. Vice-President and
Chief Financial Officer
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<PAGE>
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
ODYSSEY PICTURES CORPORATION (THE "COMPANY"), OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER
STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON FEBRUARY 25, 2000.
ODYSSEY PICTURES CORPORATION
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
125,000 Warrants
(Subject to Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by ODYSSEY PICTURES CORPORATION, a Nevada corporation
(the "Company"),________ is hereby granted the right to purchase, at the initial
exercise price of $1.06 per share (subject to adjustments as provided in Section
5 hereof), at any time from February 26, 1997 until 5:00 P.M. New York City time
on February 25, 2000, 125,000 shares (the "Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $1.06 per Share payable in cash or by certified or official bank
check in New York Clearing House funds,
1
<PAGE>
subject to adjustments as provided in Section 5 hereof. Upon surrender of this
Warrant at the offices of the Company, with the annexed Subscription Form duly
executed, together with payment of the Purchase Price (as hereinafter defined)
for the Shares purchased, the registered holder of this Warrant (the "Holder")
shall be entitled to receive a certificate or certificates for the Shares so
purchased.
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
2
<PAGE>
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act but only upon a
Holder hereof having first obtained the written opinion of counsel to the
Company, or other counsel reasonably acceptable to the Company, that the
proposed disposition is consistent with all applicable provisions of the Act as
well as any applicable "Blue Sky" or other state securities law. Upon exercise,
in part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect.
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $1.06 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the initial
purchase price per Share or the adjusted purchase price per share, depending
upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change.
3
<PAGE>
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
4
<PAGE>
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Odyssey Pictures Corporation
380 Lexington Avenue, Suite 2500
New York, New York 10019
Attn: Stephen R. Greenwald, CEO
5
<PAGE>
With a copy to:
Howard J. Kerker, Esq.
45 West 45th Street
New York, New York 10036
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
York, without giving effect to conflicts of laws principles. Each of the Company
and the Holder hereby agrees that any dispute or controversy arising out of this
Warrant shall be adjudicated in a court located in New York City, and hereby
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal courts in the Southern District
of New York, and irrevocably waives any objection each now or hereafter may have
respecting the venue of such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, and consents to
the service of process in any such action or proceeding by means of registered
or certified mail, return receipt requested.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
ODYSSEY PICTURES CORPORATION
By:
--------------------------------------
Stephen R. Greenwald
Title: Chief Executive Officer
7
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase _____________________ Shares represented by this Warrant in accordance
with the conditions hereof and herewith makes payment of the Purchase Price of
such Shares in full.
Date:
----------------
----------------------------
(Signature)
----------------------------
(Print Name)
----------------------------
(Social Security Number or
Taxpayer's Identification
Number)
8
<PAGE>
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
ODYSSEY PICTURES CORPORATION (THE "COMPANY"), OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER
STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON , 2002
ODYSSEY PICTURES CORPORATION
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
25,000 Warrants
(Subject to Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by ODYSSEY PICTURES CORPORATION, a Nevada corporation
(the "Company"), is hereby granted the right to purchase, at the
initial exercise price of $1.00 per share (subject to adjustments as provided in
Section 5 hereof), at any time from , 1997 until 5:00 P.M. New York City
time on , 2002, 25,000 shares (the "Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $1.00 per Share payable in cash or by
1
<PAGE>
certified or official bank check in New York Clearing House funds, subject to
adjustments as provided in Section 5 hereof. Upon surrender of this Warrant at
the offices of the Company, with the annexed Subscription Form duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Shares purchased, the registered holder of this Warrant (the "Holder") shall be
entitled to receive a certificate or certificates for the Shares so purchased.
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
2
<PAGE>
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act but only upon a
Holder hereof having first obtained the written opinion of counsel to the
Company, or other counsel reasonably acceptable to the Company, that the
proposed disposition is consistent with all applicable provisions of the Act as
well as any applicable "Blue Sky" or other state securities law. Upon exercise,
in part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect.
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $1.00 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the
initial purchase price per Share or the adjusted purchase price per share,
depending upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change.
3
<PAGE>
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
4
<PAGE>
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Odyssey Pictures Corporation
c/o Mr. Stephen R. Greenwald
380 Lexington Avenue, Suite 2500
New York, New York 10019
5
<PAGE>
With a copy to:
Howard J. Kerker, Esq.
600 Madison Avenue
New York, New York 10022
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
York, without giving effect to conflicts of laws principles. Each of the Company
and the Holder hereby agrees that any dispute or controversy arising out of this
Warrant shall be adjudicated in a court located in New York City, and hereby
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal courts in the Southern District
of New York, and irrevocably waives any objection each now or hereafter may have
respecting the venue of such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, and consents to
the service of process in any such action or proceeding by means of registered
or certified mail, return receipt requested.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
ODYSSEY PICTURES CORPORATION
By:
--------------------------------------
Ira N. Smith, President
7
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase Shares represented by this Warrant in accordance with
the conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
Date:
----------------
---------------------------
(Signature)
---------------------------
(Print Name)
---------------------------
(Social Security Number or
Taxpayer's Identification
Number)
8
<PAGE>
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
ODYSSEY PICTURES CORPORATION (THE "COMPANY"), OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER
STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON APRIL 28, 2002
ODYSSEY PICTURES CORPORATION
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
50,000 Warrants
(Subject to Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by ODYSSEY PICTURES CORPORATION, a Nevada corporation
(the "Company"), G & H Media, Ltd. is hereby granted the right to purchase, at
the initial exercise price of $1.00 per share (subject to adjustments as
provided in Section 5 hereof), at any time from April 29, 1997 until 5:00 P.M.
New York City time on April 28, 2002, 50,000 shares (the "Shares") of the
Company's Common Stock, par value $.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $1.00 per Share payable in cash or by
1
<PAGE>
certified or official bank check in New York Clearing House funds, subject to
adjustments as provided in Section 5 hereof. Upon surrender of this Warrant at
the offices of the Company, with the annexed Subscription Form duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Shares purchased, the registered holder of this Warrant (the "Holder") shall be
entitled to receive a certificate or certificates for the Shares so purchased.
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
2
<PAGE>
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act but only upon a
Holder hereof having first obtained the written opinion of counsel to the
Company, or other counsel reasonably acceptable to the Company, that the
proposed disposition is consistent with all applicable provisions of the Act as
well as any applicable "Blue Sky" or other state securities law. Upon exercise,
in part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect.
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $1.00 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the
initial purchase price per Share or the adjusted purchase price per share,
depending upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change.
3
<PAGE>
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
4
<PAGE>
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Odyssey Pictures Corporation
c/o Mr. Stephen R. Greenwald
380 Lexington Avenue, Suite 2500
New York, New York 10019
5
<PAGE>
With a copy to:
Howard J. Kerker, Esq.
600 Madison Avenue
New York, New York 10022
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
York, without giving effect to conflicts of laws principles. Each of the Company
and the Holder hereby agrees that any dispute or controversy arising out of this
Warrant shall be adjudicated in a court located in New York City, and hereby
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal courts in the Southern District
of New York, and irrevocably waives any objection each now or hereafter may have
respecting the venue of such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, and consents to
the service of process in any such action or proceeding by means of registered
or certified mail, return receipt requested.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
ODYSSEY PICTURES CORPORATION
By:
--------------------------------------
Ira N. Smith, President
7
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase Shares represented by this Warrant in accordance with
the conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
Date:
----------------
---------------------------
(Signature)
---------------------------
(Print Name)
---------------------------
(Social Security Number or
Taxpayer's Identification
Number)
8
<PAGE>
PROMISSORY NOTE AND COLLATERAL ASSIGNMENT
$25,000.00 , 1997
FOR VALUE RECEIVED, the undersigned, Odyssey Pictures Corporation, a Nevada
corporation having a principal place of business at 1875 Century Park East, Los
Angeles California 90067 (the "Corporation"), hereby promises to pay to the
order of ("Payee"), ON DEMAND, at the offices of the Corporation or at such
other place as the holder hereof shall designate in writing to the Corporation,
the principal sum of $25,000, together with interest thereon from the date
hereof at the rate of 9.25% per annum.
The Corporation and Payee acknowledge that this Note is one of four Notes
issued by the Corporation in connection with aggregate loans made to the
Corporation in the amount of $125,000. As further security for the payment of
this Note, the Corporation hereby assigns to Payee a 20% interest in the
Corporation's current receivable due from Kinnevik Media Properties, Ltd. in the
aggregate amount of $300,000, including any and all proceeds derived by the
Corporation from the payment, collection and or/discounting of said receivable.
Odyssey Pictures Corporation
By:
------------------------------
Stephen R. Greenwald, CEO
<PAGE>
PROMISSORY NOTE AND COLLATERAL ASSIGNMENT
$50,000.00 April 23, 1997
FOR VALUE RECEIVED, the undersigned, Odyssey Pictures Corporation, a Nevada
corporation having a principal place of business at 1875 Century Park East, Los
Angeles California 90067 (the "Corporation"), hereby promises to pay to the
order of Stephen R. Greenwald ("Payee"), ON DEMAND, at the offices of the
Corporation or at such other place as the holder hereof shall designate in
writing to the Corporation, the principal sum of $50,000, together with interest
thereon from the date hereof at the rate of 9.25% per annum.
The Corporation and Payee acknowledge that this Note is one of four Notes
issued by the Corporation in connection with aggregate loans made to the
Corporation in the amount of $125,000. As further security for the payment of
this Note, the Corporation hereby assigns to Payee a 40% interest in the
Corporation's current receivable due from Kinnevik Media Properties, Ltd. in the
aggregate amount of $300,000, including any and all proceeds derived by the
Corporation from the payment, collection and or/discounting of said receivable.
Odyssey Pictures Corporation
By:
------------------------------
Ira N. Smith, President
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 79,260
<SECURITIES> 0
<RECEIVABLES> 818,825
<ALLOWANCES> 0
<INVENTORY> 786,615
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,005,548
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0
0
<COMMON> 32,796
<OTHER-SE> (1,868,063)
<TOTAL-LIABILITY-AND-EQUITY> 2,005,548
<SALES> 130,226
<TOTAL-REVENUES> 130,226
<CGS> 391,406
<TOTAL-COSTS> 391,406
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<INCOME-PRETAX> 64,798
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