ODYSSEY PICTURES CORP, 10-K, 1999-10-13

ODYSSEY PICTURES CORP
10-K, 1999-10-13
MOTION PICTURE & VIDEO TAPE PRODUCTION

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended June 30, 1999

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from _________ to _________

Commission file number 0-18954

Odyssey Pictures Corporation
----------------------------
(Exact name of registrant as specified in its charter)

Nevada 95-4269048
- ------------------------------- ----------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)

1601 Elm Street, Dallas, Texas 75201
------------------------------------
(Address of principal executive offices)

Registrant's telephone number, including area code: (214) 720-1622

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value.

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 such
filing requirements for the past 90 days. Yes x No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of October 8, 1999 was approximately $5,613,461 (based on the
mean between the closing bid and asked prices of the Common Stock on such date),
which value, solely for the purposes of this calculation, excludes shares held
by Registrant's officers and directors. Such exclusion should not be deemed a
determination by Registrant that all such individuals are, in fact, affiliates
of the Registrant.

As of October 8, 1999 there were outstanding 9,885,406 shares of Odyssey
Pictures Corporation's common stock, par value $.01 per share (the "Common
Stock").
<PAGE>

ODYSSEY PICTURES CORPORATION
Form 10-K Report for the Fiscal Year
Ended June 30, 1999

TABLE OF CONTENTS
Page
----

PART I

Item 1. Business ....................................................... 2

Item 2. Properties ..................................................... 10

Item 3. Legal Proceedings .............................................. 10

Item 4. Submission of Matters to a Vote of Security Holders............. 13

PART II

Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters .................................. 14

Item 6. Selected Financial Data ........................................ 15

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 15

Item 8. Financial Statements and Supplementary Data .................... 17

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .......................... 17

PART III

Item 10. Directors and Executive Officers of the Registrant ............ 18

Item 11. Executive Compensation ........................................ 20

Item 12. Security Ownership of Certain Beneficial Owners
and Management ............................................... 25

Item 13. Certain Relationships and Related Transactions ................ 26

PART IV

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ......................................... 28

1
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PART I

Item 1. Business

(a) General Development of Business

Odyssey Pictures Corporation ("Odyssey" or the "Company"), formerly known
as Communications and Entertainment Corp., was formed in December 1989 as a
holding company. At such time, the Company had no material assets. In September
1990, Double Helix Films, Inc. ("Double Helix"), a producer of low budget films,
and Odyssey Entertainment Ltd. ("OEL"), an international film distribution
company, were merged with wholly-owned subsidiaries of the Company (the
"Mergers"). Subsequent to the Mergers, each of Double Helix and OEL became a
wholly-owned subsidiary of the Company. In June 1991, the Company sold Double
Helix and thereafter began to focus on the distribution of motion pictures in
overseas markets as its primary business.

A change in the entire Board of Directors of the Company (the "Board")
occurred on April 12, 1995 pursuant to the terms of a Settlement Agreement,
dated as of March 31, 1995 (the "Settlement Agreement"), by and among Robert
Hesse, Shane O'Neil, Lawrence I. Schneider, Henry N. Schneider, Robert E.
Miller, Jr., Russell T. Stern, Jr. (collectively, a group of shareholders
originally formed to effect a change in management control of the Company and
known as the "CECO Shareholders Committee"), the Company, OEL, Global
Intellicom, Inc., each of Jerry Silva, Robert Ferraro, N. Norman Muller, Thomas
W. Smith and David A. Mortman (constituting all the directors of the Company at
the time of the execution of the Settlement Agreement and hereinafter referred
to collectively as the "Former Directors"), and others.

As contemplated by the Settlement Agreement, on April 11, 1995, the Former
Directors increased the size of the Board from five to six directors and elected
Henry N. Schneider, a designee of the CECO Shareholders Committee, a new
director effective upon the closing of the Settlement Agreement. The closing of
the Settlement Agreement occurred on April 12, 1995 and, upon the closing, the
resignations of the Former Directors became effective. After the closing, Henry
N. Schneider, as sole remaining director of the Company, elected Lawrence I.
Schneider, Russell T. Stern, Jr., Patrick J. Haynes, III and Robert E. Miller,
Jr. as new directors of the Company. In addition to the change in the
composition of the Board, the Settlement Agreement provided for the settlement
of all outstanding litigation between the Company and the CECO Shareholders
Committee. The CECO Shareholders Committee disbanded upon the closing of the
Settlement Agreement. Effective September 8, 1995, each of Messrs. Haynes, Stern
and Henry N. Schneider resigned as directors of the Company and were replaced by
Stephen R. Greenwald and Ira N. Smith, each of whom was appointed to the Board
and, together with Lawrence Schneider, elected to executive management positions
to operate the business and affairs of the Company on a day-to-day basis.

On March 6, 1996, the Company declared a reverse one-for-six stock split of
its Common Stock (the "Reverse Split"), effective March 18, 1996. All share
amounts and per share prices reflected in this Report have been adjusted to give
effect to the Reverse Split.

Mr. Schneider resigned his executive position in September, 1997, and in
March, 1998, the Board of Directors appointed Mr. Johan Schotte as Chief
Executive Officer and Chairman of the Board of the Company. At the same time,
Mr. Pierre Koshakji was appointed to the Board and elected as President of the
Company. Mr. Johan Schotte expanded the Board to include additional independent
directors and Messrs. Greenwald and Smith agreed to terminate their existing
employment agreements in exchange for revised employment and consulting
agreements. In connection with the change in management, an affiliate of Mr.
Schotte purchased convertible deferred compensation notes from former management
and converted a portion of these notes into 667,648 shares of the Company's
common stock in April, 1998. The balance of these notes was converted into
176,050 shares of common stock in October, 1998.

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During the early 1990s, the Company developed an excellent reputation in
overseas markets for the distribution of quality motion picture entertainment, a
reputation which the Company's management believes it continues to enjoy despite
its recent difficulties. However, due to the changes in management control and
disruptions in the continuity of the Company's business following the change in
control in 1995, the Company has been unable to sustain any substantial
activities in the international distribution of motion pictures.

Under the leadership of Mr. Schotte, the Company will seek to re-establish
its position as a significant distributor of quality motion pictures by
establishing relationships and strategic alliances with major film studios and
successful writers, directors and producers. The Company also intends to
establish a permanent presence in Europe through select joint-venture partners.
In this connection, the Company purchased the assets of Sweden-based Kimon
Mediabright KB ("Kimon") in August, 1998, consisting of a film library with
worldwide and/or Scandanavian distribution rights and Scandanavian video
distribution rights to certain Hallmark Entertainment products.

While continuing to develop and re-establish the Company's film
distribution business, new management's objective going forward is to
aggresively build a diverse, global media company independent in ownership from
the major film and music companies. Management will seek to establish a group of
domestic and international companies providing both content and distribution in
film, music, publishing, sports, merchandising and other multimedia outlets. See
"Business - Narrative Description of Business - Business Strategy."

(b) Financial Information About Industry Segments

Since the sale of its Double Helix subsidiary in 1991, the Company has been
engaged in only one industry segment and line of business, the international
distribution of motion pictures. See "Selected Financial Data."

Foreign Sales and Distribution Operations

General.

The foreign distribution of films involves two principal activities - the
acquisition of rights from the licensor or the seller, usually the producer of
the film, and the licensing of the distribution rights to subdistributors in
foreign markets. In general, the rights obtained from the producer relate to all
media, including theatrical distribution, video and all forms of television.
However, the licensing of rights to subdistributors may exclude certain
territories and/or media.

It is unlikely that subdistributors would bypass the Company and deal
directly with the licensors of film rights. Historically, independent licensors
of film rights prefer to deal with a single sales agent/distributor rather than
deal with various subdistributors in foreign markets. Consequently, even if a
particular subdistributor attempted to perform the function of the Company, it
is unlikely that the film's licensor would be willing to deal with such
subdistributor. Furthermore, with respect to any particular film, the Company
would typically enter into an exclusive distributorship arrangement, thereby
precluding others from competing with the Company with respect to that film.
Moreover, in certain circumstances, the Company may also provide a financing
function for the production of a film which a subdistributor would generally be
unable to provide. See "Terms of Distribution Agreements."

Terms of Distribution Agreements. Foreign distribution is generally handled
by a distributor such as the Company which coordinates worldwide sales in all
territories and media. Overseas film sales companies rely on local
subdistributors to physically deliver the motion picture and related marketing
materials and to collect revenues from local exhibitors and other local
distributors of the film. Typically, the territorial rights for a specific
medium such as television exhibition are sold for a "cycle" of approximately
seven years, after which the rights become available for license for additional
cycles.

3
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The film distribution business breaks down into two broad categories:

o Sales Agency Representation. As a sales agent, the Company would
undertake to represent and license a motion picture in all markets and media on
a best-efforts basis, with no guarantees or advances, for a fee of 15-20%, and
typically for a term ranging from seven to fifteen years.

o Distribution. As a distributor, the Company may provide the producer
of the film a guarantee of a portion of the budget of the project. This
guarantee may be in the form of a bank commitment to the producer, secured by
license agreements with foreign licensees, which is used by the producer to
finance the production. Typically, a distributor would receive a distribution
fee of 25-35% over a term ranging from 15 years to perpetuity. In addition, the
distributor may acquire a profit participation in the film project.

Once the rights to a picture are obtained either as sales agent or
distributor with minimum guarantee, the Company would then seek to license its
rights to subdistributors in the territories for which it has acquired
distribution rights. In general, the grant of rights to the subdistributors
includes all media other than satellite, although satellite is included in some
subdistributors' territories. The subdistributor in each territory generally
pays for its distribution rights with a down payment at the time the contract is
executed with the balance due upon delivery of the picture to the
subdistributor. (Delivery occurs upon the Company's acceptance of the master
negative and its obtaining access to the interpositive and certain other items
necessary for the distribution of the film). In certain instances, the
subdistributors' obligations for the payment due on delivery are secured by a
letter of credit. Sales take place primarily at three film markets - Cannes,
France in May; MIFED in Milan, Italy in October; and the American Film Market
("AFM") in Los Angeles in February.

In general, after financing (if any) is repaid, the Company applies the
distribution receipts from its subdistributors first to the payment of
commissions due to the Company, then to the recovery of certain distribution
expenses advanced by the Company, and third, to the extent not recouped as part
of the repayment of the financing, to the reimbursement of the Company for its
guarantee, if any, paid to the producer. Additional distribution receipts, if
any, are shared by the Company and the producer according to the percentages
negotiated in the agreement between the Company and the producer.

Independent Film Production and Product Acquisition

Overseas film distribution companies such as the Company primarily
represent independent producers of motion pictures (rather than motion picture
studios) in all overseas markets and all media, including theatrical release,
television and home video distribution, and cable or satellite-distributed
media.

Producers seek to be independent producers of motion pictures for a variety
of reasons, including greater creative control of a project and potentially a
greater profit participation through the retention of the copyright or the
ability to sell the film directly in particular markets. Often, young, new
directors and producers have no choice but to independently produce their
projects, and the motion picture industry has a long history of "breakthrough"
films produced at very low cost by first time producers and directors which
subsequently achieve considerable revenues. The Company has generally obtained
its product from among these independently produced films rather than from major
motion picture studios which typically have their own in-house distribution
networks. Nevertheless, from time to time, the Company has entered into "split
rights" arrangements with studios to represent a film in the overseas market.

The Company's management seeks to identify attractive projects very early
in their development, either through relationships with producers, directors and
agents or through industry announcements of new productions. In addition, the
Company's acquisitions personnel attend festivals and film markets, such as the
Sundance Film Festival and the Cannes Film Festival, in order to locate new
product.

4
<PAGE>
Business Strategy

The Company's strategy is to capitalize on its reputation and the
experience of its management team to build a global media company independent in
ownership from the major film studios and music companies. The Company's new
Board of Directors and executive management intend to integrate the Company into
today's total entertainment and media environment. "Odyssey Media", or a name
more appropriate, will be established as the parent to a diversified group of
U.S. and international companies providing both content and distribution in
film, music, publishing, sports, merchandising and other multimedia outlets.

The value and growth of "Odyssey Media" is intended to be achieved
primarily through acquisition of, and joint ventures with, established private
and public media companies. Such companies may be attracted by the strategic
relations and access to business that the other Odyssey media companies may
provide; the international markets that Odyssey may participate in; and access
to the public markets for capital and exposure.

Such companies may be identified through the experience and the strong
international entertainment, sport, banking and private investment network
contacts that the executive management and Board of Directors possess. Targeted
companies would be acquired primarily through issuance of new equity capital,
stock swaps and other means.

The parent company will provide each company with strong corporate
governance policies, direction for its management, strategic planning guidance,
control and reporting systems, marketing assistance, cross promotion and other
promotional support, as well as with assistance with business and joint venture
development, merger and acquisition assistance, executive and management search
support, and other services. The emphasis will be to optimize each individual
company's success as well as the cross-success of the entire media company. The
proposed business strategy for each division of "Odyssey Media" is as follows:

ODYSSEY PICTURES: The film production and distribution division will continue to
operate as Odyssey Pictures for the purpose of providing a presence in Hollywood
and New York and establishing a permanent presence in Europe through select
joint-venture partners. The foreign sales agency business unit of Odyssey will
be de-emphasized, since it would only be feasible as part of the Company's own
distribution network, which will be expanded as soon as new Odyssey properties
are ready for worldwide distribution. In order to insure a high quality regular
product flow, alliances will be sought with major film studios and successful
writers, directors and producers.

ODYSSEY MUSIC: The music unit of Odyssey will be initiated from Europe through
exploitation and music publishing of the Techno/Dance music genre due to its low
investment cost versus high return, and will serve as a basis to penetrate the
U.S. market. This base will allow the launch of new acts via movie sound tracks.
A U.S. operation will be set up as soon as practicable.

ODYSSEY PUBLISHING: Publishing will encompass all print and electronic media
including multi-media and Internet services as well as the traditional products
and services associated with magazines and other publications. When finally
viable, Odyssey Publishing will leverage intellectual property from the other
media properties, for example, book and multi-media products derived from motion
pictures.

ODYSSEY SPORTS: Ownership and management of sport teams and entertainment events
will be pursued at the minor and major league levels as a means of providing
content and avenues of advertising, promotion, and access to business for the
entire media company and its clients. It will also be pursued as an opportunity
for ancillary revenues through venue management and merchandising. At present,
the Company owns a minority interest in Team Sacramento, formerly known as the
Albuquerque Geckos, a second division professional soccer team in California.

5
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ODYSSEY MERCHANDISING: Manufacturing, sourcing, and distribution of merchandise
will be pursued and grown by Odyssey as a natural business complement to all
other media companies as well as a stand-alone business unit.

Strategic Objectives

To properly build Odyssey Media, the Company's Board and executive
management will seek to implement the following strategies:

- - Create and implement strong corporate governance policies and the most
effective corporate infrastructure;

- - Properly capitalize the Company and seek a NASDAQ listing;

- - Acquire profitable media-related operations that will contribute to the
Company's near-term and long-term earnings;

- - Leverage connections between investors and projects in Europe and the
United States; identify talent and management that will augment the
Company's abilities;

o Limit risk in the manner companies are acquired and investments are
financed;

o Maintain a cost consciousness in acquisition, financing, production and
distribution activities.

Recent Acquisitions

In April 1999, the Company purchased an option with the right of first
refusal to be the exclusive worldwide distributor of a motion picture entitled
"HARA." The film is an action-packed semi-biographical martial arts love story
and is expected to start pre-production in January, 2000. A company affiliated
with management of the Company owns a 50% equity interest, in Red Sun
Productions, Inc., the production company which owns all rights to the film
"HARA."

In August, 1998, the Company completed the acquisition of the assets of
Sweden-based Kimon Mediabright KB ("Kimon"), valued at $4,500,000, in exchange
for 4,500,000 shares of the Company's subordinated convertible Preferred Stock,
Series B, having a value for conversion purposes of $1.00 per share. Kimon will
have the right to convert to Odyssey common stock between June 30, 2000 and
December 31, 2000 on a dollar-for-dollar basis based on the price of the
Company's common stock at the time of conversion. Kimon assets purchased consist
of a film library with worldwide and/or Scandanavian distribution rights and
Scandanavian video distribution rights to certain Hallmark Entertainment
products.

In connection with the change of control in March, 1998, the Company
acquired an 18% equity interest in each of two corporations affiliated with Mr.
Schotte, one of which is the owner of the Albuquerque Geckos, a second division
professional soccer team in New Mexico (subsequently transferred to Sacramento),
and the other of which is a media holding company in Luxembourg. The Company
issued one-year notes in the aggregate amount of $450,000 in consideration of
the purchase of the equity interests in these companies. (In June, 1999, the
Company satisfied $135,000 of these notes, and the accrued interest thereon of
$27,225, by the issuance of 348,721 shares of the Company's restricted common
stock valued at $.465 per share). The Company's equity interest in the entity
which owns the professional soccer team has been diluted by half, or to 9%, as a
result of a capital increase/call in which the Company did not participate.

6
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Sales of Library Films

On January 2, 1996, the Company entered into an agreement with Regency
International Pictures, B.V. ("Regency"), the Company's joint venture partner,
to sell the Company's interest in the related joint ventures through which it
held approximately 50% ownership interests in four theatrical motion pictures,
entitled "Switch", "Q & A," "Guilty by Suspicion" and "This Boy's Life".
Pursuant to the agreement with Regency, the Company received $1,000,000 on
January 23, 1996 and $500,000 on February 14, 1996, in exchange for all of the
Company's interests in the joint ventures. In addition, the Company retained a
contingent interest in certain receivables, not to exceed $212,500, and a
contingent interest in future revenues from the pictures.

On August 29, 1996, the Company entered into an agreement with Kinnevik
Media Properties, Ltd. ("Kinnevik"), pursuant to which the Company agreed to
grant to Kinnevik subdistribution rights in, and to sell to Kinnevik other
distribution rights to, certain films in the Company's film library. In exchange
for these rights, the Company received a total cash consideration of $1,075,000,
payable $500,000 on closing, $275,000 six months after closing, and $300,000
eighteen months after closing. In addition, the Company retained a continuing
right to receive revenues from certain of the films, valued by management at a
minimum of approximately $150,000. As part of the transaction, the Company
granted 100,000 stock options to Kinnevik, exercisable over a three year period
at the bid price of the Company's common stock in effect on August 5, 1996
($.625). The transaction with Kinnevik closed on October 7, 1996.

Recent Financings

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 had a maturity date of one year
and accrued interest at the rate of 12% per annum. A total of 6.25 units were
sold at a purchase price of $50,000 per unit. In addition, warrants were issued
to the purchasers at the rate of 4,167 warrants for each unit sold, or a total
of 26,042 warrants (on a post Reverse Split basis). Each warrant certificate
entitled the holder thereof to purchase one share of common stock at an exercise
price of either $2.83 per share (the August warrants) or $2.37 per share (the
October warrants) over a three year period commencing one year after the closing
of the private placement. After paying expenses and commissions of $42,500, the
Company received net proceeds of $270,000 from the private placement. The notes
issued in the private placement were due to be paid by the Company upon their
respective due dates on August 28 and October 3, 1996.

The Notes and interest were not repaid as scheduled. The Company proposed
that Noteholders either defer maturity of their notes and exchange existing
warrants for shares, or cancel the notes and warrants in their entirety in
exchange for a greater number of shares. The Company offered to register any
shares issued in exchange for the notes. On August 12, 1997, the date the
registration became effective, a total of $262,500 of notes were exchanged for
595,455 shares of registered stock. The remaining notes for $50,000 (held by a
single investor) have not been paid and are in default.

In September, 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 (and an additional 1,000,000 warrants) in consideration of
$750,000. Following a dispute between the parties concerning the satisfaction of
certain conditions to closing, the parties reached a settlement in June, 1997,
pursuant to which the investor purchased 66,667 shares of common stock of the
Company for $50,000, or $.75 per share.

In September, 1996, the Company reached an agreement with Paramount
Pictures, pursuant to which Paramount would cancel the Company's contractual
guarantee of $2.7 million in full, in exchange for which the Company agreed to
(i) relinquish all further distribution rights to "Wuthering Heights"; (ii)
assign to Paramount all of its rights in any outstanding distribution agreements
for the film, and any receivables to be generated therefrom; (iii) guarantee

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that Paramount would collect a total of $500,000 in sales revenue from existing
distribution agreements no later than January 15, 1997. Existing license
agreements yielded approximately $420,000 in net revenues prior to January 15,
1997 (of which the Company would have been entitled to retain approximately 20%
thereof in commissions). The Company paid $250,000 in net revenues to Paramount
and is currently in negotiations with Paramount regarding the timing of the
remaining $250,000 payment.

In January, 1997, prior counsel to the Company agreed to exchange a
promissory note in the face amount of $70,000 for 120,000 shares of the
Company's common stock.

In February, 1997, the Company completed the sale of 500,000 shares of
common stock and 500,000 common stock purchase warrants to four offshore
European investors for an aggregate consideration of $375,000. The warrants are
exercisable over a three year period (expiring February 25, 2000) at an exercise
price of $1.06 per share. One of the investors was Johan Schotte, who was
subsequently elected as CEO of the Company in March, 1998.

In April, 1997, Stephen R. Greenwald, Lawrence I. Schneider and Robert
Miller, Jr., all directors of the Company, made loans to the company in the
amounts of $50,000, $25,000 and $25,000, respectively. Each loan was payable on
demand and accrued interest at the rate of 2 points over prime per annum. The
notes were secured by a collateral assignment of the Company's $300,000 note
receivable from Kinnevik. In consideration of making the loans, the lenders
received five-year warrants to purchase shares of common stock of the Company,
exercisable at $1.00 per share. Messrs. Schneider and Miller each received
25,000 warrants and Mr. Greenwald received 50,000 warrants as consideration for
making the loans to the Company. In addition, two independent unaffiliated third
parties made additional $25,000 loans to the Company in June and August, 1997 on
the same terms and conditions as the loans made by Mr. Greenwald, Schneider and
Miller. In May, 1998, the loans of Mr. Schneider and one of the unaffiliated
parties were paid from the proceeds of the Kinnevik receivable. The remaining
lenders agreed to a rollover of their loans (aggregating $100,000) against a
second Kinnevik receivable and, in consideration, will receive an additional
50,000 warrants in the aggregate, exercisable at $1.00 per share over a three
year period. In September, 1998, all but $25,000 of these loans were repaid from
the proceeds of the Kinnevik receivable. The remaining lender, Robert E. Miller,
Jr., a director of the Company, agreed to a rollover of his $25,000 loan on an
unsecured basis for an additional six month period with interest at the rate of
10% per annum. Thereafter, Mr. Miller agreed to a further six-month extension
(through September, 1999) in consideration of an increase in the interest rate
on the loan to 12% per annum, the issuance of an additional 12,500 common stock
purchase warrants at $1.00 per share, and an extension of the expiration date on
all warrants issued to date to the year 2004.

In September, 1997, the Company and Kinnevik Media Properties, Ltd.
executed an agreement pursuant to which Kinnevik agreed to purchase 500,000
shares of convertible, redeemable preferred stock of the Company, par value
$1.00 per share, for an aggregate purchase price of $500,000. Kinnevik agreed to
purchase the first $250,000 of preferred stock at the closing, an additional
$125,000 of preferred stock 90 days after closing, and the final $125,000 of
preferred stock 270 days (subsequently extended to 360 days) after closing. The
preferred stock would bear interest at the rate of 10% per annum which would be
paid in kind semi-annually by the issuance of additional shares of preferred
stock at a par value of $1.00 per share. Kinnevik would have the right for a
five-year period to convert the preferred stock into common stock of the Company
on a share-for-share basis. The Company would have the right to redeem the
preferred stock for $1.25 per share in the event the Company's common stock
traded at a price of $2.00 per share or more for a period of 20 consecutive
trading days. The Company agreed to help secure television distribution rights
for Kinnevik from third parties, and introduce various projects to Kinnevik from
time to time which may be of interest to Kinnevik. In the event Kinnevik
acquires any rights as a result of any introductions made by the Company, the
parties agree to mutually determine the value of such services and to redeem
shares of the preferred stock at $1.00 per share based on the aggregate value of
the services so determined.

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The Company received $150,000 in funding from the Augustine Fund, L.P. in
July, 1998. In exchange for the financing, the Augustine Fund received a zero
coupon $150,000 convertible note as well as up to 150,000 transferable warrants,
exercisable at $1.60 per share for a three year period. Augustine can convert
into restricted shares of the Company's common stock at a discount to the market
price of Odyssey common stock at the time of conversion (i.e., at the lower of
the market price on the closing date, or 80% of the market price prior to
conversion). Augustine and certain Augustine associated parties were also issued
a total of 45,000 shares of restricted common stock in connection with the
transaction.

In August, 1998, three unaffiliated investors loaned 4,000,000 Belgiam
Francs (approximately $100,000) and received one year convertible notes with
interest at 10% per annum (the notes are convertible at a 15% discount to the
market price).

In September 1998 an unaffiliated third party loaned $25,000 to the Company
and received a six-month note with interest at 10% per annum. Thereafter, the
lender agreed to a six-month extension on the note (through September, 1999) in
consideration of an increase in the interest rate on the loan to 12% per annum,
the issuance of 12,500 common stock purchase warrants at $1.00 per share, and an
extension of the expiration date on all warrants issued to date to the year
2004.

In November 1998, the Company issued 200,000 common shares to an
unaffiliated party in exchange for $88,000 of barter credits.

In December 1998, (i) an unaffiliated party purchased 625,000 common shares
at $.30 per share for a total purchase price of $187,500 (see "Certain
Relationships and Related Transactions"); and (ii) counsel to the Company
converted $40,000 of accrued legal fees into 100,000 shares of common stock of
the Company.

During the period between April, 1999 and September, 1999, the Company
completed four private placements to offshore investors, the first of which was
completed for 575,000 shares of common stock at a purchase price of $.30 per
share (resulting in gross proceeds to the Company of $172,500), and the latter
three of which were completed for an aggregate of 1,600,000 shares of common
stock at a purchase of $.40 per share (resulting in gross proceeds to the
Company of $400,000).

In August 1999, the assignee of a former director of the Company elected to
convert accrued wages owed by the Company in the amount of $81,103 to 300,678
shares of the Company's common stock.

Competition

The entertainment industry generally, and the film industry in particular,
are highly competitive. The Company's competition includes the smaller
independent producers as well as major motion picture studios and music
companies. Many of the Company's competitors have financial and other resources
which are significantly greater than those available to the Company.

Operations

The Company's operations have been greatly reduced as a result of the
restructuring of the Company by new management. The Company's principal office
is located in Dallas, Texas (see "Properties") and, as of October 8, 1999, the
Company had three full-time employees, consisting of Mr. Schotte, Mr. Koshakji,
and Mr. Greenwald, the CEO, President, and Managing Director of the Company,
respectively.

Tax Loss Carryforward

The Company is entitled to the benefits of certain net operating loss
carryforwards to reduce its tax liability. The utilization by the Company of
such tax loss carryforwards is limited under applicable provisions of the
Internal Revenue Code of 1986, as amended, and the applicable regulations
promulgated thereunder. As of June 30, 1999, there were approximately
$32,000,000 in net operating loss carryforwards remaining to be used to reduce
tax liability. The utilization of approximately $4.9 million of these losses in
future periods will be limited to approximately $350,000 per year.

9
<PAGE>
Item 2. Properties
- -------------------

The Company presently conducts its operations out of leased premises at
1601 Elm Street, Dallas, Texas, consisting of approximately 2,500 square feet.
The premises are presently being made available to the Company as an
accommodation by a company affiliated with Mr. Johan Schotte, the CEO of the
Company. Rent expense for each of the fiscal years ended June 30, 1999, 1998 and
1997 was $84,939, $69,002 and $38,772, respectively. In June, 1998, the Company
entered into a sublease for office space in Los Angeles, California with an
affiliate of the CEO of the Company. The sublease was on a month-to-month basis
at the rate of $1,500 per month. The Company utilized these premises for the
period June through December, 1998. In January, 1999, the Company entered into a
sublease for approximately 5,000 square feet of office space at the rate of
$12,823 per month for premises located at 2049 Century Park East, Suite 2750, in
Los Angeles, California. The Company relinquished this sublease in May, 1999 in
consideration of a lease surrender settlement with the landlord in the amount of
$5,000.

Item 3. Legal Proceedings
- --------------------------

On December 20, 1990, Hibbard Brown & Company, Inc. ("Hibbard Brown") filed
a complaint entitled Hibbard Brown & Company, Inc. v. Double Helix Films, Inc.,
Odyssey Entertainment Ltd. and Communications and Entertainment Corp. in the
Supreme Court of the State of New York, County of New York. The Complaint sought
payment of $300,000 under an agreement with the Company, Odyssey, Double Helix
and Hibbard Brown dated December 21, 1989 for certain investment banking
services allegedly performed in introducing Odyssey and Double Helix and
assisting them in consummation of the Mergers by which they became wholly-owned
subsidiaries of the Company. A counterclaim seeking recovery of $50,000 paid to
Hibbard Brown upon execution of the Agreement was asserted.

Hibbard Brown's motion for summary judgment was granted in October, 1991.
On January 30, 1992, the Company moved, by order to show cause, to renew and
thereupon deny, dismiss or stay Hibbard Brown's previously granted motion for
summary judgment on the ground that Hibbard Brown had intentionally concealed
the fact that it was an unauthorized foreign corporation transacting business in
New York. By Order dated March 2, 1992, the court granted the Company's motion
in part by renewing the action and staying judgment pending Hibbard Brown's
qualification in New York. On October 29, 1992, Hibbard Brown moved for an order
vacating the stay of judgment, a declaration that it was now an authorized
foreign corporation and reinstatement of the summary judgment granted in
October, 1991 or, in the alternative, to rehear its motion for summary judgment
on the original papers and grant judgment in its favor.

On January 29, 1993, Double Helix, Odyssey and the Company cross-moved for
an order granting reargument and/or renewal of Hibbard Brown's motion for
summary judgment and consolidating the litigation with an action that the
Company had brought against Hibbard Brown (described below), or staying the
issuance, entry and execution of judgment pending the resolution and trial of
the Company's action against Hibbard Brown.

On March 26, 1993, the court issued a Decision and Order vacating the stay
of entry of the $300,000 judgment against the Company and granting the Company's
cross-motion for a stay of execution pending the determination of the Company's
action against Hibbard Brown. The Company's cross-motions for reargument and
renewal and consolidation were denied.

By Decision and Order dated June 18, 1993, the court affirmed the stay of
execution of the judgment, but required the Company to obtain a bond to secure
the stay. The Company obtained a non-collateral bond.

On March 5, 1992, the Company instituted an action entitled Communications
and Entertainment Corp. v. Hibbard Brown & Company in the Supreme Court, New
York County, for the return of 150,000 shares of Common Stock previously issued
on the ground that Hibbard Brown failed to perform the required services.
Hibbard Brown counterclaimed for breach of contract.

10
<PAGE>
In July 1993, after considerable pre-trial discovery, the Company and
Hibbard Brown moved for summary judgment. By Decision and Order dated August 11,
1993, the court denied both motions. Both parties appealed. On March 3, 1994,
the appellate court affirmed the denial of summary judgment.

On or about October 14, 1994, Hibbard Brown filed a voluntary petition for
relief under Chapter 11, Title 11 of the United States Code with the United
States Bankruptcy Court, Southern District of New York. Consequently, the
Company's action against Hibbard Brown has been automatically stayed. The
Company has filed a Proof of Claim. In January 1998 the U.S. Bankruptcy Court of
the Southern District of New York approved a final settlement of the bankruptcy
of Hibbard Brown.

On or about September 11, 1992, Joseph Duignan brought an action in the
Superior Court of New Jersey, Mercer County, entitled Joseph Duignan v. Double
Helix Films Limited Partnership No. 1, L.P., Double Helix Films, Inc., Cinecom
International Films, Film Gallery, Inc., Stan Wakefield, Jerry Silva, Arthur
Altarac and Anthony Tavone (MER-L-4262-92). Jerry Silva, the only defendant who
was served, is former Vice Chairman of the Board of Directors of the Company.
Mr. Silva has demanded that the Company indemnify him against any expenses,
judgments, and amounts paid in settlement of the action. The Company contends
that it is not required to indemnify Mr. Silva because he breached his fiduciary
duties to the Company.

Mr. Duignan claims that he invested $75,000 to acquire a partnership
interest in Double Helix Films Limited Partnership No. 1 and that Mr. Silva
forged or caused to be forged his signature on a Subscription Agreement dated
July 28, 1986. The Complaint alleges claims for rescission, unjust enrichment
(against Double Helix), conversion, fraud, breach of contract, breach of
fiduciary duty and breach of covenants of good faith and fair dealing (against
Mr. Silva and Double Helix). Mr. Duignan seeks to recover compensatory damages,
including but not limited to, his alleged $75,000 investment, punitive damages
and attorney's fees. Mr. Silva has answered the Complaint.

On or about December 30, 1994, Krishna Shah, who allegedly served as
President of Double Helix from about July 1991 until about March 1993, brought
an action in the Superior Court of California, Los Angeles County, entitled
Krishna Shah v. Norman Muller, Communications and Entertainment Corp., ATC II,
Carnegie Film Group, Inc., Jerry Minsky, Perry Scheer, Susan Bender, Larry
Myers, Robert Hesse, Double Helix Films, Inc. and Does 1-100, alleging claims
for breach of an oral agreement to pay Mr. Shah $152,000 (which he allegedly
advanced for the benefit of Double Helix) and to give him a 19.5% ownership
interest in its corporate successors. The Company's current management has paid
Mr. Shah the sum of $15,000 in July 1998 and in full settlement of all claims
against the Company.

In The Private Lessons Partnership v. Carnegie Film Group, Inc., Monogram
Pictures Corp., Filmways Entertainment Corp., ATC, Inc., Krishna Shah, Lonnie
Romati, Gerald Muller, Jerry Minsky and Does 1-100 (California Superior Court,
Los Angeles County, Case No. BC091840), the plaintiff asserted claims for breach
of oral contract, fraud in the inducement and fraudulent conveyance against Mr.
Shah, seeking damages in the amount of $315,000, plus further unspecified
compensatory damages and punitive damages. In August 1995, Mr. Shah filed a
cross-complaint against the Company, Double Helix Films and Norman Muller for
indemnification, apportionment of fault and declaratory relief. In addition to
compensatory damages, he seeks punitive and exemplary damages, emotional
distress damages and attorney's fees. The Company has answered the
cross-complaint.

11
<PAGE>
restraining order and a preliminary injunction. In June 1995, the Court denied
plaintiffs an attachment and stayed the action pending arbitration in New York.
In September, 1996, the Court dismissed the Complaint. In December, 1996, the
Company settled the outstanding litigation with Generale Bank ("Generale")
(formerly known as Credit Lyonnais Bank Nederland N.V.) and Cinecom
Entertainment Group Inc. Pursuant to the settlement agreement, the Company
agreed to pay to Generale the sum of $275,000 in complete settlement of the
claim, payable $25,000 upon execution of the settlement agreement, $25,000 on
each of June 30 and December 31 in the years 1997, 1998 and 1999, and $100,000
on June 30, 2000. Interest on the installments (at the rate of LIBOR plus 1% per
annum) will be waived provided the Company remains in compliance with the agreed
upon payment schedule. The Company and Generale later agreed upon a new payment
schedule as follows: $25,000 on or before October 15, 1997 (payment was made);
$30,000 on each of April 15, 1998, June 30, 1998, December 31, 1998, June 30,
1999, and December 31, 1999; and $100,000 on June 30, 2000. The Company is in
receipt of a demand letter dated May 4, 1998. The letter demands that the
company Cure the non-payment of a $30,000 installment due April 15, 1998.
According to the agreement between the Company and Generale, the Company had ten
days after receipt of the letter to cure the default. The default has not yet
been cured. The consequences of not curing the default is the entry of a
confession of judgment already executed by the Company for the amount of
$275,000. This confession of Judgment is against Odyssey Distributors, Ltd., a
wholly owned but non-operating subsidiary of the Company.

In August 1995, G.P. Productions, Inc. ("GP") and Greenwich Subject Films,
Inc. ("Greenwich") commenced an action entitled G.P. Productions, Inc. and
Greenwich Studios, Inc. v. Double Helix Films, Inc., Communications and
Entertainment, Inc., Krishna Shaw, Gerald Muller and Norman Muller in the United
States District Court, Southern District of Florida (Case No. 95-1188). Mr.
Muller has demanded that the Company indemnify him against any expenses,
judgments and amounts paid in settlement of the action. The Company contends
that, by virtue of Mr. Muller's breaches of fiduciary duty and violation of his
obligations to the Company, it is not required to provide indemnification.

GP and Greenwich allege that they are the exclusive owners of the films
"The Gallery" and "South Beach". They assert claims for copyright infringement,
unfair competition, breach of contract, accounting, conversion, civil theft,
conspiracy and fraudulent conveyance. The Complaint demands a recall of the
films, an attachment, preliminary and permanent injunctive relief, an
accounting, and unspecified compensatory, punitive and treble damages. The
Company's motion to transfer venue of the action was granted in November, 1995,
and the case was transferred to the United States District Court for the
Southern District of New York. There has been no activity in this matter since
the transfer of venue in 1995.

In October, 1995, Canon Financial Services filed a Complaint in the
Superior Court of New Jersey entitled Canon Financial Services, Inc. v.
Communications and Entertainment Corp. The plaintiff is claiming that it is due
$47,499.83, plus damages, pursuant to a lease agreement. The Company has filed
an Answer in this action and plaintiff's motion for summary judgment has been
denied by the Court. No trial date has yet been set in this matter.

In December, 1995, Robert F. Ferraro, a former director of the Company,
brought an action against the Company in the Supreme Court of the State of New
York, New York County. The action was brought on a promissory note in the amount
of $25,000 and plaintiff obtained a judgment on a summary judgment motion. The
plaintiff has not yet moved to enforce the judgment and the Company is
considering whether or not it has a claim for indemnification against prior
management in connection with the issuance of the note. The Company is presently
settling with Mr. Ferraro.

In March, 1996, an action was filed against the Company in Los Angeles
Municipal Court by Judy Hart, in which the plaintiff claims that she is due
$17,920 pursuant to a promissory note. The Company has filed a cross-claim
seeking offsets against the amount due and other damages. On May 21, 1998, a
default judgment was entered on behalf of plaintiff in the amount of $22,261.
Subsequently, plaintiff filed a motion to include attorneys fees and costs in
the aggregate amount of approximately $17,000. The Company is attempting to
reach a settlement with plaintiff.

12
<PAGE>
In March, 1996, a class action complaint was filed against the Company
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 subsidiary, Double Helix Films, Inc. 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 "Diane Pfannebecker v. Norman Muller,
Communications and Entertainment Corp., Jay Behling, Jeffrey S. Konvitz, Tom
Smith, Jerry Silva, David Mortman, Price Waterhouse & Co., Todman & Co., and
Tenato Tomacruz." Following the filing of the second action, the first action
was dismissed by stipulation in May 1997. The Company filed a motion to dismiss
the complaint in the second action and after a hearing on the motion in July,
1997, the Court dismissed the federal securities law claims as being time-barred
by the applicable statute of limitations, and dismissed the state securities law
claims for lack of subject matter jurisdiction. The lower court's dismissal of
this action was upheld on appeal by the Ninth Circuit. 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 upon their wrongful actions and
failure to comply with various obligations to the Company. The case was refiled
in California state court in August 1998 and the Company has retained counsel to
represent itself. The Court has granted motions to dismiss two of the complaints
filed by the Plaintiff who has also filed a third complaint. Counsel expects a
further motion to dismiss to be granted by the court.

In December, 1997, the Directors Guild of America ("DGA") obtained an
arbitration award against Down Range Productions, Inc., a wholly owned
subsidiary of Odyssey ("Down Range"), on behalf of Kahn Brothers Pictures fso
Michael Kahn, Charles Skouras, and Scott C. Harris. Down Range was ordered to
pay Kahn Brothers Pictures the total sum of $155,041; Charles Skouras the sum of
$32,360; and Scott C. Harris the total sum of $8,868; plus interest at 18% per
annum on each of these amounts from April 1, 1997. Down Range was also ordered
to pay the DGA $2,500. Down Range was also ordered to assign to the DGA all of
Down Range's right, title and interest in the motion picture "Down Range,"
including the screenplay for the motion picture, and Down Range was enjoined
from licensing the motion picture or the screenplay to any third party other
than the DGA. Down Range was also ordered to pay the arbitrator $2,250.

Kahn Brothers Pictures fso Michael Kahn also filed a claim against Down
Range Productions, Inc. and the Company with the Writers Guild of America West
(WGA) for unpaid writing services on "Down Range." That claim has been settled
by the current management for the amount of $15,000 in July 1998.

The Screen Actors Guild ("SAG") has also asserted that there are amounts
owing to several actors arising out of "Down Range." In September, 1999, SAG
obtained an arbitration award against Down Range for a total amount of $96,183,
inclusive of salaries to the actors, pension and health contributions and late
fees. Down Range was also ordered to pay $200 to the arbitrator. Additionally,
there were two actors, Corbin Bernsen and Jeff Fahey, who had pay-or-play
contracts. The outcome of these contracts and the actors' claims have not been
resolved.

In April, 1998, an action was commenced against the Company by Siegel &
Gale, a provider of brochure materials, seeking payment of $48,695, plus costs,
related to work done by Siegel & Gale for the Company. The Company settled this
matter in October 1999 for the amount of $25,000.

Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

13
<PAGE>
PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
- -----------------------------------------------------------------------------

The following table sets forth the range of high and low bid information
for the Common Stock of the Company as reported by the Nasdaq Stock Market, Inc.
("Nasdaq") on a quarterly basis for each of the two preceding fiscal years. On
May 1, 1996, Nasdaq notified the Company that its shares of Common Stock were
being deleted from Nasdaq's SmallCap Market, effective May 2, 1996, because the
Company did not maintain a combined capital and surplus of $1,000,000, as
required by Section 1(c)(3) of Schedule D of the NASD By-Laws. Since May 2,
1996, the Company's shares have traded in the over-the-counter market on the OTC
Bulletin Board. The Company's Common Stock trades under the symbol OPIX.

No dividends have been declared or paid with respect to the Common Stock.

The bid quotations represent inter-dealer prices and do not include retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.

Common Stock
------------

Fiscal 1998 High Low
- ----------- ---- ---
First Quarter $.44 $.19
Second Quarter .22 .08
Third Quarter .88 .06
Fourth Quarter .82 .19

Fiscal 1999
- -----------
First Quarter $.94 $ .37
Second Quarter .70 .26
Third Quarter .66 .30
Fourth Quarter .51 .25

As of October 8, 1999, there were approximately 5,533 record holders of the
Company's Common Stock.

14
<PAGE>
Item 6. Selected Financial Data (in thousands, except per share data).
- ---------------------------------------------------------------------

The following table sets forth the selected financial data for the Company
and should be read in conjunction with the Consolidated Financial Statements and
Notes thereto, and with Management's Discussion and Analysis of Financial
Condition and Results of Operations which appear elsewhere in this report.

For the Years Ended June 30,
<S> <C> <C> <C> <C> <C>

1999 1998 1997 1996 1995

Income Statement Data

Revenues......................................... $246 $41 $141 $1,011 $1,521
Income(loss) from continuing operations.......... (1,388) (1,119) 69 (4,960) (6,852)
Income(loss) from discontinued operations........ -- -- -- -- --
Net income (loss)................................ (1,388) (1,119) 69 (4,960) (7,310)

Per Share Data*

Income(loss) from continuing operations.......... (.22) (.25) .02 (2.17) (2.94)
Income(loss) from discontinued operations........ -- -- -- -- (0.20)
Net income (loss)................................ (.22) (.25) .02 (2.17) (3.14)
Cash dividends................................... -- -- -- -- --
Weighted average shares.......................... 6,459 4,403 2,294 2,284 2,332

Balance Sheet Data

Film costs ...................................... 4,378 110 120 1,001 10,656
Total assets .................................... 5,439 675 740 2,448 15,078
Indebtedness .................................... 1,192 1,079 962 562 249
Shareholders' equity ............................ 2,161 (2,083)(2,226) (2,749) 1,979

</TABLE>

- ------------------------------------

Per share data and weighted average shares for all periods have been restated to
reflect the effect of a one-for-six reverse stock split in March 1996.

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
- ----------------------------------------------------------

Results of Operations

Years Ended June 30, 1999 and 1998

Net loss for the year ended June 30, 1999 was due to the fact that the
Company did not release any new films. Revenues for the twelve months ended June
30, 1999 increased to $288,430 compared to $42,630 for the twelve months ended
June 30, 1998. No new films became available for delivery during either period.

Costs related to revenues increased to $261,050 for the twelve months ended
June 30, 1999 as compared to $20,019 for the twelve months ended June 30, 1998.
The increase is primarily related to costs associated with exploiting the Kimon
and Hallmark assets.

Selling, general and administrative expense increased by $209,419 to
$1,282,553 for the twelve-month period ended June 30, 1999 from $1,073,134 for
the comparable period ending June 30, 1998. The increase is primarily due to
increases in personnel and related expenses.

15
<PAGE>
There was no other income recognized in the twelve-month period ended June
30, 1999 and June 30, 1998.

Since the change in management control in March 1998, new management has
embarked on a program to reverse the unfavorable results by taking steps to
recapitalize the Company, purchasing film assets, acquiring interests in new
pictures in development or pre-production, and by acquiring equity interests in
two corporations, one of which is the owner of a professional soccer team, and
the other of which is a media production company.

Years Ended June 30, 1998 and 1997

Net loss for the year ended June 30, 1998 was due to the fact that the
Company did not release any new films and did not enter into any new agreements
for the release of existing rights in films. Revenues for the twelve months
ended June 30, 1998 decreased to $42,630 compared to $141,202 for the twelve
months ended June 30, 1997. No new films became available for delivery during
either period.

Costs related to revenues decreased to $20,019 for the twelve months ended
June 30, 1998 as compared to $565,610 for the twelve months ended June 30, 1997.
The decrease is primarily related to the fact that there were lower film
revenues in the current year. Additionally, during the twelve months ended June
30, 1997, development and festival costs in the amount of $249,544 were written
off, litigation and settlement costs related to the Film Bridge settlement in
the amount of $148,174 were expensed, and $435,102 in inventory costs related to
the picture Downrange were written off. This was primarily offset by a write-off
of $449,163 in participation liabilities related to the Kinnevik library which
were settled subsequent to the Kinnevik sale.

Selling, general and administrative expense decreased by $605,316 to
$1,073,134 for the twelve-month period ended June 30, 1998 from $1,678,450 for
the comparable period ending June 30, 1997. The decrease is primarily due to
decreases in personnel and related expenses.

There was no other income recognized in the twelve-month period ended June
30, 1998. Other income for the twelve months ended June 30, 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 $1,245,758 gain from the
cancellation of a contractual obligation related to the Company's distribution
rights in "Wuthering Heights," and recognition of 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.

Liquidity and Capital Resources

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
adequate to meet its ongoing operation requirements. These factors raise
substantial doubt about the Company's ability to continue as a going concern.

At June 30, 1999, the Company held approximately $4,715 of cash.

New management has taken significant steps to recapitalize and fund the
Company's operations.

The company signed an agreement with Kimon on July 14, 1998 to purchase the
assets of Kimon, valued at $4,500,000, in exchange for 4,500,000 Odyssey shares
of subordinated convertible preferred stock, Series B, having a value of $1.00
per share for conversion purposes. Kimon shall be able to convert to Odyssey
common stock between June 30, 2000 and December 31, 2000 on a dollar-for-dollar
basis based on the price of the Company's common stock at the time of
conversion. Kimon assets purchased consist of a film library with worldwide
and/or Scandanavian distribution rights and Scandanavian video distribution
rights to certain Hallmark Entertainment products.

16
<PAGE>
In June, 1998, the company applied for, and was accepted for, trading on
the Berlin Stock Exchange, under the symbol "ODY." The German company Berliner
Freiverkehr (Atkien) assisted the Company in the application and signed an
agreement with the Company to serve as a market maker/coordinator in exchange
for 200,000 warrants having an exercise price of $1.55 per share, exercisable
during the two-year period commencing June 23, 1998.

The Company received $150,000 in funding from the Augustine Fund L.P. in
July 1998. In exchange for the financing, the Augustine Fund received a $150,000
convertible note as well as up to 150,000 transferable warrants, exercisable at
$1.60 per share for a three year period. Augustine can convert into restricted
shares of the Company's common stock at a discount to the market price of the
common stock at the time of the conversion (i.e., at the lower of the market
price on the closing date, or 80% of the market price prior to conversion).
Augustine and certain Augustine associated parties were also issued a total of
45,000 shares of restricted common stock in connection with the transaction.

In August, 1998, three unaffiliated investors loaned 4,000,000 Belgian
Francs (approximately $100,000) and received one year convertible notes with
interest at 10% per annum (the notes are convertible at a 15% discount to the
market price).

In September 1998 an unaffiliated third party loaned $25,000 to the Company
and received a six-month note with interest at 10% per annum.

In November 1998, the Company issued 200,000 common shares to an
unaffiliated party in exchange for $88,000 of barter credits.

Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------

The response to this Item is submitted as a separate section of this report
commencing on page F-1.

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
- -----------------------------------------------------

Reference is made to the Company's Reports on Form 8-K, dated September 24,
1997, and February 13, 1998, with respect to a change in accountants for the
Company.

17
<PAGE>
PART III

Item 10. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------

The directors and executive officers of the Company are as follows:

Name Age Position

Johan Schotte 38 Chairman of the Board
& Chief Executive Officer

Pierre Koshakji 37 President & Director

Stephen R. Greenwald 59 Managing Director &
Director (resigned
both positions in
September, 1999)

Robert E. Miller, Jr. 52 Director

Patrick Speeckaert 52 Director

Ian Jessel 54 Director

Set forth below is information regarding the business experience of the
current Directors and executive officers of the Company.

Johan Schotte is Founder and Chairman of Media Trust S.A. and Entertainment
Education Enterprises Corporation. Mr. Schotte has an extensive background in
banking and management, and holds an M.B.A. degree from the University of Dallas
in Irving, Texas. Before joining Odyssey in 1998, he served as Managing Director
of Rocket Pictures, an international film production and distribution company,
for whom he produced the satirical comedy "Cannes Man" in 1996.

Pierre R. Koshakji is co-founder, and was President and director of,
Entertainment Education Enterprises Corporation (E3 Corporation), an
international sports, entertainment, and investment group. E3 Corporation has
offices in Dallas, Luxembourg and Los Angeles and has a professional affiliation
with the Lamar Hunt group of companies, Unity Hunt. Prior to E3 Corporation, Mr.
Koshakji served as Director of Business Development with Unity Hunt/Hunt Sports
Enterprises where he evaluated, negotiated, and implemented targeted
acquisitions and projects. He played a development role in establishing major
league soccer (MLS) and in establishing the two Hunt MLS teams in Columbus, Ohio
and in Kansas City, Missouri, and served as Senior Vice-President of Marketing
on the Las Vegas domed Stadium project as well as marketing consultant to the
San Francisco Giants new ball park at China Basin. Other positions and titles
Mr. Koshakji has held during his professional career include Deputy Executive
Director of the 1994 World Cup, Dallas Venue, including the responsibility of
liaison with the European Broadcast Union and International Broadcast Center,
the position of Director at KMPG Management Consulting in the country of Kuwait,
and electrical engineer at Chrysler Technologies Airborne Systems. Mr. Koshakji
graduated from Vanderbilt University BSEE with honors and received his Masters
of Business Administration at Southern Methodist University.

18
<PAGE>
Stephen R. Greenwald served as Chief Executive officer and Co-Chairman in the
Office of the Chairman of Odyssey from September, 1995 through March, 1998.
Since 1990, Mr. Greenwald has been a consultant to banks and other clients in
the media and film business, most recently having served as chief executive
officer of Vision International, an international film distribution company
based in Los Angeles, from February,1994 through June,1996. Mr. Greenwald has
also been involved in financing and distributing independently produced motion
pictures including, among others, "Blue Velvet," "Dune," "King of Comedy,"
"Ragtime," "Crimes of the Heart," and "Manhunter." Mr. Greenwald also
co-produced the film "Amityville II: the Possession." Mr. Greenwald resigned as
a Director of the Company in September, 1999 to pursue other interests, and has
also resigned as Managing Director (effective October 31, 1999) subject to
satisfaction of certain terms set forth in a settlement agreement with the
Company. See "Compensation Agreements, Termination of Employment and
Change-in-Control Arrangements."

Robert E. Miller, Jr. is a private investor and principal shareholder of Word
Power Incorporated d/b/a Hollywood North Productions, a privately-held
development company for feature films and movies-of-the-week. Mr. Miller is also
Associate Director of Trade Task Group, Inc., a strategic planning consulting
firm where he has served as manager of client development since 1984. He is also
a board member emeritus of the International Standards Institute and a member of
the board of advisors of the World Film Institute, sponsors of "The Family Film
Awards."

Patrick Speeckaert for more than the past five years has served as Managing
Director of Morrow & Co., Inc. in New York City. Morrow & Co., Inc. is a leading
company specializing in advising international corporations with respect to
issues involving corporate governance, shareholder relations and solicitations.
Mr. Speeckaert was appointed to the Board of Directors on January 1, 1999.

Ian Jessel is an experienced film and television executive who served as
President of Miramax International during the period from 1992 to 1995, and as
President of Spelling Films International for the two-year period prior thereto.
During the 1980's, Mr. Jessel also held top executive positions at CBS
Theatrical Films, I.T.C. International, and Nelson Entertainment. Films released
during his presidency at Miramax International include Robert Altman's
"Pret-A-Porter," Chen Kaige's "Farewell My Concubine," Quentin Tarantino's "Pulp
Fiction," and Woody Allen's "Bullets Over Broadway." Mr. Jessel currently serves
as President and CEO of Condor Communications LLC, a company he founded in 1995
to co-finance, co-produce, and supervise the international distribution of,
quality motion pictures. Mr. Jessel was appointed to the Board of Directors on
January 1, 1999.

Meetings and Committees of the Board of Directors

For the fiscal year ended June 30, 1999, there were 7 meetings and/or
written consents in lieu of meetings of the Board of Directors. All Directors
attended or consented to in excess of 75% of the meetings (and consents in lieu
of meetings) of the Board of Directors during said fiscal year. The Board of
Directors has a nominating committee consisting of Mr. Patrick Speeckaert, who
acts as Chairman of the committee, and Mr. Robert E. Miller, Jr. The Board of
Directors does not presently have any standing audit or compensation committees,
the customary functions of such committees being performed by the entire Board
of Directors. The Board of Directors intends to form such committees in the near
future.

19
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% stockholders are
required by the Commission's regulations to furnish the Company with copies of
all section 16(a) forms they file. To the Company's knowledge, based solely on a
review of the copies of reports furnished to the Company during the fiscal year
ended June 30, 1999, the Company's officers, directors and greater than 10%
stockholders complied with all filing requirements under section 16(a) except
that (i)Mr. Greenwald did not file Form 4's to reflect the disposition of
approximately 137,586 shares pursuant to Rule 144, and (ii) Lecoutere Finance,
S.A. did not file a Form 4 to reflect the issuance of 348,721 shares to
Lecoutere in satisfaction of a promissory note, and the subsequent transfer of
331,285 shares to an affiliated entity.

Item 11. Executive Compensation.
- --------------------------------

The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer of the
Company, the four most highly compensated executive officers who were executive
officers as of June 30, 1999, and other significant employees for whom inclusion
in the following table would be required but for the fact that such employees
were not executive officers of the Company at the end of the most recently
completed fiscal year:

Summary Compensation Table

Annual Compensation Long-Term
Securities
Name and Fiscal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
- -------- ---- ------ ----- ------------ ------- ------------

Johan Schotte 1999 29,050 -- -- -- 138,950(1)
Chief Executive 1998 5,000 -- -- -- 43,000(1)
Officer; Chairman

Pierre Koshakji 1999 36,750 -- -- -- 131,250(1)
President 1998 5,000 -- -- -- 43,000(1)

Stephen Greenwald 1999 26,000 -- -- -- 118,000(1)(2)
Managing Director 1998 83,000 -- -- -- 96,000(1)(2)
1997 127,500 -- -- 100,000(2) 97,500(1)(2)

Ian Jessel 1999 50,000 18,750(4) -- -- 137,495(3)
C.E.O., Film &
Television Division

</TABLE>

(1) Represents deferred compensation which accrued during the fiscal years
indicated. See "Compensation Arrangements, Termination of Employment and
Change-in-Control Arrangements" for a more detailed explanation of the
terms of the compensation agreements between the Company and its executive
officers.

20
<PAGE>
(2) The cash compensation and stock options reflected as being paid to or
received by Mr. Greenwald in the foregoing table were actually paid to or
received by G & H Media, Ltd., a consulting firm of which Mr. Greenwald is
a principal and controlling party. The compensation to Mr. Greenwald does
not include compensation paid to a law firm of which Mr. Greenwald is a
member. See "Certain Relationships and Related Transactions."

(3) See "Compensation Arrangements, Termination of Employment and
Change-in-Control Arrangements" for a more detailed explanation of the
terms of the compensation agreements between the Company and Mr. Jessel.

(4) Mr. Jessel received 50,000 shares of the Company's common stock in January,
1999 as a sign on bonus. The closing bid price of the common stock at that
time was $.375.

Options/Stock Appreciation Rights

The following table provides information with respect to stock options and
stock appreciation rights ("SARs") granted to the named executive officers
during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>

Individual Grants(1)
----------------------------------------
% of Total
Number of Options Potential Realized Value at
Securities Granted to Exercise Assumed Annual Rates of
Underlying Employees Price Stock Price Appreciation
Options in Fiscal Per Expiration For Option Terms(2)
Granted Year Share Date 5% 10%
------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>

Name
- ----
Johan Schotte 103,385 50% $.74 No expiration $22,744 $94,080

Pierre Koshakji 103,385 50% $.74 No expiration $22,744 $94,080
</TABLE>

- ----------------------------
(1)The foregoing table does not include 5,000 stock options granted to Johan
Schotte, and 1,350 stock options granted to Pierre Koshakji, in each case issued
not as compensation but rather in consideration of personal loans made to the
Company. The table also does not include 25,000 stock options issued to Mr.
Greenwald in consideration of a rollover of his short term loans to the Company
See "Certain Relationships and Related Transactions."

(2)The options reflected in the above table do not have an expiration date. For
purposes of determining potential realizable value, the options are assumed to
have an expiration date of ten years.

Aggregated Option/SAR Exercises and Fiscal Year-End Options/SAR Value Table
<TABLE>
<CAPTION>

Number of Securities
Underlying Unexercised Value of Unexercised
Options at Year End In-the-Money Options
Shares ---------------------- --------------------
Acquired Value
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>

Johan Schotte(1) __ __ 238,385 __ 0 __

Pierre Koshakji(1) __ __ 104,735 __ 0 __

Stephen Greenwald(1) __ __ 375,000 __ 0 __

</TABLE>

(1) The chart includes 75,000 stock options for Mr. Greenwald, 5,000 stock
options for Mr. Schotte, and 1,350 stock options for Mr. Koshakji, in each
case issued in connection with personal loans made to the Company. See
"Certain Relationships and Related Transactions."

21
<PAGE>
Director Compensation

The Company does not have any standard arrangements pursuant to which
directors of the Company are compensated for services provided as a director.
All directors are entitled to reimbursement for expenses reasonably incurred in
attending Board of Directors' meetings.

Compensation Agreements, Termination of Employment and Change-in-Control
Arrangements

On October 1, 1995, Stephen Greenwald executed a compensation agreement
with the Company (the "Agreement"), pursuant to which he agreed to render
management services to the company for a three year period ending October 1,
1998. Pursuant to the Agreement, Mr. Greenwald agreed to serve as a Co-Chairman
in the Office of the Chairman of the Company and as Chief Executive Officer. The
Agreement was superseded by an agreement executed on March 6, 1996. The
subsequent agreement (also defined as the "Agreement") was substantially
identical to the original Agreement in all material respects with respect to
cash compensation but modified the provisions regarding the issuance of stock
options. (In the subsequent Agreement with Mr. Greenwald, the named party is G &
H Media, Ltd., rather than Mr. Greenwald individually; G & H Media, Ltd. is a
consulting firm of which Mr. Greenwald is a principal and controlling party).

The Agreement provided for compensation at the rate of $15,000 per month,
$20,000 per month and $25,000 per month during the first, second and third years
of the Agreement. In September, 1997, the term of the Agreement was extended for
an additional two-year period.

Mr. Greenwald agreed that with respect to each calendar quarter during the
term of the Agreement, the following percentage of his compensation would be
paid: (i) no payment if the current assets of the Company as of the end of the
previous calendar quarter are less than $500,000; (ii) one-third if the current
assets of the Company as of the end of the previous calendar quarter are more
than $500,000 but less than $1,000,000; (iii) two-thirds if the current assets
as of the end of the previous calendar quarter are more than $1,000,000 but less
than $1,500,000; and (iv) full payment if the current assets as of the end of
the previous calendar quarter are more than $1,500,000. Any portion of the
compensation not paid would be deferred and would be paid in twelve months with
interest pursuant to a promissory note issued by the Company, provided that the
note could be converted into common stock of the Company at any time prior to
payment in full at the average closing bid price in effect for the common stock
for the 10-day trading period immediately preceding the date of the conversion
election.

During the quarter ended December 31, 1995, Mr. Greenwald deferred 100% of
his compensation for the quarter, or $45,000. During each of the next two
quarters, he deferred one-third of his compensation, or a total of $30,000. On
June 10 and June 30, 1996, Mr. Greenwald converted his deferred compensation
note of $75,000 (plus accrued interest) into a total of 102,351 shares of common
stock at prices of $.75 and $.789 per share, respectively. On September 30,
1996, he converted deferred compensation notes of $15,000 for the quarter then
ended into a total of 26,316 shares of common stock at a conversion price of
$.57 per share. In November, 1998, Mr. Greenwald converted $44,968 of deferred
compensation notes into 145,058 shares of common stock at a conversion price of
$.31 per share.

The Agreement also provided for the issuance of 200,000 stock options to
Mr. Greenwald, exercisable during the five-year period commencing March 6, 1996
at an exercise price of $1.87 per share (subsequently lowered to $1.00 per share
by action of the Board of Directors in December 1996).

On December 2, 1996, the Board of Directors granted 100,000 common stock
purchase warrants to Stephen Greenwald in consideration of services rendered to
the Company. The warrants were granted for a five-year period and are
exercisable at a purchase price of $1.00 per share.

In April, 1997, the Company granted additional common stock purchase
warrants to Mr. Greenwald (or his designee), in consideration of providing
certain interim financing to the Company. Additional warrants were subsequently
granted to Mr. Greenwald in consideration of deferring repayment of such interim
financing. See "Certain Relationships and Related Transactions."
22
<PAGE>
In March, 1998, Mr. Greenwald stepped down as CEO of the Company in
connection with a change in control of the Company. In connection with such
change of management, Mr. Greenwald terminated his existing employment agreement
and entered into a new compensation arrangement with the Company. Mr. Greenwald
agreed to serve as managing director of the Company through December 31, 1999,
and was to receive the sum of $130,000 during such period in varying monthly
payments. In addition, in consideration of terminating his existing employment
agreement, Mr. Greenwald was to receive an additional $130,000, also payable in
varying monthly amounts during the two-year period ending December 31, 1999. In
September, 1999, Mr. Greenwald resigned as a Director of the Company to pursue
other interests. He also agreed to settle all outstanding payments due to him
under his employment agreement, and to resign as a Managing Director of the
Company, provided the Company pays to him the settlement amount of $75,000 on or
before October 31, 1999, together with 75,000 shares of restricted common stock.
If payment is delayed beyond October 31, 1999, then the number of shares to be
delivered to Mr. Greenwald will increase by 25,000 shares for each week of
delayed payment. This settlement agreement with Mr. Greenwald is subject to
approval by the Board of Directors of the Company.

Mr. Smith, a former officer and director of the Company (through S.F.H.
Associates, Inc.), agreed to serve in a consulting capacity to the Company for
the period from March, 1998 through December 31, 1999. Pursuant to such
consulting agreement, Mr. Smith's consulting company is entitled to receive the
sum of $160,000 during such period, payable at the rate of $8,000 per month,
commencing May, 1998. In addition, in consideration of terminating his then
existing employment agreement with the Company, Mr. Smith is entitled to receive
an additional $100,000, payable in varying monthly amounts during the term of
the consulting agreement. The Company is in default under the agreements with
S.F.H. Associates, Inc. and Mr. Smith, as a result of which such parties have
exercised their contractual rights to double the payments due to them under such
agreements. The Company will seeks to settle this obligation with S.F.H.
Associates, Inc. and with Mr. Smith.

Mr. Ian Jessel entered into a three-year employment agreement with the
Company, commencing November 9, 1998 and continuing through November 9, 2001.
Mr. Jessel's responsibilities included management of the Company's Motion
Picture & Television Division. Mr Jessel's compensation is set at a rate equal
to $300,000 per annum for the first year, $350,000 per annum for the second
year, and $400,000 per annum for the third year. The agreement provides for a
yearly bonus equal to 10% of the net profits of the film division and to a 5%
bonus, paid in the Company's stock, of the net profits of the Company provided
that the film division is responsible for one half of such net profits, or
Jessel's bonus shall be proportionately reduced down to a floor of 1% of 100% of
the Company's net profits. The Company paid the sum of $50,000 to Mr. Jessel in
fiscal 1999 and deferred payment of the balance of the compensation due to him.
In June, 1999, Mr. Jessel notified the Company that he discharged himself from
any further services to the Company for failure to pay his compensation and
expenses on a timely basis. The Company believes it was justified in deferring
certain payments due to Mr. Jessel and the parties are negotiating a possible
resolution of the matter.

In connection with the change of management in the Company in March, 1998,
Johan Schotte entered into a two-year employment agreement with the Company,
commencing as of January 1, 1998 and continuing through December 31, 1999. Mr.
Schotte's compensation is set at $150,000 per year during such period. Mr.
Koshakji also entered into a two-year employment agreement with the Company at
the rate of $150,000 per annum. As of June 30, 1999, a substantial portion of
the compensation due to Messrs. Smith and Koshakji under their respective
agreements is past due.

In connection with the change of management, an affiliate of Mr. Schotte
purchased a total of $230,000 of deferred compensation notes from Messrs.
Greenwald and Smith, and converted approximately 75% of these notes into 667,648
shares of the Company's common stock in April, 1998. The balance of these notes
was converted into 176,050 shares of common stock in October, 1998.

23
<PAGE>

In November, 1998, the Board of Directors of the Company authorized the
following bonus incentive compensation package for each of Messrs. Schotte and
Koshakji:

I) Warrants: 2% of the Company's total outstanding stock each
year, beginning with the fiscal year commencing July 1, 1998,
and each year thereafter. Warrants shall be priced at the
average bid price for the 10 consecutive trading days
preceding the issue date each year, and exercisable at any
time following the issue date. (Messrs. Schotte and Koshakji
were each issued 103,385 warrants as of July 1, 1998 at an
exercise price of $.74 per share).

II) Performance Bonus: Each year beginning with the fiscal year
ending June 30, 1999, and each year thereafter, if the
Company's gross revenues increase by 20% or more over the
gross revenues of the preceding year, the performance bonus
shall be the greater of either 1% of the revenue differential
or 2.5% of the EBITDA.

III) Market Cap Bonus: At the end of each fiscal year, beginning
with the fiscal year ending June 30, 1999, if the Company's
market capitalization increases from the preceding year based
on the average closing price for the 30 previous consecutive
trading days, the market capitalization bonus shall equal 1%
of the differential.

Compensation Committee Report and Compensation Committee Interlocks and Insider
Participation

Executive officer compensation is determined by the entire Board of
Directors. The Board has not appointed or designated a separate compensation
committee to determine or set executive compensation. The Board's executive
compensation policy is intended to attract and retain key executives, compensate
them at appropriate levels and provide them with both cash and equity incentives
to enhance the Company's value for all of its stockholders.

24
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------

The following table sets forth information concerning ownership of common
stock, as of October 8, 1999, by each person known by the Company to be the
beneficial owner of more than 5% of the common stock, each director and
executive officer, and by all directors and executive officers of the Company as
a group.

Name & Address of Shares Percentage of
Beneficial Owner Status Beneficially Owned Class
- ----------------- ------ ------------------ --------------

Robert Miller, Jr. Director 227,333(2) 2.3%
900 4th Avenue
Seattle, WA

Stephen R. Greenwald Managing 536,139(3) 5.2%
380 Lexington Avenue Director
New York, NY

Johan Schotte CEO and 363,385(4) 3.5%
1601 Elm Street Chairman
Dallas, TX

Pierre Koshakji President & 104,735(5) 1.0%
1601 Elm Street Director
Dallas, TX

Ian Jessel Director 50,000 .5%
1601 Elm Street
Dallas, TX

Lecoutere Finance S.A. __ 1,887,734(6) 18.4%
39 route de Remich
L-5650 Mondorf-les-Bains
Grand Duchy of Luxembourg

All Executive
Officers &
Directors As
A Group (6 Persons)(1) __ 1,281,592(7) 11.9%
- -----------------------
(1) Includes Johan Schotte, Pierre Koshakji, Robert Miller, Jr., Stephen
Greenwald, Ian Jessel and Patrick Speeckaert.
(2) Includes presently exercisable options to purchase 156,666 shares of common
stock; also includes 61,167 shares held jointly with Mr. Miller's wife, and
9,500 shares held in an individual retirement account for Mr. Miller's
wife, as to which latter shares Mr. Miller disclaims beneficial ownership.
(3) Includes presently exercisable options to purchase 375,000 shares of common
stock.
(4) Includes presently exercisable options to purchase 238,385 shares of common
stock; does not include 1,486,134 shares of common stock and 401,600 common
stock purchase warrants held by a corporate affiliate of Mr. Schotte,
Lecoutere Finance S.A.; also does not include 111,285 shares of common
stock and 2660 common stock purchase warrants held by E3 Capital, and
29,537 common stock purchase warrants held by Media Trust S.A., both
corporate affiliates of Mr. Schotte. (Mr. Schotte disclaims beneficial
ownership of all shares and warrants held by affiliated entities, although
based on Mr.Schotte's close business relationship with the other principal
shareholders of these entities, there exists the possibility that these
shareholders may act in concert with Mr. Schotte with respect to the voting
of these shares in the Company).
(5) Includes presently exercisable options to purchase 104,735 shares of common
stock.
(6) Includes presently exercisable options to purchase 401,600 shares of common
stock. See note (4).
(7) Includes presently exercisable options to purchase 874,786 shares of common
stock.
25
<PAGE>
Item 13. Certain Relationships and Related Transactions.
- -------------------------------------------------------

In April, 1997, Stephen R. Greenwald, Lawrence Schneider (then a director
of the Company), and Robert E. Miller, Jr. made loans to the Company in the
amounts of $50,000, $25,000 and $25,000, respectively. Each loan was payable on
demand, accrued interest at the rate of 9.25% per annum, and was secured by a
collateral assignment of the Company's $300,000 receivable due from Kinnevik.
See "Business-Sales of Distribution Rights." In consideration of making such
loans, the lenders received five-year warrants to purchase shares of common
stock of the Company, exercisable at $1.00 per share. Messrs. Schneider and
Miller each received 25,000 warrants in consideration of their respective
$25,000 loans to the Company, and Mr. Greenwald (or his designee) received
50,000 warrants in consideration of his $50,000 loan to the Company. Mr.
Schneider's loan was repaid in April, 1998 from the Kinnevik receivable.
However, Messrs. Greenwald and Miller agreed to a rollover of their loans to be
paid from the proceeds of a second Kinnevik receivable due in September, 1998.
In consideration of the rollover, Mr. Greenwald will receive 25,000 warrants and
Mr. Miller will receive 12,500 warrants, in each case exercisable over a
five-year period at $1.00 per share. Mr. Greenwald's loan was repaid in
September, 1998; Mr. Miller's loan was rolled over for a six month period on an
unsecured basis with interest at the rate of 10% per annum. Mr. Miller
subsequently agreed to another six-month rollover (through September, 1999), in
consideration of which he will receive an additional 12,500 warrants exercisable
over a five-year period at $1.00 per share, an increase in the interest rate on
his loan to 12% per annum, and an extension on the expiration date of all
warrants issued to date to the year 2004.

In March, 1998, Ira Smith and Stephen Greenwald stepped down as Co-Chairmen
in the Office of the Chairman of the Company, and Johan Schotte was appointed as
Chairman and CEO of the Company. In connection with the change in management, an
affiliate of Mr. Schotte purchased $230,000 face value of deferred compensation
notes from Messrs. Smith and Greenwald, and in April, 1998, converted
approximately 75% of those notes into 667,648 shares of the Company's common
stock. The balance of these notes were converted into 176,050 shares of common
stock in October, 1998.

In connection with the change of management in March, 1998, the Company
acquired an 18% equity interest in each of two corporations affiliated with Mr.
Schotte, one of which is the owner of the Albuquerque Geckos, a second division
professional soccer team in New Mexico (subsequently transferred to Sacramento),
and the other of which is a media production company in Luxembourg. The Company
issued one-year notes in the aggregate amount of $450,000 in consideration of
the purchase of the equity interests in these companies. (In June, 1999, the
Company satisfied $135,000 of these notes, and the accrued interest thereon of
$27,225, by the issuance of 348,721 shares of the Company's restricted common
stock valued at $.465 per share to Lecoutere Finance, S.A., an affiliate of Mr.
Schotte's. The recipient of the shares then transferred 331,285 of such shares
to E3 Capital, also an affiliate of Mr. Schotte's). The Company's equity
interest in the entity which owns the professional soccer team has been reduced
to 9% as a result of a transfer of ownership of that corporation and an
additional capital contribution into that corporation in which the Company did
not participate.

In June, 1998, the Company entered into a sublease for office space in Los
Angeles with an affiliate of the CEO of the Company. The sublease was on a
month-to-month basis at the rate of $1,500 per month. The Company utilized the
premises for the period between June and December, 1998.

In June, 1998, the Company entered into the following related party
transactions with E3 Sports New Mexico, Inc., a company which is an affiliate of
Mr. Schotte and Mr. Koshakji (the CEO and President of the Company,
respectively) and in which the Company holds a minority interest: (i) the
Company purchased a $25,000 sponsorship from the Albuquerque Geckos, the
professional soccer team owned by the affiliate; and (ii) the Board authorized
the Company to loan up to $100,000 to the affiliate, payable no later than July
15, 1999 with interest at 15% per annum (the loan is secured by 10,000 shares of
E3 Sports new Mexico, Inc.). The company is in the process of collecting this
debt.

26
<PAGE>
In July, 1998, the Company entered into the following related party
transactions with Media Trust S.A., a company which is an affiliate of Mr.
Schotte and in which the Company holds a minority interest: (i) the Company has
agreed to make a $2,500 loan to the affiliate, payable in one year with interest
at 15% per annum; (ii) the Company engaged the affiliate to introduce
prospective investors to the company, in exchange for which the affiliate will
receive 10% of any investments made in the Company by persons or entities
introduced by the affiliate, together with five-year warrants (100 warrants per
$1,000 invested) at an exercise price equal to the market price of the Company's
stock on the date of the investment. In connection with convertible loans made
to the Company in 1998 by Belgian investors in the aggregate amount of
approximately $100,000, and the purchase of 625,000 shares of common stock of
the Company by Lecoutere Finance, S.A. in December, 1998 (see below), a total of
29,540 five-year warrants have been issued to Media Trust, S.A. with exercise
prices ranging from $.38 per share to $.98 per share.

In December, 1998, Lecoutere Finance, S.A., an affiliate of the CEO of the
Company, purchased 625,000 shares of common stock from the Company for an
aggregate consideration of $187,500 ($.30 per share). The price was based on the
average price of the Company's common stock for the 30 day period preceding the
date of purchase (i.e., $.37 per share), less a 20% discount due to the
restricted nature of the shares purchased. (See "Security Ownership of Certain
Beneficial Owners and Management").

During the fiscal year ended June 30, 1999, Mr.Schotte loaned the Company
$21,985, and Mr. Koshakji loaned the Company $5,700, with each loan bearing
interest at the rate of 12% per annum. In consideration of making such loans,
Mr. Schotte received 5,000 common stock purchase warrants and Mr. Koshakji
received 1,350 common stock purchase warrants, in each case exercisable over a
five-year period at a purchase price of $1.00 per share.

27
<PAGE>
PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------------------------------------------------------------------------
(a)(1) The response to this portion of Item 14 is submitted as a separate
section of this report commencing on page F-1.

(a)(2) See (a)(1) above.

(a)(3) Exhibits

3.1 Articles of Incorporation, as amended through June 30, 1995(1)

3.2 Amendments to Articles of Incorporation filed in March and June, 1996(8)

3.3 Amendment to Articles of Incorporation filed in January, 1997 (9)

3.4 By-laws(1)

4.1 Indenture between Odyssey and Continental Stock Transfer and Trust Company
("Continental") dated as of July 15, 1987(1)

4.2 Form of Supplemental Indenture between Continental and the Company(1)

4.3 Form of Common Stock Certificate(1)

4.4 Form of options granted of officers, directors and 5% stockholders(2)

4.5 Form of Warrant issued to purchasers parties to the 1995 Private Placement
completed September 30, 1995(5)

4.6 Form of 12% Unsecured Promissory Note issued to purchasers parties to the
1995 Private Placement completed September 30, 1995(5)

4.7 Form of Stock Option Agreement by and between the Company and officers and
directors of the Company, for stock options issued in April 1995(5)

4.8 Form of Common Stock Purchase Warrant by and between the Company and
officers, directors, employees and consultants of the Company for warrants
issued during the fiscal year ended June 30, 1996(8)

4.9 Common Stock Purchase Warrant, dated March 6,1996, between the Company and
G & H Media, Ltd. (assignee of Stephen R. Greenwald)(7)

4.10 Common Stock Purchase Warrant,dated March 6, 1996, between the Company and
Lawrence I. Schneider(7)

4.11 Common Stock Purchase Warrant,dated March 6, 1996, between the Company and
Ira N. Smith(7)

4.12 Form of Common Stock Purchase Warrant by and between the Company and
officers, directors, employees and consultants of the Company for warrants
issued during the fiscal year ended June 30, 1997 (9)

4.13 Preferred Stock Certificate, Series A,issued to Kinnevik Media Properties,
Ltd. in September, 1997 (10)

4.14 Convertible Note issued to Augustine Fund L.P. in July, 1998 (12)

4.15 Preferred Stock Certificate, Series B, issued to Kimon, Inc. in September,
1998 (10)

10.1 1989 Long Term Incentive Plan(1)

10.2 Agreement of Settlement and Release, dated October 2, 1995, by and between
Home Box Office, Inc. and Odyssey(5)

10.3 Private Placement Memorandum used in connection with 1995 Private
Placement (the "1995 Private Placement Memorandum")(5)

28
<PAGE>
10.4 Supplement to the 1995 Private Placement Memorandum(5)

10.5 Supplement No. 2 to the 1995 Private Placement Memorandum(5)

10.6 Supplement No. 3 to the 1995 Private Placement Memorandum(5)

10.7 Settlement Agreement, dated as of March 31, 1995, by and between the
Company, Odyssey, Global Intellicom, Inc., N. Norman Muller, Thomas W.
Smith, David Mortman, Robert Ferraro, the CECO Shareholders Committee,
Lawrence Schneider, Robert E. Miller, Henry Schneider, Robert Hesse, Shane
O'Neil, Patrick Haynes, Russell T. Stern, Jr., Thurston Group, Inc., The
Insight Fund, L.P. and Lois Muller(3)

10.8 Memorandum of Agreement, dated as of August 24, 1995 between the Company
and Multipix Communications, Inc.(4)

10.9 Termination Agreement, dated as of January 2, 1996, between Regency
International Pictures, B.V. and Odyssey Distributors B.V.(6)

10.10 Employment Agreement dated October 1, 1995, between the Company and
Stephen R. Greenwald(6)

10.11 Employment Agreement dated October 1, 1995, between the Company and
Lawrence I. Schneider(6)

10.12 Employment Agreement dated October 1, 1995, between the Company and Ira N.
Smith (6)

10.13 Agreement, dated March 6, 1996, between Communications and Entertainment
Corp. and its wholly-owned subsidiary, Odyssey Distributors, Ltd.(7)

10.14 Severance and Consulting Agreement, dated March 26, 1996, between the
Company and Shane O'Neil, and related modifying agreement dated March 28,
1996(7)

10.15 Management Agreement between the Company and Stephen R. Greenwald, dated
March 6, 1996, superseding the Employment Agreement dated October 1,
1995(8)

10.16 Management Agreement between the Company and Lawrence I. Schneider, dated
March 6, 1996, superseding the Employment Agreement dated October 1,
1995(8)

10.17 Management Agreement between the Company and Ira N. Smith, dated March 6,
1996, superseding the Employment Agreement dated October 1, 1995(8)

10.18 Addendum to Management Agreements of Messrs. Schneider, Greenwald and
Smith(8)

10.19 Joint Venture Letter between the Company and Film Bridge International,
Inc., dated March 11, 1996(8)

10.20 Lease for office premises at 1875 Century Park East, Suite 2130, Los
Angeles, California, dated May 9, 1996(8)

10.21 Agreement dated August 29, 1996, between the Company and Kinnevik Media
Properties, Ltd.(8)

10.22 Agreement dated September 6, 1996 between the Company and Mr. David
Somerstein(8)

10.23 Settlement Agreement and Release between Paramount Pictures Corporation
and Odyssey Distributors, Ltd. (a wholly owned subsidiary of the Company),
and Guarantee agreement of the Company, each dated as of September 26,1996
(9)

10.24 Form of Settlement Agreement with Generale bank Nederland, N.V., dated as
of December 18, 1996 (9)

10.25 Stock Purchase Agreement between the Company and Kinnevik Media
Properties, Ltd., dated September 1997 (10)

29
<PAGE>
10.26 Stock Purchase Agreement between the Company and Flanders Film S.A.
relating to purchase of minority stock interest in E3 Sports New Mexico,
Inc. and Media Trust S.A., and related promissory notes for $135,000 and
$315,000, dated March 2, 1998 (10)

10.27 Termination /Employment Agreement with Stephen R. Greenwald, dated March
2, 1998 (10)

10.28 Termination Agreement with Ira Smith dated March 2, 1998 (10)

10.29 Consulting Agreement with S.F.H. Associates, Inc. for the services of Ira
Smith, dated March 2, 1998 (10)

10.30 Employment Agreement with Johan Schotte, dated March 2, 1998 (10)

10.31 Convertible Note issued to Augustine Fund, L.P. in July, 1998 (12)

10.32 Asset Purchase Agreement between the Company and Kimon Mediabright KB, a
Swedish limited partnership, dated July 14, 1998 (10)

10.33 Employment Agreement with Pierre Koshakji, dated March 2, 1998 (11)

10.34 Employment Agreement with Ian Jessel, dated November 8, 1998 (13)

10.35 Settlement Agreement with Stephen Greenwald, dated October 6, 1999(13)

21.1 Subsidiaries of the Registrant(3)

__________________________________________

(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-4, File No. 33-34627.

(2) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, File No. 33-43371.

(3) Incorporated herein by reference to the Company's Current Report on Form
8-K filed April 12, 1995, File No. 0-18954.

(4) Incorporated herein by reference to the Company's Current Report on Form
8-K filed August 30, 1995, File No. 0-18954.

(5) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1995, File No. 0-18954.

(6) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1995, File No. 0-18954.

(7) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, File No. 0-18954.

(8) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1996, File No. 0-18954.

(9) Incorporated herein by reference to the Company's Registration Statement on
Form S-1, File No. 333-20701.

(10) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1997, File No. 0-18954

30
<PAGE>

(11) Incorporated herein by reference to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended June 30, 1997, File No.
0-18954

(12) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the Fiscal Year Ended June 30, 1998, File No. 0-18954

(13) Filed herewith.

(b) Reports on Form 8-K

No Reports on Form 8-K were filed by the Company during the last quarter of
the period covered by this Report.

(d) None.

31
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

ODYSSEY PICTURES CORPORATION

Dated: October 13, 1999 By: /s/ Johan Schotte
-----------------
Johan Schotte,
CEO and Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Johan Schotte CEO and Chairman 10/13/99
- ----------------- (Principal Executive &
Johan Schotte Financial Officer)

/s/ Pierre Koshakji President; Director 10/13/99
- -------------------
Pierre Koshakji

/s/ Robert E. Miller, Jr. Director 10/13/99
- -------------------------
Robert E. Miller, Jr.

/s/ Patrick Speeckaert Director 10/13/99
- ----------------------
Patrick Speeckaert

/s/ Ian Jessel Director 10/13/99
- ---------------
Ian Jessel

32
<PAGE>

ODYSSEY PICTURES CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----
Report of Independent Accountants F-2

Financial Statements:
Consolidated Balance Sheets
as of June 30, 1999 and 1998 F-3

Consolidated Statements of Operations for the
Years Ended June 30, 1999, 1998 and 1997 F-4

Consolidated Statements of Changes in Shareholders'
Equity (Deficit) for the Years Ended June 30,
1999, 1998 and 1997 F-5

Consolidated Statements of Cash Flows for the
Years Ended June 30, 1999, 1998 and 1997 F-6 - F-7

Notes to Consolidated Financial Statements F-8 - F-24

All schedules have been omitted because the requested information is not
required, or, because the information required is included in the financial
statements or notes thereto.

F-1
<PAGE>
WANT & ENDER, CPA, P.C.
386 PARK AVENUE SOUTH, SUITE 1618
NEW YORK, NY 10016

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Odyssey Pictures Corporation

In our opinion, the accompanying consolidated balance sheets and related
consolidated statement of operations, shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Odyssey
Pictures Corporation and its subsidiaries at June 30, 1999 and 1998 and the
results of their operations and their cash flows for the period ended June 30,
1999 and 1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.

As discussed in Note 7 to the financial statement, the Company defaulted on
payments due August and October 1996 relating to notes payable. The Company
proposed to the noteholders to defer maturity of the notes and exchange
exisiting warrants for shares, or cancel the notes and existing warrants in
their entirety in exchange for shares. The Company offered to register any
shares issued in exchange for the notes as of August 12, 1997 the date the
registration becomes effective, and all but one of the noteholders agreed to
exchange their notes for registered stock. The remaining notes for $50,000 (held
by a single investor) have not been paid and are in default. Additionally, an
unsecured note of $179,000 is also in default. At this time, the ultimate
outcome of this matter cannot be determined.

As discussed in Note 8, the Company is a defendant in various lawsuits. The
Company has filed counteractions and preliminary hearings and discovery
proceedings on several actions are in progress. The ultimate outcome of the
litigation cannot be determined at present. Not all liabilities that may result
upon adjudication have been accrued in the accompanying financial statements.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital deficiency and has insufficient working capital to meet its
current obligations and liquidity needs. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

New York City, New York

/s/ Want & Ender, CPA, P.C.
- ---------------------------
Want & Ender, CPA, P.C.
October 13, 1999

F-2
<PAGE>
<TABLE>
<CAPTION>
ODYSSEY PICTURES CORPORATION

CONSOLIDATED BALANCE SHEETS

June 30, June 30,
ASSETS 1999 1998
- ------ ---------------- ----------------
<S> <C> <C>

Cash $ 4,715 $ 4,331
Accounts receivable, net of allowances
of $0 and $0 81,986 9,500
Notes receivable 131,272 100,000
Film costs, net 4,383,629 110,422
Prepaid expenses and other 380,906 1,200
Investments 456,600 450,000
---------------- ----------------

TOTAL ASSETS $ 5,439,108 $ 675,453
================ ================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Liabilities

Accounts payable and accrued expenses $ 805,071 $ 865,923
Accrued wages 839,185 457,794
Accrued interest 163,198 77,168
Due to producers and participants 250,000 250,000
Deferred revenues 29,000 29,000
Notes and loans payable 1,192,081 1,079,000
---------------- ----------------

Total Liabilities 3,278,535 2,758,885
---------------- ----------------

Commitments and contingencies

Shareholders' Equity (Deficit)

Preferred stock, Series A, par value $.10;
Authorized - 10,000,000 shares

Issued - 500,000 shares 50,000 50,000
Preferred stock, Series B, par value $.10
Authorized - 10,000,000 shares

Issued - 4,500,000 shares 450,000
Common stock, par value $.01;
Authorized - 40,000,000 shares
Issued and outstanding -

8,284,728 and 5,029,285 82,847 50,293
Capital in excess of par value 32,704,197 27,552,973
Accumulated deficit (31,126,471) (29,736,698)
---------------- ----------------
Total shareholders' deficit 2,160,573 (2,083,432)
---------------- ----------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 5,439,108 $ 675,453
================ ================

The accompanying notes are an integral part of these financial statements.
</TABLE>

F-3
<PAGE>
<TABLE>
<CAPTION>
ODYSSEY PICTURES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended June 30,

1999 1998 1997
----------------- ---------------- ---------------
<S> <C> <C> <C>

Revenue

$ 288,430 $ 42,630 $ 141,202
Expenses

Costs related to revenues 261,050 20,019 565,610
Selling, general and
administrative expenses 1,282,553 1,073,134 1,678,450
----------------- ---------------- ---------------
1,543,603 1,093,153 2,244,060
----------------- ---------------- ---------------

Operating income (loss) (1,255,173) (1,050,523) (2,102,858)

Other income (expenses)

Other income
Interest income 15,004
Interest expense (149,604) (68,891) (91,435)
Loss on sale of joint venture interests -
Other income 2,263,101
----------------- ---------------- ---------------

Income (loss) from operations
before provision for income taxes (1,389,773) (1,119,414) 68,808
Provision / Benefit for income taxes - - -

NET INCOME (LOSS) $ (1,389,773) $ (1,119,414) $ 68,808
================= ================ ===============

Basic income (loss) per share $ (0.22) $ (0.25) $ 0.02

Weighted average common
shares outstanding 6,459,396 4,403,435 2,993,809
================= ================ ===============

Diluted income (loss) per share $ (0.22) $ (0.25) $ 0.02

Weighted average common
shares outstanding 6,459,396 4,403,435 2,993,809
================= ================ ===============

The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
ODYSSEY PICTURES CORPORATION
Consolidated Statements Of Changes in Shareholders' Equity (Deficit)

Preferred Stock Common Stock Total
Amount Amount Capital in Shareholders'
($.10 Par ($.01 Par Excess of Accumulated Equity
Shares Value) Shares Value) Par Value Deficit (Deficit)
------ --------- ------ ------- ---------- ------------- -------------
Balances - June 30, 1996 - - 2,591,242 25,913 25,911,366 (28,686,092) (2,748,813)
Issuance of shares to officers
in payment of notes 78,948 789 44,211 45,000
Re-issue of unexchanged shares
shares previously cancelled 65,825 659 (659) 0
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 68,808 68,808
------------ --------- ------------ ----------- ------------ ------------- ------------

Balances - June 30, 1997 - - 3,279,515 $32,796 $26,358,583 ($28,617,284) ($2,225,905)

Issuance of shares of preferred
stock to equity investors 500,000 50,000 450,000 500,000
Issuance of shares of common stock
in exchange for cancellation
notes payable and other
liabilities 1,010,455 10,104 529,235 539,339
Issuance of shares of common stock
to equity investors 66,667 667 49,333 50,000
Issuance of shares of stock in
exchange for cancellation of
deferred compensation notes 667,648 6,676 165,823 172,499
Issuance of shares of common stock
in consideration for service
rendered 5,000 50 50
Net loss (1,119,414) (1,119,414)
------------ --------- ------------ ----------- ------------ ------------- ------------

Balances - June 30, 1998 500,000 $50,000 5,029,285 $50,293 $27,552,973 ($29,736,698) ($2,083,432)
============ ========= ============ =========== ============ ============= =============

The accompanying notes are an integral part of these statements.
</TABLE>

F-5
<PAGE>
<TABLE>
<CAPTION>

ODYSSEY PICTURES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30,

1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ (1,389,773) $ (1,119,414) $ 68,808
Adjustments to reconcile net income (loss)
to net cash used in
operating activities:
Amortization of film costs 162,931 36,976 1,660,440
Additions to film costs (153,179) (26,926) (779,944)
Other depreciation and amortization 21,500 10,961 18,963
Issuance of shares of common stock in consideration
for services rendered 76,816 50 34,100
Changes in assets and liabilities:
Accounts receivable, net (72,486) 282,751 704,323
Notes receivable (31,272) 200,000 (300,000)
Prepaid expenses and other (10,165) 5,837 (536)
Accounts payable and accrued expenses (60,852) 272,240 219,035
Due to producers and participants - (310,499) (2,924,643)
Deferred revenues - 9,200 16,800
Accrued wages 381,391 121,798 318,624
Accrued interest 113,255 12,567 18,329
-------------- --------------- --------------

Net cash used in operating activities (961,834) (504,459) (945,701)
-------------- --------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of stock in E-3 Sports New Mexico, Inc. (6,600)
Acquisition of fixed assets (8,480)

-------------- --------------- --------------

Net cash used in investing activities (6,600) - (8,480)
-------------- --------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of note payable in settlement of Generale Bank litigation - (25,000) -
Net proceeds from private placement sale of common stock 440,693 - 375,000
Net proceeds/payments - notes and loans payable 528,125 (25,000) 125,000
Issuance of shares of preferred stock to equity investors - 500,000 -
Issuance of shares of common stock to equity investors - 50,000 -
-------------- --------------- --------------

Net cash provided by financing activities 968,818 500,000 500,000
-------------- --------------- --------------

Net increase (decrease) in cash 384 (4,459) (454,181)
Cash at beginning of period 4,331 8,790 462,971
-------------- --------------- --------------

Cash at end of period $ 4,715 $ 4,331 $ 8,790
============== =============== ==============

The accompanying notes are an integral part of these financial statements.
</TABLE>

F-6
<PAGE>
<TABLE>
<CAPTION>

ODYSSEY PICTURES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30,

1999 1998 1997
--------------- --------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<S> <C> <C> <C>

Non-cash transactions:

Issuance of shares of preferred stock for purchase of
Kimon film library and other assets $4,500,000
===============
Issuance of shares in consideration for services rendered and to
be rendered $ 250,816 $ 50 $ 34,100
=============== =============== =============
Issuance of shares of common stock in full satisfaction of
loans and accrued interest $ 162,225 $ 539,338
=============== ===============
Issuance of shares of common stock as partial consideration
for loans made to company $ 19,800
===============
Issuance of shares to officers in payment of notes (1999) and
deferred compensation (1998 and 1997) $ 260,244 $ 172,499 $ 45,000
=============== =============== =============
Issuance of note payable to purchase stock in
E-3 Sports New Mexico, Inc. $ 135,000
===============
Issuance of note payable to purchase stock in
Media Trust S.A. $ 315,000
===============

Cash paid during the year for:

Interest $ - $ 18,476 $ 48,240
=============== =============== =============

Income taxes $ - $ - $ -
=============== =============== =============

The accompanying notes are an integral part of these financial statements.
</TABLE>

F-7
<PAGE>
ODYSSEY PICTURES CORPORATION
Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies:

a) Organization and Nature of Operations:

Odyssey Pictures Corporation (the "Company") was organized in December 1989
as a Nevada corporation. The Company is currently engaged in the
international distribution of motion pictures.

b) Principles of Consolidation:

The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and majority owned or controlled joint
ventures. All significant intercompany accounts have been eliminated.

Certain reclassifications have been made to prior year amounts to conform
to the current year presentation.

c) Revenue Recognition:

Revenues from foreign theatrical, home video, television and pay television
licensing contracts are recognized when the film is available for
exhibition by the licensee and when certain other conditions are met.
Revenues from domestic theatrical distribution of films are recognized as
the films are exhibited.

Virtually all of the Company's revenues for the fiscal year ended June 30,
1999, 1998 and 1997 were from foreign distribution rights.

d) Film Costs:

Film costs include (1) cost of production, (2) investment in distribution
rights, (3) marketing and distribution expenses, and (4) development costs.
Film costs are amortized, and estimated residual and participation costs
are accrued, on an individual film basis in the ratio that the current
year's gross film revenues bear to management's estimate of total ultimate
gross film revenues from all sources.

Film costs are stated at the lower of cost or estimated net realizable
value on an individual film basis. Ultimate revenue and cost forecasts for
films are periodically reviewed by management and revised when warranted by
changing conditions. When estimates of total revenues and costs indicate
that a film will result in an ultimate loss, additional amortization is
provided to fully recognize such loss.

e) Investments:

Investments consist of shares of common stock of two privately held
corporations, representing 9% and 18% ownership of each of the
corporations. These investments are accounted for using the cost method.

f) Earnings (Loss) Per Share:

Earnings (loss) per share are computed using the weighted average number of
common shares outstanding during the respective periods, adjusted for the
dilutive effect, if any, of outstanding stock options and warrants.

g) Use of Estimates:

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in financial
statements. Actual results could differ from those estimates.

F-8
<PAGE>
h) Fair Value of Financial Instruments:

The carrying value of cash, notes receivable and notes and loans payable
approximates fair value because of the short-term maturity of these
instruments.

i) Impact of Recently Issued Accounting Standards:

2. Change in Management Control:
- -------------------------------

In March 1998, the Board of Directors appointed Mr. Johan Schotte as Chief
Executive Officer and Chairman of the Board of the Company, and Mr. Pierre
Koshakji as President and Director of the Company. Former management agreed
to terminate their existing employment agreement in exchange for revised
employment and consulting agreements. An affiliate of Mr. Schotte purchased
convertible deferred compensation notes from former management and
converted a portion of those notes into 667,648 shares of the Company's
common stock in April 1998. The balances of these notes were converted into
176,050 shares of common stock in October 1998.

In connection with the change in management, the Company acquired an 18%
ownership interest in two corporations affiliated with Mr. Schotte, one of
which is the owner of a professional soccer team in New Mexico, and the
other of which is a media production company in Luxembourg. The Company
issued one-year notes in the aggregate amount of $450,000 in consideration
of the purchase of the equity interests in these companies.

Mr. Ira Smith, one of the Company's Directors on the Board, resigned as a
Director on July 2, 1998 to pursue other business interests. Mr. Dominique
Verhaegen and Mr. Yves Bayle resigned from the Board in November 1998 for
personal reasons. Mr. Ian Jessel and Mr. Patrick Speeckaert were appointed
to the Board as of January 1, 1999. Mr. Jessel was also appointed as CEO of
the Company's Motion Picture and Television Division.

In December 1998, the Company hired Mr. Ian Jessel, who is past President
of Miramax International and who joined the Company's Board of Directors on
January 1, 1999, to head up its film division. In June, 1999, Mr. Jessel
notified the Company that he discharged himself from any further services
to the Company for failure to pay his compensation and expenses on a timely
basis. The Company believes it was justified in deferring certain payments
due to Mr. Jessel and the parties are negotiating a possible resolution of
the matter.

3. Results of Operations and Management's Plans:

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 adequate to meet its ongoing operation requirements. These
factors raise substantial doubt about the Company's ability to continue as
a going concern.

Net loss for the year ended June 30, 1999 was due to the fact that the
Company did not release any new films. Revenues for the twelve months ended
June 30, 1999 increased to $288,430 compared to $42,630 for the twelve
months ended June 30, 1998. No new films became available for delivery
during either period.

Costs related to revenues increased to $261,050 for the twelve months ended
June 30, 1999 as compared to $20,019 for the twelve months ended June 30,
1998. The increase is primarily related to costs associated with exploiting
the Kimon and Hallmark assets.

Selling, general and administrative expense increased by $209,419 to
$1,282,553 for the twelve month period ended June 30, 1999 from $1,073,134
for the comparable period ending June 30, 1998. The increase is primarily
due to increases in personnel and related expenses.

F-9
<PAGE>
There was no other income recognized in the twelve month period ended June
30, 1999 and June 30, 1998.

Net loss for the year ended June 30, 1998 was due to the fact that the
Company did not release any new films and did not enter into any new
agreements for the release of existing rights in films. Revenues for the
twelve months ended June 30, 1998 decreased to $42,630 compared to $141,202
for the twelve months ended June 30, 1997. No new films became available
for delivery during either period.

Costs related to revenues decreased to $20,019 for the twelve months ended
June 30, 1998 as compared to $565,610 for the twelve months ended June 30,
1997. The decrease is primarily related to the fact that there were lower
film revenues in the current year. Additionally, during the twelve months
ended June 30, 1997, development and festival costs in the amount of
$249,544 were written off, litigation and settlement costs related to the
Film Bridge settlement in the amount of $148,174 were expensed, and
$435,102 in inventory costs related to the picture Downrange were written
off. This was primarily offset by a write-off of $449,163 in participation
liabilities related to the Kinnevik library which were settled subsequent
to the Kinnevik sale.

Selling, general and administrative expense decreased by $605,316 to
$1,073,134 for the twelve month period ended June 30, 1998 from $1,678,450
for the comparable period ending June 30, 1997. The decrease is primarily
due to decreases in personnel and related expenses.

There was no other income recognized in the twelve month period ended June
30, 1998. Other income for the twelve months ended June 30, 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
$1,245,758 gain from the cancellation of a contractual obligation related
to the Company's distribution rights in "Wuthering Heights," and
recognition of 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.

Since the change in management control in March 1998, new management has
embarked on a program to reverse the unfavorable results by taking steps to
recapitalize the Company, purchasing film assets, acquiring interests in
new pictures in development or pre-production, and by acquiring equity
interests in two corporations, one of which is the owner of a professional
soccer team, and the other of which is a media production company.

The Company's operations have been greatly reduced as a result of the
restructuring of the Company by new management. The Company's principal
office is located in Dallas, Texas (see "Properties") and, as of October 8,
1999, the Company had three full-time employees, consisting of Mr. Schotte,
Mr. Koshakji, and Mr. Greenwald, the CEO, President, and Managing Director
of the Company, respectively.

In September 1997, the Company and Kinnevik Media Properties, Ltd. executed
a letter agreement pursuant to which Kinnevik agreed, subject to completion
of due diligence and the approval of Kinnevik's Board, to purchase 500,000
shares of convertible, redeemable preferred stock of the Company, par value
$1.00 per share, for an aggregate purchase price of $500,000. Kinnevik
would purchase the first $250,000 of preferred stock at the closing, an
additional $125,000 of preferred stock 90 days after closing, and the final
$125,000 of preferred stock 270 days after closing. The preferred stock
would bear interest at the rate of 10% per annum which would be paid in
kind semi-annually by the issuance of additional shares of preferred stock
at a par value of $1.00 per share. Kinnevik would have the right for a five
year period to convert the preferred stock into common stock of the Company
on a share-for-share basis. The Company would have the right to redeem the
preferred stock for $1.25 per share in the event the Company's common stock
trades at a price of $2.00 per share or more for a period of 20 consecutive

F-10
<PAGE>
trading days. The Company agreed to help secure television distribution
rights for Kinnevik from third parties, and introduce various projects to
Kinnevik from time to time which may be of interest to Kinnevik. In the
event Kinnevik acquires any rights as a result of any introductions made by
the Company, the parties agree to mutually determine the value of such
services and to redeem shares of the preferred stock at $1.00 per share
based on the aggregate value of the services so determined.

In January 1997, prior counsel to the Company agreed to exchange a
promissory note in the face amount of $70,000 in exchange for 120,000
Shares of the Company's Common Stock.

In June 1998, the Company applied for, and was accepted for, trading on the
Berlin Stock Exchange under the symbol "ODY". The German company Berliner
Freiverkehr (Aktien) assisted the Company in the application and signed an
agreement with the Company to serve as a market maker/coordinator in
exchange for 200,000 warrants having an exercise price of $1.55 per share,
exercisable during the two-year period commencing June 23, 1998.

During the period between April, 1999 and September, 1999, the Company
completed four private placements to offshore investors, the first of which
was completed for 575,000 shares of common stock at a purchase price of
$.30 per share (resulting in gross proceeds to the Company of $172,500),
and the latter three of which were completed for an aggregate of 1,600,000
shares of common stock at a purchase of $.40 per share (resulting in gross
proceeds to the Company of $400,000). The proceeds of these offerings were
used primarily for debt reduction and working capital for the Company.

4. Acquisition of Film Assets:

On July 14, 1998, the Company entered into an Asset Purchase Agreement with
Sweden based Kimon Mediarright KB ("Kimon"), pursuant to which the Company
acquired certain intangible assets from Kimon valued at $4,500,000. In
exchange, the Company agreed to issue to Kimon 4,500,000 shares of the
Company's subordinated convertible Preferred Stock, Series B, having a
value for conversion purposes of $1.00 per share. The Series B Preferred
Stock is subordinate to the Company's Series A Preferred Stock, consisting
of 500,000 shares (plus accruals thereunder) having a liquidation
preference of $1.00 per share. Kimon will have the right to convert to
Odyssey common stock between June 30, 2000 and December 31, 2000 on a
dollar-for-dollar basis based on the price of the Company's common stock at
the time of conversion. Kimon assets purchased consist of a film library
with worldwide and/or Scandinavian distribution rights and Scandinavian
video distribution rights to certain Hallmark Entertainment products. The
contract was conditioned on the consent of Hallmark Entertainment to the
assignment of its distribution agreement with Kimon to the Company. Such
consent was obtained in August 1998. In connection with the acquisition, an
affiliate of Kimon agreed to render management services to the Company in
connection with the marketing of the distribution rights acquired by the
Company. In consideration of such management services, the affiliate will
receive certain royalties based on sales of the Hallmark films plus
reimbursement of cost incurred in connection with such management services.

In April 1999, the Company purchased an option with the right of first
refusal to be the exclusive worldwide distributor of a motion picture
entitled "HARA." The film is an action-packed semi-biographical martial
arts love story and is expected to start preproduction in January, 2000. A
company affiliated with management of the Company owns a 50% equity
interest, in Red Sun Productions, Inc., the production company which owns
all rights to the film "HARA."

F-11
<PAGE>

5. Film costs:

Film costs are comprised of the following:

June 30,
Component 1999 1998

Films released, at cost $ 0 $ 0
Less accumulated amortization 0 0
-------- --------
0 0
======== ========

Projects in development 4,383,629 110,422
-------- --------
Total film costs 4,383,629 $110,422
======== ========

6. Income Taxes:

At June 30, 1999, the Company had a federal net operating loss carry
forward, for tax purposes, of approximately $32,000,000, expiring through
2011. The utilization of approximately $4,900,000 of these losses in future
periods is estimated by the Company to be limited to approximately $350,000
per year (the "annual earnout limitation").

7. Notes and Loans Payable:

The following table presents notes and loans payable at June 30, 1999 and
1998:

1999 1998
---- ----
6% Convertible Subordinated Debentures $ 179,000 $ 179,000
12% Senior Unsecured Promissory Notes 100,000 100,000
Augustine Note 150,000 -
Generale Bank Litigation Settlement Note 250,000 250,000
Media Trust Note 315,000 315,000
E3 Sports Note - 135,000
Interim Financing Loans 185,165 100,000
Visa Loan 12,916 -
---------- -----------
Total $1,192,081 $ 1,079,000
========== ===========

On July 17, 1997, unsecured long term notes of the Company in the aggregate
amount of $179,000 matured. Such notes were not paid on the maturity date.
The Company entered into an installment payment plan extending over a 15
month period through March 1999. The Company has not made any payments and
is presently in default of the payment schedule.

In 1995, the Company received net proceeds from the private placement of an
aggregate of $362,500 principal amount of 12% Senior Unsecured Promissory
Notes (the "Notes"). The Notes are repayable with interest on the earlier
of (a) the closing of a public offering of the Company's equity securities
from which the Company receives gross proceeds of at least $10,000,000, or
(b) one year from the issuance date. The Company also granted to the
purchasers of the Notes an aggregate of 26,042 warrants (the "Warrants"),
20,833 of which are exercisable at $2.83 per share and 5,209 of which are
exercisable at $2.37 per share. Each of the Warrants is exercisable at any
time beginning one year after the date of issuance and expiring four years
after the date of issuance.

F-12
<PAGE>

The Notes and interest were not repaid as scheduled. The Company proposed
that note holders either defer maturity of their notes and exchange
existing warrants for shares, or cancel the notes and warrants in their
entirety in exchange for a greater number of shares. The Company offered to
register any shares issued in exchange for the notes. As of August 12,
1997, the date the registration became effective, a total of $262,500 of
notes were exchanged for 595,455 shares of registered stock. The remaining
notes for $100,000 (held by a single investor) have not been paid and are
in default.

The Company received $150,000 in funding from the Augustine Fund L.P.
(Augustine) in July 1998. In exchange for the financing, Augustine received
a $150,000 convertible note as well as up to 150,000 transferable warrants,
exercisable at $1.60 per share for a three year period. Augustine can
convert into restricted shares of the Company's common stock at a discount
to the market price of the common stock at the time of the conversion
(i.e., at the lower of the market price on the closing date, or 80% of the
market price prior to conversion). Augustine and certain Augustine
associated parties were also issued a total of 45,000 shares of restricted
common stock in connection with the transaction.

In December 1996, the Company settled the outstanding litigation with
Generale Bank ("Generale") (formerly known as Credit Lyonnais Bank
Nederland N.V.) and Cinecom Entertainment Group Inc. Pursuant to the
settlement agreement with Generale, the Company agreed to pay to Generale
the sum of $275,000 in complete satisfaction of the claim, $25,000 on each
of June 30, and December 31 in the years 1997, 1998 and 1999, and $125,000
on June 30, 2000. Interest on the installments (at the rate of LIBOR plus
1% per annum) will be waived provided the Company remains in compliance
with the agreed upon payment schedule. The Company and General Bank later
agreed upon a new payment schedule as follows: $25,000 on or before October
15, 1997 (payment was made); $30,000 on each of April 15, 1998, June 30,
1998, December 31, 1998, June 30, 1999 and December 31, 1999; and $125,000
on June 30, 2000. No amounts have been paid since October 1997, and thus,
the Company is in default.

In March 1998, the Company acquired an 18% interest in the common stock of
E-3 Sports New Mexico, Inc. and Media Trust S.A. In consideration for the
seller's transfer and sale of the shares, the Company delivered two
promissory notes, one in the amount of $315,000 (the "Media Trust Note")
and one in the amount of $135,000 (the "E-3 Note"). The entire principal of
both notes are to be repaid twelve months after the date of issue, and
shall bear interest at a rate of (a) 8% for the first three month period,
(b) 12% for the second three month period, (c) 16% for the third three
month period and (d) 20% for the final three month period. Any outstanding
amount of principal and interest may be repaid, in whole or in part, at any
time without penalty. In June 1999, the seller exchanged the E-3 Note and
related accrued interest of $27,225 for 348,721 shares of Company common
stock.

F-13
<PAGE>

unaffiliated parties were paid from the proceeds of the Kinnevik
receivable. The remaining lenders agreed to a rollover of their loans
(aggregating $100,000) against a second Kinnevik receivable and, in
consideration, will receive an additional 50,000 warrants in the aggregate,
exercisable at $1.00 per share over a three year period. In September,
1998, all but $25,000 of these loans were repaid from the proceeds of the
Kinnevik receivable. The remaining lender, Robert E. Miller, Jr., a
director of the Company, agreed to a rollover of his $25,000 loan on an
unsecured basis for an additional six month period with interest at the
rate of 10% per annum. Thereafter, Mr. Miller agreed to a further six-month
extension (through September, 1999) in consideration of an increase in the
interest rate on the loan to 12% per annum, the issuance of an additional
12,500 common stock purchase warrants at $1.00 per share, and an extension
of the expiration date on all warrants issued to date to the year 2004.

In August 1998, three unaffiliated investors loaned 4,000,000 Belgian
Francs (approximately $100,000) and received one year convertible notes
with interest at 10% per annum (the notes are convertible at a 15% discount
to the market price). Mr. Johan Schotte and Mr. Pierre Koshakji each have
12% Interim Financing Loans to the Company at June 30, 1999, of $21,985 and
$5,700, respectively.

8. Commitments and Contingencies:

Lease Commitments:

The Company presently conducts its operations out of leased premises at
1601 Elm Street, Dallas, Texas, consisting of approximately 2,500 square
feet. The premises are presently being made available to the Company as an
accommodation by a company affiliated with Mr. Johan Schotte, the CEO of
the Company. Rent expense for each of the fiscal years ended June 30, 1999,
1998 and 1997 was $84,939, $69,002 and $38,772, respectively. In June,
1998, the Company entered into a sublease for office space in Los Angeles,
California with an affiliate of the CEO of the Company. The sublease was on
a month-to-month basis at the rate of $1,500 per month. The Company
utilized these premises for the period June through December, 1998. In
January, 1999, the Company entered into a sublease for approximately 5,000
square feet of office space at the rate of $12,823 per month for premises
located at 2049 Century Park East, Suite 2750, in Los Angeles, California.
The Company relinquished this sublease in May, 1999 in consideration of a
lease surrender settlement with the landlord in the amount of $5,000.

Litigation:

On December 20, 1990, Hibbard Brown & Company, Inc. ("Hibbard Brown") filed
a complaint entitled Hibbard Brown & Company, Inc. v. Double Helix Films,
Inc., Odyssey Entertainment Ltd. and Communications and Entertainment Corp.
in the Supreme Court of the State of New York, County of New York. The
Complaint sought payment of $300,000 under an agreement with the Company,
Odyssey, Double Helix and Hibbard Brown dated December 21, 1989 for certain
investment banking services allegedly performed in introducing Odyssey and
Double Helix and assisting them in consummation of the Mergers by which
they became wholly-owned subsidiaries of the Company. A counterclaim
seeking recovery of $50,000 paid to Hibbard Brown upon execution of the
Agreement was asserted.

Hibbard Brown's motion for summary judgment was granted in October, 1991.
On January 30, 1992, the Company moved, by order to show cause, to renew
and thereupon deny, dismiss or stay Hibbard Brown's previously granted
motion for summary judgment on the ground that Hibbard Brown had
intentionally concealed the fact that it was an unauthorized foreign
corporation transacting business in New York. By Order dated March 2, 1992,
the court granted the Company's motion in part by renewing the action and
staying judgment pending Hibbard Brown's qualification in New York. On
October 29, 1992, Hibbard Brown moved for an order vacating the stay of
judgment, a declaration that it was now an authorized foreign corporation
and reinstatement of the summary judgment granted in October, 1991 or, in
the alternative, to rehear its motion for summary judgment on the original
papers and grant judgment in its favor.

F-14
<PAGE>

On March 26, 1993, the court issued a Decision and Order vacating the stay
of entry of the $300,000 judgment against the Company and granting the
Company's cross-motion for a stay of execution pending the determination of
the Company's action against Hibbard Brown. The Company's cross-motions for
reargument and renewal and consolidation were denied.

By Decision and Order dated June 18, 1993, the court affirmed the stay of
execution of the judgment, but required the Company to obtain a bond to
secure the stay. The Company obtained a non-collateral bond.

On March 5, 1992, the Company instituted an action entitled Communications
and Entertainment Corp. v. Hibbard Brown & Company in the Supreme Court,
New York County, for the return of 150,000 shares of Common Stock
previously issued on the ground that Hibbard Brown failed to perform the
required services. Hibbard Brown counterclaimed for breach of contract.

In July 1993, after considerable pre-trial discovery, the Company and
Hibbard Brown moved for summary judgment. By Decision and Order dated
August 11, 1993, the court denied both motions. Both parties appealed. On
March 3, 1994, the appellate court affirmed the denial of summary judgment.

On or about October 14, 1994, Hibbard Brown filed a voluntary petition for
relief under Chapter 11, Title 11 of the United States Code with the United
States Bankruptcy Court, Southern District of New York. Consequently, the
Company's action against Hibbard Brown has been automatically stayed. The
Company has filed a Proof of Claim. In January 1998 the U.S. Bankruptcy
Court of the Southern District of New York approved a final settlement of
the bankruptcy of Hibbard Brown.

On or about September 11, 1992, Joseph Duignan brought an action in the
Superior Court of New Jersey, Mercer County, entitled Joseph Duignan v.
Double Helix Films Limited Partnership No. 1, L.P., Double Helix Films,
Inc., Cinecom International Films, Film Gallery, Inc., Stan Wakefield,
Jerry Silva, Arthur Altarac and Anthony Tavone (MER-L-4262-92). Jerry
Silva, the only defendant who was served, is former Vice Chairman of the
Board of Directors of the Company. Mr. Silva has demanded that the Company
indemnify him against any expenses, judgments, and amounts paid in
settlement of the action. The Company contends that it is not required to
indemnify Mr. Silva because he breached his fiduciary duties to the
Company.

Mr. Duignan claims that he invested $75,000 to acquire a partnership
interest in Double Helix Films Limited Partnership No. 1 and that Mr. Silva
forged or caused to be forged his signature on a Subscription Agreement
dated July 28, 1986. The Complaint alleges claims for rescission, unjust
enrichment (against Double Helix), conversion, fraud, breach of contract,
breach of fiduciary duty and breach of covenants of good faith and fair
dealing (against Mr. Silva and Double Helix). Mr. Duignan seeks to recover
compensatory damages, including but not limited to, his alleged $75,000
investment, punitive damages and attorney's fees. Mr. Silva has answered
the Complaint.

F-15
<PAGE>

(which he allegedly advanced for the benefit of Double Helix) and to give
him a 19.5% ownership interest in its corporate successors. The Company's
current management has paid Mr. Shah the sum of $15,000 in July 1998 and in
full settlement of all claims against the Company.

In The Private Lessons Partnership v. Carnegie Film Group, Inc., Monogram
Pictures Corp., Filmways Entertainment Corp., ATC, Inc., Krishna Shah,
Lonnie Romati, Gerald Muller, Jerry Minsky and Does 1-100 (California
Superior Court, Los Angeles County, Case No. BC091840), the plaintiff
asserted claims for breach of oral contract, fraud in the inducement and
fraudulent conveyance against Mr. Shah, seeking damages in the amount of
$315,000, plus further unspecified compensatory damages and punitive
damages. In August 1995, Mr. Shah filed a cross-complaint against the
Company, Double Helix Films and Norman Muller for indemnification,
apportionment of fault and declaratory relief. In addition to compensatory
damages, he seeks punitive and exemplary damages, emotional distress
damages and attorney's fees. The Company has answered the cross-complaint.

On or about May 15, 1995, Credit Lyonnais Bank Nederland N.V. and Cinecom
Entertainment Group, Inc. filed a Complaint in the Superior Court for the
State of California, County of Los Angeles, captioned Credit Lyonnais Bank
Nederland N.V. and Cinecom Entertainment Group, Inc. v. Odyssey
Distributors, Ltd. and Does 1 through 100 (No. BC 127790). They allege that
Odyssey Distributors, Ltd. (a subsidiary of the Company) collected but
failed to remit to them assigned distribution proceeds in the amount of
$566,283.33 from the foreign distribution of "Aunt Julia and the
Scriptwriter" and "The Handmaid's Tale." The Complaint alleges claims for
breach of contract and breach of fiduciary duty and demands damages in
excess of $566,283, attorney's fees, an accounting, a temporary restraining
order and a preliminary injunction. In June 1995, the Court denied
plaintiffs an attachment and stayed the action pending arbitration in New
York. In September, 1996, the Court dismissed the Complaint. In December,
1996, the Company settled the outstanding litigation with Generale Bank
("Generale") (formerly known as Credit Lyonnais Bank Nederland N.V.) and
Cinecom Entertainment Group Inc. Pursuant to the settlement agreement, the
Company agreed to pay to Generale the sum of $275,000 in complete
settlement of the claim, payable $25,000 upon execution of the settlement
agreement, $25,000 on each of June 30 and December 31 in the years 1997,
1998 and 1999, and $100,000 on June 30, 2000. Interest on the installments
(at the rate of LIBOR plus 1% per annum) will be waived provided the
Company remains in compliance with the agreed upon payment schedule. The
Company and Generale later agreed upon a new payment schedule as follows:
$25,000 on or before October 15, 1997 (payment was made); $30,000 on each
of April 15, 1998, June 30, 1998, December 31, 1998, June 30, 1999, and
December 31, 1999; and $100,000 on June 30, 2000. The Company is in receipt
of a demand letter dated May 4, 1998. The letter demands that the company
Cure the non-payment of a $30,000 installment due April 15, 1998. According
to the agreement between the Company and Generale, the Company had ten days
after receipt of the letter to cure the default. The default has not yet
been cured. The consequences of not curing the default is the entry of a
confession of judgment already executed by the Company for the amount of
$275,000. This confession of Judgment is against Odyssey Distributors,
Ltd., a wholly owned but non-operating subsidiary of the Company.

In August 1995, G.P. Productions, Inc. ("GP") and Greenwich Subject Films,
Inc. ("Greenwich") commenced an action entitled G.P. Productions, Inc. and
Greenwich Studios, Inc. v. Double Helix Films, Inc., Communications and
Entertainment, Inc., Krishna Shaw, Gerald Muller and Norman Muller in the
United States District Court, Southern District of Florida (Case No.
95-1188). Mr. Muller has demanded that the Company indemnify him against
any expenses, judgments and amounts paid in settlement of the action. The
Company contends that, by virtue of Mr. Muller's breaches of fiduciary duty
and violation of his obligations to the Company, it is not required to
provide indemnification.

F-16
<PAGE>
conversion, civil theft, conspiracy and fraudulent conveyance. The
Complaint demands a recall of the films, an attachment, preliminary and
permanent injunctive relief, an accounting, and unspecified compensatory,
punitive and treble damages. The Company's motion to transfer venue of the
action was granted in November, 1995, and the case was transferred to the
United States District Court for the Southern District of New York. There
has been no activity in this matter since the transfer of venue in 1995.

In October, 1995, Canon Financial Services filed a Complaint in the
Superior Court of New Jersey entitled Canon Financial Services, Inc. v.
Communications and Entertainment Corp. The plaintiff is claiming that it is
due $47,499.83, plus damages, pursuant to a lease agreement. The Company
has filed an Answer in this action and plaintiff's motion for summary
judgment has been denied by the Court. No trial date has yet been set in
this matter.

In December, 1995, Robert F. Ferraro, a former director of the Company,
brought an action against the Company in the Supreme Court of the State of
New York, New York County. The action was brought on a promissory note in
the amount of $25,000 and plaintiff obtained a judgment on a summary
judgment motion. The plaintiff has not yet moved to enforce the judgment
and the Company is considering whether or not it has a claim for
indemnification against prior management in connection with the issuance of
the note. The Company is presently settling with Mr. Ferraro.

In March, 1996, an action was filed against the Company in Los Angeles
Municipal Court by Judy Hart, in which the plaintiff claims that she is due
$17,920 pursuant to a promissory note. The Company has filed a cross-claim
seeking offsets against the amount due and other damages. On May 21, 1998,
a default judgment was entered on behalf of plaintiff in the amount of
$22,261. Subsequently, plaintiff filed a motion to include attorneys fees
and costs in the aggregate amount of approximately $17,000. The Company is
attempting to reach a settlement with plaintiff.

In March, 1996, a class action complaint was filed against the Company
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 subsidiary, Double Helix Films, Inc. 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 "Diane
Pfannebecker v. Norman Muller, Communications and Entertainment Corp., Jay
Behling, Jeffrey S. Konvitz, Tom Smith, Jerry Silva, David Mortman, Price
Waterhouse & Co., Todman & Co., and Tenato Tomacruz." Following the filing
of the second action, the first action was dismissed by stipulation in May
1997. The Company filed a motion to dismiss the complaint in the second
action and after a hearing on the motion in July, 1997, the Court dismissed
the federal securities law claims as being time-barred by the applicable
statute of limitations, and dismissed the state securities law claims for
lack of subject matter jurisdiction. The lower court's dismissal of this
action was upheld on appeal by the Ninth Circuit. 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 upon their wrongful
actions and failure to comply with various obligations to the Company. The
case was refiled in California state court in August 1998 and the Company
has retained counsel to represent itself. The Court has granted motions to
dismiss two of the complaints filed by the Plaintiff who has also filed a
third complaint. Counsel expects a further motion to dismiss to be granted
by the court.

F-17

<PAGE>
In December, 1997, the Directors Guild of America ("DGA") obtained an
arbitration award against Down Range Productions, Inc., a wholly owned
subsidiary of Odyssey ("Down Range"), on behalf of Kahn Brothers Pictures
fso Michael Kahn, Charles Skouras, and Scott C. Harris. Down Range was
ordered to pay Kahn Brothers Pictures the total sum of $155,041; Charles
Skouras the sum of $32,360; and Scott C. Harris the total sum of $8,868;
plus interest at 18% per annum on each of these amounts from April 1, 1997.
Down Range was also ordered to pay the DGA $2,500. Down Range was also
ordered to assign to the DGA all of Down Range's right, title and interest
in the motion picture "Down Range," including the screenplay for the motion
picture, and Down Range was enjoined from licensing the motion picture or
the screenplay to any third party other than the DGA. Down Range was also
ordered to pay the arbitrator $2,250.

Kahn Brothers Pictures fso Michael Kahn also filed a claim against Down
Range Productions, Inc. and the Company with the Writers Guild of America
West (WGA) for unpaid writing services on "Down Range." That claim has been
settled by the current management for the amount of $15,000 in July 1998.

The Screen Actors Guild ("SAG") has also asserted that there are amounts
owing to several actors arising out of "Down Range." In September, 1999,
SAG obtained an arbitration award against Down Range for a total amount of
$96,183, inclusive of salaries to the actors, pension and health
contributions and late fees. Down Range was also ordered to pay $200 to the
arbitrator. Additionally, there were two actors, Corbin Bernsen and Jeff
Fahey, who had pay-or-play contracts. The outcome of these contracts and
the actors' claims have not been resolved.

In April, 1998, an action was commenced against the Company by Siegel &
Gale, a provider of brochure materials, seeking payment of $48,695, plus
costs, related to work done by Siegel & Gale for the Company. The Company
settled this matter in October 1999 for the amount of $25,000.

9. Shareholders' Equity:

On March 6, 1996 the Board of Directors of the Company approved a
one-for-six reverse stock split of the outstanding shares of the Company's
Common Stock (the "Common Stock"). The Reverse Stock Split was effective as
of March 18, 1996 (the "Record Date"). On the Record Date, each six shares
of the Company's then outstanding Common Stock (the "Old Common Stock")
were automatically converted into one share of the new Common Stock, par
value $.01 per share (the "New Common Stock").

No fractional shares of New Common Stock were issued. Rather, holders of
Old Common Stock who are entitled to receive fractional shares of New
Common Stock will be rounded up to the nearest whole share of New Common
Stock.

The Reverse Stock Split resulted in a net reduction of 11,408,973 in the
number on Common Shares outstanding, including 1,995 shares issuable due to
the rounding up of fractional shares.

Except for the number of shares of Common Stock outstanding after the
Reverse Stock Split, the Old Common Stock and the New Common Stock are
identical.

On February 14, 1995, the then Board of Directors of the Company declared a
dividend payable to holders of record on February 24, 1995 ("the Dividend
Record Date") of the Company's common stock and Class A stock. The dividend
consisted of 1,700,000 shares of common stock, $.01 par value per share, of
Global Intellicom, Inc. that were owned by the Company. Holders of the
Company's common stock and Class A stock received .1233 and .0786 shares,
respectively, of Global common stock for each share of the Company's stock.
The dividend was recorded as a reduction of capital in excess of par value.

The shares of Global common stock were distributed to an escrow agent on
the Dividend Record Date pending registration of the shares. The Securities
and Exchange Commission declared Global's registration statement effective
as of September 1, 1995 and, accordingly, the escrow agent was authorized
to distribute the dividend shares.

F-18
<PAGE>
Communications and Entertainment Corp. was originally formed to consummate
the mergers of Double Helix Films, Inc. ("Double Helix") and Odyssey
Entertainment Ltd. pursuant to the Agreement and Plan of Merger dated
September 22, 1989 ("the Merger Agreement"). On September 6, 1990 the
shareholders of Double Helix and Odyssey approved the Merger Agreement.
Pursuant to the terms of the Merger Agreement, each share of common stock
of Odyssey was convertible into one share of Class A stock of the Company
and each share of Double Helix common stock was convertible into one share
of the Company's common stock. Prior management's instructions to the
transfer agent required that any shares of Odyssey or Double Helix
outstanding at the time of the Merger not tendered to the Company's
transfer agent for exchange by March 31, 1995 should be canceled.
Accordingly, 86,790 shares of the Class A stock and 10,496 shares of the
common stock reserved for exchange were canceled. The par value of the
shares canceled, of $5,837, was transferred to capital in excess of par.
Upon further research by counsel to the Company, the instructions of prior
management were reversed, and all cancelled shares were reinstated, with
the result that $5,837 was transferred back to stated capital.

Additionally, in accordance with the Company's charter, all outstanding
shares of the Company's Class A stock, automatically converted, on March
31, 1995, into shares of the Company's common stock at a rate of .6375
shares of common stock for each share of Class A stock.

10. Stock Options and Warrants:

The Company has an Incentive Stock Option Plan (The "Option Plan") for its
key employees providing for the granting of options to acquire common
stock. The maximum number of shares of common stock subject to the Option
Plan is 75,000, plus 5% of any increase in the number of issued shares
after the effective date of the Merger, excluding any increase due to stock
awards to key employees or as result of the conversion of Class A stock.
The price for the shares covered by each option will not be less than 100%
of the fair market value at the date of grant (110% for holders of more
than 10% of the company's common stock). Options granted expire ten years
from the date of grant (five years for holders of more than 10% of the
Company's common stock).

No options were outstanding at June 1999, 1998 or 1997.

During the fiscal year ended June 30, 1997, a total of 1,153,333 warrants
were issued to officers, directors, employees, consultants and third
parties, exercisable at prices ranging from $ .625 per share to $1.06 per
share. The warrants are exercisable for periods ranging from three to five
years. None of such warrants was exercised during fiscal year 1999 or 1998.

During the fiscal year ended June 30, 1998, a total of 254,260 warrants
were issued to third parties, exercisable at prices ranging from $1.00 per
share to $1.65 per share. The warrants are exercisable for periods ranging
from two to five years. None of such warrants was exercised during fiscal
year 1999 or 1998.

During the fiscal year ended June 30, 1999, a total of 467,660 warrants
were issued to officers, directors and holders of notes payable,
exercisable at prices ranging from $.55 to $1.65. The warrants are
exercisable for periods ranging from two to five years, except for two
officers' issuances which have no expiration date. None of such warrants
were exercised during fiscal year 1999.

11. Related Party Transactions:

The Company has entered into a "first look" agreement with Presto
Productions, a production company in which Stephen R. Greenwald, a Director
of the Company, has an interest. Mr. Greenwald's interest in Presto varies
on a film-by-film basis. The Company believes that the terms of its
arrangement with Presto are no less favorable than could be arranged with
other independent third party producers.

F-19
<PAGE>

In April, 1997, Stephen R. Greenwald, Lawrence I. Schneider and Robert
Miller, Jr., all directors of the Company, made loans to the company in the
amounts of $50,000, $25,000 and $25,000, respectively. Each loan was
payable on demand and accrued interest at the rate of 2 points over prime
per annum. The notes were secured by a collateral assignment of the
Company's 300,000 note receivable from Kinnevik. In consideration of making
the loans, the lenders received five-year warrants to purchase shares of
common stock of the Company, exercisable at $1.00 per share. Messrs.
Schneider and Miller each received 25,000 warrants and Mr. Greenwald
received 50,000 warrants as consideration for making the loans to the
Company. In addition, two independent unaffiliated third parties made
additional $25,000 loans to the Company in June and August, 1997 on the
same terms and conditions as the loans made by Mr. Greenwald, Schneider and
Miller. In May, 1998, the loans of Mr. Schneider and one of the
unaffiliated parties were paid from the proceeds of the Kinnevik
receivable. The remaining lenders agreed to a rollover of their loans
(aggregating $100,000) against a second Kinnevik receivable and, in
consideration, will receive an additional 50,000 warrants in the aggregate,
exercisable at $1.00 per share over a three year period. In September,
1998, all but $25,000 of these loans were repaid from the proceeds of the
Kinnevik receivable. The remaining lender, Robert E. Miller, Jr., a
director of the Company, agreed to a rollover of his $25,000 loan on an
unsecured basis for an additional six month period with interest at the
rate of 10% per annum. Thereafter, Mr. Miller agreed to a further six-month
extension (through September, 1999) in consideration of an increase in the
interest rate on the loan to 12% per annum, the issuance of an additional
12,500 common stock purchase warrants at $1.00 per share, and an extension
of the expiration date on all warrants issued in connection with his loan
to the Company to the year 2004.

In June 1998, the Company entered into a sublease for office space in Los
Angeles with an affiliate of the CEO of the Company. The sublease is on a
month-to-month basis at the rate of $1,500 per month and ended December
1998.

In November 1998, the Company entered into the following related party
transaction with E 3 Sports New Mexico, Inc., a company which is an
affiliate of Mr. Schotte and Mr. Koshakji (the CEO and President of the
Company, respectively) and in which the Company holds a minority interest:
(i) the Company purchased a $25,000 sponsorship from the Albuquerque
Geckos, the professional soccer team owned by the affiliate; and (ii) the
Board authorized the Company to loan up to $100,000 to the affiliate,
payable no later than July 15, 1999 with interest at 15% per annum (the
loan is secured by 10,000 shares of E 3 Sports New Mexico, Inc.).

In July 1998, the Company entered into the following related party
transactions with Media Trust S.A., a company which is an affiliate of Mr.
Schotte and in which the Company holds a minority interest: (i) the Company
has agreed to make a $2,500 loan to the affiliate, payable in one year with
interest at 15% per annum; (ii) the Company engaged the affiliate to
introduce prospective investors to the Company, in exchange for which the
affiliate will receive 10% of any investments made in the Company by
persons or entities introduced by the affiliate, together with five-year
warrants (100 warrants per $1,000 invested) at an exercise price equal to
the market price of the Company's stock on the date of the investment. In
connection with convertible loans made to the Company in 1998 by Belgian
investors in the aggregate amount of approximately $100,000, and the
purchase of 625,000 shares of common stock of the Company by Lecoutere
Finance, S.A. in December, 1998 (see below), a total of 29,537 five-year
warrants will be issued to Media Trust, S.A. with exercise prices ranging
from $ .38 per share to $ .98 per share.

F-20
<PAGE>
In December 1998, Lecoutere Finance S.A., a affiliate of the CEO of the
Company, purchased 625,000 shares of common stock from the Company for an
aggregate consideration of $187,500 ($.30 per share). The price was based
on the average price of the Company's common stock for the 30 day period
preceding the date of purchase (i.e., $ .37 per share), less a 20% discount
due to the restricted nature of the shares purchased.

On December 1, 1998, a total of 50,000 three-year warrants were issued to
three parties (one of which is an affiliate of the Company) in
consideration of extending the maturity date of loans to the Company. The
warrants have an exercise price of $1.00 per share.

In April 1999, the Company purchased an option with the right of first
refusal to be the exclusive worldwide distributor of a motion picture
entitled "HARA." The film is an action-packed semi-biographical martial
arts love story and is expected to start pre-production in January, 2000. A
company affiliated with management of the Company owns a 50% equity
interest, in Red Sun Productions, Inc., the production company which owns
all rights to the film "HARA."

12. Subsequent Events:

In August 1999, the assignee of a former director of the Company elected to
convert accrued wages owed by the Company in the amount of $81,103 to
300,678 shares of Company common stock.

In April, 1998, an action was commenced against the Company by Siegel &
Gale, a provider of brochure materials, seeking payment of $48,695, plus
costs, related to work done by Siegel & Gale for the Company. The Company
settled this matter in October 1999 for the amount of $25,000.

During the period between April, 1999 and September, 1999, the Company
completed four private placements to offshore investors, the first of which
was completed for 575,000 shares of common stock at a purchase price of
$.30 per share (resulting in gross proceeds to the Company of $172,500),
and the latter three of which were completed for an aggregate of 1,600,000
shares of common stock at a purchase of $.40 per share (resulting in gross
proceeds to the Company of $400,000). The proceeds of these offerings were
used primarily for debt reduction and working capital for the Company.

In September, 1999, Mr. Greenwald resigned as a Director of the Company to
pursue other interests. He also agreed to settle all outstanding payments
due to him under his employment agreement, and to resign as a Managing
Director of the Company, provided the Companys pays to him the settlement
amount of $75,000 on or before October 31, 1999, together with 75,000
shares of restricted common stock. If payment is delayed beyond October 31,
1999, then the number of shares to be delivered to Mr. Greenwald will
increase by 25,000 shares for each week of delayed payment. The settlement
agreement with Mr. Greenwald is subject to the approval of the Board of
Directors of the Company.

F-21

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