SECURITIESAND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





x Annual Report under Section 13 or 15(d) of the Securities


Exchange Act of 1934





For the fiscal year ended June 30, 2010





or





o Transitional Report under Section 13 or 15(d) of the


Securities Exchange Act of 1934


0-18954Commission file number


ODYSSEY PICTURES CORPORATION(Exact name of small business issuer as specified in its charter)


Nevada

95-4269048(State of incorporation)

(IRS Employer Identification Number)


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


(972) 867-0055(Issuer's telephone number)


Securities registered under Section12(b) of the Exchange Act: NONE





Securities registered under Section 12(g) of the Exchange Act:


Common Stock: $.01 Par Value(Title of Class)


Indicate by check mark whether the registrant if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act   Yes oNo x





Indicate by check mark whether the registrant if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act  Yes xNo o





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 xNo o





Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will 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. o





Indicate by check mark whether the registrant if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (check one)




Large Accelerated Filer o
Accelerated Filer o
Non-accelerated Filer o
Smaller Reporting Company x


Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo x


The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2010 was approximately $3,845,123 (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 June 30, 2010 there were outstanding 68,150,888 shares of Odyssey Pictures Corporation's common stock, par value $.01 per share (the "Common Stock").










ODYSSEY PICTURES CORPORATION





Form 10-K


Report for the Fiscal Year


Ended June 30, 2010





PART I
1Item 1. Business
1Item 2. Properties
3Item 3. Legal Proceedings
3Item 4. (Removed and Reserved)
4PART II
4Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
4Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
5Item 8. Financial Statements and Supplementary Data
7Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
7Item 9A(T). Controls and Procedures
7PART IIIItem 10. Directors and Executive Officers and Corporate Governance
9Item 11. Executive Compensation
9Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
10Item 13. Certain Relationships and Related Transactions and Director Independence
10Item 14. Principal Accountant Fees and Services
11Item 15. Exhibits
11Signature


i





PART I





ITEM 1.          DESCRIPTION OF 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. 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").  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.


Beginning in the fiscal year ended June 30, 2008 the Company began selling branding services, web site design and development services and graphics and online business presentation services to a limited numbers of companies. These projects are managed by the Company and are completed using principally third party contract services. To the extent that the company relies on outside vendors, there is no assurance that acceptable vendors will remain available to enable the Company to continue to offer these services as part of its business offering however, to the extent they are available, the Company expects to expand this line of business in addition to film, digital delivery technologies, finance, marketing and other related businesses.


(b) Narrative Description of Business


The focus of the distribution segment of the industry in general, has expanded into areas other than filmed entertainment properties. With emerging markets in e-commerce, varying levels of broadcast, new fields of revenue opening for direct-to-market applications, along with technological advancement for electronic distribution of media content throughout the world, Odyssey developed a new plan to engage in latest methods of distribution at various levels of this technological advancement for delivery of content and services to the client, client affiliates, or the end users.


As a next step in its business development the Company has been selling branding services, web site design and development services and graphics and online business presentation services to a limited numbers of companies on a contract basis. These projects are managed by the Company and are completed using principally third party contract services. The Company’s delivery of services on a contract basis allows it to receive revenues throughout the production and delivery of the service rather than waiting until final product delivery.


The delivery of web site design, development and content services as well as hosting platform design services allows the Company to initiate development of its own proprietary platform, now the beginning stages, at the same time that it is providing these services for customers.


Our business has a new focus and generally falls into the following categories:


1. Service Representation. Our company contracts with a client to organize and administer a new campaign for their image, branding, marketing, and general awareness of their product, media materials including all forms of recorded media, and defining methods of distribution specific to that particular client's needs. Our company engages with the client and receives a fee in consideration for the proposed duration of time, the amount of man hours that are going to be devoted in order to build the various campaigns that are required, and formulates a budget based on new materials that have to be generated in order to penetrate the clients markets.


2.  Distribution Methods. Along with the assemblage of service platform for the client, the company receives rights to distribute, organize, and otherwise make ready all necessary content elements in order to administer them to the network, outlet, or specified end performance venue of such content. As before practiced, the Company then seeks to license the rights it has been authorized to subdistributors in the territories for the respective distribution rights. In general, the grant of rights to the subdistributors includes all media since digital distribution does involve all forms previously segregated for independent sales among one or many other sales agents in the past. 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 becoming due before access to the content can be made through the company's secure process over the Internet. In some cases, our company will provide certain arrangements where advertising revenue is split in lieu of licensing fees for the benefit of the client and where the client may have sponsorships, advertising, marketing campaigns already directed by our company. This revenue sharing process is incorporated as a part of the service arrangement that we are providing for the client. In this case, our company is licensing both the content and the entire advertising/sponsorship program package from which revenue would be generated upon transmission and/or broadcast.


With worldwide distribution markets developing new platforms on a rapid basis, the independent media releasing and distribution industry has had to change methods of operating in order to remain competitive with the broadcast, film, and prerecorded (DVD) business (notice the reduction of venues from past replications). The entry level to online access for broadcast markets has become an essential element in determining and maintaining the existence and future of many businesses and entertainment venues.





Online distribution or "digital media distribution" has become a necessity in effecting access to audio and video content and is incumbent upon the distributor now to seek and streamline new methods of acquiring, storing, securing, and procuring quality of reproduction over the Internet, and providing this within an economic condition that allows us to compete as well as to keep up with the economics of upgrading with challenging and changing technology requirements.


The Company expects to be able to create a reliable system for the end user that matches the impact from which many high profile companies were very successful in establishing the “experience of high-quality media delivery”. This includes having the ability “in-house” to store and secure content and make content accessible to expanding markets such as digital theaters, pay per view, video on demand, and downloads including mobile “on demand” and interactive technology such as short code technology and instant access response. With this new platform in the forefront of Odyssey's new developments, we have found it necessary to expand into other areas of content reproduction such as live events, prerecorded concerts, educational and learning programs, educational, fitness, self-help and medical, even customizing related technology to client-specific needs and future affiliated organizations in other areas of content provision.


Odyssey has also become involved with development and delivery of intellectual property products. The Company expects that the future of the business would rely on certain technological advancements at the forefront of digital distribution and delivery. The Company believes that it is prudent to develop products such as system infrastructure design, website design with video interface, online support systems, special secure coding, as well as Internet broadcast solutions and satellite access. These elements, now embedded into the management and operations of the Company, will become known as “Proprietary Management Systems” and are unique to the media and media processing venues that capitalize on current market interest and will be valuable in the very near future. Certain applications to this new service would include branding, image design, corporate and graphic presentation matters such as logos, logo colors, logo statements in various templates from which new business systems will be redesigned and developed for numerous business applications over the Internet and broadcast.


Overall, the company should find itself able to not only support additional product and media within its own structure, but also engage other affiliates and related companies into cross-marketing and promotion for expanded media projects on several levels, including interactive media.


With the onset of several different and diverse web-based companies, we are also developing a series of advertising partners, sponsors, and other venues which will result in promotional considerations to offset our costs and being able to place content out into various markets of all levels. New digital delivery systems such as the one we are embarking upon enable us to deliver to the traditional markets, new digital transmission venues, broadcast over the Internet, Satellite accessibility, and even video interface and multi-response mobile communications as well.


Once Odyssey has a significant amount of content available, it creates its own" library" with which to categorize in various areas of interest, either by the end licensing company (such as foreign buyers, foreign television/broadcast, integration into entertainment slots in cable/satellite networks, and programming via our own defined broadcast capabilities) or to specific requirements to clients. The end result should be to create additional streams of revenue, additional opportunities for service income, more control over distribution and security, and operating more on an "international multi-function delivery service basis".


Competition


The entertainment and media industry generally are highly competitive and not always predictable. The Company's competition includes the smaller independent companies operating in similar distribution and delivery venues as well as independent producers and even major studios funding similar operations. Many of these competitors have financial means and other resources significantly greater than those available to the Company. The Company faces competition in all aspects of the business and cannot represent or warrant any assurances that it will be able to compete effectively.


The business of providing content over the Internet is experiencing rapid growth and is characterized by substantial technological changes. Moreover, there are new and varying well-established companies entering into the same fields. Many of these companies have financial, technological, promotional and other resources that are much greater than those available to us and could more effectively use or adapt to current technology changes, or are able to purchase technology to provide a service directly competitive with the Company. Rapidly changing financial markets in our industry and the present economical outlook are not favorable for the Company to have ready-access to capital in order to offset such market interference from competitors. New digital markets and ever-changing technologies require the Company to compete, bid and successfully market for licensing rights and maintain a strong and consistent level of sub-distributor and client relationships in its on-going efforts and enter into potentially volatile markets that it has to afford to remain competitive in over the long term.


2


We will greatly rely on our strategic relationships to assist us in capitalizing on new digital transmission services with digital download and multi-faceted broadcast capabilities along with the affordability to maintain our position in these markets.


Operations


The Company's operations have been greatly reduced as a result of there structuring of the Company by management. The Company's principal office is located in Plano, Texas (see "Properties") and, as of June 30, 2010, the Company had three full-time employees, consisting of Mr. John Foster, the CEO and President of the Company, along with an administrative assistant and an office assistant in the Plano office. The company is fortunate to have been able to use some of its board members, along with a past board member, to help in areas where it could not afford full-time personnel. The company also supports intern programs from time to time where college students can work at the offices on a part-time basis for college credit. Additional staff is planned in the administrative, accounting, technological interests and sales areas, either on a commission or contract basis.


The Company has continued to expand development of its own web site for use in the distribution of broadcast media and other products.


The Company  sells branding services, web site design and development services and graphics and online business presentation services to a limited numbers of companies. These projects are managed by the Company and are completed using principally third party contract services. To the extent that the company relies on outside vendors, there is no assurance that acceptable vendors will remain available to enable the Company to continue to offer these services as part of its business offering however, to the extent they are available, the Company expects to expand this line of business in addition to other related businesses.


ITEM 2.          PROPERTIES


During the reported period, the Company conducted its operations out of leased premises at 2321 Coit Rd. Suite E, Plano, Texas, consisting of approximately 2,500 square feet.  Rent expense for each of the fiscal years through end of term at June 30, 2010, is as follows:


June 30, 2010

$
30,923June 30, 2009

$
22,900


ITEM 3.          LEGAL PROCEEDINGS


Ian Jessel v. Odyssey Pictures Corp. A settlement of this breach of contract matter had been negotiated prior to November 2001 for payment of a sum certain over time. The Company failed to perform and a judgment of $369,160 was entered by stipulation on May 13, 2004.  This matter has been settled.  The Company made payments against this settlement agreement with the final payment being made September 15, 2009.




Dennis Morgan v. Odyssey Pictures Corp. A settlement of this breach of contract matter had been negotiated prior to 2009 for payment of a sum certain over time. The Company paid the final payment on September 30, 2009 and the matter settled.




Lawsuit- Watson, Farley and Williams v. Odyssey Pictures Corp., Gold Leaf Pictures, Belgium, Johan Schotte, Chardonnay Enterprise Ltd, and A Hero From Zero N.V. Complaint filed April 30, 2001, New York Supreme Court, New York County, for balance owing for services rendered from the period beginning 1997 through to April of 2001 to all named defendants. Odyssey has answered this complaint, although it was not notified until August 10, 2001 denying its position in the named defendants. Odyssey contends that it did, in fact, pay any and all outstanding related legal bills related to the Plaintiff’s corporate involvement. Odyssey offered a settlement in 2002, however, no response has been made from the Plaintiff on this matter as of the close of business on June 30, 2010.


In August of 2003, the Company received notice of a federal tax lien being filed in the amount of $27,210 for non-payment of federal payroll tax deposits. The Company paid this obligation during the reported period.





On March 22, 2005 a judgment was entered against the Company in favor of Distinct Web Creations, Inc. and Denise K. Houston in the amount of $32,000 plus prejudgment interest in the amount of $6,291.50, plus attorneys fees in the Circuit Court in Volusia County, Florida.  The Company entered into an agreement with Distinct Web concerning the settlement of this judgment after the end of the fiscal year.  On April 25, 2006, a judgment was entered in favor of the Carlton Fields law firm in the amount of $21,848.12 in the Circuit Court in and for Hillsborough County, Florida for legal services in representing the Company in the Distinct Web Creations, Inc. matter.


3





On June 30, 2006 the Company entered into a settlement agreement with ThorFilms, LLC. as to claims of each whereby the Company agreed to make payment of $100,000 to ThorFilms, LLC prior to December 30, 2006. As of the date of this filing the Company has not made payment under this settlement agreement.


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


ITEM 4.          (REMOVED AND RESERVED)





PART II


ITEM 5.           MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES.


The following table sets forth the range of high and low bid information for the Common Stock of the Company as reported by the National Quotation Bureau’s Pink Sheets on a quarterly basis for each of the two preceding fiscal years. The Company's shares have traded in the over-the-counter market on the OTC market. 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, markdowns or commissions and may not necessarily represent actual transactions.


Common Stock


Fiscal 2009

High


LowFirst Quarter

$
.013


$
.005Second Quarter


.018



.006Third Quarter


.055



.008Fourth Quarter


.09



.05





Fiscal 2010

High


LowFirst Quarter

$
.13


$
.05Second Quarter


.10



.031Third Quarter


.07



.031Fourth Quarter


.09



.055


As of June 30, 2010, there were approximately 4,251 record holders of the Company's Common Stock.





In January, 2009, the Company completed the cancellation of 41,840,469 shares of its common stock previously held by seven (7) individuals and companies.    The shares were acquired by the Company for a total of $105,000 in cash and were cancelled and returned to “authorized but unissued” status pursuant to a unanimous consent of the Company’s Board of Directors and Nevada Law.





On April 20, 2010, the Company completed settlement of existing debt consisting of notes for cash, prepaid subscriptions for cash, services and other consideration totaling $169,869.52 in exchange for 2,165,500 shares of the Company’s common stock.





On June 15, 2009, the Company issued 670,000 shares of common stock to Redcliffe Svenska, SA. These shares were sold in exchange for the settlement  of $134,000 in debt represented by cash advances from Redcliffe Svenska, SA  in addition to the waiver of any and all outstanding interest owed to them by the Company for this debt as well as any and all outstanding interest owed on an additional debt of $80,000 which was earlier converted into shares.  At the time of this transaction Redcliffe Svenska, SA held 22,000,000 shares of the company’s common stock.





On August 15, 2009, the Company issued 234,375 shares of common stock to Amarillo Entertainment, Inc. the shares were sold in exchange for the settlement of a $25,000 note represented by cash advances from Amarillo Entertainment, inclusive of all interest owed.





4


ITEM 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.


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


Overview


During all periods included in this Annual Report, the Company has maintained consistent operations. As of the date of this report, the Company has had limited ongoing operations catering to a single client with services consisting of: creating brand marketing, web site design and development services, Internet broadcast development specialized graphics and online business presentation services to Company’s  client and a limited number of their companies. These projects are managed by the Company and are completed using principally third party contract services.   The revenue derived  from these services has assisted the company with capital to pay legal fees to settle claims and expenditures to maintain the Company in compliance with Securities and Exchange Commission regulations such as accounting and auditing and other costs related to financial disclosure obligations.


Results of Operations for years ended June 30, 2009 and 2010


Sales for the year ended June 30, 2010 were $1,204,200, compared to $1,225,300 for the year ended June 30, 2009 resulting in Income Before other Income and Taxes of $69,800 for the period ended June 30, 2010 down from $323,200 the prior year.


Amortizable capitalized film inventory costs related to revenues on licensees and the receipt of payments on residuals have been fully amortized or impaired in prior periods. We expense all current costs as incurred.  Selling, general and administrative expenses increased to $575,400 for the year period ended June 30, 2010 from $434.906 for the  prior year.


Interest expense decreased to $74,500 for the year ended June 30, 2010 from $181,700 for the prior year.   We recognized the full discount as interest expense in the current period.


Earnings for the year ended June 30, 2010 were $51,700 down  from $2,937,800 for the year ended June 30, 2009. The Earnings for the year ended June 30, 2009 included an entry for Excess Carrying Value of Renegotiated Payables of $2,796,300 compared to $59,300 for the reported year.   This resulted in Earnings per Share of $.04 for the year ended June 30, 2009,  compared to Nil for the year ended June 30, 2010.





As of June 30, 2010, the Company had no agreements with sub-distributors relating to distribution commitments or guarantees that had not been recognized in the statement of operations.


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




There is substantial doubt about the company's ability to continue as an ongoing business due to a $3.2 million working capital deficiency as substantiated by the financial statements in this report. It should be noted that this working capital deficiency is 50% comprised of debt to related parties. Whereas the Company has been consistently profitable with positive cash flows during these past nine fiscal quarters, and we continue to expand into other markets, we cannot guarantee or ensure present activity as a future trend. Should the Company experience an interruption in the current services that it provides its captive client, or our market activity does not result in expanded revenue resources, we would be required to seek alternative financing and raise additional funds to finance operations in order to remain a going concern. If this were the case, we might not be able to timely and effectively receive positive response to new capital needs and, if we do, we are not assured that the terms of any financing would be affordable or advantageous to continued operations.




To offset this uncertain element, the company has recently embarked on new avenues of business in building strategic relationships with other successful sales agencies, production companies and prospective clients. If we were required to afford operations and accommodate our working capital deficiency without the necessary timeliness or our proposed business elements in place, we would be unable to assert that our current cash and cash equivalents would be sufficient and, as a result, there would be substantial doubt as to our ability to continue as a going concern.




5


Liquidity and Capital Resources





During the year ended June 30, 2010 we issued 3,069,875 shares of our common stock. 2,165,000 shares were issued as consideration in the settlement of existing obligations. The shares were valued at $140,758 or about $0.065 per share and reflect the market value at the grant date.  We also issued 670,000 shares to Redcliffe in settlement of $134,000 owed. The amount due Redcliffe exceeded the fair value of the stock by $94,000. Redcliffe was considered a related party at the date of settlement and the excess over fair value was, accordingly, considered a capital transaction. We also issued 234,375 shares in full payment of a note. The shares issued were valued at the quoted market price at the date of grant.




During the year ended June 30, 2009 we issued 8,000,000 shares of our common stock upon the conversion of $80,000 of convertible notes payable. We also purchased and constructively retired 41,840,469 shares of our common stock in December, 2008. The repurchase price of $105,000 was $313,400 less than the par or stated value of the shares. Accordingly, the excess was credited to additional paid-in capital.




Cash Flows

Year EndedJune 30, 2010


June 30, 2009Net Cash Generated by Operating Activities

$
223,100


$
639,700Net Cash Used by financing Activities

$
202,900


$
634,600Cash Ending

$
19,900


$
2,500





The Company had Net Cash Generated from Operating Activities of $223,100 after operating expenses for the year ended June 30, 2010 down from $639,700 for the prior year. The Company had $19,900.00 in cash as of June 30, 2010.


The Company continues to fund operation through revenues, trade payables, the issuance of stock and the proceeds of short term borrowings.





Our access to capital resources is limited to obtaining small loans with short term maturities and to use the value of our common stock as currency to settle existing obligations in such situation where the stock is acceptable by the counter party.


Commitments and Capital Expenditures


The Company had no material commitments for capital expenditures as of June 30, 2010.





Critical Accounting Policies Involving Management Estimates and Assumptions


Our discussion and analysis of our financial condition and results of operations is based on our financial statements. In preparing our financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures.


Revenue Recognition. The Company recognizes revenue in accordance with the provisions of Statement of Financial Accounting Standards No. 139 and American Institute of Certified Public Accountants Statement of Position 00-2 (collectively referred to as "SOP 00-2"). Revenues from licensing contracts are recognized when the project is completed and delivered or is available for exhibition by the licensee or client and when certain other conditions are met. All revenues for the periods presented were derived principally from royalty and services contract and, in some cases, the foreign distribution rights and continuing ancillary revenues from media products that the Company has had in circulation, such as foreign income from soundtracks or other revenue not previously accounted for (known as “residuals") relating thereto.


Stock Based Compensation. We will account for employee stock-based compensation costs in accordance with ASC 718, Share-Based Payments, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in our statements of operations based on their fair values. We will utilize the Black-Scholes option pricing model to estimate the fair value of employee stock based compensation at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our stock-based compensation.


6


Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.


Deferred Tax Valuation Allowance. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax expense is the total of tax payable for the period and the change during the period in deferred tax assets and liabilities.


Accounting For Obligations And Instruments Potentially To Be Settled In The Company s Own Stock: We account for obligations and instruments potentially to be settled in the Company s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's own stock.





Off-Balance Sheet Arrangements


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


ITEM 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. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, therefore, has the ability to manage the recovery of its assets and satisfy its liabilities in the normal course of its continued operation.


ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


None


ITEM 9A(T).       INTERNAL CONTROLS AND PROCEDURES





Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. John Foster, our Chief Executive Officer and our Principal Accounting Officer, is responsible for establishing and maintaining disclosure controls and procedures for our company.





Our management has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2010 (under the supervision and with the participation of the Chief Executive Officer and the Principal Accounting Officer), pursuant to Rule13a-15(b) promulgated under the Exchange Act. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation, our Company's Chief Executive Officer and Principal Accounting Officer have concluded that our Company's disclosure controls and procedures were not effective as of June 30, 2010 due to the lack of  sufficient personnel to assure segregation of duties and lack of a GAAP accounting professional on staff.   Management with the assistance of its Securities Counsel will closely monitor all future filings to ensure completeness of all company filings.





The term "internal control over financial reporting" is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:




·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;





·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and


7


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


MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.





Our management, with the participation of the Chief Executive Officer, evaluated the effectiveness of the Company's internal control over financial reporting as of June 30, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control -- Integrated Framework. Based on this evaluation, our Company's Chief Executive Officer and Principal Accounting Officer have concluded that our Company's disclosure controls and procedures were not effective as of June 30, 2010 due to the following:




·
Company's disclosure controls and procedures were not effective as of June 30, 2010 due to the lack of  sufficient personnel to assure segregation of duties and the lack of a GAAP accounting professional on staff.




This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.


CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING





In connection with the evaluation of the Company's internal controls during the Company’s last fiscal year, the Company's Principal Executive Officer and Principal Accounting Officer have determined that there are no changes to the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially effect, the Company's internal controls over financial reporting.


INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS





The Company's management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.


8





PART III





ITEM 10.           DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


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





Name

Age

PositionJohn W. Foster

57

Director, Chairman of the Board and CEO/PresidentDan Persson

71

DirectorStefan Drakelid

57

Director, Vice Chairman of the BoardFrank Saran

54

Director


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


Mr. John Foster has been an independent financial consultant and analyst specializing in turnaround situations and management restructuring in specific industries including the entertainment and communications industry. He has extensive background in information systems and data processing, and worked as a consultant and investment advisor in determining strategies of financing and investments in motion picture projects for investors, distributors and producers. Mr. Foster served as interim President of the Company from January 2000 through June 2000, and was formally working in the position of President from that time. His contract was extended and he is currently serving as Chairman, President and CEO of the Company during the reported period.


Mr. Dan Persson holds an MBA in Economics from the Gothenburg School of Economics and has practiced as a Certified Public Accountant.


Mr. Stefan Drakelid holds an LL.M. degree from the University of Lund, Sweden. He has specialized in economics, taxation law and legal issues relating to entertainment since 1981, acting as consultant and co-partner/investor in Scandinavia, Great Britain and the United States.  He is an advisor to Siguiente Capital AB, a venture capital company in Sweden.


Mr. Frank Saran received a BS degree in Business in 1979 from Eastern Illinois University.  He was previously with Merrill Lynch and subsequently Shearson, Lehman.  He has been an investor in media related companies and has known and worked in various outside consulting and advisory capacities since 1990.


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, 2008, the Company's officers, directors and greater than10% stockholders did not comply with filing requirements under section16(a) except for disclosure provided in the Company’s 10-K.


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 only compensated executive officer as of June 30, 2010. Other significant employees would not be required to be included in the table due to 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


PayoutsName and

Principal Position

Fiscal

Year


Salary


Bonus


Other Annual Compensation


Underlying

Options


All other

CompensationJohn W. Foster,


2010
*

$
200,257



–



–



–



–President/CEO


2009


$
142,000


*Mr. Foster has previously waived a portion of his salary.  As of June 30, 2010 Mr. Foster currently owed $759,918.


Options/Stock Appreciation Rights:


9





There were no stock options and stock appreciation rights ("SARs") granted to executive officers during the fiscal year ended June 30, 2010 or in 2009.


Aggregated Option/SAR Exercises and Fiscal Year-End Options/SAR Value Table


Note:  No bonus has been paid or distributed in the past four fiscal quarters of  this reporting period or fiscal 2009.


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. There have been no distributions of Stock to the Board Members as of the end of June 30, 2010 and for the same period ending June 30, 2009.


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


As of July of 2001, Mr. Foster served as President and was voted as Chairman and CEO by the Board of Directors. He received a pay increase to $14,700 per month and his contract was extended through June 30, 2002, with a 5% increase beginning July 1, 2002 and each year thereafter. A portion Mr. Foster's salary has gone unpaid and remains payable by the Company as of the end of June 30, 2009 and 2010.  Mr. Foster has previously waived a portion of his salary.  As of June 30, 2010 Mr. Foster currently owed $759,918.





ITEM 12.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATED STOCKHOLDER MATTERS.


The following table sets forth information concerning ownership of common stock, as of June 30, 2010, 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.


SharesBeneficially

PercentageName of beneficial owner

Status

owned

of ClassJohn W. Foster

Director, President and CEO

2,000

Less than 1%Stefan Drakelid

Director

7,286,235

10.69%Frank Saran

Director

1,000,000

1.467%Dan Persson

Director

100,000

Less than 1%Redcliffe Svenska, SA

5% holder

8,494,350

12.46%All Executive Officers & Directors

And Affiliates
16,883,585

24.777%








ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.




DirectorsJohn W. Foster
Director, Chairman, President and CEOStefan Drakelid
Director, Vice ChairmanFrank Saran
DirectorDan Persson
Director








In January 2009, the Company completed the sale of 2,500,000 shares of the Company’s common stock to Future Vision Consulting, SA for $125,000 in cash.   Stefan Drakelid, a member of the Company’s Board of Directors, is a principal of Future Vision Consulting, SA.


10





The Board of  Directors of the Company on June 15, 2009 approved the sale of 670,000 shares of the Company’s common stock to Redcliffe Svenska, SA.   These shares were sold in exchange for the settlement of $134,000 in debt represented by cash advances from Redcliffe Svenska, SA  in addition to the waiver of any and all outstanding interest owed to them by the Company for this debt as well as any and all outstanding interest owed on an additional debt of $80,000 which was earlier converted into shares.  At the time of this transaction Redcliffe Svenska, SA held 22,000,000 shares of the company’s common stock.





ITEM 14.         PRINCIPAL ACCOUNTANT FEES AND SERVICES


(1)    Audit Fees:  The Company’s principal accountant has billed for Audit services $9,500 for the Year ended 2009 and $9,500 for the Year ended 2008.


(2)    Audit Related Fees:   None


(3)    Tax Fees:                      None


(4)    All Other Fees:             None





PART IV





ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


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 1995Private 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 April1995 (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)10.01
1989 Long Term Incentive Plan (1)10.02
Sub-Lease for office premises at 16910 Dallas Parkway, Suite104, Dallas Texas dated February 1, 2001 (8)10.03
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)10.04
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 March2, 1998 (10)10.05
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 Mediaright 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 December, 1998 (13)10.35
Settlement Agreement with Stephen Greenwald, dated September, 1999 (13)21.1
Subsidiaries of the Registrant (3)31.1
Officer's Certification Pursuant to Section 302 (14)32.1
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (14)


11





Odyssey Pictures CorporationBalance SheetAssets

June 30, 2010


June 30, 2009Current AssetsCash & cash equivalent's

$
19,900


$
2,500Prepaid expenses


40,100



0Total current assets


60,000



2,500Property & equipment (net)


2,100



0Intangible assets, net


0



6,500Other


2,600



2,600Total assets

$
64,700


$
11,600Liabilities and Stockholders' DeficiencyCurrent Liabilities:Accounts payable

$
20,600


$
166,500Accounts payable-related parties


261,000



401,400Accrued interest


818,800



716,900Other accrued expenses


781,800



761,300Legal settlements & judgments


216,900



324,900Current debt obligations due within one year


213,900



0Debt obligations in default


339,000



755,500Deferred income


655,000



445,000Total current liabilities


3,307,000



3,571,500Related parties


128,500



156,100Reserve for loss contingencies


110,000



110,000Stockholders' Deficiency:common stock-110,000,000 authorized $0.01 par value68,150,888 issued & outstanding (65,081,013 in 2009)


681,500



650,800Additional paid in capital


38,744,900



38,482,100Accumulated deficit


(42,907,200
)


(42,958,900
)Total Stockholders' Deficiency


(3,480,800
)


(3,826,000
)Total Liabilities and Stockholders' Deficiency

$
64,700


$
11,600See Summary of Significant Accounting Policies and Notes to Financial Statements.







F-1






Odyssey Pictures CorporationStatement of OperationsYears Ended June 30,2010


2009Net Sales of services

$
1,204,200


$
1,225,300Costs Applicable to Sales & Revenue


439,100



359,800Gross Profit


765,100



865,500Selling, General & Administrative Expenses


575,400



434,900Settlements, net


119,900



107,400Total Operating Expenses


695,300



542,300Income (Loss) Before Other Income & Income Taxes


69,800



323,200Other Income (Expense)Excess carrying value of renegotiated payables


59,300



2,796,300Interest (Expense)


(74,500
)


(181,700
)Income (Loss) Before Income Taxes


54,600



2,937,800Income Taxes


2,900



0Net Income available to common shareholders

$
51,700


$
2,937,800Basic and Diluted Net Income Per Common Share

Nil


$
0.04Weighted Average Common Shares Outstanding (Basic)


66,384,088



79,671,688See Summary of Significant Accounting Policies and Notes to Financial Statements.







F-2







Odyssey Pictures CorporationStatement of Cash FlowsYear Ended June 30,2010


2009Cash Flows from Operating Activities:Net Income

$
51,700


$
2,937,800Adjustments required to reconcile net loss to cash flowsfrom operating activities:Excess carrying value of renegotiated payables


(59,300
)


(2,796,300
)Depreciation & impairment


7,200



0Expenses paid by the issuance of common stock


140,800



0Changes in Operating Assets & Liabilities:Prepaid expenses


(40,100
)


0Increase in deferred income


210,000



445,000Decrease in payables to affiliates


(168,000
)


(66,800
)Accounts Payable & Other


80,800



120,000Net cash generated by operating activities


223,100



639,700Cash Flows from Investing Activities:Purchase of equipment


(2,804
)


0Security deposits


0



(2,600
)Net cash used by investing activities


(2,804
)


(2,600
)Cash Flows from Financing Activities:Proceeds from sale of common stock


0



125,000Acquisition of treasury stock


0



(105,000
)Payments made on long term debt


(45,400
)


(43,000
)Payments made on settlements & judgments


(157,500
)


(611,600
)Net cash used by financing activities


(202,900
)


(634,600
)Net Change In Cash


17,400



2,500Cash-Beginning


2,500



0Cash-Ending

$
19,900


$
2,500See Summary of Significant Accounting Policies and Notes to Financial Statements.







F-3












Odyssey Pictures CorporationStatement of Stockholders' DeficiencyStockholders' DeficiencyCommon StockShares


Common Stock Amount


Additional

Paid-In Capital


Accumulated

Deficit


TotalBalance at June 30, 2008


99,471,482


$
994,700


$
38,047,200


$
(45,896,700
)

$
(6,854,800
)Acquisition & retirement of treasury stock


(41,840,469
)


(418,400
)


313,400







(105,000
)Fair value of stock returned as part of settlement agreements


(3,050,000
)


(30,500
)


(22,000
)






(52,500
)Stock issued for cash


2,500,000



25,000



100,000







125,000Derivatives reclassified as permanent equity










17,400







17,400Fair value of other warrants issued










26,100







26,100Stock issued to Redcliffe upon conversion of debt


8,000,000



80,000











80,000Net Income














2,937,800



2,937,800Balance at June 30, 2009


65,081,013


$
650,800


$
38,482,100


$
(42,958,900
)

$
(3,826,000
)Fair value of stock issued under settlement agreements


2,165,500



21,700



119,100







140,800Stock issued upon conversion of debt


904,375



9,000



143,700







152,700Net Income














51,700



51,700Balance at June 30, 2010


68,150,888


$
681,500


$
38,744,900


$
(42,907,200
)

$
(3,480,800
)See Summary of Significant Accounting Policies and Notes to Financial Statements.





F-4







ODYSSEY PICTURES CORPORATION




BACKGROUND AND




SIGNIFICANT ACCOUNTING POLICIES




June 30, 2010






The Company




Organizational Background: 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. The Company has been engaged to operate in the marketing, sales and branding services, intellectual property management in the media and entertainment industry, specifically, in connection with the development, production and distribution of proprietary product feature films, broadcast media and specialized productions.





Significant Accounting Policies




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




Revenue Recognition: We earn revenue under a three year “Branding & Services” agreement that provides for a monthly licensing fee. Revenue is recognized monthly on a straight line basis over the term of the agreement.




Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.




Cash and Cash Equivalents:For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents.




Property and Equipment  New property and equipment are recorded at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.




Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.




Stock Based Compensation:Stock-based awards to employees and non-employees are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments.  Our primary type of share-based compensation consists of stock options. ASC 718 requires that companies measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements. We calculate the fair value of options using a Black-Scholes option pricing model. We do not currently have any outstanding options subject to future vesting.




ASC 718 also requires the benefits of tax deductions in excess of recognized compensation expense to be reported in the Statement of Cash Flows as a financing cash inflow rather than an operating cash inflow. In addition, ASC 718 required a modification to the Company’s calculation of the dilutive effect of stock option awards on earnings per share.




F-5





Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock: We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments.This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.




Fair Value of Financial Instruments: FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At June 30, 2010 and 2009, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates




Fair Value Measurements: FASB ASC 820 defines fair value and establishes a framework for measuring fair value and establishes a fair value hierarchy which prioritizes the inputs to the inputs to the valuation techniques. Fair value is the price that would be received to sell an asset or amount paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by FASB ASC 820, are used to measure fair value.




Fair Value Hierarchy




FASB ASC 820  specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company’s own assumptions of market participant valuation (unobservable inputs). In accordance with FASB ASC 820, these two types of inputs have created the following fair value hierarchy:




·
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.·
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.


·
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.





FASB ASC 820 requires the use of observable market data if such data is available without undue cost and effort.




Measurement of Fair Value




The Company measures fair value as an exit price using the procedures described below for all assets and liabilities measured at fair value. When available, the Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based or independently-sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally depends on the specific asset or liability being valued. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments.




F-6





Earnings per Common Share: We have adopted the provisions of ASC 260, Earnings per Share.  ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.




Income Taxes:We have adopted ASC 740, Accounting for Income Taxes.Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.




We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.




Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.




In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.




ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.




Contingent Liabilities




We are subject to lawsuits, investigations and other claims related to operations, securities, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees.





A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue. We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. We disclose contingent liabilities when the risk of loss is reasonably possible or probable.




F-7





Our contingent liabilities contain uncertainties because the eventual outcome will result from future events, and determination of current reserves requires estimates and judgments related to future changes in facts and circumstances, differing interpretations of the law and assessments of the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control.




We have not made any material changes in the accounting methodology used to establish our contingent liabilities during the past three fiscal years.





We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our contingent liabilities. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material.




Recent Accounting Pronouncements




In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.




In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.




In June 2009, the FASB issued guidance now codified as ASC 105, Generally Accepted Accounting Principlesas the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s financial statements, but did eliminate references to pre-codification standards.




Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.


F-8




ODYSSEY PICTURES CORPORATION




NOTES TO FINANCIAL STATEMENTS




June 30, 2010









1. Revenues & Economic Dependency:




We earn revenue under a three year “Branding & Services” agreement that provides for a monthly licensing fee. Revenue is recognized monthly on a straight line basis over the term of the agreement. The Revenues recognized under this agreement were $1,200,000 through June 30, 2010 and the same in 2009, and represented 99% of all revenue.




2. Notes and Loans Payable:




As of June 30, 2010we owe $552,900 to approximately 25 unsecured note holders. The notes vary in amounts and interest rates and range from $3,250 to $160,000. Interest rates average about $8%. We reestablished terms on 5 such notes in 2010 to bring the company into terms. Accordingly, we are within terms on note aggregating $213,200 and remain in default on notes aggregating $339,000.




3. Income Taxes:




We have adopted ASC 740 which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits.




We have a current operating loss carry-forward of $ 39,470,000. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all our net deferred tax assets.




Future utilization of currently generated federal and state NOL and tax credit carry forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry forwards before full utilization.




The Company is not under examination by any jurisdiction for any tax year. At June 30, 2010 and 2009, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FIN 48.




F-9


4. Commitments:




LeasesThe Company leases its office space. Rent expense was $30,923 and $22,900 for the years ended June 30, 2010 and 2009 respectively. Rent expense is recognized on a straight-line basis over the lease term. Future minimum lease payments are as follows:




2011


30,9232012


30,9232013


23,192$
85,038




Employment Agreements




As of July of  2001 Mr.  Foster served as President and was voted as Chairman and CEO by the  Board of  Directors.  He received a pay increase to $14,700  per month and his contract was extended through June 30, 2002, with a 5% increase beginning July 1, 2002 through to June 30, 2003 and each year thereafter.   From the years, 2004 through 2006, Mr. Foster's salary has principally gone unpaid and remains payable by the Company as of the end of June 30, 2010 and 2009.  Approximately $100,000 of his salary was waived in calendar 2007, to which a fair market value of $36,000 was expensed by the Company. Beginning January 2008 Mr. Foster’s salary was readjusted at a rate of $6,850 monthly, and then again adjusted in July of 2008 to $9,850 monthly. He also receives a medical and life insurance allowance.  Mr. Foster’s monthly salary was $16,688 in fiscal 2010 and $11,835 in fiscal 2009.  Mr. Foster is currently owed $759,918 under this agreement.




Settlements & Judgments




Material Items are as follows:




We remain liable for $216,900 due to five outstanding judgments and liens. The amounts range from $6,800 to $100,000. Such amounts bear interest at the jurisdictional statutory rate and may vary over time.




Reserve for Contingencies




We assess our exposures to loss contingencies including legal and other matters and we record accruals for such contingencies if it is judged to be probable and reasonably estimable. The legal proceedings are complex in nature and have outcomes that are difficult to predict.  If the actual loss from a contingency differs from our estimate, there could be a material impact on our results of operations or financial position. Operating expenses associated with contingencies are expensed when incurred.




Currently two such proceedings have been identified and reserved. The Company has determined that losses related to these proceedings is probable and has reserved for the estimated amounts of losses and related legal expenses. Judgments that have been finalized and awarded are reclassified to “Judgments and settlements” on the balance sheet. We settled and paid a dispute with Matheson in 2009 for $40,000 and have reclassified this amount from our current reserve estimate.




Discharge of Debt




In 2009 we wrote off certain accounts payable in which no attempts at collection had been made or which we had determined were barred from collection by the Texas and New York statute of limitations. We also negotiated revised amounts and terms on a trade payable and five judgments. A summary of the amounts recognized as income from the discharge of debt is as follows:




2010


2009Excess carrying value of settled obligations

$
52,705


$
1,053,767Related accrued interest


6,663



720,125Obligations deemed barred by statute of limitations


0



913,680Other


0



108,728$
59,368


$
2,796,300







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5. Stockholders' Equity:




Common Stock




We are currently authorized to issue up to 110,000,000 shares of $ 0.01 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.




During the year ended June 30, 2010 we issued 3,069,875 shares of our common stock. 2,165,000 shares were issued as consideration in the settlement of existing obligations. The shares were value at $140,758 or about $0.065 per share and reflect the market value at the grant date. We also issued 670,000 shares to Redcliffe in settlement of $134,000 owed. The amount due Redcliffe exceeded the fair value of the stock by $94,000. Redcliffe was considered a related party at the date of settlement and the excess over fair value was, accordingly, considered a capital transaction. We also issued 234,375 shares in full payment of a $25,000 note. The shares so issued were valued at the quoted market price at the date of grant.




During the year ended June 30, 2009 we issued 8,000,000 shares of our common stock upon the conversion of $80,000 of convertible notes payable. We also purchased and constructively retired 41,840,469 shares of our common stock in December, 2008. The repurchase price of $105,000 was $313,400 less than the par or stated value of the shares. Accordingly, the excess was credited to additional paid-in capital.




6. Stock Options and Warrants:




Summary of Warrant Activity




As part of a restructured settlement agreement, in 2009 we issued 400,000 warrants. Exercise price are $0.10 and expired three years from the date of issuance. We evaluate and account for such securities in accordance with EITF Issue No. 00-19 and FASB ASC 815, Accounting for Derivative Financial Instruments.




The Company used the Black-Scholes option pricing model in valuing the warrants. The inputs for the valuation analysis of the warrants include the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the warrants and the risk free interest rate. The key inputs for the valuation analysis at June 30, 2009-2010 were a volatility of 164%, common stock value of $0.078 and a risk free interest rate of 4.4%. A table summarizing the assumptions for each year presented is as follows:




Year
Interest Rate
Dividend Yield
Expected Volatility
Expected Life2009
4.4%
0.0%
164.0%
36-48 mos.2010
4.4%
0.0%
164.0%
36-48 mos.




The following table provides summary information on the various warrants issued by us in private placement transactions; the warrants exercised to date; the warrants that are presently exercisable and the current weighted average exercise prices of such warrants.




All Plan & Non-Plan Compensatory Type OptionsWeighted

average

exercise price
Weighted

average

remaining

contractual

term (years)
Aggregate

intrinsic

valueSharesOptions outstanding at June 30, 2008
3,170,480
$0.32Granted
400,000
$0.00Exercised
0
$0.00Lapsed
(500,000)
$0.10Options outstanding at June 30, 2009
3,070,480
$0.05
2.3
$32,854Granted


0
$0.00Exercised


0
$0.00Lapsed


(2,670,480)
$0.05Options outstanding at June 30, 2010
400,000
$0.10
1.8
$0Options exercisable at June 30, 2010
400,000
$0.10
1.8
$0







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The following table summarizes the status of the Company's aggregate warrants as of June 30, 2010:Warrants Outstanding

Warrants ExercisableRange of exercise prices
Shares
Weighted

average exercise

price
Weighted

average

remaining life

in months
Shares
Weighted

average exercise

price$ 0.01-$ 0.50
400,000
$0.10
21.5
400,000
$0.10$ 0.51-$ 1.00
0
$0.00
0.0
0
$0.00Total Shares
400,000


400,000







7. Related Party Transactions not Disclosed Elsewhere:




Prepaid Expenses:Amountscarried as prepaid expenses are advances paid to Texas Media Management, a company owned by John Foster, our current president. At June 30, 2010 advance payments were made for July travel and payroll totaling $40,124. Texas Media Management also acts on behalf of the company as paying agent. Amounts transferred to Texas Media Management in 2010 and 2009 in such capacity amounted to $317,000 and $350,000 respectively. These amounts also included 100% of Mr. Foster's salary, expense allowances, reimbursements of expenses, required advances pur agreement, and other related obligatory commitments for which Mr. Foster may have been a guarantor.




Sales: Our primary source of revenue is generated through our “Branding & Services” agreement with Unilistings UK. Unilistings is a company owned or controlled by a former director of the company. The former director controls approximately 5.8 million shares of our stock or about 8.5% as of June 30, 2010.




Due Related Parties:Amounts due related parties consist of corporate operating expenses and advances paid or incurred in previous years due to JL Media, a company minority owned and controlled by John Foster. The total of such items due was $557,470 at June 30, 2009. During 2010 we were billed $12,883 for current services and paid amounts due of $180,890 resulting in a balance of $389,463 at June 30, 2010.


F-12





8. Results of Operations and Management's Plans:




The Company's  continued  existence is dependent upon its ability to resolve its near-term and long-term liquidity issues.  The Company must continue to sustain a profitable level of operations with positive cash  flows and must continue to obtain affordable financing adequate to meet its ongoing growth requirements. To continue its growth pattern, the company has established a niche in the Branding Services it offers and has begun soliciting an expanded client base in need of its unique proprietary services. In addition, the Company has established a new division in the entertainment field by reconnecting to all of the international markets and festivals and has established strategic alliances with several companies to launch new services as a Producers Representative and providing expertise in marketing, development, exhibition, and international distribution for other sales companies, sales agents and producers worldwide. The company has been asked to represent several high-profile properties in the broadcast markets, more specifically in the development and exploitation of series for television, DVD sales, and IP TV broadcast, the latter of which the company has developed extensively to accommodate future needs of each client and strategic alliance party. The  Company's  operations and debt structure have been greatly reduced as a result of the restructuring of the Company by management. The Company's  principal office is located in  Plano, Texas and as of June 30, 2010, the Company had three full-time employees, consisting  of Mr. Foster, the CEO and President, an administrative manager and an office assistant. The Company also hires on occasion, several professionals in advisory capacities and sales on a contract or commission basis. Additional staff is planned in the administrative and sales areas.




Subsequent Events:




In September of 2010, the Company entered into a settlement agreement with Distinct Web Creations. The agreed-upon terms allow for full settlement and release of judgment upon final payment which is scheduled to be made on or before the end of January, 2011. The initial payment to secure the arrangement was made on September 24, 2010.




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Michael F. Cronin


Certified Public Accountant


Orlando, FL 32708











Board of Directors and Shareholders


Odyssey Pictures Corp.


Plano, TX




I have audited the accompanying balance sheets of Odyssey Pictures Corp. as of June 30 2010 and 2009 and the related statements of operations, stockholders' deficiency and cash flows for the years then ended. The financial statements are the responsibility of the directors. My responsibility is to express an opinion on these financial statements based on my audits.




I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.


In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Odyssey Pictures Corp. as of June 30, 2010 and 2009 and the results of its operations, its cash flows and changes in stockholders' deficiency for the years then ended in conformity with accounting principles generally accepted in the United States.





The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in financial statement notes, the Company has a $3.2 million working capital deficiency. The Company may not have adequate readily available resources to fund operations through June 30, 2011. This raises 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 the Notes. The financial statements do not include any adjustments that might result from the outcome of this uncertainty





October 14, 2010




/s/ Michael F. CroninMichael F. CroninCertified Public AccountantNY, FLOrlando, FL




F-13





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 14, 2010


by: /s/ John W. Foster


John W. Foster,


President


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





by: /s/ John W. Foster


John W. Foster,


CEO, Chairman and President