U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2001
Commission File Number 0-26136
ODYSSEY MARINE EXPLORATION, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 84-1018684
---------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3604 Swann Avenue, Tampa, Florida 33609
-----------------------------------------------------
(Address of principal executive offices)
(813) 876-1776
-----------------------------------------------------
(Registrants telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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.
[ X ] Yes [ ] No
As of September 30, 2001, the Registrant had 17,865,536 shares of common
stock, $.0001 par value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheet - as of
August 31, 2001............................................ 3
Unaudited Consolidated Statements of Operations, Three
Months Ended August 31, 2001, and 2000..................... 4
Unaudited Consolidated Statements of Operations, Six
Months Ended August 31, 2001, and 2000..................... 5
Unaudited Consolidated Statements of Cash Flows, Six
Months Ended August 31, 2001, and 2000..................... 6 - 7
Notes to Consolidated Financial Statements................. 8
Item 2. Management's Plan of Operation.......................... 8 - 9
Part II: Other Information...................................... 10
Item 1. Legal Proceedings................................. 10
Item 2. Change in Securities.............................. 10
Item 3. Defaults Upon Senior Securities................... 10
Item 4. Submission of Matters to a Vote
of Security Holders............................... 10
Item 5. Other Information................................. 10
Item 6. Exhibits and Reports on Form 8-K.................. 10
Signatures ..................................................... 10
2
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2001 - Unaudited
ASSETS
CURRENT ASSETS
Cash $ 1,251,110
Marketable securities 2,287
Advances and prepaid expense 19,246
-----------
Total current assets 1,272,643
PROPERTY AND EQUIPMENT
Equipment and office fixtures 371,663
Accumulated depreciation (118,702)
-----------
252,961
OTHER ASSETS
Loans receivable from related parties 239,435
Inventory 20,000
Deposits 21,684
-----------
281,119
-----------
TOTAL ASSETS $ 1,806,723
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 33,407
Accrued expenses 8,157
-----------
Total current liabilities 41,564
NOTES PAYABLE TO RELATED PARTY 58,497
DEFERRED INCOME FROM REVENUE PARTICIPATION CERTIFICATES 887,500
STOCKHOLDERS' EQUITY
Preferred stock - $.0001 par value; 8,450,000 shares
authorized, none outstanding -
Preferred stock Series A Convertible - $.0001 par value;
700,000 shares authorized; 190,000 shares issued
and none outstanding -
Preferred stock Series B Convertible - $.0001 par value;
850,000 shares authorized; 850,000 shares issued
and outstanding 85
Common stock - $.0001 par value; 100,000,000 shares
authorized; 17,865,536 issued and outstanding 1,786
Additional paid-in capital 7,447,680
Accumulated unrealized loss in investment (26,926)
Accumulated deficit (6,603,463)
-----------
Total stockholders' equity 819,162
-----------
$ 1,806,723
===========
The accompanying notes are an integral part of these financial statements.
3
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited
Three Months Ended
August 31
2001 2000
----------- -----------
OPERATING EXPENSES
Project development 53,248 42,908
Project operations 139,202 382,952
Marketing and promotion 17,077 14,784
----------- -----------
Total operating expenses 209,527 440,644
GENERAL AND ADMINISTRATIVE EXPENSES 136,328 130,313
----------- -----------
(LOSS) FROM OPERATIONS (345,855) (570,957)
OTHER INCOME OR (EXPENSE)
Gain(Loss) on sale of marketable securities - 25,753
Interest income 17,540 3,243
Interest expense (1,415) (24,541)
Other 59 (2,952)
----------- -----------
Total other income or (expense) 16,184 1,503
----------- -----------
NET LOSS $ (329,671) $ (569,454)
=========== ===========
OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities - (3,184)
----------- -----------
COMPREHENSIVE LOSS $ (329,671) $ (572,638)
=========== ===========
(BASIC AND DILUTED LOSS PER SHARE) $ (0.02) $ (0.05)
Weighted average number of common
shares and potential common shares,
basic and diluted outstanding. 17,865,536 11,470,465
The accompanying notes are an integral part of these financial statements.
4
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited
Six Months Ended
August 31
2001 2000
----------- -----------
OPERATING EXPENSES
Project development $ 95,384 $ 87,453
Project operations 550,853 444,439
Marketing and promotion 56,310 26,542
----------- -----------
Total operating expenses 702,547 558,434
GENERAL AND ADMINISTRATIVE EXPENSES 262,262 278,017
----------- -----------
(LOSS)FROM OPERATIONS (964,809) (836,451)
OTHER INCOME OR (EXPENSE)
Gain on sale of marketable securities - 206,886
Interest income 44,713 6,480
Interest expense (2,975) (55,573)
Other 59 (7,413)
----------- -----------
Total other income or (expense) 41,797 150,380
----------- -----------
NET LOSS $ (923,012) $ (686,071)
=========== ===========
OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities 8,466 (2,134)
----------- -----------
COMPREHENSIVE LOSS $ (931,478) $ (688,205)
=========== ===========
(BASIC AND DILUTED LOSS PER SHARE) $ (0.05) $ (0.06)
Weighted average number of common
shares and potential common shares,
basic and diluted, outstanding. 17,865,536 11,470,465
The accompanying notes are an integral part of these financial statements.
5
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Six Months Ended
August 31
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (923,012) $ (686,071)
Adjustments to reconcile net loss to
net cash used by operating activity:
Depreciation 34,973 16,317
Common stock issued for services - 85,000
Finance charge added to note - 4,500
Loss (gain) on sale of marketable securities - (206,886)
Decrease (increase)in:
Advances (1,867) 2,856
Interest receivable (9,336) (11,421)
Prepaid expenses (17,256) -
Increase (decrease) in:
Accounts payable (27,492) (20,960)
Accrued expenses (105,668) 57,067
----------- -----------
NET CASH(USED) IN OPERATING ACTIVITIES (1,049,658) (759,598)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (83,819) (18,753)
Increase in loans receivable (48,600) -
---------- -----------
NET CASH (USED) IN INVESTING ACTIVITIES (132,419) (18,753)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Related party loans - 5,000
Loans from others - 50,000
Issuance of common stock - 367,500
Issuance of revenue participation certificates - 12,500
Sale of marketable securities - 338,815
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 773,815
---------- -----------
NET INCREASE(DECREASE)IN CASH (1,182,077) (4,536)
CASH AT BEGINNING OF PERIOD 2,433,187 47,175
----------- -----------
CASH AT END OF PERIOD $ 1,251,110 $ 42,639
=========== ===========
The accompanying notes are an integral part of these financial statements.
6
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
SUPPLEMENTARY INFORMATION:
Interest paid $ - 23,223
Income taxes paid $ - -
Summary of significant non cash transactions:
There were no significant non cash transactions during the quarter ending
August 31, 2001.
During the quarter ended May 31, 2001, a note to a related party was renewed.
The original principal amount of $48,821 and accrued interest of $7,323 were
combined in a new note in the principal amount of $56,144 bearing interest at
10% per annum. The due date was extended to March 31, 2003.
During the quarter ended August 31, 2000, two subcontractors who provided
services valued at $80,000 on the Republic project, were compensated by the
issuance of 160,000 shares of common stock.
During the quarter ended May 31, 2000, a director who was owed $105,000 of
accrued expenses, $132,131 of notes, and $8,256 of accrued interest assigned
the entire amount owed to an unrelated third party who was issued 490,774
shares of common stock for converting the entire amount due $245,387 into
stock. A related party was issued 151,548 shares for the conversion of $68,894
of principal and $6,880 of accrued interest into stock. A consultant was
issued 10,000 shares of common stock for $5,000 of services.
The accompanying notes are an integral part of these financial statements.
7
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Odyssey Marine
Exploration, Inc. and subsidiary have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission and the
instructions to Form 10-QSB and, therefore, do not include all information and
footnotes normally included in financial statements prepared in accordance
with generally accepted accounting principles. These interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company's Form 10-KSB for the
year ended February 28, 2001.
In the opinion of management, these financial statements reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation of the financial position as of August 31, 2001, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months, and six months ended August 31, 2001, are not
necessarily indicative of the results that may be expected for the year ended
February 28, 2002.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION.
In the long term, the Company expects to derive substantially all of its
revenue through the sale and/or display of shipwreck cargoes and artifacts,
including replicas. Therefore, until the Company is successful in acquiring
and marketing artifacts and/or cargoes, it will be dependent upon investment
capital to meet its cash flow requirements. To date, the Company has
conducted private placements of debt, equity and project specific revenue
participation to meet its financial obligations. For the next twelve months,
the Company anticipates spending approximately $70,000 per month to pay
administrative, promotion and project development overhead. In addition, the
Company is actively working on two projects, and has a number of other
projects it may commence work on, depending on the availability of additional
financing.
THE CAMBRIDGE PROJECT:
The Cambridge Project is an attempt to locate, identify, recover, conserve and
market the cargo and artifacts of the English warship HMS Sussex that is
believed to have sunk during a storm in the western Mediterranean Sea in 1694.
There is circumstantial evidence that the ship was carrying a substantial
cargo of money at the time on its sinking. (See "Risk Factors" in the
Company's Form 10-KSB for the period ending February 28, 2001)
The Company began search operations during 1998 and has continued these
operations on and off through June 2001. To date, over 315 square miles of
ocean bottom have been searched with side scan sonar, locating 415 anomalies.
Fifty sites have been inspected with a remotely operated vehicle.
During operations conducted between May through June 2001, the expedition
archaeologist, Neil Cunningham Dobson, directed the recovery of certain
artifacts from a site that he believed demonstrated some of the
characteristics of the Sussex.
8
On September 10, 2001, the Company announced the completion of Mr. Dobson's
draft archaeological report. The report detailed the search operations, the
preliminary archaeological work on the recovered artifacts and the historical
data relating to the Sussex. He concludes in the report that after studying
the survey data, the historical and documentary sources, the underwater
investigations, the location, the size and shape of the site, and the cannon
distribution and sizes, he believes that the site is likely to be the remains
of the Sussex. However, the Company stresses that all of the evidence is
circumstantial and is subject to review by other experts who are currently
evaluating the report.
Odyssey recently delivered this preliminary draft archaeological report to the
United Kingdom's Ministry of Defence ("MOD"). The MOD will have their experts
review the material and compare their findings with Mr. Dobson's. After taking
into considerations any comments by the MOD and other experts, the final
report and findings will be released. Until that time, the Company and the MOD
have agreed not to release any further information contained in the report.
If the site in question is determined to be that of the Sussex, the Company
will request a license from the MOD to conduct an archaeological excavation of
the site. While there can be no assurance that the MOD will issue such a
license, the Company believes that a license will be issued and that the
license will contain provisions for Odyssey to receive a substantial
distribution of any recovered items. The Company also anticipates that any
license will be subject to the stringent application of archaeological
standards for all work conducted on the site.
In the event the Company is issued a license for the recovery of the Sussex
or otherwise exercises it's rights to perfect a claim under maritime salvage
law, the Company will most likely seek financing in the form of project
revenue participation, debt, or equity and, assuming adequate financing is
received, would likely begin recovery during the Spring of 2002.
If the Company is successful in obtaining the rights to the Sussex and
financing for the project, the Company plans to produce revenue from the
project by selling the trade goods recovered (after conservation and
documentation), along with ancillary products such as replicas, video footage,
promotional items, and intangible property rights. The Company anticipates
that the project will have a marketing life in excess of ten years.
REPUBLIC PROJECT
On September 1 2001, the Company entered into an agreement with Mr. Jeff
Hummel, a researcher for the Republic Project, to conduct search operations
during September and October 2001 on a "no cure - no pay" basis. Hummel will
be responsible for all costs of the operations and will not be entitled to any
fees or reimbursement from Odyssey unless he provides to Odyssey conclusive
location and identification of the Republic shipwreck. All rights in the
project remain with Odyssey, and, if Mr. Hummel is successful in providing the
Company conclusive location and identification of the vessel, he will be
entitled to a fee of $250,000 and an additional 5% of the recovery.
If the search operations are successful, the Company may seek additional
financing in the form of project specific revenue participation to conduct
additional search and identification operations, or recovery operations.
Recovery operations, if any, would most likely commence in the summer of 2002.
Management believes the Company currently has sufficient cash to fund its
overhead for the next twelve months.
9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements 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 MARINE EXPLORATION, INC.
Date: October 10, 2001 By:/s/ David A. Morris
David A. Morris, Treasurer
(Principal Accounting Officer
and Duly Authorized Officer)
10