<PAGE>
<PAGE>
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, 1998
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.)
3507 Frontage Road, Suite 100, Tampa, Florida 33607
-----------------------------------------------------
(Address of principal executive offices)
(813) 282-0855
-----------------------------------------------------
(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, 1998, the Registrant had 10,294,999 shares of common
stock, $.0001 par value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
<PAGE>
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INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
August 31, 1998 ........................................... 3
Unaudited Consolidated Statements of Operations, Three
Months Ended August 31, 1998, and Three Months
Ended August 31, 1997 ..................................... 4
Unaudited Consolidated Statements of Operations, Six Months
Ended August 31, 1998, Six Months Ended August 31, 1997 and
and from May 20,1994 (Date of Inception) through August 31,
1998 ...................................................... 5
Unaudited Consolidated Statement of Cash Flows, Six
Months Ended August 31, 1998, Six Months Ended
August 31, 1997, and from May 20,1994 (Date of Inception)
through August 31, 1998 .................................... 6 - 8
Notes to Consolidated Financial Statements.................. 9 - 13
Item 2. Management's Plan of Operation........................... 14
Part II: Other Information....................................... 15
Item 1. Legal Proceedings.................................. 15
Item 2. Change in Securities............................... 15
Item 3. Defaults Upon Senior Securities.................... 15
Item 4. Submission of Matters to a Vote
of Security Holders................................ 15
Item 5. Other Information.................................. 15
Item 6. Exhibits and Reports on Form 8-K................... 15
Signatures ...................................................... 16
2
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET - Unaudited
August 31,1998
ASSETS --------------
CURRENT ASSETS
Cash $ 107,102
Marketable securities 7,000
Advances and prepaid expense 1,363
Inventory 20,000
-----------
Total current assets 135,465
PROPERTY AND EQUIPMENT
Equipment and office fixtures 135,909
Accumulated depreciation (27,940)
-----------
107,969
OTHER ASSETS
Organization costs, net of
accumulated amortization of $3,395 604
Marketable securities held long term 88,875
Loans receivable from related parties 120,938
Deposits 1,209
-----------
211,626
-----------
$ 455,060
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 25,222
Accrued expenses 403,082
Notes payable to related parties 371,831
-----------
Total current liabilities 800,135
LONG TERM LIABILITIES
Deferred RPC Income 600,000
STOCKHOLDERS' DEFICIENCY
Preferred stock - $.0001 par value; 10,000,000
shares authorized; no shares issued or outstanding -
Common Stock - $.0001 par value; 100,000,000 shares
authorized; 10,294,999 issued and outstanding 1,029
Additional paid-in capital 2,443,928
Accumulated unrealized loss in investment (227,625)
Excess of expenses over revenues during development stage (3,162,407)
-----------
Total Stockholders' deficiency (945,075)
-----------
TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 455,060
===========
The accompanying notes are an integral part of these financial statements.
3
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Three Months Three Months
Ended Ended
August 31 August 31
1998 1997
----------- -----------
REVENUES $ - $ -
OPERATING EXPENSES
Project Development 12,146 6,174
Project Operations 248,792 11,315
Marketing 20,951 -
----------- -----------
Total Operating
Expenses 281,889 17,489
GENERAL AND
ADMINISTRATIVE
EXPENSES 101,808 234,276
----------- -----------
INCOME(LOSS)FROM
OPERATIONS (383,697) (251,765)
OTHER INCOME
OR (EXPENSE)
Interest Income 3,285 9,281
Interest Expense (22,220) (79,587)
Total other Income ----------- -----------
or (expense) (18,935) (70,306)
----------- -----------
NET INCOME(LOSS) $ (402,632) $ (322,071)
=========== ===========
INCOME(LOSS)PER SHARE $ (0.04) $ (0.22)
Weighted average
number of common
shares and common
shares equivalents
outstanding. 10,294,999 1,432,687
The accompanying notes are an integral part of these financial statements.
4
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
From May 20,
1994 (Date
Six Months Six Months of Incep-
Ended Ended tion) through
August 31 August 31 August 31
1998 1997 1998
----------- ----------- -----------
REVENUES $ 214,750 $ - $ 228,250
OPERATING EXPENSES
Project Development 55,964 15,493 692,420
Project Operations 256,324 63,288 1,019,993
Marketing 42,214 - 112,137
----------- ----------- -----------
Total Operating
Expenses 354,502 78,781 1,824,550
GENERAL AND
ADMINISTRATIVE
EXPENSES 210,357 357,509 1,520,594
----------- ----------- -----------
INCOME(LOSS)FROM
OPERATIONS (350,109) (436,290) (3,116,894)
OTHER INCOME
OR (EXPENSE)
Interest Income 5,568 - 13,429
Interest expense (31,905) (94,768) (158,880)
Other 100,000 31,016 99,938
Total other income ----------- ----------- -----------
or (expense) 73,663 (63,752) (45,513)
----------- ----------- -----------
NET INCOME(LOSS) $ (276,446) $ (500,042) $(3,162,407)
=========== =========== ===========
INCOME(LOSS)PER SHARE $ (0.03) $ (0.35) $ (0.31)
Weighted average
number of common
shares and common
shares equivalents
outstanding. 10,294,999 1,432,687 10,294,999
The accompanying notes are an integral part of these financial statements.
5
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
From May 20,
1994 (Date
Six Months Six Months of Incep-
Ended Ended tion) through
August 31 August 31 August 31
1998 1997 1998
----------- ----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income(Loss) $ (276,446) $ (500,042) $(3,162,407)
Adjustments to re-
concile net loss to
net Cash used by
operating activity:
Depreciation 12,677 2,699 27,940
Amortization 399 399 3,395
Common Stock issued
for services 46,938 8,750 471,438
Marketable securities
received on settlement (271,500) (12,000) (283,500)
(Increase)decrease in:
Advances 587 16,067 (2,572)
Accounts receivable - (61) -
Organization cost - - (3,999)
Interest receivable (8,662) - (8,662)
Inventory (20,000) - (20,000)
Increase (decrease) in:
Accounts payable 4,768 (5,469) 25,222
Accrued expenses 68,455 93,618 936,932
----------- ----------- -----------
NET CASH(USED) IN
OPERATING ACTIVITIES (442,784) (396,039) (2,016,213)
----------- ----------- -----------
CASH FLOWS FROM IN-
VESTING ACTIVITIES:
Purchase of property
and equipment (13,573) (18,193) (135,909)
Issuance of Notes - - (112,276)
---------- ----------- -----------
NET CASH (USED) IN
INVESTING ACTIVITIES (13,573) (18,193) (248,185)
---------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from:
Related party loans 13,250 201,000 684,500
Loans from others 30,000 272,000 632,000
Issuance of Common Stock - 2,500 506,500
Issuance of RPC 600,000 - 667,500
Repayment of Note (99,000) (20,000) (119,000)
---------- ---------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 544,250 455,500 2,371,500
---------- ---------- -----------
The accompanying notes are an integral part of these financial statements.
6
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
From May 20,
1994 (Date
Six Months Six Months of Incep-
Ended Ended tion) through
August 31 August 31 August 31
1998 1997 1998
----------- ----------- -----------
NET INCREASE
(DECREASE)IN CASH 87,893 41,268 107,102
CASH AT BEGINNING
OF PERIOD 19,209 1,861 -
----------- ----------- -----------
CASH AT END OF
PERIOD $ 107,102 $ 43,129 $ 107,102
=========== =========== ===========
SUPPLEMENTARY
INFORMATION:
Interest paid $ 2,250 - $ 2,250
Income taxes paid $ - - $ -
Summary of significant non cash transactions
During the year ended December 31, 1994 the Company issued 160,000 shares of
Common Stock for 100,000 shares of Seahawk Deep Ocean Technology, Inc. Common
Stock valued at $40,000.
During the year ended December 31, 1995 the Company issued 10,000 shares of
Common Stock for consulting and research services valued at $55,000, and also
issued 2,000 shares for legal services of $10,000.
During the year ended December 31, 1996, the Company converted Revenue
Participation Certificates originally sold for $67,000 into 14,000 shares of
Common Stock. The Company also issued shares as follows:
Common
Amount Shares
----------- ------------
Directors' fees $ 125,000 16,667
Project consulting and research 100,750 16,500
Legal services relative to projects 50,000 5,000
----------- ------------
$ 275,750 38,167
=========== ============
The accompanying notes are an integral part of these financial statements.
7
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
During the two months ended February 28,1997, the Company issued 2,000 shares
of Common Stock for Directors' fees of $25,000, and 7,000 shares of Common
Stock for consulting and research fees of $50,000.
During the year ended February 28, 1998, several debt holders converted their
debt to stock. A summary of the debt converted to stock is as follows:
Common
Amount Shares
----------- ------------
Accrued expenses $ 216,500 30,925
Accrued interest - related 40,508 78,233
Accrued interest - other 45,546 87,960
Notes payable - related 410,918 793,619
Notes payable - other 455,659 880,039
----------- ------------
$ 1,169,131 1,870,776
=========== ============
The Company also issued 775 shares of Common Stock to three individuals for
project related services valued at $8,750.
The Company issued approximately 7,500,000 common shares to the stockholders
of Remarc International, Inc. ("Remarc")for 100% of Remarc's outstanding
Common Stock in a reverse acquisition. The Company also issued 180,000 shares
of Common Stock for consulting services related to the reverse acquisition.
During the six months ended August 31, 1998, the Company issued 190,120 shares
of common stock for services and accrued expenses valued at $237,325. The
Company issued 137,569 shares to six individuals for $12,000 of current and
$165,387 of accrued project expense. The Company issued 10,625 shares to two
individuals for consulting services valued at $25,938. The Company issued
38,626 shares for accrued compensation valued at $25,000, and issued an
additional 3,300 shares for pre paid expenses valued at $9,000.
The accompanying notes are an integral part of these financial statements.
8
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
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 10Q-SB 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, 1998.
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, 1998, results of
operations, and cash flows for the interim periods presented and from
inception. Operating results for the three months and six months ended August
31, 1998, are not necessarily indicative of the results that may be expected
for the year ended February 28, 1999.
The Company has generated minimal revenue to date and is considered to be in
the development stage.
NOTE B - INVESTMENT IN AFFILIATE
The Company owns 24% of, the Common Voting Stock and 55% of the Preferred
Non-Voting Stock of Pesquisas Arqueologicas Maritimas, S.A. (Pesqamar).
Pesqamar, a Brazilian S/A, was formed to research, locate and salvage a
shipwreck. In August of 1995, Pesqamar and Salvanav S.A., a Brazilian salvage
company competing for the same shipwreck, entered into an agreement forming a
Brazilian consortium known as Consorcio Para Pesquisas Arqueologicas
Submarinas (CONPAS). CONPAS now conducts all operations on the shipwreck
project. During 1996, the Company signed an agreement with CONPAS to provide
the financing for the search phase of the shipwreck project in exchange for
30% of any gross proceeds. In addition, the Company owns the right to finance
the recovery phase of the project for an additional 20% of the gross proceeds.
The Company is responsible for 100% of all search phase expenses. These
expenses have been charged to operations as project expenses, therefore no
investment in Pesqamar is reflected in these financial statements.
NOTE C - REVENUES
During the six months ending August 31, 1998, the Company received a
commission on the sale of artifacts purchased by Michaels Treasure Jewelry,
Inc. ("Michaels") and Vanderbuilt Square Corp ("Vanderbuilt") from Seahawk
Deep Ocean Technology, Inc. jointly with Seahawk I, Ltd. ("Seahawk") pursuant
to the Artifacts and Displays Purchase Agreement (the "Agreement") consummated
between those parties (the "Parties").
9
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NOTE C - REVENUES - Continued
The commission paid to Odyssey was $214,750 (10% of the proceeds to Seahawk
plus $5,000). The commission payment was made by a combination of cash,
inventory, and common stock as follows:
Amount Shares
----------- -----------
Cash $ 23,500
Inventory 20,000
Common stock 171,500 1,008,824
----------- -----------
$ 214,500 1,008,824
The common stock consists of restricted shares of Vanderbuilt originally
valued at $0.17 per share. The purchase Agreement stipulates that Vanderbuilt
will register the stock within one year of the closing date, which was March
19, 1998. Additionally, Vanderbuilt has granted all holders of the stock a
Right to Put Stock during the one year period beginning twelve months after
the closing date. If Vanderbuilt is successful in registering the stock within
one year of the closing date, holders may put any or all shares of the stock
to Vanderbuilt at $0.085 per share. In the event Vanderbuilt fails to register
the shares by March 19, 1999, holders may put any or all shares of the stock
to Vanderbuilt at $0.17 per share. Vanderbuilt is required to purchase all
shares put to it pursuant to this Agreement. The common stock is carried as a
long-term marketable security at 50% of the quoted price at August 31, 1998. A
provision for accumulated unrealized loss in investment has been reflected as
a separate component in stockholders' equity for $128,625 as of August 31,
1998.
The inventory consists of raw emeralds recovered from the 1655 shipwreck of
the Nuestra Senora de al Maravilla, with Certificates of Authenticity. The
Company intends to market these items.
The Agreement stipulates a deferred payment which, if made, will entitle
Odyssey to a $20,000 cash payment, however, none of the deferred revenue was
received during the period ended August 31, 1998, but $10,000 was received
during September 1998. Revenue will be reflected at that time when received.
The Company has no other deals or operations in progress from which it expects
to receive revenue during the foreseeable future. Further revenue will depend
upon the Company successfully locating, recovering, and selling trove from one
of its shipwreck projects, or developing other marketing opportunities.
NOTE D - OTHER INCOME AND EXPENSE
During May 1998, the Company executed the First Amendment to the Pesqamar
Joint Venture Agreement ("Amendment") with Seahawk Deep Ocean Technology, Inc.
wherein the two investors in Pesquisas Arqueologicas Maritimas, S.
A.(Pesqamar) revised the ownership, sharing of administrative costs of
Pesqamar, and debt owed to Odyssey under the original agreement. Under the
original agreement Odyssey had billed Seahawk $153,018 for their 50% share of
costs, and had provided a 100% provision for doubtful accounts. Under terms of
the Amendment, Odyssey will assume responsibility for 100% of the
administrative costs of Pesqamar, and consider the $153,018 debt to be paid in
10
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NOTE D - OTHER INCOME AND EXPENSE - Continued
full in exchange for 1,000,000 shares of common stock of Vanderbuilt Square
Corp (See Note C). Additionally, Odysseys percentage of ownership in the
Preferred Non Voting Shares of Pesqamar increased to 55%.
Other income was recorded on the books for the fair value of the Vanderbuilt
common stock as a $100,000 recovery of bad debt. Additionally, a provision for
accumulated unrealized loss in investment has been reflected as a separate
component in stockholders' equity for $57,500 as of August 31, 1998.
NOTE E - MARKETABLE SECURITIES
The current portion of marketable securities held by the Company consists of
100,000 shares of Seahawk Deep Ocean Technology, Inc. Common Stock. These
shares which had an original cost of $40,000, are deemed available for sale
and had a fair market value of $7,000 on August 31, 1998. A provision for
accumulated unrealized loss in investment on these shares has been reflected
as a separate component in stockholders' equity for $33,000 as of August 31,
1998.
The Company also holds a number of restricted shares of common stock, which
are included in the balance sheet as "Marketable securities held long term". A
provision for accumulated unrealized loss in investment has been reflected as
a separate component in stockholders' equity for $194,625 against the carrying
value of these shares as of August 31, 1998.
A detail of the book value of the Marketable Securities and Unrealized loss in
investment is set out in the table below:
Class of Security Original
Issuer Shares Value Provision Book Value
- ---------------------- ---------- --------- --------- ----------
Current Marketable
Securities
Seahawk Deep Ocean --------- ----------
Technology, Inc. 100,000 $ 40,000 $ 33,000 $ 7,000
Long Term Marketable
Securities
Seahawk Deep Ocean
Technology, Inc. 100,000 $ 12,000 $ 8,500 $ 3,500
Vanderbuilt Square
Corp. 1,008,824 171,500 128,625 42,875
Vanderbuilt Square
Corp. 1,000,000 100,000 57,500 42,500
--------- ----------
$ 194,625 $ 88,875
Total Unrealized Loss ---------
in Investment $ 227,625
=========
11
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NOTE F - REVENUE PARTICIPATION CERTIFICATES
The Company has sold through a private placement of Convertible Revenue
Participation Certificates ("RPC's") the right to share in future revenues of
the Company related to the "Cambridge Project." Each RPC entitles the holder
to receive a percentage of the Gross Revenues received by the Company from the
Cambridge Project. Gross Revenues are defined as all cash proceeds payable to
the Company as a result of the Cambridge Project, less any amounts paid to the
British Government or their designee(s); provided, however, that all funds
received by the Company to finance the project are excluded from Gross
Revenue.
The Company sold a total of $600,000 of RPC's. Therefore, the owners of the
RPC's, as a group, will receive a percentage of all Gross Revenues, if any
from the Cambridge Project in accordance with the following schedule:
Gross RPC Holders
Revenue Percentage
------------------- -----------
$0 - 600,000 100.00 %
$600,000 - 4 million 0.00 %
$4 - 35 million 18.00 %
above $35 million 9.00 %
Distributions will be made to each certificate holder within 15 days after the
end of each quarterly reporting period in which the Company receives any cash
proceeds from, or as a result of, the Cambridge Project.
Additionally, each RPC ($50,000) may be converted into 16,666 shares of the
Company's common stock at any time prior to June 30th, 2000 or within 10 days
of receipt of the "Notice of First Distribution", whichever occurs first. The
RPC's and any stock that it may be converted for constitute restricted
securities.
As of August 31, 1998 the Company had sold $600,000 of RPC's which are
reflected on the books as Deferred RPC Income to be amortized under the units
of revenue method.
NOTE G - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at August 31, 1998 consist of:
Unsecured 10% note payable to the family member of
an officer due August 31, 1999 $ 87,727
Unsecured 15% note payable to an officer due
August 31, 1999 71,290
Unsecured 15% note payable to a director due
August 31, 1999 104,703
Unsecured 15% note payable to a director due
August 31, 1999 78,111
Unsecured 15% note payable to the family member of an
officer due January 1999. The note can be converted
to Common Stock for $3 per share and is personally
guaranteed by the officer. 30,000
----------
$ 371,831
==========
12
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NOTE H - COMMITMENTS AND CONTINGENCIES
Participation and Vessel Charter Agreement
The Company entered into a Participation and Vessel Charter Agreement on May
26th, 1998, with Seahawk Deep Ocean Technology, Inc. wherein Seahawk will
provide the vessel R/V Seahawk, equipment, and crew necessary to conduct a
side scan survey over an area of approximately 100 square miles, and provide
for ten days inspection of anomalies as directed by the Odyssey project
manager. Seahawk delivered the vessel on July 9th. Survey operations began on
or about July 13th and will continue until completed. As payment for the
services Odyssey has agreed to pay Seahawk $215,000, payable in part upon
delivery of the vessel and subsequently for completed operations. As
additional payment for the services Seahawk will be paid 5% of the gross
proceeds which Odyssey receives from the sale or rental of any cargoes or
artifacts recovered from the search area, or any other area which Odyssey
shall direct Seahawk to search in conjunction with the project.
Industry Related Risks
Although the Company has access to a substantial amount of research and data
which has been compiled regarding the shipwreck business, the quality and
reliability of such research and data, like all research and data of its
nature, is unknown. Even if the Company is able to plan and obtain permits
for its projects, there is a possibility that the shipwreck may have been
salvaged, or may not have had anything of value on board at the time of the
sinking. Furthermore, even if objects of believed value are located and
recovered, there is the possibility that the Company's rights to the recovered
objects will be challenged by others, including both private parties and
governmental entities, asserting conflicting claims. Finally, even if the
Company is successful in locating and retrieving objects from a shipwreck and
establishing good title thereto, there can be no assurance as to the value
that such objects will bring at their sale as the market for such objects is
very uncertain.
NOTE I - GOING CONCERN CONSIDERATION
The Company, a development stage enterprise, has incurred net losses of
$3,162,407. At August 31, 1998 the Company had negative working capital as
indicated by current liabilities exceeding current assets by $664,670.
Management recently raised $600,000 for the financing of a shipwreck project
and operating expenses through a private placement offering of Revenue
Participation Certificates. Management intends to raise additional funds
through the sale of debt or equity to finance future shipwreck projects, or
operating expenses until such time as sales from recovered artifacts,
replicas, or other products contribute toward achieving profitability. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
13
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ITEM 2. MANAGEMENT'S PLAN OF OPERATION.
This Report contains forward-looking statements that involve a number of risks
and uncertainties. While these statements represent the Company's current
judgment in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. Certain factors that could cause
results to differ materially from those projected in the forward-looking
statements are set forth under "RISK FACTORS" in the Company's Form 10-KSB for
the year ended February 28, 1998.
The Company expects to derive substantially all of its revenue through the
sale and/or display of artifacts, including replicas, and cargoes that the
Company plans to recover from various shipwrecks. Therefore, until the
Company is successful in locating, recovering 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
and equity to meet its financial obligations, the majority of which have been
purchased by the officers and directors. The Company intends to continue to
offer private placements of equity, debt or project participation to fund its
various projects and corporate overhead.
For the next twelve months, the Company anticipates spending approximately
$35,000 per month to pay salaries and general office expenses. In addition,
the Company intends to complete the search phase of the Cambridge Project and,
subject to final negotiations concerning financing, continue the search phase
of the Concepcion Project.
On September 17th, 1998, in conjunction with the Cambridge Project, the
Company located what it believes to be a Phoenician shipwreck that sank in the
4th or 5th century BC. The Company intends to seek financing for the recovery
of this shipwreck and hopes to begin recovery during early 1999. Once the
shipwreck is recovered and conserved, the Company believes it can generate
income by leasing the artifact collection to museums.
The Company also believes search operations will resume on the Concepcion
Project during late 1998 or early 1999. The Company intends to finance this
operation through the sale of equity, revenue participation or debt. There can
be no assurance of the Company's ability to secure this financing which could
cause a delay or cancellation of the project.
In the event the Company experiences cash flow difficulty, the officers and
directors of the Company have entered into an agreement which provides that if
the Company's operating cash reserves drop below $20,000, the officers will
accrue their salaries and the four outside directors will each loan the
Company up to $3,000 per month to pay general overhead expenses. This
arrangement will continue until June 1, 1999.
The Company has reviewed the effect that the year 2000 will have on its
essential computer systems, especially those related to its ongoing operations
and its internal control systems, including the preparation of financial
information. The Company has plans underway to ensure that there will be no
significant adverse effect on its operations or accounting records related to
the year 2000.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities.
During the three months ended August 31, 1998, the Company sold a
total of $600,000 of revenue participation certificates ("RPC's"). The RPC's
provide the holders with the right to receive a percentage of gross revenues
received by the Company from the Cambridge Project. The RPC's were sold to 20
investors pursuant to the exemption provided by Rule 506. The investors were
provided with information regarding their investment, and the Company believes
that such person had knowledge and experience in financial and business
matters such that they were capable of evaluating the merits and risks of the
investment. The certificates representing the RPC's bear an appropriate
legend restricting the transfer of such securities.
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
15
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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 14, 1998 By:/s/ David A. Morris
David A. Morris, Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3, 4 and 6 of the
Company's Form 10-QSB for the quarter ended August 31, 1998, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1998
<CASH> 107,102
<SECURITIES> 7,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,000
<CURRENT-ASSETS> 135,465
<PP&E> 135,909
<DEPRECIATION> (27,940)
<TOTAL-ASSETS> 455,060
<CURRENT-LIABILITIES> 800,135
<BONDS> 0
0
0
<COMMON> 1,029
<OTHER-SE> (946,104)
<TOTAL-LIABILITY-AND-EQUITY> 455,060
<SALES> 0
<TOTAL-REVENUES> 214,750
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 564,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31,905)
<INCOME-PRETAX> (276,446)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (276,446)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
