<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, 1999
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, 1999, the Registrant had 10,555,614 shares of common
stock, $.0001 par value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
<PAGE>
INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
August 31, 1999 ........................................... 3
Unaudited Consolidated Statements of Operations, Three
Months Ended August 31, 1999, and Three Months
Ended August 31, 1998 ..................................... 4
Unaudited Consolidated Statements of Operations, Six Months
Ended August 31, 1999, and Six Months Ended
August 31, 1998 ........................................... 5
Unaudited Consolidated Statement of Cash Flows, Six
Months Ended August 31, 1999, and Six Months Ended
August 31, 1998 ........................................... 6 - 7
Notes to Consolidated Financial Statements................. 8 - 9
Item 2. Management's Plan of Operation.......................... 9 - 10
Part II: Other Information...................................... 11
Item 1. Legal Proceedings................................. 11
Item 2. Change in Securities.............................. 11
Item 3. Defaults Upon Senior Securities................... 11
Item 4. Submission of Matters to a Vote
of Security Holders............................... 11
Item 5. Other Information................................. 11
Item 6. Exhibits and Reports on Form 8-K.................. 11
Signatures ..................................................... 11
2
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET - Unaudited
AUGUST 31,1999
ASSETS
CURRENT ASSETS
Cash $ 1,245
Accounts Receivable 250
Marketable securities 260,500
Advances and prepaid expense 1,354
-----------
Total current assets 263,349
PROPERTY AND EQUIPMENT
Equipment and office fixtures 143,067
Accumulated depreciation (55,795)
-----------
87,272
OTHER ASSETS
Inventory 20,000
Marketable securities held long term 2,500
Loans receivable from related parties 145,650
Deposits 240
-----------
168,390
-----------
$ 519,011
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 138,702
Accrued expenses 664,841
Notes payable to related parties 297,241
Notes payable other 157,000
-----------
Total current liabilities 1,257,784
DEFERRED RPC INCOME 825,000
STOCKHOLDERS' DEFICIENCY
Preferred stock - $.0001 par value; 9,300,000
shares authorized; none outstanding -
Preferred stock Series A Convertible - $.0001 par value;
700,000 shares authorized; 190,000 shares issued
and outstanding 19
Common Stock - $.0001 par value; 100,000,000 shares
authorized; 10,555,614 issued and outstanding 1,055
Additional paid-in capital 2,891,843
Accumulated unrealized loss in investment (40,300)
Accumulated deficit (4,416,390)
-----------
Total Stockholders' deficiency (1,563,773)
-----------
TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 519,011
===========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Three Months Ended
August 31
1999 1998
----------- -----------
REVENUES $ 250 $ -
OPERATING EXPENSES
Project development 44,724 12,146
Project operations 259,889 248,792
Marketing 16,979 20 951
----------- -----------
Total operating expenses 321,592 281,889
GENERAL AND ADMINISTRATIVE EXPENSES 103,981 101,808
----------- -----------
INCOME(LOSS) FROM OPERATIONS (425,323) (383,697)
OTHER INCOME OR (EXPENSE)
Interest income 2,861 3,285
Interest expense (16,226) (22,220)
----------- -----------
Total other income or (expense) (13,365) (18,935)
----------- -----------
NET INCOME(LOSS) $ (438,688) $ (402,632)
=========== ===========
OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX
Unrealized gain(loss) on available for sale
securities 63,768 (48,427)
----------- -----------
COMPREHENSIVE LOSS $ (374,920) $ (451,059)
=========== ===========
(BASIC LOSS PER SHARE) $ (0.04) $ (0.04)
Weighted average number of common
shares and common shares equivalents
outstanding. 10,555,614 10,294,999
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Six Months Ended
August 31
1999 1998
----------- -----------
REVENUES $ 250 $ 214,750
OPERATING EXPENSES
Project development 127,117 55,964
Project operations 312,071 256,324
Marketing 29,100 42,214
----------- -----------
Total operating expenses 468,288 354,502
GENERAL AND ADMINISTRATIVE EXPENSES 255,837 210,357
----------- -----------
INCOME(LOSS)FROM OPERATIONS (723,876) (350,109)
OTHER INCOME OR (EXPENSE)
Interest income 5,620 5,568
Interest expense (32,145) (31,905)
Other - 100,000
----------- -----------
Total other income or (expense) (26,524) 73,663
----------- -----------
NET INCOME(LOSS) $ (750,400) $ (276,446)
=========== ===========
OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX
Unrealized gain(loss) on available for sale
securities 57,363 (199,625)
----------- -----------
COMPREHENSIVE LOSS $ (693,037) $ (476,071)
=========== ===========
(BASIC LOSS PER SHARE) $ (0.07) $ (0.03)
Weighted average number of common
shares and common shares equivalents
outstanding. 10,555,614 10,294,999
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Six Months Ended
August 31
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (750,400) $ (276,446)
Adjustments to reconcile net loss to
net cash used by operating activity:
Depreciation 14,034 12,677
Amortization 204 399
Common stock issued for services - 46,938
Marketable securities received on settlement - (271,500)
(Increase)decrease in:
Advances 2,336 587
Accounts receivable (250) -
Interest receivable (10,724) (8,662)
Inventory - (20,000)
Increase (decrease) in:
Accounts payable 91,956 4,768
Accrued expenses 192,425 68,455
----------- -----------
NET CASH(USED) IN OPERATING ACTIVITIES (460,419) (442,784)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,845) (13,573)
---------- -----------
NET CASH (USED) IN INVESTING ACTIVITIES (2,845) (13,573)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Related party loans 35,000 13,250
Loans from others 32,000 30,000
Issuance of preferred Stock 285,000 -
Issuance of revenue participation certificates 15,000 600,000
Repayment of note (8,931) (99,000)
---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 358,069 544,250
---------- -----------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Six Months Ended
August 31
1999 1998
----------- -----------
NET INCREASE(DECREASE)IN CASH (105,195) 87,893
CASH AT BEGINNING OF PERIOD 106,440 19,209
----------- -----------
CASH AT END OF PERIOD $ 1,245 $ 107,102
=========== ===========
SUPPLEMENTARY INFORMATION:
Interest paid $ 5,322 2,250
Income taxes paid $ - -
Summary of significant non cash transactions
During the six months ended August 31, 1999, two directors converted $122,375
of principal and $12,625 of accrued interest into $135,000 of Cambridge
project Revenue Participation Certificates.
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.
7
<PAGE>
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 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, 1999.
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, 1999, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months and six months ended August 31, 1999, are not
necessarily indicative of the results that may be expected for the year ended
February 28, 2000.
NOTE B - MARKETABLE SECURITIES
Current marketable securities consist partially of 2,008,824 shares of
Treasures and Exhibits International, Inc. ("TEI"). In March 1999, the
Company exercised its right to put the shares to TEI, at $.17 per share, and
TEI failed to honor the put. The Company filed suit against TEI and on October
14, 1999 was granted a judgement for liquidated damages, in the amount of
$341,500.08, and prejudgment interest in the amount of $16,361.78. The entire
amount of the judgement will bear interest at the rate of ten percent per
annum until paid. The Company intends to pursue collection of the judgement,
and believes TEI, which reported $2,608,400 of total assets at September 30,
1998, has sufficient cash or assets to satisfy the debt. Accordingly, there is
no reserve for unrecognized loss on the TEI shares which have been included in
current assets at their cost basis of $256,500. The Company also holds 80,000
shares of Seahawk Deep Ocean Technology, Inc. (SDOT) Common Stock with a fair
market value of $4,000.
Marketable securities held as long term investments by the Company August
31, 1999, consist of 100,000 shares of Seahawk Deep Ocean Technology, Inc.
Common Stock. All of these shares are restricted shares and therefore are
carried on the books at a fair market value of 50% of the quoted price as of
August 31, 1999.
The accumulated unrecognized loss in investment on the Seahawk shares is
$40,300.
NOTE C - SERIES A CONVERTIBLE PREFERRED STOCK
During the three month period ended August 31, 1999, the Company raised an
additional $120,000 through the sale of 190,000 shares of Series A Convertible
Preferred Stock.
8
<PAGE>
NOTE D - NOTES PAYABLE RELATED
Notes payable to three related parties in the amount of $185,565 plus $24,149
of accrued interest thereon became due on August 31, 1999. Two of the parties
have extended the due dates of notes and interest in the amount of $70,217
until August 31, 2000 under the same terms and conditions as the original
notes. These notes accrue interest at 15% per annum. A note with accrued
interest in the amount of $120,784 due to a director of the Company on August
31 1999 has not been renewed. As a result, the unpaid principal and interest
is payable in full, and the rate of interest on the note increases to 18% per
annum from August 31, 1999. Also, the Company may be liable for costs of
collection. The Company believes that this director will agree to a renewal of
this note, but due to extensive travel, the parties have not concluded a
negotiation for the extension.
NOTE E - GOING CONCERN CONSIDERATION
The Company has incurred net losses of $4,416,350. At August 31, 1999, the
Company had negative working capital as indicated by current liabilities
exceeding current assets by $994,435. Management intends to raise additional
funds through the sale of debt or equity to finance ongoing 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.
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, 1999.
The Company expects to derive substantially all of its revenue through the
sale and/or display of the shipwreck cargoes and artifacts, including replicas
and general shipwreck merchandise. 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 financial requirements.
During the current fiscal year, the Company anticipates spending approximately
$50,000 per month to pay administrative and general office expenses.
The original plan for the payment of these expenses involved the liquidation
of approximately 2 million shares of Treasure and Exhibits International, Inc.
(formerly know as Vanderbilt Square Corporation)("TEI") restricted common
stock and the sale of the Company's equity or debt. When the Company
attempted to
9
<PAGE>
liquidate the TEI shares through the exercise of its right to "Put" these
shares back to TEI on March 20, 1999, TEI failed to honor its commitment. The
Company filed suit and on October 14 1999, a judgement was entered against TEI
in the principal amount of $341,500.08 plus prejudgment interest of
$16,361.78. The unpaid balance of this amount will earn interest at the rate
of ten percent per annum until the judgement is paid in full. The company
believes this judgement is collectable and intends to diligently pursue all
collection efforts. As a result of TEI's failure to meet its financial
obligations with respect to the Put Option, the Company has become delinquent
in certain of its financial obligations. The Company believes this is a
short-term problem and that it will be current in its obligations within
ninety days of the filing of this Report.
In addition to the funds the Company expects to receive from TEI, the Company
intends to continue to sell debt and equity securities to fund its ongoing
office, overhead and operational expenses.
Operationally, the Company, subject to financing, plans to continue the search
operations for the Cambridge, Republic and Concepcion Projects. Additionally,
if any of the search operations are successful, and subject to financing, the
Company plans to begin recovery operations on one or more of these projects.
The Company intents to finance these operations through the sale of equity,
revenue participation or debt. There can be no assurance of the Company's
ability to secure financing and this could cause a delay or cancellation of
one or more projects.
YEAR 2000 COMPLIANCE
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's computer systems are used primarily for basic
accounting, word processing, spreadsheet applications, and access to the
internet and world wide web.
The Company uses PC computers with year 2000 compliant hardware. The
Company does not depend on any specialized computer hardware that may become
non-functional due to Y2K problems.
The Company has investigated potential problems with software used by the
Company for the management of its business and communications. The Company
utilizes very common software packages, all of which are relatively new.
Potential problems with software compliance have been addressed by all of the
software package vendors and in the first quarter of 1999 the Company
installed patches to it's software programs to insure Y2K compliance. There
was no additional cost incurred to access these updates.
The Company is not dependant on any material suppliers that would be expected
to cause an interruption of the Company's business operations if they were to
suffer Y2K compliance problems. The Company believes that there will be no
significant adverse effect on its operations or accounting records related to
the year 2000.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities.
During the three month period ended August 31, 1999, the Company raised
$120,000
from three accredited and four non-accredited investors in a private offering
of Series A Preferred Stock. The securities were sold pursuant to the
exemption provided by Rule 506. The investors were provided with information
regarding their investment, and the Company believes that such persons 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 securities 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
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 15, 1999 By:/s/ David A. Morris
David A. Morris, Chief Financial Officer
<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 and 4 of the
Company's Form 10-QSB for the quarter ended August 31, 1999, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> AUG-31-1999
<CASH> 1,245
<SECURITIES> 260,500
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,000
<CURRENT-ASSETS> 263,349
<PP&E> 87,272
<DEPRECIATION> (55,795)
<TOTAL-ASSETS> 519,011
<CURRENT-LIABILITIES> 1,257,784
<BONDS> 0
0
19
<COMMON> 1,055
<OTHER-SE> (1,564,847)
<TOTAL-LIABILITY-AND-EQUITY> 519,011
<SALES> 0
<TOTAL-REVENUES> 250
<CGS> 0
<TOTAL-COSTS> 468,288
<OTHER-EXPENSES> 255,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (32,145)
<INCOME-PRETAX> (750,400)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 57,363
<CHANGES> 0
<NET-INCOME> (693,037)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
