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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended February 28, 1999
Commission File Number 0-26136
ODYSSEY MARINE EXPLORATION, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1018684
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3507 Frontage Road, Suite 100, Tampa, Florida 33607
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(Address of principal executive offices)
(813) 282-0855
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(Registrant's 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 May 15, 1999, the Registrant had 10,555,614 shares of Common Stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
PART I.
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
ODYSSEY MARINE EXPLORATION, INC.
Odyssey Marine Exploration, Inc (the "Company" or "Odyssey"), formerly
Universal Capital Corporation, was formed under the laws of the State of
Colorado on March 5, 1986, to evaluate, structure and complete a merger with,
or acquisition of, prospects consisting of private companies, partnerships or
sole proprietorships.
On August 8, 1997, the Company acquired all of the issued and outstanding
stock of Remarc International, Inc., a Delaware corporation ("Remarc"), in
exchange for approximately 7,750,000(post split) shares of its no par value
Common Stock. On August 15, 1997, the Company filed an Information Statement
with the Securities and Exchange Commission, which announced the Company's
intention to hold a Shareholder Meeting on September 8, 1997. The
Shareholders approved the following measures: (i) change the name of
corporation to Odyssey Marine Exploration; (ii) change the domicile of the
corporation from Colorado to Nevada; (iii) reverse split the Common Stock 1:5,
(iv) approve an Employee Stock Option Plan, and (v) authorize 10,000,000
shares of preferred stock.
All financial information and share data in this Form 10-KSB give retroactive
effect to this reverse split.
REMARC INTERNATIONAL, INC.
Remarc International, Inc. was formed May 26,1994 to engage in the business of
recovering and marketing artifacts and cargo from deepwater shipwrecks.
Since its inception, Remarc focused on researching, permitting and developing
a number of shipwreck projects. On August 8th 1997, Remarc became a wholly
owned subsidiary of Odyssey Marine Exploration and on February 25th 1999,
Remarc International Inc. and Odyssey merged with Odyssey being the surviving
Corporation.
ODYSSEY MARINE, INC.
Odyssey Marine, Inc., a Florida corporation, was incorporated on November 2,
1998, as a wholly owned subsidiary of Odyssey Marine Exploration, Inc. for the
purpose of administering the Company's payroll and health plan.
The Company maintains a web site at www.shipwreck.net.
DESCRIPTION OF BUSINESS
GENERAL
Odyssey is engaged in the business of conducting archaeologically sensitive
recoveries of cargoes and artifacts from various shipwrecks. The Company plans
to produce revenue by exhibiting the artifacts and selling merchandise
consisting of certain cargoes, replicas of the artifacts and general
merchandise relating to the specific shipwrecks or the shipwreck business in
general. In addition, the Company plans on receiving revenue in the form of
project sponsorships and through the sale of intellectual property rights.
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The shipwreck business consists of six major component areas.
A. Project Development: Research and Government Liaison
B. Offshore Search and Inspections
C. Offshore Recovery Operations
D. Conservation and Documentation of Artifacts
E. Sharing the Knowledge and the Artifacts with the Public
F. Marketing the Cargoes, Artifact Replicas and Ancillary Products
A. PROJECT DEVELOPMENT: RESEARCH AND GOVERNMENT LIAISON.
The foundation for any shipwreck search and recovery expedition is the
research behind the project. Not only is the research critical to evaluate the
potential value, location and viability of finding a shipwreck, but it is
necessary to establish the historical significance and the archaeological
approach to the excavation that may be required.
The Company uses several outside shipwreck researchers to scout out
potentially viable projects. Data from these researchers is brought in and
checked against the Company's own database and resources, compared against
information from other experts in the industry, then reviewed by a review
board comprised of three outside directors and one executive officer, before
further money is spent on the project.
Once a project looks promising, the next step is to develop a working
relationship with the government or company that holds the rights to that
shipwreck. Development of these relationships is often time-consuming and
requires tremendous patience. Many foreign governments have had bad
experiences with "treasure hunters" in the past and are wary and skeptical of
any mention of shipwrecks.
In the case of shipwrecks that lie beyond any government's jurisdiction, how
and where the artifacts or cargo from the shipwreck are brought ashore could
determine whether the Company could even legally claim the cargo.
Once the Company is satisfied with the historical research and its legal
rights to a specific shipwreck, the project will enter the next phase.
B. OFFSHORE SEARCH AND INSPECTION.
Most offshore search operations will be conducted by first utilizing a side
scan sonar to detect anomalies on the seabed. After one or more promising
anomalies are located, a remotely operated vehicle ("ROV") will be deployed to
inspect and make a video record of the anomaly.
ROV's can be equipped with a wide variety of tools enabling the operator to
pick up samples, dredge or remove sand and/or overburden, take video footage
or still photos and to acquire approximate measurements of the visible wreck
site. There are several companies that lease the vessels, equipment and
personnel necessary to conduct offshore search operations. The Company intends
to lease the necessary vessels and equipment until such time as the Company's
utilization of vessels and equipment justifies ownership and the financing for
such vessels and equipment is available. The Company will then retain its own
project manager to insure quality control.
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C. OFFSHORE RECOVERY OPERATIONS.
Since all of the Company's projects are currently located in deep water,
recovery operations will most likely be conducted utilizing remote operated
vehicles.
How a recovery operation will be conducted depends on a number of factors
including the depth of the water, the age, condition, historical and
archaeological importance of the wreckage, local weather and tidal conditions.
Once the decision has been made to recover a shipwreck, the Company will work
with vessel and equipment contractors, archeologists and other interested
parties to determine the most appropriate method of recovery.
D. CONSERVATION OF THE ARTIFACTS.
Conservation of artifacts has, during the past ten years, become a well-
documented and organized function that can be undertaken efficiently by any
number of professional organizations. The Company may contract these services
or elect to establish its own conservation facilities when recovery operations
are successful.
E. SHARING THE KNOWLEDGE OF THE ARTIFACTS WITH THE PUBLIC
The recent success of the movie Titanic, and the associated success of the
sale of coal pieces from the shipwreck, books about the tragedy, sale of media
rights and Discovery Channel coverage, as well as the popularity of the
artifact exhibit underscore the importance of the public's exposure to the
excitement of shipwrecks. Any project undertaken by the Company will be
augmented with a large-scale public awareness program that is dedicated to
making the shipwreck a well-recognized household name.
The Company plans on using documentaries, movies, books and major Internet
communication facilities to provide the media with the technical and
historical stories that the public finds so interesting. The Company plans to
partner with major media outlets and publishers which should provide self-
liquidating promotional opportunities that should provide income as well as
exposure.
The heightened public awareness translates into brand equity in the shipwreck
cargoes and artifacts that management believes will significantly enhance
their value and collectibility.
F. MARKETING THE ARTIFACTS, REPLICAS AND ANCILLARY PRODUCTS
As the shipwreck industry moves from "treasure hunters" to businesses
specializing in shipwreck exploration, a new business model is being
developed. This model reflects the unique archaeological nature of the
shipwreck industry while developing multiple revenue streams.
Odyssey plans to capitalize on the public's fascination with shipwrecks by
developing opportunities for the public to share in the excitement. These
plans include: joining the expedition as "adventure tourists", following the
expedition on the Internet, watching television specials that bring together
the history, search and recovery of shipwrecks, viewing video of recovery
operations, owning coins or artifact replicas, and viewing shipwreck artifacts
at both traveling and permanent exhibitions.
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Each shipwreck project is different, and Odyssey expects to generate different
combinations of revenue from each project. The Company believes its five
primary sources of revenue will be cargo and trade goods sales, merchandise
sales, exhibit income, sponsorships and intellectual property (IP) rights.
CARGO AND TRADE GOODS SALES
The first area, cargo sales, refers to items or "cargo" found on a ship that
are not considered culturally significant. For example, from a shipwreck found
with a large cargo of coins, Odyssey might market and sell those coins, after
significant study of the collection and setting aside a representative sample
for future study. Another project may recover gold bullion, which could
quickly be sold. Other shipwrecks may never produce revenue from cargo sales.
An example of this would be the "Melkarth" shipwreck, the ancient Punic or
Phoenician shipwreck discovered by Odyssey in September 1998. The artifacts
recovered from this shipwreck will likely be too culturally and
archaeologically significant to split the collection. For shipwrecks such as
the "Melkarth", the other identified revenue streams should allow Odyssey to
recover, conserve and publish these archaeologically significant finds.
MERCHANDISE SALES
Merchandise sales will comprise any items sold that were not recovered from a
particular shipwreck. This merchandise can include artifact replicas
(including jewelry), logo merchandise, videotapes, books and other products.
Merchandise may be sold through retail outlets, over the Internet (e-
commerce), in conjunction with exhibits, and through direct marketing,
including documercials.
EXHIBITS
Exhibit income will be derived from various types of exhibits. Permanent
shipwreck exhibits may have rotating exhibits of several shipwreck projects.
Large market exhibits would travel to larger cities and stay in place for 4 to
6 months. The traveling exhibit plan includes weeklong stops in secondary and
tertiary markets. In addition to income from exhibit admission fees, all of
the exhibit plans include opportunities for sponsorship income and additional
merchandising (cargo and/or merchandise sales).
SPONSORSHIPS
Sponsorships will be available for some of Odyssey's projects. These corporate
or institutional sponsorships will allow appropriate companies or products to
share the media exposure and promotional opportunities associated with
specific Odyssey expeditions, from search and recovery through exhibit of
artifacts.
INTELLECTUAL PROPERTY
Intellectual Property (IP) rights will include media rights (television, film,
book, video, photos), and licensing fees. "Rights" fees to shipwreck projects
will be weighed against the PR value of the exposure (which drives later
merchandise sales), and what future rights the company may retain to promote
sales.
The current increase in the number of digital television channels will drive a
major explosion in the need for content (programming). Retaining some or all
rights to the television specials produced for each project could generate an
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additional revenue stream from licensing fees to the domestic and
international television markets long into the future.
OTHER SHIPWRECK PROJECTS
In addition to marketing the results of Odyssey's own successful shipwreck
recovery operations, groups that engage in joint ventures with Odyssey, or
purchase data and/or projects from Odyssey, will require the same marketing
services.
There is a large gap between the traditional shipwreck hunter's resources to
market their materials and the public's ability to access them. Because of the
limited supply of artifacts, no single shipwreck recovery typically has enough
profit potential to support a large-scale marketing plan. Now that access to
the trove of deep shipwrecks is virtually assured by technology, this should
all change.
The ongoing support of shipwreck exploration depends on the development of a
sophisticated marketing network. It is Odyssey's intention to offer services
for marketing shipwreck artifacts, replicas and collectibles for other
carefully-selected legitimate archaeological projects as well as its own.
Odyssey believes that by building a worldwide marketing network and brand
recognition it can create a business that can last long after shipwrecks have
been recovered and conserved, providing a permanent source of revenue that is
not conditional on continued discoveries.
ACTIVE PROJECTS
The Company currently has 8 projects in various stages of development and has
plans to conduct operations at three of its sites this year.
CAMBRIDGE PROJECT
The "Cambridge Project" (previously called the "Ark Royal Project") is an
expedition to locate, recover and market the artifacts and cargo of a large
colonial warship, lost in a severe storm in the 1600's. Based on research
conducted by the Company, the Company's management believes that there is a
high probability that the ship was carrying a cargo of coins with a bullion
value of between $20 and $75 million and a potential numismatic value of
between $200 million to over $1 billion. This will depend on whether the
specie referenced in research documents is gold or silver and its denomination
and condition.
During 1998, the Company conducted search operations over an area of
approximately 100 square miles. Several anomalies were located and several
shipwrecks, including a Phoenician wreck dubbed "Melkarth" were identified.
The Cambridge was not located within the original search area. This led the
Company to conclude the Cambridge is mostly likely located in the territorial
waters of a country with strict underwater exploration laws. During April
1999, the Company was issued a Permit from this country to expand the search
for the Cambridge into their territorial waters.
The Company intends to resume search operations in the newly permitted area
during June 1999, first undertaking a side scan survey, then inspecting all
anomalies with an ROV.
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REPUBLIC PROJECT
The Republic Project is an attempt to locate, identify, recover, conserve and
market the cargo of the Republic, a steam ship that sank after the Civil War.
The Republic's cargo included approximately 48,000 troy ounces of gold. While
the bullion value (at $280 per ounce) is approximately $13,000,000, much of
the gold may been shipped as dust, nuggets, and privately minted coins and
bars from the gold fields, potentially increasing the value of the cargo.
Odyssey has reached an agreement with researchers and insurance interests that
give the Company 80% of any net revenue generated by the project.
A side-scan sonar survey has already been completed in the search for the
Republic, and 64 anomalies were found. Several of these anomalies are
potential targets. Operations to inspect the anomalies found during that
survey will be conducted using Odyssey's "Phantom" remotely operated vehicle
(ROV). ROV operations are scheduled to commence in the summer of 1999. If the
shipwreck is located and identified and pending financing, archaeological
excavation could begin as early as the fall of 1999.
CONCEPCION PROJECT
The "Concepcion Project" is a project attempting to locate, identify, recover,
conserve and market the cargo of an early 18th century shipwreck that sank
while carrying a large cargo of gold. Value estimates by Management for the
Concepcion Project range from a gold bullion value of approximately 35 million
dollars to a potential numismatic and collectors value of well over 100
million dollars.
Pesquisas Arqueologicas Maritimas, S.A. (Pesqamar), a Brazilian S/A, was
formed to conduct the Concepcion Project. The Company owns 24.5% of the Common
Voting Stock and 55% of the Preferred Non-Voting Stock of Pesqamar.
In August of 1995, Pesqamar and Salvanav LTDA., 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 conducted all operations on the shipwreck project
until April of 1999 when a bifurcation agreement between the parties ended the
operation of CONPAS. The sought after shipwreck has not been identified to
date and the Company intends to continue searching for the shipwreck through
Pesqamar.
In addition to its ownership in Pesqamar, the Company has signed a Finance
Agreement with Pesqamar whereby it will receive 30% of the gross recovery for
providing the search financing and, optionally, an additional 20% of the gross
for providing the recovery financing. Assuming the shipwreck is located and
the recovery financing option is taken, the combination of its ownership in
Pesqamar and the Financing Agreement would entitle the Company to
approximately 72.18% of any post government revenue that may be generated from
this project.
The offshore search phase of this project was commenced during October 1996.
To date over 400 square miles have been surveyed with side scan sonar and ROV
inspections have been conducted on approximately 20 sites. Due to the
conditions observed with the ROV, a magnetometer survey was conducted on these
sites during January and February 1998. The Company anticipates further ROV
inspections will be recommenced during the fall of 1999.
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BETHLEHEM PROJECT
The "Bethlehem Project" is a project that was being conducted as a joint
venture with another company. The expedition is an attempt to locate,
identify, recover and market the cargo of the British East Indiaman. The
Company agreed to provide search financing in exchange for 50% of the gross
recovery. The initial side scan survey has already been completed, however,
the final location and recovery can not take place until approval by the
Government in whose environmentally sensitive waters the shipwreck lies. Since
the other company controls the project and Odyssey is not aware of any
attempts to secure such approval, it is doubtful that any further action on
this project will occur in the foreseeable future.
DEEP-WATER VS SHALLOW WATER OPERATIONS
The shipwreck business is broken into two primary areas: deep-water projects
and shallow water projects. Traditionally, the shallow water business has
comprised nearly 100% of the industry, primarily because the cost of entry is
relatively low.
Many of the world's most famous recoveries were made with minimal investment.
As a result, the lack of archaeological professionalism associated with these
projects brought a tremendous amount of criticism from the archaeological
community. While this didn't dampen the public's enthusiasm for these
ventures, the resulting conflict with the archaeological and scientific
community caused a great deal of wariness in government and bureaucratic
circles. The net result was a burgeoning body of law designed to limit or
prevent access to shipwrecks by these shallow water shipwreck explorers. Many
of the countries that are richest in potential shipwreck projects have enacted
legislation that prevents salvors or divers from even touching these sites.
In addition to these problems of working in shallow water, there are several
other factors that make shallow water shipwreck projects more risky. They
include:
* Many competitors can afford to engage in shallow water projects.
* Ease of pirates stealing artifacts from shallow water sites.
* Possibility that the shipwrecks were already salvaged.
* Probability that the site is scattered over a large area by waves
and currents.
* Difficulty of security when working with divers.
* Problems extracting encrusted and coral-covered artifacts.
Deep-water shipwrecks, on the other hand, exhibit characteristics that make
them much more suitable for legitimate commercial operations. They include:
* It is usually easier to gain title to shipwrecks in international
waters.
* Depth is a barrier to all but well-funded commercial operations.
* Deep shipwrecks tend to be in one capsule, perfect for
archaeological excavation.
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* In water greater than 200 meters, there is typically little coral
or encrustation.
* Difficulty of access provides good site security.
* Expense dictates that archaeologists can't reach sites without
commercial help.
* There is a high probability that shipwrecks have not been
previously salvaged.
* High cost creates need for professionalism in all commercial
operations.
* High tech nature of operation increases public interest.
For these reasons the Company has decided to concentrate on deep-water
shipwreck projects.
COMPETITION
The Company is aware of the following companies which are currently engaged in
the deep water shipwreck business:
* Nauticus
* Columbus America Group
* Seahawk Deep Ocean Technology, Inc.
* Blue Water Recoveries
While each of these companies could be considered competitors, management does
not believe that any of them are interested in any of the Company's current or
planned projects.
There are also several companies engaged in deep-water oil exploration and
seismic research. While these companies may own and operate the type of
equipment necessary to locate and recover shipwrecks, the Company does not
consider them to be competitors but rather potential suppliers.
On the marketing side, there is a cottage industry of a few shops and small
museums around the country that market shipwreck artifacts. However, there is
one group, which has recently begun a pioneering effort in marketing
shipwrecks. In spite of the fact that their business is less than three years
old, they have developed a formula that seems to be working very well. They
have developed a "Shipwreck Treasure Road Show" which has two components.
First is a small display of valuable pieces from the Atocha and various other
shipwrecks, which is advertised in the press as a "Mini-museum" free for the
public to view. The second component is a large display of jewelry, artifacts,
replicas, books and other items relating to shipwrecks. The exhibit typically
comes to a town for 4 to 5 days, during which it is set up in one of the
largest jewelry stores in that city. A major advertising campaign in the
market is undertaken, and the public's response to date has been excellent.
While this group might be considered competition, they are currently viewed
more as pioneers and potential marketing partners that have proven the
public's acceptance on a wide scale shipwreck marketing program.
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EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS
To the extent that the Company engages in shipwreck search and recovery
activities in the territorial, contiguous or exclusive economic zones of
countries, the Company must comply with applicable regulations and treaties.
Prior to engaging in any project, the Company seeks legal advice to ascertain
what effect this may have on the financial returns of the operation. This
factor is taken into account in determining whether to proceed with the
program as planned. In addition, there is currently an initiative being
considered in the United Nations Educational, Scientific & Cultural
Organization ("UNESCO") known as the Convention on the Protection of
Underwater Cultural Heritage. If adopted, it could restrict access to
historical shipwrecks throughout the world to the extent that it would require
compliance with guidelines set forth by the International Council of Monuments
and Sites (ICOMOS), if these guidelines are annexed to the Convention. These
guidelines require adherence to strict archaeological practices, and the
Company intends to follow these guidelines in all projects to which they are
applicable. The article in the ICOMOS guideline, which may be problematic to
the Company, is the requirement that items of cultural significance not be
traded. The Company believes that the primary value of the cargoes it seeks is
trade goods (such as coins, bullion and gems), and therefore the Company does
not believe that these items constitute artifacts of cultural significance.
Nevertheless, the Company believes that the proposed convention, if adopted,
could significantly increase regulation of shipwreck recovery operations and
may result in higher costs.
Management does not believe that the Convention will be adopted as presented,
however, because the United States, Great Britain and several other critical
countries have voiced their opposition to this initiative and stand ready to
block its passage. In addition, several organizations, including the Maritime
Law Association, Historic Shipwreck Salvors Professional Association (HSSPAC)
and the Professional Shipwreck Explorer's Association (ProSEA) are cooperating
to prevent adoption of this convention in its currently proposed restrictive
form. The Company's management has been involved in a leadership role, and
Greg Stemm is presently President of ProSEA, as well as a member of the United
States delegation chosen to negotiate this Convention.
COST OF ENVIRONMENTAL COMPLIANCE
While offshore operations and the operation of vessels require compliance with
numerous environmental regulations, the Company intends to lease or charter
the necessary vessel and equipment thereby transferring the responsibility of
environmental compliance to the equipment and vessel owners.
EMPLOYEES
The Company currently employees its three executive officers, on a full time
basis. The Company also employs three individuals doing administrative
assistance, public relations, and archaeological research. In addition, the
Company hires consultants from time to time to perform specific services.
RISK FACTORS
Shareholders or investors in shares of the Company's Common Stock should
consider the following risk factors, in addition to other information in this
Report:
1. SPECIAL RISKS OF THE BUSINESS. An investment in a business such as
that of the Company should be considered extremely speculative and of
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exceptionally high risk. Although the Company has access to a substantial
amount of research and data which has been compiled regarding its various
projects, 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 various projects, there is a possibility that
the shipwrecks 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.
2. UNCERTAIN RELIABILITY OF RESEARCH AND DATA. The success of a
shipwreck project will be dependent to a substantial degree upon the research
and data assimilated by the Company. By its very nature, however, all such
research and data regarding shipwrecks, such as those sought by the Company,
is imprecise, incomplete and unreliable as it is often composed of or effected
by numerous assumptions, rumors, "legends", historical and scientific
inaccuracies and inaccurate interpretations which have become a part of such
research and data over time.
3. DEPENDENCE ON OTHERS FOR LOCATION AND RECOVERY OF WRECKSITES. While
the Company plans to contract with other parties who will be responsible for
the location and recovery of shipwrecks, it is possible that the primary
responsibility for such location and recovery may fall directly upon the
Company. While Mr. Morris and Mr. Stemm have experience in the location and
recovery of shipwrecks, the Company does not currently own the equipment or
employ the personnel that may be necessary for this type of work. Whenever
the primary responsibility for search and recovery operations fall upon the
Company, it will be required to contract with others to supply personnel and
equipment to complete the project. There can be no assurance that financing or
third party contracts will be available to the Company. The availability of
specialized recovery equipment may present a problem, and the cost of
obtaining the use of such equipment to conduct recovery operations is
uncertain and will depend on, in part, the location and condition of the
wreckage to be recovered.
4. NATURAL HAZARDS. Underwater recovery operations are inherently
difficult and dangerous and may be delayed or suspended by weather, sea
conditions or other natural hazards. Further, such operations may be
undertaken more safely during certain months of the year than during others.
There can be no assurances that the Company and/or entities it is affiliated
with will be able to conduct their search and/or recovery operations only
during such favorable periods. In addition, even though sea conditions in the
search location are somewhat predictable, the possibility exits that
unexpected conditions in the search area may occur and that such unexpected
conditions might adversely affect the Company's operations. Further, it is
possible that natural hazards may prevent or significantly delay search and/or
recovery operations and therefore any distributions.
5. UNCERTAIN TITLE TO OBJECTS LOCATED. Persons and entities other than
the Company and entities it is affiliated with (both private and governmental)
may claim title to the shipwrecks. Even if the Company is successful in
locating and recovering shipwrecks, there is no assurance that the Company
will be able to establish its right to property recovered as against
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governmental entities, prior owners, or other attempted salvors claiming an
interest therein.
6. UNCERTAIN MARKET FOR AND VALUE OF RECOVERED OBJECTS. Even if
valuable items can be located and recovered, it is difficult to predict the
price that might be realized for these items. The value of the recovered
items will fluctuate with a precious metals market that has been highly
volatile in recent years. Moreover, the entrance on the market of a large
supply of similar items from shipwrecks located and recovered by others could
itself depress the market for these items.
7. DELAY IN DISTRIBUTION OR SALE OF RECOVERED OBJECTS. The methods and
channels to be used in the disposition of the recovered items are uncertain at
present and may include one or a combination of several alternatives. Ready
access to buyers for disposition of any artifacts or other valuable items
recovered, however, cannot be assured and delays in the disposition of such
items are very possible.
8. THEFT. If the Company locates a shipwreck and asserts a valid claim
to items of value, there is a risk of theft of such items at sea, both before
and after their recovery, by "pirates" or poachers and while in transit to a
safe destination.
9. COMPETITION. There are a number of competing entities engaged in
various aspects of the shipwreck business. One or more of these competing
entities may locate and recover the shipwreck that the Company is planning to
locate and recover. In addition, these competing entities may be better
capitalized and may have greater resources to devote to their pursuit of the
shipwreck.
10. FAILURE TO OBTAIN PERMITS. It is possible that the Company will not
be successful in obtaining title to, or permission to excavate the wrecks. In
addition, permits which are sought for the projects, may never be issued, and
if issued, may not be legal or honored by the entities which issued them.
11. NEED FOR ADDITIONAL CAPITAL. Until the Company begins to generate
revenue from the sale of recovered items, it will need additional capital in
order to continue the search, recovery and marketing phases of its projects.
12. PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK. Although there is a
limited market for the Company's Common Stock, there can be no assurance that
such a market can be sustained. The investment community could show little or
no interest in the Company in the future. As a result, purchasers of the
Company's securities may have difficulty in selling such securities should
they desire to do so. The Common Stock currently trades on the NASD's
Bulletin Board.
13. CONTROL BY EXISTING MANAGEMENT. The current executive officers and
directors of the Company own beneficially approximately 57% of the Company's
outstanding Common Stock. Accordingly, the current executive officers and
directors will continue to have the ability to significantly influence the
outcome of elections of the Company's directors and other matters presented to
a vote of shareholders.
14. DIFFICULTY IN TRADING "PENNY-STOCKS". The Company's securities may
be subject to a rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers (as defined in the rule) and accredited investors (generally,
institutions and, for individuals, an investor with assets in excess of
12
<PAGE>
$1,000,000 or annual income exceeding $200,000 or $300,000 together with such
investor's spouse). For transactions covered by this rule, the broker-dealer
must make a special suitability determination for the purchaser and must have
received the purchaser's written consent to the transaction prior to the
purchase. Consequently, many brokers may be unwilling to engage in
transactions in the Company's securities because of the added disclosure
requirements, thereby making it more difficult for shareholders to resell
Common Stock in the secondary market.
15. GENERIC PREFERRED STOCK AUTHORIZED. The Company's Articles of
Incorporation authorize the issuance of up to 10,000,000 shares of Preferred
Stock. The Board of Directors has the right to establish the terms,
preference, rights and restrictions of the Preferred Stock. Other companies on
occasion have issued series of such preferred stock with terms, rights,
preferences and restrictions that could be considered to discourage other
persons from attempting to acquire control of such companies and thereby
insulate incumbent management. It is possible the Company could issue shares
of its Preferred Stock for such a purpose. In certain circumstances, the
existence of corporate devices that would inhibit or discourage takeover
attempts could have a depressant effect on the market value of the Company's
common stock.
ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains its offices at 3507 Frontage Road, Suite 100, Tampa,
Florida 33607. The offices consist of approximately 3,170 square feet of
office space that the Company sub-leases from a non-affiliated company. The
agreement began April 1, 1997 and expires December 31, 2000. The approximate
yearly rental is as follows: 1998-$40,112, 1999-$44,120, 2000-$39,777.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings, and the Company is not aware of any threatened
legal proceedings to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
13
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) PRINCIPAL MARKET OR MARKETS.
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "OMEX." The following table sets forth the range for the high and low
bid quotations for the Company's securities as reported by the OTC Bulletin
Board. These prices are believed to be representative inter-dealer quotations,
without retail markup, markdown or commissions, and may not represent actual
transactions.
Bid*
High Low
Quarter Ended ----- -----
May 31, 1997* $4.43 $1.25
August 31, 1997* $4.53 $3.12
November 30, 1997 $3.37 $2.00
February 28, 1998 $3.50 $2.50
May 31, 1998 $4.00 $2.00
August 31, 1998 $3.50 $2.00
November 30, 1998 $2.37 $0.94
February 28, 1999 $2.37 $0.81
(*) The above prices have been adjusted to account for the 1:5 reverse
split effective September 9, 1997.
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK.
The number of record holders of the Company's $.0001 par value Common Stock at
April 30, 1999 was 163. This does not include shareholders that hold their
stock in accounts in street name with broker/dealers.
(c) DIVIDENDS.
Holders of the Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends have been paid
with respect to the Company's Common Stock and none are anticipated in the
foreseeable future.
(d) RECENT SALES OF UNREGISTERED SECURITIES.
CONVERTIBLE REVENUE PARTICIPATION CERTIFICATES
During the three months ended February 28, 1999 the Company sold $12,500 of
Cambridge project Revenue Participation Certificates("RPC's) to one investor.
The RPC's provide the holder with the right to receive a percentage of gross
revenues received by the Company from the Cambridge project. The RPC was sold
pursuant to the exemption provided by Rule 506 to one investor who had
previously purchased units of the offering. The investor was provided with
information regarding the investment, and the Company believes that this
person had knowledge and experience in financial and business matters such
that he was capable of evaluating the merits and risk of the investment. The
certificate representing the RPC bears an appropriate legend restricting the
transfer of the securities.
14
<PAGE>
COMMON STOCK
During the three months ending February 28, 1999 the Company sold 205,000
shares of restricted Common Stock to seven investors for $102,500. The Company
also issued 55,615 shares to four individuals for services valued at $60,460.
These securities were issued pursuant to the exemption provided by Section
4(2) of the Securities Act of 1933. The persons to whom such securities were
issued were employees of consultants to the Company and existing shareholders
who made an informed investment decision and had access to material
information regarding the Company. 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 acquisition of the Company's
common stock in connection with these transactions. The certificates
representing such common shares bear an appropriate legend restricting the
transfer of such securities, and stop transfer instructions have been provided
to the Company's transfer agent in accordance therewith.
ITEM 6. 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 of 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 Item 1.
The Company expects to derive substantially all of its revenue through the
sale and/or display of the shipwreck cargoes and artifacts, including replicas
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, equity and project specific revenue participation to meet its financial
obligations.
For the next twelve months, the Company anticipates spending approximately
$50,000 per month to pay salaries and general office expenses. The Company
plans to liquidate approximately 2 million shares of Treasure and Exhibits
International, Inc. ("TEI") restricted common stock, which the Company
currently owns, to pay these expenses. The Company has the contractual right
to "Put" these shares to TEI at the price of $.17 per share and has notified
TEI of its desire to exercise this put. In the event TEI fails to honor its
obligation, the Company plans to register and sell these shares under rule 144
and take the appropriate legal steps to force TEI to makeup any difference in
the market price realized for the shares and the put value of $.17 per share.
At the current time TEI is not current in its SEC filing and therefore the
Company is not able to register the shares under rule 144. If the Company is
unable to generate any cash flow from the TEI shares, it plans to sell equity
or debt to finance its general overhead.
Operationally, the Company 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
intends 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
15
<PAGE>
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 four 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.
ITEM 7. FINANCIAL STATEMENTS.
Please see pages F-1 through F-17.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
16
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table sets forth the names and positions of the officers and
directors.
NAME AGE POSITION
----------------- --- -----------------------------
John C. Morris 50 President and Chairman of the
Board of Directors
Gregory P. Stemm 42 Vice-President, Research &
Operations, Director and Chairman
of Nominating Committee
David A. Morris 48 Secretary and Treasurer
William C. Callari 37 Director and Chairman of Project
Review Committee
Gerald Goodman 50 Director and Chairman of Audit
Committee
E. Eugene Cooke 59 Director
Brad Baker 39 Director and Chairman of the
Compensation Committee
There is no family relation between any of the Directors or the Executive
Officers of the Company except John Morris and David Morris who are brothers.
All directors will hold office until the next annual meeting of the
Shareholders.
The three Executive Officers each have employment contracts that are effective
from March 1, 1999 until February 28, 2000.
The following sets forth biographical information as to the business
experience of each Officer and Director of the Company for at least the last
five years.
JOHN C. MORRIS has served as an Officer and Director of the Company since
August 1997, and as an officer and director of Remarc since May 1994. Prior
to that, Mr. Morris was an officer and director of Seahawk Deep Ocean
Technology, Inc. ("SDOT") from March 1989, until January 1994. As President
of SDOT, Mr. Morris was in charge of the Company which completed the first
archaeologically sound recovery of a deep water shipwreck, salvaging a Spanish
shipwreck from approximately 1,500 feet of water near the Dry Tortugas. The
recovery yielded nearly 17,000 artifacts consisting of gold, silver coins,
pottery, pearls, jewelry, and numerous other artifacts. Mr. Morris was also
President of Seahawk, Inc. an Alabama corporation engaged in leasing the
Research Vessel "Seahawk", a deep-water search and inspection vessel. From
1992 until 1997, Mr. Morris served on the Board of Directors of the Florida
Aquarium, a not for profit corporation engaged in the operation of a new $90
million aquarium facility in Tampa, Florida. Prior to his involvement with
Seahawk, Mr. Morris was engaged in the real estate and construction business.
17
<PAGE>
WILLIAM C. CALLARI, 37, has served as an Officer of the Company from October
1995 to February 1998, and as a Director of the Company since October 1995.
Callari is Chairman of International Licensing & Merchandising, Inc., Nevada,
a company that holds the license for the management of the e-Commerce platform
for the world's fair, EXPO2000, to be held in Hannover, Germany in the year
2000. He is President of North Star Resources, Inc., New Jersey, a firm that
provides contracting management services, and business management services.
For the past nine years, he has also been President of Realty Development &
Management, Inc., New Jersey, a real estate development and construction
company. From 1986 to 1992, Mr. Callari was involved in property management,
real estate development, construction and marketing for many real estate
limited partnerships. Prior to that, he received a Bachelor of Science degree
in Business Administration (Marketing) from Seton Hall University in 1983.
Mr. Callari has been featured in Builder Magazine and lectured at state
conventions on residential marketing. During 1990 and 1991 he won many state
and local Sales and Marketing awards for product design and presentation. He
was also a member of the Young Entrepreneur's Organization.
GREGORY P. STEMM has served as Vice President, Research and Operations and as
a member of the Board of Directors since December 1995 and is responsible for
research and operations on all shipwreck projects. Prior to that, he served as
an officer and director of Seahawk Deep Ocean Technology from the time he co-
founded the company in 1989 until January 1994.
Stemm is a member of the United States delegation to the United Nations,
Educational, Scientific and Cultural Organization (UNESCO) expert meeting to
consider the "Draft Convention for the Protection of Underwater Cultural
Heritage". This group will determine future international deep-ocean shipwreck
guidelines. He has written articles on the ethics and future of deep ocean
shipwreck exploration and archaeological excavation, and has given over 100
lectures on the subject at the Institute of Nautical Archaeology, World
President's Organization, Young Entrepreneur's Organization and before other
groups. He was named a panelist on Shipwreck Ethics at the 1998 Law of the Sea
Institute and was also recently selected as a fellow of the Explorers Club.
Greg is on the Advisory Board of Ocean News and Technology Magazine, and is
currently President, and a founding Board Member, of the Professional
Shipwreck Explorers Association (ProSEA). ProSEA is a not-for-profit trade
association that provides a forum through which salvors, archaeologists and
government entities work together to promote a high standard of ethics and
principals in dealing with deep sea shipwreck resources.
As a principal of Seahawk, Stemm was involved in directing research and
technology for the company, which resulted in locating two Spanish Colonial
shipwrecks in depths greater than 1,000 feet. He was also responsible for
directing the archaeological team and operations that accomplished the world's
first remote archaeological excavation, in a depth of 1,500 feet southwest of
the Florida Keys.
In addition, Stemm is a member of MENSA, The Society for Historical
Archaeology, The Society for American Archaeology, and a founder of the
Florida Aquarium. He was an officer and director of the Young Entrepreneurs
Organization (YEO), an exclusive group of founders of companies throughout the
world. He was also appointed to the International Board of Directors of the
World Entrepreneurs Organization (WEO), and is active in the activities of
that group. Prior to his involvement with Seahawk, Stemm was co-founder and a
partner in DeFrain-Stemm Advertising, a full service advertising agency
18
<PAGE>
which included clients such as Trammell Crow Real estate, NCNB National Bank,
Hyatt Hotels and may other tourism and real-estate-oriented businesses. Greg
was responsible for all strategic planning and marketing for clients of the
agency.
E. EUGENE COOKE has been a member of the Board of Directors of the Company
since August 1997 and a member of the Board of Directors of Remarc since
September 1996. Prior to joining the Board, Mr. Cooke was an investor in
Remarc. From 1986 until 1994 Mr. Cooke was the President of Gravure
Packaging, a printing concern located in Richmond Virginia. From 1994 through
the present, Mr. Cooke serves as President of CAS Leasing, Inc., an aircraft
leasing company located in Richmond Virginia and he is also President of
Commonwealth Aviation in Richmond. Mr. Cooke serves on the Board of Directors
of Goodwill Industries and is a Board member at the Trinity Episcopal School
in Richmond.
GERALD GOODMAN has served on the Board of Directors since September, 1996. He
also serves on the Board of Directors of International Licensing &
Merchandising, Inc., a Nevada company that holds the license for the
management of the e-Commerce platform for the world's fair, EXPO2000, to be
held in Hannover, Germany in the year 2000. In addition, he is also a name-
partner in the certified public accounting firm of Weiner & Goodman, P.C.,
Eatontown, New Jersey, where he has been affiliated for the past twenty-three
years. The firm is a regional firm with offices located in New Jersey and New
York. Gerald provides audit, tax and management advisory services to his
broad base of clients, and he is the designated partner-in-charge of the SEC
Practice Section of his firm. A major portion of his client base is
international, with clients based in Hong Kong, the United Kingdom, France,
Germany as well as the United States and the CIS. Gerald was awarded a
Bachelor of Science degree in Accounting from Pennsylvania State University in
1970, and he was admitted as a member of the American Institute of Certified
Public Accountants in 1983.
BRAD BAKER is President of Kansas Home Development Corporation, a home
building company in Kansas City, Kansas. He was previously Director of
Business Development for Comcast Online Communications, having recently been
promoted from General Manager of Comcast Online Communications in Sarasota,
Florida. He was the founder and CEO of NetLine Communications, a statewide
Internet provider that was acquired by Comcast in July 1996. At NetLine, he
was responsible for implementing one of the state's first frame relay networks
to provide Internet Access throughout Florida.
He began his technology career by founding a chain of retail computer stores
that became the premier Apple and IBM dealers in southwest Florida. Later, he
took a computer peripheral company, Tech:Time (NASDQ TTME) public. One of
Baker's projects was to design a low cost computer network for peripheral
equipment that is still used today. Baker has consulted with Bell & Howell and
Hewlett Packard on ink-jet printer design; as well as the U. S. Coast Guard
and several other Fortune 500 companies on solid-state equipment design.
Baker received a presidential appointment from President Reagan to serve as a
White House Fellow in 1987. In this assignment he was involved in many policy
issues, including technology. Later, he became one of the officers of the
Resolution Trust Corporation, the government agency tasked with solving the
savings and loan problem. As founder and CEOI of NetLine, Baker has guided the
company through explosive growth while engineering a high level of customer
support and service.
19
<PAGE>
DAVID MORRIS has served as Secretary and Treasurer of the Company since August
1997. He joined Remarc in April 1997, and in May 1997 he became Remarc's
Secretary and Treasurer. Prior to that, Mr. Morris was employed by Seahawk
Deep Ocean Technology where he was an Administrative Assistant to the Chief
Financial Officer from 1994 through 1997, and manager of the Conservation and
Archaeology departments from 1990 through 1994. Prior to 1990, Mr. Morris was
employed for five years as a building contractor. Mr. Morris graduated with a
Bachelor of Science degree in Mechanical Engineering from Michigan State
University in 1974.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year, and Form 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year
and certain written representations, no persons who were either a Director,
Officer or beneficial owner of more than 10% of the Company's Common Stock,
failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year except as follows: (1) John
C. Morris was late filing a Form 4 reporting the conversion of a promissory
note into common stock; (2) Will Callari was late reporting the conversion of
a promissory note to common stock and late reporting the termination of a
beneficial interest in stock held by a trust; (3) Eugene Cooke was late filing
two Form 4's reporting the purchase of Revenue Participation Certificates; and
(4) Greg Stemm has not filed Form 4's reporting sales of the Company's Common
Stock during the last three months of the year ended February 28, 1999.
ITEM 10. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-----------------------------
Annual Compensation Awards Payouts
----------------------- ----------------- -------
Securi-
ties
Other Re- Under- All
Name and Annual stricted lying LTIP Other
Principal Compen- Stock Options/ Payout Compen-
Position Year Salary Bonus sation Awards SARs(#) ($) sation
- --------------- ---- -------- ----- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Morris, 1998 $100,000 -0- -0- -0- 75,000 -0- -0-
President 1997 $ 90,000 -0- -0- -0- -0- -0- -0-
1996 $ 90,000 -0- -0- -0- -0- -0- -0-
Gregory P. Stemm, 1998 $100,000 -0- -0- -0- 75,000 -0- -0-
Vice-President 1997 $ 90,000 -0- -0- -0- -0- -0- -0-
1996 $ 90,000 -0- -0- -0- -0- -0- -0-
</TABLE>
20
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date
- --------------- ---------- ------------ ------------ ----------
John C. Morris 75,000 33.33 $ 3.00 2/28/2003
Greg P. Stemm 75,000 33.33 $ 3.00 2/28/2003
AGGREGATE OPTION EXERCISES IN YEAR ENDED
FEBRUARY 28, 1999 AND FEBRUARY 28, 1999 OPTION VALUES
Securities Under- Value of Unexer-
lying Unexercised cised In-The-
Shares Options at Money Options at
Acquired on February 28, 1999 February 28, 1999
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
- -------------- ----------- -------- ----------------- ----------------
John C. Morris -0- -0- 75,000 / 0 -0- / -0-
Greg P. Stemm -0- -0- 75,000 / 0 -0- / -0-
EMPLOYMENT AND CONSULTING AGREEMENTS
Effective March 1, 1999 the Company entered into one year employment
agreements with its three executive officers. These agreements provide for
the following annual salaries: John C. Morris, President - $150,000; Gregory
P. Stemm, Vice-President - $150,000; and David A. Morris, Secretary and
Treasurer - $125,000. All three officers are also entitled to receive a bonus
of up to 100% of their base salary with such bonuses to be based upon job
proficiency and approval of the board of directors. Each agreement also
provides for the issuance of a total of 100,000 stock options according to the
following schedule: 25,000 at an exercise price of $1.50 per share; 50,000 at
an exercise price of $2.00 per share; and 25,000 at an exercise price of $3.00
per share.
Effective March 1, 1999 the Company entered into a one year consulting
agreement with William C. Callari, a director of the Company. Mr. Callari was
retained to serve as a liaison between the board of directors and the various
committees and to act as Board secretary. As payment for his services the
Company has agreed to issue to Mr. Callari a total of 100,000 stock options
according to the following schedule: 25,000 at an exercise price of $1.50 per
share; 50,000 at an exercise price of $2.00 per share and 25,000 at an
exercise price of $3.00 per share.
EMPLOYEE STOCK OPTION PLAN
During the Special Shareholder Meeting held September 8, 1997, the
Shareholders approved an Employee Stock Option Plan (the "Plan"). The Plan
authorizes the issuance of options to purchase up to 2 million shares of the
Company's Common Stock.
The Plan allows the Board of Directors to grant stock options from time to
time to employees, officers and directors of the Company. The Board has the
power to determine at the time the option is granted whether the option will
21
<PAGE>
be an Incentive Stock Option (an option which qualifies under Section 422 of
the Internal Revenue Code of 1986) or an option which is not an Incentive
Stock Option. Vesting provisions are determined by the board at the time
options are granted. The option price for any option will be no less than the
fair market value of the Common Stock on the date the option is granted.
During the fiscal year ended February 28, 1999, the Company issued the
following options to officers and directors, in addition to those itemized in
the Summary Compensation Table above, from the Plan:
<TABLE>
<CAPTION>
Date Number of Option Date
Of Options Exercise Of
Grantee Position Grant Granted Price Expiration
- ----------------- ---------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
David A. Morris Sec/Treasurer 4/23/1998 75,000 $3.00 2/28/2003
William C. Callari Director 4/23/1998 80,000 $3.00 2/28/2003
E. Eugene Cooke Director 4/23/1998 30,000 $3.00 2/28/2003
Brad Baker Director 4/23/1998 30,000 $3.00 2/28/2003
Gerald Goodman Director 4/23/1998 30,000 $3.00 2/28/2003
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table set forth, as of April 30, 1999, the stock ownership of
each person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock, each Officer and Director individually and
all Officers and Directors of the Company as a Group.
Amount of
Name of Beneficial Percentage
Beneficial Owner Ownership of Class
- ----------------- -------------- ----------
John C. Morris 1,349,395 (1) 12.4%
3507 Frontage Rd. Suite 100
Tampa, FL 33607
Gregory P. Stemm 1,915,241 (2) 17.7%
3507 Frontage Rd., Suite 100
Tampa, FL 33607
William C. Callari 1,421,895 (3) 13.2%
Wedgewood Professional Bldg.
1725 Route 35, Suite B
Wall Township, NJ 07719
E. Eugene Cooke 879,816 (4) 8.2%
3901 Old Gun Road West
Midlothian, VA 23113
Mr. Gerald Goodman 139,379 (5) 1.3%
Meridian Center I,
Two Industrial Way West
Eatontown, NJ 07724
Brad Baker 113,627 (6) 1.1%
1322 Pine Needle Road
Venice, FL 34292
22
<PAGE>
David A. Morris 347,253 (7) 3.2%
6522 Bimini Court
Apollo Beach, FL 33572
Kimberly A. Davis 568,398 (8) 5.4%
PO Box 320487
Tampa, FL 33679
The William C. Callari 604,524 5.7%
Irrevocable Family Trust
c/o First Union Bank
Capital Management Group
303 Broad Street
Red Bank, NJ 07701
All Officers and Directors
as a group 6,166,606 51.7%
__________________
(1) Includes 914,149 shares held of record by John Morris, 123,580 shares
owned beneficially by Mr. Morris by virtue of his 45% interest in shares held
by Estimated Prophet, Inc., 295,000 shares underlying currently exercisable
stock options, and 16,666 shares underlying the option to convert revenue
participation certificates into common stock.
(2) Includes 126,182 shares held of record by Greg and Laurie Stemm, 1,519,059
shares held by Adanic Capital, Ltd., a limited partnership for which Greg
Stemm serves as general partner, and 270,000 shares underlying currently
exercisable stock options.
(3) Includes 1,196,895 shares held of record by William Callari and 225,000
shares underlying currently exercisable stock options.
(4) Includes 741,482 shares held of record by Eugene Cooke, 92,500 shares
underlying currently exercisable stock options and 45,834 shares underlying
the option to convert revenue participation certificates into common stock.
(5) Includes 64,379 shares held of record by Gerald Goodman and 75,000 shares
underlying currently exercisable stock options.
(6) Includes 38,627 shares held of record by Brad Baker and 75,000 shares
underlying currently exercisable stock options.
(7) Includes 77,253 shares held of record by David A. Morris and 270,000
shares underlying currently exercisable stock options.
(8) Includes 375,265 shares held of record by Kimberly A. Davis and 193,133
shares held for Ashley Angle, a minor child.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the last fiscal year ended certain officers or directors have granted
new loans or extended the due dates of existing loans to the Company. At
February 28, 1999 the Company had loan agreements with its officers and
directors under the following terms:
23
<PAGE>
<TABLE>
<CAPTION>
Relation- Interest Due Warrants or
Date Name ship Amount Rate Date Conversion Right
- ------- --------- --------- ------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
8/31/98 J. Morris O&D $ 72,500 15% 8/31/99 -0-
8/31/98 E. Cooke D $ 82,708 15% 8/31/99 -0-
8/31/99 W. Callari D $115,519 15% 8/31/99 -0-
</TABLE>
On March 31, 1998 the Company entered into a loan agreement with Robert Stemm,
Greg Stemm's father, wherein Mr. Stemm loaned the Company $30,000 bearing
interest at 15% per annum. This loan became due March 31, 1999, and is
secured by an inventory of raw emeralds. On March 31, 1999 Mr. Stemm entered
into a loan extension agreement extending the due date of the loan for a term
of one year. This loan bears interest at the rate of 15% per annum and is now
due March 31, 2000. As an incentive to extend the due date of the loan Mr.
Stemm was granted an option to purchase up to 11,000 shares of the Company's
restricted Common Stock at a purchase price of $3.00 per share. This loan is
convertible into shares of Common Stock at the rate of $1.50 per share.
On August 31, 1998 the Company entered into a loan extension agreement with
Robert Stemm, Greg Stemm's father. The due date on his loan, originated
October 16, 1996 in the principal amount of $50,000, was extended for a term
of one year. This loan bears interest at the rate of 15% per annum and is now
due August 31, 1999. As an incentive to extend the due date of the loan Mr.
Stemm was granted an option to purchase up to 20,000 shares of the Company's
restricted Common Stock at a purchase price of $3.00 per share. This loan is
convertible into shares of Common Stock at the rate of $3.00 per share.
On January 8, 1999 the Company entered into a loan extension agreement with
Olive Morris, the mother of both John and David Morris. Mrs. Morris's loan was
extended for a one-year term until January 8, 2000 and bears interest at 15%
per annum. The loan is convertible into shares of the Company's Common Stock
at $1.00 per share at Mrs. Morris' option. Additionally, the original loan
granted Mrs. Morris warrants entitling her to purchase up to 10,000 shares of
the Company's restricted Common Stock at a purchase price of $3.00 per share.
As an incentive to extend the due date of the loan, which originally became
due on January 8, 1999, Mrs. Morris was granted an additional option to
purchase up to 15,000 shares of the Company's restricted Common Stock at a
purchase price of $2.00 per share.
During the year ended February 28, 1999, the Company made periodic advances to
John Morris and Greg Stemm. These advances bear interest at 8%, and as of
February 28, 1999, the amount of the receivable from John Morris was $69,196,
including interest, and the amount of receivable from Greg Stemm was $65,730,
including interest.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description Location
- ------ ----------- --------
3 Articles of Incorporation, as Incorporated by reference to
amended Registrant's Form S-18 Regis-
tration Statement
(No. 33-7678-D)
24
<PAGE>
3 Bylaws Incorporated by reference to
Registrant's Form S-18 Regis-
tration Statement
(No. 33-7678-D)
10.1 Employment Agreement dated March 1, Filed herewith electronically
1999, with David A. Morris
10.2 Employment Agreement dated March 1, Filed herewith electronically
1999 with Greg Stemm
10.3 Employment Agreement dated March 1, Filed herewith electronically
1999 with John C. Morris
10.4 Consulting Agreement with William C. Filed herewith electronically
Callari dated March 1, 1999
23 Consent of Independent Public Filed herewith electronically
Accountants
27 Financial Data Schedule Filed herewith electronically
25
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ODYSSEY MARINE EXPLORATION, INC.
PAGE
Report of Independent Certified Public Accountants . . . . . . . . F-1
Financial Statements:
Consolidated Balance Sheet - February 28, 1999 . . . . . . . F-2
Consolidated Statements of Operations for the years ended
February 28, 1999 and 1998 . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders'
Deficiency for the years ended February 28, 1999, and
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years
ended February 28, 1999, and 1998 . . . . . . . . . . . . . . F-5-F-6
Notes to the Consolidated Financial Statements. . . . . . . . . F-7-F-17
26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Odyssey Marine Exploration, Inc.
Tampa, Florida
We have audited the accompanying consolidated balance sheet of Odyssey Marine
Exploration, Inc. and subsidiary as of February 28, 1999, and the related
consolidated statements of operations, stockholders' deficiency, and cash
flows for the years ended February 28, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Odyssey
Marine Exploration, Inc. and subsidiary as of February 28, 1999, and the
results of their operations and their cash flows for the years ended February
28, 1999 and 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $780,029 for 1999 and has
incurred substantial net losses for each of the past several years resulting
in an accumulated deficit of $3,665,990. At February 28, 1999, the Company
has negative working capital as indicated by current liabilities exceeding
current assets by $803,217. These factors, in addition to other factors as
discussed in Note S, raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in operation.
/s/ Giunta, Ferlita & Walsh, P.A.
GIUNTA, FERLITA & WALSH, P.A.
Certified Public Accountants
April 23, 1999
F-1
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999
ASSETS
CURRENT ASSETS
Cash $ 106,440
Marketable securities 136,987
Advances 3,690
-----------
Total current assets 247,117
PROPERTY AND EQUIPMENT
Equipment and office fixtures 140,222
Accumulated depreciation (41,761)
-----------
98,461
OTHER ASSETS
Inventory 20,000
Organization costs, net of
accumulated amortization of $3,794 204
Marketable securities held long term 68,650
Loans receivable from related parties 134,926
Deposits 240
-----------
224,020
-----------
$ 569,598
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 46,744
Accrued expenses 487,968
Notes payable 125,000
Notes payable to related parties 390,622
-----------
Total current liabilities 1,050,334
LONG TERM LIABILITIES
Deferred Income from Revenue Participation Certificates 675,000
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; 10,555,614 issued and outstanding 1,055
Additional paid-in capital 2,606,862
Accumulated unrealized loss in investment (97,663)
Accumulated deficit (3,665,990)
-----------
Total Stockholders' deficiency (1,155,736)
-----------
$ 569,598
===========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended February 28,
1999 1998
------------ -----------
REVENUES $ 235,750 $ 13,500
OPERATING EXPENSES
Project Development 117,023 237,138
Project Operations 456,488 209,106
Marketing 88,773 51,610
----------- -----------
Total Operating Expenses 662,284 497,854
GENERAL AND ADMINISTRATIVE EXPENSES 384,143 520,703
----------- -----------
(LOSS) FROM OPERATIONS (810,677) (1,005,057)
OTHER INCOME OR (EXPENSE)
Gain(Loss) on sale of marketable securities (3,325) -
Interest Income 10,766 7,861
Interest expense (61,793) (111,654)
Recovery of bad debt 85,000 -
Total other income ----------- -----------
or (expense) 30,648 (103,793)
----------- -----------
NET(LOSS) (780,029) (1,108,850)
OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities (69,663) (500)
----------- -----------
COMPREHENSIVE LOSS $ (849,692) $(1,109,350)
=========== ===========
(BASIC LOSS PER SHARE) $ (0.08) $ (0.19)
Weighted average number of common
shares and common shares equivalents
outstanding 10,315,637 5,721,335
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Cumulative
Additional Other
Common Stock Paid-In Comprehensive Accumulated Comprehensive
Shares Amount Capital Income(Loss) (Deficit) Income
---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
February 28, 1997 355,140 $ 35 $1,027,215 $ (27,500) $(1,777,111)
Common Stock Issued
For cash 200 - 2,500
For services 775 - 8,750
For accrued expenses 210,925 21 216,479
Recapitalization for
effect of reverse
acquisition 7,697,988 770 (770)
Conversion of notes
payable 1,839,851 184 952,448
Net change in
unrealized loss on
securities available
for sale (500) $ (500)
Net loss for the
year ended
February 28,1998 (1,108,850) $(1,108,850)
Balance at ---------- ------- ---------- ----------- ----------- -----------
February 28, 1998 10,104,879 $ 1,010 $2,206,622 $ (28,000) $(2,885,961) $(1,109,350)
===========
Common Stock Issued
For cash 205,000 21 102,479
For services 84,716 8 107,390
For accrued expenses 161,019 16 190,371
Net change in
unrealized loss on
securities available
for sale (69,663) $ (69,663)
Net loss for the
year ended
February 28,1999 (780,029) $ (780,029)
Balance at ---------- ------- ---------- ----------- ----------- -----------
February 28, 1999 10,555,614 $ 1,055 $2,606,862 $ (97,663) $(3,665,990) $( 849,692)
========== ======= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 28,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (780,029) $(1,108,850)
Adjustments to reconcile net loss to net
cash used by operating activity:
Depreciation 26,497 13,096
Amortization 798 797
Common Stock issued for services 107,398 8,750
Loss on sale of securities 3,325
Marketable securities received
on settlement (85,000) (12,000)
as commission (171,500) -
(Increase)decrease in:
Advances (769) 13,883
Interest receivable (9,649) -
Inventory (20,000) -
Increase (decrease) in:
Accounts payable 26,290 13,222
Accrued expenses 168,920 501,659
----------- -----------
NET CASH(USED)IN OPERATING ACTIVITIES (733,719) (569,443)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (17,885) (111,683)
Issuances of Notes Receivable (13,000) (112,276)
----------- -----------
NET CASH (USED) IN INVESTING ACTIVITIES (30,885) (223,959)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Related party loans 47,750 471,250
Loans from others 125,000 357,000
Issuance of Common Stock 102,500 2,500
Issuance of RPC 587,500 -
Sale of Marketable Securities 1,875 -
Repayment of Note (12,790) (20,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 851,835 810,750
----------- -----------
NET INCREASE(DECREASE)IN CASH 87,231 17,348
CASH AT BEGINNING OF YEAR 19,209 1,861
----------- -----------
CASH AT END OF YEAR $ 106,440 $ 19,209
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Years ended February 28,
1999 1998
----------- -----------
SUPPLEMENTARY INFORMATION:
Interest paid $ 16,245 $ 750
Income taxes paid - -
Summary of significant non cash transactions
During the year ending February 28, 1999, two debt holders converted $85,000
of notes payable and $2,500 of accrued interest thereon into deferred income
in the form of Cambridge Project Revenue Participation Certificates. (See Note
K)
The Company also issued 161,019 shares of Common Stock to eight individuals
for
accrued expenses valued at $190,371 and an additional 84,716 shares for
services valued at $107,390.
During March 1998 the Company received 1,008,824 shares of restricted public
stock valued at $171,500 and inventory valued at $20,000 as partial payment of
a $234,500 commission due to the Company.
During May of 1998 the Company negotiated the recovery of previously written
off debt in which the Company received 1,000,000 shares of common stock valued
at $85,000 as other income.
During the year ending 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.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
ORGANIZATION
Odyssey Marine Exploration, Inc. was incorporated March 5, 1986, as a Colorado
corporation named Universal Capital Corporation, Inc. On August 8, 1997
Odyssey Marine Exploration, Inc.(the "Company"), completed the acquisition of
100% of the outstanding Common Stock of Remarc International, Inc.("Remarc")
in exchange for the Company's Common Stock in a reverse acquisition. On
September 7, 1997, the Company's domicile was changed to Nevada and the name
was changed to Odyssey Marine Exploration, Inc.
Remarc International, Inc. was organized as a Colorado corporation on May 20,
1994. On April 9, 1996 Remarc International, Inc., a Colorado Corporation and
Remarc International, Inc., a Delaware Corporation merged. Remarc
International, Inc., the Delaware corporation was the surviving corporation.
Effective with the reverse acquisition of Odyssey as discussed in Note B,
Remarc International, Inc. adopted February as its fiscal year end.
Subsequently, on February 25, 1999, Remarc International, Inc. and Odyssey
Marine Exploration, Inc. were merged with Odyssey Marine Exploration, Inc.
being the surviving corporation.
Odyssey Marine, Inc., a Florida corporation, was incorporated on November 2,
1998, as a wholly owned subsidiary of Odyssey Marine Exploration, Inc. for the
purpose of administering the Company's payroll and health plan.
BUSINESS ACTIVITY
Odyssey Marine Exploration, Inc., is engaged in the business of researching,
developing, financing and marketing of shipwreck projects on a worldwide
basis. The corporate headquarters are located in Tampa, Florida.
The Company reported as a development stage enterprise for the period ending
February 28, 1998 and has not established ongoing revenue from operations to
date. However, during the year ending February 28, 1999, the Company conducted
significant side scan and ROV operations and located shipwrecks that the
Company considers significant in accordance with it's plan of operations.
Therefore, the Company now considers itself to be out of the development stage
and is reporting accordingly in these financial statements.
NOTE B - REVERSE ACQUISITION
On August 8, 1997 Odyssey Marine Exploration, Inc. completed the acquisition
of 100% of the outstanding Common Stock of Remarc International, Inc. in
exchange for the Company's Common Stock. The Company issued approximately
7,500,000 shares of its Common Stock to the shareholders of Remarc at closing,
pursuant to a Share Exchange Agreement between the Company and Remarc.
For accounting purposes the acquisition has been treated as a
re-capitalization of Remarc, with Remarc as the acquirer(reverse acquisition).
The historical financial statements prior to August 8, 1997 are those of
Remarc.
F-7
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management who is
responsible for their integrity and objectivity and have prepared them in
accordance with the Company's customary accounting practices.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Odyssey Marine, Inc. All significant
inter-company transactions and balances have been eliminated.
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were used.
Revenue Recognition
Although the Company has generated minimal revenues to date, marketing of the
artifacts, replicas and ancillary products will be recognized on the point of
sale method.
Cash Equivalents
Cash equivalents include cash on hand and cash in banks. The Company also
considers all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Fair Value of Financial Instruments
The carrying value of cash, accounts payable, and accrued expenses approximate
fair value. The carrying value of notes payable(except those to related
parties) approximate fair value which is estimated based on quoted market
prices for the same or similar issues. Notes receivable and payable to related
parties are discussed in Notes F and I, respectively.
Considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value, and, accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
Marketable Securities
The portion of the securities deemed available-for-sale are carried at fair
value. Unrealized losses on these securities are excluded from earnings and
reported, net of any income tax effect, as a separate component of
stockholders' equity. Restricted shares of securities are carried at estimated
F-8
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - Continued
fair market values (50% of quoted price).
Depreciation
Property and equipment is stated at historical cost. Depreciation is provided
using the straight-line method at rates based on the assets' estimated useful
lives.
Investment in Affiliate
The Company owns 24.5% 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 conducted all operations on the shipwreck project
until April of 1999 when a bifurcation agreement between the parties ended the
operation of CONPAS. The sought after shipwreck has not been identified to
date and the Company intends to pursue a permit to continue searching for the
shipwreck through Pesqamar.
During the current year ending period the Company accepted common stock and a
5% increase(from 50% to 55%)in its share of the Preferred Stock of Pesqamar
from another investor in consideration for a past due amount previously
written off by the Company. This results in a recovery of bad debt during the
current period.
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.
Organization Costs
Organization costs are being amortized, using the straight line method, over a
period of 60 months.
Loss Per Share
Basic earnings per share (EPS) is computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding for the year. Diluted EPS reflects the potential dilution that
would occur if dilutive securities and other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of Odyssey.
At February 28, 1999, and 1998, potential common shares were excluded from the
computation of diluted EPS because their inclusion would have had an
antidilutive effect on EPS. At February 28, 1999 and 1998, all of the
exercisable stock options and stock warrants were excluded from the
computation of diluted EPS because the options' exercise prices were greater
than the average market price of the common shares.
F-9
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE C -Continued
Income Taxes
Deferred income taxes are provided for the temporary differences between the
carrying amount of assets and liabilities for financial reporting and income
tax purposes.
NOTE D - MARKETABLE SECURITIES CURRENT AND LONG TERM
The current portion of marketable securities held by the Company February 28,
1999 consist of 80,000 shares of Seahawk Deep Ocean Technology, Inc.(SDOT)
Common Stock and 1,008,824 shares of Common Stock of Treasures and Exhibits
International, Inc.("Exhibits") which are deemed available for sale.
The Company received the Exhibits shares as partial payment of a commission
earned on the sale of an artifact collection in the first quarter of the
current year ended. (See Note N) The Seahawk shares have been held in excess
of two years.
Marketable securities held as long term investments by the Company February
28, 1999, consist of 100,000 shares of Seahawk Deep Ocean Technology, Inc.
Common Stock and 1,000,000 shares of Treasures and Exhibits International,
Inc. ("Exhibits") 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 February 28, 1999.
The Seahawk shares were acquired during the year ended February 28, 1998, and
the Exhibits shares were received during the current fiscal year as explained
in Note O.
The total unrealized loss to February 28, 1999 of $97,663 is reflected as an
adjustment to stockholders' equity and included in the comprehensive loss
shown on the Company's financial statements.
The costs basis for each security held by the Company is derived by dividing
the total cost of acquiring each block of stock by the total number of shares
acquired by the Company for each class of security. A detail of the fair
market value and unrealized loss of the marketable securities held by the
Company at February 28, 1999 is set out in the table below:
F-10
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - Continued
Fair
Class of Security Cost Unrealized Market
Issuer Shares Basis Loss Value
- ---------------------- ---------- --------- --------- -----------
Current Marketable
Securities
Seahawk Deep Ocean
Technology, Inc. 80,000 $ 20,800 $ 14,960 $ 5,840
Treasures & Exhibits
International, Inc. 1,008,824 $ 128,800 (2,347) 131,147
Total Current --------- -----------
Marketable Securities 12,613 $ 136,987
===========
Long Term Marketable
Securities
Seahawk Deep Ocean
Technology, Inc. 100,000 $ 26,000 22,350 $ 3,650
Treasures & Exhibits
International, Inc. 1,000,000 $ 127,700 62,700 65,000
Total Long Term --------- -----------
Marketable Securities 85,050 $ 68,650
===========
Total Unrealized Loss ---------
in Investment $ 97,663
=========
NOTE E - INVENTORY
The Company's inventory consists of a collection of 748 raw emeralds recovered
from the 1656 shipwreck of the Nuestra Senora de al Maravilla salvaged by
Seafinders, Inc. in 1972. The emeralds range in size from 0.5 to 17.5 carat
weight and each is accompanied by a "Treasure Certificate" explaining the
origin and a brief history of the item. The Company received these items as
partial compensation for services rendered during the year in a transaction
wherein the inventory was assigned a value of $20,000. Due to the uncommon
nature of the items the Company has not sought an independent appraisal of the
goods.
NOTE F - LOANS RECEIVABLE FROM RELATED PARTIES
On January 1, 1997 the Company entered into a loan agreement with two of its
officers authorizing each to borrow a maximum of $75,000 from the Company at
8% annual interest compounded quarterly. The loan balances, which become due
on December 31, 2000, were $69,196 and $65,730 respectively.
F-11
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - PROPERTY AND EQUIPMENT
Property and equipment consist of:
Accumulated
Original Depreciation/ Book
Class Cost Amortization Value
-------------------- ------------ ------------ ------------
Computers and
Peripherals $ 31,837 $ 11,829 $ 20,008
Furniture and
Office equipment 15,559 3,178 12,381
Marine survey equipment 87,761 24,812 62,949
Leasehold Improvements 5,065 1,942 3,123
----------- ----------- -----------
$ 140,222 $ 41,761 $ 98,461
=========== =========== ===========
NOTE H - ACCRUED EXPENSES
Accrued expenses at February 28, 1999 consist of:
Officer compensation $ 320,623
Employee wages 10,515
Payroll tax 9,118
Research and consulting 119,484
Interest on notes payable 28,228
-----------
$ 487,968
===========
NOTE I - NOTES PAYABLE
Notes payable at February 28, 1999 consist of:
Unsecured 15.00% note payable due February 28,2000.
The note can be converted to Common Stock for
$1.50 per share. $ 25,000
Unsecured 15.00% note payable due February 28, 2000.
The note can be converted to Common Stock for
$1.50 per share. 100,000
-----------
$ 125,000
===========
F-12
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE J - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at February 28, 1999 consist of:
Unsecured 15% note payable to the family member of
an officer due August 31, 1999. The note can be
converted to Common Stock for $3 per share. $ 59,895
Unsecured 15% notes payable to an officer due
August 31, 1999. 106,769
Unsecured 15% notes payable to a director due
August 31, 1999. 72,500
Unsecured 15% notes payable to a director due
August 31, 1999. 77,708
Two Unsecured 15% demand loans payable to
two directors. 13,750
Unsecured 15% note payable to the family member of an
officer due January 2000. The note can be converted
to Common Stock for $1 per share and is personally
guaranteed by the officer. 30,000
Secured 15% note payable to the family member of an
officer due April 2000. The note is secured by
inventory and can be converted to Common Stock
for $1.50 per share. 30,000
-----------
$ 390,622
===========
NOTE K - SALE OF FUTURE REVENUE PARTICIPATION
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" which 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 disignee(s); provided, however, that all funds
received by the Company to finance the project are excluded from Gross
Revenue.
As of April 30, 1999, when the offering was closed, the Company sold $875,000
of a maximum of $900,000 of the RPC's. As a group, the holders are entitled to
100% of the first $875,000 of gross revenue, 24.75% of gross revenue from $4 -
35 million, and 12.375% of gross revenue above $35 million generated by the
Cambridge project.
Distributions will be made to each certificate holder within 15 days from the
end of each quarterly reporting period in which the Issuer receives any cash
proceeds from, or as a result of, the Cambridge Project.
Additionally each $50,000 RPC unit 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 which it may be converted for constitute restricted
securities.
F-13
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE K - Continued
As of February 28, 1999 the Company had sold $675,000 of RPC's which are
reflected on the books as Deferred RPC Income to be amortized under the units
of revenue method.
NOTE L - PREFERRED AND COMMON STOCK
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock. The
preferred stock may be issued in series from time to time with such
designation, rights, preferences and limitation as the Board of Directors of
the Company may determine by resolution. No preferred stock had been issued at
February 28, 1999.
Common Stock
On September 8, 1997, the Company effected a 1 for 5 reverse split on the
shares of the Company's Common Stock outstanding. The per share amounts and
number of shares in the financial statements have been retroactively adjusted
for the effect of this reverse stock split.
NOTE M - COMMON STOCK OPTIONS AND WARRANTS
The Company adopted the 1997 Stock Option Plan on September 8, 1997. Under
the terms to the plan, options to purchase Common Stock are granted at not
less than 100% of the fair market value of the shares on the date of grant or
the par value thereof whichever is greater. Notwithstanding the preceding
sentence, in the case of a grant of an incentive stock option to an employee
who, as of the date of the grant, owns more than ten percent of the stock of
the Company, the option price shall not be less than 110% of the fair market
value of the shares on the date of grant or the par value thereof, whichever
is greater. The cumulative number of shares which may be subject to options
issued and outstanding pursuant to the plan is limited to 2,000,000 shares.
As of February 28, 1999 the following non-statutory stock options had been
granted:
Option
Date Price per Expiration Shares
Of Grant Share of Option Granted
----------- ----------- ------------ ------------
Officers 4/24/98 $3.00 2/28/2003 225,000
Directors 4/24/98 $3.00 2/28/2003 170,000
Consultant 6/5/98 $4.00 2/28/2003 8,000
-----------
403,000
===========
No options have been cancelled or exercised since the inception of the stock
option plan, therefore, 403,000 options are exercisable at a weighted average
exercise price of $3.02 per share.
F-14
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE M - Continued
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". Accordingly, no compensation has been recognized for the stock
options awarded during the year ended February 28, 1998, and no options were
awarded during the previous year. However, using the Black-Scholes method of
option valuation, the options granted during 1998 are determined to have had
no current value on the date of grant and would have had no effect on the
Company's net loss or basic loss per share had compensation costs been
recorded for such options.
The Company issued warrants to five individuals in connection with loans made
to the Company. Warrants issued are as follows:
Price
Warrants per Share Expiration Date
----------- ----------- --------------------------------
58,333 $ 3.00 Two years from the date the loan
is paid in full
77,500 $ 2.00 Two years from the date the loan
is paid in full
-----------
135,833
===========
NOTE N - REVENUES
During the year ended February 28, 1999, the Company received a commission on
the sale of artifacts purchased by Treasures and Exhibits International, Inc.,
formerly Vanderbuilt Square Corp ("Exhibits"), and Michaels Treasure
Jewelry,Inc. ("Michaels") and 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").
The commission paid to Odyssey was $234,750 (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 $ 43,250
Inventory 20,000
Common stock 171,500 1,008,824
----------- ----------
$ 234,750 1,008,824
=========== ==========
The common stock consists of restricted shares of Exhibits originally valued
at $0.17 per share. The purchase Agreement stipulated that Exhibits shall
register the stock within one year of the closing date which was March 19,
1998. Additionally, Exhibits granted all holders of the stock a Right to Put
Stock during the one year period beginning twelve months after the closing
F-15
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE N - Continued
date. If Exhibits had been successful in registering the stock within one
year of the closing date, holders may put any or all shares of the stock to
Exhibits at $0.085 per share. However, Exhibits failed to register the shares
by March 19, 1999, and holders may put any or all shares of the stock to
Exhibits at $0.17 per share. The Company has exercised the option to put the
shares to Exhibits at $0.17 per share, but is uncertain whether Exhibits will
be financially able, or whether Exhibits will agree to honor the put. The
common stock is carried as a current marketable security at the quoted price
at February 28,1999.
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 stipulated a deferred payment of $200,000 to Seahawk which was
made in August 1998 and upon which, Odyssey received a $20,000 cash payment.
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 O - OTHER INCOME AND EXPENSE
During the year ended February 28,1999, 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 full in exchange for 1,000,000 shares of common stock of
Treasures and Exhibits, International, Inc.("Exhibits")(See Note N).
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 Exhibits
common stock as an $85,000 recovery of bad debt.
NOTE P - COMPREHENSIVE LOSS
During Fiscal 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS No. 130) The company has included Comprehensive Loss in the financial
statements for the years ended February 28, 1998 and 1999. The comprehensive
losses resulted entirely from the unrecognized losses on the value of
marketable securities held by the Company as detailed in Note D.
F-16
<PAGE>
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE Q - INCOME TAXES
The Company has a net operating loss carry forward of approximately $3,100,000
that is available to offset future regular taxable income. The carry forward
will expire in various years ending through the year 2014 The Company has
provided for 100% of any deferred asset related to the carry forward due to
questionable future realization.
NOTE R - COMMITMENTS AND CONTINGENCIES
Offices
In March 1997, the Company entered into a sublease agreement for 3,170 square
feet of office space. The four year agreement began April 1, 1997. Rent
payments for this office were $40,112 for the fiscal year ending February 28,
1999. Approximate future rent payments for this lease in subsequent fiscal
years ending February 28, are as follows:
Year Amount
------ ----------
2000 $ 44,120
2001 39,800
---------
$ 83,920
=========
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 S - GOING CONCERN CONSIDERATION
The Company has incurred net losses of $3,665,990. At February 28, 1999 the
Company has negative working capital as indicated by current liabilities
exceeding current assets by $803,217. Management was able to raise $675,000
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 the continuation of its current and 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.
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunder duly authorized.
ODYSSEY MARINE EXPLORATION, INC.
Dated: May 28, 1999 By /s/ John C. Morris
John C. Morris, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ John C. Morris President and Chairman of May 28, 1999
John C. Morris the Board of Directors
/s/ Gregory P. Stemm Vice President and Director May 28, 1999
Gregory P. Stemm
/s/ David A. Morris Secretary and Treasurer May 28, 1999
David A. Morris (Chief Financial Officer)
/s/ William C. Callari Director May 28, 1999
William C. Callari
____________________________ Director
Gerald Goodman
/s/ E. Eugene Cooke Director May 28, 1999
E. Eugene Cooke
____________________________ Director
Brad Baker
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
March 1, 1999, by and between Odyssey Marine Exploration, Inc. ("Odyssey"),
of 3507 Frontage Road, Suite 100, Tampa, Florida 33607, and David A. Morris,
("Morris"), 6522 Bimini Court, Apollo Beach, Florida 33572.
Whereas: Odyssey is engaged in the business of researching, developing,
financing and marketing shipwreck projects, and
Whereas: Odyssey desires to have the services of Morris, and
Whereas: Morris is willing to be employed by Odyssey,
NOW THEREFORE, the parties agree as follows:
1) EMPLOYMENT. The Company hereby employs Morris for the term (as
hereinafter defined), to render services to the Company as Secretary and
Treasurer of the Company, and, in connection therewith, to perform such
duties, as he shall reasonably be directed to perform by the Company.
a) Scope of Employment. Morris is to be employed in the capacity of
Secretary and Treasurer for the Company, with all duties attendant and
incident thereto. Further Morris agrees to faithfully render, perform, carry
out and conduct such other duties as shall be delegated to him in the sole
discretion of the President of the Company. Morris understands and agrees
that he is employed to actively pursue the business and best interest of the
Company and Morris shall devote his full time and energy to the discharge of
his duties hereunder. Morris agrees that he shall not engage in any other
employment, which shall require time or energy in the discharge of any
obligations thereunder. Notwithstanding anything herein to the contrary
contained, Morris reserves the right to make investments in other business
ventures, with the exception of those entities which might be contrary to the
interest, welfare or benefit of the Company.
2) COMPENSATION.
a) Base Salary. As compensation for the services provided by Morris
under this Agreement, Odyssey will pay Morris an annual salary of $125,000.00
payable in semi-monthly installments on the 15th and last days of
each month. Upon termination of this Agreement, payments under this paragraph
shall cease; provided, however, that Morris shall be entitled to payments for
periods or partial periods that occurred prior to the date of termination and
for which Morris has not yet been paid. Accrued vacation will be paid in
accordance with state law and Odyssey's customary procedures.
b) Bonus. Morris shall be entitled to receive a bonus of up to
100% of his base salary. All bonus payments shall be based upon job
proficiency and shall be approved by the board of directors.
c) Stock Options. Morris shall receive options to purchase shares
of Odyssey's common stock according to the following schedule:
i) 25,000 shares at a purchase price of $1.50 per share;
<PAGE>
ii) 50,000 shares at a purchase price of $2.00 per share;
iii) 25,000 shares at a purchase price of $3.00 per share, all in
accordance with Odyssey's 1997 Stock Option Plan.
d) Medical Insurance. Morris shall be entitled to participate in
Odyssey's Health Insurance plan and Odyssey shall pay for all premiums related
thereto.
3) REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH ODYSSEY POLICY. Odyssey
will reimburse Morris for all "out-of-pocket" expenses in accordance with
Odyssey policies in effect from time to time.
4) CONFIDENTIALITY. Morris recognizes that Odyssey has and will have
information regarding inventions, products, prices, costs, future plans,
business affairs, processes, trade secrets, technical matters, customer lists,
product design, copyrights and other vital information (collectively,
"Information") which are valuable, special and unique assets of Odyssey.
Morris agrees that Morris will not at any time or in any manner, directly or
indirectly, divulge, disclose, or communicate in any manner any Information to
any third party without the prior written consent of Odyssey. Morris will
protect the Information and treat it as strictly confidential. A violation by
Morris of this paragraph shall be a material violation of this Agreement and
will justify legal and/or equitable relief.
5) UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Morris
has disclosed (or has threatened to disclose) Information in violation of this
Agreement, Odyssey shall be entitled to an injunction to restrain Morris from
disclosing, in whole or in part, such Information, or from providing any
services to any party to whom such Information has been disclosed or may be
disclosed. Odyssey shall not be prohibited by this provision from pursuing
other remedies, including a claim for losses and damages.
6) CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality
provisions of this Agreement shall remain in full force and effect for a 2
years period after the termination of Morris's employment. During such 2 years
period, neither party shall make or permit the making of any public
announcement or statement of any kind that Morris was formerly employed by or
connected with Odyssey.
7) NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of the company, Morris agrees and
covenants that for a period of 2 years following the termination of this
Agreement, whether such termination is voluntary or involuntary, Morris will
not directly or indirectly engage in any business competitive with Odyssey.
This covenant shall apply to the geographical area that includes the area
within a 100-mile radius of any project that the company is actively
considering. Directly or indirectly engaging in any competitive business
includes, but is not limited to, (i) engaging in a business as owner, partner,
or agent, (ii) becoming an employee of any third party that is engaged in such
business, (iii) becoming interested directly or indirectly in any such
business, or (iv) soliciting any customer of Odyssey for the benefit of a
third party that is engaged in such business
8) VACATION. Morris shall be entitled to three weeks of paid vacation
for each year of employment beginning on the first day of Morris's employment.
Such vacation must be taken at a time mutually convenient to Odyssey and
Morris, and must be approved by Odyssey.
2
<PAGE>
9) TERM/TERMINATION.
a) Term. Morris's employment under this Agreement shall be for
one year, beginning on March 1, 1999, unless otherwise extended.
b) Breach of Responsibility. In the event of gross neglect by
Morris of his duties hereunder, conviction of Morris of any felony, or of any
lesser crime or offense involving the property of the Company or any of its
subsidiaries or affiliates, willful misconduct by Morris in connection with
the performances of his duties hereunder or any other conduct on the part of
Morris, which would make his continued employment by the Company prejudicial
to the best interests of the Company, the Company may at any time by written
notice with a period of five (5) business days to cure such breach, terminate
the term of Morris's employment hereunder, with no requirement of any further
compensation under any of the provisions of this Agreement.
c) Determination by Board of Directors. In the event of a
determination by the Board of Directors of the Company that the continuation
of the employment arrangement of this Employment Agreement is not in the best
interest of the Company, the Company may, at any time, upon its sole
discretion, terminate this Employment Agreement. If such termination is more
than six (6) months from the beginning of the employment year, Morris shall
receive full equity interest for that year and the subsequent year.
Accordingly, if such termination is less than six (6) months from the
beginning of the employment year, Morris shall be entitled to receive full
compensation for the balance of the year.
10) COMPLIANCE WITH ODYSSEY'S RULES. Morris agrees to comply with all
of the rules and regulations of Odyssey.
11) RETURN OF PROPERTY. Upon termination of this Agreement, Morris
shall deliver all property (including keys, records, notes, data, memoranda,
models, and equipment) that is in Morris's possession or under Morris's
control which is Odyssey's property or related to Odyssey's business.
12) NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, to the addresses first
above written. Such addresses may be changed from time to time by either
party by providing written notice in the manner set forth above.
13) ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior
written or oral agreements between the parties.
14) AMENDMENT. This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
15) SEVERABILITY. If any provisions of this Agreement shall be held to
be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid or enforceable, then such provision shall be
deemed to be written, construed, and enforced as so limited.
3
<PAGE>
16) WAIVER OF CONTRACTUAL RIGHT. The failure of either party to
enforce any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement.
17) APPLICABLE LAW. The laws of the State of Florida shall govern this
Agreement.
Odyssey Marine Exploration, Inc.
By:_______________________________________
On behalf of the Compensation Committee
Morris:
By: /s/ David A. Morris
David A. Morris
4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
March 1, 1999, by and between Odyssey Marine Exploration, Inc., ("Odyssey"),
of 3507 Frontage Road, Suite 100, Tampa, Florida 33607, and Gregory P. Stemm
5719 Longboat Blvd., Tampa, Fl. 33615 ("Stemm").
Whereas: Odyssey is engaged in the business of researching, developing,
financing and marketing shipwreck projects, and
Whereas: Odyssey desires to have the services of Stemm, and
Whereas: Stemm is willing to be employed by Odyssey,
NOW THEREFORE, the parties agree as follows:
1) EMPLOYMENT. The Company hereby employs Stemm for the term (as
hereinafter defined), to render services to the Company as Vice-President of
the Company, and, in connection therewith, to perform such duties, as he shall
reasonably be directed to perform by the Company.
a) Scope of Employment. Stemm is to be employed in the capacity of
Vice-President for the Company, with all duties attendant and incident
thereto. Further Stemm agrees to well and faithfully render, perform, carry
out and conduct such other duties as shall be delegated to him in the sole
discretion of the President of the Company. Stemm understands and agrees that
he is employed to actively pursue the business and best interest of the
Company and Stemm shall devote his full time and energy to the discharge of
his duties hereunder. Stemm agrees that he shall not engage in any other
employment, which shall require time or energy in the discharge of any
obligations thereunder. Notwithstanding anything herein to the contrary
contained, Stemm reserves the right to make investments in other business
ventures, with the exception of those entities which might be contrary to the
interest, welfare or benefit of the Company.
b) Stemm also reserves the right, if invited to do so, to
participate on the Board of Directors of another Company, providing that the
inviting Company's business does not compete with the Company's products or
services and providing that participating as a board member does not interfere
with Stemm's ability to fulfill his duties and obligations to the Company.
Stemm agrees that the Board of Directors shall approve all outside board
involvement by Stemm.
2) COMPENSATION.
a) Base Salary. As compensation for the services provided by Stemm
under this Agreement, Odyssey will pay Stemm an annual salary of $ 150,000.00
payable in semi-monthly installments on the 15th and last days of each month.
Upon termination of this Agreement, payments under this paragraph shall cease;
provided, however, that Stemm shall be entitled to payments for periods or
partial periods that occurred prior to the date of termination and for which
Stemm has not yet been paid. Accrued vacation will be paid in accordance with
state law and Odyssey's customary procedures.
b) Bonus. Stemm shall be entitled to receive a bonus of up to 100%
of his base salary. All bonus payments shall be based upon job proficiency
and shall be approved by the board of directors.
<PAGE>
c) Stock Options. Stemm shall receive options to purchase shares
of Odyssey's common stock according to the following schedule:
i) 25,000 shares at a purchase price of $1.50 per share;
ii) 50,000 shares at a purchase price of $2.00 per share;
iii) 25,000 shares at a purchase price of $3.00 per share,
all in accordance with Odyssey's 1997 Stock Option Plan.
d) Medical Insurance. Stemm shall be entitled to participate in
Odyssey's Health Insurance plan and Odyssey shall pay for all premiums related
thereto.
3) REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH ODYSSEY POLICY. Odyssey
will reimburse Stemm for all "out-of-pocket" expenses in accordance with
Odyssey policies in effect from time to time.
4) CONFIDENTIALITY. Stemm recognizes that Odyssey has and will have
information regarding inventions, products, prices, costs, future plans,
business affairs, processes, trade secrets, technical matters, customer lists,
product design, copyrights and other vital information (collectively,
"Information") which are valuable, special and unique assets of Odyssey.
Stemm agrees that he will not at any time or in any manner, directly or
indirectly, divulge, disclose, or communicate in any manner any Information to
any third party without the prior written consent of Odyssey. Stemm will
protect the Information and treat it as strictly confidential. A violation by
Stemm of this paragraph shall be a material violation of this Agreement and
will justify legal and/or equitable relief.
5) UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Stemm has
disclosed (or has threatened to disclose) Information in violation of this
Agreement, Odyssey shall be entitled to an injunction to restrain Stemm from
disclosing, in whole or in part, such Information, or from providing any
services to any party to whom such Information has been disclosed or may be
disclosed. Odyssey shall not be prohibited by this provision from pursuing
other remedies, including a claim for losses and damages.
6) CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality
provisions of this Agreement shall remain in full force and effect for a 2
years period after the termination of Stemm's employment. During such 2 years
period, neither party shall make or permit the making of any public
announcement or statement of any kind that Stemm was formerly employed by or
connected with Odyssey.
7) NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of the company, Stemm agrees and
covenants that for a period of 2 years following the termination of this
Agreement, whether such termination is voluntary or involuntary, Stemm will
not directly or indirectly engage in any business competitive with Odyssey.
This covenant shall apply to the geographical area that includes the area
within a 100-mile radius of any project that the company is actively
considering. Directly or indirectly engaging in any competitive business
includes, but is not limited to, (i) engaging in a business as owner, partner,
or agent, (ii) becoming an employee of any third party that is engaged in such
business, (iii) becoming interested directly or indirectly in any such
business, or (iv) soliciting any customer of Odyssey for the benefit of a
third party that is engaged in such business
2
<PAGE>
8) VACATION. Stemm shall be entitled to three weeks of paid vacation for
each year of this Employment Agreement, beginning on the first day of Stemm's
employment. Such vacation must be taken at a time mutually convenient to
Odyssey and Stemm, and must be approved by Odyssey.
9) TERM/TERMINATION.
a) Term. Stemm's employment under this Agreement shall be for one
year, beginning on March 1, 1999, unless otherwise extended.
b) Breach of Responsibility. In the event of gross neglect by Stemm
of his duties hereunder, conviction of Stemm of any felony, or of any lesser
crime or offense involving the property of the Company or any of its
subsidiaries or affiliates, willful misconduct by Stemm in connection with the
performances of his duties hereunder or any other conduct on the part of
Stemm, which would make his continued employment by the Company prejudicial to
the best interests of the Company, the Company may at any time by written
notice with a period of five (5) business days to cure such breach, terminate
the term of Stemm's employment hereunder, with no requirement of any further
compensation under any of the provisions of this Agreement.
c) Determination by Board of Directors. In the event of a
determination by the Board of Directors of the Company that the continuation
of the employment arrangement of this Employment Agreement is not in the best
interest of the Company, the Company may, at any time, upon its sole
discretion, terminate this Employment Agreement. If such termination is more
than six (6) months from the beginning of the employment year, Stemm shall
receive full equity interest for that year and the subsequent year.
Accordingly, if such termination is less than six (6) months from the
beginning of the employment year, Stemm shall be entitled to receive full
compensation for the balance of the year.
10) COMPLIANCE WITH ODYSSEY'S RULES. Stemm agrees to comply with all
of the rules and regulations of Odyssey. In addition, Stemm agrees to comply
with all laws, both domestic and international, and with the rules and
regulations of any country where the Company conducts its business.
11) RETURN OF PROPERTY. Upon termination of this Agreement, Stemm
shall deliver all property (including keys, records, notes, data, memoranda,
models, and equipment) that is in Stemm's possession or under Stemm's control
which is Odyssey's property or related to Odyssey's business.
12) NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, to the address first above
written. Such addresses may be changed from time to time by either party by
providing written notice in the manner set forth above.
13) ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior
written or oral agreements between the parties.
14) AMENDMENT. This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
3
<PAGE>
15) SEVERABILITY. If any provisions of this Agreement shall be held to
be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid or enforceable, then such provision shall be
deemed to be written, construed, and enforced as so limited.
16) WAIVER OF CONTRACTUAL RIGHT. The failure of either party to
enforce any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement.
17) APPLICABLE LAW. The laws of the State of Florida shall govern this
Agreement.
Odyssey:
Odyssey Marine Exploration, Inc.
By:/s/ Brad Baker
Chairman of the Compensation Committee
AGREED TO AND ACCEPTED.
Stemm:
By:/s/ Gregory P. Stemm
Gregory P. Stemm
4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made effective as of
March 1, 1999, by and between Odyssey Marine Exploration, Inc., ("Odyssey"),
of 3507 Frontage Road, Suite 100, Tampa, Florida 33607, and John Morris,
("Morris"), of PO Box 320487, Tampa, Florida 33609.
Whereas: Odyssey is engaged in the business of researching, developing,
financing and marketing shipwreck projects, and
Whereas: Odyssey desires to have the services of Morris, and
Whereas: Morris is willing to be employed by Odyssey,
NOW THEREFORE, the parties agree as follows:
1) EMPLOYMENT. The Company hereby employs Morris for the term (as
hereinafter defined), to render services to the Company as President of the
Company, and, in connection therewith, to perform such duties, as he shall
reasonably be directed to perform by the Company.
a) Scope of Employment. Morris is to be employed in the capacity
of President for the Company, with all duties attendant and incident thereto.
Further Morris agrees to well and faithfully render, perform, carry out and
conduct such other duties as shall be delegated to him in the sole discretion
of the Board of Directors of the Company, mindful, never less, of the stature
and benefits normally associated with the position of President of the
Company. Morris understands and agrees that he is employed to actively pursue
the business and best interest of the Company and Morris shall devote his full
time and energy to the discharge of his duties hereunder. Morris agrees that
he shall not engage in any other employment, which shall require time or
energy in the discharge of any obligations thereunder. Notwithstanding
anything herein to the contrary contained, Morris reserves the right to make
investments in other business ventures, with the exception of those entities
which might be contrary to the interest, welfare or benefit of the Company.
b) Morris also reserves the right, if invited to do so, to
participate on the Board of Directors of another Company, providing that the
inviting Company's business does not compete with the Company's products or
services and providing that participating as a board member does not interfere
with Morris's ability to fulfill his duties and obligations to the Company.
Morris agrees that the Board of Directors shall approve all outside board
involvement by Morris.
2) COMPENSATION.
a) Base Salary. As compensation for the services provided by Morris
under this Agreement, Odyssey will pay Morris an annual salary of $
150,000.00 payable in semi-monthly installments on the 15th and last days of
the each month. Upon termination of this Agreement, payments under this
paragraph shall cease; provided, however, that Morris shall be entitled to
payments for periods or partial periods that occurred prior to the date of
termination and for which Morris has not yet been paid. Accrued vacation will
be paid in accordance with state law and Odyssey's customary procedures.
<PAGE>
b) Bonus. Morris shall be entitled to receive a bonus of up to
100% of his base salary. All bonus payments shall be based upon job
proficiency and shall be approved by the board of directors.
c) Stock Options. Morris shall receive options to purchase shares
of Odyssey's common stock according to the following schedule:
i) 25,000 shares at a purchase price of $1.50 per share;
ii) 50,000 shares at a purchase price of $2.00 per share;
iii) 25,000 shares at a purchase price of $3.00 per share,
d) all in accordance with Odyssey's 1997 Stock Option Plan.
e) Medical Insurance. Morris shall be entitled to participate in
Odyssey's Health Insurance plan and Odyssey shall pay for all premiums related
thereto.
3) REIMBURSEMENT FOR EXPENSES IN ACCORDANCE WITH ODYSSEY POLICY. Odyssey
will reimburse Morris for all "out-of-pocket" expenses in accordance with
Odyssey policies in effect from time to time.
4) CONFIDENTIALITY. Morris recognizes that Odyssey has and will have
information regarding inventions, products, prices, costs, future plans,
business affairs, processes, trade secrets, technical matters, customer lists,
product design, copyrights and other vital information (collectively,
"Information") which are valuable, special and unique assets of Odyssey.
Morris agrees that Morris will not at any time or in any manner, directly or
indirectly, divulge, disclose, or communicate in any manner any Information to
any third party without the prior written consent of Odyssey. Morris will
protect the Information and treat it as strictly confidential. A violation by
Morris of this paragraph shall be a material violation of this Agreement and
will justify legal and/or equitable relief.
5) UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Morris
has disclosed (or has threatened to disclose) Information in violation of this
Agreement, Odyssey shall be entitled to an injunction to restrain Morris from
disclosing, in whole or in part, such Information, or from providing any
services to any party to whom such Information has been disclosed or may be
disclosed. Odyssey shall not be prohibited by this provision from pursuing
other remedies, including a claim for losses and damages.
6) CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality
provisions of this Agreement shall remain in full force and effect for a 2
years period after the termination of Morris's employment. During such 2 years
period, neither party shall make or permit the making of any public
announcement or statement of any kind that Morris was formerly employed by or
connected with Odyssey.
7) NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of the company, Morris agrees and
covenants that for a period of 2 years following the termination of this
Agreement, whether such termination is voluntary or involuntary, Morris will
not directly or indirectly engage in any business competitive with Odyssey.
This covenant shall apply to the geographical area that includes the area
within a 100-mile radius of any project that the company is actively
considering. Directly or indirectly engaging in any competitive business
2
<PAGE>
includes, but is not limited to, (i) engaging in a business as owner, partner,
or agent, (ii) becoming an employee of any third party that is engaged in such
business, (iii) becoming interested directly or indirectly in any such
business, or (iv) soliciting any customer of Odyssey for the benefit of a
third party that is engaged in such business
8) VACATION. Morris shall be entitled to three weeks of paid vacation
for each year of employment beginning on the first day of Morris's employment.
Such vacation must be taken at a time mutually convenient to Odyssey and
Morris, and must be approved by Odyssey.
9) TERM/TERMINATION.
a) Term. Morris's employment under this Agreement shall be for one
year, beginning on March 1, 1999, unless otherwise extended.
b) Breach of Responsibility. In the event of gross neglect by
Morris of his duties hereunder, conviction of Morris of any felony, or of any
lesser crime or offense involving the property of the Company or any of its
subsidiaries or affiliates, willful misconduct by Morris in connection with
the performances of his duties hereunder or any other conduct on the part of
Morris, which would make his continued employment by the Company prejudicial
to the best interests of the Company, the Company may at any time by written
notice with a period of five (5) business days to cure such breach, terminate
the term of Morris's employment hereunder, with no requirement of any further
compensation under any of the provisions of this Agreement.
c) Determination by Board of Directors. In the event of a
determination by the Board of Directors of the Company that the continuation
of the employment arrangement of this Employment Agreement is not in the best
interest of the Company, the Company may, at any time, upon its sole
discretion, terminate this Employment Agreement. If such termination is more
than six (6) months from the beginning of the employment year, Morris shall
receive full equity interest for that year and the subsequent year.
Accordingly, if such termination is less than six (6) months from the
beginning of the employment year, Morris shall be entitled to receive full
compensation for the balance of the year.
10) COMPLIANCE WITH ODYSSEY'S RULES. Morris agrees to comply with all
of the rules and regulations of Odyssey. In addition, Morris agrees to comply
with all laws, both domestically and internationally, and with the rules and
regulations of any country where the Company conducts any business.
11) RETURN OF PROPERTY. Upon termination of this Agreement, Morris
shall deliver all property (including keys, records, notes, data, memoranda,
models, and equipment) that is in Morris's possession or under Morris's
control which is Odyssey's property or related to Odyssey's business.
12) NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage paid, to the address's first
above written. Such addresses may be changed from time to time by either party
by providing written notice in the manner set forth above.
13) ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior
written or oral agreements between the parties.
3
<PAGE>
14) AMENDMENT. This Agreement may be modified or amended, if the
amendment is made in writing and is signed by both parties.
15) SEVERABILITY. If any provisions of this Agreement shall be held to
be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid or enforceable, then such provision shall be
deemed to be written, construed, and enforced as so limited.
16) WAIVER OF CONTRACTUAL RIGHT. The failure of either party to
enforce any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement.
17) APPLICABLE LAW. The laws of the State of Florida shall govern this
Agreement.
Signed this ___ day of ______, 1999.
Odyssey Marine Exploration, Inc.
By:/s/ Brad Baker
On behalf of the Compensation Committee
Morris:
By:/s/ John Morris
John Morris
4
CONSULTING AGREEMENT
This Agreement is made effective as of March 1, 1999, by and between
Odyssey Marine Exploration, Inc., of 3507 Frontage Road, Suite 100, Tampa,
Florida 33607, and William C. Callari, 1725 Route 35, Wall townships, New
Jersey 07719.
Whereas:
Callari is a Director of Odyssey, and
Callari has a background in corporate governance and strategic planning
and is willing to provide services to Odyssey based on this background.
Odyssey desires to have services, as hereinafter defined, provided by
Callari.
Therefore, the parties agree as follows:
1. DESCRIPTION OF SERVICES. Beginning on March 1, 1999, Callari will
provide the following services (collectively, the "Services"): Liaise between
the Board of Directors and the various committees and act as Board Secretary.
2. PERFORMANCE OF SERVICES. Callari shall determine the manner in
which the Services are to be performed and the specific hours to be worked by
Callari. Odyssey will rely on Callari to work as many hours as may be
reasonably necessary to fulfill Callari 's obligations under this Agreement.
3. PAYMENT. Upon signing of this agreement Odyssey will issue Callari
an option to purchase shares of Odyssey's common stock according to the
following schedule:
i) 25,000 shares at a purchase price of $1.50 per share.
ii) 50,000 shares at a purchase price of $2.00 per share.
iii) 25,000 shares at a purchase price of $3.00 per share.
This Option will be issued pursuant to the Company's Incentive Stock
Option Plan and shall be valid for a period of eighteen months from the date
of issuance.
4. EXPENSES. Callari shall be entitled to receive reimbursement for all
reasonable expenses incurred in the performance of his duties hereunder. Any
expense that exceeds $250.00 must be pre-approved in writing by the Company.
5. NEW PROJECT APPROVAL. Callari and Odyssey recognize that Callari 's
Services will include working on various projects for Odyssey. Callari shall
obtain the approval of Odyssey prior to the commencement of a new project.
6. TERM/TERMINATION. This Agreement shall terminate of February 28,
2000.
<PAGE>
7. RELATIONSHIP OF PARTIES. The parties understand that Callari is an
independent contractor with respect to Odyssey, and not an employee of
Odyssey. Odyssey will not provide fringe benefits, including health insurance
benefits, paid vacation, or any other employee benefit, for the benefit of
Callari.
8. DISCLOSURE. Callari is required to disclose any outside activities
or interests, including ownership or participation in any shipwreck related
activity that conflicts or may conflict with the best interests of Odyssey.
Prompt disclosure is required under this paragraph if the activity or interest
is related, directly or indirectly, to:
A product or product line of Odyssey
Any activity that Callari may be involved with on behalf of Odyssey
Any shipwreck activity
8. EMPLOYEES. Callari 's employees, if any, who perform services for
Odyssey under this Agreement shall also be bound by the provisions of this
Agreement. At the request of Odyssey, Callari shall provide adequate
evidence that such persons are Callari 's employees.
9. INJURIES. Callari acknowledges Callari's obligation to obtain
appropriate insurance coverage for the benefit of Callari (and Callari 's
employees, if any) Callari waives any rights to recovery from Odyssey for any
injuries that Callari (and/or Callari 's employees) may sustain while
performing services under this Agreement and that are a result of the
negligence of Callari or Callari 's employees.
10. INDEMNIFICATION. Callari agrees to indemnify and hold Odyssey
harmless from all claims, losses, expenses, fees including attorney fees,
costs, and judgments that may be asserted against Odyssey that result from the
acts or omissions of Callari, Callari 's employees, if any, and Callari 's
agents.
11. ASSIGNMENT. Callari's obligations under this Agreement may not be
assigned or transferred to any other person, firm, or corporation without the
prior written consent of Odyssey.
12. INTELLECTUAL PROPERTY. The following provisions shall apply with
respect to copyrightable works, ideas, discoveries, inventions, applications
for patents, and patents (collectively, "Intellectual Property"):
a. Consultant's Intellectual Property. Callari does not personally
hold any interest in any Intellectual Property.
b. Development of Intellectual Property. Any improvements to
Intellectual Property items listed on Exhibit A, further inventions or
improvements, and any new items of Intellectual Property discovered or
developed by Callari (or Callari 's employees, if any) during the term of this
Agreement shall be the property of Odyssey. Callari shall sign all documents
necessary to perfect the rights of Odyssey in such Intellectual Property,
including the filing and/or prosecution of any applications for copyrights or
patents. Upon request, Callari shall sign all documents necessary to assign
the rights to such Intellectual Property to Odyssey.
2
<PAGE>
13. CONFIDENTIALITY. Callari recognizes that Odyssey has and will have
the following information: inventions, products, prices, costs, future plans,
business affairs, trade secrets, technical information, customer lists,
product design information or copyrights and other proprietary information
(collectively, "Information") which are valuable, special and unique assets of
Odyssey. Callari agrees that Callari will not at any time or in any manner,
either directly or indirectly, use any Information for Callari 's own benefit,
or divulge, disclose, or communicate in any manner any Information to any
third party without the prior written consent of Odyssey. Callari will
protect the Information and treat it as strictly confidential. A violation of
this paragraph shall be a material violation of this Agreement.
14. UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Callari
has disclosed (or has threatened to disclose) Information in violation of this
Agreement, Odyssey shall be entitled to an injunction to restrain Callari from
disclosing, in whole or in part, such Information, or from providing any
services to any party to whom such Information has been disclosed or may be
disclosed. Odyssey shall not be prohibited by this provision from pursuing
other remedies, including a claim for losses and damages.
15. CONFIDENTIALITY AFTER TERMINATION. The confidentiality provisions of
this Agreement shall remain in full force and effect after the termination of
this Agreement.
16. SERVICES TO THIRD PARTIES. The parties recognize that Callari may
provide consulting services to third parties. However, the confidentiality
provisions of this Agreement bind Callari, and Callari may not use the
Information, directly or indirectly, for the benefit of third parties.
17. NON-COMPETE AGREEMENT. Recognizing that the various items of
Information are special and unique assets of Odyssey, Callari agrees and
covenants that for a period of two years following the termination of this
Agreement, whether such termination is voluntary or involuntary, Callari will
not directly or indirectly engage in any business competitive with Odyssey.
This covenant shall apply to the geographical area that includes worldwide.
Directly or indirectly engaging in any competitive business includes, but is
not limited to, (i) engaging in a business as owner, partner, or agent, (ii)
becoming an employee of any third party that is engaged in such business, or
(iii) becoming interested directly or indirectly in any such business, or (iv)
soliciting any customer of Odyssey for the benefit of a third party that is
engaged in such business. Callari agrees that this non-compete provision
will not adversely affect the livelihood of Callari.
18. RETURN OF RECORDS. Upon termination of this Agreement, Callari
shall deliver all records, notes, data, memoranda, models, and equipment of
any nature that are in Callari's possession or under Callari's control and
that are Odyssey's property or relate to Odyssey's business.
19. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed delivered when delivered in person or
deposited in the United States mail, postage prepaid, to the addresses first
written above. Such address may be changed from time to time by either party
by providing written notice to the other in the manner set forth above.
20. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior
written or oral agreements between the parties.
3
<PAGE>
21. AMENDMENT. This Agreement may be modified or amended if the
amendment is made in writing and is signed by both parties.
22. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid and enforceable, then such provision shall be
deemed to be written, construed, and enforced as so limited.
23. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce
any provision of this Agreement shall not be construed as a waiver or
limitation of that party's right to subsequently enforce and compel strict
compliance with every provision of this Agreement.
24. APPLICABLE LAW. The laws of the State of Florida shall govern this
Agreement.
Odyssey Marine Exploration, Inc. William C. Callari
By:/s/ John C. Morris By:/s/ William C. Callari
John C. Morris, President William C. Callari
4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated April 23, 1998,
appearing in the Annual Report on page F-2 of Form 10-KSB of Odyssey Marine
Exploration, Inc. for the year ended February 28, 1999, in the Company's
Registration Statements on Form S-8, SEC File No. 333-50325 regarding the 1997
Stock Option Plan and SEC File No. 333-50343 regarding the Consulting
Agreement.
/s/ Giunta, Ferlita & Walsh, P.A.
Giunta, Ferlita & Walsh, P.A.
3302 Azeele Street
Tampa, Florida 33609
May 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statements of operations found on
pages F-3 through F-4 of the Company's Form 10-K for the fiscal year ended
February 28, 1999, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<CASH> 106,440
<SECURITIES> 136,987
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,000
<CURRENT-ASSETS> 247,117
<PP&E> 140,222
<DEPRECIATION> (41,761)
<TOTAL-ASSETS> 569,598
<CURRENT-LIABILITIES> 1,050,334
<BONDS> 0
0
0
<COMMON> 1,050
<OTHER-SE> (1,156,791)
<TOTAL-LIABILITY-AND-EQUITY> 569,598
<SALES> 235,750
<TOTAL-REVENUES> 235,750
<CGS> 0
<TOTAL-COSTS> 662,284
<OTHER-EXPENSES> 384,143
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,793
<INCOME-PRETAX> (849,692)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (849,692)
<EPS-BASIC> (0.08)
<EPS-DILUTED> 0
</TABLE>
