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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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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(Registrants telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of June 20, 2000, the Registrant had 12,267,099 shares of Common Stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
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INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
May 31, 2000 ................................................ 3
Unaudited Consolidated Statements of Operations, Three
Months Ended May 31, 2000, and 1999 ......................... 4
Unaudited Consolidated Statement of Cash Flows, Three
Months Ended May 31, 2000, and 1999 .......................... 5 - 6
Notes to Consolidated Financial Statements.................. 7 - 8
Item 2. Management's Plan of Operation........................... 8 - 9
Part II: Other Information
Item 1. Legal Proceedings.................................. 9
Item 2. Change in Securities............................... 9
Item 3. Defaults Upon Senior Securities.................... 10
Item 4. Submission of Matters to a Vote
of Security Holders................................ 10
Item 5. Other Information.................................. 10
Item 6. Exhibits and Reports on Form 8-K................... 10
Signatures ...................................................... 10
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET - Unaudited
MAY 31, 2000
ASSETS
CURRENT ASSETS
Cash $ 97,903
Marketable securities 94,557
Prepaid expenses 83,267
Advances 16,341
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Total current assets 292,068
PROPERTY AND EQUIPMENT
Equipment and office fixtures 160,819
Accumulated depreciation (71,979)
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88,840
OTHER ASSETS
Inventory 20,000
Loans receivable from related parties 160,806
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180,806
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$ 561,714
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 135,979
Accrued expenses 326,567
Notes payable 94,000
Notes payable to related parties 529,832
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Total current liabilities 1,086,378
LONG TERM LIABILITIES
Deferred Income from Revenue Participation Certificates 825,000
STOCKHOLDERS' DEFICIENCY
Preferred stock - $.0001 par value; 9,300,000 shares
Authorized, none outstanding
Preferred stock Series A Convertible - $.0001 par value;
700,000 shares authorized; 190,000 shares issued
and outstanding 19
Common Stock - $.0001 par value; 100,000,000 shares
authorized; 12,267,099 issued and outstanding 1,226
Additional paid-in capital 3,663,666
Accumulated unrealized loss in investment (3,150)
Accumulated deficit (5,011,425)
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Total stockholders' deficiency (1,349,664)
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TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 561,714
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The accompanying notes are an integral part of these financial statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Three Months Ended May 31,
2000 1999
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OPERATING EXPENSES
Project Development 44,545 79,538
Project Operations 61,487 52,182
Marketing 11,757 12,121
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Total Operating Expenses 117,789 143,841
GENERAL AND ADMINISTRATIVE EXPENSES 147,705 154,699
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(LOSS)FROM OPERATIONS (265,494) (298,540)
OTHER INCOME OR (EXPENSE)
Gain(Loss) on sale of marketable securities 181,133 -
Interest Income 3,276 2,760
Interest Expense (31,032) (15,919)
Other (4,500) -
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Total other income or (expense) 148,877 (13,159)
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NET LOSS $ (116,617) $ (311,699)
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OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities 1,050 (42,405)
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COMPREHENSIVE LOSS $ (115,567) $ (354,104)
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(BASIC AND DILUTED LOSS PER SHARE) $ (0.01) $ (0.03)
Weighted average number of common
shares and potential common shares,
basic and diluted, outstanding. 11,148,071 10,555,614
The accompanying notes are an integral part of these financial statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Three Months Ended May 31,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income(Loss) $ (116,617) $ (311,699)
Adjustments to reconcile net loss to
net Cash used by operating activity:
Depreciation 8,230 6,956
Amortization - 199
Common Stock issued for services 5,000 -
Finance charge added to note 4,500 -
Loss (Gain) on sale of marketable securities (181,133) -
Decrease(Increase)in:
Prepaid expenses (83,267) -
Advances (6,094) 2,268
Interest receivable (3,178) (5,863)
Increase (decrease) in:
Accounts payable (68,634) 3,608
Accrued expenses (2,951) 131,865
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NET CASH(USED) IN OPERATING ACTIVITIES (444,144) (172,666)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16,337) (806)
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NET CASH (USED) IN INVESTING ACTIVITIES (16,337) (806)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Loans from others - 2,000
Issuance of common stock 240,000 -
Issuance of preferred stock - 165,000
Issuance of revenue participation
certificates - 15,000
Sale of marketable securities 271,209 -
Repayment of note - (8,931)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 511,209 173,069
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NET INCREASE(DECREASE)IN CASH 50,728 (403)
CASH AT BEGINNING OF PERIOD 47,175 106,440
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CASH AT END OF PERIOD $ 97,903 $ 106,037
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SUPPLEMENTARY
INFORMATION:
Interest paid $ 23,223 1,194
Income taxes paid $ - -
The accompanying notes are an integral part of these financial statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Summary of significant non cash transactions:
During the quarter ended May 31, 2000, a director who was owed $105,000 of
accrued expenses, $132,131 of notes, and $8,256 of accrued interest assigned
the entire amount owed to an unrelated third party who was issued 490,774
shares of common stock for converting the entire amount due $245,387 into
stock. A related party was issued 151,548 shares for the conversion of $68,894
of principal and $6,880 of accrued interest into stock. A consultant was issued
10,000 shares of common stock for $5,000 of services.
During the quarter ended May 31, 1999, two directors converted $122,375 of
principal and $12,625 of accrued interest into $135,000 of Cambridge project
Revenue Participation Certificates.
The accompanying notes are an integral part of these financial statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Odyssey Marine
Exploration, Inc. and subsidiary have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission and the
instructions to Form 10-QSB and, therefore, do not include all information and
footnotes normally included in financial statements prepared in accordance
with generally accepted accounting principles. These interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company's Form 10-KSB for the
year ended February 29, 2000.
In the opinion of management, these financial statements reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation of the financial position as of May 31, 2000, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months ended May 31, 2000, are not necessarily
indicative of the results that may be expected for the year ended February 28,
2001.
NOTE B - PREPAID EXPENSES
In preparation for the search and survey operations to be conducted on the
Republic and Cambridge projects during May through July, the Company entered
into five agreements wherein fees for operational expenses to be incurred
during the second quarter were prepaid during the quarter ending May 31, 2000.
Prepaid expenses at May 31, 2000 were as follows:
Total
Republic Cambridge Prepaid
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Survey equipment and technicians $ 26,267 $ - $ 26,267
Vessel expenses 29,000 28,000 57,000
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$ 83,267
NOTE C - COMMON STOCK
On March 31, 2000 the Board of Directors authorized a private placement to
sell a maximum of 10 units of the Company's securities at a price of $50,000
per unit. Each unit consists of 100,000 shares of Restricted Common Stock, and
100,000 Common Stock Purchase Warrants. Each warrant entitles the holder to
purchase one share of common stock at $1.25 per share until December 1, 2000
and at $2.50 per share from December 1, 2000 until March 31, 2002.
The offering provided that payments would be made and stock issued in a series
of transactions until July 15, 2000 when each unit subscribed for is to be paid
in full. During the three month period ended May 31, 2000, the Company received
$240,000 from five accredited investors in this private offering, and issued
480,000 shares of common stock.
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NOTE D - COMMITMENTS AND CONTINGENCIES
On May 26, 2000, the Company entered into a charter party agreement for
utilization of a crewed vessel, it's ROV and sidescan systems, during July
2000. Under the agreement the Company is obligated to spend approximately
$90,000 for survey work on the Cambridge project. The Company has paid $25,000,
which is reflected on the balance sheet as prepaid expense against this amount.
On June 30, 2000, the Company entered into a purchase agreement for a data
acquisition and processing workstation. The workstation will cost $37,192 and
will be paid for in installments of approximately $6,000 per month until the
unit is paid for in full.
NOTE E - GOING CONCERN CONSIDERATION
The Company has incurred net losses of $5,011,425. At May 31, 2000, the
Company had negative working capital as indicated by current liabilities
exceeding current assets by $794,310. Management intends to raise additional
funds through the sale of debt or equity to finance ongoing shipwreck
projects, or operating expenses until such time as sales from recovered
artifacts, replicas, or other products contribute toward achieving
profitability. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION.
This Report contains forward-looking statements that involve a number of risks
and uncertainties. While these statements represent the Company's current
judgment in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. Some of the 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 of the Company's
10-KSB for the year ended February 29, 2000.
The Company expects to derive substantially all of its revenue through the
sale and/or display of shipwreck cargoes and artifacts, including replicas
and general shipwreck merchandise. Therefore, until the Company is successful
in locating, recovering and marketing artifacts and/or cargoes, it will be
dependent upon investment capital to meet these requirements. To date, the
Company has conducted private placements of debt, equity and project specific
revenue participation to meet these requirements.
During the current fiscal year, the Company anticipates spending approximately
$60,000 per month to pay administrative and general office expenses. On June
30, 2000 the Company entered into a purchase agreement for a CODA data
acquisition and processing workstation. The CODA workstation will cost $37,192
and will be paid for in installments of approximately $6,000 per month until
the unit is paid for in full. In order to pay these expenses, the Company
intends to sell certain marketable securities (the "Securities") that it holds
and to use portions of the funds raised through the private sale of equity,
debt or specific project financing. The Securities are common shares in two
thinly traded small cap companies and there can be no assurance of what value
the Company may receive for these Securities. Additionally, while the Company
has been successful in conducting certain private placements, there can be no
assurance that it will be able to continue to do so.
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Operationally, the Company is conducting search and identification operations
on the Republic and Cambridge projects. The Company conducted side scan
operations on approximately 65% of the Republic project initial search area
during June, 2000, and intends to return to the search area in August provided
that financing is available. The Company will visit the Cambridge search area
in July of 2000 to inspect certain anomalies discovered during previous side
scan operations. Depending on the results of the search operations and
the availability of search and recovery financing, the Company may begin
recovery operations on one or both of these projects during this fiscal year.
The Company also intends to conduct ROV inspections on the Concepcion project
sometime between October and December of 2000 provided financing and equipment
are available. The Company is financing the Cambridge and Republic search
operations through the proceeds of a private placement of equity and intends to
finance the other operations through the sale of equity, revenue participation
or debt. There can be no assurance of the Company's ability to continue to
secure financing and this could cause a delay or cancellation of one or more
projects.
YEAR 2000 COMPLIANCE
To date, there have been no adverse effects on the Company's operations or
accounting records related to the year 2000 issue.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
On February 18, 2000 two complaints were filed against the Company in the
Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough
County Florida, Civil Division, on behalf of plaintiff, Seahawk Deep Ocean
Technology, Inc.("Seahawk"), seeking approximately $43,400, plus attorney
fees, in payment for certain services rendered. On May 31, 2000 the Company
released funds previously escrowed to Seahawk in the amount of $32,600 and paid
an additional $4,400.00 in full settlement of the cases.
ITEM 2. Changes in Securities.
On March 31, 2000 the Board of Directors authorized a private placement to
sell a maximum of 10 units of the Company's securities at a price of $50,000
per unit. Each unit consists of 100,000 shares of Restricted Common Stock, and
100,000 Common Stock Purchase Warrants. Each warrant entitles the holder to
purchase one share of common stock at $1.25 per share until December 1, 2000
and at $2.50 per shares from December 1, 2000 until March 31, 2002.
During the three month period ended May 31, 2000, the Company received $240,000
from five accredited investors in this private offering, and issued 480,000
shares of Common Stock and Warrants to purchase 480,000 shares of Common Stock.
The securities were sold pursuant to the exemption provided by Section 4(2) of
the Securities Act of 1933. The investors were provided with information
regarding their investment, and the Company believes that such persons had
knowledge and experience in financial and business matters such that they were
capable of evaluating the merits and risks of the investment. The certificates
representing the securities bear an appropriate legend restricting the transfer
of such securities.
Additionally, during the quarter ended May 31, 2000, a director who was owed
$105,000 of accrued expenses, $132,131 of notes, and $8,256 of accrued interest
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assigned the entire amount owed to an unrelated third party. This accredited
investor was issued 490,774 shares of Common Stock for exchanging the entire
amount due of $245,387 into Common Stock. In addition, another accredited
investor was issued 151,548 shares of Common Stock for the conversion of
$68,894 of principal and $6,880 of accrued interest into stock. Also, a
consulting firm was issued 10,000 shares of Common Stock in exchange for $5,000
in services. The consulting firm was also issued a Warrant to purchase 75,000
shares of Common Stock. The Warrant is subject to certain vesting provisions.
The securities were sold pursuant to the exemption provided by Section 4(2) of
the Securities Act of 1933. The investors were provided with information
regarding their investment, and the Company believes that such persons had
knowledge and experience in financial and business matters such that they were
capable of evaluating the merits and risks of the investment. The certificates
representing the securities bear an appropriate legend restricting the transfer
of such securities.
ITEM 3. Defaults upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description Location
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during
this reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ODYSSEY MARINE EXPLORATION, INC.
Date: July 14, 2000 By:/s/ David A. Morris
David A. Morris, Treasurer
(Principal Accounting Officer
and Duly Authorized Officer)
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