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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 August 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 September 30, 2000, the Registrant had 13,127,099 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 Sheet - as of
August 31, 2000 ........................................... 3
Unaudited Consolidated Statements of Operations and
Comprehensive Income, Three Months Ended August 31, 2000,
and Three Months Ended August 31, 1999 .................... 4
Unaudited Consolidated Statements of Operations and
Comprehensive Income, Six Months Ended August 31, 2000,
and Six Months Ended August 31, 1999 ...................... 5
Unaudited Consolidated Statements of Cash Flows, Six
Months Ended August 31, 2000, and Six Months Ended
August 31, 1999 ........................................... 6 - 7
Notes to Consolidated Financial Statements................. 8 - 9
Item 2. Management's Plan of Operation.......................... 9 - 10
Part II: Other Information...................................... 10
Item 1. Legal Proceedings................................. 10
Item 2. Change in Securities.............................. 10 - 11
Item 3. Defaults Upon Senior Securities................... 11
Item 4. Submission of Matters to a Vote
of Security Holders............................... 11
Item 5. Other Information................................. 11
Item 6. Exhibits and Reports on Form 8-K.................. 11
Signatures ..................................................... 12
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET - Unaudited
AUGUST 31,2000
ASSETS
CURRENT ASSETS
Cash $ 42,639
Marketable securities 49,520
Advances and prepaid expense 7,390
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Total current assets 99,549
PROPERTY AND EQUIPMENT
Equipment and office fixtures 163,235
Accumulated depreciation (80,065)
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83,170
OTHER ASSETS
Inventory 20,000
Loans receivable from related parties 169,049
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189,049
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TOTAL ASSETS $ 371,768
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 183,653
Accrued expenses 371,996
Notes payable to related parties 534,832
Notes payable other 158,589
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Total current liabilities 1,249,070
DEFERRED INCOME FROM REVENUE PARTICIPATION CERTIFICATES 837,500
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; 12,727,099 issued and outstanding 1,272
Additional paid-in capital 3,871,121
Accumulated unrealized loss in investment (6,334)
Accumulated deficit (5,580,880)
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Total Stockholders' deficiency (1,714,802)
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TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 371,768
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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 AND COMPREHENSIVE INCOME - Unaudited
Three Months Ended
August 31
2000 1999
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REVENUES $ - $ 250
OPERATING EXPENSES
Project development 42,908 44,724
Project operations 382,952 259,889
Marketing 14,784 16,979
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Total operating expenses 440,644 321,592
GENERAL AND ADMINISTRATIVE EXPENSES 130,313 103,981
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INCOME(LOSS) FROM OPERATIONS (570,957) (425,323)
OTHER INCOME OR (EXPENSE)
Gain(Loss) on sale of marketable securities 25,753 -
Interest Income 3,243 2,861
Interest Expense (24,541) (16,226)
Other (2,952) -
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Total other income or (expense) 1,503 (13,365)
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NET LOSS $ (569,454) $ (438,688)
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OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities (3,184) 99,768
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COMPREHENSIVE LOSS $ (572,638) $ (338,920)
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BASIC AND DILUTED LOSS PER SHARE $ (0.05) $ (0.04)
Weighted average number of common
shares and common shares equivalents
outstanding.
11,470,465 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 OPERATIONS AND COMPREHENSIVE INCOME - Unaudited
Six Months Ended
August 31
2000 1999
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REVENUES $ - $ 250
OPERATING EXPENSES
Project development 87,453 127,117
Project operations 444,439 312,071
Marketing 26,542 29,100
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Total operating expenses 558,434 468,288
GENERAL AND ADMINISTRATIVE EXPENSES 278,017 255,837
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INCOME(LOSS)FROM OPERATIONS (836,451) (723,875)
OTHER INCOME OR (EXPENSE)
Gain on sale of marketable securities 206,886 -
Interest income 6,480 5,620
Interest expense (55,573) (32,145)
Other (7,413) -
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Total other income or (expense) 150,380 (26,525)
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NET INCOME(LOSS) $ (686,071) $ (750,400)
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OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX
Unrealized gain(loss) on available for sale
securities (2,134) 57,363
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COMPREHENSIVE LOSS $ (688,205) $ (693,037)
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BASIC AND DILUTED LOSS PER SHARE $ (0.06) $ (0.07)
Weighted average number of common
shares and common shares equivalents
outstanding. 11,470,465 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
Six Months Ended
August 31
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (686,071) $ (750,400)
Adjustments to reconcile net loss to
net cash used by operating activity:
Depreciation 16,317 14,034
Amortization - 204
Common stock issued for services 85,000 -
Finance charge added to note 4,500 -
Loss (gain) on sale of marketable securities (206,886) -
Decrease (increase)in:
Advances 2,856 2,336
Accounts receivable - (250)
Interest receivable (11,421) (10,724)
Increase (decrease) in:
Accounts payable (20,960) 91,956
Accrued expenses 57,067 192,425
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NET CASH(USED) IN OPERATING ACTIVITIES (759,598) (460,419)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (18,753) (2,845)
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NET CASH (USED) IN INVESTING ACTIVITIES (18,753) (2,845)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Related party loans 5,000 35,000
Loans from others 50,000 32,000
Issuance of common stock 367,500 -
Issuance of preferred stock - 285,000
Issuance of revenue participation certificates 12,500 15,000
Sale of marketable securities 338,815 -
Repayment of note - (8,931)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 773,815 358,069
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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 CASH FLOWS - (Continued)
Six Months Ended
August 31
2000 1999
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NET INCREASE(DECREASE)IN CASH (4,536) (105,195)
CASH AT BEGINNING OF PERIOD 47,175 106,440
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CASH AT END OF PERIOD $ 42,639 $ 1,245
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SUPPLEMENTARY INFORMATION:
Interest paid $ 23,223 5,322
Income taxes paid $ - -
Summary of significant non cash transactions
During the quarter ended August 31, 2000, two subcontractors who provided
services valued at $80,000 on the Republic project, were compensated by the
issuance of 160,000 shares of common stock.
During the quarter ended May 31, 2000, a director who was owed $105,000 of
accrued expenses, $132,131 of notes, and $8,256 of accrued interest assigned
the entire amount owed to an unrelated third party who was issued 490,774
shares of common stock for converting the entire amount due $245,387 into
stock. A related party was issued 151,548 shares for the conversion of $68,894
of principal and $6,880 of accrued interest into stock. A consultant was
issued
10,000 shares of common stock for $5,000 of services.
During the six months ended August 31, 1999, two directors converted $122,375
of principal and $12,625 of accrued interest into $135,000 of Cambridge
project revenue participation certificates.
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 August 31, 2000, results of
operations, and cash flows for the interim periods presented. Operating
results for the six months ended August 31, 2000, are not necessarily
indicative of the results that may be expected for the year ended February 28,
2001.
NOTE B - COMMON STOCK
During the quarter ended August 31, 2000, the remaining balance of $20,000
from the sale of units of the March 31, 2000 private placement was received
and 40,000 shares of restricted common stock were issued.
During June and July the Company sold units consisting of shares of restricted
common stock, and 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.
Two and three quarter (2.75) units were sold to five accredited investors for
a total of $55,000 and a total of 110,000 shares of restricted common stock
and 110,000 warrants were issued. The private placement offering was then
closed.
During August the Company sold, through a private placement, units consisting
of shares of restricted common stock, and a revenue participation certificate,
entitling the holder to receive a percentage of the gross revenue received by
the Company as a result of the Company's Republic project. The $50,000 cost of
each unit was allocated between common stock and revenue participation with
$37,500 applied to common stock and $12,500 to the revenue participation
certificate.
During the quarter ending August 31, 2000, the Company received $50,000 from
three accredited investors and issued a total of 100,000 shares of common
stock and revenue participation certificates representing a total of 1% of the
gross revenue of the Republic project. After the end of the quarter, the
Company terminated the offering after selling an additional 400,000 shares of
common stock and revenue participation certificates totaling 4% of the gross
revenues of the Republic project for a total of $200,000.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - COMMITMENTS AND CONTINGENCIES
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 D - GOING CONCERN CONSIDERATION
The Company has incurred net losses of $5,580,880. At August 31, 2000, the
Company had negative working capital as indicated by current liabilities
exceeding current assets by $1,149,521. 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. 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.
Operationally, the Company is conducting search and identification operations
on the Republic and Cambridge projects. During June and September 2000, the
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Company conducted side scan operations over approximately 200 square miles of
the Republic project search area. The September portion of the search yielded
30 anomalies located in depths of between 500 and 3,000 feet deep. The side
scan data has been returned to the Company's offices in Tampa for post
processing and analysis. Upon completion of the analysis, the Company will
decide if one or more of the anomalies will be inspected with a remotely
operated vehicle and/or if more side scan work will be conducted.
The Company is finalizing plans to continue the Cambridge search in October
and November of 2000. Plans call for additional side scan searches and ROV
inspections of any new anomalies. Additionally, we plan to reinvestigate
certain anomalies located on previous expeditions. Depending on the results
of the search operations and the availability of search and recovery
financing, the Company may begin recovery operations on this project during
this fiscal year.
The Company has postponed its plans to conduct ROV inspections on the
Concepcion project.
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.
None
ITEM 2. Changes in Securities.
During June and July, 2000, the Company sold units consisting of shares of
restricted common stock, and 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 August 31, 2000, the
Company received $55,000 from five accredited investors in this private
offering, and issued 110,000 shares of common stock and warrants to purchase
110,000 shares of common stock.
These 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.
During August, 2000, the Company commenced the sale of units consisting of
shares of restricted common stock, and revenue participation certificates,
entitling the holder to receive a percentage of the gross revenue received by
the Company as a result of the Company's Republic project.
During the three month period ended August 31, 2000, the Company received
$50,000 from three accredited investors in this private offering and issued a
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total of 100,000 shares of common stock and revenue participation certificates
representing a total of 1% of the gross revenue of the Republic project.
These securities were sold pursuant to the exemption provided by Section 4(2)
of the Securities Act of 1933, and Regulation D. 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. A Form D concerning this
offering was filed with the SEC.
Additionally, during the quarter ended August 31, 2000, two subcontracting
firms were issued 160,000 shares of common stock in exchange for $80,000 in
services.
These 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.
On August 1, 2000, the Board of Directors authorized an extension of the date
until which holders of Cambridge revenue participation certificates may
convert their certificates into shares of the Company's common stock from June
30, 2000, until December 31, 2001, or within 10 days of the "Notice of First
Distribution", whichever occurs first.
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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ODYSSEY MARINE EXPLORATION, INC.
Date: October 6, 2000 By:/s/ David A. Morris
David A. Morris, Treasurer
(Principal Accounting Officer
and Duly Authorized Officer)
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING LOCATION
27. Financial Data Schedule Filed herewith electronically
