<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 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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(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 December 31, 1999, the Registrant had 10,555,614 shares of common
stock, $.0001 par value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
<PAGE>
INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
November 30, 1999 ........................................... 3
Unaudited Consolidated Statements of Operations, Three
Months Ended November 30, 1999, and Three Months
Ended November 30, 1998 ..................................... 4
Unaudited Consolidated Statements of Operations, Nine Months
Ended November 30, 1999, and Nine Months Ended
November 30, 1998 ........................................... 5
Unaudited Consolidated Statement of Cash Flows, Nine
Months Ended November 30, 1999, and Nine Months Ended
November 30, 1998 ........................................... 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
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
2
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET - Unaudited
NOVEMBER 30,1999
ASSETS
CURRENT ASSETS
Cash $ 9,153
Marketable securities 241,426
Advances and prepaid expense 3,630
-----------
Total current assets 254,209
PROPERTY AND EQUIPMENT
Equipment and office fixtures 153,067
Accumulated depreciation (63,206)
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89,861
OTHER ASSETS
Artifacts 20,000
Marketable securities held long term 1,000
Loans receivable from related parties 152,848
Deposits 240
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174,088
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$ 518,158
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable $ 174,399
Accrued expenses 386,306
Notes payable to related parties 731,671
Notes payable other 197,000
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Total current liabilities 1,489,376
DEFERRED RPC INCOME 825,000
STOCKHOLDERS' DEFICIENCY
Preferred stock - $.0001 par value; 9,300,000
shares authorized; none outstanding -
Preferred stock Series A Convertible - $.0001 par value;
700,000 shares authorized; 190,000 shares issued
and outstanding 19
Common Stock - $.0001 par value; 100,000,000 shares
authorized; 10,555,614 issued and outstanding 1,055
Additional paid-in capital 2,891,843
Accumulated unrealized loss in investment (44,200)
Accumulated deficit (4,644,935)
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Total Stockholders' deficiency (1,796,218)
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TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 518,158
===========
The accompanying notes are an integral part of these financial statements.
3
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Three Months Ended
November 30
1999 1998
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REVENUES $ - $ 20,000
OPERATING EXPENSES
Project development 40,252 18,104
Project operations 30,504 127,668
Marketing 12,266 27,485
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Total operating expenses 83,022 173,257
GENERAL AND ADMINISTRATIVE EXPENSES 120,675 73,465
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INCOME(LOSS) FROM OPERATIONS (203,697) (226,722)
OTHER INCOME OR (EXPENSE)
Interest income 4,365 2,572
Interest expense (34,735) (13,423)
Other 5,523 (1,625)
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Total other income or (expense) (24,847) (12,476)
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NET INCOME(LOSS) $ (228,544) $ (239,198)
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OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX
Unrealized gain(loss) on available for sale
securities (3,900) 112,083
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COMPREHENSIVE LOSS $ (232,444) $ (127,115)
=========== ===========
(BASIC LOSS PER SHARE) $ (0.02) $ (0.02)
Weighted average number of common
shares and common shares equivalents
outstanding. 10,555,614 10,294,999
The accompanying notes are an integral part of these financial statements.
4
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Nine Months Ended
November 30
1999 1998
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REVENUES $ 250 $ 234,750
OPERATING EXPENSES
Project development 167,369 74,068
Project operations 342,575 383,991
Marketing 41,366 69,700
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Total operating expenses 551,310 527,759
GENERAL AND ADMINISTRATIVE EXPENSES 376,513 283,812
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INCOME(LOSS)FROM OPERATIONS (927,573) (576,821)
OTHER INCOME OR (EXPENSE)
Interest income 9,986 8,140
Interest expense (66,880) (45,328)
Other 5,523 98,375
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Total other income or (expense) (51,371) 61,187
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NET INCOME(LOSS) $ (978,944) $ (515,634)
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OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX
Unrealized gain(loss) on available for sale
securities 53,463 (87,542)
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COMPREHENSIVE LOSS $ (925,481) $ (603,176)
=========== ===========
(BASIC LOSS PER SHARE) $ (0.09) $ (0.05)
Weighted average number of common
shares and common shares equivalents
outstanding. 10,555,614 10,294,999
The accompanying notes are an integral part of these financial statements.
5
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Nine Months Ended
November 30
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (978,944) $ (515,634)
Adjustments to reconcile net loss to
net cash used by operating activity:
Depreciation 21,446 19,562
Amortization 204 599
Common stock issued for services - 46,938
(Gain)loss on sale of marketable securities (5,523) 1,625
Marketable securities received on settlement - (271,500)
(Increase)decrease in:
Advances 60 (1,264)
Interest receivable (17,923) (13,624)
Inventory - (20,000)
Increase (decrease) in:
Accounts payable 127,655 8,451
Accrued expenses 300,033 129,943
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NET CASH(USED) IN OPERATING ACTIVITIES (552,992) (614,904)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,845) (17,885)
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NET CASH (USED) IN INVESTING ACTIVITIES (2,845) (17,885)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Related party loans 90,000 13,250
Loans from others 72,000 55,000
Issuance of preferred Stock 285,000 -
Issuance of revenue participation certificates 15,000 662,500
Sale of marketable securities 22,197 375
Repayment of note (25,647) (97,790)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 458,550 633,335
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The accompanying notes are an integral part of these financial statements.
6
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Nine Months Ended
November 30
1999 1998
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NET INCREASE(DECREASE)IN CASH (97,287) 546
CASH AT BEGINNING OF PERIOD 106,440 19,209
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CASH AT END OF PERIOD $ 9,153 $ 19,755
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SUPPLEMENTARY INFORMATION:
Interest paid $ 7,092 3,375
Income taxes paid $ - -
Summary of significant non cash transactions
During the nine months ended November 30, 1999, two directors converted
$122,375 of principal and $12,625 of accrued interest into $135,000 of
Cambridge project Revenue Participation Certificates. The Company issued notes
to three officers for accrued unpaid compensation of $375,000, and $10,000 was
added to a note payable to a related party for $10,000 of sonar equipment.
The accompanying notes are an integral part of these financial statements.
7
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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 10Q-SB and, therefore, do not include all information and
footnotes normally included in financial statements prepared in accordance
with generally accepted accounting principles. These interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company's Form 10-KSB for the
year ended February 28, 1999.
In the opinion of management, these financial statements reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation of the financial position as of November 30, 1999, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months and nine months ended November 30, 1999, are not
necessarily indicative of the results that may be expected for the year ended
February 28, 2000.
NOTE B - MARKETABLE SECURITIES
In March 1999, the Company exercised its right to put 2,008,824 shares to
Treasures and Exhibits International, Inc. ("TEI"), at $.17 per share, and
TEI failed to honor the put. The Company filed suit against TEI and on October
14, 1999 was granted a judgement for liquidated damages, in the amount of
$341,500.08 plus prejudgment interest for $16,361.78 with the entire amount
bearing interest at the rate of ten percent per annum until paid.
On December 8, 1999, the Company entered into a settlement agreement with TEI
that provides for a payment plan under which TEI will purchase the shares with
periodic payments through February 16th 2000. The settlement amount includes
$341,500 for the shares, $20,327 for legal expense reimbursement, and $18,911
for interest.
At November 30, 1999, the Company's current marketable securities totaled
$241,426 consisting of 1,878,252 shares of TEI valued at $239,826 and 80,000
shares of Seahawk Deep Ocean Technology, Inc. (SDOT) Common Stock with a fair
market value of $1,600.
Marketable securities held as long term investments by the Company August
31, 1999, consist of 100,000 shares of Seahawk Deep Ocean Technology, Inc.
Common Stock. All of these shares are restricted shares and therefore are
carried on the books at a fair market value of 50% of the quoted price as of
November 30, 1999. The accumulated unrecognized loss in investment on the
Seahawk shares is $44,200.
8
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - GOING CONCERN CONSIDERATION
The Company has incurred net losses of $4,644,935. At November 30, 1999, the
Company had negative working capital as indicated by current liabilities
exceeding current assets by $1,235,167. Management intends to raise additional
funds through the sale of debt or equity to finance ongoing shipwreck
projects, or operating expenses until such time as sales from recovered
artifacts, replicas, or other products contribute toward achieving
profitability. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
ITEM 2. MANAGEMENT'S PLAN OF OPERATION.
This Report contains forward-looking statements that involve a number of risks
and uncertainties. While these statements represent the Company's current
judgment in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events. Certain factors that could cause
results to differ materially from those projected in the forward-looking
statements are set forth under "RISK FACTORS" in the Company's Form 10-KSB for
the year ended February 28, 1999.
The Company expects to derive substantially all of its revenue through the
sale and/or display of the shipwreck cargoes and artifacts, including replicas
and general shipwreck merchandise. Therefore, until the Company is successful
in locating, recovering and marketing artifacts and/or cargoes, it will be
dependent upon investment capital to meet its financial requirements.
During the current fiscal year, the Company anticipates spending approximately
$50,000 per month to pay administrative and general office expenses.
The original plan for the payment of these expenses involved the liquidation
of approximately 2 million shares of Treasure and Exhibits International, Inc.
(formerly know as Vanderbilt Square Corporation)("TEI") restricted common stock
and the sale of the Company's equity or debt. When the Company attempted to
liquidate the TEI shares through the exercise of its right to "Put" these shares
back to TEI on March 20, 1999, TEI failed to honor its commitment. The Company
filed suit and on October 14 1999, a judgement was entered against TEI in the
principal amount of $341,500.08 plus prejudgment interest of $16,361.78. The
unpaid balance of this amount will earn interest at the rate of ten percent per
annum until the judgement is paid in full. On December 8, 1999 the Company
entered into a Settlement Agreement with TEI and it's principal officer, Larry
Schwartz, as Guarantor. The Agreement required TEI to pay the debt, including
legal expense and interest, through weekly installments until February 16, 2000
when the debt is to be paid in full. TEI has defaulted on the Agreement and the
Company filed suit on December 28, 1999 against the Guarantor for collection of
the entire amount owing.
9
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In addition to the funds the Company expects to receive from TEI and/or its
principal, the Company intends to continue to sell debt and equity securities to
fund its ongoing office, overhead and operational expenses.
Operationally, the Company, subject to financing, plans to continue the search
operations for the Cambridge, Republic and Concepcion Projects. Additionally,
if any of the search operations are successful, and subject to financing, the
Company plans to begin recovery operations on one or more of these projects.
The Company 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 had no adverse effect on its operations or accounting records
related to the year 2000.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ODYSSEY MARINE EXPLORATION, INC.
Date: January 13, 1999 By:/s/ David A. Morris
David A. Morris, Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheets and statements of operations found on pages 3 and 4 of the Company's
Form 10-QSB for the quarter ended November 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> NOV-30-1999
<CASH> 9,153
<SECURITIES> 241,426
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 20,000
<CURRENT-ASSETS> 254,209
<PP&E> 89,861
<DEPRECIATION> (63,206)
<TOTAL-ASSETS> 518,158
<CURRENT-LIABILITIES> 1,489,376
<BONDS> 0
0
19
<COMMON> 1,055
<OTHER-SE> (1,797,292)
<TOTAL-LIABILITY-AND-EQUITY> 518,158
<SALES> 0
<TOTAL-REVENUES> 250
<CGS> 0
<TOTAL-COSTS> 551,310
<OTHER-EXPENSES> 376,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (66,880)
<INCOME-PRETAX> (978,944)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 53,463
<CHANGES> 0
<NET-INCOME> (925,481)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
