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, 2002
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.)
3604 Swann Avenue, Tampa, Florida 33609
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(Address of principal executive offices)
(813) 876-1776
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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 30, 2002, the Registrant had 27,395,536 shares of Common Stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
Page 1
INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheet - as of
May 31, 2002 .............................................. 3
Unaudited Consolidated Statements of Operations, Three
Months Ended May 31, 2002 and 2001......................... 4
Unaudited Consolidated Statements of Cash Flows, Three
Months Ended May 31, 2002 and 2001.......................... 5 - 6
Notes to Consolidated Financial Statements.................. 7
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.................... 9
Item 4. Submission of Matters to a Vote
of Security Holders................................ 9
Item 5. Other Information.................................. 9
Item 6. Exhibits and Reports on Form 8-K................... 9
Signatures ...................................................... 10
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2002- Unaudited
ASSETS
CURRENT ASSETS
Cash $ 1,337,618
Advances 3,019
Prepaid Expenses 68,540
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Total current assets 1,409,177
PROPERTY AND EQUIPMENT
Equipment and office fixtures 395,014
Accumulated depreciation (175,190)
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219,824
OTHER ASSETS
Loans receivable from related parties 261,407
Inventory 19,692
Deposits 45,206
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326,305
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$ 1,955,306
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 138,940
Accrued expenses 30,872
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Total current liabilities 169,812
NOTES PAYABLE TO RELATED PARTY 56,144
DEFERRED INCOME FROM REVENUE PARTICIPATION CERTIFICATES 887,500
STOCKHOLDERS' EQUITY
Preferred stock - $.0001 par value; 9,300,000
shares authorized; none outstanding -
Preferred stock series A convertible - $.0001 par value;
510,000 shares authorized; none issued
and none outstanding -
Common stock - $.0001 par value; 100,000,000 shares
authorized; 27,395,536 issued and outstanding 2,739
Additional paid-in capital 8,688,112
Accumulated deficit (7,849,001)
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Total stockholders' equity 841,850
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$ 1,955,306
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The accompanying notes are an integral part of these financial statements.
Page 3
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
Three Months Ended May 31,
2002 2001
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OPERATING EXPENSES
Project development 1,874 42,136
Project operations 265,515 411,651
Marketing and promotion 20,367 39,233
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Total operating expenses 287,756 493,020
GENERAL AND ADMINISTRATIVE EXPENSES 296,071 125,934
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(LOSS)FROM OPERATIONS (583,827) (618,954)
OTHER INCOME OR (EXPENSE)
Interest income 8,796 27,173
Interest expense (1,415) (1,560)
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Total other income or (expense) 7,381 25,613
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NET LOSS $ (576,446) $ (593,341)
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OTHER COMPREHENSIVE LOSS, NET OF TAX
Unrealized loss on available for sale
securities - 8,466
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COMPREHENSIVE LOSS $ (576,446) $ (601,807)
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(BASIC AND DILUTED LOSS PER SHARE) $ (0.02) $ (0.03)
Weighted average number of common
shares and potential common shares,
basic and diluted, outstanding 26,608,140 17,865,536
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,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income(Loss) $ (576,446) $ (593,341)
Adjustments to reconcile net loss to
net cash used by operating activity:
Depreciation 19,144 16,949
Compensation expense of non-statutory options 26,300 -
Interest income (5,167) (4,604)
Interest expense 1,415 1,559
(Increase)decrease in:
Advances, prepaids, deposits (91,181) (24,700)
Inventory 308 -
Increase(decrease) in:
Accounts payable 88,385 (11,718)
Accrued expenses 12,186 35,267
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NET CASH(USED) IN OPERATING ACTIVITIES (525,056) (580,588)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (9,875) (77,181)
Increase in loans receivable - (48,600)
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NET CASH (USED) IN INVESTING ACTIVITIES (9,875) (125,781)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Issuance of common stock 1,015,000 -
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,015,000 -
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NET INCREASE(DECREASE)IN CASH 480,069 (706,369)
CASH AT BEGINNING OF PERIOD 857,549 2,433,187
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CASH AT END OF PERIOD $ 1,337,618 $ 1,726,818
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SUPPLEMENTARY INFORMATION:
Interest paid $ - $ -
Income taxes paid $ - $ -
The accompanying notes are an integral part of these financial statements.
Page 5
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Summary of significant non cash transactions:
During the quarter ended May 31, 2002, two unrelated parties exercised non
statutory stock options resulting in non cash expense of $26,300 due to the
difference in fair market value and the option exercise price on the date of
exercise of the options.
During the quarter ended May 31, 2001, a note to a related party was renewed.
The original principal amount of $48,821 and accrued interest of $7,323 were
combined in a new note in the principal amount of $56,144 bearing interest at
10% per annum. The due date was extended to March 31, 2003.
The accompanying notes are an integral part of these financial statements.
Page 6
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 28, 2002.
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, 2002, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months ended May 31, 2002, are not necessarily
indicative of the results that may be expected for the year ended February 28,
2003.
NOTE B COMMITMENTS AND CONTINGENCIES
On April 29, 2002, the Company entered into a Time Charter Agreement for
utilization of a vessel on the Bavaria project. At May 31, the Company was
liable for approximately $101,200 to complete the charter contract obligation
and had paid an advance deposit of $30,800 to be applied to the final invoice
from the vessel owners.
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ITEM 2. MANAGEMENT'S PLAN OF OPERATION.
Forward-Looking Information
This Report on Form 10-QSB contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
statements regarding Odyssey Marine Exploration, Inc. and its subsidiaries
contained in this report that are not historical in nature, particularly those
that utilize terminology such as "may," "will," "should," "likely," "expects,"
"anticipates," "estimates," "believes" or "plans," or comparable terminology,
are forward-looking statements based on current expectations and assumptions,
and entail various risks and uncertainties that could cause actual results to
differ materially from those expressed in such forward-looking statements.
Plan of Operation
In the long term, the Company expects to derive substantially all of its
revenue through the sale and/or display of shipwreck cargoes and artifacts,
including replicas, and potentially, through the operation of exhibits and/or
themed attractions. Therefore, until the Company is successful in acquiring
and marketing artifacts and/or cargoes or opening exhibits or themed
attractions, 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. During the next twelve months, the Company anticipates spending
approximately $80,000 per month to pay salaries and general office expense.
Operationally, the Company is planning to conduct search operations on the
Bavaria and Republic Projects and to conduct recovery operation on the HMS
Sussex Project. Additionally, the Company plans to investigate exhibit and
attraction opportunities.
Bavaria Search Expedition
The Company has budgeted $600,000 for the Bavaria search expedition which
began April 29, 2002. The side scan survey project is expected to be concluded
during July or August 2002. If the shipwreck is located, the Company
anticipates that recovery operations will begin as soon as the archeological
excavation plan is complete, the necessary recovery funds have been secured
and the required vessel and equipment can be mobilized. The Company believes
that it will not need permits or licenses to begin recovery operations, and
currently has no partners or revenue sharing obligation for proceeds that
might be realized if a recovery is successful on this project.
The funds necessary for this search operation were raised in a $1 million
private placement of equity and warrants, which was concluded in May 2002. The
balance of the private placement funds has been allocated to pay
administrative and general overhead expense.
Republic Search Expedition
The Company has budgeted $350,000 to complete the Republic Project search.
Whether or not the Company will be required to raise additional funding to
complete the Republic search will depend on the amount of money spent on the
Bavaria Project, the potential exercise of outstanding options and/or warrants
and the method and amount of any potential funding raised in conjunction with
the Sussex recovery project.
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HMS Sussex Recovery Project
The Company is currently in the process of concluding its negotiations with
the United Kingdom Ministry of Defence for a license to recover a shipwreck
the Company believes to be HMS Sussex. Although management believes that it
will obtain this license, there is no assurance it will be obtained.
Upon signing the License Agreement, the Company will be required to submit a
Project Plan detailing, among other things, its proposed methods for the
exploration of the shipwreck and for the conservation, documentation and
curation of any artifacts that may be retrieved. A substantial portion of the
Project Plan has been completed in anticipation of receiving the License, and
the Company plans to submit it to the Ministry of Defence shortly after
signing the License Agreement.
The Company plans to begin the exploration as soon as the Project Plan is
approved, financing can be arranged and the appropriate vessel, equipment and
personnel are retained.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
During the three month period ended May 31, 2002, the Company raised
$1,000,000 from 27 accredited investors in a private offering of Common Stock
and warrants. A total of 800,000 shares and 800,000 warrants were sold. Each
warrant is exercisable to purchase one share of common stock at $2.50 per
share through May 15, 2005. The securities were sold pursuant to the
exemption provided by Rule 506 of Regulation D under the Securities Act of
1933. The Company filed a Form D with the SEC concerning this offering. The
investors were provided with a private placement memorandum with information
regarding the Company and their investment, and the Company believes that such
persons had knowledge and experience in financial and business matters such
that they were capable of evaluating the merits and risks of the investment.
The certificates representing the securities bear an appropriate legend
restricting the transfer of such securities.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None.
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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: July 15, 2002 By:/s/ Michael V. Barton
Michael V. Barton, Chief Financial Officer
and Authorized Officer
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