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, 2003
Commission File Number 1-31895
ODYSSEY MARINE EXPLORATION, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 84-1018684
---------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3604 Swann Avenue, Tampa, Florida 33609
-----------------------------------------------------
(Address of principal executive offices)
(813) 876-1776
-----------------------------------------------------
(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, 2003, the Registrant had 37,152,099 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
November 30, 2003.......................................... 3
Unaudited Consolidated Statements of Operations, Three
Months Ended November 30, 2003, and 2002................... 4
Unaudited Consolidated Statements of Operations, Nine
Months Ended November 30, 2003, and 2002................... 5
Unaudited Consolidated Statements of Cash Flows, Nine
Months Ended November 30, 2003, and 2002................... 6 - 7
Notes to Consolidated Financial Statements................. 8 - 11
Item 2. Management's Plan of Operation.......................... 11 - 14
Item 3. Controls and Procedures................................. 14
Part II: Other Information...................................... 14
Item 1. Legal Proceedings................................. 14
Item 2. Change in Securities.............................. 14
Item 3. Defaults Upon Senior Securities................... 14
Item 4. Submission of Matters to a Vote
of Security Holders............................... 14
Item 5. Other Information................................. 15
Item 6. Exhibits and Reports on Form 8-K.................. 15
Signatures ..................................................... 16
Page 2
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 2003 - Unaudited
ASSETS
CURRENT ASSETS
Cash $ 3,422,149
Investments 2,988,664
Prepaid expense 328,154
Other current assets 2,398
-----------
Total current assets 6,741,365
PROPERTY AND EQUIPMENT
Equipment and office fixtures 4,209,605
Accumulated depreciation (476,145)
-----------
3,733,460
OTHER ASSETS
Loans receivable from related parties 269,787
Inventory 594,783
Deposits 33,538
-----------
898,108
-----------
TOTAL ASSETS $11,372,933
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 440,974
Accrued expenses 62,905
-----------
Total current liabilities 503,879
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; 37,152,099 issued and outstanding 3,715
Additional paid-in capital 23,648,363
Accumulated deficit (13,670,524)
-----------
Total stockholders' equity 9,981,554
-----------
$11,372,933
===========
The accompanying notes are an integral part of these financial statements.
Page 3
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited
Three Months Ended
November 30,
2003 2002
----------- -----------
REVENUE, net of selling expense $ 1,388 $ -
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative 496,121 326,383
Depreciation 111,949 31,847
----------- -----------
608,070 358,230
OPERATING EXPENSES
Project operations 1,247,230 305,151
Marketing and promotion 31,968 27,509
----------- -----------
Total operating expenses 1,279,198 332,660
(LOSS) FROM OPERATIONS (1,885,880) (690,890)
OTHER INCOME OR (EXPENSE)
Interest income 6,994 8,353
Interest expense - (1,400)
Gain from legal settlement 40,000 -
Other - 500
----------- -----------
Total other income or (expense) 46,994 7,453
----------- -----------
NET LOSS $(1,838,886) $ (683,437)
=========== ===========
(BASIC AND DILUTED LOSS PER SHARE) $ (0.06) $ (0.03)
Weighted average number of common
shares and potential common shares,
basic and diluted outstanding. 30,702,034 27,180,073
The accompanying notes are an integral part of these financial statements.
Page 4
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited
Nine Months Ended
November 30
2003 2002
----------- -----------
REVENUE $ 71,807 $ -
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative 1,388,006 912,149
Depreciation 197,820 70,071
----------- -----------
1,585,826 982,220
OPERATING EXPENSES
Project operations 2,168,619 872,150
Marketing and promotion 65,467 73,897
----------- -----------
Total operating expenses 2,234,086 946,047
(LOSS)FROM OPERATIONS (3,748,105) (1,928,267)
OTHER INCOME OR (EXPENSE)
Interest income 19,364 25,576
Interest expense (109,227) (4,230)
Gain on disposal of equipment 5,736 -
Gain from legal settlement 40,000 -
Revenue participation (12,986) -
Other - 500
----------- -----------
Total other income or (expense) (57,113) 21,846
----------- -----------
NET LOSS $(3,805,218) $(1,906,421)
=========== ===========
(BASIC AND DILUTED LOSS PER SHARE) $ (0.12) $ (0.07)
Weighted average number of common
shares and potential common shares,
basic and diluted, outstanding. 30,702,034 27,180,073
The accompanying notes are an integral part of these financial statements.
Page 5
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
Nine Months Ended
November 30
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(3,805,218) $(1,906,421)
Adjustments to reconcile net loss to
net cash used by operating activity:
Common stock issued for:
Services 74,150 10,000
Officer and director compensation 50,600 -
Interest payable 108,750 -
Depreciation 225,663 70,071
Gain on disposal of equipment (5,736) -
Interest income related parties (15,770) (15,853)
Interest expense related party - 4,230
Inventory (575,877) 308
(Increase)in:
Advances, accounts receivable and deposits (9,481) (24,317)
Prepaid expenses (261,453) (61,862)
Increase (decrease) in:
Accounts payable 360,820 76,271
Accrued expenses 26,451 27,522
----------- -----------
NET CASH(USED) IN OPERATING ACTIVITIES (3,827,101) (1,820,051)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,276,111) (557,325)
Purchase of U.S. Treasury Bills (2,988,664) -
Increase in loan receivable - (5,000)
----------- -----------
NET CASH (USED) IN INVESTING ACTIVITIES (6,264,775) (562,325)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Issuance of common stock 11,713,250 2,447,000
Issuance of preferred stock - 500,000
Repayment of related party loans receivable 38,610 -
Issuance of notes payable 978,750 -
Repayment of note payable to related party (2,144) -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,728,466 2,947,000
----------- -----------
NET INCREASE IN CASH 2,636,590 564,624
CASH AT BEGINNING OF PERIOD 785,559 857,549
----------- -----------
CASH AT END OF PERIOD $ 3,422,149 $ 1,422,173
=========== ===========
The accompanying notes are an integral part of these financial statements.
Page 6
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
SUPPLEMENTARY INFORMATION:
Interest paid $ 11,229 $ -
Income taxes paid $ - $ -
Summary of significant non-cash transactions:
During August 2003 the holder of Series C Convertible Preferred stock elected
to convert the share into 400,000 shares of common stock and a warrant to
purchase an additional 400,000 shares of common stock at a price of $2.50 per
share. Also during August, ten unrelated note-holders converted $978,750 of
principal and $108,750 of interest into 870,000 shares of common stock, and a
consultant received 7,143 shares of common stock for services valued at
$5,000.
During July 2003 a researcher received 25,000 shares of common stock for
research, valued at $31,250, regarding the location and cargo of the SS
Republic.
During March 2003 four consultants were issued a total of 58,135 shares of
common stock for services valued at $33,700, and an additional 6,635 shares
for an account payable valued at $5,000 and 7,500 shares for prepaid expense
of $4,200. Also, a note holder elected to convert principal in the amount of
$54,000 into 108,000 shares of common stock.
During March 2003, the compensation committee and board of directors
authorized bonus compensation to be partially paid in common stock to Michael
Barton, David Morris and George Becker, officers of the Company. Each was
awarded a bonus of $12,000 and received the net amount after taxes of $7,700
by the issuance of 14,000 shares of common stock. George Knutsson, a Director
also received 50,000 shares of common stock for services valued at $27,500.
The compensation was valued at the closing price of the common stock on March
16, 2003 the day prior to the Compensation committee meeting.
During the quarter ending August 31, 2002, a related party exercised a
non-statutory stock option in part by conversion of an accrued expense account
due to the related party in the amount of $9,000. Also, an unrelated party
elected under the terms of a consulting agreement with the Company, to receive
9,550 shares of restricted common stock in satisfaction of services valued at
$5,000 and payment toward an account receivable of $5,000 due from the
Company.
The accompanying notes are an integral part of these financial statements.
Page 7
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Odyssey Marine
Exploration, Inc. and subsidiaries 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, 2003.
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, 2003, results of
operations, and cash flows for the interim periods presented. Operating
results for the three months ended and nine months ended November 30, 2003,
are not necessarily indicative of the results that may be expected for the
year ended February 28, 2004.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Participation Certificates
Revenue was received during the period ended May 31, 2003 that is subject to
revenue sharing with holders of the Cambridge Revenue Participation
Certificates. The obligation, which was accrued and subsequently paid, has
been classified as other expense.
Stock-Based Compensation
We account for stock-based compensation using the intrinsic value method in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and have adopted the disclosure provisions of
Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure, an amendment of FASB
Statement No. 123." Under APB No. 25, when the exercise price of our employee
stock options equals or exceeds the market price of the underlying stock on
the date of grant, no compensation expense is recognized. Accordingly, no
compensation expense has been recognized in the consolidated financial
statements in connection with employee stock option grants.
The following table illustrates the effect on net income and earnings per
share had we applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation.
Three Months Ended November 30,
2003 2002
------------- -------------
Net (loss):
As reported $ (1,838,886) $ (683,437)
Pro forma adjustment for compensation $ (256,209) $ (35,050)
------------ -----------
Pro forma $ (2,095,095) $ (718,487)
============ ===========
Page 8
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Basic and diluted(loss) per share:
As reported $ (0.06) $ (0.03)
Pro forma $ (0.07) $ (0.03)
Nine Months Ended November 30,
2003 2002
-------------- -----------
Net (loss):
As reported $(3,805,218) $(1,906,421)
Pro forma adjustment for compensation $ (411,039) $ (169,080)
----------- -----------
Pro forma $(4,216,257) $(2,075,501)
=========== ===========
Basic and diluted(loss) per share:
As reported $ (0.12) $ (0.07)
Pro forma $ (0.14) $ (0.07)
The weighted average estimated fair value of stock options granted during the
three months ended November 30 2002 was $1.09. No options were granted during
the quarter ended November 30, 2003. This amount was determined using the
Black-Scholes option-pricing model, which values options based on the stock
price at the grant date, the expected life of the option, the estimated
volatility of the stock, the expected dividend payments, and the risk-free
interest rate over the life of the option. The assumptions used in the
Black-Scholes model were as follows for stock options granted in the three
months ended November 30:
2003 2002
--------- ---------
Risk-free interest rate N/A 2.3%
Expected volatility of common stock N/A 193%
Dividend Yield N/A 0%
Expected life of options N/A 4 years
The Black-Scholes option valuation model was developed for estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. Because option valuation models require the use of subjective
assumptions, changes in these assumptions can materially affect the fair-
value of the options. Our options do not have the characteristics of traded
options, therefore, the option valuation models do not necessarily provide a
reliable measure of the fair value of our options.
Equity instruments issued, if any, to non-employees in exchange for goods,
fees and services are accounted for under the fair value-based method of SFAS
No. 123.
Restatement of Fourth Quarter Adjustment
In the fourth quarter for the year ended February 28, 2003, we recorded an
adjustment that reduced net loss for the quarter ended November 30, 2002 by
$46,500 and for the nine month ended November 30, 2002 by $74,050. The
Statement of Operations and Statement of Cash Flows in this report reflect
these adjustments.
Page 9
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - INVESTMENTS
On November 28, 2003 we purchased five United States Treasury Bills each of
which mature for $1,000,000 if held to maturity. Two of these which were
purchased at a cost of $1,996,888 and had original maturity dates of less than
90 days have been classified as cash. The costs and maturities of the three
remaining Treasury Bills are as follows:
Maturity Investment Cost
-------- ---------------
3/25/04 $ 997,109
4/22/04 $ 996,275
5/20/04 $ 995,280
-----------
$ 2,988,664
===========
NOTE D - INVENTORY
During the quarter ended November 30, 2003 we began to recover cargo
consisting of gold and silver coins, bottles and other items from the SS
Republic. Our total inventory of $594,783 consists of $19,692 in raw emeralds
and $575,091 of SS Republic cargo. The SS Republic cargo has been valued by
capitalizing the costs of recovery of these items. We are using the cost
method of valuation according to Generally Accepted Accounting Principles. We
believe the net realizable value will be substantially higher than the costs
recorded.
NOTE E - ACCOUNTS PAYABLE
Accounts payable at November 30, 2003 consist of trade accounts payable of
$431,675 and the balance due on an insurance premium finance agreement
including interest at 7.33% of $9,299 to be paid in one remaining monthly
installment.
NOTE F - INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The primary temporary
difference that gives rise to the deferred tax asset is the Company's net
operating loss carry forward.
We have approximately $10,000,000 of net operating loss carry forward at the
beginning of this fiscal year. The carry forward will expire in various
years ending through year 2023. During this quarter, we have recovered coins
and artifacts from the SS Republic wreck site and have plans to generate
revenues from sale of these coins and artifacts. Although we expect to fully
utilize our net operating loss carry forward in the future as a result of this
recovery effort, management believes additional recovery and conservation is
necessary to make a reasonable estimate of the utilization of a deferred tax
asset. Therefore, the valuation allowance remains at 100% for this quarter.
NOTE G - SUBSEQUENT EVENTS
On January 7, 2004, we entered into an Agreement with a potential claimant
that we believe had a verifiable claim over the shipwreck of the SS Republic
and some of its cargo. The potential claimant insured the hull, $45,000 worth
of the specie and approximately $96,000 worth of "other cargo" at the time of
Page 10
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - SUBSEQUENT EVENTS - Continued
its' sinking. The party assigned all of their rights and interest in the
shipwreck and its cargo to us in exchange for a one-time cash payment of $1.6
million which we anticipate will be capitalized as Inventory.
The United States Government has requested until January 31, 2004 to determine
if they have a verifiable claim to any of the cargo being salvaged from the SS
Republic. We remain unaware of any research or documents that would give rise
to any claim by the Government. However, if the government were to prove a
claim to any portion of the cargo, we believe we would be entitled to a
salvage award equal to at least 90% of the recovered value based on previous
court cases.
Item 2. MANAGEMENT'S PLAN OF OPERATION.
Forward-Looking Information
This Report on Form 10-QSB contains forward-looking statements. 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 - Generally
In the long term, we expect to derive substantially all of our revenue through
the sale of and/or display of shipwreck cargoes and artifacts, including
replicas, and potentially, through the operation of exhibits and/or themed
attractions. Current recovery operations on the Republic Project are producing
artifacts and specie that should allow us to generate revenue during the last
quarter of this fiscal year or the first quarter of fiscal 2005. Once this
revenue source has commenced, we believe we will have adequate cash flow to
fund our operating and capital requirements for the foreseeable future.
Administration
For the next twelve months, we anticipate spending approximately $250,000 per
month to pay salaries, general office expense and project development
expenses. We anticipate the funds for these expenses will be paid out of
operating capital.
Operations
Generally, our current operational plans for the next twelve months call for:
* conducting recovery operations on the wreck of the SS Republic,
* conducting identification and possible recovery operations on two or
more additional sites within the Bavaria search area,
* conducting a pre-disturbance survey and recovery operations on the
Sussex Project,
* completing the search phase of the Seattle (formerly the Republic)
Project,
Page 11
* conducting search operations on one or more undisclosed sites, and
* investigating exhibit and attraction opportunities.
Bavaria Project - SS Republic
During the month of August, we located the wreck of the SS Republic, a
side-wheel steamer that sank during a Hurricane in 1865. The Republic was the
primary target for our Bavaria Project. Our research indicates that the
Republic was carrying a substantial cargo of specie, and perhaps other
valuable cargo, which sank with the vessel.
We arrested this shipwreck on August 11, 2003 in the U. S. District Court,
Middle District of Florida in Tampa. Potential claimants had until September
1, 2003 to file claims with respect to the shipwreck.
No claims were filed with the court, however, The United States Government
made an inquiry to determine whether any Government payroll was lost with the
vessel. We agreed to an extension of the 30 day claim period to allow the
Government to conduct research on the vessel to determine whether or not they
had a verifiable claim. In mid October, we requested that the Government file
any claim if they felt they had information to support such a claim. On
October 31, 2003 the Government filed a Motion for Extension of Time seeking
an indefinite extension. On December 2, 2003 the Court entered an Order that
required the Government to file any claim by December 31, 2003. The Order
also directed us to make all of the recovered artifacts available for the
Government's inspection.
During December 2003, the Government's representatives inspected the artifacts
and reviewed our research documents. On January 2, 2004, the Government filed
an additional Motion for Extension of Time requesting the Court to allow them
until January 31, 2004 to complete their research and potentially file a
verified claim. We then filed a Memorandum in Opposition to the United States
of America's Motion for further Extension of Time to file a claim. In our
Memorandum we notified the court of our finalized settlement with the Atlantic
Mutual Insurance Company and of our intentions to file a motion seeking a
partial salvage award for the artifacts recovered to date. We further
requested that the Government only be allowed until January 22, 2004 to file a
verifiable claim. We remain unaware of any research or documents that would
give rise to any claim by the Government. However, if the government were to
prove a claim to any portion of the cargo, we believe we would be entitled to
a salvage award equal to at least 90% of the recovered value based on previous
court cases.
The only other claimant that we believe had a verifiable claim over the
shipwreck or any of its cargo was the Atlantic Mutual Insurance Company who
insured the hull, $45,000 worth of the specie and approximately $96,000 worth
of "other cargo". On January 7, 2004 we signed a contract with Atlantic
Mutual wherein they assigned all of their rights and interest in the shipwreck
and its cargo to us in exchange for a one-time cash payment of $1.6 million.
Archaeological excavation and recovery operations were commenced at the
shipwreck site during the first full week of October 2003. During the initial
site inspection, we recovered a ship's bell that we believe positively
identified the wrecksite as that of the SS Republic.
After the completion of a detailed photomosaic of the site and archaeological
pre-disturbance survey, recovery operations began and on November 6, 2003 we
located the first specie at the site. Further exploration of the site
revealed a substantial number of gold and silver coins. Approximately 780
Page 12
gold coins and 3,300 silver coins were recovered during November and December
2003. The condition and variety of the rare coins we were recovering indicated
that mistakes in coin handling could significantly decrease the numismatic
value. Excavation operations were temporarily suspended on December 20, 2003,
in order to evaluate the tools and methods being used for coin recovery. The
evaluations and recommendations by numismatic conservators were taken into
account in the development of new, safer and more efficient coin recovery and
handling methods. In addition to the coins, approximately 575 bottles and
other artifacts have been recovered and are currently being conserved and
studied.
On January 12, 2004, the Odyssey Explorer returned to the Republic site and
will continue to recover coins and other artifacts. Due to the large
assemblage of coins and other artifacts, we believe the recovery operation
will continue for at least another ninety to one hundred twenty days at an
approximate cost of $500,000 per month.
Bavaria Project - Other Targets
We have located two other shipwrecks within the Bavaria search area that may
have commercial value. We plan to conduct limited diagnostic exploration and
sample artifact recovery to determine whether or not these shipwreck warrant
additional research. We also intend to conduct search operations in one or
more areas that our research indicates may contain another shipwreck with
potential commercial value.
Sussex Project
During December 2003, meetings were held in London between representatives of
Odyssey and the Ministry of Defense in order to address the archaeological
staffing for the Sussex recovery project. The parties tentatively agreed to a
May 2004 start date, which allows both sides to finalize contracts with the
appropriate parties to fulfill the archaeological staffing.
The budget for the Sussex recovery and conservation is approximately $3
million. If the recovery is highly successful, this amount may increase to
approximately $4.5 million or more as a result of additional conservation,
documentation, curation and security expenses that may need to be incurred.
Seattle Project (Formerly known as the Republic Project)
We recommenced the search operations for the Seattle Project during September
2003. The search was non-conclusive and further search operations will need
to be conducted to locate this shipwreck. Our current plan is to reevaluate
all of the research and data in order to plan the search area for the 2004
season.
Equipment and Capital Spending
In order to accomplish our search and recovery objectives for 2004, we
anticipate the need to purchase or lease an additional vessel and ROV system.
We are currently investigating the market for vessels and ROV systems and
anticipate we will consummate a purchase or lease of this equipment as soon as
we are assured of sufficient cash flow from the Republic project.
Page 13
Liquidity and Capital Resources
As of November 30, 2003, we had working capital of $6,237,486 as indicated by
current assets exceeding current liabilities.
During the period ended November 30, 2003 a combination of warrants and stock
options were exercised for the purchase of 2,748,300 shares of common stock
providing the Company with $6,555,625 of operating capital.
During the next twelve months we anticipate spending approximately $12 million
for search and recovery operations. We anticipate the funding for these
operations will come from the exercise of warrants, borrowing secured by
Company assets or through revenue generated by the sale of recovered cargoes.
ITEM 3. Controls and Procedures
As of November 30, 2003, under the supervision and with the participation of
the Company's Chief Executive Officer and the Principal Financial Officer,
management has evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Principal Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of November 30,
2003. There were no changes in internal control over financial reporting that
occurred during the fiscal quarter covered by this report that have materially
affected, or are reasonably likely to affect, the Company's internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
During the quarter ended November 30, 2003, we issued a total of 2,580,000
shares of our common stock to 55 persons in private transactions upon the
exercise of warrants held by those persons. The Company received total
proceeds of $6,452,000 from the exercise of the warrants. The warrants were
issued to the investors as part of earlier private offerings of the Company's
securities. In connection with these issuances, the Company relied on the
exemptions provided by Section 4(2) of the Securities Act of 1933, and Rule
506 of Regulation D thereunder. The investors had access to complete
information concerning the Company, and we believe 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 shares were issued with an appropriate restrictive legend.
ITEM 3. Defaults Upon Senior Securities. None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
On October 7, 2003, an Annual Meeting of the Shareholders was held to vote on
the appointment of members to the Board of Directors and to ratify the
appointment of the Company's independent auditors. The following six persons
were elected to the Board of Directors each by a vote of 26,058,876 shares for
and 400 shares withheld: John C. Morris, Gregory P. Stemm, George Knutsson,
Henri Germain DeLauze, George E. Lackman, Jr., and David J. Saul.
Page 14
The shareholders also ratified the appointment of Ferlita, Walsh & Gonzales,
P.A., Certified Public Accountants, to act as independent auditors by a vote
of 25,806,710 shares for, and 5,550 against and 247,016 abstentions. There
were no broker non-votes.
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
31.1 Certification of Chief Executive Filed herewith electronically
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
31. 2 Certification of Chief Financial Filed herewith electronically
Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Filed herewith electronically
Officer pursuant to 18 U.S.C.
Section 1350
32.2 Certification of Chief Financial Filed herewith electronically
Officer pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K.
During the quarter ended November 30, 2003, we filed one report on Form 8-K
dated November 6, 2003, reporting information under Item 5 of that form
concerning the discovery of gold coins at the site of the SS Republic recovery
operation.
Page 15
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 14, 2004 By:/s/ Michael V. Barton
Michael V. Barton, Chief Financial Officer
and Authorized Officer
Page 16