10QSB 1 odyssey.txt ODYSSEY MARINE EXPLORATION 11/30/2000 10-QSB 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, 2000 Commission File Number 0-26136 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.) 3507 Frontage Road, Suite 100, Tampa, Florida 33607 ----------------------------------------------------- (Address of principal executive offices) (813) 282-0855 ----------------------------------------------------- (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, 2000, the Registrant had 14,691,510 shares of common stock, $.0001 par value, outstanding. Transitional Small Business Disclosure format: Yes [ ] No [ X ] INDEX Part I: Financial Information Page No. Item 1. Financial Statements: Unaudited Consolidated Balance Sheet - as of November 30, 2000 ........................................... 3 Unaudited Consolidated Statements of Operations and Comprehensive Income, Three Months Ended November 30, 2000, and Three Months Ended November 30, 1999 .................... 4 Unaudited Consolidated Statements of Operations and Comprehensive Income, Nine Months Ended November 30, 2000, and Nine Months Ended November 30, 1999 ..................... 5 Unaudited Consolidated Statements of Cash Flows, Nine Months Ended November 30, 2000, and Nine Months Ended November 30, 1999 ........................................... 6-7 Notes to Consolidated Financial Statements................... 8 Item 2. Management's Plan of Operation............................ 8-9 Part II: Other Information........................................ 9 Item 1. Legal Proceedings................................... 9 Item 2. Change in Securities................................ 9-10 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 ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET - Unaudited NOVEMBER 30, 2000 ASSETS CURRENT ASSETS Cash $ 6,582 Marketable securities 14,131 Advances and prepaid expense 1,900 ----------- Total current assets 22,613 PROPERTY AND EQUIPMENT Equipment and office fixtures 163,235 Accumulated depreciation (88,151) ----------- 75,084 OTHER ASSETS Inventory 20,000 Loans receivable from related parties 173,626 ----------- 193,626 ----------- TOTAL ASSETS $ 291,323 =========== LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable $ 172,177 Accrued expenses 483,274 Notes payable to related parties 534,832 Notes payable other 120,215 ----------- Total current liabilities 1,310,498 DEFERRED INCOME FROM REVENUE PARTICIPATION CERTIFICATES 887,500 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 70,000 outstanding 7 Common Stock - $.0001 par value; 100,000,000 shares authorized; 14,429,010 issued and outstanding 1,443 Additional paid-in capital 4,067,962 Accumulated unrealized loss in investment (21,952) Accumulated deficit (5,954,135) ----------- Total Stockholders' deficiency (1,906,675) ----------- TOTAL LIABILITY AND STOCKHOLDERS' DEFICIENCY $ 291,323 =========== The accompanying notes are an integral part of these financial statements. 3 ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited Three Months Ended November 30 2000 1999 ----------- ----------- REVENUES $ - $ - OPERATING EXPENSES Project development 43,123 40,252 Project operations 178,457 30,504 Marketing 16,163 12,266 ----------- ----------- Total operating expenses 237,743 83,022 GENERAL AND ADMINISTRATIVE EXPENSES 101,294 120,675 ----------- ----------- INCOME(LOSS) FROM OPERATIONS (339,037) (203,697) OTHER INCOME OR (EXPENSE) Gain(Loss) on sale of marketable securities (13,480) 5,523 Interest income 3,377 4,365 Interest expense (24,110) (34,735) ----------- ----------- Total other income or (expense) (34,213) (24,847) ----------- ----------- NET LOSS (373,250) $ (228,544) =========== =========== OTHER COMPREHENSIVE LOSS, NET OF TAX Unrealized loss on available for sale securities (15,619) (3,900) ----------- ----------- COMPREHENSIVE LOSS (388,869) $ (232,444) =========== =========== BASIC AND DILUTED LOSS PER SHARE $ (0.03) $ (0.02) Weighted average number of common shares and common share equivalents outstanding. 12,177,841 10,555,614 The accompanying notes are an integral part of these financial statements. 4 ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - Unaudited Nine Months Ended November 30 2000 1999 ----------- ----------- REVENUES $ - $ 250 OPERATING EXPENSES Project development 130,576 167,369 Project operations 622,895 342,575 Marketing 42,705 41,366 ----------- ----------- Total operating expenses 796,176 551,310 GENERAL AND ADMINISTRATIVE EXPENSES 379,311 376,513 ----------- ----------- INCOME(LOSS)FROM OPERATIONS (1,175,487) (927,573) OTHER INCOME OR (EXPENSE) Gain(Loss) on sale of marketable securities 193,406 5,523 Interest income 9,858 9,986 Interest expense (79,683) (66,880) Other (7,413) - ----------- ----------- Total other income or (expense) 116,168 (51,371) ----------- ----------- NET LOSS $(1,059,319) $ (978,944) =========== =========== OTHER COMPREHENSIVE GAIN(LOSS), NET OF TAX Unrealized gain(loss) on available for sale securities (17,752) 53,463 ----------- ----------- COMPREHENSIVE LOSS $(1,077,071) $ (925,481) =========== =========== BASIC AND DILUTED LOSS PER SHARE $ (0.09) $ (0.09) Weighted average number of common shares and common share equivalents outstanding. 12,177,841 10,555,614 The accompanying notes are an integral part of these financial statements. 5 ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited Nine Months Ended November 30 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income(loss) $(1,059,320) $ (978,944) Adjustments to reconcile net loss to net cash used by operating activity: Depreciation 24,404 21,446 Amortization - 204 Common stock issued for services 132,000 - Finance charge added to note 7,500 - Loss(gain) on sale of marketable securities (193,406) (5,523) Decrease(increase)in: Advances 8,346 60 Interest receivable (15,998) (17,923) Increase(decrease) in: Accounts payable (32,436) 127,655 Accrued expenses 166,118 300,033 ----------- ----------- NET CASH(USED) IN OPERATING ACTIVITIES (962,792) (552,992) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (18,753) (2,845) ---------- ----------- NET CASH (USED) IN INVESTING ACTIVITIES (18,753) (2,845) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Related party loans 5,000 90,000 Loans from others 75,000 72,000 Issuance of common stock 517,500 Issuance of preferred stock - 285,000 Issuance of revenue participation certificates 62,500 15,000 Sale of marketable securities 345,105 22,197 Repayment of note (64,153) (25,647) ---------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 940,952 458,550 ---------- ----------- The accompanying notes are an integral part of these financial statements. 6 ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) Nine Months Ended November 30 2000 1999 ----------- ----------- NET INCREASE(DECREASE)IN CASH (40,593) (97,287) CASH AT BEGINNING OF PERIOD 47,175 106,440 ----------- ----------- CASH AT END OF PERIOD $ 6,582 $ 9,153 =========== =========== SUPPLEMENTARY INFORMATION: Interest paid $ 31,919 7,092 Income taxes paid $ - - Summary of significant non cash transactions During the quarter ended November 30, 2000, five unrelated accredited investors who purchased shares through the private placement which was completed in July 2000 were issued 757,911 additional shares pursuant to the terms of the private placement. Additionally, 120,000 shares of Series A Preferred stock were surrendered and converted into 450,000 shares of common stock, and two subcontractors who provided services valued at $47,000 on the Republic project were issued 94,000 shares of common stock for services. 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 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 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 November 30, 2000, results of operations, and cash flows for the interim periods presented. Operating results for the three months and nine months ended November 30, 2000, are not necessarily indicative of the results that may be expected for the year ended February 28, 2001. NOTE B REPUBLIC REVENUE PARTICIPATION CERTIFICATES During the quarter ended November 30, 2000 the Company issued revenue participation certificates to five investors which entitle them to receive 4% of the gross proceeds, if any, from the Republic project. The total Republic Revenue Participation Certificates sold entitle the holders, as a group, to 5% of the gross revenues of the Republic project. The investments are reflected in the books as $67,500 of deferred income. NOTE C - GOING CONCERN CONSIDERATION The Company has incurred net losses of $5,954,135. At November 30, 2000, the Company had negative working capital as indicated by current liabilities exceeding current assets by $1,287,885. 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 8 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 29, 2000. 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 $60,000 per month to pay for administrative and general office expenses, project development, and marketing and promotion. In order to pay these expenses, the Company intends to raise cash through the sale of Marketable Securities and through the sale of equity, debt, or revenue participation on one or more of it's projects. Operationally, the Company is concentrating search and identification operations on the Republic and Cambridge projects. During September 2000, the Company conducted side scan operations on the Republic project. The Company is currently negotiating with subcontractors to continue search and survey operations on the Republic project during February and March 2001. The Company was unable to continue the Cambridge search in October and November of 2000, as planned, due to scheduling problem with certain equipment. Plans are being made to return to the search area in March or April, 2001 to investigate certain anomalies and to conduct further side scan operations. The Company has postponed all work on the Concepcion project pending the outcome of certain proposed legislation. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. None ITEM 2. Changes in 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 November 30, 2000, the Company received $200,000 from five accredited investors in this private offering and issued a total of 400,000 shares of common stock and revenue participation certificates representing a total of 4% 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 9 the transfer of such securities. A Form D concerning this offering was filed with the SEC. During the quarter ended November 30, 2000, two subcontracting firms were issued 94,000 shares of common stock in exchange for $47,000 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. During the quarter ended November 30, 2000, holders of Series A Convertible Preferred stock elected to convert 120,000 shares of Series A Convertible Preferred Stock into 450,000 shares of common stock. Also, during the quarter ended November 30, 2000, five accredited investors were issued 757,911 shares of common stock as an adjustment to the number of shares issued pursuant to subscriptions in a private placement which was completed in July 2000. 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 11, 2001 By:/s/ David A. Morris David A. Morris, Treasurer (Principal Accounting Officer and Duly Authorized Officer) 10