Odyssey Marine Expl (AMEX:OMR)
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Odyssey Marine Exploration (AMEX:OMR), a leader in the
field of deep-ocean shipwreck exploration, today reported full year
2005 financial results.
For the full year 2005, Odyssey reported revenues of $10.0
million, compared to $17.6 million in 2004. The Company reported a net
loss of $14.9 million for the full year 2005, compared to net income
of $5.2 million in 2004. The net loss per share for the full year 2005
was $.35, compared to earnings of $.13 per share in 2004.
Odyssey attributed the 2005 annual loss to several factors.
Revenues were lower than expected due to a smaller customer base of
independent coin dealers, diminishing availability of high-value gold
coins, lower than expected direct sales, and the impact of Hurricane
Katrina on Odyssey's first-ever shipwreck attraction in New Orleans.
Expenses for Operations and Research increased $9.3 million
primarily due to vessel recovery costs not being capitalized during
most of 2005 and the addition of a chartered vessel for the Company's
"Atlas" search project. Marketing, general and administrative expenses
increased $4.2 million primarily due to expansion of marketing and
sales and administrative expenses associated with Odyssey's
themed-attractions segment. In addition, the impact of tax accounting
standards resulted in a full valuation allowance against the Company's
deferred tax asset which reduced net income by $7.8 million.
"While we're disappointed with this year's financial results, we
continue to make solid progress establishing direct and indirect sales
markets for our coins, artifacts, and shipwreck merchandise. In
addition, our business and our unique industry makes us very different
from traditional companies because our bottom line is directly
impacted by our ability to find and excavate high-value shipwrecks.
Therefore, as the HMS Sussex, `Atlas' and `Bristol' projects move
forward in 2006, and as we continue to improve our direct and indirect
sales channels for products, we expect Odyssey's financial performance
to improve," said Mike Barton, Odyssey's Chief Executive Officer.
Full Year 2005 Results
Note: For 2005, the fiscal year included a twelve-month period
which ended December 31, 2005. Fiscal year 2004 included a ten-month
transition period which ended December 31, 2004.
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REVENUE
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Revenues are generated primarily through the sale of gold and
silver coins, but also include other artifacts and merchandise.
Revenues for fiscal years 2005 and 2004 were $10.0 million and $17.6
million, respectively, representing sales volume of approximately
2,500 gold and silver coins in 2005, and approximately 9,000 gold and
silver coins in 2004. In 2005, sales were made through independent
coin dealers at wholesale prices as well as through the Company's
direct retail sales. In 2004, sales were made primarily through
independent coin dealers.
Odyssey continues to sell numismatic coins to independent coin
dealers. During the latter half of 2005, the Company experienced a
decrease in numismatic gold coin revenue, relative to 2004, due to a
lower availability of high-value gold coins, a desire to maximize
total revenue from existing coin inventory, and sales to fewer
independent coin dealers.
The number of independent dealers dropped from thirteen in 2004,
to six in 2005, of which two dealers represented 57 percent of total
sales. Odyssey's experience has shown that many of these independent
dealers are primarily interested in the higher quality numismatic coin
market. As availability of high-quality coins diminishes, the Company
expects the number of independent dealers interested in its coins to
be reduced. In addition, the sale of silver half dollars was
significantly reduced from 2004 levels as Odyssey added direct retail
distribution, where margins are higher, to existing independent coin
dealer wholesale channels.
In December 2004, Odyssey opened a direct sales department to test
distribution of its products through retail sales channels where gross
margins are typically higher. Sales in 2005 were less than projected.
However, the Company continues to build a database of customers which
it anticipates will buy additional Odyssey products from various
shipwrecks. Odyssey believes sales volumes will increase as it
continues to build its client base for repeat sales, expand book
sales, and pursue leads generated by themed attractions, advertising
efforts in direct response print, television and radio outlets, and
other activities. Based on 2005 results, the Company is investigating
additional resources and strategic partnerships to service direct
response inquiries and orders.
The Company also continues to develop additional indirect sales
channels to supplement its coin dealer network for non-graded gold
coins, shipwreck-effect silver coins, and for other Odyssey
merchandise. While significant revenue has not yet been realized from
these new indirect sales channels, Odyssey is building additional
distribution for its shipwreck products, which should begin producing
revenue in 2006.
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EXPENSES
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Operations and research expenses were $11.3 million in 2005,
compared to $2.0 million in 2004. Of the $9.3 million increase in
2005, $4.2 million was a result of not capitalizing vessel recovery
costs since February 2005, when Odyssey's archaeological recovery ship
left the SS Republic shipwreck site. Vessel recovery costs of $4.8
million were capitalized in 2004, versus $.6 million in 2005.
Additionally, $3.3 million was attributable to vessel operations
(which includes $1.8 million for a chartered vessel for the "Atlas"
search project); $.5 million to ongoing research and conservation
efforts; $1.0 million for start-up operations of Odyssey's
themed-attraction segment; and $.3 million to the write-off of an
investment in developing a second attraction location, due to a
realignment in attraction development strategy resulting from
hurricane Katrina and other factors.
Marketing, general and administrative expenses were $9.3 million
in 2005, as compared to $5.1 million in 2004. Of the $4.2 million
increase, $2.3 million resulted from expansion of marketing and sales
associated with the development of a direct sales effort, $.6 million
related to general and administrative expenses associated with the
themed-attractions segment, and $1.3 million to other general and
administration expenses, corporate communications, information
technology, and professional and audit services related to
Sarbanes-Oxley implementation.
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NET LOSS
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The Company reported a net loss of $14.9 million for the full year
2005, compared to net income of $5.2 million in 2004. The net loss per
share for the full year 2005 was $.35, compared to earnings of $.13
per share in 2004.
Included in the net loss for fiscal year 2005 is a full valuation
allowance of $7.8 million placed on the deferred tax assets. The
Company recorded this full valuation allowance due to uncertainty
surrounding the realization of these deferred tax assets, which
resulted from net operating loss carry-forwards from previous years.
The full valuation allowance adjustment is a non-cash adjustment. The
income tax provisions for the fiscal years 2005 and 2004 are $3.3
million and $3.5 million, respectively.
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ANNUAL OPERATIONAL OVERVIEW
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SS Republic Project
The SS Republic was a side-wheel steamer lost in deep water in
1865 after battling a hurricane for several days. The ship, en-route
from New York to New Orleans, was reportedly carrying $400,000 in
specie (1865 face value) when it sank. The ship's history includes
service in both the Confederate and Union navies during the American
Civil War. Odyssey discovered the shipwreck in the summer of 2003
nearly 1,700 feet below the surface of the Atlantic Ocean
approximately 100 miles off the Georgia coast.
The archaeological excavation and recovery was completed in
February 2005. During the SS Republic excavation, more than 51,000
gold and silver coins and approximately 14,000 artifacts were
recovered. The Company's remotely operated vehicle (ROV) ZEUS,
completed 262 dives to the shipwreck site and debris field, logging
almost 3,500 hours of bottom time. The coins recovered represent
approximately 25 percent of the "$400,000 in specie" (1865 face value)
that historical research indicated was on board the Republic when she
sank.
In March 2004, the Company was awarded title and ownership to the
SS Republic shipwreck and cargo, including the hull, artifacts and the
specie on board. In February 2005, the Odyssey Explorer left the SS
Republic shipwreck site to steam to the Western Mediterranean.
Western Mediterranean Project
In April 2005, the Odyssey Explorer performed survey and
archaeological work in the western Mediterranean. The Company located
23 shipwreck sites, produced 14 pre-disturbance photomosaics, and
completed preliminary excavations on seven sites. The archaeological
work resulted in the recovery of approximately 400 artifacts plus a
substantial number of trading beads undergoing conservation and study
by Odyssey's research and conservation departments.
"Atlas" Search Project
On May 4, 2005, Odyssey announced that search operations had begun
on its 2005 shipwreck search program, code-named the "Atlas" project,
with a chartered side-scan survey vessel. The "Atlas" project is the
result of an extensive target development program and consists of a
minimum of five target shipwrecks. It is believed to be the most
extensive shipwreck search operation ever launched. Utilizing an
advanced side-scan system allowed the Company to map the seafloor
twice as fast as previous searches.
The Odyssey Explorer joined the Company's chartered side-scan
survey vessel in the "Atlas" search area in June 2005 to inspect
promising side-scan targets utilizing ZEUS. Using one ship for survey,
and a second ship with an ROV for inspections, resulted in a highly
efficient search process.
The 2005 "Atlas" search operations resulted in the mapping of over
4,600 square miles of the search area. Results included the discovery
of 2,421 anomalies on the sea floor using advanced high-resolution,
side-scan sonar system. After processing data, over 1,100 of those
anomalies were selected for further examination. Of those, 577 sites
were inspected and at least 180 are believed to be manmade or
shipwreck sites. Of the shipwrecks inspected by ZEUS, several exhibit
key characteristics of some of the target shipwrecks being sought as
part of the "Atlas" project. To date, however, Odyssey has not
positively identified any of its primary targets. The Company
continues to analyze the "Atlas" project's high-definition video,
digital photos and collected artifacts to determine the potential
identity, cultural significance, and economic value of inspected
sites.
On November 7, 2005, the Company announced that operations on the
"Atlas" search project would be suspended through the winter months
due to inclement weather while the Odyssey Explorer was deployed to
the western Mediterranean to begin operations on the Sussex project.
Odyssey intends to complete the search of the "Atlas" area in 2006
when the weather window re-opens. (For reasons of security and
strategic confidentiality, the Company does not disclose the location
of the "Atlas" project area.)
HMS Sussex Project
The Sussex project is an expedition to locate and recover
artifacts and cargo of a large colonial-period British warship, HMS
Sussex, which was lost in a severe storm in 1694. Based on documentary
research conducted by contract researchers and our in-house research
team in libraries and historical archives in Great Britain, France and
other countries, Odyssey believes that there is a high probability the
ship was carrying a cargo of coins with a substantial numismatic
value.
On September 27, 2002, Odyssey entered into an agreement with the
Government of the United Kingdom of Great Britain and Northern
Ireland, which we refer to as "Her Majesty's Government" (HMG), which
allows the Company to conduct an archaeologically sensitive
exploration of the shipwreck believed to be HMS Sussex and to recover
artifacts from the shipwreck site. The agreement provided for Odyssey
to submit a Project Plan to HMG concerning the equipment, personnel
and methodologies the Company will use in the exploration of the
shipwreck, and the conservation and documentation of any artifacts and
cargo that may be recovered. This Plan was submitted and approved in
2004.
In December 2005, Odyssey's 251' deep-ocean archaeological
platform, the Odyssey Explorer, returned to the western Mediterranean
from the "Atlas" search area. The ship and crew conducted the initial
phases of Odyssey's Sussex project plan approved by HMG.
During January 2006, Odyssey announced it had completed
archaeological and environmental survey operations believed to fulfill
the requirements of Phase 1A, and a substantial portion of Phase 1B. A
report was submitted to HMG, which detailed the work completed by
Odyssey to satisfy Phase 1A requirements of the Sussex project plan.
The report was reviewed by the Ministry of Defence (MoD) and the
Sussex Archaeological Executive committee.
HMG notified Odyssey that the work detailed in the report met or
exceeded all requirements of Phase 1A of the Sussex Project plan and
Odyssey is authorized to proceed to complete Phase 1B of the project.
(A public version of the project plan is available at
http://www.shipwreck.net.) Odyssey's archaeological team has also
completed a report detailing results of Phase 1B accomplished during
the month of January, which was submitted to HMG in March 2006.
On January 26, 2006, a nota verbal was communicated to Odyssey
through diplomatic channels requesting the Company suspend operations
until the Junta of Andalucia - the regional government of the Spanish
state of Andalucia - appointed an expert to observe operations on the
site believed to be the Sussex. It was further declared the Junta did
not appoint an expert because they believed Odyssey was working
without appropriate authorization and that the Project Plan presented
by the Company did not comply with the applicable Andalucian
legislation as requested by the Spanish Ministry of Foreign Affairs.
Odyssey did, in fact, submit a Project Plan to the Spanish
Government through diplomatic channels that was believed to comply
with all applicable requirements. In good faith, the Company began
operations on the Sussex after submission of the Project Plan and
subsequent assurance by the Spanish Government through diplomatic
channels that failure of the Junta to appoint an expert to join the
operation would not be considered a failure of Odyssey to comply with
the cooperative agreement pursuant to the nota verbal. In addition,
assurances were provided to Odyssey through diplomatic channels during
January 2006 that there would be no interference with Sussex
operations.
The January 2006 nota verbal from Spain appears to have been a
contradiction of that position, and Odyssey trusts the inconsistency
resulted from ambiguity and possible miscommunication relative to
jurisdictional issues.
When operating in territorial waters of any country, Odyssey has
always done so with the appropriate authorizations. In the case of the
Sussex project, because of regional sensitivities over the issue of
the territorial status of the waters, and in accordance with
diplomatic requests, the Company's agreements of cooperation were made
without prejudice to any jurisdictional claims relative to the
territorial status of waters. Thus, the assertion of any claim to
those waters or the assertion of any rights based on such claims is
not consistent with the diplomatic discussions relative to the
project.
During meetings held in Spain in February 2006 with the Spanish
Government, the Junta de Andalucia and the Government of the United
Kingdom, Odyssey agreed to re-submit an archaeological project plan
pursuant to specific requirements requested by Spanish authorities to
move the project forward. This plan, which would include collaboration
with Spanish archaeologists, will be delivered to the appropriate
authorities in March 2006.
Odyssey understands the geographic and political sensitivities
surrounding this project and is willing to go to great efforts to show
willingness to work in a cooperative fashion with all governments
involved. Both Odyssey and HMG have been assured by the Andalucian and
Spanish central government authorities that they will expeditiously
examine the archaeological project plan when it is re-submitted, in
order to allow Odyssey to proceed with the operation in a
collaborative manner.
As a Sovereign warship, the HMS Sussex remains the property of the
Government of the United Kingdom and has not been contested by the
Spanish government or other entities, to the Company's knowledge.
About Odyssey Marine Exploration
Odyssey Marine Exploration is an American Stock Exchange Company
with several shipwreck projects in various stages of development
throughout the world. Additional information about Odyssey, its
projects and archaeological methodologies, is available at
http://www.shipwreck.net.
For additional information, please contact John McNeilly,
Odyssey's Manager of Corporate Communications, at 813-876-1776 (ext.
2553).
Odyssey Marine Exploration believes the information set forth in
this Press Release may include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934. Certain factors that could cause results to
differ materially from those projected in the forward-looking
statements are set forth in "Risk Factors," and "Business" in the
Company's annual report on Form 10-K for the year ended December 31,
2005, which has been filed with the Securities and Exchange
Commission.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2005 2004
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,283,331 $ 3,050,721
Accounts receivable, net 1,527,913 2,104,914
Inventory 4,728,394 3,759,552
Deferred tax asset -- 1,651,604
Other current assets 729,678 640,150
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Total current assets 10,269,316 11,206,941
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PROPERTY AND EQUIPMENT
Equipment and office fixtures 10,745,738 6,612,764
Building and land 3,973,988 3,333,481
Accumulated depreciation (2,738,572) (1,328,202)
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Total property and equipment 11,981,154 8,618,043
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OTHER ASSETS
Inventory (non current) 5,839,914 5,945,177
Deferred tax asset -- 1,176,796
Attraction development 1,172,475 569,634
Other long term assets 927,599 404,209
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Total other assets 7,939,988 8,095,816
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Total assets $ 30,190,458 $ 27,920,800
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 601,129 $ 591,138
Accrued expenses 1,843,261 2,024,882
Mortgage and loans payable 111,433 173,700
Deposits 103,069 19,098
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Total current liabilities 2,658,892 2,808,818
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LONG TERM LIABILITIES
Mortgage payable 1,758,333 1,858,333
Deferred income from Revenue Participation
Certificates 887,500 887,500
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Total long term liabilities 2,645,833 2,745,833
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Total liabilities 5,304,725 5,554,651
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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 or outstanding -- --
Common stock - $.0001 par value;
100,000,000 shares authorized; 45,823,224
and 38,530,599 issued and outstanding 4,582 3,853
Additional paid-in capital 43,870,228 26,430,934
Unrealized gain on investments, net of tax -- 554
Accumulated deficit (18,989,077) (4,069,192)
------------ ------------
Total stockholders' equity 24,885,733 22,366,149
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Total liabilities and stockholders' equity $ 30,190,458 $ 27,920,800
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The accompanying notes are an integral part of these financial
statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
12 Month 10 Month 12 Month
Period Ended Period Ended Period Ended
December 31, December 31, February 29,
2005 2004 2004
------------ ------------ ------------
REVENUE $ 10,036,575 $ 17,622,092 $ 73,879
OPERATING EXPENSES
Cost of sales 1,098,014 1,883,912 --
Operations and research 11,294,015 1,962,186 2,590,666
Marketing, general &
administrative 9,294,056 5,072,681 2,620,180
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Total operating expenses 21,686,085 8,918,779 5,210,846
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INCOME (LOSS) FROM OPERATIONS (11,649,510) 8,703,313 (5,136,967)
OTHER INCOME OR (EXPENSE)
Interest income 57,882 6,011 23,958
Interest expense (121,439) (57,842) (109,227)
Other income 74,692 40,667 40,000
Revenue participation -- -- (12,986)
------------ ------------ ------------
Total other income or
(expense) 11,135 (11,164) (58,255)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES (11,638,375) 8,692,149 (5,195,222)
Income tax (provision)
benefit (3,281,510) (3,462,911) 5,762,103
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NET INCOME (LOSS) $(14,919,885) $ 5,229,238 $ 566,881
============ ============ ============
EARNINGS (LOSS) PER SHARE
Basic $ (.35) $ 0.14 $ 0.02
Diluted $ (.35) $ 0.13 $ 0.02
Weighted average number of
common shares outstanding
Basic 42,373,217 38,400,329 32,952,161
Diluted 42,373,217 40,254,049 34,278,545
The accompanying notes are an integral part of these financial
statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
12 Month 10 Month 12 Month
Period Ended Period Ended Period Ended
December 31, December 31, February 29,
2005 2004 2004
Preferred Stock - Shares
At beginning of year -- -- 1
Common stock issued for
conversion of Series C
Preferred stock -- -- (1)
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At end of year -- -- --
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Common Stock - Shares
At beginning of year 38,530,599 37,993,099 28,721,886
Common stock issued for
conversion of Series C
Preferred stock -- -- 400,000
Common stock issued for
cash 7,252,625 537,500 8,731,435
Common stock issued for
services 40,000 -- 139,778
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At end of year 45,823,224 38,530,599 37,993,099
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Common Stock
At beginning of year $ 3,853 $ 3,799 $ 2,872
Common stock issued for
conversion of Series C
Preferred stock -- -- 40
Common stock issued for
cash 729 54 873
Common stock issued for
services -- -- 14
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At end of year 4,582 3,853 3,799
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Paid-in Capital
At beginning of year 26,430,934 25,147,839 10,664,706
Common stock issued for
conversion of Series C
Preferred stock -- -- (40)
Common stock issued for
cash 16,848,083 1,030,259 14,109,564
Common stock issued for
services 100,000 -- 97,237
Stock options issued for
services 38,101 -- --
Tax benefit on exercised
employee stock options 453,110 252,836 276,372
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At end of year 43,870,228 26,430,934 25,147,839
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Accumulated Unrealized Loss
in Investment
At beginning of year 554 2,988 --
Net change in unrealized
gain on investments, net
of tax (554) (2,434) 2,988
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At end of year -- 554 2,988
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Accumulated Deficit
At beginning of year (4,069,192) (9,298,430) (9,865,311)
Net income (loss) (14,919,885) 5,229,238 566,881
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At end of year (18,989,077) (4,069,192) (9,298,430)
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Total shareholders' equity $ 24,885,733 $ 22,366,149 $ 15,856,196
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Comprehensive Income (Loss)
Net income (Loss) (14,919,885) 5,229,238 566,881
Net change in unrealized
gain on investments, net
of tax (554) (2,434) 2,988
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At end year $(14,920,439) $ 5,226,804 $ 569,869
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The accompanying notes are an integral part of these financial
statements.
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ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
12 Month 10 Month 12 Month
Period Ended Period Ended Period Ended
December 31, December 31, February 29,
2005 2004 2004
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $(14,919,885) $ 5,229,238 $ 566,881
Adjustments to reconcile net
income to net cash used by
operating activity:
Effect of unrealized gain on
investments -- (2,434) (1,877)
Tax benefit related to
exercise of employee
stock options 453,110 252,836 276,372
Common stock issued for
services 38,101 -- 124,750
Depreciation 1,445,551 362,114 380,013
Loss on disposal of
equipment 43,528 20,000 31,927
(Increase) decrease in:
Accounts receivable 210,004 (2,092,438) --
Inventory (717,110) (5,658,105) (4,049,689)
Advances, prepaids, deposits (687,797) (82,646) (475,295)
Deferred tax asset 2,828,400 3,208,198 (6,036,598)
Increase (decrease) in:
Accounts payable 9,988 (402,388) 953,372
Accrued expenses and other 319,041 1,926,773 189,625
------------ ------------ ------------
NET CASH PROVIDED (USED)IN
OPERATING ACTIVITIES (10,977,069) 2,761,148 (8,040,519)
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property,
equipment and improvements (1,869,532) (2,217,418) (3,607,691)
Attractions and exhibits (3,656,982) (569,634) --
Purchase of U.S. Treasury
bills -- -- (1,991,555)
Proceeds from sale of
equipment 49,647 -- --
Purchase of building and
land -- (1,333,481) --
------------ ------------ ------------
NET CASH USED IN INVESTING
ACTIVITIES (5,476,867) (4,120,533) (5,599,246)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from related party
loans receivable -- 292,627
Proceeds from issuance of
common stock 16,848,813 1,030,313 12,936,313
Proceeds from issuance of
loan payable 11,433 1,523,700 978,750
Proceeds from sale of
marketable securities -- 1,996,420 --
Repayment of note payable
to related party -- -- (2,144)
Repayment of loan payable -- (1,450,000) --
Repayment of mortgage payable (173,700) (41,667) --
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 16,686,546 3,058,766 14,205,546
------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 232,610 1,699,381 565,781
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,050,721 1,351,340 785,559
------------ ------------ ------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 3,283,331 $ 3,050,721 $ 1,351,340
------------ ------------ ------------
SUPPLEMENTARY INFORMATION:
Interest paid $ 119,174 $ 53,051 $ 11,229
Income taxes paid $ -- $ -- $ --
NON CASH TRANSACTIONS:
Depreciation reclassified
as inventory $ 72,912 $ 374,123 $ 115,235
Accrued compensation paid by
common stock $ 100,000 $ -- $ --
Accounts receivable paid by
services $ 317,350 $ 40,000 $ --
Building purchase paid
by mortgage loan $ -- $ 2,000,000 $ --
Loan principle converted to
common stock $ -- $ -- $ 1,032,750
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