Tampa, FL – November 9, 2011 – Odyssey Marine Exploration, Inc. (NasdaqCM: OMEX), a pioneer in the field of deep-ocean exploration, today reported results for the third quarter ended September 30, 2011.
For the third quarter of 2011, Odyssey reported revenue of $5.9 million, compared to $9.8 million in the third quarter of 2010 and operating expenses of $9.9 million in the third quarter of 2011 compared to $8.8 million in the comparable period in 2010. Odyssey also reported a net loss of $5.1 million, compared to a net loss of $1.3 million in 2010. The net loss per share for the third quarter was $0.07, compared to a net loss of $0.02 per share in the third quarter of the prior year.
“Locating and positively identifying the SS Gairsoppa was one of our key operational objectives for the quarter. We achieved and exceeded that goal, maximizing company resources to locate a second site, the SS Mantola. We are now preparing and acquiring the resources and technology needed for a spring 2012 recovery of the reported silver cargoes of these ships, which combined is expected to be up to 7.6 million ounces,” said Mark Gordon, Odyssey President and Chief Operating Officer.
“Rather than syndicating the Gairsoppa and Mantola projects, which would have increased revenue during the period, we funded these internally, which we expect will result in greater returns for our shareholders. In order to expedite results, we chartered a deep-ocean search vessel to assist in the search, which resulted in higher operational expenses, but also resulted in two significant discoveries for our shareholders,” said Greg Stemm, Odyssey CEO. “We are continuing to carefully manage our cash flow while ensuring that we have the right equipment and technology to conduct a successful recovery on the Gairsoppa and Mantola beginning next Spring. In addition to those two precious metals recoveries, we are also planning the excavation of one of our confirmed high-value targets during the coming year. We plan on commencing that project once our legal rights have been confirmed, which we anticipate happening in the coming months.
THIRD QUARTER 2011 RESULTS
The majority of the $5.9 million in revenue was generated through expedition charters with $5.3 million generated from subsea mining exploration work for Neptune Minerals. The decrease in total revenue of $3.9 million was primarily related to a decrease in expedition charter revenue of $4.1 million partially offset by an increase in artifact sales and exhibit revenue of $200,000. The decrease in expedition charter revenue was associated with an increase in subsea mineral mining charters ($300,000) offset by a reduction syndicated shipwreck project revenue ($2.2 million) and other miscellaneous government and commercial charter revenue ($2.2 million).
During the three-month period ended September 30, 2011, the Company realized an increase in artifact sales of $200,000 versus 2010 primarily due to the addition of a major new distributor in the first quarter 2011 and increased marketing efforts.
Operations and research expenses were $7.5 million in 2011 as compared to $6.6 million in 2010. The $900,000 increase was primarily due to marine operations, vessel and research expenses. The Ocean Alert was sold in October 2011 for $ 500,000 resulting in a $600,000 charge to operations and research in the third quarter 2011. The sale of the ship will eliminate over $400,000 in expenses per quarter.
Cost of sales increased by $100,000 in the third quarter of 2011 compared to the 2010 period due to an additional volume of approximately 280 silver coins sold.
Marketing, general and administrative expenses were $2.3 million in 2011 as compared to $2.2 million in 2010. The increase of $100,000 primarily represented an increase in loan origination fees related to the Company’s term loan and shareholder maintenance expenses due to an increase in shares in 2011.
QUARTERLY OPERATIONAL UPDATE
Odyssey has numerous shipwreck projects in various stages of development around the world. In order to protect the targets of our planned search or recovery operations, in some cases Odyssey will defer disclosing specific information relating to the Company’s projects until Odyssey has located a shipwreck or targets of interest and determined a course of action to protect the Company’s property rights.
Additional information regarding announced projects may be found in Odyssey’s Annual Report on Form 10-K for the year ended December 31, 2010 and Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011. Only projects with material status updates since those reports were filed are discussed below. Odyssey may have other projects in various stages of planning or execution that may not be disclosed for security or legal reasons until considered appropriate by management. Odyssey may use its owned vessel, the Odyssey Explorer, or chartered vessels to conduct operations based on availability.
“Atlas” Search Project
Between 2005 and 2011, Odyssey searched more than 5,000 square nautical miles of seabed in the western English Channel and the Western Approaches to the Channel, recording approximately 300 shipwrecks. The shipwrecks discovered include site “35-F,” the Marquise de Tornay, and HMS Victory (1744) as well as other identified and unidentified shipwrecks. Additional high-value targets are believed to be within the “Atlas” search area.
Operations in the “Atlas” search area during the quarter included additional search, inspection and verification work on several targets.
HMS Victory Project
Odyssey discovered and conducted a preliminary investigation of the shipwreck of Admiral Balchin’s HMS Victory (which sank in 1744) during the Company’s 2008 “Atlas” season. HMS Victory was the inspiration for and direct predecessor to Nelson’s Victory and was the mightiest and most technically advanced vessel of her age.
We have been cooperating closely with the United Kingdom (UK) Ministry of Defence (the “MOD”) on the project. All activities at the site, including the recovery of two bronze cannon, have been conducted in accordance with protocols approved by the UK Government (UKG) and Royal Navy officials. The Victory discovery was announced publicly February 2, 2009. On September 18, 2009, Odyssey announced an agreement with the UKG on an 80% salvage award for the cannon recovered from the site.
The UKG (MOD and Department for Culture, Media and Sport) held a Public Consultation on options for the management of the wreck site of HMS Victory and the results of that consultation were published on July 19, 2011. The report concludes it is unlikely public funds can be made available to support the project therefore other funding options must be explored. The UKG has decided to place responsibility for future management of the site on a charitable trust. Odyssey intends to keep open the offer made to the UK Government and/or charitable trust pending final disposition of the shipwreck.
After notification and agreement with the UK Ministry of Defence, Odyssey conducted a reconnaissance of the site in April 2011 and in October 2011 and discovered additional damage to the site. A full report on the Company’s findings has been provided to the MOD. Odyssey is continuing negotiations for the excavation and recovery of artifacts believed to be at risk on the site consistent with the archaeological principles of the United Nations Educational Scientific and Cultural Organization’s (UNESCO) Convention for the Protection of Underwater Cultural Heritage (“CPUCH”).
Robert Fraser Projects (“Enigma II,” “Firebrand,” “Shantaram”)
Odyssey executed agreements in 2010 with clients of Robert Fraser & Partners LLP (RFP) for three shipwreck search projects code named “Firebrand,” “Shantaram” and “Enigma II.”
Two of the three “Robert Fraser Marine” search projects conducted in 2010 moved into the “verification” phase. Based on preliminary results, there is evidence suggesting that at least one of the target shipwrecks has been located. Agreements for both of these projects have been executed and funded. Marine operations on one of these verification projects took place during the second and third quarter. Data is being evaluated and when complete, a full report on the findings will be prepared for clients of Robert Fraser and Partners, who will determine next steps, if any, on the sites discovered and documented.
To protect the security of the operations and search areas, specific location details for “Enigma,” “Firebrand” and “Shantaram” are not being released at this time.
SS Gairsoppa Project
On January 25, 2010, Odyssey was awarded the exclusive salvage contract for the cargo of the SS Gairsoppa by the United Kingdom (UK) Government Department for Transport. The contract was awarded after a competitive bid process and is scheduled to expire in January 2013.
The SS Gairsoppa was a 412-foot steel-hulled British cargo ship that was torpedoed by a German U-boat in February 1941 while enlisted in the service of the United Kingdom (UK) Ministry of War Transport. Contemporary research and official documents indicate that the ship was carrying £600,000 (1941 value) or up to 7 million total ounces of silver, including over 3 million ounces of private silver bullion insured by the UK government
Under the contract, Odyssey assumes the risk, expense, and responsibility for the search, cargo recovery, documentation, and marketing of the cargo. If the salvage is successful, Odyssey will retain 80% of the net salved value of the silver recovered under the contract. This project aligns with the Company’s strategy to focus on partnership projects with several governments that provide straightforward legal ownership arrangements.
In June 2011, Odyssey executed a charter agreement to utilize the Russian Research Vessel Yuzhmorgeologiya to conduct search operations for the SS Gairsoppa. Search operations began in July 2011.
On September 26, 2011, Odyssey announced the Company confirmed the identity and location of the SS Gairsoppa. Odyssey is currently specifying, acquiring and assembling the tools and equipment for the salvage, and anticipates that operations will begin in the spring as soon as the weather window begins to open up in the North Atlantic.
SS Mantola Project
On October 10, 2011, Odyssey announced the discovery of the SS Mantola, which sank on February 9, 1917, after being torpedoed by German submarine U-81. Odyssey discovered the shipwreck approximately 2,500 meters beneath the surface of the northern Atlantic Ocean, approximately 100 miles from the SS Gairsoppa shipwreck.
In 1917, the British Ministry of War Transport paid a War Risk Insurance Claim for £110,000 (in 1917 value) for silver that was on board the Mantola when she sank. This sum would equate to more than 600,000 ounces of silver based on silver prices in 1917. In September 2011, the UK Government Department for Transport awarded Odyssey a salvage contract for the cargo of the SS Mantola. Under the agreement, Odyssey will retain 80% of the net salved silver value recovered.
Odyssey is planning to conduct the recovery expedition in conjunction with the SS Gairsoppa recovery.
Subsea Mineral Mining and Exploration Project
The Dorado Discovery completed charter work conducting geological exploration services to Neptune Minerals, Inc. (“Neptune” or “NMI”) to explore NMI’s South Pacific tenement areas. The 100-day charter concluded in October 2011. The charter was valued at $6.9 million representing both cash and additional equity in Neptune. This expedition documented several new discoveries of SMS deposits with assay results indicating substantial incidence of high grade gold, silver, zinc and copper ore.
The charter agreement has generated positive cash flow for Odyssey and has also allowed the Company to acquire additional equity at attractive valuations. To date Neptune has been successful in attracting the investment capital required to fund mineral exploration expeditions and to facilitate its path to commercially viable ore extraction. At September 30, 2011, Odyssey owned 6,146,600 shares (approximately 33% of NMI). Subsequent to September 30, 2011, NMI was in the process of a private offering for two million Class B common shares at $7.50 per share.
As a result of Odyssey’s operational success on the Dorado and Neptune projects, the Company is also currently negotiating projects with several other companies who requested Odyssey’s technical and operational assistance on ocean mining projects in various parts of the world.
About Odyssey Marine Exploration, Inc.
Odyssey Marine Exploration, Inc. (Nasdaq:OMEX) is engaged in deep-ocean exploration using innovative methods and state-of-the-art technology. The Company is a world leader in shipwreck exploration, conducting extensive search and archaeological recovery operations on deep-ocean shipwrecks around the world. Odyssey also has a minority ownership stake in Neptune Minerals, a company focused on discovering and commercializing high-value mineral deposits from the ocean floor. Odyssey also provides contracting services, including proprietary deep-ocean expertise and equipment, to governments and companies around the world.
Odyssey recently located the shipwreck of the SS Gairsoppa, which sank in 1941 carrying a reported cargo of up to seven million ounces of silver. The company has also recently announced the discovery of the shipwreck of the SS Mantola which sank in 1917 with an estimated 600,000 ounces of silver on board. The Company also discovered the Civil War-era shipwreck of the SS Republic® in 2003 and recovered over 50,000 coins and 14,000 artifacts from the site nearly 1,700 feet deep. In May 2007, Odyssey announced the historic deep-ocean treasure recovery of over 500,000 silver and gold coins, weighing 17 tons, from a Colonial-era site code-named "Black Swan." In February 2009, Odyssey announced the discovery of Balchin's HMS Victory. Odyssey also has other shipwreck projects in various stages of development around the world.
Odyssey offers various ways to share in the excitement of deep-ocean exploration by making shipwreck treasures and artifacts available to collectors, the general public and students through its webstore, exhibits, books, television, merchandise, educational programs and virtual museum located at www.odysseysvirtualmuseum.com.
Odyssey's shipwreck operations are the subject of a Discovery Channel television series titled "Treasure Quest," produced by JWM Productions. The 12-episode first season aired worldwide in 2009.
Following previous successful engagements in New Orleans, Tampa, Detroit, Oklahoma City, Charlotte, Baltimore and Sarasota, Odyssey's SHIPWRECK! exhibit is now open at the Witte Museum in San Antonio.
For details on Odyssey's activities and its commitment to the preservation of maritime heritage please visit www.shipwreck.net.
For consolidated financial statements as well as the full filing, please go to: http://www.sec.gov/Archives/edgar/data/798528/000119312511304790/d223020d10q.html