Tampa, FL ? November 10, 2008 - Odyssey Marine Exploration, Inc. (NasdaqCM: OMEX), the world leader in the field of deep-ocean shipwreck exploration, today filed a quarterly report with the Securities and Exchange Commission detailing results of the Company's third quarter 2008.
For the third quarter of 2008, Odyssey reported revenue of $2.2 million, compared to $1.3 million in the third quarter 2007. The Company also reported a net loss of $6.5 million, compared to a net loss of $5.4 million in the third quarter 2007. The net loss per share for the third quarter 2008 was $.13, compared to a net loss of $.11 per share in the third quarter 2007.
"We are very happy with our results so far this year. We have had some significant operational challenges during the third quarter, but we have seen our offshore team step up in a big way that has yielded some really promising results. During this season, we located and tentatively identified at least one of our targeted high-value shipwrecks. We also mapped a huge new area of seabed and filed admiralty arrests on four separate sites. The JWM Production crew has followed our teams offshore and onshore, and we are looking forward to the launch of the Discovery Channel primetime series in early 2009. While our vessels, the Odyssey Explorer and Ocean Alert, are both preparing for scheduled repairs and five year surveys in drydock during the winter months, we plan to continue work with a chartered ship during the winter months. We are looking forward to filing our response to Spain's motion in the "Black Swan" case and we're hopeful that the case can then move forward. All in all, we are in great shape as we move into the final quarter of 2008 and are solidifying our position as the world's leading shipwreck exploration company," said Greg Stemm, Odyssey Chief Executive Officer.
THIRD QUARTER 2008 RESULTS
Revenue
Revenue is generated through the sale of coins, artifacts, merchandise, themed attractions, and beginning in the second quarter of 2008, expedition charter revenue associated with the production of a shipwreck exploration television series. The increase in revenue of $.9 million is primarily related to expedition charter revenue from the television series ($1.4 million) offset in part by fewer coins sold in 2008 versus the same period in 2007. With the SS Republic gold inventory sold out, except for a small quantity of high grade coins, we continue to develop the SS Republic coin products to sustain demand until we are able to offer a more diverse product line with new shipwreck products and stories.
An agreement was negotiated during third quarter 2008 with Arqueonautas Worldwide for the exclusive worldwide marketing rights to the collectible quality coins from their S?o Jos? shipwreck project. These coins have not been available for sale previously and we are marketing them through our authorized distributors. This project is expected to generate revenue through sales commissions beginning in the fourth quarter 2008 and has allowed us to expand our distribution network with new product to prepare for future Odyssey shipwreck products and stories.
Expenses
Cost of sales consists of shipwreck recovery costs, grading, conservation, packaging, and shipping costs associated with artifact and merchandise sales. The primary cost component is from the sale of coins. Cost of sales for coins decreased $.2 million for 2008 versus 2007 primarily because of fewer coins sold in 2008. There is no cost of sales component associated with the themed attraction and expedition charter revenues.
Marketing, general and administrative expenses primarily include all costs within the following departments: Executive, Finance & Accounting, Legal, Information Technology, Human Resources, Marketing & Communications, Sales and Business Development. Marketing, general and administrative expenses were $2.5 million in 2008 as compared to $2.8 million in 2007. The decrease of $.3 million was primarily attributable to lower advertising and commissions related to the restructure of our direct sales program with our direct marketing partner.
Operations and research expenses primarily include all costs within the following departments: Archaeology, Conservation, Research, and Marine Operations which include all vessel operations. Operations and research expenses were $6.1 million in 2008, compared to $3.5 million in 2007. The $2.6 million increase was primarily due to increased vessel operating expenses primarily related to additional ship charters utilized to supplement our operating schedule in the "Atlas" search area while the Ocean Alert was undergoing repairs ($1.8 million), higher vessel fuel costs ($.4 million) and vessel repairs and maintenance expenses ($.4 million).
QUARTERLY OPERATIONAL UPDATE
We have numerous shipwreck projects in various stages of development around the world. In order to protect the identities of the targets of our planned search or recovery operations, in some cases we will defer disclosing specific information relating to our projects until we have located a shipwreck or shipwrecks of interest and determined a course of action to protect our property rights.
Additional information regarding projects discussed below may be found in our Annual Report on Form 10-K for the year ended December 31, 2007, and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008. Only projects with status updates since these reports were filed will be discussed herein.
Equipment
Our 251' deep-ocean archaeological platform, Odyssey Explorer, recently completed its planned 2008 season work in the "Atlas" search area, which included extensive search, inspection and preliminary excavation activities as well as serving as the primary filming platform for a television series expected to be broadcast on the Discovery Channel beginning in early 2009 (additional information below). The ship is now being prepared for her five year Special Survey plus repairs and modifications, which will necessitate a dry dock period. Although the Special Survey was not due until spring, the survey and dry dock were scheduled over the winter months to maximize operational opportunities around anticipated weather conditions.
Our vessel, the Ocean Alert, has completed an extensive overhaul of engines and other equipment which took longer than expected. The engines have now been tested successfully and the ship has made a transit to Hull, England where she is scheduled for a dry dock period to meet her five year class survey requirements, scheduled to be completed by early 2009. During the period that the Ocean Alert was not operational, the company utilized various different charter vessels to conduct search operations, so our search capability was not hampered by the work done on the Ocean Alert.
Operations in the "Atlas" search area and other areas are continuing with a chartered vessel which has dynamic positioning capability and can be configured for both search and recovery operations.
2008 Operations and "Atlas" Project
During the 2008 operations season, we located and tentatively identified at least one of our targeted high value shipwrecks. Additional information will be released after positive identification and/or pursuant to completion of negotiations with potential claimants.
The Odyssey crews were accompanied by television production crews from JWM Productions during the 2008 season to produce an 11-episode prime-time television series for Discovery Channel, scheduled to air worldwide beginning in early 2009. JWM has exclusive access to film Odyssey's operations and at other Odyssey controlled locations as needed for JWM to complete filming for the series. JWM also has limited use of our resources for production of the series.
Revenue generated to date by the production of this television series is included with the quarterly and year-to-date revenue discussed in the "Results of Operations" section. In addition to revenue generated from the production of the series, we anticipate that we will benefit from the brand building and exposure generated by the show, which features Odyssey's offshore operations and shipwreck discoveries.
The "Atlas" Project encompasses a minimum of five high-value targets within a search area covering more than 5,000 square miles. We conducted operations in this search area during the 2005, 2006 and 2008 seasons. Results to date in the "Atlas" search area include the discovery of three Colonial period shipwreck sites containing cannon which are the subject of Admiralty arrests filed by Odyssey. The first site was located and arrested in 2006. Admiralty arrests were filed in May 2008 on the two additional cannon sites discovered in 2008. For additional information refer to the "Admiralty Legal Proceedings" section of our 10-Q.
Two Admiralty arrests were also filed on shipwrecks located in the northern Atlantic Ocean west of the western approaches to the English Channel in November 2008. For more information refer to the "Admiralty Legal Proceedings" section of our 10-Q.
"Black Swan" Project
The "Black Swan" is a Colonial period site we discovered during 2007 in the Atlantic Ocean. The Company recovered over 500,000 silver coins weighing more than 17 tons, hundreds of gold coins, worked gold and other artifacts from this site.
We have taken great care to archaeologically document this site and to carefully conserve and record all artifacts to the highest professional standards. The site which is primarily comprised of cargo spread over a large area does not contain an actual vessel or shipwreck. There are no signs of human remains at the site; however, the site is being treated with the utmost respect. We believe it is important to keep the location of the site confidential to protect the integrity of the site.
We have indicated that no actual ship or vessel has been found at the site. One working hypothesis put forth by us is that a vessel related to the cargo found at this deep-water site may be the Nuestra Se?ora de las Mercedes (the "Mercedes"), sunk in 1804 while carrying mostly private merchant cargo. The Kingdom of Spain, which has filed a claim in this case, stated in court documents their belief that the site in question is definitely the Mercedes.
The recovered cargo and artifacts were brought to the United States under an Admiralty arrest action and we have been appointed Substitute Custodian by the federal US District Court. For additional information refer to the "Admiralty Legal Proceedings" section of our 10-Q.
North Carolina Project
We reached an agreement with shipwreck exploration firm Intersal, Inc. to pursue operations at a site off the coast of North Carolina.
Intersal holds an exploration permit from the North Carolina Department of Cultural Resources, which includes the site and additional surrounding areas, some of which correlate with Odyssey's "Firefly" shipwreck project. Odyssey and Intersal are committed to continuing Intersal's policy of maintaining high archaeological standards and close co-operation with the North Carolina State Government.
The agreement also entitles Odyssey to share in substantial research and data acquired by Intersal over the years relating to the target shipwreck and the work completed to date in the permit area. A number of artifacts have been recovered from the site, which is the subject of an admiralty arrest action by Intersal in the Eastern District of North Carolina. Documents are being prepared to request the substitution of Odyssey as Plaintiff in the case. By taking over the arrest, Odyssey will assume certain rights and obligations associated with continuing operations at the site.
The area covered by this permit and arrest is located near Odyssey's current "Firefly" project, which was acquired by Odyssey from BDJ Discovery Group in 2007 and includes one arrested site that has already produced a small number of gold and silver artifacts. This new Intersal site and permit area may also be related to the high-value, Colonial-era merchant vessel believed to be located in the area. The agreements with BDJ and Intersal are similar but separate and the areas do not overlap.
Plans are being developed to resume work in both areas in 2009.
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