Odyssey Marine Exploration Announces 2005 Financial Results

[EZ_E]

With $1000 bottles and sea damaged half dollars selling for the same, I find it hard to believe that they had such heavy losses. The main losers were those paying a thousand bucks for a fifty dollar coin.

 

 

Odyssey Marine Exploration Announces 2005 Financial Results

 

Tampa, FL - March 14, 2006 - 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.

 

REVENUE

 

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.

 

EXPENSES

 

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.

 

NET LOSS

 

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.

 

ANNUAL OPERATIONAL OVERVIEW

 

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 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 www.shipwreck.net.

[HaydenTubbs]

It was worth more than $50

[EZ_E]

It was worth more than $50

 

Would you pay more than fifty dollars for a damaged, common date Seated Liberty half??

[Hoot]

... The service that the explorations do for archaeology is more valuable than the monetary recovery. But hey, I'm a scientist.

 

hoot

[HaydenTubbs]

It was worth more than $50

 

Would you pay more than fifty dollars for a damaged, common date Seated Liberty half??

 

Yes