News & Media
Odyssey Marine Exploration Announces Third Quarter 2005 Results
Michael V. Barton Named Interim CEO
Tampa, FL - November 10, 2005 - Odyssey Marine Exploration (AMEX: OMR), a leader in the field of deep-ocean shipwreck exploration, has filed a quarterly report with the Securities and Exchange Commission detailing results for the third quarter 2005.
In addition, the Company announced that the Odyssey Board of Directors has named Michael V. Barton to serve as Interim Chief Executive Officer, effective November 10, 2005. Barton, Odyssey's former Chief Financial Officer, will assume the duties of Chief Executive Officer while John Morris, Odyssey's President and CEO since the Company's inception, recovers from recent medical treatments.
Morris recently completed a series of treatments for a tumor in his neck. A full recovery is expected, but he will have difficulty speaking in the coming weeks which will impede his ability to carry out day-to-day duties as Chief Executive Officer. Morris will retain his position as Chairman of the Board and will remain active in the leadership and strategic direction of the Company.
"Temporarily stepping back from the day-to-day activities at Odyssey is difficult, but for the short term, it's in the best interest of the Company and my physical recovery," stated John Morris. "I'm confident that Mike Barton, Greg Stemm and our management team, will continue to move the Company forward during this period and I'm thrilled that Mike is re-joining Odyssey. I will continue to remain involved with Odyssey as Chairman of the Board and I expect to return as CEO within a few months."
Mike Barton served as Odyssey's CFO from May 2002 until May 2004, helping guide substantial growth in the Company's shareholder equity, earnings and entry onto the American Stock Exchange. Since that time, he has served as Managing Director of Intrust Advisors, LLC, and President of the Tampa Bay Estate Planning Council. From 1995 to May 2002 he was Vice President of the Wealth Management Group for First Union National Bank where he assisted high net worth clients with estate and business succession planning, investment strategies, and tax planning. Prior to that, Barton worked in the mutual fund industry as a Senior Compliance Officer and in public accounting. Barton received a B.S. in Business Administration and Master of Accountancy degrees from the University of South Florida.
"Balancing the needs of the Company while focusing on daily medical treatments have taken a lot out of John," commented Greg Stemm, Odyssey's co-founder. "We've had to push him to take some critical time to recover. Mike Barton's been through thick and thin with us, so the entire Odyssey team is delighted to have him back, even in a temporary position. We'll be consulting and talking with John regularly, and we'll continue to benefit from his guidance and leadership, but this arrangement will spare him the strenuous day-to-day activities of running a public company. All of us here at Odyssey wish him the best and offer our thoughts and prayers for a speedy recovery."
Third Quarter 2005 Results
Note: Due to a change in the Company's fiscal year effective December 31, 2004, the third quarter of our current fiscal year ends on September 30th, 2005, as compared to the third quarter 2004, which ended on November 30, 2004, during our prior fiscal year.
Odyssey reported third quarter 2005 revenue of $1.0 million, which was generated primarily through the sale of gold and silver coins recovered from the SS Republic shipwreck, but also includes other artifact and merchandise sales. Revenue for the third quarter 2004 was $6.3 million. In 2004, sales were made only through independent coin dealers. Revenues were significantly lower in 2005 versus 2004 due to a number of factors.
Odyssey continues to sell numismatic coins to independent coin dealers. During the third quarter 2005, however, the Company experienced a decrease in numismatic gold coin revenue, relative to 2004, due to a lower availability of high-value gold coins. The Company is also developing additional indirect sales channels to supplement its coin dealer network for non-graded gold, shipwreck-effect silver coins, and for other merchandise.
While significant revenue has not yet been realized from these new indirect sales channels, the Company is building additional distribution for Odyssey shipwreck products, which should begin producing revenue by early 2006.
Odyssey continues to develop retail distribution of coins through direct retail sales channels where gross margins are substantially higher. However, during the third quarter 2005, sales were lower than expected as the Company planned to obtain retail leads from the New Orleans attraction to supplement direct-response advertising. However, Hurricane Katrina closed down the Company's themed attraction, thereby preventing access to retail leads that would have been furnished to direct sales operations.
The Company is continuing to build a client base in its direct sales department and sales volumes will increase as Odyssey continues to expand book sales, direct-response print, television and radio marketing efforts, as well as leads generated by themed attractions and other shipwreck marketing activities.
Operations and research expenses for the third quarter of 2005 were $3.8 million, compared to $.7 million for third quarter 2004. Of the $3.1 million increase, $2.3 million was related to vessel costs - with $1.6 million due to recovery costs associated with the "Atlas" search project not being capitalized during 2005, and an additional $.7 million attributable to charter costs for search operations also related to the "Atlas" search.
In addition $.8 million of the increase was due to start-up operations in our themed attractions group.
Marketing, general and administrative expenses were $2.3 million in 2005 as compared to $1.4 million in 2004. The Company continued the expansion of its corporate support infrastructure to execute its business plan. This includes the continued development of search and recovery projects and the expansion of marketing and sales initiatives associated with developing direct sales channels.
Of the $.9 million increase, $.5 million resulted from expansion of marketing and sales functions associated with the development of direct sales programs. Additionally, $.2 million was related to the themed attractions group and $.2 million was attributable to general and administration expenses, including information technology, and professional and audit services related primarily to the implementation of Sarbanes-Oxley
Cost of sales consists of shipwreck recovery costs, grading, conservation, packaging, and shipping costs associated with artifact, merchandise and book sales. Cost of sales as a percentage of revenue for 2005 and 2004 was 19% and 5%, respectively. The lower cost of sales percentage in 2004 is attributable to a higher sales mix of gold coins.
The Company reported a net loss of $3.1 million for the third quarter of 2005 compared to net income of $2.4 million in the third quarter 2004. The net loss per share for the third quarter of 2005 was $.07, compared to earnings of $.06 per share in the third quarter 2004.
Increased expenses and reduced revenue involved in executing the Company's long-term business strategy contributed to the reduction in income and EPS.
ADDITIONAL DEVELOPMENTS AND PLANS
The Company held the grand opening of its first themed attraction, Odyssey's Shipwreck & Treasure Adventure, on August 27, 2005, at the Jax Brewery complex in the French Quarter of New Orleans. The attraction was closed early on the grand opening day due to Hurricane Katrina. The Jax Brewery building in which the attraction resides remains closed.
Odyssey has been informed by the building manager that the building will remain closed while loss consultants determine the extent of property damage and make necessary repairs due to the storm damage. There was no flooding in the immediate area. The Odyssey attraction sustained minimal damage and the Company was able to safely remove all irreplaceable artifacts and valuables including all coins and other high-value items.
Odyssey carries $4.5 million of insurance coverage for the attraction including property and business income. The Company has reserved $91,000 representing the deductible portion of estimated damages to property and equipment. Odyssey is currently evaluating business alternatives for the New Orleans attraction. The Company also has a second attraction in development with plans to roll out in 2006.
In addition, Odyssey's Shipwreck Heritage Press subsidiary, delivered its hard-cover publication of Lost Gold of the Republic: The Remarkable Quest for the Greatest Shipwreck Treasure of the Civil War Era, to bookstores nationwide. The book, which details the Company's search for and excavation of the SS Republic, has garnered positive reviews in several publications, including the Associated Press, which called it "a splendid book." An aggressive media campaign is currently underway to promote the book to audiences nationwide.
QUARTERLY OPERATIONAL REVIEW
The Company also announced that 2005 operations on the "Atlas" search project will be suspended through the winter months due to inclement weather while the Odyssey Explorer is deployed to the Western Mediterranean to begin operations on HMS Sussex.
The "Atlas" project is believed to be the most extensive shipwreck search operation ever launched and is utilizing the Odyssey Explorer deploying the Remotely Operated Vehicle (ROV) ZEUS for target inspection and artifact recovery, and a second search ship using a new, advanced side-scan system to search the ocean bottom. A minimum of five high-value shipwrecks are believed to be in this search area.
The 2005 search operations, which were initially announced May 4th, have resulted in the mapping of over 4,600 square miles of the search area. Results include the discovery of 2,421 anomalies on the sea floor using an advanced high-resolution side-scan sonar system. After post-processing data, over 1,100 of those anomalies were selected for possible further examination. Of those, 577 sites have been inspected and at least 180 are believed to be man-made 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" search project. Odyssey is currently analyzing high-definition video, digital photos and collected artifacts to determine the potential identity, cultural significance, and economic value of the inspected sites. 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 Odyssey Explorer, Odyssey's 251-foot deep-ocean archaeological platform is currently being mobilized to resume operations on the shipwreck believed to be HMS Sussex. While en route to the Western Mediterranean, the Odyssey Explorer may spend several additional days inspecting targets discovered during the "Atlas" search, weather conditions permitting.
Sussex operations are expected to commence shortly after the Odyssey Explorer reaches the Western Mediterranean.
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 methodologies, is available at www.shipwreck.net.
For additional information, please contact John McNeilly, Odyssey's Manager of Corporate Communications, at 813-876-1776.
The Company 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 10KSB/A for the year ended December 31, 2004, which has been filed with the Securities and Exchange Commission.
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