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Odyssey Marine Exploration Inc. Reports Operating Results (10-Q)

August 07, 2009 | About:
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Odyssey Marine Exploration Inc. (OMEX) filed Quarterly Report for the period ended 2009-06-30.

Odyssey Marine is in the field of deep ocean shipwreck exploration. Odyssey Marine Exploration Inc. has a market cap of $99.4 million; its shares were traded at around $1.87 with and P/S ratio of 24.2.

Highlight of Business Operations:

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 $2.2 million in 2009 as compared to $2.4 million in 2008. The decrease of $.2 million was primarily attributable to lower outside professional service and legal expenses.

Marketing, general and administrative expenses were $4.8 million in 2009 as compared to $5.7 million in 2008. The decrease of $.9 million was primarily attributable to lower employee-related expenses ($.7 million) including contract labor, bonus accruals and share-based compensation, and lower outside professional service and legal expenses.

Net cash used in operating activities for the first six months of 2009 was $8.3 million. This amount primarily reflected an operating loss of $10.3 million and non-cash items including depreciation and amortization ($1.2 million) and share based compensation ($1.2 million), a decrease in inventory, restricted cash and other assets ($.5 million), offset by a decrease in accounts payable and accrued expenses ($.9 million). Net cash used in operating activities in the first six months of 2008 was $11.4 million. This amount primarily reflected an operating loss of $12.2 million offset in part by non-cash items including depreciation and amortization ($1.4 million) and share based compensation ($1.3 million), and a net decrease in working capital (net $1.9 million) primarily attributable to a decrease in accrued expenses ($1.7 million) and an increase in restricted cash ($.5 million) required by our new credit facility.

Cash flows used in investing activities was $.4 million for the first six months in 2009 which primarily reflected the purchase of property and equipment for our marine operations group which included extensive capitalized upgrades to the Ocean Alert ($.3 million). Cash used in investing activities in 2008 of $1.2 million primarily reflected the purchase of vessel-related property and equipment of $1 million which included capitalized maintenance for extensive engine repairs and upgrades to the Ocean Alert of $.5 million, and the purchase of a building, used primarily as a conservation lab and storage facility, for $1.0 million of which we financed $.8 million (net $.2 million).

Cash flows provided by financing activities for the first six months of 2009 were $5.8 million which included $5.1 million proceeds from the issuance and sale of common stock in May 2009 and $.8 million proceeds from the exercise of warrants to purchase preferred stock in the first quarter. Cash flows provided by financing activities for the first six months of 2008 were $.4 million. This included repayment of our building mortgage and equipment loan payable with Mercantile Bank ($3.1 million) due to our new credit facility with Fifth Third Bank, offset by proceeds from the issuance of common stock and exercise of warrants ($1.0 million) and proceeds from our revolving line of credit ($2.5 million). In July 2008 we replaced the building mortgage with Fifth Third Bank.

At June 30, 2009, we had cash and cash equivalents of $7.9 million, a decrease of $2.9 million from the December 31, 2008, balance of $10.7 million. Based upon our current expectations, we believe our cash and cash equivalents, cash generated from operations and existing credit facility will be sufficient to fund working capital requirements through the remainder of 2009. Our capacity to generate net income in future periods is dependent upon our success in recovering and monetizing high-value shipwrecks as well as the coins and artifacts from previous operations including the SS Republic and our ability to generate income from marketing products from other companies’ projects. While we have recovered more than 17 tons of silver coins and hundreds of gold coins and other artifacts from the “Black Swan” project, we will not have the ability to immediately monetize any recovered cargo until or if we receive title or a salvage award from the U.S. District Court. At the present time, we cannot determine how long that process may take. We have also identified at least one additional potential high value target, however until we successfully recover and acquire title to coins and artifacts, we will not be able to monetize any of this cargo in the short term. If cash flow is not sufficient to meet our projected business plan requirements, we will be required to raise additional capital in 2009 and beyond or curtail expenses. While we have been successful in raising the necessary funds in the past, there can be no assurance that we can continue to do so.

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