UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended JuneSeptember 30, 2010

or

For the transition period from            to            

Commission File Number 001-31895

ODYSSEY MARINE EXPLORATION, INC.

(Exact name of registrant as specified in its charter)

5215 W. Laurel Street, Tampa, Florida 33607

(Address of principal executive offices) (Zip code)

(813) 876-1776

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes  ¨     No  x

The number of outstanding shares of the registrant’s Common Stock, $.0001 par value, as of August 5,November 1, 2010, was 66,770,926.

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited

The accompanying notes are an integral part of these financial statements.

ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited

The accompanying notes are an integral part of these financial statements.

ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -– BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Odyssey Marine Exploration, Inc. and subsidiaries (the “Company,” “Odyssey,” “us,” “we” or “our”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in financial statements prepared in accordance with generally accepted accounting principles. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

In the opinion of management, these financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position as of JuneSeptember 30, 2010, and the results of operations and cash flows for the interim periods presented. Operating results for the six-monthnine-month period ended JuneSeptember 30, 2010, are not necessarily indicative of the results that may be expected for the full year. We have evaluated subsequent events for recognition or disclosure through the date this Form 10-Q is filed with the Securities and Exchange Commission.

NOTE B -– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding our financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity, and have prepared them in accordance with our customary accounting practices.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Odyssey Marine Services, Inc., OVH, Inc., Odyssey Retriever, Inc. and Odyssey Marine Entertainment, Inc. All significant inter-company transactions and balances have been eliminated. Equity investments in which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method.

Shipwreck Heritage Press, LLC was organized during 2005 to publish and distribute print media. The entity does not have any current activity and has not been capitalized, and therefore, it is not consolidated.

Use of Estimates

Management used estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

Reclassifications

At December 31, 2009, a deferred revenue balance of $1,257,453 was included in the accrued expenses and other balance of $3,390,450. In the December 31, 2009 balance sheet presented, the deferred revenue balance has been reclassified into its own account to fairly present the balance sheet when compared to future periods.account. This reclassification has no effect on net income for the fiscal year ended December 31, 2009.

Revenue Recognition and Accounts Receivable

Revenue from product sales is recognized at the point of sale when legal title transfers. Legal title transfers when product is shipped or is available for shipment to customers. Exhibit or expedition revenue is recognized based upon the accrual method of accounting supported by contractual terms of an agreement. Bad debts are recorded as identified, and no allowance for bad debts has been recorded. A return allowance is established for sales which have a right of return. Accounts receivable is stated net of any recorded allowance for returns, if any.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash include cash on hand and cash in banks. We also consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, prepaid expense, accounts payable, accrued expense, loan payable and mortgage payable approximate fair value. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that we could realize in a current market exchange.

Inventory

Our inventory consists mainly of artifacts recovered from the SSRepublic shipwreck as well as general branded merchandise and related packaging material. The value of recovered artifacts in inventory is comprised of the costs of recovery and conservation. Costs of recovery include direct operating costs such as vessel and related equipment operations and maintenance, crew and technical labor, fuel, provisions and supplies, port fees and depreciation. The SSRepublic recovery costs also include the fee paid to an insurer to relinquish the insurer’s claim to the artifacts recovered from the shipwreck. Conservation costs include fees paid to conservators for cleaning and preparing the artifacts for sale. We continually monitor the recorded aggregate costs of the artifacts in inventory to ensure these costs do not exceed the net realizable value. Historical sales, publications or available public market data are used to assess market value.

Packaging materials and merchandise are recorded at average cost. We record our inventory at the lower of cost or market.

Long-Lived Assets

Our policy is to recognize impairment losses relating to long-lived assets in accordance with the Accounting Standards Codification (“ASC”) topic for Property, Plant and Equipment. Decisions are based on several factors, including, but not limited to, management’s plans for future operations, recent operating results and projected cash flows.

Comprehensive Income

Securities with a maturity greater than three months from purchase date are deemed available-for-sale and carried at fair value. Unrealized gains and losses on these securities are excluded from earnings and reported as a separate component of stockholders’ equity. At JuneSeptember 30, 2010, we did not own securities with a maturity greater than three months.

Property and Equipment and Depreciation

Property and equipment is stated at historical cost. Depreciation is provided using the straight-line method at rates based on the assets’ estimated useful lives, which are normally between three and ten years. Leasehold improvements are amortized over their estimated useful lives or lease term, if shorter. Major overhaul items (such as engines or generators) that enhance or extend the useful life of vessel related assets qualify to be capitalized and depreciated over the useful life or remaining life of that asset, whichever is shorter. Certain major repair items required by industry standards to ensure a vessel’s seaworthiness also qualify to be capitalized and depreciated over the period of time until the next scheduled planned major maintenance for that item. All other repairs and maintenance are accounted for under the direct-expensing method and are expensed when incurred.

Earnings Per Share

Basic earnings per share (EPS) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if dilutive securities and other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in our earnings. We use the treasury stock method to compute potential common shares from stock options and warrants and the as-if-converted method to compute potential common shares from Preferred Stock or other convertible securities.

When a net loss occurs, potential common shares have an anti-dilutive effect on earnings per share and such shares are excluded from the diluted EPS calculation.

At JuneSeptember 30, 2010 and 2009, weighted average common shares outstanding year-to-date were 64,469,49865,245,071 and 53,396,960,55,159,192, respectively. For the periods ended JuneSeptember 30, 2010 and 2009, in which net losses occurred, all potential common shares were excluded from diluted EPS because the effect of including such shares would be anti-dilutive.

The potential common shares in the following table represent potential common shares calculated using the treasury stock method from outstanding options, stock awards and warrants that were excluded from the calculation of diluted EPS:

Potential common shares from out-of-the-money options and warrants were also excluded from the computation of diluted EPS because calculation of the associated potential common shares has an anti-dilutive effect on EPS. The following table lists options and warrants that were excluded from diluted EPS:

Weighted average potential common shares from outstanding Convertible Preferred Stock calculated on an as-if-converted basis having an anti-dilutive effect on diluted EPS were excluded from potential common shares as follows:

(40%) of the eligible coin inventory calculated on a rolling twelve-month wholesale average value. Odyssey is required to comply with a number of customary affirmative and negative covenants. The significant covenants include: maintaining insurance on the

inventory; ensuring the collateral is free from encumbrances and without the consent of the Bank, the Company cannot merge or consolidate with or into any other corporation or entity nor can the Company enter into a material debt agreement with a third party.

Notes Payable

On August 20, 2010, we entered into individual purchase agreements with certain investors pursuant to which we issued and sold promissory notes in the aggregate principal amount of $1,800,000 and warrants to purchase an aggregate of 270,000 shares of common stock. The notes bear interest at a rate equal to 5.0% per annum, and all principal and accrued interest thereunder is due and payable on or before December 18, 2010. If an event of default occurs, the notes will thereafter bear interest at a rate equal to 25% per annum. As of October 18, 2010, these notes were pre-paid and satisfied in their entirety. The warrants have an exercise price of $2.25 per share of common stock and will be exercisable in accordance with their terms at any time on or before the close of business on August 20, 2013. These warrants represented a discount on the notes payable, therefore were valued using the Black-Scholes valuation method and bifurcated establishing a discount on notes payable for $150,893 and a corresponding increase to paid-in-capital. The discount is being amortized to interest expense over the life of the note until October 18, 2010. The notes payable of $1,800,000 at September 30, 2010 is shown net of the discount remaining which is $40,771.

Mortgage Payable

On July 11, 2008, we entered into a mortgage loan with theFifth Third Bank. Pursuant to the Loan Agreement, we borrowed $2,580,000. The loan bears interest at a variable rate equal to the prime rate plus three-fourths of one percent (0.75%) per annum. The loan matures on July 11, 2013, and requires us to make monthly principal payments in the amount of $10,750 plus accrued interest. This loan is secured by a restricted cash balance (See NOTE C) as well as a first mortgage on our corporate office building. This loan contains customary representations and warranties, affirmative and negative covenants, conditions, and other provisions.

During May 2008, we entered into a mortgage loan in the principal amount of $679,000 with The Bank of Tampa to purchase our conservation lab and storage facility. This obligation has a monthly payment of $5,080 and a maturity date of May 14, 2015. Principal and interest payments are payable monthly. Interest is at a fixed annual rate of 6.45%. This debt is secured by the related mortgaged real property. The seller is carrying a second mortgage for $100,000 with interest due monthly and $25,000 of principal due each May commencing in May 2009. The interest is at a variable rate of 1.0% above the prime interest rate stated by BB&T, formerly Colonial Bank of Tampa. This obligation has a maturity date of May 14, 2012, and is also secured by the related mortgaged real property.

NOTE J – STOCKHOLDER’S EQUITY

Common Stock

On May 6, 2010, we issued 1,300,000 shares of common stock to one institutional investor upon conversion of 13 outstanding shares of our Series DE Convertible Preferred Stock.

On April 20, 2010, we issued 600,000 shares of common stock to one institutional investor upon conversion of 600,000 outstanding shares of our Series D Convertible Preferred Stock.

On March 18, 2010, we issued 600,000 shares of common stock to one institutional investor upon conversion of 600,000 outstanding shares of our Series D Convertible Preferred Stock.

On February 12, 2010, we issued 500,000 shares of common stock to one institutional investor upon conversion of 500,000 outstanding shares of our Series D Convertible Preferred Stock.

During January 2010, we entered into individual purchase agreements with certain investors pursuant to which we sold an aggregate of 4,000,000 shares of Odyssey’s common stock and warrants to purchase up to 2,400,000 shares of common stock to such investors. The common stock and warrants were sold as units, with each unit consisting of one share of common stock and a warrant to purchase 0.6 shares of common stock. The purchase price for each unit was $1.565. The warrants have an exercise price of $2.25 per share of common stock and are exercisable in accordance with their terms at any time on or before the close of business on January 29, 2013. The net proceeds to us from the registered direct public offering, after deducting placement agent fees and its offering expenses, and excluding the proceeds, if any, from the exercise of the warrants issued in the offering, were approximately $6.1 million.

On May 22, 2009, we issued and sold 1,720,000 shares of common stock at a price of $2.965 per share, for an aggregate purchase price of $5,100,000 in cash, pursuant to a Common Stock Purchase Agreement between the Company and three funds managed by two accredited investors. During the three-month period ended June 30, 2009, we issued 4,241,200 shares of common stock to two accredited investors upon conversion of 4,241,200 shares of Series D Convertible Preferred Stock.

On January 28, 2009, we issued 250,000 shares of common stock to one accredited investor upon conversion of 250,000 shares of Series D Convertible Preferred Stock.

Preferred Stock

During January 2009, three accredited investors exercised warrants for the purchase of 197,600 shares of Series D Convertible Preferred Stock for an aggregate exercise price of $790,400.

Stock-Based Compensation

We have two active stock incentive plans, the 1997 Stock Incentive Plan and the 2005 Stock Incentive Plan (“the Plan”). The 1997 Stock Incentive Plan expired on August 17, 2007. As of that date, options cannot be granted from that Plan but any granted and unexercised options will continue to exist until exercised or they expire. The Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock units and stock appreciation rights. We initially reserved 2,500,000 of our authorized but unissued shares of common stock for issuance under the Plan, and, at the time the Plan

was adopted, not more than 500,000 of these shares could be used for restricted stock awards and restricted stock units. On January 16, 2008, the Board of Directors approved amendments to the Plan to add 2,500,000 shares of common stock to the Plan, to allow any number of shares to be used for restricted stock awards, to clarify certain other provisions in the Plan and to submit the amended Plan for stockholder approval. The amended Plan was approved at the annual meeting of stockholders on May 7, 2008. On June 3, 2010, the stockholders approved the addition of 3,000,000 shares to the Plan. Any incentive option and non-qualified option granted under the Plan must provide for an exercise price of not less than the fair market value of the underlying shares on the date of grant, but the exercise price of any incentive option granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant.

Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest. As share-based compensation expense recognized in the statement of operations is based on awards ultimately expected to vest, it will be reduced for forfeitures. The ASC topic Stock Compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The share based compensation charged against income for the six-monthnine-month periods ended JuneSeptember 30, 2010 and 2009 was $937,548$1,406,640 and $1,215,091,$1,629,182, respectively, and for the three monththree-month periods ended JuneSeptember 30 2010 and 2009 was $468,774$469,092 and $401,386,$414,091, respectively.

The weighted average estimated fair value of stock options granted during the three-month period ended JuneSeptember 30, 2009,2010, was $1.78.$.84. We did not issue stock options in the three-month period ended JuneSeptember 30, 2010.2009. The weighted average fair value of stock options granted is determined using the Black-Scholes option-pricing model, which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, the expected dividend payments, and the risk-free interest rate over the life of the option. The Black-Scholes option valuation model was developed for estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Because option valuation models require the use of subjective assumptions, changes in or variations from these assumptions can materially affect the fair value of the options.

NOTE K – DEFERRED REVENUE

During the three-month period ended June 30, 2010, we entered into two marine search services contracts associated with the Robert Frasier Marine, LTD.Ltd. projects. These contracts are comprised of two components: sale of research and search operations. Cash payments for the sale of research are received and recorded as revenue upon execution of the contract. Cash payments for search operations are normally 50% on contract, 40% upon arrival at the site and 10% upon completion; however, revenue is recognized over the contractual period on a daily basis when services are performed. AThe period of time a search operationsoperation contract is active varies but will generally 125 days butlast over several months and may be accelerated or extended depending upon operational factors. At JuneSeptember 30, 2010, we have a $2,299,866$1,620,734 service obligation that will be recognized as revenue over the period of time the contractual services are provided. At December 31, 2009, related to another marine search services contract, we had deferred revenue of $1,257,453 which was earned in 2010. For the three-month and six-monthnine-month periods ended JuneSeptember 30, 2010, we earned charter expedition revenue of $1,505,930$679,132 and $2,472,547,$3,151,680, respectively, relating to these contracts.

NOTE L – CONCENTRATION OF CREDIT RISK

We maintain our cash in three financial institutions. The Federal Deposit Insurance Corporation insures up to $250,000 per legal entity per financial institution through December 31, 2013. On July 21, 2010, the Federal Deposit Insurance Corporation made the $250,000 insurance limit permanent. At June 30, 2010,Previously, our main financial institution participated in the Transaction Guarantee Program which provided unlimited coverage to checking deposit accounts that do not earn interest. On July 1, 2010, our main financial institution opted out of the Transaction Guarantee Program. At JuneSeptember 30, 2010, our uninsured cash balance was approximately $1,200,000.$1,600,000.

Our revolving credit facility and primary mortgage bear interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the principal amount of such indebtedness remained the same. Interest on both of these debt instruments are equal to prime plus basis points as described in NOTE I. An increase in the prime rate could have an adverse effect on our operating cash flows and financial condition but we believe it would not be material.

NOTE M – SUBSEQUENT EVENTS

On October 6, 2010, we entered into separate purchase agreements with certain investors pursuant to sell 24 shares of Series G 8% Convertible Preferred Stock, par value $0.0001 per share, and warrants to purchase up to 1,800,000 shares of Odyssey’s common stock to such investors. The Series G preferred stock and warrants were offered as units, with each unit consisting of one share of Preferred Stock and a Warrant to purchase 75,000 shares of common stock. The purchase price for each unit was $250,000 (the “Financing Arrangement”). On October 12, 2010, we completed the Financing Arrangement which resulted in the sale of 24 units for cash proceeds of $5,050,000 and the exchange for face value $950,000 of 5.0% Promissory Notes, issued August 20, 2010 and due December 18, 2010 (also see NOTE I).

Our Series G Preferred Stock has a liquidation value of $250,000 per share and provides for cumulative dividends of $20,000 per share per annum (8% of the liquidation preference) payable upon declaration by our Board of Directors. The Series G Preferred Stock is convertible into shares of our common stock after April 11, 2011 at an initial conversion price of $1.785714. The initial conversion price is subject to adjustment for changes in our capital structure and for sales or issuances of common stock or contracts linked to our common stock at amounts or conversion prices below the initial conversion price. The Series G Preferred Stock is redeemable for cash at our option after December 15, 2010. For the period from December 15, 2010 to March 31, 2011, the cash redemption price is 100% of the liquidation value. Subsequently, the redemption price increases at a rate of 1% of the liquidation value each month. The Series G Preferred Stock is also redeemable for cash at the option of the investors after December 15, 2011 at a redemption price equal to our redemption price. Accordingly, the initial redemption price to the investors on December 15, 2011 is $272,500 per share (or 109% of the liquidation value). The Series G Preferred Stock votes with our common stock on an if-converted basis.

The Warrants were immediately exercisable by the investors at an initial exercise price of $2.50 per share. The exercise price is subject to adjustment for changes in our capital structure and for sales or issuances of common stock or contracts linked to our common stock at amounts or exercise prices below the initial exercise price. The Warrants, which expire on October 11, 2013, do not extend voting or any other rights of a shareholder to the investors. We have agreed to maintain effectiveness of a Registration Statement that applies to common shares underlying the Warrants.

We will account for the Financing Arrangement in the period it was completed. We will account for exchange of Series G Preferred Stock and Warrants for Promissory Notes as an extinguishment of the Promissory Notes, wherein the financial instruments issued will be recorded at their fair values, the carrying values of our Promissory Notes will be removed from our accounts and the difference will be reflected as a gain or a loss upon extinguishment. At the time of filing of this report, we have not completed the calculation of the fair values of the financial instruments issued.

We will account for the sale of Series G Preferred Stock and Warrants for cash as a financing transaction, wherein the net proceeds that we received will be allocated to the financial instruments and other components issued. For purposes of our allocation, we have concluded that the Warrants do not achieve conditions necessary for their classification in our stockholders’ equity. Accordingly, we will first allocate proceeds to the Warrants based upon their fair value. We have also concluded certain features embedded in the Series G Preferred Stock, including the conversion and redemption features, are required to be separated as a compound derivative financial instrument from the Series G Preferred Stock. Accordingly, we will next allocate proceeds to this compound derivative financial instrument based upon its fair value. We have not completed the calculation of fair values of the Warrants or the compound derivative financial instrument. The residual balance of the proceeds, after allocation to the Warrants and the compound derivative financial instrument, will be allocated to the Series G Preferred Stock.

The Warrants and the compound derivative financial instrument are required to be classified in liabilities and measured at their fair values both initially and subsequently, with changes in fair value reflected in our income. The Series G Preferred Stock is required to be classified outside of stockholders’ equity because it is a redeemable security. The residual value initially ascribed to

the Series G Preferred Stock will be accreted to its redemption value, through charges to retained earnings using the effective interest method, over the period from issuance to the earliest redemption date of December 15, 2011. Also, following the issuance of the Series G Preferred Stock, charges for accretion and dividends, whether or not declared, will be reflected as a reduction to our income for purposes of computing income (loss) applicable to our common stockholders and income (loss) per common share.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion will assist in the understanding of our financial position and results of operations. The information below should be read in conjunction with the financial statements, the related notes to the financial statements and our Annual Report on Form 10-K for the year ended December 31, 2009.

In addition to historical information, this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 regarding the Company’s expectations concerning its future operations, earnings and prospects. On the date the forward-looking statements are made, the statements represent the Company’s expectations, but the expectations concerning its future operations, earnings and prospects may change. The Company’s expectations involve risks and uncertainties (both favorable and unfavorable) and are based on many assumptions that the Company believes to be reasonable, but such assumptions may ultimately prove to be inaccurate or incomplete, in whole or in part. Accordingly, there can be no assurances that the Company’s expectations and the forward-looking statements will be correct. Please refer to the Company’s most recent Annual Report on Form 10-K for a description of risk factors that could cause actual results to differ (favorably or unfavorably) from the expectations stated in this discussion. Odyssey disclaims any obligation to update any of these forward-looking statements except as required by law.

Operational Update

We have 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 we will defer disclosing specific information relating to our projects until we have located a shipwreck or targets of interest and determined a course of action to protect our property rights.

Additional information regarding our announced projects may be found in our Annual Report on Form 10-K for the year ended December 31, 2009 and our Quarterly ReportReports on Form 10-Q for the quarter endedquarters ending March 31, 2010 and June 30, 2010. Only projects with material status updates since those reports were filed are discussed below. We 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.

We may use our vessels, theOdyssey Explorer andOcean Alert, or chartered vessels to conduct operations based on availability.

“Atlas” Search Project

Between 2005 and 2009,2010, we searched more than 4,7005,000 square nautical miles of seabed in the western English Channel and the Western Approaches to the Channel, recording 267over 270 shipwrecks. The shipwrecks discovered include site“35-F,” theMarqiseMarquise de TornayTourny, and HMSVictory (1744). Additional high-value targets are believed to be within the “Atlas” search area, and search operations are currently underway in this area.

HMSVictory Project

We discovered and conducted a preliminary investigation of the shipwreck of Admiral Balchin’s HMSVictory (which sank in 1744) during our 2008“Atlas” season and 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 and Royal Navy officials. TheVictory discovery was announced publicly February 2, 2009. On September 18, 2009, we announced an agreement with the UK Government on an 80% salvage award for the cannon recovered from the site. We have since received the cash payment as compensation under that agreement.

On March 25, 2010, the MOD and the Department for Culture Media and Sport published an official consultation document with a deadline for public submissions of June 30, 2010. Odyssey submitted a document to this process that included a proposal for additional archaeological work on the site.

Although the UK is not a signatory to the United Nations Educational Scientific and Cultural Organization’s (UNESCO) Convention for the Protection of Underwater Cultural Heritage (“CPUCH”) and therefore not bound by CPUCH, Odyssey’s proposal is consistent with the archaeological principles of the Rules of CPUCH.

Robert Fraser Projects (“Enigma II”,” “Firebrand,” “Shantaram”)

In February 2010, we jointly developed plans and signed a letter of intent with Robert Fraser & Partners LLP to execute a series (at least six) of additional deep-ocean projects in 2010 similar to the model of the project code-named “Enigma.” Three projects are expected to target shipwrecks, while three or more projects will be aimed at mineral mining expeditions (see “Subsea Mineral Exploration Projects” included in this section). Under the proposed structure, Odyssey will be compensated for search, survey and archaeological excavation as well as development of research files on specific shipwrecks and other projects. Odyssey will also receive deferred cash payments and have a substantial interest in the back-end of each project as well as being compensated for providing other services including conservation, documentation, marketing and sales of recovered cargoes. Under the proposed structure for mineral mining projects, Odyssey will be compensated for search and survey operations and development of geological research files on specific expeditions. If valuable mineral deposits are found and eventually sold, Odyssey will receive deferred cash payments and will benefit from its ownership in the mining company.

Search contracts are generally 125 days but may be accelerated or extended depending upon operational factors. Cash payments are comprised of two components, sale of research and search operations. Cash payments for the sale of research are received and recorded as revenue upon execution of the contract. Cash payments for search operations are normally 50% upon execution of the contract, 40% upon arrival at the site and 10% upon completion; however, revenue is recognized over the contractual period on a daily basis when services are performed. At June 30, 2010, we have a $2.3 million service obligation that will be recognized as revenue over the period of time the contractual services are provided. At December 31, 2009, related to the “Enigma” search project, we had deferred revenue of $1.3 million which was earned in the first quarter of 2010. We expect each project will generate a cash flow up to $3.5 million.

Our initial project which began in November 2009 code-named “Enigma” was completed in March 2010. Eight target sites were identified, including two sites that had some of the characteristics of the “Enigma” shipwreck. However, our subsequent analysis indicated that the sites are not likely to be the “Enigma.”

In April 2010, we entered into agreements to provide project research and shipwreck search and survey services for a project code-named“Firebrand”associated with Robert Fraser Marine, Ltd. projects. Under the agreements, Odyssey furnished research related to the“Firebrand” and its sinking and willagreed to provide a research vessel, equipment and crew to search a specified area and inspect targets in that area. The contracts provided initial cash payments totaling £2.1approximately $3.2 million (approximately $3.2 million) to Odyssey(of which $3.0 has been paid) as well as additional payments upon the sale of coins or artifacts from the“Firebrand” project. After repayment of salvage costs and fees, Odyssey will receive 75% of net revenue in aggregate until an additional £10.5 (approximately $16$17 million) has been received and then 50% in aggregate of all further net revenue. We plan to commence searchSearch operations inhave commenced on the third quarter 2010.“Firebrand” project and are currently underway.

In June 2010, we entered into agreements to provide project research and shipwreck search and survey services for a project code-named“Shantaram”associated with Robert Fraser Marine, Ltd. projects. Under the agreements, Odyssey furnished research related to the “ShantaramShantaram”” and its sinking and will provideprovided a research vessel, equipment and crew to search a specified area and inspect targets in that area. The contract provides for cash payments totaling approximately U.S. $3.4 million representing initial cash payments of $1.7 million and additional payments of approximately $1.5 million within 30 days and $0.2 million upon project completion, plus additional payments upon the sale of coins or artifacts from the “Shantaram”“Shantaram” project. After the re-payment of salvage costs and fees, we will receive 75% of net revenue in aggregate until an additional £11.4 million (approximately U.S. $16.7$18 million) has been received and then 50% in aggregate of all further net revenue. We expect theThe survey of the “Shantaram”“Shantaram” search block is complete. Targets of interest have been inspected by our remotely operated vehicle and several other targets remain to be inspected. An amount of approximately $1.5 million remains due which we are still expecting to receive. In the event of non-payment, Odyssey has secured collateral which includes the right to receive an additional percentage of the net proceeds assuming the target shipwreck is located.

In September 2010, we executed agreements to provide supplementary project research and shipwreck search and survey services for a project code-named “Enigma II” associated with Robert Fraser Marine, Ltd. projects. As part of the agreements for the “Enigma II” project, Odyssey furnished research related to the anticipated location of the “Enigma II” and agreed to provide the research vessel, equipment and crew to search a specified area and inspect targets in that area. The contract provided for initial cash payments totaling approximately $1.6 million to Odyssey, plus additional payments upon the sale of coins or artifacts from the “Enigma II” project. After the repayment of all recovery costs, Odyssey will receive 75% of net revenue in aggregate until an additional £5.2 million (approximately $8 million) has been received and then 60% in aggregate of all further net revenue. Survey operations have been completed inand targets of interest have been inspected with a remotely operated vehicle.

Based on preliminary results, there is evidence suggesting that at least one of the third quarter. Data“Robert Fraser Project” target shipwrecks has been located. Additional analysis and investigation is currently being processed to determine which of the anomalies detected warrant further inspection with high resolution side-scan or ROV inspections.underway.

We expect to execute another shipwreck agreement in August 2010 and searchadditional agreements for subsea mineral miningexploration and explorationother projects in the near future with operations commencing in the fall of 2010.fourth quarter. To protect the security of the operations and search areas, specific location details for search projects are not being released at this time.

ET 409 Project

OnIn January 25, 2010, Ethiopian Airlines Flight ET 409 crashed into the Mediterranean Sea shortly after take-off from Beirut International Airport in Lebanon. Our search vessel,Ocean Alert, was operating near the area and had been using the Beirut port for fuel and supplies during these operations. In the weeks prior to the ET 409 crash, Odyssey management had been negotiating an agreement with the Government of Lebanon to partner in a deep-ocean project, so Lebanese officials were familiar with the capabilities of Odyssey and theOcean Alert.

When ET 409 crashed, Lebanese authorities contacted Odyssey and asked the company to assist in the search and recovery efforts. TheAlert returned to Beirut and was integrated into search operations that included the Lebanese Navy and Army, the US Navy (USSRamage) and a German Navy ship, theLaboe.

Before the plane wreckage was discovered, the Government of Lebanon asked Odyssey to provide additional capabilities for more complex technical documentation of the site. Odyssey sent theOdyssey Explorer, which was based in the UK, to Lebanon to assist. We were paid $1.4 million for the work completed to-date by the Lebanese government. We presently have also completed a signed agreement with the insurance company to create avideo survey and photomosaic of the entire area of the wreckage and debris which we are commencing in August 2010.field under contract to the airline insurance company for a total contract price of $ 1.5 million. This groundbreaking project is believed to be the largest underwater geo-spatially accurate photomosaic ever completed, and required stitching together over 50,000 individual high resolution photos. Additional aircraft recovery work at the site is pending until a thorough review of the photomosaic has been completed by the accident investigation team.

Odyssey is continuing negotiations with the Lebanese government for the original project. All operations on this project will be conducted in close coordination with the Government of Lebanon and will include official government observers on board Odyssey vessels.

“Gairsoppa” Project

OnIn January 25, 2010, Odyssey was awarded the exclusive salvage contract for the cargo of the SSGairsoppa by the United Kingdom (UK) Government Department for Transport. The contract was awarded after a competitive bid process and is for two (2) years, which commenced immediately.

The SSGairsoppa was a British cargo steamer enlisted in the service of the United Kingdom for the Ministry of War Transport during World War II. It was torpedoed by a German U-Boat in February 1941 in the North Atlantic while reportedly carrying a significant cargo of silver.

Odyssey will assume the risk, expense, and responsibility for the search, cargo recovery, documentation, and marketing of the cargo. If the salvage is successful, Odyssey will be compensated with a salvage award which consists of 80% of the net value of the recovered cargo after deduction of expenses of search and salvage. This project aligns with our strategy to focus on partnership projects with several governments that provide straightforward legal ownership arrangements.

WeDue to August and September hurricanes adversely affecting the North Atlantic and availability of equipment for ourGairsoppa search, we are currently planning to begin search operations later in 2010 subject to the weather conditions in the search area.second quarter of 2011.

Subsea Mineral Mining and Exploration Project

In November 2009, Odyssey acquired a 25% interest in SMM Project LLC,currently owns 40.8% of Dorado Ocean Resources Ltd., a company funded by a group of investorscreated to bring together exclusive licenses and skills of world renowned deep-ocean geologist Dr. Timothy McConachy of Bluewater Metals, the deep-ocean survey and exploration expertise of Odyssey, and the offshore coring and mining expertise of Robert Goodden and Subsea Minerals.

SMM Project LLC purchasedWe entered into a majority interestlong-term charter agreement for a vessel, theDorado Discovery, which underwent renovations and mobilization in Bluewater Metals Pty Ltd, an Australian company with licenses for mineral exploration of approximately 150,000 square kilometers of ocean floor in territorial waters controlled by four different countries inSoutheast Asia. TheDorado Discovery was deployed to the South Pacific. A new business entity, Dorado Ocean Resources Ltd (“Dorado”), a limited liability company organizedPacific in Hong Kong, was formedAugust to focuswork on thesubsea mineral mining and exploration and monetization of gold, silver, zinc and copper-rich Seafloor Massive Sulfide (SMS) deposits. In April 2010, Dorado acquired SMM Project LLC and the remaining interest in Bluewater.

In April 2010, we purchased 1,200 shares of Dorado, for a purchase price of U.S. $2.0 million. Under the terms of the Share Subscription Agreement, Odyssey has the option to pay for this investment in cash or by providing marine services to Dorado over a three-year period. Odyssey also exchanged its five membership units in SMM Project, LLC for 450 Dorado shares bringing Odyssey’s total ownership in Doradoprojects subject to a 41.25%, non-controlling interest.

charter agreement with Dorado. We will provideare providing proprietary expertise and personnel management to Dorado under contract on a commercially reasonable basis, and will continue to conduct operations to explore for deep-ocean SMS deposits in areas covered by exploration permits held by Dorado.

Preliminary results of our early exploration efforts are very encouraging. Operations to-date have supported reconnaissance of an epithermal gold deposit and two SMS (Seafloor Massive Sulfide) deposits. Detailed analyses of certain samples collected to-date indicate high gold, silver, lead and zinc content. However, much more work is needed to assess the commercial value, if any, of these deposits. We are in the very early stages of exploration of the Dorado tenements and remain excited about the prospects for this new venture.

Odyssey entered into a long-term charter agreement for a vessel, theDorado Discovery, which has been undergoing renovations and mobilization in Southeast Asia. TheDorado Discovery has recently been deployed to the South Pacific to work on subsea mineral mining and exploration projects subject to a charter agreement with Dorado. Operations are to commence in August 2010.

Admiralty Legal Proceedings

An Admiralty arrest is a legal process in which Odyssey seeks recognition from the Court of Odyssey’s salvor-in-possession status for a specific shipwreck, site or cargo. It is the first legal step in establishing Odyssey’s rights to ownership or to a salvage award. If Odyssey is able to confirm that any entity has a potential legitimate legal claim to any materials recovered from any shipwreck site, we will provide legal notice to any and all potential claimants and pursue prompt resolutions of all claims.

“Black Swan”Arrest

We filed our notice of appeal with the Federal District Court for the Middle District of Florida and Eleventh Circuit Court of Appeals on January 15, 2010, and filed the appeal with the Eleventh Circuit on May 11, 2010. Spain issued their reply to our appeal on July 19, 2010.2010, and Odyssey’s reply to Spain’s response is duewas filed on August 19, 2010. Our case has been scheduled for oral argument during the week of February 28, 2011 in Atlanta, Georgia.

In its initial brief, Odyssey argued that the district court erroneously dismissed the case by using flawed legal analysis and by failing to acknowledge or understand several major aspects of the case, including the issue of sovereign immunity. The opening brief also points out several erroneous factual findings and legal conclusions made by the district court including the following:

The case is currently pending in the Eleventh Circuit Court of Appeals in Atlanta, Georgia. All of Odyssey’s significant filings to date, including those made at the district court level, can be viewed athttp://www.shipwreck.net/blackswanlegal.php.

Critical Accounting Policies and Changes to Accounting Policies

There have been no material changes in our critical accounting estimates since December 31, 2009, nor have we adopted any accounting policy that has or will have a material impact on our consolidated financial statements.

Results of Operations

The dollar values discussed in the following tables, except as otherwise indicated, are approximations to the nearest $100,000 and therefore do not necessarily sum in columns or rows. For more detail refer to the Financial Statements in Part I, Item 1. For the three months ended September 30, 2010, we have shown Income From Operations of $1.0 million which is the first quarter in several years whereby we have shown a profit from operations.

Three months ended JuneSeptember 30, 2010, compared to three months ended JuneSeptember 30, 2009

The explanations that follow are for the three months ended March 31,September 30, 2010, compared to the three months ended MarchSeptember 30, 2009.

Revenue

The increase in total revenue of $9.0 million was primarily related to a $9.8 million increase in expedition charter revenue associated with subsea mineral mining work in the South Pacific with Dorado Ocean Resources Ltd. ($5.1 million), syndicated shipwreck search projects which includeEnigma II,Shantaram andFirebrand ($2.5 million), government and insurance company services in the wake of the airline accident in the Eastern Mediterranean ($1.5 million) and other miscellaneous charter services ($.7 million). We are currently working under a charter agreement with Dorado Ocean Resources Ltd. which will extend into the fourth quarter 2010 and longer. We are also planning other syndicated projects in the South Pacific in late 2010 and in 2011.

Odyssey’s exhibit,SHIPWRECK! Pirates & Treasure, was not on display in the third quarter 2010, but opened at the Maryland Science Center in Baltimore on October 1, 2010. The exhibit will run through January 31, 2011, in the Legg Mason Gallery on the second floor of the science center. We have also seen a decline in artifact sales of $.6 million in the third quarter 2010 which we believe is due to general economic conditions, availability of new product offerings and merger of two of our major distributors.

Operating Expenses

Marketing, general and administrative expenses were $2.2 million in 2010 as compared to $2.1 million in 2009 primarily representing an increase in employee-related expenses offset in part by a decrease in outside professional services.

Operations and research expenses were $6.6 million in 2010 as compared to $2.9 million in 2009. The $3.7 million increase was due to higher vessel - related expenses in 2010 versus 2009 primarily attributable to the volume of projects underway and the addition of our two chartered vessels. TheDorado Discoverycomprised $2.6 million of the increase and has recently completed renovations and mobilization in Southeast Asia and has been deployed to the South Pacific to work on subsea mineral mining and exploration projects under a charter agreement with Dorado Ocean Resources Ltd. Our second chartered vessel was deployed during the second quarter 2010 to work on the “Shantaram” project and has recently been sub-chartered to a third party which comprised $1.4 million of the increase. These increases in vessel-related expenses were offset in part by decreasesOcean Alert expenses of $.3 million while she is waiting to be deployed on the next project. We are currently anticipating several options for theOcean Alert including charter, use on the recovery of the aircraft which crashed in the Easter Mediterranean and potential sale.

Other Income (Expense)

Other income (expense) represents income from investments, interest expense on loans and gain (loss) on our equity investment in Dorado Ocean Resources Ltd. For the third quarter 2010, $2.1 million represents our portion of the loss on the equity investment. See Note F of the Notes to the Consolidated Financial Statements.

Nine months ended September 30, 2010, compared to nine months ended September 30, 2009