Mail Stop 03-05
April 21, 2005
John C. Morris
President and Chairman of the Board of Directors
Odyssey Marine Exploration, Inc.
5215 West Laurel Street
Tampa, Florida 33607
Re: Odyssey Marine Exploration, Inc.
Form S-3 filed March 29, 2005
File No. 333-123650
Form 10-KT filed March 23, 2005
File No. 1-31895
Dear Mr. Morris:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
Form 10-K filed March 23, 2005
Description of Business, page 3
Overview of Odyssey, page 3
1. On a supplemental basis, please provide verifiable support for
your assertions in the second paragraph of the overview section on
page 3.
2. Please revise disclosure to provide a section on your
dependence
on one or a few major customers. We note that during the year
ended
December 31, 2004, you had four customers who accounted for 12.5%,
14.4%, 13.9% and 23.0% of your sales. Refer to Item 101(a)(6) of
Regulation S-B.
Mission and Strategy, page 4
3. Since you state that the cost of mobilizing vessels, complex
equipment and a professional team is very high, please consider
disclosing the typical costs incurred in projects such as the SS
Republic Project and the HMS Sussex Project.
SS Republic Project, page 5
4. Please clarify disclosure in this section to describe the
September 2000 private placement in which you sold units comprised
of
Republic Revenue Participation Certificates and common stock
relating
to the Republic Project. Please describe the financial impact of
this revenue-sharing arrangement.
HMS Sussex Project, page 7
5. Please improve your description of research methods supporting
your determination that the HMS Sussex was carrying a cargo of
coins
with a bullion value of approximately $100 million and a much
higher
numismatic value. You should consider balancing disclosure to
address the uncertainties you describe on page 12 of your risk
factors section.
Sales and Marketing, page 9
6. To the extent material, please describe the nature of your
business relationship with coin dealers and further describe your
dealer network. Please explain how these dealer networks are able
to
provide a distribution method for the sale of your products.
Also,
describe the nature of dealer compensation. See Item 101(a)(2) of
Regulation S-B.
Competition, page 11
7. Please revise disclosure to provide more of a background on
what
your competitive conditions are in the shipwreck business. It
appears that you view the competition as a factor worthy of
disclosure in the risk factors section. Consider naming the
principal competitors and describe how the various aspects of
their
work create a competitive condition for your business. Please
revise
your risk factor accordingly. Refer to Item 101 (a)(4) of
Regulation
S-B.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 15
Liquidity and Capital Resources, page 17
8. Please quantify your cash requirements for the next twelve
months
and for longer than one year.
Directors, Executive Officers, Promoters and Control Persons, page
19
9. Please revise disclosure to provide dates of employment for
Messrs. Holmes and Howe. Please disclose the specific titles held
at
the companies you list. Refer to Item 401(e) of Regulation S-K.
Certain Relationships and Related Party Transactions, page 29
10. Please further describe the nature of Messrs. Morris and
Stemm`s
membership interests in the Georgia limited liability company and
quantify the extent of their economic interests in the 5% revenue
sharing interest relating to the Cambridge Project.
Consolidated Statements of Operations, page F-4
11. In the business section, you state that you have derived
revenue
from your own telemarketing group, and through wholesale dealers.
You also state that you intend to open attractions that will
generate
revenue in 2005, some of which appears to be service-type revenue.
To the extent that you generate revenue from the sale of different
products and services, revise to disclose revenues derived from
each
product or service in the notes to your financial statements as
required by paragraph 31 of SFAS 131. In addition, separate
disclosure in MD&A should discuss this source to revenues and its
related costs of revenues.
12. We note that losses on disposals of equipment were classified
as
other income or expense. Note that gains and losses on disposals
should be separately reported in your consolidated statement of
operations within operating income (loss) in a similar manner as
"other expenses". Refer to the guidance in paragraphs 25 and 45
of
SFAS 144 and footnote 68 of Staff Accounting Bulletin Topic 13.
Please revise your classification accordingly.
Consolidated Statements of Cash Flows
13. Please tell us the nature and significant terms of the
transaction in which loan principal aggregating $1,042,750 was
converted into shares of the Company`s common stock during the
fiscal
year ended February 29, 2004. As part of your response, please
explain how the conversion price associated with the loan
converted
into common shares was determined and indicate whether the
conversion
was made in accordance with the original terms of the debt
obligation
or pursuant to a troubled debt restructuring or inducement offer.
Refer to the guidance outlined in SFAS No.15 and SFAS No.84. We
may
have further comment upon receipt of your response.
Note B-Summary of Significant Accounting Policies
Inventory, page F-9
Depreciation, page F-9 and
Note F- Inventory, page F-12
14. We note that $3,274,942, and $5,945,177 of your current and
non-
current inventory, respectively, relates to SS Republic Artifacts,
for which it appears that different valuation methods were used
for
each one of their components. Significantly expand your
disclosure
and supplementally advise us in detail of the different components
comprising the category titled "SS Republic Artifacts", and
explain
the specific nature and amounts of the recovery and conservation
costs capitalized to these investments. Your response should also
explain your methodology to determine the inventory values for
each
component or type of inventory (i.e. coins, other artifacts,
e.t.c.)
and should explain how you ensure these inventories are valued at
the
lower of cost or market as required by Chapter 4 of ARB No. 43.
As
part of your response, cite specifically any accounting literature
that you relied upon in determining your cost capitalization
policies. Also, tell us and revise to disclose, the nature and
amount of costs that have been capitalized to inventory during
each
period presented.
Earnings per Share
15. Revise future filings to disclose the number of options and
warrants that could potentially dilute the Company`s basic
earnings
per share in future periods but that were not included in the
computation of the Company`s diluted earnings per share for the
periods presented because to do so would be anti-dilutive for the
periods presented. Refer to the disclosure requirements of
paragraph
40c of SFAS No.128.
Other
16. Please add disclosure and supplementally advise us to describe
the nature and accounting for costs included in attraction
development. Your response should explain in detail the specific
nature and amounts of the costs capitalized and should also
explain
why you believe capitalization is appropriate. We may have
further
comment upon reviewing your response.
Note K- Mortgage Payable, page F-13
17. Please indicate the total amounts due after the fifth year.
Also, since you state that the loan is due in ten years but the
payments are based on a 20 year amortization schedule, expand your
disclosure to indicate the amount a balloon payment due at the end
of
ten years.
Note O- Sale of Revenue Participating Certificates, page F-14
18. Expand your disclosure and supplementally advise us of the
accounting for the deferred RPC revenue in the event there is no
revenue generated from the Cambridge project. Also, please
explain
in further detail how and why you plan to begin recognizing
revenue
associated with the Republic revenue participation certificates.
We
note that although you are recognizing revenue from the Republic
project, you have not yet recognized revenue from the Republic
revenue participation certificates.
Note Q - Common Stock Options and Warrants
19. In future filings, please include the disclosures required by
paragraph 48 of SFAS No.123 with respect to stock options that are
exercisable as of the most recent balance sheet date presented.
Also,
please tell us and revise the notes to your financial statements
to
disclose the amount of expense recognized in connection with
warrants
granted to non-employees during the periods presented in your
financial statements and explain how the amount of expense
recognized
was calculated or determined.
Other
20. Add disclosure in the notes to the financial statements to
discuss the litigation described in Item 3-Legal Proceedings, and
provide any applicable disclosures from SFAS 5. We may have
further
comment upon reviewing your response. If you believe disclosure
is
not required, please explain in detail your basis for this
conclusion.
21. Provide a currently dated consent from the independent public
accountant in future amendments.
Other
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
Closing
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Effie Simpson at (202) 942-2838 or Linda
Cvrkel
at (202) 942-1936 if you have questions regarding comments on the
financial statements and related matters. Please contact Johanna
Vega Losert at (202) 942-2931 or me at (202) 942-1850 with any
other
questions.
Sincerely,
Max A. Webb
Assistant Director
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Odyssey Marine Exploration, Inc.
April 21, 2005
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