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, 2008.

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 shipwrecks of interest and determined a course of action to protect our property rights.

Additional information regarding projects discussed herein may be found in our Annual Report on Form 10-K for the year ended December 31, 2008. Projects with status updates since that report was 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.

"Atlas" Search Project

The "Atlas" project encompasses a minimum of five high-value targets within a search area covering more than 6,000 square miles. Based on work completed during past "Atlas" seasons, two sites within the "Atlas" search area are the subject of Admiralty arrests filed by Odyssey. In addition, HMS Victory was discovered within this search area.

Operations for the 2009 "Atlas" season commenced in February 2009 with the 251-foot Odyssey Explorer conducting search and inspection operations. In addition to search and inspection technology used in the past, our teams have integrated new technologies into the ZEUS platform that have significantly enhanced its inspection capabilities.

The Ocean Alert was utilized for some search operations in the "Atlas" search area in 2009 and after recently undergoing equipment upgrades, has recently left the "Atlas" area to begin work on the "Enigma" project (see "Enigma" Project).

Between February 2009 and October 2009, approximately 1,000 square miles of seabed were mapped with side scan sonar and magnetometer. Odyssey's Remotely Operated Vehicle ZEUS completed 141 dives spending approximately 380 hours on the seabed. Of the 238 targets inspected to date in 2009, 11 shipwrecks were discovered. Additional work in the area continued into November.

We discovered and conducted a preliminary investigation of the shipwreck of Admiral Balchin's HMS Victory (which sank in 1744) during our 2008 "Atlas" season. HMS Victory was the inspiration for and direct predecessor to Nelson's Victory and was the mightiest and most technically advanced vessel of her age.

Odyssey has been cooperating closely with the United Kingdom (UK) Ministry of Defence (the "MOD") on the HMS Victoryproject. All activities at the site, including the recovery of two bronze cannon, have been conducted in accordance with protocols agreed to by the UK Government and Royal Navy officials. On September 18, 2009, Odyssey announced it reached an agreement with the UK Government on an 80% salvage award for the cannon recovered from the site. Odyssey will be participating in the ongoing process of consultation with the UK Government to determine what approaches should be adopted towards the wreck. Terms of the collaboration between Odyssey and the UK MOD on the project are currently being negotiated. Pursuant to the agreement, Odyssey dismissed without prejudice the admiralty arrest on this 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 proposed agreement is consistent with the archaeological principles of CPUCH.

Operations were conducted in August and September 2009 in the area covered by the exploration permit issued by the North Carolina Department of Cultural Resources to Odyssey's partner, Intersal, Inc. Odyssey has an agreement with Intersal, Inc. to pursue operations under this permit and to share in substantial research and data acquired by Intersal over the years relating to the target shipwreck and the work completed to date in the permit area.

The 2009 operations included remote sensing in two search blocks with side scan sonar and magnetometer which identified multiple targets requiring additional inspection. A preliminary report has been submitted to the North Carolina Department of Cultural Resources.

The area covered by this permit and the arrest are located near Odyssey's current "Firefly" project, which was acquired by Odyssey from BDJ Discovery Group in 2007 and includes one arrested site that has already produced a small number of gold and silver artifacts. The Intersal site and permit area may also be related to a high-value, Colonial-era merchant vessel believed to be located in the area. The agreements with BDJ and Intersal are similar but separate, and the areas do not overlap.

"Symphony" Project

Odyssey completed the first phase of survey in a new search area code named "Symphony." The work was conducted under a government permit in an exclusive claim area and in conjunction with a project partner. Results of the survey are being analyzed and compiled into a report that will be provided to the government before the next phase of work is commenced. Preliminary review of the data suggests that four shipwrecks have been located in the phase-one search area, but at this point, none of the sites have been conclusively identified. Research suggests the search area contains at least two commercial vessels with significant cargoes of gold coins.

The expedition was conducted by the Odyssey search team on a chartered vessel. To protect the security of the search area, specific location details are not being released at this time. Proceeds of any recoveries from this search area will be split with the government and project partner with an anticipated 88% of the net proceeds of the project retained by Odyssey.

"Enigma" Project

Odyssey and our wholly owned subsidiary, OVH, Inc. have executed agreements to provide project research and shipwreck search and survey services to Robert Fraser Marine Ltd and client companies of Robert Fraser & Partners LLP in return for cash payments and a significant back end interest in the project. Search operations on "Enigma" are expected to commence in November 2009.

To protect the security of the search area, specific location details are not being released at this time.

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. Odyssey currently has six pending Admiralty arrest cases: two in the "Atlas" search area, one in the north Atlantic, the "Black Swan," the "Firefly" and a 20th century passenger liner in the Mediterranean.

Additional information regarding the admiralty legal proceedings for these arrests may be found in our Annual Report on Form 10-K for the year ended December 31, 2008. Only arrests with status updates since that report was filed are discussed below.

In the "Black Swan" case, on June 3, 2009, a Report and Recommendation (R&R) was filed by the Magistrate which recommended that Spain's Motion to Dismiss the case be granted. Objections to the R & R could be made until July 21, 2009. Six separate Objections were filed before the deadline, including an Objection from Odyssey, Peru, and many claiming to be descendants of merchants who owned the private cargo on the Mercedes. Odyssey's objection included arguments that:

• The applied legal standard of review is incorrect (i.e., the motion must be denied because the factual questions regarding jurisdiction are intertwined with the merits of the case).

• There is no coherent vessel located at the "Black Swan" site.

• There is clear and convincing evidence of the commercial nature of the Mercedes' mission at the time of her demise which Odyssey believes legally nullifies the claim to sovereign immunity of that vessel.

• A distinction between cargo and vessel is allowed and even required by settled admiralty law.

• The majority of the coins aboard the Mercedes were merchant-owned, commercial cargo being shipped as freight for a fee and were never owned by Spain.

Spain filed a response to the Objections on August 31, 2009. Odyssey filed a reply to that response on October 15, 2009 reiterating that the R&R had applied the wrong legal standard of review and had incorrectly interpreted factual and legal issues. On October 14, 2009 Odyssey filed a response to a statement of interest filed in the case by the United States Department of Justice which, while not addressing the specific jurisdictional issue before the court, supported Spain's argument that the Nuestra Senora de las Mercedes, would have been considered a sovereign vessel. The court denied Odyssey's motion to file a declaration signed by the primary drafter of relevant legislation. A motion to file an amicus brief by members of Congress purporting to counter the DOJ filing was also denied. Filings on the jurisdictional issue are complete and the parties await a ruling from the Court.

In case number 8:06-cv-01685 (unidentified "Atlas" Arrest), on June 23, 2009, the court ordered Odyssey to file a brief report informing the court as to the status of Odyssey's investigation of the site by November 6, 2009. All parties are to appear for a status conference in the case on November 9, 2009.

After reaching an agreement with the United Kingdom's Ministry of Transportation, Odyssey filed a request on July 17, 2009, to dismiss without prejudice the Admiralty arrest action on the shipwreck believed to be Laconia (case number 8:08-cv-02219), and the case was closed on July 20, 2009. Also, Odyssey filed an Amended Arrest complaint on July 16, 2009, on the shipwreck believed to be Cairn Hill (case number 8:08-cv-02220) to exclude from the arrest any property on the vessel that was the property of the United Kingdom.

As part of a larger agreement with the United Kingdom including a salvage award for the cannon recovered to date from the site, on September 17, 2009, Odyssey filed a Motion for Leave to Dismiss the Admiralty Arrest Without Prejudice in the Victory admiralty action (case number 8:08-cv-01045). Although the admiralty case is U.S. Court has been closed, Odyssey continues discussions with the Ministry of Defence regarding future efforts at the site.

On June 25, 2009, Odyssey filed a motion to stay the proceedings on the shipwreck site believed to be SS Ancona (case number 8:07-cv-00616). The court had previously entered a default in the case, but rather than proceeding to judgment, Odyssey requested a stay of the proceedings to discuss with Italy any potential interests they may have in the wreck. Odyssey asked the court to stay the proceedings until the parties have concluded negotiations. The court has agreed to stay the proceedings until December 31, 2009, with a report due before January 6, 2010, and has administratively closed the case until that time.

On July 30, 2009, the Clerk of the Court entered a notice of default on the shipwreck believed to be the Marqise de Tornay (case number 8:08-cv-01044). This closes the time for claimants to come forward allowing us to proceed to a final judgment in the case.

We will continue to pursue prompt resolutions of all claims. If we are able to confirm that any entity has a potential legitimate legal claim to any of the materials recovered from these sites, we intend to provide legal notice to any and all potential claimants. Even if another entity is able to prove that it has an ownership interest in the shipwreck and/or cargo and that they had not legally abandoned the shipwreck, Odyssey would seek a salvage award from the Admiralty Court. In cases such as this, salvors are typically awarded up to 90% of the recovery.

Critical Accounting Policies and Changes to Accounting Policies

There have been no material changes in our critical accounting estimates since December 31, 2008, 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.

Three months ended September 30, 2009, compared to three months ended September 30, 2008

                                                                  2009 vs. 2008
                                                               Increase/(Decrease)
                                            2009    2008        $                %
    Revenue                                 $  .8   $ 2.2   $     (1.4 )          (62 )%

    Cost of sales                              .2      .2           .1             28 %
    Marketing, general and administrative     2.1     2.5          (.4 )          (18 )%
    Operations and research                   2.9     6.1         (3.2 )          (53 )%

    Total cost and expenses                 $ 5.2   $ 8.8   $     (3.6 )          (41 )%

The explanations that follow are for the three months ended September 30, 2009, compared to the three months ended September 30, 2008.

Revenue

Revenue is generated through the sale of artifacts (including coins, artifacts and merchandise), exhibits, and beginning in the second quarter of 2008, expedition revenue associated with the production of a shipwreck exploration television series. The decrease in revenue of $1.4 million was primarily related to a decrease in expedition revenue associated with the production of the Treasure Quest television series. In April 2009, JWM Productions notified Odyssey that they wished to exercise their option for a second contract year on the "Expedition Agreement" which applied to Discovery's Treasure Quest series. Filming for this second contract year is being focused on following our core operational schedule, which leaves Odyssey in sole control over operations. Consequently, the schedule has primarily consisted of "Tag Along Days" (as defined in the Expedition Agreement), therefore we expect to generate less expedition revenue associated with the production of the television series in 2009 than comparable periods of 2008.

While overall artifact and other sales were relatively flat over the period, the quantity of silver coins sold in 2009 increased by more than 50 percent versus the prior period primarily due to an increase in demand for SS Republic silver sets and Civil War era coins. Actual coin sales increased $.3 million in 2009. In 2008 artifact and other sales included a $.3 million non-coin sale.

Our exhibit sales were up 26 percent in 2009 due to the continued success of our SHIPWRECK! Pirates & Treasure exhibit which opened at Discovery Place in Charlotte, NC, on July 4, 2009 and will run through January 31, 2010, in the museum's newly renovated exhibition hall.

Costs and Expenses

Cost of sales consists of shipwreck recovery costs, grading, conservation, packaging, and shipping costs associated with artifact and other sales. The primary cost component is from the sale of coins. Cost of sales for coins increased 28 percent during 2009 versus 2008 primarily because of more coins sold in 2009.

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 $2.1 million in 2009 as compared to $2.5 million in 2008. The decrease of $.4 million was primarily attributable to lower outside professional service and legal expenses ($.2 million) and lower employee-related expenses ($.2 million) primarily related to accrued bonus expenses.

Operations and research expenses primarily include all costs within the following departments: Archaeology, Conservation, Research, and Marine Operations which include all vessel operations. Operations and research expenses were $2.9 million in 2009 as compared to $6.1 million in 2008. The $3.2 million decrease was primarily due to lower vessel operating expenses in 2009 versus 2008 ($3.1 million) and lower exhibit expenses ($.1 million). The lower vessel operating expenses were primarily attributable to not chartering additional vessels in 2009 ($1.7 million) and other favorable expenses including repairs and maintenance expenses for existing vessels ($.7 million), fuel costs ($.4 million) and other vessel operating expenses ($.3 million).

Nine months ended September 30, 2009, compared to nine months ended September 30, 2008

                                                                   2009 vs. 2008
                                                                Increase/(Decrease)
                                            2009     2008        $                %
   Revenue                                 $  1.9   $  3.6   $     (1.7 )          (48 )%

   Cost of sales                               .5       .5           -               9 %
   Marketing, general and administrative      6.9      8.2         (1.3 )          (16 )%
   Operations and research                    8.9     13.8         (4.9 )          (35 )%

   Total cost and expenses                 $ 16.4   $ 22.6   $     (6.2 )          (27 )%

The explanations that follow are for the nine months ended September 30, 2009, compared to the nine months ended September 30, 2008.

Revenue

The decrease in revenue of $1.7 million was primarily related to a decrease in expedition revenue ($1.5 million) associated with the production of the Treasure Quest television series. In April 2009, JWM Productions notified Odyssey that they wished to exercise their option for a second contract year on the "Expedition Agreement" which applied to Discovery's Treasure Quest series. Filming for this second contract year is being focused on following our core operational schedule, which leaves Odyssey in sole control over operations. Consequently, the schedule has primarily consisted of "Tag Along Days" (as defined in the Expedition Agreement), therefore we expect to generate less expedition revenue associated with the production of the television series in 2009 than comparable periods of 2008.

While overall artifact and other sales were down $.2 million in 2009 versus 2008, the quantity of silver coins sold in 2009 increased by more than 27 percent versus 2008 primarily due to the release of limited edition, numbered sets of SS Republic silver half dollars coupled with the continued roll out of sales programs across multiple distributors. Actual coin sales increased $.2 million in 2009. The decrease in artifact and other sales was attributable to $.3 million of non-coin other sales which occurred in 2008.

Costs and Expenses

Marketing, general and administrative expenses were $6.9 million in 2009 as compared to $8.2 million in 2008. The decrease of $1.3 million was primarily attributable to lower employee-related expenses ($.9 million) including contract labor and bonus accruals, lower outside professional services and legal expenses ($.2 million) and lower depreciation expenses ($.2 million).

Operations and research expenses were $8.9 million in 2009 as compared to $13.8 million in 2008. The $4.9 million decrease was primarily due to lower vessel operating expenses in 2009 versus 2008 primarily attributable to not chartering additional vessels in 2009 ($2.0 million) and other favorable expenses including repairs and maintenance expenses for existing vessels ($1.4 million), fuel costs ($.6 million) and other vessel operating expenses ($.9 million).

Liquidity and Capital Resources

Discussion of Cash Flows

Net cash used in operating activities for the first nine months of 2009 was $11.8 million. This amount primarily reflected an operating loss of $14.7 million and non-cash items including depreciation and amortization ($1.7 million) and share-based compensation ($1.6 million), a decrease in inventory, accounts receivable and other assets ($.9 million), offset in part by a decrease in accounts payable and accrued expenses ($1.3 million). Net cash used in operating activities for the first nine months of 2008 was $17.0 million. This amount primarily reflected an operating loss of $18.8 million offset in part by non-cash items including depreciation and amortization ($2.0 million) and share-based compensation ($1.5 million), a decrease in accrued expenses ($1.4 million) and inventory ($.5 million) and an increase in restricted cash ($.9 million) required by our credit facility and building mortgage with Fifth Third Bank.

Cash flows used in investing activities was $.5 million for the first nine months in 2009 which primarily reflected the purchase of property and equipment for our marine operations group which included extensive capitalized upgrades to the Ocean Alert ($.3 million). Cash used in investing activities in 2008 of $1.2 million primarily reflected purchase of property and equipment which included capitalized maintenance for extensive engine repairs and upgrades to the Ocean Alert ($.5 million), 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), and $.5 million for property and equipment primarily vessel-related.

Cash flows provided by financing activities for the first nine months of 2009 were $5.7 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 proceeds were offset in part by repayments of mortgage and loans payable of

$.2 million. Cash flows provided by financing activities for the first nine months of 2008 were $10.2 million which primarily included $10.8 million from the issuance of common stock and exercise of warrants offset by net loan repayments of $.6 million. Loan proceeds of $5.0 million included $2.5 million from our line of credit and $2.5 million due to refinancing our corporate building with Fifth Third Bank in July 2008. The loan proceeds were offset by $5.6 million loan repayments which included $3.1 million for the prior building mortgage and equipment loan with Mercantile Bank in February 2008, and $2.5 million repayment of our line of credit.

Material Trends and Uncertainties

At September 30, 2009, we had cash and cash equivalents of $4.1 million, a decrease of $6.6 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 and/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.

On November 6, 2009, we filed a shelf registration statement with the SEC which, when declared effective by the SEC, will enable us to sell common stock, preferred stock, debt securities, and/or warrants in one or more offerings up to a total dollar amount of $50,000,000.

New Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165, now incorporated in the ASC Topic Subsequent Events, is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for financial statements issued for fiscal years and interim periods beginning after June 15, 2009 and will be applied prospectively. SFAS No. 165 is consistent with current practice and does not have any impact on the Company's results of operations, financial condition or liquidity. See Note A for required disclosure.

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