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, 2011.

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

Additional information regarding our announced projects may be found in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report for the period ended March 31, 2012. Only projects with material status updates since those report 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 owned vessel, the Odyssey Explorer, or chartered vessels to conduct operations based on availability.

HMS Victory Project

In 2008, Odyssey discovered HMS Victory (lost 1744) and is, as recognized by the owner and under maritime law, salvor-in-possession of the wreck. After a period of joint consultation between the UK Ministry of Defense and the UK Department for Culture, Media and Sport, and a public consultation period, the title to the HMS Victory was transferred to the Maritime Heritage Foundation in January 2012. The Foundation is a charity established to locate shipwrecks, investigate, recover and preserve artifacts to the highest archaeological standards and to promote knowledge and understanding of Britain's maritime heritage, has now assumed responsibility for the future management of the wreck site. The Foundation has contracted with Odyssey to provide a full range of archaeological, recovery, conservation and other services.

Pursuant to an agreement with the Foundation, Odyssey has produced an extensive project design for the archaeological excavation of the site, including a complete plan for recording, documentation, conservation, publication and public education. The agreement calls for Odyssey's project costs to be reimbursed and for Odyssey to be paid a percentage of the recovered artifacts' fair value. The preferred option is for Odyssey to be compensated in cash. However, if the Foundation determines, based on the principles adopted for their collection management and curation policy, that it is in its best interest to de-accession certain artifacts, the Foundation may choose to compensate Odyssey with artifacts in lieu of cash.

A report was provided to the Foundation and the UK MOD that details monitoring of the site conducted by Odyssey and Wreck Watch International between 2008 and early 2012. The report includes evidence, including photographs, of additional damage to the site since 2008. This report was published in June 2012 and is available here http://shipwreck.net/victorypapers.php

"Gairsoppa" Project

On January 25, 2010, Odyssey was awarded the exclusive salvage contract for the cargo of the SS Gairsoppa by the United Kingdom Government (UKG) Department for Transport. The contract was awarded after a competitive bid process.

The SS Gairsoppa was a 412-foot steel-hulled British cargo ship that was torpedoed by a German U-boat in February 1941 while enlisted in the service of the UKG Ministry of War Transport. Contemporary research and official documents indicate that the ship was carrying £600,000 (1941 value) or up to 7 million total ounces of silver, including over 3 million ounces of private silver bullion insured by the UKG. The British Ministry of War Transport paid a War Risk Insurance Claim for £325,514 (in 1941 value) for 2,817 bars of silver that was reported to be on board the Gairsoppa when she sank. The UKG only paid this insurance on privately owned cargo. Any cargo belonging to the UKG owned cargo would not have been insured through the War Risk Insurance Office.

Under the recovery contract, Odyssey assumes the risk, expense, and responsibility for the search, cargo recovery, documentation, and marketing of the cargo. Any monetary proceeds from the salvage will first be applied to reimbursement of Odyssey's recovery and processing expenses. Any remaining monetary proceeds will next be divided with Odyssey retaining 80% of the net salved value, and 20% retained by the UK.

Search operations began in July 2011. On September 26, 2011, we announced confirmation of the identity and location of the SS Gairsoppa approximately 300 miles southwest of Galway, Ireland in waters approximately 4700 meters deep.

In March and April, 2012 we conducted extensive reconnaissance dives to the site of the Gairsoppa shipwreck utilizing the RV Odyssey Explorer and an inspection-class ROV capable of diving to 6000 meters. The goal for this expedition was to prepare the recovery team with data to plan efficient and effective recovery operations. Hundreds of hours of high-definition dive video and thousands of still photographs were acquired during these dives and a photomosaic was produced. In addition to information about the cargo composition, location and accessibility, extensive information about the shipwreck's condition and structure was acquired which allows us to more efficiently plan for a successful recovery of the target cargo.

The MV Seabed Worker, which serves as our platform for salvage recovery operations, left port in Norway May 31, 2012 to begin recovery operations.

On July 18, 2012, we announced that recovery of silver cargo from the Gairsoppa was underway and that the first 1.4 million troy ounces of silver had been delivered to a secure location in the UK. Recovery operations are continuing.

"Mantola" Project

Odyssey was also awarded the exclusive salvage contract for the cargo of the SS Mantola by the UKG Department for Transport. On October 10, 2011, we announced the discovery of the SS Mantola, which sank on February 9, 1917, after being torpedoed by German submarine U-81. Odyssey discovered the shipwreck approximately 2,500 meters beneath the surface of the northern Atlantic Ocean, approximately 100 miles from the SS Gairsoppa shipwreck.

In 1917, the British Ministry of War Transport paid a War Risk Insurance Claim for £110,000 (in 1917 value) for silver that was reported to be on board the Mantola when she sank. This sum would equate to more than 600,000 ounces of silver based on silver prices in 1917. In September 2011, the UK Government Department for Transport awarded Odyssey a salvage contract for the cargo of the SS Mantola. The terms and conditions are similar to the SS Gairsoppa salvage contract. Under the agreement, Odyssey will retain 80% of the net salved silver value recovered.

We are planning continue conducting our silver recovery operations in conjunction with the SS Gairsoppa recovery aboard the Seabed Worker.

Subsea Mineral Mining Exploration Projects

At June 30, 2012, we owned 6.2 million shares (approximately 33%) of Neptune Minerals, a company focused on discovering and commercializing high-value mineral deposits. To-date Neptune has been successful in attracting the investment capital required to fund mineral exploration expeditions and to facilitate its path to commercially viable ore extraction. Neptune's most recent capital raise, completed in December 2011, was for $12 per share of Class B common stock.

In May 2012 we received our final cash payment of $1 million for recent charter services. We also received 9.3 million shares of Chatham Rock Phosphate Ltd. common stock for charter services valued at $1.7 million (12.2 % of Chatham shares outstanding). Chatham Rock Phosphate Ltd currently holds a license covering over 4,000 square kilometers off the coast of New Zealand believed to have significant seabed deposits of rock phosphate and other potentially valuable minerals.

It is anticipated that The Dorado Discovery will be undergoing routine annual inspection and maintenance work in the near future and when that is completed, will plan to be working on contracted projects in the Pacific.

An admiralty arrest is a legal process in which we seek recognition from the Court of our salvor-in-possession status for a specific shipwreck, site or cargo. It is the first legal step in establishing our rights to ownership or to a salvage award. If we are 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

On September 21, 2011, a panel of the Eleventh Circuit Court of Appeals upheld the dismissal of the case by the United States Federal District Court for the Middle District of Florida finding no subject matter jurisdiction under the Foreign Sovereign Immunities Act. Without concluding that the coins and artifacts recovered were owned by the Kingdom of Spain, the Court upheld the order to transfer all property to Spain based upon a finding that it was once carried aboard the Nuestra Senora de Las Mercedes, a Spanish naval vessel. The appeal had been argued before a panel of three judges. Odyssey and other claimants including the country of Peru filed Petitions for Rehearing En Banc, requesting that the entire Court hear the case. Those Petitions were denied.

In an order issued January 31, 2012, the Eleventh Circuit Court of Appeals denied the company's motion for a stay of mandate, which would have delayed execution of the order for release of the property to Spain. Odyssey then filed an Emergency Motion for Stay with the U.S. Supreme Court to stay the release until the high Court could consider the Company's Petition for Writ of Certiorari in the case. Justice Clarence Thomas denied our request to stay the mandate, and subsequently, the Eleventh Circuit issued a mandate to the district court. On February 17, 2012 the district court held a hearing and entered its order to Odyssey to provide an inventory of artifacts and to release to Spain the artifacts within its jurisdiction to Spain by February 24, 2012. Odyssey complied with the Court order and the coins were taken by Spain to a local U.S. Air Force base for transport to Spain on February 23, 2012. Odyssey has also released the Black Swan property in Gibraltar to Spain pursuant to the district court's order. On April 16, 2012 Spain filed a motion with the district court for an award of unspecified fees and costs (footnoted roughly $4 million). We prepared our response indicating there is no legal basis for such an award in this case, and filed it on May 15, 2012. We await a ruling on the motion.

All of Odyssey's significant filings to-date, including those made at the district court level, can be viewed at
http://www.shipwreck.net/blackswanlegal.php.

Unidentified Shipwreck (Bray Case)

On March 31, 2011, the Eleventh Circuit Court of Appeals reversed the dismissal of the case ruling that an alleged oral agreement for purchase of research materials was a maritime contract. Upon remand to the district court, Plaintiff Bray filed an Amended Complaint seeking to rescind the written and fully performed contract, and adding yet more terms allegedly agreed upon over ten years ago prior to the written contract. Odyssey filed a Motion to Dismiss the Amended Complaint. On February 3, 2012, the district court entered an Order to Show Cause requesting Bray to explain why with no case or controversy, the Motion to Dismiss should not be granted. Bray's response was filed on March 20, 2012. We await a ruling from the district court. We will continue to vigorously defend against what we consider to be a frivolous claim.

Critical Accounting Policies and Changes to Accounting Policies

There have been no material changes in our critical accounting estimates since December 31, 2011, 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 June 30, 2012, compared to three-months ended June 30, 2011

     Increase/(Decrease)                                               2012 vs. 2011
     (Dollars in millions)                    2012        2011         $           %
     Artifact sales and other                $   .1      $   .1      $   -           27 %
     Exhibit                                     .1          -           -          164
     Expedition charter                         1.2         6.6        (5.4 )       (82 )

     Total revenue                           $  1.4      $  6.7      $ (5.3 )       (79 )%

     Cost of sales                           $   .1      $   .1      $   -           71 %
     Marketing, general and administrative      2.5         2.4         .-            2
     Operations and research                    9.6         5.2         4.4          84

     Total operating expenses                $ 12.1      $  7.7      $  4.5          58 %

Other income (expense) $ (4.9 ) $ (1.0 ) $ (3.9 ) (388 )%

Revenue

The decrease in total revenue of $5.3 million was primarily related to a decrease in expedition charter revenue. The decrease in expedition charter revenue was associated with our subsea mineral mining charters ($3.0 million) and a reduction of Robert Fraser shipwreck projects ($2.4 million). The expedition charter revenue of $1.2 million in 2012 was primarily associated with a subsea mineral mining charter with Chatham Rock Phosphates off the coast of New Zealand. The expedition charter revenue in 2011 of $4.2 million related to a subsea mineral mining charter with Neptune Minerals. Also, our operational efforts in 2012 were focused on our shipwreck recovery projects (i.e., Gairsoppa, Mantola and HMS Victory).

Operating Expenses

Operations and research expenses were $9.6 million in 2012 as compared to $5.2 million in 2011. Marine operations and vessel expenses were unfavorable by $4.3 million between the two periods. The increase was primarily related to our charter operations for the recovery of the Gairsoppa and Mantola projects ($4.1 million) and $.2 million of other miscellaneous ship operating expenses.

Other Income (Expense)

Other income and expense generally consists of interest income on investments offset by interest expense on our bank term and other mortgage loans and convertible notes. Beginning in the fourth quarter 2009, it also included the income or loss from our equity investment in subsea mineral mining which has since been written down to zero. It also includes the change in fair value of the derivatives related to our issuance of Series G convertible preferred stock and senior convertible notes. The unfavorable other expense variance of $3.9 million in the second quarter of 2012 was primarily related to an unfavorable impact on the fair value of the derivative financial instruments ($3.9 million, see Note M). Also included in other expense was a favorable impact of $1.6 million on the loss on equity investment since the investment had been written down to zero in 2011. This favorable impact was offset by unfavorable interest expense variance of $1.6 million which primarily related to the interest accretion on the convertible note payable and other interest.

Six-months ended June 30, 2012, compared to six-months ended June 30, 2011

     Increase/(Decrease)                                               2012 vs. 2011
     (Dollars in millions)                    2012        2011         $           %
     Artifact sales and other                $   .2      $   .5      $  (.3 )       (59 )%
     Exhibit                                     .1          .1          -           40
     Expedition charter                         4.0         8.3        (4.3 )       (51 )

     Total revenue                           $  4.3      $  8.8      $ (4.5 )       (51 )%

     Cost of sales                           $   .1      $   .2      $  (.1 )       (45 )%
     Marketing, general and administrative      4.8         4.6          .2           5
     Operations and research                   14.7         8.7         6.0          69

     Total operating expenses                $ 19.7      $ 13.6      $  6.1          45 %

Other income (expense) $ (5.7 ) $ (2.4 ) $ (3.3 ) (139 )%

The explanations that follow are for the six-months ended June 30, 2012, compared to the six-months ended June 30, 2011.

Revenue

The decrease in total revenue of $4.5 million was primarily related to a decrease in expedition charter revenue of $4.3 million and a decrease in artifact sales and of $.3 million. The decrease in expedition charter revenue was associated with our subsea mineral mining charters ($1.4 million), a reduction of Robert Fraser shipwreck projects ($2.4 million) and a $.5 million miscellaneous charter in 2011 for the Odyssey Explorer. The expedition charter revenue of $4.0 million in 2012 was primarily associated with a subsea mineral mining charter with Chatham Rock Phosphates off the coast of New Zealand. The expedition charter revenue in 2011 of $5.4 million related to a subsea mineral mining charter with Neptune Minerals. Also, our operational efforts in 2012 were focused on our shipwreck recovery projects (i.e., Gairsoppa, Mantola and HMS Victory).

The decrease in artifact and other sales of $.3 million was due to over 500 fewer coins sold in the 2012 versus 2011.

Operating Expenses

Cost of sales decreased by $.1 million in 2012 versus 2011 due approximately 500 fewer silver coins sold in the first quarter 2012 versus 2011.

Operations and research expenses were $14.7 million in 2012 as compared to $8.7 million in 2011. Marine operations and vessel expenses were unfavorable by $5.9 million between the two periods. The Dorado Discovery was unfavorable $1.8 million in 2012 versus 2011 primarily related to operating day utilization and off hire periods in 2011 due to vessel maintenance issues. The Odyssey Explorer was unfavorable $.9 million in 2012 versus 2011 primarily related to the additional rental costs for equipment for the Gairsoppa survey project which was offset by favorable Ocean Alert expenses of $.8 million due to the sale in 2011. The remaining unfavorable expenses of $4.1 million in 2012 related to our charter operations for the recovery of the Gairsoppa and Mantola projects.

Other Income (Expense)

Other income and expense generally consists of interest income on investments offset by interest expense on our bank term and other mortgage loans and convertible notes. Beginning in the fourth quarter 2009, it also included the income or loss from our equity investment in subsea mineral mining which has since been written down to zero. It also includes the change in fair value of the derivatives related to our issuance of Series G convertible preferred stock and senior convertible notes. The unfavorable other expense variance of $3.3 million in 2012 was primarily related to an unfavorable impact on the fair value of the derivative financial instruments ($2.5 million, see Note M). Also included in other expense was a favorable impact of $1.6 million on the loss on equity investment since the investment had been written down to zero in 2011. This favorable impact was offset by unfavorable interest expense variance of $2.5 million which primarily related to the interest accretion on the convertible note payable and other interest.