Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding our condensed consolidated 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 condensed consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries, both domestic and international. Equity investments in which we exercise significant influence but do not control and of which we are not the primary beneficiary are accounted for using the equity method. All significant inter-company and intra-company transactions and balances have been eliminated. The portion of the consolidated subsidiaries not owned by the Company and any related activity is eliminated through non-controlling interests in the condensed consolidated balance sheets and net income or loss attributable to redeemable non-controlling interests in the condensed consolidated statements of operations. The results of operations attributable to the non-controlling interest are presented within equity and net income or loss and are shown separately from the Company’s equity and net income attributable to the Company. Some of the existing inter-company balances, which are eliminated upon consolidation, include features allowing the liabilities of Exploraciones Oceánicas S. de R.L. de CV (“ExO”) and Oceanica Resources, S. de R.L. (“Oceanica”), majority-owned subsidiaries of the Company, to be converted into additional equity of a subsidiary, which, if exercised, could increase the Company’s direct or indirect interest in the non-wholly owned subsidiaries.

Use of Estimates

Management used estimates and assumptions in preparing these condensed consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could vary from the estimates that were used.

Bismarck Exploration License

The Company follows the guidance pursuant to Financial Accounting Standards Board (“FASB”) ASC 350, “Intangibles-Goodwill and Other” (“ASC 350”) in accounting for the exploration license held by Bismarck Mining Corporation, Ltd., (the “Bismarck Exploration License”). Management determined the rights to use the license to have an indefinite life. This assessment is based on the historical success of renewing the license every two years since 2006, and the fact that management believes there are no legal, regulatory, or contractual provisions that would limit the useful life of the asset. The Company was notified in November 2023 that the 2022 exploration license renewal application was approved. The Bismarck Exploration License is not dependent on another asset or group of assets that could potentially limit the useful life of the Bismarck Exploration License. We test the Bismarck Exploration License for impairment annually, and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired, per the guidance of the ASC 350. We did not have any impairment indicators for the three and nine months ended September 30, 2024 and 2023.

Investment in Unconsolidated Entities

As discussed in Note 6, Investment in Unconsolidated Entities, the Company has cost basis method investments and equity method investments with related parties. As of September 30, 2024 and December 31, 2023, there were no variable interest entities (“VIE”) for which the Company was the primary beneficiary. We also review these investments for any potential impairment annually.

Long-Lived Assets

We did not have any impairment indicators related to long-lived assets for the three and nine months ended September 30, 2024 and 2023.

Earnings Per Share (“EPS”)

Basic EPS has been computed pursuant to FASB ASC Topic 260, Earnings Per Share, and is computed by dividing income or loss 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, restricted stock units and warrants and use the if-converted method to compute potential common shares from preferred stock, convertible notes or other convertible securities.

Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. The potential common shares in the following tables represent potential common shares from outstanding options, restricted stock awards, convertible notes and other convertible securities that were excluded from the calculation of diluted EPS during periods due to having an anti-dilutive effect are:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Average market price during the period	$	3.75	$	3.79	$	4.16	$	3.41
Option awards		1,233,090		1,116,855		1,529,824		1,098,433
Unvested restricted stock awards		—		207,200		10,087		10,999
Convertible notes		—		573,813		—		—
Common Stock Warrant related		5,878,427		12,096,169		2,174,716		7,156,654
Put Options		—		3,994,419		—		—

The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income per share:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

Net income (loss) attributable to Odyssey Marine Exploration, Inc.	$	18,688,236		$	(3,813,285	)	$	20,659,157		$	13,562,793
Numerator:
Basic net income (loss) available to stockholders	$	18,688,236		$	(3,813,285	)	$	20,659,157		$	13,562,793
Income (loss) on equity method investment		746,505			—			(256,062	)		—
Fair value change of debt instruments		(5,285,472	)		—			(5,528,725	)		(214,339	)
Fair value change of warrants		(10,798,965	)		—			(17,394,715	)		(3,398,976	)
Fair value change of convertible debt		(6,279	)		—			(360,690	)		—
Diluted net income (loss) available to stockholders	$	3,344,025		$	(3,813,285	)	$	(2,881,035	)	$	9,949,478

Denominator:
Weighted average common shares outstanding – Basic		20,665,783			20,025,067			20,524,779			19,871,381
Dilutive effect of options		24,862			—			—			5,236
Dilutive effect of other derivative instruments		3,871,880			—			3,871,880			174,754
Dilutive effect of warrants		519,690			—			1,386,386			91,459
Dilutive effect of convertible instruments		137,043			—			131,488			1,394,132
Weighted average common shares outstanding – Diluted		25,219,258			20,025,067			25,914,533			21,536,962

Net income (loss) per share:
Basic	$	0.90		$	(0.19	)	$	1.01		$	0.68
Diluted	$	0.13		$	(0.19	)	$	(0.11	)	$	0.46

Segment Reporting

We evaluate the products and services that produce our revenue and the geographical regions in which we operate to determine reportable segments in accordance with ASC 280 – Segment Reporting. Based on that evaluation, we have determined that we have only one operating segment.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued new guidance on segment reporting (ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”). This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company operates in one reportable segment; however, it is currently evaluating the effect that implementation of this standard will have on the Company’s condensed consolidated financial statements and disclosures.

In December 2023, the FASB issued new guidance on income tax disclosures (ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”). Among other requirements, this update adds specific disclosure requirements for income taxes, including: (1) disclosing specific categories in the rate reconciliation and (2) providing additional information for reconciling items that meet quantitative thresholds. The guidance is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the impact of the adoption of ASU 2023-09 on the Company’s condensed consolidated financial statements and disclosures.

Other recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not or are not believed by management to have a material effect, if any, on the Company’s financial statements.