TABLE OF CONTENTS
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED |
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
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| Emerging growth company | ||||||
TABLE OF CONTENTS
As used in this Comprehensive Annual Report on Form 10-K, “we,” “us,” “our company” and “Odyssey” mean Odyssey Marine Exploration, Inc. and our subsidiaries, unless the context indicates otherwise.
Explanatory Note
As previously disclosed in the Current Report on Form 8-K filed by the company with the Securities and Exchange Commission (the “SEC”) on February 26, 2024, the Company’s Audit Committee of the Board of Directors concluded that we would restate certain of our previously issued consolidated financial statements.
This comprehensive Annual Report on Form 10-K (this “Comprehensive Form 10-K”) for the year ended December 31, 2023, includes the following information in lieu of separate annual reports on Form 10-K and quarterly reports on Form 10-Q for the following periods:
| • | restated audited consolidated financial statements for the year ended December 31, 2022 (the “2022 Restatement”); |
| • | restated unaudited consolidated financial statements for the interim periods as contained in the company’s Quarterly Reports on Form 10-Q for the fiscal periods ended March 31, 2022 and 2023, June 30, 2022 and 2023, and September 30, 2022 (collectively, the “Interim Period Restatements” and, together with the 2022 Restatement, the “Restatement”); |
| • | unaudited consolidated financial statements for the interim period ended September 30, 2023; and |
| • | amended Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) as it relates to the year ended December 31, 2022. |
We did not file our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, and we include the unaudited consolidated financial statements for that period in this Comprehensive Form 10-K.
Our delay in the filing of our quarterly report on Form 10-Q for the period ended September 30, 2023, and our Annual Report for the year ended December 31, 2023, was primarily due to the time required to (a) complete the preparation of the restatement of certain of our previously issued consolidated financial statements; (b) prepare the consolidated financial statements for the quarter ended September 30, 2023; and (c) prepare other disclosures contained herein.
For a more detailed description of the financial impact of the restatements referenced above, see NOTE 2 – Restatement of Consolidated Financial Statements, and “Restatement of Previously Issued Financial Statements” under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Comprehensive Form 10-K. For the impact of these adjustments on the unaudited quarterly financial data, see NOTE 20 – Quarterly Financial Data (Unaudited). All amounts in this Comprehensive Form 10-K affected by the Restatement adjustments reflect such amounts as restated.
This Comprehensive Form 10-K also includes amendments or updates to Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 8 — Financial Statements, and Item 9A Controls and Procedures.
PART I
This Comprehensive Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. The statements regarding Odyssey Marine Exploration, Inc. and its subsidiaries contained in this report that are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes,” “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.
Important factors known to us that could cause such material differences are identified in our “RISK FACTORS” in Item 1A and elsewhere in this Comprehensive Form 10-K. Accordingly, readers of this Comprehensive Form 10-K should consider these factors in evaluating an investment in our securities and are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information or future events unless otherwise specifically indicated, except as required by law.
ITEM 1. BUSINESS
Overview
Odyssey Marine Exploration, Inc. discovers, validates and develops high-value seafloor mineral resources in an environmentally responsible manner, providing access to critical resources that can transform societies and economies for generations to come.
The company has a diversified mineral portfolio that includes projects controlled by us and other projects in which we are a minority owner and service provider. In addition, our team is continually working to add new projects to the portfolio by identifying potential new assets through a proprietary Global Prospectivity Program leading to the acquisition of appropriate rights. Our development focus is on projects that can meet stringent standards for environmental responsibility and sustainability while unlocking benefits for the host country. Environmental protection remains at the forefront of the strategic and tactical decision-making processes in all our work.
Each project in the portfolio is advanced along a defined development path, decreasing risk and increasing value along the way. These steps may include, but are not limited to, verification and quantification of the mineral asset, collection of baseline environmental data essential for environmental permitting, environmental impact studies and reports, design and verification of extraction systems and definition and verification of commercial programs. Odyssey may elect to sell equity in individual projects to fund continued advancement of the project.
For nearly 30 years, we have deployed cutting-edge ocean technology and processes at depths up to 6,000 meters, under the direction of some of the industry’s most skilled and successful ocean exploration professionals, scientists, and environmental specialists.
Importance of Seabed Mineral Exploration
There is growing global demand for critical mineral resources to power the green economy, feed the world’s growing population and provide vital infrastructure. Land based deposits of cobalt, manganese, rare earth minerals, phosphorite, gold, silver, copper and zinc are being depleted. As the worldwide population continues to grow, it is necessary to explore additional and alternative sources of these much-needed materials to meet increasing forecasted demand.
Climate change and the global transition to a lower carbon economy presents opportunities for Odyssey given the increased demand for raw materials for the future green economy, including those required for renewable energy generation and storage. Furthermore, as the worldwide population continues to grow, it is necessary to explore additional and alternative sources of these much-needed materials.
Subsea mineral deposits can provide these critical resources with less adverse social and environmental impact. We have the expertise and technology to find and access these deposits and to prepare the project for extraction in an economically feasible and environmentally sensitive way.
Benefits of Ocean Mineral Resource Development
Some of the benefits of ocean mineral resource development include:
| • | Infrastructure Expense: No site-specific infrastructure and generally low capital expenditures – ship-based extraction systems provide the ability to redeploy, repurpose or increase equipment productivity through cost/tonne or ship charter financing options. |
| • | Overburden: Compared to terrestrial projects, overburden to be removed in most proposed seafloor mining projects is less, which contributes to operational efficiencies. |
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| • | Flexibility: Extraction ships can move to different types of deposits/minerals or projects to suit market conditions without infrastructure loss at minimal costs. |
| • | Social Displacement: No people are displaced, no disruption of society or property. |
| • | Environmental Impact: Seafloor mining can be done responsibly with limited biological impact and a manageable carbon footprint. No forested lands will be impacted, and freshwater systems are not affected. Seafloor dredging, aggregate and diamond mining have been carried out for many years in shallow waters around the world and with appropriate mitigation programs have posed minimal adverse impact to marine ecosystems. |
| • | Transshipment: Shipping logistics are efficient as ore and materials are extracted and moved directly to bulk carriers, lowering the number of steps in the delivery process thus reducing time and costs. |
Considering the benefits of subsea mineral resource extraction, we are convinced that ocean mining will be the best practice for responsible provision of critical resources required worldwide. Odyssey is taking the lead in preparing for this future through the validation and development of environmentally and socially responsible seafloor mineral projects.
Mineral and Offshore Services
We provide specialized mineral exploration, project development and marine services to clients (subsidiary companies, other companies and/or governments). As our business is focused on the development of a diversified portfolio of subsea resources, we may elect to receive equity for the provision of our services on select mineral projects. We have an extensive history conducting deep-ocean projects down to 6,000 meters in depth including deep-ocean resource explorations, ship and airplane wreck explorations, archaeological recovery and conservation and insurance documentation. We also apply this experience and expertise to advance our project portfolio.
Operational Projects and Status
We focus on projects that can meet stringent standards for environmental responsibility while unlocking benefits for the host community and country.
Our subsea project portfolio contains multiple projects in various stages of development throughout the world and across different mineral resources. We are regularly evaluating new projects through the development of new deposits, acquisition of mineral rights/deposits and through a leveraged contracting model, which allows the company to earn equity in deep-sea mineral projects.
With respect to mineral deposits, Subpart 1300 of Regulations S-K outlines the Securities and Exchange Commission’s (“SEC”) basic mining disclosure policy and what information may be disclosed in public filings. See Item 2 Properties.
Although Odyssey has a variety of projects in various stages of development, only projects with material activity in the past 12 months are included below.
ExO Phosphate Project:
The “Exploraciones Oceánicas” Phosphate Project is a rich deposit of phosphate sands located 70-90 meters deep within Mexico’s Exclusive Economic Zone (“EEZ”). This deposit contains a large amount of high-grade phosphate ore that can be extracted on a financially attractive basis (essentially a standard dredging operation). The product will be attractive to Mexican and other world producers of fertilizers and can provide important benefits to Mexico’s agricultural development.
The deposit lies within an exclusive mining concession licensed to the Mexican company Exploraciones Oceánicas S. de R.L. de CV (“ExO”). Oceanica Resources, S. de R.L., a Panamanian company (“Oceanica”) owns 99.99% of ExO, and Odyssey owns 56.04% of Oceanica through Odyssey Marine Enterprises, Ltd., a wholly owned Bahamian company (“Enterprises”).
In 2012, ExO was granted a 50-year mining license by Mexico (extendable for another 50 years at ExO’s option) for the deposit that lies 25-40 km offshore in Baja California Sur.
We spent more than three years preparing an environmentally sustainable development plan with the assistance of experts in marine dredging and leading environmental scientists from around the world. Key features of the environmental plan included:
| • | No chemicals would be used in the dredging process or released into the sea. |
| • | A specialized return down pipe that exceeds international best practices to manage the return of dredged sands close to the seabed, limiting plume or impact to the water column and marine ecosystem (including primary production). |
| • | The seabed would be restored after dredging in such a way as to promote rapid regeneration of seabed organisms in dredged areas. |
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| • | Ecotoxicology tests demonstrated that the dredging and return of sediment to the seabed would not have toxic effects on organisms. |
| • | Sound propagation studies concluded that noise levels generated during dredging would be similar to whale-watching vessels, merchant ships and fisherman’s ships that already regularly transit this area, proving the system is not a threat to marine mammals. |
| • | Dredging is limited to less than one square kilometer each year, which means the project would operate in only a tiny proportion of the concession area each year. |
| • | Proven turtle protection measures were incorporated, even though the deposit and the dredging activity are much deeper and colder than where turtles feed and live, making material harm to the species highly remote. |
| • | There will be no material impact on local fisheries as fishermen have historically avoided the water column directly above the deposit due to the naturally low occurrence of fish there. |
| • | The project would not be visible from the shoreline and would not impact tourism or coastal activities. |
| • | Precautionary mitigation measures were incorporated into the development plan in line with best-practice global operational standards. |
| • | The technology proposed to recover the phosphate sands has been safely used in Mexican waters for over 20 years on more than 200 projects. |
Notwithstanding the factors stated above, in April 2016 the Mexican Ministry of the Environment and Natural Resources (“SEMARNAT”) unlawfully rejected the permit to move forward with the project.
ExO challenged the decision in Mexican federal court and in March 2018, the Tribunal Federal de Justicia Administrativa (“TFJA”), an 11-judge panel, ruled unanimously that SEMARNAT denied the application in violation of Mexican law and ordered the agency to re-take its decision. Just prior to the change in administration later in 2018, SEMARNAT denied the permit a second time in defiance of the court. ExO is once again challenging the unlawful decision of the Peña Nieto administration before the TFJA. In addition, in April 2019, we filed a claim under the North American Free Trade Agreement (“NAFTA”) against Mexico to protect our shareholders’ interests and significant investment in the project.
Our claim seeks compensation of over $2 billion on the basis that SEMARNAT’s wrongful repeated denial of authorization has destroyed the value of our investment and is in violation of the following provisions of NAFTA:
| • | Article 1102. National Treatment. |
| • | Article 1105. Minimum Standard of Treatment; and |
| • | Article 1110. Expropriation and Compensation. |
We filed our First Memorial in the NAFTA case in September 2020. It is supported by documentary evidence and 20 expert reports and witness statements. In summary, this evidence includes:
| • | MERITS: Testimony from independent environmental experts that the environmental impact of ExO’s phosphate project is minimal and readily mitigated by the mitigation measures proposed by ExO. Witnesses also testified that Mexico’s denial of environmental approval by the prior administration was politically motivated and not justified on environmental grounds, and that Mexico granted environmental permits to similar dredging projects in areas that are considered more environmentally sensitive than ExO’s project location. |
| • | RESOURCE: An independent certified marine geologist testified as to the size and character of the resource. |
| • | OPERATIONAL VIABILITY: Engineering experts testified that the project uses established dredging and processing technology, and the project’s anticipated CAPEX and OPEX was reasonable. |
| • | VALUE: A phosphate market analyst testified that the project’s projected CAPEX and OPEX would make the project one of the lowest costs producing phosphate ore resources in the world, and damages experts testified the project would be commercially viable and profitable. |
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Odyssey filed its First Memorial in the case on September 4, 2020. Mexico filed its Counter-Memorial on February 23, 2021. On June 29, 2021, we filed our reply to Mexico’s Counter-Memorial. Mexico filed its Rejoinder on October 19, 2021. The NAFTA Tribunal hearing took place in early 2022. In accordance with the procedural calendar, written post-hearing briefs were filed in September 2022. Information on the case can be found at www.odysseymarine.com/nafta. The procedural calendar and case filings are available on the International Centre for Settlement of Investment Disputes (“ICSID”) website, Case Details | ICSID (worldbank.org). The evidentiary phase of the case is now closed and the Tribunal has begun its deliberations. On October 6, 2023, Odyssey received a letter from ICSID advising that the Tribunal is well advanced in the drafting of the Award and expects to issue the Award in the first quarter of 2024. ICSID also advised that Odyssey would be duly notified of any change to the timing estimate provided. Odyssey cannot otherwise predict the length of these deliberations or when a ruling will be issued, but we remain confident in the merits of our case. On March 8, 2024, Odyssey received a letter from ICSID advising that the Tribunal “has continued to make progress in finalizing its determinations” and that it “expects to render the Award in the second quarter of this year.”
On June 14, 2019, Odyssey and ExO executed an agreement that provided up to $6.5 million in funding for prior, current and future costs of the NAFTA action. On January 31, 2020, this agreement was amended and restated, as a result of which the availability increased to $10.0 million. In December 2020, Odyssey announced it secured an additional $10 million from the funder to aid in our NAFTA case. On June 14, 2021, the funder agreed to fund up to an additional $5.0 million for arbitration costs. The funder will not have any right of recourse against us unless the environmental permit is awarded or proceeds are received (See NOTE 12 Fair Value Financial Instruments – Litigation Financing).
CIC Project:
CIC Limited (“CIC”) is a deep-sea mineral exploration company. CIC is supported by a consortium of companies providing expertise and financial contributions in support of development of the project. Odyssey is a member of the consortium, which also includes Royal Boskalis Westminster N.V.
In February 2022, the Cook Islands Seabed Minerals Authority (“SBMA”) awarded CIC a five-year exploration license beginning June 2022. Offshore explorations and research commenced in the third quarter of 2022 with positive results in early sampling, which tested vessel and equipment functions and performance, and provided information and data further defining the requirements for viable operational functions as the basis for a longer-term operation over the license period. The early operations also resulted in preliminary resource sampling, which will ultimately accrue to the resource evaluation and regional environmental assessment and ongoing operations.
Through a wholly owned subsidiary, we have earned and now hold approximately 14.99% of the current outstanding equity units of CIC issued in exchange for provision of services by the Company.
We have the ability to earn up to an aggregate of 20.0 million equity units over the next several calendar years, which represents an approximate 16.00% interest in CIC, based upon the currently outstanding equity units. This means we can earn approximately 1.5 million additional equity units in CIC under our current services agreement. We achieved our current equity position through the provision of services rendered to CIC (see NOTE 7 Investment in Unconsolidated Entities).
Ocean Minerals, LLC Project:
Ocean Minerals, LLC (“OML”) is a deepwater critical metals exploration and development company incorporated in the Cayman Islands. Moana Minerals Limited (“Moana Minerals”) is a wholly owned subsidiary of OML and is a deepwater critical metals exploration and development company incorporated in the Cook Islands with offices and operations based in Rarotonga, Cook Islands. In 2022, the SBMA awarded Moana Minerals a five-year exploration license (“EL3”) for a 23,630 square kilometer area in the Cook Islands’ EEZ.
Moana Minerals has discovered polymetallic nodules in its exploration license area and, in compliance with SBMA’s regulations, standards and guidelines, it is conducting further exploration activities to increase confidence in the reported mineral resource and size of the reported mineral resources and to secure environmental approvals to perform commercial operations. OML and its project partners are also advancing work to develop recovery systems to harvest and process these high-quality seafloor polymetallic nodules commercially.
On June 4, 2023, Odyssey entered into a purchase agreement to acquire an approximately 13% interest in OML in exchange for a contribution by Odyssey of its interest in its then wholly owned subsidiary, ORI, whose sole asset is a 6,000-meter remotely operated vehicle (“ROV”), cash contributions of up to $10 million in a series of transactions over the following year, a Contribution Agreement and an Equity Exchange Agreement (the “OML Put Option”). On July 3, 2023, the parties consummated the initial closing of the purchase agreement, pursuant to which Odyssey’s wholly owned subsidiary obtained approximately 6.28% of OML’s outstanding equity interests. The purchase agreement allows Odyssey to acquire up to 40% of OML over the next 18 months at Odyssey’s discretion.
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The 6,000-meter rated ROV contributed to OML by Odyssey provides OML with an additional tool to advance the project toward eventual applications for an environmental permit and harvesting license when exploration and feasibility studies are completed and demonstrate how harvesting can be done without serious environmental harm. Over the next year, OML expects to advance its current Joint Ore Reserve Committee (“JORC”) compliant report, substantially increasing resources reporting to indicated and measured confidence levels and completing its preliminary Feasibility Study, among other important project milestones.
LIHIR Gold Project:
The exploration license for the Lihir Gold Project covers a subsea area that contains several prospective gold exploration targets in two different mineralization types: seamount-related epithermal and modern placer gold. Two subaqueous debris fields within the area are adjacent to the terrestrial Ladolam Gold Mine and are believed to have originated from the same volcanogenic source. The resource lies 500-2,000 meters deep in the Papua New Guinea Exclusive Economic Zone off the coast of Lihir Island, adjacent to the location of one of the world’s largest know terrestrial gold deposits. We have an 85.6% interest in Bismarck Mining Corporation, Ltd, the Papua New Guinea company that holds the exploration license (the “Bismarck Exploration License”) for the project.
Previous exploration expeditions in the license area, including research conducted by Odyssey, indicate it is highly prospective for commercially viable gold content.
In November 2023, Papua New Guinea issued a permit extension allowing Odyssey to continue with our exploration program. We have developed an exploration program for the Lihir Gold Project to validate and quantify the precious and base metal content of the prospective resource. The Company met with local regulatory authorities, specialists in local mining, environmental legal experts, and logistics support service companies in Papua New Guinea to establish baseline business functions essential for a successful program to support upcoming marine exploration operations in the license area. This offshore work began in late 2021 and is ongoing. Bismarck and Odyssey value the environment and respect the interests and people of Papua New Guinea and Lihir and are committed to transparent sharing of all environmental data collected during the exploration program.
Offshore survey and mapping operations commenced in December 2021 in the Papua New Guinea, Lihir license area and was completed in 2022. This work produced a high-resolution acoustic terrain model of the seafloor in the area, as well as acquiring acoustic images of subseafloor sediments and lithology. This allowed characterization of the geologic setting of the area and essentially created a “snapshot” of the environment. These activities will help us to further characterize the value of this project and allow informed decision making on how to proceed with environmentally sensitive direct geologic sampling. In the first half of 2023, a comprehensive project plan was designed identifying specific target areas for geological and environmental samples to be collected in future offshore operations. No timetable has been set for operations to commence, as operational plans are currently being developed. On November 13, 2023, Bismarck received a further renewal of the Bismarck Exploration License.
Odyssey’s multi-year exploration program is planned to focus on robust environmental surveys and studies that will accrue to environmental permitting in compliance with Papua New Guinea’s requirements as well as the development of an Environmental Impact Assessment (“EIA”). During the exploration phase, steps to validate and quantify the precious and base metal content of the prospective resource would also be carried out. Once completed, if the data shows extraction can be carried out responsibly, Odyssey will apply for a mining license.
Further development of this project is dependent on the characterization of any present resources during exploration and license approvals.
Legal and Political Issues
Odyssey works with several leading international maritime lawyers and policy experts to constantly monitor international legal initiatives that might affect our projects.
To the extent that we engage in mineral exploration or marine activities in the territorial, contiguous or exclusive economic zones of countries, we work to comply with verifiable applicable regulations and treaties.
We believe there will be increased interest in the recovery of subsea minerals throughout the oceans of the world. We are uniquely qualified to provide governments and international agencies with knowledge and skills to help manage these resources.
Related to mineral exploration, we evaluate the political climate and specific legal requirements of any areas in which we plan to work or are currently working. We may partner with third parties who have unique industry experience in specific geographical areas to assist with navigation of the regulatory landscape.
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Competition
We conduct mineral exploration on both shallow and deep-sea terrains. There are several companies that publicly identify themselves as engaged in aspects of deep-ocean mineral exploration or mining, including Deep Sea Mining Finance Limited, OML, The Metals Company, Global Sea Mineral Resources , and Chatham Rock Phosphate, Ltd., as well as countries that are evaluating options to mine deep-ocean mineralized materials. As our mineral exploration business plan includes partnering with others in the industry, we view these entities as potential partners rather than pure competitors. As mineral rights are generally granted on an exclusive basis for a specific area or tenement, once licenses are granted, we do not anticipate any competitive intrusion on those areas. It is possible that one of these companies or some currently unknown group may secure licenses on an area desired by us or one of our partners; but since exploration work does not start until licenses are secured, we do not believe that competition from one or more of these entities, known or unknown, would materially affect our operating plan or alter our current business strategy. For offshore mineral exploration, there are providers of vessels and equipment that could be competitors or partners for certain projects. These companies generally service the oil, gas, wind and telecom industries with survey capabilities. We view these companies as potential strategic partners or services providers for our projects.
Cost of Environmental Compliance
With the exception of marine operations, our general business operations do not expose us to environmental risks or hazards. We carry insurance that provides a layer of protection in the event of an environmental exposure resulting from the operation of vessels we may utilize. The cost of such coverage is not material on an annual basis. Our seabed mineral business is currently in the exploration and validation phase and has thus not exposed us to any significant environmental risks or hazards, other than those which are standard to basic marine operations.
Executive Officers of the Registrant
The names, ages and positions of all the executive officers of the Company as of March 1, 2024, are listed below.
Mark D. Gordon (age 63) has served as Chief Executive Officer since October 1, 2014, and was appointed to the Board of Directors in January 2008. Mr. Gordon also served as President from October 2007 to June 2019, when he was appointed Chairman of the Board. Previously, Mr. Gordon served as Chief Operating Officer since October 2007 and as Executive Vice President of Sales and Business Development since January 2007 after joining Odyssey as Director of Business Development in June 2005. Prior to joining Odyssey, Mr. Gordon owned and managed four different ventures.
John D. Longley, Jr. (age 57) has served as Chief Operating Officer since October 1, 2014, and was appointed President in June 2019. Previously Mr. Longley served as Executive Vice President of Sales and Business Development since February 2012. Mr. Longley was originally the Director of Sales and Business Operations when he joined the Company in May 2006. Prior to joining Odyssey, Mr. Longley served as Vice President of Sales and Marketing for Public Imagery from 2003 to 2005 and Director of Retail Marketing for Office Depot North American stores from 1998 to 2003.
Human Capital Management
We believe our success has always been dependent on our team of professionals in various fields who are passionate about the ocean, discovery, and making a difference. Therefore, we invest in our people and cultivate a dynamic, engaging, safe and welcoming workplace that drives innovation, encourages collaboration, and helps our people thrive.
As of December 31, 2023, we had 11 full-time employees, most working from our corporate offices in Tampa, Florida. Additionally, we contract with specialized technicians to perform technical marine survey and recovery operations and from time to time hire subcontractors and consultants to perform specific services.
Recruitment, Retention, Training and Development
Odyssey has a long-tenured team that continues to attract world class experts. We believe this is a testament to our culture of treating our employees with respect, providing them with the tools and setting to be productive and innovative, and providing benefits that allow employees to maintain a healthy home and work life. To foster their and our success, we have made the recruitment, retention and development of dedicated and experienced professionals a cornerstone of our corporate strategy.
A key contributing factor to our historically high employee retention rates is our ability to rescale and upscale them through internal and external training and development programs. These include seminars, educational courses and webinars, degree programs, professional organization memberships, scholarly journal subscriptions, books and computer-based resources.
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Compensation, Benefits and Well-being
Odyssey strives to support our employees in various ways and provide compensation and benefits that reflect our vested interest in them and their families. We offer generous health, dental and vision insurance coverage, company funded Health Reimbursement Accounts, as well as zero cost short-term disability, long-term disability and life insurance coverage for all full-time employees. We recognize that our team’s needs are varied and changing and that our benefits should be as well. Our Beyond Benefits program provides other, non-traditional assistance to employees to help them maintain their unique needs.
Diversity, Equity and Inclusion
Our ability to retain and recruit employees with diverse backgrounds and perspectives is critical to driving innovation and adapting to future challenges. As we grow our employee base and expand our work in other countries with diverse local communities, we strive to foster an inclusive company culture through increased training and awareness programs.
To date, our primary focus has been on improving gender diversity. Currently, 50% of our employees are female.
Enhancing gender and racial/ethnic diversity in management and our broader workforce is among Odyssey’s priorities for the coming years. When recruiting for senior leadership roles, we aspire to have at least 50% of candidates represent diverse backgrounds.
Health and Safety
Odyssey is committed to maintaining an incident-free, healthy work environment for employees and contractors. Our focus on responsible seafloor exploration includes complying with applicable laws and regulations in all material respects and adhering to international best practices in occupational health and safety. We require that any contracted vessel, ship management agency, ship company, and staffed crew be in good standing with various national, international and trade association codes.
To measure progress towards our safety goals outlined in our Quality, Health, Safety and Environment policies and procedures, we track several key performance indicators (“KPIs”). These include recordable medical incidents, lost workdays, first aid cases, restricted workdays, and the frequency of safety meetings. We also implement additional risk control measures such as safety drills and management visits. KPIs and control measures continue to evolve as our organization and project requirements change.
Internet Access
Odyssey’s Forms 10-K, 10-Q, 8-K and all amendments to those reports are available without charge through Odyssey’s web site on the Internet as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission, www.sec.gov. They may be accessed as follows: www.odysseymarine.com (Investors/Financial Information Link).
ITEM 1A. RISK FACTORS
You should carefully consider the following factors, in addition to the other information in this Comprehensive Form 10-K, in evaluating our company and our business. Our business, operations and financial condition are subject to various risks. The material risks are described below and should be carefully considered in evaluating Odyssey or any investment decision relating to our securities. This section is intended only as a summary of the principal risks. If any of the following risks actually occur, our business, operating results, or financial results could suffer. If this occurs, the trading price of our common stock could decline, and you could lose all or part of the money you paid to buy our common stock.
We face risks related to the Restatement of our financial information and the material weaknesses in our internal control over financial reporting, as described in Item 9A – Controls and Procedures and Note 2- Restatement of Consolidated Financial Statements.
We are subject to various SEC reporting and other regulatory requirements. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud and material errors in transactions and to fairly present financial statements. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing we conduct in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.
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As discussed in the Explanatory Note to this Comprehensive Form 10-K and in NOTE 2 to the restated audited annual consolidated financial statements included in this Comprehensive Form 10-K, we determined to restate certain financial information in our previously issued consolidated financial statements for the year ended December 31, 2022, and for the interim periods ended March 31, 2023 and 2022, June 30, 2023 and 2022, and September 30, 2022. The circumstances leading to the Restatement of our previously issued financial statements, and our efforts to investigate, assess and remediate those matters have resulted in substantial costs in the form of accounting, legal fees, and similar professional fees, in addition to the substantial diversion of time and attention of our senior management and members of our accounting team in preparing the Restatement.
In addition, as a result of the Restatement, we have identified material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. While we have undertaken substantial work to maintain effective internal controls and have taken action to remediate the material weaknesses identified in connection with the Restatement, we cannot be certain that we will be successful in our remediation efforts or in maintaining adequate internal controls over our financial reporting. As a result of the material weaknesses, management determined that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2023. If we fail to maintain an effective system of internal controls over financial reporting and disclosure controls and procedures, we may not be able to accurately determine our results of operations or financial conditions or to prevent fraud.
As a result of the Restatement, we have become subject to a number of additional risks and uncertainties, which may affect investor confidence in the accuracy of our financial disclosures and may raise reputational issues for our business. We expect to continue to face the risks and challenges related to the Restatement, including the following: (i) we may face potential litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims, or other claims arising from the Restatement; (ii) the SEC may review the restatements, including the Restatement, and require further amendment of our public filings; and (iii) the processes undertaken to effect the Restatement may not have been adequate to identify and correct all errors in our historical financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement. We cannot provide assurance that all of the risks and challenges described above will be eliminated or that general reputational harm will not persist. If any of the foregoing risks or challenges persists, our business, operations and financial condition could be materially adversely affected.
We face risks related to being delinquent in our SEC reporting obligations.
Primarily due to the matters that led to our restatement of prior financial statements and the material weaknesses identified in connection therewith, which are more fully detailed in NOTE 2 – Restatement of Consolidated Financial Statements and Item 9A – Controls and Procedures, immediately prior to the filing of this Comprehensive Form 10-K, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, and our Annual Report for the year ended December 31, 2023, were not timely filed. We expect to continue to face many of the risks and challenges related to the matters that led to the delay in the filing of that Quarterly Report and Annual Report, including the following:
| • | we may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which would adversely affect the accuracy and timing of our financial reporting; |
| • | failure to timely file our SEC reports and make our current financial information available may place downward pressure on our stock price and result in the inability of our employees to sell the shares of our common stock underlying their awards granted pursuant to our equity compensation plans, which may adversely affect hiring and employee retention; |
| • | litigation and claims, and any as regulatory examinations, investigations, proceedings and orders arising out of our failure to file SEC reports on a timely basis, including the reasons and causes for the delay in filing, could divert management attention and resources from the operation of our business; and |
| • | negative reports or actions on our commercial credit ratings would increase our costs of, or reduce our access to, future commercial credit arrangements and limit our ability to refinance existing indebtedness. |
If any of the foregoing risks or challenges persists, our business, operations and financial condition are likely to be materially and adversely affected.
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We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.
We have concluded that our internal control over financial reporting was not effective as of December 31, 2023 and prior periods, due to the existence of material weaknesses in our internal control over financial reporting, all as described in Part II, Item 9A - Controls and Procedures of this Comprehensive Form 10-K. Although we have initiated remediation measures to address the identified material weaknesses, we cannot provide assurance that our remediation efforts will be adequate to allow us to conclude that such controls will be effective in the future. We also cannot assure that additional material weaknesses in our internal control over financial reporting will not arise or be identified in the future. We intend to continue our control remediation activities and to continue to improve our overall control environment and our operational, information technology, financial systems, and infrastructure procedures and controls, as well as to continue to train, retain and manage our personnel who are essential to effective internal controls. In doing so, we will continue to incur expenses and expend management time on compliance-related issues. If we are unable to successfully complete our remediation efforts or favorably assess the effectiveness of our internal control over financial reporting, our operating results, financial position, ability to accurately report our financial results and timely file our SEC reports, and stock price could be adversely affected.
Moreover, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all. If we are unable to provide reliable and timely financial reports in the future, our business and reputation may be further harmed. Restated financial statements and failures in internal controls may also cause us to fail to meet reporting obligations, negatively affect investor and customer confidence in our management or result in adverse publicity and concerns from investors and customers, any of which could have a negative effect on the price of our common stock, subject us to further regulatory investigations, potential penalties or stockholder litigation, and have a material adverse impact on our business and financial condition.
Our business involves a high degree of risk.
An investment in Odyssey is extremely speculative and of exceptionally high risk. With respect to mineral exploration projects, there are uncertainties with respect to the quality and quantity of the material and their economic feasibility, the price we can obtain for the sale of the deposit or the ore extracted from the deposit, the granting of the necessary permits to operate, environmental safety, technology for extraction and processing, distribution of the eventual ore product, and funding of necessary equipment and facilities. In projects where Odyssey takes a minority ownership position in the company holding the mining rights, there may be uncertainty as to that company’s ability to move the project forward.
The research and data we use may not be reliable.
The success of a mineral project is dependent to a substantial degree upon the research and data we or others have obtained. By its very nature, research and data regarding mineral deposits can be imprecise, incomplete, outdated, and unreliable. For mineral exploration, data is collected based on a sampling technique and available data may not be representative of the entire ore body or tenement area. Prior to conducting offshore exploration, we typically conduct onshore research, which relies heavily on third-party data and reports. There is no guarantee that the models and research conducted onshore will be representative of actual results on the seafloor. Offshore exploration typically requires significant expenditures, with no guarantee that the results will be useful or financially rewarding.
Operations may be affected by natural hazards.
Underwater exploration and extraction operations are inherently difficult and may be delayed or suspended by weather, sea conditions or other natural hazards. Further, such operations may be undertaken more reliably during certain months of the year than others. We cannot guarantee that we, or the entities we are affiliated with, will be able to conduct exploration, sampling or extractions operations during favorable periods. In addition, even though sea conditions in a particular search location may be somewhat predictable, the possibility exists that unexpected conditions may occur that adversely affect our operations. It is also possible that natural hazards may prevent or significantly delay operations. Seabed mineral extraction work may be subject to interruptions resulting from storms that adversely affect the extraction operations or the ports of delivery. Project planning considers these risks to the extent practicable.
We may be unable to establish our rights to resources or items we discover or recover.
We may discover potentially valuable seabed mineral deposits, but we may be unable to get title to the deposits or get the necessary governmental permits to commercially extract the minerals. Mineral deposits may be in controlled waters where the policies and laws of a certain government may change abruptly, thereby adversely affecting our ability to operate in those zones. We have a process for evaluating this risk in our proprietary Global Prospectivity Program which enables us to rank and prioritize projects.
The market for minerals we recover is uncertain.
During the time, measured in years, between when a mineral deposit is discovered and the first extracted minerals are sold, world and local prices for the mineral may fluctuate drastically and thereby adversely affect the economics of the mineral project.
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We could experience delays in the disposition or sale of minerals.
It may take significant time between when a mineral deposit is discovered and the first extracted minerals are sold. Stakes in the mineral deposits can potentially be sold at an earlier date, but there is no guarantee that there will be readily available buyers at favorable competitive prices.
Legal, political or civil issues could interfere with our marine operations.
Legal, political or civil issues of governments throughout the world could restrict access to our operational marine sites or interfere with our marine operations or rights to seabed mineral deposits. In many countries, the legislation covering ocean exploration lacks clarity or certainty. As a result, when we are conducting projects in certain areas of the world for our own account or on our behalf of a contracting party, we may be subjected to unexpected delays, requests, and outcomes as we work with local governments to define and obtain the necessary permits and to assert our claims over assets on the seafloor bottom. Vessels on which we work, equipment, personnel and or cargo could be seized or detained by government authorities. We may have to work with different units of a government, and there may be a change of government representatives over time. This may result in unexpected changes or interpretations in government contracts and legislation.
Non-governmental organizations (“NGOs”) that are opposed to seafloor mineral extraction may attempt to disrupt business operations. NGOs may also use disinformation in the media to damage our reputation and the reputations of our projects. This may result in delays to project timelines and incremental costs to the company to implement strategies to mitigate and counter NGO activities.
We may be unable to get permission to conduct exploration, excavation, or extraction operations.
It is possible we will not be successful in obtaining the necessary permits to conduct exploration or excavation or extraction operations. In addition, permits we obtain may be revoked or not honored by the entities that issued them. In addition, certain governments may develop new permit requirements that could delay new operations or interrupt existing operations.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect the profitability of our businesses.
As changes in our business environment occur, we may need to adjust our business strategies to meet these changes or we may otherwise find it necessary to restructure our operations or particular businesses or assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets or sell certain assets. In any of these events our costs may increase, and we may have significant charges associated with the write-down of assets.
We may be unsuccessful in raising the necessary capital to fund operations and capital expenditures.
Our ability to generate cash inflows is dependent upon our ability to provide mineral exploration and development services to our subsidiaries and other subsea mineral companies or monetize mineral rights or monetize our investments in third-party projects. However, we cannot guarantee that the sales and other cash sources will generate sufficient cash inflows to meet our overall cash requirements. If cash inflows are not sufficient to meet our business requirements, we will be required to raise additional capital through other financing activities. Although we have been successful in raising the necessary funds in the past, there can be no assurance we can continue to do so in the future.
We depend on key employees and face competition in hiring and retaining qualified employees.
Our employees are vital to our success, and our key management and other employees are difficult to replace. We currently do not have employment contracts with the majority of our key employees. We may not be able to retain highly qualified employees in the future which could adversely affect our business.
We may continue to experience significant losses from operations.
We have experienced a net loss in every fiscal year since our inception except for 2023 and 2004. We had net income in 2023 of $1.5 million only as a result of a gain recognized on debt extinguishment. Our net losses were $23.1 million in 2022. Even if we do generate operating income in one or more quarters in the future, subsequent developments in our industry, customer base, business or cost structure or an event such as significant litigation or a significant transaction may cause us to again experience operating losses. We may not become profitable for the long-term, or even for any quarter.
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Technological obsolescence of our marine assets or failure of critical equipment could put a strain on our capital requirements or operational capabilities.
From time to time, we employ state-of-the-art technology including but not limited to sonars, magnetometers, ROVs, vessels, and other advanced science and technology to perform seabed mineral exploration. Although we try to maintain back-ups on critical equipment and components, equipment failures may require us to delay or suspend operations. Also, while we endeavor to keep marine equipment in excellent working condition and current with all available upgrades, technological advances in new equipment may provide superior efficiencies compared to the capabilities of our existing equipment, and this could require us to purchase new equipment which would require additional capital.
We may not be able to contract with clients or customers for marine services or third-party projects.
From time to time we earn revenue by chartering out equipment and crew and providing marine services to clients or customers. Even if we do contract out our services, the revenue may not be sufficient to cover administrative overhead costs. Although the operational results of these third-party projects are generally successful, the clients or customers may not be willing or financially able to continue with third-party projects of this type in the future. Failure to secure such revenue producing contracts in the future may have a material adverse impact on our revenue and operating cash flows.
The issuance of shares at conversion prices lower than the market price at the time of conversion and the sale of such shares could adversely affect the price of our common stock.
Some of our outstanding shares may have been acquired from time to time upon conversion of convertible notes at conversion prices that are lower than the market price of our common stock at the time of conversion. In the past, Odyssey has issued debt obligations that could be converted into common shares at prices below the current market price. Conversion of the notes at conversion prices that are lower than the market price at the time of conversion and the sale of the shares issued upon conversion could have an adverse effect upon the market price of our common stock.
Investments in subsea mineral exploration companies may prove unsuccessful.
We have invested in marine mineral companies that to date are still in the exploration phase and have not begun to earn significant revenue from operations. We may or may not have control or input on the future development of these businesses. There can be no assurance that these companies will achieve profitability or otherwise be successful in capitalizing on the mineralized materials they intend to exploit or through other revenue-generating activities.
We may be subject to short selling strategies.
Short sellers of our stock may be manipulative and may attempt to drive down the market price of our common stock. Short selling is the practice of selling securities that the seller does not own but rather has, supposedly, borrowed from a third party with the intention of buying identical securities back later to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum and generate profits for themselves after selling a stock short. Although traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the availability of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by large Wall Street firms and independent research analysts. These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base. Issuers who have limited trading volumes and are susceptible to higher volatility levels than large-cap stocks, can be particularly vulnerable to such short seller attacks. These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to certification requirements imposed by the Securities and Exchange Commission and, accordingly, the opinions they express may be based on distortions or omissions of actual facts or, in some cases, fabrications of facts. In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed short sellers will continue to issue such reports.
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Some of our equipment or assets could be seized or we may be forced to sell certain assets.
We have pledged certain assets, such as equipment and shares of subsidiaries, as collateral under our loan agreements. Some lenders could seize some of our assets if we do not make timely payments for the loans, services, supplies, or equipment that they have provided to us. If we were unable to make payments on these obligations, the lender or supplier may seize the asset or force the sale of the asset. The loss of such assets could adversely affect our operations. The sale of the asset may be done in a manner and under circumstances that do not provide the highest cash value for the sale of the asset.
We could be delisted from the Nasdaq Capital Market.
Our common stock is listed on the Nasdaq Capital Market, which imposes, among other requirements, a minimum bid requirement. The closing bid price for our common stock must remain at or above $1.00 per share to comply with Nasdaq’s minimum bid requirement for continued listing. If the closing bid price for our common stock is less than $1.00 per share for 30 consecutive business days, Nasdaq may send us a notice stating we will be provided a period of 180 days to regain compliance with the minimum bid requirement or else Nasdaq may make a determination to delist our common stock. Another requirement for continued listing on the Nasdaq Capital Market is to maintain our market capitalization above $35.0 million.
Our failure to maintain compliance with the above-mentioned and other Nasdaq continued listing requirements, including timely filing of our periodic reports with the SEC, may lead to the delisting of our common from the Nasdaq Capital Market. Delisting from the Nasdaq Capital Market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, where an investor may find it more difficult to sell our stock or obtain accurate quotations as to the market value of our common stock. We cannot assure you that our common stock, if delisted from the Nasdaq Capital Market, will be listed on another national securities exchange or quoted on an over-the counter quotation system.
Our insurance coverage may be inadequate to cover all of our business risks.
Although we seek to obtain insurance for some of our main operational risks, there is no guarantee that the insurance policies that we have are sufficient, that they will be in place when needed, that we will be able to obtain insurance coverage when desired, that insurance will be available on commercially attractive terms, or that we will be able to anticipate the risks that need to be insured. For example, although we may be able to obtain War Risk coverage for a project at a specific date and location, such insurance may be unavailable at other times and locations. Although we may be able to insure our marine assets for certain risks such as certain possible loss or damage scenarios, we may lack insurance to cover against government seizure or detention of certain marine assets. Permanent loss or temporary loss of our marine assets and the associated business interruption without commensurate coverage from an insurance policy could severely impact the financial results and operational capabilities of the company.
We may be exposed to cybersecurity risks.
We depend on information technology networks and systems to process, transmit and store electronic information and to communicate among our locations around the world and among ourselves within our company. Additionally, one of our significant responsibilities is to maintain the security and privacy of our confidential and proprietary information and the personal data of our employees. Our information systems, and those of our service and support providers, are vulnerable to an increasing threat of continually evolving cybersecurity risks. Computer viruses, hackers and other external hazards, as well as improper or inadvertent staff behavior could expose confidential company and personal data systems and information to security breaches. Techniques used to obtain unauthorized access or cause system interruption change frequently and may not immediately produce signs of intrusion. As a result, we may be unable to anticipate these incidents or techniques, timely discover them, or implement adequate preventative measures. With respect to our commercial arrangements with service and support providers, we have processes designed to require third-party IT outsourcing, offsite storage and other vendors to agree to maintain certain standards with respect to the storage, protection and transfer of confidential, personal and proprietary information. However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a vendor’s employee or agent, the breakdown of a vendor’s data protection processes, or a cyber-attack on a vendor’s information systems or our information systems.
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Subsea mineral, development and operating have inherent risks.
Mining operations generally involve a high degree of risk. The financing, exploration, development and mining of any of our properties is furthermore subject to a number of macroeconomic, legal and social factors, including commodity prices, laws and regulations, political conditions, currency fluctuations, the ability to hire and retain qualified people, the inability to obtain suitable and adequate machinery, equipment or labor and obtaining necessary services in the jurisdictions in which we may operate. Unfavorable changes to these and other factors have the potential to negatively affect our operations and business. Major expenses may be required to locate and establish mineral reserves and resources, to develop processes and to construct mining and processing facilities at a particular site. Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Unusual or infrequent weather phenomena, sabotage, government or other interference could adversely affect our operations, financial condition and results of operations. It is impossible to ensure that the exploration or development programs planned by us will result in a profitable commercial mining operation. Whether precious or base metal or mineral deposits will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as the quantity and quality of mineralization; mineral prices, which are highly volatile; and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in not receiving an adequate return on invested capital. There is no certainty that the expenditures to be made by us towards the exploration and evaluation of our projects will result in discoveries or production of commercial quantities of the minerals. In addition, once in production, mineral reserves are finite and there can be no assurance that we will be able to locate additional reserves as its existing reserves are depleted.
We are subject to significant governmental regulations, which affect our operations and costs of conducting our business.
Our exploration operations are subject to government legislation, policies and controls relating to prospecting, development, production, environmental protection, mining taxes and labor standards. For us to carry out our activities, various licenses and permits must be obtained and kept current. There is no guarantee that the Company’s licenses and permits will be granted, or that once granted will be maintained and extended. In addition, the terms and conditions of such licenses or permits could be changed and there can be no assurances that any application to renew any existing licenses will be approved. There can be no assurance that all permits that we require will be obtainable on reasonable terms, or at all. Delays or a failure to obtain such permits, or a failure to comply with the terms of any such permits that we have obtained, could have a material adverse impact on our operations. We may be required to contribute to the cost of providing the required infrastructure to facilitate the development of our properties and will also have to obtain and comply with permits and licenses that may contain specific conditions concerning operating procedures, water use, waste disposal, spills, environmental studies and financial assurances. There can be no assurance that we will be able to comply with any such conditions and non-compliance with such conditions may result in the loss of certain of our permits and licenses on properties, which may have a material adverse effect on us. Future taxation of mining operators cannot be predicted with certainty so planning must be undertaken using present conditions and best estimates of any potential future changes. There is no certainty that such planning will be effective to mitigate adverse consequences of future taxation on us.
We may not be able to obtain all required permits and licenses to place any of our properties into production.
Our current and future operations, including development activities and commencement of production, if warranted, require permits from governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, environmental protection, mine safety and other matters. Companies engaged in mineral property exploration and the development or operation of mines and related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. We cannot predict if all permits which we may require for continued exploration, development or construction of mining facilities and conduct of mining operations will be obtainable on reasonable terms, if at all. Costs related to applying for and obtaining permits and licenses may be prohibitive and could delay our planned exploration and development activities. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on our operations and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties.
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Calculations of mineral resources are estimates only and subject to uncertainty.
The estimation of mineral resources is an imprecise process and the accuracy of such estimates is a function of the quantity and quality of available data, the assumptions used and judgments made in interpreting engineering and geological information and estimating future capital and operating costs. There is significant uncertainty in any reserve or resource estimate, and the economic results of mining a mineral deposit may differ materially from the estimates as additional data are developed or interpretations change.
Estimated mineral resources may be materially affected by other factors.
In addition to uncertainties inherent in estimating mineral resources, other factors may adversely affect estimated mineral resources and mineral reserves. Such factors may include but are not limited to metallurgical, environmental, permitting, legal, title, taxation, socio-economic, marketing, political, gold prices, and capital and operating costs. Any of these or other adverse factors may reduce or eliminate estimated mineral reserves and mineral resources and could have a material adverse effect on our business, prospects, results of operations, cash flows, financial condition and corporate reputation.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We are dedicated to protecting the integrity, confidentiality, and availability of our data, infrastructure and operating systems. As part of our commitment to safeguarding our operations against cybersecurity threats, we employ a comprehensive strategy for the assessment, identification, and management of cybersecurity risks. We engage a third-party CIO consulting firm and a managed services provider, which work together to provide wide-ranging services including risk assessments, threat detection, monitoring and response strategies, security audits and cybersecurity services, tools and training.
Cybersecurity Processes: We conduct robust cybersecurity processes aligned with NIST and CMMC protocols. Our comprehensive approach includes:
| • | An enterprise firewall; |
| • | Implementation of Multi-Factor Authentication (MFA); |
| • | Adherence to the Zero Trust model; |
| • | Utilization of Managed Detection and Response (MDR); |
| • | Endpoint Detection and Response (EDR) technologies; |
| • | 24x7 Security Operations Center (SOC); and |
| • | Employment of Security Information and Event Management (SIEM) systems to continuously monitor our network and respond to threats in real time. |
Risk Assessment Procedures: We conduct periodic risk assessments to identify potential cybersecurity threats and vulnerabilities within our IT infrastructure. These assessments are conducted using various software tools and methodologies that enable us to evaluate our systems critically and comprehensively. Our risk assessment process includes the analysis of:
| • | Hardware and software configurations; |
| • | Network and data access protocols; |
| • | Encryption standards; and |
| • | Compliance with relevant industry and regulatory standards. |
Threat Identification: We utilize advanced threat detection tools and services that continuously monitor our network for signs of unauthorized access, anomalies, and potential breaches. Our third-party cybersecurity provider is equipped with sophisticated detection technologies that help to swiftly identify even the most subtle signs of compromise. We focus on:
| • | Real-time monitoring of our networks; |
| • | Regularly updated intrusion detection systems (IDS); |
| • | Deployment of endpoint detection and response (EDR) solutions; and |
| • | Utilization of threat intelligence platforms to stay abreast of emerging threats. |
Threat Management: Upon identification of a potential threat, our managed service provider’s dedicated incident response team takes immediate action to mitigate any adverse impacts. Our threat management procedures include:
| • | Immediate isolation of affected systems to prevent the spread of threats; |
| • | Application of appropriate remediation measures, such as patches and software updates; |
| • | Conducting a thorough investigation to understand the breach’s nature and scope; and |
| • | Implementing enhancements to prevent future occurrences. |
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Our incident response plan provides a concise strategy of how we will respond to an incident, including who will respond and their roles and responsibilities, the facilities that are in place to help with the management of the incident, how decisions will be taken with regard to our response to an incident, how communication will be handled both internally and externally, and defining what will happen once the incident is resolved and how we can learn and improve from the situation.
Integration into Overall Risk Management: Our cybersecurity risk assessment processes are fully integrated into the broader risk management framework. Cybersecurity is positioned as a core component of our risk management strategy, with direct reporting to our President and COO, who is guided by our third-party CIO firm. The CIO firm provides strategic direction on policy, procedures and best practice. The synergy between cybersecurity and risk management ensures a resilient posture against emerging cyber threats.
Engagement of Third Parties: These providers are selected based on stringent criteria for cybersecurity expertise, particularly their capability to implement and manage NIST and CMMC protocols.
Third-Party Service Provider Oversight: Our oversight processes include comprehensive due diligence checks for any new third-party service provider and continuous monitoring of our existing managed service provider and CIO firms’ activities. We have established protocols for communication and incident response that align with our managed service provider’s operations, and industry best practice, ensuring swift action in the face of cybersecurity threats. Furthermore, a scheduled series of meetings has been established to procure updates and deliberate upon cybersecurity strategy with our contracted third-party providers.
Impact of Cybersecurity Risks
Material Effects from Cyber Threats: To date, our operations and financial condition have not been materially affected by cybersecurity threats, due in part to our proactive measures such as employee security training programs and advanced threat detection and response capabilities. Our defensive strategies have successfully mitigated the risks of cyber incidents.
Potential Risk Exposure: While we have not experienced significant disruptions from cyber threats, we recognize the evolving nature of cyber risks. We continually evaluate the likelihood of potential cybersecurity incidents that could materially impact our strategic direction, operational efficacy, and financial stability. Our investment in training, alongside our sophisticated SOC, SIEM, and Zero Trust architecture, positions us to identify and address potential cybersecurity challenges promptly.
Cybersecurity Governance
Our executive team is actively involved in overseeing our cybersecurity operations to ensure that they meet industry standards. The executive team provides regular updates to the board of directors – specifically the audit committee – on the status of our cybersecurity efforts, including any potential risks, threats or incidents.
The President and COO, with guidance from our third-party managed services provider and CIO consulting firm, manages our cybersecurity risk management and strategy process. Collectively, our consultants have 50+ years’ experience in the cybersecurity industry in various roles.
Processes for Informing the Board: The audit committee is regularly informed about cybersecurity risks through quarterly briefings from the President and COO. These briefings include risk assessment reports, incident response updates, changes to the cybersecurity landscape, and other relevant information. In the case of a cybersecurity incident that meets reporting thresholds, the audit committee will be promptly notified and will receive continual updates until the situation is remedied.
ITEM 2. PROPERTIES
Corporate Office
We maintain our corporate offices in Tampa, Florida where we lease approximately 6,000 square feet of office space. We currently do not own any buildings or land. We believe our current leased facility is sufficient for our foreseeable needs.
Don Diego Phosphorite Project
Summary
We have one material mining project, the Don Diego Phosphorite Project, which is located in the Mexican Exclusive Economic Zone (the “Mexican EEZ”) offshore Baja California Sur, Mexico in the Pacific Ocean. The exclusive mining concessions for the Don Diego Phosphorite Project are held by Exploraciones Oceánicas S. de R.L. de CV (“ExO”), a Mexican company in which we hold, through other subsidiaries, a 56.04% interest. The Primary concession (concession No. 244813) was granted in 2012, and rights for the two additional adjacent concessions (Norte concession No. 242994 and Sur concession No. 242995) were acquired in 2014. Exploration has confirmed the Don Diego West Phosphorite Deposit lies within the Primary and Norte concessions. The Don Diego Phosphorite Project currently has no reportable mineral reserves.
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Location and Brief Description
The Don Diego Phosphorite Project concession area is a sedimentary marine phosphorite deposit located in the Mexican EEZ offshore Baja California Sur, Mexico in the Pacific Ocean. The property is located using a multi-point polygonal property demarcation bounded by latitudes 26.1°, 25.4°, and longitudes -112.2°, -112.9° WGS 1984. The property is roughly 20 to 45 kilometers from shore. Following is a map denoting the three concessions in relation to Baja California Sur, Mexico.
Infrastructure and Access
There is no material infrastructure located on the property where the concessions are located. Access to the site is by sea-going vessels dispatched from various nearby ports of opportunity. Project engineering anticipates use of existing dredging technology to recover the phosphorite ore, including a trailing suction hopper dredger, and on-site mechanical beneficiation using a floating production and storage platform to produce phosphate ore concentrate, none of which introduces chemicals to the marine environment.
Description of Concessions
Total concessions encompass approximately 114,775 hectares of seafloor at a water depth of approximately 80 meters and consist of three concessions in total (see section Location and Brief Description above). The concessions were granted to ExO by the Mexican Secretary of Economy, General Coordination of Mining, and are valid for 50 years, with an option for a 50-year extension. The Primary concession was granted in 2012, and rights for the other two concessions (Norte and Sur) were acquired thereafter in 2014. To commence further operations on the Don Diego Phosphorite Project, ExO must obtain approval of its Environmental and Social Impact Assessment (“ESIA”) from the Mexican Ministry of Environment and Natural Resources (“SEMARNAT”). See ExO Phosphate Project in the above ITEM 1. BUSINESS for additional information.
The property is subject to rents, fees and other payments to the Government of Mexico or its designated government ministry or agency. The anticipated annual obligations for each of the years in the three-year period ending December 31, 2025, are set forth in the table below.
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Primary Concession
| Year |
Area (Hectares) |
Annual Rent, MxN Pesos, owed semesterly | ||||
| 2024 |
80,050.5 | 33,999,030 | ||||
| 2025 |
80,050.5 | The above is based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
| 2026 |
80,050.5 | The above is based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
Norte Concession
| Year |
Area (Hectares) |
Annual Rent, Mx Pesos, owed semesterly | ||||
| 2024 |
14,300 | 6,073,496 | ||||
| 2025 |
14,300 | Will be based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
| 2026 |
14,300 | Will be based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
Sur Concession
| Year |
Area (Hectares) |
Annual Rent, Mx Pesos, owed semesterly | ||||
| 2024 |
20,425 | 8,674,906 | ||||
| 2025 |
20,425 | Will be based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
| 2026 |
20,425 | Will be based on 212.36 MXN per hectare per semester, with an increase in this rate from inflation | ||||
Work Completed
The Don Diego Phosphorite Project has sufficient data to confirm the geological continuity of the deposit and the estimation of measured, indicated and inferred resource tonnes. ExO, through exploration operations conducted by Odyssey, explored the area, characterized the environmental baseline to enable drafting and submittal of the ESIA, and acquired approximately 200 vibracore samples for assay. These cores were split into individual strata core units each of approximately 1 meter length. The cores were assayed at Florida Industrial and Phosphate Research Institute (“FIPR”) in Bartow, Florida under the guidance of Mr. Henry Lamb.
Related Matters
This Comprehensive Form 10-K does not include a resource estimate for the Don Diego Phosphorite Project because currently we do not have a technical report summary for the project that meets the requirements of Item 601(b)(96) of Regulation S-K.
ITEM 3. LEGAL PROCEEDINGS
The Company may be subject to a variety of claims and suits that arise from time to time in the ordinary course of business. We are not a party to any litigation as a defendant where a loss contingency is required to be reflected in our consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
17
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Price Range of Common Stock
Our common stock is listed on the Nasdaq Capital Market under the symbol OMEX. The following table sets forth the high and low sale prices for our common stock during each quarter presented.
| Price | ||||||||
| High | Low | |||||||
| Quarter Ended |
||||||||
| March 31, 2022 |
$ | 6.99 | $ | 5.27 | ||||
| June 30, 2022 |
$ | 7.12 | $ | 2.53 | ||||
| September 30, 2022 |
$ | 3.62 | $ | 2.37 | ||||
| December 31, 2022 |
$ | 3.88 | $ | 2.79 | ||||
| Quarter Ended |
||||||||
| March 31, 2023 |
$ | 3.74 | $ | 2.87 | ||||
| June 30, 2023 |
$ | 3.85 | $ | 2.85 | ||||
| September 30, 2023 |
$ | 4.35 | $ | 3.53 | ||||
| December 31, 2023 |
$ | 4.65 | $ | 2.86 | ||||
Approximate Number of Holders of Common Stock
The number of record holders of our common stock at January 18, 2023, was approximately 130. This does not include approximately 6,900 stockholders that hold their stock in accounts included in street name with broker/dealers.
Dividends
Holders of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. No dividends have been declared with respect to our common stock and none is anticipated in the foreseeable future.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities of the Company’s common stock during the year ended December 31, 2023. There were no unregistered sales of equity securities of the Company’s common stock during the year ended December 31, 2022.
Issuer Purchases of Equity Securities
There were no repurchases of shares of the Company’s common stock during the years ended December 31, 2023 and 2022.
18
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to provide a narrative of our financial results and an evaluation of our results of operations and financial condition. The discussion should be read in conjunction with our consolidated financial statements and notes thereto. A description of our business is discussed in Item 1 of this Comprehensive Form 10-K, which contains an overview of our business as well as the status of our ongoing project operations.
Results of Operations
The dollar values discussed in the following tables, except as otherwise indicated, are approximations to the nearest thousands and therefore do not necessarily sum in columns or rows. For more detail refer to the Financial Statements in Item 8. The tables identify years 2023 and 2022, all of which included a twelve-month period ended December 31.
2023 Compared to 2022
| Increase/(Decrease) | 2023 vs. 2022 | |||||||||||||||
| (Dollars in thousands) | 2023 | 2022 ( As Restated) |
$ | % | ||||||||||||
| Total revenues |
$ | 804 | $ | 1,335 | $ | (531 | ) | (39.8 | %) | |||||||
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| Marketing, general and administrative |
6,843 | 9,427 | (2,584 | ) | (27.4 | %) | ||||||||||
| Operations and research |
4,298 | 9,761 | (5,463 | ) | (56.0 | %) | ||||||||||
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|
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| Total operating expenses |
$ | 11,141 | $ | 19,188 | $ | (8,047 | ) | (41.9 | %) | |||||||
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| Total other income (expense) |
$ | 6,453 | $ | (11,969 | ) | $ | 18,422 | (153.9 | %) | |||||||
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| Income tax benefit |
$ | — | $ | — | $ | — | 0.0 | % | ||||||||
| Net loss attributable to non-controlling interest |
$ | 9,230 | $ | 7,742 | $ | 1,488 | 19.2 | % | ||||||||
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| Net Income / (Loss) attributable to Odyssey Marine Exploration, Inc. |
$ | 5,346 | $ | (22,080 | ) | $ | 27,426 | (124.2 | %) | |||||||
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Revenue
The revenue generated in each period was a result of performing marine research and project administration for our customers and related parties. Total revenue for the year ended December 31, 2023 was $804,000, a $531,000 decrease compared to $1.3 million from the year ended December 31, 2022. We provided these services in both years to a deep-sea mineral exploration company, CIC, which we consider to be a related party because our lead director is an indirect minority equity holder of CIC (see NOTE 8 Related Party Transactions). In 2023, we started providing services to OML, which is also a related party as we account for OML investment under the equity method of accounting.
Operating Expenses
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. Costs decreased $2.6 million to $6.8 million for the year ended December 31, 2023 compared to $9.4 million for the year ended December 31, 2022. The primary items contributing to this $2.6 million decrease was a decrease of non-cash long-term incentive share-based compensation of $1.2 million. Legal fees also decreased by $462,000, and a decrease in offering costs related to the 2022 Warrant by $1.1 million. These decreases were offset in part by an increase in audit fees of $350,414.
Operations and research expenses are primarily focused around deep-sea mineral exploration, which includes minerals research, scientific services, marine operations and project management. Operations and research expenses decreased by $5.5 million to $4.3 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily as a result of a $5.7 million decrease in litigation financing costs directly associated with our NAFTA arbitration and a $674,000 decrease in professional services. These decreases were partially offset by a $402,000 increase in the cost for the Mexican exploration license, a $223,000 contract labor expense associated with ROV sea trials, a $143,000 increase in depreciation expense for certain marine equipment, a $142,000 increase in employee benefits and compensation related expenses, a $95,000 increase in freight, and a gain on sale of equipment of $135,000.
Total Other Income and Expense
Total Other income and expense was $6.5 million in net income and $12.0 million in net expense for the years ended December 31, 2023 and 2022, respectively, resulting in a net change of $18.4 million. This change is primarily attributable to an increase in interest income of $316,000 related to our equity investment partners, $22.2 million gain on debt extinguishment predominantly from the termination of the MINOSA debt, a $174,107 gain from the sale of a wholly owned subsidiary. These items were offset mainly by an increase in the loss of $279,000 from our equity investment, an increase of $2.7 million in interest expense, a $1.0 million financing fee and a $525,000 foreign exchange expense increase.
19
Taxes and Non-Controlling Interest
Due to losses, we did not incur any income taxes in 2023 or 2022.
In 2013, we became the controlling shareholder of Oceanica. Our financial statements thus include the financial results of Oceanica and its subsidiary, ExO. Except for intercompany transactions that are fully eliminated upon consolidation, Oceanica’s revenues and expenses, in their entirety, are shown in our consolidated financial statements. The share of Oceanica’s net losses corresponding to the equity of Oceanica not owned by us is subsequently shown as the “Non-Controlling Interest” in the consolidated statements of operations. The non-controlling interest adjustment in the year ended December 31, 2023 was $9.2 million as compared to $7.7 million for the year ended December 31, 2022. The substance of these amounts is primarily due to the increase in permits fees and other standard operating costs.
Liquidity and Capital Resources
| (Dollars in thousands) | 2023 | 2022 (As Restated) |
||||||
| Summary of Cash Flows: |
||||||||
| Net cash used in operating activities |
$ | (10,170 | ) | $ | (10,210 | ) | ||
| Net cash (used in) by investing activities |
(1,029 | ) | (2,477 | ) | ||||
| Net cash provided by financing activities |
13,778 | 11,856 | ||||||
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| Net increase (decrease) in cash and cash equivalents |
$ | 2,579 | $ | (831 | ) | |||
| Beginning cash and cash equivalents |
1,443 | 2,274 | ||||||
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| Ending cash and cash equivalents |
$ | 4,022 | $ | 1,443 | ||||
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Discussion of Cash Flows
Net cash used by operating activities for the year ended December 31, 2023 was $10.2 million. This represents a comparable use of funds when compared to the use of $10.2 million for the year ended December 31, 2022. Cash flows used in operating activities for the year ended December 31, 2023 of $10.2 million reflected a net income $5.3 million and is adjusted primarily by non-cash items of $17.2 million, which primarily includes depreciation of $243,000, debt accretion and amortization of fees and discounts of $3.7 million, interest paid in kind of $859,000, share-based compensation of $586,000, and change in derivatives liabilities fair value of $8.3 million offset by a gain on debt extinguishment net of $21.2 million, change in investment of an unconsolidated entity of $780,000 and a noncash adjustment from our noncontrolling interests of $9.2 million. Other operating activities resulted in an increase in working capital of $1.7 million. This $1.7 million increase primarily comprises a $2.7 million increase to accrued expenses, and a decrease in accounts payable of $1.7 million offset by an increase of approximately $600,000 in other working capital accounts. The increase in accrued expenses and accounts payable is predominantly related to increased accrued interest and permit fees.
Cash flows used in operating activities for the year ended December 31, 2022 of $10.2 million reflected a net loss before non-controlling interest of $29.9 million and is adjusted primarily by an increase in non-cash items of 11.3 million, which primarily includes share-based compensation of $1.8 million, note payable accretion of $0.3 million and the $0.3 million non-cash adjustment loans payable prepayment premium and offset by an investment in unconsolidated entity of $1.2 million. Other operating activities resulted in an increase in working capital of $8.3 million. This $8.3 million increase includes a $2.7 million increase to accrued expenses and an increase of $6.0 million to accounts payable in 2022. The increase in accrued expenses and accounts payable is predominantly related to our NAFTA arbitration.
Cash flows used in investing activities for the year ended December 31, 2023 was $1.0 million. This represents an approximate $1.4 million decrease from cash flows used by investing activities of $2.5 million for the year ended December 31, 2022. During the year ended December 31, 2023, the primary items impacting the net cash used in investing activities were $1.2 million for the purchase of property and equipment, cash paid for the investment in a new unconsolidated entity of $1.0 million, offset by proceeds from the note receivable repayment of $1.0 million and proceeds from the sale of equipment of $318,000.
Cash flows used by investing activities for the year ended December 31, 2022 of $2.5 million was from the purchase of property and equipment for $1.5 million coupled with a $1.0 million loan payment.
Cash flows provided by financing activities for the year ended December 31, 2023 were $13.8 million. The $13.8 million comprises $21.4 million received from the issuance of loans payable, proceeds from warrants exercised of $303,000, $239,000 proceeds from the issuance of common stock and $4.1 million of proceeds from the sale leaseback transaction, offset by the $11.5 million of debt obligation payments and $370,000 sale leaseback payments.
Cash flows provided by financing activities for the year ended December 31, 2022 were $11.9 million. The $11.9 million comprises $16.5 million received from the June 2022 issuance of stock and $2.2 million received from the issuance of loans payable offset by the $5.5 million of debt obligation payments and $1.8 million of offering costs associated with the stock issuance.
20
General Discussion 2023
At December 31, 2023, we had cash of $4.0 million, an increase of $2.6 million from the December 31, 2022 balance of $1.4 million. Debt obligations from loans to the company were $23.3 million at December 31, 2023 and $22.4 million at December 31, 2022. During March 2023, we entered into a Note and Warrant Purchase Agreement, pursuant to which we issued and sold to an institutional investor (a) a promissory note (the “March 2023 Note”) in the principal amount of up to $14.0 million, of which $13.1 million was advanced in March 2023, an additional $450,000 was advanced during the three months ended June 30, 2023 and the final $449,925 was advanced during the three months ended September 30, 2023, and (b) a warrant (the “March 2023 Warrant” and, together with the March 2023 Note, the “Securities”) to purchase up to 3,703,703 shares of Odyssey’s common stock. We also paid AHMSA $9.0 million in cash to terminate the Minosa Notes (as defined below) and converted a portion of the Minosa Notes into 304,879 shares of Odyssey’s common stock. During April 2023, Odyssey entered into a $3.5 million sale-leaseback arrangement for marine equipment and CIC repaid principal and interest in the aggregate amount of $1.1 million in full satisfaction of the convertible promissory note and the Loan Agreement. A portion of the proceeds of the April sale-leaseback transaction was used to repay the note outstanding to the seller of the marine equipment that we issued in December 2022. During June 2023, Odyssey entered into a Note Purchase Agreement with 37North SPV 11, LLC for $1.0 million and entered into a $1.0 million sale-leaseback arrangement for marine equipment. During August 2023, CIC repaid principal and interest in the aggregate amount of $686,976 in full satisfaction of the Services Agreement Note. During the three and nine months ended September 30, 2023, holders of warrants issued by Odyssey on June 10, 2022, exercised 90,552 warrants with an exercise price of $3.35 per share. On December 1, 2023, we entered into a Note and Warrant Purchase Agreement (the “December 2023 Note Purchase Agreement”) with institutional investors pursuant to which we issued and sold to the investors (a) a series of promissory notes (the “December 2023 Notes”) in the principal amount of up to $6.0 million and (b) two tranches of warrants (the “December 2023 Warrants” and, together with the December 2023 Notes, the “December 2023 Securities”) to purchase shares of our common stock. We issued December 2023 Notes in the aggregate amount of $3.75 million and related warrants on December 1, 2023, and December 2023 Notes in the aggregate amount of $2.25 million and related warrants on December 28, 2023.
Because SEMARNAT declined to approve the environmental permit application of our Mexican subsidiary in April 2016 and again in October 2018, notwithstanding that the Superior Court of the Federal Court of Administrative Justice (“TFJA”) in Mexico nullified SEMARNAT’s 2016 denial, we continue to support the efforts of our subsidiaries and partners to work through the administrative, legal and political process necessary to have the decision reviewed and overturned in the TFJA. On January 4, 2019, we initiated the process to submit a claim against Mexico to arbitration under the investment protection chapter of the NAFTA. On September 4, 2020, we filed our First Memorial with the Tribunal. The First Memorial is the filing that fully lays out our case, witnesses and evidence for the Tribunal. Mexico filed its counter-memorial, on February 23, 2021. On June 29, 2021, we filed our reply to Mexico’s counter-memorial. ’The NAFTA Tribunal hearing took place in January and May 2022. In accordance with the procedural calendar, written post hearing briefs were filed in September 2022. The evidentiary phase of the case is now closed And the Tribunal has begun its deliberations. On October 6, 2023, Odyssey received a letter from ICSID advising that the Tribunal is well advanced in the drafting of the Award and expects to issue the Award in the first quarter of 2024. ICSID also advised that Odyssey would be duly notified of any change to the timing estimate provided. On March 8, 2024, Odyssey received a letter from ICSID advising that the Tribunal “has continued to make progress in finalizing its determinations” and that it “expects to render the Award in the second quarter of this year.”
21
Financings
The Company’s consolidated notes payable consisted of the following carrying values and related interest expense at:
| Loans Payable | ||||||||
| December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| MINOSA 1 |
$ | — | $ | 14,750,001 | ||||
| MINOSA 2 |
— | 5,050,000 | ||||||
| MARCH 2023 Note |
14,858,816 | — | ||||||
| December 2023 Note |
6,000,000 | — | ||||||
| Emergency Injury Disaster Loan |
150,000 | 149,900 | ||||||
| Vendor note payable |
484,009 | 484,009 | ||||||
| Seller Note payable |
— | 1,400,000 | ||||||
| AFCO Insurance note payable |
468,751 | 562,280 | ||||||
| Pignatelli note |
500,000 | — | ||||||
| 37N Note |
804,997 | — | ||||||
| Finance liability (NOTE 13) |
4,112,332 | — | ||||||
| Total Loans payable |
27,378,905 | 22,396,190 | ||||||
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|
|||||
| Less: Unamortized deferred lender fee |
(106,488 | ) | — | |||||
| Less: Unamortized deferred discount |
(3,955,449 | ) | — | |||||
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|
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| Total Loans payable, net |
23,316,968 | 22,396,190 | ||||||
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| Less: Current portion of loans payable |
(15,413,894 | ) | (21,732,654 | ) | ||||
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| Loans payable - long term |
$ | 7,903,074 | $ | 663,536 | ||||
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Stock Purchase Agreement
On March 11, 2015, we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Penelope Mining LLC (the “Investor”), and, solely with respect to certain provisions of the Stock Purchase Agreement, Minera del Norte, S.A. de C.V. (“MINOSA”). The Stock Purchase Agreement provided for us to issue and sell to the Investor shares of our preferred stock in the amounts and at the prices set forth below (the numbers set forth below have been adjusted to reflect the 1-for-12 reverse stock split of February 19, 2016):
| Series |
No. of Shares | Price per Share |
||||||
| SeriesAA-1 |
8,427,004 | $ | 12.00 | |||||
| SeriesAA-2 |
7,223,145 | $ | 6.00 | |||||
The closing of the sale and issuance of shares of the Company’s preferred stock to the Investor was subject to certain conditions, including the Company’s receipt of required approvals from the Company’s stockholders (received on June 9, 2015), the receipt of regulatory approval, performance by the Company of its obligations under the Stock Purchase Agreement, receipt of certain third party consents, the listing of the underlying common stock on the Nasdaq Stock Market and the Investor’s satisfaction, in its sole discretion, with the viability of certain undersea mining projects of the Company. Completion of the transaction required amending the Company’s articles of incorporation to (a) effect a reverse stock split, which was completed on February 19, 2016, (b) adjusting the Company’s authorized capitalization, which was also completed on February 19, 2016, and establishing a classified board of directors.
The Stock Purchase Agreement provided for the purchase and sale of 2,916,667 shares of Series AA-1 Preferred Stock at an initial closing and for the purchase and sale of the remaining 5,510,337 shares of Series AA-1 Preferred Stock according to a specified schedule, was subject to the satisfaction or waiver of certain other conditions set forth in the Stock Purchase Agreement. The initial closing and subsequent closings did not occur because certain conditions to closing were not satisfied or waived.
Subject to the terms set forth in the Stock Purchase Agreement, the Lender provided the Company, through a subsidiary of the Company, with a loan of $14.75 million, the outstanding amount of which, plus accrued interest, was to be repaid from the proceeds from the sale of the shares of Series AA-1 Preferred Stock at the initial closing. The outstanding principal balance of the loan at December 31, 2023 was zero and at December 31, 2022 was $14.75 million.
22
The obligation to repay the loan was evidenced by a promissory note (the “Note”) in the amount of up to $14.75 million and bore interest at the rate of 8.0% per annum, and, pursuant to a pledge agreement (the “Pledge Agreement”) between the Lender and Odyssey Marine Enterprises Ltd., an indirect, wholly owned subsidiary of the Company (“OME”), was secured by a pledge of 54.0 million shares of Oceanica Resources S. de R.L., a Panamanian limitada (“Oceanica”), held by OME. On December 15, 2015, the Promissory Note was amended to provide that, unless otherwise converted as provided in the Note, the adjusted principal balance shall be due and payable in full upon written demand by MINOSA; provided that MINOSA agreed that it would not demand payment of the adjusted principal balance earlier than the first to occur of: (i) 30 days after the date on which (x) SEMARNAT made a determination with respect to the current application for the Manifestacion de Impacto Ambiental relating to our phosphate deposit project, which determination is other than an approval or (y) Enterprises or any of its affiliates withdraws such application without MINOSA’s prior written consent; (ii) termination by Odyssey of the Stock Purchase Agreement; (iii) the occurrence of an event of default under the Note; (iv) March 30, 2016; or (v) if the Investor had terminated the Stock Purchase Agreement pursuant to Section 8.1(d)(iii) thereof, March 30, 2016. On March 18, 2016 the agreements with MINOSA and Penelope were further amended and extended the maturity date of the loan to March 18, 2017 (see NOTE 11 Loans Payable). The August 10, 2017 amendment to the Stock Purchase Agreement also amended the due date of the Note to a due date which may be no earlier than December 31, 2017, and at least 60 days subsequent to written notice that Minosa intended to demand payment. In December 2017 MINOSA transferred the Note to its parent company, Altos Hornos de México, S.A.B. de C.V. (“AHMSA”).
On March 3, 2023, Odyssey, AHMSA, MINOSA and Phosphate One LLC (f/k/a Penelope Mining LLC, “Phosphate One” and together with AHMSA and MINOSA, the “AHMSA Parties”) entered into Settlement, Release and Termination Agreement (the “Termination Agreement”).
Pursuant to the Termination Agreement:
| • | Odyssey paid AHMSA $9.0 million (the “Termination Payment”) in cash on March 6, 2023; |
| • | the parties agreed that, concurrently with the payment of the Termination Payment, a portion of the Minosa Notes would be deemed automatically converted into 304,879 shares of Odyssey’s common stock; |
| • | the Minosa Notes, the Stock Purchase Agreement, and the Pledge Agreements were terminated; |
| • | each of the AHMSA Parties, on the one hand, and Odyssey, on the other, agreed to release the other parties and their respective affiliates, equity holders, beneficiaries, successors and assigns (the “Released Parties”) from any and all claims, demands, damages, actions, causes of action or liabilities of any kind or nature whatsoever under the SPA, the Minosa Notes, the Minosa Purchase Agreement, or the Pledge Agreements (the “Released Matters”); and |
| • | each of the AHMSA Parties, on the one hand, and Odyssey, on the other, agreed not to make any claims against any of the Released Parties related to the Released Matters. |
The transactions contemplated by the Termination Agreement were completed on March 6, 2023.
On March 6, 2023, Odyssey entered into a Release and Termination Agreement with James S. Pignatelli, who was a director of Company, to terminate and release a portion of the MINOSA 2 Note assigned to Mr. Pignatelli in 2021, the related Note Purchase Agreement (“NPA”) and the Pledge Agreement.
On March 6, 2023, Odyssey issued a new Unsecured Convertible Promissory Note in the principal amount of $500,000 to Mr. Pignatelli of the Company that bears interest at the rate of 10.0% per annum convertible at a conversion price of $3.78 per share. Pursuant to the Release and Termination Agreement with Mr. Pignatelli noted above, he agreed, in exchange for the issuance of this Unsecured Convertible Promissory Note by Odyssey, to release the assigned portion of the MINOSA 2 note issued by Odyssey Marine Exploration, Inc., a wholly owned subsidiary of the Company, to Mr. Pignatelli in the principal amount of $404,634 and convertible at a conversion price of $4.35 per share, pursuant to which the outstanding aggregate obligation with accrued interest was $630,231.
AFCO Insurance Note Payable
On December 1, 2021, we executed the Premium Finance Agreement with AFCO Credit Corporation (“AFCO”). Pursuant to the Premium Finance Agreement, AFCO agreed to finance the D&O Insurance premiums evidenced by the promissory note, bearing interest at a rate of 2% per annum, that matured on November 30, 2022. On November 1, 2022, we executed the Premium Finance Agreement with AFCO Credit Corporation (“AFCO”). Pursuant to the Premium Finance Agreement, AFCO agreed to finance the D&O Insurance premiums evidenced by the promissory note, bearing interest at a rate of 4.95% per annum, that matured on October 31, 2023. On November 1, 2023, we signed the Premium Finance Agreement – Promissory Note with AFCO bearing an interest rate of 7.20% per annum maturing on October 31, 2024.
23
Seller Note Payable
On December 2, 2022, we executed an Amended and Restated Purchase and Sale Agreement (“Purchase and Sale Agreement”) with the seller of certain marine equipment (“Seller”). Pursuant to the Purchase and Sale Agreement, Seller agreed to sell us the marine equipment, related tooling items and spares for $2.5 million. On or before the closing date, Odyssey paid the Seller $1.1 million for the acquisition of the assets. Pursuant to the Purchase and Sale Agreement, we paid the Seller the $1.4 million balance of the purchase price as a fully amortizing loan, bearing interest at a rate of 20% per annum, maturing on June 5, 2024 (the “Seller Note”). We paid the Seller Note in full on April 4, 2023, using part of the proceeds from the April 2023 sale-leaseback transaction.
March 2023 Note and Warrant Purchase Agreement
On March 6, 2023, Odyssey entered into a Note and Warrant Purchase Agreement (the “March 2023 Note Purchase Agreement”) with an institutional investor pursuant to which Odyssey issued and sold to the investor (a) a promissory note (the “March 2023 Note”) in the principal amount of up to $14.0 million, of which $13.1 million was advanced in March 2023, an additional $450,000 was advanced during the three months ended June 30, 2023 and the final $449,925 was advanced during the three months ended September 30, 2023 and (b) a warrant (the “March 2023 Warrant” and, together with the March 2023 Note, the “March 2023 Securities”) to purchase shares of Odyssey’s common stock.
The principal amount outstanding under the March 2023 Note bears interest at the rate of 11.0% per annum, and interest is payable in cash on a quarterly basis, except that, (a) at Odyssey’s option and upon notice to the holder of the March 2023 Note, any quarterly interest payment may be satisfied, in lieu of paying such cash interest, by adding an equivalent amount to the principal amount of the March 2023 Note (“PIK Interest”), and (b) the first quarterly interest payment due under the March 2023 Note will be satisfied with PIK Interest. The March 2023 Note provides Odyssey with the right, but not the obligation, upon notice to the holder of the March 2023 Note to redeem (x) at any time before the first anniversary of the issuance of the March 2023 Note, all or any portion of the indebtedness outstanding under the Note (together with all accrued and unpaid interest, including PIK Interest) for an amount equal to one hundred twenty percent (120%) of the outstanding principal amount so being redeemed, and (y) at any time on or after the first anniversary of the issuance of the March 2023 Note, all or any portion of the indebtedness outstanding under the March 2023 Note (together with all accrued and unpaid interest, including PIK Interest). Unless the March 2023 Note is sooner redeemed at Odyssey’s option, all indebtedness under the March 2023 Note is due and payable on September 6, 2024. Under the terms of the March 2023 Note Purchase Agreement, Odyssey agreed to use the proceeds of the sale of the Securities to fund Odyssey’s obligations under the Termination Agreement (as defined below), to pay legal fees and costs related to Odyssey’s NAFTA arbitration against the United Mexican States, to pay fees and expenses related to the transactions contemplated by the March 2023 Note Purchase Agreement, and for working capital and other general corporate expenditures. Odyssey’s obligations under March 2023 Note are secured by a security interest in substantially all of Odyssey’s assets (subject to limited stated exclusions).
Under the terms of the March 2023 Warrant, the holder has the right for a period of three years after issuance to purchase up to 3,703,703 shares of Odyssey’s common stock at an exercise price of $3.78 per share, which represents 120.0% of the official closing price of Odyssey’s common stock on the Nasdaq Capital Market immediately preceding the signing of the March 2023 Note Purchase Agreement, upon delivery of a notice of exercise to Odyssey. Upon exercise of the Warrant, Odyssey has the option to either (a) deliver the shares of common stock issuable upon exercise or (b) pay to the holder an amount equal to the difference between (i) the aggregate exercise price payable under the notice of exercise and (ii) the product of (A) the number of shares of common stock indicated in the notice of exercise multiplied by (B) the arithmetic average of the daily volume-weighted average price of the common stock on the Nasdaq Capital Market for the five consecutive trading days ending on, and including, the trading day immediately prior to the date of the notice of exercise. The warrant provides for customary adjustments to the exercise price and the number of shares of common stock issuable upon exercise in the event of a stock split, recapitalization, reclassification, combination or exchange of shares, separation, reorganization, liquidation, or the like.
In connection with the execution and delivery of the March 2023 Note Purchase Agreement, Odyssey entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which Odyssey agreed to register the offer and sale of the shares (the “Exercise Shares”) of Odyssey common stock issuable upon exercise of the Warrant. Pursuant to the Registration Rights Agreement, Odyssey agreed to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement covering the resale of the Exercise Shares and to use its reasonable best efforts to have the registration statement declared effective by the SEC as soon as practicable thereafter, subject to stated deadlines.
We incurred $98,504 in related fees which are being amortized over the term of the March 2023 Note Purchase Agreement and charged to legal expense with-in marketing, general and administrative expense. The initial proceeds of $13.6 million were allocated between debt and equity for the warrants based on the relative fair value of the two instruments. As a result, there was a debt discount of $3,536,154, which is being amortized over the remaining term of the March 2023 Note Purchase Agreement using the effective interest method, which is charged to interest expense.
For the year ended December 31, 2023, we recorded $2,044,377 of interest expense from the amortization of the debt discount and $53,810 interest from the fee amortization, respectively. The December 31, 2023 carrying value of the debt was $13,116,138 and was net of unamortized debt fees of $44,693, net of unamortized debt discount of $1,697,985 associated with the fair value of the warrant. The total face value of this obligation at December 31, 2023 was $14,858,816.
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37North
On June 29, 2023, we entered into a Note Purchase Agreement (“Note Agreement”) with 37North SPV 11, LLC (“37N”) pursuant to which 37N agreed to loan us $1,000,000. The proceeds from this transaction were received in full on June 29, 2023. Pursuant to the Note Agreement, the indebtedness was non-interest bearing and matured on July 30, 2023. At any time from 31 days after the maturity date, 37N has the option to convert all or a portion of the outstanding amount of the indebtedness into a number of conversion shares equal to the quotient obtained by dividing (A) 120% of the amount of the indebtedness, by (B) the lower of $3.66 or 70% of the 10-day volume-weighted average price of Common Stock. The aggregate maximum number of shares of Common Stock to be issued in connection with conversion of the indebtedness is not to exceed (i) 19.9% of the outstanding shares of Common Stock prior to the date of the Agreement, (ii) 19.9% of the combined voting power of the outstanding voting securities, or (iii) such number of shares of Common Stock that would violate the applicable listing rules of the Principal Market if the stockholders did not approve the issuance of Common Stock upon conversion of the indebtedness.
Any time prior to maturity, we had the option to prepay the indebtedness at an amount of 108% of the unpaid principal. From the maturity date to 29 days after the maturity date (August 27, 2023), we were permitted to repay all (but not less than all) of an amount equal to 112.5% of the unpaid amount of the indebtedness. At any time after the 30th day after the maturity date (August 28, 2023), we were permitted to repay all (but not less than all) of an amount equal to 115% of the unpaid amount of the indebtedness after 10 days’ notice. If 37N delivers an exercise notice during this 10-day period, the note issued pursuant to the Note Agreement (the “37N Note”) would be converted to shares of Common Stock, instead of being repaid. As of December 31, 2023, we had not repaid this Note Agreement. On December 27, 2023, 37N delivered an exercise notice to us pursuant to which it exercised its right to convert $360,003 of the outstanding indebtedness under the Note Agreement into shares of our Common Stock. In accordance with the Note Agreement, based on the applicable conversation rate of $2.3226 under the agreement, we issued 155,000 shares of our common Stock to 37N on December 29, 2023.
If the number of shares issuable pursuant to any exercise notices by 37N is limited by the 19.9% limitation outlined above, then we are permitted to repay all of the remaining unpaid amount of the Loan in an amount equal to 130% of the remaining unpaid amount.
We evaluated the indebtedness and, based on the criteria of ASC 480 and 815-15-25-1, the 37N convertible note is classified as a liability on the consolidated balance sheet with a share settled redemption feature that is recorded as an embedded derivative. As a result, the share settled redemption feature was recorded at fair value at each reporting period outstanding with changes recognized through Interest expenses on the consolidated statement of operations. At December 31, 2023, the debt instrument and embedded derivatives were recorded on the consolidated balance sheets at fair value of $804,997, in Loans payable – short term, and $702,291, in Litigation financing and other – long term.
Certain default put provisions were not considered to be clearly and closely related to the debt host, but management concluded that the value of these default put provisions was de minimis.
On March 7, 2022, we entered into a Note Purchase Agreement (“2022 Note Agreement”) with 37N in which 37N agreed to loan us up to $2,000,000. These loan proceeds were received in full on March 25, 2022. Pursuant to the 2022 Note Agreement, the indebtedness was non-interest bearing and matured on June 25, 2022. Anytime from 30 days after the maturity date, 37N had the option to convert all or a portion of the outstanding amount of the indebtedness into conversion shares equal to the quotient obtained by dividing (A) 125% of the amount of the indebtedness, by (B) the lower of $5.94 and 70% of the 10-day VWAP. The aggregate maximum number of shares of Common Stock to be issued in connection with conversion of the indebtedness was not to exceed (i) 19.9% of the outstanding shares of Common Stock prior to the date of the 2022 Note Agreement, (ii) 19.9% of the combined voting power of the outstanding voting securities, or iii) exceed the applicable listing rules of the Principal Market if the stockholders did not approve the issuance of Common Stock upon conversion of the indebtedness.
Any time prior to maturity, we had the option to prepay the indebtedness at an amount of 110% of the unpaid principal. From the maturity date to 29 days after the maturity date (July 24, 2022), we were permitted to prepay all (but not less than) an amount equal to 115% of the unpaid amount of the indebtedness. Anytime, after the 30th day after the maturity date (July 25, 2022), we were permitted to prepay all (but not less than) an amount equal to 125% of the unpaid amount of the indebtedness, however, we were required to provide 37N a prepayment notice at least 10 days prior to repayment. If 37N delivered an exercise notice during this 10-day period, the Note would be converted, rather than prepaid.
If 37N delivered an exercise notice and the number of shares issuable is limited by the 19.9% limitation outlined above, then we were permitted to prepay all (but not less than all) an amount equal to 130% of the remaining unpaid amount.
On June 29, 2022, the Company paid $2,200,000 of the outstanding amounts payable under the 2022 Note Agreement with 37N. On July 6, 2022, the Company paid the remaining $100,000 of the outstanding amounts payable under the 2022 Note Agreement with 37N.
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December 2023 Note and Warrant Purchase Agreement
On December 1, 2023, we entered into a Note and Warrant Purchase Agreement (the “December 2023 Purchase Agreement”) with institutional investors pursuant to which we issued and sold to the investors (a) a series of promissory notes (the “December 2023 Notes”) in the principal amount of up to $6.0 million and (b) two tranches of warrants (the “December 2023 Warrants” and, together with the December 2023 Notes, the “December 2023 Securities”) to purchase shares of our common stock. We issued the December 2023 Notes in the aggregate amount of $3.75 million and related warrants on December 1, 2023, and December 2023 Notes in the aggregate amount of $2.25 million and related warrants on December 28, 2023.
The principal amount outstanding under the December 2023 Notes bears interest at the rate of 11.0% per annum, and interest is payable in cash on a quarterly basis, except that, (a) at our option and upon notice to the holder of the December 2023 Notes, any quarterly interest payment may be satisfied, in lieu of paying such cash interest, by adding an equivalent amount to the principal amount of the December 2023 Notes (“December 2023 PIK Interest”), and (b) the first quarterly interest payment due under the December 2023 Notes will be satisfied with December 2023 PIK Interest. The December 2023 Notes provide us with the right, but not the obligation, upon notice to the holders of the December 2023 Notes to redeem (x) at any time before the first anniversary of the issuance of the December 2023 Notes, all or any portion of the indebtedness outstanding under the December 2023 Notes (together with all accrued and unpaid interest, including December 2023 PIK Interest) for an amount equal to one hundred twenty percent (120%) of the outstanding principal amount so being redeemed, and (y) at any time on or after the first anniversary of the issuance of the December 2023 Notes, all or any portion of the indebtedness outstanding under the December 2023 Notes (together with all accrued and unpaid interest, including December 2023 PIK Interest). Unless the December 2023 Notes are sooner redeemed at our option, all indebtedness under the December 2023 Notes is due and payable on June 1, 2025. Under the terms of the December 2023 Note Purchase Agreement, we agreed to use the proceeds of the sale of the December 2023 Securities for working capital and other general corporate expenditures and to pay fees and expenses related to the transactions contemplated by the December 2023 Note Purchase Agreement. Our obligations under December 2023 Notes are secured by a pledge of and security interest in our equity interests in Odyssey Marine Cayman Limited (subject to limited stated exclusions).
Under the terms of the first tranche of December 2023 Warrants, the holders have the right for a period of three years after issuance to purchase an aggregate of up to 1,411,765 shares of our common stock at an exercise price of $4.25 per share, which represents 120.0% of the official closing price of our common stock on the Nasdaq Capital Market immediately preceding the signing of the December 2023 Note Purchase Agreement, upon delivery of a notice of exercise to Odyssey. Under the terms of the second tranche of December 2023 Warrants, the holders have the right for a period of three years after issuance to purchase an aggregate of up to 211,565 shares of our common stock at an exercise price of $7.09 per share, which represents 200.0% of the official closing price of our common stock on the Nasdaq Capital Market immediately preceding the signing of the December 2023 Note Purchase Agreement, upon delivery of a notice of exercise to Odyssey. Upon exercise of the December 2023 Warrants, Odyssey has the option to either (a) deliver the shares of common stock issuable upon exercise or (b) pay to the holder an amount equal to the difference between (i) the aggregate exercise price payable under the notice of exercise and (ii) the product of (A) the number of shares of common stock indicated in the notice of exercise multiplied by (B) the arithmetic average of the daily volume-weighted average price of the common stock on the Nasdaq Capital Market for the five consecutive trading days ending on, and including, the trading day immediately prior to the date of the notice of exercise. The December 2023 Warrants provide the holders with a cashless exercise option if we have announced payment of a dividend or distribution on account of our common stock. The December 2023 Warrants also include customary adjustments to the exercise price and the number of shares of common stock issuable upon exercise in the event of a stock split, recapitalization, reclassification, combination or exchange of shares, separation, reorganization, liquidation, or the like.
In connection with the execution and delivery of the December 2023 Note Purchase Agreement, we entered into a registration rights agreement (the “December 2023 Registration Rights Agreement”) pursuant to which we agreed to register the offer and sale of the shares (the “December 2023 Exercise Shares”) of our common stock issuable upon exercise of the December 2023 Warrants. Pursuant to the December 2023 Registration Rights Agreement, we agreed to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement covering the resale of the December 2023 Exercise Shares and to use our reasonable best efforts to have the registration statement declared effective by the SEC as soon as practicable thereafter, subject to stated deadlines.
Monaco
On October 4, 2021, we and Monaco Financial, LLC and certain associated entities (collectively with Monaco, the “Monaco Parties”) entered into a Termination and Settlement Agreement (the “Termination Agreement”). We were parties to various loan arrangements and other commercial contractual relationships, and the purposes of the Termination Agreement were to terminate the loan agreements and contractual relationships and to settle the outstanding obligations thereunder between us and the Monaco Parties.
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Pursuant to the Termination Agreement, the loan agreements and contractual relationships were terminated, and we agreed to (a) issue 984,848 shares of our common stock (the “Settlement Shares”) to Monaco and (b) pay Monaco an aggregate amount of $3.0 million (the “Settlement Cash”) no later than December 1, 2021. The Settlement Shares were issued at a price equal to $6.60 per share, totaling $6.5 million, which was negotiated by the parties with reference to the recent market prices of our common stock and the other terms of the Termination Agreement. We delivered $500,000 of the Settlement Cash to Monaco upon execution and delivery of the Termination Agreement. At Monaco’s option, Monaco has the right, but not the obligation, to receive the remaining $2.5 million in shares of our common stock rather than in cash. This amount was to be settled December 1, 2021, but remained outstanding at December 1, 2021. This indebtedness did not bear interest. Under the terms of the Termination Agreement, (a) the Monaco Parties agreed that approximately $14.5 million of indebtedness, which included accrued interest, owed by us to the Monaco Parties was satisfied in full and (b) certain of the Monaco Parties assigned to us all of their right, title, and interest in a portion of the proceeds from a specified shipwreck project. As a result of the termination of the loan agreements and contractual relationships, (x) our right to receive a percentage of the proceeds derived by the Monaco Parties from certain shipwreck projects was terminated, and (y) Monaco’s option to convert certain indebtedness held by it into shares of Oceanica Resources, S. de R.L. held indirectly by us was terminated. The Termination Agreement also set forth mutual releases and other customary representations, warranties, and covenants of the parties. The Company determined that the embedded conversion feature was clearly and closely related to the host contract and met the scope exception under FASB ASC 815-40. Thus, it did not require derivative liability classification under ASC 815. The Company then evaluated the conversion feature under FASB ASC 470-20, “Debt with conversion and other options” for consideration of any beneficial conversion features (“BCF”). Based on the market price of the common stock on the date of the agreement as compared to the conversion price, they determined there was a BCF of 232,175 which was recorded in additional paid-in capital. A BCF results in a debt discount which should be amortized over the stated maturity of the convertible instrument, or the earliest potential conversion date. Because the contract was convertible upon issuance, the discount was immediately accreted and charged to interest expense.
As a result of the Termination Agreement, we recognized a gain on debt settlement of approximately $5.2 million in the fourth quarter of 2021, which represented the difference between the loan principal, accrued interest and accounts payable forgiven of approximately $14.7 million and total consideration given of approximately $9.5 million.
The shares of common stock issuable under the Termination Agreement were offered and sold pursuant to a base prospectus and a prospectus supplement, both filed pursuant to Odyssey’s shelf registration statement on Form S-3 (File No. 0333-227666).
On June 14, 2022, the Company paid the $2,500,000 outstanding amount payable under the Termination Agreement with Monaco.
Other Financing Arrangement
Litigation Financing
On June 14, 2019, Odyssey and Exploraciones Oceánicas S. de R.L. de C.V., our Mexican subsidiary (“ExO” and, together with Odyssey, the “Claimholder”), and Poplar Falls LLC (the “Funder”) entered into an International Claims Enforcement Agreement (the “Agreement” and the funding provided pursuant to the Agreement, as amended or amended and restated from time to time, the “Litigation Financing”), pursuant to which the Funder agreed to provide funding to the Claimholder to facilitate the prosecution and recovery of the claim by the Claimholder against the United Mexican States under Chapter Eleven of the North American Free Trade Agreement (“NAFTA”) for violations of the Claimholder’s rights under NAFTA related to the development of an undersea phosphate deposit off the coast of Baja Sur, Mexico (the “Project”), on our own behalf and on behalf of ExO and United Mexican States (the “Subject Claim”). Pursuant to the Agreement, the Funder agreed to specified fees and expenses regarding the Subject Claim (the “Claims Payments”) incrementally and at the Funder’s sole discretion.
Under the terms of the Agreement, the Funder agreed to make Claims Payments in an aggregate amount not to exceed $6,500,000 (the “Maximum Investment Amount”). The Maximum Investment Amount was made available to the Claimholder in two phases, as set forth below:
| (a) | a first phase, in which the Funder shall make Claims Payments in an aggregate amount no greater than $1,500,000 for the payment of antecedent and ongoing costs (“Phase I Investment Amount”); and |
| (b) | a second phase, in which the Funder shall make Claims Payments in an aggregate amount no greater than $5,000,000 for the purposes of pursuing the Subject Claim to a final award (“Phase II Investment Amount”). |
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Upon exhaustion of the Phase I Investment Amount, the Claimholder will have the option to request Tranche A of the Phase II Investment Amount, consisting of funding up to $3.5 million (“Tranche A Committed Amount”). Upon exhaustion of the Tranche A Committed Amount, the Claimholder will have the option to request Tranche B of the Phase II Investment Amount, consisting of funding of up to $1.5 million (“Tranche B Committed Amount”). The Claimholder must exercise its option to receive the Tranche A Committed Amount in writing, no less than thirty days before submitting a Funding Request to the Funder under Tranche A. The Claimholder must exercise its option to receive the Tranche B Committed Amount in writing within forty-five days after the exhaustion of the Tranche A Committed Amount. Pursuant to the Agreement, the Claimholder agreed that, upon exercising the Claimholder’s option to receive funds under Phase I, Tranche A of Phase II, or Tranche B of Phase II, the Funder will be the sole source of third-party funding for the specified fees and expenses of the Subject Claim under each respective phase and tranche covered by the option exercised, and the Claimholder will obtain funding for such fees and expenses only as set forth in the Agreement. The Funder was due a closing fee of $80,000 for the Phase I Investment Amount, and $80,000 for the Phase II Investment Amount to pay third parties in connection with due diligence and other administrative and transaction costs incurred by the Funder prior to and in furtherance of execution of the Agreement.
Upon the Funder making Claims Payments to the Claimholder or its designees in an aggregate amount equal to the Maximum Investment Amount, the Funder has the option to continue funding the specified fees and expenses in relation to the Subject Claim on the same terms and conditions provided in the Agreement. The Funder must exercise its option to continue funding in writing, within thirty days after the Funder has made Claims Payments in an aggregate amount equal to the Maximum Investment Amount. If the Funder exercises its option to continue funding, the parties agreed to attempt in good faith to amend the Agreement to provide the Funder with the right to provide at the Funder’s discretion funding in excess of the Maximum Investment Amount, in an amount up to the greatest amount that may then be reasonably expected to be committed for investment in Subject Claim. If the Funder declines to exercise its option, the Claimholder may negotiate and enter into agreements with one or more third parties to provide funding, which shall be subordinate to the Funder’s rights under the Agreement.
The Agreement provides that the Claimholder may at any time without the consent of the Funder either settle or refuse to settle the Subject Claim for any amount; provided, however, that if the Claimholder settles the Subject Claim without the Funder’s consent, which consent shall not be unreasonably withheld, conditioned, or delayed, the value of the Recovery Percentage (as defined below) will be deemed to be the greater of (a) the Recovery Percentage (under Phase I or Phase II, as applicable), or (b) the total amount of all Claims Payments made in connection with such Subject Claim multiplied by three (3).
If the Claimholder ceases the Subject Claim for any reason other than (a) a full and final arbitral award against the Claimholder or (b) a full and final monetary settlement of the claims, including in particular, for a grant of an environmental permit to the Claimholder allowing it to proceed with the Project (with or without a monetary component), all Claims Payments under Phase I and, if Claimholder has exercised the corresponding option, the Tranche A Committed Amount and Tranche B Committed Amount, shall immediately convert to a senior secured liability of the Claimholder. This sum shall incur an annualized internal rate of return (“IRR”) of 50.0% retroactive to the date each Funding Request was paid by the Funder (under Phase I), or, to the conversion date for the Tranche A Committed Amount and Tranche B Committed Amount of Phase II if the Claimholder has exercised the respective option (collectively, the “Conversion Amount”). Such Conversion Amount and any and all accrued IRR shall be payable in-full by the Claimholder within 24 months of the date of such conversion, after which time any outstanding Conversion Amounts, shall accrue an (“IRR”) of 100.0%, retroactive to the conversion date (the “Penalty Interest Amount”). The Claimholder will execute such documents and take other actions as necessary to grant the Funder a senior security interest on and over all sums due and owing by the Claimholder in order to secure its obligation to pay the Conversion Amount to the Funder. If the Claimholder ceases the Subject Claim due to the grant of an environmental permit (with or without a monetary component), all Claims Payments under Phase 1 and, if the Claimholder has exercised the corresponding option, the Tranche A Committed Amount and Tranche B Committed Amount shall immediately convert to a senior secured liability of the Claimholder and shall incur an annualized an IRR of 50.0% on the Conversion Amount, noted above, from the conversion date. Management has estimated it is more likely than not the Subject Claim will result in the issuance of the environmental permit requiring us to record interest under Generally Accepted Accounting Principles in the United States (“US GAAP”). Reliance should not be placed on this estimate in determining the likely outcome of the Subject Claim.
If, at any time after exercising its option to receive funds under either Tranche A or Tranche B of Phase II, the Claimholder wishes to fund the Subject Claim with its own capital (“Self-Funding”) (which excludes any Claims Payments made, either directly or indirectly, by any other third party), the Claimholder shall immediately pay to the Funder the Conversion Amount, provided that this requirement shall not apply if, after the Funder has made Claims Payments in an aggregate amount equal to the Maximum Investment Amount, the Funder does not exercise its option to provide Follow-On Funding.
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In the event of any receipt of proceeds resulting from the Subject Claim (as defined in the Agreement, “Proceeds”), the Funder shall be entitled to any additional sums above the Conversion Amount to which the Funder is entitled as described below. Should the Claimholder cease the Subject Claim as described above after Self-Funding the Claim, accrued IRR and Penalty Interest shall be calculated and paid to the Funder as set forth above. The Funder’s rights to the Recovery Percentage as defined below shall survive any decision by Claimholder to utilize Self-Funding. The parties acknowledged that the Agreement constitutes a sale of the right to a portion of the Proceeds (if any) arising from the Subject Claim as set forth in this Agreement. The Claimholder has relinquished its right to the portion of the proceeds, if any, that the Funder would have the right to as described below. This sale of proceeds is being accounted for under the guidance of ASC 815 Derivatives and Hedging.
On each Distribution Date, distributions of the Proceeds shall be made to the Claimholder and the Funder in accordance with subparagraph (a) or (b) below (the “Recovery Percentage”), as applicable:
| (a) | If the Claimholder receives only the Phase I Investment Amount from the Funder, the first Proceeds shall be distributed as follows: |
| (i) | first, 100.0% to the Funder, until the cumulative amount distributed to the Funder equals the total Claims Payments paid by the Funder under Phase I; |
| (ii) | second, 100.0% to the Funder until the cumulative amount distributed to the Funder equals an IRR of 20% of Claims Payments paid by the Funder under Phase I (“Phase I Compensation”), per annum; and |
| (iii) | thereafter, 100.0% to the Claimholder. |
| (b) | If the Claimholder exercises its options to receive Tranche A or both Tranche A and Tranche B of the Phase II Investment Amount, the first Proceeds shall be distributed as follows: |
| (i) | first, 100.0% to the Funder until the cumulative amount distributed to the Funder equals the total Claims Payments paid by the Funder under Phases I and II; |
| (ii) | second, 100.0% to the Funder until the cumulative amount distributed to the Funder equals an additional 300.0% of Phase I Investment Amount; plus an additional 300% of the Tranche A Committed Amount (i.e. 300.0% of $3.5 million), less any amounts remaining of the Tranche A Committed Amount that the Funder did not pay as Claims Payments; plus an additional 300.0% of the Tranche B Committed Amount (i.e. 300.0% of $1.5 million), if the Claimholder exercises the Tranche B funding option, less any amounts remaining of the Tranche B Committed Amount that the Funder did not pay as Claims Payments; |
| (iii) | third, for each $10,000 in specified fees and expenses paid by the Funder under Phase I and Phase II and any amounts over each $10,000 of the Tranche A Committed Amount and the Tranche B Committed Amount (if the Claimholder exercises the Tranche B funding option), 0.01% of the total Proceeds from any recoveries after repayment of (i) and (ii) above, to the Funder; and |
| (iv) | thereafter, 100% to the Claimholder. |
The Agreement provides that if no Proceeds are ever paid to or received by the Claimholder or its representatives and if the environmental permit is not issued, the Funder shall have no right of recourse or right of action against the Claimholder or its representatives, or any of their respective property, assets, or undertakings, except as otherwise specifically contemplated by the Agreement. If (a) Proceeds are paid to or received by the Claimholder or its representatives; (b) such Proceeds are promptly applied and/or distributed by the Claimholder or on behalf of the Claimholder in accordance with the terms of the Agreement; and (c) the amount received by the Funder as a result thereof is not sufficient to pay all of the Recovery Percentage and all of the amounts due to the Funder under the Agreement, then (provided that all of the Proceeds which the Funder will ever be entitled to have been paid to or received by the Funder), the Funder shall have no right of recourse or action against the Claimholder or its Representatives, or any of their property, assets, or undertakings, except as otherwise specifically contemplated by the Agreement. Pursuant to the Agreement, the Claimholder acknowledged the Funder’s priority right, title, and interest in any Proceeds, including against any available collateral to secure its obligations under the Agreement, which security interest shall be first in priority as against all other security interests in the Proceeds. The Claimholder also acknowledged and agreed to execute and authorize the filing of a financing statement or similar and to take such other actions in such jurisdictions as the Funder, in its sole discretion, deems necessary and appropriate to perfect such security interest. The Agreement also includes representations and warranties, covenants, conditions, termination and indemnification provisions, and other provisions customary for comparable arrangements.
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Amendment and Restatement (January 31, 2020)
On January 31, 2020, the Claimholder and the Funder entered into an Amended and Restated International Claims Enforcement Agreement (the “Restated Agreement”). The material terms and provisions that were amended or otherwise modified are as follows:
| • | the Funder agreed to provide up to $2.2 million in Arbitration Support Funds for the purpose of paying the Claimholder’s litigation support costs in connection with Subject Claim; |
| • | a closing fee of $200,000 has been retain by the Funder in connection with due diligence and other transaction costs incurred by the Funder; |
| • | a warrant was issued to purchase our common stock which is exercisable for a period of five years beginning on the earlier of (a) the date on which the Claimholder ceases the Subject Claim for any reason other than a full and final arbitral award against the Claimholder or a full and final monetary settlement of the claims or (b) the date on which Proceeds are received and deposited into escrow. The exercise price per share is $3.99, and the Funder can exercise the warrant to purchase the number of shares of our common stock equal to the dollar amount of Arbitration Support Funds provided to us pursuant to the Restated Agreement divided by the exercise price per share (subject to customary adjustments and limitations); and |
| • | all other terms in the Restated Agreement are substantially the same as in the original Agreement. |
During 2020, the Funder provided us with $2.0 million of the Arbitration Support Funds, and we incurred $200,000 in related fees that were treated as an additional advance. Upon each funding, the proceeds were allocated between debt and equity for the warrants based on the relative fair value of the two instruments. As a result, there was an immediate expense of $1,063,811 related to the derivative.
Although the warrants only become exercisable upon the occurrence of future events, they are considered issued for accounting purposes and were valued using a binomial lattice model. The expected volatility assumption was based on the historical volatility of our Common Stock. The expected life assumption was primarily based on management’s expectations of when the Warrants will become exercisable and the risk-free interest rate for the expected term of the warrant is based on the U.S. Treasury yield curve in effect at the time of measurement.
Second Amendment and Restatement (December 12, 2020)
On December 12, 2020, the Claimholder and the Funder entered into a Second Amended and Restated International Claims Enforcement Agreement (the “Second Restated Agreement”) relating to the Subject Claim. Under the terms of the Second Restated Agreement, the Funder agreed to make Claims Payments in an aggregate amount not to exceed $20,000,000 (the “Maximum Investment Amount”). The Second Restated Agreement required the Funder to make Claims Payments in an aggregate amount no greater than $10,000,000 for the purposes of pursuing the Subject Claim to a final award (“Phase III Investment Amount”). We also incurred $200,000 in related fees, which were treated as an additional advance. The Second Restated Agreement includes the same representations and warranties, covenants, conditions, termination and indemnification provisions, and other provisions as in the original agreement.
Third Amendment and Restatement (June 14, 2021)
On June 14, 2021, the Claimholder and the Funder entered into a Third Amended and Restated International Claims Enforcement Agreement (the “Third Restated Agreement”) relating to the Subject Claim. Under the terms of the Third Restated Agreement, the Funder made and agreed to make Claims Payments in an aggregate amount not to exceed $25,000,000, an increase of $5.0 million (the “Incremental Amount”). The Third Restated Agreement required the Claimholder to request $2.5 million of the Incremental Amount (the “First $2.5 Million”). Within 15 days after exhaustion of the First $2.5 Million, the Claimholder may either (a) request the remaining $2.5 million (the “Second $2.5 Million”) of the Incremental Amount or (b) notify the Funder that the Claimholder has decided to self-fund the Second $2.5 Million. We also incurred $80,000 in related fees which were treated as an additional advance. This Second Restated Agreement includes the same representations and warranties, covenants, conditions, termination and indemnification provisions, and other provisions as in the original agreement. As of December 31, 2023, the Funder has made Claim Payments in the aggregate amount of $4.8 million.
Litigation Financing Waiver and Consent
On March 6, 2023, the Claimholder and the Funder under the Agreement entered into a Waiver and Consent Agreement, pursuant to which, among other things, (i) the Funder provided a waiver and consent (i) to allow the Claimholder to fund certain costs and expenses arising from the Subject Claim from the Claimholder’s own capital in an aggregate amount not to exceed $5,000,000, and (ii) Odyssey paid a $1,000,000 nonrefundable waiver fee to the Funder.
30
The Company determined that the financing arrangement was a derivative, measured at fair value within the scope of ASC 815 Derivatives and Hedging. Subsequently, any changes in the fair value of the derivative will be reported in earnings on a quarterly basis. Fair value was calculated as the midpoint of estimated ranges of the probability-weighted present value of potential results based on management assumptions. As such, the fair value of the obligation on December 31, 2023, and 2022 was $52.1 million and $45.4 million, respectively, with changes in the fair value of $6.7 million and $6.1 million.
See NOTE 2 for discussion of the restatement of a material prior period error.
June 2022 Subscription Agreement and Warrant Agreements
In June 2022, we sold an aggregate of 4,939,515 shares of our Common Stock and warrants (the “2022 Warrants”) to holders to purchase up to 4,939,515 shares of our Common Stock pursuant to a Subscription Agreement and Warrant Agreements dated as of June 10, 2022 (the “2022 Equity Transaction”). The net proceeds received from sale, after offering expenses of $1.8 million, were $14.7 million. The shares of Common Stock and 2022 Warrants were sold in units, with each unit consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $3.35 (the “Warrant Price”) per share of common stock. Each unit was sold at a negotiated price of $3.35 per unit. The 2022 Warrants are exercisable at any time beginning on December 10, 2022, and ending on the close of business on June 10, 2027.
Under the terms of the warrant agreement, the Holders are entitled to purchase from the Company one share of Common Stock, at the price of $3.35 per share. The Company in its sole discretion may lower the Warrant Price at any time prior to the expiration date for a period of not less than twenty Business Days, provided that the Company shall provide at least twenty days prior written notice of such reduction to holders of the 2022 Warrants and, provided further that any such reduction shall be identical among all of the 2022 Warrants.
A 2022 Warrant may be exercised by the Holder by delivering the aggregate exercise price unless the Holder chooses net settlement via the cashless exercise option if, there is no active registration statement or available prospectus for the issuance of the Warrant Shares by the Holder. In a cashless exercise, the Holder will receive a number of Warrant Shares determined by dividing [(A-B) (X)] by (A), where (A) represents volume-weighted average price of the common stock or the bid price of common stock, depending on the circumstances, (B) represents the Exercise Price of the 2022 Warrant, as adjusted, and (X) represents the number of Warrant Shares that would be issued upon exercise of the Warrant, if it were a cash exercise rather than a cashless exercise.
If the Company fails to deliver the Warrant Shares to the Holder within the time frame required by the agreement, and the Holder must purchase shares of Common Stock to fulfill a sale that was based on receiving the Warrant Shares (referred to as a “Buy-In”), then the Company must reimburse the Holder in cash for the difference between the total purchase price of the Common Stock purchased and the product of the number of Warrant Shares that should have been delivered and the sale price at which the obligation to purchase arose. The 2022 Warrants also included customary adjustments to the exercise price and the number of shares of common stock issuable upon exercise in the event of a stock split, recapitalization, reclassification, combination or exchange of shares, separation, reorganization, liquidation, or the like.
The Company determined that the 2022 Warrants meet the definition of a derivative and are not considered indexed to the Company’s own stock due to the input related to the price per share and any non-cash consideration. Management determined that this input would preclude the 2022 Warrants from being indexed to the Company’s stock given that this input could be affected by variables that are extraneous to the pricing of a fixed-for-fixed option or forward contract on equity shares. As such, the 2022 Warrants were recognized as derivative liabilities and will be initially and subsequentially measured at fair value with the gain or loss due to changes in fair value recognized in the current period. The Company noted that when debt is issued with liability-classified stock purchase warrants, the residual method should be used so that the 2022 Warrants are recognized at fair value at issuance and the residual proceeds are allocated to the debt.
Management determined that the $1.8 million in incremental costs directly attributable to the Common Stock Offering and the issuance of 2022 Warrants shall be allocated between the two instruments in proportion to the allocation of the issuance proceeds. Furthermore, the incremental costs allocated to the Common Stock were recorded as a reduction of the proceeds in equity while the incremental costs allocated to the 2022 Warrants were expensed as incurred.
See NOTE 2 for discussion of the restatement of a material prior period error.
Going Concern Consideration
We have experienced several years of net losses and may continue to do so. Our ability to generate net income or positive cash flows for the following twelve months is dependent upon financings, our success in developing and monetizing our interests in mineral exploration entities, generating income from contracted services or collecting on amounts owed to us.
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Our 2024 business plan requires us to generate new cash inflows to effectively allow us to perform our planned projects. We continually plan to generate new cash inflows through the monetization of our receivables and equity stakes in seabed mineral companies, financings, syndications or other partnership opportunities. If cash inflow ever becomes insufficient to meet our projected business plan requirements, we would be required to follow a contingency business plan based on curtailed expenses and fewer cash requirements. On December 1, 2023, we entered into the December 2023 Note Purchase Agreement with institutional investors pursuant to which we issued and sold to the investors the December 2023 Notes in the principal amount of up to $6.0 million and the December 2023 Warrants to purchase shares of our common stock. We issued December 2023 Notes in the aggregate amount of $3.75 million and related warrants on December 1, 2023, and December 2023 Notes in the aggregate amount of $2.25 million and related warrants on December 28, 2023. On May 3, 2024, we received a payment of approximately $9.4 million arising from a residual economic interest in a salvaged shipwreck. The balance of the proceeds from the December 2023 Notes and a portion of the proceeds received in May 2024, together with other anticipated cash inflows, are expected to provide operating funds through at least the third quarter of 2024.
Our consolidated non-restricted cash balance at December 31, 2023 was $4.0 million. We have a working capital deficit at December 31, 2023 of $26.6 million. The total consolidated book value of our assets was approximately $22.8 million at December 31, 2023, which includes cash of $4.0 million. The fair market value of these assets may differ from their net carrying book value. The factors noted above raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Off Balance Sheet Arrangements
We do not engage in off-balance sheet financing arrangements. In particular, we do not have any interest in so-called limited purpose entities, which include special purpose entities (“SPEs”) and structured finance entities.
Indemnification Provisions
Under our bylaws and certain consulting agreements, we have agreed to indemnify our officers and directors for certain events arising as a result of the officer’s or director’s serving in such capacity. Separate agreements may provide indemnification after term of service. The term of the indemnification agreement is as long as the officer or director remains in the employment of the company. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. However, our director and officer liability insurance policy limits its exposure and enables us to recover a portion of any future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal and no liabilities are recorded for these agreements as of December 31, 2023.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial position and results of operations is based upon our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect our financial position and results of operations. Changes in these estimates and assumptions by our management could materially impact our results of operations and financial condition. Our management has discussed these critical accounting policies and the related estimates and assumptions with the audit committee of our board of directors.
See NOTE 3 Summary of Significant Accounting Policies to the consolidated financial statements for a description of our significant accounting policies. Critical accounting estimates are defined as those that are reflective of significant judgment and uncertainties, and potentially result in materially different results under different assumptions and conditions. We have identified the following critical accounting policies that rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements. We have discussed the development, selection and disclosure of these policies with our audit committee.
32
Derivative Financial Instruments
We evaluate all of our agreements to determine whether such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. In evaluating the fair value of derivative financial instruments, there are numerous assumptions that management must make that may influence the valuation of the derivatives that would be included in the financial statements. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
As discussed in NOTE 11 Loans Payable and NOTE 12 Fair Value Financial Instruments to the consolidated financial statements, we have certain litigation financing with detachable warrants, warrant liabilities, the OML Put Option and an embedded derivative related to the 37N Note included in the consolidated balance sheets at December 31, 2023 and 2022 that are considered derivative financial instruments.
The Litigation Financing agreement involved numerous amendments, significant non-cash financing, issuance of warrants, and issuance costs. Determination of the fair value of the derivative required significant judgment of and assumptions and estimates regarding the facts and circumstances regarding the potential liability. The fair value of the derivative is an inherently uncertain estimate because almost none of the inputs used in calculating the estimate–other than amounts funded–is objectively quantifiable. The inputs are based on management’s good-faith but unavoidably subjective assumptions, judgments and estimates regarding the potential outcomes of the NAFTA arbitration case, the potential outcomes and award amounts conditional on Odyssey winning the arbitration, the potential repayment dates, the potential dates on which any proceeds from the arbitration might be received, and certain market inputs such as discount rates. The calculations based on these inputs resulted in a range of estimated fair values. The Company reported the midpoint of that range as the fair value at each relevant period. The estimate has changed each period based on management’s revised judgments and assumptions regarding timing and other inputs. The estimate reported as the fair value is sensitive to the methods, assumptions, judgments and estimates underlying the fair value calculations because the use of different probabilities regarding potential case outcomes, potential awards, repayment dates, discount rates, or other estimated assumptions, or another method of reporting the fair value from within the calculated range, could result in a significantly or materially different estimated fair value being reported.
The fair values of 2022 Warrant and the December 2023 Warrant, which are accounted for as derivative liabilities, were estimated using a Black-Scholes valuation model. The assumptions used in this model included the use of key inputs, including expected stock volatility, the risk–free interest rate, the expected life of the option and the expected dividend yield. Expected volatility is calculated based on the historical volatility of our Common Stock over the term of the warrant. Risk–free interest rates are calculated based on risk–free rates for the appropriate term. The expected life is estimated based on contractual terms as well as expected exercise dates. The dividend yield is based on the historical dividends issued by us. If the volatility rate or risk-free interest rate were to change, the value of the warrants would be impacted.
The fair value of the embedded derivative liability related to the share settled redemption feature recognized in connection with the 37N Note is determined using the with-and-without valuation method. As inputs into the valuation, we considered the type and probability of occurrence of certain events, the amount of the payments, the expected timing of certain events, and a risk-adjusted discount rate.
The OML put option was initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The OML Put Option valuation was based on the exercise period of the equity exchange agreement, share price and volatility.
Investment in Unconsolidated Entities
We account for our interests in entities in which we are able to exercise significant influence over operating and financial policies, generally 50% or less ownership interest, under the equity method of accounting. In such cases, our original investments are recorded at cost and adjusted for our share of earnings, losses and distributions. We account for our interests in entities where we have virtually no influence over operating and financial policies under the cost method of accounting. In such cases, our original investments are recorded at the cost to acquire the interest and any distributions received are recorded as income. All investments are subject to our impairment review policy.
As discussed in NOTE 8 Related Party Transactions and NOTE 7 Investment in Unconsolidated Entity Entities to the consolidated financial statements, the Company has a cost investment in a related party. The Company has entered into numerous agreements with the related party that required analysis of ASC 810-10 to determine that the Company was not the primary beneficiary. This analysis required judgment and review of the facts and circumstance to determine the proper accounting for this cost method investment. We also reviewed the impairment guidance to determine any potential impairment of the investment.
The current investment in unconsolidated entities accounted for under the equity method consists of a 6.28% in interest in OML, with an opportunity to purchase up to 40% of OML in the 18 months following the initial acquisition. We determined that the Company has a significant influence over OML’s operation due to the agreements to purchase additional interests in OML and the services we provide to OML which require our involvement in the decisions made over OML’s operations. The initial value of an investment in an unconsolidated affiliate accounted for under the equity method is recorded at the fair value of the consideration paid. As part of this acquisition, we entered into the OML Put Option to acquire additional interest in OML, which was determined to be an obligation to issue a variable number of shares that is predominantly based on variations in something other than the fair value of the company’s equity shares, within the scope of ASC 480. As such, the OML Put Option is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The OML Put Option valuation was based on the exercise period of the equity exchange agreement, share price and volatility.
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 and therefore we do not disclose segment information.
Contractual Obligations
At December 31, 2023, except as disclosed in NOTE 18 Commitments and Contingencies regarding our office lease and NOTE 13 Sale-Leaseback Financing Obligations, the Company did not have any other contractual obligations that extended beyond 12 months.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. We do not believe we have material market risk exposure and have not entered into any market risk sensitive instruments to mitigate these risks or for trading or speculative purposes.
We currently do not have any debt obligations with variable interest rates.
ITEM 8. FINANCIAL STATEMENTS
The information required by this item appears beginning on page 36.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
33
ITEM 9A. CONTROLS AND PROCEDURES
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
Due to the material weakness described below with respect to our internal control over financial reporting relating to the appropriate review of accounting positions for certain significant transactions, management has concluded that our internal control over financial reporting was not effective as of December 31, 2023.
Disclosure Controls and Procedures
Disclosure controls are procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Comprehensive Form 10-K, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and principal financial officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our CEO, who is currently also acting as our CFO for this purpose, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of December 31, 2023, as the result of the material weakness in our internal control over financial reporting discussed below, which is currently being remediated.
Notwithstanding the material weaknesses, management believes the consolidated financial statements included in this Comprehensive Form 10-K present fairly, in all material respects, the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report in conformity with US GAAP.
Material Weakness in Internal Control over Financial Reporting
In early 2023, we transitioned from an outdated enterprise resource planning (“ERP”) system and, as a result, we are not able to access and to provide evidence of the existence of appropriate user roles, controls and review for the year ended December 31, 2022, under our old ERP system in conjunction with the Restatement of our 2022 consolidated financial statements. This deficiency was remediated in 2023 by our transition to a new ERP system.
In connection with our evaluation for the year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting for the years ended December 31, 2023 and 2022, relating to the appropriate review of accounting positions for certain significant transactions. Specifically, (a) the Company does not have sufficient resources with the adequate technical skills to identify and evaluate specific accounting positions and conclusions, and (b) the Company has inadequate processes and controls to ensure appropriate level of precision of review related to our financial statement footnote disclosures.
The material weakness resulted in a material misstatement in our financial statements or disclosures as set forth in this Comprehensive Form 10-K, and restatements were required of our previously released interim and audited consolidated financial statements.
Remediation Efforts to Address Material Weakness
Management is committed to maintaining a strong internal control environment. In response to the identified material weakness in internal control over financial reporting, management, with the oversight of the Audit Committee of the Board of Directors, has taken actions to remediate the material weakness in internal control over financial reporting by (a) engaging experienced personnel with responsibility for monitoring the performance of controls by control owners, (b) commencing an evaluation of the skills and experience of our existing personnel with respect to public company experience and appropriate level of expertise in the respective areas of accounting, SEC financial reporting and associated internal controls commensurate with the type, volume and complexity of our accounting operations, transactions and reporting requirements, and (c) engaging accounting advisory consultants to provide additional depth and breadth in our technical accounting, which we will continue to utilize as appropriate until we have ensured that our personnel have the appropriate expertise and experience or to supplement the expertise of our personnel. In addition, we have reinforced the importance of adherence to Company policies regarding control performance and related documentation with control owners, identified training and resource needs for control owners, and developed monitoring activities to validate the performance of controls by control owners.
34
The Company anticipates the actions described above and resulting improvements in controls will strengthen the Company’s processes, procedures and controls related to management’s review of accounting positions for our transactions and will address the related material weakness. However, the material weakness cannot be considered remediated until the applicable control has operated for a sufficient period of time, and management has concluded, through testing, that the control is operating effectively.
Changes in Internal Control over Financial Reporting
Other than the remediation of the material weakness in internal control relating to information technology described above, the material weakness in internal control over financial reporting described above, and the ongoing remediation of such material weakness, there were no changes during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning Directors and Executive Officers is hereby incorporated by reference to the information under the headings “Election of Directors” and “Executive Officers and Directors of the Company” in the Company’s Proxy Statement (the “Proxy Statement”) for the Annual Meeting of Stockholders to be held on June 10, 2024.
The Company has adopted a Code of Ethics that applies to all of its employees, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Ethics and all committee charters are posted on the Company’s website (www.odysseymarine.com). We will provide a copy of any of these documents to stockholders free of charge upon request to the Company.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference to the information under the heading “Executive Compensation and Related Information” in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A portion of the information required by this Item pursuant to Item 403 of Regulation S-K is hereby incorporated by reference to the information under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement. The information required pursuant to Item 201(d) of Regulation S-K is hereby incorporated by reference to the information under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is hereby incorporated by reference to the information under the heading “Certain Relationships and Related Transactions” in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is hereby incorporated by reference to the information under the heading “Independent Public Accounting Firm’s Fees” in the Proxy Statement.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Comprehensive Form 10-K:
| 1. | Consolidated Financial Statements
See “Index to Consolidated Financial Statements” on page 40. | |||
| All other schedules have been omitted because the required information is not significant or is included in the financial statements or notes thereto, or is not applicable. | ||||
| 2. | Exhibits | |||
| The Exhibits listed in the Exhibits Index, which appears immediately following the signature page and is incorporated herein by reference, are filed as part of this Comprehensive Form 10-K. | ||||
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38 |
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| Consolidated Financial Statements: |
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• |
We evaluated the Company’s accounting memoranda and other documentation, including application of the relevant accounting guidance. |
• |
We compared the underlying terms of the International Claims Enforcement Agreement to management’s accounting memoranda and independently interpreted and applied the accounting literature to the transaction. |
• |
We evaluated the reasonableness of management’s assessment of probabilities of outcomes by reviewing publicly available information, discussions with management and legal counsel regarding the status of the case and comparing the model to the legal terms of the agreement. We inspected minutes of the meetings of the Board of Directors and committees of the Board of Directors to search for any contradictory evidence which may indicate that the probabilities used by management might not be appropriate. |
• |
With the assistance of our valuation specialists, we evaluated the appropriateness of the model used in determining the fair value of litigation financing derivative liability. We also performed an independent valuation of the discount rate from external market data and compared it to the discount rate management used in the model. |
• |
We evaluated the Company’s accounting memoranda and other documentation, including application of the relevant accounting guidance. |
• |
We compared the underlying terms of the OML Purchase Agreement to the Company’s accounting memoranda and with the assistance of our internal subject matter expert, independently interpreted the application of the accounting literature to the transaction. |
• |
We evaluated management’s analysis of significant activities of the VIE and which variable interest holder has the power to direct such activities. In our evaluation, we considered the purpose and design of the entity, the composition of the board of directors and other legal rights of the parties, including the significance of the decision making rights of each party in assessing which party has the power to direct the activities that most significantly affect the performance of the VIE, as well as the substance of the arrangements. |
• |
We evaluated management’s analysis of significant activities of the VIE and which variable interest holder has the power to direct such activities. In our evaluation, we considered the purpose and design of the entity, the composition of the board of directors and other legal rights of the parties, including the significance of the decision making rights of each party in assessing which party has the power to direct the activities that most significantly affect the performance of the VIE, as well as the substance of the arrangements. |
• |
We compared the rights of each party to underlying executed legal documents and discussed with management the purpose and design of the VIE. |
• |
We evaluated the Company’s accounting memoranda and other documentation, including application of the relevant accounting guidance. |
December 31, 2023 |
December 31, 2022 (As Restated) |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts and other related party receivables |
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Short-term notes receivable from related party |
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Other current assets |
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Total current assets |
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NON-CURRENT ASSETS |
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Investment in unconsolidated entities |
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Option to purchase equity securities in related parties |
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Bismarck exploration license |
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Property and equipment, net |
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Right of use - operating leases |
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Other non-current assets |
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Total non-current assets |
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Total assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable |
$ | $ | ||||||
Accrued expenses |
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Operating lease liability, current portion |
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Forward contract liability |
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Put option liability |
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Loans payable, current portion |
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Total current liabilities |
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LONG-TERM LIABILITIES |
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Loans payable |
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Warrant liabilities |
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Litigation financing and other |
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Deferred contract liability |
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Operating lease liability |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies (NOTE 18) |
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STOCKHOLDERS’ DEFICIT |
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Preferred stock - $ |
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Common stock – $ |
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Additional paid-in capital |
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Accumulated deficit |
( |
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Total stockholders’ deficit before non-controlling interest |
( |
) | ( |
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Non-controlling interest |
( |
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Total stockholders’ deficit |
( |
) | ( |
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Total liabilities and stockholders’ deficit |
$ | $ | ||||||
Year ended December 31, 2023 |
Year ended December 31, 2022 (As Restated) |
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| REVENUE |
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| Marine services |
$ | $ | ||||||
| Other services |
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| OPERATING EXPENSES |
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| LOSS FROM OPERATIONS |
( |
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| OTHER INCOME (EXPENSE) |
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| Interest income |
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| Interest expense |
( |
) | ( |
) | ||||
| Loss on equity method investment |
( |
) | — | |||||
| Gain on Cuota Appreciation Rights extinguishment |
— | |||||||
| Gain on debt extinguishment |
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| Change in derivative liabilities fair value |
( |
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| Other |
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|
|
|||||
| Total other income (expense) |
( |
) | ||||||
| |
|
|
|
|||||
| (LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ||||
| Income tax benefit |
||||||||
| |
|
|
|
|||||
| NET (LOSS) |
( |
) | ( |
) | ||||
| Net loss attributable to noncontrolling interest |
||||||||
| |
|
|
|
|||||
| NET INCOME / (LOSS) attributable to Odyssey Marine Exploration, Inc. |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| NET INCOME / (LOSS) PER SHARE |
||||||||
| Basic |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Diluted |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Weighted average number of common shares outstanding |
||||||||
| Basic |
||||||||
| |
|
|
|
|||||
| Diluted |
||||||||
| |
|
|
|
|||||
Preferred Stock – Shares |
Common Stock – Shares |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Non- controlling Interest |
Total |
|||||||||||||||||||||||||
| Year Ended December 31, 2021 (As Reported) |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative effect of change of Restatement |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance as of January 1, 2022 (As Restated) |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Common stock issued for cash |
— | — | — | — | ||||||||||||||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Director compensation settled with equity |
— | |
|
|
— | |||||||||||||||||||||||||||
| Cancellation of stock awards for payment of withholding tax requirements |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Prior years accrued incentives settled with stock options |
— | — | — | — | ||||||||||||||||||||||||||||
| Net (loss) |
— | — | — | — | — | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Year Ended December 31, 2022 (As Restated) |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | |
|
| |||||||||||||||||||||||
| Director compensation paid with share-based instruments |
|
|
|
— | |
|
|
|
|
| ||||||||||||||||||||||
| Cancellation of stock awards for payment of withholding tax requirements |
— | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Common stock issued for debt extinguishment |
— | — | — | — | ||||||||||||||||||||||||||||
| Fair value of warrants issued |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Common stock issued for warrants exercised |
— | — | — | — | ||||||||||||||||||||||||||||
| Common stock issued for convertible debt conversion |
— | — | — | |||||||||||||||||||||||||||||
| Common stock issued for options exercised |
— | — | — | |||||||||||||||||||||||||||||
| Net income (loss) |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Year Ended December 31, 2023 |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Year ended December 31, 2023 |
Year ended December 31, 2022 (As Restated) |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net (Loss) |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Services provided to unconsolidated entity |
( |
) | ( |
) | ||||
| Depreciation |
||||||||
| Financing fees amortization |
||||||||
| Amortization of finance liability |
||||||||
| Amortization of loan prepayment premium |
||||||||
| Note payable interest accretion |
||||||||
| Note payable interest paid in kind |
||||||||
| Note receivable interest accretion |
( |
) | ( |
) | ||||
| Right of use asset amortization |
||||||||
| Share-based compensation |
||||||||
| Director compensation settled with equity |
||||||||
| Amortization of deferred discount |
||||||||
| Loss on equity method investment |
||||||||
| Gain on debt extinguishment |
( |
) | ||||||
| Gain on sale of equipment |
( |
) | ||||||
| Change in derivatives liabilities fair value |
||||||||
| (Increase) decrease in: |
||||||||
| Accounts and other related party receivables |
( |
) | ( |
) | ||||
| Short-term notes receivable related party |
( |
) | ||||||
| Change in operating lease liability |
( |
) | ( |
) | ||||
| Other assets |
( |
) | ||||||
| Accounts payable |
( |
) | ||||||
| Accrued expenses and other |
||||||||
| |
|
|
|
|||||
| NET CASH (USED IN) OPERATING ACTIVITIES |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Proceeds from sale of equipment |
||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Cash paid for investment in unconsolidated entity |
( |
) | ||||||
| Repayment of loan from related party |
||||||||
| Advance to related party |
( |
) | ||||||
| |
|
|
|
|||||
| NET CASH (USED IN) BY INVESTING ACTIVITIES |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
Year ended December 31, 2023 |
Year ended December 31, 2022 (As Restated) |
|||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from issuance of loans payable |
||||||||
| Proceeds from loans |
||||||||
| Payment of debt obligation |
( |
) | ( |
) | ||||
| Cancellations of stock awards for payment of withholding tax requirements |
( |
) | ( |
) | ||||
| Proceeds from sale leaseback financing, net |
||||||||
| Payment on sale leaseback financing |
( |
) | ||||||
| Offering cost paid on sale of common stock |
( |
) | ||||||
| Proceeds from issuance of common stock |
||||||||
| Financing offering costs |
( |
) | ||||||
| Proceeds from warrants exercised |
||||||||
| |
|
|
|
|||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||||||
| |
|
|
|
|||||
| NET INCREASE (DECREASE) IN CASH |
( |
) | ||||||
| CASH AT BEGINNING OF YEAR |
||||||||
| |
|
|
|
|||||
| CASH AT END OF YEAR |
$ | $ | ||||||
| |
|
|
|
|||||
Year ended December 31, 2023 |
Year ended December 31, 2022 (As Restated) |
|||||||
| SUPPLEMENTARY INFORMATION: |
||||||||
| Interest paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
| Prior year director compensation settled with equity |
$ | $ | ||||||
| Accrued expenses converted to equity |
$ | $ | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
||||||||
| Fair value of liability warrants issued |
$ | $ | ||||||
| Debt extinguished and paid in common stock |
$ | $ | ||||||
| Conversion of debt to common stock |
$ | $ | ||||||
| Non-cash contribution of investment in Odyssey Retriever, Inc. |
$ | $ | ||||||
| Put option liability |
$ | $ | ||||||
| Capital expenditures financed |
$ | $ | ||||||
| Capital expenditures included in accounts payable |
$ | $ | ||||||
| Conversion of accounts receivable to note receivable |
$ | $ | ||||||
| • | Monaco Note Payable Adjustmen |
| • | Capitalization of ROV Expense adjustment |
Consolidated Balance Sheet As of December 31, 2022 |
||||||||||||||||||||||||
Corrected Consolidated Balance Sheet |
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||||
| ASSETS |
||||||||||||||||||||||||
| Investment in unconsolidated entities |
( |
) | ||||||||||||||||||||||
| Option to purchase equity securities in related parties |
||||||||||||||||||||||||
| Property and equipment, net |
||||||||||||||||||||||||
| Total assets |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||||||
| Accounts payable |
$ | $ | $ | $ | $ | |||||||||||||||||||
| Accrued expenses |
( |
) | ( |
) | ||||||||||||||||||||
| Loans payable |
( |
) | ||||||||||||||||||||||
| Litigation financing and other |
||||||||||||||||||||||||
| Deferred revenue |
||||||||||||||||||||||||
| Warrant liability |
||||||||||||||||||||||||
| Total liabilities |
( |
) | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Commitments and contingencies (Note 18) |
||||||||||||||||||||||||
| STOCKHOLDERS’ DEFICIT |
— | — | — | — | ||||||||||||||||||||
| Additional paid-in capital |
( |
) | ||||||||||||||||||||||
| Accumulated deficit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities and stockholders’ deficit |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Consolidated Statement of Operations For the Twelve Months Ended December 31, 2022 |
||||||||||||||||||||
Corrected Consolidated Statements of Operations |
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
|||||||||||||||
| Marketing, general and administrative |
( |
) | ||||||||||||||||||
| Operations and research |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Total operating expenses |
( |
) | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| INCOME (LOSS) FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ||||||||||||||
| OTHER INCOME (EXPENSE) |
||||||||||||||||||||
| Interest expense |
( |
) | ( |
) | ||||||||||||||||
| Change in derivative liabilities fair value |
( |
) | ( |
) | ( |
) | ||||||||||||||
| Total other income (expense) |
( |
) | ( |
) | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME / (LOSS) |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
| Basic (See Note 2) |
$ | ( |
) | ( |
) | $ | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Diluted (See Note 2) |
$ | ( |
) | ( |
) | $ | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Weighted average number of common shares outstanding |
||||||||||||||||||||
| Basic |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Diluted |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Consolidated Statements Changes in Stockholders’ Equity |
Preferred Stock – Shares |
Common Stock – Shares |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling Interest |
Total |
||||||||||||||||||||||||
| Balance at December 31, 2022 (As previously reported) |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
||||||||||||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
( |
) | ( |
) | ||||||||||||||||||||||||||||
| 2022 Warrant Adjustment |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Other Adjustment |
( |
) | ||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at December 31, 2022 (As Restated) |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
For the Twelve Months Ended December 31, 2022 |
||||||||||||||||||||
Corrected Consolidated Statements of Cash Flows |
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
|||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
| Net loss before non-controlling interest |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
| Change in derivatives liabilities fair value |
||||||||||||||||||||
| Accrued expenses and other |
( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ( |
) | ||||||||||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) | ( |
) | ( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
| Offering cost paid on financing |
||||||||||||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCREASE (DECREASE) IN CASH |
( |
) | ( |
) | ||||||||||||||||
| CASH AT BEGINNING OF YEAR |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH AT END OF YEAR |
$ | $ | $ | $ | $ | |||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
Average market price during the period |
$ | $ | ||||||
Option awards |
||||||||
Unvested restricted stock awards |
||||||||
Convertible notes |
||||||||
Put Option Liability |
||||||||
Common Stock Warrant |
||||||||
Year ended December 31, 2023 |
Year ended December 31, 2022 (As Restated) |
|||||||
| Net income (loss) attributable to Odyssey Marine Exploration, Inc. |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Numerator: |
||||||||
| Basic net income (loss) |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Diluted net income (loss) available to stockholders |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Denominator: |
||||||||
| Weighted average common shares outstanding – Basic |
||||||||
| Dilutive effect of options |
— | |||||||
| Dilutive effect of warrants |
— | |||||||
| Dilutive effect of other convertible securities |
— | |||||||
| |
|
|
|
|||||
| Weighted average common shares outstanding – Diluted |
||||||||
| |
|
|
|
|||||
| Net (loss) income per share – basic |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Net (loss) income per share – diluted |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
December 31, 2023 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total Balance |
|||||||||||||
| Liabilities: |
||||||||||||||||
| 37N Note embedded derivative |
$ | $ | $ | $ | ||||||||||||
| Put option liability |
||||||||||||||||
| Litigation financing |
||||||||||||||||
| Warrant liabilities issued with debt (December 2023 Warrants) |
||||||||||||||||
| Warrant liabilities issued with equity (2022 Warrants) |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total of fair valued l iabilities |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
December 31, 2022 (As Restated) |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total Balance |
|||||||||||||
| Liabilities: |
||||||||||||||||
| Warrant liabilities issued with equity (2022 Warrants) |
$ | $ | $ | $ | ||||||||||||
| Litigation Financing |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total of fair valued l iabilities |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
37N Note embedded derivative |
Put option liability |
Litigation financing |
Warrant liabilities issued with debt (December 2023 warrants) |
Warrant liabilities issued with equity (2022 warrants) |
Total |
|||||||||||||||||||
| Balance as of January 1, 2022 (As Restated) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Change in fair value |
||||||||||||||||||||||||
| Issuance of new instrument |
||||||||||||||||||||||||
| Issuance of new funding |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Year ended December 31, 2022 (As Restated) |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Change in fair value |
( |
) | ||||||||||||||||||||||
| Issuance of new instrument |
||||||||||||||||||||||||
| Issuance of new funding |
||||||||||||||||||||||||
| Warrants exercised |
( |
) | ( |
) | ||||||||||||||||||||
| Debt conversion to equity |
( |
) | ( |
) | ||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Year ended December 31, 2023 |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| • | The lease term – The lease term is the period of the lease not cancellable by us, together with periods covered by: (i) renewal options we are reasonably certain to exercise or that are controlled by the lessor and (ii) termination options we are reasonably certain not to exercise. |
| • | The present value of lease payments is calculated based on: |
| - | Lease payments – Lease payments include certain fixed and variable payments, less lease incentives, together with amounts probable of being owed by us under residual value guarantees and, if reasonably certain of being paid, the cost of certain renewal options and early termination penalties set forth in the lease arrangement. Lease payments exclude consideration that is: (i) not related to the transfer of goods and services to us and (ii) allocated to the non-lease components in a lease arrangement, except for the classes of assets where we have elected to not separate lease and non-lease components. |
| - | Discount rate – The discount rate must be determined based on information available to us upon the commencement of a lease. Lessees are required to use the rate implicit in the lease whenever such rate is readily available; however, if the implicit rate a lease is not readily determinable, we would use the hypothetical incremental borrowing rate we would have to pay to borrow an amount equal to the lease payments, on a collateralized basis, over a timeframe similar to the lease term. |
| • | Lease classification – In making the determination of whether a lease is an operating lease or a finance lease, we consider the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors, including the lessee’s and lessor’s rights, obligations and economic incentives over the term of the lease. |
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| Related party (see Note 8) |
$ | $ | ||||||
| Other |
||||||||
| |
|
|
|
|||||
| Total accounts and other related party receivables |
$ | $ | ||||||
| |
|
|
|
|||||
December 31, 2023 |
December 31, 2022 (Restated) |
|||||||
| Related party (see Note 8) |
$ | $ | ||||||
| |
|
|
|
|||||
| Short-term notes receivable |
$ | $ | ||||||
| |
|
|
|
|||||
December 31, 2023 |
December 31, 2022 (Restated) |
|||||||
| CIC Limited |
$ | $ | ||||||
| Chatham Rock Phosphate, Limited |
||||||||
| Neptune Minerals, Inc. |
||||||||
| Ocean Minerals, LLC |
||||||||
| |
|
|
|
|||||
| Investment in unconsolidated entities |
$ | $ | ||||||
| |
|
|
|
|||||
| • | We account for the investments we make in certain legal entities in which equity investors do not have (1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, or (2) as a group, the holders of the equity investment at risk do not have either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance, or (3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. This type of legal entity is referred to as a VIE. |
| • | We would consolidate the results of any such entity in which we determined we had a controlling financial interest. We would have a “controlling financial interest” in such an entity if we had both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, we reassess whether we have a controlling financial interest in our investments in these legal entities. |
| • | We determine whether any of the entities in which we have made investments is a VIE at the start of each new venture and if a reconsideration event has occurred. At such times, we also consider whether we must consolidate a VIE and/or disclose information about our involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. |
| (1) | The Initial Closing – The Company purchased |
| (2) | The Second Closing – The Company agreed to purchase |
| (3) | The Third Closing – The Company agreed to purchase |
| (4) | Optional Units – The Company has the option to purchase up to additional on December 31, 2023. Optional Units are within the scope of ASC 321, and would therefore be initially recognized at cost as part of the initial consideration transferred, and thereafter will be accounted for under the measurement alternative at cost with adjustments related to impairment and observable market conditions. If the Company does not purchase all the Optional Units prior to the eighteen-month anniversary, the Company may purchase any of such unpurchased Optional Units at the higher price of (i) a discount of |
| Cash consideration |
$ | |||
| Fair value of Odyssey Retriever, Inc. |
||||
| Fair value of the Second Closing |
||||
| Fair value of the Third Closing |
||||
| Fair value of the Equity Exchange Agreement |
||||
| Transaction costs |
||||
| |
|
|||
| Initial closing consideration |
$ | |||
| |
|
| • | FourWorld purchased a portion of the March 2023 Note in the principal amount of $ |
| • | Two Seas purchased a portion of the March 2023 Note in the principal amount of $ |
| • | Greywolf purchased a portion of the March 2023 Note in the principal amount of $ |
| • | FourWorld purchased a December 2023 Note in the principal amount of $ |
| • | Two Seas funds purchased a December 2023 Note in the principal amount of $ |
| • | Greywolf purchased a December 2023 Note in the principal amount of $ |
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| Prepaid insurance |
$ | $ | ||||||
| Other prepaid assets |
||||||||
| Deposits |
||||||||
| |
|
|
|
|||||
| Total other current assets |
$ | $ | ||||||
| |
|
|
|
|||||
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| Computers and peripherals |
$ | $ | ||||||
| Furniture and office equipment |
||||||||
| Marine equipment |
||||||||
| |
|
|
|
|||||
| Less: Accumulated depreciation |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Property and equipment, net |
$ | $ | ||||||
| |
|
|
|
|||||
| Depreciation expense for the years ended |
$ | $ | ||||||
| |
|
|
|
|||||
Loans Payable |
||||||||
December 31, 2023 |
December 31, 2022 (Restated) |
|||||||
| MINOSA 1 |
$ | $ | ||||||
| MINOSA 2 |
||||||||
| March 2023 Note |
||||||||
| December 2023 Note |
||||||||
| Emergency Injury Disaster Loan |
||||||||
| Vendor note payable |
||||||||
| Seller Note payable |
||||||||
| AFCO Insurance note payable |
||||||||
| Pignatelli note |
||||||||
| 37N Note |
||||||||
| Finance liability (NOTE 13) |
||||||||
| |
|
|
|
|||||
| Total Loans payable |
||||||||
| Less: Unamortized deferred lender fee |
( |
) | ||||||
| Less: Unamortized deferred discount |
( |
) | ||||||
| |
|
|
|
|||||
| Total Loans payable, net |
||||||||
| Less: Current portion of loans payable |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Loans payable - long term |
$ | $ | ||||||
| |
|
|
|
|||||
| • | Odyssey paid AHMSA $ |
| • | the parties agreed that, concurrently with the payment of the Termination Payment, a portion of the Minosa Notes would be deemed automatically converted into |
| • | the Minosa Notes, the Stock Purchase Agreement, and the Pledge Agreements were terminated; |
| • | each of the AHMSA Parties, on the one hand, and Odyssey, on the other, agreed to release the other parties and their respective affiliates, equity holders, beneficiaries, successors and assigns (the “Released Parties”) from any and all claims, demands, damages, actions, causes of action or liabilities of any kind or nature whatsoever under the SPA, the Minosa Notes, the Minosa Purchase Agreement, or the Pledge Agreements (the “Released Matters”); and |
| • | each of the AHMSA Parties, on the one hand, and Odyssey, on the other, agreed not to make any claims against any of the Released Parties related to the Released Matters. |
| • | On January 31, 2020, the Claimholder and the Funder entered into an Amended and Restated International Claims Enforcement Agreement (the “Restated Agreement”). The material terms and provisions that were amended or otherwise modified are as follows: |
| • | The Funder agreed to provide up to $ |
| • | A closing fee of $ |
| • | Warrants to purchase our common stock were issued that are exercisable for a period of five years beginning on the earlier of (a) the date on which the Claimholder ceases the Subject Claim for any reason other than a full and final arbitral award against the Claimholder or a full and final monetary settlement of the claims or (b) the date on which Proceeds are received and deposited into escrow. The exercise price per share is $ |
| • | All other terms in the Restated Agreement are substantially the same as in the original Agreement. |
| Issue Date |
Exercise Price | Total Warrants Outstanding |
Exercisable Warrants Outstanding |
Expiration Date | ||||||||||||
| 6/10/2022 |
$ | |||||||||||||||
| 3/6/2023 |
$ | |||||||||||||||
| Various 2020 |
$ | ** |
||||||||||||||
| 12/1/2023 |
$ | |||||||||||||||
| 8/25/2020 |
$ | |||||||||||||||
| 7/19/2019 |
$ | |||||||||||||||
| 12/1/2023 |
$ | |||||||||||||||
| |
|
|
|
|||||||||||||
| |
|
|
|
|||||||||||||
| ** | A five-year exercise period commences upon the earliest occurrence of either Trigger Date A or Trigger Date B. Trigger Date A is the date on which the Claimholder ceases the Subject Claim for any reason other than (i) a full and final arbitral award against the Claimholder or (ii) a full and final monetary settlement of the claim, see Note 12 Fair Value Financial Instruments – Litigation Financing. Trigger Date B is the date on which Proceeds are deposited into the Escrow Account. |
| Issue Date |
Stock price | Exercise price | Term in years | Volitility | Treasury Yield | |||||||||||||
| 6/10/2022 |
$ | $ | % | |||||||||||||||
| 3/6/2023 |
$ | $ | % | |||||||||||||||
| 12/1/2023 |
$ | $ | % | |||||||||||||||
| 12/1/2023 |
$ | $ | % | |||||||||||||||
| Issue Date |
Stock price | Exercise price | Term in years | Volitility | Treasury Yield | |||||||||||||
| 6/29/2023 |
$ | $ | % | % | ||||||||||||||
| 6/4/2023 |
$ | $ | % | % | ||||||||||||||
Year ending December 31, |
Annual payment obligation |
|||
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
| $ | ||||
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
Compensation and incentives |
$ | $ | ||||||
Professional services |
||||||||
Deposit |
||||||||
Interest |
||||||||
Exploration license fees |
||||||||
Other |
||||||||
Total accrued expenses |
$ | $ | ||||||
Issue Date |
December 31, 2023 |
December 31, 2022 |
Exercise Price |
Termination Date |
||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ** | |||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| $ | ||||||||||||||||
| ** | A five-year term commences upon the earliest occurrence of either Trigger Date A or Trigger Date B. Trigger Date A is the date on which the Claimholder ceases the Subject Claim for any reason other than (i) a full and final arbitral award against the Claimholder or (ii) a full and final monetary settlement of the claim, see NOTE 12 Fair Value Financial Instruments – Litigation Financing. Trigger Date B is the date on which Proceeds are deposited into the Escrow Account. |
Convertible Preferred Stock |
Shares |
Price Per Share |
Total Investment |
|||||||||
SeriesAA-1 |
$ | $ | ||||||||||
SeriesAA-2 |
$ | |||||||||||
| $ | ||||||||||||
November 15, 2023 |
August 7, 2023 |
June 9, 2023 |
May 24, 2023 |
December 9, 2022 |
||||||||||||||||
Risk free interest rate |
% | % | % | % | % | |||||||||||||||
Expected life |
||||||||||||||||||||
Expected volatility |
% | % | % | % | % | |||||||||||||||
Expected dividend yield |
— | — | — | — | — | |||||||||||||||
Grant-date fair value |
||||||||||||||||||||
December 8, 2022 |
||||
Risk free interest rate |
% | |||
Expected life |
||||
Expected volatility |
% | |||
Expected dividend yield |
— | |||
Grant-date fair value |
||||
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Life |
||||||||||
Outstanding at December 31, 2021 |
$ | |||||||||||
Granted |
$ | |||||||||||
Exercised |
$ | |||||||||||
Cancelled |
$ | |||||||||||
Outstanding at December 31, 2022 |
$ | |||||||||||
Granted |
$ | |||||||||||
Exercised |
( |
) | ||||||||||
Cancelled |
( |
) | ||||||||||
Outstanding at December 31, 2023 |
$ | |||||||||||
Options exercisable at December 31, 2021 |
$ | |||||||||||
Options exercisable at December 31, 2022 |
$ | |||||||||||
Options exercisable at December 31, 2023 |
$ | |||||||||||
Stock Options Outstanding |
||||||||||||
Range of Exercise Prices |
Number of Shares Outstanding |
Weighted Average Remaining Contractual Life in Years |
Weighted Average Exercise Price |
|||||||||
$ |
$ | |||||||||||
$ |
$ | |||||||||||
| $ | ||||||||||||
Number of Shares |
Weighted Average Grant Date Fair Value |
|||||||
Unvested at December 31, 2022 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Cancelled |
( |
) | ||||||
Unvested at December 31, 2023 |
$ | |||||||
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| Current |
||||||||
| Federal |
$ | $ | ||||||
| State |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
| Deferred |
||||||||
| Federal |
$ | $ | ||||||
| State |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
December 31, 2023 |
December 31, 2022 (As Restated) |
|||||||
| Deferred tax assets: |
||||||||
| Net operating loss and tax credit carryforwards |
$ | $ | ||||||
| Start-up costs |
||||||||
| Excess of book over tax depreciation |
||||||||
| Stock option and restricted stock award expense |
||||||||
| Debt Extinguishment |
||||||||
| Less: valuation allowance |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
| Deferred tax liability: |
||||||||
| Property and equipment basis |
$ | $ | ||||||
| Prepaid expenses |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
| Net deferred tax asset |
$ | $ | ||||||
| |
|
|
|
|||||
| December 31, 2023 |
$ | |||
| December 31, 2022 |
||||
| |
|
|||
| Change in valuation allowance |
$ | ( |
) | |
| |
|
December 31, 2023 |
December 31, 2022 (Restated) |
|||||||
| Expected (benefit) |
$ | $ | ( |
) | ||||
| Effects of: |
||||||||
| State income taxes net of federal benefits |
( |
) | ||||||
| Nondeductible expense |
||||||||
| Subpart F income |
||||||||
| Equity method investment |
||||||||
| Derivatives fair value |
||||||||
| Change in valuation allowance |
( |
) | ||||||
| Foreign rate differential |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
Year ending December 31, |
Annual payment obligation |
|||
2024 |
$ | |||
| $ | ||||
| • | the tribunal in the pending arbitration issues a decision in favor of and a monetary award to Odyssey and/or ExO (an “Arbitration Award”); or (b) Odyssey enters into an agreement pursuant to which Odyssey is entitled to receive a monetary payment (a “Settlement”) relating to ExO or its mineral licenses; and |
| • | Odyssey receives cash payments from any combination of (a) a dividend or distribution resulting from an Arbitration Award or Settlement based on its indirect ownership interest in ExO; (b) an Award or Settlement, or any agreement to monetize an Award; or (c) repayment of certain promissory notes issued by or relating to ExO; and |
| • | the aggregate net cash payments received by Odyssey, after payment of or reservation of cash for all legal and other expenses, including litigation financing for the Arbitration, and all of ExO’s outstanding liabilities, equal at least $ |
Consolidated Balance Sheet As of March 31, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
Other Adjustments |
As Restated |
||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Accounts and other related party receivables |
— | — | — | |||||||||||||||||
Short-term notes receivable related party |
— | — | — | — | — | |||||||||||||||
Other current assets |
— | — | — | |||||||||||||||||
Total current assets |
— | — | — | |||||||||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||||||||||
Investment in unconsolidated entities |
— | ( |
) | — | ||||||||||||||||
Option to purchase equity securities in related parties |
— | — | ||||||||||||||||||
Exploration license |
— | — | — | |||||||||||||||||
Property and equipment, net |
— | — | — | |||||||||||||||||
Right of use - operating leases |
— | — | — | |||||||||||||||||
Other non-current assets |
— | — | — | |||||||||||||||||
Total non-current assets |
— | — | ||||||||||||||||||
Total assets |
$ | $ | — | $ | $ | — | $ | |||||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||
Accounts payable |
$ | $ | $ | — | $ | — | $ | |||||||||||||
Accrued expenses |
( |
) | — | |||||||||||||||||
Operating lease liability, current portion |
— | — | — | |||||||||||||||||
Loans payable, current portion |
— | — | ||||||||||||||||||
Total current liabilities |
( |
) | — | |||||||||||||||||
LONG-TERM LIABILITIES |
||||||||||||||||||||
Loans payable |
( |
) | — | — | ||||||||||||||||
Litigation financing and other |
— | — | — | |||||||||||||||||
Deferred revenue |
— | — | — | |||||||||||||||||
Operating lease liability |
— | — | — | |||||||||||||||||
Total long-term liabilities |
— | |||||||||||||||||||
Total liabilities |
||||||||||||||||||||
Commitments and contingencies (Note 18) |
||||||||||||||||||||
STOCKHOLDERS’ DEFICIT |
— | — | ||||||||||||||||||
Preferred stock - $ |
||||||||||||||||||||
Common stock – $ |
— | — | — | |||||||||||||||||
Additional paid-in capital |
— | — | ( |
) | ||||||||||||||||
Accumulated deficit |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Total stockholders’ deficit before non-controlling interest |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Non-controlling interest |
( |
) | — | — | — | ( |
) | |||||||||||||
Total stockholders’ deficit |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Total liabilities and stockholders’ deficit |
$ | $ | — | $ | $ | — | $ | |||||||||||||
Consolidated Balance Sheet As of June 30, 2022 |
||||||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | — | $ | ||||||||||||||
Accounts and other related party receivables |
— | — | — | — | ||||||||||||||||||||
Short-term notes receivable related party |
— | — | — | — | — | — | ||||||||||||||||||
Other current assets |
— | — | — | — | ||||||||||||||||||||
Total current assets |
— | — | — | — | ||||||||||||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||||||||||||||
Investment in unconsolidated entities |
— | ( |
) | — | — | |||||||||||||||||||
Option to purchase equity securities in related parties |
— | — | — | |||||||||||||||||||||
Exploration license |
— | — | — | — | ||||||||||||||||||||
Property and equipment, net |
— | — | — | — | ||||||||||||||||||||
Right of use - operating leases |
— | — | — | — | ||||||||||||||||||||
Other non-current assets |
— | — | — | — | ||||||||||||||||||||
Total non-current assets |
— | — | ||||||||||||||||||||||
Total assets |
$ | $ | — | $ | $ | $ | — | $ | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||||||
Accounts payable |
$ | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Accrued expenses |
( |
) | — | — | ||||||||||||||||||||
Operating lease liability, current portion |
— | — | — | — | ||||||||||||||||||||
Loans payable, current portion |
— | — | — | |||||||||||||||||||||
Total current liabilities |
( |
) | — | — | — | |||||||||||||||||||
LONG-TERM LIABILITIES |
||||||||||||||||||||||||
Loans payable |
( |
) | — | — | — | |||||||||||||||||||
Litigation financing and other |
— | — | — | |||||||||||||||||||||
Deferred revenue |
— | — | — | — | ||||||||||||||||||||
Warrant liability |
— | — | — | — | ||||||||||||||||||||
Operating lease liability |
— | — | — | — | ||||||||||||||||||||
Total long-term liabilities |
— | |||||||||||||||||||||||
Total liabilities |
— | |||||||||||||||||||||||
Commitments and contingencies (Note 18) |
||||||||||||||||||||||||
STOCKHOLDERS’ DEFICIT |
— | — | — | — | ||||||||||||||||||||
Preferred stock - $ |
— | |||||||||||||||||||||||
Common stock – $ |
— | — | — | — | ||||||||||||||||||||
Additional paid-in capital |
— | — | ( |
) | ( |
) | ||||||||||||||||||
Accumulated deficit |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
Total stockholders’ deficit before non-controlling interest |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||||
Non-controlling interest |
( |
) | — | — | — | — | ( |
) | ||||||||||||||||
Total stockholders’ deficit |
( |
) |
( |
) |
( |
) | ( |
) |
— | ( |
) | |||||||||||||
Total liabilities and stockholders’ deficit |
$ | $ | — | $ | $ | $ | — | $ | ||||||||||||||||
Consolidated Balance Sheet As of September 30, 2022 |
||||||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||||||
Cash and cash equivalents |
$ |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
||||||||||||||
Accounts and other related party receivables |
— |
— |
— |
— |
||||||||||||||||||||
Short-term notes receivable related party |
— |
— |
— |
— |
||||||||||||||||||||
Other current assets |
— |
— |
— |
— |
||||||||||||||||||||
Total current assets |
— |
— |
— |
— |
||||||||||||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||||||||||||||
Investment in unconsolidated entities |
— |
( |
) |
— |
— |
|||||||||||||||||||
Option to purchase equity securities in related parties |
— |
— |
||||||||||||||||||||||
Exploration license |
— |
— |
— |
— |
||||||||||||||||||||
Property and equipment, net |
— |
— |
— |
— |
||||||||||||||||||||
Right of use - operating leases |
— |
— |
— |
— |
||||||||||||||||||||
Other non-current assets |
— |
— |
— |
— |
||||||||||||||||||||
Total non-current assets |
— |
— |
||||||||||||||||||||||
Total assets |
$ |
$ |
— |
$ |
$ |
$ |
— |
$ |
||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||||||
Accounts payable |
$ |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||||
Accrued expenses |
( |
) |
— |
— |
||||||||||||||||||||
Operating lease liability, current portion |
— |
— |
— |
— |
||||||||||||||||||||
Loans payable, current portion |
— |
— |
— |
|||||||||||||||||||||
Total current liabilities |
( |
) |
— |
— |
— |
|||||||||||||||||||
LONG-TERM LIABILITIES |
||||||||||||||||||||||||
Loans payable |
( |
) |
— |
— |
— |
|||||||||||||||||||
Litigation financing and other |
— |
— |
— |
— |
||||||||||||||||||||
Deferred revenue |
— |
— |
— |
|||||||||||||||||||||
Warrant liability |
— |
— |
— |
— |
||||||||||||||||||||
Operating lease liability |
— |
— |
— |
— |
||||||||||||||||||||
Total long-term liabilities |
— |
|||||||||||||||||||||||
Total liabilities |
— |
|||||||||||||||||||||||
Commitments and contingencies (Note 18) |
||||||||||||||||||||||||
STOCKHOLDERS’ DEFICIT |
— |
— |
— |
— |
||||||||||||||||||||
Preferred stock - $. |
||||||||||||||||||||||||
Common stock – $. |
— |
— |
— |
— |
||||||||||||||||||||
Additional paid-in capital |
— |
— |
( |
) |
( |
) |
||||||||||||||||||
Accumulated deficit |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||
Total stockholders’ deficit before non-controlling interest |
( |
) |
( |
) |
( |
) |
( |
) |
— |
( |
) | |||||||||||||
Non-controlling interest |
( |
) |
— |
— |
— |
— |
( |
) | ||||||||||||||||
Total stockholders’ deficit |
( |
) |
( |
) |
( |
) |
( |
) |
— |
( |
) | |||||||||||||
Total liabilities and stockholders’ deficit |
$ |
$ |
— |
$ |
$ |
— |
$ |
— |
$ |
|||||||||||||||
Consolidated Balance Sheet As of March 31, 2023 |
||||||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | — | $ | ||||||||||||||
Accounts and other related party receivables |
— | — | — | — | ||||||||||||||||||||
Short-term notes receivable related party |
— | — | — | — | ||||||||||||||||||||
Other current assets |
— | — | — | ( |
) | |||||||||||||||||||
Total current assets |
— | — | — | ( |
) | |||||||||||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||||||||||||||
Investment in unconsolidated entities |
— | ( |
) | — | — | |||||||||||||||||||
Option to purchase equity securities in related parties |
— | — | — | |||||||||||||||||||||
Exploration license |
— | — | — | — | ||||||||||||||||||||
Property and equipment, net |
— | — | — | |||||||||||||||||||||
Right of use - operating leases |
— | — | — | — | ||||||||||||||||||||
Other non-current assets |
— | — | — | — | ||||||||||||||||||||
Total non-current assets |
— | |||||||||||||||||||||||
Total assets |
$ | $ | — | $ | $ | $ | $ | |||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||||||
Accounts payable |
$ | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Accrued expenses |
( |
) | — | — | ||||||||||||||||||||
Operating lease liability, current portion |
— | — | — | — | ||||||||||||||||||||
Loans payable, current portion |
— | — | — | ( |
) | |||||||||||||||||||
Total current liabilities |
( |
) | — | — | ( |
) | ||||||||||||||||||
LONG-TERM LIABILITIES |
||||||||||||||||||||||||
Loans payable |
( |
) | — | — | ||||||||||||||||||||
Litigation financing and other |
— | — | — | — | ||||||||||||||||||||
Deferred revenue |
— | — | — | |||||||||||||||||||||
Warrant liability |
— | — | — | — | ||||||||||||||||||||
Operating lease liability |
— | — | — | — | ||||||||||||||||||||
Total long-term liabilities |
||||||||||||||||||||||||
Total liabilities |
( |
) | — | |||||||||||||||||||||
Commitments and contingencies (Note 18) |
||||||||||||||||||||||||
STOCKHOLDERS’ DEFICIT |
— | — | — | — | ||||||||||||||||||||
Preferred stock - $ |
||||||||||||||||||||||||
Common stock – $ |
— | — | — | — | ||||||||||||||||||||
Additional paid-in capital |
— | ( |
) | ( |
) | |||||||||||||||||||
Accumulated deficit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Total stockholders’ deficit before non-controlling interest |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Non-controlling interest |
( |
) | — | — | — | — | ( |
) | ||||||||||||||||
Total stockholders’ deficit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Total liabilities and stockholders’ deficit |
$ | $ | — | $ | $ | $ | $ | |||||||||||||||||
Consolidated Balance Sheet As of June 30, 2023 |
||||||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
|||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
CURRENT ASSETS |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | — | $ | ||||||||||||||
Accounts and other related party receivables |
— | — | — | — | ||||||||||||||||||||
Short-term notes receivable related party |
— | — | — | — | ||||||||||||||||||||
Other current assets |
— | — | — | ( |
) | |||||||||||||||||||
Total current assets |
— | — | — | ( |
) | |||||||||||||||||||
OTHER NON-CURRENT ASSETS |
||||||||||||||||||||||||
Investment in unconsolidated entities |
— | ( |
) | — | — | |||||||||||||||||||
Equity securities |
— | — | — | |||||||||||||||||||||
Exploration license |
— | — | — | — | ||||||||||||||||||||
Property and equipment, net |
— | — | — | |||||||||||||||||||||
Right of use - operating leases |
— | — | — | — | ||||||||||||||||||||
Other non-current assets |
— | — | — | — | ||||||||||||||||||||
Total non-current assets |
||||||||||||||||||||||||
Total assets |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||||||||||||||||||
CURRENT LIABILITIES |
||||||||||||||||||||||||
Accounts payable |
$ | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
Accrued expenses |
( |
) | — | — | ||||||||||||||||||||
Operating lease liability, current portion |
— | — | — | |||||||||||||||||||||
Loans payable, current portion |
— | — | — | ( |
) | |||||||||||||||||||
Total current liabilities |
( |
) | — | — | ( |
) | ||||||||||||||||||
LONG-TERM LIABILITIES |
||||||||||||||||||||||||
Loans payable |
( |
) | — | — | — | |||||||||||||||||||
Litigation financing and other |
— | — | ||||||||||||||||||||||
Deferred revenue |
— | — | — | |||||||||||||||||||||
Warrant liability |
— | — | — | — | ||||||||||||||||||||
Operating lease liability |
— | — | — | — | ||||||||||||||||||||
Total long-term liabilities |
||||||||||||||||||||||||
Total liabilities |
( |
) | ( |
) | ||||||||||||||||||||
Commitments and contingencies (Note 18) |
||||||||||||||||||||||||
STOCKHOLDERS’ DEFICIT |
— | — | — | — | ||||||||||||||||||||
Preferred stock - $. |
||||||||||||||||||||||||
Common stock – $. |
— | — | — | — | ||||||||||||||||||||
Additional paid-in capital |
— | — | ( |
) | ( |
) | ||||||||||||||||||
Accumulated deficit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Total stockholders’ deficit before non-controlling interest |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Non-controlling interest |
( |
) | — | — | — | ( |
) | |||||||||||||||||
Total stockholders’ deficit |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Total liabilities and stockholders’ deficit |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Consolidated Balance Sheet As of September 30, 2023 |
||||
ASSETS |
||||
CURRENT ASSETS |
||||
Cash and cash equivalents |
$ | |||
Accounts and other related party receivables |
||||
Short-term notes receivable related party |
||||
Other current assets |
||||
Total current assets |
||||
OTHER NON-CURRENT ASSETS |
||||
Investment in unconsolidated entities |
||||
Equity securities |
||||
Exploration license |
||||
Property and equipment, net |
||||
Right of use - operating leases |
||||
Other non-current assets |
||||
Total non-current assets |
||||
Total assets |
$ | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||
CURRENT LIABILITIES |
||||
Accounts payable |
$ | |||
Accrued expenses |
||||
Operating lease liability, current portion |
||||
Equity securities liability |
||||
Put option liability |
||||
Loans payable, current portion |
||||
Total current liabilities |
||||
LONG-TERM LIABILITIES |
||||
Loans payable |
||||
Litigation financing and other |
||||
Deferred revenue |
||||
Warrant liability |
||||
Operating lease liability |
||||
Total long-term liabilities |
||||
Total liabilities |
||||
Commitments and contingencies (Note 18) |
||||
STOCKHOLDERS’ DEFICIT |
||||
Preferred stock - $. outstanding |
||||
Common stock – $. |
||||
Additional paid-in capital |
||||
Accumulated deficit |
( |
) | ||
Total stockholders’ deficit before non-controlling interest |
( |
) | ||
Non-controlling interest |
( |
) | ||
Total stockholders’ deficit |
( |
) | ||
Total liabilities and stockholders’ deficit |
$ | |||
Consolidated Statement of Operations For the Three Months Ended March 31, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Investment in Unconsolidated Entities Adjustments |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
— | — | — | |||||||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | — | ||||||||||||||||
Operations and research |
— | — | — | |||||||||||||||||
Total operating expenses |
( |
) | — | — | ||||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | — | — | ( |
) | ||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | — | ( |
) | ( |
) | ||||||||||||
Other |
( |
) | — | — | — | ( |
) | |||||||||||||
Total other income (expense) |
( |
) | — | ( |
) | ( |
) | |||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | — | ( |
) | ( |
) | |||||||||||||
Income tax benefit |
— | — | — | — | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | — | ( |
) | ( |
) | |||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
( |
) | — | ( |
) | ( |
) | |||||||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
( |
) | — | ( |
) | ( |
) | |||||||||||||
Diluted (See Note 2) |
( |
) | — | ( |
) | ( |
) | |||||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Three Months Ended June 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | |||||||||||||||||
Operations and research |
— | — | — | |||||||||||||||||
Total operating expenses |
( |
) | — | |||||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | ( |
) | — | ( |
) | |||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | ( |
) | ( |
) | |||||||||||||
Other |
— | — | — | |||||||||||||||||
Total other income (expense) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Income tax benefit |
— | — | — | — | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | |||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | ( |
) | ( |
) | ( |
) | $ | ( |
) | ||||||||||
Diluted (See Note 2) |
$ | ( |
) | ( |
) | ( |
) | $ | ( |
) | ||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Six Months Ended June 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | |||||||||||||||||
Operations and research |
— | — | — | |||||||||||||||||
Total operating expenses |
( |
) | — | |||||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | ( |
) | — | ( |
) | |||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | ( |
) | — | ( |
) | ||||||||||||
Other |
( |
) | — | — | — | ( |
) | |||||||||||||
Total other income (expense) |
( |
) | ( |
) | — | ( |
) | |||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | — | ( |
) | |||||||||||||
Income tax benefit |
— | — | — | — | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | ( |
) | — | ( |
) | |||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | ( |
) | $ | $ | ( |
) | $ | — | $ | ( |
) | ||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | ( |
) | ( |
) | — | $ | ( |
) | |||||||||||
Diluted (See Note 2) |
$ | ( |
) | ( |
) | — | $ | ( |
) | |||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Three Months Ended September 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | — | ||||||||||||||||
Operations and research |
— | — | — | |||||||||||||||||
Total operating expenses |
( |
) | — | — | ||||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | — | — | ( |
) | ||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | — | — | |||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | — | ||||||||||||||||
Other |
( |
) | — | — | — | ( |
) | |||||||||||||
Total other income (expense) |
( |
) | — | |||||||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | — | ( |
) | |||||||||||||||
Income tax benefit |
— | — | — | — | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | — | ( |
) | |||||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | ( |
) | $ | $ | $ | — | $ | ( |
) | ||||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | ( |
) | $ | $ | $ | — | $ | ( |
) | ||||||||||
Diluted (See Note 2) |
$ | ( |
) | $ | $ | $ | — | $ | ( |
) | ||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Nine Months Ended September 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | |||||||||||||||||
Operations and research |
— | — | — | |||||||||||||||||
Total operating expenses |
( |
) | — | |||||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | ( |
) | — | ( |
) | |||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | — | — | |||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | ( |
) | — | ( |
) | ||||||||||||
Other |
( |
) | — | — | ( |
) | ||||||||||||||
Total other income (expense) |
( |
) | ( |
) | — | ( |
) | |||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | — | ( |
) | |||||||||||||
Income tax benefit |
— | — | — | — | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | ( |
) | — | ( |
) | |||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | ( |
) | $ | $ | ( |
) | $ | — | $ | ( |
) | ||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | ( |
) | ( |
) | — | $ | ( |
) | |||||||||||
Diluted (See Note 2) |
$ | ( |
) | ( |
) | $ | ( |
) | ||||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Three Months Ended March 31, 2023 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | — | ||||||||||||||||
Operations and research |
— | — | ( |
) | ||||||||||||||||
Total operating expenses |
( |
) | — | ( |
) | |||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | — | ( |
) | |||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | — | ( |
) | ||||||||||||||
Gain on debt extinguishment |
— | — | — | |||||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | — | ||||||||||||||||
Other |
( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||
Total other income (expense) |
( |
) | ||||||||||||||||||
(LOSS) BEFORE INCOME TAXES |
||||||||||||||||||||
Income tax benefit |
— | — | ( |
) | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
||||||||||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | $ | $ | $ | $ | |||||||||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | $ | ||||||||||||||||||
Diluted (See Note 2) |
$ | $ | ||||||||||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | ( |
) | ||||||||||||||||
Consolidated Statement of Operations For the Three Months Ended June 30, 2023 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | — | ||||||||||||||||
Operations and research |
— | — | ( |
) | ||||||||||||||||
Total operating expenses |
( |
) | — | ( |
) | |||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | — | ( |
) | |||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | ( |
) | |||||||||||||||
Gain on debt extinguishment |
( |
) | — | — | — | ( |
) | |||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | ( |
) | — | ( |
) | ||||||||||||
Other |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
Total other income (expense) |
( |
) | ( |
) | ( |
) | ||||||||||||||
(LOSS) BEFORE INCOME TAXES |
( |
) | ( |
) | ( |
) | ||||||||||||||
Income tax benefit |
— | — | ( |
) | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
( |
) | ( |
) | ( |
) | ||||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | ( |
) | ( |
) | $ | ( |
) | ||||||||||||
Diluted (See Note 2) |
$ | ( |
) | ( |
) | $ | ( |
) | ||||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | — | |||||||||||||||||
Consolidated Statement of Operations For the Six Months Ended June 30, 2023 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrant Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
REVENUE |
||||||||||||||||||||
Marine services |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Other services |
— | — | — | |||||||||||||||||
Total revenue |
— | — | — | |||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Marketing, general and administrative |
( |
) | — | — | ||||||||||||||||
Operations and research |
— | — | ( |
) | ||||||||||||||||
Total operating expenses |
( |
) | — | ( |
) | |||||||||||||||
INCOME (LOSS) FROM OPERATIONS |
( |
) | — | ( |
) | |||||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||||||
Interest income |
— | — | — | |||||||||||||||||
Interest expense |
( |
) | — | ( |
) | |||||||||||||||
Gain on debt extinguishment |
— | — | — | |||||||||||||||||
Change in derivative liabilities fair value |
— | ( |
) | — | ||||||||||||||||
Other |
( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||
Total other income (expense) |
||||||||||||||||||||
(LOSS) BEFORE INCOME TAXES |
||||||||||||||||||||
Income tax benefit |
— | — | ( |
) | — | |||||||||||||||
NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
||||||||||||||||||||
Net loss attributable to noncontrolling interest |
— | — | — | |||||||||||||||||
NET INCOME / (LOSS) |
$ | $ | $ | $ | $ | |||||||||||||||
NET INCOME / (LOSS) PER SHARE |
||||||||||||||||||||
Basic (See Note 2) |
$ | $ | ||||||||||||||||||
Diluted (See Note 2) |
$ | $ | ||||||||||||||||||
Weighted average number of common shares outstanding |
||||||||||||||||||||
Basic |
— | — | — | |||||||||||||||||
Diluted |
— | — | ||||||||||||||||||
Consolidated Statement of Operations |
||||||||
For the Nine Months ended |
For the Three Months ended |
|||||||
September 30, 2023 |
September 30, 2023 |
|||||||
| REVENUE |
||||||||
| Marine services |
$ | $ | ||||||
| Other services |
( |
) | ||||||
| |
|
|
|
|||||
| Total revenue |
||||||||
| |
|
|
|
|||||
| OPERATING EXPENSES |
||||||||
| Marketing, general and administrative |
||||||||
| Operations and research |
||||||||
| |
|
|
|
|||||
| Total operating expenses |
||||||||
| |
|
|
|
|||||
| INCOME (LOSS) FROM OPERATIONS |
( |
) | ( |
) | ||||
| OTHER INCOME (EXPENSE) |
||||||||
| Interest income |
||||||||
| Interest expense |
( |
) | ( |
) | ||||
| Loss on equity method investment |
( |
) | ( |
) | ||||
| Gain (loss) on debt extinguishment |
— | |||||||
| Gain (loss) sale of wholly owned entity |
||||||||
| Change in derivative liabilities fair value |
( |
) | ( |
) | ||||
| Other |
( |
) | ||||||
| |
|
|
|
|||||
| Total other income (expense) |
( |
) | ||||||
| |
|
|
|
|||||
| (LOSS) BEFORE INCOME TAXES |
( |
) | ||||||
| Income tax benefit |
— | — | ||||||
| |
|
|
|
|||||
| NET (LOSS) BEFORE NON-CONTROLLING INTEREST |
) | |||||||
| Net loss attributable to noncontrolling interest |
||||||||
| |
|
|
|
|||||
| NET INCOME / (LOSS) |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| NET INCOME / (LOSS) PER SHARE |
||||||||
| Basic |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Diluted |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Weighted average number of common shares outstanding |
||||||||
| Basic |
||||||||
| |
|
|
|
|||||
| Diluted |
||||||||
| |
|
|
|
|||||
Preferred Stock – Shares |
Common Stock – Shares |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Non-controlling Interest |
Total |
|||||||||||||||||||||||||
| Balance at December 31, 2021 (As previously reported) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at December 31, 2021 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2022 (As previously reported) |
— | $ |
— |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2022 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at June 30, 2022 (As previously reported) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| 2022 Warrant Adjustment |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at June 30, 2022 (As Restated) |
— | $ | — | $ | $ | $ |
( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at September 30, 2022 (As previously reported) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| 2022 Warrant Adjustment |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at September 30, 2022 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2023 (As previously reported) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | — | ||||||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| 2022 Warrant Adjustment |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at March 31, 2023 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at June, 2023 (As previously reported) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Litigation Financing Adjustment |
— | — | — | — | — | |||||||||||||||||||||||||||
| Investment in Unconsolidated Entities Adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| 2022 Warrant Adjustment |
— | — | — | — | ( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||
| Other Adjustments |
— | — | — | — | ( |
) | — | |||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Cumulative restatement adjustments |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at June, 2023 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance at June, 2023 (As Restated) |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Sharebased compensation |
||||||||||||||||||||||||||||||||
| Commons stock issued for warrants exercised |
||||||||||||||||||||||||||||||||
| Fair value of warrants |
||||||||||||||||||||||||||||||||
| Net income / (loss) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balance as of September 30, 2023 |
— | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Statement of Cash Flows For the Three Months Ended March 31, 2022 |
||||||||||||||||
As Reported |
Litigation Financing Adjustment |
Other Adjustment |
As Restated |
|||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||
Net Income/(Loss) |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||
Investment in unconsolidated entity |
( |
) | — | — | ( |
) | ||||||||||
Depreciation |
— | — | ||||||||||||||
Financing fees amortization |
— | — | ||||||||||||||
Amortization of finance liability |
— | — | ||||||||||||||
Amortization of loan prepayment premium |
— | — | ||||||||||||||
Note payable interest accretion |
— | — | ||||||||||||||
Note receivable interest accretion |
— | — | ||||||||||||||
Right of use asset amortization |
— | — | ||||||||||||||
Fair market value adjustment for OML acquisition liabilities |
— | — | ||||||||||||||
Share-based compensation |
— | — | ||||||||||||||
Change in derivatives liabilities fair value |
||||||||||||||||
(Increase) decrease in: |
||||||||||||||||
Accounts and other related party receivables |
— | — | ||||||||||||||
Change in operating lease liability |
( |
) | — | — | ( |
) | ||||||||||
Other assets |
— | — | ||||||||||||||
Accounts payable |
— | — | ||||||||||||||
Accrued expenses and other |
( |
) | — | |||||||||||||
NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ( |
) | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||
Proceeds from sale of equipment |
( |
) | — | — | ( |
) | ||||||||||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) | — | — | ( |
) | ||||||||||
As Reported |
Litigation Financing Adjustment |
Other Adjustment |
As Restated |
|||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||
Proceeds from issuance of loans payable |
— |
— |
||||||||||||||
Payment of debt obligation |
( |
) |
— |
— |
( |
) | ||||||||||
Repurchase of stock-based awards withheld for payment of withholding tax requirements |
( |
) |
— |
— |
( |
) | ||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
— |
— |
||||||||||||||
NET INCREASE (DECREASE) IN CASH |
( |
) |
— |
— |
( |
) | ||||||||||
CASH AT BEGINNING OF YEAR |
— |
— |
||||||||||||||
CASH AT END OF YEAR |
$ |
$ |
— |
$ |
— |
$ |
||||||||||
As Reported |
Litigation Financing Adjustment |
Other Adjustment |
As Restated |
|||||||||||||
SUPPLEMENTARY INFORMATION: |
||||||||||||||||
Interest paid |
$ |
— |
— |
— |
$ |
— |
||||||||||
Income taxes paid |
$ |
— |
— |
— |
$ |
— |
||||||||||
Statement of Cash Flows For the Six Months Ended June 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net Income/(Loss) |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) | |||||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
Investment in unconsolidated entity |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Depreciation |
— |
— |
— |
|||||||||||||||||
Financing fees amortization |
— |
— |
— |
|||||||||||||||||
Amortization of loan prepayment premium |
— |
— |
— |
|||||||||||||||||
Note payable interest accretion |
— |
— |
— |
|||||||||||||||||
Right of use asset amortization |
— |
— |
— |
|||||||||||||||||
Share-based compensation |
— |
— |
— |
|||||||||||||||||
Change in derivatives liabilities fair value |
— |
|||||||||||||||||||
(Increase) decrease in: |
||||||||||||||||||||
Accounts and other related party receivables |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Change in operating lease liability |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Other assets |
— |
— |
— |
|||||||||||||||||
Accounts payable |
— |
— |
— |
|||||||||||||||||
Accrued expenses and other |
( |
) |
— |
— |
||||||||||||||||
NET CASH USED IN OPERATING ACTIVITIES |
( |
) |
( |
) |
— |
( |
) | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Purchase of property and equipment |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Proceeds from issuance of loans payable |
— |
— |
— |
|||||||||||||||||
Payment of debt obligation |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Repurchase of stock-based awards withheld for payment of withholding tax |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Offering cost paid on sale of common stock |
( |
) |
— |
— |
( |
) | ||||||||||||||
Proceeds from sale of common stock |
— |
— |
— |
|||||||||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
— |
— |
||||||||||||||||||
NET INCREASE (DECREASE) IN CASH |
— |
— |
— |
|||||||||||||||||
CASH AT BEGINNING OF YEAR |
— |
— |
— |
|||||||||||||||||
CASH AT END OF YEAR |
$ |
$ |
— |
$ |
— |
$ |
— |
$ |
||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
SUPPLEMENTARY INFORMATION: |
||||||||||||||||||||
Interest paid |
$ |
— |
— |
— |
— |
— |
||||||||||||||
Income taxes paid |
$ |
— |
— |
— |
— |
— |
||||||||||||||
Statement of Cash Flows For the Nine Months Ended September 30, 2022 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net Income/(Loss) |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
— |
$ |
( |
) | ||||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
Investment in unconsolidated entity |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Depreciation |
— |
— |
— |
|||||||||||||||||
Financing fees amortization |
— |
— |
— |
|||||||||||||||||
Amortization of loan prepayment premium |
— |
— |
— |
|||||||||||||||||
Note payable interest accretion |
— |
— |
— |
|||||||||||||||||
Right of use asset amortization |
— |
— |
( |
) |
( |
) | ||||||||||||||
Share-based compensation |
— |
— |
— |
|||||||||||||||||
Change in derivatives liabilities fair value |
— |
|||||||||||||||||||
(Increase) decrease in: |
||||||||||||||||||||
Accounts and other related party receivables |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Other assets |
— |
— |
— |
|||||||||||||||||
Accounts payable |
— |
— |
— |
|||||||||||||||||
Accrued expenses and other |
( |
) |
— |
— |
||||||||||||||||
NET CASH USED IN OPERATING ACTIVITIES |
( |
) |
— |
( |
) |
( |
) |
( |
) | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Purchase of property and equipment |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Proceeds from issuance of loans payable |
— |
— |
— |
|||||||||||||||||
Payment of operating lease liability |
( |
) |
— |
— |
— |
|||||||||||||||
Payment of debt obligation |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Repurchase of stock-based awards withheld for payment of withholding tax |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
Offering cost paid on sale of common stock |
( |
) |
— |
— |
( |
) | ||||||||||||||
Proceeds from sale of common stock |
— |
— |
— |
|||||||||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
— |
|||||||||||||||||||
NET INCREASE (DECREASE) IN CASH |
||||||||||||||||||||
CASH AT BEGINNING OF YEAR |
— |
— |
— |
|||||||||||||||||
CASH AT END OF YEAR |
$ |
$ |
— |
$ |
— |
$ |
— |
$ |
||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
SUPPLEMENTARY INFORMATION: |
||||||||||||||||||||
Interest paid |
$ |
— |
— |
— |
$ |
|||||||||||||||
Income taxes paid |
$ |
— |
— |
— |
— |
$ |
— |
|||||||||||||
Consolidated Statement of Cash Flows For the Three Months Ended March 31, 2023 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
| Net Income/(Loss) |
$ | $ | $ | $ | $ | |||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
| Investment in unconsolidated entity |
( |
) | — | — | — | ( |
) | |||||||||||||
| Depreciation |
— | — | — | |||||||||||||||||
| Financing fees amortization |
— | — | — | |||||||||||||||||
| Note payable interest accretion |
— | — | — | |||||||||||||||||
| Note receivable interest accretion |
( |
) | — | — | — | ( |
) | |||||||||||||
| Right of use asset amortization |
— | — | — | |||||||||||||||||
| Share-based compensation |
— | — | — | |||||||||||||||||
| (Gain) loss on debt extinguishment |
( |
) | — | — | — | ( |
) | |||||||||||||
| Change in derivatives liabilities fair value |
— | ( |
) | — | ( |
) | ||||||||||||||
| (Increase) decrease in: |
||||||||||||||||||||
| Accounts and other related party receivables |
— | — | — | |||||||||||||||||
| Short-term notes receivable related party |
( |
) | — | — | — | ( |
) | |||||||||||||
| Change in operating lease liability |
( |
) | — | — | — | ( |
) | |||||||||||||
| Other assets |
( |
) | — | — | ( |
) | ||||||||||||||
| Accounts payable |
( |
) | — | — | — | ( |
) | |||||||||||||
| Accrued expenses and other |
( |
) | — | — | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ( |
) | — | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
| Purchase of property and equipment |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
| Proceeds from issuance of loans payable |
— |
— |
— |
|||||||||||||||||
| Waiver fee paid |
( |
) |
— |
— |
— |
|||||||||||||||
| Offering cost paid on financing |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
| Payment of debt obligation |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
— |
— |
||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCREASE (DECREASE) IN CASH |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
| CASH AT BEGINNING OF YEAR |
— |
— |
— |
|||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH AT END OF YEAR |
$ |
$ |
— |
$ |
— |
$ |
— |
$ |
||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustments |
As Restated |
||||||||||||||||
| SUPPLEMENTARY INFORMATION: |
||||||||||||||||||||
| Interest paid |
$ | — | — | — | $ | |||||||||||||||
| Income taxes paid |
$ | — | — | — | — | $ | — | |||||||||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
||||||||||||||||||||
| Conversion of debt to common stock |
$ | — | — | — | $ | |||||||||||||||
| Warrants issued |
$ | — | — | — | $ | |||||||||||||||
Consolidated Statement of Cash Flows For the Six Months Ended June 30, 2023 |
||||||||||||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
| Net Income/(Loss) |
$ | $ | $ | $ | $ | |||||||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||||||||||
| Investment in unconsolidated entity |
( |
) | — | — | — | ( |
) | |||||||||||||
| Depreciation |
— | — | — | |||||||||||||||||
| Financing fees amortization |
— | — | — | |||||||||||||||||
| Amortization of loan prepayment premium |
— | — | — | |||||||||||||||||
| Note payable interest accretion |
— | — | ||||||||||||||||||
| Note receivable interest accretion |
( |
) | — | — | — | ( |
) | |||||||||||||
| Right of use asset amortization |
— | — | — | |||||||||||||||||
| Share-based compensation |
— | — | — | |||||||||||||||||
| Gain on debt extinguishment, net of note receivable write-off |
( |
) | — | — | — | ( |
) | |||||||||||||
| (Gain) loss on debt extinguishment |
— | — | — | — | — | |||||||||||||||
| Gain on sale of equipment |
( |
) | — | — | — | ( |
) | |||||||||||||
| Beneficial conversion feature on convertible debt, interest expense |
— | — | — | — | — | |||||||||||||||
| Change in derivatives liabilities fair value |
— | ( |
) | — | ( |
) | ||||||||||||||
| (Increase) decrease in: |
||||||||||||||||||||
| Accounts and other related party receivables |
( |
) | — | — | — | ( |
) | |||||||||||||
| Short-term notes receivable related party |
( |
) | — | — | — | ( |
) | |||||||||||||
| Change in operating lease liability |
( |
) | — | — | — | ( |
) | |||||||||||||
| Other assets |
( |
) | — | — | ( |
) | ||||||||||||||
| Accounts payable |
( |
) | — | — | — | ( |
) | |||||||||||||
| Accrued expenses and other |
( |
) | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ( |
) | — | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
| Proceeds from sale of equipment |
— | — | — | |||||||||||||||||
| Purchase of property and equipment |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
| Proceeds from related party |
— | — | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
— | — | ( |
) | ||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
| Proceeds from issuance of loans payable |
— | — | — | |||||||||||||||||
| Waiver fee paid |
( |
) | — | — | ||||||||||||||||
| Offering cost paid on financing |
( |
) | — | — | — | ( |
) | |||||||||||||
| Payment of debt obligation |
( |
) | — | — | — | ( |
) | |||||||||||||
| Proceeds from sale leaseback financing, net |
— | — | — | |||||||||||||||||
| Payment on sale leaseback financing |
( |
) | — | — | — | ( |
) | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
— | — | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| NET INCREASE (DECREASE) IN CASH |
— | — | ||||||||||||||||||
| CASH AT BEGINNING OF YEAR |
— | — | — | |||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| CASH AT END OF YEAR |
$ | $ | — | $ | — | $ | $ | |||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
As Reported |
Litigation Financing Adjustment |
2022 Warrants Adjustment |
Other Adjustment |
As Restated |
||||||||||||||||
| SUPPLEMENTARY INFORMATION: |
||||||||||||||||||||
| Interest paid |
$ | — | — | — | $ | |||||||||||||||
| Income taxes paid |
$ | — | — | — | — | $ | — | |||||||||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
||||||||||||||||||||
| Conversion of debt to common stock |
$ | — | — | — | $ | |||||||||||||||
| Warrants issued |
$ | |
— | — | — | $ | |
|||||||||||||
Consolidated Statement of Cash flows For the Nine Months ended September 30, 2023 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||
Net Income/(Loss) |
$ | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||
Investment in unconsolidated entity |
( |
) | ||
Depreciation |
||||
Financing fees amortization |
||||
Amortization of finance liability |
||||
Amortization of deferred discount |
||||
Note payable interest accretion |
||||
Note receivable interest accretion |
( |
) | ||
Note payable interest paid in kind |
||||
Right of use asset amortization |
||||
Share-based compensation |
||||
Loss on equity method investment |
||||
Gain on debt extinguishment, net of note receivable write-off |
( |
) | ||
Gain on sale of equipment |
( |
) | ||
Change in derivatives liabilities fair value |
||||
(Increase) decrease in: |
||||
Accounts and other related party receivables |
( |
) | ||
Short-term notes receivable related party |
||||
Change in operating lease liability |
( |
) | ||
Other assets |
||||
Accounts payable |
( |
) | ||
Accrued expenses and other |
||||
NET CASH USED IN OPERATING ACTIVITIES |
( |
) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||
Proceeds from sale of equipment |
||||
Purchase of property and equipment |
( |
) | ||
Cash paid for investment in unconsolidated entity |
( |
) | ||
Proceeds from related party |
||||
Gain on sale of entity |
( |
) | ||
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
( |
) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||
Proceeds from sale leaseback financing, net |
||||
Payment on saleleaseback financing |
( |
) | ||
Debt proceeds |
||||
Repayment of debt obligations |
( |
) | ||
Proceeds from warrants exercised |
||||
Warrants issued |
||||
Offering costs paid on financing |
( |
) | ||
Proceeds from sale of common stock |
||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||
NET INCREASE (DECREASE) IN CASH |
( |
) | ||
CASH AT BEGINNING OF YEAR |
||||
CASH AT END OF YEAR |
$ | |||
SUPPLEMENTARY INFORMATION: |
||||
Interest paid |
$ | |||
Income taxes paid |
$ | |||
NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
||||
Conversion of debt to common stock |
$ | |||
Warrants issued |
$ | |||
Non-cash contribution of Investment in Odyssey Retriever, Inc. for equity interest in Ocean Minerals, LLC |
$ | |||
Ocean Minerals, LLC acquisition liabilities |
$ | |||
Accrued expenses converted to equity |
$ | |||
Non-cash financing related to litigation financing |
$ | |||
ITEM 16. FORM 10-K SUMMARY
None.
EXHIBITS INDEX
106
107
| * | Management contract or compensatory plan. |
108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ODYSSEY MARINE EXPLORATION, INC. | ||||||
| Dated: May 17, 2024 | By: | /S/ Mark D. Gordon | ||||
| Chief Executive Officer Principal Executive Officer Principal Financial Officer | ||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| SIGNATURE |
TITLE |
DATE | ||
| /S/ Mark D. Gordon |
Chief Executive Officer (Principal | May 17, 2024 | ||
| Mark D. Gordon | Executive Officer and Principal Financial Officer) and Chairman of the Board | |||
| /S/ John D. Longley |
President and Chief Operating Officer | May 17, 2024 | ||
| John D. Longley | ||||
| /S/ Jon D. Sawyer |
Director | May 17, 2024 | ||
| Jon D. Sawyer | ||||
| /S/ Todd E. Siegel |
Director | May 17, 2024 | ||
| Todd E. Siegel | ||||
| /S/ Mark B. Justh |
Lead Director | May 17, 2024 | ||
| Mark B. Justh | ||||
109