Odyssey Marine Exploration Inc 10-Q for FY2023 Q1
Odyssey Marine Exploration Inc (OMEX)
About this 10-Q
Odyssey Marine Exploration Inc filed this 10-Q on May 12, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $288.74K
- down 3.6% from $299.61K a year earlier
- Net income
- $16.6M
- compared with a net loss of $8.23M a year earlier
- Diluted EPS
- $0.83
- compared with -$0.57 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from |
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to |
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Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer: ☐ Accelerated filer: ☐
Emerging growth company:
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes ☐ No
The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of April 30, 2023 was
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Page No.
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Part I: |
Financial Information |
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Item 1. |
Financial Statements: |
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3 |
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4 |
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Condensed Consolidated Statements of Changes in Stockholders’ Deficit |
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6 |
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8 – 19 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 – 28 |
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Item 3. |
28 |
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Item 4. |
28 |
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Part II: |
Other Information |
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Item 1. |
29 |
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Item 1A. |
29 |
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Item 2. |
29 |
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Item 4. |
29 |
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Item 5. |
29 |
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Item 6. |
30 |
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31 |
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2
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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Unaudited March 31, 2023 |
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December 31, |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable and other, net |
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Short-term notes receivable related party, net |
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Deferred tax asset |
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— |
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Other current assets |
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Total current assets |
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PROPERTY AND EQUIPMENT |
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Equipment and office fixtures |
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Right of use - operating leases |
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Accumulated depreciation |
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Total property and equipment |
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NON-CURRENT ASSETS |
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Investment in unconsolidated entity |
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Exploration license |
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Other non-current assets |
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Total non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Operating lease liability |
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Loans payable |
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Total current liabilities |
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LONG-TERM LIABILITIES |
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Loans payable |
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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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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 |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Unaudited
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Three Months Ended |
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March 31, |
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March 31, |
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REVENUE |
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Marine services |
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$ |
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$ |
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Operating and other |
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Total revenue |
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OPERATING EXPENSES |
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Marketing, general and administrative |
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Operations and research |
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Total 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 |
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Gain (loss) on debt extinguishment |
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Other |
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Total other income (expense) |
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INCOME/(LOSS) BEFORE INCOME TAXES |
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Income tax benefit (provision) |
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NET INCOME(LOSS) BEFORE NON-CONTROLLING INTEREST |
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Non-controlling interest |
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NET INCOME (LOSS) |
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$ |
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$ |
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NET INCOME (LOSS) PER SHARE |
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Basic (See Note 2) |
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$ |
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$ |
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Diluted (See Note 2) |
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$ |
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$ |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDER’S DEFICIT - Unaudited
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Three Months Ended March 31, 2023 |
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Common Stock |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Non-controlling Interest |
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Total |
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Period Ended December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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Common stock issued for debt extinguishment |
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— |
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— |
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Fair value of warrants issued |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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Period Ended March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended March 31, 2022 |
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Common Stock |
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Paid-in Capital |
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Accumulated Deficit |
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Non-controlling Interest |
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Total |
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Period Ended December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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Net (loss) |
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— |
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— |
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Period Ended March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
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Three Months Ended |
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March 31, |
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March 31, |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) before non-controlling interest |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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Investment in unconsolidated entity |
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Depreciation and amortization |
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Financing fees amortization |
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Amortization of loan prepayment premium |
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Note payable interest accretion |
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Note receivable interest accretion |
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Right of use asset amortization |
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Share-based compensation |
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(Gain) loss on debt extinguishment |
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Payment of operating lease liability |
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(Increase) decrease in: |
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Accounts receivable |
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Accrued interest receivable |
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Deferred tax asset |
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Other assets |
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Increase (decrease) in: |
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Accounts payable |
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Accrued expenses and other |
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NET CASH USED IN OPERATING ACTIVITIES |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of property and equipment |
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NET CASH USED IN INVESTING ACTIVITIES |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from issuance of loans payable |
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Waiver fee paid |
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Offering cost paid on financing |
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Payment of debt obligation |
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Repurchase of stock-based awards withheld for payment of withholding tax requirements |
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NET CASH PROVIDED BY FINANCING ACTIVITIES |
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTARY INFORMATION: |
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Interest paid |
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$ |
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$ |
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Income taxes paid |
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$ |
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$ |
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NON-CASH INVESTING AND FINANCING TRANSACTIONS: |
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Director compensation settled with equity |
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$ |
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$ |
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Conversion of debt to common stock |
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$ |
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$ |
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Warrants issued |
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$ |
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$ |
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Non-Cash Disclosure:
During the three months ended March 31, 2023 and 2022, we received $
6
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited - Continued
On March 3, 2023, Odyssey, Altos Hornos de México, S.A.B. de C.V. (“AHMSA”), Minera del Norte, S.A. de C.V. ("MINOSA") and Phosphate One LLC (f/k/a Penelope Mining LLC, “Phosphate One” and together with AHMSA and MINOSA, the “AHMSA Parties”) entered into a Settlement, Release and Termination Agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, the parties agreed that, concurrently with the payment of the Termination Payment as disclosed in Note 9 Loans Payable, a portion of the MINOSA Notes would be deemed automatically converted into
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ODYSSEY MARINE EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The accompanying unaudited condensed consolidated financial statements of Odyssey Marine Exploration, Inc. and subsidiaries (the “Company,” “Odyssey,” “us,” “we” or “our”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in financial statements prepared in accordance with generally accepted accounting principles. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
In the opinion of management, these financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position as of March 31, 2023 and the results of operations and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the full year.
Accounting standards adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update are effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.
The amendments in ASU No. 2020-06 affect entities that issue convertible instruments and/or contracts in an entity’s own equity. For convertible instruments, the instruments primarily affected are those issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements in this update. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. The FASB simplified the settlement assessment by removing the requirements (1) to consider whether the contract would be settled in registered shares, (2) to consider whether collateral is required to be posted, and (3) to assess shareholder rights. Those amendments also affect the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in this update affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. We adopted this ASU as of January 1, 2022. Adoption did not have a material impact on its consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not or are not believed by management to have a material effect, if any, on the Company’s financial statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding our condensed consolidated financial statements. The financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity and have prepared them in accordance with our customary accounting practices.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries, both domestic and international. Equity investments in which we exercise significant influence but do not control and of which we are not the primary beneficiary are accounted for using the equity method. All significant inter-company and intra-company transactions and balances have been eliminated. The results of operations attributable to the non-controlling interest are presented within equity and net income and are shown separately from the Company’s equity and net income attributable to the Company. Some of the existing inter-company balances, which are eliminated upon consolidation, include features allowing
8
the liability to be converted into equity of a subsidiary, which if exercised, could increase the direct or indirect interest of the Company in the non-wholly owned subsidiaries.
Use of Estimates
Management uses estimates and assumptions in preparing these condensed consolidated financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.
Reclassifications
Certain reclassifications have been made to the 2022 condensed consolidated financial statements in order to conform to the classifications used in 2023. The reclassifications had no impact to operations or working capital.
Revenue Recognition and Accounts Receivable
Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Accounting Standards Codification (“ASC”) Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.
The Company currently generates revenues from service contracts with customers. Currently, there are two sources of revenue: marine services and other services. The contracts for these services provide research, scientific services, marine operations planning, management execution and project management. These services are billed generally on a monthly basis and recognized as revenue as the services are performed. Revenue is recognized at a point in time as services are provided, as the customers simultaneously receive and consume the benefits provided by the Company each month. The Company generally does not receive any upfront consideration for these services, and there is no variable consideration for the services. Costs associated with both services include all direct consulting labor, and minimal supplies, and are charged to operations as a component of Operations and Research.
Accounts receivable are based on amounts billed to customers. Generally accepted accounting principles state an estimate is to be made for an allowance for doubtful accounts. We have determined no allowance is currently necessary. If we were to have a recorded allowance, the accounts receivable would be stated net of the recorded allowance.
We evaluate our accounts and notes receivable to estimate an allowance for credit losses over the remaining life of the financial instrument. The remaining life of our financial assets is determined by considering contractual terms among other factors. We estimate an allowance for credit losses based on ongoing evaluations of the accounts and notes receivable, the related credit risk characteristics, and the overall economic and environmental conditions affecting the financial assets. Credit losses are charged-off against the allowance when we believe the uncollectibility of the financial asset is confirmed. Subsequent recoveries, if any, are credited to the allowance once received. A credit loss expense, or benefit, is recorded as Other expense in the Statement of Operations in an amount necessary to adjust the allowance for credit losses to our estimate as of the end of each reporting period.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in banks. We also consider all highly liquid investments with a maturity of
Exploration License
The Company follows the guidance pursuant to ASU 350, “Intangibles-Goodwill and Other” in accounting for its Exploration License. Management determined the rights to use the license to have an indefinite life. This assessment is based on
9
the historical success of renewing the license every two years since 2006, and the fact that management believes there are no legal, regulatory, or contractual provisions that would limit the useful life of the asset. The exploration license is not dependent on another asset or group of assets that could potentially limit the useful life of the exploration license. In the future, the recoverability of the license will be tested whenever circumstances indicate that its carrying amount may not be recoverable per the guidance of the ASC topic 360 for Property, Plant and Equipment. We did
Long-Lived Assets
Our policy is to recognize impairment losses relating to long-lived assets in accordance with the ASC 360 Property, Plant and Equipment. Decisions are based on several factors, including, but not limited to, management’s plans for future operations, recent operating results and projected cash flows. Impairment losses are included in depreciation at the time of impairment. We did not have any impairments for the three months ended March 31, 2023 and 2022, respectively.
Property and Equipment and Depreciation
Property and equipment is stated at historical cost. Depreciation is calculated using the straight-line method at rates based on the assets’ estimated useful lives which are normally between and
Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if dilutive securities and other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. We use the if-converted method to compute potential common shares from stock options, restricted stock units, warrants, preferred stock, convertible notes or other convertible securities. When a net loss occurs, potential common shares have an anti-dilutive effect on earnings per share and such shares are excluded from the diluted EPS calculation.
For the three months ended March 31, 2023 and 2022, the weighted average common shares outstanding year-to-date were
The potential common shares in the following tables represent potential common shares calculated using the if-converted method from outstanding options, stock awards and warrants that were excluded from the calculation of diluted EPS:
|
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Three Months Ended |
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|||||
|
|
March 31, |
|
|
March 31, |
|
||
Average market price during the period |
|
$ |
|
|
$ |
|
||
In the money potential common shares from options excluded |
|
|
— |
|
|
|
|
|
In the money potential common shares from warrants excluded |
|
|
— |
|
|
|
|
|
Potential common shares from out of the money options and warrants were also excluded from the computation of diluted EPS because calculation of the associated potential common shares has an anti-dilutive effect on EPS. The following table lists options and warrants that were excluded from diluted EPS:
10
|
|
Three Months Ended |
||
Per share exercise price |
|
March 31, |
|
March 31, |
Out of the money options excluded: |
|
|
|
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
||
$ |
|
|
||
$ |
|
|
||
Out-of-the-money warrants excluded: |
|
|
|
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
— |
|
$ |
|
|
||
Total excluded |
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|
||
The equivalent common shares relating to our unvested restricted stock awards that were excluded from potential common shares in the earning per share calculation due to having an anti-dilutive effect are:
|
|
Three Months Ended |
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|||||
|
|
March 31, |
|
|
March 31, |
|
||
Excluded unvested restricted stock awards |
|
|
— |
|
|
|
|
|
The following is a reconciliation of the numerators and denominators used in computing basic and diluted net income per share:
|
|
Three Months Ended |
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|||||
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|
March 31, |
|
|
March 31, |
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Numerator, basic and diluted net loss available to stockholders |
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$ |
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$ |
( |
) |
|
Denominator: |
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Shares used in computation – basic: |
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Weighted average common shares outstanding |
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Shares used in computation – diluted: |
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Weighted average common shares outstanding |
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||
Net loss per share – basic |
|
$ |
|
|
$ |
( |
) |
|
Net loss per share – diluted |
|
$ |
|
|
$ |
( |
) |
|
Income Taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or the entire deferred tax asset will not be realized.
Stock-based Compensation
Our stock-based compensation is recorded in accordance with the guidance in the ASC topic for Stock-Based Compensation (See Note 11 Stockholders' Equity/(Deficit)).
11
Fair Value of Financial Instruments
Financial instruments consist of cash, evidence of ownership in an entity, and contracts that both (i) impose on one entity a contractual obligation to deliver cash or another financial instrument to a second entity, or to exchange other financial instruments on potentially unfavorable terms with the second entity, and (ii) conveys to that second entity a contractual right (a) to receive cash or another financial instrument from the first entity, or (b) to exchange other financial instruments on potentially favorable terms with the first entity. Accordingly, our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative financial instruments and mortgage and loans payable. We carry cash and cash equivalents, accounts payable and accrued liabilities, and mortgage and loans payable at the approximate fair market value, and, accordingly, these estimates are not necessarily indicative of the amounts that we could realize in a current market exchange. We carry derivative financial instruments at fair value as is required under current accounting standards.
Derivative financial instruments consist of financial instruments or other contracts that contain a notional amount and one or more underlying variables (e.g., interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially, and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets. We generally do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, we have entered into certain other financial instruments and contracts with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. As required by ASC 815 – Derivatives and Hedging, these instruments are required to be carried as derivative liabilities, at fair value, in our financial statements with changes in fair value reflected in our income.
We adopted ASC Topic 820 for certain financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
Fair Value Hierarchy
The three levels of inputs that may be used to measure fair value are as follows:
Level 1. Quoted prices in active markets for identical assets or liabilities.
Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.
Level 3. Unobservable inputs to the valuation methodology are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.
At March 31, 2023 and December 31, 2022, the Company did
NOTE 3 – ACCOUNTS RECEIVABLE AND OTHER RELATED PARTY, NET
Our accounts receivable consist of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
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Related party (see Note 5) |
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$ |
|
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$ |
|
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Other |
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|
|
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|
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Total accounts receivable and other |
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$ |
|
|
$ |
|
||
NOTE 4 – SHORT-TERM NOTES RECEIVABLE RELATED PARTY, NET
12
Our short-term notes receivable consisted of the following:
|
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March 31, 2023 |
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December 31, 2022 |
|
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Related party (see Note 5) |
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$ |
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$ |
|
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Other |
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Short-term notes receivable, net |
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$ |
|
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$ |
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NOTE 5 – RELATED PARTY TRANSACTIONS
We currently provide services to a deep-sea mineral exploration company, CIC Limited (“CIC”), which was organized and is majority owned and controlled by Greg Stemm, Odyssey’s past Chairman of the Board. Mr. Stemm’s involvement with this company was disclosed to, and approved by, the Odyssey Board of Directors and legal counsel pursuant to the terms of Mr. Stemm’s consulting agreement in effect at that time. A current Odyssey director, Mark B. Justh, made an investment into CIC’s parent company and indirectly owns approximately
In furtherance of the Master Services Agreement, we are financing the acquisition of certain equipment required for implementation of CIC’s Marine Operations Plan, which is the comprehensive workplan for offshore operations, including exploration, survey and sampling of potential mineral deposits. As of March 31, 2023 we have paid $
On December 13, 2022, we entered into a Loan Agreement with CIC. Pursuant to the Loan Agreement, CIC issued to Odyssey a convertible promissory note in the amount of $
On December 13, 2022, CIC issued a Services Agreement Note to us. Pursuant to the Services Agreement Note, Odyssey agreed to extend the terms of its outstanding accounts receivables balance for past and future services performed under the Master Services Agreement for an amount not to exceed $
On July 15, 2021, MINOSA assigned $
13
NOTE 6 – INVESTMENT IN UNCONSOLIDATED ENTITY
At March 31, 2023 and December 31, 2022, our accumulated investment in CIC was $
NOTE 7 - INCOME TAXES
During the three months ended March 31, 2023, we generated a federal net operating loss (“NOL”) carryforward of $
NOTE 8 – COMMITMENTS AND CONTINGENCIES
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 condensed consolidated financial statements.
Contingency
We owe consultants contingent success fees of up to $
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 exploration charters or collecting on amounts owed to us.
Our 2023 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 became insufficient to meet our desired projected business plan requirements, we would be required to follow a contingency business plan based on curtailed expenses and fewer cash requirements. During March 2023, we entered Note and Warrant Purchase Agreement pursuant to which we issued and sold to an institutional investor a promissory note (the “Note”) in the principal amount of $
Our consolidated non-restricted cash balance at March 31, 2023 was $
Lease commitment
At March 31, 2023, the right of usage (“ROU”) asset and lease obligation for our corporate office operating lease were $
14
The remaining lease payment obligations, which includes an interest component of $
Year ending |
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Annual payment obligation |
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2023 |
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2024 |
|
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|
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$ |
|
|
At March 31, 2023, the ROU asset and lease obligation for our marine operations operating lease were $
The remaining lease payment obligations, which includes an interest component of $
Year ending |
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Annual payment obligation |
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|
2023 |
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2024 |
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|
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|
$ |
|
|
We recognized approximately $
NOTE 9
The Company’s consolidated notes payable consisted of the following carrying values and related interest expense at:
|
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Note payable |
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Interest expense |
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Three Months Ended |
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March 31, |
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December 31, |
|
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March 31, |
|
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March 31, |
|
||||
MINOSA 1 |
|
$ |
— |
|
|
$ |
|
|
$ |
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|
$ |
|
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MINOSA 2 |
|
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— |
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Litigation financing |
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DP SPV I LLC note |
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— |
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- |
|
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Emergency Injury Disaster Loan |
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Vendor note payable |
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Seller note payable |
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- |
|
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AFCO Insurance note payable |
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Pignatelli note |
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|
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|
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— |
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|
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|
|
- |
|
||
Galileo note |
|
|
— |
|
|
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— |
|
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Bridge loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
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- |
|
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|
|
$ |
|
|
$ |
|
|
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|
||||
MINOSA 1
On March 11, 2015, in connection with a Stock Purchase Agreement ("SPA"), Minera del Norte, S.A. de C.V. ("MINOSA") agreed to lend us up to $
MINOSA 2
On August 10, 2017, we entered into a Note Purchase Agreement (the "Minosa Purchase Agreement") with MINOSA. Pursuant to the Minosa Purchase Agreement, MINOSA agreed to loan our wholly owned subsidiary, Odyssey Marine Enterprises, Ltd., up to $
15
demand by MINOSA; provided, that MINOSA agreed not make a demand for payment prior to the earlier of (a) an event of default (as defined in the Minosa Note) or (b) a date, which may be no earlier than December 31, 2017, that is at least
Pursuant to second amended and restated pledge agreements (the "Pledge Agreements") entered into by us in favor of MINOSA on August 10, 2017, we pledged and granted security interests to MINOSA in (a) the
Settlement, Release and Termination Agreement of the MINOSA 1 and MINOSA 2
On March 3, 2023, Odyssey, Altos Hornos de México, S.A.B. de C.V. (“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 a Settlement, Release and Termination Agreement (the “Termination Agreement”).
Pursuant to the Termination Agreement:
The transactions contemplated by the Termination Agreement were completed on
On March 6, 2023, Odyssey entered into a Release and Termination Agreement with a director of the Company, James S. Pignatelli, 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.
As a result of these transactions, Odyssey has recorded a Gain on debt extinguishment of $
Pignatelli
On March 6, 2023, Odyssey issued a new Unsecured Convertible Promissory Note in the principal amount of $
Litigation Financing
Waiver and Consent
16
On January 31, 2020, 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 Amended and Restated International Claims Enforcement Agreement (as amended, the "Agreement"), 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.
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, (a) the Funder consented 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 $
For the three months ended March 31, 2023 and 2022, we recorded $
Galileo
On February 28, 2023, Odyssey issued a $
DP SPV I LLC
On March 6, 2023, Odyssey entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) with an institutional investor pursuant to which Odyssey issued and sold to the investor (a) a promissory note (the “DP SPV Note”) in the principal amount of $
The principal amount outstanding under the DP SPV Note bears interest at the rate of
Under the terms of the Warrant, the holder has the right for a period of three years after issuance to purchase up to
17
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 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 $
For the three months ended March 31, 2023, we recorded $
Accrued interest
Total accrued interest associated with our financings was $
NOTE 10 – ACCRUED EXPENSES
Accrued expenses consist of the following:
|
|
December 31, |
|
|
December 31, |
|
||
Compensation and incentives |
|
$ |
|
|
$ |
|
||
Professional services |
|
|
|
|
|
|
||
Deposit |
|
|
|
|
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|
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Interest |
|
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|
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Accrued exploration license fees |
|
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Total accrued expenses |
|
$ |
|
|
$ |
|
||
Deposits primarily consists of an earnest money deposit of $
NOTE 11 – STOCKHOLDERS' EQUITY/(DEFICIT)
Common Stock
As noted above, on March 3, 2023, Odyssey, AHMSA, MINOSA and Phosphate One entered into the Termination Agreement whereby the parties agreed that, concurrently with the payment of the Termination Payment, a portion of the MINOSA Notes would be deemed automatically converted into
Warrant
In conjunction with the Purchase Agreement on March 6, 2023, as described above, we issued the Warrant to purchase up to
18
Stock-Based Compensation
The share-based compensation charged against income, related to our options and restricted stock units, for the three months ended March 31, 2023 and 2022, was $
NOTE 12 – CONCENTRATION OF CREDIT RISK
We do
For the three months ended March 31, 2023 and 2022, we had
NOTE 13 – SUBSEQUENT EVENTS
We have evaluated subsequent events for recognition or disclosure through the date this Form 10-Q is filed with the SEC.
On April 4, 2023, Odyssey entered into a $
On April 6, 2023, CIC repaid principal and interest in the aggregate amount of $
19
ITEM 2. 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 operation and financial condition. The discussion should be read in conjunction with our consolidated financial statements, the related notes to the financial statements and our Annual Report on Form 10-K for the year ended December 31, 2022.
In addition to historical information, this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 regarding the Company’s expectations concerning its future operations, earnings and prospects. On the date the forward-looking statements are made, the statements represent the Company’s expectations, but the expectations concerning its future operations, earnings and prospects may change. The Company’s expectations involve risks and uncertainties and are based on many assumptions that the Company believes to be reasonable, but such assumptions may ultimately prove to be inaccurate or incomplete, in whole or in part. Accordingly, there can be no assurances that the Company’s expectations and the forward-looking statements will be correct. Please refer to the Company’s most recent Annual Report on Form 10-K for a description of risk factors that could cause actual results to differ from the expectations stated in this discussion. Odyssey disclaims any obligation to update any of these forward-looking statements except as required by law.
Operational Update
Additional information regarding our announced projects can be found in our Annual Report on Form 10-K for the year ended December 31, 2022. Only projects material in nature or with material status updates are discussed below. We may have other projects in various stages of planning or execution that may not be disclosed for security or legal reasons until considered appropriate by management or required by law.
Our subsea project portfolio contains multiple projects in various stages of development throughout the world and across different mineral resources. We are regularly adding 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 SEC’s basic mining disclosure policy and what information may be disclosed in public filings.
Subsea Mineral Mining Exploration Projects
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. This deposit contains a large amount of high-grade phosphate rock 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 56.29% 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:
20
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 North American Free Trade Agreement (“NAFTA”) Claim 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 in the country and is in violation of the following provisions of NAFTA:
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:
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. Odyssey’s filings are available at www.odysseymarine.com/nafta. Mexico filed its Rejoinder on October 19, 2021. The procedural calendar and case filings are available on the ICSID website. The NAFTA Tribunal hearing took place in early 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. Odyssey cannot predict the length of these deliberations or when a ruling will be issued, but we remain confident in the merits of our case.
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
21
to aid in our NAFTA case. On June 14, 2021, the funder agreed to fund up to an additional $5.0 million for litigation costs. The funder will not have any right of recourse against us unless the environmental permit is awarded or if proceeds are received (See Note 9 Loans Payable).
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.
In December 2021, the Cook Islands Seabed Minerals Authority’s (“SBMA”) Licensing Panel announced that CIC met the qualification criteria for an exploration license. On February 23, 2022, the SMBA 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 and testing of vessels and equipment, which informed 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 when primary operations commence in 2023.
Through a wholly owned subsidiary, we have earned and now hold approximately 14.54% 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 16.0% interest in CIC, based upon the currently outstanding equity units. This means we can earn approximately 1.8 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 6 Investment in Unconsolidated Entity).
South American Phosphate Project:
Odyssey reached an exclusive agreement in early 2022 with BlueSea Minerals, Ltd. and BlueSea Minerals Brasil Ltda, (collectively, “BlueSea Group”) to create a new joint venture company (the “JV”) in which Odyssey will own a 75% interest. The JV will have exclusive rights to 19 highly prospective phosphate areas in the Exclusive Economic Zone (EEZ) of a South American country. Legacy data and desktop research indicate high-grade phosphate deposits in the concession areas.
Pending execution of the definitive agreement, Odyssey will manage the overall South American Phosphate Project development, and BlueSea Group will manage business operations in South America. A related party to BlueSea Group, SeaSeep, will provide marine operations services, supervised by Odyssey.
The 19 licenses to be developed by the JV include 366 square kilometres of seabed. The geological setting of these licenses is similar to the geology Odyssey identified off the coast of Mexico, which is now known as the ExO Phosphate deposit (“ExO project”). The ExO deposit estimated 588 million tonnes of high-grade resource. The ExO project had extremely compelling economics that demonstrated that ExO could have been one of the lowest cost producers in the world. Phosphate prices have surged in recent months, and the need for phosphate to combat world hunger continues to grow. It is anticipated that the South American deposits can be harvested with the standard and similar technology and engineering solutions already identified for the ExO Project, which will allow the phosphate to be recovered in an environmentally responsible manner without the addition of any chemicals into the sea.
LIHIR Gold Project:
The exploration license for the Lihir Gold Project covers a subsea area that contains at least five 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 for the project.
Previous exploration expeditions in the license area, including a survey conducted by Odyssey, indicate it is highly prospective for commercially viable gold content.
In August 2021, Papua New Guinea (“PNG”) 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
22
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 PNG 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. 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.
Odyssey’s multi-year exploration program will focus on robust environmental surveys and studies that will accrue to environmental permitting in compliance with PNG’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 will 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.
Critical Accounting Policies and Changes to Accounting Policies
There have been no material changes in our critical accounting estimates since December 31, 2022.
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 Part I, Item 1.
Three months ended March 31, 2023, compared to three months ended March 31, 2022,
Increase/(Decrease) |
|
|
|
|
|
|
|
2023 vs. 2022 |
|
|||||||
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
Total revenues |
|
$ |
289 |
|
|
$ |
300 |
|
|
$ |
(11 |
) |
|
|
(3.7 |
)% |
Marketing, general and administrative |
|
|
1,878 |
|
|
|
1,918 |
|
|
$ |
(40 |
) |
|
|
(2.1 |
)% |
Operations and research |
|
|
1,788 |
|
|
|
5,057 |
|
|
$ |
(3,269 |
) |
|
|
(64.6 |
)% |
Total operating expenses |
|
$ |
3,666 |
|
|
$ |
6,975 |
|
|
$ |
(3,309 |
) |
|
|
(47.4 |
)% |
Total other income (expense) |
|
$ |
17,736 |
|
|
$ |
(3,416 |
) |
|
$ |
21,152 |
|
|
|
619.2 |
% |
Income tax benefit (provision) |
|
$ |
(6 |
) |
|
$ |
— |
|
|
$ |
(6 |
) |
|
|
100.0 |
% |
Non-controlling interest |
|
$ |
2,235 |
|
|
$ |
1,861 |
|
|
$ |
374 |
|
|
|
20.1 |
% |
Net income (loss) |
|
$ |
16,601 |
|
|
$ |
(8,230 |
) |
|
$ |
24,831 |
|
|
|
301.7 |
% |
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 three months ended March 31, 2023 was $289 thousand, which is consistent as compared to the three months ended March 31, 2022. One company to which we provided these services in both years is a deep-sea mineral exploration company, CIC, which we consider to be a related party since it is owned and controlled by our past Chairman of the Board (see Note 5 Related Party Transactions).
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. Expenses for the three months ended March 31, 2023 were $1.9 million, which is consistent as compared to the three months ended March 31, 2022. Employee benefits and compensation related expenses increased $85 thousand offset by decreases in non-cash long term incentive share-based compensation and employee bonuses of $190 thousand and $52 thousand,
23
respectively. Audit fees increased by $87 thousand primarily related to the change in audit firms during 2023. Other professional fees increased by $158 thousand, primarily related to supporting the expansion of our seafloor minerals portfolio.
Operations and research expenses are primarily focused around deep-sea mineral exploration, which include minerals research, scientific services, marine operations and project management. Operations and research expenses decreased by $3.3 million for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 as a result of a $4.3 million decrease in our Litigation financed costs directly associated with our NAFTA litigation expenses. This decrease was offset by increases of $635 thousand in marine equipment repair and maintenance costs, $239 thousand in legal fees and $85 thousand increase in our concession permit fees for our Mexican subsidiary.
Total Other Income and Expense
Total other income and expense was $17.7 million in net income and $3.4 million in net expense for three months ended March 31, 2023 and 2022, respectively, resulting in a net income increase of $21.2 million. This variance was attributable to a $21.5 million gain on the extinguishment of the Minosa Notes during March 2023 and $0.4 million of interest income earned on the CIC notes receivable. This increase was offset in part by a $0.6 million increase in interest expense in connection with our NAFTA litigation funding and new notes entered into during the three months ended March 31, 2023.
Taxes and Non-Controlling Interest
During the three months ended March 31, 2023 we recorded a minimal income tax benefit related to losses incurred in South America. We did not accrue any taxes during the three months ended March 31, 2022.
Starting 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 condensed 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 condensed consolidated statements of operations. The non-controlling interest adjustment in the three months ended March 31, 2023 was $2.2 million as compared to $1.9 million for the three months ended March 31, 2022. The substance of these amounts is primarily due to the increase in permits and other standard operating costs.
Liquidity and Capital Resources
|
|
Three Months Ended |
|
|||||
(In thousands) |
|
March 31, |
|
|
March 31, |
|
||
Summary of Cash Flows: |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(3,488 |
) |
|
$ |
(1,724 |
) |
Net cash used in investing activities |
|
|
(5 |
) |
|
|
(3 |
) |
Net cash provided by financing activities |
|
|
2,724 |
|
|
|
1,559 |
|
Net decrease in cash and cash equivalents |
|
$ |
(769 |
) |
|
$ |
(168 |
) |
Beginning cash and cash equivalents |
|
|
1,443 |
|
|
|
2,275 |
|
Ending cash and cash equivalents |
|
$ |
674 |
|
|
$ |
2,106 |
|
Discussion of Cash Flows
Net cash used in operating activities for the three months ended March 31, 2023 was $3.5 million. This represents an approximate $1.8 million increase in use of funds when compared to the use of $1.7 million for the three months ended March 31, 2022. The net cash used in operating activities reflected a net income before non-controlling interest of $14.4 million and is adjusted primarily by non-cash items of $21.4 million, which primarily includes the gain on debt extinguishment of $21.5 million, note receivable accretion of $289 thousand and an investment in unconsolidated entity of $271 thousand offset by share-based compensation of $122 thousand and note payable accretion of $315 thousand. Other operating activities resulted in an increase in working capital of $3.6 million. This $3.6 million increase includes a $4.5 million increase to accrued expenses offset by a decrease of $657 thousand to accounts payable and increases of $168 thousand in accrued interest receivable and $117 thousand in other assets in 2023. The increase in accrued expenses is predominantly related to our NAFTA arbitration litigation.
Cash flows used in investing activities for the three months ended March 31, 2023 and 2022 were minimal.
Cash flows provided by financing activities for the three months ended March 31, 2023 were $2.7 million. The $2.7 million is consists of $13.5 million received from the issuance of loan payable offset by the $9.7 million of debt obligation payments and
24
$1.0 million of waiver fee paid. Cash flows provided by financing activities for the three months ended March 31, 2022 were $1.6 million. The $1.6 million is consists of $2.2 million received from our litigation funder related to our NAFTA litigation financed expenses offset by $0.5 million of repurchase of stock-based awards withheld for the payment of withholding tax requirements and $187 thousand of debt obligation payments.
Other Cash Flow and Equity Areas
General Discussion
At March 31, 2023, we had cash and cash equivalents of $674 thousand, a decrease of $769 thousand from the December 31, 2022 balance of $1.4 million. Financial debt of the company was $36.1 million at March 31, 2023 and $46.7 million at December 31, 2022. During March 2023, we entered Note and Warrant Purchase Agreement, pursuant to which we issued and sold to an institutional investor (a) a promissory note (the “DP SPV Note”) in the principal amount of $13.1 million and (b) a warrant (the “Warrant” and, together with the Note, the “Securities”) to purchase up to 3,465,778 shares of Odyssey’s common stock. We also paid AHMSA $9.0 million in cash to terminate the Minosa Notes in cash and converted a portion of the MINOSA Notes into 304,879 shares of Odyssey’s common stock. We paid $1.5 million of self-funding amounts due to vendors who are supporting our NAFTA litigation during the three months ended March 31, 2023. During March 2022, we received $2.0 million of loan proceeds from 37N. During June 2022, we repaid $9.7 million of debt principal and accrued interest related to the Monaco and 37N loans. Our litigation funder paid, on our behalf, $5.6 million of amounts due to vendors who are supporting our NAFTA litigation as well as directly reimbursing the Company $200 thousand for expended costs related directly to our NAFTA litigation during the three months ended March 31, 2022.
Since 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 court of 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, which is available on the International Centre for Settlement of Investment Disputes (“ICSID”) website, on February 23, 2021. On June 29, 2021, we filed our reply to Mexico’s counter-memorial. Odyssey’s filings are available at www.odysseymarine.com/nafta. The NAFTA Tribunal hearing took place in early 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.
Financings
The Company’s consolidated notes payable consisted of the following carrying values and related interest expense at:
|
|
Note payable |
|
|
Interest expense |
|
||||||||||
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
|
March 31, |
|
||||
MINOSA 1 |
|
$ |
— |
|
|
$ |
14,750,001 |
|
|
$ |
210,137 |
|
|
$ |
290,959 |
|
MINOSA 2 |
|
|
— |
|
|
|
5,050,000 |
|
|
|
89,932 |
|
|
|
124,520 |
|
Litigation financing |
|
|
23,493,442 |
|
|
|
24,347,513 |
|
|
|
3,102,064 |
|
|
|
2,412,348 |
|
DP SPV I LLC note |
|
|
9,798,236 |
|
|
|
— |
|
|
|
315,980 |
|
|
|
— |
|
Emergency Injury Disaster Loan |
|
|
150,000 |
|
|
|
149,900 |
|
|
|
1,387 |
|
|
|
1,461 |
|
Vendor note payable |
|
|
484,009 |
|
|
|
484,009 |
|
|
|
14,321 |
|
|
|
14,322 |
|
Seller note payable |
|
|
1,193,778 |
|
|
|
1,400,000 |
|
|
|
62,733 |
|
|
|
— |
|
AFCO Insurance note payable |
|
|
376,187 |
|
|
|
562,280 |
|
|
|
7,747 |
|
|
|
2,903 |
|
Pignatelli note |
|
|
500,000 |
|
|
|
— |
|
|
|
3,562 |
|
|
|
— |
|
Galileo note |
|
|
— |
|
|
|
— |
|
|
|
723 |
|
|
|
— |
|
Bridge loan |
|
|
115,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
36,110,652 |
|
|
$ |
46,743,703 |
|
|
|
|
|
|
|
||
Litigation Financing
Waiver and Consent
On January 31, 2020, Odyssey and ExO (together with Odyssey, the "Claimholder") and Poplar Falls LLC (the "Funder") entered into an Amended and Restated International Claims Enforcement Agreement (as amended, the "Agreement"), pursuant to
25
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.
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, (a) the Funder consented 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 (b) Odyssey paid a $1,000,000 nonrefundable waiver fee to the Funder. The waiver fee was accounted for as a debt modification and recorded as an additional debt discount of $1,000,000, which is being amortized through December 31, 2025, using the effective interest method, which is charged to interest expense.
For the three months ended March 31, 2023 and 2022, we recorded $81,484 and $68,140, respectively, of interest expense from the amortization of the debt discount, $36,724 and $36,724 of interest from the fee amortization, respectively, and $25,194 and $0 of interest expense from the amortization of the waiver discount, respectively. The March 31, 2023 and December 31, 2022 carrying value of the debt was $23,493,442 and $24,347,513, respectively, and was net of unamortized debt fees of $110,173 and $146,897, respectively, net of unamortized debt discount of $272,512 and $353,996, respectively, associated with the fair value of the warrant and net of the unamortized waiver fee of $974,806 and $0, respectively. The total face value of this obligation at March 31, 2023 and December 31, 2022 was $24,850,933 and $24,848,406, respectively.
DP SPV I LLC
On March 6, 2023, Odyssey entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) with an institutional investor pursuant to which Odyssey issued and sold to the investor (a) a promissory note (the “ DP SPV Note”) in the principal amount of $13.1 million and (b) a warrant (the “Warrant” and, together with the DP SPV Note, the “Securities”) to purchase shares of Odyssey’s common stock.
The principal amount outstanding under the 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 DP SPV 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 DP SPV Note (“PIK Interest”), and (b) the first quarterly interest payment due under the DP SPV Note will be satisfied with PIK Interest. The DP SPV Note provides Odyssey with the right, but not the obligation, upon notice to the holder of the DP SPV Note to redeem (x) at any time before the first anniversary of the issuance of the DP SPV 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 DP SPV Note, all or any portion of the indebtedness outstanding under the DP SPV Note (together with all accrued and unpaid interest, including PIK Interest). Unless the DP SPV Note is sooner redeemed at Odyssey’s option, all indebtedness under the DP SPV Note is due and payable on September 6, 2024. Under the terms of the 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 Purchase Agreement, and for working capital and other general corporate expenditures. Odyssey’s obligations under DP SPV Note are secured by a security interest in substantially all of Odyssey’s assets (subject to limited stated exclusions).
Under the terms of the Warrant, the holder has the right for a period of three years after issuance to purchase up to 3,465,778 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 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 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
26
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 Purchase Agreement and charged to legal expense with-in marketing, general and administrative expense. The $13.1 million in 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 a debt discount of $3,416,594, which is being amortized over the remaining term of the Purchase Agreement using the effective interest method, which is charged to interest expense.
For the three months ended March 31, 2023, we recorded $208,685 of interest expense from the amortization of the debt discount and $4,648 interest from the fee amortization, respectively. The March 31, 2023 carrying value of the debt was $9,798,236 and was net of unamortized debt fees of $93,855, net of unamortized debt discount of $3,207,909 associated with the fair value of the warrant. The total face value of this obligation at March 31, 2023 was $13,100,000.
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 exploration charters or collecting on amounts owed to us.
Our 2023 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 desired projected business plan requirements, we would be required to follow a contingency business plan that is based on curtailed expenses and fewer cash requirements. During March 2023, we entered Note and Warrant Purchase Agreement pursuant to which we issued and sold to an institutional investor a promissory note (the “Note”) in the principal amount of $13.1 million. On April 4, 2023, Odyssey entered into a $3.0 million sale/leaseback arrangement for certain of its marine equipment. A portion of the proceeds of the transaction was used to repay the note outstanding to the seller of the marine equipment that we issued in December 2022. On April 6, 2023, CIC repaid principal and interest in the aggregate amount of $1,068,000 in full satisfaction of the convertible promissory note and the Loan Agreement. The balance of the proceeds from the Note, after payment of certain obligations, the sale/leaseback arrangement and the CIC loan repayment, coupled with other anticipated cash inflows, are expected to provide operating funds through the remainder of 2023.
Our consolidated non-restricted cash balance at March 31, 2023 was $674 thousand. We have a working capital deficit at March 31, 2023 of ($32.6) million. The total consolidated book value of our assets was approximately $13.2 million at March 31, 2023, which includes cash of $674 thousand. 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 condensed 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.
New Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this update are effective for public business entities that meet the definition of a Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.
27
The amendments in ASU No. 2020-06 affect entities that issue convertible instruments and/or contracts in an entity’s own equity. For convertible instruments, the instruments primarily affected are those issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed. However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements in this update. For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope exception related to certain requirements of the settlement assessment. The FASB simplified the settlement assessment by removing the requirements (1) to consider whether the contract would be settled in registered shares, (2) to consider whether collateral is required to be posted, and (3) to assess shareholder rights. Those amendments also affect the assessment of whether an embedded conversion feature in a convertible instrument qualifies for the derivatives scope exception. Additionally, the amendments in this update affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. We adopted this ASU as of January 1, 2022.
Other recent accounting pronouncements issued by the FASB, the AICPA and the SEC did not or are not believed by management to have a material effect, if any, on the Company’s financial statements.
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.
ITEM 3. 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 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedure
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 report, 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 Chief 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 judgement in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our CEO and CFO, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act of 1934 Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation our CEO and CFO have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company may be subject to a variety of claims or 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 condensed consolidated financial statements.
ITEM 1A. Risk Factors
For information regarding risk factors, please refer to Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Investors should consider such risk factors prior to making an investment decision with respect to the Company’s securities.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 4. Mine Safety Disclosures
Not applicable
ITEM 5. Other Information
Not applicable
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ITEM 6. Exhibits
31.1 |
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31.2 |
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32.1 |
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32.2 |
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101 |
Interactive Data File |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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SIGNATURES
Pursuant to the requirements 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.
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ODYSSEY MARINE EXPLORATION, INC. |
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Date: May 12, 2023 |
By: |
/s/ Christopher E. Jones |
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Christopher E. Jones, as Chief Financial Officer and Authorized Officer |
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark D. Gordon, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Odyssey Marine Exploration, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 12, 2023
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/s/ Mark D. Gordon |
Mark D. Gordon |
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher E. Jones, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Odyssey Marine Exploration, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 12, 2023 |
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/s/ Christopher E. Jones
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Christopher E. Jones |
Chief Financial Officer and Authorized Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
ODYSSEY MARINE EXPLORATION, INC.
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I hereby certify that, to the best of my knowledge, the quarterly report on Form 10-Q of Odyssey Marine Exploration, Inc. for the period ending March 31, 2023:
(1) complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of Odyssey Marine Exploration, Inc.
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/s/ Mark D. Gordon |
Mark D. Gordon |
Chief Executive Officer |
May 12, 2023 |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Odyssey Marine Exploration, Inc. and will be retained by Odyssey Marine Exploration, Inc. and furnished to the Securities and Exchange Commission upon request.
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
ODYSSEY MARINE EXPLORATION, INC.
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I hereby certify that, to the best of my knowledge, the quarterly report on Form 10-Q of Odyssey Marine Exploration, Inc. for the period ending March 31, 2023:
(1) complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of Odyssey Marine Exploration, Inc.
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/s/ Christopher E. Jones |
Christopher E. Jones |
Chief Financial Officer and Authorized Officer |
May 12, 2023 |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Odyssey Marine Exploration, Inc. and will be retained by Odyssey Marine Exploration, Inc. and furnished to the Securities and Exchange Commission upon request.