Odyssey Marine Exploration(US:OMEX)2024-05-17 19:05Project Development and Exploration - Odyssey Marine Exploration has a diversified mineral portfolio, including projects where it holds a majority stake and others where it is a minority owner, focusing on environmentally responsible development [22]. - The ExO Phosphate Project in Mexico contains high-grade phosphate ore, with a mining license granted for 50 years, extendable for another 50 years, and is expected to provide significant benefits to Mexico's agricultural sector [35][37]. - Odyssey is seeking over $2 billion in compensation from Mexico under NAFTA due to unlawful permit denials for the ExO project, claiming that these actions have destroyed the value of its investment [42]. - The CIC Project, awarded a five-year exploration license in June 2022, has resulted in positive early sampling and operational data, with Odyssey holding approximately 14.99% equity in CIC [46][47]. - Odyssey has entered into a purchase agreement to acquire up to 40% interest in Ocean Minerals, LLC, contributing cash and a 6,000-meter ROV, with an initial closing completed in July 2023 [51]. - The Ocean Minerals project aims to develop recovery systems for high-quality polymetallic nodules, with ongoing exploration to secure environmental approvals for commercial operations [50]. - The Lihir Gold Project exploration license covers a subsea area with prospective gold targets, with an 85.6% interest in Bismarck Mining Corporation, Ltd [54]. - Previous exploration expeditions indicate the area is highly prospective for commercially viable gold content [55]. - In November 2023, a permit extension was issued to continue the exploration program, which began in late 2021 and is ongoing [56]. - Offshore survey and mapping operations produced a high-resolution acoustic terrain model of the seafloor, completed in 2022 [57]. - A comprehensive project plan was designed in the first half of 2023 to identify specific target areas for geological and environmental samples [57]. - The multi-year exploration program will focus on environmental surveys and studies to comply with Papua New Guinea's requirements [58]. - The Don Diego Phosphorite Project is located in the Mexican Exclusive Economic Zone, covering approximately 114,775 hectares of seafloor at a water depth of about 80 meters [136]. - The company holds a 56.04% interest in the Don Diego Phosphorite Project, which currently has no reportable mineral reserves [136]. - The primary concession for the project was granted in 2012, with additional adjacent concessions acquired in 2014 [136]. - The project requires approval of its Environmental and Social Impact Assessment from the Mexican Ministry of Environment and Natural Resources to commence further operations [139]. - The company is exposed to significant governmental regulations affecting operations, including the need for various licenses and permits [116]. Financial Performance and Reporting - The company reported a net income of $1.5 million in 2023, primarily due to a gain recognized on debt extinguishment, following a net loss of $23.1 million in 2022 [101]. - The company has experienced net losses in every fiscal year since inception, except for 2023 and 2004 [101]. - Total revenue for the year ended December 31, 2023 was $804,000, a decrease of $531,000 (39.8%) compared to $1.3 million in 2022 [158]. - Total operating expenses decreased by $8.0 million (41.9%) to $11.1 million in 2023 from $19.2 million in 2022 [157]. - Marketing, general and administrative expenses decreased by $2.6 million (27.4%) to $6.8 million in 2023 compared to $9.4 million in 2022 [159]. - Operations and research expenses decreased by $5.5 million (56.0%) to $4.3 million in 2023 from $9.8 million in 2022 [160]. - Total other income was $6.5 million in 2023, a change of $18.4 million from a net expense of $12.0 million in 2022 [161]. - Net cash used in operating activities for 2023 was $10.2 million, consistent with the $10.2 million used in 2022 [165]. - Cash flows provided by financing activities for 2023 were $13.8 million, including $21.4 million from loans payable issuance [169]. - The ending cash and cash equivalents increased to $4.0 million in 2023 from $1.4 million in 2022 [164]. - The non-controlling interest adjustment for 2023 was $9.2 million, up from $7.7 million in 2022 [163]. - The company did not declare any dividends in 2023 and none are anticipated in the foreseeable future [152]. - Total loans payable increased to $27.4 million as of December 31, 2023, up from $22.4 million at the end of 2022 [173]. - The company has a total debt obligation of $23.3 million as of December 31, 2023, compared to $22.4 million at the end of 2022 [171]. Internal Controls and Compliance - The company has identified material weaknesses in internal controls over financial reporting as of December 31, 2023, due to a restatement of financial information [82]. - The restatement has led to additional risks, including potential litigation and reputational issues for the company [83]. - The company aims to enhance gender and racial/ethnic diversity in management, with 50% of current employees being female [74]. - The company has identified material weaknesses in its internal control over financial reporting, which could adversely affect the accuracy and timing of financial reporting [87]. - As of December 31, 2023, the company's internal control over financial reporting was deemed ineffective due to existing material weaknesses [87]. - The company has initiated remediation measures for identified internal control weaknesses but cannot assure their adequacy for future effectiveness [87]. - The company may incur additional expenses and management time on compliance-related issues as it continues its control remediation activities [87]. Cybersecurity - Cybersecurity risks are a concern, with the company employing a comprehensive strategy for risk assessment and management [122]. - The company has not experienced material effects from cybersecurity threats due to proactive measures and advanced threat detection capabilities [130]. - The company’s cybersecurity governance includes regular updates to the board of directors on risks and incidents [132]. - The company’s incident response plan outlines roles, responsibilities, and communication strategies in the event of a cybersecurity incident [126]. Capital and Financing - The company expects the ICSID Tribunal to issue its Award in the first quarter of 2024 regarding the arbitration claim against Mexico [172]. - Odyssey issued a promissory note with a principal amount of up to $14.0 million, of which $13.1 million was advanced in March 2023 [184]. - The interest rate on the March 2023 Note is 11.0% per annum, with the first quarterly interest payment satisfied with PIK Interest [185]. - As of December 31, 2023, the carrying value of the debt was $13,116,138, net of unamortized debt fees and discounts [189]. - Odyssey entered into a Note Purchase Agreement with 37North SPV 11, LLC for a loan of $1,000,000, which was non-interest bearing and matured on July 30, 2023 [190]. - On December 1, 2023, Odyssey issued promissory notes totaling $3.75 million and additional notes of $2.25 million on December 28, 2023 [199]. - The December 2023 Notes also bear an interest rate of 11.0% per annum, with the first interest payment to be satisfied with PIK Interest [200]. - The first tranche of December 2023 Warrants allows the purchase of up to 1,411,765 shares at an exercise price of $4.25 per share [201]. - The second tranche of December 2023 Warrants allows the purchase of up to 211,565 shares at an exercise price of $7.09 per share [201]. - The total face value of the March 2023 Note obligation at December 31, 2023, was $14,858,816 [189]. - Odyssey's obligations under the December 2023 Notes are secured by a pledge of equity interests in Odyssey Marine Cayman Limited [200]. - The company entered into a Termination Agreement with Monaco, issuing 984,848 shares at $6.60 per share, totaling $6.5 million, and paying $3.0 million in cash, with $500,000 paid upon execution [205]. - A gain on debt settlement of approximately $5.2 million was recognized in Q4 2021, representing the difference between forgiven debt of approximately $14.7 million and total consideration of approximately $9.5 million [206]. - The company paid the remaining $2.5 million under the Termination Agreement on June 14, 2022 [208]. - The Litigation Financing Agreement allows for a maximum investment of $6.5 million, divided into two phases: $1.5 million for antecedent costs and $5.0 million for pursuing the claim [210][211]. - The Claimholder can request Tranche A funding of up to $3.5 million and Tranche B funding of up to $1.5 million, with specific conditions for each tranche [212]. - If the Claimholder ceases the Subject Claim, the Claims Payments convert to a senior secured liability with an annualized internal rate of return (IRR) of 50% [215]. - The Funder has the right to receive 100% of the Proceeds until the total Claims Payments are repaid, with additional compensation based on specified percentages of the investment amounts [220].