ODYSSEY MARINE EXPLORATION, INC. 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
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
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
Subsea Mineral Mining Exploration Projects
The "Exploraciones Oceanicas"
The deposit lies within an exclusive mining concession licensed to the Mexican
company Exploraciones Oceánicas
In 2012, ExO was granted a 50-year mining license by
We spent more than three years preparing an environmentally sustainable development plan with the assistance of experts in marine dredging and leading environmental scientists from around the world. Key features of the environmental plan included:
•
No chemicals would be used in the dredging process or released into the sea.
•
A specialized return down pipe that exceeds international best practices to
manage the return of dredged sands close to the seabed, limiting plume or impact
to the water column and marine ecosystem (including primary production).
•
The seabed would be restored after dredging in such a way as to promote rapid
regeneration of seabed organisms in dredged areas.
•
Ecotoxicology tests demonstrated that the dredging and return of sediment to the
seabed would not have toxic effects on organisms.
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•
Sound propagation studies concluded that noise levels generated during dredging would be similar to whale-watching vessels, merchant ships and fisherman's ships that already regularly transit this area, proving the system is not a threat to marine mammals. • Dredging limited to less than one square kilometre each year, which means the project would operate in only a tiny proportion of the concession area each year. • Proven turtle protection measures were incorporated, even though the deposit and the dredging activity are much deeper and colder than where turtles feed and live, making material harm to the species highly remote. • There will be no material impact on local fisheries as fishermen have historically avoided the water column directly above the deposit due to the naturally low occurrence of fish there. • The project would not be visible from the shoreline and would not impact tourism or coastal activities. • Precautionary mitigation measures were incorporated into the development plan in line with best-practice global operational standards. • The technology proposed to recover the phosphate sands has been safely used in Mexican waters for over 20 years on more than 200 projects.
Notwithstanding the factors stated above, in
ExO challenged the decision in Mexican Federal court and in
Our claim seeks compensation of over
•
Article 1102. National Treatment. • Article 1105. Minimum Standard of Treatment; and • Article 1110. Expropriation and compensation.
We filed First Memorial in the
•
MERITS: Testimony from independent environmental experts that the environmental impact of ExO's phosphate project is minimal and readily mitigated by the mitigation measures proposed by ExO. Witnesses also testified thatMexico's denial of environmental approval by the prior administration was politically motivated and not justified on environmental grounds, and thatMexico granted environmental permits to similar dredging projects in areas that are considered more environmentally sensitive than ExO's project location. • RESOURCE: An independent certified marine geologist testified as to the size and character of the resource. • OPERATIONAL VIABILITY: Engineering experts testified that the project uses established dredging and processing technology, and the project's anticipated CAPEX and OPEX was reasonable. • VALUE: A phosphate market analyst testified that the project's projected CAPEX and OPEX would make the project one of the lowest cost phosphate rock resources in the world, and damages experts testified the project would be commercially viable and profitable.
Odyssey filed its First Memorial in the case on
On
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increased to
The exploration license for the
Previous exploration expeditions in the license area, including a survey conducted by Odyssey, indicate it is highly prospective for commercially viable gold content.
In
Offshore survey and mapping operations commenced in
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.
Odyssey is a member of the
In
Through a wholly owned subsidiary, we have earned and now hold a position of approximately 13.88% of the current outstanding equity units of CIC. We have the ability to earn up to 20.0 million equity units over the next several calendar years, which represents an approximate 16.0% interest in CIC based on the currently outstanding equity units. This means we can earn approximately 3.5 million additional equity units in CIC under our current services agreement. We achieved our current equity position through the provision of services rendered to this venture, see NOTE D.
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In
Odyssey reached an exclusive agreement early in 2022 with
Pending execution of the definitive agreement, Odyssey will manage the overall
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
Critical Accounting Policies and Changes to Accounting Policies
There have been no material changes in our critical accounting estimates since
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
Increase/(Decrease) 2022 vs. 2021 (Dollars in thousands) 2022 2021 $ % Total revenues$ 390 $ 182 $ 208 0 %
Marketing, general and administrative 2,292 1,700
1,230 3,429 $ (2,199 ) 181.3 %
Total operating expenses $ 3,522 $ 5,129 $ (1,607 ) 125.8 %
Total other income (expense) $ (3,410 ) $ 1,191 $ (4,601 ) 46.8 %
Income tax benefit (provision) $ - $ - $ - 0 %
Non-controlling interest $ 1,858 $ 1,528 $ 330 32.6 %
Net income (loss) $ (4,683 ) $ (2,227 ) $ (2,456 ) 121.2 %
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
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Operating Expenses
Marketing, general and administrative expenses primarily include all costs
within the following departments: Executive, Finance & Accounting, Legal,
Information Technology, Human Resources,
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
Total Other Income and Expense
Total other income and expense was
Taxes and Non-Controlling Interest
Due to losses, we did not accrue any taxes in either period ending 2022 or 2021.
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
Six months ended
Increase/(Decrease) 2022 vs. 2021 (Dollars in millions) 2022 2021 $ % Total revenues$ 690 $ 474 $ 216 0 %
Marketing, general and administrative 4,211 2,991
6,286 5,227 $ 1,059 181.3 %
Total operating expenses $ 10,497 $ 8,218 $ 2,279 125.8 %
Total other income (expense) $ (6,826 ) $ (1,135 ) $ (5,691 ) 46.8 %
Income tax benefit (provision) $ - $ - $ - 0 %
Non-controlling interest $ 3,719 $ 2,931 $ 788 32.6 %
Net income (loss) $ (12,914 ) $ (5,948 ) $ (6,966 ) 121.2 %
Revenue
Total revenue for the six months ended
Operating Expenses
Marketing, general and administrative expenses increased
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share-based compensation of
Operations and research expenses increased by
Total Other Income and Expense
Total other income and expense was
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