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Mortgage And Loans Payable | 12 Months Ended
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Dec. 31, 2011
Mortgage And Loans Payable [Abstract] |
Mortgage And Loans Payable | NOTE L – MORTGAGE AND LOANS PAYABLE The Company's consolidated mortgages and notes payable consisted of the following at December 31, 2011 and 2010:
|  | 2011 |  |  | 2010 |
Term loan |  | $ | 3,000,000 |  |  | $ | 5,000,000 |
Face value $10,000,000, 8% Convertible Senior Note payable |  |  | 5,316,328 |  |  |  | — |
Mortgages payable |  |  | 2,176,727 |  |  |  | 2,950,920 |
|  | $ | 10,493,055 |  |  | $ | 7,950,920 |
Term Loan On May 4, 2011, we amended our revolving credit facility with Fifth Third Bank (the "Bank") to replace it with a $5 million term loan maturing on April 23, 2012. A principal payment of $2 million was due and paid prior to August 1, 2011, and the remainder is due by maturity. The facility bears floating interest at the one-month LIBOR rate according to the Wall Street Journal plus 500 basis points. Any prepayments made in full or in part are without premium or penalty. A commitment fee of $250,000 was paid at closing. Restricted cash amounts are not required to be kept on deposit. As a condition to the loan renewal, we were required to amend the Loan Agreement (mortgage payable) for our corporate real estate facility, which is due to mature on July 11, 2013, whereby we were required to pay additional principal to meet an 80% loan-to-value (LTV) based upon an independent real estate appraisal. The additional monthly principal payments were $100,000 per month until the loan balance met the 80% LTV. Based on this condition, we remitted $600,000 in 2011 and the final $ $43,750 in January 2012. In March 2012, the bank provided a term sheet which increases this term loan to $5 million (an additional $2 million) and will extend the maturity to mid-2013. Terms and conditions are similar to the terms and conditions of our current term loan. We expect to close on this new term loan within the next month. The amended term loan is secured by approximately 27,000 numismatic coins which had a carrying value of $5,879,137 that were recovered from the SS Republic shipwreck, which amount will be reduced over the term by the amount of coins sold by the Company. The coins used as collateral are held by a custodian for the security of the Bank. The borrowing base is equal to forty percent (40%) of the eligible coin inventory valued on a rolling twelve-month wholesale average value which was $16.3 million at December 31, 2011. The Company is required to comply with a number of customary covenants. Revolving Credit Facility On February 7, 2008, we entered into a $5 million revolving credit facility with Fifth Third Bank (the "Bank"). The credit facility had a floating interest rate equal to the "Prime Rate" plus fifty basis points (.50%), required monthly payments of interest only and was originally due in full February 7, 2010, with a 90-day extension granted until May 7, 2010. On April 23, 2010, the Bank renewed the credit facility which became due in full on April 23, 2011. The facility required us to pay the Bank an unused line fee equal to one-half percent (0.50%) per annum of the unused portion of the credit line. The line of credit was originally secured by a restricted cash balance (See NOTE D) as well as approximately 28,500 coins recovered from the SS Republic shipwreck. The coin inventory balance that secured the debt was to be reduced over the term by the amount of coins sold. The modified borrowing base was equal to forty percent (40%) of the eligible coin inventory calculated on a rolling twelve-month wholesale average value. Odyssey was required to comply with a number of customary affirmative and negative covenants. The significant covenants included: maintaining insurance on the inventory; ensuring the collateral is free from encumbrances and without the consent of the Bank, the Company cannot merge or consolidate with or into any other corporation or entity nor can the Company enter into a material debt agreement with a third party. Senior Convertible Note During November 2011, we entered into a securities purchase agreement (the "Purchase Agreement") with one institutional investor pursuant to which we issued and sold a Senior Convertible Note in the original principal amount of $10.0 million (the "Initial Note") and a warrant (the "Warrant") to purchase up to 1,302,083 shares of our common stock. Subject to the satisfaction of conditions set forth in the Purchase Agreement, we have the right to require the investor to purchase an additional senior convertible note in the original principal amount of up to $5.0 million on the six-month anniversary of the initial closing date (the "Additional Note" and, collectively "Notes"). Aggregate direct finance costs amounted to $545,000 of which $45,000 related to costs of the lender and, accordingly, were included in the original issue discount on the Initial Note. The indebtedness evidenced by the Note bears interest at 8.0% percent per year (15% under default conditions, if ever). Interest is compounded monthly and payable quarterly at the beginning of each calendar quarter. The Note is amortized with equal monthly principal installments of $434,783 commencing on July 8, 2012. Prepayment is not allowed. Further, the Note may be converted into our common stock, at the option of the holder, at any time following issuance, with respect to the Initial Note, or at any time following six months after the date of issuance, with respect to the Additional Note. The initial conversion price of the Initial Note is $3.74, subject to adjustment on the six-month anniversary of the initial closing date as follows: The reset conversion price applicable to the Initial Note will be adjusted to the lesser of (a) the then current conversion price and (b) the greater of (i) $1.44 and (ii) 110.0% of the market price of our common stock on the six-month anniversary of the initial closing date (as applicable, the "Conversion Price"). The conversion price is also subject to adjustment for stock splits, stock dividends, recapitalizations, and similar transactions. We have agreed to pay each amortization payment in shares of our common stock, if certain conditions are met; provided, that we may, at our option, elect to pay such amortization payments in cash. The conversion rate applicable to any amortization payment that we make in shares of our common stock will be the lower of (a) the Conversion Price and (b) a price equal to 85.0% of the volume-weighted average price of our shares of common stock for a ten-day period immediately prior to the applicable amortization date. The Note provides for redemption upon the occurrence of an event of default. Default conditions include non-servicing of the debt and certain other credit risk related conditions. Default conditions also include certain equity indexed events including failures to file public information documents, non-conversion or insufficient share authorizations to effect conversion and failure obtain and maintain an effective registration statement covering the underlying common shares. The remedies to the investor for events of default include acceleration of payment at 125% of the remaining face value in certain circumstances. In the event the default redemption is not paid, the investor would have the right to elect conversion of the note at an adjusted conversion price approximating 75% of quoted market prices. A change in control would also result in a redemption requirement at 125% of the face value. The Notes extend no voting rights to the investors. However, the Notes extend participation rights in dividend payments, if any, made to the holders of the Company's common or other class of stock, except our Series G Preferred Stock. Under the terms of the Warrant, the holder is entitled to exercise the Warrant to purchase up to 1,302,083 shares of our common stock at an initial exercise price of $4.32 per share, during the five-year period beginning on the six-month anniversary of the initial closing date; provided, that 434,027 shares of our common stock issuable upon exercise of the Warrant may not be exercised unless the investor has purchased the Additional Note. On the six-month anniversary of the initial closing date, the exercise price applicable to the Warrant will be adjusted to the lesser of (a) the then current exercise price and (b) 125.0% of the market price of our common stock on the six-month anniversary of the initial closing date (as applicable, the "Exercise Price"). The Exercise Price is also subject to adjustment for stock splits, stock dividends, recapitalizations, and similar transactions. We are generally prohibited from issuing shares of common stock upon exercise of the Warrant if such exercise would cause us to breach our obligations under the rules or regulations of the stock market on which the common stock is traded. In connection with the financing, we entered into a registration rights agreement pursuant to which we agreed to file a registration statement with the Securities and Exchange Commission (with the "SEC") relating to the offer and sale by the investor of the shares of common stock issuable upon conversion of the Notes and the exercise of the Warrant. Pursuant to the agreement, we are required to file the registration statement within six months of the initial closing date and to use its best efforts for the registration statement to be declared effective 90 days thereafter (or 120 days thereafter if the registration statement is subject to review by the SEC). We have accounted for the Initial Note and Warrants issued for cash as a financing transaction, wherein the net proceeds that we received were allocated to the financial instruments issued. Prior to making the above accounting allocation, we evaluated the Initial Note and the Warrants for proper classification under ASC 480 Distinguishing Liabilities from Equity ("ASC 480") and ASC 815 Derivatives and Hedging ("ASC 815"). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the conversion option and related conversion reset price protection, the Company's redemption privilege, and certain redemption rights that were indexed to equity risks. The conversion option and conversion reset price protection, along with the redemption features bearing risks of equity, were not clearly and closely related host debt agreement and required bifurcation. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative. The Warrants had terms of five and one-half years and an exercise price of $4.32. The contractual exercise price is subject to adjustment for both traditional recapitalization events as is also subject to reset on the sixth month anniversary of issuance. Although the warrants did not fall within the scope of ASC 480, the warrants required derivative liability accounting because the conversion price reset protection terms are not consistent with the definition for financial instruments indexed to a company's own stock. Based on the previous conclusions, we allocated the cash proceeds first to the derivative components at their fair values (see NOTE K) with the residual allocated to the host debt contract, as follows:
|  | Allocation |
Initial Note |  | $ | 4,910,862 |
Compound embedded derivative |  |  | 2,989,537 |
Derivative warrants |  |  | 2,054,601 |
|  | $ | 9,955,000 |
The basis that was subject to allocation included the gross proceeds of $10,000,000, less costs of the investor paid out of proceeds that amounted to $45,000. We also allocated the direct financing costs of $500,000 to the note payable and the derivative components based upon the relative fair values of these financial instruments. As a result of this allocation, $246,653 was recorded in deferred costs and $253,347 was recorded as expense. The financing basis allocated to the notes payable and the deferred asset arising from direct finance costs are subject to amortization with periodic charges to interest expense using the effective interest method. Amortization of these components included in interest expense during the year ended December 31, 2011 amounted to $425,116. The derivative components are subject to re-measurement to fair value at the end of each reporting period with the change reflected in income. See Note K for information about our derivatives. Mortgages Payable On July 11, 2008, we entered into a mortgage loan with Fifth Third Bank. Pursuant to the Loan Agreement, we borrowed $2,580,000. The loan bears interest at a variable rate equal to the prime rate plus three-fourths of one percent (0.75%) per annum. The loan matures on July 11, 2013, and requires us to make monthly principal payments in the amount of $10,750 plus accrued interest. This loan is secured by a restricted cash balance (See NOTE D) as well as a first mortgage on our corporate office building which has a carrying value of $2,539,259. This loan contains customary representations and warranties, affirmative and negative covenants, conditions, and other provisions. During May 2008, we entered into a mortgage loan in the principal amount of $679,000 with The Bank of Tampa to purchase our conservation lab and storage facility. This obligation has monthly payment of $5,080 and a maturity date of May 14, 2015. Principal and interest payments are payable monthly. Interest is at a fixed annual rate of 6.45%. This debt is secured by the related real property which has a carrying value of $926,873. The seller is carrying a second mortgage for $100,000 with interest due monthly and $25,000 of principal due each May. The first principal payment was made in May 2009. The interest is at a variable rate of 1.0% above the prime interest rate stated by BB&T, formerly Colonial Bank of Tampa. This obligation has a maturity date of May 14, 2012 and is secured by the related real property. Long-Term Obligation Maturities:
|  | Total |  |  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | 2016 |  |  | More than 5 years |
Long term obligations |  | $ | 12,176,727 |  |  | $ | 2,828,553 |  |  | $ | 6,607,466 |  |  | $ | 2,199,055 |  |  | $ | 541,653 |  |  | $ | — |  |  | $ | — |
Operating leases |  |  | 8,868,261 |  |  |  | 4,102,554 |  |  |  | 4,102,554 |  |  |  | 663,153 |  |  |  | — |  |  |  | — |  |  |  | — |
Interest on obligations |  |  | 1,363,560 |  |  |  | 841,997 |  |  |  | 436,335 |  |  |  | 65,897 |  |  |  | 19,331 |  |  |  | — |  |  |  | — |
Total obligations |  | $ | 22,408,548 |  |  | $ | 7,773,104 |  |  | $ | 11,146,355 |  |  | $ | 2,928,105 |  |  | $ | 560,984 |  |  | $ | — |  |  | $ | — |
Long-term obligations represent the amount due on our existing mortgages and convertible note as described above. The operating lease represents our vessel charter. The vessel charter has a lease period March 2010 to February 2014 as well as a ninety-day termination notice clause.

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