Restatement of Consolidated Financial Statements

12 Months Ended

Dec. 31, 2023

Restatement Of Consolidated Financial Statements [Abstract]

Restatement of Consolidated Financial Statements

NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

During the preparation of our consolidated financial statements for the period ended September 30, 2023, the Company reevaluated its accounting treatment of the International Claims Enforcement Agreement (the “Agreement” and the funding provided pursuant to the Agreement, as amended or amended and restated from time to time, the “Litigation Financing”) entered into on June 14, 2019, by 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”), pursuant to which the Funder agreed to provide funding to the Claimholder to facilitate the prosecution and recovery of the claim by the Claimholder against the United Mexican States under Chapter Eleven of the North American Free Trade Agreement (“NAFTA”) for violations of the Claimholder’s rights under NAFTA related to the development of an undersea phosphate deposit off the coast of Baja Sur, Mexico (the “Project”), on our own behalf and on behalf of ExO and United Mexican States (the “Subject Claim”). We determined that the Litigation Financing should be accounted for and classified as a derivative liability on the balance sheet, measured at fair value at each reporting date, with the corresponding change in market value being accounted for in the statement of operations with fees recognized as expenses when incurred. At the inception of the Litigation Financing in 2019, the Company, with the assistance of external accounting advisors, concluded that it should account for the Litigation Financing as a loan payable, and the related accrued interest as a short-term liability, in its consolidated financial statements beginning in the second quarter of 2019. We accounted for the Litigation Financing accordingly in our financial statements beginning with the interim period ended June 30, 2019, through the interim period ended June 30, 2023.

The change in accounting treatment does not reflect any change in the Company’s expectations regarding the outcome of the Arbitration or any amendment or modification of the Litigation Financing, or of the Company’s anticipated cash flows. It is a change in the accounting treatment of the Litigation Financing resulting in certain adjustments in the financial statements.

Our opening stockholders’ deficit at January 1, 2022 was adjusted by the amount of $4,501,234 as a result of this restatement.

Additional Corrections

During the preparation of our consolidated financial statements for the period ended September 30, 2023, and the restated consolidated financial statements, we reevaluated our accounting treatment with respect to certain other transactions and determined that there were certain errors in the accounting treatment of those transactions. The Company has corrected the accounting of those transactions in these financial statements.

The accounting treatments corrected in the restated financial statements include the following:

CIC Equity Investment Adjustment

– A correction of an error was made to Loss on Equity Method Investment of $503,100 during the year ended December 31, 2022, to correct its investment in CIC LLC as an equity method investment through August 31, 2020, when our investment in CIC LLC was converted to an investment in CIC Limited. The CIC LLC investment was incorrectly recorded under the cost method. We no longer have an investment in CIC LLC. Our investment is now in CIC Limited, which is accounted for as a cost method investment.

CIC Services Agreement Adjustment

– Under the terms of the Master Services Agreement (“MSA”), Odyssey provides services to CIC Limited in return for additional CIC Limited Shares at a fixed price (“Service Option”). Additionally, the MSA includes an option to purchase CIC Limited Shares that have not been exchanged for services at a fixed price (“Cash Option”). Odyssey Management determined that revenue from the Service Option provided subject to the MSA are within the scope of ASC 606. A correction of an error was made to record the $1,488,973 fair value of the Cash Option with a contra liability in the form of a deferred revenue at January 1, 2022. Subsequently, corrections of an error at December 31, 2022 was recorded based on the settlement of the MSA through services provided or cash settlement.

2022 Warrant Issuance

Adjustment

– Management determined that the 2022 Warrants previously accounted for as equity are not indexed to the Company’s own stock, and as such, they are accounted for as derivative liabilities and subsequently remeasured to fair value at each reporting date with changes in fair value being recorded in earnings. During the second quarter of 2022, a correction of an error was made to reclassify from Equity to Derivative Financial Instrument as described in this Note.

Other Adjustments:

•

Monaco Note Payable Adjustmen

t - Management determined that the Beneficial Conversion Feature within the Monaco Termination and Settlement Agreement is an embedded derivative and should be initially and subsequently measured at fair value, with changes in fair value reported in earnings. A correction of an error was made to Equity to record the fair value of the Beneficial Conversion Feature of $232,175 at December 31, 2022.

•

Capitalization of ROV Expense adjustment

– The Company capitalized refurbishments costs of its Retriever asset that were previously expensed of $131,123 during the year ended December 31, 2022.

The following presents a reconciliation of the impacted financial statement line items as previously reported to the restated amounts as of and for the year ended December 31, 2022:


	Consolidated Balance Sheet As of December 31, 2022
Corrected Consolidated Balance Sheet	As Reported			Litigation Financing Adjustment			Investment in Unconsolidated Entities Adjustments			2022 Warrant Adjustment			Other Adjustment			As Restated
ASSETS
Investment in unconsolidated entities		4,404,717			—			(503,100	)		—			—			3,901,617
Option to purchase equity securities in related parties		—			—			960,968			—			—			960,968
Property and equipment, net		2,746,467			—			—			—			131,123			2,877,590
Total assets	$	13,281,836		$	—		$	457,868		$	—		$	131,123		$	13,870,827

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	2,285,892		$	—		$	—		$	—		$	2			2,285,894
Accrued expenses		40,481,204			(22,865,695	)		—			—			(2	)		17,615,507
Loans payable		25,011,049			(24,347,513	)		—			—			—			663,536
Litigation financing and other		—			45,368,948			—						—			45,368,948
Deferred revenue		—			—			960,968			—			—			960,968
Warrant liability		—			—			—			13,602,467			—			13,602,467
Total liabilities		89,826,594			(1,844,260	)		960,968			13,602,467			—			102,545,769

Commitments and contingencies (Note 18)
STOCKHOLDERS’ DEFICIT					—			—			—			—
Additional paid-in capital		265,882,279			—			—			(8,919,015	)		—			256,963,264
Accumulated deficit		(298,231,607	)		1,844,260			(503,100	)		(4,683,452	)		131,123			(301,442,776	)

Total liabilities and stockholders’ deficit	$	13,281,836		$	—		$	457,868		$	—		$	131,123		$	13,870,827


	Consolidated Statement of Operations For the Twelve Months Ended December 31, 2022
Corrected Consolidated Statements of Operations	As Reported			Litigation Financing Adjustment			2022 Warrant Adjustment			Other Adjustment			As Restated
Marketing, general and administrative		8,487,070			(146,896	)		1,087,254			—			9,427,428
Operations and research		9,891,593			—			—			(131,123	)		9,760,470

Total operating expenses		18,378,663			(146,896	)		1,087,254			(131,123	)		19,187,898

INCOME (LOSS) FROM OPERATIONS		(17,043,961	)		146,896			(1,087,254	)		131,123			(17,853,196	)
OTHER INCOME (EXPENSE)
Interest expense		(14,086,466	)		11,784,671			—			—			(2,301,795	)
Change in derivative liabilities fair value		—			(6,086,172	)		(3,828,373	)		—			(9,914,545	)
Total other income (expense)		(13,839,361	)		5,698,499			(3,828,373	)		—			(11,969,235	)

NET INCOME / (LOSS)	$	(23,140,750	)	$	5,845,395		$	(4,915,627	)	$	131,123		$	(22,079,859	)

NET INCOME / (LOSS) PER SHARE
Basic (See Note 2)	$	(1.34	)		0.34			(0.28	)		0.01		$	(1.28	)

Diluted (See Note 2)	$	(1.34	)		0.34			(0.28	)		0.01		$	(1.28	)

Weighted average number of common shares outstanding
Basic		17,310,915			—			—			—			17,310,915

Diluted		17,310,915			—			—			—			17,310,915


Consolidated Statements Changes in Stockholders’ Equity	Preferred Stock – Shares		Common Stock – Shares		Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Non-controlling Interest			Total
Balance at December 31, 2022 (As previously reported)		—		19,540,310	$	—	$	1,954	$	265,882,279		$	(298,231,607	)	$	(44,197,384	)	$	(76,544,758	)

Litigation Financing Adjustment		—		—		—		—		—			1,844,260			—			1,844,260
Investment in Unconsolidated Entities Adjustments		—		—		—		—		—			(503,100	)		—			(503,100	)
2022 Warrant Adjustment		—		—		—		—		(8,686,840	)		(4,915,627	)		—			(13,602,467	)
Other Adjustment		—		—		—		—		(232,175	)		363,298			—			131,123

Cumulative restatement adjustments		—		—		—		—		(8,919,015	)		(3,211,169	)		—			(12,130,184	)

Balance at December 31, 2022 (As Restated)		—		19,540,310	$	—	$	1,954	$	256,963,264		$	(301,442,776	)	$	(44,197,384	)	$	(88,674,942	)


	For the Twelve Months Ended December 31, 2022
Corrected Consolidated Statements of Cash Flows	As Reported			Litigation Financing Adjustment			2022 Warrants Adjustment			Other Adjustments			As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before non-controlling interest	$	(30,883,322	)	$	5,845,395		$	(4,915,627	)	$	131,123		$	(29,822,431	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in derivatives liabilities fair value		—			6,086,172			3,828,373			—			9,914,545
Accrued expenses and other		14,651,375			(11,931,567	)		—			—			2,719,808

NET CASH USED IN OPERATING ACTIVITIES		(9,253,809	)		—			(1,087,254	)		(131,123	)		(10,209,940	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,346,424	)		—			—			(131,123	)		(1,477,547	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(2,346,424	)		—			—			(131,123	)		(2,477,547	)


	As Reported			Litigation Financing Adjustment		2022 Warrants Adjustment		Other Adjustments		As Restated
CASH FLOWS FROM FINANCING ACTIVITIES:
Offering cost paid on financing		—			—		1,087,254		—		1,087,254
NET CASH PROVIDED BY FINANCING ACTIVITIES		10,768,903			—		1,087,254		—		11,856,157

NET INCREASE (DECREASE) IN CASH		(831,330	)		—		—		—		(831,330	)
CASH AT BEGINNING OF YEAR		2,274,751			—		—		—		2,274,751

CASH AT END OF YEAR	$	1,443,421		$	—	$	—	$	—	$	1,443,421