What changed in this filing

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Item 1A. Risk Factors

2025-03-31 compared with 2024-05-17 · 58 added, 50 removed, 152 unchanged (42% of the section changed)

You should carefully consider the following factors, in addition to the other information in this Comprehensive Form 10-K, in evaluating our company and our business.

You should carefully consider the following factors, in addition to the other information in this Annual Report on Form 10-K, in evaluating our company and our business.

Our business, operations and financial condition are subject to various risks.

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If this occurs, the trading price of our common stock could decline, and you could lose all or part of the money you paid to buy our common stock.

We face risks related to the Restatement of our financial information and the material weaknesses in our internal control over financial reporting, as described in Item 9A – Controls and Procedures and Note 2- Restatement of Consolidated Financial Statements.

We face risks related to the recent restatement of our financial information and the material weakness in our internal control over financial reporting.

We are subject to various SEC reporting and other regulatory requirements.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud and material errors in transactions and to fairly present financial statements.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to

prevent fraud and material errors in transactions and to fairly present financial statements.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

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Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.

As discussed in the Explanatory Note to this Comprehensive Form 10-K and in NOTE 2 to the restated audited annual consolidated financial statements included in this Comprehensive Form 10-K, we determined to restate certain financial information in our previously issued consolidated financial statements for the year ended December 31, 2022, and for the interim periods ended March 31, 2023 and 2022, June 30, 2023 and 2022, and September 30, 2022.

The circumstances leading to the Restatement of our previously issued financial statements, and our efforts to investigate, assess and remediate those matters have resulted in substantial costs in the form of accounting, legal fees, and similar professional fees, in addition to the substantial diversion of time and attention of our senior management and members of our accounting team in preparing the Restatement.

In addition, as a result of the Restatement, we have identified material weaknesses in our internal controls over financial reporting.

As discussed in the Explanatory Note to our Comprehensive Report on Form 10-K for the year ended December 31, 2023, we determined to restate certain financial information in our previously issued consolidated financial statements for the year ended December 31, 2022, and for the interim periods ended March 31, 2022 and 2023, June 30, 2022 and 2023, and September 30, 2022.

The circumstances leading to the restatement of our previously issued financial statements, and our efforts to investigate, assess, and remediate those matters have resulted in substantial costs in the form of accounting, legal, and similar professional fees, in addition to the substantial diversion of time and attention of our senior management and members of our accounting team in preparing the restated financial statements and information.

In addition, as a result of the restatement, we identified material weaknesses in our internal controls over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

While we have undertaken substantial work to maintain effective internal controls and have taken action to remediate the material weaknesses identified in connection with the Restatement, we cannot be certain that we will be successful in our remediation efforts or in maintaining adequate internal controls over our financial reporting.

As a result of the material weaknesses, management determined that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2023.

Although we have undertaken substantial work to maintain effective internal controls and have taken action to remediate the material weaknesses identified in connection with the restatement, we cannot be certain that we will be successful in our remediation efforts or in maintaining adequate internal controls over our financial reporting.

As a result of those material weaknesses, management determined that our internal control over financial reporting and disclosure controls and procedures were ineffective as of December 31, 2023, that has not been fully remediated as of December 31, 2024.

If we fail to maintain an effective system of internal controls over financial reporting and disclosure controls and procedures, we may not be able to accurately determine our results of operations or financial conditions or to prevent fraud.

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We expect to continue to face the risks and challenges related to the restatement, including the following:

(i) we may face potential litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims, or other claims arising from the Restatement;

(ii) the SEC may review the restatements, including the Restatement, and require further amendment of our public filings;

and (iii) the processes undertaken to effect the Restatement may not have been adequate to identify and correct all errors in our historical financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement.

(a) we may face potential litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims, or other claims arising from the restatement;

(b) the SEC may review the restatements and require further amendment of our public filings;

and (c) the processes undertaken to effect the restatement may not have been adequate to identify and correct all errors in our historical financial statements and, as a result, we may discover additional errors and our financial statements remain subject to the risk of future restatement.

We cannot provide assurance that all of the risks and challenges described above will be eliminated or that general reputational harm will not persist.

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We face risks related to being delinquent in our SEC reporting obligations.

Primarily due to the matters that led to our restatement of prior financial statements and the material weaknesses identified in connection therewith, which are more fully detailed in NOTE 2 – Restatement of Consolidated Financial Statements and Item 9A – Controls and Procedures, immediately prior to the filing of this Comprehensive Form 10-K, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, and our Annual Report for the year ended December 31, 2023, were not timely filed.

We expect to continue to face many of the risks and challenges related to the matters that led to the delay in the filing of that Quarterly Report and Annual Report, including the following:

Primarily due to the matters that led to our restatement of prior financial statements and the material weaknesses identified in connection therewith, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023, and our Annual Report on Form 10-K for the year ended December 31, 2023, were not timely filed.

We expect to continue to face many of the risks and challenges related to the matters that led to the delay in the filing of such Form 10-Q and Form 10-K reports, including the following:

• we may fail to remediate material weaknesses in our internal control over financial reporting and other material weaknesses may be identified in the future, which would adversely affect the accuracy and timing of our financial reporting;

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If any of the foregoing risks or challenges persists, our business, operations, and financial condition are likely to be materially and adversely affected.

We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

We have concluded that our internal control over financial reporting was not effective as of December 31, 2023 and prior periods, due to the existence of material weaknesses in our internal control over financial reporting, all as described in Part II, Item 9A - Controls and Procedures of this Comprehensive Form 10-K.

Although we have initiated remediation measures to address the identified material weaknesses, we cannot provide assurance that our remediation efforts will be adequate to allow us to conclude that such controls will be effective in the future.

We also cannot assure that additional material weaknesses in our internal control over financial reporting will not arise or be identified in the future.

We have identified material weaknesses in our internal control over financial reporting and may identify other material weaknesses in our internal control over financial reporting in the future, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.

We have concluded that our internal control over financial reporting was not effective as of December 31, 2024, September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and certain prior periods, due to the existence of material weaknesses in our internal control over financial reporting.

Although we have initiated and continue to apply remediation measures to address the identified material weaknesses, we cannot assure that additional material weaknesses in our internal control over financial reporting will not arise or be identified in the future.

We intend to continue our control remediation activities and to continue to improve our overall control environment and our operational, information technology, financial systems, and infrastructure procedures and controls, as well as to continue to train, retain, and manage our personnel who are essential to effective internal controls.

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In projects where Odyssey takes a minority ownership position in the company holding the mining rights, there may be uncertainty as to that company’s ability to move the project forward.

We may continue to experience significant losses from operations.

We have experienced a loss from operations in every fiscal year since our inception except for the year ended December 31, 2004.

Our losses from operations for the years ended December 31, 2024 and 2023, were $12.0 million and $10.3 million, respectively.

Even if we do generate operating income in one or more periods in the future, subsequent developments in our industry, customer base, business or cost structure or an event such as significant litigation or a significant transaction may cause us to again experience operating losses.

We may not become profitable for the long term, or even for any quarter.

The audit report covering our consolidated financial statements contains an explanatory paragraph that states that the Company’s operating losses and need for additional capital to fund operations and capital expenditures raise substantial doubt about our ability to continue as a going concern.

The research and data we use may not be reliable.

The success of a mineral project is dependent to a substantial degree upon the research and data we or others have obtained.

The success of a mineral project is dependent to a substantial degree upon the research and data we or a contracting party have obtained.

By its very nature, research and data regarding mineral deposits can be imprecise, incomplete, outdated, and unreliable.

For mineral exploration, data is collected based on a sampling technique and available data may not be representative of the entire ore body or tenement area.

Prior to conducting offshore exploration, we typically conduct onshore research, which relies heavily on third-party data and reports.

Prior to conducting offshore exploration, we typically conduct onshore research.

There is no guarantee that the models and research conducted onshore will be representative of actual results on the seafloor.

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Operations may be affected by natural hazards.

Underwater exploration and extraction operations are inherently difficult and may be delayed or suspended by weather, sea conditions or other natural hazards.

Further, such operations may be undertaken more reliably during certain months of the year than others.

Underwater exploration and extraction operations are inherently difficult and dangerous and may be delayed or suspended by weather, sea conditions or other natural hazards.

Further, such operations may be undertaken more safely during certain months of the year than others.

We cannot guarantee that we, or the entities we are affiliated with, will be able to conduct exploration, sampling or extractions operations during favorable periods.

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Seabed mineral extraction work may be subject to interruptions resulting from storms that adversely affect the extraction operations or the ports of delivery.

Project planning considers these risks to the extent practicable.

Project planning considers these risks.

We may be unable to establish our rights to resources or items we discover or recover.

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Mineral deposits may be in controlled waters where the policies and laws of a certain government may change abruptly, thereby adversely affecting our ability to operate in those zones.

We have a process for evaluating this risk in our proprietary Global Prospectivity Program which enables us to rank and prioritize projects.

We have a process for evaluating this risk in our proprietary “Global Prospectivity Program”.

The market for minerals we recover is uncertain.

During the time, measured in years, between when a mineral deposit is discovered and the first extracted minerals are sold, world and local prices for the mineral may fluctuate drastically and thereby adversely affect the economics of the mineral project.

During the time between when a mineral deposit is discovered and the first extracted minerals are sold, world and local prices for the mineral may fluctuate drastically and thereby adversely affect the economics of the mineral project.

We could experience delays in the disposition or sale of minerals.

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As a result, when we are conducting projects in certain areas of the world for our own account or on our behalf of a contracting party, we may be subjected to unexpected delays, requests, and outcomes as we work with local governments to define and obtain the necessary permits and to assert our claims over assets on the seafloor bottom.

Vessels on which we work, equipment, personnel and or cargo could be seized or detained by government authorities.

Our vessel, equipment, personnel and cargo could be seized or detained by government authorities.

We may have to work with different units of a government, and there may be a change of government representatives over time.

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This may result in delays to project timelines and incremental costs to the company to implement strategies to mitigate and counter NGO activities.

We may be unable to get permission to conduct exploration, excavation, or extraction operations.

It is possible we will not be successful in obtaining the necessary permits to conduct exploration or excavation or extraction operations.

We may be unable to get permission to conduct exploration and extraction operations.

It is possible we will not be successful in obtaining the necessary permits to conduct exploration and extraction operations.

In addition, permits we obtain may be revoked or not honored by the entities that issued them.

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We may be unsuccessful in raising the necessary capital to fund operations and capital expenditures.

Our ability to generate cash inflows is dependent upon our ability to provide mineral exploration and development services to our subsidiaries and other subsea mineral companies or monetize mineral rights or monetize our investments in third-party projects.

However, we cannot guarantee that the sales and other cash sources will generate sufficient cash inflows to meet our overall cash requirements.

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We may not be able to retain highly qualified employees in the future which could adversely affect our business.

We may continue to experience significant losses from operations.

We have experienced a net loss in every fiscal year since our inception except for 2023 and 2004.

We had net income in 2023 of $1.5 million only as a result of a gain recognized on debt extinguishment.

Our net losses were $23.1 million in 2022.

Even if we do generate operating income in one or more quarters in the future, subsequent developments in our industry, customer base, business or cost structure or an event such as significant litigation or a significant transaction may cause us to again experience operating losses.

We may not become profitable for the long-term, or even for any quarter.

We depend on consultants and subcontractors to perform services in certain technical areas, and may face competition and creditor risk in engaging such consultants or vendors.

Our technical consultants and subcontractors supplement and complement the work performed by our employees and are difficult to replace.

We may not be able to engage highly qualified consultants or vendors in the future, or there may be contract or credit risk relating to engagement of key consultants or vendors, which could adversely affect our business.

Technological obsolescence of our marine assets or failure of critical equipment could put a strain on our capital requirements or operational capabilities.

From time to time, we employ state-of-the-art technology including but not limited to sonars, magnetometers, ROVs, vessels, and other advanced science and technology to perform seabed mineral exploration.

From time to time, we employ state-of-the-art technology including sonars, magnetometers, ROVs, vessels, and other advanced science and technology to perform seabed mineral exploration.

Although we try to maintain back-ups on critical equipment and components, equipment failures may require us to delay or suspend operations.

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The issuance of shares at conversion prices lower than the market price at the time of conversion and the sale of such shares could adversely affect the price of our common stock.

Some of our outstanding shares may have been acquired from time to time upon conversion of convertible notes at conversion prices that are lower than the market price of our common stock at the time of conversion.

Some of our outstanding shares may have been acquired from time to time upon the conversion of convertible notes at conversion prices that are lower than the market price of our common stock at the time of conversion.

In the past, Odyssey has issued debt obligations that could be converted into common shares at prices below the current market price.

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Short sellers of our stock may be manipulative and may attempt to drive down the market price of our common stock.

Short selling is the practice of selling securities that the seller does not own but rather has, supposedly, borrowed from a third party with the intention of buying identical securities back later to return to the lender.

The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale.

As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects to create negative market momentum and generate profits for themselves after selling a stock short.

Although traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the availability of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by large Wall Street firms and independent research analysts.

Although traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called “research reports” that mimic the type of investment analysis performed by large Wall Street firms and independent research analysts.

These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base.

Issuers who have limited trading volumes and are susceptible to higher volatility levels than large-cap stocks, can be particularly vulnerable to such short seller attacks.

These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to certification requirements imposed by the Securities and Exchange Commission and, accordingly, the opinions they express may be based on distortions or omissions of actual facts or, in some cases, fabrications of facts.

These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to certification requirements imposed by the SEC and, accordingly, the opinions they express may be based on distortions or omissions of actual facts or, in some cases, fabrications of facts.

In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed short sellers will continue to issue such reports.

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We have pledged certain assets, such as equipment and shares of subsidiaries, as collateral under our loan agreements.

Some lenders could seize some of our assets if we do not make timely payments for the loans, services, supplies, or equipment that they have provided to us.

Some suppliers have the ability to seize some of our assets if we do not make timely payments for the services, supplies, or equipment that they have provided to us.

If we were unable to make payments on these obligations, the lender or supplier may seize the asset or force the sale of the asset.

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We could be delisted from the Nasdaq Capital Market.

Our common stock is listed on the Nasdaq Capital Market, which imposes, among other requirements, a minimum bid requirement.

Our common stock is listed on the Nasdaq Capital Market, which imposes, among other requirements, a minimum bid price requirement.

The closing bid price for our common stock must remain at or above $1.00 per share to comply with Nasdaq’s minimum bid requirement for continued listing.

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Another requirement for continued listing on the Nasdaq Capital Market is to maintain our market capitalization above $35.0 million.

Our failure to maintain compliance with the above-mentioned and other Nasdaq continued listing requirements, including timely filing of our periodic reports with the SEC, may lead to the delisting of our common from the Nasdaq Capital Market.

Nasdaq notified us on October 30, 2024, that we did not meet the $35.0 million market capitalization requirement for 30 consecutive business days, as required under Nasdaq Listing Rule 5550(b)(2).

In accordance with the Nasdaq Listing Rules, the Company has a 180-calendar day period, ending April 28, 2025, to regain compliance with the market capitalization requirement.

On November 4, 2024, Nasdaq notified us that we did not meet the $1.00 minimum bid price requirement for 30 consecutive business days, as required under Nasdaq Listing Rule 5550(a)(2).

In accordance with the Nasdaq Listing Rules, the Company has a 180-calendar day period, ending May 5, 2025, to regain compliance with the minimum bid price requirement.

Our failure to regain compliance with the above-mentioned and other Nasdaq continued listing requirements may lead to the delisting of our common from the Nasdaq Capital Market.

Delisting from the Nasdaq Capital Market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity.

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Although we seek to obtain insurance for some of our main operational risks, there is no guarantee that the insurance policies that we have are sufficient, that they will be in place when needed, that we will be able to obtain insurance coverage when desired, that insurance will be available on commercially attractive terms, or that we will be able to anticipate the risks that need to be insured.

For example, although we may be able to obtain War Risk coverage for a project at a specific date and location, such insurance may be unavailable at other times and locations.

Although we may be able to insure our marine assets for certain risks such as certain possible loss or damage scenarios, we may lack insurance to cover against government seizure or detention of certain marine assets.

Permanent loss or temporary loss of our marine assets and the associated business interruption without commensurate coverage from an insurance policy could severely impact the financial results and operational capabilities of the company.

Permanent or temporary loss of our marine assets and the associated business interruption without commensurate compensation from an insurance policy could severely impact the financial results and operational capabilities of the company.

We may be exposed to cybersecurity risks.

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However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a vendor’s employee or agent, the breakdown of a vendor’s data protection processes, or a cyber-attack on a vendor’s information systems or our information systems.

Subsea mineral, development and operating have inherent risks.

Subsea development and operating have inherent risks.

Mining operations generally involve a high degree of risk.

The financing, exploration, development and mining of any of our properties is furthermore subject to a number of macroeconomic, legal and social factors, including commodity prices, laws and regulations, political conditions, currency fluctuations, the ability to hire and retain qualified people, the inability to obtain suitable and adequate machinery, equipment or labor and obtaining necessary services in the jurisdictions in which we may operate.

The financing, exploration, development and mining of any of our properties is furthermore subject to a number of macroeconomic, legal and social factors, including commodity prices, laws and

regulations, political conditions, currency fluctuations, the ability to hire and retain qualified people, the inability to obtain suitable and adequate machinery, equipment or labor and obtaining necessary services in the jurisdictions in which we may operate.

Unfavorable changes to these and other factors have the potential to negatively affect our operations and business.

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It is impossible to ensure that the exploration or development programs planned by us will result in a profitable commercial mining operation.

Whether precious or base metal or mineral deposits will be commercially viable depends on a number of factors, some of which are:

Whether precious or base metal or mineral deposits will be commercially viable depends upon a number of factors, some of which are:

the particular attributes of the deposit, such as the quantity and quality of mineralization;

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There is no certainty that the expenditures to be made by us towards the exploration and evaluation of our projects will result in discoveries or production of commercial quantities of the minerals.

In addition, once in production, mineral reserves are finite and there can be no assurance that we will be able to locate additional reserves as its existing reserves are depleted.

In addition, once in production, mineral reserves are finite and there can be no assurance that we will be able to locate additional reserves as existing reserves are depleted.

We are subject to significant governmental regulations, which affect our operations and costs of conducting our business.

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Calculations of mineral resources are estimates only and subject to uncertainty.

The estimation of mineral resources is an imprecise process and the accuracy of such estimates is a function of the quantity and quality of available data, the assumptions used and judgments made in interpreting engineering and geological information and estimating future capital and operating costs.

estimating future capital and operating costs.

There is significant uncertainty in any reserve or resource estimate, and the economic results of mining a mineral deposit may differ materially from the estimates as additional data are developed or interpretations change.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors