Item 1A. Risk Factors
ITEM 1A. RISK FACTORS.
You should carefully review and consider the information regarding certain factors that could materially affect our business, consolidated financial condition or results of operations set forth under Item 1A. Risk Factors in our 2025 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. Except as set forth below, there have been no material changes from or additions to the risk factors disclosed in those reports. We may disclose changes to risk factors or additional factors from time to time in our future filings with the SEC.
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The ISA’s inquiry into the possible non-compliance of NORI and TOML with their exploration contracts, and the related proceedings before the Seabed Disputes Chamber, could adversely affect our rights under the ISA regime.
In March 2026, the ISA identified our subsidiaries NORI and TOML as contractors requiring specific attention for possible non-compliance with their exploration contracts. NORI and TOML maintain that they have complied with their contractual obligations and have each instituted proceedings against the ISA before the Seabed Disputes Chamber challenging the process by which the inquiry is being conducted.
On July 18, 2026, the Chamber prescribed provisional measures in both proceedings. Those orders are interim, do not prejudge the merits, and did not suspend the inquiries, which the ISA remains able to continue in accordance with the applicable legal framework, including rules of due process. There is no assurance that the Chamber will find in favor of NORI or TOML on the merits, that the ISA will comply with the provisional measures, or that a final decision would afford effective relief.
The timing of the merits phase is uncertain and may extend well beyond our current expectations. The ISA has asked the Chamber to defer its defense on the merits to March 30, 2027 and, if that request is granted, the merits would not be heard before the second half of 2027 at the earliest. We expect to continue to incur legal costs while the proceedings continue, and prolonged uncertainty may adversely affect our relationships with the ISA, our sponsoring States and our commercial partners.
An adverse outcome in the inquiry could result in findings of non-compliance and in remedial measures, sanctions or other action by the ISA in respect of the exploration contracts, including, in certain circumstances, their suspension or termination. The Council of the ISA’s approval of a five-year extension of NORI’s exploration contract is stated to be without prejudice to any findings arising from the inquiry. An adverse outcome could also affect the extension of TOML’s exploration contract and our ability to obtain a contract for exploitation from the ISA.
In addition, TOML’s exploration contract is due to expire on January 11, 2027, before the LTC is scheduled to consider its extension application, and TOML expects the contract to be deemed extended from January 12, 2027 under the transitional provision of the ISA’s extension procedures. If the ISA were to take a different view of the application of that provision, or if either extension were denied or delayed, our exploration rights could lapse or be interrupted, which could adversely affect our sponsorship arrangements with Naoero and Tonga and have a material adverse effect on our business, financial condition and prospects.
If we are unable to implement and maintain effective internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and we may face litigation.
As a public company, we are subject to the requirements of Section 404 of the Sarbanes-Oxley Act, and are required to implement and maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Under Section 404(a) of the Sarbanes-Oxley Act, our management is required to report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for each fiscal year. Based on our capitalization and share price as of June 30, 2026, we expect to transition to “large-accelerated filer” status for the year ending December 31, 2026. As a result, we expect to be subject to Section 404(b) of the Sarbanes-Oxley Act, which will require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting for the first time in the Annual Report on Form 10-K for the year ending December 31, 2026, among other additional requirements. Compliance with Section 404(b) of the Sarbanes-Oxley Act will result in increased costs and expenses and will divert management resources from other matters. If we are unable to assert that our internal control over financial reporting is effective, or, if required, our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the valuation of our common shares could be adversely affected. In addition, any misstatement in our financial information caused by a material weakness could lead to shareholder litigation that could have a material adverse effect on our business or financial condition. For example, we have previously identified and remediated material weaknesses in our internal control over financial reporting. Certain of these material weaknesses caused us to restate financial information and resulted in shareholder litigation against us. There is no guarantee we will be able to maintain effective internal controls in the future.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the three months ended June 30, 2026.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.