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Critical Year Ahead

Catching up with financial filings. Last Friday, OMEX released its delayed 10-K report for 2023, bringing it back in compliance with SEC filing requirements, and followed it up with Monday’s release of its 10-Q report for 1Q24. The delayed filings were necessitated by the decision to restate certain balance sheet items, such as OMEX’s litigation financing, which has been reclassified as a derivative liability under GAAP, as well as other balance sheet adjustments that had no adverse effect on its business or financial position. Cash balance improves and should suffice through 3Q24. OMEX finished 2023 with $4MM in cash, a $2.6MM improvement from 2022, as it strengthened its balance sheet by settling previous debt and warrant obligations and issuance of new debt with attached warrants. While continuing cash burn to support operations and its engagement with portfolio companies reduced the cash balance by $2MM over the course of 1Q24, management announced the monetization of its economic interest in a shipwreck project subsequent to the close of 1Q24, receiving $9.4MM cash in consideration. Management believes that combined with cash on hand, this will be sufficient to finance operations through 3Q24. NAFTA ruling delayed. In October 2023, OMEX received a letter from the International Centre for Settlement of Investment Disputes (ICSID) indicating the ruling in its dispute with Mexico would be forthcoming in 1Q24. However, while ICSID continues to make progress in finalizing its determination, an updated letter from the agency received in March 2024 indicated that the decision will now be rendered in 2Q24. OMEX remains confident in the merits of its case and looks forward to its final resolution in 2Q24. However, failure to receive adequate financial compensation from the tribunal’s decision would significantly impede OMEX’s ability to operate and fund its share of project development work of its portfolio companies and potentially require monetization of its interests in these projects to continue as a going concern. Cooks Island EEZ work continues. Over the course of 2023, Ocean Minerals LLC (OML), one of the two companies that hold licenses to explore seabed polymetallic nodule deposits in Cook Islands EEZ that OMEX invested in and completed multiple expeditions in its license area of the EEZ, generating a comprehensive mapping survey and collecting environmental data and collecting resource samples. As this data is analyzed by independent laboratories and scientists, an updated JORC resource report will be issued. Furthermore, OML was able to collect a five metric tonne sample of nodules that will be used to advance metallurgical process development work, leading to an updated JORC resource report in the coming months. OMEX holds a ~6.6% equity interest in OML, as well as 15.08% interest in CIC Ltd. a second seabed exploration license holder in Cook Islands EEZ that OMEX is an investor in. High risk, high reward. While the delayed ICSID decision is a source of concern, as OMEX’s operations can be significantly affected, the growing political support for deep-sea mining increases the likelihood that seabed mineral harvesting industry will play a major role in facilitating global energy transition initiatives, benefiting OMEX and other deep-sea pioneers in the process.