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Odyssey Marine Exploration Co (NASDAQ:OMEX):

Do Investors Know What Lies Beneath the Surface?

Executive Summary for OMEX Investigative Report - we have spent over 6 months doing an in-depth investigative report on OMEX, our full report can be found at: www.omextruth.com

As of October 31, 2013:

Target Price: $0.00Thesis: Strong Sell
Market Cap: $230mm (80mm x $2.84/sh)Shareholder's Equity: ($5.6mm)
Total Cash: $10mm1Total Debt: $20mm2

Net Loss 2012 - 2008, respectively: ($18.2mm); ($16.2mm); ($23.3mm); ($18.6mm); ($24.8mm)

1)Unclear how much of this cash resides in the US, OMEX formed offshore subsidiaries in 2013

2)As of June 30, 2013, over $5.3mm of this debt is convertible with a "death spiral" conversion feature that allows for the payments to be converted to stock at a 15% discount to market

"Our talented people, global presence, financial strength and massive market knowledge have created our sustainable and unique businesses. [Our new business models] will accelerate their growth. We plan to leverage all of these competitive advantages to create significant value for our shareholders."

-Enron's 2000 (Final) Letter to shareholders, published 7 months before bankruptcy

OMEX was founded by and is currently run by expert stock promoters who have been sued by the SEC.

  • Greg Stemm and John Morris's previous shipwreck hunting company Seahawk (SHWK: $0.0012) was sued by the SEC. They refused to cooperate with government subpoenas and had a stop order placed on their stock1.
  • Since 2000, OMEX executives and directors have received cash compensation over $20mm and have net sold $5mm of stock, shareholders have been diluted 7-X and accumulated losses of $180mm2.
  • We believe the purpose of OMEX is to serve as a vehicle for OMEX insiders to live a life of glamor hunting the ocean while disappointed investors foot the bill.

We believe OMEX stock is worth $0.00 and if OMEX is unable to raise equity they will be forced to file bankruptcy within the next 6-12 months.

  • In spite of the recent Gairsoppa success, OMEX's business lines of historical shipwrecks and commodity shipwrecks have averaged $20mm of annual losses over the past 5 years and we believe are unlikely to repay OMEX's growing debt burden.
  • The CEO has publicly stated they do not have enough cash to operate through the end of 20143 and carries their debt at a discount to face value on their SEC financials4.
  • As highlighted by the "Black Swan" debacle, we believe UNESCO's new regulations to protect national gravesites and heritage make for-profit historic shipwreck hunting unviable.

We believe OMEX's new business of undersea mineral exploration is a pipedream and worth zero.

  • We believe that management representations of "$179mm of Off Balance Sheet Value" in equity stakes are inflated by at least a factor of 10 and we question whether they are based on non-arm's length transactions.
  • In early 2013, OMEX created a new business "Oceanica" that utilizes opaque offshore subsidiaries in Panama and Bahamas that we question how there could be any valid business purpose and are reminiscent of Enron's use of off balance sheet entities to obfuscate the true nature of cash transfers and inflate valuations.
  • We believe that Neptune Minerals, Inc. - founded by John Morris, co-founder and former CEO of OMEX - is also worthless and is simply a reincarnation of Neptune Minerals, Plc, a failed public company in the UK which John Morris acquired for $140,000 in 2011.
  • According to an attachment to OMEX's recent 10Q, via Oceanica, OMEX is partners with a Panamanian company, DNA Ltd Inc. Our investigation finds substantial evidence that DNA's principal members are connected to at least 3 alleged pump and dump frauds and admitted involvement in the alleged $400mm money laundering scandal, "Teegan Inc."

What do we want? What is our motivation?

We fundamentally want the same thing that anyone long OMEX stock wants: Answers to our questions and more specific information about the company's operations, not vague platitudes or promises.

Our actions are all consistent with our words. We are short the stock because we believe if the Company provides true and clear answers to the serious questions we have raised then it will be readily apparent to ALL investors that the company, as it is currently performing, has approximately zero economic value to shareholders. We may be wrong in that belief and the stock may be worth some higher number, in which case, great, that's how markets are supposed to work! Our policy is to admit when we have been proven wrong very quickly and learn from it, there are lots of other stocks to spend time on.

If you own the stock, you deserve answers more than anyone, so demand them from YOUR company. As shareholders, management reports to YOU.

Our Key Questions for OMEX that Shareholders Deserve Answers to:

1)Please explain OMEX co-founder John Morris's involvement in Chatham Rock Phosphate, Neptune Minerals, and Oceanica?

2)How much cash have John Morris and affiliated entities received from OMEX since 2008?

3)How much cash has OMEX received from John Morris and affiliated entities since 2008?

4)Why did OMEX improve the terms on the Galt Resources deal for ex-CEO and current consultant John Morris after the original contract had been signed? Why is this fair to shareholders?

5)Has Josh Adam, SVP of Neptune and Manager of Mako, ever received compensation directly or indirectly from OMEX?

6)Is the "Brad Baker" who appears to have signed documents on behalf of Dorado (later, renamed Neptune), an ostensibly arms-length entity, the same Brad Baker that is on OMEX's board?

7)Please explain precisely why your offshore subsidiaries are necessary now (commencing in 2013) when in your previous 16 years of operations, OMEX never required these?

8)In what banks and countries is OMEX holding shareholder cash?

9)Why did you chose to partner with DNA, Ltd. Inc.? Were you aware of the principal members' connections to multiple alleged investment scams?

10)Is OMEX using its offshore subsidiaries, formed in 2013, to make unlawful payments to government officials?

The full report is long, detailed and contains complex content. We address undersea mining and offshore subsidiaries in Chapter 3 and recommended investors very familiar with OMEX begin there, specifically in sections 3 and 4, where we show that we believe the value of Neptune and Oceanica are likely zero. We explore in depth what we believe to be Oceanica's cofounding shareholder, DNA Ltd, Inc, a Panamanian entity whose principal members are connected to a number of alleged financial crimes.

[1] http://www.sec.gov/litigation/aljdec/1993/id19930526ejk.pdf

[2] See appendix for cash compensation and insider transaction table in full report. Data taken from OMEX SEC filings

[3] http://ir.odysseymarine.com/releasedetail.cfm?ReleaseID=785335

[4] See OMEX 2013 10-K filing with the SEC

Source: Investigative Report Questions Odyssey Marine's New Offshore Subsidiaries And Undersea Mining

Additional disclosure: Meson Capital Partners, LLC, based in San Francisco, is a research-driven activist fund manager founded in 2009.