New Lawsuit From Investor Highlights Imploding Odyssey Marine-Related Private Company

May.12.14 | About: Odyssey Marine (OMEX)


New lawsuit from a large investor in Seagrass Recovery questions shell games: related-party transactions used to allegedly siphon money into insiders’ pockets.

Seagrass is run out of same office as Neptune Minerals under the same CEO: OMEX co-founder John Morris.

Josh Adam, SVP Finance at Neptune under CEO John Morris, raised $27.5mm for OMEX via Oceanica / Mako Resources LLC (via unregistered private securities).

We believe OMEX is desperate to raise capital and will require a massive discount to the current $2.06/share to close.

A recent article in the Columbus Dispatch, home of the original investors in the SS Central America project who have yet to see a dime, compared buying shares in Odyssey Marine (NASDAQ:OMEX) to buying a lottery ticket. We certainly share the sentiment that OMEX should not be considered an investment where you expect to make money but at least lotteries are FAIR. We think a more appropriate analogy might be buying a lottery ticket where every previous winner has been a relative or friend of the lottery organizer.

New public court documents relating to a lawsuit in Pinellas County, Florida shed light on the web of private non-arms-length companies OMEX has been using for years, in addition to how the co-founder of OMEX treats his investors.

An investor who has been an employee and investor in Seagrass Recovery since 2007, after numerous reasonable attempts to accommodate Seagrass, had not been paid what he was owed and filed a notice of default July 15, 2013 on his $1,500,000 note.

On Jan 15, 2014, a Judge ORDERED that Seagrass make its books and records available and to reimburse the investor's attorney's fees.

As of February 3, 2014, all of the officers and directors of Seagrass resigned, including CEO John Morris and Michael Barton (husband of Laura Barton, a current OMEX officer), leaving just Walter Copeland as sole director and CEO.

March 25, 2014 the Judge found Seagrass in contempt of court for failing to comply with the order to deliver books and records and reimbursing the investors attorney fees.

Related party Transactions used to Siphon Money into Insiders' Pockets

In addition to the disturbingly confrontational tone and belligerence with which the OMEX co-founder attacks his investors, the filed complaint also questions related party transactions that appear to be used to siphon money out of the company and into insiders' pockets. For example, Gulf Bargeco, LLC is managed by John Morris and his wife Eleanor Morris and is a shell company with the same office as SRI to own barges that were allegedly leased to Seagrass at 10X fair market rates.

Given this alleged conduct by OMEX's co-founder, we question whether OMEX is utilizing other undisclosed related party transactions to siphon money out of the company - for example, have relatives of CEO Greg Stemm (who was paid $1.3mm in 2013) been hired as "consultants" while not actually performing legitimate services to the company?

The OMEX Web of Private Companies

In addition to John Morris being the co-Founder of OMEX, there is a current connection as these structures have been used with OMEX for years that we have been documenting since October 2013 at We have included a diagram of all of the entities in the OMEX web that we are aware of at the moment including Neptune Minerals and Seagrass, both run out of 5858 Central Ave Suite A., St. Petersburg, Florida.

Click to enlarge

How Does OMEX Bridge the Looming Cash Shortfall?

With OMEX's private company "funnels" unwinding:

· Mako Resources (owner of Oceanica shares) has not exercised its options to inject more capital in 2014

· Seagrass appears to have imploded with all officers resigning

· Neptune Minerals appears insolvent and desperate to raise capital at new low valuations

If OMEX cannot raise capital indirectly via these related private companies by selling unregistered securities (while using questionable brokers with numerous FINRA sanctions) - they will only be able to turn to the public markets, which we believe means selling shares at a massive discount to the current $2.06/share.

Disclosure: I am short OMEX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.