REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Seafarer Exploration Corporation
We have audited the accompanying balance sheets of Seafarer Exploration Corporation as of December 31, 2013 and 2012, and the related statements of operations, stockholders’ deficit and cash flows for the years then ended and the cumulative period from February 15, 2007 (inception) to December 31, 2013 . Seafarer Exploration Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Seafarer Exploration Corporation as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended and the cumulative period from February 15, 2007 (inception) to December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has incurred net losses and negative cash flow from operations since inception. These factors, and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about the Company’s ability to continue as a going concern.
/s/ Accell Audit & Compliance, P.A.
|
|
|
Tampa, FL
April 11, 2014
|
|
|
|
|
4868 West Gandy Boulevard
●
Tampa, Florida 33611
●
813.440.6380
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
DECEMBER 31, 2013 AND 2012
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
578
|
|
|
$
|
43,919
|
|
Prepaid expenses
|
|
|
26,824
|
|
|
|
36,014
|
|
Advances to shareholder
|
|
|
3,267
|
|
|
|
3,267
|
|
Deposits and other receivables
|
|
|
1,183
|
|
|
|
1,183
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
31,852
|
|
|
|
84,383
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
130,239
|
|
|
|
164,223
|
|
|
|
|
|
|
|
|
|
|
Investment in common stock
|
|
|
1,100
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
163,191
|
|
|
$
|
249,706
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expense
|
|
$
|
142,583
|
|
|
$
|
140,270
|
|
Convertible notes payable, net of discounts of $120,533 and $13,997
|
|
|
139,457
|
|
|
|
91,503
|
|
Convertible notes payable, related parties, net of discounts of $26,889 and -0-
|
|
|
24,111
|
|
|
|
-
|
|
Convertible notes payable, in default
|
|
|
191,300
|
|
|
|
149,300
|
|
Convertible notes payable, in default - related parties
|
|
|
113,500
|
|
|
|
66,000
|
|
Convertible notes payable, at fair value
|
|
|
-
|
|
|
|
183,242
|
|
Notes payable, in default
|
|
|
30,000
|
|
|
|
30,000
|
|
Notes payable, in default - related parties
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
648,451
|
|
|
|
667,815
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.0001 par value - 50,000,000 shares authorized; 7 shares issued
|
|
|
|
|
|
|
|
|
and outstanding at December 31, 2013 and 2012
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.0001 par value - 850,000,000 shares authorized; 844,216,349 and
|
|
|
|
|
|
|
|
|
739,313,459 shares issued and outstanding at December 31, 2013 and 2012
|
|
|
84,422
|
|
|
|
73,931
|
|
Additional paid-in capital
|
|
|
7,453,578
|
|
|
|
5,356,866
|
|
Accumulated deficit during development stage
|
|
|
(8,023,260
|
)
|
|
|
(5,848,906
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(485,260
|
)
|
|
|
(418,109
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
163,191
|
|
|
$
|
249,706
|
|
See accompanying notes to the financial statements.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 15, 2007
|
|
|
|
|
|
|
|
|
|
(inception) to
|
|
|
|
2013
|
|
|
2012
|
|
|
December 31, 2013
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Consulting and contractor expenses
|
|
|
1,219,602
|
|
|
|
387,433
|
|
|
|
4,402,753
|
|
Professional fees
|
|
|
296,668
|
|
|
|
81,592
|
|
|
|
784,926
|
|
Vessel expense
|
|
|
126,472
|
|
|
|
100,916
|
|
|
|
505,355
|
|
Travel and entertainment expense
|
|
|
105,040
|
|
|
|
48,080
|
|
|
|
322,416
|
|
General and administrative expense
|
|
|
64,258
|
|
|
|
26,886
|
|
|
|
384,192
|
|
Depreciation expense
|
|
|
33,984
|
|
|
|
32,783
|
|
|
|
202,182
|
|
Rent expense
|
|
|
33,414
|
|
|
|
16,093
|
|
|
|
154,100
|
|
Other operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
13,187
|
|
Total operating expenses
|
|
|
1,879,438
|
|
|
|
693,783
|
|
|
|
6,769,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
(1,879,438
|
)
|
|
|
(693,783
|
)
|
|
|
(6,769,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(356,170
|
)
|
|
|
(297,654
|
)
|
|
|
(1,035,711
|
)
|
Interest income
|
|
|
99,701
|
|
|
|
93,636
|
|
|
|
243,922
|
|
Loss on extinguishment of debt
|
|
|
(38,447
|
)
|
|
|
(37,197
|
)
|
|
|
(419,560
|
)
|
Loss on impairment
|
|
|
-
|
|
|
|
(21,800
|
)
|
|
|
(42,800
|
)
|
Total other income (expense)
|
|
|
(294,916
|
)
|
|
|
(263,015
|
)
|
|
|
(1,254,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,174,354
|
)
|
|
$
|
(956,798
|
)
|
|
$
|
(8,023,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
806,432,658
|
|
|
|
670,703,572
|
|
|
|
|
|
See accompanying notes to the financial statements.
SEAFARER EXPLPLORATION CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
|
|
|
Stock
|
|
|
Stock value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
Balance, February 15, 2007 (Inception)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
5,000,000
|
|
|
$
|
500
|
|
|
$
|
4,693
|
|
|
$
|
-
|
|
|
$
|
5,193
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,294
|
)
|
|
|
(5,294
|
)
|
Balance, April 30, 2007
|
|
|
5,000,000
|
|
|
|
500
|
|
|
|
4,693
|
|
|
|
(5,294
|
)
|
|
|
(101
|
)
|
Common stock issued for cash
|
|
|
5,000,000
|
|
|
|
500
|
|
|
|
4,500
|
|
|
|
-
|
|
|
|
5,000
|
|
Common stock issued for subscription agreements
|
|
|
7,533,333
|
|
|
|
753
|
|
|
|
612,247
|
|
|
|
-
|
|
|
|
613,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(282,364
|
)
|
|
|
(282,364
|
)
|
Balance, April 30, 2008
|
|
|
17,533,333
|
|
|
|
1,753
|
|
|
|
621,440
|
|
|
|
(287,658
|
)
|
|
|
335,535
|
|
Recapitalization at reverse merger
|
|
|
233,522,002
|
|
|
|
23,352
|
|
|
|
68,148
|
|
|
|
-
|
|
|
|
91,500
|
|
Common stock issued for services
|
|
|
17,783,332
|
|
|
|
1,778
|
|
|
|
321,555
|
|
|
|
-
|
|
|
|
323,333
|
|
Common stock issued on conversion of notes payable
|
|
|
1,344,972
|
|
|
|
135
|
|
|
|
18,865
|
|
|
|
-
|
|
|
|
19,000
|
|
Common stock issued for subscription agreements
|
|
|
6,425,918
|
|
|
|
643
|
|
|
|
356,132
|
|
|
|
-
|
|
|
|
356,775
|
|
Reclassification to mezzanine equity
|
|
|
-
|
|
|
|
-
|
|
|
|
(64,500
|
)
|
|
|
-
|
|
|
|
(64,500
|
)
|
Funds received no shares issued
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(970,794
|
)
|
|
|
(970,794
|
)
|
Balance, December 31, 2008
|
|
|
276,609,557
|
|
|
|
27,661
|
|
|
|
1,346,640
|
|
|
|
(1,258,452
|
)
|
|
|
115,849
|
|
Common stock issued for services
|
|
|
11,670,000
|
|
|
|
1,167
|
|
|
|
503,123
|
|
|
|
-
|
|
|
|
504,290
|
|
Common stock issued on conversion of notes payable
|
|
|
8,608,384
|
|
|
|
861
|
|
|
|
108,638
|
|
|
|
-
|
|
|
|
109,499
|
|
Common stock issued for subscription agreements
|
|
|
20,783,371
|
|
|
|
2,078
|
|
|
|
251,630
|
|
|
|
-
|
|
|
|
253,708
|
|
Reclassification to mezzanine equity
|
|
|
-
|
|
|
|
-
|
|
|
|
(64,500
|
)
|
|
|
-
|
|
|
|
(64,500
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,090,914
|
)
|
|
|
(1,090,914
|
)
|
Balance, December 31, 2009
|
|
|
317,671,312
|
|
|
|
31,767
|
|
|
|
2,145,531
|
|
|
|
(2,349,366
|
)
|
|
|
(172,068
|
)
|
Common stock issued for services
|
|
|
32,725,000
|
|
|
|
3,272
|
|
|
|
315,798
|
|
|
|
-
|
|
|
|
319,070
|
|
Common stock issued on conversion of notes payable
|
|
|
42,839,094
|
|
|
|
4,284
|
|
|
|
310,421
|
|
|
|
-
|
|
|
|
314,705
|
|
Common stock issued for subscription agreements
|
|
|
44,225,000
|
|
|
|
4,423
|
|
|
|
228,773
|
|
|
|
-
|
|
|
|
233,196
|
|
Common stock issued as financing fees
|
|
|
3,530,000
|
|
|
|
353
|
|
|
|
31,887
|
|
|
|
-
|
|
|
|
32,240
|
|
Common stock issued to extinguish notes
|
|
|
5,178,425
|
|
|
|
518
|
|
|
|
27,553
|
|
|
|
-
|
|
|
|
28,071
|
|
Common stock issued under minimum value stock subscriptions
|
|
|
3,310,842
|
|
|
|
331
|
|
|
|
128,669
|
|
|
|
-
|
|
|
|
129,000
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,026,433
|
)
|
|
|
(1,026,433
|
)
|
Balance, December 31, 2010
|
|
|
449,479,673
|
|
|
|
44,948
|
|
|
|
3,188,632
|
|
|
|
(3,375,799
|
)
|
|
|
(142,219
|
)
|
Common stock issued for services
|
|
|
52,145,000
|
|
|
|
5,214
|
|
|
|
556,063
|
|
|
|
-
|
|
|
|
561,277
|
|
Common stock issued on conversion of notes payable and stockholder loans
|
|
|
43,617,329
|
|
|
|
4,362
|
|
|
|
536,162
|
|
|
|
-
|
|
|
|
540,524
|
|
Common stock issued for subscription agreements
|
|
|
54,827,619
|
|
|
|
5,483
|
|
|
|
291,689
|
|
|
|
-
|
|
|
|
297,172
|
|
Common stock issued as financing fees
|
|
|
500,000
|
|
|
|
50
|
|
|
|
3,450
|
|
|
|
-
|
|
|
|
3,500
|
|
Common stock issued to extinguish outstanding invoices for legal services
|
|
|
6,073,374
|
|
|
|
607
|
|
|
|
39,950
|
|
|
|
-
|
|
|
|
40,557
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,516,309
|
)
|
|
|
(1,516,309
|
)
|
Balance, December 31, 2011
|
|
|
606,642,995
|
|
|
|
60,664
|
|
|
|
4,615,946
|
|
|
|
(4,892,108
|
)
|
|
|
(215,498
|
)
|
Common stock issued for services
|
|
|
19,425,000
|
|
|
|
1,943
|
|
|
|
123,944
|
|
|
|
-
|
|
|
|
125,887
|
|
Common stock issued on conversion of notes payable and
stockholder loans
|
|
|
39,486,259
|
|
|
|
3,948
|
|
|
|
256,038
|
|
|
|
-
|
|
|
|
259,986
|
|
Common stock issued for subscription agreements
|
|
|
59,953,571
|
|
|
|
5,995
|
|
|
|
252,405
|
|
|
|
-
|
|
|
|
258,400
|
|
Common stock issued as financing fees
|
|
|
300,000
|
|
|
|
30
|
|
|
|
1,470
|
|
|
|
-
|
|
|
|
1,500
|
|
Common stock issued to extinguish outstanding invoices
|
|
|
8,171,694
|
|
|
|
817
|
|
|
|
51,173
|
|
|
|
-
|
|
|
|
51,990
|
|
Common stock issued as investment in LLC
|
|
|
1,000,000
|
|
|
|
100
|
|
|
|
9,700
|
|
|
|
-
|
|
|
|
9,800
|
|
Common stock issued to extinguish debt
|
|
|
4,333,940
|
|
|
|
434
|
|
|
|
29,904
|
|
|
|
-
|
|
|
|
30,338
|
|
Beneficial conversion feature arising from convertible note
financing
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
Warrants arising from convertible note financing
|
|
|
-
|
|
|
|
-
|
|
|
|
14,286
|
|
|
|
-
|
|
|
|
14,286
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(956,798
|
)
|
|
|
(956,798
|
)
|
Balance, December 31, 2012
|
|
|
739,313,459
|
|
|
|
73,931
|
|
|
|
5,356,866
|
|
|
|
(5,848,906
|
)
|
|
|
(418,109
|
)
|
Common stock issued for services
|
|
|
47,714,330
|
|
|
|
4,772
|
|
|
|
1,142,767
|
|
|
|
-
|
|
|
|
1,147,539
|
|
Common stock issued on conversion of notes payable and
stockholder loans
|
|
|
30,893,929
|
|
|
|
3,090
|
|
|
|
268,262
|
|
|
|
-
|
|
|
|
271,352
|
|
Common stock issued for subscription agreements
|
|
|
26,580,335
|
|
|
|
2,658
|
|
|
|
275,685
|
|
|
|
-
|
|
|
|
278,343
|
|
Common stock issued to extinguish outstanding invoices
|
|
|
1,964,296
|
|
|
|
196
|
|
|
|
56,733
|
|
|
|
-
|
|
|
|
56,929
|
|
Beneficial conversion feature arising from convertible note
financing
|
|
|
-
|
|
|
|
-
|
|
|
|
353,040
|
|
|
|
-
|
|
|
|
353,040
|
|
Cancellation of common shares
|
|
|
(2,250,000
|
)
|
|
|
(225
|
)
|
|
|
225
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,174,354
|
)
|
|
|
(2,174,354
|
)
|
Balance, December 31, 2013
|
|
|
844,216,349
|
|
|
$
|
84,422
|
|
|
$
|
7,453,578
|
|
|
$
|
(8,023,260
|
)
|
|
$
|
(485,260
|
)
|
See accompanying notes to the financial statements.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
|
|
|
|
|
|
|
|
February 15, 2007
|
|
|
|
|
|
|
|
|
|
(inception) to
|
|
|
|
2013
|
|
|
2012
|
|
|
December 31, 2013
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,174,354
|
)
|
|
$
|
(956,798
|
)
|
|
$
|
(8,023,260
|
)
|
Adjustments to reconcile net income to
net cash provided (used) by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
33,984
|
|
|
|
32,782
|
|
|
|
202,182
|
|
Change in allowance for uncollectible notes receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
38,867
|
|
Amortization of deferred financing costs
|
|
|
-
|
|
|
|
26,114
|
|
|
|
59,605
|
|
Amortization of debt discount and interest expense on
beneficial conversion feature of convertible notes payable
|
|
|
185,715
|
|
|
|
204,644
|
|
|
|
638,288
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
37,197
|
|
|
|
381,113
|
|
Write-off of uncollectible deposits
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
Accrued interest on notes receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,705
|
)
|
Loss on impairment
|
|
|
-
|
|
|
|
21,800
|
|
|
|
42,800
|
|
Common stock issued for services
|
|
|
1,147,539
|
|
|
|
125,887
|
|
|
|
2,981,395
|
|
Common stock issued for legal services
|
|
|
56,929
|
|
|
|
25,754
|
|
|
|
122,423
|
|
Common stock issued for financing fees
|
|
|
-
|
|
|
|
1,500
|
|
|
|
5,000
|
|
Decrease (increase) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
9,190
|
|
|
|
(4,400
|
)
|
|
|
(39,070
|
)
|
Advances from shareholder
|
|
|
-
|
|
|
|
(1,015
|
)
|
|
|
(1,015
|
)
|
Deposits and other receivables
|
|
|
-
|
|
|
|
-
|
|
|
|
(23,346
|
)
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
2,313
|
|
|
|
(13,284
|
)
|
|
|
234,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by operating activities
|
|
|
(738,684
|
)
|
|
|
(499,819
|
)
|
|
|
(3,372,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payment from notes receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,000
|
)
|
Acquisition of equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(325,000
|
)
|
Purchase of common stock
|
|
|
-
|
|
|
|
(12,000
|
)
|
|
|
(34,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided used by investing financing activities
|
|
|
-
|
|
|
|
(12,000
|
)
|
|
|
(384,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds form the issuance of common stock
|
|
|
278,343
|
|
|
|
258,400
|
|
|
|
2,325,887
|
|
Proceeds from the issuance of convertible notes payable
|
|
|
303,000
|
|
|
|
249,500
|
|
|
|
1,065,800
|
|
Proceeds from the issuance of convertible notes payable, related
party
|
|
|
144,000
|
|
|
|
50,000
|
|
|
|
200,000
|
|
Proceeds from issuance of notes payable
|
|
|
-
|
|
|
|
10,000
|
|
|
|
286,500
|
|
Proceeds from issuance of notes payable, related parties
|
|
|
-
|
|
|
|
2,500
|
|
|
|
8,500
|
|
Payment on convertible notes payable
|
|
|
(30,000
|
)
|
|
|
(11,000
|
)
|
|
|
(76,000
|
)
|
Payments on notes payable
|
|
|
-
|
|
|
|
(12,500
|
)
|
|
|
(57,500
|
)
|
Payments on notes payable, related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,000
|
)
|
Proceeds from loans from stockholders
|
|
|
8,750
|
|
|
|
5,000
|
|
|
|
49,675
|
|
Payments on loans from stockholders
|
|
|
(8,750
|
)
|
|
|
(5,000
|
)
|
|
|
(44,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
695,343
|
|
|
|
546,900
|
|
|
|
3,756,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(43,341
|
)
|
|
|
35,081
|
|
|
|
578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - beginning
|
|
|
43,919
|
|
|
|
8,838
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash - ending
|
|
$
|
578
|
|
|
$
|
43,919
|
|
|
$
|
578
|
|
See accompanying notes to the financial statements.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS
Seafarer Exploration Corp. (the “Company”), formerly Organetix, Inc. (“Organetix”), was incorporated on May 28, 2003 in the State of Delaware.
The principal business of the Company is to engage in the archaeologically-sensitive exploration, documentation, and recovery of historic shipwrecks with the objective of exploring and discovering Colonial-era shipwrecks for future generations to be able to appreciate and understand. Seafarer currently has two different wreck sites under permit with the State of Florida and one wreck site under contract with a private party and is working closely with the Florida Department of Historical Resources and the Florida Bureau of Archeological Research to research and document these, and additional, wreck sites.
The Company is in the development stage and its activities during the development stage include developing a business plan and raising capital.
NOTE 2 - GOING CONCERN
These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As shown in the accompanying financial statements, the Company has incurred net losses totaling $8,023,260 since inception, which raises substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from
April 14
, 2014. Management's plans include raising capital through the equity markets to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any revenues for the foreseeable future.
Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern; however, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There are no cash equivalents at December 31, 2013 and 2012.
Earnings Per Share
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Basic and diluted losses per share were the same at the reporting dates as there because outstanding common stock equivalents would have been anti-dilutivet December 31, 2013 and 2012.
Components of loss per share for the respective years are as follows:
|
|
For the Year Ended
December 31, 2013
|
|
|
For the Year Ended
December 31, 2012
|
|
Net loss attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities, as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES,
continued
|
●
|
Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
|
|
●
|
Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
|
|
●
|
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
|
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of the Company’s derivative liability is determined using Level 1 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.
T
he carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of long-term loans approximate their fair values due to the fact that the interest rates on these loans are reset each year based on
prevailing market interest rates.
Fixed Assets and Depreciation
Fixed assets are recorded at historical cost. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. Property and equipment, net consist of the following at December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Diving vessel
|
|
$
|
325,000
|
|
|
$
|
325,000
|
|
Generator
|
|
|
7,420
|
|
|
|
7,420
|
|
Less accumulated depreciation
|
|
|
(202,181
|
)
|
|
|
(168,197
|
)
|
|
|
$
|
130,239
|
|
|
$
|
164,223
|
|
Depreciation expense for the years ended December 31, 2013 and 2012 amounted to $33,984 and $32,783, respectively
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES,
continued
Impairment of Long-Lived Assets
In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. The Company recognized impairment losses of -0- and $21,800 during the years ended December 31, 2013 and 2012, respectively.
Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the periods ended December 31, 2013 and 2012, the Company did not report any revenues.
Convertible Notes Payable
The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. As of December 31, 2013 and 2012, all of the Company’s convertible notes payable were classified as conventional instruments.
The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES,
continued
Recent Accounting Pronouncements
In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-04. This update clarifies how entities measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This guidance is effective for fiscal years beginning after December 15, 2013 and interim reporting periods thereafter. This update is not expected to have an impact on the Company’s financial position or results of operations.
In April 2013, the FASB issued ASU 2013-07 to clarify when it is appropriate to apply the liquidation basis of accounting. Additionally, the update provides guidance for recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. Under the amendment, entities are required to prepare their financial statements under the liquidation basis of accounting when a liquidation becomes imminent. This guidance is effective for annual reporting periods beginning after December 15, 2013, and interim reporting periods thereafter. This update is not expected to have an impact on the Company’s financial position or results of operations.
In July 2013, the FASB issued ASU 2013-11 which provides guidance relating to the financial statement presentation of unrecognized tax benefits. The update provides that a liability related to an unrecognized tax benefit would be presented as a reduction of a deferred tax asset for a net operating loss carry forward, a similar tax loss or a tax credit carry forward, if such settlement is required or expected in the event the uncertain tax position is disallowed. This update does not require any new recurring disclosures and is effective for public entities for fiscal years beginning after December 15, 2013, and interim reporting periods thereafter. This update is not expected to have an impact on the Company’s financial position or results of operations.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
NOTE 4 – CAPITAL STOCK
As of December 31, 2013 and 2012, the Company was authorized to issue 850,000,000 shares of $0.0001 par value common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CAPITAL STOCK,
continued
Series A Convertible Preferred Stock
The Company is authorized to sell or issue 50,000,000 shares of preferred stock.
During the period ended December 31, 2011, the Company issued seven shares of its preferred stock. The Company and the preferred shareholders have agreed to
amend
the preferred shareholder agreements so that each share of preferred stock has the right to convert into 214,286 shares of the Company’s common stock and receive a 1% share of any artifacts found at the Church Hollow Site. As of December 31, 2013, no shares of preferred stock had been converted into shares of the Company’s common stock.
Warrants and Options
As of December 31, 2013, a convertible note holder had a warrant to purchase 4,000,000 shares of its common stock with an exercise price of $.005 per share for a period of ten years beginning on November 20, 2012.
NOTE 5 - INCOME TAXES
At December 31, 2013 and 2012, the Company had available Federal and state net operating loss carry forwards to reduce future taxable income. The amounts available were approximately $8,023,000 and $5,849,000 for Federal purposes. The Federal carry forward begin to expire in 2033. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit.
Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2013 and 2012, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2013 and 2012, the Company has not accrued interest or penalties
related to uncertain tax positions. Additionally, tax years 2010 through 2013 remain open to examination by the major taxing jurisdictions to which the Company is subject.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES,
continued
Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carry forwards and will recognize a deferred tax asset at that time.
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:
|
|
For the Year Ended
December 31, 2013
|
|
|
For the Year Ended
December 31, 2012
|
|
Income tax at federal statutory rate
|
|
|
(34.00
|
%)
|
|
|
(34.00
|
%)
|
State tax, net of federal effect
|
|
|
(3.96
|
%)
|
|
|
(3.96
|
%)
|
|
|
|
37.96
|
%
|
|
|
37.96
|
%
|
Valuation allowance
|
|
|
(37.96
|
%)
|
|
|
(37.96
|
%)
|
Effective rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
As of December 31, 2013 and 2012, the Company’s only significant deferred income tax asset was a cumulative estimated net tax operating loss of $8,023,260 and $5,848,906, respectively that is available to offset future taxable income, if any, in future periods, subject to expiration and other limitations imposed by the Internal Revenue Service. Management has considered the Company's operating losses incurred to date and believes that a full valuation allowance against the deferred tax assets is required as of December 31, 2013 and 2012.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – LEASE OBLIGATION
Corporate Office
The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The Company entered into an amended lease agreement on July 1, 2013 for its current location. Under the terms of the amended lease agreement, the lease term has been extended to June 30, 2015, with a base monthly rent of $1,200 from July 1, 2013 to June 30, 2014 and a base monthly rent of $1,235 from July 1, 2014 through June 30, 2015. There may be additional monthly charges for pro-rated maintenance, late fees, etc.
As of December 31, 2013, future minimum rental payments required under this non-cancelable operating lease are as follows:
Years ending December 31,
|
|
|
|
2014
|
|
$
|
14,608
|
|
2015
|
|
|
7,407
|
|
Total
|
|
$
|
22,015
|
|
NOTE 7 – SUPPLEMENTAL CASH FLOW DISCLOSURES
|
|
|
|
|
|
|
|
February 15, 2007
|
|
|
|
|
|
|
|
|
|
(inception) to
|
|
|
|
2013
|
|
|
2012
|
|
|
December 31, 2013
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest expense
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,660
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Noncash operating and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to Organetix, Inc. reclassified to additional paid-in capital
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
91,500
|
|
Common stock to satisfy minimum value guarantee
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
87,667
|
|
Common stock issued to satisfy debt
|
|
$
|
56,929
|
|
|
$
|
76,528
|
|
|
$
|
133,187
|
|
Convertible debt converted and accrued interest to common
stock
|
|
$
|
271,352
|
|
|
$
|
259,986
|
|
|
$
|
1,509,600
|
|
Common stock issued in exchange for fixed assets
|
|
$
|
-
|
|
|
$
|
7,420
|
|
|
$
|
7,420
|
|
Common stock issued in conjunction with joint venture
|
|
$
|
-
|
|
|
$
|
9,800
|
|
|
$
|
9,800
|
|
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
Upon inception, the Company evaluates each financial instrument to determine whether it meets the definition of “conventional convertible” debt under paragraph 4 of EITF 00-19, which was superseded by ASC 815, and EITF 05-02, which was superseded by ASC 470.
Convertible Notes Payable
The following table reflects the convertible notes payable, other than the notes remeasured to fair value, which are discussed in Note 9, as of December 31, 2013 and 2012:
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE,
continued
Issue
|
Maturity
|
|
December 31,
|
|
|
December 31,
|
|
|
Interest
|
|
|
Conversion
|
|
Date
|
Date
|
|
2013
|
|
|
2012
|
|
|
Rate
|
|
|
Rate
|
|
Convertible notes Payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2013
|
January 28, 2014
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
January 28, 2013
|
January 28, 2014
|
|
|
25,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
August 8, 2013
|
February 11, 2014
|
|
|
40,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0100
|
|
September 18, 2013
|
March 18, 2014
|
|
|
20,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0125
|
|
September 25, 2013
|
March 25, 2014
|
|
|
10,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0125
|
|
October 21, 2013
|
April 21, 2014
|
|
|
40,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0100
|
|
October 4, 2013
|
May 12, 2014
|
|
|
50,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0125
|
|
October 30, 2013
|
October 30, 2014
|
|
|
49,990
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0125
|
|
February 17, 2012
|
February 17, 2013
|
|
|
-
|
|
|
|
7,500
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
April 5, 2012
|
April 5, 2013
|
|
|
-
|
|
|
|
15,000
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
July 16, 2012
|
July 16, 2013
|
|
|
-
|
|
|
|
5,000
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
October 31, 2012
|
April 30, 2013
|
|
|
-
|
|
|
|
8,000
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
November 20, 2012
|
May 20, 2013
|
|
|
-
|
|
|
|
50,000
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
December 20, 2012
|
June 20, 2013
|
|
|
-
|
|
|
|
20,000
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
|
|
|
|
259,990
|
|
|
|
105,500
|
|
|
|
|
|
|
|
|
|
Unamortized discounts
|
|
|
|
(120,533
|
)
|
|
|
(13,997
|
)
|
|
|
|
|
|
|
|
|
Balance
|
|
|
$
|
139,457
|
|
|
$
|
91,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable, in default
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2012
|
April 30, 2013
|
|
$
|
8,000
|
|
|
$
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
July 16, 2012
|
July 30, 2013
|
|
|
5,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
November 20, 2012
|
May 20, 2013
|
|
|
50,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
January 19, 2013
|
July 30, 2013
|
|
|
5,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
February 11, 2013
|
August 11, 2013
|
|
|
9,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
August 28, 2009
|
November 1, 2009
|
|
|
4,300
|
|
|
|
4,300
|
|
|
|
10.00
|
%
|
|
|
0.0150
|
|
April 7, 2010
|
November 7, 2010
|
|
|
70,000
|
|
|
|
70,000
|
|
|
|
6.00
|
%
|
|
|
0.0080
|
|
November 12, 2010
|
November 7, 2011
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
6.00
|
%
|
|
|
0.0080
|
|
November 9, 2011
|
December 31, 2012
|
|
|
-
|
|
|
|
35,000
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
|
|
|
|
191,300
|
|
|
|
149,300
|
|
|
|
|
|
|
|
|
|
Unamortized discount
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
$
|
191,300
|
|
|
$
|
149,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable - related party, in default
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 7, 2013
|
June 30, 2013
|
|
|
7,500
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
January 19, 2013
|
July 30, 2013
|
|
|
15,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0040
|
|
February 7, 2013
|
August 7, 2013
|
|
|
10,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
July 9, 2013
|
December 19, 2013
|
|
|
15,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0150
|
|
January 9, 2009
|
January 9, 2010
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
10.00
|
%
|
|
|
0.0150
|
|
January 25, 2010
|
January 25, 2011
|
|
|
6,000
|
|
|
|
6,000
|
|
|
|
6.00
|
%
|
|
|
0.0050
|
|
January 18, 2012
|
July 18, 2012
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
8.00
|
%
|
|
|
0.0040
|
|
|
|
|
|
113,500
|
|
|
|
66,000
|
|
|
|
|
|
|
|
|
|
Unamortized discount
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
$
|
113,500
|
|
|
$
|
66,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable - related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 17, 2013
|
January 17, 2014
|
|
|
30,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0010
|
|
July 26, 2013
|
January 26, 2014
|
|
|
10,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0010
|
|
November 12, 2013
|
May 12, 2014
|
|
|
11,000
|
|
|
|
-
|
|
|
|
6.00
|
%
|
|
|
0.0125
|
|
|
|
|
|
51,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Unamortized discount
|
|
|
|
(26,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
$
|
24,111
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE,
continued
Notes Payable
The following table reflects the notes payable, as of December 31, 2013 and 2012:
Issue Date
|
Maturity Date
|
|
December 31, 2013
|
|
|
December 31, 2012
|
|
|
Interest Rate
|
|
Notes payable, in default –related parties:
|
|
|
|
|
|
|
|
|
|
February 24, 2010
|
February 24, 2011
|
|
$
|
7,500
|
|
|
$
|
7,500
|
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, in default:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 23, 2011
|
August 23, 2011
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
6.00
|
%
|
April 27, 2011
|
August 23, 2011
|
|
|
5,000
|
|
|
|
5,000
|
|
|
|
6.00
|
%
|
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,500
|
|
|
$
|
37,500
|
|
|
|
|
|
In August of 2013 a related party shareholder provided the Company with emergency short term loan proceeds totaling $2,500. The Company repaid the related party shareholder the entire $2,500 balance prior to December 31, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.
In October of 2013 a related party shareholder provided the Company with emergency short term loan proceeds totaling $6,250. The Company repaid the related party shareholder the entire $6,250 loan balance prior to December 31, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.
At December 31, 2013 and 2012, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $59,267 and $45,898, respectively, and are included in accounts payable and accrued liabilities on the accompanying balance sheets. Management intends to have discussions or has already had discussions with several of the promissory note holders who do not currently have convertible notes regarding amending their notes to make them convertible into shares of the Company’s common stock. Any such agreements to convert promissory notes into shares of the Company’s common stock would more than likely have a highly dilutive effect on current shareholders and such dilution may significantly depress the trading price of the Company’s common stock.
Convertible Notes Payable and Notes Payable, in Default
At December 31, 2013, the Company had convertible notes payable, notes payable and stockholder loans of $505,868, of which $342,300 were in default. The convertible notes payable and notes payable in default at December 31, 2013 are reflected in the tables shown above.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE,
continued
The Company does not have additional sources of debt financing to refinance its convertible notes payable and notes payable that are currently in default. If the Company is unable to obtain additional capital, such lenders may file suit, including suit to foreclose on the assets, including foreclosure on the Company’s main salvage vessel, held as collateral for the obligations arising under the secured notes. If any of the lenders file suit to foreclose on the assets held as collateral, then the Company may be forced to significantly scale back or cease its operations which would more than likely result in a complete loss of all capital that has been invested in or borrowed by the Company.
The convertible notes that have been issued by the Company are convertible at the lender’s option. These convertible notes represent potential dilution to the Company’s current shareholders as the convertible price of these notes is generally lower than the current market price of the Company’s shares. When these notes are converted into equity, there is typically a highly dilutive effect on current shareholders.
NOTE 9 – CONVERTIBLE NOTES PAYABLE AT FAIR VALUE
Convertible Note Payable Dated October 6, 2011
On October 6, 2011, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $42,500, bears interest at 8.0% per annum and is due on July 11, 2012. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
The Company elected to account for this hybrid contract under the guidance of ASC 815-15-25-4.
In connection with the issuance of the convertible note payable on October 6, 2011, the Company encountered the unusual circumstance of a day-one derivative loss related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received
from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be currently recognized in interest expense or interest income on the Company’s statement of operations.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – CONVERTIBLE NOTES PAYABLE AT FAIR VALUE,
continued
The holder of this convertible note has substantial rights and protections regarding dilution if certain events, including a default were to occur. There are a number of events that could trigger a default, including but not limited to failure to pay principal or interest, failure to issue shares under the conversion feature, breach of covenants, breach of representations and warranties, appointment of a receiver or trustee, judgments, bankruptcy, delisting of common stock, failure to comply with the exchange act, liquidation, cessation of operations, failure to maintain assets, material financial statement restatement, reverse split of borrowers stock, etc. In the event of that any of these events were to occur then the lender would be entitled to receive significant amounts of additional shares of the Company’s stock above the amounts for conversion and such occurrence would be highly dilutive to the Company’s shareholders.
Furthermore, there are additional events that could cause the lender to be due additional shares of common stock above and beyond the shares due from a conversion. Some of these events include, but are not limited to a merger or consolidation of the Company, dividend distribution or spin off, dilutive issuances of the Company’s stock, etc. If the lender receives additional shares of the Company’s commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the shareholders of the Company. Such dilution would likely result in a significant drop in the per share price of the Company’s common stock. The potential dilutive nature of this note presents a very high degree of risk to the Company and its shareholders.
During the year ended December 31, 2012, the holder converted the note in full into 15,524,573 shares of the Company’s common stock.
Convertible Note Payable Dated January 31, 2012
On January 31, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $32,500, bears interest at 8.0% per annum and is due on November 2, 2012. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – CONVERTIBLE NOTES PAYABLE AT FAIR VALUE,
continued
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
During the year ended December 31, 2012, the holder converted the note in full into 11,655,173 shares of the Company’s common stock.
Convertible Note Payable Dated May 7, 2012
On May 7, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $32,500, bears interest at 8.0% per annum and is due on February 11, 2013. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
During the year ended December 31, 2012, the holder converted the note in full into 12,306,513 shares of the Company’s common stock.
Convertible Note Payable Dated October 22, 2012
On October 22, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $42,500, bears interest at 8.0% per annum and is due on July 24, 2013. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 60%
multiplied by the average of the lowest two trading prices for the Company’s common stock during the twenty five trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – CONVERTIBLE NOTES PAYABLE AT FAIR VALUE,
continued
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
During the year ended December 31, 2013, the Company repaid $30,000 in principal and the remaining $12,500 in principal was converted into 1,136,364 shares of the Company’s common stock.
Convertible Note Payable Dated December 18, 2012
On December 18, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $42,500, bears interest at 8.0% per annum and is due on September 20, 2013. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 60% multiplied by the average of the lowest two trading prices for the Company’s common stock during the twenty five trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).
In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.
During the year ended December 31, 2013, the full $42,500 in principal and $1,700 in accrued interest was converted into 3,226,278 shares of the Company’s common stock.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS
Agreement to Explore a Shipwreck Site Located off of
Brevard
County, Florida
On February 1, 2013, the Company entered into an agreement with a corporation under which Seafarer was given the rights to explore a purported historic shipwreck located off of Brevard County, Florida. Under the terms of the agreement Seafarer agreed to provide services that are normal to the exploration and salvage of historic shipwrecks, including exploration, dig and identify, research and establish historic province, salvage, recover and conserve artifacts and archeological material from abandoned and lost shipwreck sites. Seafarer will also assist to obtain and/or update the necessary permits and contracts with various governmental agencies including the Florida Division of Historical Resources, including environmental permits, which are required to be able to explore and eventually salvage the shipwreck site. Seafarer will also act as the project manager for the exploration and salvage of the shipwreck site. Under the agreement, Seafarer will receive 60% of any recovery of archeological material from the shipwreck site and the corporation will receive 40%, net of any percentages that are donated to the State of Florida. All ancillary rights, including, but not limited to public exhibits, publicity, movies, real time video, television, literary, archival research, and replica rights shall be shared equally between Seafarer and the corporation. Seafarer agreed to pay to the corporation 10 million shares of its restricted common stock with 2.5 million shares due and payable upon execution of the agreement, 2.5 million shares due and payable upon the receipt of a salvage and recovery contract from the State of Florida, 2.5 million shares upon commencement of the work at the site, and 2.5 million shares upon the discovery of valuable archeological material. Seafarer may, in its discretion, issue additional performance shares of stock to the corporation. Seafarer and the corporation will be jointly responsible for overseeing the conservation of archeological materials from the site and will mutually locate and agree on a third party to handle the conservation of the artifacts. Seafarer will be responsible for 60% of the cost of the conservation of the artifacts and the corporation will be responsible for 40% of the cost. Seafarer and the corporation are individually responsible for their own costs and expenses that they incur that are associated with the agreement, including, but not limited to fees, insurance, independent contractors, food, permit and contract fees, repairs, equipment, vessels, divers, safety equipment, travel, legal expenses, etc. Subsequent to December 31, 2013 this Agreement was cancelled and the parties, through an affiliate of the corporation that originally entered into the Agreement with Seafarer, agreed to form a new limited liability company to continue to pursue obtaining the permits required for the exploration and recovery of the site.
Agreement with Tulco Resources, Ltd.
As previously noted in its 8-K filing on June 11, 2010, the Company entered into an agreement with Tulco Resources, Ltd. (“Tulco”) on June 8, 2010 which granted the Company the exclusive rights to explore, locate, identify, and salvage a possible shipwreck within the territorial limits of the State of Florida, off of Palm Beach County, in the vicinity of Juno Beach, Florida (the “Exploration Agreement”). The term of the Agreement is for three years and may renew for an additional three years under the same terms unless otherwise agreed to in writing by the Tulco and Seafarer. The Agreement may be terminated by mutual agreement of both Tulco and Seafarer or it may be terminated by either party for cause. Termination for cause may include willful misconduct or gross
negligence with respect to carrying out any duties responsibilities or commitments under the agreement and/or failure by Seafarer to fully pay the annual conservation payment on time. Under the Agreement the Company paid Tulco a total of $40,000, a total which included $20,000 to cover fees owed to Tulco from the 2009 diving season and a $20,000 payment for the 2010 diving season. The Company also agreed to pay Tulco a conservation payment of $20,000 per calendar year during the term of the Agreement. The amount of the conservation payment my increase in future years based on the mutual agreement of Tulco and the Company. The Company agreed to furnish its own personnel, salvage vessel and equipment necessary to conduct operations at the shipwreck site. The Company also agreed to pay all of its own expenses directly associated with salvage operations, including but not limited to fuel, food, ground tackle, electronic equipment, dockage, wages, dive tanks, and supplies. The Company agreed to split any artifacts that it recovers equally with Tulco, after the State of Florida has selected up to twenty percent of the total value of recovered artifacts for the State of Florida’s museum collection. The Company and Tulco agreed to receive their share of the division of artifacts at the same time. The Company and Tulco agreed to jointly handle all correspondence with the State of Florida regarding any agreements and permits required for the exploration and salvage of the shipwreck site.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
The Company has previously received correspondence from Tulco’s legal counsel demanding that the Company pay additional fees that are not contemplated in the Exploration Agreement and that the Company turn over artifacts to Tulco. Tulco has stated that if the Company does not meet its demands then Tulco will seek other groups to work at the Juno Beach site and that it will terminate its agreement with the Company and it has threatened to take legal action against the Company. The Company paid Tulco the $20,000 fee in January 2012, as required under the Exploration Agreement, however Tulco has not cashed the check. The Company has not paid Tulco the $20,000 fee in January 2013, as contemplated in the Agreement and does not intend to make the payment until legal counsel is able to determine Tulco’s intent with regard to the Exploration Agreement. Tulco has not provided any conservation services as required under the Exploration Agreement. The original three year term of the Exploration Agreement was valid until June 10, 2013 and both Seafarer and Tulco had the option to extend the agreement for an additional three years. There have been no discussions between Tulco and Seafarer regarding extending the Exploration Agreement. It is possible that Tulco may claim that the Exploration Agreement is no longer valid and therefore the Company has no further rights to explore and salvage the Juno Beach site.
On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed against Tulco based upon breach of contract, equitable relief and injunctive relief. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement dated June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008, which was renewed in the June 2010 agreements between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer, during the period
of approximately March 2008 through April 2012, had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares and monies for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. As of March 24, 2014, Seafarer, through Counsel with the assistance of a licensed investigator, established there was no party or individual to be served from Tulco due to the death of the former Manager, and having no other legal person or entity to serve, has established that it will seek the entry of a default judgment, and final judgment for award of all rights to such site for contractual and other rights held by Tulco.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
Recovery Permit with Florida Division of Historical Resources
The Company and Tulco received a 1A-31 Recovery Permit from the Florida Division of Historical Resources. The Recovery Permit is active through April 25, 2014. The Permit authorizes Seafarer to dig and recover artifacts from the designated site at Juno Beach, Florida. It will be necessary for the Company to obtain a renewal to the Recovery Permit for the Juno Beach shipwreck site in order to continue to perform exploration and recovery work at the site after April 25, 2014. As of the date of these financial statements, the Company has not received a renewal permit to continue recovery operations at the Juno Beach site.
Exploration Permit with Florida Division of Historical Resources
On November 2, 2012, the Company received a three year 1A-31 Exploration Permit from the Division of Historical Resources for an area identified off of Lantana Beach, Florida. Under the permit, the Company can begin remote sensing of the site including magnetometer and side scan sonar as necessary, underwater recording of exposed target information using photo, video, measuring tapes and temporary datum points, develop a research plan to test selected target areas that appear to represent historic shipwreck material once the remote sensing has been completed and the data analyzed. The Company and any associated personnel and contractors must adhere to a number of requirements and conditions that are outlined in the permit. If the work authorized under the Exploration Permit confirms the presence of a historical shipwreck then a request for a recovery permit will be made.
Certain Other Agreements
On January 8, 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the
Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 4,000,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for pre-approved expenses.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In January of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 900,000 restricted shares of its common stock. According to the agreement the shares vest at a rate of 75,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for pre-approved expenses. All fees paid to the advisor during the twelve month period ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement.
In February of 2013, the Company issued 900,000 shares of its restricted common stock to a consultant for assistance with administrative and compliance services relating to the Company’s permitting and ongoing reporting of its historic shipwreck exploration operation to the State of Florida. The 900,000 restricted shares are included as an expense in consulting and contractor fees in the accompanying income statement.
In February of 2013, the Company issued 3,000,000 shares of its restricted common stock to a consultant for technical accounting and financial reporting services. The 3,000,000 restricted shares are included as an expense in consulting and contractor fees in the accompanying income statement.
In March of 2013, the Company issued a total of 4,500,000 shares of its restricted common stock to an individual.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In April of 2013, the Company and a consultant mutually amended an agreement they had entered into in August of 2011 under which the consultant agreed to provide services and advice to the Company on site work as deemed necessary for the job, directing, mapping, charting for the Company in relation to the specific shipwreck project under the direction of the Company’s President. Under the original terms of the consulting agreement the Company agreed to pay the consultant $10,000 per month after receiving an approved salvage permit with the State of Florida for the shipwreck site that the consultant agreed to make known to the Company. Under the amended agreement the Company agreed to pay the consultant $5,000 per month instead of $10,000. In addition to the cash fee the company also issued the consultant 5,500,000 restricted shares of its common stock as consideration for the services. All of the other terms of the original consulting agreement remain in effect. All fees paid to the consultant during the twelve month period ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement.
In April of 2013, the Company entered into an independent contractor agreement with a limited liability company to provide various archeological and historic research consulting services to the Company, including researching historic shipwreck sites, identifying artifacts, advising the Company in regards to proper archeological guidelines for exploring and salvaging shipwrecks, teaching classes pertaining to proper archeological procedures and the proper way to recover artifacts and to perform other consulting services as may be appropriate from time to time. The term of each of the consulting agreements is open ended and may be terminated by either party upon request. In consideration for the performance of the consulting services, the Company agreed to issue the consultant a total of 2,000,000 restricted shares of its common stock. Additionally, the Company agreed to pay the consultant $3,500 per month in shares of the Company’s restricted common stock. Under the consulting agreement, the Company has agreed to reimburse the advisors for preapproved expenses. In August of 2013, the Company and the consultant agreed to amend the original agreement so that the agreement reflects that the Company will pay the consultant a minimum of $4,000 per month in shares of its restricted common stock. The Company also agreed to pay expenses, including travel, lodging, meals and entertainment and other out of pocket expenses, for archaeological research of historic shipwrecks and the attendance of the consultant at events related to historical shipwrecks and the archaeology, exploration, and recovery of historical shipwrecks.
In April of 2013, the Company entered into a legal services agreement with an individual under which the individual agreed to act as the Company’s legal representative, counselor and agent with regards to media projects that the Company undertakes, including movies and television. The Company agreed to issue the legal consultant 200,000 shares of its restricted common stock in exchange for the services. The term of the agreement is for one year. During the twelve month period ended December 31, 2013, the Company had issued the consultant 200,000 shares of its restricted common stock which is included as an expense in consulting and contractor fees in the accompanying income statement.
In May of 2013, the Company issued 4,000,000 shares of its restricted common stock to one of its attorneys as payment for legal services rendered. The 4,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In June of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 240,000 restricted shares of its common stock. According to the agreement, the shares vest at a rate of 20,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for preapproved expenses.
In July of 2013, the Company entered into a settlement agreement with an individual who was a former officer and director of the Company prior to its reverse merger in 2008. Under the terms of the settlement agreement, the individual agreed to cancel 2,250,000 shares of the Company restricted common stock and the Company agreed to dismiss a potential legal action and not pursue any further claims against the individual. The agreement also allowed the individual to sell 3,557,333 of the Company’s common stock that had been issued to him prior to the reverse merger in 2008. The individual agreed that he would only sell 500,000 shares per week. The 2,250,000 shares that were returned to the Company were cancelled.
In August of 2013, the Company entered into a consulting agreement with a corporation to provide corporate planning, strategy negotiations, and researching statutory requirements for shipwreck salvage at the federal, state and international levels, research and analyze historical data and background data, develop a corporate communications strategy, and provide strategic planning and operational support services on a project basis. The Company agreed to pay the consultant a fee of 100,000 shares of its restricted stock for performance of the services. The Company also agreed to pay some expenses that the consultant may incur while providing the services, however the Company must authorize any such expenses prior to the consultant incurring them. The Company considered the fee earned by the consultant during the twelve month period ended December 31, 2013 and an expense of $1,500 has been included as an expense in consulting and contractor fees in the accompanying income statement for the period.
In August of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and
the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 360,000 restricted shares of its common stock. According to the agreement, the shares vest at a rate of 30,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for preapproved expenses.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In August of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to continue serving as a member of the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 1,500,000 restricted shares of its common stock at the execution of the agreement and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for preapproved expenses. As of September 30, 2013, the Company had issued the related party Director 1,500,000 shares of its restricted common stock pursuant to the agreement. The 1,500,000 shares are included as an expense in the amount of $26,250 in consulting and contractor fees in the accompanying income statement.
On various dates during the twelve month period ended December 31, 2013, the Company issued a total of 1,025,000 shares to five independent contractor consultants as additional compensation to the cash fees they were being paid. 925,000 shares were issued for services related to its operations, primarily its shipwreck exploration and recovery operations and 100,000 shares were issued for various administrative and clerical services. The Company issued the shares to the consultants in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services to the Company. The 1,025,000 shares
are included as an expense in the amount of $24,450 in consulting and contractor fees in the accompanying income statement.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In October of 2013, the Company entered into a settlement agreement with an individual who was previously provided legal services to the Company. The Company and the individual agreed that the individual should have received 2,500,000 shares for legal services that the individual had previously provided to the Company. Due to an administrative oversight the individual did not provide an invoice for the services indicating that the shares were owed to him. Upon further investigation and discussion with the individual, management believes that the individual had a reasonable basis to believe that the shares were owed to him and as such it would be in the Company’s best interest to settle the matter by issuing the shares. The 2,500,000 shares were valued at $50,000 based on the closing price of the Company’s stock on the date of issuance and are included as an expense in consulting and contractor fees in the accompanying income statement.
In October of 2013, the Company re-entered into an agreement with an individual who was previously a member of the Company’s Board of Directors to continue as a member of the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 500,000 restricted shares of its common stock valued at $10,500. According to the agreement the shares vest at a rate of 41,667 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for preapproved expenses. The shares that vested during 2013 are included as an expense in consulting and contractor fees in the accompanying income statement.
In November of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's
operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 500,000 restricted shares of its common stock valued at $10,750. According to the agreement the shares vest at a rate of 41,667 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for preapproved expenses.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
In December of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 300,000 restricted shares of its common stock valued at $4,500. According to the agreement the shares vest at a rate of 25,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for preapproved expenses.
In December of 2013, the Company issued 500,000 shares of its restricted common stock to one of its independent contract divers as a bonus for that individual obtaining his commercial boat captain’s license. The shares were also issued in order to induce the independent contractor to continue to provide services to the Company under the same terms and conditions. Management believes that the independent contractor obtaining the captain’s license will benefit the Company. The 500,000 shares were valued at $7,700 based on the closing price of the Company’s stock on the date of issuance and are included as an expense in consulting and contractor fees in the accompanying income statement.
The Company has an ongoing consulting agreement to pay a limited liability company controlled by its former Chief Financial Officer a minimum of $5,000 per month for providing ongoing financial reporting and corporate financial consulting and services, business planning, strategic planning and corporate advisory services including making strategic recommendations regarding both the short
term and the long term objectives of the Company’s business, providing analysis of proposed corporate decisions and identifying and evaluating potential alternative courses of action, identifying and evaluating external threats and opportunities to the Company, and assistance with accounting. The consultant is also authorized to write checks on behalf of the Company and to pay for Company related expenses using a Company issued debit card. The consultant reports directly to the CEO. The Company also agreed to pay additional compensation to the consultant in the form of cash and/or restricted stock to be awarded solely at the Company’s discretion to show appreciation for the consultant’s willingness to spend additional time and effort rendering services to the Company, to provide services to the Company at below market cash compensation rates and as an incentive and an inducement to continue to provide services to the Company as well as a partial bonus for the outstanding service provided by the consultant. In addition to the cash fees paid to the consultant during the twelve month periods ending December 31, 2011, 2012 and 2013 the Company paid the consultant a total of 13,000,000 shares of the Company’s restricted common stock in 2011, 3,000,000 shares of the Company’s restricted common stock in 2012, and 2,000,000 share of its restricted stock in 2013. The Company also agreed to reimburse the consultant for certain expenses. The agreement is verbal and may be terminated by the Company or the consultant at any time. All fees paid to the consultant, including any payments of restricted stock, during the twelve month period ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statements.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
The Company has an ongoing verbal agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO to pay the related party consultant $3,000 per month to provide general business consulting, industry research, monitoring and assessing the Company's business and to advise management with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, perform background research including background checks and provide investigative information on individuals and companies and acting as an administrative specialist to perform various administrative duties and clerical services including reviewing the Company’s agreements and books and records. The consultant provides the services under the direction and supervision of the Company’s CEO. During the year ended December 31, 2012, the Company paid the related party consultant fees of $26,400. During the year ended December 31, 2013, the Company paid the related party consultant fees of $32,300. During the year ended December 31, 2013 the Company also paid the consultant a fee of 600,000 shares of its restricted common stock with a market value at the time of issuance of $9,600 in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services at such rates. All fees paid to the related party consultant during the year ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.
The Company has an ongoing agreement with a limited liability company that is owned and controlled by a person who is related to the Company’s CEO to provide stock transfer agency services. During the year ended December 31, 2013, the Company paid the related party transfer agency fees of $4,864.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – MATERIAL AGREEMENTS,
continued
All fees paid to the related party consultant during the year ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the year. At December 31, 2013, the Company owed the related party limited liability company $8,625 for transfer agency services rendered and legal fees relating to a lawsuit against the transfer agent arising from its relationship with the Company. The stock transfer agreement between the related party limited liability company and the Company states that the Company will pay the legal fees incurred by the stock transfer agency related to lawsuits or legal proceedings against the transfer agency that arise as a result of the services that the transfer agency provides to the Company. In August 2013 the Company entered into a separate debt settlement agreement with the related party vendor to settle a total of $5,730 of outstanding debt related to legal fees incurred by the related party vendor due to a lawsuit against the Company in which suit the related party vendor was also named as a defendant due to its position as the Company’s stock transfer agency. The Company issued 458,462 shares of its common stock to this vendor as satisfaction for the outstanding debt. The agreement between the Company and the vendor stipulated that should the transfer agency realize less than $5,730 from the sale of the stock, then the consultant is entitled to receive up to an additional 400,000 shares of common stock or a cash payment until the balance is paid in full. During the year ended December 31, 2013 the Company has issued the related party limited liability company a total of 1,964,296 shares of its common stock to settle a total of $18,482 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability was also named as a defendant due to its business relationship with the Company. During the year ended December 31, 2012 the Company issued the related party limited liability company a total of 6,641,583 shares of its common stock to settle a total of $19,261 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability company was also named as a defendant due to its business relationship with the Company. All fees paid to the related party consultant during the years ended December 31, 2013 and 2012 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.
NOTE 11 – DIVISON OF ARTIFACTS AND TREASURE
Under the Exploration Agreement with Tulco that was renewed on June 8, 2010, the Company is required to split any artifacts or treasure that it successfully recovers from the Juno Beach Shipwreck site with the FLDHR and Tulco. Tulco and the Company, assuming that the FLDHR’s portion will be 20%, have agreed to the following division of artifacts and treasure:
20% to the FLDHR
40% to Tulco
40% to the Company
More specifically, the FLDHR has the right to select up to 20% of the total value of recovered artifacts and treasure for the State's museum collection. After the FLDHR has selected those artifacts and treasure that it feels will complement its collection, then the Company and Tulco will split the remaining artifacts and treasure equally.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – DIVISON OF ARTIFACTS AND TREASURE,
continued
In addition to the division of artifacts with the FLDHR and Tulco, the Company has entered into agreements where it may be required to pay additional percentages of its net share of any artifacts that it recovers at the Juno Beach Shipwreck site:
|
●
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The Company may elect to pay its divers or other personnel involved in the search for artifacts by giving them a percentage of the artifacts that they locate after a division of artifacts takes place with the FLDHR and Tulco. At the present time, the Company does not have any written agreements to pay any of its dive personnel a net percentage of any recovered artifacts; however, the Company reserves the right to do so in the future.
|
|
●
|
The Company has become aware that an individual has made a claim that he has a legally valid and binding agreement with Tulco to receive a percentage of any artifacts recovered from the Juno Beach Shipwreck. The individual has purportedly claimed that his agreement with Tulco was executed several years prior to the Company and Tulco entering into the Exploration Agreement in March 2007. The Company has not been able to verify the legal standing of this claim. If this alleged agreement exists and is legally valid and binding, or if there are other agreements that have a valid, legal claim on the Juno Beach Shipwreck site, then such consequences may have a material adverse effect on the Company and its prospects.
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SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – LEGAL PROCEEDINGS
Since December 11, 2009, the Company, has been involved in a lawsuit where it was named as a Defendant, along with its CEO and transfer agent in Case Number 09-CA-030763, filed in the Circuit Court of Hillsborough County, Florida. The lawsuit was brought in the name of 31 individuals and 1 corporation. The lawsuit alleges that the Company, its CEO, and its transfer agent wrongfully refused to remove the restrictive legend from certain shares of the Company’s common stock that are collectively owned by the plaintiffs, which prevented the plaintiffs from selling or transferring their shares of the Company’s common stock. The plaintiffs allege that they have lost approximately $1,041,000 as of the date of the lawsuit. Such lawsuit continued to a hearing of the Plaintiffs’ motion for summary judgment against the Defendants including Seafarer, which was heard on September 1, 2011 and denied by the Court. Litigation of the matter has continued and the Company has presented evidence and arguments of law that the shares were distributed from their original recipient, Micah Eldred, in an illegal sale to another corporate entity. The Company further contends in its pleadings that such shares were then illegally purchased back by Eldred, then distributed in a manner by Eldred to others including the 31 other Plaintiffs to avoid reporting requirements under the Securities Act
and as Eldred had a duty to report as a principal of a brokerage. The actions by Eldred, as pled by the Corporation, is that on or about October 8, 2008, Eldred gifted most of the 34,700,000 shares to certain friends, family, and employees (i.e., the Plaintiffs named in this Complaint), and kept ownership of 4,140,000 shares. On September 11, 2013, the Parties attended a voluntary mediation, which ended in an impasse. Some discovery had progressed to the point that Seafarer had, on September 25, 2013, filed a Motion to File Counterclaims and Third-Party Complaint (“Motion for Leave to File Counterclaim”) along with a proposed Counterclaim. The proposed Counterclaim names as defendants the Plaintiffs in the Lawsuit, as well as non-parties Spartan Securities Group, Ltd., (“Spartan Securities”) and Am- Asia Consulting (“Am-Asia”) (collectively the “Proposed Counterclaim Defendants”). Neither Spartan Securities nor Am-Asia has yet been joined or served with any process in the Lawsuit. The allegations in the proposed Counterclaim arise from the same transaction or occurrence that gave rise to the Lawsuit. Specifically, the proposed Counterclaim alleges that the Plaintiffs including Eldred violated and conspired to violate securities laws, specifically Rule 10b-5 promulgated under the Securities Exchange Act, 15 U.S.C. § 78j, and Fla. Stat. § 517.301, in connection with the activities which form the basis of Plaintiffs’ claims in the Lawsuit. Included in the proposed counterclaim was an allegation of conspiracy between Eldred and Sean Murphy for the publication of false information which Seafarer sued Murphy for and received a judgment for libel against Murphy on April 1, 2011 for $5,080,000. Thus the counterclaim was proposed and filed as a proposed claim against the Plaintiffs: Micah Eldred, Michael J. Daniels, Carl Dilley, Heather Dilley, James Eldred, Mary R. Eldred, Michole Eldred, Nathan Eldred, Toni A. Eldred, Diane J. Harrison, Ioulia Hess, Olessia Kritskaia, Anna Krokhina, George Lindner, Elizabeth Lizzano, Karen Lizzano, Robert Lizzano, Abby Lord, Jillian Mally, Ekaterina Messinger, Susan Miller, Michael Mona, Matthew J. Presy, Oksana Savchenko, Vanessa A. Verbosh, Alan Wolper, Sarah Wolper, and Christine Zitman. On October 18, 2013, the Plaintiffs filed a Notice of Removal to Federal Court in the Tampa Division of the United States District Court, citing the allegation that such lawsuit should be moved to Federal Court based upon the Defendants proposed counterclaims of Federal law. The pleading for removal contained the allegation by the Plaintiffs that they had the consent of all the listed Plaintiffs to remove the matter to Federal Court. On November 4, 2013, Seafarer filed a Motion to Remand back to State Court in the Federal Court, citing legal argument and the undisputed facts that removal to Federal Court was improper as having no basis in law, and asking for attorneys’ fees from the Plaintiffs for such removal. On November 7, 2013, Judge James Moody of the United States District Court entered an Order granting the Remand Motion of Seafarer, finding that “Plaintiffs removed the case based on their assumption that the counterclaim would establish federal jurisdiction. Plaintiffs’ removal is patently without merit.” Judge Moody further held “Plaintiffs’ removal had no basis under the law or facts. Simply put, the removal was not objectively reasonable.” Accordingly, the Court Ordered the case sent back to State Court and that the Federal Court would award Defendants [Seafarer] a reasonable amount of attorney’s fees and costs.” Seafarer collected such attorney’s fees through counsel. Such case was remanded to the Circuit Court in Hillsborough County, where Seafarer had the motion to file the Counterclaims and Third Party Claims heard and an Order Granting the filing and service of such claims was made by Circuit Judge Paul Huey on December 13, 2013. Seafarer filed such complaint and served such Counterclaim Defendants and Third Party Defendants during the months of December 2013 and January 2014. Such complaint included claims by Seafarer for damages
including punitive damages against the Plaintiffs for their actions, which is alleged to have materially damaged the Corporation and its shareholders. In early October 2013, counsel for Seafarer was contacted by counsel representing the listed Plaintiff, CADEF: The Childhood Autism Foundation (CADEF), as to their being named in the lawsuit as Plaintiffs in the State Court action and the litigation being done in their name. Pursuant to those discussions, on November 5, 2013, Seafarer, Kyle Kennedy (individually), Cleartrust LLC and CADEF entered into a Settlement Agreement and Release from Litigation. CADEF agreed to surrender all rights to the 1,000,000 shares in its name, as well as causing dismissal of any such claims against the Seafarer, Kennedy and Cleartrust that had been brought in their name in the lawsuit. Specifically, CADEF agreed: “CADEF agrees that the following matters of fact exist based upon the knowledge of its Board of Directors and Principals: A) The Board of Directors of CADEF had no knowledge of the share certificate ever being issued for its benefit or the existence of such share certificate until recently in the month of October 2013 when such shares were sent to them. B) The Board of Directors of CADEF never authorized the filing of the lawsuit cited above or to be a party to such. C) Because of the above in B) CADEF’s Board of Directors was never advised of any settlement offer being made by the Defendants nor of the mediation held on September 11, 2013. On approximately October 30, 2013 CADEF delivered such 1,000,000 shares to counsel for Seafarer. Management believes that this is a pattern of activity by the Plaintiff. Such litigation is now pending a motion to dismiss by the Counterclaim Defendants, as well as the Third Party Defendants, which motion is set for hearing in March 2014. Management and counsel of Seafarer stand by the legal argument that there no longer exists any legal basis under the Securities Act for such shares to ever have their legend removed. It is the position of Seafarer that due to the actions involved with such shares, they are tainted and should be ordered to be cancelled. Seafarer intends to continuously pursue this defense and the counterclaims and third party claims on behalf of the Corporation and its shareholders.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – LEGAL PROCEEDINGS,
continued
On February 24, 2011, the Company was named as defendants in Case Number 11000393CC filed in the Circuit Court of Martin County, Florida, by a limited liability company. The limited liability company is claimed that the Company owed $12,064, plus court costs. On February 21, 2013, both parties settled the matter with neither party making any admission of liability. Such settlement and dismissal was finalized and filed with no ongoing impact to the Company.
On March 2, 2010, the Company filed a complaint naming, Sean Murphy as a Defendant who formerly provided services as a captain, diver, and general laborer to the Company as a defendant in the Circuit Court of Hillsborough County, Florida case number 10-CA-004674. The lawsuit contains numerous counts against the defendant, including civil theft, breach of contract, libel and negligence. On April 5, 2011, a six person jury in Hillsborough County, Florida found in favor of the Company and found that the Defendant was responsible for $5,080,000 in compensatory damages. In 2012, the Company attempted to schedule a trial for the punitive damages, but the Court cancelled the trial due to scheduling of priority cases. The Company is currently seeking final entry of not only the judgment, but will be exercising collection matters against the Defendant. The Company intends to pursue collection, no matter the ability of the Defendant to pay.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – LEGAL PROCEEDINGS,
continued
Seafarer Exploration Inc. currently has litigation pending in Pinellas County, the Sixth Judicial Circuit, Civil Case No. 11-05539-Cl-19 naming as Defendants both an individual and a corporation controlled by the individual. The case is a collection case against the corporation for the balance of a promissory note due to the Company, and against the individual as a guarantor of the promissory note. The Defendants have filed an Answer in the nature of a general denial, certain affirmative defenses. Legal discovery is ongoing, and the pleadings are not otherwise currently “at-issue” to schedule the action for trial. There are currently no counterclaims or adverse liabilities of record in the above case as of the date of these financial statements.
On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure cite at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 which was renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares and monies for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer.
NOTE 13 – RELATED PARTY TRANSACTIONS
In January of 2013, the Company entered into a convertible loan agreement in the amount of $7,500 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest were
due
on or before June 30, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share.
In January of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be
terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 4,000,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for preapproved expenses.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
In January of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 4,000,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for preapproved expenses.
In January 2013, the Company entered into a convertible loan agreement in the amount of $15,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest were due on or before July 30, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share.
In February of 2013, the Company entered into a convertible loan agreement in the amount of $10,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest were
due
on or before August 7, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.005 per share.
In March of 2013, the Company entered into a convertible loan agreement in the amount of $23,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest were due on or before September 6, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.015 per share. During the year ended December 31, 2013 the note was converted into approximately 1.5 million shares of common stock.
In April of 2013, one of the Company’s promissory note holders agreed to assign a total of $10,000 of the principal balance of his note which had an original face value of $20,000 and which was in
default due to non-payment of principal and interest, to an investor who is related to the Company’s CEO, pursuant to two wrap around agreements between note holder and the related party investor. Under the agreements the related party investor agreed to repay the related party note holder a portion of the principal balance which was $10,000. The investor elected to convert the $10,000 principal balance of the note into 2,120,000 shares of the Company’s common stock.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
In June of 2013, an individual who is related to the Company’s CEO entered into a subscription agreement to purchase 1,500,000 shares of the Company’s restricted common stock at a price of $0.01 per share and the Company received proceeds of $15,000.
In July of 2013, the Company entered into a convertible loan agreement in the amount of $15,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before December 19, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.015 per share.
In July of 2013, the Company entered into a convertible loan agreement in the amount of $30,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 17, 2014. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.01 per share.
In July of 2013, the Company entered into a convertible loan agreement in the amount of $10,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 26, 2014. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.01 per share.
In August of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to continue serving as a member of the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 1,500,000 restricted shares of its common stock at the execution of the agreement
and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for preapproved expenses. As of December 31, 2013, the Company had issued the related party Director 1,500,000 shares of its restricted common stock pursuant to the agreement. The 1,500,000 shares are included as an expense in the amount of $26,250 in consulting and contractor fees in the accompanying income statement.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
In August of 2013, one of the Company’s promissory note holders agreed to assign a total of $5,000 of the remaining principal balance of his note which had an original face value of $20,000 and which was in default due to non-payment of principal and interest, to an investor who is related to the Company’s CEO, pursuant to a wrap around agreement, between the note holder and the related party investor. Under the agreement, the related party investor agreed to repay the related party note holder a portion of the principal balance which was $5,000. The investor elected to convert the $5,000 principal balance of the note, plus accrued interest of $400 into a total of 1,080,000 shares of the Company’s common stock.
In August of 2013, a related party shareholder provided the Company with emergency short term loan proceeds totaling $2,500. The Company repaid the related party shareholder the entire $2,500 balance prior to September 30, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.
In September of 2013, a convertible note holder who is related to the Company’s CEO elected to convert the note dated March 6, 2013 with a face value of $23,000 plus accrued interest of $690 into a total of 1,579,333 shares of the Company’s common stock.
The Company has an ongoing verbal agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO to pay the related party consultant $3,000 per month to provide general business consulting, industry research, monitoring and assessing the Company's business and to advise management with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, perform background research including background checks and provide investigative information on individuals and companies and acting as an administrative specialist to perform various administrative duties and clerical services including reviewing the Company’s agreements and books and records. The consultant provides the services under the direction and supervision of the Company’s CEO. During the year ended December 31, 2012, the Company paid the related party consultant fees of $26,400. During the twelve month period ended December 31, 2013, the Company paid the related party consultant fees of $32,300. During the year ended December 31, 2013 the Company also paid the consultant a fee of 600,000 shares of its restricted common stock with a market value at the time of issuance of $9,600 in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services at such rates. All fees paid to the related party consultant during the year ended December 31, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
The Company has an ongoing agreement with a limited liability company that is owned and controlled by a person who is related to the Company’s CEO to provide stock transfer agency services. During the year ended December 31, 2013, the Company paid the related party transfer agency fees of $4,864.
All fees paid to the related party consultant are included as an expense in consulting and contractor fees in the accompanying income statement for the period. At December 31, 2013, the Company owed the related party limited liability company $8,625 for transfer agency services rendered and legal fees relating to a lawsuit against the transfer agent arising from its relationship with the Company. The stock transfer agreement between the related party limited liability company and the Company states that the Company will pay the legal fees incurred by the stock transfer agency related to lawsuits or legal proceedings against the transfer agency that arise as a result of the services that the transfer agency provides to the Company. In August 2013 the Company entered into a separate debt settlement agreement with the related party vendor to settle a total of $5,730 of outstanding debt related to legal fees incurred by the related party vendor due to a lawsuit against the Company in which suit the related party vendor was also named as a defendant due to its position as the Company’s stock transfer agency. The Company issued 458,462 shares of its common stock to this vendor as satisfaction for the outstanding debt. The agreement between the Company and the vendor stipulated that should the transfer agency realize less than $5,730 from the sale of the stock, then the consultant is entitled to receive up to an additional 400,000 shares of common stock or a cash payment until the balance is paid in full. During the year ended December 1, 2013 the Company has issued the related party limited liability company a total of 1,964,296 shares of its common stock to settle a total of $18,482 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability company was also named as a defendant due to its business relationship with the Company. During the year ended December 31, 2012 the Company issued the related party limited liability company a total of 6,641,583 shares of its common stock to settle a total of $19,261 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability company was also named as a defendant due to its business relationship with the Company. All fees paid to the related party consultant during the year ended December 31, 2013 and 2012 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.
In October of 2013, a related party shareholder provided the Company with emergency short term loan proceeds totaling $6,250. The Company repaid the related party shareholder the entire $6,250 balance prior to December 31, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.
In November of 2013, the Company entered into a convertible loan agreement in the amount of $11,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before May 12, 2014. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0125 per share.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
At December 31, 2013 the following promissory notes and shareholder loans were outstanding to related parties:
A convertible note payable dated January 9, 2009, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 10% per annum with interest payments to be paid monthly and is convertible at the note holder’s option into the Company’s common stock at $0.015 per share. The convertible note payable was due on or before January 9, 2010 and is secured. This convertible note payable is currently in default due to non-payment of principal and interest.
A convertible note payable dated January 25, 2010, in the principal amount of $6,000 with a person who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 25, 2011. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.005 per share. This loan is currently in default due to non-payment of principal and interest.
A note payable dated February 24, 2010, the principal amount of $7,500 with a corporation. The Company’s CEO is a director of the corporation and a former Director of the Company is an officer of the corporation. The loan is not secured and pays interest at a rate of 6% per annum and the principle and accrued interest were due on or before February 24, 2011. This loan is currently in default due to non-payment of principal and interest.
A convertible note payable dated January 18, 2012, in the amount of $50,000, with two individuals who are related to the Company’s CEO. This loan pays interest at a rate of 8% per annum and the principle and accrued interest were due on or before July 18, 2012. The note is secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share. The note is currently in default due to non-payment of principal and interest.
A convertible note payable dated January 7, 2013, due to a person related to the Company’s CEO with a face amount of $7,500. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.004 per share. The convertible note payable is due on or before June 30, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest.
A convertible note payable dated January 19, 2013, due to a person related to the Company’s CEO with a face amount of $15,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.004 per share. The convertible note payable is due on or before July 30, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – RELATED PARTY TRANSACTIONS,
continued
A convertible note payable dated February 7, 2013, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.005 per share. The convertible note payable is due on or before August 7, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest.
A convertible note payable dated July 9, 2013, due to a person related to the Company’s CEO with a face amount of $15,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.015 per share. The convertible note payable was due on or before December 19, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest.
A convertible note payable dated July 17, 2013, due to a person related to the Company’s CEO with a face amount of $30,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.01 per share. The convertible note payable is due on or before January 17, 2014 and is not secured.
A convertible note payable dated July 26, 2013, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.01 per share. The convertible note payable is due on or before January 26, 2014 and is not secured.
A convertible note payable dated November 12, 2013, due to a person related to the Company’s CEO with a face amount of $11,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.0125 per share. The convertible note payable is due on or before May 12, 2014 and is not secured.
NOTE 14 - SUBSEQUENT EVENTS
After the reporting date of December 31, 2013, the following matters occurred which the Company considers to be matters considered material for purposes of reporting.
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - SUBSEQUENT EVENTS,
continued
On February 10, 2014, the Board of Directors of the Company under the authority granted under Article V of the Articles of Incorporation, defined and created a new preferred series of shares from
the 50,000,000 authorized preferred shares from the authorized preferred shares. Pursuant to Article V, the Board of Directors has the power to designate such shares and all powers and matters concerning such shares.
Such share class shall be designated Preferred Class B.
The preferred class was created for 60 Preferred Class B shares.
Such shares each have a voting power equal to one percent of the outstanding shares issued at the time of any vote action as necessary for share votes under Florida law, with or without a shareholder meeting. Such shares are non-convertible to common shares of the Company and are not considered as convertible under any accounting measure. Such shares shall only be held by the Board of Directors as a Corporate body, and shall not be placed into any individual name. Such shares were considered issued at the time of this resolution’s adoption, and do not require a stock certificate to exist, unless selected to do so by the Board for representational purposes only. Such shares are considered for voting as a whole amount, and shall be voted for any matter by a majority vote of the Board of Directors. Such shares shall not be divisible among the Board members, and shall be voted as a whole either for or against such a vote upon the vote of the majority of the Board of Directors. In the event that there is any vote taken which results in a tie of a vote of the Board of Directors, the vote of the Chairman of the Board shall control the voting of such shares. Such shares are not transferable except in the case of a change of control of the Corporation when such shares shall continue to be held by the Board of Directors. Such shares have the authority to vote for all matters that require a share vote under Florida law and the Articles of Incorporation. Such filing became official with the State of Florida and effective February 18, 2014.
On February 11, 2014, the Board of Directors, pursuant to Section 607.0704, Florida Statutes, the Board of Directors, acting as shareholders and pursuant to their own resolution, voted to increase the authorized shares of the Corporation from 850,000,000 common shares to 950,000,000 common shares. Such filing became official with the State of Florida and effective February 18, 2014.
On March 1, 2014, Seafarer entered into a partnership and ownership with Marine Archaeology Partners, LLC, with the formation of Seafarer’s Quest, LLC. Such LLC was formed in the State of Florida for the purpose of permitting, exploration and recovery of artifacts from a designated area on the east coast of Florida. Such site area is from a defined, contracted area by a separate entity, which a portion of such site is designated from a previous contracted holding through the State of Florida. Under such agreement, Seafarer is responsible for costs of permitting, exploration and recovery, and is entitled to 60% of such artifact recovery. Seafarer has a 50% ownership, with designated management of the LLC coming from Seafarer. Further actions toward the permitting have been taken for such site.
The Company entered into a convertible note payable with a corporation. This convertible note payable dated March 17, 2014 has a face value of $40,000, bears interest at a rate of 8.0% per annum and is due and payable on March 17, 2015. The holder of the note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company’s commons stock without restrictive legend of any nature, at a price for each share of common stock equal to 57% of the lowest closing bid price of the common stock as reported on the National
Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon which the common stock may be traded in the future, for the fifteen prior trading days including the day upon which a notice of conversion is received by the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the variable conversion price. Any amount of principal or interest on this note which is not paid when due, shall bear interest at a rate of 24% per annum. The note is secured and the note holder has substantial rights and protections regarding dilution if certain events, including a default, were to occur. The potential highly dilutive nature of this convertible note represents a very significant risk to the Company’s existing shareholders. Such dilution may result in a significant decrease in the trading price of the Company’s shares.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Management’s Annual Report on Internal Control over Financial Reporting.
Management’s Responsibility for Controls and Procedures
The Company’s management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. The Company’s controls over financial reporting are designed under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of December 31, 2013. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely record, process, summarize and report financial information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. However, as a result of our evaluation and review process, management believes that the financial statements and other information presented herewith are materially correct.
Internal Control Over Financial Reporting
As of December 31, 2013, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described
Internal
Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (as revised). Based on our evaluation, management concluded that our internal control over financial reporting was not effective so as to timely record, process, summarize and report financial information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. However, as a result of our evaluation and review process, management believes that the financial statements and other information presented herewith are materially correct.
The management including its Principal Executive Officer/Principal Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting will prevent all error and all fraud. A control system no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.
Item 9A. Controls and Procedures
- continued
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
The Company has limited resources and as a result, a material weakness in financial reporting currently exists, because of our limited resources and personnel, including those described below.
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The Company has an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.
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We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.
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We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the managements view that to have audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over the Company's financial statements.
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We have not achieved an optimal segregation of duties for executive officers of the Company.
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A material weakness is a deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) auditing standard 5) or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that a material weakness exists due to a lack of segregation of duties, resulting from the Company's limited resources and personnel.
Remediation Efforts to Address Deficiencies in Internal Control Over Financial Reporting
As a result of these findings, management, upon obtaining sufficient capital and operations, intends to take practical, cost-effective steps in implementing internal controls, including the possible remedial measures set forth below. As of December 31, 2013 we did not have sufficient capital and/or operations to implement any of the remedial measures described below.
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Assessing the current duties of existing personnel and consultants, assigning additional duties to existing personnel and consultants, and, in a cost effective manner, potentially hiring additional personnel to assist with the preparation of the Company's financial statements to allow for proper segregation of duties, as well as additional resources for control documentation.
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Assessing the duties of the existing officers of the Company and, in a cost effective manner, possibly promote or hire additional personnel to diversify duties and responsibilities of such executive officers.
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Board to review and make recommendations to shareholders concerning the composition of the Board of Directors, with particular focus on issues of independence. The Board of Directors will consider nominating an audit committee and audit committee financial expert, which may or may not consist of independent members.
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Interviewing and potentially hiring outside consultants that are experts in designing internal controls over financial reporting based on criteria established in Internal Control Integrated Framework issued by Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (as revised).
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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
(b) Change in Internal Control Over Financial Reporting
The Company has not made any change in our internal control over financial reporting during the period ended December 31, 2013.
Item 9B. Other Information.
None.