The results presented in this Managements Discussion and Analysis of Financial Conditions and Results of Operations are those of Endurance Exploration Group, Inc. and its subsidiaries as reflected in the audited consolidated financial statements included herein.
This discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this registration statement.
Our discussion and analysis may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, and projections about the Company, our beliefs, and assumptions made by us. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as believe, estimate, project, expect, intend, may, anticipate, plan, seek, variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives, or goals also are forward-looking statements. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this report. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any such forward-looking statements, whether as a result of new information, future events or otherwise.
Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to the risk factors which are identified in this registration statement, including factors identified under the headings Business, Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations.
In November 2013, Endurance LLC entered into a contract with the sovereign government of an island nation in the Indian Ocean. The contract provides us with a three-year period in which to operate within the territorial waters of the nation with full permission to survey for and recover the
Black Marlin
and her silver cargo. We are currently pursuing an option to extend the existing contract. Net proceeds of our recovery efforts, after payment of the costs to transport, store and insure any recovered items, will be split between us (75%) and the island government (25%). The cost of finding and recovering the cargo of the
Black Marlin
is estimated to be $2,000,000. The Company needs additional working capital to undertake the search for the
Black Marlin
. There can be no assurances that the Company will be successful in securing additional working capital and therefore cannot represent it will ever be in position to search for and recover the cargo of the
Black Marlin
.
The following information represents our results of operations for the three months ended March 31, 2016 and 2015
Since inception through March 31, 2016, we have not generated any revenues. However, during this period of time, the Company has acquired a ship, side scan sonar, topside computer processing of sonar images and a remotely operated vehicle with cameras that can visually inspect things located by the side scan sonar. The Company, through contracted personnel, has also developed an operational capability for this ship and its equipment. The Company can also access, on a contract basis, additional ships, equipment and personnel on a case-by-case basis when needed. This capability allows the Company to offer aquatic research, survey, inspection and recovery, as well as maritime contract services and consulting to both the public and private sectors that contract for such equipment and services. As of the time of this filing there are no agreement or contracts for the use of the Company equipment or the services described herein and the Company needs additional working capital to continue to offer said equipment and services. Therefore, the Company cannot represent that, in the future, it will ever generate revenue from aquatic research, survey, inspection and recovery projects, as well as maritime contract services and consulting.
We incurred operations and research expenses of $13,757 for the three months ended March 31, 2016 as compared to $11,736 for the three months ended March 31, 2015, an increase of $2,021. The primary reason for this three month net increase is a result of the increased spending on salvage operations.
We incurred marketing and promotion expenses of $4,176 for the three months ended March 31, 2016 as compared to $0 for the three months ended March 31, 2015, an increase of $4,176. This increase is primarily due to an increase in both advertising and printing expenses.
We incurred general and administrative expenses of $35,876 for the three months ended March 31, 2016 as compared to $37,749 for the three months ended March 31, 2016, an decrease of $1,873. The general and administrative costs consist primarily of legal and professional fees.
For the three months ended March 31, 2016 and 2015, other income (expense) consisted only of interest expense of $375 and $375 respectively.
For the three months ended March 31, 2016, we incurred a net loss of $79,805 as compared to a net loss of $73,211 for the three months ended March 31, 2015.
The following information represents our results of operations for the years ended December 31, 2015 and 2014.
Since inception through December 31, 2015, we have not generated any revenues. However, during this period of time, the Company has acquired a ship, side scan sonar, topside computer processing of sonar images and a remotely operated vehicle with cameras that can visually inspect things located by the side scan sonar. We have surveyed, using sidescan sonar, over 700 square miles in the North Atlantic. We have positively identified the Steamship
Connaught
, and have been appointed as salvor-in-possession by the U.S. Federal Court.
Even if we are successful in recovering shipwreck cargoes, we would expect any future revenues to be highly inconsistent and unreliable in future periods.
We incurred operations and research expenses of $698,849 for the year ended December 31, 2015 as compared to $287,468 for the year ended December 31, 2014, an increase of $411,381. The primary reason for this increase is a result of the increased spending on salvage operations undertaken in 2015 on the
Connaught
project.
We incurred marketing and promotion expenses of $52,737 for the year ended December 31, 2015 as compared to $57,943 for the year ended December 31, 2014, a decrease of $5,206. This decrease is primarily due to a decrease in both advertising and travel expenses.
We incurred $581,377 in stock based compensation for the year ended December 31, 2015 as compared to $73,150 for the year ended December 31, 2014, an increase of $508,227. The primary reason for the increase is the increase in stock based compensation issued to the salvage contractors.
We incurred general and administrative expenses of $184,539 for the year ended December 31, 2015 as compared to $242,715 for the year ended December 31, 2014, a decrease of $58,176. The general and administrative costs consist primarily of legal and professional fees.
Other income for the year ended December 31, 2015 consists of cancellation of debt income in the amount of $63,144. Other income for the year ended December 31, 2014 was $0.
For the year ended December 31, 2015, we incurred a net loss of $973,512 as compared to $684,114 for the year ended December 31, 2014.
Current Liquidity and Capital Resources
Since inception, we have funded our operations through the sale of equity securities and advances made to us by our officers and directors and their affiliated entities.
As of December 31, 2015, we had $825 in cash.
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Net cash used by operating activities was $664,113 for the year ended December 31, 2015.
Net cash used by investing activities was $54,944 for the year ended December 31, 2015.
Net cash provided by financing activities was $718,832 for the year ended December 31, 2015. This amount includes $604,832 net of issuance costs, raised from the sale of stock and funds advanced from related parties to facilitate operations for the period.
Other Recent Financings
On April 7, 2014, we entered into a Debt Conversion Agreement with Endeavour Cooperative Partners, LLC (Endeavour) relating to the conversion of indebtedness to Endeavour in the amount of $35,000. This amount represents the related party debt payable to Endeavour as of that date. The terms of the agreement allowed for Endeavour to convert this debt into common stock at $0.25 per share. Endeavour converted all of such debt into shares, as a result of which we issued 140,000 shares to Endeavour.
On April 7, 2014, we entered into a Debt Conversion Agreement with Island Capital Management, LLC (Island), a company owned and controlled by Endeavour, relating to the conversion of indebtedness to Island in the amount of $70,000. This amount represents the related party debt payable to Island as of that date. The terms of the agreement allowed for Island to convert this debt into common stock at $0.25 per share. Island converted all of such debt into shares, as a result of which we issued 280,000 shares to Island.
On June 24, 2014, we entered into a contract with Eclipse Group Inc. (Eclipse) for Eclipse to provide personnel and services to us in connection with the operation and monitoring of a remotely operated vehicle (ROV) in connection with our investigation of a suspected shipwreck located off the coast of New England. Steven Saint Amour, who serves as a member of our Board of Directors, and Joan Saint Amour are the principal shareholders and officers of Eclipse. The contract provides that Eclipse will provide 2 people, including Mr. Saint Amour, for approximately four 12-hour days to operate and monitor the ROV, which will be provided by us. We issued 100,000 shares of common stock to Eclipse Group Inc., with an agreed value of $25,000, under the contract, and reimbursed Eclipse in cash for its cost for the second ROV technician.
On May 15, 2015, we entered into a contract with Eclipse Group Inc. (Eclipse) for Eclipse to provide personnel and services to us in connection with the operation and monitoring of a remotely operated vehicle (ROV) in connection with our investigation of a shipwreck located off the coast of New England. Steven Saint Amour, who serves as a member of our Board of Directors, and Joan Saint Amour are the principal shareholders and officers of Eclipse. The contract provides that Eclipse will provide equipment and personnel. We issued 2,000,000 shares of common stock to Eclipse Group Inc., with an agreed value of $500,000, under the contract, as prepayment for these services. Eclipse will invoice against this prepayment as services are rendered.
During the year ended December 31, 2014, Micah Eldred on the one hand and Carl Dilley and Heather Dilley on the other, made advances to the Company in the aggregate amounts of $281,500 in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. As of December 31, 2014, the aggregate amount of such advances outstanding was $281,500.
During the year ended December 31, 2015, Endeavour Cooperative Partners, LLC made net advances to the Company in the aggregate amount of $67,500, and Micah Eldred made net advances to the Company in the aggregate amount of $25,000 in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. As of December 31, 2015, the aggregate amount of such advances outstanding was $95,500. Interest has not been imputed on this balance as management has deemed it to be immaterial.
From April 2015 until November 2015, we engaged in an offering of up to 15,000,000 shares of common stock at a price of $0.25 per share to accredited investors pursuant to Rule 506(c) under Regulation D and Regulation S. The offering is now closed, and the Company has sold $717,500 of common stock. The net proceeds after cash issuance costs was $604,832.
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During the year ended December 31, 2015, Endeavour Cooperative Partners, LLC made net advances to the Company in the aggregate amount of $67,500, and Micah Eldred made net advances to the Company in the aggregate amount of $28,000 in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. As of December 31, 2015, the aggregate amount of such advances outstanding was $95,500. Interest has not been imputed on this balance as management has deemed it to be immaterial
During the three months ended March 31, 2016, Endeavour Cooperative Partners, LLC made net advances to the Company in the aggregate amount of $77,500, in order to provide the Company with funds to carry on its operations. These advances do not bear interest, are unsecured and have no specific terms of repayment. As of March 31, 2016, the aggregate amount of such advances outstanding was $173,000. Interest has not been imputed on this balance as management has deemed it to be immaterial.
Future Capital Requirements
Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for 2016 will depend on numerous factors, including managements evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.
The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.
Research and Development
For the years ended December 31, 2015 and 2014, we incurred expenses for research consultants and travel of $14,758 and $12,804.
Inflation
The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
32
Critical Accounting Estimates Stock Based Compensation
We applied the provisions of FASB ASC 718, Compensation Stock Compensation, to account for our stock-based compensation. Stock-based compensation cost is measured at the grant date based on the calculated fair value of the award. We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during 2015 was $.10. We used the following Black-Scholes assumptions in arriving at the fair value of options granted on December 22, 2015:
|
|
Expected Life In Years
|
5.5
|
Risk-free Interest Rates
|
.990%
|
Volatility
|
133.77%
|
Dividend Yield
|
0%
|
Off-Balance Sheet Arrangements
As of December 31, 2015, we had no off balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
33
CORPORATE HISTORY AND STRUCTURE
Our Corporate History and Background
We were incorporated as Tecton Corporation, a Nevada corporation, on January 19, 2006, as a wholly-owned subsidiary of Hemis Corporation. On December 1, 2006, Hemis declared a dividend of Tecton shares to all shareholders as of that date and concurrently cancelled its share ownership Tecton. The effect of this dividend declaration and share cancellation was that Tecton was spun off as an independent company. On January 2, 2014, we amended our Articles of Incorporation to change our name to Endurance Exploration Group, Inc. As used in this report, the terms we, us, our, Endurance and the Company mean Endurance Exploration Group, Inc. (formerly Tecton Corporation), unless otherwise indicated.
Prior to June 2008, we were engaged in the exploration and acquisition of uranium properties that were either past producers or had been the subject of prior work programs and/or contained historic resources. On or about June 1, 2008, we ceased/discontinued operations of our uranium exploration activities; and had incurred to that point a net operating loss of approximately $5,600,000 since inception as we have sought to restructure and find a suitable business opportunity. We were deemed a shell company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, from the discontinuance of operations in 2008 until the filing of our Form 8-K on December 31, 2013, relating to the acquisition of Endurance Exploration Group, LLC, on that date. During our restructuring period from June 2008 until December 31, 2013, we:
Elected a new slate of directors and appointed a new management team focused on finding a suitable business opportunity for us;
Attempted to reorganize our balance sheet through the US Bankruptcy courts by filing a Chapter 11 bankruptcy petition, but later withdrew our petition at the request of the court;
Brought current our filings with the State of Nevada and our financial reporting and disclosure filings with the SEC;
Effected a reverse 1 for 40 reverse split of our common stock;
Amended and restated our Articles of Incorporation to increase the total authorized capital stock to 110,000,000 shares, being comprised of 100,000,000 shares of common stock with a par value of $.01 per share, and 10,000,000 shares of preferred stock with a par value of $.001;
Paid approximately $292,000 of outstanding debt through the issuance of 12,733,499 newly issued common shares on December 31, 2013; and
Entered into a Share Exchange Agreement, on December 31, 2013, to acquire the ownership interests of Endurance Exploration Group, LLC. for 20,550,539 shares of common stock.
Our fiscal year end was changed from January 31 to December 31 in November 2013. Our common stock is quoted on the OTCQB electronic quotation system under the symbol EXPL.
Endurance Exploration Group, LLC
On December 31, 2013, we completed the purchase of 100% of the membership interests of Endurance Exploration Group, LLC, a Florida limited liability company (Endurance LLC), from its members in exchange for 20,550,539 shares of our common stock, valued at $0.0186 per share, based upon the net book value of the assets of Endurance LLC of $381,173 as of December 31, 2013. Micah Eldred, who serves as our Chairman, Chief Executive Officer and President, and Carl Dilley who serves as one of our directors and our Vice President, were the owners of all of the interests in Endurance LLC. Messrs. Eldred and Dilley were also the beneficial owners of a majority of our common stock at the time. Endurance LLC is now a wholly owned subsidiary of ours, and its operations are now our primary focus.
34
OUR BUSINESS
Overview
Endurance LLC was formed in 2009 to explore, from an operational and financial perspective, the feasibility and potential economic return of recovering historic and modern day shipwreck cargos. Based on the business started by Endurance LLC, we have developed a research methodology with three goals. The first goal is to establish a comprehensive understanding of the larger economic, technological and social trends that lead to the transport of physical wealth across oceans during different historical periods, along with creating a High Interest list of shipwrecks and their cargos lost across various historical periods. Conflict, accidents and acts of nature claimed a percentage of all voyages, and many of the shipwrecked vessels are believed to have carried a valuable cargo. The second objective is to identify, from this population of potential shipwreck losses, those shipwrecks that could be legally salvaged and recovered, and the cargos sold, with a positive return on the capital investment required for their location and recovery. The third goal is to move those projects which had the potential to generate positive investment returns into an operational phase with a high, risk-adjusted, chance of success; and, to develop a portfolio of projects in various stages of research, search, survey and recovery.
To that end, we have evaluated historical shipwreck databases holding in excess of 125,000 entries as well as undertaken contextual and keyword library and archival searches. It is important to note that even these massive repositories of data reflect just a small percentage of the 3,000,000+ shipwrecks the United Nations estimates lay on the ocean floor.
From these databases and other searches, we have developed an initial High Interest list of approximately 400 shipwrecks. Using criteria including (but not limited to) depth, potential search area, legal concerns, difficulty of excavation and potential value, we further culled the High Interest list to approximately two-dozen targets, the Target List. In order for a shipwreck to qualify for our Target List, and to potentially move forward as an Operational Target (OT) -one that we may consider for the search and survey operation phase- the shipwreck must possess the following criteria:
Known Cargo of Value.
Based upon the historical and archival records, an OT must contain a quantifiable cargo of value. While the historical records may not provide our researchers with an exact present day value of a potential cargo, we must be able to determine a quantifiable range of its estimated value based upon cargo manifests or other archival documents.
Known Navigational Data
. Our research must provide information that would allow us to establish a geographically definable search and sinking location and, subsequently, an economically feasible search area for any potential target.
Legal Salvage and Clear Path to Title.
Admiralty law, salvage law, and various sovereign nations laws and regulations concerning the search and salvage of historical and modern shipwrecks are complex. Prior to pursuing an OT, we must be able to establish a clear legal path to the title of any potential recovery, and search and recovery must be made in compliance with international laws and regulations or under specific country permissions.
35
Potential Returns Exceed Risk-Adjusted Cost of Search and Recovery.
Prior to moving a shipwreck from our Target List to an Operational Target, we evaluate a large number of factors to determine the potential search and recovery costs, and the risks associated with such search and recovery. Items considered include: a targets location and likely depth, its location from the nearest operational port, the complexity and costs of potential search and salvage, legal issues to title, and many other factors; and, we develop an initial search plan and budget for each potential project. We recognize the high risk, yet potentially high rewards, of our business; and, we realize that we will not be successful finding or salvaging every project we undertake. Therefore, prior to moving any project onto the Operational Target list, we take a risk-adjusted approach to the potential returns that a project can provide; and we determine if, on a risk-adjusted basis, the potential target is economically feasible and appropriate to add to our portfolio of Operational Targets.
Projects code-named
Connaught
has now reached operational status. For project
Connaught
we have now surveyed over 700 square miles in the Western Atlantic Ocean in search of a sunken passenger liner carrying a substantial cargo of gold coinage. In addition to this manifest cargo, we also expect to find additional valuables among the personal stores of the ships passengers. In October of 2014 we announced the discovery of the steamship
Connaught
, previously identified only as Project
Sailfish
.
In July 2015, we were granted exclusive salvage rights by the US Federal Courts. Please refer to
Current & Ongoing Projects
for additional information.
For pre-operational project
Black Marlin
, in November 2013, Endurance LLC entered into a contract with the sovereign government of an island nation in the Indian Ocean. The contract provides us with a three-year period in which to operate within the territorial waters of the nation with full permission to survey for and recover the
Black Marlin
and her silver cargo. Net proceeds of our recovery efforts, after payment of the costs to transport, store and insure any recovered items, will be split between us (75%) and the island government (25%). This contract also allows for other potentially valuable targets of opportunity within the territorial waters of this nation. We are currently pursuing an option to extend the existing contract. Please refer to
Current & Ongoing Projects
for additional information.
We believe this survey and recovery capability combined with our proprietary research will allow us to conduct approximately two deep-water surveys per yearly weather window, should we have sufficient capital to undertake such operational surveys.
Description of Key Equipment
In 2011, Endurance LLC began purchasing key equipment for operations. Our equipment purchases have included a 100-foot survey vessel, tethered side-scan sonar units, and light work-class and inspection Remotely Operated Vehicles (ROV), Shackleton 1 and Squirt.
Survey Ship
Our 100-foot survey ship has been recently refurbished to include a sonar winch and the latest in electronics and side-scan sonar survey equipment. Depending on the timeframe, circumstances and our other commitments, we may use this ship or charter another vessel of similar or greater capability.
Sidescan Sonar
Side-scan sonar is currently the industry-standard search methodology used for oceanic search operations. An unmanned side-scan sonar unit, or towfish, is towed behind a manned surface vessel at a pre-set altitude above the seafloor. The sonar unit sends out a ping or sound-wave to acoustically map terrain, natural obstructions and man-made objects, including shipwrecks and jettison cargo.
36
To engage in search operations, we have purchased side-scan sonar systems. Our dual-frequency systems may be set for a range of velocities, search widths and resolutions for both area mapping and high-resolution target prosecution up to 2,000 meters in depth. Our system is compatible with third-party hardware and software systems and meets IHO & NOAA survey specifications. Beyond shipwreck surveys, the system is also capable of cable and pipeline surveys, channel conditioning, geophysical surveys, mine countermeasures and search and recovery operations.
Our sonar systems are a flexible platform from both a hardware and software standpoint, and may continue to be upgraded with industry-standard, off-the-shelf sensor packages.
The sonar towfish of one of our current survey systems was lost during the final days of our 2013 search operations. For more information on project
Connaught
, please refer to
Current & Ongoing Projects
. We expect to purchase, charter or otherwise replace this sonar equipment and capability before beginning any future search operations.
Potential shipwreck targets found by sonar will be catalogued, evaluated and eventually visually prosecuted using the
Shackleton
1
or
Squirt
ROV systems, or other systems chartered or rented for inspection and recovery missions.
ROV Shackleton 1
The Remotely-Operated Vehicle (ROV) system
Shackleton
1 is a light work-class ROV. This system is comprised of underwater lighting, still and motion picture cameras and a single robotic manipulator arm. Initially designed for mid-water industrial applications, the ROV has been redesigned for shipwreck search, identification and cargo recovery operations. Beyond shipwreck operations, the system is also capable of cable and pipeline inspection and repair, geophysical sampling and search and recovery operations. ROV system Shackleton 1 is currently in disassembled condition for storage following a scheduled overhaul and will be reassembled prior to any operational requirements.
Employees
The Company has five corporate officers. Each officer is also an officer of other entities and not full time employees of the Company. A list of the Companys officers and the average number of hours per week each officer expects to devote to Company affairs are as follows:
Micah Eldred, Director, President and CEO, 20 hours per week.
Carl Dilley, Director and Vice President, 10 hours per week.
Christine Zitman, Director, Secretary, Treasurer and CFO, 20 hours per week.
Guy Zajonc, Director and Vice President, 20 hours per week.
Keith Holloway, Vice President of Shareholder Communications, 30 hours per week.
Other Employees and Contractors
We utilize contract personnel for vessel operation during our survey periods, and intend to continue to use contract technicians to perform marine survey and recovery operations in the future. From time to time, we have or intend to hire other contractors, subcontractors and consultants to perform specific services. During 2014, two individuals who joined our Board of Directors in January 2014 were employed in various capacities by us as independent contractors. See Compensation Paid to Messrs. Zajonc and Saint Amour in 2014 and Employment Agreements below.
37
Project Operations
Research
During the Colonial period (1500-1850), the world economy was highly dependent on the physical transportation of bullion coinage, precious metals and high-value non-ferrous metals. A small percentage of shipping during this period was lost to storm, fire, acts of war, natural disasters and other causes, both known and unknown. The administration of this economic system required state-level bureaucratic oversight and record-keeping. Many of these historic records are available in publications, libraries, archives and digitized formats in depositories across the world. Though many records have been lost to time, enough remain to create in-depth, credible project profiles for potential excavation targets.
To that end, we have created a series of regional and period-specific databases from which to compare, evaluate and select potential targets for research, discovery and eventual excavation and recovery.
The graphics below are a visual representation of selected world regions containing our High Interest database of shipwrecks and their approximate location and time of sinking.
38
39
Before search or recovery operations may begin, we seek to understand every factor necessary to mount a recovery operation with a high probability of success.
These factors include, but are not limited to:
·
The historical context of the shipwreck, including political forces, technological developments, important contextual persons and events and the public reaction to the loss.
·
Any images of the shipwreck, including still photography, motion pictures, drawing, paintings, recreations and/or models.
·
A complete sinking timeline, including as much information as possible on weather patterns, departure date/time, intended course, course corrections, witness/observer statements. This includes any statement, fact or event material in any way to the sinking.
·
A proposed search area with a high-probability of success, including an evaluation of all factors listed in the Sinking Timeline as well as any territorial boundaries or environmental factors.
·
An Identification Guide, enabling rapid qualification or rejection of potential targets based on sonar and visual imagery, thus limiting expensive ship time on station.
·
Cargo evaluation, evaluating the historical records on the targets cargo and potential modern-day value.
·
Any encumbering factors, including territorial ownership of waters, insurance claims, potential cargo claims and sovereign rights. We will not begin a project without a legal path to possession.
·
All of the above information is gleaned from publications, libraries, archives and digitized medium. Development of further projects is a continuous, ongoing process.
40
Search
Most operational projects begin with a sonar search phase. We have outfitted our vessel with state-of-the-art sonar systems, an industry standard for underwater search operations. Our vessel tows the sonar systems to map the seafloor and search for targets. Potential targets are then selected from the sonar imagery using a combination of computerized post-processing and expert evaluation. While some shipwreck targets may be positively identified using high-resolution sonar system, others may need visual identification using an underwater camera ROV (Remote Operated Vehicle) system or an AUV (Autonomous Underwater Vehicle).
Recovery
Once a target is positively identified, excavation and recovery operations will begin using our Shackleton 1 light-work class ROV system, or other chartered ROV systems. Shackleton 1 will document the site using sonar, still and motion-picture imagery. It will then be used for any necessary excavation, as well as coinage, bullion and/or other recovery operations.
Post-Recovery Conservation
Coinage, precious metals and non-ferrous metals typically require a minimum amount of post-recovery conservation. In order to preserve the value of the recovered cargo, we will have an on-site facility capable of properly storing and transporting all recovered coinage, precious metals and non-ferrous metals to definitive and final conservation and storage prior to sale.
Sales
We intend to recover coinage and bullion precious metals, including but not limited to gold and silver. We believe that bullion metals, numismatically-graded coinage and non-graded coinage have significant value in the collector market. We intend to sell the existing independent coin dealers as well as directly to the collector and consumer market through the internet.
Current & Ongoing Projects
Project Connaught Research Summary
The Connaught was a steam-powered packet ship, part of a fast and indispensable transatlantic communication link, the perfect vessel to rapidly ferry mails and passengers between Britain and the United States. Large for her time, she was a side-wheel steamer constructed almost entirely of iron.
On her last voyage, the Connaught left Great Britain, bound for the United States. She carried several dozen first-class passengers, more than four hundred steerage passengers and a full crew of nearly 130. The
Connaught
also disembarked with a cargo of gold coins, and the Captain assumed an uneventful voyage
According to reports, when heavy seas set in, the
Connaught
began to roll heavily. Though the initial problem was temporarily fixed, twelve hours later the same roll started again. Making matters worse, fire broke out. Buckets and pumps were manned, but the water rose rapidly and extinguished the furnaces, rendering the ship immobile. The fire quickly spread, driving the passengers above decks.
The purser and two men attempted to rescue the gold shipment, but were driven back by the smoke and flames. A nearby ship came to the rescue, bravely maneuvering close to the
Connaught
and running a line between the two to facilitate transfer of passenger. Per age-old protocol, the Captain was the last man off the ship.
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Virtually nothing was saved. Nearly every trunk and stitch of clothing was lost, including all the money of the first-class passengers. Early the next morning, a passing ship fell in with the
Connaught,
shadowing the stricken vessel through her final hours. The burning
Connaught
exploded and sank by the stern, leaving only an overturned lifeboat, light portions of the decking and a few trunks. The passing ship spent an hour recovering debris, dutifully recorded the sinking position, and then sailed on to New York.
Historic image of Steamship Connaught
Source: National Maritime Museum, Greenwich
Project Connaught Current Status
In October of 2014 we positively identified the location of Project Sailfish, the Steamship
Connaught
through sonar imagery and video footage. In July 2015, we were granted exclusive salvage rights by the US Federal Courts, we returned to the site of the
Connaught
to begin salvage efforts, and retrieved the first artifacts from the debris field.
Our salvage operations were temporarily hampered by the discovery of a mass of man-made debris and large commercial fishing nets concentrated around the aft section of the wreck. We have determined the appropriate equipment and methodology to clear these obstacles, and intend to return to the wreck site with these new tools as soon as practical.
Given the task list and the short weather window that we can work in the North Atlantic, we intend to resume our salvage operations in summer of 2016. The cost of recovering the cargo of the
Connaught
is estimated to be $1,200,000 - $1,500,000. The Company needs additional working capital to recover the cargo of the
Connaught
. There can be no assurances that the Company will be successful in securing additional working capital and therefore cannot represent it will ever be in position to recover the cargo of the
Connaught
.
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High-resolution sonar image of the steamship
Connaught
Source: Endurance Exploration Group, Inc. August 2015
Chinaware logo of the Atlantic Royal Mail Steam Navigation Company, Ltd., colloquially known to passengers and the public as the Galway Line
Source: Endurance Exploration Group, Inc. August 2015
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Underwater view of shipwreck
Connaught
debris field
Source: Endurance Exploration Group, Inc. August 2015
Underwater view of shipwreck
Con
naught ribs and hull plates
Source: Endurance Exploration Group, Inc. August 2015
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Project Black Marlin- Research Summary
In the end of the 17th century, the world economy was fueled by the Spanish silver mines of the Americas, and the European demand for Asian drugs, spices, commodities and teas. This trade was based on the exchange of precious metals for goods, and silver was the only European payment acceptable to Asian trading partners.
The
Black Marlin
was one such vessel engaged in this trade. She was an English East Indiaman, more than 700 tons, three decks high and armed with many cannon. In addition to the silver coin expected by Asian merchants, she also carried lace, golden fabric, beaver fur, tobacco, wine, cloth and iron nails.
The shipping routes of the time took the English ship to the Indian Ocean for resupply in the middle of her long voyage to the East. According to reports, unknown to her Captain and crew, nearby European enemy ships were hunting for English shipping. They discovered the
Black Marlin
was in the area and sailed to intercept. The European enemy ships approached the English ship under a false flag and prepared to attack.
The trap set and ready to attack, the Europeans demanded the surrender of the English vessel. Instead of surrendering, the English captain counterattacked, and the vessels began to exchange heavy cannon fire, beginning a pitched fight that would continue over many hours. In a last-ditch effort to escape, the English ship unfurled her sails and attempted to sail away. The Europeans quickly caught up and soon the English ship was disabled and unable to continue fighting.
Rather than surrender, the Captain of the English ship set his own vessel on fire, escaping in a small boat with a chosen group of men while allowing his own ship and abandoned sailors to burn. The fire reached the gunpowder storage, and the English ship burned vigorously and sank, taking with her a rich cargo of silver.
We believe this shipwreck lies at a depth of between 500-3000 meters of water.
Woodcut graphic depicting the sinking of
Black Marlin
Source: A Sea Fight in 1690. (1893) Tuapeka Times, Rōrahi XXV.
”
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Project
“
Black Marlin
”
–
Current Status
In November 2013, Endurance LLC entered into a contract with the sovereign government of an island nation in the Indian Ocean. The contract provides us with a three-year period in which to operate within the territorial waters of the nation with full permission to survey for the location and recover the
Black Marlin
and her silver cargo. We are currently pursuing an option to extend the existing contract. Net proceeds of our recovery efforts, after payment of the costs to transport, store and insure any recovered items, will be split between us (75%) and the island government (25%). The Company needs additional working capital to undertake the search for the
Black Marlin.
There can be no assurances that the Company will be successful in securing additional working capital and therefore cannot represent it will ever be in position to search for, or recover the
Black Marlin.
By selecting
Black Marlin
as our second project and since the
Black Marlin
was reported to have been lost within 12 nautical miles of land, it was necessary, in the ordinary course of our business, to seek permission of the coastal state to work in their territorial waters. We are not under any obligation to undertake this project and if, at any time, events in the area or our continuing research revealed a lost shipwreck that is a more logical choice to undertake as our second project, we will make that change in project priorities.
Project Black Marlin Targets of Opportunity Wahoo and Dolphin
As part of discussions pertaining to project
Black Marlin,
we have learned of two shallow-water targets of opportunity within the same territorial waters as the
Black Marlin.
Believed to be English East Indiaman, these wrecks (code-named Dolphin and Wahoo) remain unidentified at this time. Until these wrecks are identified, it will not be possible to generate any estimate on the potential value, if any. We expect to begin operations on these wrecks in conjunction with the
Black Marlin
in mid-2016.
Patents, trademarks, licenses, franchises and concession
Currently, we neither own nor rely on any patents, trademarks, licenses or franchises. We have been granted a concession for shipwreck search and recovery in the territorial waters of an East African island nation by the government of that nation. The contract provides us with a three-year period in which to operate within the territorial waters of the nation with full permission to survey for and recover the
Black Marlin
and her silver cargo. Net proceeds of our recovery efforts, after payment of the costs to transport, store and insure any recovered items, will be split between us (75%) and the island government (25%).
Competition
There are a number of competing entities engaged in aquatic research, survey, inspection and the various aspects of the shipwreck salvage business. One or more of these competing entities may locate and recover a shipwreck that we intend to locate and recover. In addition, these competing entities may be better capitalized and may have greater resources to devote to their pursuit of shipwreck salvage.
Governmental and Environmental Regulation
We are subject to local, state and national taxation. Additionally, our operations are subject to a variety of national, federal, state, local and international laws. In particular, the legal, political, or civil initiatives of countries, international governing bodies and/or other maritime jurisdictions may restrict our operations and prevent or cause us to suspend or abort particular searches or salvage operations.
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Project Black Marlin Government or environmental regulations that may restrict our operations.
The island nation has signed and ratified the United Nations Convention on the Law of the Seas (the LOS). In this capacity and in keeping with the provisions of the LOS, the island nation asserts jurisdiction over its territorial waters, defined by the LOS as 12 nautical miles, 22.2 kilometers or 13.1 miles from the low water mark of the coastal state. Based upon our historical research, we believe the
Black Marlin
sank within the territorial waters of the island nation. While the island nation is not a signatory to nor has it ratified the International Convention on Salvage (ICS), the Company and its contractors operate in accordance the provisions of the ICS. Those provisions state generally, that in undertaking salvage a salvage company shall exercise due care in order to minimizing damage to the environment. Damage to the environment is defined by the Treaty under Article 1 (d) as follows: Damage to the environment means substantial physical damage to human health or to marine life or resources in coastal or inland waters or areas adjacent thereto, caused by pollution, contamination, fire, explosion or similar major incidents. The Company and its contractors take into account complying with the ISC when estimating costs for the
Black Marlin
cargo recovery operations. The island country has no written laws or regulations with respect to salvage operations in general and has placed no additional restrictions on the operations of the Company when it begins operations to locate and recover the
Black Marlins
cargo.
Project Connaught Government or environmental regulations that may restrict our operations.
We believe that the target site identified as
Connaught
is the wreck of the
Connaught
a paddlewheel steamer that sank in October 1860. That shipwreck is located approximately 125 miles off the coast of the United States of America (U.S.). While the U.S. has not ratified the LOS, this location is recognized under U.S. law as being in international waters. The Company has elected to submit itself to the jurisdiction of the United States Federal Courts by filing a case in admiralty on October 3, 2014 in the U.S. District Court, Middle District of Florida. The process of adjudicating ownership and claims, including the Companys request for a salvage claim or, in the alternative, title to the ship and its cargo, will proceed in the U.S. Court pursuant to U.S. admiralty law. The right to salvage a privately own vessel is not subject to approval of the U.S. Courts or any government agency. Once a party has submitted themselves to the jurisdiction of the U.S. Federal Courts, the Court can determine the ownership rights to the cargo salvaged and the amount of a salvage award according to precedent cases ruled upon by the U.S. Supreme Court. The Company makes its claims based upon those legal precedents.
The United States Coast Guard undertakes marine environmental protection in U.S. waters pursuant to Volume IX of its Marine Environmental Protection Marine Safety Manual COMDTINST M16000.14. As specified in Chapter 1 on page 16, the U.S. Coast Guard also looks to the International Convention on Salvage for guidance on salvage operations even though the U.S. has not ratified that treaty. The Company and its contractors expect to conduct salvage operations within the guidelines of the ICS. The Company and its contractors take into account complying with the ISC when estimating costs for the
Connaught
cargo recovery operations.
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