NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The
accompanying condensed financial statements of Seafarer Exploration
Corp. (“Seafarer” or the “Company”) are
unaudited, but in the opinion of management, reflect all
adjustments (consisting only of normal recurring adjustments)
necessary to fairly state the Company’s financial position,
results of operations, and cash flows as of and for the dates and
periods presented. The financial statements of the Company are
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for
interim financial information.
These
unaudited condensed financial statements should be read in
conjunction with the Company’s audited financial statements
and footnotes included in the Company’s Report on Form 10-K
for the twelve months ended December 31, 2015, filed with the
Securities and Exchange Commission (the “Commission”).
The results of operations for the nine months ended September 30,
2016 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 2016 or for
any future period.
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 develop the infrastructure
necessary to engage in the archaeologically-sensitive exploration
and recovery of historic shipwrecks. During 2008, the Company
changed its fiscal year end from April 30 to December
31.
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. The Company has incurred net losses 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 November 14, 2016. 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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This
summary of significant accounting policies of Seafarer Exploration
Corp. is presented to assist in understanding the
Company’s condensed financial statements. The
condensed 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 condensed financial statements.
Accounting Method
The
Company’s condensed financial statements are prepared using
the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of
America.
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.
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 September 30, 2016 and 2015, the Company did not report any
revenues.
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
stockholders 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 were no common stock
equivalents outstanding at September 30, 2016 and
2015.
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:
Level 1
– Valuation based on unadjusted quoted market prices in
active markets for identical assets or liabilities.
Level 2
– Valuation based on, observable inputs (other than level one
prices), quoted market prices for similar assets such as at the
measurement date; quoted prices in the market that are not active;
or other inputs that are observable, either directly or
indirectly.
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 notes recorded at fair value
is determined using Level 3 inputs, which consider (i) time value,
(ii) current market and (iii) contractual prices.
The
carrying amounts of financial assets and liabilities, such as cash
and cash equivalents, receivables, accounts payable, notes payable
and other payables, approximate their fair values because of the
short maturity of these instruments.
The
following table represents the Company’s assets and
liabilities by level measured at fair value on a recurring basis at
December 31, 2015:
Description
|
|
|
|
Notes payable at
fair value
|
$
-
|
$
-
|
$
311,076
|
The
following table represents the Company’s assets and
liabilities by level measured at fair value on a recurring basis at
September 30, 2016:
Description
|
|
|
|
Notes payable at
fair value
|
$
-
|
$
-
|
$
-
|
The
following assets and liabilities are measured on the balance sheets
at fair value on a recurring basis utilizing significant
unobservable inputs or Level 3 assumptions in their valuation. The
following tables provide a reconciliation of the beginning and
ending balances of the liabilities:
The
change in the notes payable at fair value for the nine month period
ended September 30, 2016 is as follows:
|
|
|
New
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable at
fair value
|
$
311,074
|
$
109,992
|
$
135,884
|
$
(556,950
)
|
$
-
|
The
change in the notes payable at fair value for the three months
ended September 30, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable at
fair value
|
$
186,605
|
$
221,059
|
$
-
|
$
(407,664
)
|
$
-
|
All
gains and losses on assets and liabilities measured at fair value
on a recurring basis and classified as Level 3 within the fair
value hierarchy are recognized in interest income or expense in the
accompanying financial statements.
The
significant unobservable inputs used in the fair value measurement
of the liabilities described above present value of the future
interest payments.
Property and Equipment 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 September 30, 2016 and December 31, 2015:
|
|
|
Diving
vessel
|
$
326,005
|
$
326,005
|
Equipment
|
32,420
|
7,420
|
Less accumulated
depreciation
|
(295,637
)
|
(270,149
)
|
|
$
62,788
|
$
63,276
|
Depreciation
expense for the nine month periods ended September 30, 2016 and
2015 amounted to $25,488.
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. There were no impairment
charges recorded during the periods ended September 30, 2016 and
2015.
Employee Stock Based Compensation
The
FASB issued SFAS No.123 (revised 2004),
Share-Based Payment
, which was
superseded by ASC 718-10. ASC 718-10 provides investors and other
users of financial statements with more complete and
neutral financial information, by requiring that the
compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments
issued. SFAS 123(R) covers a wide range of share-based compensation
arrangements, including share options, restricted share plans,
performance-based awards, share appreciation rights and employee
share purchase plans. As of September 30, 2016, the Company has not
implemented an employee stock based compensation plan.
Non-Employee Stock Based Compensation
The
Company accounts for stock based compensation awards issued to
non-employees for services, as prescribed by ASC 718-10, at either
the fair value of the services rendered or the instruments issued
in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in
EITF 96-18,
Accounting for
Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services
, which was superseded by ASC 505-50. The Company has
previously issued compensatory shares for various services
including, but not limited to, executive, board of directors,
business consulting, corporate advisory, accounting, research,
archeological, operations, strategic planning, corporate
communications, financial, legal and administrative consulting
services. As determined by Management the Company may issue
compensatory shares in the future for these or other services.
Use of Estimates
The
process of preparing condensed 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 condensed financial
statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
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.
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.
The
classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting
period. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether or
not net-cash settlement of the derivative instrument could be
required within 12 months of the balance sheet
date.
Convertible Notes Payable at Fair Value
The
Company elected to account for
this hybrid contract under the
guidance of ASC
815-15-25-4. This guidance allows an entity that
initially recognizes a hybrid financial instrument that under
paragraph ASC 815-15-25-1 would be required to be
separated into a host contract and a derivative instrument may
irrevocably elect to initially and subsequently measure that hybrid
financial instrument in its entirety at fair value (with changes in
fair value recognized in earnings).
The
fair value election is also available when a previously recognized
financial instrument subject to a re-measurement event and the
separate recognition of an embedded derivative. The fair value
election may be made instrument by instrument. For purposes of this
paragraph, a re-measurement event (new basis event) is an event
identified in generally accepted accounting principles, other than
the recognition of an other-than-temporary impairment, that
requires a financial instrument to be re-measured to its fair value
at the time of the event but does not require that instrument to be
reported at fair value on a continuous basis with the change in
fair value recognized in earnings. Examples of re-measurement
events are business combinations and significant modifications of
debt as defined in Subtopic 470-50.
NOTE 4 - LOSS PER SHARE
Components
of loss per share for the three months ended September 30, 2016 and
2015 are as follows:
|
For the Three Months Ended
September 30, 2016
|
For the Three Months Ended
September 30, 2015
|
Net loss
attributable to common stockholders
|
$
(685,265
)
|
$
(326,116
)
|
|
|
|
Weighted average
shares outstanding:
|
|
|
Basic and
diluted
|
2,005,911,180
|
1,193,601,601
|
|
|
|
Loss per
share:
|
|
|
Basic and
diluted
|
$
(0.00
)
|
$
(0.00
)
|
Components
of loss per share for the nine months ended September 30, 2016 and
2015 are as follows:
|
For the Nine Months Ended
September 30, 2016
|
For the Nine Months Ended
September 30, 2015
|
Net loss
attributable to common stockholders
|
$
(1,192,443
)
|
$
(736,738
)
|
|
|
|
Weighted average
shares outstanding:
|
|
|
Basic and
diluted
|
1,633,729,734
|
1,120,925,906
|
|
|
|
Loss per
share:
|
|
|
Basic and
diluted
|
$
(0.00
)
|
$
(0.00
)
|
NOTE 5 – CAPITAL STOCK
At
September 30, 2016 the Company was authorized to issue
2,300,000,000 shares of $0.0001 par value common
stock.
Preferred Stock
The
Company is authorized to sell or issue 50,000,000 shares of
preferred stock.
Series A Preferred Stock
At
September 30, 2016, the Company had seven shares of Series A
preferred stock issued and outstanding. Each share of Series A
preferred stock has the right to convert into 214,289 shares of the
Company’s common stock. As of September 30, 2016
and 2015, no shares of preferred stock had been converted into
shares of the Company’s common stock.
Series B Preferred Stock
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. 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
(totaling 60%) 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 stock
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.
Warrants and Options
During
the three month period ended September 30, 2016, the Company issued
the following warrants:
Term
|
Amount
|
Exercise Price
|
07/12/16 to 01/12/18
|
4,000,000
|
$0.0020
|
07/20/16 to 08/26/17
|
18,181,818
|
$0.0033
|
08/26/16 to 08/26/17
|
7,000,000
|
$0.0050
|
08/31/16 to 08/31/18
|
25,000,000
|
$0.0010
|
|
54,181,818
|
|
As of
September 30, 2016, the Company had a total of 143,531,818 warrants
outstanding with exercise prices ranging from $0.0005 to $0.01 per
share.
NOTE 6 - INCOME TAXES
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 Nine Months Ended September 30, 2016
|
For the Nine Months Ended September 30, 2015
|
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
September 30, 2016 and December 31, 2015, the Company’s only
significant deferred income tax asset was an estimated net tax
operating loss of
$12,518,000 and
$11,326,000
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
September 30, 2016 and December 31, 2015. Company is preparing
information for tax returns for past years. Due to the
Company’s lack of revenue since inception, management does
not believe that there is any income tax liability for past years.
Management has evaluated tax positions in accordance with ASC 740
and has not identified any tax positions, other than those
discussed above, that require disclosure.
NOTE 7 - 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 commencing on July
1, 2015 through June 30, 2017. Under the amended lease agreement
the base monthly rent is $1,215 from July 1, 2015 through June 30,
2016 and $1,251 from July 1, 2016 to June 30,
2017. There may be additional monthly charges for
pro-rated maintenance, late fees, etc.
Diving Operations House
The
Company has an operating lease for a house located in Palm Bay,
Florida. The Company uses the house to store equipment and gear and
to provide temporary work-related living quarters for its divers,
personnel, consultants and independent contractors involved in its
exploration and recovery operations. The term of the lease
agreement commenced on October 1, 2015 and expired on October 31,
2016. The Company is leasing the property on a month to month basis
subsequent to October 31, 2016 under the same terms. The Company
pays $1,300 per month to lease the operations house.
NOTE 8 - CONVERTIBLE NOTES PAYABLE AND NOTES
PAYABLE
The
Company evaluates each financial instrument to determine whether it
meets the definition of “conventional convertible” debt
under ASC 815-40. The note payable conversion feature of
the outstanding convertible debt met the definition of conventional
convertible for purposes of applying the conventional convertible
exemption. The definition of conventional contemplates a limitation
on the number of shares issuable under the arrangement. Since the
convertible notes achieved the conventional convertible exemption,
the Company was required to consider whether the hybrid contracts
embody a beneficial conversion feature. The calculation of the
effective conversion amount did result in a beneficial conversion
feature.
Convertible Notes Payable
The
following table reflects the convertible notes payable, other than
five notes that have been remeasured to fair value which are
discussed later in Note 8, as of September 30, 2016:
Issue
|
Maturity
|
|
|
|
|
Date
|
|
|
|
Convertible notes
payable:
|
|
|
|
|
April 4,
2016
|
November 4,
2016
|
$
10,000
|
6.00
%
|
0.0010
|
July 19,
2016
|
July 19,
2017
|
4,000
|
6.00
%
|
0.0015
|
August 24,
2016
|
February 24,
2017
|
20,000
|
6.00
%
|
0.0010
|
|
|
|
|
August 31,
2016
|
August 31,
2017
|
25,750
|
6.00
%
|
0.0010
|
|
|
|
|
Unamortized
discount
|
|
(36,482
)
|
|
|
Balance
|
|
$
23,268
|
|
|
Convertible notes
payable – related parties
|
|
|
|
|
|
|
|
|
May 10,
2016
|
November 10,
2016
|
$
5,000
|
6.00
%
|
0.00050
|
May
10,2016
|
November
10,2016
|
5,000
|
6.00
%
|
0.00050
|
May 20,
2016
|
November
20,2016
|
5,000
|
6.00
%
|
0.00050
|
July 12,
2016
|
January
12,2016
|
2,400
|
6.00
%
|
0.00060
|
Unamortized
discount
|
|
(4,717
)
|
|
|
|
$
12,683
|
|
|
Convertible notes
payable, in default
|
|
|
|
|
October 31,
2012
|
April 30,
2013
|
$
8,000
|
6.00
%
|
0.0040
|
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
%
|
0.0060
|
September 25,
2013
|
March 25,
2014
|
10,000
|
6.00
%
|
0.0125
|
August 28,
2009
|
November 1,
2009
|
4,300
|
10.00
%
|
0.0150
|
April 7,
2010
|
November 7,
2010
|
70,000
|
6.00
%
|
0.0080
|
November 12,
2010
|
November 7,
2011
|
40,000
|
6.00
%
|
0.0050
|
October 4,
2013
|
April 4,
2014
|
50,000
|
6.00
%
|
0.0125
|
October 30,
2013
|
October 30,
2014
|
50,000
|
6.00
%
|
0.0125
|
May 15,
2014
|
November 15,
2014
|
40,000
|
6.00
%
|
0.0070
|
October 13,
2014
|
April 13,
2015
|
25,000
|
6.00
%
|
0.0050
|
June 29,
2015
|
December 29,
2015
|
25,000
|
6.00
%
|
0.0050
|
September 18,
2015
|
March 18,
2016
|
25,000
|
6.00
%
|
0.0020
|
April
20,2015
|
April 20,
2016
|
23,652
|
6.00
%
|
0.0032
|
Balance
|
|
$
434,952
|
|
|
Convertible notes
payable - related party, in default
|
|
|
|
January 19,
2013
|
July 30,
2013
|
$
15,000
|
6.00
%
|
0.0040
|
January 9,
2009
|
January 9,
2010
|
10,000
|
10.00
%
|
0.0150
|
January 25,
2010
|
January 25,
2011
|
6,000
|
6.00
%
|
0.0050
|
January 18,
2012
|
July 18,
2012
|
50,000
|
8.00
%
|
0.0040
|
July 26,
2013
|
January 26,
2014
|
10,000
|
6.00
%
|
0.0100
|
January 17,
2014
|
July 17,
2014
|
31,500
|
6.00
%
|
0.0060
|
May 27,
2014
|
November 27,
2014
|
7,000
|
6.00
%
|
0.0070
|
July 21,
2014
|
January 25,
2015
|
17,000
|
6.00
%
|
0.0080
|
October 16,
2014
|
April 16,
2015
|
21,000
|
6.00
%
|
0.0045
|
July 14,
2015
|
January 14,
2016
|
9,000
|
6.00
%
|
0.0030
|
January 12,
2016
|
July 12,
2016
|
$
5,000
|
6.00
%
|
0.00200
|
|
|
|
|
Balance
|
|
$
181,500
|
|
|
Notes Payable
The
following table reflects the notes payable as of September 30,
2016:
|
Maturity Date
|
|
|
Notes
payable, in default –related parties:
|
|
|
|
February 24,
2010
|
February 24,
2011
|
$
7,500
|
6.00
%
|
October 6,
2015
|
November 11,
2015
|
10,000
|
6.00
%
|
|
$
17,500
|
|
Notes
payable, in default:
|
|
|
|
June 23,
2011
|
August 23,
2011
|
25,000
|
6.00
%
|
April 27,
2011
|
April 27,
2012
|
5,000
|
6.00
%
|
March 05,
2016
|
June 16,
2016
|
7,000
|
6.00
%
|
|
$
37,000
|
|
Note
Conversions
A
lender who had a convertible promissory note outstanding with a
remaining principal balance of $38,000 elected to convert a portion
of the principal balance of $13,348 of the note plus accrued
interest and late fees of $6,652 into 12,750,000 shares of the
Company’s common stock. The remaining principal balance of
this note was $23,652 at September 30, 2016
A
lender elected to convert the entire principal balance of $15,000
of a convertible promissory note into 30,000,000 shares of the
Company’s common stock. The remaining principal balance of
this note was $0 at September 30, 2016.
A
lender elected to receive 10,000,000 shares of the Company’s
common stock to pay down $10,000 of the principle balance of a
promissory note. The remaining principal balance of this note was
$7,000 at September 30, 2016.
At
September 30, 2016 and December 31, 2015, combined accrued interest
on the convertible notes payable, notes payable and stockholder
loans was $154,790 and $135,581 respectively, and is included in
accounts payable and accrued liabilities on the accompanying
balance sheets.
Convertible Notes Payable and Notes Payable, in
Default
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 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 fact that the Company
is in default of several promissory notes held by various lenders
makes investing in the Company or providing any loans to the
Company extremely risky with a very high potential for a complete
loss of capital.
The
convertible notes that have been issued by the Company are
convertible at the lender’s option. These convertible notes
represent significant 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. As such when these notes are converted into
shares of the Company’s common stock there is typically a
highly dilutive effect on current shareholders and very possible
that such dilution may significantly negatively affect the trading
price of the Company’s common stock.
Shareholder Loans
At September 30, 2016 the Company had two loans outstanding to its
CEO totaling $29,270, consisting of a loan in the amount of $28,070
with a 6% annual rate of interest and a loan in the amount of
$1,200 at 6% rate of interest and an option to convert the loan
into restricted shares of the Company’s common stock at
$0.002, and, a loan in the amount of $1,200 at a rate of 0%
interest.
Convertible Notes Payable at Fair Value
Convertible Note Payable Dated August 28, 2015 at Fair
Value
On
August 28, 2015 the Company entered into a convertible note payable
with a corporation. The note payable, with a face value
of $44,000, including a $4,000 of original issue discount, bears
interest at 12.0% per annum and is due on August 28, 2016. 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 62%
multiplied by the lowest closing bid price for the Company’s
common stock during the twenty (20) trading day period including
the day the notice of conversion is received by the Company. If the
Company’s market capitalization is less than $1,000,000 on
the day immediately prior to the date of the notice of conversion,
then the conversion price shall be 25% multiplied by the lowest
closing price as of the date notice of conversion is given and if
the closing price of the Company’s common stock on the day
immediately prior to the date of the notice of conversion is less
than $0.00075 then the conversion price shall be 25% multiplied by
the lowest closing price as of the date a notice of conversion is
given. 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.
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 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, the
Company recognized day-one derivative loss totaling $76,210 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 $76,210 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.
The
conversion of the note into shares of the Company’s common
stock is potentially highly dilutive to current shareholders. If
the note holder elects to sell the shares that it has acquired as a
result of converting the note into shares of common stock, then any
such sales may result in a significant decrease in the market price
of the Company’s shares.
During
the nine month period ended September 30, 2016, the principle
balance and accrued interest was converted into 54,561,311 shares
of common stock.
Convertible Note Payable Dated September 3, 2015 at Fair
Value
On
September 3, 2015 the Company entered into a convertible note
payable with a corporation. The note payable in the
amount of $38,500, including a $3,500 original issue discount, and
bears interest at 12.0% per annum and is due on September 3, 2017.
According to the terms of the note, the Company was eligible to
utilize up to $200,000 of credit under the note, with potential
proceeds received of $180,000, however at the time the Company
elected to borrow only the $38,500. Any additional
amount borrowed under this note would require approval of both the
Company and the lender. 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 65% multiplied by the lowest trade
price for the Company’s common stock in the twenty-five (25)
trading day period previous to the conversion. 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.
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 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, the
Company recognized day-one derivative loss totaling $42,308 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 $29,789 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.
The
conversion of the note into shares of the Company’s common
stock is potentially highly dilutive to current shareholders. If
the note holder elects to sell the shares that it has acquired as a
result of converting the note into shares of common stock, then any
such sales may result in a significant decrease in the market price
of the Company’s shares.
During
the nine month period ended September 30, 2016, the principle
balance and accrued interest was converted into 86,597,589 shares
of common stock.
Convertible Note Payable Dated September 8, 2015 at Fair
Value
On
September 8, 2015, the Company entered into a convertible note
payable with a corporation. The convertible note
payable, with a face value of $27,000, bears interest at 8.0% per
annum and is due on September 8, 2016. The 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 65% multiplied by the lowest closing
bid price for the Company’s common stock during
the fifteen (15) trading day period including the day the 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 conversion price.
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 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, the
Company recognized day-one derivative loss totaling $16,690 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,
Company was required to record a $16,690 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.
The
conversion of the note into shares of the Company’s common
stock is potentially highly dilutive to current shareholders. If
the note holder elects to sell the shares that it has acquired as a
result of converting the note into shares of common stock, then any
such sales may result in a significant decrease in the market price
of the Company’s shares.
During
the nine month period ended September 30, 2016, the principle
balance and accrued interest was converted into 50,268,153 shares
of common stock.
Convertible Note Payable Dated December 15, 2015 at Fair
Value
On
December 15, 2015 the Company entered into a convertible note
payable with a corporation. The note
payable in the amount of $27,500, including a $2,500
original issue discount, and bears interest at 12.0% per annum and
is due on September 3, 2017. 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 65% multiplied by the lowest trade
price for the Company’s common stock in the twenty-five (25)
trading day period previous to the conversion. 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.
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 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, the
Company recognized day-one derivative loss totaling $29,789 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 $29,789 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.
The
conversion of the note into shares of the Company’s common
stock is potentially highly dilutive to current shareholders. If
the note holder elects to sell the shares that it has acquired as a
result of converting the note into shares of common stock, then any
such sales may result in a significant decrease in the market price
of the Company’s shares.
During
the nine month period ended September 30, 2016, the principle
balance and accrued interest was converted into 53,181,384 shares
of common stock.
Convertible Note Payable Dated March 24, 2016 at Fair
Value
On
March 24, 2016 the Company entered into a convertible note payable
with a corporation. The note payable, with a face value
of $33,000, including a $3,000 of original issue discount, bears
interest at 12.0% per annum and is due on March 24, 2017. 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 62%
multiplied by the lowest closing bid price for the Company’s
common stock during the twenty-five (25) trading day period
including the day the notice of conversion is received by the
Company. If the Company’s market capitalization is less than
$1,000,000 on the day immediately prior to the date of the notice
of conversion, then the conversion price shall be 25% multiplied by
the lowest closing price as of the date notice of conversion is
given and if the closing price of the Company’s common stock
on the day immediately prior to the date of the notice of
conversion is less than $0.0009 then the conversion price shall be
25% multiplied by the lowest closing price as of the date a notice
of conversion is given. 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.
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 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,
during the three month period ended March 31, 2016 the Company
recognized day-one derivative loss totaling $32,210 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,
during the three month period ended March 31, 2016 the Company was
required to record a $102,882 loss on the derivative financial
instrument and is included in interest expense. 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.
The
conversion of the note into shares of the Company’s common
stock is potentially highly dilutive to current shareholders. If
the note holder elects to sell the shares that it has acquired as a
result of converting the note into shares of common stock, then any
such sales may result in a significant decrease in the market price
of the Company’s shares.
During
the nine month period ended September 30, 2016, the principle
balance and accrued interest was converted into 69,091,471 shares
of common stock.
NOTE 9 – MATERIAL AGREEMENTS
Agreement to Explore a Shipwreck Site Located off of Brevard
County, Florida
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.
Exploration Permit with the Florida Division of Historical
Resources for an Area off of Melbourne Beach, Florida
On July
28, 2014, Seafarer’s Quest, LLC, received a 1A-31 Permit (the
“Permit”) from the Florida Division of Historical
Resources for an area identified off of Melbourne Beach, Florida.
The Permit is active for three years from the date of
issuance.
Exploration Permit with the Florida Division of Historical
Resources for an Area off of Melbourne Beach, Florida
On July
6, 2016, Seafarer’s Quest, LLC, received a 1A-31 Permit (the
“Permit”) from the Florida Division of Historical
Resources for a second area identified off of Melbourne Beach,
Florida. The Permit is active for three years from the date of
issuance.
Certain Other Agreements
In
January of 2016 the Company entered into a consulting agreement
with an individual under which the individual agreed to provide
corporate communications services and shareholder notification and
awareness services. The term of the agreements is for twelve months
and the Company agreed to pay the consultant 4,000,000 shares of
restricted common stock to perform the services.
In
April of 2016, the Company entered into agreements with seven
separate individuals to either join or rejoin the Company’s
advisory council. Under the advisory council agreements all of the
advisors 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 advisors shares of the Company’s restricted common
stock including 4,000,000 shares each to three of the advisors,
3,000,000 shares each to three of the advisors and 2,000,000 shares
to one of the advisors, an aggregate total of 23,000,000 restricted
shares. According to the agreements each of the advisors’
shares vest at a rate of 1/12 th of the amount per month over the
term of the agreement. If any of the advisors or the
Company terminates the advisory council agreements prior to the
expiration of the one year terms, then each of the advisors whose
agreement has been terminated 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.
In
April of 2016, the Company entered into a consulting agreement with
a limited liability company under which the consultant agreed to
provide diving services, assist in maintaining Seafarer’s
vessels and equipment, and provide operational and project
management services for Seafarer’s exploration and recovery
diving operations. The term of the consulting agreement is from
April 1, 2016 to March 31, 2017 and at the end of the term the
consulting agreement may be renegotiated. The consultant reports
directly to the CEO of Seafarer. The Company agreed to pay $125 per
day to the consultant plus an initial $25 per day for operational
and site management services. The Company also agreed to pay $700
per month to the consultant for campground and electrical services
while the consultant is on site providing services to the Company..
The Company also agreed to pay 4,000,008 shares of restricted
common stock to the consultant for the services. The shares vest at
a rate of 333,334 shares per month over a twelve month period. If
the Company or the consultant terminates the agreement prior to the
end of the term of the agreement then any of the shares that have
not yet vested will be cancelled. The Company, in its sole
discretion, may pay the consultant additional compensation or
bonuses.
In
April of 2016, the Company paid 2,880,000 shares of restricted
common stock to an individual for providing past project management
services related to the Company’s dive
operations.
In
April of 2016 the Company entered into a consulting agreement with
a corporation under which the corporation agreed to provide various
services including business development, mergers and acquisitions,
business strategy and analysis of business opportunities in the
historic shipwreck exploration business in Panama. The consultant
will not negotiate on behalf of the Company or provide any market
making or listing services. The term of the agreement is open ended
and will continue until the completion of the consulting services.
The Company agreed to pay the consultant a total of 2,000,000
shares of restricted common stock.
In
April of 2016 the Company entered into a consulting agreement with
a corporation under which the corporation agreed to provide various
services including business development, mergers and acquisitions
and business. The consultant will not negotiate on behalf of the
Company or provide any market making or listing services. The term
of the agreement is open ended and will continue until the
completion of the consulting services. The Company agreed to pay
the consultant a total of 1,000,000 shares of restricted common
stock.
In May
of 2016, the Company entered into an agreement with an individual
to rejoin the Company’s advisory council. Under the advisory
council agreement 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 agreement is for one year. In consideration for
the performance of the advisory services, the Company agreed to
issue the advisor 2,000,000 shares of restricted common stock.
According to the agreements the advisor’s shares vest at a
rate of 1/12 th of the amount per month over the term of the
agreement. If the advisor or the Company terminates the
advisory council agreement prior to the expiration of the one year
term, the advisor has agreed to return to the Company for
cancellation any portion of the shares that have not vested. Under
the advisory council agreement, the Company has agreed to reimburse
the advisor for pre approved expenses.
In May
of 2016, the Company extended the term of a previous 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 20,000,000 shares of restricted
common stock and to negotiate future compensation on a year-by-year
basis. The Company also agreed to reimburse the Director for
pre-approved expenses.
In May
of 2016, the Company extended the term of a previous 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 20,000,000 shares of restricted
common stock and to negotiate future compensation on a year-by-year
basis. The Company also agreed to reimburse the Director for
pre-approved expenses.
In May
of 2016, the Company issued a consultant 5,000,000 shares of
restricted common stock for providing various project management
services related to the Company’s shipwreck exploration and
recovery services. The Company believes that the consultant has
provided services at below market rates of compensation and the
shares were paid both to more fairly compensate the consultant and
as a bonus and inducement for the consultant to continue to provide
services to the Company.
In June
of 2016, the Company entered into a consulting agreement with two
individuals under which the individuals agreed to provide various
consulting services including website development to include a
storefront, and business strategy relating to business development
for the Company’s digital storefront and Internet
merchandising site. The term of the agreement is open ended and
will continue until the completion of the services. The Company
agreed to pay each consultant 2,000,000 shares of its restricted
common stock, a total of 4,000,000 shares of restricted common
stock.
In June
of 2016, the Company entered into a consulting agreement with an
individual who is related to the Company’s CEO under which
the individual agreed to provide various consulting services
including business development, photography, custom logo design and
development, developing corporate identity materials such as
business cards, editing, art illustrations, and working with the
Company and other consultants to develop its future digital
storefront and Internet merchandise site. The term of the agreement
is open ended and will continue until the completion of the
services. The Company agreed to pay the consultant a total of
5,000,000 shares of restricted common stock.
In July
of 2016 the Company entered into a consulting agreement with a
corporation under which the corporation agreed to provide various
services including business development, mergers and acquisitions
and business. The consultant will not negotiate on behalf of the
Company or provide any market making or listing services. The term
of the agreement is open ended and will continue until the
completion of the consulting services. The Company agreed to pay
the consultant a total of 5,000,000 shares of restricted common
stock.
In July
of 2016 the Company issued 4,732,000 shares of restricted common
stock to a consultant to reimburse the consultant for travel
expenses and time incurred for setting up various
meetings.
In July
of 2016, the Company entered into a consulting agreement with an
individual under which the individual agreed to provide various
consulting services including website development to include
business development, assistance with other consultants in
developing and maintaining a digital store front, film editing, and
for other Web based consulting relating to the Company’s
efforts to develop Internet merchandising opportunities. The term
of the agreement is open ended and will continue until the
completion of the services. The Company agreed to pay the
consultant 2,500,000 shares of its restricted common
stock.
In July
of 2016, the Company entered into a consulting agreement with an
individual under which the individual agreed to provide various
consulting services including media, business development related
to television and motion pictures, and general consulting related
to media and entertainment. The term of the agreement is open ended
and will continue until the completion of the services. The Company
agreed to pay the consultant 2,000,000 shares of its restricted
common stock.
In
September of 2016 the Company issued 5,000,000 shares of restricted
common stock to one of its legal advisors. The shares were issued
as retention bonus for the advisor’s willingness to forego
receiving payment for services rendered for lengthy time periods,
appreciation for past legal services rendered, as well to induce
the advisor to continue to provide services on favorable terms to
the Company.
In
September of 2016 the Company issued 1,500,000 shares of restricted
common stock to one of its consultants. The shares were issued as
retention bonus for the consultant’s willingness to forego
receiving payment for services rendered for lengthy time periods,
appreciation for past administrative and clerical services
rendered, as well to induce the consultant to continue to provide
services on favorable terms to the Company.
In
September of 2016 the Company issued 15,000,000 shares of
restricted common stock to one of its business advisory
consultants. The shares were issued as retention bonus for the
consultant’s willingness to forego receiving payment for
services rendered for lengthy time periods, appreciation for past
business advisory, strategic planning, assistance with financial
reporting, administrative and IT services, as well to induce the
consultant to continue to provide services on favorable terms to
the Company.
In
September of 2016 the Company issued a total of 13,000,000 shares
of restricted common stock to nine independent contractor
consultants who provide various services relating to the
Company’s diving operations. The shares were issued were
issued as retention bonus for the consultants’ willingness to
forego receiving payments for services rendered for lengthy time
periods, appreciation for past services rendered, as well to induce
the consultants to continue to provide services on favorable terms
to the Company.
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 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, perform period background research
including background checks and provide investigative information
on individuals and companies and to occasional assist 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.
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. At September 30, 2016, the Company owed the related
party limited liability company $1,195.
The
Company has an ongoing agreement to pay a limited liability company
a monthly fee of $3,500 in cash or $5,000 per month in restricted
stock for archeological services and the review of historic
shipwreck research consulting services.
The
Company has an ongoing agreement to pay an individual a monthly fee
of $1,500 per month for archeological consulting
services.
The
Company has an ongoing consulting agreement to pay a limited
liability company a minimum of $5,000 per month for business
advisory, strategic planning and consulting services, assistance
with financial reporting, IT management, and administrative
services. The Company also agreed to reimburse the consultant for
expenses. The agreement is verbal and may be terminated by the
Company or the consultant at any time.
NOTE 10 – LEGAL PROCEEDINGS
On
March 23, 2016 the Board of Directors signed a universal settlement
agreement with the Plaintiffs in the litigation matters of
Micah Eldred, et al., v. Seafarer
Exploration, et al.
, Hillsborough County, Florida, Case No.
09-CA-30763, and
Micah Eldred v.
Seafarer Exploration Corp., et al., Hillsborough County,
Florida
, Case No. 14-CA-5360, and in the matter of
Seafarer Exploration, et al. v.
Micah Eldred, et al.,
Hillsborough County, Florida, Court of
Appeals Case No. 14-2884, specifically: Micah Eldred, Michael
Daniels, Diane J. Harrison, James Eldred, Mary R. Eldred, Michole
Eldred, Nathan Eldred, Toni A. Eldred, Toni A. Eldred FBO Jordan
Gratton, Toni A. Eldred FBO Justin Gratton, Vanessa A Verbosh,
Oksana Savchenko, Matthew J. Presy, Olessia Kritskaia, Ekaterina
Messinger, Abby Lord, Ioulia Hess, Anna Krokhina, George Linder,
Christine Zitman, Carl Dilley, Heather Dilley, Robert Lizzano,
Elizabeth Lizzano, Karen Lizzano, Susan Miller, Jillian Mally,
Michael Mona, Alan Wolper, Sarah Wolper, Alan Wolper FBO Michael
Wolper, Spartan Securities Group, Ltd., and Am Asia Consulting
entered into the settlement agreement with Seafarer. An earlier
named party, CADEF, The Childhood Autism Foundation, Inc., had
previously entered into a settlement agreement and is no longer a
party in the Litigation.
The
settlement called for both cases to be dismissed, with prejudice,
and the Plaintiffs in case number 09-CA-30763 agreed to surrender
and cancel all of their 32,300,000 shares of restricted common
stock which were returned to the treasury of the Corporation. All
such shares have been returned for cancellation. On March 23, 2016
Seafarer CEO signed the resolution to cancel the 32,300,000 shares
and instructed the transfer agent ClearTrust LLC to cancel the
shares and return them to treasury for the benefit of Seafarer thus
reducing the number of outstanding shares by 32,300,000 shares. At
the present time the dismissal has been filed and the case closed,
with all shares cancelled.
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 site 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 Seafarer gained a default and final Judgment on such
matter on July 23, 2014. Seafarer is now working with the State for
the renewed permit to be in Seafarer’s name and rights only,
with Tulco removed per the Order of the Court. On March 4, 2015,
the Court awarded full rights to the Juno sight to Seafarer
Exploration, erasing all rights of Tulco Resources. The company has
currently filed an Admiralty Claim over such sight in the United
States District Court which is pending final ruling. On October 21,
2016 a hearing on the Admiralty Claim in the United States District
Court for the Southern District of Florida was held, where the
Court Ordered actions to take place for ongoing admiralty claim,
which will occur during the month of November 2016. The Company
expects to complete such claim within a few months.
On
September 3, 2014, the Company filed a lawsuit against Darrel
Volentine, of California. Mr. Volentine was sued in two counts of
libel per se under Florida law, as well as a count for injunction
against the Defendant to exclude and prohibit internet postings.
Such lawsuit was filed in the Circuit Court in Hillsborough County,
Florida. Such suit is based upon internet postings on
www.investorshub.com
.
On or about October 15, 2015, the Company and Volentine entered
into a stipulation whereby Volentine admitted to his tortious
conduct, however the stipulated damages agreed to were rejected by
the Court, and the Company is proceeding to trial on damages
against Volentine in a non-jury trial on December 1, 2015. The
Defendant is the subject of a contempt of court motion which was
heard on April 7, 2016, whereby the Court found a violation and
modified the injunction against the Defendant, and imposed other
matters of potential penalties against the Defendant. The Court
also awarded attorney’s fees against the Defendant on behalf
of Seafarer for such motion. The Defendant subsequently attempted
to have such ruling, evidence and testimony attacked through a
motion heard before the Court on October 24, 2016. The Court
dismissed the Defendant’s motion after presentation of the
Defendant’s case at the hearing. The Plaintiff has set the
matter for entry of the attorney’s fees amount due from the
Defendant for hearing in December 2016. As well the Plaintiff has
set for hearing its motion for sanctions in the form of
attorney’s fees for frivolous filing of the October
24
th
motion, which motion is also set for hearing in December 2016. The
Plaintiff filed a renewed and amended motion for punitive damages
in the case on September 11, 2016, which has not been set for
hearing. The Defendant had also filed a motion for summary judgment
on the matter of notice entitlement pre-suit, which motion is
pending before the Court. The Plaintiff filed a motion for
sanctions against the Defendant for the motion for summary judgment
being frivolous under existing law, and such motion is pending
ruling on the motion. Discovery is ongoing on such
case.
NOTE 12 – RELATED PARTY TRANSACTIONS
During
the nine month period ended September 30, 2016:
In
January of 2016, the Company entered into a convertible promissory
note agreement in the amount of $5,000 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 was due
on or before July 12, 2016. 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 $0.002 per
share.
In
January of 2016 a shareholder who is related to the Company’s
CEO provided a loan in the amount of $260 to the Company. This loan
pays 0% interest.
In February 2016, the Company’s CEO provided a loan to the
Company in the amount of $4,000. This loan pays interest at a rate
of 6% per annum and if the loan and accrued interest are not repaid
within 90 days from February 10, 2016 then the lender is entitled
to receive 500,000 shares of the Company’s restricted common
stock which has not been issued. 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 $0.002 per
share.
In May
of 2016, the Company’s CEO provided a loan to the Company in
the amount of $1,200. This loan was repaid during the nine month
period ended September 30, 2016, no interest was paid.
In May
of 2016, the Company extended the term of a previous 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 20,000,000 restricted shares of
its common stock and to negotiate future compensation on a
year-by-year basis. The Company also agreed to reimburse the
Director for pre-approved expenses.
In May
of 2016, the Company extended the term of a previous 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 20,000,000 restricted shares of
its common stock and to negotiate future compensation on a
year-by-year basis. The Company also agreed to reimburse the
Director for pre-approved expenses.
In May
of 2016, the Company entered into a convertible promissory note
agreement in the amount of $5,000 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 November 10, 2016. 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 $0.0005 per
share. The related party lender received 2,500,000
warrants to purchase shares of the Company’s common stock at
a price of $0.002.
This note remains
unpaid.
In May
of 2016, the Company entered into a convertible promissory note
agreement in the amount of $5,000 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 November 10, 2016. 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 $0.0005 per
share. The related party lender received 2,500,000
warrants to purchase shares of the Company’s common stock at
a price of $0.002.
This note remains
unpaid.
In May
of 2016, the Company entered into a convertible promissory note
agreement in the amount of $5,000 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 November 20, 2016. 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 $0.0005 per
share. The related party lender received 10,000,000
warrants to purchase shares of the Company’s common stock at
a price of $0.002.
This note remains
unpaid.
In June
of, 2016, the Company entered into a consulting agreement with an
individual who is related to the Company’s CEO under which
the individual agreed to provide various consulting services
including business development, photography, custom logo design and
development, developing corporate identity materials such as
business cards, editing, art illustrations, and working with the
Company to develop its future digital storefront and Internet
merchandise site. The term of the agreement is open ended and will
continue until the completion of the services. The Company agreed
to pay the consultant a total of 5,000,000 million shares of its
restricted common stock.
On
various dates in July of 2016 the Company repaid a total of $4,100
of the principal balance of loans owed to its CEO. No interest or
financing fees were paid to the Company’s CEO in conjunction
with the repayment of the loans.
On
various dates in July of 2016 the Company repaid a total of $3,180
of the principal balance of several loans owed to a related party.
No interest or financing fees were paid to the related party in
conjunction with the repayment of the loans.
In July
of 2016, the Company entered into a convertible promissory note
agreement in the amount of $2,400 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 12, 2017. 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 $0.0006 per share. The related
party lender received 4,000,000 warrants to purchase shares of the
Company’s common stock at a price of $0.002.
In
August of 2016, the Company entered into a debt settlement
agreement with a related party vendor to settle a total of $32,213
of outstanding debt related to transfer agent fees and 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 32,212,790 shares of its restricted
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 $32,213from the
sale of the stock, then the consultant is entitled to receive up to
an additional 11,000,000 shares of common stock or a cash payment
until the balance is paid in full.
In
September of 2016, the Company agreed to pay a related party who is
related to the Company’s CEO, 25,000,000 shares of its
restricted common stock for the purchase of a magnetometer owned by
the related party. The related party had previously purchased the
magnetometer and agreed to rent the equipment to the Company in
2015, however the Company and the related party never agreed to a
specific rental price and the Company never made any rental
payments or paid any fees for use of the equipment. The agreement
specifically states that the Company does not owe the related party
any past fees for rental or equipment charges for use of the
magnetometer.
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 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, perform period background research
including background checks and provide investigative information
on individuals and companies and to occasional assist 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.
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. At September 30, 2016, the Company owed the related
party limited liability company $1,195 for transfer agency services
rendered and for the reimbursement of legal fees
At September 30, 2016 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 note
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 were 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 note is currently in
default due to non-payment of principal and interest.
A note
payable dated February 24, 2010 in the principal amount of $7,500
with a corporation. The Company’s CEO was a director 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 note 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 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 was 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.
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 was due on or before
January 26, 2014 and is not secured. The note is
currently in default due to non-payment of principal and
interest.
A
convertible note payable dated January 17, 2014 due to a person
related to the Company’s CEO with a face amount of $31,500.
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 $0.006 per
share. The convertible note payable is due on or before
July 17, 2015 and is not secured. The note is currently in
default due to non-payment of principal and interest.
A
convertible note payable dated May 27, 2014 due to a person related
to the Company’s CEO with a face amount of $7,000. 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 $0.007 per share. The
convertible note payable was due on or before November 27, 2014 and
is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated July 21, 2014 due to a person
related to the Company’s CEO with a face amount of $17,000.
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 $0.008 per share.
The convertible note payable was due on or before January 25, 2015
and is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated October 16, 2014 due to a person
related to the Company’s CEO with a face amount of $21,000.
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 $0.0045 per
share. The convertible note payable was due on or before
April 16, 2015 and is not secured. The note is currently
in default due to non-payment of principal and
interest.
A
convertible note payable dated July 14, 2015 due to a person
related to the Company’s CEO with a face amount of $9,000.
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 $0.0030 per
share. The convertible note payable was due on or before
January 14, 2016 and is not secured. The note is
currently in default due to non-payment of principal and
interest.
A note
payable dated October 6, 2015 in the principal amount of $10,000
due to one of the Company’s Directors. The loan is not
secured and pays interest at a rate of 6% per annum and the
principle and accrued interest was due on or before November 11,
2015. This note is currently in default due to non-payment of
principal and interest.
A loan
in the amount of $28,070 due to the Company’s CEO. The loan
is not secured and pays interest at a 6% per annum and the
principal and accrued interest and was due on or before June 14,
2016. The note is currently in default due to non-payment of
principal and interest.
A
convertible note payable dated January 12, 2016 due to a person
related to the Company’s CEO with a face amount of $5,000.
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 $0.0020 per
share. The convertible note payable was due on or before
July 12, 2016 and is not secured. The note is currently
in default due to non-payment of principal and
interest.
A loan
in the amount with the remaining principal balance of $1,200 due to
the Company’s CEO. The loan is not secured and pays interest
at a 6% per annum. The lender is entitled to receive 500,000 shares
of the Company’s restricted common stock due to the loan not
being repaid within 90 days from February 10, 2016.
A
convertible note payable dated May 10, 2016 due to a person related
to the Company’s CEO with a face amount of $5,000. 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 $0.0005 per share. The
convertible note payable is due on or before November 10, 2016 and
is not secured.
A
convertible note payable dated May 10, 2016 due to a person related
to the Company’s CEO with a face amount of $5,000. 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 $0.0005 per share. The
convertible note payable is due on or before November 10, 2016 and
is not secured.
A
convertible note payable dated May 20, 2016 due to a person related
to the Company’s CEO with a face amount of $5,000. 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 $0.0005 per share. The
convertible note payable is due on or before November 20, 2016 and
is not secured.
A
convertible note payable dated July 12, 2016 due to a person
related to the Company’s CEO with a face amount of $2,400.
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 $0.0006 per
share. The convertible note payable is due on or before
January 12, 2017 and is not secured.