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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

 

or

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to __________.

 

Commission File Number 000-29461

 

(SEAFARER LOGO)

 

SEAFARER EXPLORATION CORP.
(Exact name of registrant as specified in its charter)

 

Florida 90-0473054
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

14497 N. Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618
(Address of principal executive offices) (Zip code)
 
(813) 448-3577
Registrant’s telephone number
 
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o   Accelerated filer o
         
Non-accelerated Filer x   Smaller reporting company x
     
  Emerging growth company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

 

As of August 11, 2023, there were 7,794,509,444 shares of the registrant’s common stock, $.0001 par value per share, outstanding.

1

 

SEAFARER EXPLORATION CORP.
Form 10-Q
For the Quarterly Period Ended June 30, 2023

 

TABLE OF CONTENTS

 

PART I: FINANCIAL INFORMATION 3
   
Item 1. Financial Statements 4
   
Condensed Consolidated Balance Sheets: June 30, 2023 (unaudited) and December 31, 2022 4
   
Unaudited Condensed Consolidated Statements of Operations: Three and six months ended June 30, 2023 and 2022 5
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit: Three and six months ended June 30, 2023 and 2022 6
   
Unaudited Condensed Consolidated Statements of Cash Flows: Six months ended June 30, 2023 and 2022 8
   
Notes to Unaudited Condensed Consolidated Financial Statements 9
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 31
   
Item 4. Controls and Procedures 31
   
PART II: OTHER INFORMATION 33
   
Item 1. Legal Proceedings 33
   
Item 1A. Risk Factors 33
   
Item 2. Recent Sales and Other Issuances of Unregistered Securities 33
   
Item 3. Defaults Upon Senior Securities 34
   
Item 4. Mine Safety Disclosures 34
   
Item 5. Other Information 34
   
Item 6. Exhibits 35
   
SIGNATURES 36

2

 

Part I: Financial Information

 

Statements in this Form 10-Q Quarterly Report may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These assumptions are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those risks discussed in this Form 10-Q Quarterly Report, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other documents which we file with the Securities and Exchange Commission.

 

In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, changes in technology, fluctuations in our quarterly results, our ability to continue and manage our growth, liquidity and other capital resource issues, compliance with government regulations and permits, agreements with third parties to conduct operations, competition, fulfillment of contractual obligations by other parties and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q Quarterly Report, except as required by Federal Securities law.

3

 

Item I. Financial Statements
 
SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30, 2023   December 31, 2022 
   Unaudited     
Assets          
Current assets          
Cash  $56,674   $177,409 
Deposits   750    750 
Total current assets   57,424    178,159 
           
Property, plant and equipment, net   274,403    154,761 
Right of use asset   1,534    10,464 
Total Assets  $333,361   $343,384 
           
Liabilities and Stockholders’ Deficit          
Current liabilities          
Accounts payable and accrued expenses  $577,543   $624,574 
Deferred revenue   140,000    140,000 
Convertible notes payable, related parties, net of discounts of $0 and $3,864, respectively   -    40,000 
Convertible notes payable, in default   235,300    235,300 
Convertible notes payable, in default - related parties   684,500    644,500 
Notes payable, in default   113,000    118,000 
Notes payable, in default - related parties   18,500    18,500 
Shareholder loan   5,000    7,400 
Operating lease liability, current   1,622    10,807 
Finance lease liability, current   21,155    - 
Total current liabilities   1,796,620    1,839,081 
           
Finance lease liability, long-term   110,604    - 
Total Liabilities   1,907,224    1,839,081 
           
Commitments and contingencies (Note 7)          
           
Stockholders’ Deficit          
Preferred stock, $0.0001 par values - 50,000,000 shares authorized; 67 shares issued          
Series A - 7 shares issued and outstanding   -    - 
Series B - 60 shares issued and outstanding   -    - 
Common stock, $0.0001 par value - 9,900,000,000 shares authorized; 7,652,499,812 and 7,172,668,896 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively   765,251    717,268 
Common stock to be issued, $0.0001 par value, 108,047,498 and 71,969,820 shares outstanding at June 30, 2023 and December 31, 2022, respectively   10,805    7,197 
Unearned compensation   (156,940)   (488)
Additional paid in capital   24,579,334    22,947,138 
Accumulated deficit   (26,772,313)   (25,166,812)
Total Stockholders’ Deficit   (1,573,863)   (1,495,697)
Total Liabilities and Stockholders’ Deficit  $333,361   $343,384 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
Revenue:                
Service income  $590   $3,131   $590   $6,220 
                     
Operating Expenses                    
Consulting and contractor expenses   355,452    395,702    874,938    883,400 
Vessel maintenance and dockage   35,696    41,645    230,515    92,914 
General and administrative expense   24,812    69,481    178,191    150,899 
Research and development   73,834    79,788    105,934    141,207 
Professional fees   38,146    10,270    66,202    32,271 
Travel and entertainment expense   25,282    19,235    46,466    34,804 
Depreciation and amortization expense   12,221    5,465    23,809    10,930 
Rent expense   10,418    15,346    24,187    26,580 
Total operating expenses   575,861    636,932    1,550,242    1,373,005 
                     
Net loss from operations   (575,271)   (633,801)   (1,549,652)   (1,366,785)
                     
Other income (expense)                    
Interest (income)   (17,261)   (17,662)   (34,250)   (33,102)
Loss on extinguishment of debt   (21,599)   -    (21,599)   - 
Total other income (expenses)   (38,860   (17,662)   (55,849)   (33,102)
                     
Net loss  $(614,131)  $(651,463)  $(1,605,501)  $(1,399,887)
                     
Basic and diluted loss per share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Weighted average shares outstanding   7,526,460,781    6,534,499,422    7,456,023,988    6,469,906,691 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
UNAUDITED

 

   Series A Preferred Stock   Series B Preferred Stock   Common Stock   Common Stock to be Issued   Unearned
Compensation
   Additional
 Paid in Capital
  

Accumulated

Deficit 

   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount                 
Balance December 31, 2022   7   $-    60   $-    7,172,668,896   $717,268    71,969,820   $7,197   $(488)  $22,947,138   $(25,166,812)  $(1,495,697)
                                                             
Common stock issued for cash   -    -    -    -    228,859,347    22,885    (40,083,333)   (4,008)   -    507,123    -    526,000 
                                                             
Stock issued as charitable donation   -    -    -    -    1,000,000    100    -    -    -    7,100    -    7,200 
                                                             
Stock issued for services   -    -    -    -    97,201,415    9,720    (3,015,276)   (301)   (280,800)   645,352    -    373,971 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    54,340    -    -    54,340 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (991,370)   (991,370)
Balance March 31, 2023   7    -    60    -    7,499,729,658    749,973    28,871,211    2,888    (226,948)   24,106,713    (26,158,182)   (1,525,556)
                                                             
Common stock issued for cash   -    -    -    -    128,816,667    12,882    75,833,333    7,583    -    378,885    -    399,350 
                                                             
Stock issued for loan origination fee   -    -    -    -    1,000,000    100    -    -    -    3,700    -    3,800 
                                                             
Stock issued for services   -    -    -    -    4,166,700    417    3,342,954    334    -    27,499    -    28,250 
                                                             
Stock issued to settle accounts payable   -    -    -    -    

6,776,250

    677    -    -    -    

22,902

    -    

23,579

 
                                                             
Stock issued to accrued interest   -    -    -    -    12,010,537    1,202    -    -    -    39,635    -    40,837 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    70,008    -    -    70,008 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (614,131)   (614,131)
Balance June 30, 2023   7   $-    60   $-    7,652,499,812   $765,251    108,047,498   $10,805   $(156,940)  $24,579,334   $(26,772,313)  $(1,573,863)

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

6

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
UNAUDITED

 

                                                    Unearned     Additional     Accumulated        
    Series A Preferred Stock     Series B Preferred Stock     Common Stock     Common Stock to be Issued     Compensation     Paid in Capital     Deficit     Total  
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount                          
Balance December 31, 2021     7   $   -       60   $   -       6,176,318,579     $ 617,632       37,750,000     $ 3,775     $ (261,536 )   $ 20,714,410     $ (22,550,211 )   $ (1,475,930 )
Common stock issued for cash     -       -       -       -       328,000,000       32,800       -       -       -       631,200       -       664,000  
Stock issued for services, committed in prior period     -       -       -       -       14,000,000       1,400       (14,000,000 )     (1,400 )     -       -       -       -  
Stock issued for services     -       -       -       -       19,885,913       2,089       -       -       (3,300 )     77,183       -       75,972  
Cancellation of shares     -       -       -       -       (61,183,646 )     (6,118 )     -       -       -       6,118       -       -  
Amortization of unearned compensation     -       -       -       -       -       -       -       -       85,470       -       -       85,470  
Net Loss     -       -       -       -       -       -       -       -       -       -       (748,424 )     (748,424 )
Balance March 31, 2022     7       -       60       -       6,477,020,846       647,803       23,750,000       2,375       (179,366 )     21,428,911       (23,298,635 )     (1,398,912 )
Common stock issued for cash     -       -       -       -       202,500,000       20,250       -       -       -       384,750       -       405,000  
Stock issued for services     -       -       -       -       13,924,764       1,392       -       -       -       38,608       -       40,000  
Cancellation of shares     -       -       -       -       (23,500,000 )     (2,350 )     -       -       -       2,350       -       -  
Amortization of unearned compensation     -       -       -       -       -       -       -       -       63,151       -       -       63,151  
Net Loss     -       -       -       -       -       -       -       -       -       -       (651,463 )     (651,463 )
Balance June 30, 2022     7     $ -       60     $ -       6,669,945,610     $ 667,095       23,750,000     $ 2,375     $ (116,215 )   $ 21,854,619     $ (23,950,098 )   $ (1,542,224 )

 

See accompanying notes to the unaudited condensed consolidated financial statements. 

7

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

 

   For the Six Months Ended June 30, 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(1,605,501)  $(1,399,887)
           
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation   10,930    10,930 
Amortization of right of use asset, finance   12,879    - 
Amortization of beneficial conversion feature and loan fees   -    2,984 
Amortization of unearned compensation   124,348    148,621 
Common stock issued for services   402,221    119,272 
Common stock issued for a charitable contribution   7,200    - 
Financing fees on debt   3,800    - 
Decrease (increase) in:          
Prepaid expenses and deposits   -    3,000 
Increase (decrease) in:          
Accounts payable & accrued expenses   7,438    36,462 
Net cash used in operating activities   (1,036,685)   (1,078,618)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property, plant and equipment   (2,000)   (1,136)
Net cash used in investing activities   (2,000)   (1,136)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from the issuance of common stock   925,350    1,069,000 
Payments on convertible notes payable   -    (10,000)
Payments on notes payable   (5,000)   (50,000)
Loans from shareholders   -    3,000 
Payments to shareholders   (2,400)   - 
Net cash provided by financing activities   917,950    1,012,000 
           
NET CHANGE IN CASH   (120,735)   (67,754)
CASH, BEGINNING OF PERIOD   177,409    81,801 
CASH, END OF PERIOD  $56,674   $14,047 
           
Supplemental disclosure of cash flow information          
Cash paid for interest expense  $-   $- 
Cash paid for income taxes  $-   $- 
           
Non-cash investing and financing activities:          
Financing lease liabilities and right of use asset  $141,451   $- 
Stock issued for prepaid services  $-   $3,300 

  

See accompanying notes to the unaudited condensed consolidated financial statements.

8

 

SEAFARER EXPLORATION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

The accompanying condensed consolidated 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 condensed consolidated 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 consolidated financial statements should be read in conjunction with the Company’s audited condensed consolidated financial statements and footnotes included in the Company’s Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “Commission”) on March 31, 2023. The results of operations for the six month period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2023 or for any future period.

 

NOTE 1 – DESCRIPTION OF BUSINESS

 

Seafarer Exploration Corp. (“Seafarer” or the “Company”), was incorporated on May 28, 2003 in the State of Delaware.

 

The principal business of the Company is to engage in the archaeologically-sensitive exploration, documentation, recovery, and conservation of historic shipwrecks with the objective of exploring and discovering Colonial-era shipwrecks for future generations to be able to appreciate and understand.

 

In March of 2014, Seafarer entered into a partnership with Marine Archaeology Partners, LLC (“MAP”), with the formation of Seafarer’s Quest, LLC (“SQ”) for the purpose of exploring a shipwreck site off of Melbourne Beach, Florida. Under the partnership with MAP, Seafarer is the designated manager of SQ.

 

The Company’s wholly owned subsidiary Blockchain LogisTech, LLC (“Blockchain”), was formed on April 4, 2018 and began operations in 2019. The Company is evaluating Blockchain’s business opportunities and does not believe that Blockchain will generate any revenues for the foreseeable future.

 

The Company formed a wholly owned subsidiary, Exploration Studios, LLC, in May 2018 in order to explore media strategies and opportunities. Exploration Studios, LLC has not yet commenced operations.

 

Florida Division of Historical Resources Agreements/Permits

 

The Company successfully renewed its permits for both Areas 1 and 2 for the Melbourne Beach site. The Area 1 permit was renewed on March 1, 2019 for a period of three years. The Area 2 permit was renewed on January 14, 2019 for a period of three years. Per Florida Statutes, Seafarer made a timely request for renewal of the 2019 permit for Area 2 on July 29, 2022. In January of 2022, Seafarer received notification from the Florida Division of Historical Resources (“FDHR”) that its permit for Area 2, which was set to expire on January 19, 2022, has been continued indefinitely while the renewal request was being processed. The existing permits will continue until the renewal is finalized or rejected. Per Florida Statutes, Seafarer made a timely request for renewal of the 2019 permit for Area 1 on July 29, 2021. On March 2, 2022, Seafarer received notification that the permit would continue indefinitely with the same terms as Area 2.

 

Federal Admiralty Judgement

 

Seafarer was granted, through the United States District Court for the Southern District of Florida, a final judgment for its federal admiralty claim on the Juno Beach shipwreck site. The Company is conducting limited exploration operations at the Juno Beach shipwreck site while it awaits updated permitting from the United States Army Corp of Engineers (“USACE”).

 

NOTE 2 – GOING CONCERN

 

These unaudited condensed consolidated 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 and has an accumulated deficit of $26,772,313 as of June 30, 2023. During the six month period ended June 30, 2023, the Company’s net loss was $1,605,501 and at June 30, 2023, the Company had a working capital deficit of $1,739,196. These factors raise 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 August 14, 2023. Management’s plans include raising capital through the issuance of common stock and debt to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any significant revenues for the foreseeable future. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof.

9

 

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 unaudited condensed consolidated 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 unaudited condensed consolidated 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.

 

Current Economic Conditions

 

The Company and certain of its advisors are closely monitoring current domestic economic conditions. Of particular concern is the rate of inflation that has been reported as being near a forty year high and had recently increased nearly 7% on a year-over-year basis from 2021 to 2022 and the rising cost of fuel. The Federal Reserve (the “Fed’) recently discussed that while inflation growth has moderated in 2023, inflation was still above the Fed’s target of 2% per year. The increasing inflation in the overall economy may lead to higher interest rates which may make it more expensive or potentially more challenging for the Company to access financing. Additionally, the Company’s vessels use large amounts of fuel when in operation and the recent rise in the per gallon cost of gasoline will cause an increase in the Company’s operating expenses. The increase in the cost of fuel may hamper the Company’s ability to conduct operations.

 

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 unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the unaudited condensed consolidated financial statements.

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and Blockchain which is a wholly owned subsidiary. Intercompany accounts and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents

 

For purposes of the unaudited condensed consolidated statements of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There were no cash equivalents at June 30, 2023 and December 31, 2022. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At June 30, 2023, the Company did not have deposits in excess of the FDIC insured limit.

 

Research and Development Expenses

 

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $105,934 and $141,207 for the six month periods ended June 30, 2023 and 2022, respectively and $73,834 and $79,788 for the three month periods ended June 30, 2023 and 2022, respectively, which is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments.

 

The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

 

The Company recognizes revenue from the referrals that Blockchain has made to providers of software services when payment for a referral is received from the provider of software services. Blockchain, at its sole discretion and with no specific sales quotas or targets, provides referrals of potential end users to the software service providers and is paid a referral fee only after the software services providers receive payment from the end user.

10

 

The Company also has a separate sales referral agreement, with no sales quotas or specific goals or targets, with a limited liability company that provides product/system engineering and development services. The Company’s performance obligation is met when the payment from the customer is received by the provider of the development services, which is at a point in time. The Company receives referral fees when payment is received from the provider of the product/system development services which is when the Company recognizes revenue under the agreement.

 

The Company recognizes revenue when cash is received or when it has met its obligations per the terms of a contract or agreement for services. Payments received for services are recorded as deferred revenue and are recognized as revenue when the services have been provided.

 

During 2021 the Company entered into an agreement to provide scanning services using its SeaSearcher technology to a corporation involved in searching for historic shipwreck material. Under the terms of the agreement the Company received an upfront payment of $140,000 which has been included in the accompanying unaudited condensed consolidated balance sheets at June 30, 2023 and December 31, 2022 as deferred revenue as the services have not yet been provided.

 

Earnings Per Share

 

The Company has adopted the FASB ASC 260-10, Earnings per Share, which provides for the 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.

 

The potentially dilutive common stock equivalents for the six month periods ended June 30, 2023 and 2022 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss. As of June 30, 2023 and 2022, there were approximately 670,982,011 and 673,692,795 shares of common stock underlying the outstanding convertible notes payable and warrants, respectively.

 

Fair Value of Financial Instruments

 

The carrying amounts of financial assets and liabilities, such as cash, accounts payable, accrued expenses, convertible notes payable and payables, approximate their fair values because of the short maturity of these instruments.

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at historical cost. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets.

 

Depreciation expense was $10,930 for the six month periods ended June 30, 2023 and 2022, and $5,465 for the three month periods ended June 30, 2023 and 2022, which is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations. 

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, Impairment and Disposal of Long Lived Assets, 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 six month periods ended June 30, 2023 and 2022.

 

Use of Estimates

 

The process of preparing condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Significant estimates for the six month periods ended June 30, 2023 and 2022 include useful life of property, plant and equipment, valuation allowances against deferred tax assets and the fair value of non cash equity transactions.

11

 

Segment Information

 

During 2019, Seafarer’s wholly owned subsidiary, Blockchain, began operations, generated revenue and incurred expenses. The business of Blockchain has no relation to the Company’s shipwreck exploration and recovery operations other than common ownership. As such, the Company concluded that the operations of Blockchain and Seafarer Exploration were separate reportable segments as of the six month periods ended June 30, 2023 and 2022 (see Note 9– Segment Information).

 

Convertible Debentures

 

The Company adopted the guidance in Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity on January 1, 2022. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features. The Company adopted ASU 2020-06 utilizing the modified retrospective method, which resulted in an immaterial impact to the Company.

 

Stock Based Compensation

 

The Company applies the fair value method of FASB ASC 718, Share Based Payment, in accounting for its stock-based compensation. The standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period. The Company values stock-based compensation at the market price for the Company’s common stock and other pertinent factors at the grant date.

 

Fully vested and non-forfeitable shares issued prior to the services being performed are classified as prepaid expenses.

 

Leases

 

The Company accounts for leases under ASU 2016-02. At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

 

Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented in operating expenses on the unaudited condensed consolidated statements of operations.

 

Finance leases are recorded as a finance lease liability and property, plant and equipment asset, based on the present value of lease payments. The asset is depreciated, and the liability is amortized with interest expense incurred over the life of the lease.

 

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.

 

Investments

 

The Company follows ASC 325-20, Cost Method Investments, to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

12

 

Recent Accounting Pronouncements

 

All other recent accounting pronouncements issued by the FASB, did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.

 

NOTE 4 – RIGHT-OF-USE ASSETS AND OPERATING AND FINANCE LEASE LIABILITIES

 

Operating Leases

 

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases are not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term.

 

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, 2020 through July 31, 2023 with base month rents of $1,475 from July 1, 2020 to June 30, 2021, $1,519 from July 1, 2021 to June 30, 2022, $1,564 from July 1, 2022 to June 30, 2023 and $1,611 from July 1, 2023 to July 31, 2023. Under the terms of the lease there may be additional fees charged above the base monthly rental fee. During the three month periods ended June 30, 2023 and 2022, the Company recorded $4,601 as operating lease expense, which is included in rent expense on the unaudited condensed consolidated statements of operations. During the six month periods ended June 30, 2023 and 2022, the Company recorded $9,202 as operating lease expense, which is included in rent expense on the unaudited condensed consolidated statements of operations.

 

On July 1, 2020, upon renewal of the lease, the Company recorded a right-of-use asset and lease liability of $48,957.

 

Right-of-use assets at June 30, 2023 and December 31, 2022 are summarized below:

 

 

   June 30, 2023   December 31, 2022 
Office lease  $48,957   $48,957 
Less accumulated amortization   (47,423)   (38,493)
Right of use assets, net  $1,534   $10,464 

 

Amortization on the right -of -use asset is included in rent expense on the unaudited condensed consolidated statements of operations.

 

Operating Lease liabilities are summarized below:

 

   June 30, 2023   December 31, 2022 
Office lease  $1,622   $10,807 
Less: current portion   (1,622)   (10,807)
Long term portion  $-   $- 

 

Maturity of lease liabilities are as follows:

 

 

Year ended December 31, 2023  $1,622 
Total future minimum lease payments   1,622 
Less: Present value discount   -
Lease liability  $1,622 

 

The Company also has an operating lease for a house located in Palm Bay, Florida that it leases on a month-to-month basis for $1,300 per month. 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 Company also pays a rental fee for a space in a park on an as needed basis.

13

 

Finance Leases

 

Commencing during the six months ended June 30, 2023, the Company entered into the following leases:

 

  o Vehicle lease - monthly lease payments of $1,167 for 60 months amortized over 5 years at 12%

 

  o Vessel lease - monthly lease payments of $1,557 for 60 months amortized over 5 years at 12%
     
  o Sonar lease - monthly lease payments of $422 for 60 months amortized over 5 years at 12%
     

Finance right of use assets are summarized below:

 

   As of   As of 
   June 30,   December 31, 
   2023   2022 
Vehicle lease  $52,464   $- 
Vessel lease   70,000    - 
Sonar lease   18,987    - 
Finance right of use asset before Accumulated Amortization   141,451    - 
Less accumulated amortization   (12,879)   - 
Finance right of use asset  $128,572   $- 

 

Finance lease liabilities are summarized below:

 

 

   As of   As of 
   June 30,   December 31, 
   2023   2022 
Vehicle lease  $48,512   $- 
Vessel lease   64,726    - 
Sonar lease   18,520    - 
Total Lease Liabilities   131,758    - 
Less: current portion   (21,155)   - 
Long term portion  $110,604   $- 

 

  

Year Ended December 31,

Total

 
Year Ended December 31, 2023  $16,154 
Year Ended December 31, 2024   37,758 
Year Ended December 31, 2025   37,758 
Year Ended December 31, 2026   37,758 
Year Ended December 31, 2027   37,758 
Thereafter   4,414 
Total future minimum lease payments   171,600 
Less imputed interest   (39,842)
PV of payments  $131,758 

14

 

Expenses incurred with respect to the Company’s finance leases during the three and six months ended June 30, 2023 and 2022 which are included in general and administrative expenses on the unaudited condensed consolidated statements of operations are set forth below.

 

   June 30,   June 30, 
Three Month Ended  2023   2022 
Finance lease amortization  $6,756   $- 
Finance lease interest   3,869    - 
Total finance lease expense  $10,625   $- 

 

   June 30,   June 30, 
Six Month Ended  2023   2022 
Finance lease amortization  $12,879   $- 
Finance lease interest   7,497    - 
Total finance lease expense  $20,376   $- 

 

The weighted average remaining lease term and the weighted average discount rate on the finance leases at June 30, 2023 and 2022 are set forth below.

 

   June 30,   June 30, 
   2023   2022 
Weighted average remaining lease term   4.61 years    - 
Weighted average discount rate   12%   - 

15

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

 

Upon inception, the Company evaluates each financial instrument to determine whether it meets the definition of “conventional convertible” debt under ASC 470.

 

Convertible Notes Payable

 

The following tables reflect the convertible notes payable at June 30, 2023 and December 31, 2022:

 

 

    Issue Date   Maturity
Date
  June 30,
2023
    December 31,
2022
    Rate     Conversion
Price
            Principal
Balance
    Principal
Balance
           
Convertible notes payable - related parties                    
                                     
Notes payable, Face Value   07/06/22   01/06/23   $ -     $ 20,000       6.00 %   0.0015
Notes payable, Face Value   07/29/22   01/28/23     -       10,000       6.00 %   0.0020
Notes payable, Face Value   08/04/22   02/04/23     -       10,000       6.00 %   0.0020
Face value             -       40,000              
                                     
Less unamortized discounts     -       -              
                                     
Balance convertible notes payable - related parties   $ -     $ 40,000              
                             
    Issue Date   Maturity
Date