ITEM 1BUSINESS
Forward-looking Statements
This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.
As used in this annual report, the terms "we", "us", "our", the Company, "Endurance (formerly Tecton) and Tecton" mean Endurance Exploration Group, Inc. (formerly Tecton Corporation), unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise indicated.
Our Corporate History and Background
We were incorporated as a Nevada company on January 19, 2006, as a wholly-owned subsidiary of Hemis Corporation. On December 1, 2006, Hemis declared a dividend of Tecton shares to all shareholders as of that date and concurrently cancelled its share ownership in the Company. The effect of this dividend declaration and share cancellation was that Tecton was spun off as an independent company. On January 2, 2014 the Company amended its Articles of Incorporation to change its name to Endurance Exploration Group, Inc.
Prior to June 2008, the Company was engaged in the exploration and acquisition of uranium properties that were either past producers or had been the subject of prior work programs and/or contained historic resources. On or about June 1, 2008, the Company ceased/discontinued operations of its uranium exploration activities; and, has incurred a net operating loss of approximately $4,900,000 since that period, as it has sought to restructure itself and find a suitable business opportunity. The Company has been deemed a shell company, as defined in the 1934 Securities and Exchange Act, Rule 12b-2 since the discontinuance of operations in 2008. During its restructuring period from June 2008 until December 31, 2013 the Company:
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Elected a new slate of directors and appointed a new management team focused on finding a suitable business opportunity for the Company,
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Attempted to reorganize its balance sheet through the US Bankruptcy courts by filing a Chapter 11 bankruptcy petition, but later withdrew its petition at the request of the court,
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Brought current its filings with the State of Nevada and its financial reporting and disclosure filings with the US Securities & Exchange Commission,
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Effected a reverse 1 for 40 reverse split,
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Amended and restated its Articles of Incorporation to increase the total authorized capital stock of the Corporation to 110,000,000 shares, being comprised of 100,000,000 shares of common stock with a par value of $.01 per share, and 10,000,000 shares of preferred stock with a par value of $.001,
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Exchanged approximately $290,000 of outstanding debt for 12,733,499 newly issued common shares, on December 31, 2013,
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And, entered into a Share Exchange Agreement, on December 31, 2013, to acquire the ownership interests of Endurance Exploration Group, LLC for 20,550,539 newly issued common shares.
Our fiscal year end is December 31, and our common stock is quoted on the OTCQB electronic quotation system under the symbol EXPL.
Endurance Explorations Group, LLC
On December 31, 2013, the Company completed the purchase of 100% of the membership interests of Endurance Exploration Group, LLC, in exchange for 20,550,539 shares of the Companys Common Stock being issued to the former members, valued at $381,173. The majority shareholders of Endurance Exploration Group, Inc. (formerly Tecton Corporation) also held a majority interest in Endurance Exploration Group LLC, and maintained controlling interests in both entities both before and after the transaction. Endurance Explorations Group LLC is now a wholly owned subsidiary of Endurance Exploration Group, Inc. (formerly Tecton Corporation) with its operations now being the Companys primary focus. The members of Endurance Exploration Group LLC who received the shares of stock included Micah Eldred and Carl Dilley, the current officers and directors of the Company.
Endurance Exploration Group LLC was formed in 2009 to explore, from an operational and financial perspective, the feasibility and potential economic return of recovering historic and modern day shipwreck cargos. We began by developing a research methodology with three goals. The first goal was to establish a comprehensive understanding of the larger economic, technological and social trends that lead to the transport of physical wealth across oceans during different historical periods, along with creating a High Interest list of shipwrecks and their cargos lost across various historical periods. Conflict, accidents and acts of nature claimed a percentage of all voyages, and many of the shipwrecked vessels are believed to have carried a valuable cargo. Our second objective was to identify, from this prior population of potential shipwreck losses, those shipwrecks that could be legally salvaged and recovered, and the cargos sold, with a positive return on the capital investment required for their location and recovery. Our third goal was to move those projects which had the potential to generate positive investment returns into an operational phase with a high, risk-adjusted, chance of success; and, to develop a portfolio of projects in various stages of research, search, survey and recovery.
To that end, we began by evaluating historical shipwreck databases holding in excess of 125,000 entries as well as undertaking contextual and keyword library and archival searches. It is important to note that even these massive repositories of data reflect just a small percentage of the 3,000,000+ shipwrecks the United Nations estimates lay on the ocean floor.
From these databases and other searches, we have developed an initial High Interest list of approximately 400 shipwrecks. Using criteria including (but not limited to) depth, potential search area, legal concerns, difficulty of excavation and potential value, we further culled the High Interest list to approximately two-dozen targets, the Target List. In order for a shipwreck to qualify for our Target List, and to potentially move forward as an Operational Target (OT) -one that we may consider for the search and survey operation phase- the shipwreck must possess the following criteria:
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·
Known Cargo of Value.
Based upon the historical and archival records, an OT must contain a quantifiable cargo of value. While the historical records may not provide our researchers with an exact present day value of a potential cargo, we must be able to determine a quantifiable range of its estimated value based upon cargo manifests or other archival documents.
·
Known Navigational Data
. Our research must provide information that would allow us to establish a geographically definable search and sinking location and, subsequently, an economically feasible search area for any potential target.
·
Legal Salvage and Clear Path to Title.
Admiralty law, salvage law, and various sovereign nations laws and regulations concerning the search and salvage of historical and modern shipwrecks are complex. Prior to pursuing an OT, we must be able to establish a clear legal path to the title of any potential recovery, and search and recovery must be made in compliance with international laws and regulations or under specific country permissions.
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Potential Returns Exceed Risk-Adjusted Cost of Search and Recovery.
Prior to moving a shipwreck from our Target List to an Operational Target, we evaluate a large number of factors to determine the potential search and recovery costs, and the risks associated with such search and recovery. Items considered include: a targets location and likely depth, its location from the nearest operational port, the complexity and costs of potential search and salvage, legal issues to title, and many other factors; and, we develop an initial search plan and budget for each potential project. We recognize the high risk, yet potentially high rewards, of our business; and, we realize that we will not be successful finding or salvaging every project we undertake. Therefore, prior to moving any project onto the Operational Target list, we take a risk-adjusted approach to the potential returns that a project can provide; and we determine if, on a risk-adjusted basis, the potential target is economically feasible and appropriate to add to our portfolio of Operational Targets.
In 2011, we began purchasing key equipment for operations. Our equipment purchases have included a 100-foot survey vessel, tethered side-scan sonar units, and light work-class and inspection Remotely Operated Vehicles (ROV), Shackleton 1 and Squirt.
Projects code-named
Sailfish
and
Black Marlin
have now reached operational or pre-operational status. For project
Sailfish
we have now surveyed over 700 square miles in the Western Atlantic Ocean in search of a sunken passenger liner carrying a substantial cargo of gold coinage. In addition to this manifest cargo, we also expect to find additional valuables among the personal stores of the ships passengers. Please refer to
Current & Ongoing Projects
for additional information.
For project
Black Marlin
we have secured a three-year contract with a sovereign island nation in the Indian Ocean for the survey and recovery of a Colonial-era merchant vessel carrying silver. This contract also allows for other potentially valuable targets of opportunity within the territorial waters of this nation. Please refer to
Current & Ongoing Projects
for additional information.
We believe this survey and recovery capability combined with our proprietary research will allow us to conduct approximately two deep-water surveys per yearly weather window, should we have sufficient capital to undertake such operational surveys.
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Description of Key Equipment
Survey Ship
Our 100-foot survey ship has been recently refurbished to include a sonar winch and the latest in electronics and side-scan sonar survey equipment. Depending on the timeframe, circumstances and our other commitments, we may use this ship or charter another vessel of similar capability.
Sidescan Sonar
Side-scan sonar is currently the industry-standard search methodology used for oceanic operations. An unmanned side-scan sonar unit, or towfish, is towed behind a manned surface vessel at a pre-set altitude above the seafloor. The sonar unit sends out a ping or sound-wave to acoustically map terrain, natural obstructions and man-made objects, including shipwrecks and jettison cargo.
To engage in search operations, the Company has purchased side-scan sonar systems. Our dual-frequency systems may be set for a range of velocities, search widths and resolutions for both area mapping and high-resolution target prosecution up to 2,000 meters in depth. Our system is compatible with third-party hardware and software systems and meets IHO & NOAA survey specifications. Beyond shipwreck surveys, the system is also capable of cable and pipeline surveys, channel conditioning, geophysical surveys, mine countermeasures and search and recovery operations.
The Companys sonar systems are a flexible platform from both a hardware and software standpoint, and may continue to be upgraded with industry-standard, off-the-shelf sensor packages.
The sonar towfish of one of our current survey systems was lost during the final days of our 2013 search operations. For more information on project
Sailfish
, please refer to
Current & Ongoing Projects
. We expect to replace this sonar equipment and capability before beginning 2014 search operations.
Potential shipwreck targets found by sonar will be catalogued, evaluated and eventually visually prosecuted using the
Shackleton
1
or
Squirt
ROV systems.
ROV Shackleton 1
The Remotely-Operated Vehicle (ROV) system
Shackleton
1 is a light work-class ROV. This system is comprised of underwater lighting, still and motion picture cameras and a single robotic manipulator arm. Initially designed for mid-water industrial applications, the ROV has been redesigned for shipwreck search, identification and cargo recovery operations. Beyond shipwreck operations, the system is also capable of cable and pipeline inspection and repair, geophysical sampling and search and recovery operations. ROV system Shackleton 1 is currently undergoing the final stages of a complete disassembly and overhaul, and we expect to have it ready for the 2014 summer season.
Employees
As of December 31, 2013, Endurance Exploration Group Inc. (formerly Tecton Corporation) had three employees, all of whom serve full-time.
Other Employees and Contractors
We utilize contract personnel for vessel operation during our survey periods, and intend to continue to use contract technicians to perform marine survey and recovery operations in the future. From time to time, we have or intend to hire other contractors, subcontractors and consultants to perform specific services.
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Project Operations
Research
During the Colonial period (1500-1850), the world economy was highly dependent on the physical transportation of bullion coinage, precious metals and high-value non-ferrous metals. A small percentage of shipping during this period was lost to storm, fire, acts of war, natural disasters and other causes, both known and unknown. The administration of this economic system required state-level bureaucratic oversight and record-keeping. Many of these historic records are available in publications, libraries, archives and digitized formats in depositories across the world. Though many records have been lost to time, enough remain to create in-depth, credible project profiles for potential excavation targets.
To that end, Endurance Exploration Group LLC has created a series of regional and period-specific databases from which to compare, evaluate and select potential targets for research, discovery and eventual excavation and recovery.
The graphics below are a visual representation of selected world regions containing our High Interest database of shipwrecks and their approximate location and time of sinking.
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Before search or recovery operations may begin, we seek to understand every factor necessary to mount a recovery operation with a high probability of success.
These factors include, but are not limited to:
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The historical context of the shipwreck, including political forces, technological developments, important contextual persons and events and the public reaction to the loss.
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Any images of the shipwreck, including still photography, motion pictures, drawing, paintings, recreations and/or models.
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A complete sinking timeline, including as much information as possible on weather patterns, departure date/time, intended course, course corrections, witness/observer statements. This includes any statement, fact or event material in any way to the sinking.
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A proposed search area with a high-probability of success, including an evaluation of all factors listed in the Sinking Timeline as well as any territorial boundaries or environmental factors.
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An Identification Guide, enabling rapid qualification or rejection of potential targets based on sonar and visual imagery, thus limiting expensive ship time on station.
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Cargo evaluation, evaluating the historical records on the targets cargo and potential modern-day value.
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Any encumbering factors, including territorial ownership of waters, insurance claims, potential cargo claims and sovereign rights. We will not begin a project without a legal path to possession.
All of the above information is gleaned from publications, libraries, archives and digitized medium. Development of further projects is a continuous, ongoing process.
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Search
Most operational projects begin with a sonar search phase. We have outfitted our vessel with state-of-the-art sonar systems, an industry standard for underwater search operations. Our vessel tows the sonar systems to map the seafloor and search for targets. Potential targets are then selected from the sonar imagery using a combination of computerized post-processing and expert evaluation. While some shipwreck targets may be positively identified using high-resolution sonar system, others may need visual identification using an underwater camera ROV (Remote Operated Vehicle) system or an AUV (Autonomous Underwater Vehicle).
Recovery
Once a target is positively identified, excavation and recovery operations will begin using our Shackleton 1 light-work class ROV system, or other chartered ROV systems. Shackleton 1 will document the site using sonar, still and motion-picture imagery. It will then be used for any necessary excavation, as well as coinage, bullion and/or other recovery operations.
Post-Recovery Conservation
Coinage, precious metals and non-ferrous metals typically require a minimum amount of post-recovery conservation. In order to preserve the value of the recovered cargo, we will have an on-site facility capable of properly storing and transporting all recovered coinage, precious metals and non-ferrous metals to definitive and final conservation and storage prior to sale.
Sales
We intend to recover coinage and bullion precious metals, including but not limited to gold and silver. We believe that bullion metals, numismatically-graded coinage and non-graded coinage have significant value in the collector market. We intend to sell the existing independent coin dealers as well as directly to the collector and consumer market through the internet.
Current & Ongoing Projects
Project Sailfish- Research Summary
The
Sailfish
was a steam-powered packet ship, part of a fast and indispensable transatlantic communication link, the perfect vessel to rapidly ferry mails and passengers between Britain and the United States. Large for her time, she was a side-wheel steamer constructed almost entirely of iron.
On her last voyage, the
Sailfish
left Great Britain, bound for New York. She carried several dozen first-class passengers, more than four hundred steerage passengers and a full crew of nearly 130. The
Sailfish
also disembarked with a cargo of gold coins, and the Captain assumed a short, uneventful voyage to
New York.
(Sailfishs destination has been changed in this narrative to New York from her historical intended port of call)
When heavy seas set in, the
Sailfish
began to roll heavily. Though the initial problem was temporarily fixed, twelve hours later the same roll started again. Making matters worse, fire broke out. Buckets and pumps were manned, but the water rose rapidly and extinguished the furnaces, rendering the ship immobile. The fire quickly spread, driving the passengers above decks.
The purser and two men attempted to rescue the gold shipment, but were driven back by the smoke and flames. A nearby ship came to the rescue, bravely maneuvering close to the
Sailfish
and running a line between the two to facilitate transfer of passenger. Per age-old protocol, the Captain was the last man off the ship.
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Virtually nothing was saved. Nearly every trunk and stitch of clothing was lost, including all the money of the first-class passengers. Early the next morning, a passing ship fell in with the
Sailfish,
shadowing the stricken vessel through her final hours. The burning
Sailfish
exploded and sank by the stern, leaving only an overturned lifeboat, light portions of the decking and a few trunks. The passing ship spent an hour recovering debris, dutifully recorded the sinking position, and then sailed on to New York.
We believe the
Sailfish
lies at a depth of between 200-500 meters of water.
Project Sailfish Current Status
Side-scan sonar survey operations on Project
Sailfish
began in July of 2013, and continued through the summer weather window until September 2013. Over the course of this initial survey, approximately 700 square miles were digitally mapped. This sonar imagery was then post-processed and evaluated for potential targets.
Additional analysis conducted in early 2014 of the side scan sonar data we collected in 2013, reveals a shipwreck target with a number of characteristics that are consistent with what we believe we would see in a side scan sonar image of, our targeted shipwreck, "Sailfish". At this point in time, we cannot confirm whether or not we have located and imaged "Sailfish" with our side scan sonar equipment. We intend to conduct an ROV inspection in early to mid-year 2014 and verify whether or not the target we have located is, or is not, "SAILFISH".
Project Black Marlin- Research Summary
In the end of the 17th century, the world economy was fueled by the Spanish silver mines of the Americas, and the European demand for Asian drugs, spices, commodities and teas. This trade was based on the exchange of precious metals for goods, and silver was the only European payment acceptable to Asian trading partners.
The
Black Marlin
was one such vessel engaged in this trade. She was an English East Indiaman, more than 700 tons, three decks high and armed with many cannon. In addition to the silver coin expected by Asian merchants, she also carried lace, golden fabric, beaver fur, tobacco, wine, cloth and iron nails.
The shipping routes of the time took the English ship to the Indian Ocean for resupply in the middle of her long voyage to the East. Unknown to her Captain and crew, nearby European enemy ships were hunting for English shipping. They discovered the
Black Marlin
was in the area and sailed to intercept. The European enemy ships approached the English ship under a false flag and prepared to attack.
The trap set and ready to attack, the Europeans demanded the surrender of the English vessel. Instead of surrendering, the English captain counterattacked, and the vessels began to exchange heavy cannon fire, beginning a pitched fight that would continue over many hours. In a last-ditch effort to escape, the English ship unfurled her sails and attempted to sail away. The Europeans quickly caught up and soon the English ship was disabled and unable to continue fighting.
Rather than surrender, the Captain of the English ship set his own vessel on fire, escaping in a small boat with a chosen group of men while allowing his own ship and abandoned sailors to burn. The fire reached the gunpowder storage, and the English ship exploded and sank, taking with her a rich cargo of silver.
We believe this shipwreck lies at a depth of between 500-3000 meters of water.
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Project Black Marlin Current Status
As of November 2013, Endurance Exploration Group LLC finalized a contract with the sovereign government of an island nation in the Indian Ocean. The provisions allow for a three-year period in which to operate within the territorial and surrounding waters of the nation with full permissions to survey for and recover the
Black Marlin
and her silver cargo. Proceeds from recovery and sale are subject to a graduated distribution, with 100% first going to cover expedition costs and with a 70% / 30% split thereafter in the favor of Endurance Exploration Group. We expect to begin initial survey operations on project
Black Marlin
in mid to late-2014.
As part of a larger economic development package included within our original proposal, we will also seek to develop media and museum products featuring both the treasure of the
Black Marlin
and the natural beauty of the island nation.
Project Black Marlin Targets of Opportunity Wahoo and Dolphin
As part of discussions pertaining to project
Black Marlin,
Endurance Exploration Group has learned of two shallow-water targets of opportunity within the same territorial waters as the
Black Marlin.
Believed to be English East Indiaman, these wrecks (code-named Dolphin and Wahoo) remain unidentified at this time. Until these wrecks are identified, it will not be possible to generate any estimate on the potential value, if any. We expect to begin operations on these wrecks in conjunction with the
Black Marlin
in mid-2014.
Patents, trademarks, licenses, franchises and concession
We currently own no patents, trademarks, or licenses; but have been granted governmental permissions for shipwreck search and recovery in the territorial waters of an East African island nation.
Competition
There are a number of competing entities engaged in aquatic research, survey, inspection and the various aspects of the shipwreck salvage business. One or more of these competing entities may locate and recover a shipwreck that we intend to locate and recover. In addition, these competing entities may be better capitalized and may have greater resources to devote to their pursuit of shipwreck salvage.
Governmental and Environmental Regulation
The Company is subject to local, state and national taxation. Additionally, the Companys operations are subject to a variety of national, federal, state, local and international laws. In particular, the legal, political, or civil initiatives of countries, international governing bodies and/or other maritime jurisdictions may prevent, restrict, suspend or abort our operations
ITEM 1A.RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated into this offering that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of you paid to buy our common stock.
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Risks Related To Our Overall Business Operations
We have a limited operating history with a history of losses and expect losses to continue for the foreseeable future.
We have yet to establish any history of profitable operations. We have not generated any revenues since January 19, 2006 (inception) and do not anticipate that we will generate revenues which will be sufficient to sustain our operations in the near future. Unless and until we are able to generate revenues we will continue to sustain losses. You may sustain a loss of a part or all of your investment in our company.
There is doubt about our ability to continue as a going concern due to recurring losses from operations and insufficient cash resources to meet our business objectives, all of which means that we may not be able to continue operations.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our consolidated statements of operations for the eleven months ended December 31, 2013 and for the year ended January 31, 2013 reflect net losses of $59,113 and $9,368 respectively. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.
In light of the acquisition of the membership interests of Endurance Explorations Group LLC on December 31, 2013, we have presented in the notes to the financial statements combined proforma results of operations for the years ended December 31, 2013 and 2012 as though this acquisition had taken place on January 1, 2012. These combined proforma financial statements show that we have had no revenue for the years ended December 31, 2013 and 2012 and incurred combined net losses of $885,874 and $319,628 respectively. The Company is currently evaluating acquisitions and other business opportunities. The Companys continuation as a going concern is dependent upon its ability to obtain clients and investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect the profitability of our businesses.
As changes in our business environment occur we may need to adjust our business strategy to meet these changes or we may otherwise find it necessary to restructure our operations or assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets. In any of these events our costs may increase, and we may have significant charges associated with the write-down of assets.
We will continue to experience losses from both pre-operational expenditures as well as planned operations.
We have experienced a net loss in every fiscal year since our inception. Even if we do generate operating income in the future, subsequent development in our industry, customer base, business or cost structure, or an event such as litigation will cause us to experience operating losses. We may not become profitable in the future.
We are subject to macroeconomic and other factors beyond our control as well as the business, financial, operating and other risks of shell companies, all of which may adversely affect our financial results and growth.
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Macroeconomic and other factors beyond our control as well as the business, financial, operating and other risks of a shell company can adversely affect our company. These factors include:
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changes and volatility in general economic conditions, including the severity and duration of any downturn in the U.S. and financial markets;
·
war, civil unrest, terrorist activities or threats and heightened travel security measures instituted in response to these events;
·
outbreaks of pandemic or contagious diseases;
·
climate change and resource scarcity, such as water and energy scarcity;
·
natural or man-made disasters, such as earthquakes, tsunamis, tornados, hurricanes, floods, oil spills and nuclear incidents;
·
low consumer confidence, high levels of unemployment and depressed housing prices;
·
domestic and international political and geo-political conditions;
·
changes in taxes and governmental regulations that influence or set wages, prices, interest rates or construction and maintenance procedures and costs;
·
the costs and administrative burdens associated with compliance with applicable laws and regulations;
·
changes in operating costs, including, but not limited to, energy, benefits, insurance and unanticipated costs resulting from force majeure events;
·
the lack of availability, or increase in the cost, of capital for us;
We may seek to expand through acquisitions of and investments in other businesses or through business alliances. These acquisitions and investment activities may be unsuccessful or divert our managements attention.
We intend to consider strategic and complementary acquisitions of and investments in other businesses or other assets. Furthermore, we may pursue these opportunities in alliance with existing businesses. In many cases, we will be competing for these opportunities with third parties that may have substantially greater financial resources than we do. Acquisitions or investments in businesses, or assets, as well as these alliances, are subject to risks that could affect our business, including risks related to:
·
issuing shares of stock that could dilute the interests of our existing stockholders;
·
spending cash and incurring debt;
·
assuming contingent liabilities;
·
creating additional expenses.
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We cannot assure you that we will be able to identify opportunities or complete transactions on commercially reasonable terms or at all, or that we will actually realize any anticipated benefits from such acquisitions, investments or alliances. Similarly, we cannot assure you that we will be able to obtain financing for acquisitions or investments on attractive terms or at all, or that the ability to obtain financing will not be restricted by the terms of our revolving credit facility or other indebtedness we may incur.
The success of any such acquisitions or investments will also depend, in part, on our ability to integrate the acquisition or investment with our existing operations. We may experience difficulty with integrating acquired businesses, or other assets, including difficulties relating to:
·
coordinating sales, distribution and marketing functions;
·
integrating technology information systems; and
·
preserving the important licensing, distribution, marketing, customer, labor and other relationships of the acquired assets.
In addition, any such acquisitions, investments, or alliances could demand significant attention from our management that would otherwise be available for our regular business operations, which could harm our business.
Risks Related To Our Wholly Owned Subsidiary
We may be unsuccessful in raising the necessary capital to fund operations and capital expenditures.
Our ability to generate cash flow is dependent upon our ability to find, excavate and monetize the cargo of shipwrecks. We cannot guarantee that the sales of the recovered cargo and/or related products and other available cash sources will generate sufficient cash flow to meet our overall cash requirements. If cash flow is not sufficient to meet our business requirements, we will be required to raise additional capital through other financing activities. Success in raising necessary funds is not guaranteed.
We depend on key personnel and face competition in hiring and retaining qualified personnel.
Key management and operational personnel may be difficult to replace. We do not have any employment or noncompetition agreements with our key personnel except for our Chief Executive Officer, Mr. Micah Eldred. We may not be able to recruit or retain qualified employees in the future, which could affect our business.
Our background research and data-gathering may prove unreliable.
The success of any marine salvage project is highly dependent on background research and data. Background research and data-gathering may prove to be imprecise, misleading, incomplete and/or unreliable. This data and research is further affected by the interpretation process due to factors such as analyst misinterpretations, erroneous calculations, and/or translation errors.
Operations may be hindered by natural hazards and weather patterns.
Marine salvage operations are inherently technologically challenging and may be delayed, suspended or aborted due to weather, sea conditions or other natural hazards. Operations may be dependent on both predictable and unpredictable seasonal weather cycles. We may not be able to logistically begin, continue or complete operations during favorable weather conditions. Both predictable and unpredictable weather events, including but not limited to storms, cyclones, hurricanes, typhoons and tsunamis, may delay, suspend or abort operations.
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Because of the speculative nature of our operations, there is substantial risk that no commercially exploitable cargo will be found and our business will fail, and you could lose your entire investment.
We have only just begun operations, and thus have no way to evaluate the likelihood that we will be successful in our efforts to locate and monetize lost shipwrecks. You should be aware of the difficulties normally encountered by similar companies and the high rate of failure of such enterprises. The search for shipwrecks as a business is inherently risky. We may not find any commercially exploitable shipwrecks. In such a case, we may be unable to continue operations, and you could lose your entire investment.
We may discover a commercially exploitable shipwreck cargo but be unable to successfully recover the cargo.
If our search program is successful in discovering a commercially exploitable cargo, we may require additional funds in order to advance operations into commercial recovery. In such an event, we may be unable to obtain the funds, equipment and/or personnel in order to continue operations, and we may be unable to generate revenues.
We may be unable to establish or maintain rights to recovered objects.
Public and private entities other than Endurance may claim title to sites and/or recovered objects. Even if we are successful in locating and recovering shipwrecks and/or cargo, we cannot guarantee we will be able to establish or maintain legal possession over recovered objects if challenged by governmental entities, prior owners, decedents of prior owners, insurance interests, and other salvors.
We may experience delays in monetizing any recovered objects.
Even after a successful marine salvage operation, we may experience significant delays in monetizing any recovered objects. At this phase in operations, we have no sales personnel, distribution channels or sales contracts. Immediate access to buyers for recovered objects cannot be guaranteed, and delays in the monetization process may adversely affect our cash flow.
Legal, political, or civil issues may interfere with our marine operations.
Legal, political, or civil initiatives of countries, international governing bodies and/or other maritime jurisdictions may prevent, restrict, suspend or abort our marine salvage operations.
Objects we recover could be taken from our possession.
Any marine salvage operation comes with a risk of theft or piracy prior to, during, or post marine salvage operations. Theft may not be adequately covered by insurance.
We may be unable to secure permission to conduct marine salvage operations.
It is possible that we will not be successful in obtaining title, permits or permission to excavate certain shipwrecks due to territorial, sovereign, or military concerns. Additionally, title, permits and permission may be denied, revoked, ruled illegal or not honored by the issuing entities.
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We may not have access to the equipment and personnel needed for operations, which could cause delays or suspension of our operations
Competitive demands for contractors and unforeseen shortages of personnel and/or equipment may result in the disruption of planned operations. Fluctuations in demand for equipment and personnel could result in suitable equipment and personnel being unavailable at the scheduled times in our operations. Fuel prices are also subject to market fluctuation. We will attempt to locate suitable equipment personnel and fuel if sufficient funds are available. If we cannot find the equipment and personnel needed for our operations, we may have to suspend some or all operations until equipment, personnel, fuel, and/or funds can be obtained.
Technological obsolescence or critical failure of our marine salvage equipment could put a strain on our capital requirements and/or operational capabilities.
Our search and salvage operations will require the use of highly specialized and costly equipment, including but not limited to side-scan sonar, remotely-operated vehicles, winch systems, and computer processing equipment. This equipment may or may not be insured, insurable, repairable or replaceable, and may require difficult or time-consuming to source customized and/or specialized components. While we construct, upgrade, repair and maintain our equipment on a best-efforts basis, technological advances in new equipment may provide superior efficiencies and capability than our existing equipment. Such an industry shift may require us to purchase new equipment, requiring additional needs for capital.
Our business and operational results may be harmed if we fail to manage our growth or change.
Our business may experience periods of rapid change and/or growth that could place significant demands on our personnel and financial resources. To manage possible growth and change, we must continue to try to locate equipment, skilled personnel and funds in a timely manner.
The market for gold, silver and numismatically-graded coins are highly volatile and a decrease in the price of any would have a material adverse effect on our business.
The profitability of our operations are directly related to the market price of metals and the numismatic coin market. The market prices of metals and the numismatic coin market fluctuate significantly and are affected by a number of factors beyond our control, including, but not limited to, the rate of inflation, the exchange rate of the dollar to other currencies, interest rates, global economic and political conditions, and the collectors market. Price fluctuations in the metals and numismatic market from the conception of a potential target to the conclusion of operations can significantly affect profitability. We may begin one or more operations at a time when the price of metals or numismatic coins make operations economically feasible and subsequently incur losses due to market decreases. Adverse fluctuations in the metals or numismatic market may force us to curtail or cease our business operations.
We face significant competition from better-established competitors
We compete with other interests possessing greater financial resources and technical facilities than we do in connection with the discovery and excavation of shipwrecks.
Risks Related To the Market for Our Stock
The market price of our common stock can be volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.
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The market price of our shares can become volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include: our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors; changes in financial estimates by us or by any securities analysts who might cover our stock; speculation about our business in the press or the investment community; significant developments relating to our relationships with our customers or suppliers; stock market price and volume fluctuations of other publically traded companies and, in particular, those that are in our industry; customer demand for our products; investor perceptions of our industry in general and our Company in particular; the operating and stock performance of comparable companies; general economic conditions and trends; announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures; changes in accounting standards, policies, guidance, interpretation or principles; loss of external funding sources; sales of our common stock, including sales by our directors, officers or significant shareholders; and additions or departures of key personnel. Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our managements attention and resources.
Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in us. We do not intend to pay dividends on shares of our common stock for the foreseeable future.
We have never declared or paid any cash dividends on shares of our common stock.
We intend to retain any future earnings to fund the operation and expansion of our business and, therefore, we do not anticipate paying cash dividends on shares of our common stock in the foreseeable future.
We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define so-called penny stocks to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. If our common stock becomes a penny stock, we may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and accredited investors (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by the Penny Stock Rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchasers written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
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We are not likely to pay cash dividends in the foreseeable future.
We intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future but will review this policy as circumstances dictate. Should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions.
Our common stock is illiquid and subject to price volatility unrelated to our operations.
If a market for our common stock does develop, its market price could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting us or our competitors. In addition, the stock market itself is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
A large number of shares may be eligible for future sale and may depress our stock price.
We may be required, under terms of future financing arrangements, to offer a large number of common shares to the public, or to register for sale by future private investors a large number of shares sold in private sales to them.
Sales of substantial amounts of common stock, or a perception that such sales could occur, and the existence of options or warrants to purchase shares of common stock at prices that may be below the then-current market price of our common stock, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities, either of which would decrease the value of any earlier investment in our common stock.