UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2020

 

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 EXPLORATION CORP 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

1

 

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 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 November 13, 2020, there were 5,063,196,777 shares of the registrant’s common stock, $.0001 par value per share, outstanding.

2

 

SEAFARER EXPLORATION CORP.
Form 10-Q
For the Quarterly Period Ended September 30, 2020

 


TABLE OF CONTENTS

 

PART I: FINANCIAL INFORMATION 4
   
Item 1. Financial Statements 5
   
Unaudited Condensed Consolidated Balance Sheets: September 30, 2020 and December 31, 2019 5
   
Unaudited Condensed Consolidated Statements of Operations: Three and nine months ended September 30, 2020 and 2019 6
   
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Deficit: Three and nine months ended September 30, 2020 and 2019 7-8
   
Unaudited Condensed Consolidated Statements of Cash Flows: Nine months ended September 30, 2020 and 2019 9
   
Notes to Unaudited Condensed Consolidated Financial Statements 10
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
   
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

3

 

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.

4

 

Item 1. Financial Statements

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

    September 30, 2020     December 31, 2019  
    (Unaudited)        
Assets                
Current assets                
Cash   $ 51,072     $ 618,537  
Prepaid expenses     42,206       159,510  
Deposits     750       750  
Total current assets     94,028       778,797  
                 
Property, plant and equipment, net     184,651       199,695  
Intangible assets, trademarks     675       -  
Right to use asset     45,516       8,001  
Investment in P & S, Inc.     78,000       78,000  
Total Assets   $ 402,870     $ 1,064,493  
                 
Liabilities and Stockholders’ Deficit                
Current liabilities                
Accounts payable and accrued expenses   $ 320,984     $ 287,089  
Convertible notes payable, net of discounts of $34,011 and $17,935, respectively     10,989       33,065  
Convertible notes payable, related parties, net of discounts of $79,731 and $57,413, respectively     30,869       19,787  
Convertible notes payable, in default     308,300       328,300  
Convertible notes payable, in default - related parties     527,900       399,700  
Notes payable, in default     135,000       175,000  
Notes payable, in default - related parties     18,500       18,500  
Shareholder loan     1,500       1,500  
Lease liability, current     14,187       8,079  
Total current liabilities     1,368,229       1,271,020  
                 
Lease liability, long-term     31,471       -  
Total Liabilities     1,399,700       1,271,020  
                 
Commitments and contingencies (Note 8)                
                 
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; 5,037,765,834 and 4,761,162,383 shares issued and outstanding at September 30, 2020 and December 31, 2019 , respectively     502,523       474,863  
Common stock to be issued, $0.0001 par value, 1,500,000 and 11,620,000 shares outstanding September 30, 2020 and December 31, 2019, respectively     150       1,162  
Additional paid in capital     17,812,011       16,581,432  
Accumulated deficit     (19,311,514 )     (17,263,984 )
Total Stockholders’ Deficit     (996,830 )     (206,527 )
Total Liabilities and Stockholders’ Deficit   $ 402,870     $ 1,064,493  

 

See accompanying notes to the financial statements.

5

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

    For the Three Months Ended
September 30
    For the Nine Months Ended
September 30
 
    2020     2019     2020     2019  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Revenue:                                
Service income   $ 2,182     $ 9,100     $ 6,382     $ 12,600  
                                 
Operating Expenses                                
Consulting and contractor expenses     388,779       361,080       941,048       852,342  
Research and development     95,460       210,134       373,769       327,935  
General and administrative expense     54,837       -       140,624       107,062  
Vessel maintenance and dockage     48,042       29,189       163,369       71,176  
Professional fees     26,293       26,000       117,611       78,575  
Travel and entertainment expense     19,435       15,730       52,056       43,405  
Rent expense     10,898       9,100       32,196       28,596  
Depreciation expense     5,015       -       15,045       -  
Total operating expenses     648,759       651,233       1,835,718       1,509,091  
                                 
Net loss from operations     (646,577 )     (642,133 )     (1,829,336 )     (1,496,491 )
                                 
Other income (expense)                                
Interest expense     (51,311 )     (55,908 )     (195,071 )     (146,187 )
Loss on extinguishment of debt     -       (5,274 )     (34,375 )     (5,274 )
Gain on settlement of accounts payable     1,252       -       1,252       -  
Gain on disposal of asset     5,500       -       5,500       -  
Dividend income     1,500       1,500       4,500       4,500  
Total other expenses, net     (43,059 )     (59,682 )     (218,194 )     (146,961 )
Net loss   $ (689,636 )   $ (701,815 )   $ (2,047,530 )   $ (1,643,452 )
                                 
Basic and diluted loss per share   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted average shares outstanding     4,985,602,633       4,304,008,551       4,886,341,827       4,012,673,236  

 

See accompanying notes to the financial statements.

6

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED)

 

    Series A Preferred Stock     Series B Preferred Stock     Common Stock     Common Stock to be Issued     Additional     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Paid in Capital     Deficit     Total  
Balance December 31, 2019     7     $ -       60     $ -       4,761,162,383     $ 474,863       11,620,000     $ 1,162     $ 16,581,432     $ (17,263,984 )   $ (206,527 )
                                                                                         
Common stock issued for cash     -       -       -       -       8,900,000       890       -       -       51,610       -       52,500  
                                                                                         
Stock issued to convert notes payable and accrued interest     -       -       -       -       39,781,082       3,978       -       -       80,108       -       84,086  
                                                                                         
Beneficial conversion feature     -       -       -       -       -       -       -       -       51,000       -       51,000  
                                                                                         
Stock issued for services     -       -       -       -       5,348,366       535       -       -       84,895       -       85,430  
                                                                                         
Shares reclassed from common stock to be issued     -       -       -       -       10,120,000       1,012       (10,120,000 )     (1,012 )     -       -       -  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (742,644 )     (742,644 )
                                                                                         
Balance March 31, 2020     7       -       60       -       4,825,311,831       481,278       1,500,000       150       16,849,045       (18,006,628 )     (676,155 )
                                                                                         
Common stock issued for cash     -       -       -       -       91,100,000       9,110       5,714,286       571       372,418       -       382,099  
                                                                                         
Stock issued for services     -       -       -       -       737,308       74       676,204       68       11,070       -       11,212  
                                                                                         
Shares issued for charitable contribution     -       -       -       -       1,000,000       100       -       -       9,600       -       9,700  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (615,250 )     (615,250 )
                                                                                         
Balance June 30, 2020     7       -       60       -       4,918,149,139       490,562       7,890,490       789       17,242,133       (18,621,878 )     (888,394 )
                                                                                         
Common stock issued for cash     -       -       -       -       92,700,001       9,270       -       -       274,930       -       284,200  
                                                                                         
Beneficial conversion feature     -       -       -       -       -       -       -       -       151,100       -       151,100  
                                                                                         
Stock issued for services     -       -       -       -       20,526,204       2,052       -       -       143,848       -       145,900  
                                                                                         
Shares reclassed from common stock to be issued     -       -       -       -       6,390,490       639       (6,390,490 )     (639 )     -       -       -  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (689,636 )     (689,636 )
                                                                                         
Balance September 30, 2020     7     $ -       60     $ -       5,037,765,834     $ 502,523       1,500,000     $ 150     $ 17,812,011     $ (19,311,514 )   $ (996,830 )

 

See accompanying notes to the financial statements.

7

 

SEAFARER EXPLORATION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(UNAUDITED)

 

    Series A Preferred Stock     Series B Preferred Stock     Common Stock     Common Stock to be Issued     Additional     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Paid in Capital     Deficit     Total  
Balance December 31, 2018     7     $ -       60     $ -       3,518,252,964     $ 350,573       23,192,857     $ 2,319     $ 13,109,751     $ (14,954,819 )   $ (1,492,176 )
                                                                                         
Common stock issued for cash     -       -       -       -       346,066,667       34,607       -       -       327,243       -       361,850  
                                                                                         
Stock issued to convert notes payable     -       -       -       -       1,284,938       128       -       -       900       -       1,028  
                                                                                         
Beneficial conversion feature     -       -       -       -       -       -       -       -       10,500       -       10,500  
                                                                                         
Stock issued for services     -       -       -       -       96,220,616       9,622       -       -       202,028       -       211,650  
                                                                                         
Stock issued for financing cost     -       -       -       -       5,000,000       500       -       -       7,000       -       7,500  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (360,386 )     (360,386 )
                                                                                         
Balance March 31, 2019     7       -       60       -       3,966,825,185       395,430       23,192,857       2,319       13,657,422       (15,315,205 )     (1,260,034 )
                                                                                         
Common stock issued for cash     -       -       -       -       160,028,572       16,003       3,500,000       350       427,547       -       443,900  
                                                                                         
Shares reclassed from common stock to be issued     -       -       -       -       23,192,857       2,319       (23,192,857 )     (2,319 )     -       -       -  
                                                                                         
Stock issued to convert notes payable     -       -       -       -       18,869,220       1,887       -       -       88,295       -       90,182  
                                                                                         
Stock issued to convert accounts payable     -       -       -       -       7,000,000       700       -       -       6,300       -       7,000  
                                                                                         
Beneficial conversion feature     -       -       -       -       -       -       -       -       25,100       -       25,100  
                                                                                         
Stock issued for services     -       -       -       -       7,850,000       785       -       -       73,090       -       73,875  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (581,251 )     (581,251 )
                                                                                         
Balance June 30, 2019     7       -       60       -       4,183,765,834       417,124       3,500,000       350       14,277,754       (15,896,456 )     (1,201,228 )
                                                                                         
Common stock issued for cash     -       -       -       -       129,034,759       12,903       3,400,000       340       391,947       -       405,190  
                                                                                         
Reclass from common stock to be issued     -       -       -       -       3,500,000       350       (3,500,000 )     (350 )     -       -       -  
                                                                                         
Stock issued to convert notes payable and accrued interest     -       -       -       -       37,806,585       3,781       -       -       200,940       -       204,721  
                                                                                         
Beneficial conversion feature     -       -       -       -       -       -       -       -       67,375       -       67,375  
                                                                                         
Stock issued for services     -       -       -       -       26,300,000       2,630       -       -       201,950       -       204,580  
                                                                                         
Stock issued for charitable contributions     -       -       -       -       4,000,000       400       -       -       32,500       -       32,900  
                                                                                         
Net Loss     -       -       -       -       -       -       -       -       -       (701,815 )     (701,815 )
                                                                                         
Balance September 30, 2019     7     $ -       60     $ -       4,384,407,178     $ 437,188       3,400,000     $ 340     $ 15,172,466     $ (16,598,271 )   $ (988,277 )

 

See accompanying notes to the financial statements.

8

 

SEAFARER EXPLORATION CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Nine Months Ended
September 30
 
    2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net Loss   $ (2,047,530 )   $ (1,643,452 )
                 
Adjustments to reconcile net loss to net cash used by operating activities:                
Depreciation     15,045       -  
Amortization of right of use asset     8,001       -  
Amortization of beneficial conversion feature and loan fees     175,606       73,397  
Common stock issued for services     178,666       432,114  
Common stock issued for a charitable contribution     9,700       32,900  
Common stock issued for loan fees     -       7,500  
Gain on disposal of asset     (5,500 )     -  
Gain on settlement of accounts payable     (1,252 )     -  
Loss on extinguishment of debt     34,375       5,274  
Decrease (increase) in:                
Prepaid expenses and deposits     146,804       -  
Increase (decrease) in:                
Accounts payable & accrued expenses     33,896       (68,450 )
Operating lease liabilities     -       (10,710 )
Net cash used by operating activities     (1,452,189 )     (1,171,427 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Application for trademark     (675 )     -  
Net cash used in investing activities     (675 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Increase in bank overdraft     -       (2,919 )
Proceeds from the issuance of common stock     718,799       1,210,940  
Proceeds from the issuance convertible notes payable     45,000       62,000  
Proceeds from the issuance convertible notes payable, related party     161,600       44,100  
Payments on convertible notes payable     -       (46,500 )
Payments on notes payable     (40,000 )     -  
Payments to shareholders     -       (5,048 )
Net cash provided by financing activities     885,399       1,262,573  
                 
NET INCREASE IN CASH     (567,465 )     91,146  
CASH, BEGINNING OF PERIOD     618,537       -  
CASH, END OF PERIOD   $ 51,070     $ 91,146  
                 
Supplemental disclosure of cash flow information                
Cash paid for interest expense   $ -     $ -  
Cash paid for income taxes   $ -     $ -  
                 
Non-cash operating and financing activities:                
Convertible debt and accrued interest converted to common stock   $ 84,086     $ 296,435  
Operating lease liabilities and right of use asset   $ (142 )   $ 22,572  
Beneficial conversion feature on convertible notes payable   $ 202,100     $ 102,975  
Stock issued for prepaid services   $ 29,500     $ 164,267  
Accounts payable paid with common stock   $ -     $ 7,500  

 

See accompanying notes to the financial statements.

9

 

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 financial statements and footnotes included in the Company’s Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (the “Commission”) on April 3, 2020. The results of operations for the nine month period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2020 or for any future period.

 

NOTE 1 – DESCRIPTION OF BUSINESS

 

Seafarer Exploration Corp., 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 and with Marine Archaeology Partners, LLC (“MAP”), with the formation of Seafarer’s Quest, LLC for the purpose of exploring a shipwreck site off of Melbourne Beach, Florida. Under the partnership with MAP, Seafarer is the designated manager of Seafarer’s Quest, LLC.

 

The Company’s wholly owned subsidiary Blockchain LogisTech, LLC, was formed on April 4, 2018 and began operations in 2019. Blockchain LogisTech, LLC provides customer referrals to a blockchain related software services company.

 

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 2 permit was renewed on January 14, 2019 for a period of three years. The Area 1 permit was renewed on March 1, 2019 for a period of three years.

 

Federal Admiralty Judgement

 

As previously noted on its form 8-K filed on November 22, 2017, 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.

 

Blockchain Software Services Referral Agreement

 

Blockchain LogisTech, LLC, has a strategic partnership to provide referrals to a blockchain software services provider and receive referral fees when the referrals lead to closed business for the blockchain software services company. Blockchain LogisTech, LLC also has a reseller agreement with a separate company that sells a blockchain related security product.

 

NOTE 2 – GOING CONCERN

 

These 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, which raises substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from November 16, 2020. Management’s plans include raising capital through the equity markets to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any significant revenues for the foreseeable future. At September 30, 2020, the Company had a working capital deficit of $1,274,201. 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.

10

 

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 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 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 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.

 

Covid-19 Disclosure

 

The COVID-19 global pandemic may seriously negatively affect the Company’s operations and business. It is possible that this ongoing global pandemic may cause the Company to have to significantly delay or suspend its operations, which would likely result in a material adverse impact on its business and financial positions.

 

Furthermore, the Company may be unable to raise sufficient capital due to COVID-19’s effects on the general economy and the capital markets. If the Company is not able to obtain financing due to COVID-19, then it is highly likely that it will be forced to cease operations. Smaller companies such as Seafarer, who lack significant revenues, earnings and cash flows as well as who lack diversified business operations are particularly vulnerable to having to potentially cease operations due to the effects of COVID-19. If the Company were to be unable to raise capital and cease its operations then it would be highly likely that the Company would not survive and lenders and investors would suffer a complete loss of all capital loaned to or invested in the Company.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of Seafarer is presented to assist in understanding the Company’s condensed consolidated financial statements. The 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 accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the condensed consolidated financial statements.

 

Principles of Consolidation

 

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

 

Cash and Cash Equivalents

 

For purposes of the 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 September 30, 2020 and December 31, 2019. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits.

 

Research and Development Expenses

 

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $373,769 and $327,935 respectively, for the nine months ended September 30, 2020 and 2019 and $95,460 and $210,134 respectively, for the three months ended September 30, 2020 and 2019.

 

Revenue Recognition

 

Effective January 1, 2018, the Company adopted 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 Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows.

 

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.

11

 

The Company recognizes revenue from the referrals that Blockchain LogisTech, LLC has made to a provider of software services when payment for a referral is received from the provider of software services. The Company also has a sales referral agreement with a limited liability company that provides product/system development services. The Company receives referral fees when payment is received from the provider of the product/system development services. To date service revenue in the segment footnote from its core historic and shipwreck recovery operations and at this point in time is unable to determine how revenue will be recognized due to a lack of visibility as to how the Company will be compensated for its services.

 

Earnings Per Share

 

The Company has adopted FASB ASC 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity.

 

The potentially dilutive common stock equivalents for the nine month periods ended September 30, 2020 and 2019 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss. As of September 30, 2020 and 2019, there were 654,492,154 and 545,722,872 shares of common stock underlying our outstanding convertible notes payable and warrants, respectively.

 

Fair Value of Financial Instruments

 

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

 

Property and Equipment

 

Property and equipment are recorded at historical cost. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. During the year ended December 31, 2019, the Company purchased a vessel with an estimated useful life of ten years. As of September 30, 2020, this is the only capital asset owned by the Company.

 

Depreciation expense was $15,045 and $0 respectively, for nine month periods ended September 30, 2020 and 2019 and $5,015 and $0 respectively, for three month periods ended September 30, 2020 and 2019.

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the nine month periods ended September 30, 2020 and 2019.

 

Use of Estimates

 

The process of preparing 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 nine month periods ended September 30, 2020 and 2019 include useful life of property and equipment, valuation allowances against deferred tax assets and fair value of non cash equity transactions.

 

Segment Information

 

Beginning in 2019, Seafarer’s wholly owned subsidiary, Blockchain LogisTech, LLC began operations, generated revenue and incurred expenses. The business of Blockchain LogisTech, LLC 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 LogisTech, LLC and Seafarer were separate reportable segments (see Note 10).

12

 

Convertible Notes Payable

 

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. ASC 470-10 addresses classification determination for specific obligations, such as short-term obligations expected to be refinanced on a long-term basis, due-on-demand loan arrangements, callable debt, sales of future revenue, increasing rate debt, debt that includes covenants, revolving credit agreements subject to lock-box arrangements and subjective acceleration clauses, and indexed debt. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

 

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, which is usually the vesting 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

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606.

 

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed 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 on the statements of operations.

 

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new 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.

 

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 consolidated financial statements.

 

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

 

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 6%, 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. During the three and nine month periods ended September 30, 2020 and 2019, the Company recorded $4,601 and $3,945 and $4,601 and $11,835, respectively, as operating lease expense, which is included in rent expense on the condensed consolidated statements of operations.

13

 

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.

 

In adopting ASC Topic 842, Leases (“Topic 842”), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new 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. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $22,575. 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 September 30, 2020 are summarized below:

 

    September 30, 2020  
    (Unaudited)  
Office lease (remaining lease term of 3 months)   $ 48,957  
Less accumulated amortization     (3,441 )
Right-of-use assets, net   $ 45,516  

 

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

 

Operating Lease liabilities are summarized below:

 

    September 30, 2020  
    (Unaudited)  
Office lease   $ 45,658  
Less: current portion     (14,187 )
Long term portion   $ 31,471  

 

Maturity of lease liabilities are as follows:

 

Year ended December 31, 2020   $ 4,459  
Year ended December 31, 2021     18,103  
Year ended December 31, 2022     18,641  
Year ended December 31, 2023     11,801  
Total future minimum lease payments     52,284  
Less: Present value discount     (6,626 )
Lease liability   $ 45,658  

 

Right-of-use assets at December 31, 2019 are summarized below:

 

    December 31, 2019  
Office lease (remaining lease term of 12 months)   $ 22,575  
Less accumulated amortization     (14,574 )
Right-of-use assets, net   $ 8,001  

 

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

14

 

Operating Lease liabilities are summarized below:

 

    December 31, 2019  
Office lease   $ 8,079  
Less: current portion     (8,079 )
Long term portion   $ -  

 

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.

 

NOTE 5 – INVESTMENT IN PROBABILITY AND STATISTICS, INC.

 

The Company entered into a share exchange agreement with Probability and Statistics, Inc. (“P&S”), a privately held corporation, in August of 2018.

 

Under the terms of the share exchange agreement, the Company agreed to issue 60,000,000 shares of its restricted common stock to P&S in exchange for 10,000 common shares of P&S, or a 1% interest. All shares issued by both parties under the agreement have all rights and entitlements as the common stock of every other shareholder of such share class.

 

The investment in P&S was valued at $78,000 based on fair value of the Company’s shares issued to P&S on the date of the share exchange agreement and is being accounted for as a cost method investment. The Company received dividends from P&S during the nine month periods ended September 30, 2020 and 2019 of $3,000, which have been presented as dividend income on the condensed consolidated statements of operations.

 

In August of 2020 the Company and P&S entered into a new agreement under which the Company and P&S agreed to wind down their relationship, with Seafarer agreeing to exchange 10,000 common shares of P&S for 60,000,000 shares of its common stock, effectively reversing the original transaction. The actual exchange of shares had not yet occurred at September 30, 2020.

 

The Company has an active agreement with P&S to receive referral fees. Under the terms of the agreement, P&S has agreed to pay a 7% referral fee to the Company when P&S receives cash flows from providing blockchain software services to entities that were referred by the Company. The agreement is ongoing and has no expiration date. During the nine month periods ended September 30, 2020 and 2019 P&S paid a total of $4,200 and $12,600, respectively, of referral fees to the Company. These amounts are included in services income in the condensed consolidated statements of operations.

 

NOTE 6 – 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.

15

 

Convertible Notes Payable

 

The following tables reflect the convertible notes payable at September 30, 2020 and December 31, 2019:

 

    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate   Conversion Price
            Principal Balance     Principal Balance          
Convertible notes payable                           
    09/04/19   03/04/20   $ -     $ 25,000     6.00%   0.00300
    09/04/19   03/04/20     -       26,000     6.00%   0.00300
    09/01/20   03/01/21     45,000       -     6.00%   0.00300
Face value         45,000       51,000          
                                 
Less unamortized discounts         34,011       17,935          
                                 
Balance convertible notes payable       $ 10,989     $ 33,065          
                                 
    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate   Conversion Price
            Principal Balance     Principal Balance          
Convertible notes payable - related parties                    
    09/17/19   04/17/20   $ -     $ 12,000     6.00%   0.00300
    11/12/19   05/12/20     -       25,000     6.00%   0.00250
    11/26/19   05/26/20     -       25,200     6.00%   0.00300
    12/03/19   06/03/20     -       15,000     6.00%   0.00300
    08/06/20   02/06/21     25,200       -     6.00%   0.00350
    08/06/20   02/06/21     35,000       -     6.00%   0.00350
    08/14/20   02/14/21     50,400       -     6.00%   0.00350
Face value             110,600       77,200          
                                 
Less unamortized discounts       79,731       57,413          
                                 
Balance convertible notes payable - related parties   $ 30,869     $ 19,787          
                                 
    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate   Conversion Price
            Principal Balance     Principal Balance          
Convertible notes payable - in default  
    08/28/09   11/01/09   $ 4,300     $ 4,300     10.00%   0.01500
    11/20/12   05/20/13     50,000       50,000     6.00%   0.00500
    01/19/13   07/30/13     5,000       5,000     6.00%   0.00400
    02/11/13   08/11/13     9,000       9,000     6.00%   0.00600
    09/25/13   03/25/14     10,000       10,000     6.00%   0.01250
    10/04/13   04/04/14     50,000       50,000     6.00%   0.01250
    10/30/13   10/30/14     50,000       50,000     6.00%   0.01250
    05/15/14   11/15/14     40,000       40,000     6.00%   0.00700
    10/13/14   04/13/15     -       25,000     6.00%   0.00500
    09/18/15   03/18/16     25,000       25,000     6.00%   0.00200
    04/04/16   10/04/16     10,000       10,000     6.00%   0.00100
    07/19/16   07/19/17     4,000       4,000     6.00%   0.00150
    08/24/16   02/24/17     -       20,000     6.00%   0.00100
    03/06/18   09/06/18     6,000       6,000     6.00%   0.00060
    02/06/18   11/07/18     6,000       6,000     6.00%   0.00060
    10/29/18   04/29/19     3,000       3,000     6.00%   0.00070
    01/03/19   07/03/19     1,000       1,000     6.00%   0.00100
    03/16/19   09/16/19     10,000       10,000     6.00%   0.00100
    09/04/19   03/04/20     25,000       -     6.00%   0.00300
Balance convertible notes payable - in default     $ 308,300     $ 328,300          

16

 

    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate   Conversion Price
            Principal Balance     Principal Balance          
Convertible notes payable - related parties, in default                
    01/09/09   01/09/10   $ 10,000     $ 10,000     10.00%   0.01500
    01/25/10   01/25/11     6,000       6,000     6.00%   0.00500
    01/18/12   07/18/12     50,000       50,000     8.00%   0.00400
    01/19/13   07/30/13     15,000       15,000     6.00%   0.00400
    07/26/13   01/26/14     10,000       10,000     6.00%   0.01000
    01/17/14   07/17/14     31,500       31,500     6.00%   0.00600
    05/27/14   11/27/14     7,000       7,000     6.00%   0.00700
    07/21/14   01/25/15     17,000       17,000     6.00%   0.00800
    10/16/14   04/16/15     21,000       21,000     6.00%   0.00450
    07/14/15   01/14/16     9,000       9,000     6.00%   0.00300
    01/12/16   07/12/16     5,000       5,000     6.00%   0.00200
    05/10/16   11/10/16     5,000       5,000     6.00%   0.00050
    05/10/16   11/10/16     5,000       5,000     6.00%   0.00050
    05/20/16   11/20/16     5,000       5,000     6.00%   0.00050
    07/12/16   01/12/17     2,400       2,400     6.00%   0.00060
    01/26/17   03/12/17     5,000       5,000     6.00%   0.00050
    02/14/17   08/14/17     25,000       25,000     6.00%   0.00075
    08/16/17   09/16/17     3,000       3,000     6.00%   0.00080
    03/14/18   05/14/18     25,000       25,000     6.00%   0.00070
    04/04/18   06/04/18     3,000       3,000     6.00%   0.00070
    04/11/18   06/11/18     25,000       25,000     6.00%   0.00070
    05/08/18   07/08/18     25,000       25,000     6.00%   0.00070
    05/30/18   08/30/18     25,000       25,000     6.00%   0.00070
    06/12/18   09/12/18     3,000       3,000     6.00%   0.00070
    06/20/18   09/12/18     500       500     6.00%   0.00070
    01/09/18   01/09/19     12,000       12,000     6.00%   0.00060
    08/27/18   02/27/19     2,000       2,000     6.00%   0.00070
    10/02/18   04/02/19     1,000       1,000     6.00%   0.00080
    10/23/18   04/23/19     4,200       4,200     6.00%   0.00070
    11/07/18   05/07/19     2,000       2,000     6.00%   0.00080
    11/14/18   05/14/19     8,000       8,000     6.00%   0.00080
    01/08/19   07/08/19     7,000       7,000     6.00%   0.00080
    04/25/19   12/23/19     20,000       20,000     6.00%   0.00400
    06/07/19   12/07/19     5,100       5,100     6.00%   0.00300
    09/17/19   04/17/20     12,000       -     6.00%   0.00300
    11/12/19   05/12/20     25,000       -     6.00%   0.00250
    11/26/19   05/26/20     25,200       -     6.00%   0.00300
    12/03/19   06/03/20     15,000       -     6.00%   0.00300
    01/07/20   06/20/20     51,000       -     6.00%   0.00300
Balance convertible notes payable - related parties, in default   $ 527,900     $ 399,700          
                                 
Balance all convertible notes payable   $ 878,058     $ 780,852          

 

 

17

 

Notes Payable

 

The following tables reflect the notes payable at September 30, 2020 and December 31, 2019:

 

    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate
            Principal Balance     Principal Balance      
Notes payable - in default                  
    04/27/11   04/27/12   $ 5,000     $ 5,000     6.00%
    12/14/17   12/14/18     25,000       65,000     6.00%
    11/29/17   11/29/19     105,000       105,000     2.06%
Balance notes payable - default     $ 135,000     $ 175,000      
                             
    Issue Date   Maturity Date   September 30, 2020     December 30, 2019     Rate
            Principal Balance     Principal Balance      
Notes payable - related parties, in default                
    02/24/10   02/24/11   $ 7,500     $ 7,500     6.00%
    10/06/15   11/15/15     10,000       10,000     6.00%
    02/08/18   04/09/18     1,000       1,000     6.00%
Balance notes payable - related parties, in default   $ 18,500     $ 18,500      
                             
Balance all notes payable     $ 153,500     $ 193,500      

 

New Convertible Notes Payable Issued During the Nine Month Period Ended September 30, 2020

 

During the nine month period ended September 30, 2020, the Company entered into the following Convertible Notes Payable and Notes Payable Agreements:

 

In January of 2020, the Company entered into a convertible promissory note agreement in the amount of $51,000 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before June 30, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $25,200 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $35,000 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $50,400 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 14, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

In September of 2020, the Company entered into a convertible promissory note agreement in the amount of $45,000 with an individual. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before March 1, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

During the nine month period ended September 30, 2019 the Company entered into the following Convertible Notes Payable and Notes Payable Agreements:

 

In January of 2019, the Company entered into a convertible promissory note agreement in the amount of $1,000 with an individual. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before July 3, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.001 per share.

 

In January of 2019, the Company entered into a convertible promissory note agreement in the amount of $7,000 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before July 8, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.008 per share. 

18

 

In March of 2019, the Company entered into a convertible promissory note agreement in the amount of $10,000 with an individual. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before September 16, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0010 per share.

 

In April of 2019, the Company entered into a convertible promissory note agreement in the amount of $20,000 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before October 23, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share.

 

In June of 2019, the Company entered into a convertible promissory note agreement in the amount of $5,100 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before December 7, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

In September of 2019, the Company entered into a convertible promissory note agreement in the amount of $25,000 with an individual. This loan pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before March 4, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

In September of 2019, the Company entered into a convertible promissory note agreement in the amount of $26,000 with an individual. This loan pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before March 4, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

In September of 2019, the Company entered into a convertible promissory note agreement in the amount of $12,000 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before April 17, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

  

Note Conversions

 

During the nine month period ended September 30, 2020:

 

The Company issued 39,781,082 shares of restricted common stock to settle $84,086 of principal and accrued interest owed on three convertible notes payable. The remaining principal balance of all of these notes was $0 at September 30, 2020.

 

During the nine month period ended September 30, 2019:

 

A lender converted the principal and accrued interest for a convertible promissory note outstanding with a principal balance of $1,000 into 1,284,938 shares of the Company’s common stock. The remaining principal balance of this note was $0 at September 30, 2019.

 

The Company issued 18,869,220 shares of common stock to settle $90,182 of accrued interest owed on fourteen convertible notes payable.

 

The Company issued 37,806,585 shares of common stock to settle $199,497 of principal and accrued interest owed on four convertible notes payable and one note payable. The remaining principal balance of all of these note was $0 at September 30, 2019. Due to the extinguishment of the one note payable with common stock a loss in the amount of $5,274 was recognized upon settlement.

 

Repayment of Promissory Note

 

During the nine month period ended September 30, 2020, the Company repaid a total of $40,000 of the principal of a promissory note with an original principal balance of $75,000 that was due on December 14, 2018. The remaining principal balance of the note at September 30, 2020 was $25,000.

 

Shareholder Loan

 

At September 30, 2020 and December 31, 2019 the Company had a loan outstanding to its CEO in the amount of $1,500. The loan has a 2% annual rate of interest and an option to convert the loan into restricted shares of the Company’s common stock at $0.0005.

 

Convertible Notes Payable and Notes Payable, in Default

 

The Company does not have additional sources of debt financing to refinance its convertible notes payable and notes payable that are currently in default. If the Company is unable to obtain additional capital, such lenders may file suit, including suit to foreclose on the assets held as collateral for the obligations arising under the secured notes. If any of the lenders file suit to foreclose on the assets held as collateral, then the Company may be forced to significantly scale back or cease its operations, which would more than likely result in a complete loss of all capital that has been invested in or borrowed by the Company. The fact that the Company is in default of several promissory notes held by various lenders makes investing in the Company or providing any loans to the Company extremely risky with a very high potential for a complete loss of capital.

19

 

The convertible notes that have been issued by the Company are convertible at the lender’s option. These convertible notes represent significant potential dilution to the Company’s current shareholders as the convertible price of these notes is generally lower than the current market price of the Company’s shares. As such, when these notes are converted into shares of the Company’s common stock, there is typically a highly dilutive effect on current shareholders and it is very possible that such dilution may significantly negatively affect the trading price of the Company’s common stock.

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Common Stock Issuances

 

During the nine month period ended September 30, 2020, the Company issued or is to issue the following shares of common stock:

 

- 192,700,001 restricted shares for total proceeds of $718,799.

 

- 39,781,082 restricted shares to settle $84,086 of principal and accrued interest owed on various convertible notes payable and one note payable.

 

- 26,611,878 vested and non-forfeitable restricted shares for services provided by consultants, contractors, and other service providers. The Company determined the fair value of the shares issued using the stock price on date of issuance. Compensation expense is recognized as the services are provided to the Company.

 

- 16,510,490 restricted shares reclassed from common stock to be issued.

 

- 1,000,000 shares valued at $9,700 issued as charitable contribution to a separate charity. The Company determined the fair value of the shares issued using the stock price on date of issuance.

 

During the nine month period ended September 30, 2019, the Company issued the following shares of common stock:

 

- 642,029,999 restricted shares for total proceeds of $1,210,940.

 

- 130,370,616 fully vested and non-forfeitable restricted shares for services provided by consultants, contractors, advisory members, board members, and other service providers. The Company determined the fair value of the shares issued using the stock price on date of issuance. Compensation expense is recognized as the services are provided to the Company.

 

- 57,960,743 restricted shares to settle $290,679 of principal and accrued interest owed on various convertible notes payable and one note payable.

 

- 7,000,000 restricted shares to settle an account payable in the amount of $7,000.

 

- 5,000,000 restricted shares to one of our convertible note payable lenders as a penalty for failure to repay the convertible note when due. The fair value of these shares was determined to be $7,500 based on the market price of the stock on date issued in accordance with the convertible note payable agreement.

 

- 4,000,000 restricted shares issued as charitable contributions to three separate charities. The Company determined the fair value of the shares issued using the stock price on date of issuance. For the three and nine month periods ended September 30, 2019, we incurred $32,900 and $32,900 of charitable donation expense for stock which is included in general and administrative expenses in the statement of operations.

 

Series A Preferred Stock

 

At September 30, 2020 and December 31, 2019, the Company had seven shares of Series A preferred stock issued and outstanding. Each share of Series A preferred stock has the right to convert into 214,289 shares of the Company’s common stock.

20

 

Series B Preferred Stock

 

On February 10, 2014, the Board of Directors of the Company under the authority granted under Article V of the Articles of Incorporation, defined and created a new preferred series of shares from the 50,000,000 authorized preferred shares. Pursuant to Article V, the Board of Directors has the power to designate such shares and all powers and matters concerning such shares. Such share class shall be designated Preferred Class B. The preferred class was created for 60 Preferred Class B shares. Such shares each have a voting power equal to one percent of the outstanding shares issued (totaling 60%) at the time of any vote action as necessary for share votes under Florida law, with or without a shareholder meeting. Such shares are non-convertible to common stock of the Company and are not considered as convertible under any accounting measure. Such shares shall only be held by the Board of Directors as a Corporate body, and shall not be placed into any individual name. Such shares were considered issued at the time of this resolution’s adoption, and do not require a stock certificate to exist, unless selected to do so by the Board for representational purposes only. Such shares are considered for voting as a whole amount, and shall be voted for any matter by a majority vote of the Board of Directors. Such shares shall not be divisible among the Board members, and shall be voted as a whole either for or against such a vote upon the vote of the majority of the Board of Directors. In the event that there is any vote taken which results in a tie of a vote of the Board of Directors, the vote of the Chairman of the Board shall control the voting of such shares. Such shares are not transferable except in the case of a change of control of the Corporation when such shares shall continue to be held by the Board of Directors. Such shares have the authority to vote for all matters that require a share vote under Florida law and the Articles of Incorporation.

 

Warrants and Options

 

The Company did not issue any warrants or options during the nine month periods ended September 30, 2020, and 2019.

 

At September 30, 2020, the Company had warrants to purchase a total of 4,000,000 shares of its restricted common stock outstanding.

 

The following table shows the warrants outstanding at September 30, 2020:

 

    Number of Shares    
Term   September 30, 2020   Exercise Price
11/10/12 to 11/20/22   4,000,000   0.0050
    4,000,000    

 

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 

Agreement to Explore a Shipwreck Site Located off of Melbourne Beach, Florida

 

In March of 2014, Seafarer entered into a partnership and with Marine Archaeology Partners, LLC (“MAP”), with the formation of Seafarer’s Quest, LLC for the purpose of exploring a shipwreck site off of Melbourne Beach, Florida. Seafarer owns 50% of Seafarer’s Quest, LLC and is handling the operations on behalf of Seafarer’s Quest. To date there has been no significant financial activity in Seafarer’s Quest. Under the partnership with MAP, Seafarer is the designated manager of Seafarer’s Quest, LLC and is responsible for the costs of permitting, exploration and recovery. Seafarer is entitled to receive 80% and MAP is entitled to receive 20% of artifacts and treasure recovered from the site after the State of Florida receives its share, which is anticipated to be 20% under any future recovery permits. The permits with the State of Florida for two areas on the site, designated as Areas 1 and 2, were renewed in 2019 for an additional 3 years. There are currently no recovery permits for the site that have been applied for or issued as of the date of this filing It will be necessary to be granted a recovery permit in order to recover any artifacts and treasure that may potentially be located on the site. The required, affiliated environmental permits were previously issued in the name of a partner that is no longer active, the Company is in the process of working with the various State of Florida agencies involved to update and consolidate all of the permits solely under the Company’s name. The State of Florida Bureau of Archeological Research (“FBAR”) had temporarily ordered the Company not to disturb the bottom while the changes and updates to the Company’s permits were in process.

 

Certain Other Agreements

 

See Note 4 Operating Lease Right-of-Use Assets and Operating Lease Liabilities.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

During the nine month period ended September 30, 2020, the Company has had extensive dealings with related parties including the following:

 

In January of 2020, the Company entered into a convertible promissory note agreement in the amount of $51,000 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before June 30, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share. 

21

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $25,200 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $35,000 with a related party. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

In August of 2020, the Company entered into a convertible promissory note agreement in the amount of $50,400 with a related party who is a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 14, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.

 

During the nine month period ended September 30, 2019, the Company has had extensive dealings with related parties including the following:

 

In January of 2019, the Company extended the term of previous agreements with four individuals to continue serving as members of the Company’s Board of Directors. Two of the individuals are related to the Company’s CEO. Under the agreement, the Directors agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company’s business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company’s operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The previous agreement also terminates automatically upon the death, resignation or removal of the Directors. Under the terms of the agreement, the Company agreed to compensate two of the individuals via payment of 22,000,000 restricted shares of its common stock each, and two of the individuals via payment of 3,666,667 shares of the Company’s restricted common stock, an aggregate total of 51,333,334 shares, and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the individuals for preapproved expenses.

 

In January of 2019, the Company entered into a convertible promissory note agreement in the amount of $7,000 with a person who is related to the Company’s CEO. This note pays interest at a rate of 6% per annum and the principal and accrued interest were due on or before July 8, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.008 per share. This note is currently in default due to non payment of principal and interest upon maturity.

 

In April of 2019, the Company entered into a convertible promissory note agreement in the amount of $20,000 with a person who is related to the Company’s CEO. This note pays interest at a rate of 6% per annum and the principal and accrued interest were due on or before October 23, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share. This note is currently in default due to non payment of principal and interest upon maturity.

 

In June of 2019, the Company entered into a convertible promissory note agreement in the amount of $5,100 with a person who is related to the Company’s CEO. This note pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before December 7, 2019. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

In September of 2019, the Company entered into a convertible promissory note agreement in the amount of $12,000 with a person who is related to the Company’s CEO. This note pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before April 17, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share.

 

The Company’s Board of Directors had previously approved a compensation package including a salary for its CEO. The Company began paying its CEO a salary of $10,000 per month in April of 2020. For the nine month periods ended September 30, 2020 and 2019 the Company has paid its CEO $$60,000 and $0, respectively and these amounts are included in general and administrative expense in the condensed consolidated statements of operations.

 

The Company has an informal consulting agreement with a limited liability company that is owned and controlled by a person who is related to the Company’s CEO to pay the related party limited liability company a minimum of $4,000 per month plus periodic bonuses to provide general business consulting and to assess the Company’s business and to advise management with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions, perform period background research including background checks and provide investigative information on individuals and companies and to assist, when needed, as an administrative specialist to perform various administrative duties and clerical services including reviewing the Company’s agreements and books and records. The consultant provides the services under the direction and supervision of the Company’s CEO. During the nine month periods ended September 30, 2020 and 2019 the Company paid the related party consultant $37,000 and $62,289, respectively, which is included in consulting and contracting expense in the condensed consolidated statements of operations. At September 30, 2020 and December 31, 2019, the Company owed the related party consultant $0 for services rendered.

22

 

The Company has an ongoing agreement with a limited liability company that is owned and controlled by a person who is related to the Company’s CEO to provide stock transfer agency services. During the nine month periods ended September 30, 2020 and 2019 the Company paid the related party consultant $5,243 and $17,011, respectively, which is included in consulting and contracting expense in the condensed consolidated statements of operations. At September 30, 2020 and December 31, 2019, the Company owed the related party consultant $475 and $2,978, respectively, for services rendered.

 

Blockchain LogisTech, LLC has an agreement with a person related to the Company’s CEO to provide marketing and administrative consulting services. During the nine month period ended September 30, 2020 the Company paid the related party consultant fees $11,250 for services rendered. During the nine month periods ended September 30, 2020 and 2019 the Company paid the related party consultant $11,250 and $0, respectively, which is included in consulting and contracting expense in the condensed consolidated statements of operations. At September 30, 2020 and December 31, 2019, the Company owed the related party consultant $0 for services rendered.

 

Shareholder Loans

 

At September 30, 2020 and December 31, 2019, the Company had a loan outstanding to its CEO in the amount of $1,500. The loan has a 2% annual rate of interest and an option to convert the loan into restricted shares of the Company’s common stock at $0.0005.

 

At September 30, 2020, the following promissory notes and shareholder loans were outstanding to related parties:

 

See Note 6 convertible notes payable – related parties, convertible notes payable – related parties, in default, and notes payable - related parties, in default.

 

NOTE 10 – SEGMENT INFORMATION

 

Seafarer’s wholly owned subsidiary Blockchain LogisTech, LLC began operations in 2019 by providing referrals to P&S (please see Note 5 - Investment in Probability and Statistics, Inc.) in exchange for referral fees for closed business.

 

Due to Blockchain LogisTech, LLC starting operations which have no relation to the Company’s shipwreck and exploration recovery business, the Company evaluated this business and its impact upon the existing corporate structure. The Company has determined that Blockchain LogisTech, LLC’s and Seafarer Exploration Corp. operate as separate segments of the business. As such, the Company has presented the income (loss) from operations during the nine month period ended September 30, 2020 and 2019 incurred by the two separate segments below.

 

Substantially all of the assets held by the Company are for its shipwreck exploration and recovery business. All proceeds received from sales of common stock and issuance of convertible notes payable and notes payable are used in the shipwreck and exploration recovery business.

 

During the nine month periods ended September 30, 2020 and 2019, Blockchain LogisTech, LLC’s revenues of $4,200 and $12,600, respectively, were 65.8% and 100%, respectively, of the consolidated revenues of Seafarer.

 

Segment information relating to the Company’s two operating segments for the nine month period ended September 30, 2020 is as follows:

 

    September 30, 2020   September 30, 2020   September 30, 2020
        Blockchain LogisTech, LLC       Seafarer Exploration Corp.       Consolidated
Service revenues   $4,200   $2,182   $6,382
             
Total operating expenses   15,185   1,820,533   1,835,718
             
Net loss from operations   ($10,985)   ($1,818,351)   ($1,829,336)

 

Segment information relating to the Company’s two operating segments for the nine month period ended September 30, 2019 is as follows:

 

    September 30, 2019   September 30, 2019   September 30, 2019
        Blockchain LogisTech, LLC       Seafarer Exploration Corp.       Consolidated
Service revenues   $12,600   -   $12,600
             
Total operating expenses   -   1,509,091   1,509,091
             
Net loss from operations   $12,600   ($1,509,718)   ($1,496,491)

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NOTE 11 – SUBSEQUENT EVENTS

 

Subsequent to September 30, 2020, the Company issued or has agreed to issue shares of its common stock as follows:

 

(i) 77,450,000 shares of restricted common stock issued under subscription agreements for proceeds of approximately $195,225 to be used for general corporate purposes, working capital and repayment of debt;

 

(ii) 5,000,000 shares paid to lease a vessel; and

 

(ii) 2,980,943 shares of restricted common stock were issued for services.

 

Per the new share exchange agreement from August of 2020 the Company exchanged 10,000 common shares of P&S for 60,000,000 shares of its common stock, effectively reversing the original transaction. The 60,000,000 shares that the Company received were returned to the treasury and then cancelled.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

FORWARD LOOKING STATEMENTS

 

The following discussion contains certain forward-looking statements that are subject to business and economic risks and uncertainties, and which speak only as of the date of this annual report. No one should place strong or undue reliance on any forward-looking statements. The use in this Form 10-Q of such words as “believes”, “plans”, “anticipates”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. The Company’s actual results or actions may differ materially from these forward-looking statements due to many factors and the success of the Company is dependent on our efforts and many other factors including, primarily, our ability to raise additional capital. Such factors include, among others, the following: our ability to continue as a going concern, general economic and business conditions; competition; success of operating initiatives; our ability to raise capital and the terms thereof; changes in business strategy or development plans; future revenues; the continuity, experience and quality of our management; changes in or failure to comply with government regulations or the lack of government authorization to continue our projects; and other factors referenced in the Form 10-Q. This Item should be read in conjunction with the consolidated financial statements, the related notes and with the understanding that the Company’s actual future results may be materially different from what is currently expected or projected by the Company.

 

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Such forward-looking statements are based on the beliefs and estimates of our management, as well as on assumptions made by and information currently available to us at the time such statements were made. Forward looking statements are subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward looking statements, including, without limitation, the failure to successfully locate cargo and artifacts from shipwreck sites and a number of other risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements, either as a result of the matters set forth or incorporated in this Report generally and certain economic and business factors, some of which may be beyond our control.

 

We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

 

Overview

 

General

 

The Company’s principal business plan is to develop the infrastructure and technology to engage in the archaeologically-sensitive exploration, recovery and conservation of historic shipwrecks. Once artifacts have been properly conserved, they may be made available for scientific research and allowed to be displayed for the public. The Company’s secondary business is to attempt to develop revenue streams to support its historic shipwreck exploration and recovery operations.

 

The Company has investigated various technologies and non-scientific equipment to help better explore or document our shipwreck sites. To the present date, none of these technologies have been proven to work with the exception of the SeaSearcher, which has been developed to scan historic shipwreck sites for potential artifacts. The Company will continue to experiment with unproven technologies and will actively work with third parties, consultants and scientists to develop its own proprietary technology which will result in considerable expenses.

 

The Company continues to review revenue producing opportunities including joint ventures and partnerships with other companies and potentially governmental agencies. Blockchain LogisTech, LLC, has a strategic partnership to provide referrals to a blockchain software services provider and receive referral fees when the referrals lead to closed business for the blockchain software services company.

 

There is a possibility that the Company will be forced to cease its operations if it is not successful in eventually locating and recovering valuable artifacts and treasure or can’t build a revenue stream in excess of its expenses. If the Company were to cease its operations, and not find or engage another business entity, then it is likely that there would be complete loss of all capital invested in or borrowed by the Company. As such, an investment in Seafarer is highly speculative and very risky.

 

This type of business venture is highly speculative in nature and carries an excessive amount of risk. An investment in the Company’s securities is very risky and should only be considered by those investors or lenders who do not require liquidity and who can afford to suffer a complete and total loss of their investment.

 

There is currently a limited trading market for the Company’s securities. It is impossible for the Company to assure that when and if an active-trading market in its shares will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of the Company’s common stock to liquidate their investment in our company.

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The sale of unregistered and restricted securities by current shareholders, including shares issued to consultants, independent contractors, Board members and shares issued to settle convertible promissory notes or to settle other loans and debt, may cause a significant decline in the market price of the Company’s securities. Furthermore, in recent years regulatory agencies have made it very difficult for broker dealers to accept stock certificates from issuers of low priced stocks and the Company believes that it will become even more challenging to deposit stock certificates and this trend may continue for the foreseeable future.

 

Moreover, in the past few years several major brokerage firms have indicated that they will not allow their clients to deposit low priced stocks. Some clearing firms who used to clear low priced securities for multiple brokerage firms have closed or been acquired, resulting in fewer brokerage firms that are willing or able to accept lower priced securities for deposit. Unless an investor has a large and well-established relationship with a brokerage firm, it may be extremely difficult and potentially expensive to deposit lower priced securities. An investor should consider consulting with professional financial advisers before making an investment in our securities.

 

Plan of Operation

 

The Company has taken the following steps to implement its business plan:

 

To date, the Company has devoted its time towards establishing its business to develop the infrastructure capable of researching, exploring, recovering and conserving historic shipwrecks. The Company has performed some research, exploration and recovery activities.

 

Spent considerable time and capital researching potential shipwrecks, including obtaining information from foreign archives.

 

The Company has generated limited revenues to date, including some nominal revenue from dividends and our business goals continue to evolve.

 

The Company continues to review revenue producing opportunities including joint ventures with other companies and potentially governmental agencies. The Company is actively looking to work with revenue producing companies. These opportunities have been slow to develop, but the Company will continue to pursue those endeavors that it believes have the potential to increase the value of the Company’s shares.

 

The Company has investigated various types of equipment and technology to expedite the process of finding artifacts other than iron or ferrous metals. Most have been of no help, but the Company continues to explore new technology. The Company has developed its own proprietary technology, the SeaSearcher, and will attempt to continue to develop additional proprietary technologies or work with third parties to develop technologies to aid in its exploration and recovery operations. Development of technologies will require additional time and financing. The cost of developing the new technology has, to date, been very expensive.

 

The Company has investigated media opportunities and will continue to evaluate different media strategies.

 

Melbourne Beach Shipwreck Site

 

There is a purported historic shipwreck site in the waters off of Melbourne Beach, Florida that the Company has been investigating. Seafarer and MAP, are partners in Seafarer’s Quest, LLC. Under such agreement, Seafarer is responsible for costs of permitting, exploration and recovery, and is entitled to 80% and MAP 20% of artifacts recovered from the site after the State of Florida receives its share, which is anticipated to be 20% under any future recovery permits. Seafarer is the designated manager of Seafarer’s Quest, LLC. The permits for two areas on the site, designated as Areas 1 and 2, were renewed in 2019 for an additional 3 years. There are no recovery permits for the site that have been applied for or issued as of the date of this filing and it will be necessary to be granted a recovery permit in order to recover any artifacts or treasure that are located on the site.

 

Juno Beach Shipwreck Site

 

The Company has previously performed some exploration and recovery operations at what it believes to be a potential historic shipwreck site located off of the coast of Florida in northern Palm Beach County, more specifically in an area known as “Juno Beach” (the “Juno Beach Shipwreck”). The Company had previously obtained a recovery permit from the State of Florida for the Juno Beach site. In November 2017, the Company was granted final judgment on its federal admiralty claim for the Juno Beach shipwreck site. The Company does not currently have a permit from the State of Florida for the Juno Beach shipwreck site. The State of Florida has requested that the Company submit a new recovery permit application for the Juno Beach shipwreck site. Even if there are valuable artifacts and/or treasure located at the site, recovering them may be difficult due to a variety of challenges that include, but are not limited to; inclement weather, hazardous ocean conditions, large amounts of sand that cover large areas of the site, lack of the necessary equipment to be able to dig deep enough into the sand, etc.

 

Even if there are valuable artifacts and/or treasure located at the site, recovering them may be difficult due to a variety of challenges that include, but are not limited to; inclement weather, hazardous ocean conditions, large amounts of sand that cover large areas of the site, lack of the necessary equipment to be able to dig deep enough into the sand, etc.

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There are very strict international, federal and state laws that govern the exploration and recovery of historic shipwrecks. While the Company has been able to obtain some permits, there is no guarantee that the Company will be able to secure future permits or enter into agreements with government agencies in order to explore and salvage historic shipwrecks. There is a risk that government entities may enact legislation that is so strict that any recovery of artifacts and cargo from historic shipwrecks will be nearly impossible. Additionally, permits and agreements with governmental agencies to conduct historic shipwreck exploration and recovery operations are expensive to obtain and maintain, both in terms of both direct costs and ongoing compliance costs. It is also entirely possible that the Company will not be successful in obtaining title or permission to excavate certain wrecks.

 

It is possible that permits that are sought for potential future international projects may never be issued, and if issued, may not be legal or honored by the entities that issued them. Governmental agencies may require various types of permits to explore shipwreck sites, and the permitting process is often lengthy and complex. Obtaining permits and entering into agreements with governmental and quasi-governmental agencies to conduct historic shipwreck exploration and recovery operations is generally a very complex, time consuming, and expensive process. Furthermore, the process of entering into agreements and/or obtaining permits may be subject to lengthy delays, possibly in excess of a year. Some governmental agencies may refuse to issue permits to the Company for recovery of artifacts or intentionally delay the permitting process.

 

The reasons for a lengthy permitting process may be due to a number of potential factors including but not limited to requests by permitting agencies for additional information, submitted applications that need to be revised or updated, newly discovered information that needs to be added to an application or agreement, changes to either the agreement or permit terms or revisions to other information contained in the permit, excessive administrative time lags at permitting agencies, etc. Existing permits and agreements may be put on hold or suspended without notice for lengthy periods of time due to administrative issues and disagreements over the terms and conditions. The length of time it takes to obtain permits, enter into agreements, or rectify any conditions that are causing a permit to be suspended or on hold may cause the Company to expend significant resources while gearing up to do work with little or no visibility as to timing.

 

The Company regularly reviews opportunities to perform exploration and recovery operations at purported historic shipwreck sites. The Company currently does have some specific plans to perform exploration and recovery operations at other shipwreck sites in the future, however these plans are subject to change based on a number of factors. The Company is actively reviewing other potential historic shipwreck sites, including sites located internationally, for possible exploration and recovery. Should the Company decide that it will pursue exploration and recovery activities at other potential shipwreck sites, it may be necessary to obtain various permits as well as environmental permits.

 

The Company continually monitors media rights for potential revenue opportunities. The Company has had discussions with media entities to further understand the advantages offered. Management believes media can represent a potential future revenue opportunity for the Company, if the right circumstances arise.

 

This type of business venture is extremely speculative in nature and carries a tremendous amount of risk. An investment in the Company’s securities is speculative and very risky and should only be considered by those investors or lenders who do not require near-term liquidity and who can afford to suffer a complete and total loss of their investment.

 

Limited Operating History

 

The Company has generated only minimal revenue from operations and does not expect to report any significant revenue from operations for the foreseeable future.

 

At September 30, 2020, the Company had a working capital deficit of $1,274,201.

 

The Company’s working capital deficit increased from $492,223 at December 31, 2019 to $1,274,201 at September 30, 2020. The Company’s large working capital deficit indicates that there is still substantial risk to the viability of the Company due to the fact that the Company does not generate meaningful cash flow from its operations and therefore has no predictable means to pay its debt. 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.

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Since inception, the Company has funded its operations through common stock issuances and loans in order to meet its strategic objectives; however, there can be no assurance that the Company will be able to obtain further funds to continue with its efforts to establish a new business. There is a very significant risk that the Company will be unable to obtain financing to fund its operation and as such the Company may be forced to cease operations at any time which would likely result in a complete loss of all capital that has been invested in and/or borrowed by the Company to date.

 

The Company expects to continue to incur significant operating losses and to generate negative cash flow from operating activities, while building out its infrastructure in order to explore and salvage historic shipwreck sites and establishing itself in the marketplace. Based on our historical rate of expenditures, the Company expects to expend its available cash in less than one month from November 16, 2020.

 

The Company’s ability to eliminate operating losses and to generate positive cash flow from operations in the future will depend upon a variety of factors, many of which it is unable to control. If the Company is unable to implement its business plan successfully, it may not be able to eliminate operating losses, generate positive cash flow or achieve or sustain profitability, which may have a material adverse effect on the Company’s business, operations, and financial results, as well as its ability to make payments on its debt obligations, and the Company may be forced to cease operations.

 

The Company’s lack of operating cash flow and reliance on the sale of its commons stock and loans to fund operations is extremely risky. If the Company is unable to continue to raise capital or obtain loans or other financing on terms that are acceptable to the Company, or at all, then it is highly likely that the Company will be forced to cease operations. If the Company ceases its operations, then it is highly likely that all capital invested in and/or borrowed by the Company will be lost.

 

Summary of Nine Months Ended September 30, 2020 and 2019 Results of Operations

 

The Company’s net loss for the nine month period ended September 30, 2020 was $2,047,530 versus $1,643,452 for the nine month period ended September 30, 2019, an increase of approximately 25%. The increase in net losses in 2020 was primarily due to increases in vessel maintenance expense, consulting and contractor expenses, research and development expenses, general and administrative expenses and professional fees.

 

During the nine month period ended September 30, 2020, consulting and contractor fees were $941,048 compared to $852,342 during the nine month period ended September 30, 2019, an increase of approximately 10%. Vessel maintenance expenses were $163,369 during the nine month period in 2020 versus $71,176 during the same period in 2019, an increase of approximately 130%. The increase in vessel maintenance expenses in 2020 was primarily due to the Company extensively utilizing multiple vessels during its exploration activities, including the Discovery which was purchased in late 2019. These vessels require ongoing maintenance and repairs that have increased due to heavy use. Research and development was $373,769 in 2020 versus research and development expenses of $327,935 in 2019, an increase of approximately 14%. The increase in research and development expenses is attributable to further development of the Company’s SeaSearcher autonomous underwater device. During the nine month period ended September 30, 2020, the Company incurred professional fees related expenses of $117,611 versus $78,575 during nine month period ended September 30, 2019, an increase of approximately 50%. Professional fees increased primarily due to an increase in legal fees. General and administrative expenses for the nine month period ended September 30, 2020 were $140,642 compared to $107,062 for the nine month period ended September 30, 2019, an increase of approximately 31%. Depreciation expense was $15,045 for the nine month period ended September 30, 2020 and $0 in 2019. The Company purchased a vessel in late 2019 and began recording depreciation in 2020, there was no depreciation expense in 2019. Rent expense was $32,196 in 2020 versus $28,596 in 2019, a 13% year-over-year increase. Travel and entertainment expenses for the nine month period ended September 30, 2020 were $52,056 versus $43,405 for the nine month period ended September 30, 2019, an increase of approximately 20%. Interest expense for the nine month period ended September 30, 2020 was $195,071 versus $146,187 for the same period in 2019, an increase of approximately 33%. The increase in interest expense was due to an increase in amortization of interest relating to the beneficial conversion features of several convertible notes. Loss on extinguishment of debt was $34,375 during the nine month period ended September 30, 2020 versus $5,274 during the same period in 2019. Gain on settlement of accounts payable was $1,252 during the nine month period ended September 30, 2020 versus $0 in the same period in 2019. Gain on disposal of asset was $5,500 during the nine month period ended September 30, 2020 versus $0 in the same period in 2019. The Company had dividend income of $4,500 during the nine month periods ended September 30, 2020 and 2019.

 

Summary of Three Months Ended September 30, 2020 and 2019 Results of Operations

 

The Company’s net loss for the three month period ended September 30, 2020 was $689,636 as compared to a net loss of $701,815 during the three month period ended September 30, 2019, a decrease of approximately 2%.

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During the three month period ended September 30, 2020 consulting and contractor fees were $388,779 as compared to $361,080 for the three month period ended September 30, 2019, an increase of approximately 8%. Vessel maintenance and dockage was $48,042 during the three month period ended September 30, 2020 versus $29,189 during the same period in 2019, an increase of 65% in 2019. Research and development expenses were $95,460 during the three month period ended September 30, 2020 versus $210,134 during the same period in 2019. During the three month period ended September 30, 2020, professional fees were $26,293 as compared to $26,000 during the three month period ended September 30, 2019, an increase of approximately 1%. The general and administrative expenses for the three month period ended September 30, 2020 were $54,837 as compared to $0 during the three month period ended September 30, 2019. Depreciation expense was $5,015 for the three month period ended September 30, 2020 and $0 in 2019. Depreciation expense increased due to the Company purchasing a new vessel to be used in its operations at the end of 2019. Rent expense was $10,898 during the three month period ended September 30, 2020 versus $9,100 for the same period in 2019, an increase of approximately 20%. The Company incurred travel and entertainment expenses of $19,435 during three month period ended September 30, 2020 as compared to $15,730 during three month period ended September 30, 2019, an approximate 24% increase on a quarter-over-quarter basis. Interest expense was $51,311 during the three month period ended September 30, 2020 versus $55,908 during the three month period ended September 30, 2019, an decrease of approximately 8%. Loss on extinguishment of debt was $0 during the three month period ended September 30, 2020 versus $5,274 during the same period in 2019. Gain on settlement of accounts payable was $1,252 during the three month period ended September 30, 2020 versus $0 in the same period in 2019. Gain on disposal of asset was $5,500 during the three month period ended September 30, 2020 versus $0 in the same period in 2019. The Company had dividend income of $1,500 during the three month periods ended September 30, 2020 and 2019.

 

Revenue

 

The Company’s core business involving the exploration and recovery of historic shipwrecks has not generated any revenues to date and is not expected to generate any significant revenues for the foreseeable future. During the nine month periods ended September 30, 2020 and 2019, the Company generated $6,382 and $12,600 in revenue respectively, which is shown as service income on the accompanying condensed consolidated statements of operations. During the three month periods ended September 30, 2020 and 2019, the Company generated $2,182 and $9,100 in revenue respectively, which is shown as service income on the accompanying condensed consolidated statements of operations.

 

Liquidity and Capital Resources

 

At September 30, 2020, we had cash in the bank of $51,072. During the nine month period ended September 30, 2020 we incurred a net loss of $2,047,530. At September 30, 2020, we had $94,028 in current assets and $1,368,229 in current liabilities, leaving us a working capital deficit of $1,274,201.

 

Lack of Liquidity

 

A major financial challenge and significant risk facing the Company is a lack of positive cash flow and liquidity. The Company continued to operate with significant debt and a working capital deficit, $1,274,201, during the nine month period ended September 30, 2020. This working capital deficit indicates that the Company is unable to meet its short-term liabilities with its current assets. This working capital deficit is extremely risky for the Company as it may be forced to cease its operations due to its inability to meet its current obligations. If the Company is forced to cease its operations then it is highly likely that all capital invested in and/or borrowed by the Company will be lost.

 

The expenses associated with being a small publicly traded company attempting to develop the infrastructure to explore and salvage historic shipwrecks recovery are extremely prohibitive, especially given that the Company does not currently generate any revenues and does not expect to generate any revenues in the near future. There are ongoing expenses associated with operations that are incurred whether the Company is conducting shipwreck recovery operations or not. Vessel maintenance, particularly as the Company utilizes multiple vessels in its exploration operations, upkeep expenses and docking fees are continuous and unavoidable regardless of the Company’s operational status. Management anticipates the Company may need to put the vessel in dry dock in order for additional repairs to be made. These repairs and maintenance are expensive and have a negative impact on the Company’s cash position.

 

In addition to the operations expenses, a publicly traded company also incurs the significant recurring corporate expenses related to maintaining publicly traded status, which include, but are not limited to accounting, legal, audit, executive, administrative, corporate communications, rent, telephones, etc. The recurring expenses associated with being a publicly traded company are very burdensome for smaller public companies such as Seafarer. This lack of liquidity creates a very risky situation for the Company in terms of its ability to continue operating, which in turn makes owning shares of the Company’s common stock extremely risky and highly speculative. The Company’s lack of liquidity may cause the Company to be forced to cease operations at any time which would likely result in a complete loss of all capital invested in or borrowed by the Company to date.

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Due to the fact that the Company does not generate any revenues and does not expect to generate revenues for the foreseeable future the Company must rely on outside equity and debt funding. The combination of both the ongoing operational and corporate expenses, even during times when there is little or no exploration or salvage activities taking place as well as the need for outside financing, creates a very risky situation for the Company and its shareholders. This working capital shortfall and lack of access to cash to fund corporate activities is extremely risky and may force the Company to cease its operations which would more than likely result in a complete loss of all capital invested in or loaned to the Company to date.

 

If the Company is unable to secure additional financing, our business may fail and our stock price will likely be materially adversely affected.

 

Lack of Revenues and Cash Flow/Significant Losses from Operations

 

The exploration and recovery of historic shipwrecks requires a multi-year, multi-stage process and it may be many years before any significant revenue is generated from exploration and recovery activities, if ever. The Company does not believe that it will generate any significant revenues in the near future. The Company believes that it may be several years before it is able to generate any cash flow from its operations, if any are ever generated at all. Without revenues and cash flow the Company does not have reliable cash flow to pay its expenses. The Company relies on outside financing in the form of equity and debt and it is possible that the Company may not be able to obtain outside financing in the future. If the Company is not able to obtain financing it would more than likely be forced to cease operations and all of the capital that has been invested in or borrowed by the Company would be lost.

 

The Company has experienced a net loss in every fiscal year since inception. The Company’s losses from operations were $1,829,336 for the nine month period ended September 30, 2020 and $1,496,491 for the nine month period ended September 30, 2019. The Company believes that it will continue to generate losses from its operations for the foreseeable future and the Company may not be able to generate a profit in the long-term, or ever.

 

Based on these financial results, the Company may not be able to continue as a going concern. The reports of our independent auditors for the years ended December 31, 2019 and 2018 raises substantial doubt as to our ability to continue as a going concern. As discussed in Note 2 to our condensed consolidated financial statements for the nine month period ended September 30, 2020, we have experienced operating losses in every year since our inception resulting in an accumulated deficit. If the Company is not able to continue as a going concern, it is highly likely that all capital invested in the Company or borrowed by the Company will be lost.

 

Furthermore, if the Company is unable to secure additional financing, our business may fail or our operating results and our stock price may be materially adversely affected. The raising of additional financing would in all likelihood result in dilution or reduction in the value of the Company’s securities.

 

Additionally, the ongoing effects of the COVID-19 global pandemic may cause the Company to be unable to obtain financing to fund its business and operations. If the Company is not able to obtain financing due to COVID-19 then it is highly likely that it will be forced to cease its operations which would likely result in the Company not surviving which would result in a complete loss of all capital invested in the Company.

 

Convertible Notes Payable and Notes Payable, in Default

 

The Company does not have additional sources of debt financing to refinance its convertible notes payable and notes payable that are currently in default. If the Company is unable to obtain additional capital, such lenders may file suit, including suit to foreclose on the assets held as collateral for the obligations arising under the secured notes. If any of the lenders file suit to foreclose on the assets held as collateral, then the Company may be forced to significantly scale back or cease its operations, which would more than likely result in a complete loss of all capital that has been invested in or borrowed by the Company. The fact that the Company is in default regarding several loans held by various lenders makes investing in the Company or providing any loans to the Company extremely risky with a very high potential for a complete loss of capital.

 

The convertible notes that have been issued by the Company are convertible at the lender’s option. These convertible notes represent significant potential dilution to the Company’s current shareholders as the convertible price of these notes is generally lower than the current market price of the Company’s shares. As such when these notes are converted into equity there is typically a highly dilutive effect on current shareholders and very high probability that such dilution may significantly negatively affect the trading price of the Company’s common stock. Furthermore, management intends to have discussions or has already had discussions with several of the promissory note holders who do not currently have convertible notes regarding converting their notes into equity. Any such amended agreements to convert promissory notes into equity would more than likely have a highly dilutive effect on current shareholders and there is a very high probability that such dilution may significantly negatively affect the trading price of the Company’s common stock. Some of these note holders have already amended their notes and converted the notes into equity. Based on conversations with other note holders, the Company believes that additional note holders will amend their notes to contain a convertibility clause and eventually convert the notes into equity.

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Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities (see Note 3, Significant Accounting Policies, contained in the notes to the Company’s condensed consolidated financial statements for the nine month periods ended September 30, 2020 and 2019 contained in this filing). On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.

 

Off-balance Sheet Arrangements

 

None.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures

 

Management’s Responsibility for Controls and Procedures

 

The Company’s management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. The Company’s controls over financial reporting are designed under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our principal executive officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of September 30, 2020. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely record, process, summarize and report financial information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. However, as a result of our evaluation and review process, management believes that the financial statements and other information presented herewith are materially correct.

 

Internal Control Over Financial Reporting

 

As of September 30, 2020, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (as revised). Based on our evaluation, management concluded that our internal control over financial reporting was not effective so as to timely record, process, summarize and report financial information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. However, as a result of our evaluation and review process, management believes that the financial statements and other information presented herewith are materially correct.

 

The management including its Principal Executive Officer/Principal Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting will prevent all error and all fraud. A control system no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

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The Company has limited resources and as a result, a material weakness in financial reporting currently exists, because of our limited resources and personnel, including those described below.

 

* The Company has an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.

 

* We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.

 

* We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the managements view that to have audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over the Company’s financial statements.

 

A material weakness is a deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) auditing standard 5) or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that a material weakness exists due to a lack of segregation of duties, resulting from the Company’s limited resources and personnel.

 

Remediation Efforts to Address Deficiencies in Internal Control Over Financial Reporting

 

As a result of these findings, management, upon obtaining sufficient capital and operations, intends to take practical, cost-effective steps in implementing internal controls, including the possible remedial measures set forth below. As of September 30, 2020 we did not have sufficient capital and/or operations to implement any of the remedial measures described below.

 

* Assessing the current duties of existing personnel and consultants, assigning additional duties to existing personnel and consultants, and, in a cost effective manner, potentially hiring additional personnel to assist with the preparation of the Company’s financial statements to allow for proper segregation of duties, as well as additional resources for control documentation.

 

* Assessing the duties of the existing officers of the Company and, in a cost effective manner, possibly promote or hire additional personnel to diversify duties and responsibilities of such executive officers.

 

* Board to review and make recommendations to shareholders concerning the composition of the Board of Directors, with particular focus on issues of independence. The Board of Directors will consider nominating an audit committee and audit committee financial expert, which may or may not consist of independent members.

 

* Interviewing and potentially hiring outside consultants that are experts in designing internal controls over financial reporting based on criteria established in Internal Control Integrated Framework issued by Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (as revised).

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

 

(b) Change in Internal Control Over Financial Reporting

 

The Company has not made any change in our internal control over financial reporting during the nine month period ended September 30, 2020.

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Part II. Other Information

 

Item 1. Legal Proceedings

 

On September 3, 2014, the Company filed a lawsuit against Darrel Volentine, of California. Mr. Volentine was sued in two counts of libel per se under Florida law, as well as a count for injunction against the Defendant to exclude and prohibit internet postings. Such lawsuit was filed in the Circuit Court in Hillsborough County, Florida. Such suit is based upon internet postings on www.investorshub.com. On or about October 15, 2015, the Company and Volentine entered into a stipulation whereby Volentine admitted to his tortious conduct, however the stipulated damages agreed to were rejected by the Court, and the Company is proceeding to trial on damages against Volentine in a non-jury trial on December 1, 2015. The Defendant is the subject of a contempt of court motion which was heard on April 7, 2016, whereby the Court found a violation and modified the injunction against the Defendant, and imposed other matters of potential penalties against the Defendant. The Court also awarded attorney’s fees against the Defendant on behalf of Seafarer for such motion. The Defendant subsequently attempted to have such ruling, evidence and testimony attacked through a motion heard before the Court on October 24, 2016. The Court dismissed the Defendant’s motion after presentation of the Defendant’s case at the hearing. The Plaintiff has set the matter for entry of the attorney’s fees amount due from the Defendant for hearing in December 2016. As well the Plaintiff has set for hearing its motion for sanctions in the form of attorney’s fees for frivolous filing of the October 24th motion, which motion is also set for hearing in December 2016. The Plaintiff filed a renewed and amended motion for punitive damages in the case on September 11, 2016, which has not been set for hearing. The Defendant had also filed a motion for summary judgment on the matter of notice entitlement pre-suit, which motion is pending before the Court. The Plaintiff filed a motion for sanctions against the Defendant for the motion for summary judgment being frivolous under existing law, and such motion is pending ruling on the motion. Discovery is ongoing on such case. On December 7, 2016, the Court held a hearing on the Defendant’s motion for sanctions, and essentially attempting to rehear the motion for contempt against the Defendant. The Court dismissed the Defendant’s motions, and renewed the ability of the Company to seek attorney’s fees on such matter, which hearing has not been set at present. On February 28, 2017, the Court entered an Order denying the Defendant’s motion for summary judgment. The Company has a pending motion for sanctions related to the Defendant’s filing of the motion for summary judgment which has not been set for hearing. The Company will be attempting to set such matter for trial during 2020.

 

On April 17, 2020, the Company filed a lawsuit in the Circuit Court in and for Hillsborough County, Florida against Michael Torres (“Torres”), regarding fraud, fraud in the inducement, breach of contract and civil theft under Florida law, as well as for injunctive relief to cancel shares issued. Such shares are currently locked up with the transfer agent pending ruling of the Court. The civil theft claim seeks triple the damages for monies paid to Torres, plus attorney’s fees and costs. Torres filed a motion to dismiss which was denied by the Circuit Court on July 28, 2020. Torres filed a general denial in an answer. Seafarer is in the discovery phase of the case. Mediation of the case has been requested by Torres, mediation is being set at this point in time.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Recent Sales and Other Issuances of Unregistered Securities

 

During the nine month period ended September 30, 2020, the Company issued 26,611,878 fully vested and non-forfeitable common stock shares for services provided by consultants, contractors, advisory members, board members, and other service providers. We determined the fair value of the shares issued using the stock price on date of issuance. Compensation expense is recognized as the services are provided to the Company. The Company believes that the issuance of the securities was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering and based on the fact that such securities were issued for services to sophisticated or accredited investors and persons who are thoroughly familiar with the Company’s proposed business by virtue of their affiliation with the Company.

 

On various dates during the nine month period ended September 30, 2020, the Company entered into subscription agreements to sell 192,700,001 shares of its restricted common stock in exchange for proceeds of $718,799. The proceeds received were used for general corporate purposes, working capital and the repayment of debt.

 

The Company issued 1,000,000 shares of restricted common stock as a charitable contribution to a charity.

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Exemptions from Registration for Sales of Restricted Securities.

 

The issuance of securities referenced above were issued to persons who the Company believes were either “accredited investors,” or “sophisticated investors” who, by reason of education, business acumen, experience or other factors, were fully capable of evaluating the risks and merits of an investment in us; and each had prior access to all material information about us. None of these transactions involved a public offering. An appropriate restrictive legend was placed on each certificate that has been issued, prohibiting public resale of the shares, except subject to an effective registration statement under the Securities Act of 1933, as amended (the “Act”) or in compliance with Rule 144. The Company believes that the offer and sale of these securities was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) under the Securities Act of 1933 (the “Act”) thereof, and/or Regulation D. There may be additional exemptions available to the Company.

 

Issuance of Securities Due to Conversion of Notes and to Settle Debt

 

During the nine month period ended September 30, 2020, the Company issued 39,781,082 shares of restricted common stock to settle $84,086 of principal and accrued interest owed on various convertible notes payable and one note payable. The Company believes that the offer and sale of these securities were exempt from the registration requirements of the Securities Act pursuant to Sections 3(a)(9) under the Securities Act of 1933, as amended.

 

Repurchase of Securities

 

During the nine month period ended September 30, 2020, the Company did not purchase any shares of its common stock. In August of 2020 the Company entered into a share exchange agreement to exchange 10,000 shares of stock in P&S for 60,000,0000 shares of the Company’s stock. At September 30, 2020 the shares had not been exchanged.

 

Stock Option Grants

 

The Company does not have any compensatory stock option grants outstanding at this time.

 

Warrants

 

The Company did not issue any warrants during the nine month period ended September 30, 2020. Please see Note 7 - Stockholders’ Deficit for a list of warrants outstanding at September 30, 2020.

 

Item 3. Defaults Upon Senior Securities

 

The Company has several promissory notes and loans that are currently in default to non-payment of principle and interest. See Part I, Item 2, notes payable and convertible notes payable, in default, for discussion of defaults on certain debt obligations of the Company.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None

34

 

Item 6. Exhibits

 

Set forth below is a list of the exhibits to this quarterly report on Form 10-Q.

 

Exhibit
Number
  Description
*31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
*32.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
 *101.INS   XBRL Instance Document
     
 *101.SCH   XBRL Taxonomy Extension Schema
     
 *101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
 *101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
*101.LAB   XBRL Taxonomy Extension Label Linkbase
     
 *101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

* Filed herewith.

35

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  SEAFARER EXPLORATION CORP.
     
Date: November 16, 2020 By:  /s/ Kyle Kennedy
    Kyle Kennedy
    President, Chief Executive Officer, and Chairman of the Board
(Principal Executive Officer and Principal Accounting Officer)
     
Date: November 16, 2020 By: /s/ Charles Branscum
    Charles Branscum, Director
     
Date: November 16, 2020 By: /s/ Robert L. Kennedy
    Robert L. Kennedy, Director
     
Date: November 16, 2020 By: /s/ Thomas Soeder
    Thomas Soeder, Director
     
Date: November 16, 2020 By: /s/ Bradford Clark
    Bradford Clark, Director

36