UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
________________________
 
FORM 10-K
______________
 
(Mark One)
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For year ended December 31, 2018
 
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
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 209N, Tampa, Florida 33618

(Address of principal executive offices) (Zip code)
 
Registrant’s telephone number: (813) 448-3577
 
 
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 No 
 
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  No
 
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  No
 
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. 
 
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
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
(Do not check if a smaller reporting company)
 
 
 
Emerging growth company
 ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  No
 
The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $7,175,851 as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the OTC:BB reported for such date. Shares of common stock held by each officer and director, and by each person who owns 10% or more of the outstanding common stock, have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
As of March 31, 2019 the Registrant had 3,942,094,084 outstanding shares of its common stock, $0.0001 par value.
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
2
 
 
 
SEAFARER EXPLORATION CORP.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
Page
PART I
ITEM 1.
BUSINESS
5
ITEM 1A.
RISK FACTORS
10
ITEM 1B.
UNRESOLVED STAFF COMMENTS
10
ITEM 2.
PROPERTIES
10
ITEM 3.
LEGAL PROCEEDINGS
11
ITEM 4.
MINE SAFETY DISCLOSURES
11
 
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
12
ITEM 6.
SELECTED FINANCIAL DATA
14
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
15
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 
21
ITEM 8.
FINANCIAL STATEMENTS
22
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
23
ITEM 9A.
CONTROLS AND PROCEDURES
23
ITEM 9B.
OTHER INFORMATION
24
 
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
25
ITEM 11.
EXECUTIVE COMPENSATION
26
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
28
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
29
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
35
 
PART IV
ITEM 15.
EXHIBITS
36
SIGNATURES
37
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
 
Statements in this Form 10-K under "Item 1. Business", "Item 2. Properties", "Item 3. Legal Proceedings", "Item 7. Management's Discussions and Analysis of Financial Condition and Results of Operations" and elsewhere constitute "forward-looking statements".  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Seafarer Exploration Corp., a company organized under the laws of Florida, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. 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-K.
 
The use in this Form 10-K 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 success of the Company is dependent on our efforts and many other factors including, primarily, our ability to raise additional capital.
 
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 based on 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 historic 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 or as a result of certain economic and business factors, some of which may be beyond our control.
 
We disclaim any obligation to subsequently 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.
 
As used in this Form 10-K, the terms “we,” “us,” “our,” “Seafarer,” and the “Company” mean Seafarer Exploration Corp. unless otherwise indicated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
 
PART I
 
Item 1. Business.
 
Summary
 
Seafarer Exploration Corp. ("the Company" or "Seafarer"), a Florida Corporation, was incorporated on May 28, 2003. The Company formerly operated under the name Organetix, Inc. (“Organetix”). The Company's principal business plan is to develop the infrastructure to engage in archaeological research, archaeologically-sensitive exploration, recovery and conservation of historic shipwrecks and to eventually monetize the recovery of the shipwrecks without selling the treasure. The business plan includes in-depth archival research and translation of historical documents from archives and repositories from around the world.
 
The exploration and recovery of historic shipwrecks is by nature speculative, and there is a high degree of risk inherent in this type of business venture. The exploration and recovery of historic shipwrecks involves a multi-year, multi-stage process and it may take several years and/or be prohibitively expensive to locate and recover valuable artifacts, if any are ever located at all, from historic shipwreck sites. It is possible that the Company will never locate any valuable artifacts from historic shipwreck sites.
 
There are a number of other significant challenges and risks regarding this type of business venture that make it risky with potential that the Company could fail. If the Company were to cease its operations, it is likely that there would be complete loss of all capital invested in and/or borrowed by the Company to date.
 
The Company is also actively researching, exploring and testing new technology to help more accurately understand current and future wreck sites in an unobtrusive manner. Up to the date of this filing, all tests of new and unproven technology and methods have failed. Additional scientists have been hired as consultants to assist in these endeavors.
 
Additionally, the Company is reviewing a few business opportunities that may allow it to eventually generate revenue streams to support the operational expenses of Seafarer. Seafarer has also acquired a 1% ownership stake in Probability and Statistics, Inc. (P&S) for an exchange of Seafarer’s restricted stock (See Note 5). The Company also has a commission only contract with P&S for any business it brings to P&S. The Company has received a dividend payment from P&S in the amount of $1,500.
    
No Revenue and Operating Losses
 
The Company expects to continue to incur significant operating losses and to generate negative cash flows from operating activities while developing the necessary infrastructure and technology for the actual investigation of historic shipwreck sites.  
 
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.  Based on our historical rate of expenditures, the Company expects to expend its available cash in less than one month from April 15, 2019. 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 would materially and adversely affect its 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 its operations.
 
General
 
It has been estimated by the United Nations Educational, Scientific and Cultural Organization (“UNESCO”) that there are over three million undiscovered shipwrecks around the world and some of these shipwrecks were lost with verifiable cargoes that contained valuable materials, including artifacts and treasure. However, many of these shipwrecks may have very little archaeological or historical value, and furthermore, a high percentage of these shipwrecks would not have been carrying valuable cargo including artifacts or treasure.
 
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 will be made available for scientific research and allowed to be displayed for the public.
 
The Company believes it may eventually be conducting archaeological research around the world and potentially supporting governmental or quasi-governmental organizations, universities and affiliated research groups and private research entities in the documentation and survey of historic shipwrecks based on their discretion. The business plan also includes in-depth archival research and translation of historical documents from various international archives and repositories. These translations of archival research will be made available to the country of origin, the State of Florida, university researchers, and other responsible academic parties upon reasonable request. 
 
5
 
In addition to the research, there is ongoing education of personnel involved in operations with the Company. College level courses in archaeology are being periodically taught in a program to help educate the personnel in context, work methodology, documentation, and conservation. It is the Company’s intent to have the highest educated personnel possible and eventually have all divers certified. The Company works with archaeologists to further insure all sensitive archaeological guidelines are met or exceeded.
 
The Company in the past has constantly investigated various technologies and non-scientific equipment to help better explore or document our sites. To present date, nothing has been proven to work. 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 extra expenses to the Company.   
 
The exploration and recovery of historic shipwrecks involves a multi-year, multi-stage 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. The length of time it takes to obtain permits or enter into agreements may cause the Company to expend significant resources while gearing up to do work with little or no visibility as to the timing of receiving a permit. It may take many years and/or be prohibitively expensive to locate, if any are ever located at all, and recover valuable artifacts from historic shipwrecks. Locating and recovering valuable artifacts is very difficult, expensive, and rare. If the Company is not able to locate artifacts or treasure with significant value, then there is high probability that the Company will face adverse consequences.
 
Underwater recovery operations are inherently difficult and dangerous and may be delayed or suspended by weather, sea conditions or other natural hazards. In addition, even though sea conditions in a particular search location may be somewhat predictable, the possibility exists that unexpected conditions may occur, and already have occurred, that adversely affect the Company’s operations. It is also possible that natural hazards may prevent or significantly delay search and recovery operations.
 
In addition to natural hazards there may be constant repair and maintenance issues with historic shipwreck exploration and recovery vessels, the Company’s primary exploration vessel is an older vessel that was originally used in other capacities and has been converted for use in historic shipwreck exploration and recovery operations. The repairs, maintenance and upkeep of vessels, is time consuming and has been very expensive and there may be significant periods of vessel down time that results from needed repairs being made or a lack of current financing to make repairs to the vessel.
 
Furthermore, 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, 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.
 
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. The length of time it takes to obtain permits or enter into agreements may cause the Company to expend significant resources while gearing up to do work with little or no visibility as to the timing of receiving a permit.
 
Even if the Company is able to obtain permits for shipwreck projects, there is a possibility that the shipwrecks may have already been salvaged, may not be located, or may not have had anything valuable on board at the time that they sank. It is the Company’s intent to find shipwrecks where available research suggests there were not any previous recovery efforts or past recovery efforts failed or were not completed. In the event that valuable artifacts are located and recovered, it is possible that the cost of recovery will exceed the value of the artifacts recovered. It is also possible that other entities, including both private parties and governmental entities, will assert conflicting claims and challenge the Company’s rights to the recovered artifacts.
 
 
6
 
Moreover, there is the possibility that should the Company be successful in locating and recovering artifacts that have significant archeological and/or monetary value, that a country whose ship was salvaged may attempt to claim ownership of the artifacts by pursuing litigation. In the event that the Company is able to make a valid claim to artifacts or other items at a shipwreck site, there is a risk of theft of such items at sea, both before or after the recovery or while the artifacts are in transit to a safe destination, as well as when stored in a secured location. Such thefts may not be adequately covered by insurance. Based on a number of these and other potential issues the Company could spend a great deal of time and invest a large sum in a specific shipwreck project and receive very little or no salvage claim or revenue for its work. The Company does have plans for security at sea, however it may never implement such plans.
 
There are a number of significant issues and challenges including, but not limited to, government regulation and/or the Company’s inability to secure permits and contracts, lack of financing, lack of revenue and cash flow and continued losses from operations that make the exploration and recovery of historic shipwrecks a speculative business venture. There is also significant expense involved in research and ongoing educational programs. Research expenses involve paying scientists for translations, and research dues and fees for various historical entities such as archives, travel and accommodations, and research materials.
 
There is currently a limited trading market for our securities. We cannot assure when and if an active-trading market in our shares will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of our common stock to liquidate their investment in our company. The ability to deposit restricted shares has also become increasingly more difficult during the year ended December 31, 2018. Furthermore, the sale of unregistered and restricted securities by current shareholders, including shares issued to consultants and shares issued to settle convertible promissory notes and to settle debt, may cause a significant drop in the market prices of the Company’s securities. Also, because the Company primarily finances the operations with the sale of securities, an increase to the authorized shares may need to be done from time to time.
 
Accordingly, an investment in Seafarer’s securities is speculative and extremely risky and should only be considered by those investors who do not require liquidity and who can afford to suffer a total loss of their investment. An investor should consult with professional advisers before making an investment in our securities.
 
Competition
 
There are a number of competing entities who are engaged in various aspects of the exploration and salvage of historic shipwrecks, and in the future other competitors may emerge. Some of these companies are publicly traded companies and there are a number of small private companies, as well as some loosely affiliated groups and individuals, who claim to be in this business as well. Some of these entities may be better capitalized and may have greater resources to devote to the pursuit of locating and salvaging historic shipwrecks. Many of these competing entities may also have significantly more experience than the Company in the exploration and recovery of historic shipwrecks. The Company is at a material competitive disadvantage as compared to competing entities that are better capitalized, have more resources and/or who possess greater experience in the business.   
 
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 revenue is generated from exploration and recovery activities, if ever. Without significant 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. 
 
In addition, the expenses associated with operating a small publicly traded company engaged in the historic shipwreck recovery business are exorbitantly high. The cost of operations may include the cost of buying or leasing a vessel, regular vessel maintenance and upkeep, ongoing vessel repairs due to wear and tear and damage by natural or human causes, docking fees, fuel, upgrades, equipment costs, personnel costs, insurance, registration costs, permitting, temporary lodging and provisions for divers and other personnel, etc. In addition to the operations expenses, a publicly traded company also incurs the significant recurring costs of maintaining publicly traded status, which include, but are not limited to administrative, accounting, audit, executive, legal, etc. These combined expenses are particularly burdensome for a smaller public company. The recurring expenses associated with being a publicly traded company focused on the exploration and recovery of historic shipwrecks may cause the Company to be at a significant competitive disadvantage when compared to some of its competitors who are private companies or public companies who are not fully reporting.
 
If the Company is unable to secure additional financing or meaningful revenues, 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.
 
 
7
 
The Company may not be able to continue as a going concern. 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. As discussed in Note 2 to our financial statements for the year ended December 31, 2018 and 2017, we have experienced operating losses in every year since our inception resulting in an accumulated deficit. Based on our financial results as of December 31, 2018, there are substantial doubts about the Company’s ability to continue as a going concern. If the Company is not able to continue as a going concern, it is likely that all capital invested in the Company or borrowed by the Company will be lost.
 
The Company has experienced a net loss in every fiscal year since inception. The Company’s net losses from were $1,277,184 for the year ended December 31, 2018 and $999,847 for the year ended December 31, 2017. 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.  
 
Governmental Regulation
 
There are very strict international, federal and state laws that govern the exploration and recovery of historic shipwrecks. There is no guarantee that the Company will be able to secure permits or enter into agreements with government agencies in order to explore and recover historic shipwrecks, although the Company has secured permits in the past. There is a substantial 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, both in terms of direct and ongoing compliance costs. 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.
 
The laws and regulations regarding the exploration and recovery of historic shipwrecks in waters controlled by the State of Florida are complex. A large amount of time and expense is required to comply with the existing laws and regulations. The State of Florida has, in the past, proposed new rules and regulations regarding the exploration and recovery of shipwrecks in Florida waters. The Company believes any new rules and regulations that are implemented into law would likely increase the cost of compliance and potentially force the Company to cease its operations. It is possible that the State of Florida may enact additional laws that ultimately make it impossible to conduct business as a commercial shipwreck exploration and recovery firm. It may also be possible that the State of Florida attempts to enact legislation which altogether bans the commercial exploration and recovery of historic shipwrecks in State controlled waters.
 
There is a possibility that new governmental regulations could be enacted at any time at the international, federal or state level that would make it impossible for the Company to continue to attempt to locate and salvage historic shipwrecks. Governmental regulation at all levels may substantially increase the costs and expenses incurred by the Company to obtain permits and agreements and comply with the regulations and represent a significant risk to the Company and all companies engaged in the commercial exploration and recovery of historical shipwrecks. There is a possibility that governmental regulation could be enacted that would make it impossible for the Company to conduct commercial exploration and recovery of historic shipwrecks anywhere in the world.
 
There are also strict environmental regulations associated with the exploration and recovery of historical shipwrecks. In order to explore and salvage shipwrecks that are located in state controlled waters, the Company must obtain permission from both federal authorities and state environmental agencies in order to conduct operations. There is always the possibility that the Company could be denied access to a historic shipwreck site based on federal or state environmental concerns
 
Litigation
 
The Company has been engaged in various litigations (See “Item 3 Legal Proceedings” below). We could be subject to future litigations, although none are known or expected, that could materially affect our ability to operate our business, which would negatively impact our results of operations and financial condition, which the Company does not foresee and none currently exist.  
 
Historic Shipwreck Exploration and Recovery in Florida
 
The Company operates year-round, but the best diving for historic shipwreck exploration and recovery in Florida waters is generally considered to be the summer months, from approximately the middle of April through October, although good weather conditions may allow operations to extend into the fall and winter months at certain historic shipwreck sites. Inclement weather and hazardous ocean conditions may hamper year round historical shipwreck exploration and recovery efforts in Florida waters. It is the Company’s intention to work continuously all year, as in years past.
 
 
8
 
Other factors that may hinder the Company’s ability to conduct year round operations include a lack of financing, the expiration of permits and agreements or the need to renew or enter into permits and agreements with various governmental or quasi-governmental agencies, and the inability to locate and retain skilled, competent and experienced personnel. Permits were renewed in Area 1 and Area 2 of Melbourne Beach for a period of 3 years. During down times, the Company's operations personnel may, among other duties, spend time researching sites, reviewing site plans, maps, charts, and other related information and performing maintenance, overhaul, cleaning, etc.
 
Juno Beach Shipwreck Site
 
The Company has previously performed some exploration and recovery operations at what it believes to be a 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. The recovery permit expired in April of 2014. In March of 2015, Seafarer was awarded full rights to the Juno site pursuant to a court order, erasing all rights of the Company’s previous partner with regards to the site. The Juno site was arrested permanently to Seafarer by the U.S. Marshal’s offices in July 7 of 2017 and in November 2017 the Company was granted final judgment on its federal admiralty claim for the Juno Beach shipwreck site (See Item 3 below). The Company is preparing to attempt to renew the permit, however there is no guarantee that a renewal permit will be issued to the Company.
 
The Company believes it is possible the Juno Beach shipwreck site may potentially contain remnants of a sunken 1500s era ship; however, the Company does not have definitive evidence of the ship’s country of origin. Due to the fact that the Company does not currently have sufficient data to positively identify the potential Juno Beach shipwreck, or its country of origin, it is not possible to determine whether or not the ship was originally carrying cargo of any significant value. To date the Company has not located the main body of a shipwreck at the Juno Beach site, only a lot of shipwreck material and remnants including pottery, porcelain, cannon balls, musket balls, ballast stones, nails, spikes, wood and scattered pieces of a sunken ship.
 
The Company has determined that a large portion of the magnetometer survey of the Juno Beach Shipwreck site, that was previously given to the Company and to the State of Florida by the Company’s past partner on the site, was intentionally deleted from the survey. The Company will complete a magnetometer survey of the entire deleted area when certain conditions are met. There is also possibility that there are no artifacts of significant value located at 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.
 
North Florida Shipwreck Site
 
There is a purported historic shipwreck site in the waters off of Brevard County Florida that the Company desires to investigate. In February 2013, the Company signed an agreement with a third party who has previously explored this site for the right to investigate the site. In March of 2014, Seafarer entered into a partnership and ownership with Marine Archaeology Partners, LLC, with the formation of Seafarer’s Quest, LLC. Such LLC was formed in the State of Florida for the purpose of permitting, exploration and recovery of artifacts from a designated area on the east coast of Florida. Such site area is from a defined, contracted area by a separate entity, which a portion of such site is designated from a previous contracted holding through the State of Florida. Under such agreement, Seafarer is responsible for costs of permitting, exploration and recovery, and is entitled to 60% of such artifact recovery. Seafarer has a 50% ownership, with designated management of the LLC coming from Seafarer. There are a significant number of challenges inherent in the exploration and recovery of historic shipwrecks, including the possibility that the Company will never find artifacts of value at the site.
  
In July of 2014, Seafarer’s Quest, LLC received a 1A-31 Exploration Permit with a Dig and Identify modification (the “Permit”) from the Florida Division of Historical Resources for an area identified as Area 2 off of Cape Canaveral, Florida. The Permit was active for three years from the date of issuance. Seafarer on behalf of Seafarer’s Quest, LLC, has been primarily focusing its operations on this site when the weather permits. In addition to the Company’s main salvage vessel, the Company has utilized additional owned and rented vessels in order to perform search and identify operations at this site. Inclement weather and difficult sea conditions have hampered the Company’s ability to perform exploration operations at this site to date. An archeologist with the technical skills, knowledge, and experience from around the world was hired to help insure the integrity of the work. The Company has applied for permits from the State of Florida for two additional areas that were formerly permitted solely by an affiliate of Marine Archeological Partners, LLC. The Permit for one of the additional areas was given to the Company on July 6, 2016 and identified as Area 1. Both permits in Area 1 and Area 2 have been renewed in 2019 for an additional 3 years.
 
 
 
9
 
The Company regularly reviews opportunities to perform exploration and recovery operations at purported historic shipwreck sites; however, the Company does have specific plans to perform exploration and recovery operations at other shipwreck sites at the present time. The Company is actively reviewing other potential historic shipwreck sites 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 recovery permits as well as environmental permits.
 
Certain Agreements
 
Agreement to Explore a Shipwreck Site Located off of Brevard County, Florida
 
In March of 2014, Seafarer entered into a partnership and ownership with Marine Archaeology Partners, LLC, with the formation of Seafarer’s Quest, LLC. Such LLC was formed in the State of Florida for the purpose of permitting, exploration and recovery of artifacts from a designated area on the east coast of Florida. Such site area is from a defined, contracted area by a separate entity, which a portion of such site is designated from a previous contracted holding through the State of Florida. Under such agreement, Seafarer is responsible for costs of permitting, exploration and recovery, and is entitled to 60% of such artifact recovery. Seafarer has a 50% ownership, with designated management of the LLC coming from Seafarer. As of December 31, 2018, the partnership has had no operations. Seafarer is responsible for managing the site on behalf of the partnership.
 
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.
 
Agreement with Probability and Statistics, Inc.
 
Seafarer acquired a 1% ownership position in Probability and Statistics, Inc. (P&S) for an exchange of shares of Seafarer’s restricted common stock.
     
Item 1A. Risk Factors.
 
Not required for smaller reporting companies.
 
Item 1B. Unresolved Staff Comments.
 
Not required for smaller reporting companies.  
 
Item 2. Properties.
 
Corporate Office
 
The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The Company entered into an amended lease agreement commencing on July 20, 2017 through June 30, 2020 with base monthly rents of $1,252 from July 1, 2017 to June 30, 2018, $1,289 from July 1, 2018 to June 30, 2019, and $1,328 from July 1, 2019 to June 30, 2020. Under the terms of the lease there may be additional fees charged above the base monthly rental fee.
 
Operations House
 
The Company has an operating lease for a house located in Palm Bay, Florida. The Company uses the house to store equipment and gear and to provide temporary work-related living quarters for its divers, personnel, consultants and independent contractors involved in its exploration and recovery operations. The Company pays $1,300 per month to lease the operations house. The term of the lease agreement commenced on October 1, 2015 and expired on October 31, 2016. The Company is currently leasing the operations house on a month-to-month basis.
 
10
 
Item 3. Legal Proceedings.
 
On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure site at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed toby Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 which was renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleged in its complaint the expenditure of large amounts of shares and monies for financing and for delays due to Tulco’s non-performance. Seafarer sought monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. Seafarer gained a default and final Judgment on such matter on July 23, 2014. Seafarer is now in position to receive the renewed permit in Seafarer’s name and rights only, with Tulco removed per the Order of the Court. On March 4, 2015, the Court awarded full rights to the Juno sight to Seafarer Exploration, erasing all rights of Tulco Resources. The Company filed an Admiralty Claim over such site inthe United States District Court. On October 21, 2016 a hearing on the Admiralty Claim in the United States District Court for the Southern District of Florida was held, where the Court Ordered actions to take place for ongoing admiralty claim. The Court subsequently entered and Order directing the arrest warrant for such site, and such arrest warrant was issued by the Clerk of Court. Such arrest warrant was served by the United States Marshalls Office in Palm Beach, Florida on July 7, 2017. The United States District Court Judge ordered service on the claim on August 10, 2017. On November 14, 2017, Judge Kenneth Marra of the United States District Court awarded Seafarer all rights as the sole owner of the sunken vessel and any items on such site.
 
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. 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 had 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 was 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 2019.
 
Item 4. Mine Safety Disclosures.
 
None.
 

 
  
 
 
 
 
 
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PART II
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information
 
Our common stock is presently quoted on the Pink Sheets under the symbol “SFRX”, as reflected below, though the current trading volume is small. No assurance can be given that any market for our common stock will continue in the future or be maintained. If an “established trading market” ever develops in the future, the sale of “restricted securities” (common stock) pursuant to Rule 144 of the Securities and Exchange Commission by members of management, consultants, promissory note holders or others may have a substantial adverse impact on any such market and the sale of restricted securities by management or others may significantly depress the market price of the Company’s shares.
 
There is currently a limited trading market for our securities on the Pink Sheets. We cannot assure when and if an active-trading market in our shares will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of our common stock to liquidate their investment in our company. If an active public market should develop in the future, the sale of unregistered and restricted securities by current shareholders may have potentially have a substantial negative impact on any such market.
 
The Company’s share price is quoted on the Pink Sheets. Accordingly, an investment in our securities should only be considered by those investors who do not require liquidity and can afford to suffer a total loss of their investment. An investor should consider consulting with professional advisers before making such an investment.
 
Furthermore, the price of our common stock may be subject to a very high degree of volatility, which makes owning shares of our common stock highly risky. Our stock price fluctuated between $0.0007 and $0.0026 for the year ended December 31, 2018, and $0.0008 and 0.0042 for the year ended December 31, 2017. The price of our shares may fluctuate significantly despite the absence of any apparent reason. In addition, our stock is thinly traded, leading to even greater volatility. You should expect this volatility to continue into the foreseeable future.
 
The range of high and low bid prices for our common stock during each quarter for 2018 and 2017 is shown below. The over-the-counter quotations reflect inter-dealer prices, with retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Such prices were determined from information derived from www.nasdaq.com and do not necessarily reflect transactions, retail markups, markdowns or commissions.
 
Quarter Ended
High Price
Low Price
March 31, 2017
0.0042
0.0009
June 30, 2017
0.0038
0.0014
September 30, 2017
0.0022
0.0010
December 31, 2017
0.0020
0.0008
March 31, 2018
0.0013
0.0007
June 30, 2018
0.0026
0.0007
September 30, 2018
0.0025
0.0009
December 31, 2018
0.0019
0.0009
 
Penny Stock
 
Our stock is considered to be a penny stock.  Our stock is subject to certain provisions of the Securities Exchange Act of 1934 (the “Exchange Act”), commonly referred to as the “penny stock” rules as defined in Rule 3a51-1. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Since our stock is deemed to be a penny stock, trading is subject to additional sales practice requirements of broker-dealers.  
 
Consequently, penny stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock.  Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.  In recent years the ability to deposit restricted shares at broker-dealers has become increasing difficult with significant administrative requirements.
 
 
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The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
 
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
 
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and may have an adverse effect on the market for our shares.
 
Additionally, investors in penny stocks should be aware that in recent years the ability to deposit restricted shares has become significantly more difficult due burdensome administrative requirements.
 
Approximate Number of Holders of Common Stock
 
The approximate number of record holders of our common stock at March 31, 2019 was 1,899 shareholders of record holding 2,271,297,144 restricted shares in certificated securities and 1,670,796,940 non-restricted shares. There are an indeterminate number of shareholders holding shares in brokerage accounts.
   
Transfer Agent
 
The Company’s stock transfer agent is ClearTrust, LLC (“ClearTrust”). ClearTrust’s address is 16540 Pointe Village Drive, Suite 205, Lutz, Florida 33558 and their telephone number is (813) 235-4490. ClearTrust is owned and controlled by a person who is related to the Company’s CEO. 
 
Dividend Policy
 
The Company did not declare cash dividends during the years ended December 31, 2018 and 2017. It is not anticipated that cash dividends will be paid at any time in the foreseeable future as the Company intends to retain earnings, if any, for use in the development of its business. The payment of dividends is contingent upon the Company's future earnings, if any, the Company's financial condition and its capital requirements, general business conditions and other factors.
 
Equity Compensation Plans
 
The Company has not established any formal equity compensation plans as of the date of this Annual Report on Form 10-K; however, the Company reserves the right to do so at a later date.
 
Reports to Security Holders
 
Seafarer Exploration Corp. is a reporting company pursuant to the Securities and Exchange Act of 1934. As such, the Company makes available its annual report which includes audited financial statements, and its quarterly reports which include unaudited financial statements.
 
 
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Recent Sales of Unregistered Securities
 
During the year ended December 31, 2018, the Company agreed to issue 287,014,220 of its restricted shares of its common stock for various operations related services, Board of Directors’ services, technology consulting, administrative, accounting and financial reporting, business advisory services as a retention bonus and fees for extra services to some independent contractors and consultants. 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 such securities were issued for services rendered to sophisticated and/or accredited investors.
 
The Company issued securities and reported these issuances, which were not registered under the Securities Act of 1933, as amended (the “Securities Act”) in our Forms 10-Q for the quarters ended March 31, 2018, June 30, 2018, and September 30, 2018. On various dates during the year ended December 31, 2018, the Company entered into subscription agreements to sell 331,254,949 shares of its restricted common stock and receive proceeds of $289,101. The proceeds were used for general corporate purposes, working capital and the repayment of debt.
 
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 year ended December 31, 2018 the Company issued or agreed to issue 62,100,000 shares of its restricted common stock for financing,loan origination fees and penalty fees on certain unpaid promissory notes upon maturity. During the year ended December 31, 2018, the holders of various convertible promissory notes with an aggregate face value of $18,546 elected to convert the principal balance of their notes plus accrued interest of $930 into 16,759,497 shares of the Company’s common stock. 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 years ended December 31, 2018 and 2017, the Company did not purchase any shares of its common stock and the Company is not likely to purchase any shares in the foreseeable future. 
 
Stock Option Grants
 
The Company does not have any compensatory stock option grants outstanding at this time.
 
Item 6. Selected Financial Data.
 
Not required for smaller reporting companies.
 
 
 
 
 
 
 
 
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Item 7. 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-K 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 for 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-K. This Item should be read in conjunction with the 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 the Juno Beach shipwreck site 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 believes it may eventually be conducting archaeological research around the world and potentially supporting governmental or quasi-governmental organizations, universities and affiliated research groups and private research entities in the documentation of historic shipwrecks based on their discretion. The business plan also includes in-depth archival research and translation of historical documents from various international archives and repositories. These translations of archival research will be made available to government states, university researchers, and other responsible academic parties upon reasonable request.
 
In addition to the research, the Company intends to maintain periodic ongoing education of personnel involved in its operations. Furthermore, the Company has also hired additional archaeologists on a consulting basis to further the Company’s depth in archaeology and to further insure that all sensitive archaeological guidelines are met or exceeded.
   
The exploration and recovery of historic shipwrecks involves a multi-year, multi-stage process. It may take many years and/or be prohibitively expensive to locate, if any are ever located at all, and recover valuable artifacts from historic shipwrecks. Locating and recovering valuable artifacts is very difficult, expensive, and rare. If the Company is not able to successfully locate artifacts or treasure with significant value, then there is a high probability that the Company will face adverse consequences, including a complete loss of all capital invested in or borrowed by the Company.
     
Underwater recovery operations are inherently difficult and dangerous and may be delayed or suspended by inclement weather, sea conditions or other natural hazards. In addition, even though sea conditions in a particular search location may be somewhat predictable, the possibility exists that unexpected conditions may occur, and already have occurred, that adversely affect the Company’s operations. For safety reasons, the Company chooses to not work in seas over three feet. To date in 2018 the Company has had limited days to work because the seas have generally been over three feet. It is also possible that natural hazards may prevent or significantly delay search and recovery operations.     
 
 
15
 
In addition to natural hazards there are constant repair and maintenance issues with historic shipwreck exploration and recovery vessels, the Company’s primary exploration vessel is an older vessel that was originally used in other capacities and has been converted for use in historic shipwreck exploration and recovery operations. The repairs, maintenance and upkeep of vessels, is time consuming and has been very expensive and there may be significant periods of vessel down time, and already has been, that results from needed repairs being made or a lack of current financing to make repairs to the vessel.
  
There are very restrictive 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 be able to enter into agreements with government agencies in order to explore and recover historic shipwrecks.
 
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. The length of time it takes to obtain permits or enter into agreements may cause the Company to expend significant resources while gearing up to do work with little or no visibility as to the timing of receiving a permit.
 
It is also 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. Even if the Company is able to obtain permits for shipwreck projects there is a possibility that the shipwrecks may have already been recovered or may not be found, or may not have had anything valuable on board at the time that they sank.
 
It is the Company’s intent to find shipwrecks where available research suggests there were not any previous recovery efforts or past recovery efforts failed or were not completed. In the event that valuable artifacts are located and recovered, it is possible that the cost of recovery will exceed the value of the artifacts recovered. It is also possible that other entities, including both private parties and governmental entities, will assert conflicting claims and challenge the Company’s rights to the recovered artifacts which could lead to lengthy and expensive legal issues.
 
Moreover, there is the possibility that should the Company be successful in locating and salvaging artifacts that have significant archeological and/or monetary value, that a country whose ship was salvaged may attempt to claim ownership of the artifacts by pursuing litigation. Such litigation, if it were to occur, would more than likely be very expensive. In the event that the Company is able to make a valid claim to artifacts or other items at a shipwreck site, there is a risk of theft of such items at sea, both before or after the recovery or while the artifacts are in transit to a safe destination, as well as when stored in a secured location. Such thefts may not be adequately covered by insurance. The Company does have plans for security at sea, but may never implement such plans. Based on a number of these and other potential issues the Company could spend a great deal of time and invest a large sum in a specific shipwreck project and receive very little or no salvage claim or revenue for its work.
 
There are a number of significant issues and challenges including, but not limited to, government regulation and/or the Company’s inability to secure permits and contracts, lack of financing, lack of revenue and cash flow and continued losses from operations that make the exploration and recovery of historic shipwrecks a speculative business venture that carries a high degree of risk. There is also significant expense involved in research and ongoing educational programs. Research expenses involve paying scientists for translations, dues and fees for various historical entities such as archives, travel and accommodations, and research materials. 
 
In the past the Company has investigated various technologies and non-scientific equipment to help better explore or document our sites. To present date, nothing has been proven to work. The Company will continue to experiment with unproven technologies and will actively work with third parties or independent contractors to develop its own proprietary technology. The Company will also continue to investigate media opportunities.
 
There is a possibility that the Company will be forced to cease its operations if it is not successful in eventually locating valuable artifacts or treasure. 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 speculative and highly risky.
 
 
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This type of business venture is extremely speculative in nature and carries a tremendous amount of risk. An investment in our securities is speculative and 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 our securities. We cannot assure when and if an active-trading market in our shares will be established, or whether any such market will be sustained or sufficiently liquid to enable holders of shares of our common stock to liquidate their investment in our company. The sale of unregistered and restricted securities by current shareholders, including shares issued to consultants 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. Regulatory agencies are also making it difficult for broker dealers to accept stock certificates from issuers of low priced stocks, even though the issuer is fully reporting and current.
 
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 money researching potential shipwrecks including obtaining information from foreign archives.
 
  ●
Although the Company has not generated revenues to date, with the exception of some nominal revue from dividends, our business goals continue to evolve. Relationships are being developed with foreign dignitaries and scientists around the world, as well as with for profit companies and a local university.
 
The Company continues to review revenue producing opportunities including joint ventures with other companies and potentially governmental agencies. These opportunities have been slow to develop, but the Company will continue to pursue those endeavors.
 
 
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 may develop its own proprietary technology or work with third parties to develop technology to aid in its exploration and recovery operations, which will require additional time and financing.
 
     
The Company has investigated media opportunities and will continue to evaluate different media strategies.
 
The Company has previously performed some exploration and recovery operations at what it believes to be a 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. The recovery permit expired in April of 2014. In March of 2015, Seafarer was awarded full rights to the Juno site pursuant to a court order, erasing all rights of the Company’s previous partner with regards to the site. The Juno site was arrested permanently to Seafarer by the U.S. Marshal’s offices in July 7 of 2017 and in November 2017 the Company was granted final judgment on its federal admiralty claim for the Juno Beach shipwreck site. The Company is preparing to attempt to renew the permit, however there is no guarantee that a renewal permit will be issued to the Company.
 
The Company believes it is possible the Juno Beach shipwreck site may potentially contain remnants of a sunken 1500s era ship; however, the Company does not have definitive evidence of the ship’s country of origin. Due to the fact that the Company does not currently have sufficient data to positively identify the potential Juno Beach shipwreck, or its country of origin, it is not possible to determine whether or not the ship was originally carrying cargo of any significant value. To date the Company has not located the main body of a shipwreck at the Juno Beach site, only a lot of shipwreck material and remnants including pottery, porcelain, cannon balls, musket balls, ballast stones, nails, spikes, wood and scattered pieces of a sunken ship.
 
The Company has determined that a large part of the magnetometer survey of the Juno Beach Shipwreck site that was previously provided to the Company and to the State of Florida by a past partner has an area that was intentionally deleted from the survey. The Company will complete a magnetometer survey of the entire deleted area when certain conditions are met. There is also possibility that there are no artifacts of significant value located at 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. 
 
 
17
 
There is a purported historic shipwreck site in the waters off of Brevard County Florida that the Company desires to investigate. In February 2013, the Company signed an agreement with a third party who has previously explored this site for the right to investigate the site. In March of 2014, Seafarer entered into a partnership and ownership with Marine Archaeology Partners, LLC, with the formation of Seafarer’s Quest, LLC. Such LLC was formed in the State of Florida for the purpose of permitting, exploration and recovery of artifacts from a designated area on the east coast of Florida. Such site area is from a defined, contracted area by a separate entity, which a portion of such site is designated from a previous contracted holding through the State of Florida. Under such agreement, Seafarer is responsible for costs of permitting, exploration and recovery, and is entitled to 60% of such artifact recovery. Seafarer has a 50% ownership, with designated management of the LLC coming from Seafarer. There are a significant number of challenges inherent in the exploration and recovery of historic shipwrecks, including the possibility that the Company will never find artifacts of value at the site.
  
In July of 2014, Seafarer’s Quest, LLC received a 1A-31 Exploration Permit with a Dig and Identify modification (the “Permit”) from the Florida Division of Historical Resources for an area identified as Area 2 off of Cape Canaveral, Florida. The Permit was active for three years from the date of issuance. Seafarer on behalf of Seafarer’s Quest, LLC, has been primarily focusing its operations on this site when the weather permits. In addition to the Company’s main salvage vessel, the Company has utilized additional owned and rented vessels in order to perform search and identify operations at this site. Inclement weather and difficult sea conditions have hampered the Company’s ability to perform exploration operations at this site to date. An archeologist with the technical skills, knowledge, and experience from around the world was hired to help insure the integrity of the work. The Company has applied for permits from the State of Florida for two additional areas that were formerly permitted solely by an affiliate of Marine Archeological Partners, LLC. The Permit for one of the additional areas was given to the Company on July 6, 2016 and identified as Area 1. Both permits for Area 1 and Area 2 have been renewed in 2019 for an additional 3 years.
 
The Company regularly reviews opportunities to perform exploration and recovery operations at purported historic shipwreck sites; however, the Company does have specific plans to perform exploration and recovery operations at other shipwreck sites at the present time. The Company is actively reviewing other potential historic shipwreck sites 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 recovery permits as well as environmental permits.
 
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 is also actively researching, exploring and testing new technology to help more accurately understand current and future wreck sites in an unobtrusive manner. Up to the date of this filing, all tests of new and unproven technology and methods have failed.
 
Additionally, the Company is reviewing a few business opportunities that may allow it to eventually generate revenue streams to support the operational expenses of Seafarer. Seafarer has also acquired a 1% ownership position in Probability and Statistics, Inc. (P&S) for an exchange of Seafarer’s restricted stock (See Note 5). The Company also has a commission only contract with P&S for any business it brings to P&S. The Company has received dividend payments from P&S.  
  
The Company continually monitors media rights for potential revenue opportunities. The Company has talked to multiple 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 our securities is speculative and 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.
 
Limited Operating History
 
The Company has not currently generated any revenue from operations and does not expect to report any significant revenue from operations for the foreseeable future. Management believes that it is strategically important to attempt to develop revenue opportunities in the future to help offset the Company’s negative cash flow from operations and the necessity of raising capital.
 
 
18
 
The Company’s working capital deficit increased from $1,126,431 at December 31, 2017 to $1,570,176 at December 31, 2018. This increase in the Company’s working capital deficit is very risky. 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.
 
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 April 12, 2019.
 
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 likely that all capital invested in and/or borrowed by the Company will be lost.  
 
Summary of the Year Ended December 31, 2018 Results of Operations
 
The Company’s net loss for the year ended December 31, 2018 was $1,277,184 as compared to a net loss of $999,847 for the year ended December 31, 2017, an increase of approximately 27.5% year-over-year. The increase in net losses in 2018 was primarily due to increases in consulting and contractor expenses and travel and entertainment expenses. The Company incurred consulting and contractor expenses of $747,886 during the year ended December 31, 2018 versus $404,072 for the year ended December 31, 2017, a year-over-year increase of approximately 85%. The increase in consulting and contractor fees in 2018 was largely a result of stock based compensation being paid to several consultants for strategy and business consulting, advisory council, financial reporting, technology consulting and research, operations, archeological services as well as the payment of Board of Directors’ fees. Travel and entertainment expenses increased approximately 36.6%, from $40,002 for the year ended December 31, 2017 to $54,636 for the year ended December 31, 2018. The increase in travel and entertainment in 2018 was primarily due to increased travel by the Company’s Management and consultants both for operational purposes and for a higher volume of meetings with shareholders, investors, advisors and other stakeholders. Additionally, the Company paid for increased travel for some independent contractors involved in the operations. Interest expense for the year ended December 31, 2018 was $228,855 versus $$264,025 for the same period in 2017. Interest expense decreased by approximately 13% in 2018 due to the impact of fair value measurement of various convertible notes. For the year ended December 31, 2018, the Company incurred professional fees of $74,340 as compared to $64,552 for the year ended December 31, 2017, a 15% increase in 2018. The Company incurred vessel related expenses of $58,309 during the year ended December 31, 2018 versus $70,784 during the year ended December 31, 2017, a decrease of approximately 17.6%. The Company did incur some expenses for repairs to the main salvage vessel in 2018, and the Company also deferred making some repairs, however the Company believes that extensive repairs will be needed in the foreseeable future on both the main salvage vessel and some lighter repairs on other vessels that the Company intends to utilize in its exploration efforts. During the year ended December 31, 2018, the Company general and administrative expenses were $59,973 as compared to $62,960 during the year ended December 31, 2017, a slight decrease of 4.7%. Rent expense was $34,185 for the year ended December 31, 2018 versus $41,170 for the same period in 2017, a decrease of approximately 17%. Surveying and site mapping expense was $0 during the year ended December 31, 2018 as compared to $15,660 during the same period in 2017. In 2017 the Company paid a third party to provide proprietary information regarding locations of potential shipwreck material utilizing a satellite based technology.
 
Liquidity and Capital Resources
 
At December 31, 2018, the Company had $0 cash in the bank.   During the year ended December 31, 2018 and the year ended December 31, 2017, the Company incurred net losses of $1,277,184 and $999,847, respectively. At December 31, 2018, Seafarer had $2,810 in current assets and $1,572,986 in current liabilities, leaving the Company a working capital deficit of $1,570,176. 
 
 
19
 
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 during the year ended December 31, 2018. 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 for an older vessel such as the Company’s main salvage vessel, 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.
 
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 the ongoing operational, even during times when there is little or no exploration or salvage activities taking place, and corporate expenses 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 we are 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 revenue is generated from exploration and recovery activities, if ever. 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.
 
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.
 
The Company may not be able to continue as a going concern. 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. The report of our independent auditors for the years ended December 31, 2018 and 2017 raises substantial doubt as to our ability to continue as a going concern. As discussed in Note 2 to our financial statements for the year ended December 31, 2018 and 2017, we have experienced operating losses in every year since our inception resulting in an accumulated deficit. Our independent auditors believe, based on our financial results as of December 31, 2018, that such results raised substantial doubts about the Company’s ability to continue as a going concern. 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.
 
The Company has experienced a net loss in every fiscal year since inception. The Company’s losses from operations were $1,049,829 for the year ended December 31, 2018 and $733,184 for the year ended December 31, 2017. 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.  
 
 
20
 
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.  
 
Critical Accounting Policies
   
Our discussion and analysis of our financial condition and results of operations are based upon our 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 financial statements for the years ended December 31, 2018 and 2017 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.
 
Management is aware that certain changes in accounting estimates employed in generating financial statements can have the effect of making the Company look more or less profitable than it actually is.  Management does not believe that the Company has made any such changes in accounting estimates.
 
Off-balance Sheet Arrangements
 
None.
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
Not required.
 
 
 
 
 
 
 
 
 
 
 
 
21
 
 
Item 8. Financial Statements.
 
 
 
 
 
 
SEAFARER EXPLORATION CORP.
FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
 
 
 
 
TABLE OF CONTENTS
 
 
 
 
Page No.
Report of Independent Registered Public Accounting Firms
F-1 - F-2
 
 
Balance Sheets
F-2
 
 
Statements of Operations
F-3
 
 
Statements of Changes in Stockholders’ Deficit
F-4
 
 
Statements of Cash Flows
F-5
 
 
Notes to Financial Statements
F-6 - F-30
 
 
 
 
 
 
 
 
 
 
 
22
 
 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and
Stockholders of Seafarer Exploration Corp.
 
Opinion on the Financial Statements
 
We have audited the accompanying balance sheets of Seafarer Exploration Corp. (the “Company”) as of December 31, 2018, and the related statements of operations, stockholders’ deficit, and cash flows for the year ended December 31, 2018, and the related notes to the financial statements (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred a net loss of $1,277,184 for the year ended December 31, 2018.  Additionally, the Company has a working capital deficit of $1,570,176 and an accumulated deficit of $14,954,819 as of December 31, 2018. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
D. Brooks and Associates CPA’s, P.A.
 
We have served as the Company’s auditor since 2019.
 
Palm Beach Gardens, Florida
 
April 15, 2019
 
 
D. Brooks and Associates CPA’s, P.A. 4440 PGA Boulevard Suite 104, Palm Beach Gardens, FL 33410 – (561) 429-6225
 
 
F-1
 
 
Report of Independent Registered Public Accounting Firm
 
 
To the Board of Directors and
Stockholders of Seafarer Exploration Corp.
Tampa, Florida
 
 
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Seafarer Exploration Corp. (the “Company”) at December 31, 2017, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company has incurred net losses since inception, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
 
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
 
 
/s/ Daszkal Bolton LLP
 
We have served as the Company’s auditor since 2016.
 
Fort Lauderdale, Florida
April 2, 2018
 
 
 
F-2
 
 
SEAFARER EXPLORATION CORP.
BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
 
 
 
December 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash
  $ -  
  $ 62,609  
Prepaid expenses
    2,060  
    32,227  
Deposits and other receivables
    750  
    750  
Total current assets
    2,810  
    95,586  
 
       
       
Property and equipment, net
    -  
    20,308  
Investment at cost
    78,000  
    -  
Total assets
  $ 80,810  
  $ 115,894  
 
       
       
 
Liabilities and Stockholders' Deficit
 
 
       
       
Current liabilities:
       
       
Overdraft
  $ 2,919  
  $ -  
Accounts payable and accrued expenses
    480,951  
    279,288  
Convertible notes payable, net of discounts of $1,401 and $-0-
    1,599  
    -  
Convertible notes payable, related parties, net of discounts of $7,588 and $-0-
    21,612  
    -  
Convertible notes payable, in default
    457,300  
    470,300  
Convertible notes payable, in default - related parties
    341,000  
    234,500  
Notes payable, net of discounts of $14,943 and $35,844
    90,057  
    144,156  
Notes payable, in default
    152,500  
    30,000  
Notes payable, in default - related parties
    18,500  
    43,750  
Shareholder loans
    6,548  
    20,023  
Total current liabilities
    1,572,986  
    1,222,017  
 
       
       
Commitments and contingencies
       
       
 
       
       
Stockholders' deficit:
       
       
Preferred stock, $0.0001 par values - 50,000,000 shares authorized; 67 shares issued
       
       
Series A - 7 shares issued and outstanding at December 31, 2018 and 2017
    -  
    -  
Series B - 60 shares issued and outstanding at December 31, 2018 and 2017
    -  
    -  
Common stock, $0.0001 par value - 4,900,000,000 shares authorized; 3,518,152,964 and
       
       
2,784,317,155 shares issued and outstanding at December 31, 2018 and 2017, respectively
  350,573
    278,432  
Common stock to be issued, $0.0001 par value,
       
       
23,192,857 shares outstanding at December 31, 2018 
  2,319
  -
Additional paid-in capital
    13,109,751  
    12,293,080  
Accumulated deficit
    (14,954,819 )
    (13,677,635 )
Total stockholders' deficit
    (1,492,176 )
    (1,106,123 )
Total liabilities and stockholders' deficit
  $ 80,810  
  $ 115,894  
 
See accompanying notes to the financial statements.
 
 
F-3
 
 
SEAFARER EXPLORATION CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
2018
 
 
2017
 
Revenue
  $ -  
  $ -  
 
       
       
Expenses:
       
       
Consulting and contractor expenses
    747,886  
    404,072  
Vessel maintenance and dockage
    58,309  
    70,784  
Professional fees
    74,340  
    64,552  
General and administrative expense
  60,165
    62,960  
Depreciation expense
    20,308
    33,984  
Rent expense
    34,185  
    41,170  
Sureying and mapping
    -  
    15,660  
Travel and entertainment expense
    54,636  
    40,002  
Total operating expenses
    1,049,829  
    733,184  
 
       
       
Loss from operations
    (1,049,829 )
    (733,184 )
 
       
       
Other income (expense):
       
       
Interest expense
    (228,855 )
    (264,025 )
Dividend income
    1,500  
       
Loss on extinguishment of debt
    -  
    (2,638 )
Total other income expense
    (227,355 )
    (266,663 )
Net loss
  $ (1,277,184 )
  $ (999,847 )
 
       
       
Net loss per share - basic and diluted
  $ -  
  $ -  
Weighted average common shares outstanding - basic and diluted
    3,103,881,581  
    2,551,178,960  
 
 
 
 
 
See accompanying notes to the financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
F-4
 
 
SEAFARER EXPLPLORATION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
Series A Preferred Stock
 
 
Series B Preferred Stock
 
 
Common Stock
 
 
 Common Stock to Be Issued
 
 
Additional
 
 
Accumulated
 
 
Total
 
 
 
Shares
 
 
Value
 
 
Shares
 
 
Value
 
 
Shares
 
 
Value
 
 
 Shares
 
 
 Amount
 
 
Paid-in Capital
 
 
Deficit
 
 
Equity
 
Balance December 31, 2016
    7  
  $ -  
    60  
  $ -  
    2,194,976,061  
  $ 219,498  
    -  
  $ -  
  $ 11,485,588  
  $ (12,677,788 )
  $ (972,702 )
 
       
       
       
       
       
       
       
       
       
       
       
Common stock issued for cash
    -  
    -  
    -  
    -  
    371,588,889  
    37,159  
    -  
    -  
    356,381  
    -  
    393,540  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued to convert notes payable
    -  
    -  
    -  
    -  
    48,239,312  
    4,824  
    -  
    -  
    60,328  
    -  
    65,152  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued to convert interest
    -  
    -  
    -  
    -  
    25,562,885  
    2,556  
    -  
    -  
    98,763  
    -  
    101,319  
 
       
       
       
       
       
       
       
       
       
       
       
Warrants issued for financing cost
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    32,641  
    -  
    32,641  
 
       
       
       
       
       
       
       
       
       
       
       
Beneficial conversion feature
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    34,984  
    -  
    34,984  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for board of director fees
    -  
    -  
    -  
    -  
    40,000,000  
    4,000  
    -  
    -  
    64,000  
    -  
    68,000  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for advisory fees
    -  
    -  
    -  
    -  
    38,000,000  
    3,800  
    -  
    -  
    61,700  
    -  
    65,500  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for consulting expense
    -  
    -  
    -  
    -  
    19,500,008  
    1,950  
    -  
    -  
    37,200  
    -  
    39,150  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for legal services
    -  
    -  
    -  
    -  
    7,500,000  
    750  
    -  
    -  
    18,000  
    -  
    18,750  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for financing cost
    -  
    -  
    -  
    -  
    38,450,000  
    3,845  
    -  
    -  
    42,995  
    -  
    46,840  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for repairs
    -  
    -  
    -  
    -  
    500,000  
    50  
    -  
    -  
    500  
    -  
    550  
 
       
       
       
       
       
       
       
       
       
       
       
Net loss
    -  
    -  
    -  
    -  
       
       
    -  
    -  
       
    (999,847 )
    (999,847 )
Balance December 31, 2017
    7  
    -  
    60  
    -  
    2,784,317,155  
    278,432  
    -  
    -  
    12,293,080  
    (13,677,635 )
    (1,106,123 )
 
       
       
       
       
       
       
       
       
       
       
       
Common stock issued for cash -
    -  
    -  
    -  
    -  
    325,004,949  
    32,500  
    6,250,000  
    625  
    255,977  
    -  
    289,102  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued to convert notes payable
    -  
    -  
    -  
    -  
    16,759,497  
    1,676  
    -
 
    -
 
    17,800  
    -  
    19,476  
 
       
       
       
       
       
       
       
       
       
       
       
Warrants issued for financing cost
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
  -
    -  
      -
 
       
       
       
       
       
       
       
       
       
       
       
Beneficial conversion feature
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    107,623  
    -  
    107,623  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued for services
    -  
    -  
    -  
    -  
    280,071,363  
    26,754  
    6,942,857  
    694  
    291,651  
    -  
    319,100  
 
       
       
       
       
       
       
       
       
       
       
       
Stock issued as financial costs
    -  
    -  
    -  
    -  
    52,100,000  
    5,210  
    10,000,000  
    1,000  
    71,620  
    -  
    77,830  
 
       
       
       
       
       
       
       
       
       
       
       
Investment purchased with stock (P&S)
    -  
    -  
    -  
    -  
    60,000,000  
    6,000  
    -  
    -  
    72,000  
    -  
    78,000  
 
       
       
       
       
       
       
       
       
       
       
       
Net loss
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    -  
    (1,277,184 )
    (1,277,184 )
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 )
 
See accompanying notes to the f inancial statements.
 
 
F-5
 
 
SEAFARER EXPLORATION CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017
  
 
 
December 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
Operating activities
 
 
 
 
 
 
Net loss
  $ (1,277,184 )
  $ (999,847 )
Adjustments to reconcile net loss to
       
       
net cash used by operating activities
       
       
Depreciation
    20,308  
    33,984  
Amortization of beneficial conversion feature and loan fees
    138,557  
    5,812  
Common stock issued for services
    319,100  
    191,950  
Common stock and warrants issued for non-payment of notes payable
    63,284  
    2,900  
Decrease in:
       
       
Prepaid expenses and deposits
    30,167  
    87,569  
Increase in:
       
       
Accounts payable and accrued expenses
    201,663  
    40,062  
Net cash used by operating activities
    (504,105 )
    (637,570 )
 
       
       
Cash flows from investing activities
    -  
    -  
 
       
       
Cash flows from financing activities:
       
       
Increase in bank overdraft
    2,919  
    -  
Proceeds from the issuance of common stock
    289,102  
    393,540  
Proceeds from the issuance of convertible notes payable
    15,000  
    265,000  
Payments on convertible notes payable
    (10,000 )
    (45,000 )
 
Proceeds from the issuance convertible notes payable, related
 
       
party
    135,700  
    28,000  
Proceeds from notes payable
  101,000  
    -
Payments on notes payable
    (53,500 )
    -
Proceeds from notes payable, related party
    26,000  
    -
Payments on notes payable related party
    (51,250 )
    -
Proceeds from loans to stockholders
    8,085  
    43,090  
Payments to shareholders
    (21,560 )
    (9,000 )
Net cash provided by financing activities
    441,496  
    675,630  
 
       
       
Net increase (decrease) in cash
    (62,609 )
    38,060  
 
       
       
Cash - beginning
    62,609  
    24,549  
Cash - ending
  $ -  
  $ 62,609  
 
       
       
Supplemental disclosure of cash flow information:
       
       
Cash paid for interest expense
  $ -  
  $ -  
Cash paid for income taxes
  $ -  
  $ -  
Noncash operating and financing activities:
       
       
 
Convertible debt and accrued interest to converted to common
 
       
stock
  $ 19,476  
  $ 68,722  
Acquisition of investment with 60,000,000 common stock shares
  $ 78,000  
  $ -  
Beneficial conversion feature on convertible notes payable
  $ 107,623
  $ -  
Stock issued for loan origination fees
  $ 19,680  
  $ -  
 
See accompanying notes to the financial statements.
 
 
F-6
 
 
SEAFARER EXPLORATION CORP.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 – DESCRIPTION OF BUSINESS
 
Seafarer Exploration Corp. (the “Company”), formerly Organetix, Inc. (“Organetix”), was incorporated on May 28, 2003 in the State of Delaware. The Company filed a Certificate of Domestication to redomicile in the State of Florida on July 26, 2011.
 
The principal business of the Company is to engage in the archaeologically-sensitive exploration, documentation, and recovery of historic shipwrecks with the objective of exploring and discovering Colonial-era shipwrecks for future generations to be able to appreciate and understand.   
 
NOTE 2 - GOING CONCERN
 
These financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses since inception, which raises substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from April 15, 2019. Management's plans include raising capital through the equity markets to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any revenues for the foreseeable future.
   
Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern; however, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.
 
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
 
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The 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 financial statements.
 
Cash and Cash Equivalents
 
For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There are no cash equivalents at December 31, 2018 and 2017.
 
Earnings Per Share
 
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 which provides for calculation of "basic" and "diluted" earnings per share.  Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity.  Basic and diluted losses per share were the same at the reporting dates, as the inclusion of outstanding common stock equivalents would have been anti-dilutive, as of December 31, 2018 and 2017.
 
As of December 31, 2018, and 2017, the Company’s outstanding convertible debt and warrants is would result in approximately 546,378,995 and 435,594,101 shares of common stock, respectively. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive.
 
F-7
 
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 and Depreciation
 
Fixed assets are recorded at historical cost. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. Property and equipment, net consist of the following at December 31 2018 and 2017, respectively:
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Diving vessel
  $ 326,005  
  $ 326,005  
 
       
       
Generator
    7,420  
    7,420  
 
       
       
Magnatometer
    25,000  
    25,000  
 
       
       
Less accumulated depreciation
  $ (358,425 )
    (338,117 )
 
       
       
Balance
  $ 0  
  $ 20,308  
 
Depreciation expense was $20,308 for the year ended December 31, 2018 and $33,984 for the year ended and 2017.
 
 
 
 
 
 
 
 
 
 
 
F-8
 
 
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. ASC 360-10 provides guidance on accounting for property, plant, and equipment, and the related accumulated depreciation on those assets. ASC 360-10 also includes guidance on the impairment or disposal of long-lived assets. ASC 360-10 notes that long-lived tangible assets include land and land improvements, buildings, machinery and equipment, and furniture and fixtures. 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. The Company has determined there has been no impairment in the carrying value of its long-lived assets at December 31, 2018 and 2017, respectively.
 
Use of Estimates
 
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
 
Revenue Recognition
 
Effective January 1, 2018, the Company adopted 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 U.S. 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.
 
Convertible Notes Payable
 
The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 provides comprehensive guidance on derivative and hedging transactions. It sets forth the definition of a derivative instrument and specifies how to account for such instruments, including derivatives embedded in hybrid instruments. In addition, ASC 815 establishes when reporting entities, in certain limited, well-defined circumstances, may apply hedge accounting to a relationship involving a designated hedging instrument and hedged exposure. Hedge accounting provides an alternative, special way of accounting for such relationships. ASC 815 also provides guidance on how reporting entities determine whether an instrument is (1) indexed to the reporting entity’s own stock and (2) considered to be settled in the reporting entity’s own stock. Such a determination will dictate whether an instrument should be accounted for as debt or equity and the appropriate accounting for the instrument. Finally, ASC 815 addresses the accounting for non-exchange-traded weather derivatives. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. As of December 31, 2018 and 2017, all of the Company’s convertible notes payable were classified as conventional instruments.
 
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, 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.
 
 
F-9
 
 
Stock Based Compensation

The Company applies the fair value method of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, “ Share Based Payment ”, in accounting for its stock-based compensation. This 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.
 
The Company accounts for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of the equity instruments exchanged, in accordance with ASC 505-50, “ Equity Based payments to Non-employees ”. The Company measures the fair value of the equity instruments issued based on the fair value of the Company’s stock on contract execution.
 
Recent Accounting Pronouncements
 
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.
 
In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting , which is intended to simplify the accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements and disclosures.
 
All other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission 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 – CAPITAL STOCK
 
The Company’s total authorized capital stock consists of 4,900,000,000 shares of common stock, $0.0001 par value per share.
 
Preferred Stock
 
The Company is authorized to sell or issue 50,000,000 shares of preferred stock.
 
Series A Preferred Stock
 
At December 31, 2018 and 2017, 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.  
  
 
F-10
 
 
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.
 
Common Stock Issuances
 
During the years ended December 31, 2018 and 2017 the Company issued the following shares of common stock:
 
 
2018
 
2017
Common shares issued for cash
325,004,949
 
371,588,889
Common stock issued to convert notes payable and accrued interest
16,759,497
 
73,802,197
Common stock issued for services
280,071,363
 
143,950,008
Common stock issued for financing costs
52,100,000
 
-
Investment purchased with stock
60,000,000
 
-
Total
733,935,809
 
589,341,094
 
Common Stock to be Issued
 
At December 31, 2018 the Company recorded 6,250,000 shares of common stock to be issued for cash.
 
At December 31, 2018 the Company recorded 6,942,857 shares of common stock to be issued for services.
 
At December 31, 2018 the Company recorded 10,000,000 shares of common stock to be issued for financing costs.
 
Warrants and Options
 
At December 31, 2018 and 2017 the Company had warrants to purchase a total of 33,000,000 and 145,333,333 shares respectively of its restricted common stock outstanding. The following table shows the warrants outstanding:
 
 
Number of Shares
Number of Shares
 
Term
2018
2017
Exercise Price
11/10/12 to 11/20/22
4,000,000
4,000,000
0.0050
09/18/15 to 09/18/20
4,000,000
4,000,000
0.0030
04/04/16 to 04/04/18
-
10,000,000
0.0020
07/12/16 to 01/12/18
-
4,000,000
0.0020
08/31/16 to 08/31/18
-
25,000,000
0.0010
01/31/17 to 01/31/18
-
40,000,000
0.0040
02/14/17 to 08/14/18
-
33,333,333
0.0050
09/10/17 to 09/10/19
15,000,000
15,000,000
0.0250
09/10/17 to 09/10/19
10,000,000
10,000,000
0.0250
 
33,000,000
145,333,333
 
 
 
F-11
 
 
Warrants Issued and Expired During the Year Ended December 31, 2018
 
The Company did not issue any warrants during the years ended December 31, 2018. During the year ended December 31, 2018, 112,333,333 warrants expired.
 
Warrants Issued During the Year Ended December 31, 2017
 
During the year ended December 31, 2017 the Company issued a total of 98,333,333 warrants to purchase shares of restricted common stock at prices ranging from $0.004 to $0.025, 40,00,000 warrants were issued under equity subscription agreements and 58,333,333 under convertible promissory notes. The warrants issued under convertible promissory note agreements were valued using the Black-Scholes model with the following assumptions.
 
 
Year ended December 31,
 
2017
Expected life in years
1 to 5 years
Stock price Volatility
205.80 %
Risk free interest rates
1.36 %
Expected dividends
-
Forfeiture rate
-
 
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. The value of the investment in P&S was accounted for as the total value of the Company’s shares issued to P&S on the date of the share exchange agreement.
 
NOTE 6 - INCOME TAXES
 
At December 31, 2018 and 2017, the Company had available Federal and state net operating loss carry forwards to reduce future taxable income. The amounts available were approximately $14,600,000 and $13,300,000 for Federal purposes. The Federal carry forwards begin to expire in 2033. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit.
 
The Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2018 and 2017, the Company did not have a liability for unrecognized tax benefits.
   
 
F-12
 
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2018 and 2017, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2013 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject. Due to the Company’s lack of revenue since inception management does not believe that there is any income tax liability for past years. There are currently no open federal or state tax years under audit.
 
Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carry forwards and will recognize a deferred tax asset at that time.
  
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:
 
 
 
For the Year Ended
December 31, 2018
 
 
For the Year Ended
December 31,  2017
 
Income tax at federal statutory rate
    (21.00 %)
    (34.00 %)
State tax, net of federal effect
    (3.96 %)
    (3.96 %)
 
    (23.96 %)
    (37.96 %)
Valuation allowance
    23.96
    37.96 %
Effective rate
    0.00 %
    0.00 %
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
 
As of December 31, 2018 and 2017, the Company’s only significant deferred income tax asset was a cumulative estimated net tax operating loss of approximately $14,600,000 and $13,300,000, respectively that is available to offset future taxable income, if any, in future periods, subject to expiration and other limitations imposed by the Internal Revenue Service.  Management has considered the Company's operating losses incurred to date and believes that a full valuation allowance against the deferred tax assets is required as of December 31, 2018 and 2017.
 
NOTE 7 – LEASE OBLIGATION
 
Corporate Office
 
The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The Company entered into an amended lease agreement commencing on July 20, 2017 through June 30, 2020 with base monthly rents of $1,252 from July 1, 2017 to June 30, 2018, $1,289 from July 1, 2018 to June 30, 2019, and $1,328 from July 1, 2019 to June 30, 2020. Under the terms of the lease there may be additional fees charged above the base monthly rental fee.
 
As of December 31, 2018, future minimum rental payments required under this non-cancelable operating lease total $15,703 for the year ending December 31, 2019, and $7,967 for the year ending December 31, 2020.  
 
Operations House
 
The Company has an operating lease for a house located in Palm Bay, Florida. The Company uses the house to store equipment and gear and to provide temporary work-related living quarters for its divers, personnel, consultants and independent contractors involved in its exploration and recovery operations. The term of the lease agreement commenced on October 1, 2015 and expired on October 31, 2016.  The Company pays $1,300 per month to lease the operations house. The term of the lease expired in October 2016, the Company is leasing the operations house on a month-to-month basis and anticipates continuing to lease the house for the foreseeable future.
 
Total rental expense during the years ended December 31, 2018 and 2017 on these leases was $34,185 and $41,170.
 
 
 
F-13
 
NOTE 8 - 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 paragraph 4 of EITF 00-19, which was superseded by ASC 815, and EITF 05-02, which was superseded by ASC 470.
 
Convertible Notes Payable
 
The following table reflects the convertible notes payable as of December 31, 2018 and 2017:
 
Issue Date
Maturity Date
2018
2017
Rate
Conversion Price
 
 
 
 
 
 
Convertible notes payable
 
 
 
 
10/29/18
04/29/19
$3,000
-
6.00%
0.00070
Balance
 
$3,000
$0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes payable - related parties
 
 
 
01/09/18
01/09/19
$12,000
-
6.00%
0.00060
08/27/18
02/27/19
2,000
-
6.00%
0.00070
10/02/18
04/02/19
1,000
-
6.00%
0.00080
10/23/18
04/23/19
4,200
-
6.00%
0.00070
11/07/18
05/07/19
2,000
-
6.00%
0.00080
11/14/18
05/14/19
8,000
-
6.00%
0.00080
Balance
 
$29,200
$0
 
 
 
 
 
 
 
 
Convertible notes payable - in default
 
 
 
08/28/09
11/01/09
$4,300
$4,300
10.00%
0.01500
04/07/10
11/07/10
70,000
70,000
6.00%
0.00800
11/12/10
11/12/11
40,000
40,000
6.00%
0.00500
10/31/12
04/30/13
8,000
8,000
6.00%
0.00400
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
25,000
6.00%
0.00500
06/29/15
12/29/15
25,000
25,000
6.00%
0.00300
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
20,000
6.00%
0.00100
03/10/17
09/10/17
-
$10,000
6.00%
0.00100
03/14/17
09/14/17
-
$15,000
6.00%
0.00150
03/06/18
09/06/18
6,000
-
6.00%
0.00060
02/06/18
11/07/18
6,000
-
6.00%
0.00060
Balance
 
$457,300
$470,300
 
 
 
 
 
 
 
 
 
 
F-14
 
 
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
5,000
5,000
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
-
6.00%
0.00070
04/04/18
06/04/18
3,000
-
6.00%
0.00070
04/11/18
06/11/18
25,000
-
6.00%
0.00070
05/08/18
07/08/18
25,000
-
6.00%
0.00070
05/30/18
08/30/18
25,000
-
6.00%
0.00070
06/12/18
09/12/18
3,000
-
6.00%
0.00070
06/20/18
09/12/18
500
-
6.00%
0.00070
Balance
 
$341,000