Related Party Disclosures

12 Months Ended

Dec. 31, 2011

Related Party Disclosures:

Related Party Transactions Disclosure

NOTE 14 – RELATED PARTY TRANSACTIONS

In January of 2011, an individual who is related to the Company’s CEO entered into a subscription agreement to purchase 1,250,000 shares of the Company’s restricted common stock at a price of $0.004 per share and the Company received proceeds of $5,000.

In January 2011, the Company repaid $2,225 to a limited liability company that is owned and controlled by a person who is related to the Company’s CEO. The $2,225 that was repaid represents the total amount that was owed to the limited liability company for providing the loans. The Company has not repaid the limited liability company any interest for providing the loans.

F-23

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

In March of 2011, a person who was a Director of the Company at that time entered into a subscription agreement to purchase 2 shares of the Company’s Series A preferred stock at a price of $3,000 per share and the Company received proceeds of $6,000.

In March of 2011, the Company partially repaid shareholder loans totaling $3,000 to a person who was Director of the Company at the time. The repayment of the stockholder loans leaves a balance of $4,800 still owed to the former Director. The Company had previously agreed to pay interest at a rate of 8% per annum on the borrowed funds; however at the time of the issuance of this report no interest has been repaid.

In April of 2011, an individual who is related to the Company’s CEO agreed to provide the Company with a loan in the amount of $1,000. The loan paid interest at an annual rate of 6% and was not secured. The principle balance of the loan plus accrued interest was due on or before May 21, 2011. The Company repaid the principle balance of $1,000 during the three month period ended June 30, 2011; however, the Company owes a late payment fee of 10% of the principal balance of the loan due to the fact that the loan was not repaid before the due date.

In April of 2011, the Company entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the  agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director.  Under the terms of the agreement, the Company agreed to pay the Director 2,500,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The shares were recorded as an expense of $40,000 in consulting and contractor fees in the accompanying income statement. The Company also agreed to reimburse the Director for pre approved expenses.

In April of 2011, the Company entered into an agreement with an individual to join the Company’s Board of Directors. Under the  agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director.  Under the terms of the agreement, the Company and the Director agreed to negotiate compensation on a year-by-year basis and no compensation was specified in the agreement.  The Company also agreed to reimburse the Director for pre approved expenses.

In June of 2011, the Company entered into a consulting agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO. Under the agreement the consultant agreed to provide background research, background checks and investigative information on individuals and companies, and act as an administrative specialist to perform administrative duties and clerical services. The term of the agreement was on a month-to-month basis. The consultant provided the services under the direction of the Company’s CEO. During the twelve month period ended December 31, 2010 the Company paid $1,000 to the consultant, which is included as an expense in consulting and contractor fees in the accompanying income statement.

In June of 2011, the Company entered into a consulting agreement with an individual who at the time of the execution of the agreement was a member of the Company’s Board of Directors. Under the terms of the Agreement, the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and the analysis of the treasure industry and developing, studying, and evaluating acquisition proposals, preparing reports and studies when advisable under the direction of the Company’s CEO. Under the terms of the agreement, the Company agreed to pay the consultant $7,500 for three months, subject to availability of funds. The Company also agreed to pay the consultant a total of 1,000,000 shares of its restricted common stock. The shares issued to the consultant are subject to the following vesting schedule: 200,000 shares vest in July 2011, 200,000 shares vest in August 2011, 200,000 shares vest in September 2011, 200,000 shares vest in October 2011, and 200,000 shares vest in November 2011.  As of December 31, 2011 the 1,000,000 restricted shares had not been issued and these shares were included as a liability in the accounts payable and accrued liabilities section in the accompanying balance sheet.

In July of 2011, a convertible note holder who is related to the Company’s CEO elected to convert the note dated December 16, 2009 with a face value of $9,000 into 1,9089,00 shares of the Company’s common stock at a price of $0.005 per share.

F-24

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

In August of 2011, a promissory note holder who is related to the Company’s CEO elected to amend his promissory note to make the note convertible into shares of the Company’s common stock and to convert the note dated July 6, 2011 with a face value of $5,000 into 1,010,988 shares of the Company’s common stock at a price of $0.005 per share.

In August 2011, a convertible note holder who is a former Director of the Company elected to convert shareholder loans that were provided to the Company in 2009 with a remaining principal balance of $4,800 into 1,200,000 shares of the Company’s common stock at a price of $0.004 per share. The Company did not pay any interest to the former Director for providing these loans.

In September of 2011, two individuals who are related to the Company’s CEO purchased 600,000 shares of the Company’s common stock at a price of $0.005 per share for total proceeds of $3,000.

In September of 2011, the Company entered into an agreement with an individual who had previously been a member of the Company’s Board of Directors to join the Company’s advisory council. Under the advisory council agreement, the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of the advisory council agreement is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor 900,000 shares of the Company’s common stock. According to the agreement the shares vest at a rate of 75,000 per month during the term of the agreement.  The shares were recorded as an expense of $9,000 in consulting and contractor fees in the accompanying income statement. If the advisory council agreements is terminated prior to the expiration of the one year terms, then the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreement, the Company has agreed to reimburse the advisor for pre approved expenses.

In November 2011, an individual who is related to the Company’s CEO entered into a subscription agreement to purchase 2,500,000 shares of the Company’s restricted common stock at a price of $0.004 per share and the Company received proceeds of $10,000.

The Company paid $3,243 to a limited liability company for stock transfer agency services. The limited liability company is owned and controlled by a person who is related to the Company’s CEO and a former Director of the Company owns a minority, non-controlling interest in the limited liability company. Additionally, the Company entered into a consulting agreement in April of 2011with the limited liability Under the terms of the agreement, the consultant agreed to assist and advise the Company regarding the annual shareholder meeting and proxy administration including analyzing the Company’s bylaws to ensure compliance with corporate bylaws and state and federal regulations, organize the shareholder meeting, mail the notice of shareholder meeting, proxy card and financial statements to shareholders,  tabulate shareholder votes and meeting attendance, author a script and assign appropriate roles, provide certified shareholder lists, attend and participate in the meeting, provide certified voting results and assist with shareholder services. Under the terms of the Agreement the Company agreed to pay the consultant $5,000 and issue to the consultant 1,000,000 shares of its restricted common stock as consideration for the services.  The shares were recorded as an expense of $9,000 in consulting and contractor fees in the accompanying income statement. At December 31, 2011, the Company owed the limited liability company $13,803 for transfer agency services rendered and for additional services rendered to assist the Company with its proxy statement and related shareholder meeting and vote. This amount is included in accounts payable and accrued liabilities in the accompanying balance sheet.

During the twelve month period ended December 31, 2011, the Company had an ongoing consulting agreement to pay a person who is related to the Company’s CEO a minimum of $3,000 per month for providing various administrative, clerical, office management and consulting services. The Company agreed to pay the related party consultant additional compensation in the form of cash and/or stock based on extra time and effort spent rendering services to the Company. The agreement is verbal and may be terminated by the Company or the consultant at any time. In October 2011 the Company issued 2,750,000 shares of its restricted common stock to person who is a related party to its CEO. The shares were issued to show appreciation for the person’s willingness to provide spend extra time rendering services to the Company and as an incentive and an inducement to continue to provide services to the Company. The shares were recorded as an expense of $40,125 in consulting and contractor fees in the accompanying income statement. All fees paid to the related party consultant during the twelve month period ended December 31, 2011 are included as an expense in consulting and contractor fees in the accompanying income statement. At December 31, 2011, the Company owed the consultant $1,500 for services rendered. This amount is included in accounts payable and accrued liabilities in the accompanying balance sheet.

The Company reimbursed a person related to its CEO $262 for expenses related to the purchase of a boat part for the Company’s salvage vessel.

At December 31, 2011, the following promissory notes and shareholder loans were outstanding to related parties:

A convertible note payable dated January 9, 2009, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 10% per annum with interest payment to be paid monthly and is convertible at the note holder’s option into the Company’s common stock at $0.015 per share.  The convertible note payable was due on or before January 9, 2010 and is secured.  This convertible note payable is currently in default due to non-payment of principal and interest.

F-25

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

A convertible loan dated January 25, 2010, in the principal amount of $6,000 with a person who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 25, 2011. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.005 per share. This loan is currently in default due to non-payment of principal and interest.

A loan agreement dated February 24, 2010, the principal amount of $7,500 with a corporation. The Company’s CEO is a director of the corporation and a former Director of the Company is an officer of the corporation. The loan is not secured and pays interest at a rate of 6% per annum and the principle and accrued interest were due on or before February 24, 2011. This loan is currently in default due to non-payment of principal and interest.

NOTE 15 – SUBSEQUENT EVENTS

Subsequent to December 31, 2011:

The Company entered into a convertible note agreement with two persons who are related to the Company’s CEO. The convertible note payable dated January 18 2012, has a face value of $50,000, bears interest at a rate of 8.0% per annum and is due and payable on July 18, 2012. If the Company is more than 15 days late in making any payment required under the agreement then the lender may declare that the entire balance of unpaid principal is due immediately, together with any interest that has accrued. The lender may at its option elect to convert all or a portion of the outstanding principal balance and unpaid accrued interest into shares of the Company’s common stock at a rate of $0.004 per share. The note is secured by the equipment, fixtures, inventory, accounts receivable and intellectual property, currently existing and/or acquired during the term of the convertible note agreement. In the event that the Company was to default on this convertible note the lender may be entitled to receive penalties in cash or a significant amount of additional stock above the amounts for conversion.  If the lender receives additional shares of the Company’s commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the Company’s current shareholders. Such dilution may result in a significant decrease in the per share price of the Company’s common stock. The potential highly dilutive nature of this convertible note represents a very significant risk to the Company’s existing shareholders.

The Company entered into a convertible note agreement with a corporation.  This convertible note payable dated January 31, 2012, has a face value of $32,500, bears interest at a rate of 8.0% per annum and is due and payable on November 2, 2012. The holder of the note has the right to convert the note at any time period beginning on the date that is 180 days following the date of the note into shares of the Company’s common stock. The convertible note payable is convertible at a variable conversion price at a 42% discount to market price of the Company’s common stock of the lowest three trading prices during the ten trading day period ending on the latest day prior to the conversion date.  The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the variable conversion price. Any amount of principal or interest on this note which is not paid when due shall bear interest at a rate of 22% per annum. The holder of the note has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events. The note is secured and the note holder has substantial rights and protections regarding dilution if certain events, including a default were to occur. There are a number of events that could trigger a default, including but not limited to failure to pay principal or interest, failure to issue shares under the conversion feature, breach of covenants, breach of representations and warranties, appointment of a receiver or trustee, judgments, bankruptcy, delisting of common stock, failure to comply with the exchange act, liquidation, cessation of operations, failure to maintain assets, material financial statement restatement, reverse split of borrowers stock, etc. In the event of these events the lender may be entitled to receive significant amounts of additional stock above the amounts for conversion.   Furthermore, there are additional events that could cause the lender to be due additional shares of common stock above and beyond the shares due from a conversion. Some of these events include, but are not limited to a merger or consolidation of the Company, dividend distribution or spin off, dilutive issuances of the Company’s stock, etc. If the lender receives additional shares of the Company’s commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the Company’s current shareholders. Such dilution may result in a significant decrease in the per share price of the Company’s common stock. The potential highly dilutive nature of this convertible note represents a very significant risk to the Company’s existing shareholders.