CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

12 Months Ended

Dec. 31, 2012

Debt Disclosure [Abstract]

CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

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determine whether it meets the definition of “conventional convertible” debt under paragraph 4 of EITF 00-19, which was superseded by ASC 815, and EITF 05-02, which was superseded by ASC 470.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, other than the notes remeasured to fair value, which are discussed in Note 9, as of December 31, 2013 and 2012:

Issue	Maturity	December 31,			December 31,			Interest			Conversion
Date	Date	2013			2012			Rate			Rate
Convertible notes Payable:
January 28, 2013	January 28, 2014	$	25,000		$	-			6.00	%		0.0050
January 28, 2013	January 28, 2014		25,000			-			6.00	%		0.0050
August 8, 2013	February 11, 2014		40,000			-			6.00	%		0.0100
September 18, 2013	March 18, 2014		20,000			-			6.00	%		0.0125
September 25, 2013	March 25, 2014		10,000			-			6.00	%		0.0125
October 21, 2013	April 21, 2014		40,000			-			6.00	%		0.0100
October 4, 2013	May 12, 2014		50,000			-			6.00	%		0.0125
October 30, 2013	October 30, 2014		49,990			-			6.00	%		0.0125
February 17, 2012	February 17, 2013		-			7,500			6.00	%		0.0040
April 5, 2012	April 5, 2013		-			15,000			6.00	%		0.0050
July 16, 2012	July 16, 2013		-			5,000			6.00	%		0.0050
October 31, 2012	April 30, 2013		-			8,000			6.00	%		0.0040
November 20, 2012	May 20, 2013		-			50,000			6.00	%		0.0050
December 20, 2012	June 20, 2013		-			20,000			6.00	%		0.0040
			259,990			105,500
Unamortized discounts			(120,533	)		(13,997	)
Balance		$	139,457		$	91,503
Convertible notes payable, in default
October 31, 2012	April 30, 2013	$	8,000		$	-			6.00	%		0.0040
July 16, 2012	July 30, 2013		5,000			-			6.00	%		0.0050
November 20, 2012	May 20, 2013		50,000			-			6.00	%		0.0050
January 19, 2013	July 30, 2013		5,000			-			6.00	%		0.0040
February 11, 2013	August 11, 2013		9,000			-			6.00	%		0.0040
August 28, 2009	November 1, 2009		4,300			4,300			10.00	%		0.0150
April 7, 2010	November 7, 2010		70,000			70,000			6.00	%		0.0080
November 12, 2010	November 7, 2011		40,000			40,000			6.00	%		0.0080
November 9, 2011	December 31, 2012		-			35,000			6.00	%		0.0040
			191,300			149,300
Unamortized discount			-			-
Balance		$	191,300		$	149,300
Convertible notes payable - related party, in default
January 7, 2013	June 30, 2013		7,500			-			6.00	%		0.0040
January 19, 2013	July 30, 2013		15,000			-			6.00	%		0.0040
February 7, 2013	August 7, 2013		10,000			-			6.00	%		0.0050
July 9, 2013	December 19, 2013		15,000			-			6.00	%		0.0150
January 9, 2009	January 9, 2010		10,000			10,000			10.00	%		0.0150
January 25, 2010	January 25, 2011		6,000			6,000			6.00	%		0.0050
January 18, 2012	July 18, 2012		50,000			50,000			8.00	%		0.0040
			113,500			66,000
Unamortized discount			-			-
Balance		$	113,500		$	66,000
Convertible notes payable - related party
July 17, 2013	January 17, 2014		30,000			-			6.00	%		0.0010
July 26, 2013	January 26, 2014		10,000			-			6.00	%		0.0010
November 12, 2013	May 12, 2014		11,000			-			6.00	%		0.0125
			51,000			-
Unamortized discount			(26,889	)
Balance		$	24,111		$	-

Notes Payable

The following table reflects the notes payable, as of December 31, 2013 and 2012:

Issue Date	Maturity Date	December 31, 2013		December 31, 2012		Interest Rate
Notes payable, in default –related parties:
February 24, 2010	February 24, 2011	$	7,500	$	7,500		6.00	%
Notes payable, in default:
June 23, 2011	August 23, 2011		25,000		25,000		6.00	%
April 27, 2011	August 23, 2011		5,000		5,000		6.00	%
			30,000		30,000
		$	37,500	$	37,500

In August of 2013 a related party shareholder provided the Company with emergency short term loan proceeds totaling $2,500. The Company repaid the related party shareholder the entire $2,500 balance prior to December 31, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.

In October of 2013 a related party shareholder provided the Company with emergency short term loan proceeds totaling $6,250. The Company repaid the related party shareholder the entire $6,250 loan balance prior to December 31, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.

At December 31, 2013 and 2012, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $59,267 and $45,898, respectively, and are included in accounts payable and accrued liabilities on the accompanying balance sheets. 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 amending their notes to make them convertible into shares of the Company’s common stock. Any such agreements to convert promissory notes into shares of the Company’s common stock would more than likely have a highly dilutive effect on current shareholders and such dilution may significantly depress the trading price of the Company’s common stock.

Convertible Notes Payable and Notes Payable, in Default

At December 31, 2013, the Company had convertible notes payable, notes payable and stockholder loans of $505,868, of which $342,300 were in default.  The convertible notes payable and notes payable in default at December 31, 2013 are reflected in the tables shown above.

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, including foreclosure on the Company’s main salvage vessel, 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 convertible notes that have been issued by the Company are convertible at the lender’s option. These convertible notes represent 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. When these notes are converted into equity, there is typically a highly dilutive effect on current shareholders.