0001199835-22-000693.txt : 20221123 0001199835-22-000693.hdr.sgml : 20221123 20221123111935 ACCESSION NUMBER: 0001199835-22-000693 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20220930 FILED AS OF DATE: 20221123 DATE AS OF CHANGE: 20221123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEAFARER EXPLORATION CORP CENTRAL INDEX KEY: 0001106213 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 731556428 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29461 FILM NUMBER: 221414376 BUSINESS ADDRESS: STREET 1: 14497 N. DALE MABRY HIGHWAY STREET 2: SUITE 209N CITY: TAMPA STATE: FL ZIP: 33618 BUSINESS PHONE: 813-448-3577 MAIL ADDRESS: STREET 1: 14497 N. DALE MABRY HIGHWAY STREET 2: SUITE 209N CITY: TAMPA STATE: FL ZIP: 33618 FORMER COMPANY: FORMER CONFORMED NAME: Organetix DATE OF NAME CHANGE: 20040902 FORMER COMPANY: FORMER CONFORMED NAME: DIAMOND INTERNATIONAL GROUP INC/NY/ DATE OF NAME CHANGE: 20000725 FORMER COMPANY: FORMER CONFORMED NAME: SEGWAY I CORP DATE OF NAME CHANGE: 20000210 10-Q/A 1 sfrx-10q.htm SEAFARER EXPLORATION CORP. 10-Q/A, AMENDMENT NO. 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2022

 

or

 

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

 

For the transition period from _________ to __________.

 

Commission File Number 000-29461

 

(SEAFARER EXPLORATION CORP LOGO)

 

SEAFARER EXPLORATION CORP.
(Exact name of registrant as specified in its charter)

 

Florida 90-0473054
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

14497 N. Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618
(Address of principal executive offices) (Zip code)
 
(813) 448-3577
Registrant’s telephone number
 
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

1

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o   Accelerated filer o
         
Non-accelerated filer x   Smaller reporting company x
     
  Emerging growth company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

 

As of November 14, 2022, there were 7,070,348,433 shares of the registrant’s common stock, $.0001 par value per share, outstanding.

2

 

 

EXPLANATORY NOTE

 

The purpose of this amendment on Form 10-Q/A to Seafarer Exploration Corp's Quarterly Report on Form 10-Q for the period ended September 30, 2022, filed with the Securities and Exchange Commission on November 14, 2022 is solely to furnish the Inline eXtensible Business Reporting Language (iXBRL) data under Exhibit 101 and 104 to the Form 10-Q in accordance with Rule 405 of Regulation S-T and a couple immaterial typos were updated.

 

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q. 

 

3

 

 

SEAFARER EXPLORATION CORP.
Form 10-Q
For the Quarterly Period Ended September 30, 2022

 


TABLE OF CONTENTS

 

PART I: FINANCIAL INFORMATION 5
   
Item 1. Financial Statements 6
   
Consolidated Balance Sheets: September 30, 2022 (unaudited) and December 31, 2021 6
   
Consolidated Statements of Operations: Three months and nine months ended September 30, 2022 and 2021 (unaudited) 7
   
Consolidated Statements of Changes in Stockholders’ Deficit: Three months and nine months ended September 30, 2022 and 2021 (unaudited) 8
   
Consolidated Statements of Cash Flows: Nine months ended September 30, 2022 and 2021 (unaudited) 9
   
Notes to Consolidated Financial Statements (unaudited) 10
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
   
Item 4. Controls and Procedures 29
   
PART II: OTHER INFORMATION 31
   
Item 1. Legal Proceedings 31
   
Item 1A. Risk Factors 31
   
Item 2. Recent Sales and Other Issuances of Unregistered Securities 31
   
Item 3. Defaults Upon Senior Securities 32
   
Item 4. Mine Safety Disclosures 32
   
Item 5. Other Information 32
   
Item 6. Exhibits 33
   
SIGNATURES 34

4

 

Part I: Financial Information

 

Statements in this Form 10-Q Quarterly Report may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These assumptions are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those risks discussed in this Form 10-Q Quarterly Report, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other documents which we file with the Securities and Exchange Commission.

 

In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, changes in technology, fluctuations in our quarterly results, our ability to continue and manage our growth, liquidity and other capital resource issues, compliance with government regulations and permits, agreements with third parties to conduct operations, competition, fulfillment of contractual obligations by other parties and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q Quarterly Report, except as required by Federal Securities law.

5

 

Item I. Financial Statements

 

SEAFARER EXPLORATION CORP.
CONSOLIDATED BALANCE SHEETS

 

   September 30, 2022   December 31, 2021 
   Unaudited     
Assets          
Current assets          
Cash  $36,394   $81,801 
Prepaid expenses   -    3,000 
Deposits   750    750 
Total current assets   37,144    85,551 
           
Property, plant and equipment, net   160,226    176,476 
Right of use asset   14,760    27,011 
Total Assets  $212,130   $289,038 
           
Liabilities and Stockholders’ Deficit          
Current liabilities          
Accounts payable and accrued expenses  $699,173   $517,038 
Deferred revenue   140,000    140,000 
Convertible notes payable, related parties, net of discounts of $0 and $3,864, respectively   40,000    2,136 
Convertible notes payable, in default   285,300    235,300 
Convertible notes payable, in default - related parties   644,500    638,500 
Notes payable   -    50,000 
Notes payable, in default   118,000    128,000 
Notes payable, in default - related parties   18,500    18,500 
Shareholder loan   14,400    7,900 
Lease liability, current   15,231    16,876 
Total current liabilities   1,975,104    1,754,250 
           
Lease liability, long-term   -   10,718 
Total Liabilities   1,975,104    1,764,968 
           
Commitments and contingencies (Note 8)          
           
Stockholders’ Deficit          
Preferred stock, $0.0001 par values - 50,000,000 shares authorized; 67 shares issued          
Series A - 7 shares issued and outstanding   -    - 
Series B - 60 shares issued and outstanding   -    - 
Common stock, $0.0001 par value - 9,900,000,000 shares authorized; 6,837,914,037 and 6,176,318,579 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively   683,892    617,632 
Common stock to be issued, $0.0001 par value, 46,865,550 and 37,750,000 shares outstanding at September 30, 2022 and December 31, 2021, respectively   4,687    3,775 
Unearned compensation   (52,369)   (261,536)
Additional paid in capital   22,216,091    20,714,410 
Accumulated deficit   (24,615,275)   (22,550,211)
Total Stockholders’ Deficit   (1,762,974)   (1,475,930)
Total Liabilities and Stockholders’ Deficit  $212,130   $289,038 

 

See accompanying notes to the unaudited consolidated financial statements.

6

 

SEAFARER EXPLORATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2022   2021   2022   2021 
Revenue:                    
Service income  $4,907    5,548   $11,127   $18,922 
                     
Operating Expenses                    
Consulting and contractor expenses   280,948    275,361    1,164,348    787,301 
Vessel maintenance and dockage   36,923    28,108    129,837    74,311 
Research and development   16,669    112,610    157,876    323,052 
Professional fees   9,000    14,008    41,271    68,808 
General and administrative expense   166,804    83,048    317,703    287,312 
Depreciation expense   5,465    5,465    16,395    16,395 
Rent expense   9,144    9,052    35,724    30,526 
Travel and entertainment expense   21,854    30,700    56,658    60,021 
Total operating expenses   546,807    558,352    1,919,812    1,647,726 
                     
Net loss from operations   (541,900)   (552,804)   (1,908,685)   (1,628,804)
                     
Other income (expense)                    
Interest expense   (17,027)   (25,761)   (50,129)   (95,848)
Loss on extinguishment of debt   (21,250)   (44,258)   (21,250)   (121,847)
Net loss on settlement of accounts payable   -    (449)   -    (449)
Loss on sale of asset   (85,000)   -    (85,000)   - 
Gain on disposal of asset   -    18,500    -    18,500 
Total other income (expenses)   (123,277)   (51,968)   (156,379)   (199,644)
                     
Net loss  $(665,177)  $(604,772)  $(2,065,064)  $(1,828,448)
                     
Basic and diluted loss per share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
                     
Weighted average shares outstanding   6,695,157,207    4,991,316,919    6,562,530,671    4,886,341,827 

 

See accompanying notes to the unaudited consolidated financial statements.

7

 

SEAFARER EXPLORATION CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)

 

                                   Unarned   Additional   Accumulated     
   Series A Preferred Stock   Series B Preferred Stock   Common Stock   Common Stock to be Issued   Compensation   Paid in Capital   Deficit   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount                 
Balance December 31, 2020   7   $-    60   $-    5,315,683,905   $531,568    1,500,000   $150   $(67,058)  $18,513,123   $(19,924,797)  $(947,014)
                                                             
Common stock issued for cash   -    -    -    -    75,850,000    7,585    -    -    -    191,965    -    199,550 
                                                             
Stock issued to convert notes payable and accrued interest   -    -    -    -    8,734,640    874    -    -    -    56,774    -    57,648 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    18,801    -    -    18,801 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (589,580)   (589,580)
                                                             
Balance March 31, 2021   7    -    60    -    5,400,268,545    540,027    1,500,000    150    (48,257)   18,761,862    (20,514,377)   (1,260,595)
                                                             
Common stock issued for cash   -    -    -    -    207,733,334    20,773    35,417,000    3,542    -    467,085    -    491,400 
                                                             
Stock issued to convert notes payable and accrued interest   -    -    -    -    15,594,247    1,559    -    -    -    77,971    -    79,530 
                                                             
Stock issued for services   -    -    -    -    13,756,154    1,376    -    -    (23,500)   67,675    -    45,551 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    19,010    -    -    19,010 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (634,096)   (634,096)
                                                             
Balance June 30, 2021   7    -    60    -    5,637,352,280    563,735    36,917,000    3,692    (52,747)   19,374,593    (21,148,473)   (1,259,200)
                                                             
Common stock issued for cash   -    -    -    -    198,000,000    19,800    -    -    -    397,200    -    417,000 
                                                             
Stock issued to convert notes payable and accrued interest   -    -    -    -    35,615,390    3,562    -    -    -    142,462    -    146,024 
                                                             
Stock issued for services   -    -    -    -    1,581,182    158    -    -    -    6,173    -    6,331 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    19,220    -    -    19,220 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (604,772)   (604,772)
                                                             
Balance September 30, 2021   7    $-    60    $-    5,872,548,852   $587,255    36,917,000   $3,692   $(33,527)  19,920,428   (21,753,245)  $(1,275,397)
                                                             
                                                             
Balance December 31, 2021   7   $-    60   $-    6,176,318,579   $617,632    37,750,000   $3,775   $(261,536)  $20,714,410   $(22,550,211)  $(1,475,930)
                                                             
Common stock issued for cash   -    -    -    -    328,000,000    32,800    -    -    -    631,200    -    664,000 
                                                             
Stock issued for services, committed in prior period   -    -    -    -    14,000,000    1,400    (14,000,000)   (1,400)   -    -    -    - 
                                                             
Stock issued for services   -    -    -    -    19,885,913    2,089    -    -    (3,300)   77,183    -    75,972 
                                                             
Cancellation of shares   -    -    -    -    (61,183,646)   (6,118)   -    -    -    6,118    -    - 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    85,470    -    -    85,470 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (748,424)   (748,424)
                                                             
Balance March 31, 2022   7    -    60    -    6,477,020,846    647,803    23,750,000    2,375    (179,366)   21,428,911    (23,298,635)   (1,398,912)
                                                             
Common stock issued for cash   -    -    -    -    202,500,000    20,250    -    -    -    384,750    -    405,000 
                                                             
Stock issued for services   -    -    -    -    13,924,764    1,392    -    -    -    38,608    -    40,000 
                                                             
Cancellation of shares   -    -    -    -    (23,500,000)   (2,350)   -    -    -    2,350    -    - 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    63,151    -    -    63,151 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (651,463)   (651,463)
                                                             
Balance June 30, 2022   7    -    60    -    6,669,945,610    667,095    23,750,000    2,375    (116,215)   21,854,619    (23,950,098)   (1,542,224)
                                                             
Common stock issued for cash   -    -    -    -    153,123,189    15,312    23,115,550    2,312    -    320,607    -    338,231 
                                                             
Stock issued for services   -    -    -    -    14,345,238    1,435    -    -    -    39,515    -    40,950 
                                                             
Stock issued for financing fees   -    -    -    -    500,000    50    -    -    -    1,350    -    1,400 
                                                             
Amortization of unearned compensation   -    -    -    -    -    -    -    -    63,846    -    -    63,846 
                                                             
Net Loss   -    -    -    -    -    -    -    -    -    -    (665,177)   (665,177)
                                                             
Balance September 30, 2022   7   $-    60   $-    6,837,914,037   $683,892    46,865,550   $4,687   $(52,369)  $22,216,091   $(24,615,275)  $(1,762,974)

 

See accompanying notes to the unaudited consolidated financial statements.

8

 

SEAFARER EXPLORATION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)

 

   For the Nine Months Ended
September 30,
 
   2022   2021 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net Loss  $(2,065,064)  $(1,828,448)
           
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation   16,395    16,395 
Amortization of beneficial conversion feature and loan fees   3,864    75,348 
Amortization of unearned compensation   212,467    57,031 
Common stock issued for services   156,922    51,882 
Financing fees on debt   1,400    - 
Gain on disposal of asset   -    (18,500)
Loss on extinguishment of debt   21,250    121,847 
Loss on disposal of asset   85,000    - 
Loss on settlement of accounts payable   -    449 
Decrease (increase) in:          
Prepaid expenses and deposits   3,000    98,956 
Deferred revenue   -    140,000 
Increase (decrease) in:          
Accounts payable & accrued expenses   78,085    21,336 
Net cash from operating activities   (1,486,681)   (1,263,704)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property, plant and equipment   (145)   - 
Proceeds from sale of asset   -    18,500 
Net cash from investing activities   (145)   18,500 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from the issuance of common stock   1,404,919    1,107,950 
Proceeds from the issuance convertible notes payable   50,000    - 
Proceeds from the issuance convertible notes payable, related party   40,000    - 
Proceeds from the issuance notes payable, related party   5,000    - 
Payments on convertible notes payable, related party   (10,000)   - 
Payments on notes payable, related party   (5,000)   - 
Payments on notes payable   (50,000)   (2,000)
Payments to shareholders   6,500    6,000 
Net cash from financing activities   1,441,419    1,111,950 
           
NET CHANGE IN CASH   (45,407)   (133,254)
CASH, BEGINNING OF PERIOD   81,801    186,873 
CASH, END OF PERIOD  $36,394   $53,619 
           
Supplemental disclosure of cash flow information          
Cash paid for interest expense  $-   $- 
Cash paid for income taxes  $-   $- 
           
Non-cash operating and financing activities:          
Convertible debt and accrued interest converted to common stock  $-   $283,202 
Stock issued for prepaid services  $3,300   $23,500 

 

See accompanying notes to the unaudited consolidated financial statements.

9

 

SEAFARER EXPLORATION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

The accompanying consolidated financial statements of Seafarer Exploration Corp. (“Seafarer” or the “Company”) are unaudited, but in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

 

These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “Commission”) on March 31, 2022. The results of operations for the nine month period ended September 30, 2022 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2022 or for any future period.

 

NOTE 1 – DESCRIPTION OF BUSINESS

 

Seafarer Exploration Corp. (“Seafarer” or the “Company”), was incorporated on May 28, 2003 in the State of Delaware.

 

The principal business of the Company is to engage in the archaeologically-sensitive exploration, documentation, recovery, and conservation of historic shipwrecks with the objective of exploring and discovering Colonial-era shipwrecks for future generations to be able to appreciate and understand.

 

In March of 2014, Seafarer entered into a partnership with Marine Archaeology Partners, LLC (“MAP”), with the formation of Seafarer’s Quest, LLC (“SQ”) for the purpose of exploring a shipwreck site off of Melbourne Beach, Florida. Under the partnership with MAP, Seafarer is the designated manager of SQ.

 

The Company’s wholly owned subsidiary Blockchain LogisTech, LLC (“Blockchain”), was formed on April 4, 2018 and began operations in 2019. The Company is evaluating Blockchain’s business opportunities and does not believe that Blockchain will generate any significant revenues for the foreseeable future.

 

The Company formed a wholly owned subsidiary, Exploration Studios, LLC, in May 2018 in order to explore media strategies and opportunities. Exploration Studios, LLC has not yet commenced operations.

 

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 1 permit was renewed on March 1, 2019 for a period of three years. The Area 2 permit was renewed on January 14, 2019 for a period of three years. Per Florida Statutes, Seafarer made a timely request for renewal of the 2019 permit for Area 2 on July 29, 2021. In January of 2022, Seafarer received notification from the Florida Division of Historical Resources (“FDHR”) that its permit for Area 2, which was set to expire on January 19, 2022, has been continued indefinitely while the renewal request was being processed. The existing permits will continue until the renewal is finalized or rejected. Per Florida Statutes, Seafarer made a timely request for renewal of the 2019 permit for Area 1 on July 29, 2021. On March 2, 2022, Seafarer received notification that the permit would continue indefinitely with the same terms as Area 2.

 

Federal Admiralty Judgement

 

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. The Company is conducting limited exploration operations at the Juno Beach shipwreck site while it awaits updated permitting from the Army Corp of Engineers and the Florida Department of Environmental Protection.

 

Blockchain Software Services Referral Agreements

 

Management is reviewing potential alternate plans for Blockchain and believes that it is highly unlikely that Blockchain will generate revenue during 2022.

 

NOTE 2 – GOING CONCERN

 

These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses since inception and has an accumulated deficit of $24,615,275 as of September 30, 2022. During the nine month period ended September 30, 2022, the Company’s net loss was $2,065,064 and at September 30, 2022, the Company had a working capital deficit of $1,937,960. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from November 14, 2022. Management’s plans include raising capital through the issuance of common stock and debt to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any significant revenues for the foreseeable future. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof.

10

 

Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of 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 unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These unaudited consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Covid-19 Disclosure

 

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

 

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

 

Current Economic Conditions

 

The Company and certain of its advisors are closely monitoring current domestic economic conditions. Of particular concern is the rate of inflation that has been reported as being near a forty year high and had recently increased nearly 7% on a year-over-year basis from 2020 to 2021 and the rising cost of fuel. The increasing inflation in the overall economy may lead to higher interest rates which may make it more expensive or potentially more challenging for the Company to access financing. Additionally, the Company’s vessels use large amounts of fuel when in operation and the recent rise in the per gallon cost of gasoline will cause an increase in the Company’s operating expenses. The increase in the cost of fuel may hamper the Company’s ability to conduct operations.

 

The Company is also aware of the recent decision by the U.S. Federal Reserve to raise interest rates. The rising interest rate environment may have a significant material negative effect on the Company’s business and operations. Higher interest rates may make it more expensive, or potentially impossible, for the Company to raise capital to fund its operations. If the Company is unable to successfully raise capital, then it is highly likely that it will be forced to cease operations which may result in investors losing the entirety of their investment in the Company.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of Seafarer Exploration Corp. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements.

 

Principles of Consolidation

 

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

 

Cash and Cash Equivalents

 

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There were no cash equivalents at September 30, 2022 and December 31, 2021. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2022, the Company did not have deposits in excess of the FDIC insured limit.

 

Research and Development Expenses

 

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $157,876 and $323,052 for the nine month periods ended September 30, 2022 and 2021, respectively and $16,669 and $112,610 for the three month periods ended September 30, 2022 and 2021, respectively, which is included in operating expenses in the accompanying consolidated statements of operations.

11

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) and all the related amendments. The Company elected to adopt this guidance using the modified retrospective method. The adoption of this guidance did not have a material effect on the Company’s financial position, results of operations or cash flows.

 

The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

 

The Company recognizes revenue from the referrals that Blockchain has made to providers of software services when payment for a referral is received from the provider of software services. Blockchain, at its sole discretion and with no specific sales quotas or targets, provides referrals of potential end users to the software service providers and is paid a referral fee only after the software services providers receive payment from the end user.

 

The Company also has a separate sales referral agreement, with no sales quotas or specific goals or targets, with a limited liability company that provides product/system engineering and development services. The Company’s performance obligation is met when the payment from the customer is received by the provider of the development services, which is at a point in time. The Company receives referral fees when payment is received from the provider of the product/system development services which is when the Company recognizes revenue under the agreement. 

 

The Company recognizes revenue when cash is received or when it has met its obligations per the terms of a contract or agreement for services. Payments received for services not yet provided are recorded as deferred revenue and are recognized as revenue when the services have been provided.

 

During the year ended December 31, 2021 the Company entered into an agreement to provide scanning services using its SeaSearcher technology to a corporation involved in searching for historic shipwreck material. Under the terms of the agreement the Company received an upfront payment of $140,000 which has been included in the accompanying consolidated balance sheets at September 30, 2022 and December 31, 2021 as deferred revenue, as the services have not yet been provided.

 

Earnings Per Share

 

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

 

The potentially dilutive common stock equivalents for the nine month periods ended September 30, 2022 and 2021 were excluded from the dilutive loss per share calculation as they would be antidilutive due to the net loss. As of September 30, 2022 and 2021, there were approximately 730,366,968 and 673,692,795 shares of common stock underlying our outstanding convertible notes payable and warrants, respectively.

 

Fair Value of Financial Instruments

 

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

 

Property, Plant and Equipment

 

Property, plant and equipment are recorded at historical cost. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets.

 

Depreciation expense was $16,395 for the nine month periods ended September 30, 2022 and 2021, respectively, and $5,465 for the three month periods ended September 30, 2022 and 2021, respectively, which is included in operating expenses in the accompanying consolidated statements of operations. 

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, Impairment and Disposal of Long Lived Assets, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the nine month periods ended September 30, 2022 and 2021.

12

 

Use of Estimates

 

The process of preparing consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Significant estimates for the nine month periods ended September 30, 2022 and 2021 include useful life of property, plant and equipment, valuation allowances against deferred tax assets and the fair value of non cash equity transactions.

 

Segment Information

 

During 2019, Seafarer’s wholly owned subsidiary, Blockchain began operations, generated revenue and incurred expenses. The business of Blockchain has no relation to the Company’s shipwreck exploration and recovery operations other than common ownership. As such, the Company concluded that the operations of Blockchain and Seafarer Exploration were separate reportable segments for the nine month periods ended September 30, 2022 and 2021 (see Note 10 – Segment Information).

 

Convertible Notes Payable

 

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, Derivatives and Hedging, in accordance with the provisions of ASC 470-20, Debt with Conversion and Other Options, 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. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

 

Stock Based Compensation

 

The Company applies the fair value method of FASB ASC 718, Share Based Payment, in accounting for its stock-based compensation. The standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period. The Company values stock-based compensation at the market price for the Company’s common stock and other pertinent factors at the grant date.

 

Fully vested and non-forfeitable shares issued prior to the services being performed are classified as prepaid expenses.

 

Leases

 

The Company accounts for leases under Accounting Standards Update (“ASU”) 2016-02. At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

 

Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented in operating expenses on the consolidated statements of operations.

 

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.

 

Investments

 

The Company follows ASC 325-20, Cost Method Investments, to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

13

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Recent Accounting Pronouncements

 

All other recent accounting pronouncements issued by the FASB, did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

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

 

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases are not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term.

 

The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618.  The Company entered into an amended lease agreement commencing on July 1, 2020 through July 31, 2023 with base month rents of $1,475 from July 1, 2020 to September 30, 2021, $1,519 from July 1, 2021 to September 30, 2022, $1,564 from July 1, 2022 to September 30, 2023 and $1,611 from July 1, 2023 to July 31, 2023. Under the terms of the lease there may be additional fees charged above the base monthly rental fee.

 

On July 1, 2020, upon renewal of the lease, the Company recorded a right-of-use asset and lease liability of $48,957. During the nine month periods ended September 30, 2022 and 2021, the Company recorded and $13,802 as operating lease expense, which is included in rent expense on the consolidated statements of operations. During the three month periods ended September 30, 2022 and 2021, the Company recorded $4,601 as operating lease expense, which is included in rent expense on the consolidated statements of operations. 

 

Right-of-use assets at September 30, 2022 and December 31, 2021 are summarized below:

 

 

   September 30, 2022   December 31, 2021 
Office lease  $48,957   $48,957 
Less accumulated amortization   (34,197)   (21,946)
Right of use assets, net  $14,760   $27,011 

 

Operating Lease liabilities are summarized below:

 

 

   September 30, 2022   December 31, 2021 
Office lease  $15,231   $27,594 
Less: current portion   (15,231)   (16,876)
Long term portion  $-   $10,718 

 

Maturity of lease liabilities are as follows:

 

 

Year ended December 31, 2022  $4,729 
Year ended December 31, 2023   11,081 
Total future minimum lease payments   15,810 
Less: Present value discount   (579)
Lease liability  $15,231 

 

The Company also has an operating lease for a house located in Palm Bay, Florida that it leases on a month-to-month basis for $1,400 per month. The Company uses the house to store equipment and gear and to provide temporary work-related living quarters for its divers, personnel, consultants and independent contractors involved in its exploration and recovery operations. The Company also pays a rental fee for a space in a park on an as needed basis.

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NOTE 5 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

 

Upon inception, the Company evaluates each financial instrument to determine whether it meets the definition of “conventional convertible” debt under ASC 470.

 

Convertible Notes Payable

 

 

The following tables reflect the convertible notes payable at September 30, 2022 and December 31, 2021: 

                     
   Issue Date  Maturity
Date
  September 30,
2022
   December 31,
2021
   Rate  Conversion
Price
         Principal
Balance
   Principal
Balance
       
Convertible notes payable – related parties                
Notes payable, Face Value  10/31/21  04/13/22  $-   $3,000   2.00%  0.0020
Notes payable, Face Value  11/10/21  05/10/22   -    3,000   2.00%  0.0020
Notes payable, Face Value  07/06/22  01/06/23   20,000    -   6.00%  0.0150
Notes payable, Face Value  07/29/22  01/29/23   10,000    -   6.00%  0.0020
Notes payable, Face Value  08/04/22  02/04/23   10,000    -   6.00%  0.0020
Face Value         40,000    6,000       
Less unamortized discounts   -    (3,864)       
Balance convertible notes payable – related parties  $40,000   $2,136       
                     
   Issue Date  Maturity
Date
  September 30,
2022
   December 31,
2021
   Rate  Conversion
Price
         Principal
Balance
   Principal
Balance
       
Convertible notes payable - in default                
Notes payable, Face Value  08/28/09  11/01/09  $4,300   $4,300   10.00%  0.0150
Notes payable, Face Value  11/20/12  05/20/13   50,000    50,000   6.00%  0.0050
Notes payable, Face Value  01/19/13  07/30/13   5,000    5,000   6.00%  0.0040
Notes payable, Face Value  02/11/13  08/11/13   9,000    9,000   6.00%  0.0060
Notes payable, Face Value  09/25/13  03/25/14   10,000    10,000   6.00%  0.0125
Notes payable, Face Value  10/04/13  04/04/14   50,000    50,000   6.00%  0.0125
Notes payable, Face Value  05/15/14  11/15/14   40,000    40,000   6.00%  0.0070
Notes payable, Face Value  09/18/15  03/18/16   25,000    25,000   6.00%  0.0020
Notes payable, Face Value  07/19/16  07/19/17   4,000    4,000   6.00%  0.0015
Notes payable, Face Value  03/06/18  09/06/18   6,000    6,000   6.00%  0.0006
Notes payable, Face Value  02/06/18  11/07/18   6,000    6,000   6.00%  0.0006
Notes payable, Face Value  01/03/19  07/03/19   1,000    1,000   6.00%  0.0010
Notes payable, Face Value  09/04/19  03/04/20   25,000    25,000   6.00%  0.0030
Notes payable, Face Value  08/31/22  09/29/22   50,000    -   6.00%  0.0020
Balance convertible notes payable - in default  $285,300   $235,300       

15

 

   Issue Date  Maturity
Date
  September 30,
2022
   December 31,
2021
   Rate  Conversion
Price
         Principal
Balance
   Principal
Balance
       
Convertible notes payable - related parties, in default                
Notes payable, Face Value  01/09/09  01/09/10  $10,000   $10,000   10.00%  0.0150
Notes payable, Face Value  01/25/10  01/25/11   6,000    6,000   6.00%  0.0050
Notes payable, Face Value  01/18/12  07/18/12   50,000    50,000   8.00%  0.0040
Notes payable, Face Value  01/19/13  07/30/13   15,000    15,000   6.00%  0.0040
Notes payable, Face Value  07/26/13  01/26/14   10,000    10,000   6.00%  0.0100
Notes payable, Face Value  01/17/14  07/17/14   31,500    31,500   6.00%