NOTES
TO CONDENSED FINANCIAL STATEMENTS
The
accompanying condensed 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 financial statements of the Company are
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for
interim financial information.
These
unaudited condensed financial statements should be read in
conjunction with the Company’s audited financial statements
and footnotes included in the Company’s Report on Form 10-K
for the twelve months ended December 31, 2016, filed with the
Securities and Exchange Commission (the “Commission”).
The results of operations for the three and six month periods ended
June 30, 2017 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 2017 or for
any future period.
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
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
condensed 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 sustained 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 August 14, 2017.
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 condensed 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 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
This
summary of significant accounting policies of Seafarer Exploration
Corp. is presented to assist in understanding the
Company’s condensed financial statements. The
condensed financial statements and notes are representations of the
Company’s management, who are responsible for their integrity
and objectivity. These accounting policies conform to
accounting principles generally accepted in the United States of
America, and have been consistently applied in the preparation of
the condensed 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.
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
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. Basic and diluted losses per share were
the same at the reporting dates as there were no dilutive common
stock equivalents outstanding at June 30, 2017 and
2016.
Fair Value of Financial Instruments
Fair
value is defined in the authoritative guidance as the price that
would be received to sell an asset or paid to transfer a liability
in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at
the measurement date. A fair value hierarchy was established, which
prioritizes the inputs used in measuring fair value into three
broad levels as follows:
Level 1
– Valuation based on unadjusted quoted market prices in
active markets for identical assets or liabilities.
Level 2
– Valuation based on, observable inputs (other than level one
prices), quoted market prices for similar assets such as at the
measurement date; quoted prices in the market that are not active;
or other inputs that are observable, either directly or
indirectly.
Level 3
– Valuation based on unobservable inputs that are supported
by little or no market activity, therefore requiring
management’s best estimate of what market participants would
use as fair value.
In
instances where the determination of the fair value measurement is
based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair
value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The
Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires
judgment, and considers factors specific to the asset or liability.
The valuation of the Company’s notes recorded at fair value
is determined using Level 3 inputs, which consider (i) time value,
(ii) current market and (iii) contractual prices.
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 June 30, 2017 and December 31, 2016:
|
|
|
Diving
vessel
|
$
326,005
|
$
326,005
|
Equipment
|
32,420
|
32,420
|
Less accumulated
depreciation
|
(321,125
)
|
(304,133
)
|
|
$
37,300
|
$
54,292
|
Depreciation
expense for the six month periods ended June 30, 2017 and 2016
amounted to $16,992, and $8,496 for the three month periods ended
June 30, 2017 and 2016.
Impairment of Long-Lived Assets
In
accordance with ASC 360-10, the Company, on a regular basis,
reviews the carrying amount of long-lived assets for the existence
of facts or circumstances, both internally and externally, that
suggest impairment. The Company determines if the carrying amount
of a long-lived asset is impaired based on anticipated undiscounted
cash flows, before interest, from the use of the asset. In the
event of impairment, a loss is recognized based on the amount by
which the carrying amount exceeds the fair value of the asset. Fair
value is determined based on appraised value of the assets or the
anticipated cash flows from the use of the asset, discounted at a
rate commensurate with the risk involved. There were no impairment
charges recorded during the six month periods ended June 30, 2017
and 2016.
Stock Based Compensation
The
Company applies the fair value method of 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 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 as of the date in which
the obligation for payment of services is incurred.
Use of Estimates
The
process of preparing condensed 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 condensed financial
statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
Convertible Notes Payable
The
Company accounts for conversion options embedded in convertible
notes in accordance with ASC 815. 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.
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.
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.
The
classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting
period. Derivative instrument liabilities are classified
in the balance sheet as current or non-current based on whether or
not net-cash settlement of the derivative instrument could be
required within twelve months of the balance sheet
date.
Convertible Notes Payable at Fair Value
The
Company elected to account for this hybrid contract under the
guidance of ASC 815-15-25-4. This guidance allows an entity that
initially recognizes a hybrid financial instrument that under
paragraph ASC 815-15-25-1 would be required to be separated into a
host contract and a derivative instrument may irrevocably elect to
initially and subsequently measure that hybrid financial instrument
in its entirety at fair value (with changes in fair value
recognized in earnings).
The
fair value election is also available when a previously recognized
financial instrument subject to a re-measurement event and the
separate recognition of an embedded derivative. The fair value
election may be made instrument by instrument. For purposes of this
paragraph, a re-measurement event (new basis event) is an event
identified in generally accepted accounting principles, other than
the recognition of another-than-temporary impairment, that requires
a financial instrument to be re-measured to its fair value at the
time of the event but does not require that instrument to be
reported at fair value on a continuous basis with the change in
fair value recognized in earnings. Examples of re-measurement
events are business combinations and significant modifications of
debt as defined in Subtopic 470-50.
NOTE 4 - LOSS PER SHARE
Components
of loss per share for the three and six months ended June 30, 2017
and 2016 are as follows:
|
For the Three
Months Ended
June 30, 2017
|
For the Three
Months Ended
June 30, 2016
|
Net loss
attributable to common stockholders
|
$
(239,854
)
|
$
(305,198
)
|
|
|
|
Weighted average
shares outstanding:
|
|
|
Basic and
diluted
|
2,516,180,900
|
1,586,342,398
|
|
|
|
Loss per
share:
|
|
|
Basic and
diluted
|
$
(0.00
)
|
$
(0.00
)
|
Components
of loss per share for the six months ended June 30, 2017 and 2016
are as follows:
|
For the Six
Months
Ended
June 30, 2017
|
For the Six
Months
Ended
June 30, 2016
|
Net loss
attributable to common stockholders
|
$
(560,836
)
|
$
(507,178
)
|
|
|
|
Weighted average
shares outstanding:
|
|
|
Basic and
diluted
|
2,395,753,200
|
1,459,185,858
|
|
|
|
Loss per
share:
|
|
|
Basic and
diluted
|
$
(0.00
)
|
$
(0.00
)
|
NOTE 5 – CAPITAL STOCK
On
February 24, 2017, the Board of Directors, acting as
shareholders of the Preferred Shares and pursuant to their own
resolution, voted to increase the authorized shares of the
Corporation from 2,500,000,000 to 2,900,000,000 common shares. Such
filing was processed to be effective with the State of Florida on
March 2, 2017.
In
January of 2017, the Company entered into a subscription agreement
to sell 17,000,000 shares of restricted common stock to two
individuals in exchange for proceeds of $75,000. The Company also
agreed that the purchaser will be entitled to receive $500,000 of
treasure of their choice after both the Company has recovered a
minimum of $1,200,000 of artifacts/treasure and the State of
Florida has received its full share of treasure per any permits or
agreements. The purchaser will have the right to convert up to a
maximum of $500,000 worth of treasure that they have received into
shares of the Company’s restricted common stock at a discount
of 10% of the average trading price of the Company’s common
stock of the previous five days closing price provided that the
Company’s common stock is trading at or above $0.04 by
providing a written notice to the Company. The conversion option
will expire eighteen months after the Company first locates a
minimum of $1,200,000 worth of treasure. The value of the treasure
will be determined by a mutually agreed upon third party who is a
recognized expert in the valuation of historic
artifacts.
In
January of 2017, the Company entered into a subscription agreement
to sell 40,000,000 shares of restricted common stock at a price
$0.0005 share to an individual in exchange for proceeds of $20,000.
The Company also agreed that the purchaser will be entitled to
receive warrants to purchase 40,000,000 shares of the
Company’s restricted common stock. The warrants are
exercisable at a price of 0.004 per share for a period of one year
from January 31, 2017.
Preferred Stock
The
Company is authorized to sell or issue 50,000,000 shares of
preferred stock.
Series A Preferred Stock
At June
30, 2017 and December 31, 2016, 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. As of June
30, 2017, and 2016, no shares of this preferred stock had been
converted into shares of the Company’s common
stock.
Series B Preferred Stock
On
February 10, 2014, the Board of Directors of the Company under the
authority granted under Article V of the Articles of Incorporation,
defined and created a new preferred series of shares from the
50,000,000 authorized preferred shares. Pursuant to Article V, the
Board of Directors has the power to designate such shares and all
powers and matters concerning such shares. Such share class shall
be designated Preferred Class B. The preferred class was created
for 60 Preferred Class B shares. Such shares each have a voting
power equal to one percent of the outstanding shares issued
(totaling 60%) at the time of any vote action as necessary for
share votes under Florida law, with or without a shareholder
meeting. Such shares are non-convertible to common stock
of the Company and are not considered as convertible under any
accounting measure. Such shares shall only be held by the Board of
Directors as a Corporate body, and shall not be placed into any
individual name. Such shares were considered issued at the time of
this resolution’s adoption, and do not require a stock
certificate to exist, unless selected to do so by the Board for
representational purposes only. Such shares are
considered for voting as a whole amount, and shall be voted for any
matter by a majority vote of the Board of Directors. Such shares
shall not be divisible among the Board members, and shall be voted
as a whole either for or against such a vote upon the vote of the
majority of the Board of Directors. In the event that there is any
vote taken which results in a tie of a vote of the Board of
Directors, the vote of the Chairman of the Board shall control the
voting of such shares. Such shares are not transferable except in
the case of a change of control of the Corporation when such shares
shall continue to be held by the Board of Directors. Such shares
have the authority to vote for all matters that require a share
vote under Florida law and the Articles of
Incorporation.
Warrants and Options
As of June 30, 2017 and December 31, 2016, the Company had a total
of 205,015,151 and 126,631,818 respectively, warrants outstanding
to purchase common stock with exercise prices ranging from $0.001
to $0.025 per share.
NOTE 6 - INCOME TAXES
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 Six Months Ended June
30, 2017
|
For the Six Months Ended June
30, 2016
|
Income tax at
federal statutory rate
|
(34.00
)%
|
(34.00
)%
|
State tax, net of
federal effect
|
(3.96
)%
|
(3.96
)%
|
|
37.96
%
|
37.96
%
|
Valuation
allowance
|
(37.96
)%
|
(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
June 30, 2017, and December 31, 2016, the Company’s only
significant deferred income tax asset was an estimated net tax
operating loss of $12,860,000 and $12,300,000 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 June 30, 2017 and December 31, 2016. The Company is
preparing and reviewing information for tax returns for past years.
Due to the Company’s lack of revenue since inception,
management does not anticipate that there is any income tax
liability for past years. Management has evaluated tax positions in
accordance with ASC 740 and has not identified any tax positions,
other than those discussed above, that require
disclosure.
NOTE 7 - LEASE OBLIGATION
The
Company leases 823 square feet of office space located at 14497
North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618.
Subsequent to June 30, 2017 the Company entered into an amended
lease agreement with a 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 periodically
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 Company is leasing the
operations house on a month-to-month basis and anticipates
continuing to lease the house for the foreseeable
future.
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 ASC 470.
Convertible Notes Payable
The
following table reflects the convertible notes payable at June 30,
2017:
Issue Date:
|
Maturity Date
|
Principal Balance
June, 30, 2017
|
Interest Rate
|
Conversion Rate
|
Convertible notes payable:
|
|
|
|
|
July 19, 2016
|
July 19, 2017
|
4,000
|
6.00%
|
0.0015
|
March 10, 2016
|
September 10, 2017
|
15,000
|
6.00%
|
0.0010
|
March 10, 2016
|
September 10, 2017
|
10,000
|
6.00%
|
0.0010
|
March 14, 2016
|
September 14, 2017
|
15,000
|
6.00%
|
0.0015
|
Unamortized
discounts
|
|
(21,875)
|
|
|
Balance
|
|
(22,125)
|
|
|
|
|
|
|
|
Convertible notes payable - related party:
|
|
|
|
|
February 24, 2017
|
August 24, 2017
|
25,000
|
6.00%
|
0.0075
|
Unamortized
discounts
|
|
(6,250)
|
|
|
Balance
|
|
18,750
|
|
|
|
|
|
|
|
Convertible notes payable, in default:
|
|
|
|
|
August 28, 2009
|
November 1, 2009
|
4,300
|
10.00%
|
0.0150
|
April 7, 2010
|
November 7, 2010
|
70,000
|
6.00%
|
0.0080
|
November 12, 2010
|
November 12, 2011
|
40,000
|
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
|
January 19, 2013
|
July 30, 2013
|
5,000
|
6.00%
|
0.0040
|
February 11, 2013
|
August 11, 2013
|
9,000
|
6.00%
|
0.0060
|
September 25, 2013
|
March 25, 2014
|
10,000
|
6.00%
|
0.0125
|
October 04, 2013
|
April 4, 2014
|
50,000
|
6.00%
|
0.0125
|
October 30, 2013
|
October 30, 2014
|
50,000
|
6.00%
|
0.0125
|
May 15, 2014
|
November 15, 2014
|
40,000
|
6.00%
|
0.0070
|
October 13, 2014
|
April 13, 2015
|
25,000
|
6.00%
|
0.0050
|
June 29, 2015
|
December 29, 2015
|
25,000
|
6.00%
|
0.0030
|
September 18, 2015
|
March 18, 2016
|
25,000
|
6.00%
|
0.0020
|
April 04, 2016
|
October 4, 2016
|
10,000
|
6.00%
|
0.0010
|
August 24, 2016
|
February 24, 2017
|
20,000
|
6.00%
|
0.0010
|
Balance
|
|
441,300
|
|
|
Convertible notes payable - related parties, in
default:
|
|
|
|
|
January 09, 2009
|
January 9, 2010
|
10,000
|
10.00%
|
0.0150
|
January 25, 2010
|
January 25, 2011
|
6,000
|
6.00%
|
0.0050
|
January 18, 2012
|
July 18, 2012
|
50,000
|
8.00%
|
0.0040
|
January 19, 2013
|
July 30, 2013
|
15,000
|
6.00%
|
0.0040
|
July 26, 2013
|
January 26, 2014
|
10,000
|
6.00%
|
0.0100
|
January 01, 2014
|
July 17, 2014
|
31,500
|
6.00%
|
0.0060
|
May 27, 2014
|
November 27, 2014
|
7,000
|
6.00%
|
0.0070
|
July 21, 2014
|
January 25, 2015
|
17,000
|
6.00%
|
0.0080
|
October 16, 2014
|
April 16, 2015
|
21,000
|
6.00%
|
0.0045
|
July 14, 2015
|
January 14, 2016
|
9,000
|
6.00%
|
0.0030
|
January 12, 2016
|
July 12, 2016
|
5,000
|
6.00%
|
0.0020
|
May 10, 2016
|
November 10, 2016
|
5,000
|
6.00%
|
0.0005
|
May 10, 2016
|
November 10, 2016
|
5,000
|
6.00%
|
0.0005
|
May 20, 2016
|
November 20, 2016
|
5,000
|
6.00%
|
0.0005
|
July 12, 2016
|
January 12, 2017
|
5,000
|
6.00%
|
0.0006
|
January 26, 2017
|
March 12, 2017
|
5,000
|
6.00%
|
|
Balance
|
|
201,500
|
|
|
|
|
|
|
|
Balance, convertible notes
payable
|
|
649,698
|
|
|
Notes Payable
The
following table reflects the notes payable at June 30,
2017:
Issue Date:
|
Maturity Date
|
Principal Balance
June, 30, 2017
|
Interest Rate
|
Conversion Rate
|
Notes payable, in default:
|
|
|
|
|
April 27, 2011
|
April 27, 2012
|
5,000
|
6.00%
|
|
June 23, 2011
|
August 23, 2011
|
25,000
|
6.00%
|
|
Balance
|
|
30,000
|
|
|
|
|
|
|
|
Notes payable - related parties, in default:
|
|
|
|
|
February 24, 2010
|
February 24, 2011
|
7,500
|
6.00%
|
|
October 6, 2015
|
November 15, 2015
|
10,000
|
6.00%
|
|
Balance
|
|
22,500
|
|
|
|
|
|
|
|
Balance, notes payable
|
|
47,500
|
|
|
New Convertible Notes Payable and Notes Payable
During
the six month period ended June 30, 2017 the Company entered into
the following Convertible Notes Payable and Notes Payable
Agreements:
In
January of 2017, the Company entered into a convertible promissory
note agreement in the amount of $5,000 with an individual who is
related to the Company’s CEO. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest was due
on or before March 12, 2017. The Company agreed to pay the related
party lender a loan origination fee of 1,000,000 shares of its
restricted common stock. 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 $0.0005 per share. At March 31, 2017, the
loan was in default due to non-payment of principal and
interest.
In
February of 2017, the Company entered into a convertible promissory
note agreement in the amount of $25,000 with an individual who is
both related to the Company’s CEO and a member of the
Company’s Board of Directors. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest are due
on or before August 14, 2017. 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 $0.00075 per share. The
related party lender received 33,333,333 warrants to purchase
shares of the Company’s common stock at a price of
$0.005.
In
March of 2017, the Company entered into a convertible promissory
note agreement in the amount of $15,000 with a corporation. This
loan pays interest at a rate of 6% per annum and the principal and
accrued interest are due on or before September 10, 2017. 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 $0.001 per
share. The lender received 15,000,000 warrants to purchase shares
of the Company’s common stock at a price of
$0.025.
In
March of 2017, the Company entered into a convertible promissory
note agreement in the amount of $10,000 with a corporation. This
loan pays interest at a rate of 6% per annum and the principal and
accrued interest are due on or before September 10, 2017. 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 $0.001 per
share. The lender received 10,000,000 warrants to purchase shares
of the Company’s common stock at a price of
$0.025.
In
March of 2017, the Company entered into a convertible promissory
note agreement in the amount of $15,000 with a corporation. This
loan pays interest at a rate of 6% per annum and the principal and
accrued interest are due on or before September 14, 2017. 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 $0.0015 per
share.
Note Conversions
A
lender who had a convertible promissory note outstanding with a
remaining principal balance of $24,402 elected to convert the
principal balance of the note plus accrued interest and late fees
of $2,242 into 36,205,587 shares of the Company’s common
stock. The remaining principal balance of this note was $0 at June
30, 2017.
A
lender who had a convertible promissory note outstanding with a
remaining principal balance of $25,750 elected to convert the
principal balance of the note plus accrued interest and late into
30,950,000 shares of the Company’s common stock. The
remaining principal balance of this note was $0 at June 30,
2017.
Shareholder Loans
At June
30, 2017 the Company had two loans outstanding to its CEO totaling
$13,070, consisting of a loan in the amount of $11,570 with a 6%
annual rate of interest and a loan in the amount of $1,500 at 6%
rate of interest and an option to convert the loan into restricted
shares of the Company’s common stock at $0.002.
Convertible Notes Payable and Notes Payable, in
Default
The
Company does not have additional sources of debt financing to
refinance its convertible notes payable and notes payable that are
currently in default. If the Company is unable to obtain additional
capital, such lenders may file suit, including suit to foreclose on
the assets held as collateral for the obligations arising under the
secured notes. If any of the lenders file suit to foreclose on the
assets held as collateral, then the Company may be forced to
significantly scale back or cease its operations which would more
than likely result in a complete loss of all capital that has been
invested in or borrowed by the Company. The fact that the Company
is in default of several promissory notes held by various lenders
makes investing in the Company or providing any loans to the
Company extremely risky with a very high potential for a complete
loss of capital.
The
convertible notes that have been issued by the Company are
convertible at the lender’s option. These convertible notes
represent significant potential dilution to the Company’s
current shareholders as the convertible price of these notes is
generally lower than the current market price of the
Company’s shares. As such when these notes are converted into
shares of the Company’s common stock there is typically a
highly dilutive effect on current shareholders and very possible
that such dilution may significantly negatively affect the trading
price of the Company’s common stock.
NOTE 9 – MATERIAL AGREEMENTS
Agreement to Explore a Shipwreck Site Located off of Brevard
County, Florida
On
March 1, 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.
Exploration Permit with the Florida Division of Historical
Resources for an Area off of Melbourne Beach, Florida
On July 28, 2014, Seafarer’s Quest, LLC, received a 1A-31
Permit (the “Permit”) from the Florida Division of
Historical Resources for an area identified off of Melbourne Beach,
Florida. This Permit became inactive on July 28, 2017
and there is no guarantee that the
permit will be renewed or expanded however the Company has been
working with the Florida Division of Historical Resources on the
renewal of the permit.
Exploration Permit with the Florida Division of Historical
Resources for an Area off of Melbourne Beach, Florida
On July
6, 2016, Seafarer’s Quest, LLC, received a 1A-31 Permit (the
“Permit”) from the Florida Division of Historical
Resources for a second area identified off of Melbourne Beach,
Florida. The Permit is active for three years from the date of
issuance
Certain Other Agreements
In
January of 2017, the Company entered into a subscription agreement
to sell 17,000,000 shares of restricted common stock to two
individuals in exchange for proceeds of $75,000. The Company also
agreed that the purchaser will be entitled to receive $500,000 of
treasure of their choice after both the Company has recovered a
minimum of $1,200,000 of artifacts/treasure and the State of
Florida has received its full share of treasure per any permits or
agreements. The purchaser will have the right to convert up to a
maximum of $500,000 worth of treasure that they have received into
shares of the Company’s restricted common stock at a discount
of 10% of the average trading price of the Company’s common
stock of the previous five days closing price provided that the
Company’s common stock is trading at or above $0.04 by
providing a written notice to the Company. The conversion option
will expire eighteen months after the Company first locates a
minimum of $1,200,000 worth of treasure. The value of any treasure
recovered will be determined by a mutually agreed upon third party
who is a recognized expert in the valuation of historic
artifacts.
In
January of 2017, the Company entered into a convertible promissory
note agreement in the amount of $5,000 with an individual who is
related to the Company’s CEO. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest was due
on or before March 12, 2017. The Company agreed to pay the related
party lender a loan origination fee of 1,000,000 shares of its
restricted common stock. 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 $0.0005 per share. At June 30,
2017, the loan was in default due to non-payment of principal and
interest.
In
January of 2017, the Company entered into a subscription agreement
to sell 40,000,000 shares of restricted common stock at a price
$0.0005 share to an individual in exchange for proceeds of $20,000.
The Company also agreed that the purchaser will be entitled to
receive warrants to purchase 40,000,000 shares of the
Company’s restricted common stock. The warrants are
exercisable at a price of 0.004 per share for a period of one year
from January 31, 2017.
In
January of 2017, the Company amended an agreement with an
individual who had previously joined the Company’s advisory
council in 2016. Under the amended advisory council agreement the
Company agreed to pay the advisor an additional 2,000,000 shares of
restricted common stock for efforts above and beyond the services
agreed to in the original advisory council agreement, in particular
advice and expertise pertaining to a certain technology that the
Company desired to utilize in its exploration operations. The
2,000,000 shares were issued to the advisor during the six month
period ended June 30, 2017.
In
February of 2017, the Company entered into a convertible promissory
note agreement in the amount of $25,000 with an individual who is
both related to the Company’s CEO and a member of the
Company’s Board of Directors. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest are due
on or before August 14, 2017. 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 $0.00075 per
share. The related party lender received 33,333,333
warrants to purchase shares of the Company’s common stock at
a price of $0.005.
In
February of 2017, the Company entered into an agreement with a
corporation under which the corporation agreed to provide
consulting services utilizing a technology to assist the Company
with shipwreck site and artifact location and identification. The
consultant agrees to utilize the technology system at a designated
shipwreck site to ascertain and/or verify the presence of valuable
artifacts in a specific area. The Company agreed to pay the
consultant 5% royalty with a cap of $1,500,000 for anything of
value located at the site. The Company also agreed to pay the
consultant a 20% royalty from the recovery of materials located and
verified by the technology in the areas surrounding the designated
site. The Company also paid the consultant of $30,000 for the
utilization of the technology to provide the Company with specific
data under a trial survey as to the approximate location of various
items of value.
In
February of 2017, the Company extended the term of a previous
agreement with an individual who is related to the Company’s
CEO to continue serving as a member of 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 20,000,000
restricted shares of its common stock and to negotiate future
compensation on a year-by-year basis. The Company also agreed to
reimburse the Director for preapproved expenses.
In
February of 2017, the Company extended the term of a previous
agreement with a second individual who is related to the
Company’s CEO to continue serving as a member of 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 20,000,000 restricted shares of its
common stock and to negotiate future compensation on a year-by-year
basis. The Company also agreed to reimburse the Director for
preapproved expenses.
In
February of 2017, the Company entered into agreements with seven
separate individuals to either join or rejoin the Company’s
advisory council. Under the advisory council agreements all of the
advisors 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 each of the
advisory council agreements is for one year. In consideration for
the performance of the advisory services, the Company agreed to
issue the advisors shares of the Company’s restricted common
stock including 5,000,000 shares each to two of the advisors,
4,000,000 shares each to four of the advisors and 3,000,000 shares
to one of the advisors, an aggregate total of 22,000,000 restricted
shares. According to the agreements each of the advisors’
shares vest at a rate of 1/12th of the amount per month over the
term of the agreement. If any of the advisors or the
Company terminates the advisory council agreements prior to the
expiration of the one year terms, then each of the advisors whose
agreement has been terminated has agreed to return to the Company
for cancellation any portion of their shares that have not vested.
Under the advisory council agreements, the Company has agreed to
reimburse the advisors for preapproved expenses.
In
March of 2017, the Company entered into a Financing and Rights
agreement with a limited liability company. The Financing and
Rights agreement contains certain conditions and contingencies that
must be met prior to the Company receiving any financing. As of the
filing date of this report the Company has not received any
financing under the agreement and it is possible that the Company
will never receive any financing under the terms of the agreement.
Under the terms of the agreement the limited liability company
agreed to provide financing for the Company for the exploration,
recovery and all other related requirements necessary for the
related permitted offshore underwater search and recovery for a
site located off of Juno Beach, Florida and several additional
sites that have been identified by a third party to Seafarer as
being located off of the East Coast of Florida in areas that would
be subject to Federal Admiralty claims should opportunities arise
for the exploration and recovery of historic shipwrecks at these
sites. The Company has agreed to enter into a separate agreement
with the third party for the specific location of the potential
additional shipwreck sites and as such the rights to these sites
that the Company may receive due its agreement with the third party
are included as a part of the Financing and Rights agreement. In
exchange for the services and rights to be provided by the Company
under its core business and such applicable rights under such
judgments and permits, the limited liability company agreed to
provide project capital for the Juno Site project in the amount of
up to $800,000, within ninety days of the approval of the recovery
permit necessary for such site. In return for such capital
contribution, the Company agreed to pay to the limited liability
company a portion of such division of artifacts, revenue. In the
event that the limited liability company has contributed capital
toward the enterprise in any amount and treasure and artifacts are
found at any time in the future under the Company or any related
party, then the limited liability company shall be entitled to a
percentage of its share of such artifacts or revenue created from
such site, so long as a minimum funding of $100,000 has been
committed in the furtherance of the recovery effort. In its sole
discretion, the limited liability company may, if it chooses to do
so, contribute such necessary capital for the necessary actions to
gain such permit for such recovery operations on such Juno Site.
The limited liability company agreed to provide the funding in
exchange for exclusive rights to portions of artifacts recovered
from such site, or revenues created from such. The agreement
further states that capital provided to the Company by the limited
liability Company shall be sued exclusively for actions or
operations on the Juno Site, unless another site is mutually agreed
upon, for dive operations, surveys and scanning as necessary, boat
and vessel expenses, compensation and site management expenses,
fuel and other related costs to the Juno Site project. The limited
liability company will have the right to withhold and approve
funding if the funding is not required for recovery operations on
the Juno Site. After a the State of Florida has taken its share of
any artifacts and treasure per any future permits or agreements for
the Juno Site, the limited liability Company will be entitled to
receive 20% of the first $10,000,000 of artifacts/treasure
recovered, 15% of the amount of any artifacts/treasure recovered
with a value greater than $10,000,000 to $50,000,000, 10% of the
amount of any artifacts/treasure recovered with a value greater
than $50,000,000 for a period of three years, and 5% of the amount
of any treasure/artifacts recovered with a value greater than
$50,000,000 for five years. Additionally, the limited liability
company has been made aware that Seafarer has had negotiations with
a separate third party for the location of several additional
shipwreck sites. The limited liability company will be given
exclusive rights to any sites that the Company gains from the third
party with the sites becoming a part of this agreement. Per the
agreement the sites are unproven, never scanned and presumed to be
unsearched and highly speculative as to whether there are any
shipwrecks or shipwreck material on the sites however such sites
are included in the Financing and Rights agreement. For any of the
sites that Seafarer acquires the rights to from the third party,
the limited liability Company will be entitled to receive 20% of
the first $10,000,000 of artifacts/treasure recovered, 15% of the
amount of any artifacts/treasure recovered with a value greater
than $10,000,000 to $50,000,000, 10% of the amount of any
artifacts/treasure recovered with a value greater than $50,000,000
for a period of three years, and 5% of the amount of any
treasure/artifacts recovered with a value greater than $50,000,000
for five years. Seafarer and the limited liability company may also
agree to revenue sharing from the sales of artifacts/treasure. If
Seafarer has not previously contracted with any party as to media
rights, then the Company and the limited liability company agreed
that the limited liability company will be allowed to make or cause
a media venture at its own expense. Each party will have portion of
the revenues from such venture from whatever source. Such media
rights are only applicable to the Juno Site and the potential third
party site projects that are subject to the Financing and Rights
agreement.
In
April of 2017, the Company entered into a one-year consulting
agreement with a limited liability company for exploration and
diving services, maintaining vessels and equipment, and providing
operational management services. The Company has agreed to issue
4,000,008 million shares valued at approximately $13,600 to the
consultant for the services. The shares vest over a one year
period. The Company also agreed to pay for the consultants'
campground and electrical services while the consultant is
performing services for the Company.
In
April of 2017, the Company entered into a consulting agreement with
an individual. Under the terms of the consulting agreement the
individual agreed to provide advice to the Company with regards to
its diving operations, for the purpose of exploring shipwrecks and
recovering artifacts and any other services that are reasonably
requested by the Company. The Company agreed to issue the
consultant 2,000,000 shares of its restricted common stock valued
at approximately $7,200.
In May
of 2017, the Company entered into an agreement with an individual
who possesses an archeological background to join the
Company’s advisory council. Under the terms of 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 agreements is for one year. In consideration for the
performance of the advisory services, the Company agreed to issue
the advisor 2,000,000 shares of the Company’s restricted
common stock valued at approximately $5,000. Per the terms of the
agreement the shares vest at a rate of 1/12th of the amount per
month over the term of the agreement. If the advisor or
the Company terminates the advisory council agreement prior to the
expiration of the one year terms, then the advisor has agreed to
return to the Company for cancellation any portion of the shares
that have not vested. Under the advisory council agreements, the
Company has agreed to reimburse the advisor for preapproved
expenses.
In May
of 2017 the Company agreed to issue one of its legal advisors
7,500,000 shares of restricted common stock for the performance of
various past legal and consulting services.
The
Company has a verbal agreement with a limited liability company
that is controlled by a person who is related to the
Company’s CEO to pay the related party consultant $3,000 per
month to provide general business consulting and assessing the
Company's business and to advise management with respect to an
appropriate business strategy on an ongoing basis, commenting on
proposed corporate decisions, perform period background research
including background checks and provide investigative information
on individuals and companies and to occasional assist as an
administrative specialist to perform various administrative duties
and clerical services including reviewing the Company’s
agreements and books and records. The consultant provides the
services under the direction and supervision of the Company’s
CEO. At June 30, 2017, the Company owed the related party limited
liability company $3,000 for services rendered.
The
Company has an ongoing agreement with a limited liability company
that is owned and controlled by a person who is related to the
Company’s CEO to provide stock transfer agency
services. At June 30, 2017, the Company owed the related party
limited liability company $1,345 for transfer agency services
rendered and fees.
The
Company has an agreement to pay an individual a monthly fee of
$1,500 per month for archeological consulting
services.
The
Company has a verbal consulting agreement to pay a limited
liability company a minimum of $5,000 per month for business
advisory, strategic planning and consulting services, assistance
with financial reporting, IT management, and administrative
services. The Company also agreed to reimburse the consultant for
expenses. The agreement may be terminated by the Company or the
consultant at any time.
NOTE 10 – LEGAL PROCEEDINGS
On
March 23, 2016 the Board of Directors signed a universal settlement
agreement with the Plaintiffs in the litigation matters of
Micah Eldred, et al., v. Seafarer
Exploration, et al.
, Hillsborough County, Florida, Case No.
09-CA-30763, and
Micah Eldred v.
Seafarer Exploration Corp., et al., Hillsborough County,
Florida
, Case No. 14-CA-5360, and in the matter of
Seafarer Exploration, et al. v.
Micah Eldred, et al.,
Hillsborough County, Florida, Court of
Appeals Case No. 14-2884, specifically: Micah Eldred, Michael
Daniels, Diane J. Harrison, James Eldred, Mary R. Eldred, Michole
Eldred, Nathan Eldred, Toni A. Eldred, Toni A. Eldred FBO Jordan
Gratton, Toni A. Eldred FBO Justin Gratton, Vanessa A Verbosh,
Oksana Savchenko, Matthew J. Presy, Olessia Kritskaia, Ekaterina
Messinger, Abby Lord, Ioulia Hess, Anna Krokhina, George Linder,
Christine Zitman, Carl Dilley, Heather Dilley, Robert Lizzano,
Elizabeth Lizzano, Karen Lizzano, Susan Miller, Jillian Mally,
Michael Mona, Alan Wolper, Sarah Wolper, Alan Wolper FBO Michael
Wolper, Spartan Securities Group, Ltd., and Am Asia Consulting
entered into the settlement agreement with Seafarer. An earlier
named party, CADEF, The Childhood Autism Foundation, Inc., had
previously entered into a settlement agreement and is no longer a
party in the Litigation.
The
settlement called for both cases to be dismissed, with prejudice,
and the Plaintiffs in case number 09-CA-30763 agreed to surrender
and cancel all of their 32,300,000 shares of restricted common
stock which were returned to the treasury of the Corporation. All
such shares have been returned for cancellation. On March 23, 2016
Seafarer CEO signed the resolution to cancel the 32,300,000 shares
and instructed the transfer agent ClearTrust LLC to cancel the
shares and return them to treasury for the benefit of Seafarer thus
reducing the number of outstanding shares by 32,300,000 shares. At
the present time the dismissal has been filed and the case closed,
with all shares cancelled.
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 cite 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 to
by 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 alleges in their
complaint the expenditure of large amounts of shares and monies for
financing and for delays due to Tulco’s non-performance.
Seafarer seeks 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 to be 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 has currently filed an Admiralty Claim over
such sight in the United States District Court which is pending
final ruling. 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, which will occur during the month of
November 2016. The Court subsequently entered and Order directing
the arrest warrant for such site, and such arrest warrant has been
issued by the Clerk of Court. Such warrant entry is now in process
by the Company. 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. Seafarer expects final judgment with a short time frame
on the admiralty claim.
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 questioned
by the Court, and the Company is proceeding to trial on damages
against Volentine in a non-jury trial on December 1, 2015. The
Defendant is the subject of a contempt of court motion which was
heard on April 7, 2016, whereby the Court found a violation and
modified the injunction against the Defendant, and imposed other
matters of potential penalties against the Defendant. The Court
also awarded attorney’s fees against the Defendant on behalf
of Seafarer for such motion. The Defendant subsequently attempted
to have such ruling, evidence and testimony attacked through a
motion heard before the Court on October 24, 2016. The Court
dismissed the Defendant’s motion after presentation of the
Defendant’s case at the hearing. The Plaintiff has set the
matter for entry of the attorney’s fees amount due from the
Defendant for hearing in December 2016. As well the Plaintiff has
set for hearing its motion for sanctions in the form of
attorney’s fees for frivolous filing of the October
24
th
motion, which motion is also set for hearing in December 2016. The
Plaintiff filed a renewed and amended motion for punitive damages
in the case on September 11, 2016, which has not been set for
hearing. The Defendant had also filed a motion for summary judgment
on the matter of notice entitlement pre-suit, which motion is
pending before the Court. The Plaintiff filed a motion for
sanctions against the Defendant for the motion for summary judgment
being frivolous under existing law, and such motion is pending
ruling on the motion. Discovery is ongoing on such case. On
December 7, 2016, the Court held a hearing on the Defendant’s
motion for sanctions, and essentially attempting to rehear the
motion for contempt against the Defendant. The Court dismissed the
Defendant’s motions, and renewed the ability of the Company
to seek attorney’s fees on such matter, which hearing has not
been set at present. On February 28, 2017, the Court entered an
Order denying the Defendant’s motion for summary judgment.
The Company has a pending motion for sanctions related to the
Defendant’s filing of the motion for summary judgment which
has not been set for hearing. The Company will be attempting to set
such matter for trial during 2017.
NOTE 11 – RELATED PARTY TRANSACTIONS
During
the six month period ended June 30, 2017:
In
January of 2017, the Company entered into a convertible promissory
note agreement in the amount of $5,000 with an individual who is
related to the Company’s CEO. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest was due
on or before March 12, 2017. The Company agreed to pay the related
party lender a loan origination fee of 1,000,000 shares of its
restricted common stock. 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 $0.0005 per share. At March
31, 2017 the loan was in default due to non-payment of principal
and interest.
In
February of 2017, the Company entered into a convertible promissory
note agreement in the amount of $25,000 with an individual who is
both related to the Company’s CEO and a member of the
Company’s Board of Directors. This loan pays interest at a
rate of 6% per annum and the principal and accrued interest are due
on or before August 14, 2017. 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 $0.00075 per
share. The related party lender received 33,333,333
warrants to purchase shares of the Company’s common stock at
a price of $0.005.
In
February of 2017, the Company extended the term of a previous
agreement with an individual who is related to the Company’s
CEO to continue serving as a member of 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 20,000,000
restricted shares of its common stock and to negotiate future
compensation on a year-by-year basis. The Company also agreed to
reimburse the Director for preapproved expenses.
In
February of 2017, the Company extended the term of a previous
agreement with an individual who is related to the Company’s
CEO to continue serving as a member of 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 20,000,000
restricted shares of its common stock and to negotiate future
compensation on a year-by-year basis. The Company also agreed to
reimburse the Director for preapproved expenses.
In
March of 2017, the Company repaid $4,000 to its CEO in order to
repay a portion of the principal balance of a loan the CEO had
previously provided to the Company.
In
April of 2017, the Company repaid $2,000 to its CEO in order to
repay a portion of the principal balance of a loan the CEO had
previously provided to the Company.
In May
of 2017, the Company repaid $2,000 to its CEO in order to repay a
portion of the principal balance of a loan the CEO had previously
provided to the Company.
The
Company has a verbal agreement with a limited liability company
that is controlled by a person who is related to the
Company’s CEO to pay the related party consultant $3,000 per
month to provide general business consulting and assessing the
Company's business and to advise management with respect to an
appropriate business strategy on an ongoing basis, commenting on
proposed corporate decisions, perform period background research
including background checks and provide investigative information
on individuals and companies and to occasional assist as an
administrative specialist to perform various administrative duties
and clerical services including reviewing the Company’s
agreements and books and records. The consultant provides the
services under the direction and supervision of the Company’s
CEO. At June 30, 2017, the Company owed the related party limited
liability company $3,000 for services rendered.
The
Company has an ongoing agreement with a limited liability company
that is owned and controlled by a person who is related to the
Company’s CEO to provide stock transfer agency
services. At June 30, 2017, the Company owed the related party
limited liability company $1,345 for transfer agency services
rendered and fees.
At June 30, 2017 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
payments 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 note
is currently in default due to non-payment of principal and
interest.
A
convertible note payable 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 principal and accrued interest were 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 note is currently in
default due to non-payment of principal and interest.
A note
payable dated February 24, 2010 in the principal amount of $7,500
with a corporation. The Company’s CEO was previously a
director of the corporation. The loan is not secured and pays
interest at a rate of 6% per annum and the principal and accrued
interest were due on or before February 24, 2011. This note is
currently in default due to non-payment of principal and
interest.
A
convertible note payable dated January 18, 2012 in the amount of
$50,000 with two individuals who are related to the Company’s
CEO. This loan pays interest at a rate of 8% per annum and the
principal and accrued interest were due on or before July 18, 2012.
The note is secured and is convertible at the lender’s option
into shares of the Company’s common stock at a rate of $0.004
per share. The note is currently in default due to non-payment of
principal and interest.
A
convertible note payable dated January 19, 2013 due to a person
related to the Company’s CEO with a face amount of $15,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.004 per
share. The convertible note payable was due on or before
July 30, 2013 and is not secured. The note is currently
in default due to non-payment of principal and
interest.
A
convertible note payable dated July 26, 2013 due to a person
related to the Company’s CEO and a member of the
Company’s Board of Directors with a face amount of $10,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.01 per
share. The convertible note payable was due on or before
January 26, 2014 and is not secured. The note is
currently in default due to non-payment of principal and
interest.
A
convertible note payable dated January 17, 2014 due to a person
related to the Company’s CEO with a face amount of $31,500.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.006 per
share. The convertible note payable is due on or before
July 17, 2015 and is not secured. The note is currently in
default due to non-payment of principal and interest.
A
convertible note payable dated May 27, 2014 due to a person related
to the Company’s CEO with a face amount of $7,000. This note
bears interest at a rate of 6% per annum with accrued interest to
be paid at the time that the principal balance is repaid or the
note is converted into shares of the Company’s common stock.
The note is convertible at the note holder’s option into the
Company’s common stock at $0.007 per share. The
convertible note payable was due on or before November 27, 2014 and
is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated July 21, 2014 due to a person
related to the Company’s CEO with a face amount of $17,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.008 per share.
The convertible note payable was due on or before January 25, 2015
and is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated October 16, 2014 due to a person
related to the Company’s CEO with a face amount of $21,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.0045 per
share. The convertible note payable was due on or before
April 16, 2015 and is not secured. The note is currently
in default due to non-payment of principal and
interest.
A
convertible note payable dated July 14, 2015 due to a person
related to the Company’s CEO with a face amount of $9,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.0030 per
share. The convertible note payable was due on or before
January 14, 2016 and is not secured. The note is
currently in default due to non-payment of principal and
interest.
A note
payable dated October 6, 2015 in the principal amount of $10,000
due to a person who is related to the Company’s CEO and a
member of the Company’s Board of Directors. The loan is not
secured and pays interest at a rate of 6% per annum and the
principal and accrued interest was due on or before November 11,
2015. This note is currently in default due to non-payment of
principal and interest.
A
convertible note payable dated January 12, 2016 due to a person
related to the Company’s CEO with a face amount of $5,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.0020 per
share. The convertible note payable was due on or before
July 12, 2016 and is not secured. The note is currently
in default due to non-payment of principal and
interest.
A
convertible note payable dated May 10, 2016 due to a person related
to the Company’s CEO with a face amount of $5,000. This note
bears interest at a rate of 6% per annum with accrued interest to
be paid at the time that the principal balance is repaid or the
note is converted into shares of the Company’s common stock.
The note is convertible at the note holder’s option into the
Company’s common stock at $0.0005 per share. The
convertible note payable was due on or before November 10, 2016 and
is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated May 10, 2016 due to a person who is
related to the Company’s CEO and a member of the
Company’s Board of Directors with a face amount of $5,000.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.0005 per
share. The convertible note payable was due on or before
November 10, 2016 and is not secured. The note is
currently in default due to non-payment of principal and
interest.
A
convertible note payable dated May 20, 2016 due to a person related
to the Company’s CEO with a face amount of $5,000. This note
bears interest at a rate of 6% per annum with accrued interest to
be paid at the time that the principal balance is repaid or the
note is converted into shares of the Company’s common stock.
The note is convertible at the note holder’s option into the
Company’s common stock at $0.0005 per share. The
convertible note payable was due on or before November 20, 2016 and
is not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated July 12, 2016 due to a person
related to the Company’s CEO with a face amount of $2,400.
This note bears interest at a rate of 6% per annum with accrued
interest to be paid at the time that the principal balance is
repaid or the note is converted into shares of the Company’s
common stock. The note is convertible at the note holder’s
option into the Company’s common stock at $0.0006 per
share. The convertible note payable was due on or before
January 12, 2017 and is not secured. The note is currently in
default due to non-payment of principal and interest.
A loan
in the amount of $11,983 due to the Company’s CEO. The loan
is not secured and pays interest at a 6% per annum.
A loan
in the amount of $1,500 due to the Company’s CEO. The loan is
not secured and pays interest at a 2% per annum. After the loan has
aged for six months from December 16, 2016 the lender has the right
to convert the loan into shares of the Company’s restricted
common shares at a rate of $0.005 per share.
A
convertible loan dated January 26, 2017 due to a person related to
the Company’s CEO with a face amount of $5,000. This note
bears interest at a rate of 6% per annum with accrued interest to
be paid at the time that the principal balance is repaid or the
note is converted into shares of the Company’s common stock.
The note is convertible at the note holder’s option into the
Company’s common stock at $0.0005 per share. The
convertible note payable was due on or before March 12, 2017 and is
not secured. The note is currently in default due to
non-payment of principal and interest.
A
convertible note payable dated February 14, 2017 in the principal
amount of $25,000 due to a person who is related to the
Company’s CEO and a member of the Company’s Board of
Directors. This loan pays interest at a rate of 6% per annum and
the principal and accrued interest are due on or before August 14,
2017. 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 $0.00075 per share.
NOTE 12 – SUBSEQUENT EVENTS
The
Company sold 46,166,667 shares of restricted common stock for
proceeds of $45,900, used for general working capital purposes and
repayment of debt.
(unaudited)