NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. Blockchain provides customer referrals to a blockchain related software service company.
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
As
previously noted on its form 8-K filed on November 22, 2017, Seafarer was granted, through the United States District Court for
the Southern District of Florida, a final judgment for its federal admiralty claim on the Juno Beach shipwreck site. 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
Blockchain
has a strategic partnership to provide referrals to a blockchain software services provider and receive referral fees when the
referrals lead to closed business for the blockchain software services company. Blockchain also has a reseller agreement with
a separate company that sells a blockchain related security product. Blockchain did not generate any revenues during the year
ended December 31, 2021. Management is reviewing potential alternate plans for Blockchain and believes that it is highly unlikely
that Blockchain will generate revenue in 2022.
NOTE
2 – GOING CONCERN
These
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 $22,550,211 as of December 31, 2021. During the year ended December
31, 2021, the Company’s net loss was $2,625,414 and at December 31, 2021, the Company had a working capital deficit of $1,668,699.
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 March 31, 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.
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 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 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 40 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.
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 accounting principles
generally accepted in the United States of America (“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 December
31, 2021 and 2020. 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 December 31, 2021, 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 $439,816 and
$463,468 for the years ended December 31, 2021 and 2020, respectively.
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.
Earnings
Per Share
The
Company has adopted FASB ASC 260-10, 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 years ended December 31, 2021 and 2020 were excluded from the dilutive loss
per share calculation as they would be antidilutive due to the net loss. As of December 31, 2021 and 2020, there were approximately
648,056,162 and 663,053,249 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. During the year ended December 31, 2019, the Company purchased a vessel with an estimated useful
life of ten years. During the year ended December 31, 2020 the Company purchased a vehicle with an estimated useful life of seven
years. As of December 31, 2021, these are the only capital assets owned by the Company.
Depreciation
expense was $21,860 and $20,379 for the years ended December 31, 2021 and 2020, 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, 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 the 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 years ended December 31, 2021
and 2020.
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 years ended December 31, 2021 and
2020 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 as
of the years ended December 31, 2021 and 2020 (see Note 11 – 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, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible
securities with beneficial conversion features. ASC 470-10 addresses classification determination for specific obligations, such as short-term
obligations expected to be refinanced on a long-term basis, due-on-demand loan arrangements, callable debt, sales of future revenue,
increasing rate debt, debt that includes covenants, revolving credit agreements subject to lock-box arrangements and subjective acceleration
clauses. 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, which is usually the vesting period. The Company values stock-based compensation at the
market price for the Company’s common stock and other pertinent factors at the grant date.
Fully
vested and non-forfeitable shares issued prior to the services being performed are classified as prepaid expenses.
Leases
In
February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The updated
guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated
guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance
in ASC 606.
On
January 1, 2019, the Company adopted ASU 2016-02, applying the package of practical expedients to leases that commenced before
the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain
leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the
inception of a contract the Company assessed 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 new 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 (“ASC 325-20”), 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.
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 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 6%, 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. During the years ended December 31, 2021 and 2020, the Company recorded $18,403 and $10,398, respectively,
as operating lease expense, which is included in rent expense on the consolidated statements of operations.
The
Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. During
the year ended December 31, 2019 and through June 30, 2020 the Company paid $1,252 per month to lease the office space. 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 June 30, 2021, $1,519 from July 1, 2021 to June 30, 2022, $1,564 from July 1, 2022 to June 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.
In
adopting Topic 842, the Company has elected the ‘package of practical expedients’, which permit it not to reassess
under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company
did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the
Company. As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition
provisions of the new 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. On January 1, 2019, upon adoption of Topic
842, the Company recorded right-of-use assets and lease liabilities of $22,575. On July 1, 2020, upon renewal of the lease, the
Company recorded a right-of-use asset and lease liability of $48,957.
Right-of-use
assets at December 31, 2021 and 2020 are summarized below:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Office lease | |
$ | 48,957 | | |
$ | 48,957 | |
| Less accumulated amortization | |
| (21,946 | ) | |
| (6,966 | ) |
| Right of use assets, net | |
$ | 27,011 | | |
$ | 41,991 | |
Amortization
on the right -of -use asset is included in rent expense on the consolidated statements of operations.
Operating
lease liabilities are summarized below:
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Office lease | |
$ | 27,594 | | |
$ | 42,274 | |
| Less: current portion | |
| (16,876 | ) | |
| (14,680 | ) |
| Long term portion | |
$ | 10,718 | | |
$ | 27,594 | |
Maturity
of lease liabilities are as follows:
| Year ended December 31, 2022 | |
$ | 18,641 | |
| Year ended December 31, 2023 | |
| 11,080 | |
| Total future minimum lease payments | |
| 29,721 | |
| Less: Present value discount | |
| (2,127 | ) |
| Lease liability | |
$ | 27,594 | |
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 $1,300
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.
NOTE
5 – INVESTMENT IN PROBABILITY AND STATISTICS, INC.
The
Company entered into a share exchange agreement with Probability and Statistics, Inc. (“P&S”), a privately held
corporation, in August of 2018.
Under
the terms of the share exchange agreement, the Company agreed to issue 60,000,000 shares of its restricted common stock to P&S
in exchange for 10,000 common shares of P&S, or a 1% interest. All shares issued by both parties under the agreement have
all rights and entitlements as the common stock of every other shareholder of such share class.
The
investment in P&S was valued at $78,000 based on the fair value of the Company’s shares issued to P&S on the date
of the share exchange agreement and is being accounted for as a cost method investment. The Company received dividends from P&S
during the years ended December 31, 2021 and 2020 of $0 and $4,500 respectively, which have been presented as dividend income
on the consolidated statements of operations.
In
August of 2020, the Company and P&S entered into a new agreement to effectively unwind the previous share exchange agreement.
Under the terms of the new agreement, Seafarer agreed to exchange 10,000 shares of P&S for 60,000,000 shares of its common
stock. As a result of the transaction in August of 2020, the Company realized a disposal of investment of $354,000.
Seafarer
also has an agreement with P&S to receive referral fees. Under the terms of the agreement, P&S has agreed to pay a 7%
referral fee to the Company when P&S receives cash flows from providing blockchain software services to entities that were
referred by the Company. The agreement is ongoing and has no expiration date, however the Company does not anticipate that it
will receive any referral fees from P&S in the future. During the years ended December 31, 2021 and 2020, P&S paid a total
of $0 and $4,200, respectively, of referral fees to the Company. These amounts are included in service income in the consolidated
statements of operations.
NOTE 6 –
CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
Convertible
Notes Payable
PAYABLE
The
following table reflects the convertible notes payable as of December 31, 2021 and 2020:
| | |
Issue
Date | |
Maturity
Date | |
December
31,
2021 | | |
December
31,
2020 | | |
Rate | | |
Conversion
Price | |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | | |
| | |
| |
| Convertible notes payable | |
| | | |
| | | |
| | | |
| | |
| | |
09/01/20 | |
03/01/21 | |
$ | - | | |
$ | 45,000 | | |
| 6.00 | % | |
| 0.0030 | |
| Face value | |
| |
| |
| - | | |
| 45,000 | | |
| | | |
| | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | |
| Less unamortized discounts | |
| - | | |
| (13,425 | ) | |
| | | |
| | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | |
| Balance convertible
notes payable | |
$ | - | | |
$ | 31,575 | | |
| | | |
| | |
| | |
Issue
Date | |
Maturity
Date | |
December
31,
2021 | |
December
31,
2020 | |
Rate | |
Conversion
Price |
| | |
| |
| |
Principal
Balance | |
Principal
Balance | |
|
|
|
| Convertible
notes payable - related parties | |
| |
| |
| | | |
| | | |
| |
| |
|
| | |
08/06/20 | |
02/06/21 | |
$ | — | | |
$ | 25,200 | | |
| 6.00 | % | |
0.0035 |
| | |
08/06/20 | |
02/06/21 | |
| — | | |
| 35,000 | | |
| 6.00 | % | |
0.0035 |
| | |
08/14/20 | |
02/14/21 | |
| — | | |
| 50,400 | | |
| 6.00 | % | |
0.0035 |
| | |
10/13/21 | |
04/13/22 | |
| 3,000 | | |
| — | | |
| 2.00 | % | |
0.0020 |
| | |
11/10/21 | |
05/10/22 | |
| 3,000 | | |
| — | | |
| 2.00 | % | |
0.0020 |
| Face value | |
| |
| |
| 6,000 | | |
| 110,600 | | |
| | |
|
|
| | |
| |
| |
| | | |
| | | |
| | |
|
|
| Less
unamortized discounts | |
| |
| |
| (3,864 | ) | |
| (24,431 | ) | |
| | |
|
|
| | |
| |
| |
| | | |
| | | |
| | |
|
|
| Balance
convertible notes payable - related parties | |
| |
| |
$ | 2,136 | | |
$ | 86,169 | | |
| | |
|
|
| | |
Issue
Date | |
Maturity
Date | |
December
31,
2021 | | |
December
31,
2020 | | |
Rate | | |
Conversion
Price | |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | | |
| | |
| |
| Convertible notes payable - in default | |
| | | |
| | | |
| | |
| | |
08/28/09 | |
11/01/09 | |
$ | 4,300 | | |
$ | 4,300 | | |
| 10.00 | % | |
| 0.0150 | |
| | |
11/20/12 | |
05/20/13 | |
| 50,000 | | |
| 50,000 | | |
| 6.00 | % | |
| 0.0050 | |
| | |
01/19/13 | |
07/30/13 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0040 | |
| | |
02/11/13 | |
08/11/13 | |
| 9,000 | | |
| 9,000 | | |
| 6.00 | % | |
| 0.0060 | |
| | |
09/25/13 | |
03/25/14 | |
| 10,000 | | |
| 10,000 | | |
| 6.00 | % | |
| 0.0125 | |
| | |
10/04/13 | |
04/04/14 | |
| 50,000 | | |
| 50,000 | | |
| 6.00 | % | |
| 0.0125 | |
| | |
10/30/13 | |
10/30/14 | |
| - | | |
| 50,000 | | |
| 6.00 | % | |
| 0.0125 | |
| | |
05/15/14 | |
11/15/14 | |
| 40,000 | | |
| 40,000 | | |
| 6.00 | % | |
| 0.0070 | |
| | |
09/18/15 | |
03/18/16 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0020 | |
| | |
04/04/16 | |
10/04/16 | |
| - | | |
| 10,000 | | |
| 6.00 | % | |
| 0.0010 | |
| | |
07/19/16 | |
07/19/17 | |
| 4,000 | | |
| 4,000 | | |
| 6.00 | % | |
| 0.0015 | |
| | |
03/06/18 | |
09/06/18 | |
| 6,000 | | |
| 6,000 | | |
| 6.00 | % | |
| 0.0006 | |
| | |
02/06/18 | |
11/07/18 | |
| 6,000 | | |
| 6,000 | | |
| 6.00 | % | |
| 0.0006 | |
| | |
10/29/18 | |
04/29/19 | |
| - | | |
| 3,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
01/03/19 | |
07/03/19 | |
| 1,000 | | |
| 1,000 | | |
| 6.00 | % | |
| 0.0010 | |
| | |
03/16/19 | |
09/16/19 | |
| - | | |
| 10,000 | | |
| 6.00 | % | |
| 0.0010 | |
| | |
09/04/19 | |
03/04/20 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0030 | |
| Balance convertible
notes payable - in default | |
$ | 235,300 | | |
$ | 308,300 | | |
| | | |
| | |
| | |
Issue Date | |
Maturity
Date | |
December 31,
2021 | | |
December 31,
2020 | | |
Rate | | |
Conversion
Price | |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | | |
| | |
| |
| Convertible notes payable - related parties, in default | |
| | | |
| | |
| | |
01/09/09 | |
01/09/10 | |
$ | 10,000 | | |
$ | 10,000 | | |
| 10.00 | % | |
| 0.0150 | |
| | |
01/25/10 | |
01/25/11 | |
| 6,000 | | |
| 6,000 | | |
| 6.00 | % | |
| 0.0050 | |
| | |
01/18/12 | |
07/18/12 | |
| 50,000 | | |
| 50,000 | | |
| 8.00 | % | |
| 0.0040 | |
| | |
01/19/13 | |
07/30/13 | |
| 15,000 | | |
| 15,000 | | |
| 6.00 | % | |
| 0.0040 | |
| | |
07/26/13 | |
01/26/14 | |
| 10,000 | | |
| 10,000 | | |
| 6.00 | % | |
| 0.0100 | |
| | |
01/17/14 | |
07/17/14 | |
| 31,500 | | |
| 31,500 | | |
| 6.00 | % | |
| 0.0060 | |
| | |
05/27/14 | |
11/27/14 | |
| 7,000 | | |
| 7,000 | | |
| 6.00 | % | |
| 0.0070 | |
| | |
07/21/14 | |
01/25/15 | |
| 17,000 | | |
| 17,000 | | |
| 6.00 | % | |
| 0.0080 | |
| | |
10/16/14 | |
04/16/15 | |
| 21,000 | | |
| 21,000 | | |
| 6.00 | % | |
| 0.0045 | |
| | |
07/14/15 | |
01/14/16 | |
| 9,000 | | |
| 9,000 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
01/12/16 | |
07/12/16 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0020 | |
| | |
05/10/16 | |
11/10/16 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0005 | |
| | |
05/10/16 | |
11/10/16 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0005 | |
| | |
05/20/16 | |
11/20/16 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0005 | |
| | |
07/12/16 | |
01/12/17 | |
| 2,400 | | |
| 2,400 | | |
| 6.00 | % | |
| 0.0006 | |
| | |
01/26/17 | |
03/12/17 | |
| 5,000 | | |
| 5,000 | | |
| 6.00 | % | |
| 0.0005 | |
| | |
02/14/17 | |
08/14/17 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
08/16/17 | |
09/16/17 | |
| 3,000 | | |
| 3,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
03/14/18 | |
05/14/18 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
04/04/18 | |
06/04/18 | |
| 3,000 | | |
| 3,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
04/11/18 | |
06/11/18 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
05/08/18 | |
07/08/18 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
05/30/18 | |
08/30/18 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
06/12/18 | |
09/12/18 | |
| 3,000 | | |
| 3,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
06/20/18 | |
09/12/18 | |
| 500 | | |
| 500 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
01/09/18 | |
01/09/19 | |
| 12,000 | | |
| 12,000 | | |
| 6.00 | % | |
| 0.0006 | |
| | |
08/27/18 | |
02/27/19 | |
| 2,000 | | |
| 2,000 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
10/02/18 | |
04/02/19 | |
| 1,000 | | |
| 1,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
10/23/18 | |
04/23/19 | |
| 4,200 | | |
| 4,200 | | |
| 6.00 | % | |
| 0.0007 | |
| | |
11/07/18 | |
05/07/19 | |
| 2,000 | | |
| 2,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
11/14/18 | |
05/14/19 | |
| 8,000 | | |
| 8,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
01/08/19 | |
07/08/19 | |
| 7,000 | | |
| 7,000 | | |
| 6.00 | % | |
| 0.0008 | |
| | |
04/25/19 | |
12/23/19 | |
| 20,000 | | |
| 20,000 | | |
| 6.00 | % | |
| 0.0040 | |
| | |
06/07/19 | |
12/07/19 | |
| 5,100 | | |
| 5,100 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
09/17/19 | |
04/17/20 | |
| 12,000 | | |
| 12,000 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
11/12/19 | |
05/12/20 | |
| 25,000 | | |
| 25,000 | | |
| 6.00 | % | |
| 0.0025 | |
| | |
11/26/19 | |
05/26/20 | |
| 25,200 | | |
| 25,200 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
12/03/19 | |
06/03/20 | |
| 15,000 | | |
| 15,000 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
01/07/20 | |
06/20/20 | |
| 51,000 | | |
| 51,000 | | |
| 6.00 | % | |
| 0.0030 | |
| | |
08/06/20 | |
02/06/21 | |
| 25,200 | | |
| - | | |
| 6.00 | % | |
| 0.0035 | |
| | |
08/06/20 | |
02/06/21 | |
| 35,000 | | |
| - | | |
| 6.00 | % | |
| 0.0035 | |
| | |
08/14/20 | |
02/14/21 | |
| 50,400 | | |
| - | | |
| 6.00 | % | |
| 0.0035 | |
| Balance convertible notes payable - related parties, in default | |
$ | 638,500 | | |
$ | 527,900 | | |
| | | |
| | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | |
| Balance all convertible notes payable | |
$ | 875,936 | | |
$ | 953,944 | | |
| | | |
| | |
Notes
Payable
The
following tables reflect the notes payable at December 31, 2021 and 2020:
| | |
Issue Date | |
Maturity
Date | |
December 31,
2021 | | |
December 31,
2020 | | |
Rate |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | |
| Notes payable | |
| |
| |
| | | |
| | |
|
|
| | |
12/08/21 | |
01/08/22 | |
$ | 50,000 | | |
$ | - | | |
6.00% |
| Balance notes payable | |
| |
| |
$ | 50,000 | | |
$ | - | |
|
|
| | |
Issue Date | |
Maturity
Date | |
December 31,
2021 | | |
December 31,
2020 | | |
Rate |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | |
| Notes payable - in default | |
| |
| |
| | |
| |
|
|
| | |
04/27/11 | |
04/27/12 | |
$ | 5,000 | | |
$ | 5,000 | | |
6.00% |
| | |
12/14/17 | |
12/14/18 | |
| 18,000 | | |
| 20,000 | | |
6.00% |
| | |
11/29/17 | |
11/29/19 | |
| 105,000 | | |
| 105,000 | | |
2.06% |
| Balance notes payable – default | |
| |
| |
$ | 128,000 | | |
$ | 130,000 | |
|
|
| | |
Issue Date | |
Maturity
Date | |
December 31,
2021 | | |
December 31,
2020 | | |
Rate |
| | |
| |
| |
Principal
Balance | | |
Principal
Balance | |
| Notes payable - related parties, in default | |
| |
| |
| | |
| |
|
|
| | |
02/24/10 | |
02/24/11 | |
$ | 7,500 | | |
$ | 7,500 | | |
6.00% |
| | |
10/06/15 | |
11/15/15 | |
| 10,000 | | |
| 10,000 | | |
6.00% |
| | |
02/08/18 | |
04/09/18 | |
| 1,000 | | |
| 1,000 | | |
6.00% |
| Balance notes payable - related parties, in default | |
| |
| |
$ | 18,500 | | |
$ | 18,500 | |
|
|
| | |
| |
| |
| | | |
| | |
|
|
| Balance all notes payable | |
| |
| |
$ | 196,500 | | |
$ | 148,500 | |
|
|
The
convertible notes payable are convertible into a fixed number of shares and with no down round protection features. The Company accounted
for the beneficial conversion features based on the intrinsic value at the date of issuance. During the years ended December 31, 2021
and 2020, the Company recognized beneficial conversion features totaling $6,000 and $202,100, respectively. The discount from the beneficial
conversion features are being amortized through charges to interest expense over the term of the convertible notes payable. For the years
ended December 31, 2021 and 2020, the Company recorded interest expense related to the amortization of debt discounts in the amount of
approximately $40,000 and $240,000 which is included in interest expense on the consolidated statements of operations.
New
Convertible Notes Payable Issued During the Years Ended December 31, 2021 and 2020
During
the year ended December 31, 2021, the Company entered into the following Convertible Notes Payable and Notes Payable Agreements:
In
October of 2021, the Company entered into a convertible promissory note agreement in the amount of $3,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 2% per annum and the principal and accrued interest is due on
or before April 13, 2022. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common
stock at a rate of $0.0020 per share.
In
November of 2021, the Company entered into a convertible promissory note agreement in the amount of $3,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 2% per annum and the principal and accrued interest is due on
or before May 10, 2022. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common
stock at a rate of $0.0020 per share.
During
the year ended December 31, 2020, the Company entered into the following Convertible Notes Payable and Notes Payable Agreements:
In
January of 2020, the Company entered into a convertible promissory note agreement in the amount of $51,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before June 30, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.003 per share. This note is currently in default due to non payment of principal and interest.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $25,200 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.0035 per share. This note is currently in default due to non payment of principal and interest.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $35,000 with a related party. This
note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is
unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.
This note is currently in default due to non payment of principal and interest.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $50,400 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before February 14, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.0035 per share. This note is currently in default due to non payment of principal and interest.
In
September of 2020, the Company entered into a convertible promissory note agreement in the amount of $45,000 with an individual. This
note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before March 1, 2021. The note is unsecured
and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.003 per share. This note
is currently in default due to non payment of principal and interest.
Note
Conversions
During
the year ended December 31, 2021:
The
Company issued 8,734,640 shares of restricted common stock to a related party to settle $20,302 of accrued interest owed on sixteen convertible
notes payable with a total share value of $57,648.
The
Company issued 15,594,247 shares of restricted common stock to a convertible note holder to settle $45,000 of the principal balance and
$1,783 of accrued interest on a convertible note payable with a total share value of $79,530.
The
Company issued 35,615,390 shares of restricted common stock to a convertible note holder to settle $73,000 of the principal balance and
$28,761 of accrued interest on four convertible notes payable with a total share value of $146,024.
During
the year ended December 31, 2020:
The
Company issued 39,781,082 shares of restricted common stock to settle $84,086 of principal and accrued interest owed on three convertible
notes payable. The remaining principal balance of all of these notes was $0 at December 31, 2020.
Repayment
of Promissory Note
During
the years ended December 31, 2021 and 2020, the Company repaid a total of $2,000 and $45,000, respectively, of the principal of a promissory
note with an original principal balance of $75,000 that was due on December 14, 2018. The remaining principal balance of the note at
December 31, 2021 was $18,000.
Shareholder
Loan
At
December 31, 2021, the Company had the following four loans outstanding to its CEO in the aggregate amount of $7,900:
| - | A
loan with no due date with a $1,500 remaining balance and an interest rate of 2% and a conversion
rate of $0.0005; |
| - | A
loan due on October 26, 2021 with a remaining balance of $4,000 and an interest
rate of 1%; |
| - | A
loan due on January 22, 2022 with a remaining balance of $1,400 and an interest
rate of 1%; and |
| - | A
loan due on January 26, 2022 with a remaining balance of $1,000 and an interest rate
of 1%; |
Repayment
of Shareholder Loan
During
the year ended December 31, 2021 the Company repaid its CEO $2,000 for a loan dated April 26, 2021 that had an original principle balance
of $6,000.
Collateralized
Promissory Notes
Two
convertible notes outstanding with related parties, dated January 9, 2009 and January 18, 2012 are collateralized by Company assets.
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.
NOTE
7 – STOCKHOLDERS’ DEFICIT
The
Company’s total authorized capital stock consists of 9,900,000,000 shares of common stock, $0.0001 par value per share.
Preferred
Stock
The
Company is authorized to issue 50,000,000 shares of preferred stock.
Series
A Preferred Stock
At
December 31, 2021 and 2020, 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. In the event of a liquidation, Series A have
preference.
Series
B Preferred Stock
On
February 10, 2014, the Board of Directors of the Company under the authority granted under Article V of the Articles of Incorporation,
defined and created a new preferred series of shares from the 50,000,000 authorized preferred shares. Pursuant to Article V, the Board
of Directors has the power to designate such shares and all powers and matters concerning such shares. Such share class shall be designated
Preferred Class B. The preferred class was created for 60 Preferred Class B shares. Such shares each have a voting power equal to one
percent of the outstanding shares issued (totaling 60%) at the time of any vote action as necessary for share votes under Florida law,
with or without a shareholder meeting. Such shares are non-convertible to common stock of the Company and are not considered as convertible
under any accounting measure. Such shares shall only be held by the Board of Directors as a Corporate body, and shall not be placed into
any individual name. Such shares were considered issued at the time of this resolution’s adoption, and do not require a stock certificate
to exist, unless selected to do so by the Board for representational purposes only. Such shares are considered for voting as a whole
amount, and shall be voted for any matter by a majority vote of the Board of Directors. Such shares shall not be divisible among the
Board members, and shall be voted as a whole either for or against such a vote upon the vote of the majority of the Board of Directors.
In the event that there is any vote taken which results in a tie of a vote of the Board of Directors, the vote of the Chairman of the
Board shall control the voting of such shares. Such shares are not transferable except in the case of a change of control of the Corporation
when such shares shall continue to be held by the Board of Directors. Such shares have the authority to vote for all matters that require
a share vote under Florida law and the Articles of Incorporation.
Common
Stock Issuances
During
the year ended December 31, 2021, the Company issued or is to issue the following shares of restricted common stock:
| |
- |
720,353,061
restricted shares for total proceeds of $1,530,110. |
| |
|
|
| |
- |
59,944,277
restricted shares to settle $283,202 of principal and accrued interest owed on various convertible notes payable. The Company had
a loss on extinguishment of debt totaling $121,847. |
| |
|
|
| |
- |
79,337,336
restricted shares for services provided by consultants, contractors, advisory members, board
members, and other service providers with a value of $197,882. The Company determined the
fair value of the shares issued using the stock price on date of issuance. Compensation expense
is recognized as the services are provided to the Company.
|
| |
|
|
| |
- |
1,000,000 restricted shares issued as a financing fee to a convertible promise note holder. |
| |
|
|
During
the year ended December 31, 2020, the Company issued or is to issue the following shares of restricted common stock:
| |
- |
425,777,619
shares for total proceeds of $1,299,024. |
| |
|
|
| |
- |
136,842,821
restricted shares for services provided by consultants, contractors, advisory members, board members, and other service providers.
The Company determined the fair value of the shares issued using the stock price on date of grant or issuance. Compensation expense
is recognized as the services are provided to the Company. For the year ended December 31, 2020, the Company incurred $751,416 of
compensation expense for stock issued for services and have prepaid expenses of $123,039 at December 31, 2020 for stock issued prior
to services being performed. The Company recorded unearned compensation of $67,058 on its consolidated balance sheet for the year
ended December 31, 2020. |
| |
|
|
| |
- |
39,781,082
shares to settle $84,086 of principle and accrued interest owed on various convertible notes payable and one note payable. |
| |
- |
1,000,000
shares valued at $6,000 for the purchase of a vehicle. The Company determined the fair value of the shares issued for the purchase
of the vehicle using the stock price on the date of the bill of sale. |
| |
|
|
| |
- |
1,000,000
shares valued at $9,700 issued as charitable contributions to a charity. The Company determined the fair value of the shares issued
using the stock price on date of issuance. |
| |
|
|
| |
- |
60,000,000
shares were cancelled and returned to the treasure (See Note 5 – Investment in Probability and Statistics, Inc.). |
| |
|
|
| |
- |
10,120,000
restricted shares reclassed from common stock to be issued. |
Warrants
and Options
The
Company did not issue any warrants or options during the years ended December 31, 2021 and 2020.
At
December 31, 2021, the Company had warrants to purchase a total of 4,000,000 shares of its restricted common stock outstanding.
The
following table shows the warrants outstanding at December 31, 2021 and 2020:
| | |
Number of | | |
Weighted Average | | |
Weighted Average | | |
Average | |
| | |
Warrants | | |
Exercise Price | | |
Remaining Life (Years) | | |
Intrinsic Value | |
| Outstanding, December 31, 2019 | |
| 8,000,000 | | |
$ | 0.0040 | | |
| 1.83 | | |
$ | 0.0038 | |
| Granted | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited or expired | |
| (4,000,000 | ) | |
| 0.0030 | | |
| - | | |
| 0.0033 | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Outstanding, December 31, 2020 | |
| 4,000,000 | | |
$ | 0.0050 | | |
| 1.92 | | |
$ | 0.0013 | |
| Exercisable, December 31, 2020 | |
| 4,000,000 | | |
$ | 0.0050 | | |
| 1.92 | | |
$ | 0.0013 | |
| Granted | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited or expired | |
| - | | |
| - | | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Outstanding, December 21, 2021 | |
| 4,000,000 | | |
$ | 0.0050 | | |
| 0.92 | | |
$ | 0.0010 | |
| Exercisable, December 21, 2021 | |
| 4,000,000 | | |
$ | 0.0050 | | |
| 0.92 | | |
$ | 0.0010 | |
NOTE 8
– INCOME TAXES
At
December 31, 2021 and 2020, the Company had available Federal and state net operating loss carry forwards (“NOLs”) to reduce
future taxable income. The amounts available were approximately $22,600,000 and $19,925,000, respectively, for Federal purposes. The
potential tax benefit arising from the NOLs of approximately $14,600,000 from the period prior to the Act’s effective date will
begin to expire in 2033. The potential tax benefit arising from the net operating loss carryforward of approximately $5,414,960 generated
from the period following the Act’s effective date can be carried forward indefinitely within the annual usage limitations. Given
the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will
not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this
benefit.
The
Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return
should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured
based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance
also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires
increased disclosures. As of December 31, 2021 and 2020, the Company did not have a liability for unrecognized tax benefits.
The valuation allowance at December 31, 2021 was
$5,414,960. The net change in valuation allowance during the year ended December 31, 2021 was $1,230,960. In assessing the realizability
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets
will not be realized.
The
Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2021
and 2020, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2018 through
2020 remain open to examination by the major taxing jurisdictions to which the Company is subject. 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 believe that
there is any income tax liability for past years. There are currently no open federal or state tax years under audit.
Upon
the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the
use of the carry forwards and will recognize a deferred tax asset at that time.
The
items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are
as follows:
| | |
For the Year | | |
For the Year | |
| | |
Ended | | |
Ended | |
| | |
December 31, 2021 | | |
December 31, 2020 | |
| Income tax at federal statutory rate | |
| (21.00 | )% | |
| (21.00 | )% |
| State tax, net of federal effect | |
| (3.96 | )% | |
| (3.96 | )% |
| | |
| (24.96 | )% | |
| (24.96 | )% |
| Valuation allowance | |
| 24.96 | % | |
| 24.96 | % |
| Effective rate | |
| 0.00 | % | |
| 0.00 | % |
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
As
of December 31, 2021 and 2020, the Company’s only significant deferred income tax asset was a cumulative estimated net tax operating
loss of approximately $22,600,000 and $19,925,000, respectively, that is available to offset future taxable income, if any, in future
periods, subject to expiration and other limitations imposed by the Internal Revenue Service. Management has considered the Company’s
operating losses incurred to date and believes that a full valuation allowance against the deferred tax assets is required as of December
31, 2021 and 2020.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
Agreement
to Explore a Shipwreck Site Located off of Melbourne Beach, Florida
In
March of 2014, Seafarer entered into a partnership and with MAP, with the formation of Seafarer’s Quest, LLC for the purpose of
exploring a shipwreck site off of Melbourne Beach, Florida. Seafarer owns 50% of Seafarer’s Quest, LLC and is handling the operations
on behalf of Seafarer’s Quest. To date there has been no significant financial activity in Seafarer’s Quest. Under the partnership
with MAP, Seafarer is the designated manager of Seafarer’s Quest, LLC and is responsible for the costs of permitting, exploration
and recovery. Seafarer is entitled to receive 80% and MAP is entitled to receive 20% of artifacts and treasure recovered from the site
after the State of Florida receives its share, which is anticipated to be 20% under any future recovery permits. The permits with the
State of Florida for two areas on the site, designated as Areas 1 and 2, were renewed in 2019 for an additional 3 years. There are currently
no recovery permits for the site that have been applied for or issued as of the date of this filing. It will be necessary to be granted
a recovery permit in order to recover any artifacts and treasure that may potentially be located on the site. The required, affiliated
environmental permits from the U.S. Army Corps of Engineers (“USACE”) and Florida Department of Environmental Protection
(“FLDEP’) were previously issued in the name of a partner that is no longer active. In 2020 Seafarer worked with the various
State of Florida governmental agencies involved to update and consolidate all of these environmental permits solely under the Company’s
name. The State of Florida Bureau of Archeological Research (“FBAR”) had ordered the Company not to disturb the ocean’s
bottom while the changes and updates to the Company’s permits were in process. Some requests of change are questionable to the
Company. Since the issuance of the USACE and FLDEP environmental permits, FBAR has continued to stop or delay ground disturbance in Seafarer’s
legally permitted area with ongoing questions and requests.
Certain
Other Agreements
See
Note 4 Operating Lease Right-of-Use Assets and Operating Lease Liabilities.
NOTE
10 – RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2021, the Company has had extensive dealings with related parties including the following:
In
April of 2021, Seafarer’s CEO provided a loan to the Company in the amount of $6,000. The loan pays a 1% annual rate of interest,
is due and payable on October 26, 2021 and is not secured.
In
October of 2021, the Company entered into a convertible promissory note agreement in the amount of $3,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 2% per annum and the principal and accrued interest is due on
or before April 13, 2022. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common
stock at a rate of $0.0020 per share.
In
October of 2021, Seafarer’s CEO provided a loan to the Company in the amount of $1,400. The loan pays a 1% annual rate of interest,
was due and payable on January 25, 2022 and is not secured.
In
October of 2021, Seafarer’s CEO provided a loan to the Company in the amount of $1,000. The loan pays a 1% annual rate of interest,
was due and payable on January 26, 2022 and is not secured.
In
November of 2021, the Company entered into a convertible promissory note agreement in the amount of $3,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 2% per annum and the principal and accrued interest is due on
or before May 10, 2022. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common
stock at a rate of $0.0020 per share.
In
December of 2021, the Company extended the term of previous agreements with four individuals to continue serving as members of the Company’s
Board of Directors. Two of the individuals are related to the Company’s CEO. Under the agreement, the Directors 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 previous agreement also terminates automatically
upon the death, resignation or removal of the Directors. Under the terms of the agreement, the Company agreed to compensate the Board
members via payment of 10,000,000 restricted shares of its common stock each, an aggregate total of 40,000,000 shares, and to negotiate
future compensation on a year-by-year basis. The Company also agreed to reimburse the individuals for preapproved expenses.
Additional
related party transactions:
The
Company has an informal consulting agreement with a limited liability company that is owned and controlled by a person who is related
to the Company’s CEO to pay the related party limited liability company a variable amount per month plus periodic bonuses 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 assist, when needed, 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. During the years ended December 31, 2021 and 2020,
the Company paid the related party consultant fees of $15,000 and $58,000, respectively, for services rendered. These fees are recorded
as an expense in consulting and contractor expenses in the accompanying consolidated statements of operations. At December 31, 2021 and
2020, the Company owed the related party limited liability company $0.
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. During the years ended December 31, 2021 and 2020 the Company paid the related party limited
liability company fees of $12,025 and $11,295 respectively, for services rendered. These fees are recorded as an expense in consulting
and contractor expenses in the accompanying consolidated statements of operations. During the years ended December 31, 2021 and 2020,
the Company also paid the related party limited liability 1,000,000 and 0 shares of the Company’s restricted common stock, valued
at $5,100, and $0, respectively, as a bonus. All of the fees paid to the related party limited liability company are recorded as an expense
in consulting and contractor expenses in the accompanying consolidated statements of operations. At December 31, 2021 and 2020, the Company
owed the related party limited liability company $0.
During
the years ended December 31, 2021 and 2020, the Company paid a related party consultant fees of $38,000 and $18,750 respectively
for marketing and administrative services rendered to the Company’s Blockchain subsidiary. Additionally, during the years ended
December 31, 2021 and 2020, the Company paid the related party consultant 6,000,000 shares, valued at $30,600, and 0 shares, respectively,
of the Company’s restricted common stock as further compensation to offset cash payments for extra work and as a retention bonus.
All of the fees paid to the related party consultant are recorded as an expense in consulting and contractor expenses in the accompanying
consolidated statements of operations.
The
Company issued 8,734,640 shares of restricted common stock to a related party to settle $20,302 of accrued interest owed on sixteen convertible
notes payable.
During the years ended December 31, 2021 and 2020
the Company paid a related party individual fees of $8,500 and $0 respectively, for graphic design services. $5,500 of the fees are recorded
as an expense in consulting and contractor expenses in the accompanying consolidated statements of operations and $3,000 of the fees were
recorded as a prepaid expense on the accompanying consolidated balance sheets.
During the years ended December 31, 2021 and 2020
the Company paid fees of $31,943 and $24,000 to one of its Board members for business consulting and strategic advisory services that
were separate from his duties as a member of the Company’s Board of Directors.
During the years ended December 31, 2021 and 2020
the Company paid fees of $22,000 and $20,000 to a limited liability company controlled by one of its Board members for business consulting
and strategic advisory services that were separate from his duties as a member of the Company’s Board of Directors,
During
the year ended December 31, 2020, the Company has had extensive dealings with related parties including the following:
In
January of 2020, the Company entered into a convertible promissory note agreement in the amount of $51,000 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before June 30, 2020. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.003 per share. This note is currently in default due to non payment of principal and interest upon
maturity.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $25,200 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before February 6, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.0035 per share. This note is currently in default due to non payment of principal and interest.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $35,000 with a related party. This
note pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before February 6, 2021. The note is
unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0035 per share.
This note is currently in default due to non payment of principal and interest.
In
August of 2020, the Company entered into a convertible promissory note agreement in the amount of $50,400 with a related party who is
a member of the Board of Directors. This note pays interest at a rate of 6% per annum and the principal and accrued interest was due
on or before February 14, 2021. The note is unsecured and is convertible at the lender’s option into shares of the Company’s
common stock at a rate of $0.0035 per share. This note is currently in default due to non payment of principal and interest.
In
December of 2020, the Company extended the term of previous agreements with four individuals to continue serving as members of the Company’s
Board of Directors. Two of the individuals are related to the Company’s CEO. Under the agreement, the Directors 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 previous agreement also terminates automatically
upon the death, resignation or removal of the Directors. Under the terms of the agreement, the Company agreed to compensate the Board
members via payment of 5,000,000 restricted shares of its common stock each, an aggregate total of 20,000,000 shares, and to negotiate
future compensation on a year-by-year basis. The Company also agreed to reimburse the individuals for preapproved expenses.
Shareholder
Loan Repayment
During
the year ended December 31, 2021 the Company repaid its CEO $2,000 for a loan dated April 26, 2021 that had an original principle balance
of $6,000.
At
December 31, 2021, the following promissory notes and shareholder loans were outstanding to related parties:
See
Note 6 convertible notes payable – related parties, convertible notes payable – related parties, in default, and notes
payable - related parties, in default.
NOTE
11 –SEGMENT INFORMATION
Seafarer’s
wholly owned subsidiary Blockchain began operations in 2019 by providing referrals to P&S (See Note 5 - Investment in Probability
and Statistics, Inc.) in exchange for referral fees for closed business.
Due
to Blockchain starting operations which have no relation to the Company’s shipwreck and exploration recovery business, the Company
evaluated this business and its impact upon the existing corporate structure. The Company has determined that Blockchain and Seafarer
Exploration Corp. operate as separate segments of the business. As such, the Company has presented the income (loss) from operations
during the years ended December 31, 2021 and 2020 incurred by the two separate segments below.
During
the years ended December 31, 2021 and 2020, Blockchain revenues of $0 and $4,200 respectively, were 0% and 39.6%, respectively, of the
consolidated revenues of the Company.
Segment
information relating to the Company’s two operating segments for the year ended December 31, 2021 is as follows:
| | |
December 31, 2021 | | |
December 31, 2021 | | |
December 31, 2021 | |
| | |
Blockchain LogisTech, LLC | | |
Seafarer Exploration Corp. | | |
Consolidated | |
| Service revenues | |
$ | - | | |
$ | 23,761 | | |
$ | 23,761 | |
| | |
| | | |
| | | |
| | |
| Total operating expenses | |
| 45,143 | | |
| 2,324,238 | | |
| 2,369,381 | |
| | |
| | | |
| | | |
| | |
| Net loss from operations | |
$ | (45,143 | ) | |
$ | (2,300,477 | ) | |
$ | (2,345,620 | ) |
Segment
information relating to the Company’s two operating segments for the year ended December 31, 2020 is as follows:
| | |
December 31, 2020 | | |
December 31, 2020 | | |
December 31, 2020 | |
| | |
Blockchain LogisTech, LLC | | |
Seafarer Exploration Corp. | | |
Consolidated | |
| Service revenues | |
$ | 4,200 | | |
$ | 6,422 | | |
$ | 10,622 | |
| | |
| | | |
| | | |
| | |
| Total operating expenses | |
| 23,469 | | |
| 2,686,359 | | |
| 2,709,828 | |
| | |
| | | |
| | | |
| | |
| Net loss from operations | |
$ | (19,269 | ) | |
$ | (2,679,937 | ) | |
$ | (2,699,206 | ) |
NOTE
12 – SUBSEQUENT EVENTS
On January 18, 2022, Seafarer received notification
from the Circuit Court of the Thirteenth Judicial Circuit that 61,183,645 restricted common shares from the Defendant could be returned
to the Plaintiff. On January 19, 2022, such shares were returned to the treasury stock of Seafarer and accounted for by Seafarer’s
transfer agent. The settlement also included “Defendant (Torres) has agreed and hereby it is recognized by the Court that Defendant
has made a full retraction of his assertions…” and agreed to pay back an undisclosed amount of money to Seafarer that the
Company does not anticipate being able to collect.
Subsequent to December 31, 2021 the Company sold or
issued shares of its restricted common stock as follows:
| |
(i) |
sales of 328,000,000 shares of restricted common stock under subscription agreements for proceeds of $664,000; and |
| |
(ii) |
issuance of 33,885,913 shares of restricted common stock to various service providers. |
Subsequent to December 31, 2021 the following
loans went into default:
| |
1) |
A loan due to the Company’s CEO in the amount of $1,400 was due January 25, 2022; and |
| |
2) |
A loan due to the Company’s CEO in
the amount of $1,000 was due January 26, 2022.
|
Subsequent to December 31, 2021 the following
loans were repaid:
| 1) |
A convertible promissory with a face
value of $50,000 that was due January 8, 2022 was paid in full prior to the due date. |