10-K: Seafarer Exploration Corp. Reports Continued Losses and Going Concern Uncertainty in 10-K Filing

Seafarer Exploration Corp.'s 10-K filing reveals ongoing operating losses, substantial doubt about its ability to continue as a going concern, and reliance on external financing for its speculative shipwreck exploration business.

Summary

• Seafarer Exploration Corp., a company focused on historic shipwreck exploration and recovery, filed its Form 10-K for the year ended December 31, 2024.
• The company's principal business plan involves developing infrastructure and technology for archaeologically-sensitive exploration, recovery, and conservation of historic shipwrecks.
• Seafarer aims to monetize recovered artifacts and develop new technologies to improve archaeology.
• The company acknowledges the speculative nature and high degree of risk inherent in historic shipwreck exploration and recovery.
• Seafarer is developing the SeaSearcher technology to improve the efficiency of exploration and recovery operations.
• The company regularly reviews opportunities at purported historic shipwreck sites but has no specific plans for exploration and recovery at other sites at this time.
• Seafarer expects to continue incurring significant operating losses and negative cash flows while developing its infrastructure and technology.
• The company's auditor has substantial doubts about its ability to continue as a going concern.
• Seafarer did not generate any significant revenues from continuing operations during the years ended December 31, 2024 and 2023.
• The company's net losses were $3,896,719 for the year ended December 31, 2024 and $3,180,646 for the year ended December 31, 2023.
• The company is involved in legal proceedings, including a lawsuit filed against John Grimm and a suit filed by Diane McConnell.
• The company's stock is considered a penny stock, which subjects trading to additional sales practice requirements of broker-dealers.
• The company issued 66,841,430 shares for various consulting services and 480,272,223 shares for proceeds of $1,804,166 during the year ended December 31, 2024.
• The company issued shares of restricted common stock to settle notes payable, accrued interest, and accounts payable during the year ended December 31, 2024.
• The company has two separately permitted Melbourne Beach area sites, called Area 1 and Area 2, that it is exploring.
• The company has a Business Continuity Group (BCG) to monitor current events and respond to potential threats or issues.
• Based on the historical rate of expenditures, the Company expects to expend its available cash in three months or less from March 26, 2025.

Sentiment

Score: 2

Explanation: The document presents a highly negative outlook due to the company's significant losses, going concern uncertainty, reliance on external financing, and the speculative nature of its business. The auditor's doubt about the company's ability to continue as a going concern further contributes to the low sentiment score.

Positives

• The company is developing the SeaSearcher technology to improve the efficiency of exploration and recovery operations.
• The company has two separately permitted Melbourne Beach area sites, called Area 1 and Area 2, that it is exploring.
• Seafarer believes they are the only company to be issued a full recovery permit by FBAR since 1986, other than one entity with an Admiralty Claim.

Negatives

• The company's auditor expresses substantial doubt about its ability to continue as a going concern.
• Seafarer reported net losses of $3,896,719 for 2024 and $3,180,646 for 2023.
• The company relies on outside financing and may be forced to cease operations if it cannot secure additional funding.
• The company's stock is considered a penny stock, which subjects trading to additional sales practice requirements of broker-dealers.
• Based on the historical rate of expenditures, the Company expects to expend its available cash in three months or less from March 26, 2025.

Risks

• The company's ability to continue as a going concern is uncertain.
• The company relies on outside financing and may be forced to cease operations if it cannot secure additional funding.
• The company's stock is considered a penny stock, which subjects trading to additional sales practice requirements of broker-dealers.
• The exploration and recovery of historic shipwrecks is a speculative business venture with a high degree of risk.
• Governmental regulation and permitting processes can be lengthy, complex, and expensive.
• The company is involved in legal proceedings, which could materially affect its ability to operate its business.
• The company's lack of operating cash flow and reliance on the sale of its common stock and loans to fund operations is extremely risky.
• The company is in default regarding several loans held by various lenders, making investing in the company or providing any loans to the company extremely risky with a very high potential for a complete loss of capital.

Future Outlook

The company expects to continue incurring significant operating losses and negative cash flow from operating activities while building out its infrastructure in order to explore and salvage historic shipwreck sites and establishing itself in the marketplace.

Management Comments

• Management believes various forms of media can represent a potential future revenue opportunity for the Company, if the right circumstances arise.
• Management anticipates that the vessels utilized by the Company in its operations will need continuous and unavoidable repairs and maintenance, particularly if the Company ramps up its operational footprint and is working on more than one site simultaneously as anticipated.

Industry Context

The historic shipwreck exploration and recovery industry is highly speculative and carries a tremendous amount of risk. The company faces competition from other entities, some of which may be better capitalized and have greater resources.

Comparison to Industry Standards

• It is difficult to compare Seafarer Exploration Corp. to industry standards due to the speculative nature of the business and the limited number of publicly traded companies focused solely on historic shipwreck exploration and recovery.
• Companies like Odyssey Marine Exploration have faced similar challenges in the past, including high operating costs, regulatory hurdles, and the uncertainty of finding valuable artifacts.
• Unlike traditional mining or exploration companies with proven reserves, Seafarer's success depends on locating and recovering valuable artifacts from undiscovered shipwrecks, which is inherently unpredictable.
• The company's reliance on external financing and the lack of consistent revenue generation are significant concerns compared to more established companies in other resource exploration sectors.

Legal Proceedings

• On December 21, 2022, the Company filed a lawsuit in the Circuit Court in and for Hillsborough County, Florida against John Grimm (Grimm), for one count of Conversion.
• On September 6, 2024, the Plaintiff, Diane McConnell filed suite against Seafarer Exploration Corporation and Kyle Kennedy in the County Court of Brevard County, Florida.

Related Party Transactions

• The Company has had extensive dealings with related parties including the following: During the years ended December 31, 2024 and 2023, the Company has had extensive dealings with related parties including the following: Year Ended December 31, 2024: During the year ended December 31, 2024, the Company repaid a related party shareholder a total of $102,679 of the principal balance and accrued interest of a convertible note payable.
• The balance of the related party convertible note was $0 at December 31, 2024.
• In January of 2024, the Company extended the term of previous agreements with four individuals to continue serving as members of the Companys Board of Directors.
• Two of the individuals are related to the Companys CEO.
• Under the terms of the agreement, the Company agreed to compensate the related party Board members via payment of 7,000,000 restricted shares of its common stock each, an aggregate total of 28,000,000 shares or $112,000, of which $111,386 was earned in 2024 and is shown in consulting and contractor expenses in the accompanying consolidated statements of operations.
• In December of 2024, the Company entered into a promissory note agreement in the amount of $15,000 with a related party.
• This note pays interest at a rate of 6% per annum and the principal and accrued interest is due on or before June 11, 2025.
• The lender received 2,000,000 shares of the Companys restricted common stock as a loan origination fee.
• The note is unsecured and is convertible at the lenders option into shares of the Companys common stock at a rate of $0.0025 per share.
• Year ended December 31, 2023: In January of 2023, the Company extended the term of previous agreements with two individuals to continue serving as members of the Companys Board of Directors.
• Two of the individuals are related to the Companys CEO.
• Under the agreement, the Company agreed to compensate the related party Board members via payment of 10,000,000 restricted shares of its common stock each, an aggregate total of 20,000,000 shares or $144,000, of which $204,164 was earned in 2023 and is shown in consulting and contractor expenses in the accompanying consolidated statements of operations.
• In July of 2023, the Company entered into a convertible promissory note agreement in the amount of $5,000 with a related party who is a member of the Board of Directors.
• This note pays interest at a rate of 1% per annum and the principal and accrued interest was due on or before September 24, 2023.
• The lender received 500,000 shares of the Companys restricted common stock as a loan origination fee.
• The note is unsecured and is convertible at the lenders option into shares of the Companys common stock at a rate of $0.00175 per share.
• At December 31, 2024 this note was in default.
• In August of 2023, the Company entered into a promissory note agreement in the amount of $100,000 with a related party.
• This note pays interest at a rate of 6% per annum and the principal and accrued interest is due on or before October 2, 2023.
• The Company agreed to pay the lender 2,000,000 shares of the its restricted common stock as a loan origination fee.
• The note is unsecured and is convertible at the lenders option into shares of the Companys common stock at a rate of $0.0020 per share.
• This note was repaid and the principal balance at December 31, 2024 was $0.
• 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 Companys 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 Companys business and to advise management with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions, perform periodic 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 Companys agreements and books and records.
• The consultant provides the services under the direction and supervision of the Companys CEO.
• During the years ended December 31, 2024 and 2023, the Company paid the related party limited liability company consulting fees of $60,503 and $38,000, 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, 2024 and 2023, 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 Companys CEO to provide stock transfer agency services.
• During the years ended December 31, 2024 and 2023, the Company paid the related party limited liability company fees of $8,424 and $6,637 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 year ended December 31, 2023, the Company issued the related party limited liability company 5,576,250 shares of restricted common stock to settle $11,153 of fees owed for transfer agency services.
• 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, 2024 and 2023, the Company owed the related party limited liability company $0.
• During the years ended December 31, 2024 and 2023, the Company paid a person who is related to the Companys CEO consulting fees of $0 and $27,000, respectively, for assistance with social media and administrative services.
• At December 31, 2024 and 2023, the Company owed the related party limited liability company $0.
• During the years ended December 31, 2024 and 2023, the Company paid fees of $53,000 and $43,300 to one of its Board members for business consulting and strategic advisory services that were separate from his duties as a member of the Companys Board of Directors.
• At December 31, 2024 and 2023, the Company owed the related party $0.
• During the years ended December 31, 2024 and 2023, the Company paid fees of $22,000 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 Companys Board of Directors.
• At December 31, 2024 and 2023, the Company owed the related party $0.
• The Companys related party transactions and amounts are not necessarily indicative of the terms that would normally be agreeable to non related third parties.
• Shareholder Loan See Note 5 convertible notes payable related parties, convertible notes payable related parties, in default, and notes payable related parties, in default.
• At December 31, 2024 and 2023, the following promissory notes and shareholder loans were outstanding to related parties: See Note 5 convertible notes payable related parties, convertible notes payable related parties, in default, and notes payable related parties, in default.

Stakeholder Impact

• Shareholders face a high risk of losing their investment due to the company's financial instability and speculative business.
• Employees may face job insecurity due to the company's uncertain future.
• The company's ability to fulfill its obligations to creditors is questionable due to its lack of cash flow and significant debt.
• The company's ability to continue exploration and recovery operations may be limited, impacting its potential to contribute to archaeological research and public display of artifacts.

Next Steps

• The company will attempt to complete a SeaSearcher survey of the entire deleted area when certain conditions are met.
• The Company will continue to scan area 1 and area 2 on the Melbourne Beach site with the SeaSearcher and magnetometer as weather permits.
• Management, upon obtaining sufficient capital and operations, intends to take practical, cost-effective steps in implementing internal controls, including the possible remedial measures set forth below.

Key Dates

Keywords

shipwreck exploration, historic shipwrecks, archaeology, SeaSearcher, recovery, artifacts, permits, Seafarer Exploration Corp, going concern, losses, financing, penny stock