10-Q: Seafarer Exploration Faces Going Concern Doubts in Q3 2025

Seafarer Exploration Corp. reported a reduced net loss for Q3 2025, but faces significant liquidity challenges, a substantial working capital deficit, and ongoing going concern doubts.

Summary

• Net loss for the nine months ended September 30, 2025, decreased by 33% to $2,055,690, compared to $3,061,742 for the same period in 2024.
• Net loss for the three months ended September 30, 2025, decreased by 12% to $680,133, compared to $769,074 for the same period in 2024.
• The company generated no revenue from its core shipwreck exploration business for the nine and three months ended September 30, 2025, and does not expect significant revenue in the foreseeable future.
• Operating expenses for the nine months ended September 30, 2025, decreased by 29% to $1,903,403, primarily due to reductions in consulting, vessel, travel, general & administrative, and professional fees.
• Cash on hand was $24,653 as of September 30, 2025, with management expecting to expend this cash in less than one month.
• A working capital deficit of $3,471,495 existed as of September 30, 2025, indicating an inability to meet short-term liabilities with current assets.
• Numerous convertible notes and notes payable are in default, posing a significant risk to the company's viability.
• The company increased its authorized common shares from 9,900,000,000 to 17,000,000,000 on June 16, 2025.

Sentiment

Score: 2

Explanation: The company faces severe liquidity issues, is operating with a substantial working capital deficit, has numerous debts in default, and explicitly states "substantial doubt about its ability to continue as a going concern." While net losses decreased, this is largely due to reduced operating expenses, not revenue generation, and cash is critically low. The high dilution risk from convertible debt further exacerbates the negative outlook.

Positives

• Net losses decreased year-over-year for both the three and nine-month periods ended September 30, 2025, by 12% and 33% respectively.
• Operating expenses decreased by 29% for the nine-month period, reflecting cost reductions in several categories.
• Cash used in operating activities decreased from $2,255,523 in 2024 to $1,545,592 in 2025.
• Permits for the Melbourne Beach historical shipwreck site (Areas 1 and 2) were successfully renewed on March 22, 2024, and are valid until March 21, 2027.
• A final judgment for the federal admiralty claim on the Juno Beach shipwreck site was granted.

Negatives

• The company generated no revenue from its core business in the current reporting periods and does not expect significant revenue in the foreseeable future.
• A substantial doubt about the company's ability to continue as a going concern is explicitly stated.
• Cash on hand is critically low at $24,653, expected to be expended in less than one month.
• A significant working capital deficit of $3,471,495 indicates severe liquidity issues.
• Numerous convertible notes and notes payable are in default, exposing the company to potential lawsuits and asset foreclosure.
• The conversion of outstanding convertible notes and future promissory notes into equity is expected to cause significant dilution to current shareholders.
• Material weaknesses in internal control over financial reporting exist due to limited resources and lack of segregation of duties.
• Research and development expenses increased by $72,734 for the nine-month period, despite overall expense reductions.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to recurring net losses and a significant accumulated deficit of $34,299,867 as of September 30, 2025.
• Immediate need for further working capital; available cash of $24,653 is expected to be expended in less than one month.
• Inability to obtain additional capital through equity or debt financing could force the company to curtail or cease operations, leading to a complete loss of invested capital.
• Default on numerous convertible notes payable and notes payable, which could lead to lenders filing suit and foreclosing on collateralized assets.
• Significant potential dilution to current shareholders from the conversion of existing convertible notes and future conversions of promissory notes into equity, which are generally at prices lower than the current market price.
• Exposure to current domestic economic conditions, including inflation and rising fuel costs, which may increase operating expenses and make financing more challenging.
• Material weaknesses in internal control over financial reporting due to limited internal resources, insufficient segregation of duties, and the absence of an independent audit committee or financial expert.
• The exploration and recovery of historic shipwrecks is a multi-year, multi-stage, highly speculative, and risky business venture with no guarantee of significant revenue generation, if ever.
• Ongoing expenses (vessel maintenance, upkeep, docking fees, public company corporate expenses) are continuous and unavoidable regardless of operational status, exacerbating liquidity issues.
• The Blockchain LogisTech, LLC and Exploration Studios, LLC subsidiaries are not expected to generate revenue for the foreseeable future, if ever.

Future Outlook

Management does not expect to generate any significant revenues for the foreseeable future from its core shipwreck exploration business or its Blockchain subsidiary. The company anticipates continuing to expend significant resources on developing its SeaSearcher technology and next-generation versions, with research and development expenses expected to fluctuate based on technological advancements and financing availability. The ability to continue operations is highly dependent on raising additional capital through equity and debt.

Management Comments

• The company expects to expend its available cash in less than one month from the filing date of this report.
• Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations.
• The fact that the Company is in default regarding several loans 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 lenders 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.
• Management intends to have discussions with several of the promissory note holders who do not currently have convertible notes regarding converting their notes into equity.
• This type of business venture is extremely speculative in nature and carries a tremendous amount of risk.
• An investment in the Company's securities is highly speculative and very risky and should only be considered by those investors or lenders who do not require near-term liquidity and who can afford to suffer a total loss of their investment.
• Management believes that the financial statements and other information presented herewith are materially correct.

Industry Context

The company operates in the highly specialized and speculative marine archaeology and shipwreck recovery industry, which is characterized by long lead times, high capital requirements, and uncertain revenue generation. Its reliance on external financing and the lack of significant revenue generation are common challenges for early-stage or project-based ventures in this sector. The mention of rising fuel costs and inflation reflects broader economic pressures impacting industries reliant on heavy equipment and operations, potentially increasing the cost of exploration and recovery efforts.

Management Changes

Corporate Governance

Legal Proceedings

• Lawsuit against John Grimm (Conversion, Rescission, Civil Theft, Breach of Fiduciary Duty, Judicial Dissolution) filed December 21, 2022, amended February 8, 2023. Settled in February 2024, resulting in a $15,000 cash payment to co-plaintiff Zachary Smith, return of certain equipment to Seafarer, and relinquishment of 10,000,000 Seafarer Common Stock shares by Grimm for attorney fees (though Seafarer does not anticipate collecting fees).
• Lawsuit by Diane McConnell (breach of contract, negligence regarding residential property lease) filed September 6, 2024. Plaintiff sought $13,000 settlement in February 2025, which the company rejected. On March 14, 2025, the company filed an answer with affirmative defenses and two counterclaims (breach of contract, breach of duty of good faith), seeking suit costs, interest, and attorney fees.

Related Party Transactions

• Issued 2,000,000 restricted common stock shares (valued at $3,400) to a Board member for consulting work during 2025.
• Repaid $102,679 of principal and accrued interest on a convertible note payable to a related party during the nine months ended September 30, 2024.
• Extended agreements with two related party Board members in January 2024, compensating them with 7,000,000 restricted shares of common stock each (aggregate 14,000,000 shares or $95,200).
• Paid $42,500 (2025) and $15,000 (2024) to a related party limited liability company (owned and controlled by a person related to the CEO) for general business consulting services. Owed $2,500 to this entity as of September 30, 2025.
• Paid $4,686 (2025) and $6,674 (2024) to a related party limited liability company (owned and controlled by a person related to the CEO) for stock transfer agency services. Owed $5,218 to this entity as of September 30, 2025.
• The CEO provided a $1,000 loan to the company on August 3, 2025, which was repaid by September 30, 2025.
• Outstanding loans to the CEO totaling $5,000 as of September 30, 2025: a $1,500 loan with no due date (2% interest, $0.0005 conversion rate) and a $3,500 loan due September 9, 2022 (1% interest).
• Two convertible notes outstanding with related parties (dated January 9, 2009, and January 18, 2012) are collateralized by company assets.
• The company explicitly states that "related party transactions are not necessarily indicative of the terms that would normally be agreeable to non related third parties."

Stakeholder Impact

• Shareholders: Face significant dilution risk from ongoing and potential future conversions of debt to equity. High risk of total loss of investment due to going concern doubts, severe liquidity issues, and numerous defaults.
• Creditors/Lenders: Many are already in default, facing potential losses or needing to pursue legal action to foreclose on collateral. New lenders face extremely high risk.
• Employees/Management: Job security is highly uncertain given the company's going concern issues and critical cash position. Management is heavily involved in capital raising efforts.
• Customers: Currently, there are no significant customers as the company generates no revenue from its core business. The deferred revenue of $140,000 indicates a past agreement for scanning services that have not yet been provided.
• Suppliers: May face payment delays or non-payment due to the company's severe liquidity constraints and working capital deficit.

Next Steps

• Raise additional capital through common stock and debt issuances.
• Generate revenue from business operations (not expected in the near future).
• Continue developing the SeaSearcher technology and next-generation versions.
• Obtain updated permitting from the Army Corp of Engineers for the Juno Beach shipwreck site to expand exploration operations.
• Engage in discussions with promissory note holders regarding converting their notes into equity.
• Implement remedial measures for internal control deficiencies once sufficient capital and operations are secured.

Key Dates

Recommendation

The company explicitly states 'substantial doubt about its ability to continue as a going concern' and has critically low cash reserves, expected to be depleted in less than one month. It operates with a significant working capital deficit and has numerous convertible notes and other debts in default, exposing it to severe legal and financial risks, including potential asset foreclosure. The core business generates no revenue, and future revenue generation is not expected in the foreseeable future. Any capital raise is likely to be highly dilutive, further eroding shareholder value. Given these severe financial distress signals and the highly speculative nature of its business, the stock represents an extremely high risk with a very high potential for total loss of capital.

Keywords

Shipwreck exploration, Marine archaeology, SEC filing, 10-Q report, Seafarer Exploration Corp, Going concern, Liquidity crisis, Convertible notes default, Dilution risk, Financial reporting, Underwater recovery, Florida permits, Juno Beach shipwreck, SeaSearcher technology