SEAFARER EXPLORATION CORP - Annual Report: 2008 (Form 10-K)

Consolidated Balance Sheets


	December 31, 2008			April 30, 2008
ASSETS
Current
Cash	$	474		$	108,280
Notes receivable		180,521			75,000
Deposits		21,284			--
Total Current Assets		202,279			183,280

Fixed assets, net of accumulated depreciation of $37,917 and $16,250		287,085			308,750

Total Assets	$	489,364		$	492,030

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current
Accounts payable and accrued liabilities	$	147,415		$	895
Due to Organetix, Inc.		--			91,500
Convertible notes payable, in default		90,000			64,000
Convertible notes payable - related parties, in default		15,000			--
Notes Payable – related parties, in default		56,500			--
Due to shareholder		100			100
Total Current Liabilities		309,015			156,495

Total Liabilities		309,015			156,495

Mezzanine equity - common stock, 3,966,668 shares par value $0.0001		64,500			--
Commitments and contingencies		--			--

Stockholders' Equity
Preferred Stock, Authorized 50,000,000 shares; par value $0.0001, None issued and outstanding		--			-
Common stock
Authorized:
500,000,000 common shares, par value $0.0001 per share
Issued and outstanding:
276,609,557 common shares (April 30, 2008 – 17,533,333,000)		27,661			1,753
Additional paid-in capital		1,346,640			621,440
Deficit accumulated during the development stage		(1,258,452	)		(287,658	)
Total Stockholders’ Equity		115,849			335,535

Total Liabilities & Stockholders’ Equity	$	489,364		$	492,030

The Accompanying Notes Are an Integral Part of these Financial Statements

SEAFARER EXPLORATION CORP.

(A Development Stage Company)

Consolidated Statements of Operations

	Eight Months Ended December 31,2008			Year Months ended April 30, 2008			February 15, 2007 (Inception) to December 31,2008



REVENUES	$	--		$	--		$	--

EXPENSES
Consulting & contractor expenses		615,887			157,594			776,482
Vessel expenses		83,439			46,836			130,276
Professional fees		97,689			27,577			127,266
Travel & entertainment		74,048			28,062			102,110
General and administrative expenses		53,110			6,879			60,284
Rent expense		21,800			425			22,225
Depreciation		21,665			16,250			37,915
Other operating expenses		3,006			2			3,005
Total Expenses		970,644			283,625			1,259,563

Loss from Operations		(970,644	)		(283,625	)		(1,259,563	)

OTHER (EXPENSE) INCOME
Interest expense		(5,690	)		(1,150	)		(6,840	)
Interest income		5,540			2,411			7,951
Total Other (Expense) Income		(150	)		1,261			1,111

NET LOSS	$	(970,794	)	$	(282,364	)	$	(1,258,452	)

NET LOSS PER SHARE - BASIC AND DILUTED	$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		262,970,299			174,643,542

The Accompanying Notes Are an Integral Part of these Financial Statements

Consolidated Statements of Cash Flows

	8 months ended December 31,2008			Year ended April 30, 2008			February 15, 2007 (Inception) to December 31,2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(970,794	)	$	(282,364	)	$	(1,258,452	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services		323,333			--			323,333
Depreciation		21,665			16,250			37,915
Changes in operating assets and liabilities:
DeDeposits		(21,284	)		--			(21,284	)
Accounts payable and accrued liabilities		146,520			(1,105	)		238,915
Due to Organetix, Inc.		--			91,500
Net cash used in operating activities		(500,560	)		(175,719	)		(679,573	) )

CASH FLOWS FROM INVESTING ACTIVITIES
Notes receivable		(105,521	)		(75,000	)		(180,521	)
Acquisition of equipment		--			(325,000	)		(325,000	)
Net cash used in investing activities		(105,521	)		(400,000	)		(505,521	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of convertible notes		60,000			64,000			124,000
Issuance of notes		56,500			--			56,500
Issuance of common shares		381,775			618,100			1,005,068
Net cash provided by financing activities		498275			682,100			1,166,568

INCREASE (DECREASE) IN CASH		(107,806	)		106,381			474

CASH, BEGINNING		108,280			1,899			--

CASH, ENDING	$	474		$	108,280		$	474

NONCASH OPERATING AND FINANCING ACTIVITIES:
Due to Organetix, Inc. reclassified to additional paid-in capital	$	91,500		$	-		$	91,500
Convertible debt converted to common stock	$	19,000		$	-		$	19,000

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	3,660		$	-		$	3,660
Income taxes	$	-		$	-		$	-

The Accompanying Notes Are an Integral Part of these Financial Statements

SEAFARER EXPLORATION CORP.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Equity

	Common Stock shares		Common Stock value		Additional Paid-in Capital			Deficit Accumulated During the Development Stage			Total
Balance, February -15, 2007 (Inception)		—	$	—	$	—		$	—		$	—
Common stock issued for cash – February 20, 2007		5,000,000		500		4,693			—			5,193
Net loss for the period from inception to April 30, 2007		—		—		—			(5,294	)		(5,294	)
Balance April 30, 2007		5,000,000		500		4,693			(5,294	)		(101	)

Common stock issued for cash – June 15, 2007		5,000,000		500		4,500			—			5,000
Common stock issued for subscription agreements – various dates		7,533,333		753		612,247			—			613,000
Net loss									(282,364	)		(282,364	)
Balance April 30, 2008		17,533,333		1,753		621,440			(287,658	)		335,535
Recapitalization at reverse merger – June 4, 2008		233,522,002		23,352		68,148						91,500
Common stock issued for services – May 21, 2008		5,783,332		578		82,755			—			83,333
Common stock issued for services – October 23, 2008		12,000,000		1,200		238,800			—			240,000
Common stock issued on conversion of promissory note – November 1, 2008		1,344,972		134		18,866			—			19,000
Common stock issued for subscription agreements – various dates		6,425,918		644		356,131			—			356,775
Reclassification to mezzanine equity		—		—		(64,500	)		—			(64,500	)
Funds received no shares issued – December 3, 2008		—		—		25,000			—			25,000
Net loss		—		—		—			(970,794	)		(970,794	)

Balance, December 31,2008		276,609,557	$	27,661	$	1,346,640		$	(1,258,452	)	$	115,849

The Accompanying Notes Are an Integral Part of these Financial Statements

SEAFARER EXPLORATION CORP.

(A Development Stage Company)

NOTE 1 – DESCRIPTION OF BUSINESS

for the fiscal year ended December 31, 2008

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

The principal business of the Company is the exploration and recovery of an underwater shipwreck. The Company’s year-end is December 31.

The Company is in the development stage and the Company’s activities during the development stage include developing a business plan and raising capital.

On June 4, 2008, Seafarer Exploration, Inc (“Seafarer Inc.”) merged with Organetix, Inc. (“Organetix”) pursuant to a Share Exchange Agreement (the “Exchange Agreement”). The Exchange Agreement provided for the exchange of all of Seafarer Inc.’s common shares for 131,243,235 of Organetix post-merger common shares. Considering that Seafarer Inc.’s former stockholders now control the majority of Organetix’ outstanding voting common stock, Seafarer Inc.’s management has actual operational control of Organetix and Organetix has effectively succeeded its otherwise minimal operations to Seafarer Inc.’s operations, Seafarer Inc. is considered the accounting acquirer in this reverse-merger transaction. A reverse-merger transaction with a non-operating public shell company is considered, and accounted for as a capital transaction in substance; it is equivalent to the issuance of Seafarer Inc.’s common stock for the net monetary assets of Organetix, accompanied by a recapitalization. Accordingly, the accounting does not contemplate the recognition of unrecorded assets of the accounting acquiree, such as goodwill. However, on the date of the merger, Organetix was a blank-check public shell company and had no assets and no liabilities. Consolidated financial statements presented herein and subsequent to the merger reflect the consolidated financial assets and liabilities and operations of Seafarer Inc., at their historical costs, giving effect to the recapitalization, as if it had been Organetix during the periods presented.

On July 17, 2008, we changed our name from Organetix, Inc. to Seafarer Exploration Corp. During 2008, we changed our year end from April 30 to December 31.

NOTE 2 - GOING CONCERN

These 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. As shown in the accompanying financial statements, the Company has incurred net losses of $1,259,736 since inception. We expect to expend our available cash in less than one month from May 5, 2009 based on our historical rate of expenditures. Management's plans include raising capital through the equity markets to fund operations, and the generating of revenue through its business.

NOTE 2 - GOING CONCERN - continued

for the fiscal year ended December 31, 2008

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 financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Accounting Method

The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents.

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the fiscal years ended December 31, 2008 and April 30, 2008, the Company did not report any revenues.

Earnings Per Share

The Company has adopted Statement of Financial Accounting Standards No. 128, which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders 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 similar to fully diluted earnings per share. Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents outstanding during the fiscal years ended December 31, 2008 and April 30, 2008.

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements” (SFAS 157) which defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. The impact of adopting SFAS 157 as of January 1, 2008 was not significant to the Company’s financial statements. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

for the fiscal year ended December 31, 2008

Fair Value of Financial Instruments - continued

Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.

Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.

Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2008. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, notes receivable, accounts payable and accrued expenses. The fair value of the Company’s long-term debt is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.

Income Taxes

The Company provides for federal and state income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that is more likely than not to be realized.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, on January 1, 2007. The Company has not recognized a liability as a result of the implementation of Interpretation 48. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit as of the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of Interpretation 48. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Fixed Assets and Depreciation

Fixed assets are recorded at historical cost. Depreciation is computed on the straight-line method over estimated useful lives of the respective assets. Currently our only asset is a diving vessel, which we purchased for $325,000 during 2008 and is being depreciated over a 10 year useful life.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the Company reviews the carrying amount of long-lived assets on a regular basis for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows before interest from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There was no impairment charges recorded during each of the years ended December 31, 2008 and April 30, 2008.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

for the fiscal year ended December 31, 2008

Stock-Based Compensation

In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) were required to apply SFAS 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. For public entities that file as small business issuers, SFAS 123(R) was applicable as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. As of December 31, 2008, the Company has not implemented a stock based compensation plan.

Non-Employee Stock Based Compensation

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by SFAS No. 123R, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in EITF 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."

Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.

Convertible Notes Payable

The Company accounts for conversion options embedded in convertible notes in accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and Emerging Issues Task Force EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" ("EITF 00-19"). SFAS 133 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments in accordance with EITF 00-19. SFAS 133 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional as that term is described in the implementation guidance under Appendix A to SFAS 133 and further clarified in EITF 05-2 "The Meaning of "Conventional Convertible Debt Instrument" in Issue No. 00-19.” As of December 31, 2008 all of the Company’s convertible notes payable were classified as conventional instruments.

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under EITF 00-19, in accordance with the provisions of Emerging Issues Task Force Issue ("EITF") 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features," and EITF 00-27 "Application of EITF 98-5 to Certain Convertible Instruments". 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. As of December 31, 2008, none of the Company’s convertible notes payable included a beneficial conversion option.

Recent Accounting Pronouncements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

for the fiscal year ended December 31, 2008

Recent Accounting Pronouncements - continued

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in -Income Taxes-an interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the accounting for uncertainty in income taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation requires that the Company recognize in the financial statements the impact of tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006 with the cumulative effect of the change in accounting principle recorded as an adjustment to beginning retained earnings. The adoption of this statement did not have a material impact on the Company's consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of this accounting pronouncement did not have a material effect on the Company’s consolidated financial statements.

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The adoption of this statement did not have a material effect on the Company's financial statements.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

for the fiscal year ended December 31, 2008

Recent Accounting Pronouncements - continued

NOTE 4 - LOSS PER SHARE

Components of loss per share for the respective periods are as follows:

		December 31, 2008		April 30, 2008
Net income available to common shareholders	$	(970,794)	$	(282,364)

Weighted average shares outstanding:
Basic and diluted		262,970,299		174,643,542

Loss per share:
Basic and diluted	$	(0.00)	$	(0.00)

NOTE 5 – CAPITAL STOCK

Common Stock

The Company is authorized to issue 500,000,000 shares of $0.0001 par value common stock. All shares have equal voting rights, are non-assessable and have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

At December 31, 2008 the Company had issued and outstanding 3,966,668 common shares for total proceeds of $64,500 that are subject to a repricing feature guaranteeing the shareholders a minimum value of $0.015 to $0.020 per share. The repricing feature extends through the date upon which all registration restrictions expire and is based upon the trading market value on that date. Due to the fact that the number of shares required to settle this minimum value guaranty will not be known until the registration restrictions have expired, the Company cannot guarantee with certainty that it will have enough authorized shares to settle these agreements. Accordingly, these shares have been accounted for in accordance with EITF Topic No. D-98, Classification and Measurement of Redeemable Securities. Pursuant to this guidance, the shares subject to the anti-dilution protection require classification as mezzanine equity until such time as the repricing feature expires.

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 fiscal year ended December 31, 2008

NOTE 6 - INCOME TAXES

	2008		2008
Income tax at federal statutory rate	(34.00)	%		(34.00)	%
State tax, net of federal effect	(3.96)	%		(3.96)	%
	37.96	%		37.96	%
Valuation Allowance
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, 2008, the Company’s only significant deferred income tax asset was an estimated net tax operating loss of ($1,258,452) 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, if any. Management has considered the Company's operating losses incurred to date, and believes that a full valuation allowance against its deferred tax assets is required as of December 31, 2008 and April 30, 2008.

NOTE 7 – LEASE OBLIGATION

The Company has an operating lease for its office space located in Tampa, Florida. The term of the lease agreement commenced on October 1, 2008 and expires on March 31, 2010. For the Year Ending December 31, 2008 the rental expense including taxes was $3,853 and the Company also paid a security deposit in the amount of $1,284. Future minimum rental payments, including taxes, required under the non-cancelable operating lease are as follows:

For the Year Ending December 31,

2009 - $15,410.64

2010 - $3,852.66

NOTE 8 – NOTES PAYABLE

Convertible Notes Payable

At December 31, 2008 and April 30, 2008, respectively, the Company had $105,000 and $64,000 in convertible promissory notes outstanding, of which $15,000 was outstanding to related parties at December 31, 2008 and April 30, 2008. The notes pay interest at 6% and are convertible at the option of the lenders into common stock at $0.10 per share. The notes are payable between September 1, 2008 through June 1, 2009 and are secured by the equipment, fixtures, inventory, accounts receivable and intellectual property of the Company. All of these notes were issued prior to the June 2008 merger discussed in Note 1. These notes are currently in default due to non-payment of principal and interest.

Payable – related parties

NOTE 9 - NOTES RECEIVABLE

for the fiscal year ended December 31, 2008

At December 31, 2008, the Company was owed a principal amount of $175,000 from Blue Water Ventures of Key West, Inc., a corporation. The notes pay interest at a rate of 4.5% per annum with interest due and payable when the notes mature. All three of the notes matured on December 31, 2008. As of April 27, 2009 Seafarer has received $120,000 in repayment of the money owed to the Company by Blue Water Ventures of Key West, Inc. and the Company believes that the entire principal amount of the notes receivable is collectible.

NOTE 10 – DIVISON OF ARTIFACTS AND TREASURE

The Company must split any artifacts or treasure that it successfully recovers from the Juno Beach shipwreck site with the State of Florida and Tulco Resources, Ltd. The division of artifacts and treasure will be:

20% to the State of Florida

40% to Tulco Resources, Ltd.

40% to the Company

More specifically the State of Florida has the right to select up to 20% of the total value of recovered artifacts and treasure for the State's museum collection. After the State of Florida has selected those artifacts and treasure that it feels will complement its collection then the Company and Tulco, Resources, Ltd. will split the remaining artifacts and treasure equally.

NOTE 11 – LEGAL PROCEEDINGS

The Company is not the subject of any pending legal proceedings and to the knowledge of management, no proceedings are presently contemplated against the Company by any federal, state or local governmental agency.

NOTE 12 – MATERIAL AGREEMENTS

Consulting Agreement

On June 23, 2008 the Company entered into a consulting agreement with an individual. Under the terms of the agreement the individual was going to provide the Company with various business development, mergers and acquisitions and business strategy consulting services at the direction of the Company’s Chief Executive Officer. In consideration for performing the consulting services the Company agreed to pay the individual 1,000,000 shares of its common stock. The agreement states that the stock consideration was to be considered earned as of the execution of the agreement. To the best of the Company’s knowledge the individual never performed any services on behalf of the Company. The Company has not issued any shares to the individual under the agreement and no expense has been recorded through December 31, 2008.

Cancellation of Purchase and Sale Agreement

The purchase and sale agreement that was previously executed on July 2, 2008 by and between Sinclair Educational Archaeological Research Expeditions, Inc. (“SeaRex, Inc.”), James J. Sinclair, Vanessa E. Friedman, and the Company was cancelled on December 9, 2008 by written consent of all of the parties to the agreement.

NOTE 12 – MATERIAL AGREEMENTS - continued

for the fiscal year ended December 31, 2008

New Purchase and Sale Agreement with SeaRex, Inc.

On December 10, 2008, the Company entered into a new purchase and sale agreement with Sinclair Educational Archaeological Research Expeditions, Inc. (“SeaRex, Inc.”) to acquire the DaVinci Research Materials. The DaVinci Research Materials purportedly contain information as to the theoretical location of a deepwater shipwreck site which has been named the “DaVinci Project”. As used in the agreement with SeaRex, Inc. the DaVinci Research Materials refers to any and all of the documents, data, records, reports, maps, compilations, computer models, writings and materials that are in any way related to the DaVinci Project that have been accumulated by SeaRex, Inc. any persons known to SeaRex, Inc. or any employees, contractors, consultants, officers, directors, agents, affiliates, or associates of SeaRex, Inc. Under the new agreement, the Company has agreed, in its sole discretion and if funds are available, to pay SeaRex, Inc. a fee of $250,000 less any funds previously paid to SeaRex, Inc. in exchange for the DaVinci Research Materials. SeaRex, Inc. acknowledged that it previously received $10,000 from Seafarer towards the purchase of the DaVinci Research Materials. According to the agreement, the remaining fees will be paid in the following increments; $10,000 was due upon execution of the Agreement; $30,000 was due by December 31, 2008 unless the parties mutually agree to extend the due date; $50,000 was due by February 15, 2009 unless the parties mutually agree to extend the due date; and $150,000 was be due by March 31, 2009 unless the parties mutually agree to extend the due date. In addition to the fees, Seafarer agreed to pay SeaRex fourteen percent (14%) of the net liquidated value of any items actually recovered from the DaVinci Project less any and all expenses incurred by Seafarer relating to the DaVinci Project (the “Contingent Fees”). The Contingent Fees will be paid to SeaRex, Inc. at the time that Seafarer actually receives funds. The agreement further states that Seafarer will have exclusive rights to the DaVinci Research Materials during the term of the agreement. Additionally, if Seafarer does not pay SeaRex, Inc. the fees by the due dates described previoulsy, then SeaRex, Inc. in its sole discretion, may terminate the agreement by providing written notice to Seafarer. If SeaRex, Inc. terminates the agreement then it agrees that within five business days of providing written notice of termination it will pay back any and all funds that it has received from Seafarer. SeaRex, Inc. specifically acknowledges that if Seafarer does not pay the fees by any of the due dates described previously, then Seafarer will not have any further financial obligations whatsoever or owe any consideration or fees of any kind to SeaRex. As of December 31, 2008 Seafarer has paid a total of $20,000 to SeaRex, Inc. towards the purchase of the DaVinci Research Materials however the Company has not been able to raise the capital necessary to complete the purchase of the DaVinci Research Materials. Even if the Company is able to successfully obtain the DaVinci Research Materials then there will be a significant amount of additional capital required to actually to both pinpoint the exact location of the DaVinci Project shipwreck and/or conduct recovery operations. At this time the Company does not have any formal plans to raise the capital that will be necessary locate, explore and recover the deepwater shipwreck.

NOTE 12 – RELATED PARTY TRANSACTIONS

On July 23, 2007 Seafarer entered into a convertible promissory note in the amount of $15,000 with Pelle Ojasu, a director of the Company. The note is convertible to common stock at $0.10 per share, is secured by substantially all the assets of the company and bears interest at a rate of 6%. The note was due September 30, 2008 but remains outstanding at December 31, 2008. The note is currently in default due to non-payment of principal and interest.

On September 9, 2008 Seafarer entered into a promissory note agreement in the amount of $9,000 with a person who is related to the CEO of the Company. The note is not secured and bears interest at the rate of 8% per annum. The note is interest only with interest payments to be made quarterly. The note is due and payable on September 9, 2009.

On September 29, 2008 Seafarer entered into a promissory note agreement in the amount of $12,500 with a corporation. Seafarer’s CEO is a Director of the corporation. The note is not secured and bears interest at the rate of 8% per annum. The note is interest only with interest payments to be made quarterly. The note is due and payable on September 29, 2009.

On October 24, 2008 Seafarer entered into a promissory note agreement in the amount of $6,500 with a person who is related to the CEO of the Company. The note is not secured and bears interest at the rate of 8% per annum. The note is interest only with interest payments to be made quarterly. The note is due and payable on October 24, 2009. The principal amount of the note was repaid in December 2008.

On October 27, 2008 Seafarer entered into a promissory note agreement in the amount of $15,000 with a person who is related to the CEO of the Company. The note is not secured and bears interest at the rate of 8% per annum. The note is interest only with interest payments to be made quarterly. The note is due and payable on October 27, 2009.