SEAFARER EXPLORATION CORP - Quarter Report: 2013 September (Form 10-Q)

seafarer_10q-15793.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________.

Commission File Number 000-29461

SEAFARER EXPLORATION CORP.

(Exact name of registrant as specified in its charter)

Florida	90-0473054
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

14497 N. Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618

(Address of principal executive offices)(Zip code)

(813) 448-3577

Registrant’s telephone number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

As of November 12, 2013, there were 838,244,142 shares of the registrant’s common stock, $.0001 par value per share, outstanding.

SEAFARER EXPLORATION CORP.

Form 10-Q

For the Quarterly Period Ended September 30, 2013

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION	4

Item 1. Financial Statements (unaudited)	5

Condensed Balance Sheets: September 30, 2013 and December 31, 2012	5

Condensed Statements of Operations: For the three and nine months ended September 30, 2013 and 2012 and the period from inception (February 15, 2007 to September 30, 2013)	6 – 8

Condensed Statements of Cash Flows: Nine months ended September 30, 2013 and 2012 and the period from inception (February 15, 2007) to September 30, 2013	9

Notes to Condensed Financial Statements	10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3. Quantitative and Qualitative Disclosures About Market Risk	36

Item 4T. Controls and Procedures	36

PART II: OTHER INFORMATION	37

Item 1. Legal Proceedings	37

Item 1A. Risk Factors	39

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3. Defaults Upon Senior Securities	39

Item 4. Submission of Matters to a Vote of Security Holders	39

Item 5. Other Information	39

Item 6. Exhibits	40

SIGNATURES	41

Part 1: Financial Information

Statements in this Form 10-Q Quarterly Report may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on our current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These assumptions are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those risks discussed in this Form 10-Q Quarterly Report, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations and in other documents which we file with the Securities and Exchange Commission.

In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, changes in technology, fluctuations in our quarterly results, our ability to continue and manage our growth, liquidity and other capital resource issues, compliance with government regulations and permits, agreements with third parties to conduct operations, competition, fulfillment of contractual obligations by other parties and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q Quarterly Report, except as required by Federal Securities law.

Item 1. Financial Statements

SEAFARER EXPLORATION CORP.

(A Development Stage Company)

CONDENSED BALANCE SHEETS

	(Unaudited)
	September 30, 2013			December 31, 2012
ASSETS
Current assets:
Cash	$	--		$	43,919
Prepaid expenses		22,455			36,014
Advances to shareholder		3,267			3,267
Deposits and other receivables		3,682			1,183
Total current assets		29,404			84,383

Property and equipment – net		138,735			164,223
Investments		1,100			1,100
Total Assets	$	169,239		$	249,706


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued liabilities	$	157,332		$	140,270
Convertible notes payable		38,999			91,503
Convertible notes payable – related parties		2,802			--
Convertible notes payable, in default		191,300			149,300
Convertible notes payable, in default – related parties		98,500			66,000
Convertible note payable, at fair value		--			183,242
Notes payable, in default		30,000			30,000
Notes payable in default related parties		7,500			7,500
Total current liabilities		526,433			667,815


Commitments and contingencies

Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value – 50,000,000 shares authorized; 7 and 0 shares issued and outstanding at September 30, 2013 and December 31, 2012		--			--
Common stock, $0.0001 par value – 850,000,000 shares authorized; 837,177,461 and 739,313,459 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively		83,719			73,931
Additional paid-in capital		7,175,185			5,356,866
Deficit accumulated during the development stage		(7,616,098	)		(5,848,906	)
Total stockholders’ equity (deficit)		(357,194	)		(418,109	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	169,239		$	249,706

See notes to condensed financial statements.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



	Three months ended
	September 30,
	2013			2012
Revenue	$	--		$	--

Expenses:
Consulting and contractor expenses		413,802			76,437
Professional fees		47,398			8,021
Depreciation		8,496			8,126
General and administrative expenses		27,144			6,003
Vessel expenses		28,067			23,133
Travel and entertainment		29,270			10,228
Rent expense		3,325			5,558
Total operating expenses		557,502			137,506
Loss from operations		(557,502	)		(137,506	)
Other income (expense):
Interest expense		(67,157	)		(50,140	)
Interest income		19,092			5,188
Total other income (expense)		(48,065	)		(44,952	)

Net loss	$	(605,567	)	$	(182,458	)

Net loss per share applicable to common stockholders — basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding – basic and diluted		811,905,248			702,779,768

See notes to condensed financial statements.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)



	Nine months ended
	September 30,
	2013			2012
Revenue	$	--		$	--

Expenses:
Consulting and contractor expenses		1,066,617			304,670
Professional fees		232,142			55,348
Depreciation		25,488			24,375
General and administrative expenses		57,147			20,292
Vessel expenses		110,746			91,004
Travel and entertainment		81,454			36,685
Rent expense		30,389			12,520
Total operating expenses		1,603,983			544,894
Loss from operations		(1,603,983	)		(544,894	)
Other income (expense):
Interest expense		(224,463	)		(108,155	)
Interest income		99,701			38,338
Loss on extinguishment of debt		(38,447	)		(31,398	)
Total other income (expense)		(163,209	)		(101,215	)

Net loss	$	(1,767,192	)	$	(646,109	)

Net loss per share applicable to common stockholders — basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding – basic and diluted		779,676,653			651,188,384

See notes to condensed financial statements.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	February 15,
	2007
	(Inception) to
	September 30,
	2013
Revenue	$	-

Expenses:
Consulting and contractor expenses		4,249,768
Professional fees		720,400
Depreciation		193,686
General and administrative expenses		377,081
Vessel expenses		489,629
Travel and entertainment		298,830
Rent expense		151,075
Other operating expenses		13,187
Total operating expenses		6,493,656
Loss from operations		(6,493,656	)
Other income (expense)
Interest expense		(904,004	)
Interest income		243,922
Loss on extinguishment of debt		(419,560	)
Loss on impairment		(42,800	)
Total other income (expense)		(1,122,442	)

Net loss	$	(7,616,098	)

See notes to condensed financial statements.

SEAFARER EXPLORATION CORP.

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

							February 15,
							2007
	Nine months ended						(Inception) to
	September 30,						September 30,
	2013			2012			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,767,192	)	$	(646,109	)	$	(7,616,098	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		25,488			24,375			193,686
Allowance for uncollectible notes receivable		--			--			38,867
Amortization of debt discount		106,358			--			108,578
Amortization of deferred finance costs		--			45,127			59,605
Interest (income) expense on fair value adjustment on convertible notes payable		(23,556	)		50,278			426,797
Interest accrued on note receivable		--			--			(11,705	)
Write off of uncollectible deposit		--			--			20,000
Loss on extinguishment of debt		--			31,398			266,285
Loss on impairment		--			--			42,800
Stock issued for services		1,024,491			89,386			2,858,347
Stock issued to satisfy legal services		56,928			--			122,422
Stock issued for financing fees		--			--			5,000
Changes in operating assets and liabilities:
Prepaid expenses		13,559			--			(34,701	)
Advances to shareholders		(2,500	)		(1,016	)		(3,516	)
Deposits and other receivables		--			--			(23,345	)
Accounts payable and accrued liabilities		86,162			20,243			318,363
Net cash used in operating activities		(480,262	)		(386,318	)		(3,113,787	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of notes receivable		--			--			(25,000	)
Purchase of investment in common stock		--			(12,000	)		(34,100	)
Acquisition of equipment		--			--			(325,000	)
Net cash used in investing activities		--			(12,000	)		(384,100	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		241,343			249,000			2,288,887
Proceeds from the issuance of convertible notes, related parties		55,500			50,000			111,500
Proceeds from the issuance of convertible notes, non related parties		169,500			95,480			704,000
Proceeds from the issuance of notes payable		--			10,000			286,500
Proceeds from the issuance of notes payable – related parties		--			--			8,500
Payments on convertible notes payable		(30,000	)		(5,000	)		(76,000	)
Payments on notes payable		--			(10,000	)		(57,500	)
Payments on notes payable – related parties		--			--			(1,000	)
Proceeds from loans from stockholders		7,500			5,000			48,425
Payments on loans from stockholders		(7,500	)		(5,000	)		(43,725	)
Net cash provided by financing activities		436,343			389,480			3,497,887

NET DECREASE IN CASH		(43,919	)		(8,838	)		--
CASH, BEGINNING OF PERIOD		43,919			8,838			--
CASH, END OF PERIOD	$	--		$	--		$	--

NONCASH FINANCING ACTIVITIES:
Due to Organetix, Inc. reclassified to additional paid-in capital	$	--		$	--		$	91,500
Common stock issued in conjunction with a joint venture	$	--		$	9,800		$	9,800

Common stock issued to satisfy debt	$	--	$	266,690	$	76,528
Common stock issued to satisfy minimum value guarantee	$	--	$	--	$	87,667
Convertible debt converted to common stock including accrued interest	$	143,936	$	208,500	$	1,382,114
Common stock issued in exchange for a fixed asset	$	--	$	--	$	7,420

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest	$	--	$	--	$	3,660

See notes to condensed financial statements.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The accompanying condensed financial statements of Seafarer Exploration Corp. (“Seafarer” or the “Company”) are unaudited, but in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in the Company’s Report on Form 10-K for the twelve months ended December 31, 2012, filed with the Securities and Exchange Commission (the “Commission”). The results of operations for the nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2013 or for any future period.

NOTE 1 – DESCRIPTION OF BUSINESS

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

The principal business of the Company is to develop the infrastructure necessary to engage in the archaeologically-sensitive exploration and recovery of historic shipwrecks. During 2008, the Company changed its fiscal year end from April 30 to December 31.

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

In June of 2008, the Company merged with Organetix pursuant to a Share Exchange Agreement (the “Exchange Agreement”). The Exchange Agreement provided for the exchange of all of the Company’s common shares for 131,243,235 of Organetix post-merger common shares. Considering that Seafarer Inc.’s former stockholders controlled the majority of Organetix’s outstanding voting common stock, Seafarer Inc.’s management had actual operational control of Organetix and Organetix effectively succeeded its otherwise minimal operations to the Company’s operations. The Company was 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. On the date of the merger, Organetix was a blank-check public shell company and had no assets and no liabilities. The condensed financial statements presented herein and subsequent to the merger reflect the condensed 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.

In July of 2008, the Company changed its name from Organetix, Inc. to Seafarer Exploration Corp.

NOTE 2 - GOING CONCERN

These condensed financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As shown in the accompanying condensed financial statements, the Company has incurred net losses of $7,616,098 since inception. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from November 14, 2013. Management's plans include raising capital through the equity markets to fund operations and eventually, the generating of revenue through its business. The Company does not expect to generate any revenues for the foreseeable future.

Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern; however, the accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Accounting Method

The Company’s condensed financial statements are prepared using the accrual basis of accounting in accordance with GAAP 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 periods ended September 30, 2013 and 2012, and for the period from inception to September 30, 2013, the Company did not report any revenues.

Earnings Per Share

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 which provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents outstanding at September 30, 2013 and 2012.

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”), superseded by ASC 820-10, 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 ASC 820-10 was not significant to the Company’s condensed financial statements. ASC 820-10 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. ASC 820-10 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:

●

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.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of our derivative liability is determined using Level 1 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2013 and 2012. 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 debt instruments is estimated based on current rates that would be available for debt of similar terms, which is not significantly different from its stated value, except for the convertible note payable, at fair value, which has been revalued based on current market rates using Level 1 inputs.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

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.

Upon inception, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), superseded by ASC 740-10. The Company did not recognize a liability as a result of the implementation of ASC 740-10. 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 did not recognize interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest related to unrecognized tax benefits in interest expense and penalties in other operating expenses.

Fixed Assets and Depreciation

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

Impairment of Long-Lived Assets

In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. On June 30, 2012, we recognized an impairment loss in the amount of $21,000 for our investment in the Church Hollow Site (See Note 10 – Material Agreements). As such our impairment charges recorded during the periods ended September 30, 2013 and 2012 or for the period from inception to September 30, 2013 were $0, $21,000, and $21,000, respectively.

Employee Stock Based Compensation

The FASB issued SFAS No.123 (revised 2004), Share-Based Payment , which was superseded by ASC 718-10. ASC 718-10 provides 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. As of September 30, 2013, the Company has not implemented an employee 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 ASC 718-10, 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 , which was superseded by ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, archeological, operations, corporate communication, financial and administrative consulting services.

Use of Estimates

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

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Convertible Notes Payable

The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40.

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt. As of September 30, 2013 and December 31, 2012, none of the Company’s convertible notes payable included a beneficial conversion feature.

Subsequent Events

In accordance with FASB ASC 855, Subsequent Events , the Company evaluated subsequent events through November 14, 2013, the date the Company’s quarterly report on Form 10-Q was ready to issue.

NOTE 4 - LOSS PER SHARE

Components of loss per share for the three months ended September 30, 2013 and 2012 are as follows:

	For the Three Months Ended September 30, 2013			For the Three Months Ended September 30, 2012
Net loss attributable to common stockholders	$	(605,567	)	$	(182,458	)

Weighted average shares outstanding:
Basic and diluted		835,583,081			702,779,768

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

Components of loss per share for the nine months ended September 30, 2013 and 2012 are as follows:

	For the Nine Months Ended September 30, 2013			For the Nine Months Ended September 30, 2012
Net loss attributable to common stockholders	$	(1,767,192	)	$	(646,109	)

Weighted average shares outstanding:
Basic and diluted		795,794,181			651,188,384

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

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5 – CAPITAL STOCK

Common Stock

The Company is authorized to issue 850,000,000 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.

Series A Preferred Stock

The Company is authorized to sell or issue 50,000,000 shares of preferred stock.

On March 30, 2011, the Company designated 50,000 shares, par value $0.0001 per share as Series A Preferred Stock (“Series A Preferred”). The Series A Preferred has a liquidation preference of $1. The holders have no voting rights and are entitled to receive dividends if and when declared by the board. Additionally, the Series A Preferred does not have a term or a maturity date; it is a perpetual financial instrument. The Company analyzed the instrument under EITF D-109 Determining the Nature of a Host Contract Related to a Hybrid Financial Instrument Issued in the Form of a Share under FASB Statement 133 (FASB Codification ASC 815) to determine if the host preferred stock is more akin to an equity instrument or a debt instrument in terms of their economic characteristics and risks. The Company concluded that the Series A Preferred is more akin to an equity instrument. The Company further analyzed the instrument under EITF D-98 Classification and Measurement of Redeemable Securities (FASB Codification ASC 480-10) and concluded that because the instrument is not redeemable for cash, it does not require classification in the mezzanine section of the financial statements.

Through September 30, 2013, the Company has issued a total of seven shares of its preferred stock. The Company and the preferred shareholders have agreed to amend the preferred shareholder agreements so that each share of preferred stock has the right to convert into 214,286 shares of the Company’s common stock and receive a 1% share of any artifacts found at the Church Hollow Site. As of September 30, 2013, no shares of preferred stock had been converted into shares of the Company’s common stock. The conversion of the outstanding preferred shares into shares of the Company’s common stock would more than likely have a highly dilutive effect on current shareholders and such dilution may result in a significant decrease in the market value of the Company’s common stock.

NOTE 6 - INCOME TAXES

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes are as follows:

	For the Nine Months Ended September 30, 2013			For the Nine Months Ended September 30, 2012
Income tax at federal statutory rate		(34.00	)%		(34.00	)%
State tax, net of federal effect		(3.96	)%		(3.96	)%
		37.96	%		37.96	%
Valuation allowance		(37.96	)%		(37.96	)%
Effective rate		0.00	%		0.00	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of September 30, 2013 and December 31, 2012, the Company’s only significant deferred income tax asset was an estimated net tax operating loss of $7,616,098 and $5,848,906, 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 September 30, 2013 and December 31, 2012.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 7 - LEASE OBLIGATION

Office Lease

The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The Company entered into an amended lease agreement on July 1, 2013 for its current location. Under the terms of the amended lease agreement, the lease term has been extended to June 30, 2015, with a base monthly rent of $1,200.21 from July 1, 2013 to June 30, 2014 and a base monthly rent of 1,234.50 from July 1, 2014 through June 30, 2015. There may be additional monthly charges for pro-rated maintenance, late fees, etc.

NOTE 8 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

Upon inception, the Company evaluates each financial instrument to determine whether it meets the definition of “conventional convertible” debt under paragraph 4 of EITF 00-19, which was ultimately superseded by ASC 470.

Convertible Notes Payable

The following table reflects the convertible notes payable, other than the one remeasured to fair value, which is discussed in Note 10, as of September 30, 2013 and December 31, 2012:

Issue Date	Maturity Date	September 30, 2013		December 31, 2012		Interest Rate			Conversion Rate
Convertible notes payable:
February 17, 2012	February 17, 2013	$	--	$	7,500		6.00	%		0.0040
April 5, 2012	April 5, 2013		--		15,000		6.00	%		0.0050
July 16, 2012	July16, 2013		--		5,000		6.00	%		0.0050
October 31, 2012	April 30, 2013		--		8,000		6.00	%		0.0040
November 20, 2012	May 20, 2013		--		36,003		6.00	%		0.0050
December 20, 2012	June 20, 2013		--		20,000		6.00	%		0.0040
January 28, 2013	January 28, 2014		4,684		--		6.00	%		0.0050
January 28, 2013	January 28, 2014		4,684		--		6.00	%		0.0050
August 8, 2013	February 8, 2014		18,640		--		6.00	%		0.0100
September 18, 2013	March 18, 2014		5,206		--		6.00	%		0.0125
September 25, 2013	March 25, 2014		5,785		--		6.00	%		0.0125
			38,999		91,503

Convertible notes payable– related parties:
July 9, 2013	December 19, 2013		946		--		6.00	%		0.0150
July 17, 2013	January 17, 2014		1,392		--		6.00	%		0.0100
July 26, 2013	January 26, 2014		464		--		6.00	%		0.0100
			2,802		--

Convertible notes payable, in default :
August 28, 2009	November 1, 2009		4,300		4,300		10.00	%		0.0150
November 9, 2011	December 31, 2012		--		35,000		6.00	%		0.0040
April 7, 2010	November 7, 2010		70,000		70,000		6.00	%		0.0080
November 12, 2010	November 7, 2010		40,000		40,000		6.00	%		0.0080
July 16, 2012	July16, 2013		5,000		--		6.00	%		0.0050
October 31, 2012	April 30, 2013		8,000		--		6.00	%		0.0040
November 20, 2012	May 20, 2013		50,000		--		6.00	%		0.0050
January 19, 2013	July 30, 2013		5,000		--		6.00	%		0.0040
February 11, 2013	August 11, 2013		9,000		--		6.00	%		0.0040
			191,300		149,300

Convertible notes payable – related parties, in default:
January 9, 2009	January 9, 2010		10,000		10,000	10.00	%	0.0150
January 25, 2010	January 25, 2011		6,000		6,000	6.00	%	0.0050
January 18, 2012	July 18, 2012		50,000		50,000	8.00	%	0.0040
January 7, 2013	June 30, 2013		7,500		--	6.00	%	0.0040
January 19, 2013	July 30, 2013		15,000		--	6.00	%	0.0040
February 7, 2013	August 7, 2013		10,000		--	6.00	%	0.0040
		$	98,500	$	66,000

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE - continued

The convertible notes payable classified as “in default” are in default as of the date this quarterly report on Form 10-Q and was ready for issue.

On November 20, 2012, the Company issued a $50,000 6% convertible note with a term to May 20, 2013 (the “Maturity Date”). The principal amount of the note and interest is payable on the maturity date. The note and accrued interest is convertible into common stock at a fixed conversion price of $0.005 per share. Within seventy five (75) days of the inception date of the note, the Company is required to issue warrants to the holder to purchase up to 4,000,000 share of the Company’s common stock at an exercise price of $0.005 per share. The warrants will have a ten year term.

The Company has evaluated the terms and conditions of the convertible note and embedded warrant under the guidance of ASC 815 and other applicable guidance. The conversion feature met the definition of conventional convertible for purposes of applying the conventional convertible exemption. The definition of conventional contemplates a limitation on the number of shares issuable under the arrangement. The note is convertible into a fixed number of shares and there are no down round protection features contained in the contracts. Since the convertible notes achieved the conventional convertible exemption, the Company was required to consider whether the hybrid contracts embody a beneficial conversion feature. The calculation of the effective conversion amount did result in a beneficial conversion feature. Additionally, the warrants did not contain any terms or feature that would preclude equity classification.

The following tables reflect the allocation of the purchase on the financing date:

	$50,000
Convertible Note	Face Value
Proceeds	$	50,000
Paid-in capital (beneficial conversion feature)		(2,000	)
Paid-in capital (warrants)		(14,286	)
Carrying value	$	33,714

The discount on the convertible note arose from the allocation of basis to the beneficial conversion feature and the embedded warrants. The discount is amortized through charges to interest expense over the term of the debt agreement. For the nine months ended September 30, 2013, the Company recorded interest expense related to the amortization of debt discount in the amount of $13,997. The carrying value of the convertible note at September 30, 2013 and December 31, 2012 was $50,000 and $36,003, respectively. As of September 30, 2013 this convertible note is considered in default.

Between January 7, 2013 and March 6, 2013, the Company issued an aggregate $134,500 6% convertible notes. The principal amount of the notes and interest is payable on the maturity date. The note and accrued interest are convertible into common stock at fixed conversion prices. The conversion prices and maturity dates of these notes are detailed in the table in the preceding page.

The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815 and other applicable guidance. The conversion feature met the definition of conventional convertible for purposes of applying the conventional convertible exemption. The definition of conventional contemplates a limitation on the number of shares issuable under the arrangement. The note is convertible into a fixed number of shares and there are no down round protection features contained in the contracts. Since the convertible notes achieved the conventional convertible exemption, the Company was required to consider whether the hybrid contracts embody a beneficial conversion feature. The calculation of the effective conversion amount did result in a beneficial conversion feature.

The following tables reflect the aggregate allocation of the purchase on the financing date(s):

	$134,500
Convertible Note	Face Value
Proceeds	$	134,500
Paid-in capital (beneficial conversion feature)		(126,000	)
Carrying value	$	8,500

The discount on these convertible notes arose from the allocation of basis to the beneficial conversion feature. The discount is amortized through charges to interest expense over the terms of the debt agreements. For the nine months ended September 30, 2013, the Company recorded interest expense related to the amortization of debt discount in the amount of $85,370. The carrying value of these convertible notes at September 30, 2013 was $93,870. As of September 30, 2013 $46,500 of the $85,369 is considered in default.

Between July 9, 2013 and September 25, 2013, the Company issued an aggregate $125,000 6% convertible notes. The principal amount of the notes and interest is payable on the maturity date. The note and accrued interest are convertible into common stock at fixed conversion prices. The conversion prices and maturity dates of these notes are detailed in the table in the preceding page.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE - continued

The following tables reflect the aggregate allocation of the purchase on the financing date(s):

	$125,000
Convertible Note	Face Value
Proceeds	$	125,000
Paid-in capital (beneficial conversion feature)		(99,560	)
Carrying value	$	25,440

The discount on these convertible notes arose from the allocation of basis to the beneficial conversion feature. The discount is amortized through charges to interest expense over the terms of the debt agreements. For the nine months ended September 30, 2013, the Company recorded interest expense related to the amortization of debt discount in the amount of $6,992. The carrying value of these convertible notes at September 30, 2013 was $32,432.

Notes Payable

The following table reflects the notes payable as of September 30, 2013 and December 31, 2012:

Issue Date	Maturity Date	September 30, 2013		December 31, 2012		Interest Rate
Notes payable, in default –related parties:
February 24, 2010	February 24, 2011	$	7,500	$	7,500		6.00	%

Notes payable, in default:
June 23, 2011	August 23, 2011		25,000		25,000		6.00	%
April 27, 2011	April 27, 2012		5,000		5,000		6.00	%
			30,000		30,000

		$	37,500	$	37,500

At September 30, 2013 and December 31, 2012, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $48,817 and $45,898, respectively, and included in accounts payable and accrued liabilities on the accompanying balance sheets.

Convertible Notes Payable and Notes Payable, in Default

At September 30, 2013, the Company had convertible notes payable and notes payable of $369,101 of which $327,300 were in default.

The Company does not have additional sources of debt financing to refinance its convertible notes payable and notes payable that are currently in default. If the Company is unable to obtain additional capital, such lenders may file suit, including suit to foreclose on the assets held as collateral for the obligations arising under the secured notes. If any of the lenders file suit to foreclose on the assets held as collateral, then the Company may be forced to significantly scale back or cease its operations which would more than likely result in a complete loss of all capital that has been invested in or borrowed by the Company. The fact that the Company is in default of several promissory notes held by various lenders makes investing in the Company or providing any loans to the Company extremely risky with a very high potential for a complete loss of capital.

The convertible notes that have been issued by the Company are convertible at the lender’s option. These convertible notes represent significant potential dilution to the Company’s current shareholders as the convertible price of these notes is generally lower than the current market price of the Company’s shares. As such when these notes are converted into equity there is typically a highly dilutive effect on current shareholders and very high probability that such dilution may significantly negatively affect the trading price of the Company’s common stock.

Furthermore, management intends to have discussions or has already had discussions with several of the promissory note holders who do not currently have convertible notes regarding converting their notes into equity. Any such amended agreements to convert promissory notes into equity would more than likely have a highly dilutive effect on current shareholders and there is a very high probability that such dilution may significantly negatively affect the trading price of the Company’s common stock. Some of these note holders have already amended their non-convertible notes to be convertible and converted the notes into equity. Based on conversations with other note holders, the Company believes that additional note holders will amend their notes to contain a convertibility clause and eventually convert the notes into equity.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9 – CONVERTIBLE NOTE PAYABLE, AT FAIR VALUE

Convertible Note Payable Dated October 22, 2012 at Fair Value

On October 22, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $42,500, bears interest at 8.0% per annum and is due on July 24, 2013. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 60% multiplied by the average of the lowest two trading prices for the Company’s common stock during the twenty five trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).

In the evaluation of the financing arrangement, the Company concluded that the conversion feature did not meet the conditions set forth in current accounting standards for equity classification. Since equity classification is not available for the conversion feature, it requires bifurcation and liability classification, at fair value. The Company also concluded that the Default Put required bifurcation because, while puts on debt instruments are generally considered clearly and closely related to the host, the Default Put is indexed to certain events that are not associated with the convertible note payable.

The Company elected to account for this hybrid contract under the guidance of ASC 815-15-25-4.

In connection with the issuance of the convertible note payable on October 22, 2012, the Company encountered the unusual circumstance of a day-one derivative loss related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be currently recognized in interest expense or interest income on the Company’s statement of operations.

The holder of this convertible note has the right to convert the balance of the note into shares of the Company’s common stock at a substantial discount to the current market price of the shares. The conversion of the note into shares of the Company’s common stock is potentially highly dilutive to current shareholders. If the note holder elects to sell the shares that it has acquired as a result of converting the note into shares of common stock, then any such sales may result in a significant decrease in the market price of the Company’s shares.

Additionally, the holder of this convertible note has substantial rights and protections regarding dilution if certain events, including a default were to occur. There are a number of events that could trigger a default, including but not limited to failure to pay principal or interest, failure to issue shares under the conversion feature, breach of covenants, breach of representations and warranties, appointment of a receiver or trustee, judgments, bankruptcy, delisting of common stock, failure to comply with the exchange act, liquidation, cessation of operations, failure to maintain assets, material financial statement restatement, reverse split of borrowers stock, etc. In the event of that any of these events were to occur then the lender would be entitled to receive significant amounts of additional shares of the Company’s stock above the amounts for conversion and such occurrence would be highly dilutive to the Company’s shareholders.

Furthermore, there are additional events that could cause the lender to be owed additional shares of common stock above and beyond the shares due from a conversion. Some of these events include, but are not limited to a merger or consolidation of the Company, dividend distribution or spin off, dilutive issuances of the Company’s stock, etc. If the lender receives additional shares of the Company’s commons stock due to any of the foregoing events or for other reasons, then this may have an extremely dilutive effect on the shareholders of the Company. Such dilution would likely result in a significant drop in the per share price of the Company’s common stock. The potential dilutive nature of this note presents a very high degree of risk to the Company and its shareholders.

During the nine months ended September 30, 2013, the Company repaid $30,000 in principal and the remaining $12,500 in principal was converted into 1,136,364 shares of the Company’s common stock. At September 30, 2013 and December 31, 2012, the convertible note payable, at fair value, was recorded at $0 and $90,047, respectively.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9 – CONVERTIBLE NOTE PAYABLE, AT FAIR VALUE - continued

Convertible Note Payable Dated December 18, 2012 at Fair Value

On December 18, 2012, the Company entered into a convertible note payable with a corporation. The convertible note payable, with a face value of $42,500, bears interest at 8.0% per annum and is due on September 20, 2013. The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the Variable Conversion Price. The Variable Conversion Price is defined as 60% multiplied by the average of the lowest two trading prices for the Company’s common stock during the twenty five trading day period ending one trading day prior to the date the convertible note payable is sent by the holder to the Company. The conversion feature is subject to full-ratchet, anti-dilution protection if the Company sells shares or share-indexed financing instruments at less than the conversion price. The holder has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events (the “Default Put”).

The Company elected to account for this hybrid contract under the guidance of ASC 815-15-25-4.

In connection with the issuance of the convertible note payable on December 18, 2012, the Company encountered the unusual circumstance of a day-one derivative loss related to the recognition of (i) the hybrid note and (ii) the derivative instrument arising from the fair value measurement due to the fair value of the hybrid note and embedded derivative exceeding the proceeds that the Company received from the arrangement. Therefore, the Company was required to record a loss on the derivative financial instrument. In addition, the fair value will change in future periods, based upon changes in the Company’s common stock price and changes in other assumptions and market indicators used in the valuation techniques. These future changes will be currently recognized in interest expense or interest income on the Company’s statement of operations.

During the nine months ended September 30, 2013, the full $42,500 in principal and $1,700 in accrued interest was converted into 3,226,278 shares of the Company’s common stock. At September 30, 2013 and December 31, 2012, the convertible note payable, at fair value, was recorded at $0 and $93,195, respectively.

The following tables summarize the effects on earnings associated with changes in the fair values of the convertible note payable, at fair value for the three months ended September 30, 2013 and 2012:

	For the three months ended
	September 30,			September 30,
	2013			2012
Interest expense recorded upon issuance of the convertible note payable		$	--		$	--
Interest income (expense) on fair value re-measurement of the convertible note payable			19,092			(35,685	)
		$	19,092		$	(35,685	)

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9 – CONVERTIBLE NOTE PAYABLE, AT FAIR VALUE - continued

The following tables summarize the effects on earnings associated with changes in the fair values of the convertible note payable, at fair value for the nine months ended September 30, 2013 and 2012:

	For the nine months ended
	September 30,			September 30,,
	2013			2012
Interest expense recorded upon issuance of the convertible note payable		$	--		$	(100,793	)
Interest income (expense) on fair value re-measurement of the convertible note payable			23,556			151,071
		$	23,556		$	50,278

NOTE 10 – MATERIAL AGREEMENTS

Agreement to Explore a Shipwreck Site Located off of Bevard County, Florida

On February 1, 2013, the Company entered into an agreement with a corporation under which Seafarer was given the rights to explore a purported historic shipwreck located off of Brevard County, Florida. Under the terms of the agreement Seafarer agreed to provide services that are normal to the exploration and salvage of historic shipwrecks, including exploration, dig and identify, research and establish historic province, salvage, recover and conserve artifacts and archeological material from abandoned and lost shipwreck sites. Seafarer will also assist to obtain and/or update the necessary permits and contracts with various governmental agencies including the Florida Division of Historical Resources, including environmental permits, which are required to be able to explore and eventually salvage the shipwreck site. Seafarer will also act as the project manager for the exploration and salvage of the shipwreck site. Under the agreement, Seafarer will receive 60% of any recovery of archeological material from the shipwreck site and the corporation will receive 40% net of any percentages that are donated to the State of Florida. All ancillary rights including but not limited to public exhibits, publicity, movies, real time video, television, literary, archival research, and replica rights shall be shared equally between Seafarer and the corporation. Seafarer agreed to pay to the corporation 10 million shares of its restricted common stock with 2.5 million shares due and payable upon execution of the agreement, 2.5 million shares due and payable upon the receipt of a salvage and recovery contract from the State of Florida, 2.5 million shares upon commencement of the work at the site, and 2.5 million shares upon the discovery of valuable archeological material. Seafarer may in its discretion issue additional performance shares of its stock to the corporation. Seafarer and the corporation will be jointly responsible for overseeing the conservation of archeological materials from the site and will mutually locate and agree on a third party to handle the conservation of the artifacts. Seafarer will be responsible for 60% of the cost of the conservation of the artifacts and the corporation will be responsible for 40% of the cost. Seafarer and the corporation are individually responsible for their own costs and expenses that they incur that are associated with the agreement, including but not limited to fees, insurance, independent contractors, food, permit and contract fees, repairs, equipment, vessels, divers, safety equipment, travel, legal expenses, etc.

Agreement with Tulco Resources, Ltd.

As previously noted in its 8-K filing on June 11, 2010, the Company entered into an agreement with Tulco Resources, Ltd. (“Tulco”) on June 8, 2010 which granted the Company the exclusive rights to explore, locate, identify, and salvage a possible shipwreck within the territorial limits of the State of Florida, off of Palm Beach County, in the vicinity of Juno Beach, Florida (the “Exploration Agreement”). The term of the Agreement is for three years and may renew for an additional three years under the same terms unless otherwise agreed to in writing by the Tulco and Seafarer. The Agreement may be terminated by mutual agreement of both Tulco and Seafarer or it may be terminated by either party for cause. Termination for cause may include willful misconduct or gross negligence with respect to carrying out any duties responsibilities or commitments under the agreement and/or failure by Seafarer to fully pay the annual conservation payment on time. Under the Agreement the Company paid Tulco a total of $40,000, a total which included $20,000 to cover fees owed to Tulco from the 2009 diving season and a $20,000 payment for the 2010 diving season. The Company also agreed to pay Tulco a conservation payment of $20,000 per calendar year during the term of the Agreement. The amount of the conservation payment my increase in future years based on the mutual agreement of Tulco and the Company. The Company agreed to furnish its own personnel, salvage vessel and equipment necessary to conduct operations at the shipwreck site. The Company also agreed to pay all of its own expenses directly associated with salvage operations, including but not limited to fuel, food, ground tackle, electronic equipment, dockage, wages, dive tanks, and supplies. The Company agreed to split any artifacts that it recovers equally with Tulco, after the State of Florida has selected up to twenty percent of the total value of recovered artifacts for the State of Florida’s museum collection. The Company and Tulco agreed to receive their share of the division of artifacts at the same time. The Company and Tulco agreed to jointly handle all correspondence with the State of Florida regarding any agreements and permits required for the exploration and salvage of the shipwreck site.

The Company has previously received correspondence from Tulco’s legal counsel demanding that the Company pay additional fees that are not contemplated in the Exploration Agreement and that the Company turn over artifacts to Tulco. Tulco has stated that if the Company does not meet its demands then Tulco will seek other groups to work at the Juno Beach site and that it will terminate its agreement with the Company and it has threatened to take legal action against the Company. The Company paid Tulco the $20,000 fee in January 2012 as required under the Exploration Agreement, however Tulco has not cashed the check from 2012. The Company has not paid Tulco the $20,000 fee in January 2013 as contemplated in the Agreement and does not intend to make the payment until legal counsel is able to determine Tulco’s intent with regard to the Exploration Agreement. Tulco has not provided any conservation services as required under the Exploration Agreement. The original three year term of the Exploration Agreement was valid until June 10, 2013 and both Seafarer and Tulco had the option to extend the agreement for an additional three years. There have been no discussions between Tulco and Seafarer regarding extending the Exploration Agreement. It is possible that Tulco may claim that the Exploration Agreement is no longer valid and that therefore the Company has no further rights to explore and salvage the Juno Beach site.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – MATERIAL AGREEMENTS - continued

On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure site at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 and as renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer, during the period of approximately March 2008 through April 2012, had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. Such service of process is continuing as Tulco is being sought for service.

Recovery Permit with Florida Division of Historical Resources

As previously noted on its form 8-K filed on May 9, 2011, the Company and Tulco received a 1A-31 Recovery Permit from the Florida Division of Historical Resources. The Recovery Permit is active through April 25, 2014. The Permit authorizes Seafarer to dig and recover artifacts from the designated site at Juno Beach, Florida.

Exploration Permit with Florida Division of Historical Resources

On November 2, 2012, the Company received a three year 1A-31 Exploration Permit from the Division of Historical Resources for an area identified off of Lantana Beach, Florida. Under the permit, the Company can begin remote sensing of the site including magnetometer and side scan sonar as necessary, underwater recording of exposed target information using photo, video, measuring tapes and temporary datum points, develop a research plan to test selected target areas that appear to represent historic shipwreck material once the remote sensing has been completed and the data analyzed. The Company and any associated personnel and contractors must adhere to a number of requirements and conditions that are outlined in the permit. If the work authorized under the Exploration Permit confirms the presence of a historical shipwreck then a request for a recovery permit will be made.

Certain Other Agreements

The Company had previously entered into two related agreements with an individual consultant in August of 2011. The first agreement was a letter agreement outlining the business terms under which the Company will provide funding, a vessel, and equipment to explore and salvage a purported abandon shipwreck site known to the consultant. Under the terms of the letter agreement the Company agreed to provide the vessel, search and salvage equipment and salvage services. The Company agreed to use its best efforts to obtain all applicable permits and agreements for the project. The letter agreement states that the Company will carry out the recovery of any recoverable artifacts at the site and the Company has sole discretion as to which artifacts are economically practical to remove from the site. Additionally if any artifacts are recovered then the Company would be responsible the stabilization, transportation, provision of secured storage and documentation of the artifacts. Should the project move forward into an operating phase then the consultant would be the operations manager and oversee the operational aspects of the project in consultation with the Company however the Company would have absolute authority of where, when and how to conduct operations. If the Company is not able to secure the necessary permits and agreements for the project then the both parties agree to release each other from their obligations under the agreement. In consideration for the consultant providing the location and information as to the purported shipwreck site, the Company agreed to pay the consultant an initial payment of 120,000 restricted shares of its common stock. If the Company is successful in obtaining the required permits and agreements from governmental agencies necessary to salvage the shipwreck site identified by the consultant then the Company agreed to issue the consultant 2,000,000 shares of its restricted common stock. The Company further agreed to pay the consultant an additional 1,000,000 shares of its restricted common stock if the Company successfully locates a minimum of $50,000 worth of valuable artifacts at the shipwreck site. The consultant will also be entitled to additional stock bonuses as determined by the Company’s Board of Directors. Furthermore the consultant will be paid for his services under a separate consulting agreement once the project receives the necessary permits and agreements to salvage the designated area. The second agreement is a consulting agreement under which the consultant agrees to provide services and advice to the Company on site work as deemed necessary for the job, directing, mapping, charting for the Company in relation to the specific shipwreck project under the direction of the Company’s President. Under the terms of the consulting agreement the Company agreed to pay the consultant $10,000 per month after receiving an approved salvage permit with the State of Florida for the shipwreck site that the consultant agreed to make known to the Company under the letter agreement described above. The agreement also states that if the value of the shares that have been given to the consultant per the letter agreement become worth more than $250,000 then the Company will only pay the consultant a fee of $5,000 per month and if after six months of salvage operations the Company determines that it is overly burdensome to continue to pay the consultant at the rate described above then will agree to renegotiate a new monthly fee schedule. The original consulting agreement has been amended to reflect that the consultant will receive $2,500 per month.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – MATERIAL AGREEMENTS - continued

The Company previously entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 4,000,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for pre-approved expenses.

The Company previously entered into an agreement in January 2013 with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 900,000 restricted shares of its common stock. According to the agreement the shares vest at a rate of 75,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for pre approved expenses. As of September 30, 2013 the Company had not issued any shares of its restricted common stock to the advisor.

In April of 2013, the Company entered into an independent contractor agreement with a limited liability company to provide various archeological and historic research consulting services to the Company, including researching historic shipwreck sites, identifying artifacts, advising the Company in regards to proper archeological guidelines for exploring and salvaging shipwrecks, teaching classes pertaining to proper archeological procedures and the proper way to recover artifacts and to perform other consulting services as may be appropriate from time to time. The term of each of the consulting agreements is open ended and may be terminated by either party upon request. In consideration for the performance of the consulting services, the Company agreed to issue the consultant a total of 2,000,000 restricted shares of its common stock. Additionally, the Company agreed to pay the consultant $3,500 per month in shares of the Company’s restricted common stock. Under the consulting agreement, the Company has agreed to reimburse the advisors for pre approved expenses. As of July 1, 2013 this agreement was amended to reflect that the consultant will be paid $4,000 per month in the form of restricted common stock of the Company at a 50% discount to the current market price for the stock.

In April of 2013, the Company entered into a legal services agreement with an individual under which the individual agreed to act as the Company’s legal representative, counselor and agent with regards to media projects that the Company undertakes, including movies and television. The Company agreed to issue the legal consultant 200,000 shares of its restricted common stock in exchange for the services. The term of the agreement is for one year.

In June of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 240,000 restricted shares of its common stock. According to the agreement, the shares vest at a rate of 20,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for pre approved expenses.

In July of 2013, the Company entered into a settlement agreement with an individual who was a former officer and director of the Company prior to its reverse merger in 2008. Under the terms of the settlement agreement, the individual agreed to cancel 2,250,000 shares of the Company restricted common stock and the Company agreed to dismiss a potential legal action and not pursue any further claims against the individual. The agreement also allowed the individual to sell 3,557,333 of the Company’s common stock that had been issued to him prior to the reverse merger in 2008. The individual agreed that he would only sell 500,000 shares per week. The 2,250,000 shares that were returned to the Company were cancelled.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – MATERIAL AGREEMENTS - continued

In August of 2013, the Company entered into a consulting agreement with a corporation to provide corporate planning, strategy negotiations, research statutory requirements for shipwreck salvage at the federal, state and international levels, research and analyze historical data and background data, develop an corporate communications strategy, and provide strategic planning and operational support services on a project basis. The Company agreed to pay the consultant a fee of 100,000 shares of its restricted stock for performance of the services. The Company also agreed to pay some expenses that the consultant may incur while providing the services, however the Company must authorize any such expenses prior to the consultant incurring them. The Company considered the fee earned by the consultant during the three month period ended September 30, 2013 and an expense of $1,500 has been included as an expense in consulting and contractor fees in the accompanying income statement for the period.

In August of 2013, the Company entered into an agreement with an individual to join the Company’s advisory council. Under the advisory council agreements the advisor agreed to provide various advisory services to the Company, including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect to the Company's business, and providing such other advisory or consulting services as may be appropriate from time to time. The term of each of the advisory council agreements is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor an aggregate total of 360,000 restricted shares of its common stock. According to the agreement, the shares vest at a rate of 30,000 per month during the term of the agreement. If the advisory council agreements are terminated prior to the expiration of the one year terms, then each of the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreements, the Company has agreed to reimburse the advisors for pre approved expenses.

In August of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to continue serving as a member of the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 1,500,000 restricted shares of its common stock at the execution of the agreement and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for preapproved expenses. As of September 30, 2013, the Company had issued the related party Director 1,500,000 shares of its restricted common stock pursuant to the agreement. The 1,500,000 shares are included as an expense in the amount of $26,250 in consulting and contractor fees in the accompanying income statement.

On various dates during the three month period ended September 30, 2013, the Company issued a total of 1,025,000 shares to five independent contractor consultants as additional compensation to the cash fees they were being paid. 925,000 shares were issued for services related to its operations, primarily its shipwreck exploration and recovery operations and 100,000 shares were issued for various administrative and clerical services. The Company issued the shares to the consultants in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services to the Company. The 1,025,000 shares are included as an expense in the amount of $24,450 in consulting and contractor fees in the accompanying income statement.

The Company has an ongoing verbal agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO to pay the related party consultant $3,000 per month to provide background research, background checks and investigative information on individuals and companies, and act as an administrative specialist to perform various administrative duties and clerical services. The consultant provides the services under the direction and supervision of the Company’s CEO. During the three month period ended September 30, 2013, the Company paid the related party consultant fees of $9,000. During the three month periods ended September 30, 2013, the Company also paid the consultant a fee of 600,000 shares of its restricted common stock with a market value at the time of issuance of $9,600 in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services at such rates All fees paid to the related party consultant during the three month period ended September 30, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10 – MATERIAL AGREEMENTS - continued

The Company has an ongoing consulting agreement to pay a limited liability company controlled by its former Chief Financial Officer a minimum of $5,000 per month for providing ongoing financial consulting, financial reporting, business and strategic planning and consulting, IT management, and accounting services. The Company also agreed to pay additional compensation to the consultant in the form of cash and/or restricted stock to be awarded solely at the Company’s discretion to show appreciation for the consultant’s willingness to spend additional time and effort rendering services to the Company, to provide services to the Company at below market cash compensation rates and as an incentive and an inducement to continue to provide services to the Company. The Company also agreed to reimburse the consultant for certain expenses. The agreement is verbal and may be terminated by the Company or the consultant at any time. The Company believes that the consultant has provided services at discounted rates and in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services at such rates, the Company paid the consultant a total of 2,000,000 shares of its restricted stock with a market value of $42,500 during the three month period ended September 30, 2013. All fees paid to the consultant during the three month periods ended September 30, 2013 are included as an expense in consulting and contractor fees in the accompanying income statements.

The Company has an ongoing consulting agreement to pay a limited liability company a minimum of $500 per month for bookkeeping services and an additional $5,000 worth of restricted stock and/or cash per quarter for providing assistance with technical accounting and financial reporting. The Company may also pay additional compensation to the consultant in the form of cash and/or restricted stock to be awarded solely at the Company’s discretion to show appreciation for the consultant’s willingness to spend additional time and effort rendering services to the Company, to provide services to the Company at below market cash compensation rates and as an incentive and an inducement to continue to provide services to the Company. The Company also agreed to reimburse the consultant for certain expenses. The agreement is verbal and may be terminated by the Company or the consultant at any time. All fees paid to the consultant, including any payments of restricted stock, during the three month period ended September 30, 2013 are included as an expense in consulting and contractor fees in the accompanying income statements.

NOTE 11 – DIVISON OF ARTIFACTS AND TREASURE

Under the Exploration Agreement with Tulco that was renewed on June 8, 2010, the Company is required to split any artifacts or treasure that it successfully recovers from the Juno Beach Shipwreck site with the FLDHR and Tulco. Tulco and the Company, assuming that the FLDHR’s portion will be 20%, have agreed to the following division of artifacts and treasure:

20% to the FLDHR

40% to Tulco

40% to the Company

More specifically, the FLDHR 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 FLDHR has selected those artifacts and treasure that it feels will complement its collection, then the Company and Tulco will split the remaining artifacts and treasure equally.

In addition to the division of artifacts with the FLDHR and Tulco, the Company has entered into agreements where it may be required to pay additional percentages of its net share of any artifacts that it recovers at the Juno Beach Shipwreck site:

●

The Company may elect to pay its divers or other personnel involved in the search for artifacts by giving them a percentage of the artifacts that they locate after a division of artifacts takes place with the FLDHR and Tulco. At the present time, the Company does not have any written agreements to pay any of its dive personnel a net percentage of any recovered artifacts; however, the Company reserves the right to do so in the future.

●

The Company has become aware that an individual has made a claim that he has a legally valid and binding agreement with Tulco to receive a percentage of any artifacts recovered from the Juno Beach Shipwreck. The individual has purportedly claimed that his agreement with Tulco was executed several years prior to the Company and Tulco entering into the Exploration Agreement in March 2007. The Company has not been able to verify the legal standing of this claim. If this alleged agreement exists and is legally valid and binding, or if there are other agreements that have a valid, legal claim on the Juno Beach Shipwreck site, then such consequences may have a material adverse effect on the Company and its prospects.

To date the Company has not located any artifacts that have any significant monetary value. The chance that the Company will actually recover artifacts of any significant value from the Juno Beach shipwreck site is very remote and highly unlikely.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12 – LEGAL PROCEEDINGS

Since December 11, 2009, the Company, has been involved in a lawsuit where it was named as a Defendant, along with its CEO and transfer agent in Case Number 09-CA-030763, filed in the Circuit Court of Hillsborough County, Florida. The lawsuit was brought in the name of 31 individuals and 1 corporation. The lawsuit alleges that the Company, its CEO, and its transfer agent wrongfully refused to remove the restrictive legend from certain shares of the Company’s common stock that are collectively owned by the plaintiffs, which prevented the plaintiffs from selling or transferring their shares of the Company’s common stock. The plaintiffs allege that they have lost approximately $1,041,000 as of the date of the lawsuit. Such lawsuit continued to a hearing of the Plaintiffs’ motion for summary judgment against the Defendants including Seafarer, which was heard on September 1, 2011 and denied by the Court. Litigation of the matter has continued and the Company has presented evidence and arguments of law that the shares were distributed from their original recipient, Micah Eldred, in an illegal sale to another corporate entity. The Company further contends in its pleadings that such shares were then illegally purchased back by Eldred, then distributed in a manner by Eldred to others including the 31 other Plaintiffs to avoid reporting requirements under the Securities Act and as Eldred had a duty to report as a principal of a brokerage. The actions by Eldred, as pled by the Corporation, is that on or about October 8, 2008, Eldred gifted most of the 34,700,000 shares to certain friends, family, and employees (i.e., the Plaintiffs named in this Complaint), and kept ownership of 4, 140,000 shares.

On September 11, 2013, the Parties attended a voluntary mediation, which ended in an impasse.

Some discovery had progressed to the point that Seafarer had, on September 25, 2013, filed a Motion to File Counterclaims and Third-Party Complaint (“Motion for Leave to File Counterclaim”) along with a proposed Counterclaim. The proposed Counterclaim names as defendants the Plaintiffs in the Lawsuit, as well as non-parties Spartan Securities Group, Ltd., (“Spartan Securities”) and Am- Asia Consulting (“Am-Asia”) (collectively the “Proposed Counterclaim Defendants”). Neither Spartan Securities nor Am-Asia has yet been joined or served with any process in the Lawsuit. The allegations in the proposed Counterclaim arise from the same transaction or occurrence that gave rise to the Lawsuit. Specifically, the proposed Counterclaim alleges that the Plaintiffs including Eldred violated and conspired to violate securities laws, specifically Rule 10b-5 promulgated under the Securities Exchange Act, 15 U.S.C. § 78j, and Fla. Stat. § 517.301, in connection with the activities which form the basis of Plaintiffs’ claims in the Lawsuit. Included in the proposed counterclaim was an allegation of conspiracy between Eldred and Sean Murphy for the publication of false information which Seafarer sued Murphy for and received a judgment for libel against Murphy on April 1, 2011 for $5,080,000. Thus the counterclaim was proposed and filed as a proposed claim against the Plaintiffs: Micah Eldred, Michael J. Daniels, Carl Dilley, Heather Dilley, James Eldred, Mary R. Eldred, Michole Eldred, Nathan Eldred, Toni A. Eldred, Diane J. Harrison, Ioulia Hess, Olessia Kritskaia, Anna Krokhina, George Lindner, Elizabeth Lizzano, Karen Lizzano, Robert Lizzano, Abby Lord, Jillian Mally, Ekaterina Messinger, Susan Miller, Michael Mona, Matthew J. Presy, Oksana Savchenko, Vanessa A. Verbosh, Alan Wolper, Sarah Wolper, Christine Zitman, and CADEF: Childhood Autism Foundation, Inc. Damages sought include actual damages of over $15,000,000. Such matter was set for hearing to be heard in the State Court on October 23, 2013. It is strongly noted as shown below, it was established that CADEF: the Childhood Autism Foundation was improperly named as a Plaintiff, and Seafarer will not proceed with any claims against the foundation and CADEF has demanded to the counsel representing the Plaintiffs that CADEF be dropped from such proceedings as a Plaintiff against Seafarer.

On October 18, 2013, the Plaintiffs filed a Notice of Removal to Federal Court in the Tampa Division of the United States District Court, citing the allegation that such lawsuit should be moved to Federal Court based upon the Defendants proposed counterclaims of Federal law. The pleading for removal contained the allegation by the Plaintiffs that they had the consent of all the listed Plaintiffs to remove the matter to Federal Court. On November 4, 2013, Seafarer filed a Motion to Remand back to State Court in the Federal Court, citing legal argument and the undisputed facts that removal to Federal Court was improper as having no basis in law, and asking for attorneys fees from the Plaintiffs for such removal. On November 7, 2013, Judge James Moody of the United States District Court entered an Order granting the Remand Motion of Seafarer, finding that “Plaintiffs removed the case based on their assumption that the counterclaim would establish federal jurisdiction. Plaintiffs’ removal is patently without merit.” Judge Moody further held “Plaintiffs’ removal had no basis under the law or facts. Simply put, the removal was not objectively reasonable. Accordingly, the Court Ordered the case sent back to State Court and that the Federal Court would award Defendants [Seafarer] a reasonable amount of attorney’s fees and costs.” Seafarer was granted the ability to file for attorney’s fees in the matter against the Plaintiffs, which its counsel intends to pursue. Such case is now being remanded to the Circuit Court in Hillsborough County, where Seafarer will again set the matter for hearing to file all the counter-claims and third party claims as previously filed to be heard. It is the intent of Seafarer, its board and management to seek complete cancellation of all shares issued to the Plaintiffs and for damages including punitive damages against the Plaintiffs for their actions, which is alleged to have materially damaged the Corporation and its shareholders.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12 – LEGAL PROCEEDINGS - continued

In early October 2013, counsel for Seafarer was contacted by counsel representing the listed Plaintiff, CADEF: The Childhood Autism Foundation (CADEF), as to their being named in the lawsuit as Plaintiffs in the State Court action and the litigation being done in their name. Pursuant to those discussions, on November 5, 2013, Seafarer, Kyle Kennedy (individually), Cleartrust LLC and CADEF entered into a Settlement Agreement and Release from Litigation. CADEF agreed to surrender all rights to the 1,000,000 shares in its name, as well as causing dismissal of any such claims against the Seafarer, Kennedy and Cleartrust that had been brought in their name in the lawsuit. Specifically, CADEF agreed: “CADEF agrees that the following matters of fact exist based upon the knowledge of its Board of Directors and Principals: A) The Board of Directors of CADEF had no knowledge of the share certificate ever being issued for its benefit or the existence of such share certificate until recently in the month of October 2013 when such shares were sent to them. B) The Board of Directors of CADEF never authorized the filing of the lawsuit cited above or to be a party to such. C) Because of the above in B) CADEF’s Board of Directors was never advised of any settlement offer being made by the Defendants nor of the mediation held on September 11, 2013. On approximately October 30, 2013 CADEF delivered such 1,000,000 shares to counsel for Seafarer. Seafarer and its counsel completely contend in such release and in such proceedings that CADEF was not a knowing party to such lawsuit. Seafarer intends to pursue the representations by the other Plaintiffs through counsel made in Pleadings, at mediation, and in the Federal Court that CADEF had been represented in such matter with their knowledge and consent.

Such litigation is now awaiting remand to the Circuit Court in Hillsborough County which is expected in the next 30 days and for continued litigation.

On February 24, 2011, the Company was named as defendants in Case Number 11000393CC filed in the Circuit Court of Martin County, Florida, by a limited liability company. The limited liability company is claiming that the Company owes $12,064, plus court costs and attorney’s fees under a lease agreement. The plaintiff is demanding that the court render judgment against the Company in the amount of $12,064, plus court costs and attorney’s fees pursuant to Section 720.305(1) of the Florida Statutes costs and other relief as the court deems just and proper. Management believes that the limited liability company was paid all of the fees owed to it under the lease agreement and the Company plans to mount a vigorous defense against this claim and is currently seeking all attorney’s fees and costs for what it sees as a spurious claim. The Company has presented proof of payment for all billed liabilities and believes that full payment was made. The Company has filed and will keep pending a motion for sanctions and dismissal of the cause of action. On February 21, 2013, both parties settled the matter with neither party making any admission of liability.

On March 2, 2010, the Company filed a complaint naming, Sean Murphy as a Defendant who formerly provided services as a captain, diver, and general laborer to the Company as a defendant in the Circuit Court of Hillsborough County, Florida case number 10-CA-004674. The lawsuit contains numerous counts against the defendant, including civil theft, breach of contract, libel and negligence. On April 5, 2011, a jury in Hillsborough County, Florida found in favor of the Company and found that the defendant was responsible for $5,080,000 in compensatory damages. In 2012, the Company attempted to schedule a trial for the punitive damages, but the Court cancelled the trial due to scheduling of priority cases. The Company is currently seeking final entry of not only the judgment, but will be exercising collection matters against the Defendant. The Company intends to pursue collection, no matter the ability of the Defendant to pay.

The Company currently has litigation pending in Pinellas County, the Sixth Judicial Circuit, Civil Case No. 11-05539-Cl-19 naming as Defendants both an individual and a corporation controlled by the individual. The case is a collection case against the corporation for the balance of a promissory note due to the Company, and against the individual as a guarantor of the promissory note. The defendants have filed an answer in the nature of a general denial, certain affirmative defenses, and a singular counterclaim against the Company and its CEO, individually, alleging that the Company and its CEO were negligent in the use or maintenance of a vessel owned by the corporation, for which damages are sought in excess of $15,000. Seafarer’s legal counsel intends to argue that the Company’s CEO has been improperly individually joined in this action. The counterclaim allegations are being vigorously legally contested by both the Company and its CEO. Motion to strike and dismiss defenses and counterclaims are currently pending, legal discovery is ongoing, and the pleadings are not otherwise currently “at-issue” to schedule the action for trial. At the time of the filing of this form 10-Q, the Company’s motions have not been set for hearing and dispositions by the court.

On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure cite at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 and as renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. Such service of process is continuing as Tulco is being sought for service.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – RELATED PARTY TRANSACTIONS

In January of 2013, the Company previously entered into an agreement with an individual who is related to the Company’s CEO to join the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 4,000,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for pre approved expenses.

In August of 2013, the Company entered into an agreement with an individual who is related to the Company’s CEO to continue serving as a member of the Company’s Board of Directors. Under the agreement, the Director agreed to provide various services to the Company including making recommendations for both the short term and the long term business strategies to be employed by the Company, monitoring and assessing the Company's business and to advise the Company’s Board of Directors with respect to an appropriate business strategy on an ongoing basis, commenting on proposed corporate decisions and identifying and evaluating alternative courses of action, making suggestions to strengthen the Company's operations, identifying and evaluating external threats and opportunities to the Company, evaluating and making ongoing recommendations to the Board with respect for one year and may be terminated by either the Company or the Director by providing written notice to the other party. The agreement also terminates automatically upon the death, resignation or removal of the Director. Under the terms of the agreement, the Company agreed to pay the Director 1,500,000 restricted shares of its common stock at the execution of the agreement and to negotiate future compensation on a year-by-year basis. The Company also agreed to reimburse the Director for pre approved expenses. As of September 30, 2013, the Company had issued the related party Director 1,500,000 shares of its restricted common stock pursuant to the agreement. The 1,500,000 shares are included as an expense in the amount of $26,250 in consulting and contractor fees in the accompanying income statement.

In July of 2013, the Company entered into a convertible loan agreement in the amount of $15,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before December 19, 2013. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.015 per share.

In July of 2013, the Company entered into a convertible loan agreement in the amount of $30,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 17, 2014. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.01 per share.

In July of 2013, the Company entered into a convertible loan agreement in the amount of $10,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 26, 2014. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.01 per share.

In August of 2013, one of the Company’s promissory note holders agreed to assign a total of $5,000 of the remaining principal balance of his note which had an original face value of $20,000 and which was in default due to non-payment of principal and interest, to an investor who is related to the Company’s CEO, pursuant to a wrap around agreements between the note holder and the related party investor. Under the agreements the related party investor agreed to repay the related party note holder a portion of the principal balance which was $5,000. The investor elected to convert the $5,000 principal balance of the note plus accrued interest of $400 into a total of 1,080,000 shares of the Company’s common stock.

In August of 2013, a related party shareholder provided the Company with emergency short term loan proceeds totaling $2,500. The Company repaid the related party shareholder the entire $2,500 balance prior to September 30, 2013. The Company did not pay any interest or fees to the related party shareholder for providing the short term loan.

In September of 2013, a convertible note holder who is related to the Company’s CEO elected to convert the note dated March 6, 2013 with a face value of $23,000 plus accrued interest of $690 into a total of 1,579,333 shares of the Company’s common stock.

The Company has an ongoing verbal agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO to pay the related party consultant $3,000 per month to provide background research, background checks and investigative information on individuals and companies, and act as an administrative specialist to perform various administrative duties and clerical services. The consultant provides the services under the direction and supervision of the Company’s CEO. During the three month period ended September 30, 2013, the Company paid the related party consultant fees of $9,000. During the three month periods ended September 30, 2013 the Company also paid the consultant a fee of 600,000 shares of its restricted common stock with a market value at the time of issuance of $9,600 in order to more fairly compensate the consultant and show appreciation for the consultant’s services and as an inducement for the consultant to continue to provide services at such rates All fees paid to the related party consultant during the three month period ended September 30, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the period.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – RELATED PARTY TRANSACTIONS - continued

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 three month period ended September 30, 2013, the Company paid the related party transfer agency fees of $4,864. All fees paid to the related party consultant during the three month period ended September 30, 2013 are included as an expense in consulting and contractor fees in the accompanying income statement for the period. At September 30, 2013, the Company owed the related party limited liability company $10,105 for transfer agency services rendered and legal fees relating to a lawsuit against the transfer agent arising from its relationship with the Company. The stock transfer agreement between the related party limited liability company states and the Company states that the Company will pay the legal fees incurred by the stock transfer agency related to lawsuits or legal proceedings against the transfer agency that arise as a result of the services that the transfer agency provides to the Company. In August 2013 the Company entered into a separate debt settlement agreement with the related party vendor to settle a total of $5,730 of outstanding debt related to legal fees incurred by the related party vendor due to a lawsuit against the Company and the transfer of which the related party vendor was also named as a defendant due to its position as the Company’s stock transfer agency. The Company issued 458,462 shares of its common stock to this vendor as satisfaction for the outstanding debt. The agreement between the Company and the vendor stipulated that should the transfer agency realize less than $5,730 from the sale of the stock, then the consultant is entitled to receive up to an additional 400,000 shares of common stock or a cash payment until the balance is paid in full. During the nine month period ended September 30, 2013 the Company has issued the related party limited liability company a total of 1,964,332 shares of its common stock to settle a total of $18,482 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability was also named as a defendant due to its business relationship with the Company. During the nine month period ended September 30, 2012 the Company issued the related party limited liability company a total of 6,641,583 shares of its common stock to settle a total of $19,261 of debt related to legal fees incurred by the related party limited liability company as a result of a lawsuit involving the Company where the limited liability was also named as a defendant due to its business relationship with the Company.

At September 30, 2013 the following promissory notes and shareholder loans were outstanding to related parties:

A convertible note payable dated January 9, 2009, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 10% per annum with interest payment to be paid monthly and is convertible at the note holder’s option into the Company’s common stock at $0.015 per share. The convertible note payable was due on or before January 9, 2010 and is secured. This convertible note payable is currently in default due to non-payment of principal and interest.

A convertible note payable dated January 25, 2010, in the principal amount of $6,000 with a person who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principle and accrued interest are due on or before January 25, 2011. The note is not secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.005 per share. This loan is currently in default due to non-payment of principal and interest.

A note payable dated February 24, 2010, the principal amount of $7,500 with a corporation. The Company’s CEO is a director of the corporation and a former Director of the Company is an officer of the corporation. The loan is not secured and pays interest at a rate of 6% per annum and the principle and accrued interest were due on or before February 24, 2011. This loan is currently in default due to non-payment of principal and interest.

A convertible note payable dated January 18, 2012, in the amount of $50,000, with two individuals who are related to the Company’s CEO. This loan pays interest at a rate of 8% per annum and the principle and accrued interest were due on or before July 18, 2012. The note is secured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.004 per share. The note is currently in default due to non-payment of principal and interest.

A convertible note payable dated January 7, 2013, due to a person related to the Company’s CEO with a face amount of $7,500. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.004 per share. The convertible note payable is due on or before June 30, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest as of the date of the filing of this form 10-Q.

A convertible note payable dated January 19, 2013, due to a person related to the Company’s CEO with a face amount of $15,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.004 per share. The convertible note payable is due on or before July 30, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest as of the date of the filing of this form 10-Q.

A convertible note payable dated February 7, 2013, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.005 per share. The convertible note payable is due on or before August 7, 2013 and is not secured. The note is currently in default due to non-payment of principal and interest as of the date of the filing of this form 10-Q.

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 13 – RELATED PARTY TRANSACTIONS - continued

A convertible note payable dated July 9, 2013, due to a person related to the Company’s CEO with a face amount of $15,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.015 per share. The convertible note payable is due on or before December 12, 2013 and is not secured.

A convertible note payable dated July 17, 2013, due to a person related to the Company’s CEO with a face amount of $30,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.01 per share. The convertible note payable is due on or before January 17, 2014 and is not secured.

A convertible note payable dated July 26, 2014, due to a person related to the Company’s CEO with a face amount of $10,000. This note bears interest at a rate of 6% per annum with accrued interest to be paid at the time that the principal balance is repaid or the note is converted into shares of the Company’s common stock. The note is convertible at the note holder’s option into the Company’s common stock at $0.01 per share. The convertible note payable is due on or before January 26, 2014 and is not secured.

NOTE 14 – SUBSEQUENT EVENTS

None.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

The following discussion contains certain forward-looking statements that are subject to business and economic risks and uncertainties, and which speak only as of the date of this annual report. No one should place strong or undue reliance on any forward-looking statements. The use in this Form 10-Q of such words as "believes", "plans", "anticipates", "expects", "intends", and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. The Company’s actual results or actions may differ materially from these forward-looking statements for due to many factors and the success of the Company is dependent on our efforts and many other factors including, primarily, our ability to raise additional capital. Such factors include, among others, the following: our ability to continue as a going concern, general economic and business conditions; competition; success of operating initiatives; our ability to raise capital and the terms thereof; changes in business strategy or development plans; future revenues; the continuity, experience and quality of our management; changes in or failure to comply with government regulations or the lack of government authorization to continue our projects; and other factors referenced in the Form 10-Q. This Item should be read in conjunction with the financial statements, the related notes and with the understanding that the Company’s actual future results may be materially different from what is currently expected or projected by the Company.

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Such forward-looking statements are based on the beliefs and estimates of our management, as well as on assumptions made by and information currently available to us at the time such statements were made. Forward looking statements are subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward looking statements, including, without limitation, the failure to successfully locate cargo and artifacts from the Juno Beach shipwreck site and a number of other risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements, either as a result of the matters set forth or incorporated in this Report generally and certain economic and business factors, some of which may be beyond our control.

We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

General

The Company’s principal business plan is to develop the infrastructure to engage in the archaeologically-sensitive exploration and recovery of historic shipwrecks. This type of business venture is extremely speculative in nature and there is a tremendous amount of risk that any capital invested in and/or borrowed by the Company will be lost.

It has been estimated that there are over three million undiscovered shipwrecks around the world and some of these shipwrecks were lost with verifiable cargoes that may have contained valuable materials, including artifacts and treasure. However, the majority of these shipwrecks may have very little archaeological or historical value, and furthermore, a very high percentage of these shipwrecks would not have been carrying valuable cargo including artifacts or treasure of any kind.

The exploration and recovery of historic shipwrecks involves a multi-year, multi stage process. It may take many years and/or be prohibitively expensive to locate, if any are ever located at all, and recover valuable artifacts from historic shipwrecks. Locating and recovering valuable artifacts is very difficult and the probability that the Company will locate valuable artifacts or treasure is very remote. If the Company is not able to locate artifacts or treasure with significant value then there is a very high probability that the Company will fail and all capital invested in or borrowed by the Company will be lost.

Underwater recovery operations are inherently difficult and dangerous and may be delayed or suspended by weather, sea conditions or other natural hazards. Such operations may be undertaken more safely during certain months of the year than others. In addition, even though sea conditions in a particular search location may be somewhat predictable, the possibility exists that unexpected conditions may occur that adversely affect the Company’s operations. It is also possible that natural hazards may prevent or significantly delay search and recovery operations.

In addition to natural hazards, there are constant repair and maintenance issues with salvage vessels, which tend to be older vessels that were originally used in other industries which have been converted for use in shipwreck exploration and recovery. The repairs, maintenance and upkeep of this type of vessel, and in particular the Company’s main salvage vessel, is very time consuming and expensive and there may be significant periods of vessel down time that result from lack of financing to make repairs to the vessel.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Furthermore, there are very strict international, federal and state laws that govern the exploration and recovery of historic shipwrecks. There is no guarantee that the Company will be able to secure permits or enter into agreements with government agencies in order to explore and salvage historic shipwrecks. There is a very substantial risk that government entities may enact legislation that is so strict that any recovery of artifacts and cargo from historic shipwrecks will be nearly impossible. Additionally, permits and agreements with governmental agencies to conduct historic shipwreck exploration and recovery operations are expensive, in terms of both direct costs and ongoing compliance costs. It is also entirely possible that the Company will not be successful in obtaining title or permission to excavate certain wrecks. It is possible that permits that are sought for the projects may never be issued, and if issued, may not be legal or honored by the entities that issued them.

Even if the Company is able to obtain permits for shipwreck sites projects, there is a possibility that the shipwrecks may have already been salvaged or may not be found, or may not have had anything valuable on board at the time that they sank. In the event that valuable artifacts are located and recovered, it is possible that the cost of recovery will be greater than the value of the artifacts recovered. It is also possible that other entities, including both private parties and governmental entities, will assert conflicting claims and challenge the Company’s rights to the recovered artifacts.

Moreover, there is the possibility that should the Company be successful in locating and salvaging artifacts that have significant archeological and/or monetary value, a country whose ship was salvaged may attempt to claim ownership of the artifacts by pursuing litigation. In the event that the Company is able to make a valid claim to artifacts or other items at a shipwreck site, there is a risk of theft of such items at sea both before or after the recovery or while the artifacts are in transit to a safe destination as well as when stored in a secured location. Such thefts may not be adequately covered by insurance. Based on a number these and other potential issues, the Company could spend a great deal of time and invest a large sum in a specific shipwreck project and receive very little or no salvage claim or revenue for its work.

There are a number of additional significant issues and challenges including, but not limited to, government regulation and/or the Company’s inability to secure permits and contracts, lack of financing, lack of revenue and cash flow and continued losses from operations that make the exploration and recovery of historic shipwrecks a very speculative and risky business venture with a very high degree of risk that the Company may fail. There is a possibility that the Company will be forced to cease its operations if it is not successful in eventually locating valuable artifacts. If the Company were to cease its operations, then it is likely that there would be complete loss of all capital invested in or borrowed by the Company. As such, an investment in Seafarer is extremely speculative and of exceptionally high risk with a very high probability that all capital invested in and/or borrowed by the Company may be lost.

Plan of Operation

During the periods ended September 30, 2013 and 2012, the Company has taken the following steps to implement its business plan:

To date, the Company has devoted its time towards establishing its business to develop the infrastructure capable of exploring, salvaging and recovering historic shipwrecks. The Company has also performed some exploration and recovery activities.

Although the Company has not generated revenues to date our development activities continue to evolve. We have been a development stage company since inception, in accordance with ASC 915-10.

The Company has evaluated various opportunities to enter into agreements or contracts to conduct exploration and recovery operations at known historic shipwreck locations or potential locations. The Company has previously spent some of its efforts exploring what it believes is a historic shipwreck site located off of Juno Beach, Florida. The Company and Tulco renewed their Exploration Agreement regarding the Juno Beach Shipwreck site in June of 2010.

Even though the Company had an Agreement with Tulco for the Exploration of the Juno Beach site through June 8, 2013, the Company is uncertain as to whether Tulco plans to renew this Exploration Agreement. Tulco did not cash the check that the Company paid under the terms of the Exploration Agreement in 2012. The Company has not paid Tulco the $20,000 fee due in January 2013 as contemplated in the Exploration Agreement and does not intend to make the payment until legal counsel is able to determine Tulco’s intent with regard to the Exploration Agreement. Tulco has not provided any conservation services as required under the Exploration Agreement. The Company has previously received correspondence from Tulco’s legal counsel demanding that the Company pay additional fees that are not contemplated in the Exploration Agreement and that the Company turn over artifacts to Tulco. Tulco has stated that if the Company does not meet its demands then Tulco will seek other groups to work at the Juno Beach site and that it will terminate its agreement with the Company and Tulco has also threatened to take legal action against the Company. The original three year term of the Exploration Agreement was valid until June 8, 2013 and both Seafarer and Tulco had the option to extend the agreement for an additional three years. There have been no discussions between Tulco and Seafarer regarding extending the Exploration Agreement. It is possible that Tulco may claim that the Exploration Agreement is no longer valid and that therefore the Company has no further rights to explore and salvage the Juno Beach site.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure cite at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be jointly responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 and as renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. Such service of process is continuing as Tulco is being sought for service.

As previously noted on its form 8-K filed on May 9, 2011, the Company and Tulco received a Recovery Permit from the Florida Division of Historical Resources. The Recovery Permit is active through April 25, 2014. The Permit authorizes Seafarer to dig and recover artifacts from the designated site at Juno Beach, Florida.

The Company has performed limited exploration and salvage activities at the Juno Beach site in 2013. It is possible that in the future, the Company will only be able to sporadically explore and salvage the Juno Beach site due to vessel repairs and a lack of financing. There may be extended periods of down time where the Company is not performing any operations at the site.

The Juno Beach Shipwreck site is an extremely speculative and highly risky project as far as the potential for the Company to ever locate valuable artifacts or treasure. Although the Company has recovered various artifacts that it believes are interesting, it has not located artifacts and/or treasure of any significant value from the Juno Beach Shipwreck site. There is also possibility that there are not any artifacts of significant value located at the Juno Beach shipwreck site. Even if there are valuable artifacts and/or treasure located at the site, recovering them may be extremely difficult or impossible due to a variety of challenges that include, but are not limited to; inclement weather, hazardous ocean conditions, large amounts of sand that cover large areas of the site, lack the necessary equipment to be able to dig deep enough into the sand, ongoing maintenance and repair issues with the Company’s main salvage vessel, permitting issues and/or a lack of financing, etc.

Moreover, the Company does not currently have sufficient data to positively identify the potential Juno Beach shipwreck, or its country of origin, and it is therefore not possible to determine whether or not the ship was originally carrying cargo of any significant value. Only remnants and scattered pieces of a sunken ship have been located to date; no main shipwreck body has been located. It is also possible that a ship began to break up on the site but the body of the ship actually sank in another area that is outside of the designated Juno Beach site area and all that was left on the Juno Beach site were scattered remnants of the original ship that have little or no archeological or actual value. There is a possibility that there are not any artifacts of significant value located on the Juno Beach shipwreck site. The chance that the Company will ultimately recover valuable artifacts or treasure from the Juno Beach shipwreck site is very remote.

There is a historic shipwreck site located off of Lantana Beach Florida in which the Company has received a three stage permit from the Florida Division of Historical Resources. The permit is for three years starting in November 2012 and ending in November 2015. The permit may be renewed at the end of the third year. Phase 1 of the permit has been completed. The Company's plan is to salvage the site in an archeologically sensitive manner once Phase 2 has been completed. An archeologist with the technical skills, knowledge, and experience from around the world has been hired to help insure the integrity of the work. The initial results, although still premature, suggest a mid to late 1800s composite shipwreck. The Company had expected, because of some previously discovered artifacts, that the wreck may have been that of a 1600s shipwreck. At this time the Company does not believe that the shipwreck remnants that have been located on this site are from a colonial era shipwreck from the 1600s or earlier. An 1800s era wreck would more than likely not contain any artifacts of any significant value and may have only limited, if any at all, historical or archeological value. Additional discovery work needs to be completed to further understand the complexities of this site. There are a significant number of challenges inherent in the exploration and salvage of historic shipwrecks and it is very highly likely that the Company will never recover any artifacts or treasure of any significant value from the Lantana site. The company has begun the dig and identify phase at the Lantana site.

There is a purported shipwreck site in the waters off of Brevard County Florida that the Company desires to explore. In February 2013, the Company signed an agreement with a third party who has previously explored this site for the right to explore the site. It is the Company's plan to request a salvage permit from the State of Florida for the site as soon as the research design report is completed. If a salvage permit is granted and the requisite environmental permits are obtained, then the Company plans to salvage the site in an archeologically sensitive manner. An archeologist with the technical skills, knowledge, and experience from around the world has been hired to help insure the integrity of the work. There are a significant number of challenges inherent in the exploration and salvage of historic shipwrecks and it is very highly likely that the Company will never recover any artifacts or treasure of any significant value from the North Florida site.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

The Company regularly reviews opportunities to perform exploration and recovery operations at purported historic shipwreck sites; however the Company does not have any specific plans to perform exploration and recovery operations at other shipwreck sites at the present time. The Company is actively reviewing other potential historic shipwreck sites for possible exploration and recovery. Should the Company decide that it will pursue exploration and salvage activities at other potential shipwreck sites it may be necessary to obtain salvage permits as well as environmental permits.

If the Company is not able to perform any exploration or recovery operations, then it may have to suspend or cease its operations. If the Company ceases its previously stated efforts, there are not any plans to pursue other business opportunities.

Limited Operating History

To date, the Company has devoted its time towards establishing its business and no revenues have been generated. As such, the Company is considered as being in the development stage, since its inception, in accordance with ASC 915-10. The Company has not currently generated any revenue from operations and does not expect to report any significant revenue from operations for the foreseeable future.

The Company is a development stage company. In a development stage company, management devotes most of its activities to establishing a new business. As of September 30, 2013, the Company had a working capital deficit of $497,029. 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.

Since inception, the Company has funded its operations through common stock issuances and loans in order to meet its strategic objectives; however, there can be no assurance that the Company will be able to obtain further funds to continue with its efforts to establish a new business. There is a very significant risk that the Company will be unable to obtain financing to fund its operation and as such the Company may be forced to cease operations at any time which would likely result in a complete loss of all capital that has been invested in and/or borrowed by the Company to date.

The Company expects to continue to incur significant operating losses and to generate 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. Based on our historical rate of expenditures, the Company expects to expend its available cash in less than one month from September 30, 2013.

The Company’s ability to eliminate operating losses and to generate positive cash flow from operations in the future will depend upon a variety of factors, many of which it is unable to control. If the Company is unable to implement its business plan successfully, it may not be able to eliminate operating losses, generate positive cash flow or achieve or sustain profitability, which may have a material adverse effect on the Company’s business, operations, and financial results, as well as its ability to make payments on its debt obligations, and the Company may be forced to cease its operations.

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. If the Company is unable to continue to raise capital or obtain loans or other financing on terms that are acceptable to the Company, or at all, then it is highly likely that the Company will be forced to cease it operations. If the Company ceases its operations, then it is likely that all capital invested in and/or borrowed by the Company will be lost.

Results of Operations

Since February 15, 2007, our inception, we have generated no revenues. Our operating expenses from inception through September 30, 2013 are $6,493,656, of which $1,603,983, and $544,894 was incurred during the nine month period ended September 30, 2013 and 2012, respectively. Our major expenses in both periods were for consulting and consulting and contractor expenses, professional fees, vessel expenses, and general and administrative expenses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Summary of Nine Months Ended September 30, 2013 Results of Operations

The Company’s net loss for the nine month period ended September 30, 2013 was $1,767,192 as compared to a net loss of $646,109 during the nine month period ended September 30, 2012. The increase in the net loss for the nine month period ended September 30, 2013 was primarily attributable to a significant increase in compensation paid to consultants and independent contractors, an increase in professional fees, an increase in general and administrative expenses, an increase in travel and entertainment expenses, and an increase in interest expenses. During the nine month period ended September 30, 2013, the Company incurred consulting related expenses of $1,066,617 versus $304,670 during the nine month period ended September 30, 2012, an increase of 250%. The 250% increase in consulting related expenses was due to a significant increase in stock based compensation paid to consultants and independent contractors for services including operations, archeological, financial, and administrative as well as shares issued to a company for the rights to explore a potential shipwreck site. During the nine month period ended September 30, 2013, the Company incurred professional fees of $232,142 as compared to $55,348 during the nine month period ended September 30, 2012, an increase of 319%. The primary reason for the increase in professional fees during the first nine months of 2013 is that the Company paid increased stock based compensation in relation to an ongoing lawsuit and for other general legal matters and the Company settled debt related to legal fees through the issuance of shares to a related party vendor. The Company also paid increased stock based compensation for accounting services in 2013. During the nine month period ended September 30, 2013 the Company incurred travel and entertainment expenses of $81,454 versus $36,685 during the nine month period ended September 12, 2012, an increase of 122%. Travel and entertainment expense increased due to the attendance of the Company’s management and an archeological consultant at an archeological conference for shipwrecks in Europe, international travel for research purposes, and the payments of some travel and lodging expenses for independent contractors involved in the Company’s operations while they were working on site. During the nine month period ended September 30, 2013, the Company general and administrative expenses were $57,147 as compared to $20,292 during the nine month period ended September 30, 2012, an increase of 184%. General and administrative expenses increased by 184% due to an overall increase in general corporate activity as the Company has two actively permitted sites in 2013 vs. only one in 2012 and the Company is actively pursuing an additional permit and researching potential shipwreck sites. During the nine month period ended September 30, 2013, the Company incurred vessel related expenses of $110,746 versus $91,004 during the nine month period ended September 30, 2012, an increase of 22%. The increase in vessel expenses was due to the Company incurring expenses related to repair and maintenance work done on its main salvage vessel. The Company has tried to keep repair costs lower for its main salvage vessel by being more proactive with vessel maintenance, however due to the advancing age of the vessel the Company anticipates that it will continue to require repairs and in some cases major unforeseen repairs. Interest expense for the nine month period ended September 30, 2013 was $224,463 versus $108,155 during the nine month period ended September 30, 2012, an increase of 108%. The increase in interest expense in 2013 was due to the impact of fair value measurement adjustments on several convertible promissory notes. The Company had gains due to the extinguishment of debt of $99,701 during the nine month period ended September 30, 2013 versus gains due to the extinguishment of debt of $38,338 during the nine month period ended September 30, 2012, an increase of 160%. The increase in gains due to the extinguishment of debt was the result of the impact of the conversion of convertible notes into shares of the Company’s stock.

Summary of Three Months Ended September 30, 2013 Results of Operations

The Company’s net loss for the three month period ended September 30, 2013 was $605,567 as compared to a net loss of $182,458 during the three month period ended September 30, 2012. The increase in the net loss for the three month period ended September 30, 2013, as compared to the three month period ended September 30, 2012, was primarily due to a significant increase in compensation paid to consultants and independent contractors, an increase in professional fees, an increase in general and administrative expenses, an increase in travel and entertainment expenses, and an increase in interest expenses. During the three month period ended September 30, 2013, the Company incurred consulting related expenses of $413,802 versus $76,437 during the three month period ended September 30, 2012, an increase of 440%. The 440% increase in consulting and independent contractor related expenses was due to a significant increase in stock based compensation paid to consultants and independent contractors including operations, archeological, financial, advisory and administrative services. During the three month period ended September 30, 2013, the Company incurred professional fees of $47,398 as compared to $8,021 during the three month period ended September 30, 2012, an increase of 491%. The primary reason for the increase in professional fees during the three month period ended September 30, 2013 is that the Company paid a very small amount of stock based compensation, $12,500, during the same three month period in 2012 as opposed to $165,586 of stock based compensation in 2013. During the three month period ended September 30, 2013, the Company incurred travel and entertainment expenses of $29,270 versus $10,228 during the three month period ended September 12, 2012, an increase of 186%. Travel and entertainment expense increased primarily due to the payment of travel and lodging expenses for independent contractors involved in the Company’s operations while they were working on site. During the three month period ended September 30, 2013, the Company’s general and administrative expenses were $27,144 as compared to $6,003 during the three month period ended September 30, 2012, an increase of 352%. General and administrative expenses increased by 352% due to an overall increase in general corporate activity as the Company has two actively permitted sites in 2013 vs. only one in 2012 and the Company is actively pursuing an additional recovery permit and researching potential shipwreck sites. During the three month period ended September 30, 2013, the Company incurred vessel related expenses of $28,067 versus $23,133 during the three month period ended September 30, 2012, an increase of 21%. The increase in vessel expenses was due to the Company incurring expenses related to repair and maintenance work done on its main salvage vessel. The Company has tried to keep repair costs lower for its main salvage vessel by being more proactive with vessel maintenance, however due to the advancing age of the vessel the Company anticipates that it will continue to require repairs and in some cases major unforeseen repairs. Interest expense for the three month period ended September 30, 2013 was $67,157 versus $50,140 during the three month period ended September 30, 2012, an increase of 34%. The increase in interest expense in 2013 was due to the impact of fair value measurement adjustments on several convertible promissory notes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

Lack of Revenues and Cash Flow/Significant Losses from Operations

It is extremely challenging to build a publicly traded historic shipwreck exploration and recovery company. The exploration and recovery of historic shipwrecks requires a multi-year, multi stage process and it may be many years before any revenue is generated from exploration and recovery activities, if ever. The Company believes that it may be several years before it is able to generate any cash flow from its operations, if any are ever generated at all. Without revenues and cash flow the Company does not have any steady cash flow to pay its expenses. The Company relies on outside financing in the form of equity and debt and it is possible that the Company may not be able to obtain outside financing in the future. If the Company is not able to obtain financing it would more than likely be forced to cease operations and all of the capital that has been invested in or borrowed by the Company would likely be lost.

The Company has experienced a net loss in every fiscal year since the reverse merger in 2008. The Company’s losses from operations were $1,603,983 for the nine months ended September 30, 2013 and $544,894 for the nine months ended September 30, 2012. The Company believes that it will continue to generate losses from its operation for the foreseeable future and the Company may not be able to generate a profit in the long-term, or ever.

Liquidity and Capital Resources

At September 30, 2013, we had a cash balance of $0. During the nine month period ended September 30, 2013, and the period from inception to September 30, 2013, we incurred net losses of $1,767,192 and $7,616,098, respectively. On September 30, 2013, the Company had $29,404 in current assets and $526,433 in current liabilities, leaving us a working capital deficit of $497,029.

Lack of Liquidity

A major financial challenge and significant risk facing the Company is a lack of liquidity. The Company continued to operate with significant debt and a working capital deficit during the three month period ended September 30, 2013. This working capital deficit indicates that the Company is unable to meet its short-term liabilities with its current assets. This working capital deficit is extremely risky for the Company as the Company may be forced to cease its operations due to its inability to meet its current obligations. If the Company is forced to cease its operations then it is very highly likely that all capital invested in the Company and/or borrowed by the Company will be lost.

The expenses associated with being a small publicly traded company attempting to develop the infrastructure to explore and salvage historic shipwrecks recovery are extremely prohibitive, especially given that the Company does not currently generate any revenues and does not expect to generate any revenues in the near future. There are ongoing expenses associated with operations that are incurred whether the Company is conducting shipwreck recovery operations or not. Vessel maintenance and upkeep expenses, particularly for an older vessel such as the Company’s main salvage vessel, and docking fees are constant and unavoidable regardless of the Company’s operational status. The Company has incurred a number or unanticipated expenses related to its main salvage vessel and management believes that there will be continued unforeseen expenses for the vessel that may at times delay or forestall exploration and salvage activities. Management is exploring the potential to acquire an additional salvage vessel, however no specific vessel has been located and any such acquisition will be contingent upon the Company having the necessary financing in place.

In addition to the operations expenses, a publicly traded company also incurs the significant recurring corporate expenses related to maintaining publicly traded status, which include, but are not limited to accounting, legal, audit, executive, administrative, corporate communications, rent, telephones, etc. The recurring expenses associated with being a publicly traded company are very burdensome for smaller public companies such as Seafarer. This lack of liquidity creates a very risky situation for the Company in terms of its ability to continue operating, which in turn makes owning shares of the Company’s commons stock extremely risky and highly speculative in nature. The Company’s lack of liquidity may cause the Company to have to cease operations at any time which would likely result in a complete loss of all capital invested in or borrowed by the Company to date.

Due to the fact that the Company does not generate any revenues and does not expect to generate revenues for the foreseeable future the Company must rely on outside equity and debt funding. The combination of the ongoing operational, even during times when there is little or no exploration or salvage activities taking place, and corporate expenses as well as the need for outside financing creates a very risky situation for the Company and its shareholders. This working capital shortfall and lack of access to cash to fund corporate activities is extremely risky and may force the Company to cease its operations which would more than likely result in a complete loss of all capital invested in or loaned to the Company to date.

The Company has issued shares of its restricted common stock to various consultants as a supplement to cash payments for services or in lieu of paying cash for services. The Company has also issued shares to certain vendors in lieu of cash in order to pay off some of its debt. The issuance of shares for services and to pay debt is highly dilutive to current shareholders and may result in significant decline in the market value of the Company’s shares. The Company intends to continue to issue shares for services and in payment of some debt obligations and as such these share issuances may result in significant dilution to shareholders and may result in a significant decline in the market value of the Company’s shares.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - continued

The Company is presently seeking additional financing. We expect to expend our available cash in less than one month from November 14, 2013, based on our historical rate of expenditures. The Company depends upon activities such as subsequent offerings of our common stock or debt financing in order to operate and grow the business. The Company has no specific plans for selling its common stock and no arrangements for debt financing. There can be no assurance the Company will be successful in raising additional capital. There may be other risks and circumstances that management may be unable to predict.

The Company’s ability to obtain additional financing will be subject to a variety of uncertainties. These conditions raise substantial doubt about our ability to continue as a going concern. The inability to raise additional funds on terms favorable to the Company, or at all, could have a material adverse effect on the Company’s business, financial condition and results of operations. If the Company is unable to obtain additional capital, it will be forced to scale back planned expenditures, which would adversely affect its business and financial condition.

If the Company is unable to obtain additional financing, it is highly likely that the Company will be forced to cease operations and there is a very high probability that all capital that has been invested in or borrowed by the Company.

Off-Balance Sheet Arrangements

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4T. Controls and Procedures

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our principal executive officer, the Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of September 30, 2013. Based on this evaluation, the Company’s principal executive officer has concluded that the Company’s disclosure controls and procedures as of the end of such periods are not effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Internal Control Over Financial Reporting

Management has not made any change in our internal control over financial reporting during the period ended September 30, 2013. The Company has limited resources and as a result, management has concluded that material weaknesses in financial reporting currently exist, including those described below. These material weaknesses were described in Item 9A(T) of the Company’s Form 10-K for the year ended December 31, 2012.

* The Company has an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.

* We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.

* We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is management’s view that an audit committee, comprised of independent board members, and an independent financial expert is an important entity-level control over the Company's financial statements.

* We have not achieved an optimal segregation of duties for executive officers of the Company.

Part II. Other Information

Item 1. Legal Proceedings

On September 11, 2013, the Parties attended a voluntary mediation, which ended in an impasse.

Item 1. Legal Proceedings - continued

Such litigation is now awaiting remand to the Circuit Court in Hillsborough County which is expected in the next 30 days and for continued litigation.

On June 18, 2013, Seafarer began litigation against Tulco Resources, LLC, in a lawsuit filed in the Circuit Court in and for Hillsborough County, Florida. Such suit was filed for against Tulco based upon for breach of contract, equitable relief and injunctive relief. Tulco was the party holding the rights under a permit to a treasure cite at Juno Beach, Florida. Tulco and Seafarer had entered into contracts in March 2008, and later renewed under an amended agreement on June 11, 2010. Such permit was committed to by Tulco to be an obligation and contractual duty to which they would be responsible for payment of all costs in order for the permit to be reissued. Such obligation is contained in the agreement of March 2008 and as renewed in the June 2010 agreement between Seafarer and Tulco. Tulco made the commitment to be responsible for payments of all necessary costs for the gaining of the new permit. Tulco never performed on such obligation, and Seafarer during the period of approximately March 2008 and April 2012 had endeavored and even had to commence a lawsuit to gain such permit which was awarded in April 2012. Seafarer alleges in their complaint the expenditure of large amounts of shares for financing and for delays due to Tulco’s non-performance. Seafarer seeks monetary damages and injunctive relief for the award of all rights held by Tulco to Seafarer. Such service of process is continuing as Tulco is being sought for service.

Item 1A. Risk Factors

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three month period ended September 30, 2013, the Company issued 7,525,442 restricted common shares of its common stock to various consultants for consulting services including administrative, executive, financial, archeological, operations, and other services. The Company believes that the issuance of the securities was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the Securities Act as a transaction by an issuer not involving any public offering and based on the fact that such securities were issued for services to sophisticated or accredited investors and persons who are thoroughly familiar with the Company’s proposed business by virtue of their affiliation with the Company.

On various dates during the three month period ended September 30, 2013, the Company entered into subscription agreements to sell 4,550,000 shares of its restricted common stock to six investors and receive proceeds of $57,500. Any of the proceeds received were used for general corporate purposes, working capital and the repayment of debt.

Exemptions from Registration for Sales of Restricted Securities.

The issuance of securities referenced above were issued to persons who the Company believes were either “accredited investors,” or “sophisticated investors” who, by reason of education, business acumen, experience or other factors, were fully capable of evaluating the risks and merits of an investment in us; and each had prior access to all material information about us. None of these transactions involved a public offering. An appropriate restrictive legend was placed on each certificate that has been issued, prohibiting public resale of the shares, except subject to an effective registration statement under the Securities Act of 1933, as amended (the “Act”) or in compliance with Rule 144. The Company believes that the offer and sale of these securities was exempt from the registration requirements of the Securities Act pursuant to Section 4(2) under the Securities Act of 1933 (the “Act”) thereof, and/or Regulation D. There may be additional exemptions available to the Company.

Issuance of Securities Due to Conversion of Notes and Debt

During the three month period ended September 30, 2013, the holders of promissory notes with a face value of $85,500 elected to convert their notes into 11,655,173 shares of the Company’s common stock an which includes 2,659,333 shares issued to a related party investor for the conversion or partial conversion of two promissory notes. Additionally, a related party vendor agreed to convert a portion of its debt, $5,731 into 458,462 shares of the Company’s common stock. The Company believes that the offer and sale of these securities were exempt from the registration requirements of the Securities Act pursuant to Sections 3(a)(9) under the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities

The Company has several promissory notes that are currently in default to non-payment of principle and interest. See Part I, Item 2, notes payable and convertible notes payable, in default, for discussion of defaults on certain debt obligations of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None

Item 6. Exhibits

Set forth below is a list of the exhibits to this quarterly report on Form 10-Q.

Exhibit Number		Description
*31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities and Exchange Act of 1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*99.1		Temporary Hardship Exemption

**101.INS		XBRL Instance Document

**101.SCH		XBRL Taxonomy Extension Schema

**101.CAL		XBRL Taxonomy Extension Calculation Linkbase

**101.DEF		XBRL Taxonomy Extension Definition Linkbase

**101.LAB		XBRL Taxonomy Extension Label Linkbase

**101.PRE		XBRL Extension Presentation Linkbase

* Filed herewith.

** To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Seafarer Exploration Corp.


Date: November 14, 2013	By:	/s/ Kyle Kennedy
		Kyle Kennedy President, Chief Executive Officer, and Chairman of the Board (Principal Executive Officer and Principal Accounting Officer)

Date: November 14, 2013	By:	/s/ Charles Branscum
		Charles Branscum, Director

Date: November 14, 2013	By:	/s/ Robert L. Kennedy
		Robert L. Kennedy, Director