CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE | NOTE 7 - 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determine whether it meets the definition of “conventional convertible” debt under paragraph 4 of EITF 00-19, which was superseded by ASC 815, and EITF 05-02, which was superseded by ASC 470. Convertible Notes Payable The following table reflects the convertible notes payable as of December 31, 2017 and 2016, Issue Date: Maturity Date 2017 2016 Interest Rate Convertible notes payable, in default: August 28, 2009 November 1, 2009 $ 4,300 $ 4,300 10.00 % April 7, 2010 November 7, 2010 70,000 70,000 6.00 % November 12, 2010 November 12, 2011 40,000 40,000 6.00 % October 31, 2012 April 30, 2013 8,000 8,000 6.00 % November 20, 2012 May 20, 2013 50,000 50,000 6.00 % January 19, 2013 July 30, 2013 5,000 5,000 6.00 % February 11, 2013 August 11, 2013 9,000 9,000 6.00 % September 25, 2013 March 25, 2014 10,000 10,000 6.00 % October 04, 2013 April 4, 2014 50,000 50,000 6.00 % October 30, 2013 October 30, 2014 50,000 50,000 6.00 % May 15, 2014 November 15, 2014 40,000 40,000 6.00 % October 13, 2014 April 13, 2015 25,000 25,000 6.00 % April 4, 2015 April 20, 2016 — 23,652 6.00 % June 29, 2015 December 29, 2015 25,000 25,000 6.00 % September 18, 2015 March 18, 2016 25,000 25,000 6.00 % April 04, 2016 October 4, 2016 10,000 10,000 6.00 % July 19, 2016 July 19, 2017 4,000 — 6.00 % August 24, 2016 February 24, 2017 20,000 — 6.00 % March 10, 2017 September 10, 2017 10,000 — 6.00 % March 14, 2017 September 14, 2017 15,000 — 6.00 % Balance $ 470,300 $ 444,952 Convertible notes payable - related parties, in default: January 09, 2009 January 9, 2010 $ 10,000 $ 10,000 10.00 % January 25, 2010 January 25, 2011 6,000 6,000 6.00 % January 18, 2012 July 18, 2012 50,000 50,000 8.00 % January 19, 2013 July 30, 2013 15,000 15,000 6.00 % July 26, 2013 January 26, 2014 10,000 10,000 6.00 % January 01, 2014 July 17, 2014 31,500 31,500 6.00 % May 27, 2014 November 27, 2014 7,000 7,000 6.00 % July 21, 2014 January 25, 2015 17,000 17,000 6.00 % October 16, 2014 April 16, 2015 21,000 21,000 6.00 % July 14, 2015 January 14, 2016 9,000 9,000 6.00 % January 12, 2016 July 12, 2016 5,000 5,000 6.00 % May 10, 2016 November 10, 2016 5,000 5,000 6.00 % May 10, 2016 November 10, 2016 5,000 5,000 6.00 % May 20, 2016 November 20, 2016 5,000 5,000 6.00 % July 12, 2016 January 12, 2017 5,000 — 6.00 % January 26, 2017 March 12, 2017 5,000 — 6.00 % February 24, 2017 August 24, 2017 25,000 — 6.00 % August 16, 2017 September 16, 2017 3,000 — 6.00 % Balance $ 234,500 $ 196,500 Balance, convertible notes payable $ 704,800 $ 641,452 Notes Payable The following table reflects the notes payable as of December 31, 2017 and 2016 : Issue Date: Maturity Date 2017 2016 Interest Rate Convertible notes payable: November 29, 2017 November 29, 2019 $ 105,000 $ — 2.06 % December 14, 2017 December 14, 2018 75,000 — 6.00 % Unamortized discount (35,844 ) — Balance $ 144,156 $ — Notes payable, in default: April 27, 2011 April 27, 2012 $ 5,000 $ 5,000 6.00 % June 23, 2011 August 23, 2011 25,000 25,000 6.00 % Balance $ 30,000 $ 30,000 Notes payable - related parties, in default: February 24, 2010 February 24, 2011 $ 7,500 $ 7,500 6.00 % October 6, 2015 November 15, 2015 10,000 10,000 6.00 % November 2, 2017 December 2, 2017 26,250 — 6.00 % Balance $ 43,750 $ 17,500 Issue Date Maturity Date December 31, 2016 Interest Rate Convertible notes payable: July 19, 2016 July 19, 2017 $ 4,000 6.00 % August 24, 2016 February 24, 2017 20,000 6.00 % August 31, 2016 August 31, 2017 25,750 6.00 % Unamortized discount (22,423 ) Balance $ 27,327 Convertible notes payable – related parties July 12, 2016 January 12,2017 $ 2,400 6.00 % Unamortized discount (156 ) $ 2,244 Notes Payable and Convertible Notes Payable Between January 1, 2017 and December 31, 2017, the Company issued notes payable and convertible notes payable totaling $331,923. The notes include interest at 6%. The principal amount of the notes and interest is payable on the maturity date. The notes 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 notes under the guidance of ASC 815 and other applicable guidance. The conversion feature of four of the notes 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 as of December 31: 2017 2016 Face value of convertible notes payable $ 180,000 $ 49,750 Beneficial conversion feature (35,844 ) (22,423 ) Carrying value $ 144,156 $ 27,327 The discounts on the convertible notes arose from the allocation of basis to the beneficial conversion feature. The discount is amortized through charges to interest expense over the term of the debt agreement. For the twelve months ended December 31, 2017 and 2016, the Company recorded interest expense related to the amortization of debt discounts in the amount of approximately $80,600 and $80,600, respectively. At December 31, 2017 and 2016, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $220,732 and $154,790, respectively, and included in accounts payable and accrued expenses on the accompanying balance sheets. New Convertible Notes Payable and Notes Payable During the year ended December 31, 2017 the Company entered into the following Convertible Notes Payable and Notes Payable Agreements: In January of 2017, the Company entered into a convertible promissory note agreement in the amount of $5,000 with an individual who is related to the Company’s CEO. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before March 12, 2017. The Company agreed to pay the related party lender a loan origination fee of 1,000,000 shares of its restricted common stock. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0005 per share. At December 31, 2017, the loan was in default due to non-payment of principal and interest. The Company recorded a debt discount of $5,000. In February of 2017, the Company entered into a convertible promissory note agreement in the amount of $25,000 with an individual who is both related to the Company’s CEO and a member of the Company’s Board of Directors. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before August 14, 2017. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.00075 per share. The related party lender received 33,333,333 warrants to purchase shares of the Company’s common stock at a price of $0.005. The Company recorded a debt discount of $25,000. In March of 2017, the Company entered into a convertible promissory note agreement in the amount of $15,000 with a corporation. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before September 10, 2017. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.001 per share. The lender received 15,000,000 warrants to purchase shares of the Company’s common stock at a price of $0.025. The Company recorded a debt discount of $15,000. In March of 2017, the Company entered into a convertible promissory note agreement in the amount of $10,000 with a corporation. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before September 10, 2017. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.001 per share. The lender received 10,000,000 warrants to purchase shares of the Company’s common stock at a price of $0.025. The Company recorded a debt discount of $10,000. In March of 2017, the Company entered into a convertible promissory note agreement in the amount of $15,000 with a corporation. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before September 14, 2017. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0015 per share. The Company recorded a debt discount of $15,000. In August of 2017, the Company entered into a promissory note agreement in the amount of $2,500 with a related party. This loan paid interest at a rate of 6% per annum and the principal and accrued interest were due on or before August 16, 2017. The related party lender received 250,000 shares of the Company’s restricted common stock as a loan origination fee. The principal balance of the note of $2,500 plus $9 of accrued interest was repaid and the remaining balance of the note at December 31, 2017 was $0. The Company recorded a debt discount of $300. In August of 2017, the Company entered into a promissory note agreement in the amount of $2,673. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before August 31, 2017. The lender received 1,000,000 shares of the Company’s restricted common stock as a loan origination fee. The note is unsecured. The Company recorded a debt discount of $1,400. In August of 2017, the Company entered into a convertible promissory note agreement in the amount of $3,000 with an individual who is both a related party and a member of the Company’s Board of Directors. This loan pays interest at a rate of 6% per annum and the principal and accrued interest were due on or before September 16, 2017. The note is unsecured and is convertible at the lender’s option into shares of the Company’s common stock at a rate of $0.0008 per share. In October of 2017, the Company entered into a promissory note agreement in the amount of $25,000. This loan is non-interest bearing and the principal was due on or before November 3, 2017. The lender received 4,000,000 shares of the Company’s restricted common stock as a loan origination fee and a $1,250 financing fee. The principal balance of the note plus accrued interest was repaid prior to December 31, 2017. The Company recorded a debt discount of $4,000. In October of 2017, the Company entered into a promissory note agreement in the amount of $2,500 with a related party. This loan paid interest at a rate of 6% per annum and the principal and accrued interest were due on or before October 23, 2017. The related party lender received 200,000 shares of the Company’s restricted common stock as a loan origination fee. The principal balance of the note of $2,500 plus $23 of accrued interest was repaid and the remaining balance of the note at December 3`, 2017 was $0. The Company recorded a debt discount of $240. In October of 2017, the Company entered into a promissory note agreement in the amount of $20,000. This loan pays interest at a rate of 6% per annum and the principal and accrued interest was due on or before November 3, 2017. The lender received a loan origination fee of $1,000. The principal balance of the note plus accrued interest was repaid prior to December 31, 2017. In November of 2017, the Company entered into a promissory note agreement in the amount of $26,250 with a related party. This loan paid interest at a rate of 6% per annum and the principal and accrued interest were due on or before December 2, 2017. The related party lender received 2,000,000 shares of the Company’s restricted common stock as a loan origination fee. At December 31, 2017 the loan was in default due to non-payment of principal and interest. The Company recorded a debt discount of $2,200. In November of 2017, the Company entered into a participating promissory note agreement in the amount of $105,000 with a limited liability company. This loan pays interest at a rate of 2.06% per annum and the principal and accrued interest are due on or before November 29, 2019. The lender received 25,000,000 shares of the Company’s restricted common stock as a loan origination fee. The lender is also entitled to receive a total of $840,000 worth of treasure or artifacts located by Seafarer at any of Seafarer’s shipwreck sites after the State of Florida and/or other permitting agencies have received their share and after any other parties who have previously entered into any agreement to receive treasure or artifacts prior to the execution of the promissory note. The Company recorded a debt discount of $32,500. In December of 2017, the Company entered into a promissory note agreement in the amount of $75,000. This loan pays interest at a rate of 6% per annum and the principal and accrued interest are due on or before December 14, 2018. The lender received 5,000,000 shares of the Company’s restricted common stock as a loan origination fee. The lender is also entitled to receive a total of $450,000 worth of treasure located by Seafarer at any of Seafarer’s shipwreck sites after the State of Florida and/or other permitting agencies have received their share and after any other parties who have previously entered into any agreement to receive treasure or artifacts prior to the execution of the promissory note. The Company recorded a debt discount of $5,000. Note Conversions During the year ended December 31, 2017 the following notes were converted into shares of the Company’s common stock: A lender who had a convertible promissory note outstanding with a remaining principal balance of $24,402 elected to convert the principal balance of the note plus accrued interest and late fees of $2,242 into 36,205,587 shares of the Company’s common stock. The remaining principal balance of this note was $0 at December 31, 2017. A lender who had a convertible promissory note outstanding with a remaining principal balance of $25,750 elected to convert the principal balance of the note plus accrued interest and late into 30,950,000 shares of the Company’s common stock. The remaining principal balance of this note was $0 at December 31, 2017. A lender who had a convertible promissory note outstanding with a remaining principal balance of $15,000 elected to convert the principal balance of the note plus accrued interest of $1,328 into 15,000,000 shares of the Company’s common stock. The remaining principal balance of this note was $0 December 31, 2017. Shareholder Loans At December 31, 2017 the Company had six loans outstanding to its CEO totaling $20,023, consisting of a loan in the amount of $11,983 with a 6% annual rate of interest, a loan in the amount of $1,500 at 6% rate of interest and an option to convert the loan into restricted shares of the Company’s common stock at $0.002, a loan in the amount of $2,600 at 1% rate of interest, a loan in the amount of $3,000 at 1% rate of interest, a loan in the amount of $500 at 1% rate of interest, and a loan in the amount of $400 at 1% rate of interest. Convertible Notes Payable and Notes Payable, in Default The Company does not have additional sources of debt financing to refinance its convertible notes payable and notes payable that are currently in default. If the Company is unable to obtain additional capital, such lenders may file suit, including suit to foreclose on the assets held as collateral for the obligations arising under the secured notes. If any of the lenders file suit to foreclose on the assets held as collateral, then the Company may be forced to significantly scale back or cease its operations which would more than likely result in a complete loss of all capital that has been invested in or borrowed by the Company. The fact that the Company is in default of several promissory notes held by various lenders makes investing in the Company or providing any loans to the Company extremely risky with a very high potential for a complete loss of capital. 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 shares of the Company’s common stock there is typically a highly dilutive effect on current shareholders and very possible that such dilution may significantly negatively affect the trading price of the Company’s common stock. |