10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-K /A

Amendment No. 1

______________

(Mark One)

x     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2011

o     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

SEAFARER EXPLORATION CORP.

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive offices)(Zip code)

Registrant’s telephone number: (813) 448-3577

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.0001 per share

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   o      No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  o      No  x

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  x       No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   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	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  o      No  x

The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $9,033,267as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the OTC:BB reported for such date. Shares of common stock held by each officer and director, and by each person who owns 10% or more of the outstanding common stock, have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of April 9, 2012, the Registrant had 639,417,784 outstanding shares of its common stock, $0.0001 par value.

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EXPLANATORY NOTE

The purpose of this amendment on Form 10-K/A to Seafarer Exploration Corp.'s Annual Report on Form 10-K for the period ended December 31, 2011, filed with the Securities and Exchange Commission on April 12, 2012 is solely to furnish Exhibit 101 to the Form 10-K in accordance with Rule 405 of Regulation S-T.

No other changes have been made to the Form 10-K. This Amendment No. 1 to the Form 10-K speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-K.

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PART IV

Item 15. Exhibits

(2)	Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
2.1	Form of Share Exchange Agreement dated June 4, 2008 by and among Organetix, Inc., Seafarer Exploration, Inc. and each of the shareholders of Seafarer Exploration incorporated by reference to Form 8-K filed with the Commission on June 10, 2008.
(3)	Articles of Incorporation and By-laws
3.1	Amended and Restated Certificate of Incorporation of Organetix, Inc. incorporated by reference to Organetix, Inc.’s Schedule 14C Definitive Information Statement filed with the Commission on May 6, 2008.
3.2	Certificate of Amendment to the Certificate of Incorporation to merge Seafarer Exploration Corp., a wholly-owned subsidiary of the Company into the Company with the Secretary of State of the State of Delaware.  Pursuant to the Certificate of Amendment, the Company’s Articles of Incorporation were amended to change its name from Organetix, Inc. to Seafarer Exploration Corp. dated July 17, 2008, incorporated by reference to Form 8-K filed with the Commission on July 24, 2008.
(10)	Material Contracts
10.1	Agreement by and between Tulco Resources, Ltd., and Seafarer Exploration, Inc. dated February 2007, incorporated by reference to Form 8-K filed with the Commission on June 8, 2010.
10.2	Consulting Agreement by and between Frank Heidel and Seafarer Exploration Corp. dated January 18, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.3	Consulting Agreement by and between Lenny H. Kohl and Seafarer Exploration Corp. dated January 18, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.4	Consulting Agreement by and between Ralph Johnson and Seafarer Exploration Corp. dated January 19, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.5	Consulting Agreement by and between John Willard and Seafarer Exploration Corp. dated January 27, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.6	Treasure Exploration Funding Agreement by and between Ridgley-Johnson-Sharpe, L.P. and Church Hollow, LLC dated April 2, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.7	Consulting Agreement by and between Glenn E. Ridgley and Seafarer Exploration Corp. dated April 2, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.8	Consulting Agreement by and between ClearTrust, LLC and Seafarer Exploration Corp. dated April 16, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.9	Consulting Agreement by and Red Letter Studios, Inc. and Seafarer Exploration Corp. dated April 18, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.10	Board of Directors Letter Agreement by and between Charles Branscum and Seafarer Exploration Corp. dated April 19, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.11	Board of Directors Letter Agreement by and between Ralph Johnson and Seafarer Exploration Corp. dated April 19, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.

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Item 15. Exhibits - continued

10.12	Consulting Agreement by and between Reward Treasure Divers, LLC and Seafarer Exploration Corp. dated June 10, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.13	Consulting Agreement by and between Ralph Johnson and Seafarer Exploration Corp. dated June 20, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.14	Consulting Agreement by and between Reward Treasure Divers, LLC and Seafarer Exploration Corp. dated August 17, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.15	Consulting Agreement by and between Joseph Albert and Seafarer Exploration Corp. dated August 23, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.16	Letter Agreement by and between Joseph Albert and Seafarer Exploration Corp. dated August 23, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.17	Consulting Agreement by and between Worldwide Financial Marketing, Inc. and Seafarer Exploration Corp. dated August 25, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.18	Advisory Council Agreement by and between Daniel Meisenheimer and Seafarer Exploration Corp. dated September 22, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.19	Advisory Council Agreement by and between Pelle Ojasu and Seafarer Exploration Corp. dated September 22, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.20	Advisory Council Agreement by and between Lenny Kohl and Seafarer Exploration Corp. dated September 22, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.21	Convertible Promissory Note issued by Seafarer Exploration Corp. to Asher Enterprises, Inc. and Securities Purchase Agreement between Asher Enterprises, Inc. and Seafarer Exploration Corp. dated as of October 6, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.22	Consulting Agreement by and between Blulife, Inc. and Seafarer Exploration Corp. dated November 23, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
10.23	Consulting Agreement by and between Steve Rupert and Seafarer Exploration Corp. dated December 12, 2011. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
31.1	Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14 and 15d-14.  Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Incorporated by reference to Form 10-K filed with the Commission on April 12, 2012.
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 Taxonomy Extension Presentation Linkbase *

* Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Seafarer Exploration Corp.
Date: February 1, 2013	By:	/s/ Kyle Kennedy
		Kyle Kennedy President, Chief Executive Officer, Chairman of the Board (Principal Executive Officer and Principal Accounting Officer)
Date: February 1, 2013	By:	/s/ Charles Branscum
		Charles Branscum, Director

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Commitment and Contingencies

12 Months Ended

Dec. 31, 2011

Commitment and Contingencies:

Legal Matters and Contingencies

NOTE 13 – LEGAL PROCEEDINGS

On December 11, 2009, the Company, its CEO and transfer agent were named as defendants in Case Number 09-CA-030763, filed in the Circuit Court of Hillsborough County, Florida, by 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. The plaintiffs are seeking actual damages in an amount greater than $15,000, punitive damages to be determined at trial, injunctive relief requiring the defendants to reissue the plaintiff’s stock without the restrictive legends, injunctive relief barring the defendants from removing the stock legends from any Seafarer stock until the dispute with the plaintiffs is fully resolved, injunctive relief barring the defendants from selling their Seafarer stock, directly or indirectly, until the dispute with the plaintiffs is fully resolved, a declaratory judgment that plaintiffs are entitled to have their shares reissued without the restrictive legend, such other incidental and consequential damages as may be proven at trial, costs, interest, and legal expenses allowed by law and such other further relief as the court may deem just and proper.  The Company contends that the restrictive legends were either (i) not qualified for removal under Rule 144 promulgated under the Securities Act of 1933, (ii) the plaintiffs failed to provide sufficient facts supporting removal of the restrictive legends, or (iii) the plaintiffs failed to provide sufficient facts to demonstrate that the distribution was not part of a plan or scheme to evade the registration requirements of the Securities Act of 1933. The Company had previously been in settlement discussions with the plaintiffs however on September 1, 2011 the plaintiffs filed a motion for summary judgment in the matter. The Company’s legal counsel filed a response to the motion for summary judgment, in which pleading and supporting affidavit, the Company presented factual allegations that the initial investment by one of the Plaintiff’s (the “Lead Plaintiff”) was made in the private company of Seafarer, Inc. on June 15, 2007 for $5,000. The Lead Plaintiff was issued shares of the private company Seafarer, Inc. which was later involved in a transaction of a reverse merger with a public company becoming Seafarer Exploration Corp. Upon the merger such private shares as held by the Lead Plaintiff were exchanged for 34,700,000 shares of the public company with all such share rights being held by the Lead Plaintiff. The Company alleged in its responsive court filing, that at the time of the investment, share rights and disbursal of such shares in the public company, the Lead Plaintiff was a registered and licensed broker with the NASD; any ownership interests and in this case a control position held by the Lead Plaintiff would have had to have been reported to overseeing authorities. The Company alleged in its filing that in order to avoid and evade the detection, knowledge of oversight authorities and restrictions of the Securities Act and regulations of the governing bodies over his licensing in the brokerage business, the Lead Plaintiff instructed the former transfer agency for the Company to not issue a physical certificate to himself, but keep the shares in book entry form. The Company alleges that the Lead Plaintiff then instructed the transfer agent to instead issue the shares to a private corporation (the “private corporation”), informing the transfer agent that he (the Lead Plaintiff) had sold the shares in a private transaction. The Company also alleged in the court filing that on or about July 18, 2008 the Lead Plaintiff instructed the transfer agent to issue the shares to the private corporation, as a third party straw man entity. Then on or about October 13, 2008, the Lead Plaintiff, in order to avoid any level of scrutiny or restriction over his ownership of such shares, then “purchased” such shares back from the private corporation, but in order to again avoid and evade detection, knowledge and regulation of governing authorities, the Lead Plaintiff immediately instructed the transfer agent that he was “gifting” such shares to family, friends, and his own acquaintances. The Lead Plaintiff made the distribution of such shares on that same date as the purchase from the private corporation, and actually had the private corporation “gift” the shares to the people and entities named as Plaintiffs in the main complaint on October 18, 2008. The Company and CEO maintain in their court filings that such transactions were unlawful under Rule 144 and that the distribution scheme was done in order to avoid the strictures of the Securities Act. The transfer agent has also brought on new counsel alleging the same matters in response to the case. As of the filing of this Form 10-K such matter has not gone to hearing on the Plaintiff’s motion for summary judgment.

F-22

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 13 – LEGAL PROCEEDINGS - continued

On December 17, 2009, the Company was named a defendant in Case Number 09-012905CO39, filed in the Circuit Court of Pinellas County, Florida, by a limited liability company, of which the Company’s CEO was previously a minority, non-controlling member.  The lawsuit alleges that the Company has failed and/or refused to pay for services rendered by the plaintiff, in breach of an agreement between the two parties. The plaintiff is seeking judgment against the Company in the amount of $13,520, plus damages that may accrue after the filing of the lawsuit, together with prejudgment interest, recoverable costs associated with the lawsuit and such other relief as may be appropriate under the circumstances.   The parties are currently in settlement discussions and case management has been extended.

On March 2, 2010, the Company filed a complaint naming an individual 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. Among other matters, the Company alleges that the defendant caused extensive damage to the Company’s main salvage vessel due to negligent operation, breached his separation agreement with the Company, and has made false and defamatory statements damaging the Company’s reputation. The Company alleged that the defendant has engaged is such malicious and defamatory campaign as revenge for his termination by the Company and in effort to obtain additional money from the Company. 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. The Company is currently pursuing the punitive damages portion and expects a substantial award of such at trial for the Punitive damages. The punitive damages portion of the case is set for trial in January, 2012. The Company’s management believes that collection of such award is extremely unlikely; however it will continue to pursue the matter against the defendant.

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.

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 Seafarer, 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 Seafarer and its CEO, individually, alleging that Seafarer 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 Seafarer’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-K Seafarer’s motions have not been set for hearing and dispositions by the court.

Commitments Disclosure

NOTE 12 – 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.

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Receivables, Loans, Notes Receivable, and Others

12 Months Ended

Dec. 31, 2011

Receivables, Loans, Notes Receivable, and Others:

Loans, Notes, Trade and Other Receivables Disclosure

NOTE 5 - NOTES RECEIVABLE

At December 31, 2011 and December, 2010, the Company was owed a principal amount of $25,000 plus accrued interest of $13,867, from a promissory note due from a corporation. The note bears interest at a rate of 4.5% per annum. The principal and interest were due at maturity, which was December 31, 2008, and the note is in default.  Management believes that the Company needs to take legal action in order to collect the remaining principal balance and, accordingly, has established an allowance for a portion of the note deemed doubtful. Because legal action may become necessary, the Company booked an allowance for doubtful accounts of $38,867 and $25,000 as of December 31, 2011 and 2010, respectively.  Additionally, no further interest will be accrued as its collection is deemed not probable. The carrying value of the note, net of the allowance for doubtful accounts, was $0 and $13,867 at December 31, 2011 and 2010, respectively.

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BALANCE SHEETS (USD $)	Dec. 31, 2011		Dec. 31, 2010
Current assets:
Cash	$ 8,838		$ 3,071
Notes receivable, net of allowance for doubtful accounts	13,867		13,867
Prepaid expenses	57,728		0
Advances to shareholder	2,252		0
Deposits and other receivables	1,183		1,183
Total current assets	70,001		18,121
Property and equipment - net	189,585		222,085
Investment in common stock	1,100		1,100
Total Assets	260,686		241,306
Current liabilities:
Accounts payable and accrued liabilities	133,827		94,848
Convertible notes payable	35,000		0
Convertible notes payable, in default	130,300		149,300
Convertible note payable, at fair value	119,557		101,752
Notes payable	5,000		0
Notes payable, in default	52,500		27,500
Stockholder loans	0		10,125
Total current liabilities	476,184		383,525
Commitments and contingencies
Stockholders' deficit:
Preferred stock	0	[1]	0	[1]
Common stock	60,664	[2]	44,948	[3]
Additional paid-in capital	4,615,946		3,188,632
Deficit accumulated during the development stage	(4,892,108)		(3,375,799)
Total stockholders' deficit	(215,498)		(142,219)
Total Liabilities and Stockholders' Deficit	$ 260,686		$ 241,306

[1] Preferred stock, $0.0001 par value – 50,000,000 shares authorized; 7 and 0 shares issued and outstanding at December 31, 2011 and 2010

[2] Common stock, $0.0001 par value – 750,000,000 shares authorized; 606,642,995 shares issued and outstanding

[3] Common stock, $0.0001 par value – 500,000,000 shares authorized; 449,479,673 shares issued and outstanding

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Organization, Consolidation and Presentation of Financial Statements

12 Months Ended

Dec. 31, 2011

Organization, Consolidation and Presentation of Financial Statements:

Development Stage Enterprises

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, Seafarer Exploration, Inc. (“Seafarer Inc.”) merged with Organetix pursuant to a Share Exchange Agreement (the “Exchange Agreement”). The Exchange Agreement provided for the exchange of all of Seafarer Inc.’s common shares for 131,243,235 of Organetix post-merger common shares. Considering that Seafarer Inc.’s former shareholders 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 Seafarer Inc.’s operations.  Seafarer Inc. 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. Financial statements presented herein and subsequent to the merger reflect the 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.

Going Concern Note

NOTE 2 - GOING CONCERN

These financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As shown in the accompanying financial statements, the Company has incurred net losses of $4,892,107 since inception. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from April 10, 2012. Management's plans include raising capital through the equity markets to fund operations and eventually, the generation 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 financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Collaborative Arrangement Disclosure

NOTE 11 – MATERIAL AGREEMENTS

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”).  There 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 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 certain 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.

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.

Certain Other Agreements

On January 18, 2011, the Company entered into an agreement with an individual to provide various consulting services as a project manager for the Company’s exploration and recovery operations, including reviewing daily and weekly operating plans, assisting in overseeing the Company’s operations, reviewing and recording potential artifact locations and coordinates and other services as requested by the Company.  The agreement expired on August 31, 2011. In consideration for performing the consulting services, the Company agreed to pay the consultant a total of 600,000 restricted shares of its common stock. The shares issued to the consultant were subject to the following vesting schedule: 50,000 shares vest in February 2011, 50,000 shares vest in March 2011, 100,000 shares vest in April 2011, 100,000 shares vest in May 2011, 100,000 shares vest in June 2011, 100,000 shares vest in July 2011 and 100,000 shares vest in August 2011. If the agreement is terminated prior to the August 31, 2011 expiration date, the consultant agreed to return to the Company any portion of the shares that had not vested.  The 600,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On January 18, 2011, the Company entered into a consulting agreement with an individual under which the consultant agreed to advise the Company regarding joint ventures, mergers and acquisitions and to develop, study and evaluate acquisition proposals and prepare reports and studies under the direction of the Company’s President. The Agreement is in effective until the services are provided as defined in the agreement. Under the terms of the agreement, the Company agreed to pay the consultant a total of 1,000,000 restricted shares of the Company’s common stock. The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On January 19, 2011, the Company entered into a consulting agreement with an individual under which the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and the analysis of the treasure industry under the direction of the Company’s President. The agreement expired on June 19, 2011. Under the terms of the agreement, the Company was required to pay the consultant $5,000 upon execution of the agreement and $2,500 per month for six months. Under the terms of the agreement the Company agreed to pay the consultant a total of 1,000,000 shares of its restricted common stock. The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On January 27, 2011, the Company entered into a consulting agreement with an individual under which the consultant agreed to advise the Company regarding its news releases and generating local media coverage of the Company’s business and operations in Florida media markets, development, mergers and acquisitions, business strategy and specifically for the purpose of developing, studying and evaluating acquisition proposals and preparing reports and studies under the direction of the Company’s CEO. The agreement expired on April 25, 2011. Under the terms of the agreement, the Company agreed to pay the consultant a total of 250,000 restricted shares of the Company’s common stock. The 250,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

F-17

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 11 – MATERIAL AGREEMENTS - continued

On April 2, 2011, the Company’s wholly owned subsidiary, Church Hollow, LLC (“CH”), entered into a Treasure Exploration Funding Agreement with a limited partnership. Under the terms of the Agreement and an amendment to the Agreement, CH agreed to provide $21,000 to the limited partnership in exchange for a maximum of 12% of the gross amount of any treasure recovered by the limited partnership from an area of Missouri known as Church Hollow (the “Church Hollow Site”). The limited partnership indicated that the funding would be used to explore, excavate and potentially recover treasure and/or valuable artifacts from the Church Hollow Site. Per the Agreement, the Company provided $21,000 to the limited partnership. The limited partnership was not successful in locating any treasure at the Church Hollow Site and does not anticipate that any treasure will be located at the site. Since there is objective evidence that the equity method investment in the Church Hollow Site is impaired and the recoverable amount is lower than the carrying amount of the equity method investment in the Church Hollow Site, an impairment loss has been recognized as “loss on impairment” included in non-operating expenses for the full amount of the investment. As a result of the impairment, the carrying amount of the investment in the Church Hollow Site as of December31, 2011 is $0.

On April 2, 2011, the Company entered into a consulting agreement with an individual under which the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and specifically assisting the Company in developing, and studying joint venture proposals in the treasure industry when advisable under the direction of the Company’s CEO. The Agreement has no specific expiration date. Under the terms of the agreement, the Company agreed to pay the consultant a total of 1,000,000 restricted shares of the Company’s common stock. The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On April 16, 2011, the Company entered into a consulting agreement with a limited liability company that is owned and controlled by a person who is related to the Company’s CEO and that provides transfer agent services to the Company. Under the terms of the agreement, the consultant agreed to assist and advise the Company regarding the annual shareholder meeting and proxy administration including analyzing the Company’s bylaws to ensure compliance with corporate bylaws and state and federal regulations, organize the shareholder meeting, mail the notice of shareholder meeting, proxy card and financial statements to shareholders,  tabulate shareholder votes and meeting attendance, author a script and assign appropriate roles, provide certified shareholder lists, attend and participate in the meeting, provide certified voting results and assist with shareholder services. Under the terms of the Agreement, the Company agreed to pay the consultant $5,000 and issue to the consultant 1,000,000 shares of its restricted common stock as consideration for the services.  The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On April 18, 2011, the Company entered into a consulting agreement with a corporation under which the consultant agreed to advise the Company on a best efforts basis regarding business development, filming, production, web hosting, mergers and business strategy under the direction of the Company’s CEO. The Agreement has no expiration date. Under the terms of the agreement, the Company agreed to pay the consultant a total of 500,000 restricted shares of the Company’s common stock. The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On April 19, 2011, the Company 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 2,500,000 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 2,500,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On April 19, 2011, the Company entered into an agreement with an individual 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 and the Director agreed to negotiate compensation on a year-by-year basis and no compensation was specified in the agreement.  The Company also agreed to reimburse the Director for pre approved expenses.

F-18

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 11 – MATERIAL AGREEMENTS - continued

On June 10, 2011, the Company entered into a consulting agreement with a limited liability company under which the consultant agreed to provide dredging, side scanning, mapping and charting services to the Company over a period of 30 working days under the direction of the Company’s CEO. Under the terms of the agreement, the Company agreed to pay the consultant a total of 2,000,000 restricted shares of the Company’s common stock, $6,000 to cover various operational costs for the limited liability company’s ship and crew, plus $1,151 to cover dockage for the ship. The Company additionally agreed to pay each of the divers that work for the limited liability company 1% of any treasure that they find up to a maximum of 5%. The 2,500,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On June 20, 2011, the Company entered into a consulting agreement with an individual who is a member of the Company’s Board of Directors. Under the terms of the Agreement under the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and the analysis of the treasure industry and developing, studying, and evaluating acquisition proposals, preparing reports and studies when advisable under the direction of the Company’s CEO. Under the terms of the agreement, the Company agreed to pay the consultant $7,500 for three months, subject to availability of funds. The Company also agreed to pay the consultant a total of 1,000,000 shares of its restricted common stock. The shares issued to the consultant were subject to the following vesting schedule: 200,000 shares vest in July 2011, 200,000 shares vest in August 2011, 200,000 shares vest in September 2011, 200,000 shares vest in October 2011, and 200,000 shares vest in November 2011.  As of December 31, 2011 the 1,000,000 restricted shares had not been issued and these shares were included as a liability in the accounts payable and accrued liabilities section in the accompanying balance sheet.

On August 17, 2011, the Company entered into a consulting agreement with a limited liability company for various consulting services including dredge work, side scanning, mapping, and charting. Under the terms of the agreement the consultant agreed to perform various services including dredging, scanning and mapping work over a period of 30 working days or 55 calendar days, whichever occurs first, under the direction of the Company’s President. The company agreed to pay to the consultant 150,000 shares of restricted common stock, $17,000 and pay for dockage of the consultant’s vessel. The Company also agreed to pay the individual divers that work for the consultant an additional bonus of 1% minimum and 5% maximum of any treasure that they locate on behalf of the Company. The Company also agreed to pay an undefined bonus in share of its common stock to whichever diver finds the first piece of treasure as well as to the divers working with him and the crew who is working on the boat at that time. As of December 31, 2011 the initial 150,000 shares had not been issued and these shares were included as a liability in the accounts payable and accrued liabilities section in the accompanying balance sheet.

On August 23, 2011, the Company entered into two related agreements with an individual consultant. The first agreement is 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 120,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On August 25, 2011, the Company entered into a financial public relations agreement with a corporation to provide various investor relations/financial public relations services. The term of the Agreement is for six months. Under the terms of the agreement the Company agreed to pay the consultant 1,000,000 restricted shares of the Company’s common stock due when the agreement was executed. The consultant agreed to act as a liaison between the Company and its shareholders, advise the Company with regards to market makers, broker dealers and other market participants and act as a liaison with such market participants, and advise the Company with respect to communications and information and as well as planning, designing, developing, organizing, writing, and distributing such communications and information. The agreement states that the consultant is not providing any investment banking

services related activities and is not being compensated or engaged to raise capital for the Company. The 1,000,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

F-19

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 11 – MATERIAL AGREEMENTS - continued

The Company entered into an amended lease agreement on September 12, 2011 for its current office location at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. Under the terms of the amended lease agreement the lease term has been extended to May of 2012 with a base monthly rent of $1,166.  There may be additional monthly charges for pro-rated maintenance, etc.

On September 22, 2011, the Company entered into three separate agreements with three individuals to join the Company’s advisory council. Under the advisory council agreements the advisors 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 three advisors an aggregate total of 2,700,000 restricted shares of its common stock. Each advisor was issued 900,000 shares of the Company’s common stock. According to the agreement each advisor will have their 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.

The Company had an outstanding accounts payable balance with a certain vendor in the amount of $40,559 related to legal services. On September 23, 2011, the Company issued 6,073,374 shares of its restricted common stock to this vendor as satisfaction for the outstanding invoices. The agreement between the Company and the vendor stipulated the stock must be worth at least $40,599 in the event the vendor sells the shares and the value received for the sale of the shares is less than $40,599 then the vendor will be entitled to receive additional payment until the balance is paid in full. The Company accounted for the right to be made “whole” as a put liability. The value of the put liability was $0 as of December 31, 2011.  As of the December 31, 2011, the fair value of the shares was $0. 

On November 23, 2011, the Company entered into a consulting agreement with a corporation under which the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and specifically for the analysis of the treasure industry under the direction of the Company’s CEO. The consultant also agreed to allow the Company to use its office space for a period of one year from the execution of the agreement. The term of the Agreement is until October 18, 2012. Under the terms of the agreement, the Company agreed to pay the consultant a total of 2,000,000 restricted shares of the Company’s common stock. The 1,200,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

On December 12, 2011, the Company entered into a consulting agreement with an individual under which the consultant agreed to advise the Company regarding communications and business development under the direction of the Company’s CEO. The term of the Agreement continues until the services are performed. Under the terms of the agreement, the Company agreed to pay the consultant a total of 2,000,000 restricted shares of the Company’s common stock. The 1,200,000 shares are included as an expense in consulting and contractor fees in the accompanying income statement.

The Company has an ongoing consulting agreement to pay a limited liability company owned by its former Chief Financial Officer a minimum of $5,000 per month for providing ongoing financial reporting, strategic planning, 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. All fees paid to the consultant during the twelve month period ended December 31, 2011 are included as an expense in consulting and contractor fees in the accompanying income statement.

The Company has an ongoing consulting agreement to pay a limited liability company minimum of $500 per month for bookkeeping services and additional restricted stock based compensation for providing assistance with technical accounting and financial reporting. 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 agreement is verbal and may be terminated by the Company or the consultant at any time. All fees paid to the consultant during the twelve month period ended December 31, 2011 are included as an expense in consulting and contractor fees in the accompanying income statement.

The Company has an ongoing consulting agreement to pay a person who is related to the Company’s CEO a minimum of $3,000 per month for providing various administrative, clerical, office management and consulting services. The Company agreed to pay the related party consultant additional compensation in the form of cash and/or stock based on extra time and effort spent rendering services to the Company. The agreement is verbal and may be terminated by the Company or the consultant at any time. All fees paid to the related party consultant during the twelve month period ended December 31, 2011 are included as an expense in consulting and contractor fees in the accompanying income statement.

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Accounting Policies

12 Months Ended

Dec. 31, 2011

Accounting Policies:

Basis of Presentation and Significant Accounting Policies

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Accounting Method

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

F-6

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

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 December 31, 2011 and 2010, and for the period from inception to December 31, 2011, 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 shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity.  Basic and diluted losses per share were the same at the reporting dates as there were no common stock equivalents outstanding at December 31, 2010 and 2009.

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 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 December 31, 2011 and 2010.  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. 

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.

F-7

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

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. There were no impairment charges recorded during the periods ended December 31, 2011 and 2010 or for the period from inception to December 31, 2011.

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 December 31, 2011, 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, operational, corporate communication and administrative consulting services.

Use of Estimates

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

Convertible Notes Payable

The Company accounts for conversion options embedded in convertible notes in accordance with 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. As of December 31, 2011 and 2010, all of the Company’s convertible notes payable were classified as conventional instruments.

The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under 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 December 31, 2011 and 2010, none of the Company’s convertible notes payable included a beneficial conversion option.

F-8

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Subsequent Events

In accordance with ASC 855, the Company evaluated subsequent events through April 6, 2012; the date the financial statements were available for issue.

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STATEMENTS OF OPERATIONS (USD $)	12 Months Ended		58 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011
Revenue	$ 0	$ 0	$ 0
Expenses:
Consulting and contractor expenses	754,226	516,458	2,795,717
Professional fees	116,131	130,186	406,666
General and administrative expenses	105,464	57,781	293,048
Depreciation	32,500	32,500	135,415
Rent expense	15,122	38,377	104,593
Vessel expenses	68,561	9,716	277,967
Travel and entertainment	14,462	12,829	169,296
Other operating expenses	0	300	13,187
Total operating expenses	1,106,466	798,147	4,195,889
Loss from operations	(1,106,466)	(798,147)	(4,195,889)
Interest expense	(125,335)	(184,328)	(381,887)
Interest income	34,288	2,162	50,585
Loss on extinguishment of debt	(297,796)	(46,120)	(343,916)
Loss on impairment	(21,000)	0	(21,000)
Total other income (expense)	(409,843)	(228,286)	(696,218)
Net loss	$ (1,516,309)	$ (1,026,433)	$ (4,892,107)
Net loss per share applicable to common stockholders - basic and diluted	$ 0	$ 0
Shares used to compute basic and diluted net loss per share applicable to common stockholders	520,722,703	388,810,219

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011
Document and Entity Information
Entity Registrant Name	Seafarer Exploration Corp.
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	true
Entity Central Index Key	0001106213
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	639,417,784
Entity Public Float	$ 9,033,267
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Amendment Description	To amend for XBRL filing attachment

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STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $)	Common Stock	Additional Paid-in Capital	Deficit Accumulated During the Development Stage	Total
Balance, Value at Feb. 14, 2007	$ 0	$ 0	$ 0	$ 0
Balance, Shares at Feb. 14, 2007	0
Common stock issued for cash, Value	500	4,693		5,193
Common stock issued for cash, Shares	5,000,000
Net loss			(5,294)	(5,294)
Balance, Value at Mar. 30, 2007	500	4,693	(5,294)	(101)
Balance, Shares at Mar. 30, 2007	5,000,000
Balance, Value at Feb. 14, 2007	0			0
Balance, Shares at Feb. 14, 2007	0
Net loss	(1,516,309)			(4,892,107)
Recapitalization at reverse merger, Value				91,500
Balance, Value at Dec. 31, 2011	60,664			(215,498)
Balance, Shares at Dec. 31, 2011	606,642,995
Balance, Value at Mar. 31, 2007	500	4,693		(101)
Balance, Shares at Mar. 31, 2007	5,000,000
Common stock issued for cash, Value	1,253	616,747		618,000
Common stock issued for cash, Shares	12,533,333
Net loss			(282,364)	(282,364)
Balance, Value at Mar. 30, 2008	1,753	621,440	(287,658)	335,535
Balance, Shares at Mar. 30, 2008	17,533,333
Common stock issued for cash, Value	643	381,132		356,775
Common stock issued for cash, Shares	6,425,918
Net loss			(970,794)
Recapitalization at reverse merger, Value	23,352	68,148		91,500
Recapitalization at reverse merger, Shares	233,522,002
Common stock issued for services, Value	1,778	321,555		323,333
Common stock issued for services, Shares	17,783,332	321,555		323,333
Common stock issued on conversion of notes payable and Extinguishments, Value	135	18,865		19,000
Common stock issued on conversion of notes payable and Extinguishments, Shares	1,344,972	18,865		19,000
Reclassification to mezzanine equity		(64,500)
Balance, Value at Dec. 31, 2008	31,767	2,145,531	(2,349,366)	(172,068)
Balance, Shares at Dec. 31, 2008	317,671,312
Common stock issued for cash, Value	2,078	251,630		253,708
Common stock issued for cash, Shares	20,783,371
Net loss			(1,090,914)
Common stock issued for services, Value	1,167	503,123		504,290
Common stock issued for services, Shares	11,670,000	503,123		504,290
Common stock issued on conversion of notes payable and Extinguishments, Value	861	108,638		109,499
Common stock issued on conversion of notes payable and Extinguishments, Shares	8,608,384	108,638		109,499
Reclassification to mezzanine equity		(64,500)
Balance, Value at Dec. 31, 2009	31,767	2,145,531		(172,068)
Balance, Shares at Dec. 31, 2009	317,671,312
Common stock issued for cash, Value	4,754	357,442		362,196
Common stock issued for cash, Shares	47,535,842
Net loss			(1,026,433)	(1,026,433)
Common stock issued for services, Value	3,272	315,798		319,070
Common stock issued for services, Shares	32,725,000	315,798		319,070
Common stock issued on conversion of notes payable and Extinguishments, Value	5,155	369,861		375,016
Common stock issued on conversion of notes payable and Extinguishments, Shares	51,547,519	369,861		375,016
Balance, Value at Dec. 31, 2010	44,948	3,188,632	(3,375,799)	(142,219)
Balance, Shares at Dec. 31, 2010	449,479,673
Common stock issued for cash, Value	5,483	291,689		297,172
Common stock issued for cash, Shares	54,827,619
Net loss			(1,516,309)	(1,516,309)
Recapitalization at reverse merger, Value				91,500
Common stock issued for services, Value	5,821	596,013		601,834
Common stock issued for services, Shares	58,218,374	596,013		601,834
Common stock issued on conversion of notes payable and Extinguishments, Value	4,362	536,162		540,524
Common stock issued on conversion of notes payable and Extinguishments, Shares	43,617,329	536,162		540,524
Common stock issued as financing fees, Value	50	3,450		3,500
Common stock issued as financing fees, Shares	500,000	3,450		3,500
Balance, Value at Dec. 31, 2011	$ 60,664	$ 4,615,946	$ (4,892,108)	$ (215,498)
Balance, Shares at Dec. 31, 2011	606,642,995

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Earnings Per Share

12 Months Ended

Dec. 31, 2011

Earnings Per Share:

Earnings Per Share

NOTE 4 - LOSS PER SHARE

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

		For the Year Ended December 31, 2011		For the Year Ended December 31, 2010
Net loss attributable to common shareholders	$	(1,516,309)	$	(1,026,433)
Weighted average shares outstanding:
Basic and diluted		520,722,703		388,810,219
Loss per share:
Basic and diluted	$	(0.00)	$	(0.00)

XML

Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes:

Income Tax Disclosure

NOTE 7 - 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 Year Ended December 31, 2011		For the Year Ended December 31,  2010
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 December 31, 2011 and 2010, the Company’s only significant deferred income tax asset was a cumulative estimated net tax operating loss of $4,892,107 and $3,375,799, 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 December 31, 2011 and 2010.

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Development Stage Enterprises

12 Months Ended

Dec. 31, 2011

Development Stage Enterprises:

Development Stage Enterprise, Nature of Activities

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, Seafarer Exploration, Inc. (“Seafarer Inc.”) merged with Organetix pursuant to a Share Exchange Agreement (the “Exchange Agreement”). The Exchange Agreement provided for the exchange of all of Seafarer Inc.’s common shares for 131,243,235 of Organetix post-merger common shares. Considering that Seafarer Inc.’s former shareholders 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 Seafarer Inc.’s operations.  Seafarer Inc. 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. Financial statements presented herein and subsequent to the merger reflect the 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.

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Leases

12 Months Ended

Dec. 31, 2011

Leases:

Leases of Lessor Disclosure

NOTE 8 – LEASE OBLIGATION

Corporate Office

The Company leases 823 square feet of office space located at 14497 North Dale Mabry Highway, Suite 209-N, Tampa, Florida 33618. The original term of the lease agreement commenced on October 1, 2008 and expired on March 31, 2010. The Company executed an amendment to the original lease effective retroactive to April 1, 2010. Under the amended lease agreement, the base rental rate, including taxes, is $1,166 per month, plus additional monthly charges for services used by the Company. Under the amendment, the lease term was extended to May 31, 2012.

Rental expense for the corporate office was $15,122 and $38,377 for the periods ended December 31, 2011 and 2010, respectively, and $104,593 for the period from inception to December 31, 2011.  As of December 31, 2011, future minimum rental payments required under this non-cancelable operating lease was $5,830, all of which is due during 2012.

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Related Party Disclosures

12 Months Ended

Dec. 31, 2011

Related Party Disclosures:

Related Party Transactions Disclosure

NOTE 14 – RELATED PARTY TRANSACTIONS

In January of 2011, an individual who is related to the Company’s CEO entered into a subscription agreement to purchase 1,250,000 shares of the Company’s restricted common stock at a price of $0.004 per share and the Company received proceeds of $5,000.

In January 2011, the Company repaid $2,225 to a limited liability company that is owned and controlled by a person who is related to the Company’s CEO. The $2,225 that was repaid represents the total amount that was owed to the limited liability company for providing the loans. The Company has not repaid the limited liability company any interest for providing the loans.

F-23

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

In March of 2011, a person who was a Director of the Company at that time entered into a subscription agreement to purchase 2 shares of the Company’s Series A preferred stock at a price of $3,000 per share and the Company received proceeds of $6,000.

In March of 2011, the Company partially repaid shareholder loans totaling $3,000 to a person who was Director of the Company at the time. The repayment of the stockholder loans leaves a balance of $4,800 still owed to the former Director. The Company had previously agreed to pay interest at a rate of 8% per annum on the borrowed funds; however at the time of the issuance of this report no interest has been repaid.

In April of 2011, an individual who is related to the Company’s CEO agreed to provide the Company with a loan in the amount of $1,000. The loan paid interest at an annual rate of 6% and was not secured. The principle balance of the loan plus accrued interest was due on or before May 21, 2011. The Company repaid the principle balance of $1,000 during the three month period ended June 30, 2011; however, the Company owes a late payment fee of 10% of the principal balance of the loan due to the fact that the loan was not repaid before the due date.

In April of 2011, the Company 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 2,500,000 restricted shares of its common stock at a future date and to negotiate future compensation on a year-by-year basis. The shares were recorded as an expense of $40,000 in consulting and contractor fees in the accompanying income statement. The Company also agreed to reimburse the Director for pre approved expenses.

In April of 2011, the Company entered into an agreement with an individual 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 and the Director agreed to negotiate compensation on a year-by-year basis and no compensation was specified in the agreement.  The Company also agreed to reimburse the Director for pre approved expenses.

In June of 2011, the Company entered into a consulting agreement with a limited liability company that is controlled by a person who is related to the Company’s CEO. Under the agreement the consultant agreed to provide background research, background checks and investigative information on individuals and companies, and act as an administrative specialist to perform administrative duties and clerical services. The term of the agreement was on a month-to-month basis. The consultant provided the services under the direction of the Company’s CEO. During the twelve month period ended December 31, 2010 the Company paid $1,000 to the consultant, which is included as an expense in consulting and contractor fees in the accompanying income statement.

In June of 2011, the Company entered into a consulting agreement with an individual who at the time of the execution of the agreement was a member of the Company’s Board of Directors. Under the terms of the Agreement, the consultant agreed to advise the Company regarding business development, mergers and acquisitions, business strategy and the analysis of the treasure industry and developing, studying, and evaluating acquisition proposals, preparing reports and studies when advisable under the direction of the Company’s CEO. Under the terms of the agreement, the Company agreed to pay the consultant $7,500 for three months, subject to availability of funds. The Company also agreed to pay the consultant a total of 1,000,000 shares of its restricted common stock. The shares issued to the consultant are subject to the following vesting schedule: 200,000 shares vest in July 2011, 200,000 shares vest in August 2011, 200,000 shares vest in September 2011, 200,000 shares vest in October 2011, and 200,000 shares vest in November 2011.  As of December 31, 2011 the 1,000,000 restricted shares had not been issued and these shares were included as a liability in the accounts payable and accrued liabilities section in the accompanying balance sheet.

In July of 2011, a convertible note holder who is related to the Company’s CEO elected to convert the note dated December 16, 2009 with a face value of $9,000 into 1,9089,00 shares of the Company’s common stock at a price of $0.005 per share.

F-24

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

In August of 2011, a promissory note holder who is related to the Company’s CEO elected to amend his promissory note to make the note convertible into shares of the Company’s common stock and to convert the note dated July 6, 2011 with a face value of $5,000 into 1,010,988 shares of the Company’s common stock at a price of $0.005 per share.

In August 2011, a convertible note holder who is a former Director of the Company elected to convert shareholder loans that were provided to the Company in 2009 with a remaining principal balance of $4,800 into 1,200,000 shares of the Company’s common stock at a price of $0.004 per share. The Company did not pay any interest to the former Director for providing these loans.

In September of 2011, two individuals who are related to the Company’s CEO purchased 600,000 shares of the Company’s common stock at a price of $0.005 per share for total proceeds of $3,000.

In September of 2011, the Company entered into an agreement with an individual who had previously been a member of the Company’s Board of Directors to join the Company’s advisory council. Under the advisory council agreement, 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 the advisory council agreement is for one year. In consideration for the performance of the advisory services, the Company agreed to issue the advisor 900,000 shares of the Company’s common stock. According to the agreement the shares vest at a rate of 75,000 per month during the term of the agreement.  The shares were recorded as an expense of $9,000 in consulting and contractor fees in the accompanying income statement. If the advisory council agreements is terminated prior to the expiration of the one year terms, then the advisors has agreed to return to the Company for cancellation any portion of their shares that have not vested. Under the advisory council agreement, the Company has agreed to reimburse the advisor for pre approved expenses.

In November 2011, an individual who is related to the Company’s CEO entered into a subscription agreement to purchase 2,500,000 shares of the Company’s restricted common stock at a price of $0.004 per share and the Company received proceeds of $10,000.

The Company paid $3,243 to a limited liability company for stock transfer agency services. The limited liability company is owned and controlled by a person who is related to the Company’s CEO and a former Director of the Company owns a minority, non-controlling interest in the limited liability company. Additionally, the Company entered into a consulting agreement in April of 2011with the limited liability Under the terms of the agreement, the consultant agreed to assist and advise the Company regarding the annual shareholder meeting and proxy administration including analyzing the Company’s bylaws to ensure compliance with corporate bylaws and state and federal regulations, organize the shareholder meeting, mail the notice of shareholder meeting, proxy card and financial statements to shareholders,  tabulate shareholder votes and meeting attendance, author a script and assign appropriate roles, provide certified shareholder lists, attend and participate in the meeting, provide certified voting results and assist with shareholder services. Under the terms of the Agreement the Company agreed to pay the consultant $5,000 and issue to the consultant 1,000,000 shares of its restricted common stock as consideration for the services.  The shares were recorded as an expense of $9,000 in consulting and contractor fees in the accompanying income statement. At December 31, 2011, the Company owed the limited liability company $13,803 for transfer agency services rendered and for additional services rendered to assist the Company with its proxy statement and related shareholder meeting and vote. This amount is included in accounts payable and accrued liabilities in the accompanying balance sheet.

During the twelve month period ended December 31, 2011, the Company had an ongoing consulting agreement to pay a person who is related to the Company’s CEO a minimum of $3,000 per month for providing various administrative, clerical, office management and consulting services. The Company agreed to pay the related party consultant additional compensation in the form of cash and/or stock based on extra time and effort spent rendering services to the Company. The agreement is verbal and may be terminated by the Company or the consultant at any time. In October 2011 the Company issued 2,750,000 shares of its restricted common stock to person who is a related party to its CEO. The shares were issued to show appreciation for the person’s willingness to provide spend extra time rendering services to the Company and as an incentive and an inducement to continue to provide services to the Company. The shares were recorded as an expense of $40,125 in consulting and contractor fees in the accompanying income statement. All fees paid to the related party consultant during the twelve month period ended December 31, 2011 are included as an expense in consulting and contractor fees in the accompanying income statement. At December 31, 2011, the Company owed the consultant $1,500 for services rendered. This amount is included in accounts payable and accrued liabilities in the accompanying balance sheet.

The Company reimbursed a person related to its CEO $262 for expenses related to the purchase of a boat part for the Company’s salvage vessel.

At December 31, 2011, 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.

F-25

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 14 – RELATED PARTY TRANSACTIONS - continued

A convertible loan 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 loan agreement 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.

NOTE 15 – SUBSEQUENT EVENTS

Subsequent to December 31, 2011:

The Company entered into a convertible note agreement with two persons who are related to the Company’s CEO. The convertible note payable dated January 18 2012, has a face value of $50,000, bears interest at a rate of 8.0% per annum and is due and payable on July 18, 2012. If the Company is more than 15 days late in making any payment required under the agreement then the lender may declare that the entire balance of unpaid principal is due immediately, together with any interest that has accrued. The lender may at its option elect to convert all or a portion of the outstanding principal balance and unpaid accrued interest into shares of the Company’s common stock at a rate of $0.004 per share. The note is secured by the equipment, fixtures, inventory, accounts receivable and intellectual property, currently existing and/or acquired during the term of the convertible note agreement. In the event that the Company was to default on this convertible note the lender may be entitled to receive penalties in cash or a significant amount of additional stock above the amounts for conversion.  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 Company’s current shareholders. Such dilution may result in a significant decrease in the per share price of the Company’s common stock. The potential highly dilutive nature of this convertible note represents a very significant risk to the Company’s existing shareholders.

The Company entered into a convertible note agreement with a corporation.  This convertible note payable dated January 31, 2012, has a face value of $32,500, bears interest at a rate of 8.0% per annum and is due and payable on November 2, 2012. The holder of the note has the right to convert the note at any time period beginning on the date that is 180 days following the date of the note into shares of the Company’s common stock. The convertible note payable is convertible at a variable conversion price at a 42% discount to market price of the Company’s common stock of the lowest three trading prices during the ten trading day period ending on the latest day prior to the conversion date.  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 variable conversion price. Any amount of principal or interest on this note which is not paid when due shall bear interest at a rate of 22% per annum. The holder of the note has the option to redeem the convertible note payable for cash in the event of defaults or certain other contingent events. The note is secured and the note holder 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 these events the lender may be entitled to receive significant amounts of additional stock above the amounts for conversion.   Furthermore, there are additional events that could cause the lender to be due 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 Company’s current shareholders. Such dilution may result in a significant decrease in the per share price of the Company’s common stock. The potential highly dilutive nature of this convertible note represents a very significant risk to the Company’s existing shareholders.

XML

Statement of Cash Flows (USD $)	12 Months Ended		58 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,516,309)	$ (1,026,433)	$ (4,892,107)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	32,500	32,500	135,415
Change in allowance for uncollectible notes receivable	13,867	25,000	38,867
Amortization of deferred finance costs	1,252	32,240	33,492
Interest expense on fair value adjustments of convertible notes payable	59,280	137,286	247,929
Write-off of uncollectible deposit			20,000
Accrued interest on notes receivable			(11,705)
Loss on extinguishment of debt	297,796	46,120	343,916
Loss on impairment	21,000	0	21,000
Stock issued for services	605,334	319,070	1,752,027
Changes in operating assets and liabilities:
Increase decrease Prepaid expenses	(43,860)		(43,860)
Increase decrease Deposits and other receivables		3,638	(23,346)
Increase decrease Accounts payable and accrued liabilities	33,960	(11,686)	244,667
Net cash used in operating activities	(495,180)	(442,265)	(2,133,706)
CASH FLOWS FROM INVESTING ACTIVITIES
Principal payments from notes receivable	(25,000)		(25,000)
Purchase of common stock	(21,000)	(1,100)	(22,100)
Acquisition of equipment	(325,000)		(325,000)
Net cash provided by (used in) investing activities	(21,000)	(1,100)	(372,100)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock	297,172	233,196	1,789,144
Proceeds from the issuance of convertible notes and convertible notes payable	261,000	246,000	801,800
Payments on notes and convertible notes payable	(31,000)	(10,000)	(81,000)
Proceeds from loans from stockholders	2,225	2,225	35,925
Payments on stockholder loans	5,225	(26,000)	(31,225)
Net cash provided by financing activities	532,397	445,421	2,514,644
CHANGE IN CASH	5,767	2,056	8,838
CASH, BEGINNING OF PERIOD	3,071	1,015
CASH, ENDING OF PERIOD	8,838	3,071	8,838
NONCASH OPERATING AND FINANCING ACTIVITIES:
Due to Organetix, Inc. reclassified to additional paid-in capital	91,500		91,500
Common stock issued to satisfy minimum value guarantee		129,000	87,667
Convertible debt converted to common stock including accrued interest	540,524	314,705	978,262
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for Interest	$ 3,660		$ 3,660

XML

Debt

12 Months Ended

Dec. 31, 2011

Debt:

Debt Disclosure

NOTE 9 – 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, other than the notes remeasured to fair value, which are discussed in Note 10, as of December 31, 2011 and 2010:

Issue Date	Maturity Date	December 31, 2011		December 31, 2010		Interest Rate			Conversion Rate
Convertible notes payable:
November 9, 2011	December 31, 2012	$	35,000	$	--		6.00	%	$	0.0150
Convertible notes payable, in default :
August 28, 2009	November 1, 2009	$	4,300	$	4,300		10.00	%	$	0.0150
November 30, 2009	May 30, 2010		--		10,000		6.00	%	$	0.0050
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
			114,300		124,300
Convertible notes payable, in default – related parties:
January 9, 2009	January 9, 2010		10,000		10,000		10.00	%	$	0.0150
December 16, 2009	December 16, 2010		--		9,000		6.00	%	$	0.0050
January 25, 2010	January 25, 2011		6,000		6,000		6.00	%	$	0.0050
			16,000		25,000
		$	165,300	$	149,300

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

F-11

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE - continued

Notes Payable

The following table reflects the notes payable, as of December 31, 2011 and 2010:

Issue Date	Maturity Date	December 31, 2011		December 31, 2010		Interest Rate
Notes payable:
April 27, 2011	April 27, 2012	$	5,000	$	--		6.00	%
Notes payable, in default – related parties:
February 24, 2010	February 24, 2011		7,500		7,500		6.00	%
Notes payable, in default:
February 22, 2010	August 22, 2010		--		20,000		3.00	%
February 23, 2011	March 23, 2011		20,000		--		7.00	%
June 23, 2011	August 23, 2011		25,000		--		6.00	%
			45,000		20,000
		$	57,500	$	27,500

Stockholder Loans

The Company repaid all stockholder loans during the period ended December 31, 2011. The following table reflects the stockholder loans as of December 31, 2011 and December 31, 2010:

Issue Date	Maturity Date	December 31, 2011		December 31, 2010		Interest Rate
Various	None stated	$	--	$	7,900		8.00	%
October 26, 2010	January 25, 2011		--		350		6.00	%
November 16, 2010	January 16, 2011		--		1,875		6.00	%
		$	--	$	10,125

At December 31, 2011 and 2010, combined accrued interest on the convertible notes payable, notes payable and stockholder loans was $11,769 and $9,038, respectively, and is included in accounts payable and accrued liabilities on the accompanying balance sheets.

Between July 13, 2011 and October 17, 2011, several promissory notes were modified to add a conversion option. These notes were converted into common stock immediately following the modifications. The following table details the promissory notes that were modified and subsequently converted:

Issue Date	Modification and Conversion Date	Face Value plus Accrued Interest		Shares Issued Upon Conversion		Extinguishment Loss
Notes payable:
May 10, 2011	July 13, 2011	$	5,050		631,555	$	5,054
April 28, 2011	July 14, 2011		50,592		10,118,368		101,184
May 19, 2011	July 19, 2011		5,049		631,150		2,525
May 25, 2011	July 26, 2011		5,049		631,150		2,525
June 6, 2011	August 12, 2011		5,055		1,010,988		5,055
February 22, 2010	August 13, 2011		20,600		6,200,000		47,600
May 26, 2011	September 6, 2011		20,224		4,044,744		46,515
June 17, 2011	October 14, 2011		5,089		1,017,876		5,089
June 16, 2011	October 17, 2011		15,218		3,043,540		15,218
		$	131,926		27,329,371	$	230,765

F-12

 SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 9 – CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE - continued

The following table details the convertible promissory notes that were converted between July 26, 2011 and August 26, 2011:

Issue Date	Modification and Conversion Date	Face Value plus Accrued Interest		Shares Issued Upon Conversion		Extinguishment Loss
Convertible notes payable:
December 16, 2009	July 26, 2011	$	9,540		1,908,000	$	13,355
February 15, 2011	August 16, 2011		22,267		2,945,370		10,132
November 30, 2009	August 26, 2011		11,071		2,767,670		30,444
Various	August 26, 2011		4,900		1,200,000		13,100
		$	47,778		8,821,040	$	67,031

NOTE 10 – CONVERTIBLE NOTES PAYABLE, AT FAIR VALUE

Convertible Note Payable Dated November 4, 2009 at Fair Value

On November 4, 2009, the Company entered into a convertible note payable with a corporation.  The convertible note payable, with a face value of $40,000, bears interest at 8.0% per annum and is due on May 4, 2010.  The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at the lesser of (1) the Variable Conversion Price or (2) a Fixed Conversion Price of $0.25.  The Variable Conversion Price is defined as 42% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten 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.

Rather than accounting for the derivatives in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities  , SFAS No. 155,    Accounting for Certain Hybrid Financial Instruments,   both superseded by ASC 815, permits both holders and issuers of certain hybrid financial instruments, at inception, to irrevocably elect to measure the instrument in its entirety at fair value, with changes in fair value recognized in earnings. Pursuant to paragraph 5 of ASC 815-15-25, the fair value election may be made on an instrument-by- instrument basis at the time the hybrid financial instrument is acquired, issued or when a previously recognized financial instrument is subject to a re-measurement, but it is required to be supported by concurrent documentation or a preexisting documented policy for automatic election. However, the fair value election is not available for a hybrid financial instrument, unless the instrument contains an embedded derivative that ASC 815-15-25-1 would require to be bifurcated.  The Company   elected to account for the hybrid contract under the guidance of ASC 815-15-25-4.

In connection with the issuance of the convertible note payable on November 4, 2009, 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 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 due 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.

F-13

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 10 – CONVERTIBLE NOTES PAYABLE, AT FAIR VALUE - continued

At December 31, 2011 and December 31, 2010, the convertible note payable, at fair value, had been fully settled.

Convertible Note Payable Dated April 1, 2010 at Fair Value

On April 1, 2010, the Company entered into a convertible note payable with a corporation.  The convertible note payable, with a face value of $50,000, bears interest at 8.0% per annum and is due on January 7, 2011.  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 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten 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 April 1, 2010, 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 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 due 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.

Between October 29, 2010 and December 15, 2010, the holder converted $46,000 of the principal balance resulting in the issuance of 12,817,117 shares of the Company’s common stock.

At December 31, 2011 and December 31, 2010, the convertible note payable, at fair value, was recorded at $0 and $11,112, respectively.

Convertible Note Payable Dated June 22, 2010 at Fair Value

On June 22, 2010, the Company entered into a convertible note payable with a corporation.  The convertible note payable, with a face value of $25,000, bears interest at 8.0% per annum and is due on March 24, 2011.  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 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten 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.

F-14

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 10 – CONVERTIBLE NOTES PAYABLE, AT FAIR VALUE - continued

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 June 22, 2010, 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 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 due 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.

At December 31, 2011 and December 31, 2010, the convertible note payable, at fair value, was recorded at $0 and $74,537, respectively.

Convertible Note Payable Dated July 12, 2010 at Fair Value

On July 12, 2010, the Company entered into a convertible note payable with a corporation.  The convertible note payable, with a face value of $10,000, bears interest at 8.0% per annum and is due on April 14, 2011.  The convertible note payable is convertible, at the holder’s option, into the Company’s common shares at a fixed conversion price of $0.006.  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 July 12, 2010, 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 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 due 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.

F-15

SEAFARER EXPLORATION CORP. AND SUBSIDIARIES

 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS  

NOTE 10 – CONVERTIBLE NOTES PAYABLE, AT FAIR VALUE - continued

At December 31, 2011 and December 31, 2010, the convertible note payable, at fair value, was recorded at $0 and $16,104, respectively.

Convertible Note Payable Dated October 6, 2011 at Fair Value

On October 6, 2011 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 11, 2012.  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 58% multiplied by the average of the lowest three trading prices for the Company’s common stock during the ten 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 6, 2011, 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 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 due 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.

At December 31, 2011, the convertible note payable, at fair value, was recorded at $119,557.

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 years ended December 31, 2011 and 2010:  

	For the year ended				For the year ended
	December 31,				December 31,
	2011				2010
Interest expense recorded upon issuance of the convertible note payable		$	(49,982	)		$	(100,089	)
Interest recapture on fair value re-measurement of the convertible note payable			(9,298	)			(21,206	)
		$	(59,280	)		$	(121,295	)