SEAFARER EXPLORATION CORP

The Company recognizes revenue when cash is received or when it has met its obligations per the terms of a contract or agreement for services. Payments received for services are recorded as deferred revenue and are recognized as revenue when the services have been provided.

During the three month period ended March 31, 2021 the Company entered into an agreement to provide scanning services using its SeaSearcher technology to a corporation involved in searching for historic shipwreck material. Under the terms of the agreement the Company received an upfront payment of $140,000 which has been included in the accompanying condensed consolidated balance sheet at March 31, 2021 as deferred revenue.

-       8,900,000 restricted shares for total proceeds of $52,500.

-       5,348,366 fully vested and non-forfeitable restricted shares for services provided by consultants, contractors, and other service providers. The Company determined the fair value of the shares issued using the stock price on date of issuance. Compensation expense is recognized as the services are provided to the Company. For the three month period ended March 31, 2020, the Company incurred $16,055 of compensation expense for stock issued for services and have prepaid expenses of $133,208 at March 31, 2020 for stock issued prior to services being performed.

Operating expenses were $506,834 for the three month period ended March 31, 2021 versus $626,278 for the same period in 2020, a decrease of 19%. The decrease in operating expenses in 2021 was primarily due to decreases in vessel maintenance and dockage expenses, consulting and contractor expenses, and professional fees. Consulting and contractor expense was $243,202 for the three month period ended March 31, 2021 versus $292,414 for the same period in 2020, a decrease of nearly 17%. The Company incurred vessel related expenses of $26,827 during the three month period ended March 31, 2021 versus $155,426 during the three month period ended March 31, 2020, a decrease of approximately 83%. Research and development expenses were $71,254 in 2021 versus $71,420 in 2020. The Company’s research and development expenses were related to the development of its SeaSearcher autonomous underwater device. The Company believes that it will continue to expend significant resources to further develop the SeaSearcher and to begin developing next generation versions of the technology. During the three month period ended March 31, 2021, professional fees were $13,575 as compared to $54,253 during the three month period ended March 31, 2020, a decrease of approximately 75%. During the three month period ended March 31, 2021, general and administrative expenses were $119,933 as compared to $18,222 during the three month period ended March 31, 2020, an increase of 558%. Depreciation expense was $5,465 during the three month period ended March 31, 2021 versus $5,015 for the same period in 2020. Rent expense was $9,111 during the three month period ended March 31, 2021 versus $11,767 for the same period in 2020, a decrease of approximately 23%. The Company incurred travel and entertainment expenses of $17,467 during the three month period ended March 31, 2021 as compared to $17,763 during the three month period ended March 31, 2020, an approximate 2% decrease on a quarter-over-quarter basis.

Other income (expense) was $91,449 during the three month period ended March 31, 2021 versus $120,566 during the three month period ended March 3, a decrease of $29,117. The 24% decrease in other income (expense) in 2021 was primarily due to a decrease in interest expense. Interest expense for the three month period ended March 31, 2021 was $54,103 versus $87,691 for the same period in 2020, a decrease of approximately 38%. Loss on extinguishment of debt was $37,346 during the three month period ended March 31, 2021 versus $34,375 during the same period in 2020. The Company received dividend income of $0 and $1,500 during the three month periods ended March 31, 2021 and 2020, respectively.