Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

^[X]

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

For the quarterly period ended: September 30, 2018

[   ]

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

ENDURANCE EXPLORATION GROUP, INC.

(Name of Small Business Issuer in its Charter)

Nevada	333-141817	03-0611187
(State or jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

15500 Roosevelt Blvd Suite 301, Clearwater, FL 33760

(Address number principal executive offices)

(727)-289-0010

(Issuer’s telephone number)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No  [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No  [   ]

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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 “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]	Accelerated filed [  ]	Non-accelerated filer [  ]	Smaller reporting company [X]
			Emerging growth company [X]

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act [X]

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

As of November 14, 2018, the registrant had 55,813,324 shares of common stock outstanding.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

Consolidated Balance Sheets at September 30, 2018 (unaudited) and December 31, 2017	5
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)	6
Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)	7
Notes to the Consolidated Financial Statements (unaudited)	8

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ENDURANCE EXPLORATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

		September 30,		December 31,
		2018		2017
ASSETS
Current Assets
Cash and cash equivalents		$ 1,195		$ 5,120
Prepaid expenses		350,000		350,000
Inventory		142,438		-
Total Current Assets		493,633		355,120
Fixed Assets
Equipment, furniture and fixtures		682,842		693,221
Accumulated depreciation		(569,955)		(537,726)
Total Fixed Assets, net		112,887		155,495
TOTAL ASSETS		$ 606,520		$ 510,615
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses		52,441		60,014
Loans and notes payable to related parties		645,311		344,000
Total Current Liabilities		697,752		404,014
TOTAL LIABILITIES		697,752		404,014
Stockholders' Deficit
Preferred stock, 10,000,000 authorized, $0.001 par value, 0 and 0 issued and outstanding		-		-
Common stock: 100,000,000 authorized; $0.01 par value 43,788,324 and 43,410,324 shares issued and outstanding respectively		437,884		434,104
Additional paid in capital		7,173,280		7,026,209
Accumulated deficit		(7,702,396)		(7,353,712)
TOTAL STOCKHOLDERS' DEFICIT		(91,232)		106,601
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$ 606,520		$ 510,615

The accompanying notes are an integral part of these unaudited financial statements

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ENDURANCE EXPLORATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		For the Three Months Ended				For the Nine Months Ended
		September 30,				September 30,
		2018		2017		2018		2017
Revenues		$ -		$ -		$ -		$ -
Operating Expenses
Operations and research		17,958		20,309		29,747		74,274
Marketing and promotion		3,465		4,224		29,835		32,088
General and administrative		39,283		76,853		235,851		164,486
Depreciation		11,544		15,450		35,310		63,991
Total operating expenses		72,250		116,836		330,743		334,839
Net loss from operations		(72,250)		(116,836)		(330,743)		(334,839)
Other Income (Expense)
Interest expense		(7,473)		-		(17,941)		-
Total other income (expense)		(7,473)		-		(17,941)		-
Net loss		$ (79,723)		$ (116,836)		$ (348,684)		$ (334,839)
Basic and diluted loss per share		$ (0.00)		$ (0.00)		$ (0.01)		$ (0.01)
Weighted average number of shares outstanding		43,729,478		43,024,369		43,544,405		43,076,274

The accompanying notes are an integral part of these unaudited financial statements

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ENDURANCE EXPLORATION GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Nine Months Ended
		September 30,
		2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$ (348,684)		$ (334,839)
Adjustments to reconcile net loss to net cash used in operating        activities:
Depreciation expense		35,310		63,991
Stock-based compensation		119,460		59,193
Capitalization of salvage costs		(142,438)
Changes in operating assets and liabilities
Accounts payable and accrued expenses		(7,573)		(25,980)
Net Cash Used by Operating Activities		(343,925)		(237,635)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment				(13,805)
Net Cash Used by Investing Activities		-		(13,805)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related parties		340,000		252,500
Net Cash Provided By Financing Activities		340,000		252,500
NET INCREASE IN CASH		(3,925)		1,060
CASH, BEGINNING OF PERIOD		5,120		2,523
CASH, END OF PERIOD		$ 1,195		$ 3,583
Supplemental schedule of non-cash financing and investing activities:
May 29, 2018 – Sold equipment in exchange for the forgiveness of related party debt		$ 38,689

The accompanying notes are an integral part of these unaudited financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2018

(UNAUDITED)

NOTE A – ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

Description of Business

Endurance Exploration Group, Inc. (the “Company”) was formed to explore, from an operational and financial perspective, the feasibility and potential economic return of recovering bullion, precious metals, numismatic-grade coinage, high-value non-ferrous metals, and other valuable cargos from both historic and modern shipwrecks throughout the world. The Company’s primary focus is its exploration and recovery operations.

On January 6, 2017, the Company formed EXPL Swordfish, LLC, a Florida limited liability company, as a wholly owned subsidiary for the purpose of pursuing a number of shipwreck and suspected shipwreck targets located in international waters off the Southeast coast of the United States, in a joint-venture with Deep Blue Exploration, LLC d/b/a Marex (“Marex”), which is further described in Note B.

On June 27, 2018, the Company formed a joint venture with Downtown Television, Inc., for the purpose of developing, producing and marketing entertainment content relating to deep-sea exploration, historical shipwreck search, artifact recovery, and expounding upon the history of these shipwrecks.  The joint venture is a new limited liability corporation that is 50% owned each by EXPL Swordfish LLC and Downtown Television Inc., and has been named Megalodon Entertainment, LLC. (“Megalodon”), as is further described in Note B. 

The Company’s corporate headquarters is located in Clearwater, Florida.  

Fiscal Year

The Company’s fiscal year was changed from January 31 to December 31 in November 2013.

Principles of consolidation and basis of presentation

These consolidated financial statements include the assets and liabilities of the Endurance Exploration Group, Inc. (formerly Tecton Corporation) and its subsidiaries as of September 30, 2018. The acquisition of the membership interests of Endurance LLC and its wholly owned Panamanian subsidiary formed to hold the registry of a research vessel occurred as of the close of its business on December 31, 2013.  The formation of EXPL Swordfish LLC, occurred on January 6, 2017.

The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s latest Annual Report on Form 10-K.

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In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of the financial position as of September 30, 2018 and the results of operations for the three and nine months ended September 30, 2018 and 2017 and cash flows for the nine months ended September 30, 2018 and 2017 have been made. All material intercompany transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-Q, to assess the need for potential recognition or disclosure in this report. Based upon this evaluation, management determined that all subsequent events that require recognition in the financial statements have been included.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents.

Fixed Assets

Fixed assets are stated at historical cost. Depreciation is provided using the straight-line method at rates based on the assets’ estimated useful life which is normally between three to ten years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Leasehold improvements are amortized over their estimated useful lives or lease term, if shorter. Equipment and major overhaul items (such as engines or generators) that enhance or extend the useful life of vessel related assets, qualify to be capitalized and depreciated over the useful life or remaining life of that asset, whichever is shorter. Certain major repair items required by industry standards to ensure a vessel’s seaworthiness also qualify to be capitalized and depreciated over the period of time, until the next scheduled planned major maintenance for that item. All other repairs and maintenance are accounted for under the direct- expensing method and are expensed when incurred.

Impairment of Lon g -Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. As of September 30, 2018, and 2017, there were no impairment losses recognized for long-lived assets.

Inventory

Our inventory consists of artifacts recovered from the Steamship Pulaski . Inventoried costs of recovered artifacts include the costs of recovery and conservation. The capitalized recovery costs include direct costs such as vessel and related equipment operations and maintenance, crew and technical labor, fuel, provisions, supplies, port fees and depreciation. Conservation costs include fees paid to conservators for cleaning and preserving the artifacts. We continually monitor the recorded aggregate costs of the artifacts in inventory to ensure these costs do not exceed the net realizable value. Historical sales, publications or available public market data are used to assess net realizable value.

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Income Taxes

The Company uses the liability method to record income tax activity. Deferred taxes are determined based upon the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws.

The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements uses the threshold of more-likely- than-not to be sustained upon examination for inclusion or exclusion. Measurement of the tax uncertainty occurs if the recognition threshold has been met.

Net Earnings (Losses) Per Common Share

The Company computes earnings (loss) per share by dividing net earnings (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the year. Dilutive common stock equivalents may consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company’s stock options (calculated using the treasury stock method). As of September 30, 2018, there were 4,459,180 common stock equivalents that were anti-dilutive and were not included in the calculation. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations.

Fair Value of Financial Instruments

The fair value of financial instruments, which include cash, loans receivable, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments.

Comprehensive Income

The Company records comprehensive income as the change in equity of a business during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. As of September 30, 2018, the Company had no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Stock Based Compensation

Stock based compensation costs are measured at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The Company determines the fair value of awards using the Black-Scholes valuation model.

New Accountin g Pronouncements

In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

The ASU will be effective for annual and interim periods beginning January 1, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company is assessing the impact of this standard.

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The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to September 30, 2018 through the date these financial statements were issued.

NOTE B – JOINT VENTURE

EXPL Swordfish, LLC

Effective January 9, 2017, the Company, through a newly formed, wholly owned subsidiary, EXPL Swordfish, LLC (“EXPL Swordfish”), entered into a joint-venture agreement (“Agreement”) with Deep Blue Exploration, LLC, d/b/a Marex (“Marex”).  The joint venture between EXPL Swordfish and Marex is referred to as Swordfish Partners.

Marex’s contribution to Swordfish Partners includes certain shipwreck research files, sonar and other subsea survey data, navigational data, artifacts, and assistance relating to  a number of shipwreck and suspected shipwreck targets located in international waters off the Southeast coast of the United States.  EXPL Swordfish has agreed to further survey and inspect the shipwreck and suspected shipwreck targets, and if deemed appropriate, take actions necessary to salvage the shipwreck targets.

The economic terms of the Original Agreement called for EXPL Swordfish to provide the funding for the further inspection, salvage and operations of the joint venture.  Any revenues from the joint venture will be split 90% first to EXPL Swordfish and 10% to Marex until EXPL Swordfish receives 2 times its costs and investments returned, and then a 50% split to both EXPL and Marex respectively.  

On August 10, 2017, EXPL Swordfish executed a Second Amendment to Joint Venture with Marex, whereby Marex agreed to decrease its 50% share of revenues from the salvage operations of the steamship off the coast of North Carolina, the Steamship Pulaski , in exchange for $10,000 and 250,000 shares in the Company.  Net proceeds of our recovery efforts for this project will be split 30% to us, 30% to Blue Water (an Independent Salvager), and 40% to Marex, after we have recovered 2 times the amount of our costs, which will be split 50/50 with Blue Water. 

The joint venture is expected to terminate in one more year, unless extended by mutual agreement between the parties.

Swordfish Partners meets the definition of a Variable Interest Entity (“VIE”) under ASC 810. The subsections of ASC 810-10 provide that a party that controls a VIE is considered to be its primary beneficiary. The primary beneficiary of a VIE is required to consolidate the financial results. EXPL Swordfish has determined it is the primary beneficiary of Swordfish Partners. All of the expenses incurred to date for Swordfish Partners have been funded by EXPL Swordfish. Marex has not paid any expenses on behalf of Swordfish Partners. The financial statements of Swordfish Partners has been consolidated in the reporting entities financials via EXPL Swordfish LLC.

On July 24, 2018, the Company, operating through its joint venture, Swordfish Partners (the “Joint Venture”), initiated an admiralty action against what the company believes is the S.S. North Carolina , her hull, cargo, tackle, boilers, machinery and appurtenances, seeking to become the substitute custodian, replacing its joint venture partner, Marex, in its role as custodian.  The vessel is located approximately 18 nautical miles east of Myrtle Beach, South Carolina.  The S.S. North Carolina sank on July 26, 1840 without the loss of life, but with presumed cargo of passenger valuables and mails that may have included gold.  The Joint Venture was appointed substitute custodian by the U.S. District Court of the Middle District of Florida, on August 22, 2018.  The Joint Venture anticipates returning to the site during the spring and summer of 2019 to conduct additional surveying, and if warranted, salvage operations of the shipwreck and its cargo.

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The results of operations for Swordfish Partners for the nine months ended September 30, 2018 is as follows:

		For the Nine Months Ended September 30, 2018
Revenues		$ -
Operating Expenses
Operations and research		11,188
Marketing and promotion		15,198
General and administrative		17,758
Total operating expenses		44,144
Net loss		$ (44,144)

Megalodon Entertainment, LLC

On June 27, 2018, the Company formed a joint venture with Downtown Television, Inc., for the purpose of developing, producing and marketing entertainment content relating to deep-sea exploration, historical shipwreck search, artifact recovery, and expounding upon the history of these shipwrecks.  Downtown Television, and its principal David Carr, have produced many successful adventure, science and exploration, and treasure hunting shows and series including: “The Curse of Oak Island”, “Treasure Quest”, “Extinct or Alive”, and “Ancient Aliens”, among others, and his productions have been featured on networks such as The History Channel, Discovery, TLC, Animal Planet, and Lifetime. We believe Downtown’s experiences will be invaluable in helping to tell the story of the Pulaski shipwreck and other discoveries being made by EXPL and our partners.  The joint venture is being formed as a new limited liability corporation that will be 50% owned each by EXPL and Downtown, and has been named Megalodon Entertainment, LLC. (“Megalodon”). 

NOTE C - GOING CONCERN MATTERS

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.   At September 30, 2018 and December 31, 2017, the Company had $1,195 and $5,120 in cash, respectively, and $204,119 and $48,894 in negative working capital, respectively.  For the nine months ended September 30, 2018 and 2017, the Company had a net loss of $348,684 and $334,839, respectively. Continued losses may adversely affect the liquidity of the Company in the future.  Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern.  The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

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NOTE D – PREPAID EXPENSES

On May 15, 2015, the Company entered into an agreement with Eclipse Group, Inc., a related party, to provide services, equipment and/or personnel in support of anticipated Endurance salvage projects, to inspect and recover one or more shipwreck cargoes located by Endurance.  The Company issued 2,000,000 common shares at $.25 per share with a value of $500,000.  These shares represent a prepayment for Eclipse services pursuant to a schedule of agreed upon costs and rates.  Eclipse will invoice the Company on a monthly basis as services are rendered.  During 2015, Eclipse rendered $150,000 of the services outlined in this agreement.  As of September 30, 2018, the Company has not received any additional invoices for services outlined in this agreement, and consequently the remaining balance of $350,000 is included in other assets.

NOTE E – FIXED ASSETS

Fixed assets consist of the following at September 30, 2018 and December 31, 2017:

				September 30,		December 31,
				2018		2017
Vessels and equipment				$ 668,750		$ 679,129
Computers and peripherals				14,092		14,092
				682,842		693,221
Less: Accumulated depreciation				(569,955)		(537,726)
Fixed Assets - net				$ 112,887		$ 155,495

Depreciation expense was $35,310 and $63,991 for the nine months ended September 30, 2018 and 2017, respectively.

NOTE F – ADVANCES FROM RELATED PARTIES AND RELATED PARTY TRANSACTIONS

Loans and notes payable to related parties at September 30, 2018 and December 31, 2017 as detailed below are summarized as follows:

		September 30, 2018			December 31, 2017
Notes payable – related parties		$ 638,311			$ 337,000
Advances from related parties		7,000			7,000
		$ 645,311			$ 344,000

On December 31, 2013, the Company completed the purchase of 100% of the membership interests of Endurance Exploration Group, LLC (“Endurance LLC”), from its members, Micah Eldred and Carl Dilley, in exchange for 20,550,539 shares of the Company’s common stock, valued at $0.0186 per share, based upon the net book value of the assets of Endurance LLC, $381,173 as of December 31, 2013.

On December 31, 2013, as a consequence of acquiring the membership interests of Endurance LLC, the Company assumed a liability of Endurance LLC to Micah Eldred under a demand promissory note, dated June 19, 2012, in the original principal amount of $60,000, bearing interest at 5%.  As of December 31, 2016, the full balance of the note plus accrued interest, totaling $73,598 was forgiven by Micah Eldred as additional contributed capital.

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The Company has entered into a contract with Island Capital Management LLC, which is owned and controlled by Connect X Capital Markets, LLC (“Connect X”), to serve as its transfer agent. Connect X is owned by Micah Eldred and Carl Dilley.  It did not charge the Company for its services during the quarter ended September 30, 2018 or the year ended December 31, 2017.

The Company has entered into a contract with Proxy & Printing, LLC, which is owned and controlled by Island Stock Transfer, Inc, to provide the Company with EDGAR, XBRL and Proxy services relating to its filings with the SEC.  It did not charge the Company for its services during the quarter ended September 30, 2018 or the year ended December 31, 2017.

On April 7, 2014, the Company entered into a Debt Conversion Agreement with Connect X relating to the conversion of indebtedness to Connect X in the amount of $35,000.  This amount represents advances received from Connect X during 2014 and constitutes the balance of the related party debt payable to Connect X as of that date.  The terms of the agreement allowed for Connect X to convert this debt into common stock at $0.25 per share.  Connect X converted all of such debt into shares, as a result of which the Company issued 140,000 shares to Connect X.

On April 7, 2014, the Company entered into a Debt Conversion Agreement with Island, a company owned and controlled by Connect X, relating to the conversion of indebtedness to Island in the amount of $70,000.  This amount represents advances received from Island during 2014 and constitutes the balance of the related party debt payable to Island as of that date.  The terms of the agreement allowed for Island to convert this debt into common stock at $0.25 per share.  Island converted all of such debt into shares, as a result of which the Company issued 280,000 shares to Island.  

On June 23, 2014, the Company entered into a contract with Eclipse Group Inc. (“Eclipse”) for Eclipse to provide personnel and services to the Company in connection with the operation and monitoring of a remotely operated vehicle (“ROV”) in connection with our investigation of a suspected shipwreck located off the coast of New England. Steven Saint Amour, who serves as a member of the Company’s Board of Directors, and Joan Saint Amour are the principal shareholders and officers of Eclipse.  The contract provides that Eclipse will provide 2 people, including Mr. Saint Amour, for approximately four 12-hour days to operate and monitor the ROV, which will be provided by the Company.  The Company issued 100,000 shares of common stock to Mr. Saint Amour, with an agreed value of $25,000, under the contract, and will reimburse Eclipse in cash for its cost for the second ROV technician.  The Company will also pay Eclipse in cash its cost plus 15% for all third party costs incurred by Eclipse, and provide Mr. Saint Amour and the second technician with food and lodging during the assignment.

On September 3, 2014, the Company entered into a contract with Overseas Marine Vessel Corp, LLC (“OMVC”) pursuant to which OMVC provided the Marine Vessel Manisee in support of an estimated 10-day mission to investigate, identify and recovery artifacts from one or more shipwrecks located in our search area off the coast of New England.  We agreed to reimburse OMVC in cash for all its out-of-pocket expenses only, including but not limited to, mooring, food, fuel, normal maintenance, satellite communications and crew costs.  Toni Eldred, the spouse of Micah Eldred, is a fifty percent owner of OMVC, and Micah Eldred is the co-manager of OMVC.

On February 12, 2015, the Company entered into a Debt Conversion Agreement with Connect X relating to the conversion of indebtedness to Connect X in the amount of $85,000. This amount represents the related party debt payable to Connect X as of that date.  The terms of the agreement allowed for Connect X to convert this debt into common stock at $0.25 per share.  Connect X converted all of such debt into shares, as a result of which we issued 340,000 shares to Connect X.  

On February 12, 2015, the Company entered into a Debt Conversion Agreement with Micah Eldred relating to the conversion of indebtedness to Micah Eldred in the amount of $143,333. This amount represents the related party debt payable to Micah Eldred as of that date.  The terms of the agreement allowed for Micah Eldred to convert this debt into common stock at $0.25 per share.  Micah Eldred converted all of such debt into shares, as a result of which we issued 573,333 shares to Micah Eldred.

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On February 12, 2015, the Company entered into a Debt Conversion Agreement with Carl & Heather Dilley relating to the conversion of indebtedness to Carl & Heather Dilley in the amount of $45,867 and $25,800 respectively. This amount represents the related party debt payable to Carl & Heather Dilley as of that date.  The terms of the agreement allowed for Carl & Heather Dilley to convert this debt into common stock at $0.25 per share.  Carl & Heather Dilley converted all of such debt into shares, as a result of which we issued 183,467 and 103,200 shares to Carl & Heather Dilley respectively.

During the year ended December 31, 2016, Connect X made net advances to the Company in the aggregate amount of $237,500, in order to provide the Company with funds to carry on its operations.  These advances do not bear interest, are unsecured and have no specific terms of repayment.  As of December 31, 2016, the full amount of these advances totaling $333,000 was forgiven as additional contributed capital.

During the year ended December 31, 2017, Connect X Capital Markets, LLC made net advances to the Company in the aggregate amount of $337,000. Additionally, the Company’s CEO made net advances to the Company of $7,000. The advances were to provide the Company with funds to carry on its operations.  These advances do not bear interest, are unsecured and have no specific terms of repayment. The Company did impute interest on these notes for the three months ended March 31, 2018 and recorded interest expense in the amount of $3,817. Beginning on April 2, 2018 these advances began bearing interest at 5% per annum and are payable on demand. For the nine months ended September 30, 2018, the Company recorded interest expense in the amount of $8,395 based on the contracted 5% interest. Total interest expense recorded for the nine months ended September 30, 2018 related to these advances amounted to $12,212.

In March 2018, the Company’s CEO agreed to provide a line of credit in the amount of $500,000 to the Company so that it will have the liquidity and funds to carry out its operations.  The Company executed a Demand Note – Line of Credit, whereby it agreed to pay 5% interest on any advances made, which are secured by a Security Agreement on the Company’s assets.  During the nine months September 30, 2018, Connect X Capital Markets, LLC made net advances to the Company in the aggregate amount of $60,000. Additionally, the Company’s CEO made net advances to the Company of $160,000. The advances were to provide the Company with funds to carry on its operations. The Company did impute interest on these notes for the three months ended September 30, 2018 and recorded interest expense in the amount of $661. Beginning on April 2, 2018 these advances began bearing interest at 5% per annum and are payable on demand. For the nine months ended September 30, 2018, the Company recorded interest expense in the amount of $5,539 based on the contracted 5% interest. Total interest expense recorded for the nine months ended September 30, 2018 related to these advances amounted to $5,728.

On May 29, 2018, Eldred Industrial, LLC, a company related to the CEO of the Company, agreed to purchase an industrial marine salvage tool from the Company as well as to reimburse the Company for expenditures relating to the purchase of materials and the design work and engineering for the industrial marine salvage tool. The purchase was in exchange for a reduction of its debt obligation to Micah Eldred by $38,689. The tool had a net book value of $7,299, resulting in $31,390 recorded as additional contributed capital.

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NOTE G – PREFERRED AND COMMON STOCK TRANSACTIONS AND REVERSE SPLIT

The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001. As of the periods ended September 30, 2018 and December 31, 2017 there are no shares issued or outstanding.

The Company has 100,000,000 shares of common stock authorized with a par value of $0.01. As of the periods ended September 30, 2018 and December 31, 2017 there are 43,788,324 and 43,410,324 shares issued and outstanding, respectively.

On August 16, 2017, the Company issued 250,000 common shares at $0.21 per share as consideration for amending a joint venture agreement.

On August 24, 2017, the Company issued 30,000 common shares at $0.2231 per share for services.

On December 29, 2017, the Company issued 105,955 common shares in exchange for the exercise of warrants.

In 2015, the Company raised $750,000 in a private offering.  In a good faith effort to obtain releases of any potential issues or claims relating to their offering registration rights, the Company has offered each investor from the 2015 private offering one additional share for each dollar invested.  As of the date of this filing, the Company has executed agreements for the issuance of 413,000 shares to several of these investors. There were no make-whole provisions contained in the Original 2015 Private Placement. During the nine months ended September 30, 2018 the Company issued 378,000 shares as part of this agreement.

NOTE H – OPTIONS

Our Board of Directors adopted the 2014 Non-qualified Stock Option Plan on December 31, 2013.  The Plan had an original termination date of December 31, 2017. However, on December 29, 2017 the Board of Directors extended the termination date to December 31, 2020.  Under the Plan, 7,000,000 shares of common stock are reserved for issuance to non-employee directors, officers, employees, consultants and advisors.  The terms of each option award will be determined by the Board, or a duly appointed board committee, provided that no employee may receive options to purchase more than 5 million shares under the Plan, the exercise price must be at least equal to the fair market value of a share of common stock (as defined in the Plan) on the date of grant, and no option may be exercisable more than 10 years after the date of grant.  Shares awarded under the Plan may be from authorized and unissued shares or treasury shares.  

As of September 30, 2018, the Company had outstanding non-qualified options to purchase 3,800,000 shares of our common stock at any time prior to their expiration dates with an exercise price of $0.25 per share.

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The following table represents stock option activity as of and for the nine months ended September 30, 2018:

		Number of Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Options Outstanding - December 31, 2016		5,000,000			$ 0.25		1.0 year			$ (0.05)
Granted / Vested		-								-
Exercised
Forfeited/expired/cancelled		(1,200,000)
Options Outstanding – December 31, 2017		3,800,000			$ 0.25		3.0 years			$ 0.45
Granted / Vested		-								-
Exercised		-
Forfeited/expired/cancelled		-
Options Outstanding – September 30, 2018		3,800,000			$ 0.25		2 years			$ (0.10)
Outstanding Exercisable – December 31, 2017		3,800,000			$ 0.25		3.0 years			$ 0.45
Outstanding Exercisable – September 30, 2018		3,800,000			$ 0.25		2 years			$ (0.10)

NOTE I – WARRANTS

As of September 30, 2018, the Company had 659,180 warrants outstanding. On December 29, 2017, 164,820 warrants were exercised via cashless exercise into 105,955 shares of our common stock.

The following table represents stock option activity as of and for the nine months ended September 30, 2018:

		Number of Shares		Weighted Average Exercise Price			Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Warrants Outstanding – December 31, 2016		824,000			$ 0.25		6.9 years			$ (0.05)
Issued		-								-
Exercised		(164,820)			$ 0.25		8.0 years			$ 0.45
Expired		-								-
Warrants Outstanding – December 31, 2017		659,180			$ 0.25		5.5 years			$ 0.45
Issued		-								-
Exercised		-
Expired		-								-
Warrants Outstanding – September 30, 2018		659,180			$ 0.25		4.7 years			$ (0.10)
Outstanding Exercisable – December 31, 2017		659,180			$ 0.25		6.9 years			$ 0.45
Outstanding Exercisable – September 30, 2018		659,180			$ 0.25		4.7 years			$ (0.10)

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We measured the warrants at their issue date using a Black-Scholes option pricing model. We used the following Black-Scholes assumptions in arriving at the fair value of options granted on May 25, 2016:

 

Expected Life In Years	2.0
Risk-free Interest Rates	1.080%
Volatility	144.64%
Dividend Yield	0%

NOTE J – SUBSEQUENT EVENTS

In 2015, the Company raised $750,000 in a private offering.  In a good faith effort to obtain releases of any potential issues or claims relating to their offering registration rights, the Company has offered each investor from the 2015 private offering one additional share for each dollar invested. See Note G. Subsequent to the report date for this filing, the Company issued 25,000 shares as part of this offer.

Effective October 1, 2018, the Company, through a newly formed Delaware corporation, Caird Explorations, Inc. (“Caird”), formed a joint venture with Global Marine Archaeological Research, LLC (“GMAR”).  Caird will initially be fifty percent (50%) each owned by EXPL and GMAR. EXPL issued and contributed 12,000,000 restricted shares of its common stock to Caird in exchange for its ownership interest in the joint venture, and GMAR assigned and transferred to the joint venture all of its rights, title, and intellectual property including sonar data, photographic data, research, agreements, and all other intellectual property relating to a number of shipwrecks which had previously been located by GMAR; and, the same data and rights concerning a specified, non-located shipwreck (“Primary Target”) which has been the subject of extensive searches by GMAR.  The previously located shipwrecks are located in international waters, off the coast of the Southeastern United States, and are located at depths up to 5000 feet. The Primary Target is expected to be located in the same general area.  

In addition to Caird’s formation, EXPL has directly acquired from GMAR a General Dynamics Bluefin 12 Autonomous Underwater Vehicle (“AUV”). The AUV represents a state of the art subsea survey system, capable of autonomously conducting side scan sonar surveys, photographing targets, and conducting other complex sensor surveys in depths up to 1,500 meters, or approximately 5,000 feet of water.  The AUV will be utilized by the joint venture for the continued search for the joint venture’s Primary Target; will be utilized by EXPL in future survey missions for new, deep-water shipwreck targets it wishes to search for, explore, and survey; and, will be offered for charter to commercial users who wish to utilize the system.  

On or about October 2, 2018, the United States District Court for the Middle District of Florida, Tampa Division rewarded the Company, operating through its previously announced joint venture, Swordfish Partners, with the entry of its Order granting Swordfish Partners title to those items set forth in the September 2018 Adjudication Report filed with the Court.  As a result of the Court’s Order, Swordfish Partners acquired title to over 600 items and artifacts salvaged from the Steamship Pulaski , a steamship that sank 40 miles off the coast of North Carolina in 1838.  Among the items recovered are over 500 gold and silver coins from all over the world that date back to the late 1700s and early 1800s.  

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this report, the terms "we", "us", "our," “Endurance” and “the Company” mean Endurance Exploration Group, Inc. (formerly Tecton Corporation), unless otherwise indicated.

This discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this report and the consolidated financial statements and notes in the Annual Report of the Company on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”).

Our discussion and analysis may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, and projections about the Company, our beliefs, and assumptions made by us. In addition, we may make other written or oral statements, which constitute forward-looking statements, from time to time. Words such as “believe,” “estimate,” “project,” “expect,” “intend,” “may,” “anticipate,” “plan,” “seek,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe our future plans, objectives, or goals also are forward-looking statements. These statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this report. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements. All forward-looking statements are made as of the date hereof, and we undertake no obligation to update any such forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to the risk factors which are identified in our most recent Annual Report on Form 10-K, including factors identified under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

All dollar amounts refer to US dollars unless otherwise indicated.

Plan of Operation

Salvage operations of Steamship Pulaski began in December 2017, and have continued through the present day to recover the cargo of what we believe to be the Steamship Pulaski .  It is anticipated that the final cost of this salvage operation will be approximately $300,000 - $500,000.  To date we have recovered approximately 500 hundred gold and silver coins, several pocket watches, personal items, dishware, and components of the vessel.  This salvage operation is expected to continue through 2019.  We anticipate beginning to market and sell those items where title has been adjudicated in favor of Swordfish Partners, our joint venture, beginning in 2019.   We may need additional working capital to continue the recovery of cargo from this steamship.  There can be no assurances that we will be successful in securing additional working capital and therefore cannot represent we will ever be in a position to complete the recovery of cargo of what we believe to be the Steamship Pulaski .

The U.S. District Court for the Middle District of Florida appointed Swordfish Partners as substitute custodian of what we believe to be the S.S. North Carolina, located approximately 18 nautical miles east of Myrtle Beach, South Carolina, on or about August 22, 2018.  we will return to the site during the summer and fall months of this year to conduct additional surveying, and, if warranted, salvage operations of the shipwreck and its presumed cargo of passenger valuables.  If salvage operations proceed, we anticipate the cost of these salvage efforts to be between $300,000 and $500,000.  We may need additional working capital to continue the recovery of cargo from this steamship.  There can be no assurances that we will be successful in securing additional working capital and therefore cannot represent we will ever be in a position to complete the recovery of cargo of what we believe to be the Steamship North Carolina.

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We have acquired as part of our joint venture, Caird, all of GMAR’s rights, title, and intellectual property relating to a number of shipwrecks that were previously located by GMAR; and, the same data and rights concerning a specified, non-located shipwreck that is a primary target.  These shipwrecks are located in international waters off the coast of the Southeastern United States.  We anticipate the cost of continuing this exploration will be $500,000 to $1,000,000.  We need additional working capital to undertake these efforts.   There can be no assurances that we will be successful in securing additional working capital and therefore cannot represent we will ever be in a position to continue this search or complete the recovery of cargo from any of these vessels.  

Side-scan sonar survey operations on Project Connaught began in July 2013.  Over the course of this initial survey, approximately 700 square miles were digitally mapped.  This sonar imagery was then post-processed and evaluated for potential targets.  In October 2014, we positively identified the target of Project “Sailfish,” as that of the Steamship Connaught via video and sonar imagery.  The cost of recovering the cargo of the Connaught is estimated to be $1,000,000 to $1,500,000.  We need additional working capital to recover the cargo of the Connaught .  There can be no assurances that we will be successful in securing additional working capital and therefore cannot represent we will ever be in position to recover the cargo of the Connaught .

In November 2013, Endurance LLC entered into a contract with the sovereign government of an island nation in the Indian Ocean.  The contract provides us with a three-year period in which to operate within the territorial waters of the nation with full permission to survey for and recover the “Black Marlin” and her silver cargo.  We are currently pursuing an option to extend the existing contract but there are no assurances that we will be granted a contract extension.  Net proceeds of our recovery efforts, after payment of the costs to recover, transport, store and insure any recovered items, will be split between us (75%) and the island government (25%).  The cost of finding and recovering the cargo of the “Black Marlin” is estimated to be $2,000,000.  We need additional working capital to undertake the search for the “Black Marlin . ”  There can be no assurances that we will be successful in securing additional working capital and therefore cannot represent we will ever be in position to search for and recover the cargo of the “Black Marlin . ”  

On June 27, 2018, the Company formed a joint venture with Downtown Television, Inc., for the purposes of developing, producing, and marketing entertainment content relating to deep-sea exploration, historical shipwreck searches, and artifact recovery.  That joint venture, Megalodon Entertainment, is owned 50% by the Company and 50% by Downtown Television.  Downtown Television has produced many successful adventure, science and exploration, and treasure hunting shows and series, and is looking to develop content based upon the activities of the Company.  The production and development of entertainment content is a very competitive arena.  Thus, there are no assurances that Megalodon Entertainment will be successful in creating, producing, and/or marketing such content, or that such content will result in any revenue for the Company.

Results of Operations

The following information represents our results of operations for the three months ended September 30, 2018 and 2017.  

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Three Months Ended September 30, 2018 Compared to 2017

 

Increase/(Decrease)					2018 vs. 2017
	2018		2017		$		%
Total revenue	$ -		$ -		$ -		-
Operations and research	17,958		20,309		(2,351)		(12%)
Marketing and promotion	3,465		4,224		(759)		(18%)
General and administrative	39,283		76,853		(37,570)		(49%)
Depreciation	11,544		15,450		(3,906)		(25%)
Total operating expenses	$ 72,250		$ 116,836		$ (44,586)		(38%)
Other income (expense)	$ (7,473)		$ -		$ (7,473)		(100%)
Net income (loss)	$ (79,723)		$ (116,836)		$ (37,113)		(32%)

Revenue

Since inception through September 30, 2018, we have not generated any revenues.  However, during this period of time, the Company has acquired a ship, side scan sonar, topside computer processing of sonar images and a remotely operated vehicle with cameras that can visually inspect things located by the side scan sonar.  The Company, through contracted personnel, has also developed an operational capability for this ship and its equipment.  The Company can also access, on a contract basis, additional ships, equipment and personnel on a case-by-case basis when needed.  This capability allows the Company to offer aquatic research, survey, inspection and recovery, as well as maritime contract services and consulting to both the public and private sectors that contract for such equipment and services.  As of the time of this filing there are no agreement or contracts for the use of the Company equipment or the services described herein and the Company needs additional working capital to continue to offer said equipment and services.  Therefore, the Company cannot represent that, in the future, it will ever generate revenue from aquatic research, survey, inspection and recovery projects, as well as maritime contract services and consulting.

Expenses

Operations and research expenses

Operations and research expenses primarily include all costs within Research, which include costs for travel and consultants, and Salvage and Marine Operations, which include marina fees, repairs and maintenance, fuel, boat expenses and contract crew services. We incurred operations and research expenditures of $97,323 for the three months ended September 30, 2018. However, we only expensed $17,958 of the expenditures. The remaining $79,365 was capitalized in inventory as it related directly to the recovery of coins in the Steamship Pulaski. For the three months ended September 30, 2017 we incurred $20,309 of operations and research expenses.

Marketing and promotion expenses

Marketing and promotion expenses include all costs associated with advertising, printing and travel expenses. We incurred marketing and promotion expenses of $3,465 for the three months ended September 30, 2018 as compared to $4,224 for the three months ended September 30, 2017, a decrease of $759.

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General and administrative expenses

General and administrative expenses include all costs associated with professional, legal fees, insurance, rent, dues and subscriptions and other administrative expenses. Also, included in this category are any costs associated with stock-based compensation. We incurred general and administrative expenses of $39,283 the three months ended September 30, 2018 as compared to $76,853 for the three months ended September 30, 2017, a decrease of $37,570.

Depreciation

We incurred depreciation expense of $11,544 for the three months ended September 30, 2018 as compared to $15,450 for the three months ended September 30, 2017, a decrease of $3,906. The decrease was due to multiple assets being fully depreciated in the year ended December 31, 2017.

Non-Operating Activity

We incurred interest expense of $7,473 for the three months ended September 30, 2018 as compared to $0 for the three months ended September 30, 2017, an increase of $7,473. The interest expense was related to related party advances.

Net Losses

For the three months ended September 30, 2018, we incurred a net loss of $79,723 as compared to $116,836 for the three months ended September 30, 2017.

Nine Months Ended September 30, 2018 Compared to 2017

Increase/(Decrease)					2018 vs. 2017
	2018		2017		$		%
Total revenue	$ -		$ -		$ -		-
Operations and research	29,747		74,274		(44,257)		(78%)
Marketing and promotion	29,835		32,088		(2,253)		(5%)
General and administrative	235,851		164,486		71,365		124%
Depreciation	35,310		63,991		(28,681)		(51%)
Total operating expenses	$ 330,743		$ 334,839		$ (4,096)		19%
Other income (expense)	$ (17,941)		$ -		$ (17,941)		(100%)
Net income (loss)	$ (348,684)		$ (334,839)		$ 13,845		4%

Revenues

Since inception through September 30, 2018, we have not generated any revenues.  However, during this period of time, the Company has acquired a ship, side scan sonar, topside computer processing of sonar images and a remotely operated vehicle with cameras that can visually inspect things located by the side scan sonar.  The Company, through contracted personnel, has also developed an operational capability for this ship and its equipment.  The Company can also access, on a contract basis, additional ships, equipment and personnel on a case-by-case basis when needed.  This capability allows the Company to offer aquatic research, survey, inspection and recovery, as well as maritime contract services and consulting to both the public and private sectors that contract for such equipment and services.  As of the time of this filing there are no agreements or contracts for the use of the Company equipment or the services described herein and the Company needs additional working capital to continue to offer said equipment and services.  Therefore, the Company cannot represent that, in the future, it will ever generate revenue from aquatic research, survey, inspection and recovery projects, as well as maritime contract services and consulting.

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Expenses

Operations and research expenses

Operations and research expenses primarily include all costs within Research, which include costs for travel and consultants, and Salvage and Marine Operations, which include marina fees, repairs and maintenance, fuel, boat expenses and contract crew services. We incurred operations and research expenditures of $172,185 for the nine months ended September 30, 2018. However, we only expensed $29,747 of the expenditures. The remaining $142,438 was capitalized in inventory as it related directly to the recovery of coins in the Steamship Pulaski. For the nine months ended September 30, 2017 we incurred $53,965 of operations and research expenses.

Marketing and promotion expenses

Marketing and promotion expenses include all costs associated with advertising, printing and travel expenses. We incurred marketing and promotion expenses of $29,835 for the nine months ended September 30, 2018 as compared to $32,088 for the nine months ended September 30, 2017, a decrease of $2,253.

General and administrative expenses

General and administrative expenses include all costs associated with professional, legal fees, insurance, rent, dues and subscriptions and other administrative expenses. Also, included in this category are any costs associated with stock-based compensation. We incurred general and administrative expenses of $235,851 the nine months ended September 30, 2018 as compared to $164,486 for the nine months ended September 30, 2017, an increase of $71,365. The primary reason for the increase was due to the issuance of 378,000 common shares to investors who had invested in a private offering in 2015, in a good faith effort to obtain releases of any potential issues or claims relating to their offering registration rights .

Depreciation

We incurred depreciation expense of $35,310 the nine months ended September 30, 2018 as compared to $63,991 for the nine months ended September 30, 2017, a decrease of $28,681. The decrease was due to multiple assets being fully depreciated in the year ended December 31, 2017.

Non-Operating Activity

We incurred interest expense of $17,941 for the nine months ended September 30, 2018 as compared to $0 for the nine months ended September 30, 2017, an increase of $17,941. The interest expense was related to related party advances.

Net Losses

For the nine months ended September 30, 2018, we incurred a net loss of $348,684 as compared to $334,839 for the nine months ended September 30, 2017.

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Current Liquidity and Capital Resources for the nine months ended September 30, 2018 versus 2017

	2018			2017
Summary of Cash Flows:
Net cash (used) by operating activities		$ (343,925)				$ (237,635)
Net cash provided by investing activities		-				(13,805)
Net cash provided by financing activities		340,000				252,500
Net decrease in cash and cash equivalents		(3,925)				1,060
Beginning cash and cash equivalents		5,120				2,523
Ending cash and cash equivalents		$ 1,195				$ 3,583

Operating Activities

Cash used in operations of $343,925 during the nine months ended September 30, 2018 was primarily a result of our $348,684 net loss reconciled with our net non-cash expenses relating to depreciation expense, inventory, accounts payable and accrued liabilities.  Cash used in operations of $237,635 during the nine months ended September 30, 2017 was primarily a result of our $334,839 net loss reconciled with our net non-cash expenses relating to depreciation expense, accounts payable, accrued liabilities and other assets.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2017 resulted from the acquisition of equipment in the amount of $13,805.

Financing Activities

Net cash provided by financing activities was $340,000 for the nine months ended September 30, 2018, which consisted completely of funds advanced from related parties to facilitate operations for the period. Net cash provided by financing activities was $252,500 for the nine months ended September 30, 2017, which consisted completely of funds advanced from related parties to facilitate operations for the period.

Other Recent Financings

In March 2018, the Company’s CEO agreed to provide a line of credit in the amount of $500,000 to the Company so that it will have the liquidity and funds to carry out its operations.  The Company executed a Demand Note – Line of Credit, whereby it agreed to pay 5% interest on any advances made, which is secured by a Security Agreement on the Company’s assets.  During the nine months ending September 30, 2018, Connect X Capital Markets, LLC made net advances to the Company in the aggregate amount of $60,000. Additionally, the Company’s CEO made net advances to the Company of $280,000. The advances were to provide the Company with funds to carry on its operations.  Beginning on April 2, 2018 these advances began bearing interest at 5% per annum and are payable on demand.

Future Capital Requirements

Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements.  Our capital requirements for 2018 will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.  

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Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.   

The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations.  Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.

Research and Development

For the nine months ended September 30, 2018 and 2017, we incurred expenses for research consultants and travel of $3,100 and $127.

Inflation

The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

Critical Accounting Estimates – Stock Based Compensation

We applied the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for our stock-based compensation.  Stock-based compensation cost is measured at the grant date based on the calculated fair value of the award.  We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model.

Inventory

Our inventory consists of artifacts recovered from the Steamship Pulaski . Inventoried costs of recovered artifacts include the costs of recovery and conservation. The capitalized recovery costs include direct costs such as vessel and related equipment operations and maintenance, crew and technical labor, fuel, provisions, supplies, port fees and depreciation. Conservation costs include fees paid to conservators for cleaning and preserving the artifacts. We continually monitor the recorded aggregate costs of the artifacts in inventory to ensure these costs do not exceed the net realizable value. Historical sales, publications or available public market data are used to assess net realizable value.

Off-Balance Sheet Arrangements

As of September 30, 2018, we had no off-balance sheet transactions that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.  

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Going concern

The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.   At September 30, 2018 and December 31, 2017, the Company had $1,195 and $5,120 in cash, respectively, and $204,119 and $48,894 in negative working capital, respectively.  For the nine months ended September 30, 2018 and 2017, the Company had a net loss of $348,684 and $334,839, respectively. Continued losses may adversely affect the liquidity of the Company in the future.  Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern.  The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, 2018, under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We concluded that, as of September 30, 2018, our disclosure controls and procedures were not effective at the reasonable assurance level.

There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any legal proceedings, and we are not aware of any legal proceedings contemplated by any governmental authority against us.  However, from time to time, certain officers, directors or control persons, are subject to regulatory audits, investigations or subpoenas by the Securities Exchange Commission (“SEC”) and/or the Financial Regulatory Authority (“FINRA”) as a result of their positions as registered investment professionals and/or as officers or control persons of registered SEC transfer agencies.  These audits, investigations or subpoenas may have an adverse effect on the Company if these officers, directors or control persons must dedicate substantial time and effort in their response to the regulatory authorities or if these regulatory inquiries result in sanctions or fines.  

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCCEDS

There were no sales of equity securities during the three months ended September 30, 2018. However, prior to September 30, 2018, there were issuances of 378,000 shares to investors who had invested in a private offering by the Company from 2015.  In a good faith effort to obtain releases of any potential issues or claims relating to their offering registration rights, the Company offered each investor from the 2015 private offering one additional share for each dollar invested.

Subsequent to the report date for this filing, the Company issued 25,000 additional shares as part of this offer, for a total of 403,000 common shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Endurance Exploration Group, Inc.
	(Registrant)
Date: November 14, 2018	/s/ Micah Eldred
	Micah Eldred
	Director, Principal, Chairman, Chief Executive Officer, President
Date November 14, 2018	/s/ Christine Zitman
	Christine Zitman
	Director, Principal Accounting Officer, Secretary, Treasurer  (Authorized Officer and Chief Financial Officer)

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