What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-06-29 · 162 added, 182 removed, 83 unchanged (81% of the section changed)

Risk Factors.

in our common stock involves risks.

13 unchanged sentences

While our revenues increased 53.5% for 2020 from 2019, and our gross profit margin increased from 15.1%

in 2018 to 15.1% in 2019, our gross profit does not provide sufficient funds to pay our operating expenses.

In 2019, our selling,

general and administrative expenses, or “SG&A”, increased 37.3% from 2018.

Unless we are able to improve our gross

profit margins, which we do not presently believe if feasible, we will continue to report net losses in future periods.

event, we may not have sufficient funds to pay our operating expenses and other obligations as they become due.

in 2019 to 32.1% in 2020, our gross profit is not sufficient to cover our operating expenses of $2,797,449 and $1,732,093,

respectively, which includes non-cash stock compensation expenses of $1,408,844 and $474,954 for the year

ending December 31, 2020 and 2019, respectively.

In 2020, our selling, general and administrative expenses, or “SG&A”,

increased 61.1% from 2019.

There are no assurances that we will be able to increase our revenues to a level which supports profitable

operations and provides sufficient capital to pay our operating expenses and other obligations as they become due.

auditors have raised substantial doubts as to our ability to continue as a going concern .

consolidated financial statements appearing later in this report have been prepared assuming we will continue as a going concern.

We have sustained recurring losses from operations and have a net capital deficiency.

These factors, among others, raise substantial

doubt about our ability to continue as a going concern.

Our consolidated financial statements do not include any adjustments that

might result from the outcome of this uncertainty.

working capital deficit has increased substantially at December 31, 2019 as compared to December 31, 2018.

December 31, 2019, we had a cash balance of approximately $71,000 and a working capital deficit of approximately $405,000 as compared

to a cash balance of approximately $79,000 and working capital of approximately $17,500 at December 31, 2018.

We used approximately

$510,000 in net cash in our operations in 2019 as compared to approximately $90,000 of net cash used in operations in 2018.

principal sources of liquidity are sales of equity and debt securities, including through sales to related parties.

in May 2020 we obtained an unsecured $159,600 PPP Loan.

We have sustained recurring losses from operations and have used approximately $556,000 in net cash in our operation in

2020 as compared to approximately $510,000 in 2019.

These factors, among others, raise substantial doubt about our ability to

continue as a going concern.

Our consolidated financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Our principal sources of liquidity are sales of equity and debt securities.

In addition, in April 2020 we

obtained an unsecured $159,600 PPP Loan.

We do not have any firm commitments to raise additional working capital.

As we are a small company who stock is quoted on the OTC Markets, we expect to encounter difficulty in raising working capital

upon terms and conditions satisfactory to us, if at all.

There is no assurance that we will be successful in obtaining funding

to continue operations, particularly in light of the current impact of the coronavirus on the U.S.

capital markets.

small company who stock is quoted on the OTC Markets, we expect to encounter difficulty in raising working capital upon terms

and conditions satisfactory to us, if at all.

rely on revenues from related parties.

later discussed in this report, we generate revenues from sales to related parties, which accounted for 22.3% of our net revenues

in 2019 and 27.8% of our net revenues in 2018.

The loss of revenues from these related parties would have a material adverse impact

on our business, results of operations and financial condition in future periods.

has negatively affected our company during the first and second quarters of 2020 .

company is located in South Florida.

As part of the State of Florida’s response to the COVID-19 pandemic, in April 2020

the Governor of Florida issued a “stay at home”

order and for the protection of our employees and customers, we temporarily

reduced non-essential staffing at our corporate office and altered work schedules at our manufacturing and warehouse facilities.

In addition, some of our senior management and our office personnel began working remotely and maintaining full capabilities to

serve our customers.

During this initial period our business was adversely impacted by the decline in discretionary spending and

travel restrictions or travel bans as a result of the COVID-19 pandemic and during the first quarter and part of the second quarter

of 2020 we experienced order cancellations.

Accordingly, our revenues were materially impacted during the first and second quarters

On May 4, 2020 the Florida “stay at home”

order was lifted and the phased reopening of the State of Florida

Our personnel have returned to full time work at our corporate office and manufacturing and warehouse facilities and our

operations have returned to “pre-stay at home”

Our revenues have also begun returning to comparable 2019 period

levels beginning in mid-May 2020.

Our loss of revenues will materially impact our liquidity, and we do not expect to be able to

access the capital markets for additional working capital.

There are no assurances that we will not experience further adverse

impact on our business and operations as a result the COVID-19 pandemic.

voting rights of our Series A Convertible Preferred Stock are superior to those of shares of our common stock.

currently have outstanding 425,000 shares of our Series A Convertible Preferred Stock which is held by Mr.

our Chief Executive Officer.

Each share of Series A Convertible Preferred Stock entitles the holder to 250 votes on any matter

submitted to our shareholders for a vote, and those shares vote as one class with our common shareholders.

Accordingly, the Series

A Convertible Preferred Stock grants Mr.

Carmichael superior voting rights and may enable him to determine the outcome of any

matter voted upon by our shareholders to the determent of the common shareholders.

issuance of shares of our common stock upon conversion of outstanding 6% secured convertible notes may cause immediate and substantial

dilution to our existing shareholders.

We may not have sufficient funds to repay the notes at maturity.

presently have $100,000 principal amount of 6% secured convertible notes outstanding which were originally issued in 2017.

securities are convertible at the option of the holders in shares of our common stock at a conversion price of $0.01.

2020, there were 11,496,700 shares of our common stock issuable upon the conversion of the principal and accrued interest due

under those notes.

The issuance of shares of our common stock upon any conversion of the 6% secured convertible notes will result

in dilution to the interests of other shareholders.

In addition, these notes mature on December 31, 2020.

There are no assurances

we will have sufficient funds available to satisfy the notes at maturity, or that one or both of the holders will elect to convert

the notes into shares of our common stock.

Each of these notes are secured by an amount of our assets sufficient to satisfy the

obligations under the note.

If we were to default under the repayment of the note, the noteholder could seek to foreclose on a

portion of our assets which would materially adversely impact our business as it is currently conducted.

issuance of shares of our common stock upon exercise of our outstanding options and warrants, or the conversion of unsecured notes

or the Series A Convertible Preferred Stock may cause immediate and substantial dilution to our existing shareholders.

addition to 6% secured convertible notes, we presently have vested and unvested options and warrants that if exercised would result

in the issuance of an additional 87,903,962 shares of our common stock, and our Series A Convertible Preferred Stock is

presently convertible into an additional 23,320 shares of common stock, together with a $10,000 convertible note with a conversion

price equal to 30% of the average of the four highest closing bid prices over the preceding five trading days prior to the date

of conversion.

The issuance of shares upon exercise of warrants and options and/or the conversion of shares of our Series A Convertible

Preferred Stock and/or the conversion of this additional convertible note will result in dilution to the interests of other shareholders.

common stock may be affected by limited trading volume and may fluctuate significantly.

common stock is quoted on the Pink tier of the OTC Markets.

There is a limited public market for our common stock and there can

be no assurance that an active trading market for our common stock will develop.

As a result, this could adversely affect our

shareholders’

ability to sell our common stock in short time periods, or possibly at all.

Thinly traded common stock can

be more volatile than common stock traded in an active public market.

Our common stock has experienced, and is likely to experience

in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without

regard to our operating performance.

In addition, we believe that factors such as quarterly fluctuations in our financial results

and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate

substantially.

company is a voluntary filer with the Securities and Exchange Commission and in the event that we cease reporting under the Exchange

Act, investors would have limited information available to them about the company.

we are voluntarily file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), we do not have a class of securities registered under Section 12(g) of the Exchange Act.

To the extent that our duty

to file Exchange Act reports has automatically suspended under Section 15(d) of the Exchange Act, as a voluntary filer, we may

elect to cease reporting under the Exchange Act at such time which would limit the information available to investors and shareholders

about the company.

common stock is deemed to be “penny stock,”

which may make it more difficult for investors to sell their shares due

to suitability requirements.

common stock is deemed to be “penny stock”

as that term is defined under the Exchange Act .

Penny stocks generally

are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges.

Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such

securities to persons other than established customers and accredited investors, which are generally institutions with assets

in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000

jointly with their spouse.

Broker/dealers

dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks.

broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor.

These requirements may reduce the potential market for our common stock by reducing the number of potential investors.

make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them.

could cause our stock price to decline.

depend on the services of our Chief Executive Officer.

success largely depends on the efforts and abilities of Robert M.

Carmichael, our Chairman, President and Chief Executive Officer.

Carmichael has been instrumental in securing our existing financing arrangements.

Carmichael is primarily responsible

for the development of our technology and the design of our products.

The loss of the services of Mr.

Carmichael could materially

harm our business because of the cost and time necessary to recruit and train a replacement.

Such a loss would also divert management

attention away from operational issues.

We do not presently maintain a key-man life insurance policy on Mr.

discussed in detail later in this report, we generate revenues from sales to related parties, which accounted for 18.4%

of our net revenues in 2020 and 22.3% of our net revenues in 2019.

The loss of revenues from these related parties would have

a material adverse impact on our business, results of operations and financial condition in future periods.

we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report

our financial results.

As a result, current and potential shareholders could lose confidence in our financial reporting, which

would harm our business and the trading price of our stock.

management has previously determined that we did not maintain effective internal controls over financial reporting.

For a detailed

description of these material weaknesses and our remediation efforts and plans, see “Part II —

Item 9A —

and Procedures.”

If the result of our remediation of the identified material weaknesses is not successful, or if additional

material weaknesses are identified in our internal control over financial reporting, our management will be unable to report favorably

as to the effectiveness of our internal control over financial reporting and/or our disclosure controls and procedures, and we

could be required to further implement expensive and time-consuming remedial measures and potentially lose investor confidence

in the accuracy and completeness of our financial reports which could have an adverse effect on our stock price and potentially

subject us to litigation.

AND OPERATIONAL RISKS

are dependent upon certain key members of management.

success will depend to a significant degree on the abilities and efforts of our senior management.

Moreover, our success depends

on our ability to attract, retain and motivate qualified management, marketing, technical and sales personnel.

These people are

in high demand and often have competing employment opportunities.

The labor market for skilled employees is highly competitive

and we may lose key employees or be forced to increase their compensation to retain these people.

Employee turnover could significantly

increase our recruitment, training and other related employee costs.

The loss of key personnel, or the failure to attract qualified

personnel, could have a material adverse effect on our business, financial condition or results of operations.

require additional personnel and could fail to attract or retain key personnel.

addition, our continued growth depends on our ability to attract and retain a Chief Financial Officer, a Chief Operations Officer,

and additional skilled associates.

We are currently utilizing the services of two professional consultants to assist the Chief

Executive Officer with finance and operations.

The loss of the services of these consultants prior to our ability to attract and

retain a Chief Financial Officer or Chief Operations Officer or further assistance in these areas may have a material adverse

effect upon us.

Also, there can be no assurance that we will be able to retain our existing personnel or attract additional qualified

associates in the future.

continued growth depends on our ability to attract and retain

an experienced Chief Financial Officer, and additional skilled associates.

We are currently utilizing the services of two

professional consultants to assist our Chief Executive Officer and Chief Financial Officer with finance and operations.

The loss of the services of these consultants prior to our ability to attract and retain an experienced Chief Financial

Officer or further assistance in these areas may have a material adverse effect upon us.

Also, there can be no assurance that

we will be able to retain our existing personnel or attract additional qualified associates in the future.

failure to obtain and enforce intellectual property protection may have a material adverse effect on our business.

17 unchanged sentences

experienced delays and also expect continued delays in our supply chain, including component products, which are manufactured

As a result of these uncertainties of COVID 19, we are unable to predict the overall impact on our company at this time.

Our loss of revenues will materially impact our liquidity, and we do not expect to be able to access the capital markets for additional

working capital.

Our senior management will continue to monitor our situation on a daily basis, however, we expect that these

factors and others we have yet to experience will materially adversely impact our company, its business and operations for the

foreseeable future.

Our senior management will continue to monitor our situation on a daily basis, however, we expect that these factors

and others we have yet to experience will materially adversely impact our company, its business and operations for the foreseeable

dependent on consumer discretionary spending.

15 unchanged sentences

accessories and dive gear are other than temporary, we could be forced to curtail or cease operations.

The decline in discretionary

spending and travel restrictions or travel bans as a result of the COVID-19 pandemic has, and is expected to continue to, materially

adversely impact our operations beginning with the first quarter of 2020.

During the first quarter of 2020 and through June 2020

we have experienced order cancellations, and we expect that trend to continue until such time as the full impact of the virus

is known, travel restrictions are lifted, beaches are reopened, and our customers begin resuming normal activities, including

historic levels of discretionary spending in our market segment.

regulations may impact us.

10 unchanged sentences

regulations in the future, which could force us to curtail or cease operations.

failure to adequately protect personal information could have a material adverse effect on our business.

wide variety of local, state, national, and international laws, directives and regulations apply to the collection, use, retention,

protection, disclosure, transfer, and other processing of personal data (including with respect to the European Union’s

General Data Protection Regulation and U.S.

state laws such as the California Consumer Privacy Act).

These data protection and

privacy-related laws and regulations continue to evolve and may result in ever-increasing regulatory and public scrutiny and escalating

levels of enforcement and sanctions and increased costs of compliance.

Our failure to comply with applicable laws and regulations,

or to protect such data, could result in enforcement actions against us, including fines, imprisonment of company officials and

public censure, claims for damages by end-customers and other affected individuals, damage to our reputation and loss of goodwill

(both in relation to existing end-customers and prospective end-customers), any of which could have a material adverse effect

on our operations, financial performance, and business.

Changing definitions of personal data and personal information, within

the European Union, the United States, and elsewhere may limit or inhibit our ability to operate or expand our business, including

limiting strategic partnerships that may involve the sharing of data.

The evolving data protection regulatory environment may

require significant management attention and financial resources to analyze and modify our information technology infrastructure

to meet these changing requirements all of which could reduce our operating margins and impact our operating results and financial

weather could have an adverse effect on operating results.

4 unchanged sentences

may not be indicative of results of any future period.

manufacture and distribution of recreational diving equipment could result in product liability claims and we have historically

lacked product liability insurance.

manufacture and distribution of recreational diving equipment could result in product liability claims.

like any other retailer, distributor and manufacturer of products that are designed for recreational sporting purposes, face an

6 unchanged sentences

will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party.

While we currently

have product liability insurance, any claim that arose prior to 2017 would not be covered.

In the event that we

do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a

material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.

we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report

our financial results.

As a result, current and potential shareholders could lose confidence in our financial reporting, which

would harm our business and the trading price of our stock.

management has previously determined that we did not maintain effective internal controls over financial reporting.

For a detailed

description of these material weaknesses and our remediation efforts and plans, see “Part II —

Item 9A —

and Procedures.”

If the result of our remediation of the identified material weaknesses is not successful, or if additional

material weaknesses are identified in our internal control over financial reporting, our management will be unable to report favorably

as to the effectiveness of our internal control over financial reporting and/or our disclosure controls and procedures, and we

could be required to further implement expensive and time-consuming remedial measures and potentially lose investor confidence

in the accuracy and completeness of our financial reports which could have an adverse effect on our stock price and potentially

subject us to litigation.

Unresolved Staff Comments

In the event that

we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have

a material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.

worldwide impact from the COVID-19 pandemic may negatively impact our business.

we have been relatively successful in navigating such impact to date, we have previously been affected by temporary manufacturing

closures, and employment and compensation adjustments.

There are also ongoing related risks to our business depending on the progression

of the pandemic, and recent trends in certain regions have indicated potential returns to limited or closed government functions,

business activities and person-to-person interactions.

Global trade conditions and consumer trends may further adversely impact

us and our industries.

For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns

and delays, resulting in additional expenses to expedite delivery of critical parts.

Similarly, increased demand for personal

electronics has created a shortfall of microchip supply, and it is yet unknown how we may be impacted.

We cannot predict the duration

or direction of current global trends from this pandemic, the sustained impact of which is largely unknown, is rapidly evolving

and has varied across geographic regions.

Ultimately, we continue to monitor macroeconomic conditions to remain flexible and to

optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements

globally and deploy our production, workforce and other resources accordingly.

issuance of shares of our common stock upon conversion of outstanding 6% secured convertible notes may cause immediate and substantial

dilution to our existing shareholders.

We may not have sufficient funds to repay the notes at maturity.

presently have $100,000 principal amount of 6% secured convertible notes outstanding which were originally issued in 2017.

securities are convertible at the option of the holders in shares of our common stock at a conversion price of $0.01.

of shares of our common stock upon any conversion of the 6% secured convertible notes will result in dilution to the interests

of other shareholders.

In addition, these notes mature on December 31, 2021.

There are no assurances we will have sufficient

funds available to satisfy the notes at maturity, or that one or both of the holders will elect to convert the notes into shares

of our common stock.

Each of these notes are secured by an amount of our assets sufficient to satisfy the obligations under the

If we were to default under the repayment of the note, the noteholder could seek to foreclose on a portion of our assets

which would materially adversely impact our business as it is currently conducted.

issuance of shares of our common stock upon exercise of our outstanding options may cause immediate and substantial

dilution to our existing shareholders.

presently have vested and unvested options that if exercised

would result in the issuance of an additional 199,730,020 shares of our common stock.

The issuance of shares upon exercise

of options will result in dilution to the interests of other shareholders.

common stock may be affected by limited trading volume and may fluctuate significantly.

common stock is quoted on the OTCQB tier of the OTC Markets.

There is a limited public market for our common stock and there

can be no assurance that an active trading market for our common stock will develop.

As a result, this could adversely affect our

shareholders’

ability to sell our common stock in short time periods, or possibly at all.

Thinly traded common stock can be

more volatile than common stock traded in an active public market.

Our common stock has experienced, and is likely to experience in

the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without

regard to our operating performance.

In addition, we believe that factors such as quarterly fluctuations in our financial results

and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate

substantially.

company is a voluntary filer with the Securities and Exchange Commission and in the event that we cease reporting under the Exchange

Act, investors would have limited information available to them about the company.

we are voluntarily file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), we do not have a class of securities registered under Section 12(g) of the Exchange Act.

To the extent that our duty

to file Exchange Act reports has automatically suspended under Section 15(d) of the Exchange Act, as a voluntary filer, we may

elect to cease reporting under the Exchange Act at such time which would limit the information available to investors and shareholders

about the company.

common stock is deemed to be “penny stock,”

which may make it more difficult for investors to sell their shares due

to suitability requirements.

common stock is deemed to be “penny stock”

as that term is defined under the Exchange Act .

Penny stocks generally

are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges.

Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such

securities to persons other than established customers and accredited investors, which are generally institutions with assets

in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000

jointly with their spouse.

Broker/dealers

dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks.

broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor.

These requirements may reduce the potential market for our common stock by reducing the number of potential investors.

make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them.

could cause our stock price to decline.

Staff Comments

applicable to smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors