What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-30 compared with 2022-04-22 · 203 added, 211 removed, 134 unchanged (76% of the section changed)

15 unchanged sentences

statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

September 3, 2021, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”)

with Submersible Acquisition, Inc., a Florida corporation and wholly owned subsidiary of the Company (“Acquisition Sub”),

SSI, and Summit Holdings V, LLC, a Florida limited liability company (“Summit”) and Tierra Vista Group, LLC, a Florida limited

liability company (“Tierra Vista” and, together with Summit, the “Sellers”), the owners of all of the capital

stock of SSI (the “Submersible Shares”), pursuant to which Acquisition Sub merged with and into Submersible (the “Merger”),

and Submersible, the surviving corporation, became a wholly owned subsidiary of the Company.

The Merger became effective upon the filing

of Articles of Merger with the Secretary of State of the State of Florida.

to the terms and conditions of the Merger Agreement, the Company acquired all of the Submersible Shares from the Sellers for an aggregate

purchase price of $1,799,919 (the “Merger Consideration”), which was paid to the Sellers at closing by issuance to

the Sellers of three-year 8% convertible promissory notes in the aggregate principal amount of $350,000 and an aggregate of 27,305,442

shares (the “ Merger Shares”) of the Company’s common stock.

Merger Shares are subject to a leak-out restriction commencing on the date of issuance, as follows:

(i) up to 12.5% may be sold after

(ii) up to 25% may be sold after 9 months;

(iii) up to 75% may be sold after 24 months;

and (iv) up to 100% may be sold after

Notwithstanding the foregoing, the leak-out restriction may be waived by the Company under certain conditions.

Sellers were granted “piggyback” registration rights with respect to the Merger Shares and the shares of common stock that

may be received upon their conversion of the 8% convertible notes.

under the notes is payable at the end of each 3-month period commencing on September 30, 2021, in shares of common stock of the Company.

The Company may prepay the notes in whole or in part at any time without penalty or premium.

Within 30 days after the end of each quarter,

commencing on the first full quarter after the closing, the Company is obligated to pay, as a reduction of the principal amount of the

notes, in cash, payments equal to 50% of SSI’s operating net income before interest, taxes, depreciation and amortization (but

expressly excluding any overhead cost allocation applied to SSI by the Company).

The final payment will be a balloon payment of the balance

due upon the end of the term of the notes.

The holders of notes may convert the notes, in whole or in part, at any time, into shares

of common stock.

connection with the Merger, Rick Kearney, Submersible’s founder, entered into a five-year confidentiality, non-competition and

non-solicitation agreement with the Company.

September 17, 2021 the Company completed a private placement of an aggregate of 14,600,000 Units to five purchasers at a purchase price

of $0.025 per Unit for gross proceeds of $365,000, with each Unit consisting of one restricted share of the Company’s common stock

and one two year common stock purchase warrant to purchase one restricted share of common stock at an exercise price of $0.025 per share.

The Units were offered and sold pursuant to the terms of a subscription agreement (the “Subscription Agreement”) to accredited

or otherwise qualified investors and included Charles Hyatt, a director and an affiliate of Mr.

Hyatt, who purchased an aggregate of

10,600,000 Units.

The Company did not pay any commissions or finder’s fees and is using the proceeds for working capital.

December 22, 2022, the CPSC issued a recall notice for the Nomad tankless

dive system, which is distributed by BLU3, Inc.

As part of the recall procedure, the CPSC has approved the Company’s proposed remedy

for the recall and BLU3 will begin to receive units back from consumers to repair affected Nomad units.

Additionally, BLU3 will re-start

its manufacturing process for the Nomad tankless dive system utilizing the material and design changes approved during the recall process,

and immediately re-establish the product in all of its sales channels.

The Company has set an allowance for expenses related to this recall of $160,500.

of COVID-19 Pandemic

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our net revenues increased 37.7% in 2022 from 2021, which included an increase of 48.6% in net revenue from sales to third parties

and an increase of 33.2% in sales to related parties.

Our cost of revenues in 2021 was 69.7% of our total net revenues

as compared to 67.9% in 2020.

Included in our cost of revenues are royalty expenses we pay to Robert Carmichael which increased 10.8%

in 2021 from 2020.

and a decrease of 12.0% in sales to related parties.

Our cost of revenues in 2022 was 67.4% of our total net revenues as compared

to 69.7% in 2021.

Included in our cost of revenues are royalty expenses we pay to Robert Carmichael which decreased 18.4% in 2022

We reported a gross profit margin of 32.6% in 2022 as compared to 30.3% in 2021.

following tables provides net revenues, costs of revenues, and gross profit margins for our segments for 2021 and 2020.

Ended December 31,

Pressure Gas Systems

Ultra-Portable

Tankless Dive Systems

Air Tank Systems

following tables provide net revenues, costs of revenues, and gross profit margins for our segments for 2022 and 2021.

Year Ended December 31,

Legacy SSA Products

High Pressure Gas Systems

Ultra-Portable Tankless Dive Systems

Redundant Air Tank Systems

Guided Tour Retail

Total revenue

of revenues as a percentage of net revenues

Ended December 31,

Pressure Gas Systems

Ultra-Portable

Tankless Dive Systems

Air Tank Systems

Year Ended December 31,

Legacy SSA Products

High Pressure Gas Systems

Ultra-Portable Tankless Dive Systems

Redundant Air Tank Systems

Guided Tour Retail

profit margins

Ended December 31,

Pressure Gas Systems

Ultra-Portable

Tankless Dive Systems

Air Tank Systems

Year Ended December 31,

Legacy SSA Products

High Pressure Gas Systems

Ultra-Portable Tankless Dive Systems

Redundant Air Tank Systems

Guided Tour Retail

Products segment

increase in net revenues of 6.4% from this segment for the year ended December 31, 2021 as compared to the year ended December

31, 2020 can be attributed to increased demand at the dealer level with a 20.2% increase.

This increase was offset by decreases in direct

to consumer revenues of 11.4%, and revenues to affiliates of 1.1%.

The decrease in consumer demand is attributed to a shift to purchases

at retail from our dealer base, as the economy has allowed the retail shops to re-open after the pandemic, and consumers switched their

buying habits away from our website.

Management believes that total sales were stifled by supply chain issues with the critical parts

delays not allowing shipment for nearly the entire month of August 2021.

Additionally, the Company has been unable to supply its popular

Pioneer model of the Third Lung line since the middle of 2021 due to the lack of availability in North America of the engine that is

the core selling feature of that unit.

costs of revenues as a percentage of net revenues in this segment increased from 65.5% in the year ended December 31, 2020 to 74.6%

in the year ended December 31, 2021.

The increase in cost of sales, and in turn decrease product margin, can be attributed primarily

to an increase in suppliers cost of products during the latter half of 2021, and the cost of having to air freight a larger amount of

products in order to keep the production lines occupied, and customer demand met.

Additionally, The Company reserved an additional

$58,829 for slow moving inventory.

Lastly, the Company made a decision to not increase prices to dealers and consumers in the second

half of 2021 and accept a smaller margin to ensure the continued movement by supporting our dealer base during the second quarter of

2021 in an effort to ensure continued product movement during the fourth quarter of 2021.

The decrease in net revenues of 10.2% from this segment for the year ended

December 31, 2022 as compared to the year ended December 31, 2021 can be attributed to decrease in revenue to the dealer base in 2022.

Related party dealer revenue decreased by 13.9% for the year ended December 31, 2022 which is demand that shifted from BTL to BLU3 according

to the customer.

Other parts of the dealer base chose to remain conservative on their inventory balances through the end of the third

quarter of 2022 and all of fourth quarter of 2022 due to economic uncertainties.

BTL also saw a decrease in affiliate sales as these

customers were not as active in the marketplace in 2022 as they were in prior years.

These decreases were offset by an increase of 4.0%

in direct-to-consumer sales from our website and factory store, as compared to 2021.

Other Customers increased 201.4% for 2022, from the

year ended December 31, 2021, as sales through Amazon are included in Other Customers, and BTL experienced increased activity from Amazon

with the Bright Weights line of products now available on that website.

Our aggregate costs of revenues

as a percentage of net revenues in this segment remained stable at 74.6% for year ended December 31, 2022 and the year ended December

The Company was able to offset cost increases from 2021 to 2022 for the components in their finished goods with price increases

at all levels.

Additionally, the change is the customer mix also allowed the Company to retain more margin at a time of rising costs.

channels for this segment are set forth below.

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Affiliates are resellers of our products that do not have formal dealer agreements.

Other represents all other sales that do not fit

in any of the categories.

Cost of Sales

Other represents all other sales, inclusive of Amazon

sales, which do not fit in any of the categories.

Cost of Sales as a % of Net Revenue

Margin as a % of Net Revenue

Direct to Consumer (website included)

Pressure Gas Systems segment

of high-pressure breathing air compressors had a 25.8% increase for the year ended December 31, 2021 as compared to the year ended December

31, 2020 as the marketplace showed an economic recovery during 2021.

All segments have opened up, and demand is continuing to increase,

with travel returning, and diving operations throughout the US and Caribbean re-opened and receiving tourists.

The majority of our dive

resort and dive operator customers’ businesses were back-up and running during the year ended December 31, 2021, and the

recovery of this customer segment is reflected in the increases in revenue of 59.8% in the reseller segment.

The Original Equipment

Manufacturer segment showed the largest growth with an increase of 151.1% for the year ended December 31, 2021 as compared

The direct to consumer segment, which includes yacht owners and direct to dive stores declined for the year ended December

31, 2021 as compared to the same period in the prior year as product was allocated from this customer base to increase the reseller and

OEM categories.

costs of revenues as a percentage of net revenues in this segment remained consistent at 63.4% in the years ended December

31, 2021 and 2020.

Cost of Sales

Sales of high-pressure breathing

air compressors had an 81.5% increase for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

showed improvement over the previous year.

As a percentage of revenue, the direct-to-consumer sector, which included yacht owners and

direct to dive stores, had the most significant increase year over year of 154.3%.

The demand from dive stores in the Caribbean increased

as the region has recovered from COVID and began to re-invest into new equipment for their facilities.

The reseller sector improved 90.2%

year over year from 2021 to 2022.

This can be directly attributed to the addition of a new distribution customer in Mexico.

The OEM sector

also showed an increase of 23.3% for the year ended December 31, 2022, as compared to the year ended December 31, 2021, as the LWA continued

to supply boat and yacht builders with their equipment.

costs of revenues as a percentage of net revenues in this segment improved from 62.7% to 61.7% for the years ended December 31, 2022

This can be attributed to the change is sales mix with increasing direct to consumer sales which tend to carry higher margins.

Cost of Goods Sold as a % of Net Revenue

Gross Margin as a % of Revenue

Direct to Consumers

Original Equipment Manufacturers

Portable Tankless Dive Systems

revenues in this segment increased 66.7% for the year ended December 31, 2021 as compared to the year ended December 31, 2020

inclusive of the one-time revenue from the BLU-Vent project booked in the year ended December 31, 2020.

During the second quarter of

2020, BLU3 received a purchase order from a third-party to adapt the design of the NEMO into a functional ventilator prototype, to potentially

help with the ventilator shortage that the country was facing due to the COVID–19 pandemic.

BLU3 Vent emerged as the first in the

Hack-a-Vent challenge to pass through preliminary testing at Uniformed Services University to confirm feasibility to treat an ARDS inflicted

BLU3 Vent has submitted initial documents for a review with the FDA at the direction and with the support of the Wright Brothers

This project is currently suspended as urgent demand for emergency use ventilators has declined.

Revenue from this agreement

totaled $570,060 for the year ended December 31, 2020.

Net of the one-time BLU-Vent project, revenue increased 189.4% during the

Ultra-Portable Tankless Dive Systems

Net revenues in this segment increased 36.2% for the year ended December

31, 2022 as compared to the year ended December 31, 2021.

In early November 2022, BLU3 recognized a flaw in the Nomad dive system that

could result in a loss of air for the diver and filed with the CSPC for a voluntary

recall and stopped selling the Nomad dive system until a fix could be created.

The recall application with the fix was approved by the

CPSC in January 2023.

Notwithstanding the foregoing recall, BLU3’s sales increased in the year ended December 31, 2022 from the

year ended December 31, 2021.

The increase in revenue for 2021 can be attributed to a 73.5% increase in NEMO sales over the prior year,

and the introduction of the NOMAD to the market in the late third quarter of 2021 at a price point is nearly double that of NEMO.

largest contributors to the revenue increases for year ended December 31, 2021 as compared to the prior year, are the growth in

dealer sales and sales via the Amazon channel.

Through December 31, 2021, BLU3 is selling to Amazon in nine countries as well as a significant

presence in the US Amazon Channel.

BLU3 continues to expand its dealer base which can be seen by the 225.6% revenue growth for

the year ended December 31, 2021 as compared to the same period in 2020.

The Company’s continued focus on direct to consumer

via its website accounted for an 84.1% increase for the year ended December 31, 2021 as compared to the prior year.

aggregate cost of revenue from this segment as a percentage of net revenues for the year ended December 31, 2021 decreased to 64.1%

as compared to 74.2% for the year ended December 31 2020.

The decrease can be attributed to efficiencies found in both the product

cost and labor cost in building the NOMAD.

Cost of Sales

The increase in revenue can be attributed to the introduction of the Nomad dive system and the strong sales

in all categories in 2022, as compared to 2021

The largest contribution to the revenue increases

for the year ended December 31, 2022 as compared to the prior year, is the growth in direct to consumer revenues from the Company’s

website and trade shows, accounting for 31.7% growth and sales via the Amazon channel accounting for 95.3% growth.

aggregate cost of revenue from this segment as a percentage of net revenues for the year ended December 31, 2022 decreased to 61.2% as

compared to 64.1% for the year ended December 31 2021.

The decrease can be attributed to efficiencies in both the product cost

and labor cost in building the NOMAD.

Cost of Sales as a % of Net Revenue

Margin as a % of Net Revenue

Direct to Consumer

Air Tank Systems

for the year ended December 31, 2021 in the Redundant Air Tank Systems System segment represents revenue from September 3, 2021,

the closing date of the acquisition of SSI.

These margins were affected by direct labor costs, as supply issues during September caused

delays in shipments to SSI’s worldwide customer base, which includes (1) commercial accounts, that have aircraft that require redundant

air systems for their pilots and passengers, such as the oil business with helicopters flying to oil rigs located in the middle of large

bodies of water.

(2) government accounts that are typically domestic and international military customers who use their egress systems

for various uses.

(3) dealers accounts that are resellers including international distributors to the military, commercial account or

dive shops, and domestic and international dive shops that carry their Spare Air product.

(4) Direct to consumer sales represent not

only online sales, but sales via trade shows that go direct to consumer

Cost of Sales

Net revenue in the Redundant Air Tank Systems System

segment was $1,592,602 for the year ended December 31, 2022.

Revenues for the twelve months ended December 31, 2021 includes only four

months of activity as SSI was acquired in September, 2021.

Dealers continue to be SSI’s largest customer sector accounting for 66%

of total revenues.

Except for profit margin for repairs, dealer margins continue to be the lowest margin sector as SSI sees this sector

as the volume driver and sets prices to help enable dealers to generate profits.

SSI has a worldwide customer base that includes (1) commercial

accounts with aircraft requiring redundant air systems for their pilots and passengers, such as helicopters flying to oil rigs located

in bodies of water (2) government accounts that are typically domestic and international military customers with egress systems (3) dealer

accounts that are resellers including, international distributors to the military, commercial account or dive shops, and domestic and

international dive shops that carry a spare air product (4) direct to consumer sales which are online sales and sales via trade shows

direct to consumer and (5) Company provided repairs and warranty repairs to all sectors.

Cost of Sales as a % of Net Revenue

Margin as a % of Net Revenue

Direct to Consumers (Website)

Tours and Retail

guided tour and retail segment is a new segment as of May 2022 and is derived from retail revenues of LBI.

Revenue in this segment

currently primarily includes retail sales, and tours and lessons.

Retail sales represent the sales of product at the retail facility,

while tours and lessons represent revenue derived from diving excursions and lessons.

for this segment are suppressed for the year ended December 31, 2022 as cost of goods sold include the amount overpaid for the inventory at acquisition, as

well as a portion of the costs of closing the transaction.

Cost of Sales as a % of Net Revenue

Margin as a % of Net Revenue

Tours and Lessons

expenses, consisting of selling, general and administrative (“SG&A”) expenses and research and development costs, are

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increased by 26.2% for the years ended December 31, 2022 as compared to the year ended December 31, 2021.

those years are as follows:

SG&A during those years

are as follows:

Non-Cash Stock based compensation – options

Professional Fees

increases for the year ended December 31, 2021 are primarily due to the addition of SSI payroll which accounted for 34.3% of the

The balance of the increase can be attributed to the hiring of a chief executive officer, a social media/marketing manager,

and several other operating and administrative personnel to support the growth in each of our divisions.

Stock compensation expenses increased 34.0% for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The increase can be attributed to stock options issued to employees as part of the Company’s 2021 Equity Plan, stock options issued

to Blake Carmichael and Christeen Buban, President of SSI, pursuant to their employment agreements during the year ended December 31,

Additionally, the increase can be attributed to compensation and bonus stock options issued to our Chief Executive Officer, pursuant

to his employment agreement and expenses related to options issued to our Chairman.

fees, representing legal and other professional fees, which we paid in a combination of cash, common stock, or stock options,

had an increase of .4% for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

an increase in professional fees related to the acquisition of SSI.

increases for the year ended December 31, 2022 can be attributed to an increase in the BLU3 payroll which contributed 29.4% of the increase.

BLU3 added customer service and engineering staff as well as increased pay for key employees in 2022.

The addition of a full year of

SSI payroll comprised approximately 21.4% of the payroll increase.

The balance of the increase can be attributed to the hiring of a

social media/marketing manager, and several other operating and administrative personnel to support the growth in each of our divisions.

Stock compensation expenses decreased 13.2% for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

decrease can be attributed to fewer options being issued during the year as well as certain vesting criteria not being met in 2022 that

were met in 2021.

Professional fees, representing legal, accounting and other professional

fees, which we paid in a combination of cash, common stock, or stock options, decreased 27.5% for the year ended December 31, 2022 as

compared to the year ended December 31, 2021.

While accounting fees increased, 75.8% in 2022, the lack of acquisition in 2022 resulted

in a reduction of legal fees of 43.2%.

Additionally, other professional fees saw a decrease as two contract employees became salaried

employees in 2022.

expense increased 45.5% for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

of the increase can be directly attributed to an increase of direct, internet and Amazon marketing by BLU3.

The addition of SSI attributed

15.4% of the increase in advertising expenses for the year ended December 31, 2021.

These increases are offset by decreases

in Trebor advertising expenses associated with the agreement with the Company’s provider of marketing and advertising, which

was entered into in the third quarter of 2020, and was not renewed as of July 31, 2021.

74.8%% of the increase

can be directly attributed to an increase of direct, internet and Amazon marketing by BLU3.

The addition of SSI attributed 19.9% of the

increase in advertising expense for the year ended December 31, 2022.

These increases are offset by decreases in Trebor advertising

expenses associated with the agreement with the Company’s provider of marketing and advertising, which was entered into in the

third quarter of 2020, and was not renewed as of July 31, 2021.

Other expenses increased 50.3%

for the year ended December 31, 2022 as compared the year ended December 31, 2021.

The primary driver to the increase in other expenses

is the addition of a reserve for expenses related to the 2022 recall of the Nomad dive system.

This reserve accounted for 57.0% of the

overall increase in other expenses.

& Development Expenses (R&D Expenses)

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The decrease can be primarily

attributed to the lack of R&D expenses related to the BLU-Vent project in 2021 as well as the completion of the R&D for BLU3’s

NOMAD in 2021.

the year ended December 31, 2021 other income and expenses, totaled approximately $264,000 in income as compared to approximately

$18,600 in expenses for the year ended December 31, 2020.

attributed to the completion of the R&D for BLU3’s NOMAD in late 2021.

the year ended December 31, 2022 other income and expenses totaled approximately $42,500 in interest expense as compared to approximately

$264,200 in other income for the year ended December 31, 2021.

Interest expense for the year ended December 31, 2022 was approximately

1 unchanged sentence

This increase can be attributed to the increase in

convertible debt related to the SSI acquisition.

Other income for the year ended December 31, 2021 included a gain on the forgiveness

of Trebor and SSI PPP loans totaling approximately $275,800 and the forgiveness of a loan payable of $10,000.

convertible debt related to the SSI acquisition, as well as the financing of tools and dyes for both the SSI and BLU3 operations.

income for the year ended December 31, 2021 included a gain on the forgiveness of Trebor and SSI PPP loans totaling approximately $275,800

and the forgiveness of a loan payable of $10,000.

and Capital Resources

had cash of $643,143 at December 31, 2021.The following table summarizes total current assets, total current liabilities and working

had cash of $484,427 on December 31, 2022.The following table summarizes total current assets, total current liabilities and working

capital at December 31, 2022 as compared to December 31, 2021.

December 31, 2022

December 31, 2021

Total Current Assets

1 unchanged sentence

Working Capital

increase in our current assets at December 31, 2021 from December 31, 2020 principally reflects increases in cash of approximately $298,000,

accounts receivable of approximately $42,000, inventory of approximately $1,031,500 and prepaid assets of approximately

The increase in our current assets

on December 31, 20221 from December 31, 2021 primarily reflects increases in inventory of approximately $527,000.

The increase in inventory

is offset by decreases in cash of approximately $158,700, accounts receivable of approximately $33,300 and prepaid assets of approximately

$35,300 for the year ended December 31, 2022.

The increase in inventory was due to the addition of SSI inventory and increased

purchasing to try to counteract the concerns over supply chain disruptions due to the lingering effects of the COVID19

The increase in accounts receivable is attributable to the increase in the aggregate sales for the year ended December 31,

2021 as compared to the year ended December 31, 2020 as well as the inclusion of the accounts receivable related to SSI in the year ended

December 31, 2021.

increase in our total current liabilities for the year ended December 31, 2021 as compared to the year December 31, 2020 reflects an

increase in accounts payable and accrued liabilities of approximately $357,400, a decrease of approximately $65,100 in

accounts payable – related parties, an increase of approximately $123,600 in customer deposits, an increase of approximately $124,600

in operating lease liabilities with the addition of the SSI lease liability, and a reduction of debt liabilities of approximately $260,600

due to the conversion of short term convertible notes and the reduction of other non- convertible debt.

The increase in inventory was due to inventory in BLU3 that was procured to continue to

produce the Nomad dive system through the end of 2022, and to ensure enough inventory through the holidays, as well as the addition of

the inventory in connection with the Gold Coast Scuba asset acquisition by LBI.

increase in our total current liabilities for the year ended December 31, 2022 as compared to the year ended December 31, 2021

reflects an increase in accounts payable and accrued liabilities of approximately $85,100, an increase in customer deposits of

approximately $23,600, an increase of approximately $185,000 in other liabilities, primarily attributed to the reserve for Nomad

recall expenses of $160,500, and an increase of approximately $36,800 in operating lease liabilities with the signing of the SSI

lease renewal, and an increase in related party demand note, net, related to funds lent to LBI.

Net cash used in operating activities

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Net cash provided by financing activities

cash used in operating activities for 2021 was primarily the result of a net loss of $1,588,467, an increase in our inventory

balances of $649,414, increases in prepaid expenses and other current assets of $109,612, and total decreases in all liabilities

of $193,614 for the year ended December 31, 2021 as compared to December 31, 2020.

The cash used related to net

loss was offset by $1,154,801 in non-cash stock related compensation expenses and $201,952 non-cash expenses for shares

issued for professional fees during the year ended December 31, 2021.

cash provided by investing activities in 2021 of $517,701 reflects primarily

the cash acquired from the SSI acquisition of $541,378 offset by fixed asset purchases of $23,677.

This compares to cash used for the purchase of fixed assets of $5,500 for the year ended December 31, 2020.

cash provided by financing activities in 2021 reflect $640,000 in proceeds related to the sale of the company’s common

stock and units that included both stock and warrants.

The increase in cash was offset by repayments of both

notes payable and other debt of $90,278.

This is compared to cash provided from the sale of common stock and

the exercise of warrants of $770,000 as well as net proceeds of debt of $65,575 after offsetting the repayment of debt from the proceeds

of debt for the year ended December 31, 2020.

Net cash used in operating activities

for 2022 was primarily the result of a net loss of $1,892,891, an additional cash used to fund inventory of $443,421, as well as the

change in long term lease liability of $242,690 for the year ended December 31, 2022 as compared to December 31, 2021.

The cash used related

to net loss was offset by $998,474 in non-cash stock related compensation expenses and $47,501 non-cash expenses for shares issued for

professional fees during the year ended December 31, 2022.

Net cash used in investing activities

for the year ended December 31, 2022 of $67,466 reflects primarily the cash used to acquire the assets of Gold Coast Scuba of $30,000

as well as the cash used to purchase fixed assets, net of debt totaling approximately $21,125, and fixed asset purchases of $16,341.

compares to cash provided by the purchase of SSI of $541,378 and cash used for the purchase of fixed assets of $23,677 for the year ended

December 31, 2021.

Net cash provided by financing activities for the year ended December 31,

2022 reflects $305,000 in proceeds related to the sale of the Company’s common stock and units comprised of stock and warrants and

$265,000 in proceeds from the exercise of warrants.

The increase in net cash was offset by repayments of notes payable and other debt

This is compared to cash provided from the sale of common stock and units of $640,000 and the repayment of debt and notes

payable totaling $90,278 for the year ended December 31, 2021.

audited consolidated financial statements included in this Annual Report were prepared assuming we will continue as a going concern,

9 unchanged sentences

deficit of $16,437,495 as of December 31, 2022.

Despite a working capital surplus of $1,570,235 at December 31, 2021, the

continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue to increase revenues,

control expenses, raise capital, and to continue to sustain adequate working capital to finance its operations.

The failure to achieve

the necessary levels of profitability and cash flows would be detrimental to the Company.

We are continuing to engage in discussions

with potential sources for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels,

net losses and limited market for our common stock.

If we fail to raise additional funds when needed, or if we do not have sufficient

cash flows from operations, we may be required to scale back or cease certain of our operations.

Despite a working capital surplus of $1,473,563 at December 31, 2022, the continued losses

and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern.

The Company’s

ability to continue as a going concern is dependent upon the Company’s ability to continue to increase revenues, control expenses,

raise capital, and to continue to sustain adequate working capital to finance its operations.

The failure to achieve the necessary levels

of profitability and cash flows would be detrimental to the Company.

We are continuing to engage in discussions with potential sources

for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels, net losses and limited

market for our common stock.

If we fail to raise additional funds when needed, or if we do not have sufficient cash flows from operations,

we may be required to scale back or cease certain of our operations.

Accounting Estimates

22 unchanged sentences

in specific markets in which the Company operates and any specific customer collection issues the Company identifies could have a favorable

or unfavorable effect on required reserve balances.

or unfavorable effect on required allownace balances.

Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value.

judgment is required to determine the reserve for obsolete or excess inventory.

judgment is required to determine the allowance for obsolete or excess inventory.

Inventory on hand may exceed future demand either because

the product is outdated or because the amount on hand is more than will be used to meet future needs.

Inventory reserves are estimated

Inventory allowances are estimated

by the individual operating companies using standard quantitative measures based on criteria established by the Company.

1 unchanged sentence

considers these reserve balances to be adequate, changes in economic conditions, customer inventory levels or competitive conditions

could have a favorable or unfavorable effect on required reserve balances.

could have a favorable or unfavorable effect on required allownace balances.

Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.

21 unchanged sentences

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 7. Management’s Discussion and Analysis