Business Combination

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combination

Note 6. Business Combination

Merger with Submersible Systems, Inc.

On September 3, 2020, the Company completed its merger with Submersible Systems, Inc. Under the terms of the Merger Agreement, the Company paid $1.79 million in consideration consisting of the issuance of 27,305,442 shares of its common stock (valued at $1.4 million), the issuance of $350,000 in 8% unsecured convertible promissory notes in exchange for all of the equity of Submersible. The 27,305,442 shares of the Company’s common stock issued for the $1.44 million in consideration are subject to leak out agreements whereby the shareholders are unable to sell or transfer based upon the following:

Holding Period from Closing Date	Percentage of shares eligible to be sold or transferred
6 months	Up to 12.5%
9 months	Up to 25.0%
24 months	Up to 75.0%
36 months	Up to 100.0%

The Leak-Out Provision may be waived by the Company, upon written request by a Seller, if the Company is trading on either the NYSE American or Nasdaq, and has a rolling 30-day average trading volume of 50,000 shares per day; provided, however, that (i) only up to five percent (5%) of the previous days total volume can be sold in one day by a Seller; and (ii) the Seller can only sell through executing trades “On the Offer.”

The transaction costs associated with the Merger were $65,000 in legal fees paid in $40,000 in cash, and 1,190,476 shares of the Company’s common stock with a fair value of $55,952. The common stock for these transaction costs will be issued subsequent to September 30, 2021.

Fair Value of Consideration Transferred and Recording of Assets Acquired

The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill:

Common stock, 27,305,442 shares at fair market value	$	1,449,919
8% Unsecured, Convertible promissory note payable to seller		350,000
Total purchase price	$	1,799,919
Tangible assets acquired	$	1,094,326
Liabilities assumed		(294,671	)
Net tangible assets acquired		799,655
Identified Intangible Assets
Customer Relationships	$	672,000
Trademarks		121,000
Non-compete agreements		22,000
Total Intangible Assets		815,000
Goodwill	$	185,264
Total purchase price	$	1,799,919

In determining the number of shares of the common stock issued, the Company considered the value of the stock as defined the Merger Agreement to be the calculated based on the volume weighted average price of a share of the Company’s common stock on the OTC Markets (“VWAP”) for (i) 180 days prior to the date of the parties’ execution and delivery of the binding term sheet for the Merger or (ii) 180 days prior to the closing date of the Merger, whichever results in a lower VWAP. Based on this calculation, the Company utilized calculation (i) resulting in a conversion price of $.051271831. This conversion price resulted in the issuance of 27,305,442 shares of common stock with a fair value of $1,449,919 on the closing date.

Inventory was assessed at the time of closing as to its fair value, and it was determined that a step-up analysis was necessary in order to evaluate the fair value of the inventory at the time of closing. The step up represents the net profit that would be attained when the inventory is sold. The key assumptions used in this analysis is a gross margin of 38.3% and selling costs of 5.0%, The analysis resulted in a necessary step up of $31,000 at the time of closing.

Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the acquisition is attributable to the value of the potential expanded market opportunity with new customers. The goodwill is not expected to be deductible for tax purposes.

As of September 30, 2021, the Company has recorded an estimated fair value of the intangible assets and goodwill of $1,198,264 based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2021. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.

	Nine months ended September 30, 2021
Revenue	$	5,258,139
Net Loss	$	(1,087,932	)
Basic and Diluted Loss per Share	$	(0.00	)
Basic and Diluted Weighted Average Common Shares Outstanding		346,431,786

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. The pro forma amounts above for basic and diluted weighted average shares outstanding have been adjusted to include the stock issued in connection with the acquisition of SSI.