Business Combination

9 Months Ended

Sep. 30, 2022

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 SSI. Under the terms of the Merger Agreement, the Company paid $1.79 million, consisting of the issuance of 27,305,442 shares of its common stock (valued at $1.4 million) and the issuance of 8% unsecured convertible promissory notes in the aggregate principal amount of $350,000 in exchange for all of the equity of SSI. The 27,305,442 shares are subject to leak out agreements whereby the sellers are unable to sell or transfer shares 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 restriction may be waived by the Company, upon written request by a seller, if the Company’s common stock is trading on 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 5% of the previous days total volume can be sold in one day and (ii) only 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.

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	$	1,101,604
Liabilities assumed		(294,671	)
Net tangible assets acquired		806,933
Identified Intangible Assets
Customer relationships	$	600,000
Trademarks		121,000
Non-compete agreements		22,000
Total intangible assets		743,000
Goodwill	$	249,986
Total purchase price	$	1,799,919

The value of the stock was calculated based on the VWAP of a share of the Company’s common stock on the OTC Markets 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 which resulted in a conversion price of $0.051271831 and 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, 2022, the Company recorded an estimated fair value of the intangible assets and goodwill of $992,986 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.

Asset acquisition Gold Coast Scuba, LLC

On May 2, 2022, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Gold Coast Scuba, LLC, a Florida limited liability company (“Gold Coast Scuba”), Steven M. Gagas and William Frenier, the sole members of Gold Coast Scuba (together, the “LLC Members”) and Live Blue, Inc. Pursuant to the terms of the Asset Purchase Agreement, Live Blue acquired substantially all of Gold Coast Scuba’s assets and assumed certain non-material liabilities of the business associated with these assets. In addition, LBI assumed the lease for the premises for Gold Coast Scuba as part of this asset acquisition.

In consideration for the assets purchased, the Company paid $150,000 to the LLC Members. The purchase price was paid by (a) the issuance to the LLC Members of an aggregate of 3,084,831 shares of the Company’s common stock (the “Consideration Shares”) with a fair market value of $120,000; and (b) a cash payment of $30,000.

The Consideration Shares are subject to leak out agreements whereby the shareholders are unable to sell or transfer shares based upon the following:

Holding Period from Closing Date	Percentage of shares eligible to be sold or transferred
6 months	Up to 25.0%
9 months	Up to 50.0%
12 months	Up to 100.0%

The leak-out restriction may be waived by the Company, upon written request by a LLC Member, if the Company’s common stock is trading on 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 5% of the previous days total volume can be sold in one day and (ii) only through executing trades “On the Offer.”

The transaction costs associated with the acquisition were $10,000 in legal fees paid in cash.

Fair Value of Consideration Transferred and Recording of Assets Acquired

The following table summarizes the asset acquisition date fair value of the consideration paid, identifiable assets acquired, including an amount for overpayment and transaction fees:

	Book Value		Overpayment Allocation		Transaction Cost Allocation		Fair Value
Rental Inventory	$	23,408	$	22,156	$	3,038	$	48,602
Fixed Assets		24,360		23,058		3,161		50,579
Retail Inventory		29,292		27,726		3,801		60,819
Total Cost	$	77,060	$	72,940	$	10,000	$	160,000

Pro Forma Information

The following unaudited pro forma information assumes all business combinations 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 (unaudited)
Revenue	$	5,489,338
Net Loss	$	(1,096,903	)
Basic and Diluted Loss per Share	$	(0.00	)
Basic and Diluted Weighted Average Common Shares Outstanding		348,134,156

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 and the assets of LBI.

Pro Forma Information

The following unaudited pro forma information assumes all business acquisitions occurred on January 1, 2022. 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.

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

	Nine months ended September 30, 2022 (unaudited)
Revenue	$	7,261,794
Net Loss	$	(1,126,690	)
Basic and Diluted Loss per Share	$	(0.00	)
Basic and Diluted Weighted Average Common Shares Outstanding		408,904,845