Forward-looking statements

Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Financial information contained in this report and in our financial statements is stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.





Description of Business

Treasure Shipwreck & Recovery, Inc. ("TSR", "us," "we,", the "Company") is focused, through its wholly owned subsidiary TSR Holdings, Inc., on the exploration and recovery of historic shipwrecks. The Company has acquired various assets including a research vessel and specialized sensing equipment to be utilized to attempt to locate and eventually recover artifacts and treasure from historic shipwrecks, generally from the colonial era. The Company has acquired the intellectual property rights in a purchase agreement for the naming, trademark and use rights of Galleon Quest, from a third party to be used on Games and Apps, and merchandising of products.





Legal Proceedings

TSR was served with a lawsuit in the lesser county court in Hillsborough County, Florida, served on February 1, 2023, over a claimed fee by Dalmore Group, LLC for a claim of fees of a limited amount of $20,000, Dalmore was contracted by TSR to perform services to TSR in regard to the offering and processing for TSR's REG A offering. However, after contracting Dalmore, and TSR paying the initial fees of some $5,950. TSR chose not to continue with their services, and communicated an end to such agreement. Dalmore apparently failed to acknowledge such termination, even though they did not provide any services at all for TSR. TSR has filed a motion to dismiss such lawsuit on numerous grounds. TSR does not believe the lawsuit to have merit and is not material to its operations and financial condition. There are no other threated or other legal proceedings for TSR.

COVID-19 Pandemic Threat and Continuity Plan

Due to current events involving the global COVID-19 pandemic, TSR, under the guidance of its President, is reviewing procedures to monitor current events as they relate to our business and to be prepared to respond to any potential threats or issues in order to protect the Company and its assets. We are also in the process of reviewing plans to locate a back office for our corporate records and information at a location to be designated so that in the event that access to the Company's offices are restricted, the Company is able to continue with its business and operations.

The Company's operations may be adversely affected by the ongoing outbreak of the coronavirus disease 2019 (COVID-19) which was declared a pandemic by the World Health Organization ("WHO") in March 2020. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the TSR's financial position, operations and cash flows.

Possible effects may include, but are not limited to, disruption to the Company's operations, inability of management team members and other key personnel and consultants to provide services or provide services in a timely manner, unavailability of equipment, parts and supplies used in operations, lack of access to maintenance and repair facilities for the Company's salvage vessel, and a decline in the value of the Company's assets including its salvage vessel, equipment and its digital properties.

Additionally, it is possible that the Company is not able to obtain financing due to COVID-19's effects on the general economy and the capital markets. If the Company is not able to obtain financing due to COVID-19 then it is highly likely that it will be forced to cease its operations. The impact of smaller companies such as TSR having to cease operations due to effects of COVID-19 would likely result in the Company not being able to survive and would cause a complete loss of all capital invested in the Company.





Results of operations

We have incurred recurring losses to date. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities. However, there can be no assurances that we will be able to raise additional capital. The Company had $0 cash at January 31, 2023. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than one month from March 21, 2023.


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Summary of the Nine Months Ended January 31, 2023 Results of Operations Compared to the Nine Months Ended January 31, 2022 Results of Operations





Revenue

The Company did not generate any revenue during the nine month periods ended January 31, 2023 and 2022.





Operating Expenses

During the nine month period ended January 31, 2023, the Company incurred consulting and accounting expense of $87,878, labor expense of $10,585, legal fees of $19,513, professional fees of $51,088, boat expense of $73,829, general and administrative expense of $33,565 and depreciation expense of $5,843.

During the nine month period ended January 31, 2022, the Company incurred consulting and accounting expense of $100,108, labor expense of $36,925, legal fees of $33,575, professional fees of $80,614, boat expense of $246,826, research and development expense of $8,000, general and administrative expense of $99,891, and depreciation expense of $10,897.

The decrease in operating expenses for the nine months ended January 31, 2023 is attributable to the decrease in boat and labor expenses for exploration and decrease in consulting and legal fees. The Company also conducted fewer exploration activities due to inclement weather.





Other Income (Expenses)

Interest expense was $80,903 during the nine month period ended January 31, 2023. Interest expense was $574,905 during the nine month period ended January 31, 2022. The interest expense in 2023 was a result of interest on notes and the amortization of the interest relating to the beneficial conversion features of several convertible promissory notes. Other income was $0 during the nine month period ended January 31, 2023 and 2022.





Net Loss

For the nine month period ended January 31, 2023 the Company incurred net losses of $363,204 versus net losses of $1,191,741 for the nine month period ended January 31, 2022. The decrease in net loss was attributable to decreased operating expenses and interest expense. The decrease in net losses for the period ended January 31, 2023 was due to decreased interest expense versus the three month period ended January 31, 2022.

Summary of the Three Months Ended January 31, 2023 Results of Operations Compared to the Three Months Ended January 31, 2022 Results of Operations





Revenue

The Company did not generate any revenue during the three month periods ended January 31, 2023 and 2022.





Operating Expenses

For the three month period ended January 31, 2023, the Company incurred consulting and accounting fees of $3,500, legal fees of $398, professional fees of $2,000, boat expense of $3,984, general and administrative expense of $4,303, and depreciation expense of $600.

For the three month period ended January 31, 2022, the Company incurred consulting and accounting expense of $27,550, labor expense of $1,232, legal fees of $8,825, professional fees of $5,448, boat expense of $11,142, general and administrative expense of $36,335, and depreciation expense of $3,632.

The decrease in operating expenses for the three months ended January 31, 2023 is attributable to a decrease in consulting and accounting fees and general and administrative expenses. The Company also conducted fewer exploration activities due to inclement weather.





Other Income (Expenses)

Interest expense was $(819) during the three month period ended January 31, 2023. Interest expense was $222,525 during the three month period ended January 31, 2022. The interest expense in 2022 was a result of interest on notes and the amortization of the interest relating to the beneficial conversion features of several convertible promissory notes. The increase in interest expense in 2022 was a result of the amortization of the interest relating to the beneficial conversion features of several convertible promissory notes having more amortization in 2021 than in 2022.



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Net Loss

For the three month period ended January 31, 2023 the Company incurred net losses of $13,966 versus losses of $222,525 for the three month period ended January 31, 2022. The decreased net loss is a result of decreased interest expense in the three months ended January 31, 2023. The decrease in net losses for the period ended January 31, 2023 was due to decreased interest expense versus the three month period ended January 31, 2022.

Liquidity and capital resources

As at January 31, 2023, our total assets were $16,800.

As at January 31, 2023, our current liabilities were $998,881 and stockholders' deficit was $982,081.

As at January 31, 2023, we had a net working capital deficit of $998,881.

Cash flows from operating activities

For the nine month period ended January 31, 2023 net cash flows used in operating activities was $264,865.

For the nine month period ended January 31, 2022 net cash flows used in operating activities was $589,706.

The decrease in cash used in operating activities is attributable to decreased boat expense and general and administrative expenses.

Cash flows from investing activities

There were no cash flows from investing activities for the nine month periods ended January 31, 2023 and 2022.

Cash flows from financing activities

For the nine month period ended January 31, 2023 cash flows provided by financing activities were $217,000.

For the nine month period ended January 31, 2022 cash flows provided by financing activities were $413,000.

The decrease in cash provided by financing activities is attributable to increased proceeds from the sale of convertible loans for the nine month period ended January 31, 2022.

We qualify as a "smaller reporting company" under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

For example, smaller reporting companies are not required to provide a compensation discussion and analysis under Item 402(b) of Regulation S-K or the auditor attestation of internal controls over financial reporting.





Future Financings

We will continue to rely on equity sales of the Company's common shares in order to continue to fund business operations. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that the Company will achieve any additional sales of equity securities or arrange for debt or other financing to fund planned operations. Future financing activities involving the sale of common stock under subscription agreements or entering into convertible promissory note agreements may cause substantial dilution to current shareholders. The Company currently has an active Reg-A for a financial raise.



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Liquidity and Capital Resources and Cash Requirements

As of the date of this report, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. At January 31, 2023, the Company had $0 cash and a working capital deficit of $998,881. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof. Based on its historical rate of expenditures, the Company expects to expend its available cash in less than three months from March 17, 2023.

The Company may not be able to continue as a going concern. The report of our independent auditors for the year ended April 30, 2022 raises substantial doubt as to our ability to continue as a going concern. If the Company is not able to continue as a going concern, it is highly likely that all capital invested in the Company will be lost.

Management believes that current trends toward lower capital investment in start-up companies pose the most significant challenge to the Company's success over the next year and in future years. Additionally, the Company will have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. The Company's management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act of 2002. This additional corporate governance time required of management could limit the amount of time management has to implement its business plan and impede the speed of its operations.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.


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