Due to @Lexible's comment and link I tracked down the movie. it's The Terror Beneath the Sea.
Quick Plot Synopsis
A high tech sub tracks a target sub. It's all demonstration by the navy for a super homing torpedo. During the tests, the silhouette of a swimming man flashes across the monitors. Journalist duo, Ken (Chiba) and Jenny (Peggy Neal), go scuba diving to check it out. Jenny encounters a silvery gill-man, takes a picture, but drops her camera. The navy doesn't believe her. Ken and Jenny go looking for the camera, but find an undersea cave full of air. They also find several sliver gill-men who capture them. They awaken in the modernistic lab of the sinister Dr. Moore who always wears sunglasses. He bombasts about the world of the future starting with his city under the sea and his army of water cyborgs. He demonstrates how humans are transformed into the aquatic cyborgs. Some gas, some colored lights, some time-lapse photography and finally a lung-gill transplant. Violá! WaterCyborg. Meanwhile, the navy found Jenny's camera and the picture of the gill-man. Now the search is on. Dr. Moore wants Ken to join his new world order, but he and Jenny try to escape. For that, Dr. Moore sentences them to becoming his next WaterCyborg. They start the process enough to give both Ken and Jenny some waxy patches on their hands and faces. Further morphing is interrupted when the navy's sub has found Moore's hidden city. A battle ensues between Moore's clever seeking missiles and the sub's also clever moves and devices. In a last desperate move, the sub's commander launches his super torpedo. This manages to cause enough damage that Moore's city begins to fail. The damaged equipment means the water cyborgs go nuts, turning on their human masters. Many fights ensue. The atomic reactor goes critical AND has a handy countdown timer to doom. Moore and his henchmen prepare to escape in a pod, but Ken stops them for some hand-to-hand combat. Just when it looks like Moore will kill Ken, Moore is killed by Professor Howard (another abductee). Ken, Jenny and the professor don't know how to launch the escape pod, but a not-quite-dead Moore tries to kick them out and escape, thereby revealing the hidden panel. This time Moore is really dead. Ken, Jenny and Howard are rocketed to safety just as the city blows up. The navy finds them. Jenny is distraught over her disfigurement, but while she was unconscious, professor Howard reversed the early gill-man-ism and she's pretty again. She and Ken walk the beach in the sunset (in their scuba gear). The End
I hate answering my own question but I don't know how to give @Lexible credit.