UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

 

 ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the quarterly period ended June 30, 2021March 31, 2022

 

or

 

 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from __________ to __________

 

Commission file number 333-99393

 

Brownie’s Marine Group, Inc.BROWNIE’S MARINE GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Florida 90-0226181

(State or other jurisdiction of

incorporation or organizationorganization)

 

(I.R.S. Employer

Identification No.)

 

3001 NW 25th25th Avenue, Suite 1  
Pompano Beach, Florida 33069
(Address of principal executive officesoffices) (Zip codecode)

 

(954) 462-5570

Registrant’s telephone number, including area code

 

Not applicable

Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
noneNone n/aNot applicable n/aNot applicable

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☒Smaller reporting company ☒
 Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There were 343,279,052408,880,065 shares of common stock outstanding at August 16, 2021.as of May 27, 2022.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page No.
 PART I - FINANCIAL INFORMATION 
   
ITEM 1.FINANCIAL STATEMENTS.4
   
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.2024
   
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.2730
   
ITEM 4.CONTROLS AND PROCEDURES.2730
   
 PART II - OTHER INFORMATION 
   
ITEM 1.LEGAL PROCEEDINGS.2831
   
ITEM 1A.RISK FACTORS.2831
   
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.2831
   
ITEM 3.DEFAULTS UPON SENIOR SECURITIES.2832
   
ITEM 4.MINE SAFETY DISCLOSURES.2832
   
ITEM 5.OTHER INFORMATION.2832
   
ITEM 6.EXHIBITS.2932

2

 

CAUTIONARY STATEMENTSNOTE REGARDING FORWARD-LOOKING INFORMATION

 

Various statements in this report contain or may containThis Quarterly Report includes forward-looking statements that are subjectrelate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors whichthat may cause our actual results, levels of activity, performance or achievements to bediffer materially different from any future results, levels of activity, performance or achievements expressed or implied by suchthese forward-looking statements. These forward-looking statements were based on various factors and were derived from utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:

●Financial risks, including:
●our history of losses;
●our ability to continue as a going concern;
●our dependence on revenues from related parties; and
●material risks in our disclosure controls and internal control over financial reporting.
●Business and operational risks, including:
●our dependence on key members of our management;
●our need to hire additional employees;
●our ability to protect our intellectual property rights;
●reliance on third party vendors and manufacturers;
●dependence on consumer discretionary spending;
●the impact of government regulations;
●any failure to protect personal information;
●the impact of bad weather;
●the exposure to potential product liability claims; and
●The continuing impact of COVID-19 on our company.
●Shareholder risks, including:
●dilution to our common shareholders upon the possible conversion of outstanding convertible debt and/or the exercise of outstanding options;
●the limited market for our common stock and the impact of penny stock rules; and
●we are a voluntary filer with the Securities and Exchange Commission.

 

You should read thoroughly this report and the documents that we refer to hereinQuarterly Report with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statementsrisk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SecuritiesSEC on April 22, 2022, which risk factors could adversely impact our business and Exchange Commission on March 31, 2021 (the “2020 10-K”) and our other filings with the Securities and Exchange Commission in their entirety.financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. TheseAll forward-looking statements speak only as of the date of this report, and you should not rely on thesewhich they are made. We undertake no obligation to update such statements without also consideringto reflect events that occur or circumstances that exist after the risks and uncertainties associated with these statements and our business.date on which they are made, except as required by applicable law.

 

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms “BWMG,” the “Company,” “we,” “our,” “us,” and similar terms refers to Brownie’s Marine Group, Inc., a Florida corporation, and our wholly owned subsidiaries, Trebor Industries, Inc., a Florida corporation (“Trebor”), Brownie’s High Pressure Compressor Services, Inc. (“BHP”), a Florida corporation, and BLU3, Inc., a Florida corporation (“BLU3”). In addition, “ Second Quarter 2021” refers to the three month period ended June 30, 2021, “Second Quarter 2020” refers to the three month period ended June 30, 2020. “First Quarter 2021” refers to the three month period ended March 31, 2021 and “First Quarter 2020” refers to the three months ended March 31, 2020. “2020” refers to the year ended December 31, 2020 and “2021” refers to the year ending December 31, 2021.

We maintain a corporate website at www.browniesmarinegroup.com. Unless specifically set forth to the contrary, the information which appears on our websites or our social media platforms is not part of this report.

3

 

PART I

 

ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETSHEETS

 June 30, 2021  December 31, 2020 
 (Unaudited)      

March 31, 2022

(Unaudited)

   December 31,
2021		 
ASSETS               
Current Assets                
Cash $161,662  $345,187  $604,274  $643,143 
Accounts receivable, net  232,179   81,251 
Accounts receivable - net  191,438   123,270 
Accounts receivable - related parties  176,645   67,644   77,140   77,301 
Inventory, net  984,731   863,791   2,029,192   1,895,260 
Prepaid expenses and other current assets  399,171   111,164   395,387   227,458 
Total current assets  1,954,388   1,469,037   3,297,431   2,966,432 
Property, equipment and leasehold improvements, net  144,608   143,413   257,215   270,065 
Operating Lease Assets  395,400   446,981   397,208   454,475 
Intangible Assets, Net  700,780   718,905 
Goodwill  249,986   249,986 
Other assets  10,649   13,649   17,831   14,098 
Total assets $2,505,045  $2,073,080  $4,920,451  $4,673,961 
Liabilities and stockholders’ equity                
Current liabilities                
Accounts payable and accrued liabilities $589,330  $386,977  $871,079  $744,383 
Accounts payable - related parties  94,573  102,360   18,032   37,267 
Customer deposits and unearned revenue  44,291   20,353   248,433   143,938 
Other liabilities  185,037   100,817   201,580   187,924 
Operating lease liabilities  112,771   107,691   208,623   232,283 
Current maturities long term debt  65,248   151,006   46,867   50,402 
Notes payable  15,000   50,000 
Convertible debentures, net  50,000   110,000 
Total current liabilities  1,156,250   1,029,204   1,594,614   1,396,197 
Long term debt  61,942   120,782 
Operating lease liabilities  282,629   339,290 
Long term debt, net of current  80,843   87,956 
Long term convertible debentures, net  340,176   339,254 
Operating lease liabilities, net of current  189,134   222,899 
Total liabilities  1,500,821   1,489,276   2,204,767   2,046,306 
Commitments and contingencies (see note 7)        
Commitments and contingent liabilities (see note 9)  -   - 
Stockholders’ equity                
        
Preferred stock; $0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.  425   425 
Common stock; $0.0001 par value; 1,000,000,000 shares authorized; 343,279,052 shares issued and outstanding at June 30, 2021 and 306,185,206 shares issued and outstanding at December 31, 2020, respectively.  34,330   30,620 
Common stock payable 138,941 shares and 138,941 shares, respectively as of June 30, 2021 and December 31, 2020, respectively.  14   14 
Preferred stock; $0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of March 31, 2022 and December 31, 2021  425   425 
Common stock; $0.0001 par value; 1,000,000,000 shares authorized; 405,656,793 and 393,850,475 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.  40,566   39,386 
Common stock payable; 138,941 shares and 138,941 shares, as of March 31, 2022 and December 31, 2021, respectively  14   14 
Additional paid-in capital  14,456,378   13,508,882   17,661,788   17,132,434 
Accumulated deficit  (13,486,923)  (12,956,137)  (14,988,696)  (14,544,604)
Accumulated other comprehensive income  

1,587

   - 
Total stockholders’ equity $1,004,224  $583,804  $2,715,684  $2,627,655 
Total liabilities and stockholders’ equity $2,505,045  $2,073,080  $4,920,451  $4,673,961 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

4

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENT OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30MARCH 31

(UNAUDITED)(unaudited)

 

 2021 2020 2021 2020 
 Three months ended June 30  Six months ended June 30 
 2021 2020 2021 2020   2022   2021 
Net revenues                        
Net revenues $1,359,745  $1,123,351  $2,106,098  $1,601,585  $1,701,564  $746,353 
Net revenues - related parties  353,173   197,177   557,589   353,732   273,405   204,416 
Total net revenues  1,712,918   1,320,528   2,663,687   1,955,317   1,974,969   950,769 
Cost of net revenues                        
Cost of net revenues  876,646   685,807   1,385,715   1,117,762   1,121,638   509,069 
Cost of net revenues - related parties  169,699   106,181   275,130   187,179   121,174   105,431 
Royalties expense - related parties  28,013   17,916   39,606   22,766   12,789   11,593 
Royalties expense  41,251   13,833   54,955   27,926   43,608   13,704 
Total cost of revenues  1,115,609   823,737   1,755,406   1,355,633   1,299,209   639,797 
Gross profit  597,309   496,791   908,281   599,684   675,760   310,972 
Operating expenses                        
Selling, general and administrative  823,607   864,463   1,560,642   1,242,041   1,105,739   737,035 
Research and development costs  21,312   39,995   42,419   56,088   3,920   21,107 
Total operating expenses  844,919   904,458   1,603,061   1,298,129   1,109,659   758,142 
Loss from operations  (247,610)  (407,667)  (694,780)  (698,445)  (433,899)  (447,170)
Other income (expense), net                        
Gain on settlement of debt  -   -   10,000   -   -   10,000 
Gain on the forgiveness of PPP loan  159,600   -   159,600   - 
Interest expense  (1,795)  (6,375)  (5,606)  (12,290)  (10,193)  (3,811)
Other income (expense), net  157,805   (6,375)  163,994   (12,290)
Total other income (expense), net  (10,193)  6,189 
Loss before provision for income taxes  (89,805)  (414,042)  (530,786)  (710,735)  (444,092)  (440,981)
Provision for income taxes  -   -   -   -   -   - 
Net Loss $(89,805) $(414,042) $(530,786) $(710,735)
                
Basic and diluted loss per common share $(0.00) $(0.00) $(0.00) $(0.00)
Basic and diluted weighted average common shares outstanding  337,489,134   296,262,167   314,941,270   274,459,029 
Net loss $(444,092) $(440,981)
Other Comprehensive Income        
Unrealized gain on foreign currency contract 

1,587

  - 
Total Other Comprehensive income $1,587  $- 
Comprehensive loss $

(442,505

) $

(440,981

)
Basic loss per common share $(0.00) $(0.00)
Diluted loss per common share $(0.00) $(0.00)
Basic weighted average common shares outstanding  

401,483,605

   309,236,042 
Diluted weighted average common shares outstanding  

401,483,605

   309,236,042 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

5

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTSSTATEMENS OF CHANGES IN STOCKHOLDERS’STOCKHOLDERS EQUITY (DEFICIT)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,MARCH 31, 2022 AND 2021 AND 2020
(Unaudited)

(Unaudited)

 

  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  (DEFICIT) 
  Preferred Stock  Common Stock  

Common Stock

Payable

  

Additional

Paid-in

  Accumulated  

Total

Stockholder’s

 
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance, December 31, 2020  425,000  $425   306,185,206  $30,620   138,941  $14  $13,508,882  $(12,956,137) $583,804 
Common stock issued for Cash  -   -   27,500,000   2,750   -   -   272,250   -   275,000 
Common stock issued for service  -   -   3,116,279   312   -   -   124,688   -   125,000 
Stock option expense  -   -   -   -   -   -   218,505   -   218,505 
Common stock issued for conversion of convertible debentures and accrued interest  -   -   422,209   42   -   -   14,735   -   14,777 
Common stock issued for exercise of warrants                                    
Common stock issued for exercise of warrants, shares                                    
Incentive bonus shares to Chairman                                    
Incentive bonus shares to Chairman, shares                                    
Common stock issued for warrants                                    
Common stock issued for warrants,shares                                    
Net Loss  -   -   -   -   -   -   -   (440,981)  (440,981)
Balance, March 31, 2021 (unaudited)  425,000   425   337,223,694   33,724   138,941   14   14,139,060   (13,397,118)  776,105 
Common stock issued for conversion of convertible debentures and accrued interest  -   -   6,055,358   606   -   -   59,948   -   60,554 
Stock option expense  -   -           -   -   257,370   -   257,370 
Net Loss  -   -   -   -   -   -   -   (89,805)  (89,805)
Balance, June 30, 2021 (unaudited)  425,000  $425   343,279,052  $34,330   138,941  $14  $14,456,378  $(13,486,923) $1,004,224 
  Shares Outstanding   Par  Shares Outstanding   Par  Shares   Amount  Paid-in Capital  Comprehensive Loss   Accumulated Deficit  Stockholders Equity 
  Preferred Stock  Common Stock  Common Stock Payable  Additional  Accumulated Other     Total 
  Shares Outstanding  Par  Shares Outstanding  Par  Shares  Amount  Paid-in Capital  Comprehensive Income  Accumulated Deficit  Stockholders’ Equity 
Balance, December 31, 2021  425,000  $425   393,850,475  $39,386   138,941  $14  $17,132,434  $-  $(14,544,604)  2,627,655 
Shares issued for exercise of warrants  -   -   10,600,000   1,060   -   -   263,940   -   -   265,000 
Shares issued for services  -   -   1,206,318   120   -   -   35,380   -   -   35,500 
Stock Option Expense  -   -   -   -   -   -   230,034   -   -   230,034 
Net loss  -   -   -   -   -   -   -      (444,092)  (444,092)
Other Comprehensive Income  -   -   -   -   -   -   -   1,587   -   1,587 
Balance, March 31, 2022 (unaudited)  425,000  $425   405,656,793  $40,566   138,941  $14  $17,661,788  $1,587  $(14,988,696)  2,715,684 

 

  Preferred Stock  Common Stock  

Common Stock

Payable

  

Additional

Paid-in

  Accumulated  

Total

Stockholder’s

Equity

 
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  (Deficit) 
Balance, December 31, 2019  425,000  $425   225,540,501  $22,554   138,941  $14  $11,338,104  $(11,604,518) $(243,421)
Common stock issued for Cash  -   -   2,647,065   265   -   -   44,735   -   45,000 
Common stock issued for exercise of warrants  -   -   12,500,000   1,250   -   -   123,750   -   125,000 
Stock option expense  -   -   -   -   -   -   96,290   -   96,290 
Incentive bonus shares to Chairman  -   -   20,000,000   2,000   -   -   (720)  -   1,280 
Net Loss  -   -   -   -   -   -   -   (296,693)  (296,693)
Balance, March 31, 2020 (unaudited)  425,000   425   260,687,566   26,069   138,941   14   11,602,159   (11,901,211)  (272,544)
Common stock issued for Cash  -   -   20,000,000   2,000   -   -   498,000   -   500,000 
Common stock issued for warrants  -   -   10,000,000   1,000   -   -   99,000   -   100,000 
Common stock issued for service  -   -   5,000,000   500   -   -   222,000   -   222,500 
Incentive shares issued to Chairman and employees  -   -   5,322,602   532   -   -   233,968   -   234,500 
Stock option expense  -   -   -   -   -   -   218,505   -   218,505 
Net Loss  -   -   -   -   -   -   -   (414,042)  (414,042)
Balance, June 30, 2020 (unaudited)  425,000  $425   301,010,168  $30,101   138,941  $14  $12,873,632  $(12,315,253) $588,919 
  Preferred Stock  Common Stock  Common Stock Payable  Additional  Accumulated Other     Total 
  Shares Outstanding  Par  Shares Outstanding  Par  Shares  Amount  Paid-in Capital  Comprehensive Loss  Accumulated Deficit  Stockholders’ Equity 
Balance, December 31, 2020  425,000  $425   306,185,206  $30,620   138,941  $14  $13,508,882  $-  $(12,956,137) $583,804 
Balance  425,000  $425   306,185,206  $30,620   138,941  $14  $13,508,882  $-  $(12,956,137) $583,804 
Shares issued for cash  -   -   27,500,000   2,750   -   -   272,250   -   -   275,000 
Shares issued for services  -   -   3,116,279   312   -   -   124,688   -   -   125,000 
Stock Option Expense  -   -   -   -   -   -   218,505   -   -   218,505 
Shares issued for conversion of convertible debentures and accrued interest  -   -   422,209   42   -   -   14,735   -   -   14,777 
Net Loss  -   -   -   -   -   -   -   -  $(440,981)  (440,981)
Balance, March 31, 2021
(unaudited)		  425,000  $425   337,223,694  $33,724   138,941  $14  $14,139,060  $-  $(13,397,118) $776,105 
Balance  425,000  $425   337,223,694  $33,724   138,941  $14  $14,139,060  $-  $(13,397,118) $776,105 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

6

 

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIXTHREE MONTHS ENDED JUNE 30MARCH 31,

(unaudited)

(unaudited)

 2021  2020   2022   2021 
Cash flows from operating activities:        
Cash flows used in operating activities:        
Net loss $(530,786) $(710,735) $(444,092)  (440,981)
Adjustments to reconcile net loss to cash used in operating activities:                
Depreciation and amortization  13,396   10,409   33,859   6,230 
Amortization of debt discount  922   - 
Amortization of right-of-use asset  57,267   23,867 
Shares issued for services  125,000   222,500   35,500   125,000 
Incentive bonus shares issued to CEO and employees  -   235,780 
Reserve (recovery) for bad debt  28,554   (2,098)  -   1,101 
Stock Based Compensation - Options  475,875   314,795   230,034   218,505 
Amortization of right-of-use asset  51,581   48,082 
Gain on the settlement of debt  (10,000)  - 
Gain on the forgiveness of PPP loan  (159,600)  - 
Gain on Settlement of Debt  -   (10,000)
Reserve for slow moving inventory  

4,528

   - 
Changes in operating assets and liabilities                
Change in accounts receivable, net  (179,482)  8,294   (68,168)  (19,874)
Change in accounts receivable - related parties  (109,001)  (44,653)
Change in accounts receivable – related parties  161   5,915 
Change in inventory  (120,940)  (156,993)  (138,460)  (94,225)
Change in prepaid expenses and other current assets  (250,909)  (31,537)  (166,342)  (133,709)
Change in other assets  3,000   3,500   (3,733)  1,501 
Change in accounts payable and accrued liabilities  217,684   (121,057)  126,696   44,948 
Change in accounts payable - related parties  (7,787)  (98,778)
Change in customer deposits and unearned revenue  23,938   (77,543)  104,495   19,280 
Change in long term lease liability  (51,581)  (48,082)  (57,425)  (23,867)
Change in other liabilities  84,220   (15,392)  13,656)  36,200 
Change in accounts payable - related parties  (19,235)  (11,346)
Net cash used in operating activities  (396,838)  (463,508)  (290,337)  (251,455)
        
Cash flows from investing activities:        
Cash flows used in investing activities:        
Purchase of fixed assets  (14,591)  -   (2,884)  - 
Net cash used in investing activities  (14,591)  -   (2,884)  - 
        
Cash flows from financing activities:                
Proceeds from unit offering  275,000   545,000 
Proceeds from issuance of common stock  -   275,000 
Proceeds from exercise of Warrants  -   225,000   265,000   - 
Proceeds from debt  -   159,600 
Repayment on notes payable  (25,000)  (30,000)  -   (15,000)
Repayment of debt  (22,096)  (14,162)  (10,648)  (9,832)
Net cash provided by financing activities  227,904   885,138   254,352   250,168 
        
Net change in cash  (183,525)  421,630   (38,869)  (1,287)
        
Cash, beginning of period  345,187   70,620 
Cash, beginning balance  643,143   345,187 
Cash, end of period $161,662  $492,550  $604,274   343,900 
        
Supplemental disclosures of cash flow information:                
Cash Paid for Interest $4,344  $5,761  $3,454   7,088 
Cash Paid for Income Taxes $-  $-  $-   - 
        
Supplemental disclosure of non-cash financing activities:        
Fixed asset purchase down payment through the issuance of debt $37,098  $- 
Shares issued for the conversion of convertible debentures and accrued interest $75,331  $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

7

 


BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Note 1. Company Overview

 

Brownie’s Marine Group, Inc., a Florida corporation (hereinafter referred to as” the “Company,” or “BWMG” (the “Company”),(1) designs, tests, manufactures and distributes recreational hookah diving, scuba and water safety products through its wholly owned subsidiary, Trebor Industries, Inc., a Florida corporation, organizedincorporated in 1981 (“Trebor” or “BTL”), and(2) manufactures and sells high pressure air and industrial compressor packages, yacht based scuba air compressor and nitrox generation systems through its wholly owned subsidiary, Brownie’s High Pressure Compressor Services, Inc., a Florida corporation organizedincorporated in 2017 (“BHP”), and doing business as LW Americas (“LWA”). In addition, in December 2017, the Company formed and (3) develops and markets portable battery powered surface supplied air dive systems through its wholly owned subsidiary BLU3, Inc., a Florida corporation (“BLU3”), to develop. On September 3, 2021, the Company, entered into an Agreement and market portable battery powered surface supplied air dive systems. When used herein, the “Company” or “BWMG” includes Brownie’s Marine Group,Plan of Merger and Reorganization (the “Merger Agreement”) with Submersible Acquisition, Inc., a Florida corporation incorporated in 2017, and our wholly-owned subsidiaries Trebor, BHPwholly owned subsidiary of the Company (“Acquisition Sub”), Submersible Systems, Inc., a Florida corporation (“Submersible” or “SSI”), and BLU3.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 Submersible, 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.

Submersible is a manufacturer of high pressure tanks and redundant air systems for the military and recreational diving industries, based in Huntington Beach, California and sells its products to governments, militaries, private companies and the dive industry throughout the world.

On February 13, 2022 the Company filed with the Florida Department of State, the articles of incorporation for a new wholly owned subsidiary, Live Blue, Inc. (“LBI”). LBI was established to enter into a guided tour business model that will utilize the technology developed by BLU3 to provide new users and interested divers a guided tour experience. There was no activity in this subsidiary for the three months ended March 31, 2022.

 

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 20202021 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our 2020Annual Report on Form 10-K for the year ended December 31, 2021 for a broader discussion of our business and the risks inherent in such business.

 

8

Principles of Consolidation

 

The consolidated financial statements include the accounts of BWMGthe Company and its wholly owned subsidiaries, Trebor, BHP, BLU3, SSI and BLU3.LBI. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

 

Only highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents. These investments are stated at cost, which approximates market value.

 

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per EIN. At March 31, 2022 and December 31, 2021, the Company had approximately $118,292and $205,500, respectively in excess of the FDIC insured limit.

Foreign Currency Forward Contracts

We use foreign currency forward contracts to hedge specific forecasted transactions denominated in foreign currencies, manage exchange rate volatility in the translation of foreign earnings, and reduce exposures to foreign currency fluctuations of certain assets and liabilities denominated in foreign currencies.

The foreign currency forward hedging contracts outstanding as of March 31, 2022 have settlement dates within 6 months. The spot rate components of these foreign currency forward contracts are designated as cash flow hedges and any unrealized gains or losses are reported in other comprehensive income and reclassified to the Consolidated Statement of Income in the same periods during which the underlying hedged transactions affect earnings. If a hedging relationship is terminated with respect to a foreign currency forward contract, accumulated gains or losses associated with the contract remain in OCI until the hedged forecasted transaction occurs and are reclassified to operations in the same periods during which the underlying hedged transactions affect earnings.

Foreign currency forward contracts entered into to hedge cost of goods purchases were as follows as of March 31, 2022 and December 31, 2021:

         
  Notional Amount 
Foreign Currency 

March 31, 2022

(unaudited)

  December 31, 2021 
Euro $223,970                   - 
Total $223,970  $- 

Accounts receivable

 

Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge. The allowances for doubtful accounts totaled $45,42646,555 and $16,87246,555 at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.

 

Inventory

 

Inventory consists of the raw material, parts that make up the items that we manufacture, and finished goods. For the year ended December 31, 2020, the Company recorded reserves for obsolete or slow-moving inventory of approximately $227,657. NaNadditional reserve for obsolete or slow-moving inventory during the six months ended June 30, 2021.following:

 Schedule of Inventory

 June 30, 2021
(unaudited)		 

December 31,

2020

  March 31, 2022
(unaudited)		 December 31,
2021		 
          
In-Transit inventory $8,300  $130,000 
Raw materials $508,094  $408,841   1,029,901   1,144,190 
Work in process  95,334   99,958 
Finished goods  476,637   454,950   895,657   521,212 
Inventory, net $984,731  $863,791  $2,029,192  $1,895,260 

8

Revenue Recognition

 

We account for revenues in accordance with Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers” and all the related amendments. This standards core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to receive.

 

We recognize the sale of products under single performance obligations upon shipment of the units as that is when ownership is transferred and our performance is completed. Revenues from repair and maintenance activities is recognized when the repairs are completed and the units have been shipped.

 

Lease Accounting

 

We account for leases in accordance with ASC 842, “Leases”. The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations.

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of June 30, 2021.March 31, 2022. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

9

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

For the three and six months ended June 30, 2021March 31, 2022 the lease expenses were approximately $32,900 64,200and $65,700, , respectively, and approximately $43,000 and $78,00032,800 for the three and six months ended June 30, 2020,March 31, 2022 and 2021, respectively. Cash paid for operating liabilities for the sixthree months ended June 30, 2021March 31, 2022 was approximately $65,40064,400 and approximately $64,00032,700 for the sixthree months ended June 30, 2020.March 31, 2021.

 

Supplemental balance sheet information related to leases was as follows:

 Schedule of Supplemental Balance Sheet Information

Operating Leases June 30, 2021  

March 31, 2022

(unaudited)

 
Right-of-use assets $395,400  $397,208 
        
Current lease liabilities $112,771  $208,623 
Non-current lease liabilities  282,629   189,134 
Total lease liabilities $395,400  $397,757 

 

Stock-Based Compensation

 

We account for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee and non-employee are required to provide service in exchange for the award, usually the vesting period.

 

9

Loss per common share

 

Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. At June 30,March 31, 2022 and March 31, 2021, and June 30, 2020, 205,855,020244,052,947 and 202,389,986209,753,340, respectively, of potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible notes, outstanding warrants, outstanding stock options and the conversion of preferred stock.

Recent accounting pronouncements

 

ASU 2019-12 Income Taxes (Topic 740)

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The recent accounting standardsCompany determined that have been issued or proposed by the Financial Accounting Standards Board (FASB) or other standards-setting bodies that do not require adoption until a future date are not expected to have a materialstandard has no impact on theits consolidated financial statements upon adoption.and related disclosures.

 

Note 3. Going Concern

 

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. For the sixthree months ended June 30, 2021,March 31, 2022, the Company incurred a net loss of $530,786444,092 , of which $475,875265,534 is non-cash stock related compensation.compensation and shares issued for service. At June 30, 2021,March 31, 2022, the Company hashad an accumulated deficit of $13,486,92314,988,696. Despite a working capital surplus of approximately $798,1381,702,817 at June 30, 2021,March 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 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. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

10

 

Note 4. Related Party Transactions

 

The Company sells products to three entities, Brownies Southport Divers, Brownies Yacht Toys and Brownies Palm Beach Divers, companies owned by the brother of Mr. Robert M. Carmichael, the Company’s President and Chief Financial Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volumes. These entities accounted for 15.113.8% and 21.2% and 14.9% of the net revenues for the three months ended June 30March 31, 2022 and March 31, 2021, and 2020, respectively, and 20.9% and 18.1%  for the six months ended June 30, 2021 and 2020 respectively.respectively. Accounts receivable from these entities totaled $153,21475,066 and $44,32375,792, respectively, at June 30, 2021March 31, 2022 and December 31, 2020.2021, respectively.

 

The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”)BGL and 940 Associates, Inc. (“940 A”),A, entities wholly-owned by Mr.Robert Carmichael. Terms of sale are more favorable than those extended to BWMG’sthe Company’s regular customers, but no more favorable than those extended to Brownie’sthe Company’s strategic partners. Accounts receivable from the combinedthese entities and Mr. Carmichael totaled $23,4312,074 and $23,3211,509 at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.

 

The Company had accounts payable to related parties of $94,57318,032 and $102,36037,267 at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The balance payable at June 30, 2021March 31, 2022 is comprised of $5,000 due to Robert Carmichael, and $9,63913,032 due to 940 Associates and $79,934 due to BGL. At December 31, 20202021 this account was comprised of $5,000 due to Robert Carmichael, and $97,36032,267 due to BGL.

 

The Company has Exclusive License Agreementsexclusive license agreements with 940 A to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. This Exclusive License Agreement providesagreements. The agreements provide that the Company will pay 940 A 2.5% of gross revenues per quarter as a royalty. Total royalty expense for the three months ended June 30,March 31, 2022 and 2021 and 2020 were $28,01312,789 and $17,916, 11,593respectively and $39,606 and $22,766 for the six months ended June 30, 2021 and 2020, respectively., respectively. The accrued royalty for June 30, 2021 isMarch 31, 2022 was approximately $22,5107,700 and it is included in other liabilities.

 

10

On March 25, 2021,February 2, 2022, the Company issued 27,500,000 shares of common stock to Mr. Charles F. Hyatt, a memberdirector, 10,000,000 shares from the exercise of our Board of Directorsa warrant at $0.025 per share in consideration of $275,000250,000.

 

AsOn February 2, 2022, the Company issued Grace Hyatt, the adult child of June 30, 2021, options to purchaseCharles Hyatt, a director, 25,000,000600,000 shares from the exercise of common stock held by Mr. Carmichael vesteda warrant at $0.025 per share in accordance with Carmichael Option agreement as further discussed in Note 6consideration of these financial statements.$15,000.

 

Note 5. Convertible DebenturesPromissory Notes and Notes Payable

 

Convertible DebenturesPromissory Notes

 

Convertible debenturespromissory notes consisted of the following at June 30, 2021:March 31, 2022:

 Schedule of Convertible Debentures

Origination
Date		 Maturity
Date		 Interest
Rate		 Origination
Principal
Balance		 Original
Discount
Balance		 Period
End
Principal
Balance		 Period
End
Discount
Balance		 Period
End
Balance,
Net		 Accrued
Interest
Balance		 Reg.  Maturity
Date		 Interest
Rate		 Origination
Principal
Balance		 Original
Discount
Balance		 Period
End
Principal
Balance		 Period
End
Discount
Balance		 Period
End
Balance,
Net		 Accrued
Interest
Balance		 Reg. 
8/31/11 8/31/13  5%  10,000   (4,286)  -   -   -   -   (1)
12/01/17 12/31/21  6%  50,000   (12,500)  -   -   -   -   (2) 12/31/21  6%  50,000   (12,500)  -   -   -   -   (1)
12/05/17 12/31/21  6%  50,000   (12,500)  50,000   -   50,000   9,331   (3) 12/31/21  6%  50,000   (12,500)      -           (2)
9/03/21 9/03/24  8%  346,500   (12,355)  346,500   (9,727)  336,773   16,170   (3)
9/03/21 9/03/24  8%  3,500   (125)  3,500   (97)  3,403   140   (4)
               $50,000  $—  $50,000  $9,331                    $350,000  $(9,824) $340,176  $16,310     

 

(1)On December 1, 2017, the Company issued a 6% secured convertible promissory note in the principal amount of $50,000, initially due December 1, 2018, subject to extension. The note is secured by the assets of the Company borrowedand is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert Carmichael.

The conversion price of the note initially ranged from $10,0000.02 per share if converted in exchange for a convertible debenture (the “Hoboken Convertible Note”).the first year to $0.125 per share if converted in year five. The holder at its optionnoteholder may convert all or part ofthe note at any time until the note plus accrued interest intois paid in full. Various other fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the maturity date of the note was extended for one year to December 31, 2019 with a reduction in the conversion price of to $300.01 % discount as determined from the average four highest closing bid prices over the preceding 5 trading days.per share. The Company valuedrecorded a loss on extinguishment of debt of $32,000 upon the beneficialmodification of conversion feature ofprice. On June 10, 2021, the convertible debenture at $4,286, which was accreted to interest expense over the period of the note. On February 22, 2021, this note and accrued interest of $4,77710,554 were converted by the holder forinto 422,2096,055,358 shares of common stock in accordance with the terms of the note.

(2)On December 1,5, 2017, the Company entered into a $50,0006% principal amount 6% secured convertible promissory note in the principal amount of $50,000, initially due December 1,4, 2018, subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, and is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr.Robert Carmichael.

11

 The conversion price under the note initially ranged from $0.02per share if converted in the first year to $0.125per share if converted in year five. The lender may convert at any time until the note plus accrued interest is paid in full. Various other fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the maturity date of the note was extended for one additional year to December 31, 2019 with a reduction in the conversion price to $0.01 per share. The Company recorded a loss on extinguishment of debt of $32,000 upon the modification of conversion price. On June 10, 2021, this note and accrued interest of $10,554 were converted by the holder for 6,055,358 shares of common stock in accordance with the terms of the note.

(3)On December 5, 2017, the Company entered into a $50,000 principal amount 6% secured convertible promissory note, initially due December 4, 2018, subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr. Carmichael.
The conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted in year five. The lender may convert at any time until the note plus accrued interest is paid in full. Various other fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the note was extended for one additional year to December 31, 2019 with a reduction in the conversion price to $0.01per share. The Company recorded a loss on extinguishment of debt of $99,000upon the modification of conversion price. The maturity date was further extendedOn August 18, 2021, this note and accrued interest of $11,145 were converted by the holder into 6,114,516 shares of common stock in accordance with the terms of the note
(3)On September 3, 2021, the Company issued a three-year 8% convertible promissory note in the principal amount of $346,550 to Summit Holding V, LLC as part of the acquisition of SSI. Payments on the note are to be equivalent to December 31, 202150%. of the adjusted net profit of SSI payable calendar quarterly. Interest is payable in shares of common stock of the Company at a conversion price of $0.051272 per share, to be paid quarterly. The note holder may convert outstanding principal and interest at a conversion price of $0.051272 per share at any time during the term of the note. The Company recorded $12,355 for the beneficial conversion feature.

 

11

Notes Payable

 

Gonzales Note

The Company issued an unsecured, non-interest-bearing note of $200,000 with Mr. Tom Gonzales on July 1, 2013. The note is payable upon demand. The Company made repayments totaling $25,000 during the six months ended June 30, 2021. The note balance was $15,000 at June 30, 2021 and $40,000 December 31, 2020.

Hoboken Note

The Company issued an unsecured, non-interest-bearing note of $10,000 with Hoboken Street Association on October 15, 2016. The note was forgiven as part of the conversion of the Hoboken Convertible Note on February 22, 2021 as described above. The note balance as of June 30, 2021 and December 31, 2020 was $0 and $10,000, respectively.

(4)On September 3, 2021, the Company issued a three-year 8% promissory note in the principal amount of $3,500 to Tierra Vista Partners, LLC as part of the acquisition of SSI. Payments on the note are to be equivalent to 50% of the adjusted net profit of SSI payable calendar quarterly. Interest is payable in common stock of the Company at a conversion price of $0.051272 per share, to be paid quarterly. The note holder may convert outstanding principal and unpaid interest at a conversion price of $0.051272 at any time up to the maturity date of the note. The Company recorded $125 for the beneficial conversion feature.

 

Loan Payable

 

Marlin Note

 

On September 30, 2019 the Company, viathrough its wholly owned subsidiary BLU3, executed an equipment finance agreement for the purchase of certain plastic molding equipment through Marlin Capital Solutions. The initial principal balance was $96,725payable overin 36equal monthly installments of $3,144(the (the “Marlin Note”). The equipment finance agreement contains customary events of default. The loan balance was $44,013 21,256as of June 30, 2021March 31, 2022.

 Schedule of Future Amortization of Loans Payable

 Payment Amortization  Payment Amortization 
2021 (6 months remaining)  16,918 
2022  27,095 
2022 (9 months remaining)  21,256 
2023      - 
2024      - 
2025  - 
2025 and thereafter      - 
2026  - 
Total Loan Payments $44,013  $21,256 
Current portion of Loan payable  (34,745)  (21,256)
Non-Current Portion of Loan Payable $9,268  $- 

12

Mercedes Benz Note

 

On August 21, 2020, the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van. The installment agreement was for $55,841with a 0zero interest rate payable over 60months with a monthly payment of $931and is personally guaranteed by Mr.Robert Carmichael. The first payment was due on October 5, 2020.2020. The loan balance as of June 30, 2021March 31, 2022 is $47,15639,399.

 Schedule of Future Amortization of Loans Payable

 Payment Amortization  Payment Amortization 
2021 (6 months remaining) $5,584 
2022 $11,168 
2022 (9 months remaining) $8,379 
2023 $11,168  $11,168 
2024 $11,168  $11,168 
2025 and thereafter $8,068  $8,684 
Total note payments $47,156  $39,399 
Current portion of note payable $(11,168) $(11,168)
Non-Current Portion of notes payable $35,988  $28,231 

 

Navitas Note

 

On May 19, 2021 the Company, viathrough its wholly owned subsidiary BLU3, executed an equipment finance agreement financed for the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $79,309payable overin 60equal monthly installments of $1,611(the (the “Navitas Note”). The equipment finance agreement contains customary events of default. The agreement was not fully funded as of JuneSeptember 30, 2021. Navitas has funded $37,098 for the down payment of an equipment purchase and the balance of the note is $36,021 as of June 30, 2021.

 Schedule of Future Amortization of Loans Payable

 Payment Amortization  Payment Amortization 
2021 (6 months remaining)  8,070 
2022  17,464 
2022 (9 months remaining)  10,873 
2023  10,487   15,342 
2024  16,629 
2025  18,204 
2026  

6,007

 
Total Note Payments $36,021  $67,055 
Current portion of Note payable  (19,335)  (14,443)
Non-Current Portion of Note Payable $16,686  $52,612 

12

PPP LoanAlliance Lease

 

On January 19, 2022, SSI entered into a capital lease with Alliance Funding Group (“lessor”) to secure a new piece of essential equipment for its operations. The lease has a 36month term with a monthly payment of $3,522. At the end of the lease SSI has the option to purchase the equipment for $3,522 plus applicable taxes. The total purchase price of the equipment was $108,675.The vendor has determined that they are unable to supply the equipment, and the purchase order for this equipment was cancelled in May, 12,2022. The lessor initially funded fifty percent of the purchase price or approximately $54,000directly to the vendor which the vendor has committed to return once properly instructed by the lessor. For the three months ending March 31, 2022, the Company made payments against this lease totaling approximately $8,600 which are recorded as deposits.

Note 6. Business Combination

Merger with Submersible Systems, Inc.

On September 3, 2020, we received anthe 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 loan from South Atlantic Bankconvertible promissory notes in the aggregate principal amount of $159,600350,000 (the “SBA Loan”), underin exchange for all of the Paycheck Protection Program (“PPP”), which was established underequity of SSI. The 27,305,442 shares are subject to leak out agreements whereby the recently enacted Coronavirus Aid, Relief,shareholders are unable to sell or transfer shares based upon the following:

Summary of Holding Period and Economic Security Act (the “CARES Act”) administeredShares Eligible To Sold

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

The leak-out restriction may be waived by the U.S. Small Business Administration. The intentCompany, upon written request by a Seller, if the Company’s common stock is trading on the NYSE American or Nasdaq, and purposehas a rolling 30-day average trading volume of 50,000 shares per day; provided, however, that (i) only up to 5% of the PPP is to support companies, duringprevious days total volume can be sold in one day and (ii) only through executing trades “On the COVID-19 pandemic, by providing funds for certain specified business expenses, with a focus on payroll. As a qualifying business as defined by the SBA, we used the proceeds from this loan to primarily help maintain our payroll and cover our rent and utilities as we navigated our business through the lockdowns associated with the COVID-19 pandemic until our return to normal operations earlier in 2020.Offer.”

 

The termtransaction costs associated with the Merger were $65,000 in legal fees paid in $40,000 in cash, and 1,190,476 shares of the note is two years, though it may be payable sooner in connectionCompany’s common stock with an eventa fair value of default under the note. The SBA Loan carries a fixed interest rate$55,952.

Fair Value of one percent per year,Consideration Transferred and a monthly paymentRecording of $Assets Acquired8,983, with the first payment due seven monthsfrom the date of initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans made under the PPP may be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. We used the SBA Loan for qualifying expenses and have applied for forgiveness of the SBA Loan in accordance with the terms of the CARES Act. On April 28, 2021, the Company was notified by South Atlantic Bank that the SBA Loan was forgiven in full under the terms of the CARES Act. The company recorded the forgiveness as a gain on the forgiveness of the PPP loan on our condensed consolidated income statement.

 

The note balance asfollowing table summarizes the acquisition date fair value of June 30, 2021the consideration paid, identifiable assets acquired, and December 31, 2020 was $liabilities assumed, including an amount for goodwill:

0Schedule of Recognized Identified Assets Acquired and $159,600Liabilities Assumed, respectively.

     
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 

 

13

 

The value of the stock was calculated based on the volume weighted average price (“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 March 31, 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.

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.

Schedule of Business Acquisition, Pro Forma Information

  

Three months ended

March 31, 2021

 
Revenue $1,282,571 
Net Loss $(494,619)
Basic and Diluted Loss per Share $(0.00)
Basic and Diluted Weighted Average Common Shares Outstanding  337,731,960 

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.

Note 7. Goodwill and Intangible Assets, Net

The following table sets for the changes in the carrying amount of the Company’ Goodwill for the quarter ended March 31, 2022

Summary of Changes in Goodwill

  2022 
Balance, January 1 $249,986 
  - 
Balance, March 31 $249,986 

14

The following table sets for the components of the Company’s intangible assets at March 31, 2022:

Summary of Intangible Assets

  Amortization Period (Years)  Cost  Accumulated Amortization  Net Book Value 
             
Intangible Assets Subject to amortization                
Trademarks  15  $121,000  $(4,653) $116,347 
Customer Relationships  10   600,000   (35,000)  565,000 
Non-Compete Agreements  5   22,000   (2,567)  19,433 
Total     $743,000  $(42,220) $700,780 

The aggregate amortization remaining on the intangible assets as of March 31, 2022 is a follows:

Schedule of Estimated Intangible Assets Amortization Expenses

 Intangible Amortization 
2022 (9 months remaining) $54,350 
2023  72,467 
2024  72,467 
2025  72,467 
2026  71,367 
Thereafter  357,662 
Total $700,780 

 

Note 6.8. Shareholders’ Equity

 

Common Stock

 

On February 22, 2021,January 17, 2022, the Company issued a law firm 422,2091,000,000 shares of common stock related to the conversion ofwith a convertible debenture and accrued interestfair market value of $14,77727,500. as part of the agreed upon compensation for a representation agreement.

 

On March 1, 2021,January 31, 2022, the Company issued a consultant 3,000,000121,212 shares of its common stock related to investor relation services atwith a fair market value of $120,0004,000. for consulting services related to the dive industry.

 

On March 25, 2021,February 2, 2022, the Company issued 27,500,000 shares of common stock to Mr. Charles F. Hyatt, a memberdirector, 10,000,000 shares from the exercise of our Board of Directors,a warrant at $0.025 per share in consideration of $275,000250,000.

 

On February 25, 2021,2, 2022, the Company issued Grace Hyatt, the adult child of Charles Hyatt, a director, 116,279600,000 shares from the exercise of common stock to a consultant with a fair valuewarrant at $0.025 per share in consideration of $5,00015,000 for professional business services..

 

On June 10 2021,February 28, 2022, the Company issued a consultant, 6,055,358 85,106shares of common stock with a fair market value of $4,000 for consulting services related to the conversion of a convertible debenture and accrued interest of $60,554.dive industry.

 

Preferred Stock

 

During the second quarter of 2010, the holderholders of the majority of the Company’s outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation authorizing the issuance of 10,000,000 shares of blank check preferred stock. The blank check preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by our Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. In April 2011, the Board of Directors designated 425,000 shares of the blank check preferred stock as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into a share of the Company’s common stock at any time at the option of the holder at a conversion price of $18.23 per share. Holders of shares of Series A Convertible Preferred Stock are entitled to 250 votes for each share held. The Company’s common stock and Series A Convertible Preferred Stock vote together as on any matters submitted to our shareholders for a vote. As of June 30, 2021,March 31, 2022, and December 31, 2020,2021, the 425,000 shares of Series A Convertible Preferred Stock are owned by Mr.Robert Carmichael.

15

 

Equity Incentive Plan

 

On May 26, 2021 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, Stock Optionsstock options may be granted to Employees, Directors,employees, directors, and Consultantsconsultants in the form of Incentive Stock Optionsincentive stock options or Non-statutory Stock Options, Stock Purchase Rights,non-qualified stock options, stock purchase rights, time vested and/performance invested Restricted Stock,restricted stock, and Stock Appreciation Rightsstock appreciation rights and Unrestricted Sharesunrestricted shares may also be granted under the Plan. The maximum number of shares that may be issued under the Plan shall be 25,000,000 shares. Common Stock to be issuedshares are reserved for issuance under the Plan may be either authorized and unissued or shares held in treasury by the Company.Plan. The term of the Plan shall be is ten years.years.

 

Equity Compensation Plan Information as of June 30, 2021:March 31, 2022:

 Schedule of Equity Compensation Plan Information

  Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)  Weighted – average exercise price of outstanding options, warrants and rights (b)  Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c) 
Equity Compensation Plans Approved by Security Holders  1,125,000  $.036   23,875,000 
Equity Compensation Plans Not Approved by Security Holders  —   —   — 
Total  1,125,000  $.036   23,875,000 

14

  Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)  Weighted – average exercise price of outstanding options, warrants and rights (b)  Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c) 
Equity Compensation Plans Approved by Security Holders  2,200,000  $.0431   22,800,000 
Equity Compensation Plans Not Approved by Security Holders  —   —   — 
Total  2,200,000  $.0434   22,800,000 

 

Options

Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 shares of common stock to Mr. Blake Carmichael. The options were issued pursuant to a stock option grant agreement and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $43,575 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%. These stock options were fully expensed as of December 31, 2020.

Effective July 29, 2019, the Company issued Mr. Carmichael options to purchase up to 20,761,904 shares of common stock. The options were issued pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $87,147 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.01%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%. These stock options were fully expenses during the year ending December 31, 2020.

Effective January 6, 2020, the Company issued options to purchase up to 2,000,000 shares of common stock to Mr. Jeffrey Guzy, then a member of the Board of Directors of the Company. The options were issued pursuant to a stock option grant agreement and is exercisable at $0.0229 per share for a period of three years from the date of issuance. The options were immediately vested. The fair value of the options on the date of the grant was $40,107 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 1.55%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 250%. These stock options were fully expenses during the year ending December 31, 2020.

Effective January 11, 2020, the Company issued options to purchase up to 2,000,000 shares of common stock to BizLaunch Advisors, LLC. The options were issued pursuant to a professional services agreement and are exercisable at $0.0229 per share for a period of three years from the date of issuance. The options were immediately vested. The fair value of the options on the date of the grant was $40,097 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 1.54%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 250%. These stock options were fully expenses during the year ending December 31, 2020.

 

On April 14, 2020, the Company entered into a Non-Qualified Stock Option Agreement with Mr.Richard Carmichael (the “Carmichael Option Agreement”). Under the terms of the Carmichael Option Agreement, as additional compensation, the Company granted Mr. Carmichael an option (the “Carmichael Option”) to purchase up to an aggregate of 125,000,000 shares of the Company’s common stock at an exercise price of $.0450.045 per share, of which the right to purchase 75,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 50,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

 

●the right to purchase 25,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively, “Net Revenues”), in excess of $3,500,000 in the aggregate over four consecutive fiscal quarters commencing May 1, 2020 and ending on April 30, 2023 (the “Net Revenue Period”);
  
●the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $7,000,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period; and
  
●the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $10,500,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

 

1516

 

 

The Carmichael Option Agreement provides that the Carmichael Option is exercisable by Mr. Carmichael on a cashless basis. The Carmichael Option is not transferrable by Mr. Carmichael, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Carmichael Option vests, it is exercisable by Mr. Carmichael for 90 days. Any portion of the Carmichael Option which does not vest during the Net Revenue Period lapses and Mr. Carmichael has no further rights thereto.

 

The fair value of the Carmichael Option on the date of the grant was $4,370,109using the Black-Scholes option pricing model with the following assumptions: i)(i) risk free interest rate of .26%.26%, ii)(ii) expected life of 1.5years, iii)(iii) dividend yield of 0%0%, iv)and (iv) expected volatility of 320%320%. The Company analyzed the likelihood that the vesting qualifications would be met. As of June 30,December 31, 2021, 25,000,000of options were vested as the targeted net revenues were reached and 3 quarters of Tranche 2 was also met and fully expensed. The second net revenueexpensed through December 31, 2021. For the three months ended March 31, 2022 the Company revenues reached the target was 25% reached. Therefore, stockrevenues for Tranche 2, and an additional 25,000,000 shares of the option vested. Stock option expense recognized during the sixthree months ended June 30, 2021March 31, 2022 for this option was $437,011218,505.

 

On November 5, 2020, the Company entered into a Non-Qualified Stock Option agreement with Christopher Constable the(the “Constable Option Agreement”) as part of his employment agreement. Under the termsAs part of the option agreement,Constable Option Agreement, the Company granted Mr. Constable a 5 yearan option (the “Bonus Option”) to purchase up to an aggregate of 5,434,783 30,000,000shares of the Company’s common stock at an exercise price of $.01840.0184 per share, of which the right to purchase 10,000,000, (the “Compensation Options”). The Compensation Options were immediately vested. The fair value shares of common stock is subject to vesting upon the achievement of the options on the datenet revenue milestones set forth below (the “Net Revenue Portion of the grant was $106,199 usingOption”) and the Black-Scholes option pricing model withright to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the following assumptions: i) risk free interest ratelisting of .16%, ii) expected lifethe Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of 2.5 years, iii) dividend yield of 0%, iv) expected volatility of 341%. These stock options were fully expensedthe Option shall vest as of December 31, 2020.follows:

 

As part of the Constable Option Agreement, the Company also granted Mr. Constable an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $.01840.0184 per share, of which the right to purchase 10,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

 

●the right to purchase 2,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively, “Net Revenues”), in excess of $5,000,000 in the aggregate over four consecutive fiscal quarters commencing January 1, 2021 and ending on April 30, 2023 (the “Net Revenue Period”);

●the right to purchase an additional 3,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $7,500,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period; and
  
●the right to purchase an additional 5,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues in excess of $10,000,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

 

The Constable Option Agreement provides that the Compensation Options and Bonus Options are exercisable by Mr. Constable on a cashless basis. The Constable Option is not transferrable by Mr. Constable, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Constable Option vests, it is exercisable by Mr. Constable for four years.years.

 

The fair value of the Bonus Options on the date of the grant was $578,082 using the Black-Scholes option pricing model with the following assumptions: i)(i) risk free interest rate of .14%.14%, ii)(ii) expected life of 2.0 years,, iii) (iii) dividend yield of 0%, iv)and (iv) expected volatility of 312.2%. The Company analyzed the likelihood that the vesting qualifications would be met, and as of June 30,March 31, 2022, through December 31, 2021 it was deemed that the Company met the qualifications for 4 quarters for the first tranche of options, and 3 quarters for Tranche 2 and expensed a total of $82,734. For the first quarter, 2022 the Company did not meet the qualifications to vest for an additional quarter, therefore, there was a 5.8% chance that the options would vest. Therefore,no stock option expense recognized duringfor the sixthree months ended June 30, 2021 for this option was $34,067.March 31, 2022.

 

1617

 

 

EffectiveOn June 14, 2021, the Company issued options to purchase up to an aggregate of 1,125,000 shares of common stock to various employees under the Plan. The options were issued pursuant to a stock option grant agreements and are exercisable at $0.036 per share for a period of four years from the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $38,369 using the Black-Scholes option pricing model with the following assumptions: i)(i) risk free interest rate of .21%, ii)(ii) expected life of 2 years, iii)years, (iii) dividend yield of 0%, iv)(iv) expected volatility of 304.77%. The stock options expense recognized for the sixthree months ended June 30, 2021March 31, 2022 was $4,7974,142.

On August 1, 2021 as part of the Blake Carmichael Employment Agreement (as defined below), the Company granted Blake Carmichael a 5 year option to purchase 3,759,400 shares of the Company’s common stock at an exercise price of $0.0399, (the “BC Compensation Options”). The BC Compensation Options vest 33.3% upon the execution of the agreement, 33% at the first anniversary date and 33% upon the second anniversary date. The fair value of the options on the date of the grant was $149,076 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .25%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 346.36%. The Company expensed $49,692 as of December 31, 2021, and did not recognize any additional expense for the three months ended March 31, 2022.

As part of the Blake Carmichael Agreement, the Company granted Blake Carmichael a 5-year option to purchase up to 18,000,000 shares of common stock to vest annually on a contract year basis, based upon the achievement of certain revenue and EBITA financial metrics. The fair value of the BC Bonus Options was $713,777 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.25%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, (iv) expected volatility of 346.36%, and (v) exercise price of 0.0399 per share. The Company analyzed the likelihood that the vesting qualifications would be met, and as of March 31, 2022, through December 31, 2021 it was deemed that it was likely that 500,000 shares would be issued at the end of contract year 1, and this was fully expensed as of December 31, 2021. For the three months ended March 31, 2022 there were no material changes to vesting qualifications and no stock option expense was recognized.

During the third quarter of 2021 the Company issued options to purchase up to an aggregate of 175,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $.044 to $.049 per share for a periods ranging from three to four yearsfrom the date of issuance, with quarterly vesting periods over oneto two years. The fair value of the options totaled $7,149 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate from .155% to .20%, (ii) expected life of 1.5 to 2 years, (iii) dividend yield of 0%, and (iv) expected volatility of 249.38% to 287.12%. The stock options expense recognized for the three months ended March 31, 2022 was $1,494.

On September 3, 2021, the Company issued options to purchase up to an aggregate of 300,000 shares of common stock to Christeen Buban, President of SSI, under the Plan. The options were issued pursuant to the Buban Employment Agreement and a stock option grant agreement and are exercisable at $0.053 per share for a period of five years from the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $15,814 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.315%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 339.21%. The stock options expense recognized for the three months ended March 31, 2022 was $1,977.

As part of the Buban Agreement, the Company is also obligated to enter into a Non-Qualified Stock option agreement (the “Buban Bonus Options”) that will grant Ms. Buban a 5-year option to purchase up to 7,110,000 shares which vest annually on a contract year basis, based upon the achievement of certain revenue and EBITA financial metrics. The fair value of the Buban Bonus Options was $374,786 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .3150%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, (iv) expected volatility of 339.21%, and (v) exercise price of $0.0531 per share. The measurement period for these options began on September 3, 2021. The company analyzed the likelihood that vesting qualifications would be met during the contract year and deemed that there was no option expense to be recognized for the three months ended March 31, 2022.

18

On September 3, 2021 the Company issued options to purchase up to an aggregate of 500,000 shares of common stock to various employees of SSI under the Plan. The options were issued pursuant to a stock option grant agreement and is exercisable at $0.0531 per share for a period of four yearsfrom the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $25,201 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.21%, (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 276.1%. The stock options expense recognized for the three months ended March 31, 2022 was $3,150.

During the fourth quarter of 2021 the Company issued options to purchase up to an aggregate of 100,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $.040 to $.0419 per share for a period of four yearsof from the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $3,863 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .204% (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 249.38% to 287.12%. The stock options expense recognized for the three months ended March 31, 2022 was $483.

On November 5, 2021 the Company entered into a non-qualified stock option agreement with Christopher Constable (the “Constable Option Agreement”) as part of his employment agreement. Under the terms of the option agreement, the Company granted Mr. Constable a 5 year option to purchase 2,403,846 shares of the Company’s common stock at an exercise price of $0.041 (the “Compensation Options”). The Compensation Options were immediately vested. The fair value of the options on the date of the grant was $98,976 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .53%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 269.12%. This stock option was fully expensed as of December 31, 2021.

On January 21, 2022 the Company issued options to purchase up to an aggregate of 75,000 shares of common stock to an employee under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at $0.032 per share for a period of four yearsfrom the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $2,259 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 1.016% (ii) expected life of 2 years, (iii) dividend yield of 0%, and (iv) expected volatility of 266.8%. The stock options expense recognized for the three months ended March 31, 2022 was $283.

 

A summary of the Company’s outstanding stock options as of December 31, 2020,2021, and changes during the sixthree months ended June 30, 2021March 31, 2022 is presented below:

 Schedule of Option Activity

 Number of
Options		 Weighted
Average
Exercise Price		 Weighted
Average
Remaining
Contractual
Life in Years		 Aggregate
Intrinsic
Value		  Number of
Options		 Weighted
Average
Exercise Price		 Weighted
Average
Remaining
Contractual
Life in Years		 Aggregate
Intrinsic
Value		 
Outstanding - December 31, 2020  199,730,020  $0.0323   2.84  $168,892 
Outstanding – December 31, 2021  233,128,266  $0.0362   2.23  $795,201 
Granted  1,125,000   0.0360           75,000   0.0320         
Forfeited  -   -                         
Exercised  -   -           -   -         
Outstanding – June 30, 2021 (unaudited)  200,855,020  $0.0351   2.35     
Exercisable - June 30, 2021 (unaudited)  69,870,645  $0.0280   2.65  $909,994 
Outstanding – March 31, 2022 (unaudited)  233,203,266  $0.0362   1.98     
Exercisable – March 31, 2022 (unaudited)  101,333,874  $0.0326   1.81  $1,063,526 

Warrants

On September 1, 2021, the Company issued Mr. Charles F. Hyatt, a member of our Board of Directors, 10,000,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $0.025 per share in consideration of $250,000. The Company did not pay any fees or commissions in connection with the sale of the unit.

On September 1, 2021, the Company issued Ms. Grace Hyatt, the adult child of a member of our Board of Directors, 600,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $0.025 per share in consideration of $15,000. The Company did not pay any fees or commissions in connection with the sale of the unit.

In September, 2021, the Company issued 4,000,000 units of the securities of the Company to three accredited investors, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $0.025 per share in consideration of $100,000. The Company did not pay any fees or commissions in connection with the sale of the unit.

19

On February 2, 2022, the Company issued Charles Hyatt, a director, 10,000,000 shares from the exercise of a warrant at $0.025 per share in consideration of $250,000.

On February 2, 2022, the Company issued Grace Hyatt, the adult child of Charles Hyatt, a director, 600,000 shares from the exercise of a warrant at $0.025 per share in consideration of $15,000.

A summary of the Company’s warrants as of December 31, 2021 and changes during the three months ended March 31, 2022 is presented below:

Schedule of Warrants Activity

  Number of Warrants  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life in Years  Aggregate Intrinsic Value 
Outstanding – December 31, 2021  14,600,000  $0.025   1.67  $153,300 
Granted                
Exercised  (10,600,000) $0.025         
Forfeited or Expired  -             
Outstanding – March 31, 2022  4,000,000  $0.025   1.44     
Exercisable – March 31, 2022  4,000,000  $0.025   1.44  $64,400 

 

Note 7.9. Commitments and contingencies

 

On August 14, 2014, the Company entered into a thirty-seven-month term lease for its facilities in Pompano Beach, Florida, commencing on September 1, 2014. Terms included payment of a $5,367 security deposit; base rent of approximately $4,000 per month over the term of the lease plus sales tax; and payment of 10.76% of annual operating expenses (i.e. common(common areas maintenance), which was approximately $2,000 per month subject to periodic adjustment. On December 1, 2016, we entered into an amendment to the initial lease agreement, commencing on October 1, 2017, extending the term of the lease for an additional eighty-four months, expiring September 30, 2024. The base rent was increased to $4,626 per month with a 3% annual escalation throughout the amended term.

On January 4, 2018, the Company entered into a sixty-one month lease renewal for its facility in Huntington Beach, California commencing on February 1, 2018. Terms included base rent of approximately $9,300 per month for the first 12 months with an annual escalation clause of 2.5%. The Company paid a security deposit of $8,450 upon entering into the lease.

 

On November 11, 2018, the Company entered a new lease agreement for approximately 8,025 square feet adjoining its existing facility in Pompano Beach, Florida. Terms of the new lease include a sixty-nine month month term commencing on January 1, 2019, or the date the Company took possession of the premises, if earlier;2019; a $6,527 security deposit; initial base rent of approximately $4,848 per month escalating at 3% per year during the term of the lease plus Florida state sales tax and payment of 10.11% of the buildings annual operating expenses (i.e. common(common area maintenance) which is approximately $1,679 per month, subject to adjustment as provided in the lease.

 

On June 30, 2020, the Company entered into Amendment No. 2 to the Patent License Agreement with Setaysha Technical Solutions, LLC (“STS”). The amendment set certain limits and expectations of the assistance from STS related to designing and commercializing certain diving products, and revised the royalty payments due to STS as consideration for uncompensated services. The Company is obligated to pay STS a minimum yearly royalty of $60,000, or $15,000per fiscal quarter, beginning in December 2019 and increasing by 2.15% per year. The minimum royalty was temporarily increased to $60,000for fiscal years 2022, 2023 and 2024, with a fourth quarter true up against earned royalties. In addition, if the Company should terminateterminates the agreementsAgreement with STS prior to December 31, 2023, then the Company is obligated to pay STS $180,000, less cumulative royalties paid in excess of $334,961 200,174for the years 2019 through 2024. In accordance with the amendment the Company will pay additional minimum royalties of $60,000 per year or $15,000 per quarter for the years 2022 through 2024. Royalty recorded in relation to this agreement totaled $41,251 43,608and $13,833 13,704for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively and $54,955 and $27,926 for the six months ended June 30 , 2021 and 2020, respectively.

20

 

On June 9, 2020, the Company entered into ana one-year advertising and marketing agreement with Figment Design. The term of the agreement isDesign for one year, and thereafter renew or cancel the agreement in writing 60 days before the final date. The Company will continue to be billed $8,840 per month through the expiration date of July 2021. The Companywhich agreement terminated the agreement with Figment Design effectiveon July 31, 2021.

On August 1, 2020, BLU3 entered into a marketing agreement with This Way Media PTY, Ltd. The term of this agreement is for 11 months and can be cancelled with 30 days’ notice during the first 90 days of the agreement. After the first 90 days, the agreement can be cancelled with 60 days’ notice after the completion of the term of the agreement. BLU3 will pay This Way Media PTY, LTD $500 per month, and 5% of each affiliate sale.This agreement expired on July 1, 2021. BLU3, Inc. is currently in negotiation to renew this agreement.

17

 

On November 5, 2020, the Company and Christopher H. Constable entered into a three year employment agreement (the “Constable Employment Agreement”) pursuant to which the Mr. Constable shall serveserves as Chief Executive Officer of the Company. Previously, Mr. Constable had provided advisory services to the Company through the agreement with Brandywine LLC. In consideration for his services, Mr. Constable shall receive (i) an annual base salary of $200,000, payable in accordance with the customary payroll practices of the Company, and (ii) issuable upon execution of the Employment Agreement and on each anniversary of the date of the agreement during the term, a non-qualified immediately exercisable five-year stock option to purchase that number of shares equal to $100,000of the value of the Company’s common stock at an exercise price equal to the market price of the Common StockCompany’s common stock on the date of issuance. Therefore, the Executive shall receiveAccordingly, on November 5, 2020, Mr. Constable was issued an initial stock option grant to purchase 5,434,783shares of the Corporation’sCompany’s common stock at an exercise price of $0.0184per share and on November 5, 2021, he was issued an option to purchase 2,403,846 shares of the Company’s common stock at an exercise price of $0.0401 per share, pursuant to an option award agreement.

 

In addition, Mr. Constable shall be entitled to receive four-year stock options to purchase shares of common stock at an exercise price equal to $0.0184per share in the amounts listed below based upon the following performance milestones during the term of the Constable Employment Agreement: (i) 2,000,000shares -– if the Company’s total net revenues, as reported in its statement of operations in its financial statements in its filings with the SEC, including as a result of a stock or asset acquisition of a third party (“Net Revenues”) are in excess of $5,000,000, in the aggregate, for four consecutive fiscal quarters; (ii)3,000,000shares -– if the Company’s Net Revenues are in excess of $7,500,000, in the aggregate, for four consecutive fiscal quarters; (iii) 5,000,000shares -– if the Company’s Net Revenues are in excess of $10,000,000, in the aggregate, for four consecutive fiscal quarters; and (iv) 20,000,000shares -– if the Company’s common stock is listed on the on NASDAQ or New York Stock Exchange.

 

On March 1, 2021, the Company entered into an investor relations consulting agreement with BGM Equity Partners, LLC. The term of the agreement is twelve months. As compensation, the Company issued 3,000,000shares of its common stock valued at $120,000 to BGM PartnersEquity Partners. This agreement was not renewed at March 1, 2022.

On August 1, 2021, the Company and Blake Carmichael entered into a three year employment agreement (the “Blake Carmichael Employment Agreement”) pursuant to which Mr. Carmichael shall serve as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael shall receive (i) an annual base salary of $120,000, payable in accordance with the customary payroll practices of the Company, and (ii) a cash bonus equal to 5% of the net income of BLU3 payable quarterly, beginning with the first full calendar quarter after the execution of the agreement. (iii) issuable upon execution of the Employment Agreement, a non-qualified five-year stock option to purchase 3,759,400 shares at $0.0399, 33.3% of which stock vests immediately, 33.3% vests on the second anniversary, and 33.3% on the third anniversary of the agreement.

In addition, Blake Carmichael shall be entitled to receive a five-year stock option to purchase up to 18,000,000 shares of common stock at an exercise price equal to $0.0399 per share that will vest upon defined financial metrics that are measured on a contract year basis. The metrics defined in the agreement escalate the shares available to vest based upon a revenue measurement, expediency measurement and an EBITDA measurement.

On August 6, 2021 the Company entered into a six-month, non-exclusive mergers and acquisitions services agreement with Newbridge Securities Corporation. The merger agreement shall pay seven percent commission for the first two million dollars paid in aggregate purchase price consideration and six percent on the aggregate purchase price consideration above two million dollars for any merger or acquisition target sourced by Newbridge. The fee shall be paid in the common stock of the Company. The equity received is subject to a holding period of six months from the closing date of the transaction. This agreement was not renewed.

On September 3, 2021, SSI and Christeen Buban entered into a three-year employment agreement (the “Buban Employment Agreement”) pursuant to which Mrs. Buban shall serve as the President of SSI. In consideration for her services, Mrs. Buban shall receive (i) an annual base salary of $110,000, payable in accordance with the customary payroll practices of the Company, (ii) a car allowance and cell phone allowance totaling $10,800 per year, (iii) a five-year stock option issued under the Plan to purchase 300,000 shares of common stock of the Company at $0.0531 per share. The option vests quarterly over the next eight calendar quarters.

21

In addition, Mrs. Buban shall be entitled to receive a five-year stock option to purchase up to 7,110,000 shares of common stock of the Company at an exercise price of $0.0531 per share that will vest upon the attainment of certain defined annual financial metrics, as set forth in the Buban Employment Agreement,

On January 17, 2022 the Company entered into an agreement with The Crone Law Group, PC (“CLG”) for the provision of legal services. In consideration therefor, the Company will pay CLG a monthly flat fee of $3,000 per month for the SEC reporting work, and its normal hourly rate for any other legal work and issued 1,000,000 shares of common stock with a fair market value of $27,500 to CLG.

 

Legal

 

The Company iswas a defendant in that certain lawsuit styled Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019 in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The complaint, which relates to consulting services provided to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $15,87015,870.97 .97 in unpaid consulting fees together with interest. In April 2020, the Company filed a Motion to Dismiss, and at a hearing held in May 2021, the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. The parties entered mediation pursuant to the Court’s order. This action was settled for $10,000on July 12, 2021. The Company pays monthly installments of $1,000 and is current in its payments. As of March 31, 2022 the balance remaining is $1,000.

18

 

Note 8.10. Segment Reporting

 

The Company has 34 operating segments as described below:

 

 1.Legacy SSA Products, which sells recreational hookahmulti-diver surface supplied air diving systems.
   
 2.High Pressure Gas Systems, which sells high pressure air and industrial gas compressor packages.
   
 3.Ultra Portable Tankless Dive Systems, which sells next generation electric surface supply air diving systems and electric shallow dive system that are battery operated and completely portable to the user.
4.Redundant Air Tank Systems, which manufactures and distributes a line of high pressure tanks and redundant air systems for the military and recreational diving industries.

 Schedule of Segment Reporting Information

Three Months Ended

  

Three Months Ended

June 30

(unaudited)

 
  Legacy SSA Products  High Pressure Gas Systems  Ultra Portable Tankless Dive Systems  Total Company 
  2021  2020  2021  2020  2021  2020  2021  2020 
Net Revenues $976,973  $626,389  $207,565  $75,170  $528,380  $618,969  $1,712,918  $1,320,528 
Cost of Revenue $(668,246)  (310,595)  (113,499)  (35,487)  (333,864)  (477,655)  (1,115,609)  (823,737)
Gross Profit  308,727   315,794   94,066   39,683   194,516   141,314   597,309   496,791 
Depreciation  4,748   2,039   -   -   2,418   4,837   7,166   6,876 
Income (loss) from Operations $(314,279) $(408,031) $40,224  $534  $26,445  $(170) $(247,610) $(407,667)

March 31

(unaudited)

  Legacy SSA Products  High Pressure Gas Systems  Ultra Portable Tankless Dive Systems  Redundant Air Tank Systems  Total Company 
  2022  2021  2022  2021  2022  2021  2022  2021  2022  2021 
Net Revenues $581,109  $466,043  $276,817  $150,128  $794,587  $334,598  $322,456  $        -  $1,974,969  $950,769 
Cost of Revenue  (461,958)  (369,826)  (160,791)  (81,178)  (416,958)  (188,793)  (259,502)  -   (1,299,209)  (639,797)
Gross Profit  119,151   96,217   116,026   68,950   377,629   145,805   62,952   -   675,760   310,972 
Depreciation  4,370   3,812   -   -   4,478   2,418   25,011   -   33,859   6,230 
Income (loss) from operations $(369,590) $(444,151) $40,459  $9,366  $16,762  $(12,385) $(121,530) $-   (433,899) $(447,170)
                                   -     
Total Assets $1,427,324  $1,503,762  $460,496  $265,604  $1,037,192  $511,621  $1,995,439  $-  $4,920,451  $2,280,987 

 

 

Six months ended

June 30

(unaudited)

 
  Legacy SSA Products  High Pressure Gas Systems  Ultra Portable Tankless Dive Systems  Total Company 
  2021  2020  2021  2020  2021  2020  2021  2020 
Net Revenues $1,443,016  $920,507  $357,693  $273,386  $862,978  $761,424  $2,663,687  $1,955,317 
Cost of Revenue  (1,038,072)  (538,782)  (194,677)  (185,287)  (522,657)  (631,564)  (1,755,406)  (1,355,633)
Gross Profit  404,944   381,725   163,016   88,099   340,321   129,860   908,281   599,684 
Depreciation  8,560   3,155   -   -   4,836   7,254   13,396   10,409 
Income (loss) from operations $(758,430) $(614,687) $49,590  $(2,237) $14,060  $(81,521)  (694,780) $(698,445)
                                 
Total Assets $1,529,702  $1,433,698  $302,088  $187,371  $673,255  $632,123   2,505,045  $2,253,192 
22

 

Note 9.11. Subsequent Events

 

On July 30, 2021,May 2, 2022, the Company entered into a binding term sheetan asset purchase agreement (the “Term Sheet”“Asset Purchase Agreement”) with Submersible Systems,Gold Coast Scuba, LLC, a Florida limited liability corporationcompany (“Submersible”Gold Coast Scuba”), Steven M. Gagas and Tierra Vista Group, LLCWilliam Frenier, the sole members of Gold Coast Scuba (together, the “LLC Members”) and Summit Holdings V, LLC (Tierra Vista GroupLive Blue, Inc., a Florida corporation and Summit Holdings V, collectively, the “Sellers”), the owners of allwholly-owned subsidiary of the membership interests of Submersible (the “Membership Interests”Company (“Live Blue”). Pursuant to the terms of the Term Sheet, the Company will acquireAsset Purchase Agreement, Live Blue acquired substantially all of Gold Coast Scuba’s assets and assumed certain non-material liabilities of the Membership Interests from the Sellersbusiness associated with these assets, for an aggregate purchase price of $1,750,000 150,000(the “Purchase Price”), to be which was paid to the Sellers at closing:by (i) by the issuance to the Sellers of three-year convertible promissory notes (each, a “Note”) in the aggregate principal amount of $350,000, at an interest rate of 8% per annum, with each Seller to receive a Note in the principal amount pro rata with the number of Membership Interests such Seller owns of Submersible, and (ii) by the issuance to the Sellers of an aggregate of $1,400,000 3,084,831shares (the “Shares”) of the Company’s common stock par valueto the LLC Members, at a price of $0.0001 0.0389per share such number(the “Consideration Shares”); and (ii) cash of Shares to be calculated based on the volume weighted average price of a share of the Company’s Common Stock on the OTC Markets (“VWAP”$30,000 (the “Gold Coast Scuba Acquisition”) for (a) 180 days prior to the date of the Term Sheet, or (b) 180 days prior to the closing date of the transaction, whichever results in a lower VWAP, with each Seller receiving a pro rata portion of the Shares based upon the total number of Membership Interests held by such Seller. .

The closing and consummation of the transactions contemplated by the Term Sheet are to occur no later than August 31, 2021, andConsideration Shares are subject to certain closing conditionsa leak-out restriction which provides that (i) up to 25% of such Consideration Shares may be sold after November 2, 2022; (ii) an additional 25% may be sold after February 2, 2023; and deliveries, including an agreement containing typical representations(iii) the balance may be sold after May 2, 2023. The Company may waive these restrictions if the Company’s common stock is trading on either the NYSE American or Nasdaq and warranties by the partieshas a rolling thirty-day average trading volume of a transaction of this nature. There are no assurances the transactions will be completed.

On July 12, 2021,$50,000 in trading volume per day. If the Company waives the leak-out restriction, only Consideration Shares of up to 5% of the previous days total volume may be sold in one day, and the may only be sold through executing trades “on the offer.”

In connection with the acquisition, the LLC Members entered into a settlement agreement related tofive-year confidentiality, non-competition and non-solicitation agreements with the lawsuit styled Basil Vann,Company and Live Blue which contain standard provisions, including that the LLC Members not engage in any business that supplies the same product or services as Personal RepresentativeGold Coast Scuba within certain areas of the EstateUnited States or that competes with Gold Coast Scuba’s business in any market in which it operates as of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019the closing.

Gold Coast Scuba is in the Circuit Courtbusiness of the 17th Judicial Circuit inproviding recreational scuba diving equipment rental, training and for Broward County, Florida. (see Note 7)

education programs, as well as dive travel, guided snorkeling tours, and dive club activities.

 

1923

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 2. Management’s DiscussionYou should read the following discussion and Analysisanalysis of Financial Conditionour financial condition and Resultsresults of Operations.operations together with our financial statements and related notes appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.

The management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

Overview

BWMG,The Company owns and operates a portfolio of companies with a concentration in the industrial and recreational diving industry. The Company, through its subsidiaries, designs, tests, manufactures, and distributes recreational hookah diving, yacht-based scuba air compressors and nitrox generation systems and scuba and water safety products in the United States and internationally.

The Company has four subsidiaries focused on various sub-sectors:

●Brownie’s Third Lung - Surface Supplied Air (“SSA”)
●BLU3, Inc. - Ultra-Portable Tankless Dive Systems
●LW Americas - High Pressure Gas Systems
●Submersible Systems, Inc. - Redundant Air Tank Systems

Our wholly owned subsidiaries do business under their respective trade names on both a wholesale and retail basis from our headquarters and manufacturing facility in Pompano Beach, Florida, and a manufacturing facility in Huntington Beach, California.

The Company, through its wholly owned subsidiaries, designs, tests, and manufactures tankless dive systems, rescue air systems and yacht-based SCUBAself-contained underwater breathing apparatus (“SCUBA”) air compressor and nitrox generation fill systems and acts as the exclusive distributor for North and South America for Lenhardt & Wagner GmbH (“L&W”) compressors in the high-pressure breathing air and industrial gas markets. Our wholly owned subsidiariesThe Company is also the exclusive United States and related product lines areCaribbean distributor for Chrysalis Trading CC, a South African manufacturer of fitness and dive equipment, doing business as follows:Bright Weights (“Bright Weights”), of a dive ballast system produced in South Africa.

 

[
]

Legacy SSA Products

This segment represents our surface supplied air (SSA) product line. Trebor began its business making surface supplied air diving systems in the late 1960s. Our Brownie’s Third Lung systems have long been a dominant figure in gasoline powered, high-performance, and now the battery powered surface supplied air diving systems. Taking full advantage of the proprietary compressor system, a complete series of traditional “fixed speed” electric compressors were developed for the built-in-boat market in 2005. After years of inventing, testing and development, in 2010 we introduced our variable-speed battery powered hookah system which provides divers with gasoline-free all day shallow diving experiences. This battery system was updated in 2019 we introduced a lithium-ion battery powered variable speed system that is capable of three dives to thirty feet for three hours on one charge. These systems provide performance and runtimes as great as 300% better than the best devices previously on the market by utilizing a variable speed technology that controls battery consumption based on diver demand.

The Legacy SSA segment has experienced a 45.8% growth in units sold in the first six months of 2021 as compared to the first six months of 2020, as we continue to expand our dealer network and the breadth of product that each of the dealers provide.

This segment is seeing results from its marketing efforts with both the consumer and our network of dealers. The company continues to add dealers across the country in order to diversify the seasonality as well as the geography risks. Additionally, we continue to pursue more aggressively the boat builder market to offer our Legacy SSA systems as an option on newly built boats, expanding our market beyond the traditional consumer markets for our products. Our Legacy SSA products include:

● Tankless Dive Systems: The Company produces a line of tankless dive products, commonly called hookah or recreational surface supplied air systems. These systems allow one to four divers to enjoy the marine environment up to a depth of up to 45 feet without the bulk and weight of conventional SCUBA gear. The removal of barriers to entry into the sport of diving and the reduction of complicated and bulky SCUBA gear invites a broader range of the general public to participate more actively and enjoyably at their own pace and schedule. The design of our product also reduces the effort required for both its transport and continued use while exploring, cruising or traveling. A line of land-based systems is available for light-duty commercial applications that demand portability and performance. In addition to the gasoline-powered units and the variable speed battery powered units, a series of AC electric powered systems is also available for light to commercial duty. Powered by battery for portability or household current for virtually unlimited dive duration, these units are used primarily by businesses that work in aquatic maintenance and marine environments.

● BIAS (Boat Integrated Air Systems): The Company developed several tankless products and complimentary accessories that it believes makes boat diving even easier. The BIAS battery powered tankless kit allows boat builders, dealers and end users to seamlessly install a pre-packaged kit directly into the boat. The E-Reel advances this idea by adding a level-winding battery powered hose reel system to provide compact storage of up to 150 feet of hose. Boaters can perform their own in-water maintenance and inspections, or just dive for enjoyment. In addition to supplying air to divers, BIAS is useful for supporting air horns, inflating boat fenders/water toys, activating pneumatically operated doors, and more. The Company strategy is to align the easy to install, complete kit packages with boat builders, dealer and end users through a vertically targeted sales and marketing program.

 

High Pressure Gas Systems

Through this segment, we design, manufacture, sell and install SCUBA tank fill systems for on-board yacht use under the brand “Yacht-Pro™”. Our systems provide complete diving packages and dive training solutions for yachts, includes Nitrox systems which allow yacht owners to fill tanks with oxygen enriched air on board. The Yacht-Pro™ compressor systems offer a completely marine-prepared, VFD (variable frequency drive)-driven, automated alternative to other compressors on the market. We also design complete dive lockers, mixed gas production and distribution systems, and the unique Nitrox Maker™. Nitrox is oxygen-enriched air, which reduces the effects of nitrogen on divers; it is the industry standard for dive professionals. The Nitrox Maker™ continuously generates the oxygen rich breathing gas directly from low-pressure air; no stored oxygen or other gases are required onboard.

Consistent with our goals for 2021, this segment of our business continues to work to expand its customer base beyond that of the diving community. We believe the product lines from L&W, will allow LW Americas to put a high quality, competitive products into the first responder and industrial market that utilize compressed air for many applications. Our goal will be to build a network of jobbers, dealers, installers and high-pressure compressor distributors throughout the territory by leveraging our know-how, brand awareness, complimentary products and creating sustainable distribution and core product OEM integration relationships.

[]

Ultra Portable Tankless Dive Systems

In the continued expansion of our business, in December 2017, we formed a wholly-owned subsidiary BLU3, to develop and market a next generation electric surface supplied air diving systems electric shallow dive system that is completely portable to the user. The BLU3 line currently consists of two models targeting specific performance levels and price points – NEMO and NOMAD.

The NEMO dive system continues to expand its customer base and become more accepted across the world. Currently, Nemo is sold in 9 countries through Amazon, and also through 25 dealers across the world. Nemo, the worlds smallest dive system is capable of taking one diver to 10 feet for 60 to 90 minutes on one charge of its lithium-ion battery. Nemo is portable, and approved for airline travel.

Currently, NOMAD is nearing the end of the design phase and full production will begin in the third quarter of 2021, as the Company continues to ensure that it will deliver a product that will excite the consumer but be safe as well. This product will expand the customers dive capability to up to 33 feet and continue to drive the vertical integration of the diving experience.

20

Second Quarter and Six Months ended June 30, 2021 HighlightsRecent Developments

 

Revenue forOn May 2, 2022, the Second Quarter 2021Company 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 six months ended June 30, 2021 have continued to increase as comparedWilliam Frenier, the sole members of Gold Coast Scuba (together, the “LLC Members”) and Live Blue, Inc., a Florida corporation and wholly-owned subsidiary of the Company (“Live Blue”). Pursuant to the same periods in 2020, The Company is succeeding in its mission to expand our customer base from primarily the southeast US to an international distributor and retail customer base. We believe that we are changing the way that people will approach the next atmosphere, by providing innovative, portable and easy to use surface supplied air products that will allow the users to explore what is below the surfaceterms of the water.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, for $150,000 which was paid by (i) the issuance to of an aggregate of 3,084,831 shares of the Company’s common stock to the LLC Members, at a price of $0.0389 per share (the “Consideration Shares”); and (ii) cash of $30,000 (the “Gold Coast Scuba Acquisition”).

 

Highlights:The Consideration Shares are subject to a leak-out restriction which provides that (i) up to 25% of such Consideration Shares may be sold after November 2, 2022; (ii) an additional 25% may be sold after February 2, 2023; and (iii) the balance may be sold after May 2, 2023. The Company may waive these restrictions if the Company’s common stock is trading on either the NYSE American or Nasdaq and has a rolling thirty-day average trading volume of $50,000 in trading volume per day. If the Company waives the leak-out restriction, only Consideration Shares of up to 5% of the previous days total volume may be sold in one day, and the may only be sold through executing trades “on the offer.”

 

In connection with the acquisition, the LLC Members entered into five-year confidentiality, non-competition and non-solicitation agreements with the Company and Live Blue which contain standard provisions, including that the LLC Members not engage in any business that supplies the same product or services as Gold Coast Scuba within certain areas of the United States or that competes with Gold Coast Scuba’s business in any market in which it operates as of the closing.

Gold Coast Scuba is in the business of providing recreational scuba diving equipment rental, training and education programs, as well as dive travel, guided snorkeling tours, and dive club activities.

Impact of COVID-19 Pandemic

The Company has previously been affected by temporary manufacturing closures, and employment and compensation adjustments. The market continues to suffer from the impacts of the pandemic via supply chain shortages and freight delays. The continued freight delays have and will likely continue to result in additional expenses to expedite delivery of critical parts. Additionally, increased demand for personal electronics has created a shortfall of microchip supply which are used in our battery powered products, and it is yet unknown how we may be impacted.

We continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.

●Our total revenue increased 29.7% for the Second Quarter and 36.2% for the six months ended June 30, 2021 as compared to the same periods in 2020.
●The Company signed an exclusive US and Caribbean distribution agreement with the manufacturer of Bright Weights. Bright Weights is a unique and fun alternative to the dive ballast systems currently available in the market today. The Company expects to use its Amazon and Dealer sales channels to grow this product line.
●BLU3, Inc. launched pre-orders for September and October shipment of its Nomad Product line.
●BLU3, Inc. has expanded its Amazon footprint to 9 countries, including the US.
●Unit sales for the BLU3 Nemo increased 152% for the six months ended June 30, 2021 as compared to the same period in 2020.
●Gross margins increased from 30.7% to 34.1% for the six months ended June 30, 2021 as compared to the same period in 2020.24

 

Results of Operations

 

Net Revenues, Costs of Net Revenues and Gross Profit

Overall, our net revenues increased 29.7% and 36.2% for the Second QuarterThree Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021 and the six months ended June 30, 2021 from the comparable periods in 2020. These increases included an increase of 21.0% and 31.5% in net revenues from sales to third parties, and an increase of 79.1% and 57.6% in net revenues from sales to related parties for the three and six months ended June 30, 2021, respectively, over the comparable prior period. Net revenue for the Second Quarter 2020 and six months ended June 30, 2020 included non-recurring revenue related to the Blu-Vent project of approximately $458,000. Adjusting this non-recurring item from the 2020 revenue the core business revenue increase for the three and six months ended June 30, 2021 would be 99.0% and 78.1%, respectively.

 

Our totalNet revenues increased 107.7% for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 as a result of a 137.5% increase in revenue for BLU3, Inc. from the continued expansion of its customer base as well as the addition of NOMAD to its product line, an increase in LWA of 84.4% as its business from the expansion of its customer base and the addition of SSI revenue which did not exist in 2021. For the three months ended March 31, 2022, cost of net revenues inwas 65.8% as compared with the Second Quarter 2021 andcost of revenues of 67.3% for the sixthree months ended June 30, 2021 were 65.1% and 65.9% of our total net revenues as compared to 62.4% and 69.3% for the same periods in 2020.March 31, 2021. Included in our total cost of net revenues are royalty expenses we pay to Mr.Robert Carmichael which increased 56.4% and 74.0%10.3% for the three and six months ended June 30, 2021March 31, 2022 as compared to the same periods in the prior year. The increased royalties are the result of increased sales in the legacy SSA segment. Also included in the total cost of net revenue are royalties paid pursuant to our agreement with STS. These royalties accounted for approximately 2.4% and 2.1% of total net revenuethree months ended March 31, 2021. Gross profit margin was 34.2% for the three and six months ended June 30, 2021, respectivelyMarch 31, 2022 as compared to 1.1% and 1.4% for the same periods in 2020.

We reported an overall gross profit margin of 34.9% and 34.1%32.7% for the three and six months ended June 30, 2021March 31, 2021. The slight improvement in gross margin, of 4.6% as comparedit relates to 37.6% and 30.7% for the three and six months ended June 30, 2020. The Legacy SSA product lines had an increase in distribution sales during the Second Quarter 2021 as compared to the direct to consumer salesrevenue is a result of the Second Quarter 2020, since the COVID stay at home orders have been liftedproduction of more finished products, reducing direct labor per unit primarily in 2021, customers are returning to their local dive stores, rather than purchasing online. The High Pressure Gas Systems margins have shown a decreaseLWA and BLU3. This improvement is offset by increases in margin percentage for the Second Quarter, 2021 to 45.3%royalties expense resulting from 52.8% during the same quarter in 2020. However, with the increased revenue in this segment,margin available to cover operating expenses grew in this segment by 137% in the Second Quarter 2021 as compared to the Second Quarter 2020 as revenue grew 176.1% for the segment. Margins related to the Ultra-Portable Tankless dive segment improved from 22.8% for the Second Quarter 2020 to 36.8% for the Second Quarter, 2021. The margins in this segment in the Second Quarter, 2020 were depressed because of the lower margins yielded from the BluVent project that was billed in that period.BLU3 product line.

 

The following tables provides net revenues, total costs of net revenues, and gross profit margins for our segments for the periods presented.

 

21

Net Revenues

 

 Three Months Ended June 30  % of  Six Months Ended June 30,  % of   Three Months Ended March 31,  % of 
 2021  2020  Change  2021  2020  Change  2022  2021  Change 
 (unaudited)     (unaudited)     (unaudited)    
Legacy SSA Products $976,973  $626,389   56.0% $1,443,016  $920,507   56.8%
SSA Products $581,109   466,043   24.7%
High Pressure Gas Systems  207,565   75,170   176.1%  357,693   273,386   30.8%  276,817   150,128   84.4%
Ultra-Portable Tankless Dive Systems  

528,380

   618,969   (14.6)%  

862,978

   761,424   13.3%  794,587   334,598   137.5%
Redundant Air Tank Systems  322,456   -   100.0%
Total net revenues $1,712,918  $1,320,528   29.7% $2,663,687  $1,955,317   36.2% $1,974,969   950,769   107.7%

 

Cost of revenues as a percentage of net revenues

 

 Three Months Ended
June 30,		  Six Months Ended
June 30,		  Three Months Ended
March 31,		 
 2021  2020  2021  2020  2022  2021 
 (unaudited) (unaudited)  (unaudited) 
Legacy SSA Products  68.4%  49.6%  71.9%  58.5%  79.5%  79.4%
High Pressure Gas Systems  54.7%  47.2%  54.4%  67.8%  58.1%  54.1%
Ultra-Portable Tankless Dive Systems  63.2%  77.2%  60.6%  82.9%  52.5%  56.4%
Redundant Air Tank Systems  80.3%  - 

 

Gross profit (loss) margins

 

 Three Months Ended
June 30,		  Six Months Ended
June 30,		  Three Months Ended
March 31,		 
 2021  2020  2021  2020  2022  2021 
 (unaudited) (unaudited)  (unaudited) 
Legacy SSA Products  31.6%  50.4%  28.1%  41.5%
SSA Products  20.5%  20.6%
High Pressure Gas Systems  45.3%  52.8%  45.6%  32.2%  41.9%  45.9%
Ultra-Portable Tankless Dive Systems  36.8%  22.8%  39.4%  17.1%  47.5%  43.6%
Redundant Air Tank Systems  19.5%  - 

25

 

Legacy SSA Products segment

 

Revenue in this segment continues to show improvement, increasing 56.0% year over year for the Second Quarter 2021. The increase in netNet revenues in this segment for the Second Quarter 2021three months ended March 31, 2022 increased 24.7% as compared to the same period in 2020three months ended March 31, 2021. The increase can be attributed to increasesan increase in dealer demand, increasing 114.1%,revenue as the Company offered discounts to both dealers and demand from affiliates increasing 344.1%. These segments increasedtheir consumers in anticipationthe three months ended March 31, 2022 to pre-stock for the 2021 summer season. Direct to consumer demand decreasedsales declined slightly as increased fuel prices we believe prohibited many families from utilizing their boats, and focusing on other family activities. Sales through affiliates increased for the Second Quarter, 2021three months ended March 31, 2022 as compared to the same period in 2020, as the re-opening of the economy after COVID allowed consumers to purchase product at retail rather than from our website. For the sixthree months ended June 30, 2021 the Legacy SSA segment continued to show significant increase over the prior year. Increases in all areas of this segment increased netting to a total increase of 56.8% for the six months ended June 30,March 31, 2021 as compared to the same period in 2020.we have added additional affiliates through our social media market campaigns.

 

Our costs of revenues as a percentage of net revenues in this segment increasedremained relatively flat increasing slightly from 58.5%79.4% to 71.9%79.5% for the sixthree months ended June 30, 2020March 31, 2022 from the prior year.three months ended March 31, 2021. The increased cost of revenue, and in turn reduction in product margin, can be attributed to increase proportion of dealer sales as compared to the prior year increasing 79.3%.three months ended March 31, 2021, as well as the discounts offered to dealers to pre-stock for the season.

 

A breakdown of the revenue channels for this segment are below. Direct to Consumer representrepresents items sold via our website, trade shows and walk-ins to our factory store. Dealer revenue represents sales to customers thatwith which we have dealer agreements that typically operate with the lowers margin. Affiliates are resellers of our products that are not in a formal dealer arrangement.

 

22

  Net Revenue  Cost of Sales as a % of Net Revenue  Margin 
  Three Months ended March 31, 2022  Three Months ended March 31, 2021  % change  Three Months ended March 31, 2022  Three Months ended March 31, 2021  Three Months ended March 31, 2022  Three Months Ended March 31, 2021 
Dealers $357,853  $253,539   41.1%  85.2%  

81.5

%  14.8%  

18.5

%
Direct to Consumer (website included)  202,635   210,672   -3.8%  70.5%  

76.7

%  29.5%  

23.3

%
Affiliates  20,621   1,832   1025.6%  73.3%  78.9%  26.7%  21.9%
Total $581,109  $466,043   24.7%  79.5%  79.4%  20.5%  20.6%

 

Three Months Ended June 30, 2021 and June 30, 2020
 
  Net Revenue  Cost of Revenue as a % of Net Revenue  Margin 
  Second Quarter 2021  Second Quarter 2020  % change  Second Quarter 2021  Second Quarter 2020  Second Quarter 2021  Second Quarter 2020 
Dealers $

664,928

  $310,499   114.1%  77.7%  31.0%  22.3%  69.0%
Direct to Consumer (website Included)  273,430   307,195   (11.0)%  45.1%  68.3%  54.9%  31.7%
Affiliates  38,615   8,695   344.1%  74.3%  51.0%  25.7%  49.0%
Total $

976,973

  $626,389   56.0%  68.4%  49.6%  31.6%  50.4%

Six Months Ended June 30, 2021 and June 30, 2020
 
  Net Revenue  Cost of Revenue as a % of Net Revenue  Margin 
  Six months ended June 30, 2021  Six months ended June 30, 2020  % change  Six months ended June 30, 2021  Six months ended June 30, 2020  Six months ended June 30, 2021  Six months ended June 30, 2020 
Dealers $918,467  $512,284   79.3%  78.7%  50.1%  21.3%  49.9%
Direct to Consumer (website Included)  484,102   387,499   25.0%  58.9%  69.5%  41.1%  30.5%
Affiliates  40,447   20,724   95.2%  74.5%  60.4%  25.5%  39.6%
Total $1,443,016  $920,507   56.8%  71.9%  58.5%  28.1%  41.5%

High Pressure Gas Systems segment

Sales of high-pressure breathing air compressors shown a 176.1% year over year increase duringincreased 84.4% in the Second Quarterthree months ended March 31, 2022 compared with the three months ended March 31, 2021 as LWA was able to continue to supply its customers with their needs despite industry supply chain issues. The reseller segment increased by 33.6% for the marketplace beganthree months ended March 31, 2022 compared to see an economic recovery during this period. All segments have begun to open up, and demand has begun to show signs of life,the three months ended March 31, 2021 with travel returning, and diving operations throughoutincreased orders through distribution customers in the US, and Caribbean have re-opened and receiving tourists. The majority of our dive resort and dive operator customers’ businesses have begun to conduct a more normalized business,South America, and the recovery of this customer segment can be seen in the increases in revenue in the reseller segment.Caribbean. The Original Equipment Manufacturer segment showed significantcontinued to show growth with an increase of over 300%2,914% for the six monththree months ended June 30, 2021March 31, 2022 as compared to 2020.the three months ended March 31, 2021. This was due to several orders shipped internationally to boat manufactures. The direct to consumer segment, which includes yacht owners and direct to dive stores, showed some lifeincreased 28.2% in the Second Quarter 2021 increasing 133%, however this increase wasn’t enough to recover the year over year results for the sixthree months ended June 30, 2021 with a decrease in revenue inMarch 31, 2022 compared to the segment of 22.0%. We continue to see acceptance of the L&W brand and we expect sales to continue to increase as we open the product up to new markets outside of the diving and yachting segments.three months ended March 31, 2021.

Our costs of revenues as a percentage of net revenues in this segment decreasedshowed a slight increase to 54.4%58.1% for the three months ended March 31, 2022 as compared to 67.8%54.1% for the sixthree months ended June 30, 2021 and 2020.March 31, 2021. This can be attributed to significant improvementsincrease cost of in margintransportation from suppliers and to customers during the reseller and OEM customer segments. This is attributed to improved product mix and improvements in the job-costing process.three months ended March 31, 2022.

 

Three Months Ended June 30, 2021 and June 30, 2020
 Net Revenue Cost of Revenue as a % of Net Revenue Margin  Net Revenue Cost of Sales as a % of Net Revenue Margin 
 Second Quarter 2021 Second Quarter 2020 % change Second Quarter 2021 Second Quarter 2020 Second Quarter 2021 Second Quarter 2020  Three months ended March 31, 2022 Three months ended March 31, 2021 % change Three months ended March 31, 2022 Three months ended March 31, 2021 Three months ended March 31, 2022 Three months ended March 31, 2021 
Resellers $121,118  $83,945   44.3%  53.0%  67.8%  47.0%  32.2% $129,773  $97,146   33.6%  54.4%  57.3%  45.6%  42.7%
Direct to Consumers  43,749   18,785   132.9%  68.2%  18.5%  31.8%  81.5%  64,429   50,241   28.2%  

55.9

%  34.0%  44.1%  66.0%
Original Equipment Manufacturers  42,698   (27,560)  254.9%  45.6%  90.2%  54.4%  9.8%  82,615   2,741   2914.0%  65.5%  49.0%  34.5%  51.0%
Total $207,565  $75,170   176.1%  54.7%  47.2%  45.3%  52.8% $276,817  $150,128   84.4%  58.1%  54.1%  41.9%  45.9%

 

2326

 

Six Months Ended June 30, 2021 and June 30, 2020
 
  Net Revenue  Cost of Revenue as a % of Net Revenue  Margin 
  Six months ended June 30 2021  Six months ended June 30, 2020  % change  Six months ended June 30, 2021  Six months ended June 30, 2020  Six months ended June 30, 2021  Six months ended June 30, 2020 
Resellers $218,264  $141,718   54.0%  57.3%  71.9%  42.7%  28.1%
Direct to Consumers  93,990   120,558   (22.0)%  51.7%  66.1%  48.3%  33.9%
Original Equipment Manufacturers  45,439   11,110   309.0%  46.1%  33.7%  53.9%  66.3%
Total $357,693  $273,386   30.8%  54.4%  67.8%  45.6%  32.2%

 

Ultra Portable Tankless Dive Systems

 

Revenue

Net revenue for the sixthree months ended June 30, 2021March 31, 2022 in the Ultra Portable Tankless Dive System segment continues to showshowed significant improvement with growth of 13.3% increase for the first six months of 2021137.5% as compared to the same period in 2020.three months ended March 31, 2021, The increase in revenue is despiteconsumer and dealer segments growth can be attributed to the lossaddition of the non-recurring revenue related to the BLU-Vent project that was recognizedNomad product line into those sales channels during the Second Quarter 2020. Allthree months ended March 31, 2022. The growth of 146.7% in the Amazon channel is growth of the sales channels for this business segment continueNemo dive system, as the Nomad was not made available to develop. The largest contributor to the revenue increases for both the three and six months ended June 30, 2021 as compared to the prior year, are the growth in consumer direct sales and sales via the Amazon channel. Through June 30, 2021, BLU3 is selling to Amazon in nine countries as well as a significant presencethat channel in the US Amazon Channel. BLU3 continues to expand its dealer base which can be seen by the 334.2% revenue growth for first six monthsquarter of 2021 as compared to the same period in 2020. The Company’s continued focus on direct to consumer via our website accounted for a 40.2% increase for the six months ended June 30, 2021 as compared to the prior year.2022.

 

Our aggregate cost of revenue from this segment as a percentage of net revenues for the three months ended and six months ended June 30, 2021 have shownMarch 31, 2022 showed significant improvement over the same periodthree months ended March 31, 2021 primarily due to the impact of the cost and production efficiencies of the Nomad dive system and the resulting increase in 2020. The costmargin as a percentage of revenue and margins throughfor the first sixthree months of 2021 are more representative ofended March 31, 2022 as compared to the normalized costs and margins, excluding the non reoccurring Ventilator project. BLU3 is consistently working toward greater production efficiency and capacity.three months ended March 31, 2021.

  Net Revenue  Cost of Sales as a % of Net Revenue  Margin 
  Three months ended March 31, 2022  Three months ended March 31, 2021  % change  Three months ended March 31, 2022  Three months ended March 31, 2021  Three months ended March 31, 2022  Three months ended March 31, 2021 
Direct to Consumer $319,005  $152,199   109.6%  46.3%  43.0%  53.7%  57.0%
Amazon  174,676   70,798   146.7%  56.9%  45.7%  43.1%  54.3%
Dealers  300,906   111,601   169.6%  56.4%  50.8%  43.6%  49.2%
Total $794,587  $334,598   137.5%  52.5%  45.9%  47.8%  54.1%

Redundant Air Tank Systems

 

Three Months Ended June 30, 2021 and June 30, 2020
 
  Net Revenue  Cost of Revenue as a % of Net Revenue  Margin 
  Second Quarter 2021  Second Quarter 2020  % change  Second Quarter 2021  Second Quarter 2020  Second Quarter 2021  Second Quarter 2020 
Ventilator $-  $457,803   (100.0)%  -   89.0%  -   11.0%
Direct to Consumer  

188,466

   149,589   26.0%  53.9%  51.3%  46.1%  48.7%
Amazon  

188,467

   -   100.0%  61.9%  -   38.1%  100.0%
Dealers  

151,447

   11,577   1,208.1%  76.4%  (57.2)%  23.6%  157.2%
Total $528,380  $618,969   (14.6)%  63.2%  77.2%  36.8%  22.8%

Net revenue for the three months ended March 31, 2022 in the Redundant Air Tank Systems System segment was $322,456. The margins for repairs were the lowest margin for the three months ended March 31, 2022 at (156.4)%. SSI must price the goods in order for the dealer to also generate profit on the product. 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) 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 online sales and sales via trade shows direct to consumer and (5) repairs represent Company provided repairs and warranty repairs to all segments.

 

Six Months Ended June 30, 2021 and June 30, 2020
 
  Net Revenue  Cost of Revenue as a % of Net Revenue  Margin 
  Six months ended June 30, 2021  Six months ended June 30, 2020  % change  Six months ended June 30, 2021  Six months ended June 30, 2020  Six months ended June 30, 2021  Six months ended June 30, 2020 
Ventilator $-  $457,803   (100.0)%  -   89.0%  -   11.0%
Direct to Consumer  

340,665

   243,042   40.2%  52.2%  71.9%  47.8%  28.1%
Amazon  259,265   -   100.0%  61.8%  -   38.2%  100.0%
Dealers  263,048   60,579   334.2%  70.1%  81.4%  29.9%  18.6%
Total $862,978  $761,424   13.3%  60.6%  82.9%  39.4%  17.1%
  Net Revenue  Cost of Sales as a % of Net Revenue  Margin 
  Three months ended March 31, 2022  Three months ended March 31, 2021  % change  Three months ended March 31, 2022  Three months ended March 31, 2021  Three months ended March 31, 2022  Three months ended March 31, 2021 
Commercial $56,606  $-   100%  43.5%  -   56.5%  - 
Dealers  212,119   -   100%  88.8%  -   11.2%  - 
Government  14,001   -   100%  35.0%  -   64.1%  - 
Repairs  7,811   -   100%  256.6%      -156.4%    
Direct to Consumers  31,919   -   100%  67.3%  -   31.3%  - 
Total $322,456  $-   100%  80.5%  -   19.5%  - 

 

2427

 

 

Operating Expenses

 

Operating expenses, consistingconsist of selling, general and administrative (“SG&A”) expenses and research and development costs, and are reported on a consolidated basis for our operating segments. Aggregate operatingOperating expenses decreased 6.6%increased 48.8% for the Second Quarter 2021three months ended March 31, 2022 as compared to the Second Quarter 2020. For the sixthree months ended June 30, 2021 aggregate operating expenses increased by 23.5% from the same period in 2020.March 31, 2021.

 

Selling, General & Administrative Expenses (SG&A Expenses)

SG&A decreased by 4.7% and increased by 25.7%52.6% for the Second Quarter and sixthree months ended June 30, 2021March 31, 2022 as compared to the same periods in 2020. The main driversthree months ended March 31, 2021. SG&A Expenses were comprised of SG&A during those periods are as follows:the following:

 

Expense Item Second Quarter 2021  Second Quarter 2020  % Change  Six months Ended June 30, 2021  Six months Ended June 30, 2020  % Change 
Payroll, Selling & Admin $

236,062

  $

103,368

   128.4% $461,529  $247,890   86.2%
Stock Compensation Expense  266,370   296,470   (10.2)%  498,875   406,040   22.9%
Other Professional Fees  71,500   238,500   (70.0)%  92,000   241,500   (61.9)%
Advertising  47,615   16,212   193.7%  113,841   35,068   224.6%
All Others  202,060   209,913   (3.7)%  394,397   311,543   26.6%
Total SG&A $823,607  $864,463   (4.7)% $1,560,642  $1,242,041   25.7%

Expense Item Three Months Ended March 31, 2022  Three Months Ended
March 31, 2021		  % change 
Payroll, Selling & Administrative $395,776  $255,411   55.0%
Stock Compensation Expense  230,034   218,505   5.3%
Professional Fees  126,412   72,646   74.0%
Advertising  156,444   68,583   128.1%
All Others  197,073   121,890   61.7%
Total SG&A $1,105,739  $737,0325   50.0%

 

Payroll increases for the three and six months ended June 30, 2021 are relatedMarch 31, 2022 can be attributed primarily to the hiringaddition of the CEO,payroll for SSI which accounts for 44.0% of the increase the remaining 11.0% can be attributed to increases in personnel at BLU3 to manage the increasing revenue and other administrative positions to support the growth in each of our divisions.production.

 

Non-Cash Stock compensation expenses have seen a slight decreaseincreased 8.4% for the Second Quarter, as the 2020 totals included stock options that were fully expensed in 2020, and no further adjustments were necessary in the Second Quarter 2021. The increase for the sixthree months ended June 30, 2021March 31, 2022 as compared to the same period in 2020 is relatedthree months ended March 31, 2021 The increase can be attributed to options granted to employees under the our CFO and Chairman, that were issued during the Second Quarter 2020 and were fully expensedCompany’s Equity Incentive Plan, adopted in the First QuarterMay 2021.

 

OtherProfessional fees, including legal and other professional fees which are typically paid with a combination of cash and common stock increased 74.0% in the form of non-cash stock or stock options decreased 70% and 61.9% for the Second Quarter 2021 and sixthree months ended June 30, 2021, respectively,March 31, 2022 as compared to the same periods in 2020. This decreasethree months ended March 31, 2021. The increase can be attributed to an increase in legal fees that increased 143.8%, of which, 98.8% of the contractsincrease was paid in common stock, Professional fees increased 228.7%, with the hiring of both an IR firma dive retail consultant, and sales consultants. These increases were offset by a PR firm indecrease of accounting fees of 73.1% as compared to the Second Quarter 2020, that were terminated or their compensation was restructured for 2021.prior year.

 

The increase in advertising expense for the three and six months ended June 30, 2021March 31, 2022 as compared to the same periods in 2020three months ended March 31, 2021 is attributable to the agreement with the Company’s provider of marketingBLU3’s, focus on social media, Amazon, and trade show advertising. This contract was executed in the Third Quarter 2020, and was not renewed as of July 31, 2021.

 

Research & Development Expenses (R&D Expenses)

R&D expenses for the Second Quarter and sixthree months ended June 30, 2021March 31, 2022 decreased 46.7% and 24.4%, respectively81.4% as compared to the same periods in the prior year.three months ended March 31, 2021. The decrease can be primarily attributed to the near completion of the R&D for BLU3’s NOMAD, as it moves towardmoved into production in the third quarter of 2021.

Total Other IncomeIncome/Expense

 

Total other income was approximately $157,800 and $163,900 forFor the Second Quarter 2021 and sixthree months ended June 30, 2021March 31, 2022 other expenses totaled approximately $10,200 of interest expense as compared to other expenseincome of approximately $6,400 and $12,300$6,200 during the same period in 2020. The otherthree months ended March 31, 2021. Other income for the Second Quarterthree months ended March 31, 2021 consists of a gain fromdue to the forgivenesssettlement of the PPP loandebt of $159,600 offset by$10,000 less interest expense of approximately $1,800.$3,800. The other expenses for the Second Quarter 2020 consist only of interest expense. The decreaseincrease in interest expense can be attributed to the decrease inNavitas loan that was funded after March 31, 2021 and the interest expense on the Marlin Note,debt related to the conversion and settlementacquisition of debt and a reduction in the note balances due to repayments made.SSI.

 

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Liquidity and Capital Resources

 

Liquidity is the abilityWe had cash of a company to generate sufficient cash to satisfy its needs for cash.$609,869 as of March 31, 2022. The following table summarizedsummarizes total current assets, total current liabilities and working capital at June 30, 2021 (unaudited)March 31, 2022 as compared to December 31, 2020.2021.

 

  June 30,  December 31,  % of 
  2021  2020  change 
   (unaudited)         
Total current assets $1,954,388  $1,469,037   33.0%
Total current liabilities $1,156,250  $1,029,204   12.3%
Working capital $798,138  $439,833   81.4%

  March 31,  December 31,  % 
  2022  2021  change 
  (unaudited)       
Total current assets $3,297,431  $2,966,432   11.2%
Total current liabilities $1,594,614  $1,396,197   14.2%
Working capital $1,702,8197  $1,570,235   8.4%

The increase in our current assets at June 30, 2021March 31, 2022 from December 31, 20202021 principally reflects increase from the assets of SSI as well as the increases in accounts receivable from related and non-related parties, inventory netpurchases that are reflected by an increase in inventory and prepaid expensesassets which includes prepayments of inventory. as the Company has experienced revenue growth, and other current assets.has ramped up purchasing and production for the upcoming summer season. The increase in our total current liabilities principally reflect increasesthe additional of the SSI liabilities for the current year as well as a significant increase in total accounts payable, customer deposits, and other liabilities, offset by decreases in current maturities of long term debt, notes payable and the convertible debentures.particularly customer deposits with LWA.

 

Summary Cash Flows

 

 

Six Months Ended

June 30,

  

Three Months Ended

March 31,

 
 2021  2020  2022  2021 
 (unaudited)  (unaudited) 
Net cash used by operating activities $(396,838) $(463,508) $(290,337) $(251,455)
Net cash used by investing activities $(14,591) $- 
Net cash used in investing activities $(2,884) $- 
Net cash provided by financing activities $227,904  $885,138  $254,352  $250,168 

 

Net cash used in operating activities for the sixthree months ended June 30, 2021March 31, 2022 was due to the net loss of approximately $530,800$444,092 which is primarily attributable to non-cash stock compensation expenses of approximately $600,900.$265,534. The non-cash stock compensation expense for the sixthree months ended June 30,March 31, 2021 is attributable to stock options issued to Mr. Carmichael, Mr. Constable,our executive officers and various employees as well as shares of common stock issued to consultants and professionals for services to consultants. Theservices. Net cash used in operating activities is also the result of increases in current assets, including, accounts receivable, inventory, net, and prepaid expenses that utilized approximately $660,300$376,500, offset by increases in current liabilities including accounts payable, other liabilities, and customer deposits, which totaled to approximately $325,900.$168,200.

 

Net cash used byin investing activities relate primarilyfor the three months ended March 31, 2022 relates solely to an increase in leasehold improvements, asa small fixed asset purchased during the company expanded its office space for additional personnel, and lighting in the production areas.quarter.

 

Net cash provided by financing activities in the sixthree months ended June 30, 2021March 31, 2022 reflects proceeds from an exercise of warrants less the salerepayment of common stock, proceeds from a new debt agreement, offset byduring the repayments of notes payable and Marlin Note.quarter.

 

Going Concern and Management’s Liquidity Plans

 

As set forth in Note 3 of theOur unaudited condensed consolidated financial statements appearingincluded in this reportQuarterly Report were prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the 12-monthtwelve-month period following the date of issuance of these consolidated financial statements. The report of our independent registered public accounting firm on our audited consolidated financial statements for the year ended December 31, 2020 contained2021 includes an explanatory paragraph stating the Company has net losses and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern qualification.concern.

 

We have a history of losses, and an accumulated deficit of $13,486,923$14,988,696 as of June 30, 2021.March 31, 2022. Despite a working capital surplus of $798,138$1,702,817 at June 30, 2021,March 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. As set forth in Note 5 appearing earlier in this report, we owe third parties approximately $50,000 under the terms of convertible debentures that become due in December 2021. In addition, we have an additional $15,000 in loans which are due on demand. 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.

 

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Critical Accounting Policies

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, valuation of inventory, allowance for doubtful accounts, and equity-based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited condensed consolidated financial statements appearing earliercontained in this report.Quarterly Report.

Recent Accounting Pronouncements

 

The recentThere were various accounting standards that have beenand interpretations issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future daterecently, none of which are not expected to have a material impacteffect on the Company’s operations, financial statements upon adoption. position or cash flows.

These recent accounting pronouncements are described in Note 2 to our notes to unaudited condensed consolidated financial statements appearing earliercontained in this report.Quarterly Report.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

ItemITEM 3. Quantitative and Qualitative Disclosures About Market Risk.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.The Company is a smaller reporting company and is not required to provide this information.

 

ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under Exchange Act. In designing and evaluating our disclosure controls and procedures, (as definedour management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. The design of any disclosure controls and procedures also is based in Rules 13a-15(e)part upon certain assumptions about the likelihood of future events, and 15d-15(e)there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluations as of the Securities Exchange Actend of 1934, as amended (the “Exchange Act”)the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that are designedour disclosure controls and procedures were not effective such that the information relating to be effective in providing reasonable assurance that informationour company, required to be disclosed in our Securities and Exchange Commission reports under the Exchange Act(i) is recorded, processed, summarized and reported within the time periods specified in theSEC rules and forms of the SEC, and that such information(ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. The Company’sdisclosure as a result of continuing material weaknesses in our internal control over financial reporting described below. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.

Our management, under the supervision and with the participationincluding our ChiefPrincipal Executive Officer and our ChiefPrincipal Financial Officer, carried out an evaluation ofhave evaluated the effectiveness of the design and operationoperations of the Company’sour disclosure controls and procedures (as defined(defined in Rule 13a-15(e)Exchange Act Rules 13a-15(c) and 15d-15(e) of the Exchange Act)) as of June 30, 2021. BasedMarch 31, 2022 and based upon thatthe such evaluation, our Chief Executive Officer and Chief Financial Officerhave concluded that the Company’s disclosure controls and procedures were ineffectivenot effective as of such date due to the endmaterial weaknesses set forth below.

●Insufficient number and lack of qualified accounting department and administrative personnel and support;
●Insufficient written policies and procedures to ensure the correct application of accounting and financial reporting with respect to GAAP and SEC disclosure requirements;

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●Insufficient segregation of duties, oversight of work performed and lack of controls in our finance and accounting functions due to limited personnel;
●Company’s systems that impact financial information and disclosures have ineffective information technology controls;
●Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded; and
●Evaluation of disclosure controls and procedures was not sufficiently comprehensive due to limited personnel.

Subject to sufficient resources, management expects to remediate the material weaknesses identified above as follows:

●Management has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP and SEC compliance requirements. We intend to expand our finance department through the hiring of a certified public accountant to strengthen the segregation of duties, internal controls and enhance our current staff.
●Segregation of duties is being analyzed and adjusted Company-wide, where possible. The Company is in the process of hiring additional personnel in the accounting department, as well as the documentation of controls and procedures.
●The Company plans on evaluating various accounting systems to enhance its system controls.

We will continue to monitor and evaluate the effectiveness of the period covered by this report as a result of the continuing material weakness in the Company’sour internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as described in Item 9A. of our 2020 10-K.necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we remediate the material weaknesses inhave added to our accounting and administrative staff allowing improved internal control over financial reporting.

 

Changes in Internal ControlsControl over Financial Reporting

There werehave been no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15 under the Exchange Act that occurred during the period covered by this reportour last fiscal quarter that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ItemITEM 1. Legal ProceedingsLEGAL PROCEEEDINGS

 

WeThere are no pending legal proceedings to which we are a defendantparty or in that certain lawsuit styled Basil Vann, as Personal Representativewhich any director, officer or affiliate of the Estateours, any owner of Jeffrey William Morris v. Brownie’s Marine Group, Inc., Case number CACE19009879 filed on May 6, 2019 in the Circuit Courtrecord or beneficially of the 17th Judicial Circuit in and for Broward County, Florida. The complaint, which relatesmore than 5% of any class of our voting securities, or security holder is a party adverse to consulting services providedus or has a material interest adverse to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $15,870.97 in unpaid consulting fees together with interest. In April 2020 the Company filed a Motion to Dismiss, and at a hearing held in May 2021 the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. This matter was settled for $10,000 in July 2021.us.

 

Item ITEM 1A. RISK FACTORS1A. Risk Factors

 

We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2020 10-K.The Company is a smaller reporting company and is not required to provide this information.

 

ItemITEM 2. Unregistered sales of equity securities and use of proceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Except as to unregisteredset forth below, there were no sales of equity securities disclosed under prior reports, during the period covered by this report we sold the securities disclosed belowQuarterly Report that were not registered under the Securities Act of 1933, as amended.and were not previously reported in a Current Report on Form 8-K filed by the Company.

On June 10, 2021,January 17, 2022, the Company issued 6,055,358a law firm 1,000,000 shares of common stock as compensation for legal services.

On January 31, 2022, the Company issued a consultant 121,212 shares of common stock for consulting services related to the dive industry.

On February 2, 2022, the Company issued 10,000,000 shares of common stock to Charles Hyatt upon the holderexercise of an outstanding convertible debenture pursuanta warrant at $0.025 per share for proceeds of $250,000.

On February 2, 2022, the Company issued 600,000 shares of common stock to Grace Hyatt upon the exercise of a warrant at $0.025 per share for proceeds of $15,000.

On February 28, 2022, the Company issued a consultant, 85,106 shares of common stock for consulting services related to the conversion of the convertible debenture and accrued interest in the amount of $60,554. The shares of restricted common stock were issued pursuant to the exemption from registration provided by Section 3(a)(9) of the Act. The holder has access to information concerning the Company and is an accredited investor.dive industry.

31

Item 3. Defaults Upon Senior Securities

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEMItem 4.MINE SAFETY DISCLOSURE

 

None.

 

ItemITEM 5. Other InformationOTHER INFORMATION

 

On July 30, 2021, the Company entered into a binding term sheet (the “Term Sheet”) with Submersible Systems, LLC, a Florida limited liability corporation (“Submersible”), and Tierra Vista Group, LLC and Summit Holdings V, LLC (Tierra Vista Group and Summit Holdings V, collectively, the “Sellers”), the owners of all of the membership interests of Submersible (the “Membership Interests”). Pursuant to the terms of the Term Sheet, the Company will acquire all of the Membership Interests from the Sellers for an aggregate purchase price of $1,750,000 (the “Purchase Price”), to be paid to the Sellers at closing: (i) by the issuance to the Sellers of three-year convertible promissory notes (each, a “Note”) in the aggregate principal amount of $350,000, at an interest rate of 8% per annum, with each Seller to receive a Note in the principal amount pro rata with the number of Membership Interests such Seller owns of Submersible, and (ii) by the issuance to the Sellers of an aggregate of $1,400,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share, such number of Shares to be calculated based on the volume weighted average price of a share of the Company’s Common Stock on the OTC Markets ("VWAP") for (a) 180 days prior to the date of the Term Sheet, or (b) 180 days prior to the closing date of the transaction, whichever results in a lower VWAP, with each Seller receiving a pro rata portion of the Shares based upon the total number of Membership Interests held by such Seller. The closing and consummation of the transactions contemplated by the Term Sheet are to occur no later than August 31, 2021, and are subject to certain closing conditions and deliveries, including an agreement containing typical representations and warranties by the parties of a transaction of this nature. There are no assurances the transactions will be completed.None.

On May 26, 2021 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, Stock Options may be granted to Employees, Directors, and Consultants in the form of Incentive Stock Options or Non-statutory Stock Options, Stock Purchase Rights, time vested and/performance invested Restricted Stock, and Stock Appreciation Rights and Unrestricted Shares may also be granted under the Plan. The maximum number of shares that may be issued under the Plan shall be 25,000,000 shares. Common Stock to be issued under the Plan may be either authorized and unissued or shares held in treasury by the Company. The term of the Plan shall be ten years.

28

ItemITEM 6. ExhibitsEXHIBITS

 

    Incorporated by Reference Filed
        Exhibit or Furnished
No. Exhibit Description Form Date Filed Number Herewith
           
3.1 Articles of Conversion (Nevada) 8-K 10/28/15 3.1  
           
3.2 Certificate of Conversion (Florida) 8-K 10/28/15 3.2  
           
3.3 Articles of Incorporation (Florida) 8-K 10/28/15 3.3  
           
3.4 Articles of Amendment 8-K 12/16/15 3.5  
           
3.5 Bylaws 8-K 10/28/15 3.4  
           
4.1 2021 Equity Incentive Plan       Filed
           
10.1 Binding Term Sheet dated July 30, 2021 8-K 

8/3/2021

   
           
31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a)       Filed
           
31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a)       Filed
           
32.1 Certification Pursuant to Section 1350       Filed
           
101 XBRL Interactive Data File       Filed
Exhibit NumberExhibit
31.1Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101.INSInline XBRL INSTANCE DOCUMENT
101.SCHInline XBRL TAXONOMY EXTENSION SCHEMA
101.CALInline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEFInline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LABInline XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PREInline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

 

In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 16, 2021May 31, 2022Brownie’s marine group, Inc.BROWNIE’S MARINE GROUP, INC.
   
 By:/s/ Christopher H. Constable
  Christopher H. Constable
  Chief Executive Officer,
  principal executive officer(Principal Executive Officer)
   
 By:/s/ Robert M. Carmichael
  Robert M. Carmichael
  Chief Financial Officer,
  principal financial and accounting officer

 

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