U.S.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(MARK ONE)

For the fiscal year endedDecember 31 2015, 2022

For the transition period from _______ to _______.

Commission File No. file number 333-99393

BROWNIE’S MARINE GROUP, INC.

(Name Of Small Business Issuer In Its Charter)Exact name of registrant as specified in its charter)

(954) Registrant’s telephone number, including area code (954) 462-5570

(Issuer’s Telephone Number, Including Area Code)

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

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

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒

Yes¨    Nox

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.Yes ☒ No ☐

Yes¨    Nox

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 ☐

Yesx    No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files.)Yes ☒ No ☐

Yesx    No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.¨

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

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

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

Yes¨     Nox

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter June 30, 2015 ($0.0025), was approximately $ 80,286.7,318,695.

There were 86,841,190436,949,232 shares of common stock outstanding as of March 17, 2016.30, 2023.

PART I

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKSINFORMATION

Information includedThis Annual Report includes forward-looking statements that relate to future events or incorporated by reference in this filing may contain forward-looking statements. This information mayour 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 theany future results, levels of activity, performance or achievements expressed or implied by anythese forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “believe,“intend,” “intend”“plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or “project”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.

You should read thoroughly this Annual Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in Part I. Item 1A. Risk Factors appearing elsewhere in this Report. Other sections of this Report include additional factors, which could adversely impact our business and 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 negativeextent to which any factor, or combination of these words or other variations on these words or comparable terminology.

This filing contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our Company’s growth strategies, (c) our Company's future financing plans and (d) our Company's anticipated needs for working capital. These statementsfactors, may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this annual report generally. Actual events orcause actual results mayto differ materially from those discussedcontained in any forward-looking statements. All forward-looking statements speak only as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters describeddate on which they are made. 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.

PART I

Unless specifically set forth to the contrary, when used in this filing generally. In light of these risksreport references to the “Company,” “we,” “our,” “us,” and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.

Overview

similar terms refers to Brownie’s Marine Group, Inc., a Florida corporation, (referred to hereinand its wholly owned subsidiaries, Trebor Industries, Inc., a Florida corporation (“Trebor”) doing business as “BWMG”, “the Company”, “we”, or “Brownie’s”Brownie’s Third Lung, Brownie’s High Pressure Compressor Services, Inc. a Florida corporation (“BHP”) doing business as LW Americas (“LWA”), doesBLU3, Inc., a Florida corporation (“BLU3”), Submersible Systems, Inc., a Florida corporation (“SSI”), doing business as Spare Air and Live Blue, Inc. (“LBI”), a Florida corporation.

Overview

The Company, through its wholly owned subsidiary, Trebor Industries, Inc., d/b/a Brownie’s Third Lung, a Florida corporation. The Companysubsidiaries, designs, tests, manufactures and distributes recreational hookah diving, yacht based scubatankless dive systems, rescue air systems and yacht-based self-contained underwater breathing apparatus (“SCUBA”) air compressor and Nitrox Generationnitrox 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. The Company is also the exclusive United States and Caribbean distributor for Chrysalis Trading CC, a South African manufacturer of fitness and dive equipment, doing business as Bright Weights (“Bright Weights”), of a dive ballast system produced in South Africa.

On September 3, 2021, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Submersible Acquisition, Inc., a Florida corporation incorporated in 2017, and wholly owned subsidiary of the Company (“Acquisition Sub”), Submersible Systems, Inc., a Florida corporation (“Submersible” or “SSI”), and scubaSummit Holdings V, LLC, a Florida limited liability company (“Summit”) and water safety products. BWMGTierra 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 formed LBI, which is being developed as a full retail, guided tour and training model utilizing the technology developed by BLU3 to provide new users and interested divers a guided tour experience, training, and the ability to purchase all of their diving and watersports needs.

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

The Company has five subsidiaries focused on various sub-sectors of our industry as described below:

Our wholly owned subsidiaries do business under their respective trade names on both on a wholesale and retail basis and does so from itsour headquarters and manufacturing facility located at 3001 NW 25^th Avenue, Suite 1,in Pompano Beach, Florida, 33069. The Company’s common stock is quoted on the OTC Markets under the symbol “BWMG”. The Company’s website iswww.Browniesmarinegroup.com. Information on the website is notand a part of this report.manufacturing facility in Huntington Beach, California.

Mr. Robert Carmichael, our Chief Executive Officer, has operated Trebor as its President since 1986. Since April 16, 2004, Mr. Carmichael has served as President, Acting Principal Accounting Officer and Acting Chief Financial Officer of the Company. From March 23, 2004 to April 16, 2004, Mr. Carmichael served as the Company’s Executive Vice-President and Chief Operating Officer. The company was organized under the laws of the State of Nevada and effective October 22, 2015, the Company reincorporated to the State of Florida pursuant to a plan of conversion, effective October 22, 2015.

The Company’s diving and marine based products are generally marketed under theBrownie’sSurface Supplied Air Products

Our Third Lung Brownie’s Tankfill,andBrownie’s Public Safety trade names.

Executive Summary and Business Strategy

From a garage based business making hookah diving systems in the late 1960s, the Company has grown into a niche manufacturing and distribution company with dive-oriented products loosely classified into three categories: Brownie’s Third Lung (low pressure hookah systems), Brownie’s Tankfill (high pressure and mixed gas systems), and Brownie’s Public Safety (first-responder/emergency personnel systems). The Company serves middle income boat owners, higher income yacht owners, and recreational, military and public safety divers.

The Company strives for meticulous attention to detail and high quality product innovation. We believe that within the boating/diving industry Brownie’s Marine Group is known as the industry standard for surface supplied “family” dive systems and Scuba Tankfill Systems for yacht diving. Brownie’s products and support services range from shallow-water dive systems and extend into deep-water with mixed gas support systems for exploration divers and submersibles/submarines.

The Company holds numerous patents and is dedicated to designing and building the world’s finest and most innovative products, and to setting the industry standard for the world’s best yacht-based diving systems. While Brownie’s Third Lung hookah diving units were the very first product sold by the Company, the Company recognized early on that there was a need for tank filling systems and unique diving applications. This realization was the catalyst for the addition of the two product categories: Brownie’s Tankfill and Brownie’s Public Safety. Brownie’s Tankfill designs, builds, and sells diving solutions from marine-ready tank filling compressors, Nitrox Makers™, complete dive lockers, and full submarine support systems. Brownie’s Public Safety features highly specialized diving gear for rescue and safety professionals and a unique automatic floatation device for body-armor that can also be integrated into foul weather jackets, traditional load bearing harnesses and other garments, such as the Garment Integrated Personal Flotation Device (GI-PFD) for use with body armor. The following paragraphs further describe the business and sales models for each of the categories of products sold:

Brownie’s Third Lung hookah systems have long been a dominant figurethe market leader in gasoline powered, high-performance and feature rich hookahmore recently in the battery powered SSA diving systems. Taking full advantage of theour proprietary compressor system, a complete series of traditional “fixed speed” electric compressors were developed for the built-in-boat market in 2005. Prior toIn 2010, Brownie’s did not offer for sale a floatingwe introduced our variable-speed battery powered hookah due to the inadequate performance/runtime afforded by previous technology. After years of inventing, testing and development, Brownie’s introduced multiple battery powered models in 2010 that we believesystem which provides divers with gasoline-free all day shallow diving experiences. These systems provide performance and runtimes as great as 300% better than the best devices previously on the marketfor up to 3 hours by utilizing a variable speed technology that controls battery consumption based on diver demand.

In 2022, we continued to expand our dealer network and our marketing efforts with both the consumer and our network of dealers. The Company continues to pursue distributors and dealers outside of the United States in order to diversify the seasonality as well as geography risks. Additionally, we continue to pursue more aggressively the boat builder market to offer our SSA systems as an option on newly built boats, expanding our market beyond the traditional consumer markets for our products.

Our variable-speedSSA products include:

● Tankless Dive Systems: The Company produces a line of tankless dive products, commonly called hookah or recreational SSA systems. These systems allow one to four divers to enjoy the marine environment up to a depth of 45 feet without the bulk and weight of conventional SCUBA gear. We believe that 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. Our product is designed to reduces the effort required for its transport and 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 hookahunits, a series of AC electric powered systems is also available for light to commercial use. Powered by battery for portability or household current for 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 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 and our E-Reel, a level-winding battery powered hose reel system, provides 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 may be used for supporting air horns, inflating boat fenders/water toys and activating pneumatically operated doors.

Ultra-Portable Tankless Dive Systems

Through our wholly owned subsidiary BLU3, we develop and market a next generation electric, surface supplied air shallow dive system that is completely portable to the user. The BLU3 line currently consists of two models, NEMO and NOMAD, targeting specific performance levels and price points.

NEMO dive systems are currently sold in various countries through Amazon, and also through dealers worldwide. NEMO, designed to be the world’s smallest dive system is capable of taking a diver to 10 feet for 60 to 90 minutes on one charge of its lithium-ion battery. NEMO is portable and its batteries are FAA compliant for airline travel.

NOMAD dive system (“NOMAD”) began shipping in the third quarter of 2021 and is currently sold to consumers via our website, Amazon and through our network of dealers worldwide. The NOMAD is highly portable and expands dive capability to up to 30 feet. NOMAD has been marketed through BLU3’s internet presence and marketing campaigns as well as at industry and other trade shows across the country.

BLU3 continues to innovate in the SSA sector and currently expects to introduce a new product to its line-up in 2023.

We believe the BLU3 product lines are changing the way that people get into the water and explore the next atmosphere. The units are ultra-portable and can travel with gasoline-free all day shallow diving experiences.the consumer to their adventures, wherever they may be.

Brownie’s TankfillHigh Pressure Gas Systems designs, manufactures, sells

Through our wholly-owned subsidiary LW Americas, we design, manufacture, sell and installs Scubainstall SCUBA tank fill systems for on-board yacht use under the brand “Yacht-Pro™”. Brownie’s Tankfill providesOur systems provide complete diving packages and dive training solutions for yachts. Brownie’s Tank Fill installs Nitroxyachts, including 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 (variablevariable frequency drive)-driven,drive (“VFD”) driven, automated alternative to other compressors on the market. Brownie’s TankfillWe also designsdesign 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; itdivers and is the industry standard for dive professionals. The Nitrox Maker™ continuously generates the oxygen rich breathing gas directly from low-pressure air;air with no stored oxygen or other gases are required onboard. We believe a parallel product analogy to this device is the fresh water-maker that swept through the yachting industry over the last two-decades. While less yacht owners may opt for diving systems then fresh water-makers, there is a broad market potential for yacht owners that will want to have an uninterrupted supply of the premium breathing gas. Recently, an increase in commercial NitroxMaker™ system sales has been seen as more diving operations and operators are responding to the demand from their customers to provide nitrox at diving destinations. In addition to the traditional yacht-based NitroxMaker™ systems the Company has now established a full line of commercial products to meet this need, the NMCS series.

Brownie’s Public Safety designs, manufactures, distributes, and sells the RES (Rapid Entry System)/ HELO™ system, a complete mini SCUBA system designed for quick water rescues. The HELO™ system can be donned in less than 60 seconds and stored in a briefcase-size padded bag. Brownie's Public Safety includes the GI-PFD™ (Garment Integrated Personal Flotation Device™) System for body armor flotation. This system can reliably support the distressed or unconscious wearer in a true life-saving position. This patented device addresses a need as law-enforcement, coast guard and military personnel are beginning to wear heavy (life-threatening in the water) body armor during waterborne patrol, inspection, and surveillance missions. The system helps the personnel float in heavy armor, hopefully saving their lives. The Company is not currently pursuing aggressive expansion into this market until it has sufficient working capital to do so.

Some of the Company’s Products in Depth

Surface Supplied Air Systems: The Company produces a line of Surface Supplied Diving products, commonly called hookah systems. These systems allow one to four divers to enjoy the marine environment up to a depth of 90 feet/27 meters without the bulk and weight of conventional SCUBA gear. We believe that hookah diving holds greater appeal to families with children of diving age than does conventional SCUBA. The reduction of weight by eliminating the tank allows smaller divers, especially children, to participate more actively and enjoyably. The design of our product also reduces the effort required for both its transport and use. We believe the PELETON™ Hose System revolutionizes hose management for recreational surface supplied diving. It reduces the work required of any single diver by dispersing the load over the entire group. We use a single, larger diameter hose as a main downline with up to four individual hoses attached to it. This configuration not only reduces the weight and bulk of the hose required, but also reduces drag and entanglement. An entire line of deck-mounted systems is available for commercial applications that demand extremely high performance. In addition to the gasoline-powered units and the Variable Speed battery powered units mentioned above, a series of 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 a marine environment.

E-Reel and Built-in Battery Systems: The Company developed two surface supplied air products that it believes makes boat diving even easier. The Built-in Battery System builds a battery powered electric unit into the boat, eliminating the need to transport the compressor/motor assembly. The need for a flotation tube is also removed, as the boat itself serves in that capacity. The E-Reel advances this idea by adding a reel system to provide compact storage of up to 150 feet/46 meters of hose. Boaters can perform their own in-water maintenance and inspections, or just dive for enjoyment. The hose is manually pulled from the reel supporting up to two divers to a depth of 50 feet/15 meters. When the dive is complete, the hose is automatically recoiled and stowed by the simple activation of a switch.

Brownie’s Integrated Air Systems (BIAS™):Compressed air can have many uses on a boat. The E-Reel and Built in Battery Systems discussed above are just a few examples of BIAS. In addition to supplying air to divers, integrated air systems provide for the inflating fenders, opening of doors, blowing of air horns, flushing toilets and more.

Kayak Diving Hose Kits:This product allows the use of a conventional SCUBA cylinder, but does not require the diver to wear it. The cylinder remains above the surface, in a kayak or boat, and a hose ranging from 20 feet/6 meters to 150 feet/46 meters allow the diver to explore the surrounding area.

Drop Weight Cummerbelt: The patented Drop Weight Cummerbelt is available with all our diving systems, and brings a new dimension to weighting systems. The belt will accommodate waist sizes from 24 to 54 inches and is depth compensating. It features two pockets, each capable of holding up to 10 pounds of block or shot weight. Each pocket can be instantly released by either hand, allowing the diver to achieve positive buoyancy in an emergency while retaining the belt itself. Additionally, the design of this belt provides for expanded capability. By adding an optional sleeve that zips onto the back of the belt, an egress, or bailout system, can be added. The Egressor Add-on Kit contains the sleeve, a 6 or 13 cubic foot SCUBA cylinder, and a SCUBA regulator. In addition to the added safety inherent in this design, many other uses for this present themselves, such as propeller clearing, overboard item retrieval and pool maintenance, to name only a few.

Tankfill Compressors: Many yacht owners enjoy the convenience and freedom of filling their own diving tanks with air, NITROX or custom mixed gases while out on cruise, freeing them from carrying extra cylinders or the need to locate a reputable source in various ports-of-call. Brownie’s Tankfill specializes in the design and installation of high-end custom systems to do just that. From surveying the vessel for installation requirements to custom fabrication of the necessary components, Tankfill provides all the services necessary to satisfy this market. We believe that every large vessel currently in service, being re-fitted, or being built is a potential customer. Through OEM relationships we have expanded our market to reach these customers. Our light duty compressor, the new Yacht Pro™25Pro Essential is specifically designed as a turn-key kit for the boat builders and builtis optimized to integrate to onboard power systems and withstand the marine environment with all components and hardware impervious to spray from the elements. The Yacht Pro™ series contains models for both medium-duty applications, such as recreational divers and small groups, and heavy-duty use as found on research vessels, commercial operations and live-aboard dive boats. All Yacht Pro™ models come with the Digital Frequency Drive,variable speed frequency drive reducing the initial start-up power demand typically associated with high pressure compressor systems.

In August 2017, we entered into a five-year exclusive distribution agreement with L&W, which is a Brownie’s Tankfill innovation. The Digital Frequency Drive eliminatesagreement automatically renews for successive five-year terms unless terminated as provided for in the spike previously experienced in startingagreement. Under the compressor, eliminatingterms of the need to rationExclusive Distribution Agreement, we were appointed the boat’s electrical usage by shutting down components when the compressor is needed. Custom design work is done in-house for major product installations and in conjunction with other entities.

NitroxMaker™: We believe Nitrox has become the gasexclusive distributor of choice for informed recreational divers the world over. What was once only available from land-based gas mixing facilities is now easily accessible to the yacht diver. With a Brownie’s NitroxMaker™, the user dials-in a desired oxygen level from 21% to 40%, eliminating the need to transport and handle pure oxygen. The resulting diving gas mix is monitored with digital oxygen analyzers, removing the calculations required to blend or mix the gas.

Rapid Entry System (RES) and HELO™ System: The Brownie’s Public SafetyL&W’s complete product line existsin North America and South America, including the Caribbean. We are conducting this business direct to address the needs of the public safety dive market. The inherent speedend-users and ease of donning our patented Drop Weight Cummerbelt with Egressor Add-on Kit identified it as a choiceestablishing sales, distribution and service centers for rapid response for water-related emergencies. A first-responder or officer on-scene can initiate the locationhigh pressure air and extraction of victims while the dive team is en-route, saving valuable time and increasing the chances for survival of victims. The RES is a small SCUBA system that can be quickly donned over clothes, usually in less than sixty seconds. Its small size allows it to be stored in areas that do not accommodate a full set of SCUBA gear. The 13 cubic foot aluminum tank can provide up to 15 minutes of air at the surface. The air cell remains stowed under the protective cover and can be partially inflated to achieve positive flotation. The cover’s specially designed break-away zipper bursts open to provide instant inflation yet “heals” and can be repacked and fastened quickly in the field. The HELO offers all the same features, but has been specially designed and modified for rescue divers working from helicopters. By placing the cylinder in the front and adding leg straps, the HELO allows divers to use the standard seating configurations. The advantages of this system over full sized SCUBA rigs are increased mobility for the diver and diminished space requirements for the gear. Since the bottle is mounted at the diver’s waist, the diver can more easily control his gear during deployment, further adding to the comfort and safety.

The Dive Industry and Growth Strategy

Currently, we believe that no companyindustrial gas systems in the dive, industryfire, CNG, military, scientific, recreational and aerospace industries under the brand name “L&W Americas/LWA”.

We are exclusively developing a sales, distribution and service capability to assist L&W with completing a worldwide network of L&W’s agencies and service centers.

In addition to breathing air compressors and related peripheral equipment, L&W also offers compressors, storage and purification systems to meet the high-pressure requirements for natural gas filling stations, and high-pressure inert gases such as argon, helium and nitrogen for industrial applications including welding and laser cutting, and for general laboratory use.

We believe the product lines from L&W, will allow LW Americas to offer high quality, competitive products into the first responder and industrial market that utilize compressed air. Our goal will be to build a complete linenetwork of jobbers, dealers, installers and high-pressure compressor distributors by leveraging our know-how, brand awareness, complimentary products and servicescreating sustainable distribution and core product original equipment manufacturer (“OEM”) integration relationships.

Redundant Air Tank Systems

In September 2021, the Company acquired SSI to serve all divers’ needs. The dive equipmentfurther expand its product offerings and manufacturing industrycapabilities. SSI has been manufacturing redundant air systems for recreational divers, private companies and militaries throughout the world for more than 40 years. Their state-of-the-art manufacturing facility in Huntington Beach, California is highly fragmented with multiple manufacturers producing very similar products. The top-ten volume leaders inequipped to add to the dive manufacturing industry provide the samemachining and product mix: Scuba BC’s (buoyancy compensators), regulators, gauges, masks, fins, snorkels, wetsuits, and a fewdevelopment capabilities of the necessary accessories. These mature companies offerCompany.

The SSI acquisition gives the product selectionCompany access to a world-wide base of in excess of 400 dealers and distributors, GSA contracting capability, as well as the “diving” market.

New markets and classes of divers have developed overdirect source for the years. The sport sector ofredundant air needs for our Brownie’s Third Lung and KayakBLU3 diving have emerged as a resultequipment and expands warehousing capabilities, reducing freight costs for both sets of snorkel diverscustomers.

SSI continues to innovate their technologies to meet changing military and commercial needs and is in development of the next generation of their Helicopter Emergency Egress Device (“HEED”) product line, specifically designed for aircraft and military vehicle use. Additionally, SSI has found use for their products in the medical field and continues to develop customer relationships in that wantedarea to sustain depth or Scuba divers that wanted more time in shallow waters with enhanced efficiency.grow revenue and diversify its product and customer portfolio.

In February 2022, the Company incorporated LBI to begin its expansion into the retail, training and guided tour market. The Company’s vision for LBI is to become a fully integrated retail experience where the Company’s unique products can be showcased, training can be offered, and a tourist model created. LBI will provide experienced based activities for the consumer in the various watersport activities it sells. In addition, LBI aims to provide training in those activities with the goal to have the consumer purchase the equipment, particularly the unique technologies provided by BLU3, from its retail stores. LBI looks to provide the full Live Blue experience for those consumers ready to enjoy all things watersports.

In May 2022, LBI acquired the assets of Gold Coast Scuba, a dive retail and training facility based in Lauderdale-By-The-Sea, Florida. This retail location is the base in which the Live Blue brand will be developed.

Diving and Boating MarketsSnorkeling Industry

The Sports, Fitness Industry Association (“SFIA”) estimated there were 2.7 million participants in the U.S. scuba diving market in 2022. According to a report published by SFIA in early 2023. The study further stated that the participation rate by casual divers increased 22% in 2022.

In contrast, the SFIA study indicated that participation in snorkeling in 2022 was 7.7 million in the U.S.

The Company has entered the tourist market via a guided tour program within LBI that is currently intended to act as an incubator for a scalable franchise model. The Company believes that the guided tour model is an important building block in introducing its battery powered diving products to the consumer market. Additionally, this model will not only give consumers the opportunity to “try before you buy”, but also provide experiential training for the consumer to increase enjoyment and safety of our diving products.

Yachting Industry

The global luxury yacht market is estimated to be $8.91 billion in 2022 and expected to reach $9.38 billion in 2023 according to Allied Market Research and is poised to grow at a compound annual growth rate (“CAGR”) of 5.4% from 2022 to 2030 to reach $13.6 billion, according to Research and Markets.com, a market research firm, in their industry report dated April, 2022. The Company’s BIAS systems have been designed with this industry in mind. The Company markets directly to the yachting industry by leveraging its relationships with large yacht servicing companies, yacht builders and yacht brokerages.

The recreational sailing and boating markets are keymarket and yachting industries also continue to grow. Grandview Research estimates that the recreational boating market was valued at $44.5 billion in 2022 and is expected to grow at a CAGR of 5.4% through 2030.

High Pressure Compressor Line

According to Allied Market Research report published in February 2018, the North American high pressure compressor market is $880 million growing at an estimated CAGR of 3%.

The Company expects to continue to distribute L&W compressors through its YachtPro, and BIAS systems, while continuing to focus on the expansion of its distribution into non-marine related distribution channels that the Brownie’s brand. Each of these industries has experienced growth over the past several decades, but we believe each industry also has significant weaknesses. The dive industry has focused on the initial certification of divers for revenue. According to industry data, follow up has been poor; causing many divers to quit diving after their first experience. When the Company’s working capital reaches a sufficient level, BWMG intends to implement a follow-up program, facilitate proper selection of equipment for divers, and institute mentoring programs.Company believes should positively impact its market reach.

The boating industry was hard hit a couple years ago by the economic downturn coupled with the increase in fuel prices. We continue to work with boaters to enhance their on-water experience by exploiting the diving activities that they can easily add as an accessory to their investment in boating. Brownie’s OEM BIAS program will improve the overall value at the manufacturing level and consumer experience by elimination of waste during the design/build phase. They can blow their horns, open air-powered doors and dive directly from a BIAS package.Intellectual Property

StatisticsTrade Names

According to Global Certification and Membership Statistics as updated February 2014 on the Professional Association of Diver Instructors (PADI) website, www.padi.com, worldwide PADI certifications of divers has grown annually from over 500,000 certifications in 1992, to consistently over 900,000 annual certifications annually from 2003 to 936,149 certifications in 2013. There are other scuba training organizations also issuing scuba dive training certifications, but PADI is the training organization issuing the largest number of certifications annually. (source: PADI)

Approximately 88.5 million people went boating in the US in 2013; this represents approximately 37% of the adult population in the United States. There were approximately 15.9 million boats in use in 2013, down slightly from approximately 16.0 million in use in 2012. (source: National Marine Manufacturers Association)

Trade names and Patents

The Company has a product development and intellectual property program. It holds numerous patents and trademarks on its own and/or through licensing agreements with its chief executive officer and his affiliates.

Trade names

The Company either owns or has licensed from an entity,entities in which the Chief Executive OfficerRobert Carmichael, our Chairman, has an ownership interest, the use of the following registered and unregistered trade names, trademarks and service marks for the terms of their indefinite lives:marks: Brownie’s Third Lung™, browniedive.com, Brownie’s, Brownie’s Third Lung oval symbol, browniedive, YachtPro, NitroxMaker™, BLU3, diveBLU3.com, BLU3 Nemo, BLU3-Vent, Submersible Systems, Spare Air, HEED 3, Snorkelator, easy dive, spareair.com, HELO, RES, Gold Coast Scuba, fast float rescue harness, tankfill.com, browniestankfill, browniestankfill.com, browniespublicsafety.com, and browniespublicsafety, Peleton Hose System, Twin-Trim, and Kayak Diving Hose Kit, Bell Bottom Flag Bag, Brownie’s Dogsnare. SHERPA, BC keel, and Garment integrated personal flotation device (GI-PFD). Use of these trade names, trademarks, and service marks is exclusive to the Company and the Company’s related parties.Kit.

Patents

The Company owns multiple patentsthe following patents:

License Agreements

On April 6, 2018, the Company entered into a patent license agreement (the “STS Agreement”) with Setaysha Technical Solutions, LLC (“STS”) pursuant to which the Company licensed certain intellectual property, including patent rights, non-patent rights and know-how from STS for use in our ultra-portable tankless dive system products. Under the STS Agreement, the Company paid an initial license fee in April 2018 through the issuance of 759,422 shares of common stock with a fair value of $30,000. The STS Agreement further provides for royalties based on annual net revenues. On December 31, 2019, the Company entered into Addendum No. 1 to the STS Agreement (“Addendum No. 1”) which amended the payments due upon the first commercial sale of Nemo. Upon entering into Addendum No. 1, $8,250 was paid to STS in cash and $8,250 was paid on January 10, 2020. On February 6, 2020, the Company issued and828,221 shares of common stock with a fair value of $18,635 in processsatisfaction of $13,500 for the first commercial sale of the Nemo dive system. On June 30, 2020, the Company entered into Addendum No. 2 to the STS Agreement concerning STS’s assistance related to designing and commercializing certain diving products. Addendum No. 2 provides for a minimum yearly royalty of $60,000, or $15,000 per fiscal quarter, beginning in December 2019 and increasing by 2.15% per year. With the following:introduction of the NOMAD in the last quarter of 2021, the Company is obligated to pay an additional annual minimum royalty of $60,000 per year for the years 2022, 2023 and 2024, which increased the quarterly minimum royalty by $15,000 per quarter. On November 1, 2022 the Company issued to the designees of STS 1,155,881 shares of common stock with a fair value of $30,000 in accordance with the STS Agreement.

Marketing

Print Literature, Public Relations, and Advertising

We have in-house graphic design capability to create and maintain product support literature, catalogs, mailings, web-based advertising, newsletters, editorials, advertorials, and press releases. We also, from time-to-time, target specific markets by selectively advertising in journals and magazines that we believe reach our potential customers. In addition, we strive to issue press releases, newsletters, and social media postings periodically to keep the public informed of our latest products and related endeavors.

Tradeshows

In 2014 and 2015,2021, the Company was represented either through their own presencedirectly or by a dealerindirectly at the following annual trade shows: The Miami Yacht and Brokerage Show, The Fort Lauderdale International Boat Show, the Palm Beach Boat Show, The Annapolis Motor and Sailing Shows, The Fort Lauderdale Boat show, Diving Equipment and Manufacturing show. In 2022, the Company expanded its marketing reach via tradeshows by attending all shows attended in 2021, The Seattle Boat Show, The Dubai Boat Show, and the Seattle Boat Show.HAI Heli-Expo, along with various other trade and industry shows.

Websites

The Company’s main website is www.browniesmarinegroup.com. Additionally,We sell our products online through our and our subsidiaries websites and many of our products are marketed on some of our customers’ websites. In addition to these websites, numerous other websites have quick links to the Company’s website. Our products are available both domestically and internationally. Internet sales and inquiries are also supported by the Company.

Distribution

Our products are distributed to our customers primarily by common carrier.

Product Research and Development (R&D)

We continuously work to provide our customers with both new and improved products. We offer research and development services to not only the related entities we license our patents and trademarks from, but also to other customers as well. R&D services for customers and the related entities are invoiced in the normal course of business. In addition, we are working on internal research and development projects as well as collaborating with others toward the goal of developing some of our own patentable products. Research and development costs for the year ended December 31, 20152022 and 2014,December 31, 2021 and were $8,739$18,393 and $4,087, respectively.$75,439, respectively, none of which cost is borne directly by customers.

Government RegulationsRegulation

The SCUBA industry is self-regulating; therefore, the Company is not subject to government industry specific regulation. Nevertheless, theHowever, SSI, our tank manufacturing company is subject to Department of Transportation (“DOT”) regulation and testing of each of their tanks. The Company strives to be a leader in promotingpromote safe diving practices within the industry and believes it is at the forefront of self-regulation through responsible diving practices. The Company is subject to all regulations applicable to “for profit” companies as well as all trade and general commerce governmental regulation. All required federal and state permits, licenses, and bonds to operate its facility have been obtained. There can be no assurance that the Company’s operation and profitability will not be subject to more restrictive regulation or increased taxation by federal, state, or local agencies in the future.

Distribution/Customers

We areThe Company has historically been predominantly a wholesale distributor to retail dive stores, marine stores, boat dealers, builders, and shipyards. This includes approximately 160 active independent Brownie dealers. We retail our products to including, but not limited to,the US and international militaries. Currently, the Company generates a significant amount of direct-to-consumer sales via its websites and its relationship with Amazon via BLU3, BTL and SSI. Retail sales customers include boat owners, recreational divers, commercial divers and commercial divers.pilots. The Company sells products to three entities owned by the brother of Robert Carmichael, the Company’s Chief Executive officer,Chairman, and two Company’scompanies owned by the Chief Executive Officer.Mr. Carmichael. Combined sales to these fivesix entities for the years ended December 31, 20152022 and 2014,2021, represented 31.75%11.4% and 43.34%17.9%, respectively, of total net revenues. A single non-related party entity represented 18.7%

The majority of revenues for 2015. L&W high pressure compressors and NitroxMaker™ systems have been sold to commercial dive stores, dive operators (resorts and liveaboard dive boats), yacht builders, yacht owners, and high-pressure compressor distributors.

Sales of YachtPro™ compressor systems have been split between retail sales directly to no other customers for the year ended December 31, 2014 represented greater than 10% of net revenues.consumers and wholesale sales to OEM boat builders/resellers/brokers.

Suppliers/Raw Materials

Principal raw materials for our business include machined parts such as rods, pistons, bearings; hoses; regulators; compressors; engines;bearings, hoses, regulators, compressors, engines, high-pressure valves and fittings;fittings, sewn goods;goods, and various plastic parts including pans, covers, intake staffs, and quick release connections.connections which are typically purchased on a per order basis. Most materials are readily available from multiple vendors. Some materials require greater lead times than other materials. Accordingly, we strive to avoid out of stock situations through careful monitoring of these inventory lead times, and through avoiding single source vendors whenever possible. Principle suppliers include Lenhardt & Wagner GmbH, Xometry, Inc., Burgess Manufacturing Corp, Bix International, Inc., Carrol Stream Motor Company, Zhejiang Xiangyang Gear Electormechan, Co, Tian Li He Technology Co, Ltd, Xiamen Feipeng Insdustry Co. Ltd. and Catalina Cylinders, Inc.

Competition

We consider the most significant competitive factors in our business to be innovation, lifestyle, fair prices, feature advantages, shopping convenience, the variety of available of products, knowledgeable sales personnel,and prompt customer service and rapid and accurate fulfillment of orders, and prompt customer service.order fulfillment. We currently recognizehave one significant competitor in hookah sales andwithin the BTL business model, Airline by JSink, Inc. There are a variety of competitors, including Aqua Lung America, Coltri America and Bauer Compressors, Inc. in our redundant air tank systems and high-pressure tankfillcompressor systems sales. Products from the hookah competitor and those from one of the tankfill competitors appear to be very similar to ours at first glance, but lack many of what we believe are our patently superior feature advantages. Brownie’s competitorsIn 2022 competition has surfaced in the high pressure tankfill market are typically focused on traditional dive storesBLU3 business segment from companies such as AirBuddy, and fire department air service. Several are large multi-national companies that do not offer adaptation to the yacht market or Nitrox integration; both areas that Brownie’s long-term investments rise to a level to suit the buyer’s needs.few other very low-cost Chinese manufactured competitors.

Overall, we are operating in a moderately competitive environment. We believe that theThe price structure for all the products we distribute compares favorably with the majority of our competitors based on quality and available features. We believe that our key competitive advantage is our ability to create new products and, in some cases, new markets.

PersonnelEmployees

We currently have eleven (11) full timethirty-six full-time employees, and three (3) part time employees at our facilityfour part-time employees.

Seasonality

Our product lines have historically been seasonal in Pompano Beach, Florida. Three (3) are classified as exempt sales and administrative or management, and eleven (11) are classified as nonexempt factory or administrative support. We utilize consultants when needednature in the absence of available in-house expertise. Our employees are not covered by a collective bargaining agreement.

Seasonality

The main product categories of our business, Brownie’s Third Lung and Brownie’s Tankfill, are seasonal in nature.United States. The peak season for Brownie’s Third Lung’sthe diving related products, BTL, BLU3, SSI and LBI is the second and third quarters of the year. The peak season for Brownie’s Tankfill’shigh pressure products is typically the fourth and first quarters of the year. SinceThe Company continues to address the seasons complement one another, we are ableseasonality of the business by expanding its reach beyond the traditional markets in the U.S. to shift cross-trained factory and warehouse personnel betweenother areas of the two product categories as needed. Thus,world that may somewhat offset the Company is able to avoid the down time normally associated with seasonal business.seasonality.

Not applicable to smaller reporting companies. However, our principal risk factors are described under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Not applicable to smaller reporting companies.

Our Pompano Beach facilities are comprised of approximately 8,541 square feet of leased space the bulk of which is factory and warehouse space. Terms of the lease include a thirty-seven month term commencing on September 1, 2014; payment of $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 areas maintenance), which is approximately $2,000 per month subject to periodic adjustment. We believe that the facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the foreseeable future.

From time to time we are subject to legal proceedings, claims and litigation arisingInvesting in the ordinary course of business, including matters relating to product liability claims. Such product liability claims sometimes involving wrongful death or injury have historically been covered by product liability insurance, which provided coverage for each claim up to $1,000,000. We currently do not have product liability coverage. See “Risk Factors” below.

As previously disclosed, we are co-defendants under an action filed by an individual in June 2013 in the Circuit Court of Broward County claiming personal injury resulting from use of a Brownie’s Third Lung. Plaintiff has claimed damages in excess of $1,000,000. The insurance carrier’s legal counsel indicates unfavorable outcome is possible, but not probable. We believe such claim is without merit and intend to continue to aggressively defend such action. In addition, as previously disclosed, we are also co-defendant under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. This claim falls outside the Company’s period of insurance coverage. The Company believes the claim to be a Workers Compensation claim relating exclusively against other defendant and without merit, and has retained counsel to aggressively defend this action.

On September 24, 2015, all claims and counterclaims by and between Undersea Breathing Systems, Inc. (“UBS”) and the Company were settled in full in the Circuit Court of the 15^th Judicial Circuit in and for Palm Beach County, FL, in the third quarter of 2015. The settlement included no payment or compensation due by the Company, UBS owing the Company certain tangible property within 14 days, mutual execution of general release, and stipulation for dismissal with prejudice with all parties to bear their own attorneys’ fees and costs.

None.

PART II

The Company’s common stock is quoted on the OTC Markets under the symbol “BWMG”. The Company’s high and low closing bid prices by quarter during 2014 and 2015, as provided by the OTC Markets (Pink) are provided below. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. On March 17, 2016, the quoted closing price of our common stock was $0.005 per share.

involves risks. In addition to those unregistered securities previously disclosedthe other information contained in reports filed with the Securities and Exchange Commission during the period covered by this report, you should carefully consider the Company sold securities without registration underfollowing risks before deciding to purchase our common stock. The occurrence of any of the Securities Actfollowing risks might cause you to lose all or a part of 1933 (the “Securities Act”)your investment. Some statements in reliance uponthis report, including statements in the exemption provided in Section 4(a)(2) as described below. The securities were issued withfollowing risk factors, constitute forward-looking statements. Please refer to “Cautionary Statement Regarding Forward-Looking Statements” for more information regarding forward-looking statements.

FINANCIAL RISKS

We have a legend restricting their transferability absent registrationhistory of applicable exemption.losses.

DuringWe incurred net losses of $1,892,891 and $1,588,467, respectively, for the year ended December 31, 2015,2022 and 2021. On December 31, 2022 we had an accumulated deficit of $16,437,495. While our revenues increased 37.7% for the Company issued 19,419,712 common shares withyear ended December 31, 2022 from 2021, and our gross profit margin increased from 30.3% in 2021 to 32.6% in 2022, our gross profit is not sufficient to cover our operating expenses of $4,644,596 and $3,742,262 for the twelve months ending December 31, 2022 and 2021, respectively. Operating expenses include non-cash stock compensation expenses of $962,474 and $1,154,801 for the years ending December 31, 2022 and 2021, respectively. In the year ended December 31, 2022, our selling, general and administrative expenses, increased 19.8% from 2021. There are no assurances that we will be able to increase our revenues to a fair value of $54,000level which supports profitable operations and provide sufficient capital to Alexander Fraser Purdon, a related party,pay our operating expenses and other obligations as employee compensation. In addition, the Company issued 396,891 common shares representing accrued interest on notes payablethey become due.

Our auditors have raised substantial doubts as to our Chief Executive Officer.

Information not required by smaller reporting company.

Overview

The Company through its wholly owned subsidiary, Trebor Industries, Inc., d/b/a Brownie’s Third Lung, a Florida corporation, designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba air compressor and Nitrox Generation Systems, and scuba and water safety products. We sell our products both on a wholesale and retail basis. Our headquarters and manufacturing facility is located in Pompano Beach, Florida. The Company does business as (dba) Brownie’s Third Lung.

Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires managementability to make a wide variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. We have identified certain accounting policies that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are as follows:

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.

Reclassifications – Certain reclassifications have been made to the 2014 financial statement amounts to conform to the 2015 financial statement presentation. Effective July 15, 2013, the Company effectuated a reverse stock split (1-for-1,350). Accordingly, the transactional number of shares and per share amounts referenced throughout this report has been retroactively stated unless otherwise noted.

Cash and 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.

Going Concern –The accompanying 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.

Our independent registered public accounting firm has included an explanatory paragraph expressing substantial doubt relating to our ability to continue as a going concern in the normal course of businessits report on our audited consolidated financial statements for the twelve-month period following the date of these financial statements. Although profitable for the yearsyear ended December 31, 2015 and 2014, we have otherwise incurred losses since 2009.2022. We have recurring losses from operations and had a working capitalnet loss of approximately $1,732,000 and have used approximately $678,400 in net cash in our operations in the year ended December 31, 2022 as well as an accumulated deficit since 2009.

The Company is behind on payments due for matured convertible debentures, related parties notes payable, accrued liabilities and interest – related party, and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raisesof approximately $16,437,000. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. The Company has issued a number of convertible debentures as an interim measure to finance working capital needs and may continue to raise additional capital through sale of restricted common stock or other securities, and obtaining some short term loans. The Company has, in the past, paid for legal and consulting services with restricted stock to maximize working capital, and intends to continue this practice where feasible. In addition, the Company continues to explore additional cost saving measures.

If BWMG fails to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back or cease operations, liquidate assets and possibly seek bankruptcy protection. The accompanyingOur consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Inventory – Inventory is stated at the lower of cost or fair market value. Cost is principally determined by using the average cost method that approximates the First-In, First-Out (FIFO) method of accounting for inventory. Inventory consists of raw materials as well as finished goods held for sale. The Company’s management monitors the inventory for excess and obsolete items and makes necessary valuation adjustments when indicated.

Furniture, Fixtures, Equipment and Leasehold Improvements– Furniture, Fixtures, Equipment and Leasehold Improvement is stated at cost less accumulated depreciation or amortization. Depreciation and amortization is provided principally on the straight-line method over the estimated useful lives of the assets, which are primarily 3 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Revenue recognition – Revenues from product sales are recognized when the Company’s products are shipped or when service is rendered. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost of each contract. This method is used because management considers the percentage of cost incurred to date to estimated total cost to be the best available measure of progress on the contracts.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Change in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Revenue and costs incurred for time and material projects are recognized as the work is performed.

Product development costs – Product development expenditures are charged to expenses as incurred.

Advertising and marketing costs– The Company expenses the costs of producing advertisements and marketing material at the time production occurs, and expenses the costs of communicating advertisements and participating in trade shows in the period in which they occur.

Customer deposits and returns policy– The Company typically takes a minimum 50% deposit against custom and large tankfill systems prior to ordering and/or building the systems. The remaining balance due is payable upon delivery, shipment, or installation of the system. There is no provision for cancellation of custom orders once the deposit is accepted, nor return of the custom ordered product. Additionally, returns of all other merchandise are subject to a 15% restocking fee as stated on each sales invoice.

Income taxes – The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Comprehensive income – The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods presented.

Stock-based compensation – The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes valuation model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued on the effective date of the agreement in accordance with generally accepted accounting principles, which includes determination of the fair value of the share-based transaction. The fair value is determined through use of the quoted stock price.

Fair value of financial instruments–Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company’s perceived risk of that investment.

At December 31, 2015, and 2014, the carrying amount of cash, accounts receivable, accounts receivable – related parties, customer deposits and unearned revenue, royalties payable – related parties, other liabilities, other liabilities and accrued interest – related parties, notes payable, notes payable – related parties, and accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

Earnings 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.

New accounting pronouncements

In July 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory. ASU No. 2015-11 does not apply to inventory measurement using the last-in, last-out (LIFO) or retail methods. ASU No. 2015-11 applies to all other inventory measurement methods, which includes first-in, first-out (FIFO) or average cost. Previously, inventory valuation was at the lower of cost or fair market value. This ASU changes the valuation to lower or cost of net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of the business, less reasonably predictable costs of completion, disposal, and transportation. ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. ASU 2015-11 should be applied prospectively with earlier application permitted. The Company opted for early adoption of ASU 2015-11 this period with no impact to financial condition, results of operations, or cash flows. The Company updated its consolidated financial statements to reflect inventory valuation at the lower of cost or net realizable value.

In August 2014, the Financial Accounting and Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-206): Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The ASU requires an entity’s management to assess its ability to continue as going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. This includes (1) providing a definition of the term substantial doubt, (2) requiring an evaluation every reporting period including interim periods, (3) providing principles for considering then mitigating effect of management’s plans, (4) requiring certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requiring an express statement and other disclosures when substantial doubt is not alleviated, and (6) requiring an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early adoption permitted. The Company elected early adoption for the year ended December 31, 2014, with insignificant impact to both its current process for evaluating ability to continue as going concern and to its existing disclosures.

The Company believes there was no other new accounting guidance adopted, but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of its financial statements.

The following discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to allowance for doubtful accounts and deferred income tax assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Results of Operations for the Year Ended December 31, 2015, as Compared to the Year Ended December 31, 2014

Net revenues. For the year ended December 31, 2015, revenues remained relatively constant with net revenues of $2,759,643 as compared to net revenues of $2,735,841 for the year ended December 31, 2014, an increase of $23,802, or less than 1%. Sales to related parties totaled $876,188 and $1,185,603 for the same periods, respectively. Sales of tankfill systems and related sales were up approximately $251,967 for the year ended December 31, 2015 compared to 2014, and this increase was partially offset by an approximate $240,408 decline in hookah systems and related sales during the same period this change in product mix is not believed to be attributable to any particular identifiable sales trend or competitive pressures but rather normal fluctuations in market demand. Discontinuance of the Company’s product liability insurance has had negative impact on hookah sales to some of the Company’s dealers, but the Company believes sales of these products will rebound over time.

Cost of net revenues. For the year ended December 31, 2015, we had cost of net revenues of $1,831,989 as compared with cost of net revenues of $1,991,626 for the year ended December 31, 2014, a decrease of $159,637, or 8%. This was primarily attributable to approximately $11,869 decrease in overhead allocation primarily due to discontinuance of product liability insurance in the third quarter of 2014, which was an expense allocable as overhead; approximately $26,622 decrease in direct labor; approximately $19,870 decrease in subcontract labor; approximately $10,220 decrease in non-sales freight; and approximately $89,973 net decrease of primarily individually insignificant decreases in the majority of cost of net revenue accounts due to continuance of cost cutting measures by the Company to maximize working capital without sacrificing quality. In addition, although material costs increased due to quantity increase in sales, the increase was offset by an approximately 1% overall decline in material cost as a percentage of net revenues.

Gross profit. For the year ended December 31, 2015, we had a gross profit of $927,654 as compared to gross profit of $744,215 for the year ended December 31, 2014, an increase of $183,439, or 25%. The increase in gross profit was primarily attributable to the decrease in cost of net revenues of $159,637 for the year ended December 31, 2015, as compared to the prior year as discussed above.

Operating expenses. For the year ended December 31, 2015, we had operating expenses of $679,721 as compared to operating expenses of $623,261 for the year ended December 31, 2014, an increase of $56,460, or 9%. The increase is primarily attributable to increase in legal expense of approximately $141,204 approximately $16,886 increase in rent, and partially offset by approximately $44,652 decrease in insurance expense related to discontinuance of product liability insurance and reduction of workers compensation insurance, and decrease in indirect labor of approximately $37,679. There were many other net increases and decreases in account balances not deemed individually insignificant. The vast majority of the legal expense increase was for the UBS legal proceeding during 2015, including legal defense and counterclaim settlement. The balance of the increase in legal is primarily a result of a credit to legal expense for overbilled amount during the year ended December 31, 2014 without comparable transaction during the year ended December 31, 2015. The decrease in direct labor for the year ended December 31, 2015 as compared to the same period in 2014 is a result of reduction in head count not replaced when the Company’s factory and headquarters relocated in October 2014.

Other (income) expense, net. For the year ended December 31, 2015, we had other (income) expense, net of $18,280, as compared to other (income) expense, net of $26,541 for the year ended December 31, 2014, a change in other (income) expense, net of $8,261, or 31%. This account is comprised of interest expense that decreased $18,217 during the year ended December 31, 2015 compared to the year ended December 31, 2014 primarily attributable to the satisfaction of related party notes. Other (income) expense net is comprised of transactions that are generally of a non-recurring nature. The decrease in other income net of $9,955 is primarily due to transactions occurring during the year ended December 31, 2014, without comparable transactions during the same period in 2015.

Net income.For the year ended December 31, 2015, we had net income of $229,610 as compared to net income of $94,369 for the year ended December 31, 2014, an increase of $135,241, or 143%. The increase in net income is primarily attributable a decrease in the cost of net revenues as described above.

Liquidity and Capital Resources

As of December 31, 2015, the Company had current assets (primarily consisting of inventory) of $958,001 and current liabilities of $1,232,943 or a current ratio of .78 to 1. This represents a working capital deficit of $274,942. As of December 31, 2014, the Company had cash and current assets of $774,291 and current liabilities of $1,356,642, or a current ratio of .57 to 1.

The consolidated financial statements included herein 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 financial statements. Although we had net income for the years ended December 31, 2014 and 2015, we have otherwise incurred annual losses since 2009, and expect we may have losses in future periods. We have had a working capital deficit since 2009.

The Company is behind on payments due matured convertible debentures; accrued liabilities and interest – related parties; and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

The Company does not expect that existing cash flow will be sufficient to fund presently anticipated operations. This raises substantial doubt about the Company’s ability to continue as a going concern during the twelve- month period following the date of the financial statements included herein. The Company will need to raise additional funds and is currently exploring alternative sources of financing. We have issued a number of convertible debentures as an interim measure to finance our working capital needs. We have historically paid for some legal and consulting services with restricted stock to maximize working capital. We intend to continue this practice in the future when possible. We have implemented some cost saving measures and will continue to explore more to reduce operating expenses.

Net cash provided by operating activities totaled $147,461 and $157,757 for the years ended December 31, 2015 and 2014, respectively. For both 2015 and 2014, the increase in net cash from operating activities was primarily the result of earnings for the period. Cash generated from 2015 earnings of $229,610 was reduced primarily by a reduction in accounts payable and accrued liabilities during the period of $112,830 as well as an increase in prepared expenses and inventory levels dictated by anticipated sales levels. Cash flows in 2015 were also increased by a decrease in accounts receivable - related parties and increase in accrued royalties, payable to related parties.

Net cash used in financing activities totaled $12,622 and $126,202 at December 31, 2015 and 2014, respectively, and primarily reflects the repayments during the periods of principal payments on notes payable to related parties of $30,068 and $113,452, respectively. The net cash used in financing activities for 2015 was net of $27,000 proceeds of additional notes payable - related parties.

Net cash provided by operating activities for 2014 resulted primarily from 2014 earning of $94,369 coupled with an increase in other liabilities and accrued interest payable to related parties of $74,504 and advanced from related parties $34,617.

For both years ending December 31, 2015 and 2014, the Company has heavily depended upon the funding of related parties to maintain its operations.

If we fail to raise additional funds when needed, or do not have sufficient cash flows from sales, we may be required to scale back or cease operations, liquidate our assets and possibly seek bankruptcy protection. The accompanying consolidated financial statements do not include any adjustments that maymight result from the outcome of this uncertainty. Our principal sources of liquidity are sales of equity and debt securities. We do not have any firm commitments to raise additional working capital. As we are a small company who stock is quoted on the OTC Markets, we expect to encounter difficulty in raising working capital upon terms and conditions satisfactory to us, if at all. If we are unable to obtain sufficient funding or generate sufficient revenues, our business and results of operations will be adversely affected, and we may be unable to continue as a going concern.

We rely on revenues from related parties.

We generate revenues from sales to related parties, which accounted for 11.4% of our net revenues in 2022 and 17.9% of our net revenues in 2021. The loss of revenues from these related parties would have a material adverse impact on our business, results of operations and financial condition in future periods.

We depend on licenses with Robert Carmichael, our Chairman, who owns much of our intellectual property.

The Company has licensed from entities in which Robert Carmichael, our Chairman, has an ownership interest, the following registered and unregistered trade names, trademarks and service marks: Brownie’s Third Lung™, browniedive.com, Brownie’s, Brownie’s Third Lung oval symbol, browniedive, YachtPro. Failure to maintain such licenses with Mr. Carmichael would have a material adverse effect on the Company’s financial condition.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

Our management has previously determined that we did not maintain effective internal controls over financial reporting. For a detailed description of these material weaknesses and our remediation efforts and plans, see Part II, Item 9A-Controls and Procedures of this Annual Report. If the result of our remediation of the identified material weaknesses is not successful, or if additional material weaknesses are identified in our internal control over financial reporting, our management will be unable to report favorably as to the effectiveness of our internal control over financial reporting and/or our disclosure controls and procedures, and we could be required to further implement expensive and time-consuming remedial measures and potentially lose investor confidence in the accuracy and completeness of our financial reports which could have an adverse effect on our stock price and potentially subject us to litigation.

The U.S. Consumer Products Safety Commission (“CPSC”) has issued a voluntary recall for one of our products.

Risk FactorsOn December 22, 2022, the CPSC issued a voluntary recall notice for the Nomad tankless dive system, which is distributed by BLU3, Inc. As part of the recall procedure, the CPSC has approved the Company’s proposed remedy for the recall and BLU3 will begin to receive units back from consumers to repair affected Nomad units. The Company has evaluated the costs of this recall and has deemed it necessary to set a reserve for those costs related to the recall of $160,500.  However, the Company is unable to currently calculate the full financial impact to the Company over the long term, and whether it may have a material adverse impact on the financial condition of the Company in future periods.

BUSINESS AND OPERATIONAL RISKS

We are dependent upon certain key members of management and qualified employees and consultants.

Our success depends to a significant degree on the abilities and efforts of our senior management. and on our ability to attract, retain and motivate highly qualified marketing, technical, engineering and sales personnel and consultants. These people are in high demand and often have competing employment opportunities. The Companylabor market for skilled employees is subjecthighly competitive and we may lose key employees or be forced to increase their compensation to retain these people. Employee turnover could significantly increase our recruitment, training and other related employee costs. The loss of key personnel, or the failure to attract qualified personnel, could result in delays in development or fulfillment of any current strategic and operational plans and have a material adverse effect on our business, financial condition or results of operations.

Our failure to obtain and enforce intellectual property protection may have a material adverse effect on our business.

Our success depends in part on our ability, and the ability of our patent and trademark licensors, and entities owned and controlled by Robert Carmichael to obtain and defend our intellectual property, including patent protection for our products and processes, preserve our trade secrets, defend and enforce our rights against infringement and operate without infringing the proprietary rights of third parties, both in the United States and in other countries. Despite our efforts to protect our intellectual proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection.

Our industry is characterized by frequent intellectual property litigation based on allegations of infringement of intellectual property rights. Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future.

Our intellectual property rights are valuable, and any inability to adequately protect, or uncertainty regarding validity, enforceability or scope of them could undermine our competitive position and reduce the value of our products and brand, and litigation to protect our intellectual property rights may be costly.

We attempt to strengthen and differentiate our product portfolio by developing new and innovative products and product improvements. As a result, our patents, trademarks, trade secrets, copyrights and other intellectual property rights are important assets to us. Various events outside of our control pose a threat to our intellectual property rights as well as to our products and services. For example, effective intellectual property protection may not be available in countries in which our products are sold. Also, although we have registered our trademark in various risks thatjurisdictions, our efforts to protect our proprietary rights may materiallynot be sufficient or effective. Any significant impairment of our intellectual property rights could harm itsour business or our ability to compete. Litigation might be necessary to protect our intellectual property rights and any such litigation may be costly and may divert our management’s attention from our core business. An adverse determination in any lawsuit involving our intellectual property is likely to jeopardize our business prospects and reputation. Although we are not aware of any of such litigation, we have no insurance coverage against litigation costs, and we would be forced to bear all litigation costs if we cannot recover them from other parties. All foregoing factors could harm our business, financial condition, and results of operations. Any unauthorized use of our intellectual property could harm our operating results.

We may be exposed to infringement or misappropriation claims by third parties, which, if determined against us, could adversely affect our business and subject us to significant liability to third parties.

Our success mainly depends on our ability to use and develop our technology and product designs without infringing upon the intellectual property rights of third parties. We may be subject to litigation involving claims of patent infringement or violations of other intellectual property rights of third parties. Holders of patents and other intellectual property rights potentially relevant to our product offerings may be unknown to us, which may make it difficult for us to acquire a license on commercially acceptable terms. There may also be technologies licensed to us and that we rely upon that are subject to infringement or other corresponding allegations or claims by third parties which may damage our ability to rely on such technologies. In addition, although we endeavor to ensure that companies that work with us possess appropriate intellectual property rights or licenses, we cannot fully avoid the risks of intellectual property rights infringement created by suppliers of components used in our products or by companies we work with in cooperative research and development activities. Our current or potential competitors may obtain patents that will prevent, limit or interfere with our ability to make, use or sell our products. The defense of intellectual property claims, including patent infringement suits, and related legal and administrative proceedings can be both costly and time consuming, and may significantly divert the efforts and resources of our technical personnel and management. These factors could effectively prevent us from pursuing some or all of our business operations and result in our customers or potential customers deferring, canceling or limiting their purchase or use of our products, which may have a material adverse effect on our business, financial condition and results of operations.

We may not be able to enforce our intellectual property rights throughout the only risks and uncertainties that the Company faces. Additional risks that weworld.

The laws of some foreign countries do not yet know of or that we currently think are immaterial may also impair our future business operations. If any of these risks or uncertainties actually occurs,protect intellectual property rights to the Company’s business, financial condition or operating results could be materially harmed. In that case,same extent as the trading pricelaws of the Company’s common stockUnited States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This could declinemake it difficult for us to stop the infringement or the misappropriation of our intellectual property rights. Many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and youtime-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could lose all or partresult in substantial costs and divert our efforts from other aspects of your investment.

Ourour business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.

We rely on third party vendors and manufacturers.

We deal with suppliers on an order-by order basis and have no long-term purchase contracts or other contractual assurances of continued supply or pricing. In addition, we have no long-term contracts with our manufacturing sources and compete with other companies for production facility capacity. Historically, we have purchased enough inventories of products or their substitutes to satisfy demand. However, unanticipated failure of any manufacturer or supplier to meet our requirements or our inability to build or obtain substitutes could force us to curtail or cease operations. Certain of our product components are manufactured in China. Due to Covid, and the logistics challenges existing currently, we have experienced delays and may experience continued delays in our supply chain, including component products, which are manufactured in China. Our senior management will continue to monitor our situation on a daily basis; however, we expect that these factors and others we have yet to experience may materially adversely impact our company, its business and operations for the foreseeable future.

We are dependent on consumer discretionary spending.

The success of our business depends largely upon a number of factors related to consumer spending, including current and future economic conditions affecting disposable consumer income such as a going concern is in substantial doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

While we incurred net income in 2015 and 2014, the Company has negative working capital, is behind on payments due for matured convertible debentures, related party notes payable, accrued liabilitiesemployment, business conditions, tax rates, and interest –related parties,rates. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which effects demand for our products. Any significant deterioration in overall economic conditions that diminishes consumer confidence or discretionary income can reduce our sales and certain vendor payables.adversely affect our financial results. The Company is working outimpact of weakening consumer credit markets; layoffs; corporate restructurings; higher fuel prices; declines in the value of investments and residential real estate; and increases in federal and state taxation can all matters of delinquency on a case by case basis. However, therenegatively affect our results. There can be no assurance that cooperationin this type of environment consumer spending will not decline, thereby adversely affecting our growth, net sales and profitability or that our business will not be adversely affected by continuing or future downturns in the economy, boating industry, or dive industry. If declines in consumer spending on recreational marine accessories and dive gear are other than temporary, we could be forced to curtail or cease operations.

Government regulations may impact us.

The SCUBA industry is self-regulating, therefore, from an industry perspective the Company has received thus faris not subject to government industry specific regulation. However, our tank manufacturing operation is required to comply with DOT, as well as being approved to sell in various countries outside of the United States. The Company strives to be a leader in promoting safe diving practices within the industry and is at the forefront of self-regulation through responsible diving practices. The Company is subject to all regulations applicable to “for profit” companies as well as all trade and general commerce governmental regulation. All required federal and state permits, licenses, and bonds to operate its facility have been obtained. There can be no assurance that our operations will continue. Our continued existence is dependent upon generating working capital and obtaining adequate new debt or equity financing. Because of our historical losses, we may not have working capitalbe subject to permitmore restrictive regulations in the future, which could force us to remain in business through the end of the year, without improvements in our cash flow from operationscurtail or new financing. Working capital limitations continuecease operations.

Our failure to impingeadequately protect personal information that is collected on our day-to-day operations.

The optional conversion features ofwebsite and our third-party payment platforms could have a series of convertible debentures issued by the Company could require the Company to issue a substantial number of shares of common stock, which will cause dilution to the Company’s stockholders and a potentially negativematerial adverse effect on our stock price.business.

Since October 4, 2010,A wide variety of local, state, national, and international laws, directives and regulations apply to the Company has issued convertible debentures to several lenderscollection, use, retention, protection, disclosure, transfer, and other third parties. At December 31, 2015processing of personal data (including with respect to the outstanding principal balanceEuropean Union’s General Data Protection Regulation and U.S. state laws such as the California Consumer Privacy Act). These data protection and privacy-related laws and regulations continue to evolve and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance. Our failure to comply with applicable laws and regulations, or to protect such data, could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by end-customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing end-customers and prospective end-customers), any of which could have a material adverse effect on our operations, financial performance, and business. Changing definitions of personal data and personal information, within the European Union, the United States, and elsewhere may limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. The evolving data protection regulatory environment may require significant management attention and financial resources to analyze and modify our information technology infrastructure to meet these debentures was approximately $372,000. The debentures convert under various conversion formulas,changing requirements all of which could reduce our operating margins and impact our operating results and financial condition.

Bad weather could have an adverse effect on operating results.

Our business is significantly impacted by weather patterns. Unseasonably cool weather, extraordinary amounts of rainfall, or unseasonably rough surf, may decrease boat use and diving, thereby decreasing sales. Accordingly, our results of operations for any prior period may not be indicative of results of any future period.

The manufacture and distribution of recreational diving equipment could result in product liability claims.

We, like any other retailer, distributor and manufacturer of products that are at a significant discountdesigned for recreational sporting purposes, face an inherent risk of exposure to market priceproduct liability claims in the event that the use of our common stock. products results in injury. Such claims may include, among other things, that our products are designed and/or manufactured improperly or fail to include adequate instructions as to proper use and/or side effects, if any. We do not obtain indemnification from parties supplying raw materials, manufacturing our products or marketing our products. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.

The conversion of anyworldwide impact from the COVID-19 pandemic may negatively impact our business.

While we have been relatively successful in navigating such impact to date, we have previously been affected by temporary manufacturing closures, and employment and compensation adjustments. There are also ongoing related risks to our business depending on the progression of the debenturespandemic, and recent trends in certain regions have indicated potential returns to limited or closed government functions, business activities and person-to-person interactions. Global trade conditions and consumer trends may further adversely impact us and our industries. For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. Similarly, increased demand for personal electronics has created a shortfall of microchip supply, and it is yet unknown how we may be impacted. We cannot predict the duration or direction of current global trends from this pandemic, the sustained impact of which is largely unknown, is rapidly evolving and has varied across geographic regions. Ultimately, we continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will result in thehave to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.

SHAREHOLDER RISKS

The issuance of a significant number of shares of our common stock which willupon exercise of our outstanding options, warrants, convertible debt and Series A Convertible Preferred Stock may cause immediate and substantial dilution to our existing shareholders. Furthermore,

We presently have vested and unvested options, warrants, convertible debt and Series A Convertible Preferred Stock that if exercised would result in the conversion at a significant discount to the market priceissuance of an additional 266,722,242 shares of our common stock may have a negative effect on our stock price.stock. The issuance of shares upon exercise of options will result in dilution to the interests of other shareholders.

Our common stock may be affected by limited trading volume and may fluctuate significantlysignificantly..

Our common stock is tradedquoted on the OTCQB tier of the OTC Markets. There is a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders’ ability to sell our common stock in short time periods, or possibly at all. Thinly traded common stock can be more volatile than common stock traded in an active public market. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.

Our company is a voluntary filer with the Securities and Exchange CommissionSEC and in the event that we cease reporting under the Exchange Act, investors would have limited information available to them about the company.

While we are subject tovoluntarily file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we do not have a class of securities registered under Section 12(g) of the Exchange Act. To the extent that our duty to file Exchange Act reports has automatically suspended under Section 15(d) of the Exchange Act, as a voluntary filer, we may elect to cease reporting under the Exchange Act at such time which would limit the information available to investors and shareholders about the company.

Our common stock is deemed to be “penny stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.

Our common stock is deemed to be “penny stock” as that term is defined under the Securities Exchange Act of 1934.Act. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).exchanges. Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, which are generally institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.

Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.

We depend onOur officers and directors are able to control the servicesCompany.

Our officers and directors and their affiliates own or have the right to vote a majority of the common stock of our Chief Executive Officer.

Our success largely depends on the efforts and abilities of Robert M. Carmichael, our President and Chief Executive Officer. Mr. Carmichael has been instrumental in securing our existing financing arrangements. Mr. Carmichael is primarily responsible for the development of our technology and the design of our products. The loss of the services of Mr. Carmichael could materially harm our business because of the cost and time necessary to recruit and train a replacement. Such a loss would also divert management attention away from operational issues. We do not presently maintain a key-man life insurance policy on Mr. Carmichael.

We require additional personnel and could fail to attract or retain key personnel.

In addition, our continued growth depends on our ability to attract and retain a Chief Financial Officer, a Chief Operations Officer, and additional skilled associates. We are currently utilizing the services of two professional consultants to assist the Chief Executive Officer with finance and operations. The loss of the services of these consultants prior to our ability to attract and retain a Chief Financial Officer or Chief Operations Officer or further assistance in these areas may have a material adverse effect upon us. Also, there can be no assurance that we will be able to retain our existing personnel or attract additional qualified associates in the future.

Our failure to obtain and enforce intellectual property protection may have a material adverse effect on our business.

Our success depends in part on our ability, and the ability of our patent and trademark licensors, entities owned and controlled by Robert M. Carmichael, our President and Chief Executive Officer, to obtain and defend our intellectual property, including patent protection for our products and processes, preserve our trade secrets, defend and enforce our rights against infringement and operate without infringing the proprietary rights of third parties, both in the United States and in other countries. Despite our efforts to protect our intellectual proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection.

Our industry is characterized by frequent intellectual property litigation based on allegations of infringement of intellectual property rights. Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future.

We may be unable to manage growth.

Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.

Reliance on vendors and manufacturers.

We deal with suppliers on an order-by order basis and have no long-term purchase contracts or other contractual assurances of continued supply or pricing. In addition, we have no long-term contracts with our manufacturing sources and compete with other companies for production facility capacity. Historically, we have purchased enough inventories of products or their substitutes to satisfy demand. However, unanticipated failure of any manufacturer or supplier to meet our requirements or our inability to build or obtain substitutes could force us to curtail or cease operations.

Dependence on consumer spending.

The success of the our business depends largely upon a number of factors related to consumer spending, including current and future economic conditions affecting disposable consumer income such as employment, business conditions, tax rates, and interest rates. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand for our products. Any significant deterioration in overall economic conditions that diminishes consumer confidence or discretionary income can reduce our sales and adversely affect our financial results. The impact of weakening consumer credit markets; layoffs; corporate restructurings; higher fuel prices; declines in the value of investments and residential real estate; and increases in federal and state taxation can all negatively affect our results. There can be no assurance that in this type of environment consumer spending will not decline, thereby adversely affecting our growth, net sales and profitability or that our business will not be adversely affected by continuing or future downturns in the economy, boating industry, or dive industry. If declines in consumer spending on recreational marine accessories and dive gear are other than temporary, we could be forced to curtail or cease operations.

Government regulations may impact us.

The SCUBA industry is self-regulating; therefore, Brownie’s is not subject to government industry specific regulation. Nevertheless, Brownie’s strives to be a leader in promoting safe diving practices within the industry and is at the forefront of self-regulation through responsible diving practices. Brownie’s is subject to all regulations applicable to “for profit” companies as well as all trade and general commerce governmental regulation. All required federal and state permits, licenses, and bonds to operate its facility have been obtained. There can be no assurance that our operations will not be subject to more restrictive regulations in the future, which could force us to curtail or cease operations.

Bad weather could have an adverse effect on operating results.

Our business is significantly impacted by weather patterns. Unseasonably cool weather, extraordinary amounts of rainfall, or unseasonably rough surf, may decrease boat use and diving, thereby decreasing sales. Accordingly, our results of operations for any prior period may not be indicative of results of any future period.

Investors should not rely on an investment in our stock for the payment of cash dividends.

We have not paid any cash dividends on our capital stock and we do not anticipate paying cash dividends in the future. Investors should not make an investment in our common stock if they require dividend income. Any return on an investment in our common stock will be as a result of any appreciation, if any, in our stock price.

The manufacture and distribution of recreational diving equipment could result in product liability claims and we currently lack product liability insurance.

We, like any other retailer, distributor and manufacturer of products that are designed for recreational sporting purposes, face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Such claims may include, among other things, that our products are designed and/or manufactured improperly or fail to include adequate instructions as to proper use and/or side effects, if any. We do not anticipate obtaining contractual indemnification from parties-supplying raw materials,manufacturing our products or marketing our products. In any event, any such indemnification if obtained will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. We currently do not have any product liability insurance. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results.company. As a result, currentthey have significant influence over the management and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

Our management has previously determined that we did not maintain effective internal controls over financial reporting. For a detailed description of these material weaknesses and our remediation efforts and plans, see “Part II — Item 9A — Controls and Procedures.” If the result of our remediationaffairs of the identified material weaknesses is not successful, or if additional material weaknesses are identified in our internalCompany and control over financial reporting, our management will be unable to report favorably as to the effectiveness of our internal control over financial reporting and/or our disclosure controls and procedures, and we could be required to further implement expensive and time-consuming remedial measures and potentially lose investor confidence in the accuracy and completeness of our financial reports which could have an adverse effect on our stock price and potentially subject us to litigation.

We currently have no independent directors, which poses a risk for us from a corporate governance perspective.

Robert Carmichael, our only executive officer, also serves as our only director. Our director and executive officer is required to make interested party decisions, such as the approval of related party transactions, his level of his compensation, and oversight of our accounting function. Our director and executive officer also exercise substantial control over all matters requiring stockholder approval, including the nominationelection of directors and the approval of significant corporate transactions. Duetransactions, such as a merger or other sale of our company or our assets. Their interests may differ from the interests of other shareholders and thus result in corporate decisions that are disadvantageous to other shareholders. This concentration of ownership and influence in management and board decision-making could also harm the price of our lackcapital stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of independent directors,our capital stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of our company.

Not applicable to smaller reporting companies.

Pompano Beach, FL

Our Pompano Beach, Florida facilities are comprised of two adjoining properties totaling approximately 16,566 square feet of leased space the bulk of which is factory and warehouse space. The initial 37-month lease covering approximately 8,541 square feet commenced on September 1, 2014. The lease provided for 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 for common areas maintenance, subject to periodic adjustment. On December 1, 2016, we entered into an amendment to the initial lease agreement, commencing on October 1, 2017, which extended the term of the lease for an additional 84 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 November 11, 2018, the Company entered a new 69-month lease agreement for an additional 8,025 square feet adjoining its existing facility in Pompano Beach, Florida. The new lease provided for a $6,527 security deposit, an 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 building’s annual operating expenses for common area maintenance, subject to adjustment as provided in the lease.

Huntington Beach, California

Our Huntington Beach, California facility is comprised of a leased 13,000 square foot free standing building of which the bulk of the square footage is warehouse and manufacturing space. The initial lease, signed in January, 2013 was for five years with a base rent of $7,410.

On January 4, 2018, the Company entered into a sixty-one month term lease renewal for its facility in Huntington Beach, California, commencing on February 1, 2018. Base rent is approximately $9,300 per month for the first 12 months with a 2.5% annual escalation throughout the term. The Company paid a security deposit of $8,450 with the initial lease that the landlord continues to hold.

On September 14, 2022, SSI entered into a sixty-month lease renewal for its facility in Huntington Beach, California commencing on February 1, 2022. Base rent is approximately $17,550 per month for the first 24 months with an annual escalation clause of 3.0% thereafter. Obligations under the lease are guaranteed by the Company. The Company paid an additional security deposit of $10,727 upon entering into the lease.

On September 30, 2022, SSI entered into a sublease of its facility in Huntington Beach, California with Camburg Engineering, Inc.(“Tenant”) commencing October 1, 2022, The term of the sublease is through December 31, 2023 with a base monthly rent of $2,247 for the first twelve months with an 3% annual escalation thereafter. The Tenant also pays a monthly common area maintenance of $112. The Tenant provided a security deposit of $2,426 upon entering into the sublease.

Lauderdale-By-The-Sea, Florida

On May 2, 2022, LBI, entered into a lease assignment agreement with Gold Coast Scuba, LLC and Vicnsons Realty Group, LLC whereby LBI is the assignee to the remainder of the lease for approximately 1,600 square feet of retail space located at 259 Commercial Blvd., Suites 2 and 3 in Lauderdale-By-The Sea, Florida. The lease is in its third year of a three-year term and has a $2,816 per month base rent. The lease provides an option to renew for an additional term of two years with an increase of base rent by 3.5%

We believe that the facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the foreseeable future.

There are no pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.

Not applicable.

PART II

The Company’s common stock is quoted on the OTCQB tier of the OTC Markets under the symbol “BWMG”. On March 28, 2023, the closing sale price of our common stock was $0.02395 per share.

Holders of Common Stock

As of March 28, 2023, the Company had approximately 448 shareholders of record.

Dividends

We have not implemented various corporate governance measures,paid any dividends on our common stock and do not anticipate paying any cash dividends in the absenceforeseeable future. We intend to retain any earnings, if any, to finance the growth of which may cause stockholders to have more limited protections against transactions implemented bythe business. We cannot assure you that we will ever pay cash dividends. Whether we pay any cash dividends in the future will depend on our financial condition, results of operations and other factors that the board of directors conflicts of interest and similar matters. Stockholders should bear in mindwill consider.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information regarding our current lack of corporate governance measures in formulating their investment decisions.

Our Chief Executive Officer beneficially owns approximately 55% of the combined voting power of our Common Stock and Series A Convertible Preferred Stock and is able to control voting issues and actions that may not be beneficial or desired by minority shareholders.

Asequity compensation plans as of December 31, 2015,2022:

Equity Compensation Plan Information