Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2024

or

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

Commission file number 333-99393

BROWNIE'S MARINE GROUP, INC.

(Exact name of registrant as specified in its charter)

Florida		90-0226181
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3001 NW 25th Avenue, Suite 1 Pompano Beach, Florida		33069
(Address of principal executive offices)		(Zip code)

(954) 462-5570

Registrant's telephone number, including area code

Not applicable

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

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		Not applicable		Not applicable

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

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer☒

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. ☐

Smaller reporting company ☒

Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒As of July 17, 2024, there were 439,805,747shares of common stock outstanding.

	TABLE OF CONTENTS
		Page No.
	PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS.	4
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	21
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	27
ITEM 4.	CONTROLS AND PROCEDURES.	27
	PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS.	29
ITEM 1A.	RISK FACTORS.	29
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	29
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	29
ITEM 4.	MINE SAFETY DISCLOSURES.	29
ITEM 5.	OTHER INFORMATION.	29
ITEM 6.	EXHIBITS.	30

NOTE REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "aim," "will," "would," "could," and similar expressions or phrases identify forward- looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.

You should read thoroughly this Quarterly 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 risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 9, 2024, which risk factors 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 extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements speak only as of the date 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

ITEM 1. FINANCIAL STATEMENTS

BROWNIE'S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		March 31, 2024			December 31, 2023
			(Unaudited)
ASSETS
Current Assets
Cash		$	238,754			$	431,112
Accounts receivable - net of allowances of $52,660in 2024 and $54,427in 2023			162,054				84,140
Accounts receivable - related parties			23,105				32,130
Inventory, net			1,967,272				1,998,807
Prepaid expenses and other current assets			267,204				190,412
Total current assets			2,658,389				2,736,601
Property, equipment and leasehold improvements, net			327,590				342,681
Operating lease assets			777,478				844,083
Intangible assets, net			555,839				573,955
Goodwill			249,986				249,986
Other assets			30,724				30,724
Total assets		$	4,600,006			$	4,778,030
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued liabilities		$	711,616			$	789,702
Accounts payable - related parties			52,173				46,578
Customer deposits and unearned revenue			204,905				255,740
Other liabilities			472,300				451,954
Operating lease liabilities			227,008				259,154
Related party convertible demand note, net			54,088				52,484
Convertible notes			347,793				346,871
Current maturities long term debt			82,478				75,304
Related party notes payable			505,000				225,000
Total current liabilities			2,657,361				2,502,787
Loans payable, net of current portion			78,273				64,656
Operating lease liabilities			581,986				615,915
Total liabilities			3,317,620				3,183,358
Commitments and contingent liabilities (see note 8)
Stockholders' equity
Preferred stock; $0.001par value: 10,000,000shares authorized; 425,000issued and outstanding as of March 31, 2024 and December 31, 2023.			425				425
Common stock; $0.0001par value; 1,000,000,000shares authorized; 437,940,254shares issued and outstanding at March 31, 2024 and 437,742,050shares issued and outstanding at December 31, 2023, respectively.			43,795				43,775
Common stock payable 138,941shares and 138,941shares, respectively as of March 31, 2024 and December 31, 2023.			14				14
Additional paid-in capital			19,259,478				19,236,068
Accumulated deficit			(18,021,326	)			(17,685,610	)
Total stockholders' equity		$	1,282,386			$	1,594,672
Total liabilities and stockholders' equity		$	4,600,006			$	4,778,030

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

BROWNIE'S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31,

(unaudited)

		2024			2023
Net revenues
Net revenues		$	1,492,299			$	1,427,963
Net revenues - related parties			115,223				211,090
Total net revenues			1,607,522				1,639,053
Cost of net revenues
Cost of net revenues			889,918				1,071,068
Cost of net revenues - related parties			53,124				108,925
Royalties expense - related parties			9,061				10,212
Royalties expense			67,984				34,823
Total cost of revenues			1,020,087				1,225,028
Gross profit			587,435				414,025
Operating expenses
Selling, general and administrative			899,821				726,220
Research and development costs			3,378				529
Total operating expenses			903,199				726,749
Loss from operations			(315,764	)			(312,724	)
Other (income) expense, net
Interest expense			(19,952	)			(15,198	)
Total other (income) expense - net			(19,952	)			(15,198	)
Loss income before provision for income taxes			(335,716	)			(327,922	)
Provision for income taxes			-				-
Net loss		$	(335,716	)		$	(327,922	)
Basic loss per common share		$	(0.00	)		$	(0.00	)
Diluted loss per common share		$	(0.00	)		$	(0.00	)
Basic weighted average common shares outstanding			437,864,048				427,289,742
Diluted weighted average common shares outstanding			437,864,048				427,289,742

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

BROWNIE'S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(unaudited)

		Preferred Stock			Common Stock			Common Stock Payable			Additional							Total
		Shares							Shares															Paid-in			Accumulated			Stockholders
		Outstanding			Par			Outstanding				Par			Shares			Amount			Capital			Deficit			Equity
Balance, December 31, 2023			425,000			$	425				437,742,050			$	43,775				138,941			$	14			$	19,236,068			$	(17,685,610	)		$	1,594,672
Shares issued for accrued interest in convertible notes			-				-				198,204				20				-								10,987				-				11,007
Stock Option Expense			-				-				-				-				-				-				12,423				-				12,423
Net Loss			-				-				-				-				-				-				-				(335,716	)			(335,716	)
Balance, March 31, 2024 (unaudited)			425,000				425				437,940,254			$	43,795				138,941			$	14			$	19,259,478			$	(18,021,326	)		$	1,282,386

		Preferred Stock			Common Stock				Common Stock Payable			Additional							Total
		Shares							Shares															Paid-in			Accumulated			Stockholders
		Outstanding			Par			Outstanding			Par			Shares			Amount			Capital			Deficit			Equity
Balance, December 31, 2022			425,000				425				425,520,662			$	42,553				138,941			$	14			$	18,916,876			$	(16,437,495	)		$	2,522,373
Shares issued for the purchase of units			-				-				11,428,570				1,143				-				-				198,857				-				200,000
Shares issued for accrued interest in convertible notes			-				-				198,204				20				-				-				8,316				-				8,336
Stock Option Expense			-				-				-				-				-				-				11,034				-				11,034
Net Loss			-				-				-				-				-				-				-				(327,922	)			(327,922	)
Balance, March 31, 2023 (unaudited)			425,000				425				437,147,436			$	43,716				138,941			$	14			$	19,135,083			$	(16,765,417	)		$	2,413,821

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

BROWNIE'S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31,

(unaudited)

		2024			2023
Cash flows provided by operating activities:
Net loss		$	(335,716	)		$	(327,922	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			40,768				36,966
Amortization of debt discount			3,763				2,764
Amortization of right-of-use asset			66,605				75,765
Reserve for Nomad recall			-				(74,200	)
Stock Based Compensation - Options			12,423				11,034
Stock based compensation - stock grant			-				8,336
Changes in operating assets and liabilities
Change in accounts receivable, net			(76,147	)			(53,898	)
Change in accounts receivable - related parties			9,025				(44,405	)
Change in inventory			31,176				206,024
Change in prepaid expenses and other current assets			(76,792	)			(6,419	)
Recovery of bad debt			(1,767	)			-
Change in reserve of slow moving inventory			359				-
Change in other assets			-				-
Change in accounts payable and accrued liabilities			(67,079	)			(132,934	)
Change in customer deposits and unearned revenue			(50,835	)			62,412
Change in long term lease liability			(66,075	)			(72,399	)
Change in other liabilities			20,346			8,756
Change in accounts payable - related parties			5,595				(13,761	)
Net cash used in operating activities			(484,351	)			(313,881	)
Cash flows used in investing activities:
Purchase of fixed assets			(7,561	)			(5,069	)
Net cash used in investing activities			(7,561	)			(5,069	)
Cash flows from financing activities:
Proceeds from issuance of units			-				200,000
Proceeds of related party demand note			280,000				-
Proceeds from long term debt			32,274				-
Repayment of debt			(12,720	)			(17,842	)
Net cash provided from in financing activities			299,554				182,158
Net decrease in cash			(192,358	)			(136,792	)
Cash, beginning balance			431,112				484,427
Cash, end of period		$	238,754				347,635
Supplemental disclosures of cash flow information:
Cash Paid for Interest		$	8,944				6,860
Cash Paid for Income Taxes		$	-				-
Supplemental disclosure of non-cash financing activities:
Common Stock issued for payment of convertible note interest			11,007				8,336
Equipment obtained through financing		$	-			$	63,689

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

BROWNIE'S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2024

(UNAUDITED)

Note 1. Company Overview

Brownie's Marine Group, Inc. (the "Company") designs, tests, manufactures and distributes recreational hookah diving, scuba and water safety products through its wholly owned subsidiary, Trebor Industries, Inc., a Florida corporation, incorporated in 1981 ("Trebor" or "BTL"), manufactures and sells high pressure air and industrial compressor packages, yacht based scuba air compressor and nitrox generation systems through its wholly owned subsidiary, Brownie's High Pressure Compressor Services, Inc., a Florida corporation incorporated in 2017 ("BHP") and doing business as LW Americas ("LWA") and develops and markets portable battery powered surface supplied air dive systems through its wholly owned subsidiary BLU3, Inc., a Florida corporation ("BLU3"). 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 and wholly owned subsidiary of the Company ("Acquisition Sub"), Submersible Systems, Inc., a Florida corporation ("Submersible" or "SSI"), and Summit Holdings V, LLC, a Florida limited liability company ("Summit") and Tierra Vista Group, LLC, a Florida limited liability company ("Tierra Vista" and, together with Summit, the "Sellers"), the owners of all of the capital stock of Submersible, pursuant to which Acquisition Sub merged with and into Submersible (the "Merger"), and Submersible, the surviving corporation, became a wholly owned subsidiary of the Company.

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

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

Basis of Presentation

The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States ("GAAP") for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2023 has been derived from the Company's annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a broader discussion of the Company's business and the risks inherent in such business. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending December 31, 2024.

Principles of Consolidation

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

Use of estimates

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

Cash and cash equivalents

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

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000per EIN. At March 31, 2024 and December 31, 2023, the Company had approximately $0and $25,000in excess of the FDIC insured limit.

Accounts receivable

The Company manufactures and sells its products to a broad range of customers, primarily retail stores. Few customers are provided with payment terms of 30 days. The Company has tracked historical loss information for its trade receivables and compiled historical credit loss percentages for different aging categories (current, 1-30 days past due, 31-60 days past due, 61-90 days past due, and more than 90 days past due).

In accordance with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables held at March 31, 2024, because the composition of the trade receivables at that date is consistent with that used in developing the historical credit-loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses at March 31, 2024 and December 31, 2023 totaled $52,660and $54,427, respectively.

Inventory

Inventory consists of the following:

		March 31, 2024 (unaudited)			December 31, 2023
Raw materials		$	1,116,667			$	1,063,888
Work in process			57,460				63,258
Finished goods			926,003				1,004,160
Rental Equipment			55,893				55,893
Allowance reserve			(188,751	)			(188,392	)
Inventory, net		$	1,967,272			$	1,998,807

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due upon receipt of the invoice and the contracts do not have significant financing components. Product sales occur once control or title is transferred based on the commercial terms. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Product sales are recorded net of variable consideration, such as provisions for returns, discounts and promotional allowances. Such provisions are calculated based on the actual allowances given. Management believes that adequate provision has been made for cash discounts, returns, spoilage and promotional allowances based on the Company's historical experience.

A breakdown of the total revenue between related party and non-related party revenue is as follows:

		Three months ended March 31
		2024			2023
		(unaudited)			(unaudited)
Revenues		$	1,492,299			$	1,427,963
Revenues - related parties			115,223				211,090
Total Revenues		$	1,607,522			$	1,639,053

Cost of Sales

Cost of sales consists of the cost of the components of finished goods, the costs of raw materials utilized in the manufacture of products, in-bound and out- bound freight charges, direct manufacturing labor as well as certain internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company's finished products, inventory allowance for excess and obsolete products, and royalties paid on licensing agreements. Components account for the largest portion of the cost of sales. Components include plastic molded parts, gas powered engines, aluminum pressure bottles, electronic parts, batteries and packaging materials.

The breakdown of cost of sales to include cost of sales for related party and non-related party as well as the related party and non-related party royalty expense is as follows:

		Three months ended March 31
		2024			2023
		(unaudited)			(unaudited)
Cost of revenues		$	889,918			$	1,071,068
Cost of revenues - related parties			53,124				108,925
Royalties expense - related parties			9,061				10,212
Royalties expense			67,984				34,823
Total cost of revenues		$	1,020,087			$	1,225,028

Lease Accounting

The Company accounts for leases in accordance with ASC 842, Leases.

The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. The Company elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. The Company did not have any finance leases as of March 31, 2024. The Company's leases generally have terms that range from three years for equipment and five to twenty years for property. The Company elected the accounting policy to include both the lease and non-lease components of its agreements as a single component and account for them as a lease.

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

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

For the three months ended March 31, 2024, and March 31,2023, cash paid for operating lease liabilities was $66,075and $72,399, respectively.

Supplemental balance sheet information related to leases was as follows:

Operating Leases		March 31, 2024
			(unaudited)
Right-of-use assets		$	777,478
Current lease liabilities		$	227,008
Non-current lease liabilities			581,986
Total lease liabilities		$	808,994

Stock-Based Compensation

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

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.

Derivatives

The accounting treatment of derivative financial instruments requires that the Company record certain warrants and embedded conversion options at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into certain note agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy, by earliest issuance date, in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors, as long as the certain variable issuance terms in certain convertible instruments exist. As of March 31, 2024 and December 31, 2023, the Company did not have any derivative liabilities.

Loss per share of common stock

Basic loss 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 loss 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 anti-dilutive. At March 31, 2024, and March 31, 2023, 107,761,177and 274,150,814shares, respectively, of potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible notes, outstanding warrants, outstanding stock options and the conversion of preferred stock.

Recent accounting pronouncements

ASU 2016-13 Current Expected Credit Loss (ASC326)

In December 2021, the FASB issued an update to ASU No. 2016-13 the Current Expected Credit Losses (CECL) standard (ASC 326), which is designed to provide greater transparency and understanding of credit risk by incorporating estimated, forward-looking data when measuring lifetime Estimated Credit Losses (ECL) and requires enhanced financial statement disclosures. This guidance was adopted on January 1, 2023, with no effect to the financial statements.

ASU 2020-06 Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity's Own Equity.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity's Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption or are not applicable.

Note 3. 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 in the normal course of business for the twelve-month period following the date of these consolidated financial statements. For the three months ended March 31, 2024, the Company incurred a net loss of $335,716. At March 31, 2024, the Company had an accumulated deficit of $18,021,326. Despite a working capital surplus of approximately $1,028at March 31, 2024, the continued losses and cash used in operations raise substantial doubt as to the Company's ability to continue as a going concern for the twelve months after the date the financial statements were issued. The Company's ability to continue as a going concern is dependent upon the Company's ability to increase revenues, control expenses, raise capital and sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

Note 4. Related Party Transactions

The Company sells products to Brownie's Southport Divers, Brownie's Yacht Toys and Brownie's Palm Beach Divers, companies owned by the brother of Robert Carmichael, the Company's Chief Executive Officer and Chief Financial Officer. Terms of sale are no more favorable than those extended to any of the Company's other customers with similar sales volumes. These entities accounted for 7.2% and 12.9% of the net revenues for the three months ended March 31, 2024 and March 31, 2023, respectively. Accounts receivable from these entities totaled $12,839and $17,828, at March 31, 2024 and December 31, 2023, respectively.

The Company sells products to BGL and 940 A, entities wholly-owned by Robert Carmichael. Terms of sale are more favorable than those extended to the Company's regular customers, but no more favorable than those extended to the Company's strategic partners. Accounts receivable from these entities totaled $10,266and $14,302at March 31, 2024 and December 31, 2023, respectively.

The Company had accounts payable to related parties of $52,173and $46,578at March 31, 2024 and December 31, 2023, respectively. The balance payable at March 31, 2024 was comprised of $23,713due to 940 A, $18,460due to Robert Carmichael and $10,000due to Blake Carmichael. At December 31, 2023, the balance payable was comprised of $29,559due to 940 A, $12,019due to Robert Carmichael and $5,000due to Blake Carmichael.

The Company has exclusive license agreements with 940 A to license the trademark "Brownie's Third Lung", "Tankfill", "Brownie's Public Safety" and various other related trademarks as listed in the agreements. The agreements provide that the Company pay 2.5% of gross revenues per quarter as a royalty to 940A. Total royalty fees paid to 940A for the three months ended March 31, 2024 and March 31, 2023 was $9,061and $10,212, respectively. The accrued royalty for March 31, 2024 and December 31, 20223 was $7,385and $2,238which is included in other liabilities.

On September 30, 2022, the Company issued a convertible demand 8% promissory note in the principal amount of $66,793to Robert Carmichael for funds to meet the working capital needs of LBI. There is no amortization schedule for the note, and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day value weighted average price ("VWAP") of the Company's stock prior to the quarterly interest payment date. The note holder may demand payment or convert the outstanding principal at a conversion rate of $0.021per share at any time. The conversion rate was calculated at a 35% discount to the 90 day VWAP of the Company's stock as of the date of the note. The Company recorded $19,250for the beneficial conversion feature. As this conversion rate is a fixed rate, the embedded conversion feature is not a derivative liability. There were payments totaling $3,047made with products in kind during the three months ended March 31, 2024. The outstanding balance on this note was $63,746as of March 31, 2024.

On January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, a Company director, an aggregate of 11,428,570units, with each unit consisting of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of$0.0175per share in consideration of $200,000.

On September 14, 2023, the Company issued a convertible demand 8% promissory note in the principal amount of $50,000to Robert Carmichael for funds to meet the working capital needs of BLU3. There is no amortization schedule for the note, and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day VWAP of the Company's stock prior to the quarterly interest payment date. The note holder may demand payment or convert the outstanding principal at a conversion rate of $0.01351per share at any time. The conversion rate was calculated at a 35% discount to the 90 day VWAP of the Company's stock as of the date of the note. The Company recorded $-0- for the beneficial conversion feature. As this conversion rate is a fixed rate, the embedded conversion feature is not a derivative liability. The outstanding balance on this note was $50,000as of March 31, 2024.

On November 14, 2023, the Company borrowed funds through the issuance of a promissory note (the Note) in the principal amount of $150,000to Charles Hyatt, a Company director, for working capital requirements and payment of certain expenses in connection with the Company's business combinations. The maturity date of the Note is May 7, 2024(the "Maturity Date"). The Note bears interest at a rate of 9.9% per annum, and a default interest of 18% per annum. Interest payments shall be due and payable on a monthly basis. The Company may prepay the Note in whole or in part, at any time without premium or penalty.

On February 5, 2024, the Company borrowed funds through the issuance of a promissory note (the Note) in the principal amount of $280,000to Charles Hyatt, a Company director, for working capital requirements and payment of certain expenses in connection with the Company's business combinations. The maturity date of the Note is August 6, 2024(the "Maturity Date"). The Note bears interest at a rate of9.9% per annum, and a default interest of 18% per annum. Interest payments shall be due and payable on a monthly basis. The Company may prepay the Note in whole or in part, at any time without premium or penalty.

On March 31, 2023, the Company issued 61,204shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending March 31, 2023. The fair value of these shares was $1,336.

On June 30, 2023, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending June 30, 2023. The fair value of these shares was $1,287.

On September 30, 2023, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending September 30, 2023. The fair value of these shares was $1,287.

On December 31, 2023, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending December 31, 2023. The fair value of these shares was $1,287.

On March 31, 2024, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending March 31, 2024. The fair value of these shares was $1,287.Note 5. Convertible Promissory Notes and Loans Payable

Convertible Promissory Notes

Convertible promissory notes consisted of the following at March 31, 2024:

Origination Date		Maturity Date		Interest Rate			Origination Principal Balance			Original Discount Balance			Period End Principal Balance			Period End Discount Balance			Period End Balance, Net			Accrued Interest Balance			Reg.
9/03/21		9/03/24			8	%			346,500				(12,355	)		$	346,500			$	(2,186	)		$	344,314				-				(1	)
9/03/21		9/03/24			8	%			3,500				(125	)			3,500				(21	)			3,479				-				(2	)
9/30/22		Demand			8	%			66,793				(19,245	)			63,746				(9,658	)			54,088				-				(3	)
																$	413,746			$	(11,865	)		$	401,881			$	-

A breakdown of current and long-term amounts due are as follows for the convertible promissory notes as of March 31, 2024:

		Summit Holdings V, LLC Note			Tierra Vista Partners, LLC Note			Robert Carmichael Note			Total
2024			346,500				3,500				63,746				413,746
Discount			(2,186	)			(21	)			(9,658	)			(11,865	)
Total Loan Payments		$	344,314			$	3,479			$	54,088			$	401,881
Current Portion of Loan Payable		$	(344,314	)		$	(3,479	)		$	(54,088	)		$	(401,881	)
Non-Current Portion of Loan Payable		$	-			$	-			$	-			$	-

(1)

On September 3, 2021, the Company issued a three-year 8% convertible promissory note in the principal amount of $346,500to Summit Holding V, LLC as part of the acquisition of SSI. The Company is required to make quarterly payments under the note in an amount equal to 50% of the adjusted net profit of SSI. Interest is payable quarterly in shares of common stock of the Company at a conversion price of $0.051272per share. The note holder may convert outstanding principal and interest into shares of common stock at a conversion price of $0.051272per share at any time during the term of the note. The Company recorded $12,355for the beneficial conversion feature. This note is classified as a current liability for the quarter ended March 31, 2024.

		Payment Amortization
2024			346,500
Total Note Payments		$	346,500
Current portion of note payable			(346,500	)
Non-Current Portion of Notes Payable		$	-

(2)

On September 3, 2021, the Company issued a three-year 8% promissory note in the principal amount of $3,500to Tierra Vista Partners, LLC as part of the acquisition of SSI. The Company is required to make quarterly payments under the note in an amount equal to 50% of the adjusted net profit of SSI. Interest is payable quarterly in common stock of the Company at a conversion price of $0.051272per share. The note holder may convert outstanding principal and interest into shares of common stock at a conversion price of $0.051272at any time during the term of the note. The Company recorded $125for the beneficial conversion feature. This note is classified as a current liability for the quarter ended March 31, 2024.

		Payment Amortization
2024			3,500
Total Note Payments		$	3,500
Current portion of note payable			(3,500	)
Non-Current Portion of Notes Payable		$	-

(3)

On September 30, 2022, the Company issued a convertible demand 8% promissory note in the principal amount of $66,793to Robert Carmichael for funds to meet the working capital needs of LBI. There is no amortization schedule for the note and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day VWAP of the Company's stock prior to the quarterly interest payment date. This note is classified as a current liability as the note holder may demand payment or convert the outstanding principal at a conversion price of $0.021per share at any time. The Company recorded $19,250for the beneficial conversion feature.

Loans Payable

		Mercedes BMG (1)			Navitas BLU3 (2)			NFS SSI (3)			Navitas 2022 BLU3 (4)			Navitas 2024 BLU3 (5)			Total
2024 (9 months)		$	11,168			$	12,596			$	27,412			$	16,131			$	3,791			$	71,097
2025			5,895				19,556				5,036				25,143				5,604				61,234
2026			-				6,339				-				-				6,304				12,643
2027			-							-				-				7,092				7,091
Thereafter			-				-				-				-				8,685				8,685
Total Loan Payments		$	17,063			$	38,492			$	32,448			$	41,273			$	31,476			$	160,751
Current Portion of Loan Payable		$	(11,168	)		$	(16,967	)		$	(27,412	)		$	(21,801	)		$	(5,131	)		$	(82,478	)
Non-Current Portion of Loan Payable		$	5,895			$	21,525			$	5,036			$	19,472			$	26,345			$	78,273

(1)	On August 21, 2020, the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van. The installment agreement is for $55,841with a zero interest rate payable over 60months with a monthly payment of $931and is personally guaranteed by Mr. Carmichael. The loan balance as of March 31, 2024 was $17,063and $19,855as of December 31, 2023.
(2)	On May 19, 2021, BLU3 executed an equipment finance agreement with Navitas Credit Corp. ("Navitas") to finance the purchase of certain plastic molding equipment. The amount financed is $75,764payable over 60equal monthly installments of $1,611. The equipment finance agreement contains customary events of default. The loan balance as of March 31, 2024 was $38,492and $42,525as of December 31, 2023.
(3)	On June 29, 2022, SSI executed an equipment financing agreement with NFS Leasing ("NFS Leasing") to secure replacement production molds. The total purchase price of the molds was $84,500of which $63,375was financed by NFS Leasing on August 15, 2022. The financing agreement has a 33month term beginning in August 2022 with a monthly payment of $2,571.The financing agreement contains customary events of default, is guaranteed by the Company and NFS Leasing has a lien on all of the assets of SSI. The loan balance as of March 31, 2024 and December 31, 2023 was $32,448and $38,607, respectively.
(4)	On December 12, 2022, BLU3 executed an equipment finance agreement to finance the purchase of certain plastic molding equipment through Navitas. The amount financed is $63,689payable over 36equal monthly installments of $2,083. The equipment finance agreement contains customary events of default. The loan balance as of March 31, 2024 was $41,273and $44,839as of December 31, 2023.
(5)	On February 12, 2024, BLU3 executed an inventory finance agreement to finance the purchase of certain equipment stock through Navitas. The amount financed is $32,274payable over 60equal monthly installments of $715. The inventory finance agreement contains customary events of default. The loan balance as of March 31, 2024 was $31,476.

Note 6. Goodwill and Intangible Assets, Net

The following table sets for the changes in the carrying amount of the Company's Goodwill for the three months ended March 31, 2024.

		2024
Balance, January 1		$	249,986
Addition:			-
Balance, March 31		$	249,986

The Company performed an evaluation of the value of goodwill at December 31, 2023. Based upon this evaluation it was determined that there should be no adjustment to goodwill. There has been nothing noted during the three months ended March 31, 2024 that would indicate that the value of goodwill should change through that date.

The following table sets for the components of the Company's intangible assets at March 31, 2024:

		Amortization Period (Years)			Cost			Accumulated Amortization			Net Book Value
Intangible Assets Subject to amortization
Trademarks			15			$	121,000			$	(20,794	)		$	100,206
Customer Relationships			10				600,000				(155,000	)			445,000
Non-Compete Agreements			5				22,000				(11,367	)			10,633
Total						$	743,000				$ (187,161)			$	555,839

The aggregate amortization remaining on the intangible assets as of March 31, 2024 is a follows:

		Intangible Amortization
2024 (9 months remaining)			54,350
2025			72,467
2026			71,367
2027			68,066
2028			68,066
Thereafter			221,523
Total		$	555,839

Amortization expense for amortizable intangible assets for each of the three months ended March 31, 2024 and 2023 was 18,117.

Note 7. Stockholders' Equity

Common Stock

On January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of 11,428,570units, with each unit consisting of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $0.0175per share in consideration of $200,000.

On March 31, 2023, the Company issued 61,204shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending March 31, 2023. The fair value of these shares was $1,336.

On March 31, 2023, the Company issued an aggregate of 137,000shares of common stock to the holders of convertible notes for payment of interest for the three months ending December 31, 2022. The fair value of these shares was $7,000.

On June 30, 2023, the Company issued 61,205shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending June 30, 2023. The fair value of these shares was $1,326.

On June 30, 2023, the Company issued an aggregate of 137,000shares of common stock to the holders of convertible notes for payment of interest for the three months ending June 30, 2023. The fair value of these shares was $7,000.

On September 30, 2023, the Company issued 61,205shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending September 30, 2023. The fair value of these shares was $1,326.

On September 30, 2023, the Company issued an aggregate of 137,000shares of common stock to the holders of convertible notes for payment of interest for the three months ending September 30, 2023. The fair value of these shares was $7,000.

On December 31, 2023, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending December 31, 2023. The fair value of these shares was $1,287.

On December 31, 2023, the Company issued an aggregate of 136,527shares of common stock to the holders of convertible notes for payment of interest for the three months ending December 31, 2023. The fair value of these shares was $7,000.

On March 31, 2024, the Company issued 61,677shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending December 31, 2023. The fair value of these shares was $1,287.

On March 31, 2024, the Company issued an aggregate of 136,527shares of common stock to the holders of convertible notes for payment of interest for the three months ending December 31, 2023. The fair value of these shares was $7,000.

Preferred Stock

During the second quarter of 2010, the holders of the majority of the Company's outstanding shares of common stock approved an amendment to the Company's Articles of Incorporation authorizing the issuance of 10,000,000shares of blank check preferred stock. The blank check preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by the Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. In April 2011, the Board of Directors designated 425,000shares as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into a share of the Company's common stock at any time at the option of the holder at a conversion price of $18.23per share. Holders of shares of Series A Convertible Preferred Stock are entitled to 250 votes for each share held. The Company's common stock and Series A Convertible Preferred Stock vote together on any matters submitted to our shareholders. As of March 31, 2024, and December 31, 2023, 425,000shares of Series A Convertible Preferred Stock are issued and outstanding and are owned by Robert Carmichael.

Equity Incentive Plan

On May 26, 2021 the Company adopted an Equity Incentive Plan (the "Plan"). Under the Plan, stock options may be granted to employees, directors, and consultants in the form of incentive stock options or non-qualified stock options, stock purchase rights, time vested and/performance invested restricted stock, and stock appreciation rights and unrestricted shares may also be granted under the Plan. 25,000,000shares are reserved for issuance under the Plan. The term of the Plan is ten years.

The Company also issued options outside of the Plan that were not approved by the security holders. These options may be granted to employees, directors, and consultants in the form of incentive stock options or non-qualified stock options.

Equity Compensation Plan Information as of March 31, 2024:

		Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)			Weighted - average exercise price of outstanding options, warrants and rights (b)			Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c)
Equity Compensation Plans Approved by Security Holders			3,275,000			$	0.0401				21,680,882
Equity Compensation Plans Not Approved by Security Holders			64,164,637				0.0293				-
Total			67,439,637			$	0.0299				21,680,882

Options

The Company has issued options to purchase approximately 67,439,637shares of its common stock at an average exercise price of $0.0299with a fair value of approximately $37,000. For the three months ended March 31, 2024, and the year ended December 31, 2023, the Company issued nooptions to purchase shares.

For the three months ended March 31, 2024 and 2023, the Company recognized an expense of approximately $12,400and $11,000, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black-Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of March 31, 2024, the Company had approximately $1,066,753of unrecognized pre-tax non-cash compensation expense related to performance based options to purchase shares, which the Company expects to recognize, based on a weighted-average period of 1.5years. The Company uses straight-line amortization of compensation expense over the requisite service period for time-based options. For performance-based options the Company evaluates the likelihood of a vesting qualification being met, and will establish the expense based on that evaluation. The maximum contractual term of the Company's stock options is 5years. The Company recognizes forfeitures and expirations as they occur. Options to purchase approximately 42,323,387shares of common stock have vested as of March 31, 2024.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black-Scholes option-pricing model is affected by the Company's stock price on the date of grant as well as assumptions regarding the following:

		Three Months ended March 31,
		2024			2023
Expected volatility			172.0% - 346.4	%			172.0- 346.4	%
Expected term			1.5- 5.0Years

			1.5- 5.0Years
Risk-free interest rate			0.16% - 4.64	%			0.16% - 4.64	%
Forfeiture rate			0.17	%			0.17	%

The expected volatility was determined with reference to the historical volatility of the Company's common stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

A summary of the status of the Company's outstanding stock options as of March 31, 2024 and December 31, 2023 and changes during the periods ending on such dates is as follows:

		Number of			Weighted Average Exercise			Weighted Average Remaining Contractual			Aggregate Intrinsic
		Options			Price			Life in Years			Value
Outstanding at December 31, 2022			238,439,167			$	0.0362				1.43
Granted			-				-
Forfeited			(170,999,530	)			0.0379
Exercised			-				-
Cancelled						-
Outstanding - December 31, 2023			67,439,637			$	0.0360				1.43
Exercisable - December 31, 2023			41,057,753			$	0.0211				0.81			$	-
Granted			-				-
Forfeited			-				-
Exercised			-				-
Cancelled			-				-
Outstanding - March 31, 2024			67,439,637			$	0.0298				1.26
Exercisable - March 31, 2024			42,323,387			$	0.0217				0.61			$	-

The following table summarizes information about employee stock options outstanding at March 31, 2024.

Range of Exercise Price		Number outstanding at March 31, 2024			Weighted average remaining Life			Weighted average exercise price			Number exercisable at March 31,2024			Weighted average exercise price			Weighted average remaining life
$ 0.0180- $0.0225			35,295,237				0.33			$	0.0180				35,295,237			$	0.0180				0.33
$ 0.0229- $0.0325			1,050,000				2.14			$	0.0324				1,043,750			$	0.0324				2.14
$ 0.0360- $0.0425			23,009,400				2.29			$	0.0398				5,009,400			$	0.0393				2.11
$ 0.0440- $0.0531			8,085,000				2.31			$	0.0529				975,000			$	0.0517				1.46
Outstanding options			67,439,637				1.26				0.0298				42,323,387				0.0217				0.61

At March 31, 2024, there was approximately $1,066,753of unrecognized stock option expense which may be recognized only if the full vesting requirements for these options are met.

At March 31, 2024, there was approximately $69,001of total unrecognized stock option expense which is expected to be recognized on a straight-line basis over a weighted-average period of 0.45years.

Warrants

On January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of 11,428,570units, with each unit consisting of one share of common stock and a two-year common stock purchase warrant to purchase one share of common stock at an exercise price of $0.0175per share in consideration of $200,000.

A summary of the Company's warrants as of December 31, 2023 and changes during the three months ended March 31, 2024 is presented below:

		Number of			Weighted Average Exercise			Weighted Average Remaining Contractual			Aggregate Intrinsic
		Warrants			Price			Life in Years			Value
Outstanding - December 31, 2023			25,684,521			$	0.0247				0.93			$	24,000
Granted			-
Exercised
Forfeited or Expired			-
Outstanding - March 31, 2024			25,684,521			$	0.0247				0.68
Exercisable - March 31, 2024			25,684,521			$	0.0247				0.68			$	-

Note 8. Commitments and contingencies

Royalty Agreement

On June 30, 2020, the Company entered into Amendment No. 2 to its Patent License Agreement with Setaysha Technical Solutions, LLC ("STS"). The Amendment, among other things, provides that STS provide 30 hours per week of commercialization support for its NextGen licensed products without charge. In consideration therefor, the Company agreed to an increased minimum yearly royalty payment of $60,000for years 2022, 2023 and 2024, with a yearly fourth quarter reconciliation with earned royalties. In addition, if the Company terminates the Agreement with STS prior to December 31, 2023, the Company is obligated to pay STS $180,000, less cumulative royalties paid in excess of $334,961for the years 2019 through 2024. Royalty recorded under the Amendment was $67,984and $34,823for the three months ended March 31, 2024 and 2023, respectively.

Consulting and Employment Agreements

On August 1, 2021, the Company and Blake Carmichael entered into a three-year employment agreement (the "Blake Carmichael Employment Agreement") pursuant to which Mr. Carmichael served as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael received (i) an annual base salary of $120,000, payable in accordance with the customary payroll practices of the Company, (ii) a cash bonus equal to 5% of the net income of BLU3, payable quarterly, beginning with the first full calendar quarter after the execution of the agreement, and (iii) upon execution of the Carmichael Employment Agreement, a non-qualified five-yearstock option to purchase 3,759,400shares at $0.0399, 33.3% of which shares vest immediately, 33.3% vest on the second anniversary, and 33.3% vest on the third anniversary of the agreement. In addition, Blake Carmichael is entitled to receive a five-year stock option to purchase up to 18,000,000shares of common stock at an exercise price of $0.0399per share that will vest upon annual financial metrics based upon a revenue measurement, expediency measurement and an EBITDA measurement. A measurement was made for the three months ended March 31, 2024 resulting in no additional expense since the vesting criteria were not met.

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

In addition, Mrs. Buban is entitled to receive a five-yearstock option to purchase up to 7,110,000shares of common stock of the Company at an exercise price of $0.0531per share, which vests upon the attainment of certain defined annual financial metrics, as set forth in the Buban Employment Agreement. A measurement was made for the three months ended March 31, 2024 and no expense was recorded based upon the vesting criteria not being met.

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

On May 2, 2022, the Company entered into a two-year employment agreement with Steven Gagas (the "Gagas Employment Agreement") pursuant to which Mr. Gagas shall serve as the General Manager of the dive shop currently operating within LBI. In consideration for his services Mr. Gagas shall receive an annual salary of $50,000.

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 of a three year lease for the property located at 259 Commercial Blvd., Suites 2 and 3 in Lauderdale-By-The Sea, Florida for $2,816per month base rent. The lease expired on March 31, 2023 and LBI is currently renting on a month to month basis. LBI has the option to renew the lease for a two year term with an increase of base rent of 3.5%.

On September 14, 2022, SSI entered into a sixty-month lease renewal for its facility in Huntington Beach, California commencing on February 1, 2022 with base rent of approximately $17,550per 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 $10,727upon 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 $2,247for the first twelve months with a 3% annual escalation thereafter. The Tenant also pays a monthly common area maintenance of $112. The Tenant provided a security deposit of $2,426upon entering into the sublease.

On December 22, 2022, the U.S. Consumer Products Safety Commission (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 received 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 an allowance of $160,500for such costs. During the twelve months ended December 31, 2023 the Company repaired and returned 653units to customers resulting in a reduction of the reserve of $93,161for the twelve months ended December 31, 2023.

Note 9. Subsequent Events

Effective May 21, 2024, Christopher Constable resigned as a member of the Company's board of directors. As described in the resignation letter submitted by Mr. Constable, his termination was, among other reasons, the result of the Company having filed its Annual Report on Form 10-K for the year ended December 31, 2023 with the Securities and Exchange Commission without obtaining authorization from Mr. Constable.

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

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

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

Overview

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

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

●	Brownie's Third Lung - Surface Supplied Air ("SSA")
●	BLU3, Inc. - Ultra-Portable Tankless Dive Systems
●	LW Americas - High Pressure Gas Systems
●	Submersible Systems, Inc. - Redundant Air Tank Systems
●	Live Blue, Inc. - Guided Tours and Retail

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

The Company, through its wholly owned subsidiaries, designs, tests, and manufactures tankless dive systems, rescue air systems and yacht-based self- contained underwater breathing apparatus ("SCUBA") air compressor and nitrox generation fill systems. In addition, the Company is 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 building a guided tour operation that includes dive retail. Lastly, The Company is 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.

Recent Development

Effective May 21, 2024, Christopher Constable resigned as a member of the Company's board of directors. As described in the resignation letter submitted by Mr. Constable, his termination was, among other reasons, the result of the Company having filed its Annual Report on Form 10-K for the year ended December 31, 2023 with the Securities and Exchange Commission without first obtaining authorization from Mr. Constable.

Results of Operations

Net Revenues, Costs of Net Revenues and Gross Profit

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Net revenues decreased 1.9% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 as a result of a decrease in revenues in BTL and LWA. Net revenue for BTL and LWA decreased 39.0% and 48.0%, respectively, as a result of a loss of sales momentum as well as a soft demand in many areas of BTL's and LWA's market. The decrease in BTL and LWA's revenues was mostly offset by increased revenues in BLU3 and SSI. The increase in BLU3's revenue is due to the recovery from the recall that directly affected the previous period's revenues. SSI's increase can be attributed to the continued momentum of the Company's newest product, HEED3 as well as increased demand from international users of SSI's Spare Air product line.

For the three months ended March 31, 2024, cost of net revenues was 74.7% as compared with the cost of net revenues of 63.5% for the three months ended March 31, 2023. The cost increase as a percentage of revenue, can be directly attributed to the cost of direct labor, which accounted for a larger portion of costs and significantly impacted the profit margin. Included in cost of net revenues are royalty expenses paid to Robert Carmichael which decreased 11.3% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

Gross profit margin was 36.5% for the three months ended March 31, 2024 as compared to gross profit margin of 25.3% for the three months ended March 31, 2023. The increase in gross margin, is directly attributable to an increase in SSI's margin to 66.7%, offset by a decrease in BTL's margin to (9.7)%.

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

Revenues

		Three Months Ended March 31,			% of
		2024			2023			Change
		(unaudited)
Legacy SSA Products		$	277,954			$	455,380				(39.0	)%
High Pressure Gas Systems			122,082				234,880				(48.0	)%
Ultra-Portable Tankless Dive Systems			657,169				476,915				37.8	%
Redundant Air Tank Systems			502,301				392,976				27.8	%
Guided Tour Retail			48,016				78,902				(39.1	)%
Total net revenues		$	1,607,522			$	1,639,053				(1.9	)%

Cost of revenues as a percentage of net revenues

		Three Months Ended March 31
		2024			2023
		(unaudited)
Legacy SSA Products			109.7	%			91.8	%
High Pressure Gas Systems			66.4	%			52.9	%
Ultra-Portable Tankless Dive Systems			66.1	%			72.2	%
Redundant Air Tank Systems			33.3	%			73.2	%
Guided Tour Rental			53.8	%			64.3	%

Gross profit (loss) margins

		Three Months Ended March 31,
		2024			2023
		(unaudited)
Legacy SSA Products			(9.7	)%			8.2	%
High Pressure Gas Systems			33.6	%			47.1	%
Ultra-Portable Tankless Dive Systems			33.9	%			27.8	%
Redundant Air Tank Systems			66.7	%			26.8	%
Guided Tour Rental			46.2	%			35.7	%

Operating Expenses

Operating expenses consist of selling, general and administrative ("SG&A") expenses and research and development costs and are reported on a consolidated basis for our operating segments. Operating expenses increased 24.3%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023.

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

SG&A increased by 23.9% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. SG&A expenses were comprised of the following:

		Three Months Ended			Three Months Ended
Expense Item		March 31,2024			March 31,2023			% Change
Payroll, Selling & Administrative		$	473,453			$	450,806				5.0	%
Stock Compensation Expense			12,423				11,034				12.6	%
Professional Fees			51,490				66,302				(22.3	)%
Advertising			107,969				104,005				3.8	%
All Other			254,486				94,073				170.5	%
Total SG&A		$	899,821			$	726,220				23.9	%

Payroll for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, increased 5.0%, respectively. The increase reflects an increase in personnel in BLU3, as well as a reallocation of SSI direct labor from payroll expense to cost of sales for the three months ended March 31, 2024.

Non-Cash Stock Compensation expenses increased by 12.6%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, as a result of vesting milestones not being met due to the reduction in revenue for the three months ended March 31, 2024.

Professional fees, including legal, accounting and other professional fees decreased 22.3%, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 can be attributed to a decrease in other professional fees of 53.6% and a decrease in accounting fees of 42.7%. The decrease in the Company's acquisition activities in 2024 resulted in a decrease in legal fees. Additionally, the decrease in professional fees is attributable to the conversion of consultants to employees early in 2023 and the decrease in accounting fees can be attributed to new auditors who offer fixed priced services.

Advertising expenses increased by 3.8% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, respectively. This increase is attributable to BLU3's increase in advertising of 26.8% during the three months ended March, 31 2024. BLU3's increase in advertising expense was offset slightly by a decrease in advertising expense for SSI of 17.2%.

Other expenses increased by 170.5% for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due primarily to a reversal of the reserve for recall expenses which decreased other expenses recorded in 2023.

Research & Development Expenses (R&D Expenses)

R&D expenses for the three months ended March 31, 2024, increased 538.6% as compared to the three months ended March 31, 2023. The increase was attributable to an increase in new product development activity.

Other Income/Expense

For the three months ended March 31, 2024 and March 31, 2023, other income/expense consisted solely of interest expense. For the three months ended March 31, 2024, interest expense increased 31.3% from the three months ended March 31, 2023 to $19,952 as compared to $15,198 in the three months ended March 31, 2023. The increase in interest expense can be attributed to the related party demand notes from Charles Hyatt that were funded in the fourth quarter 2023 and first quarter of 2024.

Liquidity and Capital Resources

We had cash of $238,754 as of March 31, 2024. The following table summarizes total current assets, total current liabilities, and working capital at March 31, 2024, as compared to December 31, 2023.

		March 31,			December 31,
		2024			2023			% change
		(unaudited)
Total current assets		$	2,658,389			$	2,736,601				(2.9	)%
Total current liabilities		$	2,657,361			$	2,502,787				6.2	%
Working capital		$	1,028			$	233,814				(99.26	)%

The decrease in our current assets at March 31, 2024 from December 31, 2023 primarily reflected by a decrease in inventory as the Company decreased its inventory purchases to match the reduction in current demand. The increase in current liabilities reflects an increase in related party notes payable.

Summary Cash Flows

		Three Months Ended March 31,
		2024			2023
		(unaudited)
Net cash used in operating activities		$	(484,351	)		$	(313,881	)
Net cash used in investing activities		$	(7,561	)		$	(5,069	)
Net cash provided by financing activities		$	299,554			$	182,158

Net cash used in operating activities for the three months ended March 31, 2024 was due to the net loss of approximately $336,000. Net cash used in operating activities is also the result of a decrease in current assets, offset by an increase in accounts receivable and prepaid expenses which generated approximately $155,000. A net increase in liabilities which generated approximately $94,000 primarily from an increase in related party notes payable partially offset by a decrease in accounts payable and customer deposits.

Net cash used in investing activities for the three months ended March 31, 2024, of $7,561 consists of fixed asset purchases.

Net cash provided by financing activities for the three months ended March 31, 2024, of $299,554 reflects the issuance of debt to a related party and proceeds from long term debt partially offset by the repayment of debt.

Going Concern

Our unaudited consolidated financial statements included in this Quarterly Report were prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements. The report of our independent registered public accounting firm on our audited consolidated financial statements for the year ended December 31, 2023 includes an explanatory paragraph stating the Company has net losses and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. If the Company is unable to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back, delay or cease operations, liquidate assets and possibly seek bankruptcy protection.

We have a history of losses, and an accumulated deficit of $18,021,326 as of March 31, 2024. Despite a working capital surplus of $1,028 at March 31, 2024, the continued losses and cash used in operations raise substantial doubt as to the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon the Company's ability to continue to increase revenues, control expenses, raise capital, and continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. We are continuing to engage in discussions with potential sources for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels, net losses and limited market for our common stock. If we fail to raise additional funds when needed, or if we do not have sufficient cash flows from operations, we may be required to scale back or cease certain of our operations.

Critical Accounting Policies

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

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company's operations, financial position or cash flows.

These recent accounting pronouncements are described in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under Exchange Act. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluations as of March 31, 2024, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting described below. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.

Our management, including our Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the design and operations of our disclosure controls and procedures (defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) as of March 31, 2024 and based upon the such evaluation, have concluded that the disclosure controls and procedures were not effective as of such date due to the material weaknesses set forth below.

	●	Insufficient number and lack of qualified accounting department and administrative personnel and support;
	●	Insufficient written policies and procedures to ensure the correct application of accounting and financial reporting with respect to GAAP and SEC disclosure requirements;
	●	Insufficient segregation of duties, oversight of work performed and lack of controls in our finance and accounting functions due to limited personnel;
	●	Company's systems that impact financial information and disclosures have ineffective information technology controls;
	●	Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded; and
	●	Evaluation of disclosure controls and procedures was not sufficiently comprehensive due to limited personnel.

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

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

We will continue to monitor and evaluate the effectiveness of our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added to our accounting and administrative staff allowing improved internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEEDINGS

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.

ITEM 1A. RISK FACTORS

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

On March 31, 2024, the Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on a convertible demand note.

The above issuance did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe isare exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

During the quarter ended March 31, 2024, no director, officer or Section 16 officer adoptedor terminatedany Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements.

ITEM 6. EXHIBITS

Exhibit
Number		Exhibit
31.1		Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101.INS		Inline XBRL INSTANCE DOCUMENT
101.SCH		Inline XBRL TAXONOMY EXTENSION SCHEMA
101.CAL		Inline XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF		Inline XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB		Inline XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE		Inline XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

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

Date: July 17, 2024	BROWNIE'S MARINE GROUP, INC.
	By:	/s/ Robert M. Carmichael
		Robert M. Carmichael
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Robert M. Carmichael
		Robert M. Carmichael
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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