10-Q

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

(MarkOne)

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

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For<br> 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<br> or other jurisdiction of<br><br> <br>incorporation<br> or organization)	(I.R.S.<br> Employer<br><br> <br>Identification<br> No.)
3001<br> NW 25th Avenue, Suite 1
---	---
Pompano<br> Beach, Florida	33069
(Address<br> of principal executive offices)	(Zip<br> 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<br> of each class	Trading<br> Symbol(s)	Name<br> of each exchange on which registered
None	Not<br> applicable	Not<br> 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<br> accelerated filer ☐	Accelerated<br> filer ☐
Non-accelerated<br> filer ☒	Smaller<br> reporting company ☒
	Emerging<br> growth company ☐

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

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

As

of August 19, 2022, there were 409,774,099 shares of common stock outstanding.

TABLE

OF CONTENTS

		Page No.
	PART I - FINANCIAL INFORMATION
ITEM<br> 1.	FINANCIAL STATEMENTS.	4
ITEM<br> 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	27
ITEM<br> 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	36
ITEM<br> 4.	CONTROLS AND PROCEDURES.	37
	PART II - OTHER INFORMATION
ITEM<br> 1.	LEGAL PROCEEDINGS.	38
ITEM<br> 1A.	RISK FACTORS.	38
ITEM<br> 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	38
ITEM<br> 3.	DEFAULTS UPON SENIOR SECURITIES.	38
ITEM<br> 4.	MINE SAFETY DISCLOSURES.	38
ITEM<br> 5.	OTHER INFORMATION.	38
ITEM<br> 6.	EXHIBITS.	38

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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 SEC on April 22, 2022, 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.

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PART

I

ITEM

1. FINANCIAL STATEMENTS

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BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

			December 31, 2021
ASSETS
Current Assets
Cash	574,567		$	643,143
Accounts receivable - net	276,812			123,270
Accounts receivable - related parties	75,122			77,301
Inventory, net	2,323,468			1,895,260
Prepaid expenses and other current assets	533,540			227,458
Total current assets	3,783,509			2,966,432
Property, equipment and leasehold improvements, net	292,038			270,065
Operating Lease Assets	372,992			454,475
Intangible Assets, Net	682,655			718,905
Goodwill	249,986			249,986
Other assets	17,831			14,098
Total assets	5,399,011		$	4,673,961
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities	1,204,610		$	744,383
Accounts payable - related parties	31,437			37,267
Customer deposits and unearned revenue	280,510			143,938
Other liabilities	222,373			187,924
Operating lease liabilities	214,061			232,283
Current maturities long term debt	38,209			50,402
Notes payable	-			-
Convertible debentures, net	-			-
Total current liabilities	1,991,200			1,396,197
Long term debt	73,775			87,956
Long term convertible debentures, net	341,098			339,254
Operating lease liabilities	159,322			222,899
Total liabilities	2,565,395			2,046,306
Commitments and contingent liabilities (see note	-
Stockholders’ equity
Preferred stock; 0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of June 30, 2022 and December 31, 2021.	425			425
Common stock; 0.0001 par value; 1,000,000,000 shares authorized; 409,774,099 shares issued and outstanding at June 30, 2022 and 393,850,475 shares issued and outstanding at December 31, 2021, respectively.	40,978			39,386
Common stock payable 138,941 shares and 138,941 shares, respectively as of June 30, 2022 and December 31, 2021.	14			14
Additional paid-in capital	18,118,191			17,132,434
Accumulated deficit	(15,317,359	)		(14,544,604	)
Accumulated other comprehensive loss	(8,633	)		-
Total stockholders’ equity	2,833,616			2,627,655
Total liabilities and stockholders’ equity	5,399,011		$	4,673,961

All values are in US Dollars.

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

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BROWNIES MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THREE AND SIX MONTHS ENDED JUNE 30

(UNAUDITED)

	Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021
Net revenues
Net revenues	$	2,110,575		$	1,359,745		$	3,812,139		$	2,106,098
Net revenues - related parties		290,663			353,173			564,068			557,589
Total net revenues		2,401,238			1,712,918			4,376,207			2,663,687
Cost of net revenues
Cost of net revenues		1,331,847			876,646			2,453,485			1,385,715
Cost of net revenues - related parties		138,025			169,699			259,199			275,130
Royalties expense - related parties		17,824			28,013			30,613			39,606
Royalties expense		50,708			41,251			94,316			54,955
Total cost of revenues		1,538,404			1,115,609			2,837,613			1,755,406
Gross profit		862,834			597,309			1,538,594			908,281
Operating expenses
Selling, general and administrative		1,177,601			823,607			2,283,340			1,560,642
Research and development costs		4,373			21,312			8,292			42,419
Total operating expenses		1,181,974			844,919			2,291,632			1,603,061
Income (Loss) from operations		(319,140	)		(247,610	)		(753,038	)		(694,780	)
Other (income) expense, net
Gain on settlement of debt		-			-			-			10,000.00
Gain on the forgiveness of PPP loan		-			159,600			-			159,600.00
Interest expense		(9,523	)		(1,795	)		(19,716	)		(5,606	)
Income (Loss) income before provision for income taxes		(328,663	)		(89,805	)		(772,754	)		(530,786	)
Provision for income taxes		-			-			-			-
Net Income (Loss)		(328,663	)		(89,805	)		(772,754	)		(530,786	)
Loss on foreign currency contract		(10,220	)		-			(8,633	)		-
Comprehensive loss		(338,883	)		(89,805	)		(781,387	)		(530,786	)
Basic income (loss)per common share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Basic weighted average common shares outstanding		406,439,244			337,489,134			399,061,998			314,941,270
Diluted income (loss) per common share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Diluted weighted average common shares outstanding		406,439,244			337,489,134			399,061,998			314,941,270

The

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

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BROWNIES MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED)

								Common<br> Stock				Additional		Accumulated<br> Other Comprehensive						Total
	Preferred<br> Stock				Common<br> Stock			Payable				Paid-in		Income			Accumulated			Stockholder’s
		Shares		Amount	Shares		Amount	Shares		Amount		Capital		(Loss)			Deficit			Equity
December 31, 2021		425,000	$	425.00	393,850,475	$	39,386	138,941	$	14	$	17,132,434	$	-		$	(14,544,604	)	$	2,627,655
Shares issued for the exercise of warrants		-		-	10,600,000		1,060	-		-		263,940		-			-			265,000
Shares issued for services		-		-	1,206,318		120	-		-		35,380		-			-			35,500
Stock Option Expense		-		-	-		-	-		-		230,034		-			-			230,034
Net Loss		-		-	-		-	-		-		-		-			(444,092	)		(444,092	)
Other<br> Comprehensive Income		-		-	-		-	-		-		-		1,587			-			1,587
March 31, 2022 (unaudited)		425,000		425	405,656,793		40,566	138,941		14		17,661,788	$	1,587			(14,988,696	)		2,715,684
Stock Issued for Service		-		-	302,953		30	-		-		11,970		-			-			12,000
Stock Issued for Asset Purchase		-		-	3,084,831		308	-		-		119,692		-			-			120,000
Stock Issued for Accrued Interest<br> on Convertible Notes		-		-	449,522		45	-		-		23,003		-			-			23,048
Stock Issued for Employee Bonus		-		-	280,000		28	-		-		11,032		-			-			11,060
Stock option expense		-		-	-		-	-		-		290,707		-			-			290,707
Net Income		-		-	-		-	-		-		-		-			(328,663	)		(328,663	)
Other<br> Comprehensive Loss		-		-	-		-	-		-		-		(10,220	)		-			(10,220	)
June 30, 2022 (unaudited)		425,000	$	425	409,774,099	$	40,978	138,941	$	14	$	18,118,191	$	(8,633	)	$	(15,317,359	)	$	2,833,616
									Common Stock				Additional							Total
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	Preferred Stock				Common Stock				Payable				Paid-in				Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital				Deficit			Equity
December<br> 31, 2020		425,000	$	425		306,185,206	$	30,620		138,941	$	14	$	13,508,882	$	-	$	(12,956,137	)	$	583,804
Common<br> stock issued for Cash		-		-		27,500,000		2,750		-		-		272,250		-		-			275,000
Common<br> stock issued for service		-		-		3,116,279		312		-		-		124,688		-		-			125,000
Stock<br> option expense		-		-		-		-		-		-		218,505		-		-			218,505
Common<br> stock issued for conversion of convertible debentures and accrued interest		-		-		422,209		42		-		-		14,735		-		-			14,777
Net<br> Loss		-		-		-		-		-		-		-		-		(440,981	)		(440,981	)
March<br> 31, 2021 (unaudited)		425,000		425		337,223,694		33,724		138,941		14		14,139,060		-		(13,397,118	)		776,105
Beginning<br> balance		425,000		425		337,223,694		33,724		138,941		14		14,139,060		-		(13,397,118	)		776,105
Common<br> stock issued for conversion of convertible debentures and accrued interest		-		-		6,055,358		606		-		-		59,948		-		-			60,554
Stock<br> option expense		-		-		-		-		-		-		257,370		-		-			257,370
Net<br> Loss		-		-		-		-		-		-		-		-		(89,805	)		(89,805	)
Net<br> Income (Loss)		-		-		-		-		-		-		-		-		(89,805	)		(89,805	)
June<br> 30, 2021 (unaudited)		425,000	$	425		343,279,052	$	34,330		138,941	$	14	$	14,456,378	$	-	$	(13,486,923	)	$	1,004,224
Ending<br> balance		425,000	$	425		343,279,052	$	34,330		138,941	$	14	$	14,456,378	$	-	$	(13,486,923	)	$	1,004,224

The

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

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BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR

THE SIX MONTHS ENDED JUNE 30,

(UNAUDITED)

	2022			2021
Cash flows provided by operating activities:
Net loss	$	(772,754	)		(530,786	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		66,802			13,396
Amortization of debt discount		1,844			-
Amortization of right-of-use asset		104,777			51,581
Shares issued for services		47,501			125,000
Reserve (recovery) for bad debt		-			28,554
Reserve for slow moving inventory		26,217			-
Stock Based Compensation - Options		520,739			475,875
Stock based compensation - stock grant		11,060			-
Shares issued for accrued interest in convertible notes		23,048			-
Gain on Settlement of Debt		-			(10,000	)
Gain on forgiveness of PPP loan		-			(159,600	)
Changes in operating assets and liabilities
Change in accounts receivable, net		(153,542	)		(179,482	)
Change in accounts receivable - related parties		2,179			(109,001	)
Change in inventory		(345,004	)		(120,940	)
Change in prepaid expenses and other current assets		(306,081	)		(250,909	)
Change in other assets		(3,733	)		3,000
Change in accounts payable and accrued liabilities		460,227			217,684
Change in customer deposits and unearned revenue		136,572			(7,787	)
Change in long term lease liability		(105,093	)		23,938
Change in other liabilities		15,815			(51,581	)
Change in accounts payable - related parties		(5,831	)		84,220
Net cash used in operating activities		(275,257	)		(396,838	)
Cash flows used in investing activities:
Cash used in asset acquisition		(30,000	)		-
Purchase of fixed assets		(1,946	)		(14,591	)
Net cash used in investing activities		(31,946	)		(14,591	)
Proceeds from issuance of units		-			275,000
Proceeds from exercise of Warrants		265,000			-
Repayment on notes payable		-			(25,000	)
Repayment of debt		(26,373	)		(22,096	)
Net cash provided by financing activities		238,627			227,904
Net change in cash		(68,576	)		(183,525	)
Cash, beginning balance		643,143			345,187
Cash, end of period	$	583,765			161,662
Supplemental disclosures of cash flow information:
Cash Paid for Interest	$	19,716			4,344
Cash Paid for Income Taxes	$	-			-
Supplemental disclosure of non-cash financing activities:
Operating lease obtained for operating lease liability	$	23,294		$	-
Shares issued for asset acquisition	$	120,000			-
Shares issued for payment of convertible note interest	$	23,048			-
Fixed asset purchase down payment through the issuance of debt	$	-		$	37,098
Shares issued for the conversion of convertible debentures and accrued interest	$	-		$	75,331

The

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

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BROWNIE’S

MARINE GROUP, INC. AND SUBSIDIARIES

NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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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 incorporated in 2017, 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.

On February 13, 2022 the Company filed with the Florida Department of State, the articles of incorporation for a new wholly owned subsidiary, Live Blue, Inc. (“LBI”). LBI utilizes technology developed by BLU3 to provide new users and interested divers a guided tour experience. 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 as part of this asset acquisition.

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

Basisof Presentation

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

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Principlesof 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.

Useof 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.

Cashand cash equivalents

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

Financial

instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per EIN. At June 30, 2022 and December 31, 2021, the Company had approximately $22,700 and $205,500, respectively in excess of the FDIC insured limit.

ForeignCurrency Forward Contracts

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

The foreign currency forward hedging contracts outstanding as of June 30, 2022 have settlement dates within 6 months. The spot rate components of these foreign currency forward contracts are designated as cash flow hedges and any unrealized gains or losses are reported in other comprehensive income and reclassified to the Consolidated Statement of Income in the same periods during which the underlying hedged transactions affect earnings. If a hedging relationship is terminated with respect to a foreign currency forward contract, accumulated gains or losses associated with the contract remain in OCI until the hedged forecasted transaction occurs and are reclassified to operations in the same periods during which the underlying hedged transactions affect earnings.

Foreign currency forward contracts entered into to hedge cost of goods purchases were as follows as of June 30, 2022 and December 31, 2021:

Schedule of Foreign Currency Forward Contracts

	Notional Amount
Foreign Currency	June 30, 2022 <br>(unaudited)		December 31, 2021
Euro	$	181,615		-
Total	$	181,615	$	-

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Accountsreceivable

Accounts

receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge. The allowances for doubtful accounts totaled $46,555 and $46,555 at June 30, 2022 and December 31, 2021, respectively.

Inventory

Inventory consists of the following:

Schedule of Inventory

	June<br> 30, 2022 <br><br> (unaudited)		December<br> 31, <br><br> 2021
In-Transit<br> inventory	$	204,562	$	130,000
Raw<br> materials		1,000,674		1,144,190
Work<br> in process		84,243		99,858
Finished<br> goods		985,387		521,212
Rental<br> Equipment		48,602		-
Inventory,<br> net	$	2,323,468	$	1,895,260

RevenueRecognition

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

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

LeaseAccounting

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

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

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

When we have 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 we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

For

the three and six months ended June 30, 2022 the lease expenses were approximately $64,500 and $128,700, respectively, and approximately $43,000 and $78,000 for the three and six months ended June 30, 2021, respectively. Cash paid for operating liabilities for the six months ended June 30, 2022 was approximately $128,400 and approximately $32,900 for the six months ended June 30, 2021.

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Supplemental balance sheet information related to leases was as follows:

Schedule of Supplemental Balance Sheet Information

Operating Leases	June 30, 2022<br> <br>(unaudited)
Right-of-use assets	$	372,992
Current lease liabilities	$	214,061
Non-current lease liabilities		159,322
Total lease liabilities	$	373,383

Stock-BasedCompensation

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

Lossper common share

Basic

earnings per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. At June 30, 2022 and June 30, 2021, 245,847,251 and 205,855,020, 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.

Recentaccounting pronouncements

ASU 2016-13 Current Expected CreditLoss (ASC326)

In December 2021, the FASB issued and 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 is effective January 1, 2023. The Company is evaluating the changes from this standard to determine the impact on its consolidated financial statements and related disclosures

ASU2019-12 Income Taxes (Topic 740)

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company determined that the standard has no impact on its consolidated financial statements and related disclosures.

Note 3. Going Concern

The

accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. For the six months ended June 30, 2022, the Company incurred a net loss of $772,754 of which $520,739 is non-cash stock related compensation and shares issued for service. At June 30, 2022, the Company had an accumulated deficit of $15,317,359. Despite a working capital surplus of approximately $1,792,309 at June 30, 2022, the continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, control expenses, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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Note 4. Related Party Transactions

The

Company sells products to Brownies Southport Divers, Brownies Yacht Toys and Brownies Palm Beach Divers, companies owned by the brother of Robert Carmichael, the Company’s President and Chief Financial Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volumes. These entities accounted for 12.1% and 20.6% of the net revenues for the three months ended June 30, 2022 and June 30, 2021, respectively, and 12.9% and 20.9% for the six months ending June 30 2022 and 2021, respectively. Accounts receivable from these entities totaled $72,344 and $75,792, at June 30, 2022 and December 31, 2021, 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 $446 and $1,509 at June 30, 2022 and December 31, 2021, respectively.

The Company has an outstanding accounts receivable to Charles Hyatt for

$2,332 as of June 30, 2022 and $0 at December 31, 2021. This amount was paid in full on August 19, 2022.

The

Company had accounts payable to related parties of $31,437 and $37,267 at June 30, 2022 and December 31, 2021, respectively. The balance payable at June 30, 2022 is comprised of $18,405 due to Robert Carmichael, and $10,051.92, to 940, LLC and $2,980 to BGL. At December 31, 2021 this account was comprised of $5,000 due to Robert Carmichael, and $32,267 due to BGL.

The

Company has exclusive license agreements with 940 A to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreements. The agreements provide that the Company pay 940 A 2.5% of gross revenues per quarter as a royalty. Total royalty expense for the three months ended June 30, 2022 and 2021 were $17,824 and $28,031, respectively. For the six months ending June 30, 2022 and 2021 royalty expense for this entity totaled $30,613 and $39,606, respectively. The accrued royalty for June 30, 2022 was approximately $11,800 and is included in other liabilities.

On

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

On

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

Note 5. Convertible Promissory Notes and Notes Payable

Convertible Promissory Notes

Convertible promissory notes consisted of the following at June 30, 2022:

Schedule of Convertible Debentures

Origination <br> Date	Maturity <br> Date	Interest <br> Rate			Origination<br> Principal <br> Balance		Original <br> Discount <br> Balance			Period <br> End <br> Principal <br> Balance		Period <br> End <br> Discount <br> Balance			Period <br> End <br> Balance, <br> Net		Accrued <br> Interest <br> Balance		Reg.
12/01/17	12/31/21		6	%		50,000		(12,500	)		-		-			-		-		(1	)
12/05/17	12/31/21		6	%		50,000		(12,500	)				-			-		-		(2	)
9/03/21	9/03/24		8	%		346,500		(12,355	)		346,500		(8,815	)		337,685		-		(3	)
9/03/21	9/03/24		8	%		3,500		(125	)		3,500		(87	)		3,413		-		(4	)
										$	350,000	$	(8,902	)	$	341,098	$	-
(1)	On<br> December 1, 2017, the Company issued a 6% secured convertible promissory note in the principal amount of $50,000, initially due December<br> 1, 2018, subject to extension. The note is secured by the assets of the Company and is guaranteed by the Company’s wholly-owned<br> subsidiaries, Trebor and BHP and the personal guarantee of Robert Carmichael.
---	---

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| --- | | The<br> conversion price of the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted<br> in year five. The noteholder may convert the note at any time until the note plus accrued interest is paid in full. Various other<br> fees and penalties apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion<br> of 9.99% of the outstanding common stock of the Company at any one time. In 2019, the maturity date of the note was extended for<br> one year to December 31, 2019 with a reduction in the conversion price to $0.01 per share. The Company recorded a loss on extinguishment<br> of debt of $32,000 upon the modification of conversion price. On June 10, 2021, the note and accrued interest of $10,554 were converted<br> by the holder into 6,055,358 shares of common stock in accordance with the terms of the note. | | --- | | (2) | On<br> December 5, 2017, the Company entered into a 6% secured convertible promissory note in the principal amount of $50,000, initially<br> due December 4, 2018, subject to extension. The note is secured with such assets of the Company equal to the principal and accrued<br> interest, and is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert<br> Carmichael. | | --- | --- | | | The<br> conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted<br> in year five. The lender may convert at any time until the note plus accrued interest is paid in full. Various other fees and penalties<br> apply if payments or conversions are not done timely by the Company. The lender will be limited to maximum conversion of 9.99% of<br> the outstanding common stock of the Company at any one time. In 2019, the note was extended for one year to December 31, 2019 with<br> a reduction in the conversion price to $0.01 per share. The Company recorded a loss on extinguishment of debt of $99,000 upon the<br> modification of conversion price. On August 18, 2021, this note and accrued interest of $11,145 were converted by the holder into<br> 6,114,516 shares of common stock in accordance with the terms of the note | | (3) | On<br> September 3, 2021, the Company issued a three-year 8% convertible promissory note in the principal amount of $346,550 to Summit Holding<br> V, LLC as part of the acquisition of SSI. Payments on the note are to be equivalent to 50% of the adjusted net profit of SSI payable<br> calendar quarterly. Interest is payable in shares of common stock of the Company at a conversion price of $0.051272 per share, to<br> be paid quarterly. The note holder may convert outstanding principal and interest at a conversion price of $0.051272 per share at<br> any time during the term of the note. The Company recorded $12,355 for the beneficial conversion feature. | | (4) | On<br> September 3, 2021, the Company issued a three-year 8% promissory note in the principal amount of $3,500 to Tierra Vista Partners,<br> LLC as part of the acquisition of SSI. Payments on the note are to be equivalent to 50% of the adjusted net profit of SSI payable<br> calendar quarterly. Interest is payable in common stock of the Company at a conversion price of $0.051272 per share, to be paid quarterly.<br> The note holder may convert outstanding principal and unpaid interest at a conversion price of $0.051272 at any time up to the maturity<br> date of the note. The Company recorded $125 for the beneficial conversion feature. | | --- | --- |

Loan Payable

MarlinNote

On

September 30, 2019 the Company, through its wholly owned subsidiary BLU3, executed an equipment finance agreement for the purchase of certain plastic molding equipment through Marlin Capital Solutions. The initial principal balance was $96,725 payable in 36 equal monthly installments of $3,144 (the “Marlin Note”). The equipment finance agreement contains customary events of default. The loan balance was $12,305 as of June 30, 2022.

Schedule of Future Amortization of Loans Payable

	Payment Amortization
2022 (6 months remaining)		12,305
2023		-
2024		-
2025		-
2025 and thereafter		-
2026		-
Total Loan Payments	$	12,305
Current portion of Loan payable		(12,305	)
Non-Current Portion of Loan Payable	$	-

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MercedesBenz Note

On

August 21, 2020, the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van. The installment agreement was for $55,841 with a zero interest rate payable over 60 months with a monthly payment of $931 and is personally guaranteed by Robert Carmichael. The first payment was due on October 5, 2020. The loan balance as of June 30, 2022 is $37,538.

Schedule of Future Amortization of Loans Payable

	Payment Amortization
2022 (6 months remaining)	$	6,825
2023	$	11,168
2024	$	11,168
2025 and thereafter	$	8,684
Total note payments	$	37,538
Current portion of note payable	$	(11,168	)
Non-Current Portion of notes payable	$	26,370

NavitasNote

On

May 19, 2021 the Company, through its wholly owned subsidiary BLU3, executed an equipment finance agreement for the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $79,309 payable in 60 equal monthly installments of $1,611 (the “Navitas Note”). The equipment finance agreement contains customary events of default. The agreement was fully funded as of September 30, 2021.

Schedule of Future Amortization of Loans Payable

	Payment<br> Amortization
2022<br> (6 months remaining)		6,139
2023		15,342
2024		16,629
2025		18,204
2026		6,007
Total<br> Note Payments	$	62,141
Current<br> portion of Note payable		(14,736	)
Non-Current<br> Portion of Note Payable	$	47,405

AllianceLease

On

January 19, 2022, SSI entered into a capital lease with Alliance Funding Group (“lessor”) to secure a new piece of essential equipment for its operations. The lease has a 36 month term with a monthly payment of $3,522. At the end of the lease SSI has the option to purchase the equipment for $3,522 plus applicable taxes. The total purchase price of the equipment was $108,675. The vendor has determined that they are unable to supply the equipment, and the purchase order for this equipment was cancelled in May 2022. The lessor initially funded fifty percent of the purchase price or approximately $54,000 directly to the vendor which the vendor has committed to return once properly instructed by the lessor. This lease was cancelled effective June 29, 2022. For the six months ending June 30, 2022, the Company wrote off approximately $6,300 related to fees for cancellation of this financing.

Note 6. Business Combination

Mergerwith Submersible Systems, Inc.

On

September 3, 2020, the Company completed its merger with SSI. Under the terms of the Merger Agreement, the Company paid $1.79 million, consisting of the issuance of 27,305,442 shares of its common stock (valued at $1.4 million) and the issuance of 8% unsecured convertible promissory notes in the aggregate principal amount of $350,000 in exchange for all of the equity of SSI. The 27,305,442 shares are subject to leak out agreements whereby the shareholders are unable to sell or transfer shares based upon the following:

Summary of Holding Period and Shares Eligible To Sold

Holding<br> Period<br><br> from Closing Date	Percentage<br> of shares<br><br> eligible to be sold or transferred
6<br> months	Up<br> to 12.5%
9<br> months	Up<br> to 25.0%
24<br> months	Up<br> to 75.0%
36<br> months	Up<br> to 100.0%

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The

leak-out restriction may be waived by the Company, upon written request by a Seller, if the Company’s common stock is trading on the NYSE American or Nasdaq, and has a rolling 30-day average trading volume of 50,000 shares per day; provided, however, that (i) only up to 5% of the previous days total volume can be sold in one day and (ii) only through executing trades “On the Offer.”

The

transaction costs associated with the Merger were $65,000 in legal fees paid in $40,000 in cash, and 1,190,476 shares of the Company’s common stock with a fair value of $55,952.

FairValue of Consideration Transferred and Recording of Assets Acquired

The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed, including an amount for goodwill:

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Common stock, 27,305,442 shares at fair market value	$	1,449,919
8% unsecured, convertible promissory note payable to seller		350,000
Total purchase price	$	1,799,919
Tangible assets acquired	$	1,101,604
Liabilities assumed		(294,671	)
Net tangible assets acquired		806,933
Identified Intangible Assets
Customer relationships	$	600,000
Trademarks		121,000
Non-compete agreements		22,000
Total intangible assets		743,000
Goodwill	$	249,986
Total purchase price	$	1,799,919

The

value of the stock was calculated based on the volume weighted average price (“VWAP”) of a share of the Company’s common stock on the OTC Markets for (i) 180 days prior to the date of the parties’ execution and delivery of the binding term sheet for the Merger or (ii) 180 days prior to the closing date of the Merger, whichever results in a lower VWAP which resulted in a conversion price of $0.051271831 and the issuance of 27,305,442 shares of common stock with a fair value of $1,449,919 on the closing date.

Inventory was assessed at the time of closing as to its fair value, and it was determined that a step-up analysis was necessary in order to evaluate the fair value of the inventory at the time of closing. The step up represents the net profit that would be attained when the inventory is sold. The key assumptions used in this analysis is a gross margin of 38.3% and selling costs of 5.0%, The analysis resulted in a necessary step up of $31,000 at the time of closing.

Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the acquisition is attributable to the value of the potential expanded market opportunity with new customers. The goodwill is not expected to be deductible for tax purposes.

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As

of June 30, 2022, the Company recorded an estimated fair value of the intangible assets and goodwill of $992,986 based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

Asset acquisition Gold Coast Scuba, LLC

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 Live Blue, Inc. Pursuant to the terms of the Asset Purchase Agreement, Live Blue acquired substantially all of Gold Coast Scuba’s assets and assumed certain non-material liabilities of the business associated with these assets. In addition, LBI assumed the lease for the premises for Gold Coast Scuba as part of this asset acquisition.

In

consideration for the assets purchased, the Company paid $150,000

to the LLC Members. The purchase price was paid

by (a) issuance to the LLC Members of an aggregate of 3,084,831

shares of the Company’s common stock (the

“Consideration Shares”) with a fair market value of $120,000; and (b) a cash payment of $30,000 .

The Consideration Shares are subject to leak out agreements whereby the shareholders are unable to sell or transfer shares based upon the following:

Summary of Holding Period and Shares Eligible To Sold

Holding<br> Period<br><br> from Closing Date	Percentage<br> of shares<br><br> eligible to be sold or transferred
6 months	Up to 25.0%
9 months	Up to 50.0%
12 months	Up to 100.0%

The leak-out restriction may be waived by the Company, upon written request by a Seller, if the Company’s common stock is trading on the NYSE American or Nasdaq, and has a rolling 30-day average trading volume of 50,000 shares per day; provided, however, that (i) only up to 5% of the previous days total volume can be sold in one day and (ii) only through executing trades “On the Offer.”

The

transaction costs associated with the acquisition were $10,000 in legal fees paid in cash.

FairValue of Consideration Transferred and Recording of Assets Acquired

The following table summarizes the asset acquisition date fair value of the consideration paid, identifiable assets acquired, including an amount for overpayment and transaction fees:

Summary of Asset Acquisition

	Book Value		Overpayment Allocation		Transaction Cost Allocation		Fair Value
Rental Inventory	$	23,408	$	22,156	$	3,038	$	48,602
Fixed Assets		24,360		23,058		3,161		50,579
Retail Inventory		29,292		27,726		3,801		60,819
Total Cost	$	77,060	$	72,940	$	10,000	$	160,000

ProForma Information

The following unaudited pro forma information assumes all business combinations occurred on January 1, 2021. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.

Schedule of Business Acquisition, Pro Forma Information

	Three months ended June 30, 2021			Six months ended <br> June 30, 2021
Revenue	$	2,423,956		$	3,730,805
Net Loss	$	(340,186	)	$	(842,500	)
Basic and Diluted Loss per Share	$	(0.00	)	$	(0.00	)
Basic and Diluted Weighted Average Common Shares Outstanding		367,879,407			345,331,543

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. The pro forma amounts above for basic and diluted weighted average shares outstanding have been adjusted to include the stock issued in connection with the acquisition of SSI and the assets of LBI.

ProForma Information

The following unaudited pro forma information assumes all business acquisitions occurred on January 1, 2022. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. The pro forma amounts for basic and diluted weighted average shares outstanding have been adjusted to include the stock issued in connection with the acquisition of Gold Coast Scuba.

Schedule of Business Acquisition, Pro Forma Information

	Three months ended June 30, 2022			Six months ended <br> June 30, 2022
Revenue	$	2,423,956		$	4,452,986
Net Loss	$	(326,829	)	$	(829,143	)
Basic and Diluted Loss per Share	$	(0.00	)	$	(0.00	)
Basic and Diluted Weighted Average Common Shares Outstanding		409,524,075			402,146,829

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Note 7. Goodwill and Intangible Assets, Net

The following table sets for the changes in the carrying amount of the Company’ Goodwill for the quarter ended June 30, 2022.

Summary of Changes in Goodwill

	2022
Balance, January 1	$	249,986
Addition:		-
Balance, June 30	$	249,986

The following table sets for the components of the Company’s intangible assets at June 30, 2022:

Summary of Intangible Assets

	Amortization Period (Years)		Cost		Accumulated Amortization			Net Book Value
Intangible Assets Subject to amortization
Trademarks		15	$	121,000	$	(6,678	)	$	114,322
Customer Relationships		10		600,000		(50,000	)		550,000
Non-Compete Agreements		5		22,000		(3,667	)		18,333
Total			$	743,000	$	(60,354	)	$	682,655

The aggregate amortization remaining on the intangible assets as of June 30, 2022 is a follows:

Schedule of Estimated Intangible Assets Amortization Expenses

	Intangible Amortization
2022 (6 months remaining)	$	36,225
2023		72,467
2024		72,467
2025		72,467
2026		71,367
Thereafter		357,662
Total	$	682,655

Note 8. Shareholders’ Equity

Common Stock

On

January 17, 2022, the Company issued a law firm 1,000,000 shares of common stock with a fair value of $27,500 as part of the agreed upon compensation for a representation agreement.

On

January 31, 2022, the Company issued a consultant 121,212 shares of common stock with a fair value of $4,000 for consulting services related to the dive industry.

On

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

On

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

On

February 28, 2022, the Company issued a consultant, 85,106 shares of common stock with a fair value of $4,000 for consulting services related to the dive industry.

On

May 3, 2022, the Company issued 3,084,831 shares of common stock pursuant to the asset purchase agreement with Gold Coast Scuba, LLC with a fair value of $120,000.

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On

May 31, 2022, the Company issued a consultant, 302,953 shares of common stock with a fair value of $12,000 for consulting services related to the dive industry.

As

of June 30, 2022, the Company issued 449,522 shares of common stock to the holders of convertible notes for payment of interest through June 30, 2022. The fair value of these shares were $23,048.

On

June 17, 2022, the Company issued 280,000 shares of common stock to an employee as a retirement gift. The fair value of this stock was $11,060.

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

425,000

shares of Series A Convertible Preferred Stock 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. 25,000,000 shares are reserved for issuance under the Plan. The term of the Plan is ten years.

Equity Compensation Plan Information as of June 30, 2022:

Schedule of Equity Compensation Plan Information

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted – average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c)
Equity Compensation Plans Approved by Security Holders		3,592,647	$	.0401		21,407,353
Equity Compensation Plans Not Approved by Security Holders		—		—		—
Total		3,592,647	$	.0401		21,407,353

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Options

On

April 14, 2020, the Company entered into a Non-Qualified Stock Option Agreement with Robert Carmichael (the “Carmichael Option Agreement”). Under the terms of the Carmichael Option Agreement, as additional compensation, the Company granted Mr. Carmichael an option (the “Carmichael Option”) to purchase up to an aggregate of 125,000,000 shares of the Company’s common stock at an exercise price of $0.045 per share, of which the right to purchase 75,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 50,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

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

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

The

fair value of the Carmichael Option on the date of the grant was $4,370,109 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .26%, (ii) expected life of 1.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 320%. The Company analyzed the likelihood that the vesting qualifications would be met. As of December 31, 2021, 25,000,000 of options were vested as the targeted net revenues were reached and three quarters of Tranche 2 was also met and fully expensed through December 31, 2021. For the three months ended June 30, 2022 the Company revenues reached the target revenues for Tranche 2, and an additional 25,000,000 shares of the option vested. Stock option expense recognized during the three and six months ended June 30, 2022 for this option was $218,505 and $437,010, respectively.

On

November 5, 2020, the Company entered into a Non-Qualified Stock Option agreement with Christopher Constable (the “Constable Option Agreement”) as part of his employment agreement. As part of the Constable Option Agreement, the Company granted Mr. Constable an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $0.0184 per share, of which the right to purchase 10,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

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As

part of the Constable Option Agreement, the Company also granted Mr. Constable an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $0.0184 per share, of which the right to purchase 10,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows:

●	the<br> right to purchase 2,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative<br> consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any subsequent<br> acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively, “Net<br> Revenues”), in excess of $5,000,000 in the aggregate over four consecutive fiscal quarters commencing January 1, 2021 and ending<br> on April 30, 2023 (the “Net Revenue Period”);
●	the<br> right to purchase an additional 3,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues<br> in excess of $7,500,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period; and
●	the<br> right to purchase an additional 5,000,000 shares of common stock shall vest at such time as the Company reports cumulative Net Revenues<br> in excess of $10,000,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

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

The

fair value of the Bonus Options on the date of the grant was $578,082 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .14%, (ii) expected life of 2.0 years, (iii) dividend yield of 0%, and (iv) expected volatility of 312.2%. The Company analyzed the likelihood that the vesting qualifications would be met, and as of June 30, 2022, it was deemed that the Company met the qualifications for four quarters for Tranches 1 and 2 $121,668. For the three and six months ended June 30, 2022, the Company recognized $38,934 and $38,934, respectively.

On June 14, 2021, the Company issued options to purchase up to an aggregate of 1,125,000 shares of common stock to various employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at $0.036 per share for a period of four years from the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $38,369 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of

.21

%, (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 304.77%. The stock options expense recognized for the three and six months ended June 30, 2022 was $4,142 and $8,284, respectively.

On August 1, 2021 as part of the Blake Carmichael Employment Agreement (as defined below), the Company granted Blake Carmichael a five-year option to purchase 3,759,400 shares of the Company’s common stock at an exercise price of $0.0399, (the “BC Compensation Options”). The BC Compensation Options vested 33.3% upon the execution of the agreement, 33% at the first anniversary date and 33% upon the second anniversary date. The fair value of the options on the date of the grant was $149,076 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of

.25

%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 346.36%. The Company expensed $49,692 as of December 31, 2021, and did not recognize any additional expense for the three and six months ended June 30, 2022.

As part of the Blake Carmichael Agreement, the Company granted Blake Carmichael a five-year option to purchase up to 18,000,000 shares of common stock which vest annually on a contract year basis, based upon the achievement of certain revenue and EBITA financial metrics. The fair value of the BC Bonus Options was $713,777 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.25%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, (iv) expected volatility of 346.36%, and (v) exercise price of 0.0399 per share. The Company analyzed the likelihood that the vesting qualifications would be met, and as of June 30, 2022, it was deemed that it was likely that 500,000 shares would be issued at the end of the first year, and accordingly was fully expensed as of December 31, 2021. For the three and six months ended June 30, 2022 there were no material changes to vesting qualifications and no stock option expense was recognized.

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During the third quarter of 2021, the Company issued options to purchase up to an aggregate of 175,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $.044 to $.049 per share for a periods ranging from three to four years from the date of issuance, with quarterly vesting periods over one to two years. The fair value of the options totaled $7,149 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate from

.155

% to

.20

%, (ii) expected life of 1.5 to 2 years, (iii) dividend yield of 0%, and (iv) expected volatility of 249.38% to 287.12%. The stock options expense recognized for the three and six months ended June 30, 2022 was $1,494 and $2,989, respectively.

On September 3, 2021, the Company issued options to purchase up to an aggregate of 300,000 shares of common stock under the Plan to Christeen Buban, President of SSI. The options were issued pursuant to the Buban Employment Agreement and a stock option grant agreement and are exercisable at $0.053 per share for a period of five years from the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $15,814 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.315%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, and (iv) expected volatility of 339.21%. The stock options expense recognized for the three and six months ended June 30, 2022 was $1,977 and $3,953, respectively.

In

connection with the Buban Employment Agreement, the Company granted Ms. Buban that will grant Ms. Buban a five-year option (the “Buban Bonus Option”) to purchase up to 7,110,000 shares of the Company’s common stock which vest annually on a contract year basis, based upon the achievement of certain revenue and EBITA financial metrics. The fair value of the Buban Bonus Option was $374,786 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of .3150%, (ii) expected life of 2.5 years, (iii) dividend yield of 0%, (iv) expected volatility of 339.21%, and (v) exercise price of $0.0531 per share. The measurement period for the Buban Bonus Option began on September 3, 2021. The Company analyzed the likelihood that vesting qualifications would be met during the contract year and deemed that there was no option expense to be recognized for the six months ended June 30, 2022.

On September 3, 2021 the Company issued options to purchase up to an aggregate of 500,000 shares of common stock to various employees of SSI under the Plan. The options were issued pursuant to a stock option grant agreement and is exercisable at $0.0531 per share for a period of four years from the date of issuance, with 12.5% of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $25,201 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 0.21%, (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 276.1%. The stock options expense recognized for the three and six months ended June 30, 2022 was $3,150 and $6,300, respectively.

During the fourth quarter of 2021, the Company issued options to purchase up to an aggregate of 100,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $.040 to $.0419 per share for a period of four years of from the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $3,863 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of

.204

% (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 249.38% to 287.12%. The stock options expense recognized for the three and six months ended June 30, 2022 was $483 and $966, respectively.

On

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

On January 21, 2022, the Company issued options to purchase up to an aggregate of 75,000 shares of common stock to an employee under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at $0.032 per share for a period of four years from the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $2,259 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 1.016% (ii) expected life of 2 years, (iii) dividend yield of 0%, and (iv) expected volatility of 266.8%. The stock options expense recognized for the three and six months ended June 30, 2022 was $283 and $565, respectively.

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During the three months ended June 30, 2022, the Company issued options to purchase up to an aggregate of 217,647 shares of common stock to three employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $.038 to $.045 per share for a period of four years of from the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $8,239 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate ranging from 2.495% to 2.602% (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 228.7% to 232.7%. The stock options expense recognized for the three and six months ended June 30, 2022 was $1,030 and $1,030, respectively.

On April 8, 2022, the Company issued an option to purchase up to 300,000 shares of common stock to one contractor under the Plan. The option was issued pursuant to a stock option grant agreement and is exercisable at $.0406 per share for a period of four years of from the date of issuance. The options vested immediately. The fair value of the options totaled $10,988 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 2.469% (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 232.41%. The stock options expense recognized for the three and six months ended June 30, 2022 was $10,988 and $10,988, respectively.

On

May 16, 2022, the Company issued an option to purchase up to 1,000,000 shares of common stock to one employee under the Plan. The option was issued pursuant to a stock option grant agreement and is exercisable at $.0325 per share for a period of four years of from the date of issuance, with quarterly vesting periods over three quarters. The fair value of the options totaled $29,161 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 2.590% (ii) expected life of 2 years, (iii) dividend yield of 0%, (iv) expected volatility of 228.97%. The stock options expense recognized for the three and six months ended June 30, 2022 was $9,720 and $9,720, respectively.

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

Schedule of Option Activity

	Number of <br> Options			Weighted <br> Average <br> Exercise Price		Weighted <br> Average <br> Remaining <br> Contractual <br> Life in Years		Aggregate <br> Intrinsic <br> Value
Outstanding – December 31, 2021		233,128,266		$	0.0362		2.23	$	795,201
Granted		1,592,647			0.0353
Forfeited		(125,000	)
Exercised		-			-
Outstanding – June 30, 2022 (unaudited)		234,595,913		$	0.0362		1.75
Exercisable – June 30, 2022 (unaudited)		105,200,664		$	0.0322		1.60	$	1,022,422

Warrants

On

September 1, 2021, the Company issued Charles F. Hyatt, a director, 10,000,000 units, 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 $0.025 per share in consideration of $250,000.

On

September 1, 2021, the Company issued Ms. Grace Hyatt, the adult child of Charles Hyatt, 600,000 units, 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 $0.025 per share in consideration of $15,000.

In

September, 2021, the Company issued 4,000,000 units to three accredited investors, each unit consisting of one share of common stock and a two-year warrant to purchase one share of common stock at $0.025 per share in consideration of $100,000.

On

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

On

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

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A summary of the Company’s warrants as of December 31, 2021 and changes during the six months ended June 30, 2022 is presented below:

Schedule of Warrants Activity

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2021		14,600,000		$	0.025		1.67	$	153,300
Granted
Exercised		(10,600,000	)	$	0.025
Forfeited or Expired		-
Outstanding – June 30, 2022		4,000,000		$	0.025		1.19
Exercisable – June 30, 2022		4,000,000		$	0.025		1.19	$	56,000

Note 9. Commitments and contingencies

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

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

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

On

June 30, 2020, the Company entered into Amendment No. 2 to its Patent License Agreement with Setaysha Technical Solutions, LLC (“STS”). The amendment set certain limits and expectations of the assistance from STS related to designing and commercializing certain diving products and revised the royalty payments due to STS as consideration for uncompensated services. The Company is obligated to pay STS a minimum yearly royalty of $60,000, or $15,000 per fiscal quarter, beginning in December 2019 and increasing by 2.15% per year. The minimum royalty was temporarily increased to $60,000 for fiscal years 2022, 2023 and 2024, with a fourth quarter true up against 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 $200,174 for the years 2019 through 2024. In accordance with the amendment, the Company will pay additional minimum royalties of $60,000 per year or $15,000 per quarter for the years 2022 through 2024. Royalty recorded under this Agreement was $50,708 and $41,251 for the three months ended June 30, 2022 and 2021, respectively, and $94,316 and $54,955 for the six months ended months ended June 30, 2022 and 2021, respectively.

On

June 9, 2020, the Company entered into a one-year advertising and marketing agreement with Figment Design for $8,840 per month which agreement terminated on July 31, 2021.

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On

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

In

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

On

March 1, 2021, the Company entered into an investor relations consulting agreement with BGM Equity Partners, LLC. The term of the agreement is twelve months. As compensation, the Company issued 3,000,000 shares of its common stock valued at $120,000 to BGM Equity Partners. The agreement expired on March 1, 2022.

On August 1, 2021, the Company and Blake Carmichael entered into a three-year employment agreement (the “Blake Carmichael Employment Agreement”) pursuant to which Mr. Carmichael shall serve as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael shall receive (i) an annual base salary of $120,000, payable in accordance with the customary payroll practices of the Company, and (ii) a cash bonus equal to 5% of the net income of BLU3 payable quarterly, beginning with the first full calendar quarter after the execution of the agreement. (iii) upon execution of the Employment Agreement, a non-qualified five-year stock option to purchase 3,759,400 shares at $0.0399, 33.3% of which 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 shall be entitled to receive a five-year stock option to purchase up to 18,000,000 shares of common stock at an exercise price of $0.0399 per share that will vest upon annual financial metrics based upon a revenue measurement, expediency measurement and an EBITDA measurement.

On

August 6, 2021, the Company entered into a six-month, non-exclusive mergers and acquisitions services agreement with Newbridge Securities Corporation which provides for a 7% commission for the first $2,000,000 paid in aggregate purchase price consideration and 6% on an aggregate purchase price in excess of $2,000,000 for any merger or acquisition target sourced by Newbridge, to be paid in common stock of the Company. Such agreement expired by its terms.

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 $10,800 per year, (iii) a five-year option issued under the Plan to purchase 300,000 shares of common stock of the Company at $0.0531 per share, which option vests quarterly over the eight calendar quarters.

In

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

On

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

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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 to the remainder of the lease for the property 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%

Legal

The

Company was a defendant in an action, Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019 in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida. The complaint, which relates to consulting services provided to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $15,870.97 in unpaid consulting fees together with interest. In April 2020, the Company filed a Motion to Dismiss, and at a hearing held in May 2021, the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. The parties entered mediation pursuant to the Court’s order. This action was settled for $10,000 on July 12, 2021. The Company paid monthly installments of $1,000. As of June 30, 2022 this settlement has been fully paid.

Note 10. Segment Reporting

The Company has five operating segments as described below:

1.	SSA<br> Products, which sells recreational multi-diver surface supplied air diving systems.
2.	High<br> Pressure Gas Systems, which sells high pressure air and industrial gas compressor packages.
3.	Ultra<br> Portable Tankless Dive Systems, which sells next generation electric surface supply air diving systems and electric shallow dive<br> system that are battery operated and completely portable to the user.
4.	Redundant<br> Air Tank Systems, which manufactures and distributes a line of high pressure tanks and redundant air systems for the military and<br> recreational diving industries.
5.	Guided<br> Tour and Retail, which provides guided tours using the BLU3 technology, and also operates as a reteal store for the diving community.

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Three

Months Ended

June

30

(unaudited)

Schedule of Segment Reporting Information

	Legacy<br> SSA Products						High<br> Pressure Gas Systems						Ultra<br> Portable Tankless Dive Systems						Redundant<br> Air Tank Systems					Guided<br> Tour Retail					Total<br> Company
	2022			2021			2022			2021			2022			2021			2022			2021		2022			2021		2022			2021
Net<br> Revenues	$	797,022		$	976,973		$	270,193		$	207,565		$	884,271		$	528,380		$	399,479		$	-	$	50,274		$	-	$	2,401,238		$	1,712,918
Cost<br> of Revenue	$	(558,426	)		(668,246	)		(140,248	)		(113,499	)		(570,027	)		(333,864	)		(255,568	)		-		(14,136	)		-		(1,538,404	)		(1,115,609	)
Gross<br> Profit		238,596			308,727			129,945			94,066			314,244			194,516			143,911			-		36,138			-		862,834			597,309
Depreciation		4,369			4,748			-			-			4,478			2,419			24,096			-		-			-		32,943			7,167
Income<br> from Operations	$	(334,967	)	$	(314,279	)	$	41,705		$	40,224		$	17,461		$	(41,248	)	$	(46,576	)	$	-	$	3,237		$	-		(319,140	)		(315,303	)

Six

Months Ended

June

30

(unaudited)

	Legacy<br> SSA Products						High<br> Pressure Gas Systems						Ultra<br> Portable Tankless Dive Systems						Redundant<br> Air Tank Systems					Guided<br> Tour Retail					Total<br> Company
	2022			2021			2022			2021			2022			2021			2022			2021		2022			2021		2022			2021
Net<br> Revenues	$	1,378,131		$	1,443,016		$	547,010		$	357,693		$	1,678,858		$	862,978		$	721,935		$	-	$	50,274		$	-	$	4,376,208		$	2,663,687
Cost<br> of Revenue		(1,020,384	)		(1,038,072	)		(301,039	)		(194,677	)		(986,985	)		(522,657	)		(515,070	)		-		(14,136	)		-		(2,837,613	)		(1,755,406	)
Gross<br> Profit		357,747			404,944			245,971			163,016			691,873			340,321			206,865			-		36,138			-		1,538,595			908,281
Depreciation		8,739			8,560			-			-			8,956			4,836			49,107			-		-			-		66,802			13,396
Income<br> (loss) from operations	$	(704,557	)	$	(758,430	)	$	82,164		$	49,590		$	34,223		$	14,060		$	(168,105	)	$	-	$	3,237		$	-		(753,038	)	$	(694,780	)
																														-
Total<br> Assets	$	1,535,945		$	1,529,702		$	540,583		$	302,088		$	1,236,449		$	673,255		$	1,825,787		$	-	$	260,247		$	-	$	5,399,011		$	2,505,045

Note 11. Subsequent Events

AllianceLease

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 $84,500 and $63,375 was financed by NFS Leasing on August 15, 2022. The lease has a 33 month term beginning in August 2022 with a monthly lease 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.

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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. 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<br> Third Lung - Surface Supplied Air (“SSA”)
●	BLU3,<br> Inc. - Ultra-Portable Tankless Dive Systems
●	LW<br> Americas - High Pressure Gas Systems
●	Submersible<br> Systems, Inc. - Redundant Air Tank Systems
●	Live<br> 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 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 building a guided tour operation that also include 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.

Impactof COVID-19 Pandemic

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

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

Resultsof Operations

NetRevenues, Costs of Net Revenues and Gross Profit

ThreeMonths Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Net revenues increased 37.2% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 as a result of a 67.4% increase in revenue for BLU3, Inc. from the continued expansion of its customer base as well as the addition of NOMAD to its product line, an increase in LWA’s revenues of 30.2% as a result of the expansion of its customer base and the addition of both SSI and LBI revenue which did not exist in 2021. For the three months ended June 30, 2022, cost of net revenues was 64.1% as compared with the cost of revenues of 65.1% for the three months ended June 30, 2021. Included in cost of net revenues are royalty expenses paid to Robert Carmichael which decreased 36.4%% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. Gross profit margin was 35.9% for the three months ended June 30, 2022 as compared to gross profit margin of 34.9% for the three months ended June 30, 2021. The slight improvement in gross margin, of 1.0% as it relates to revenue is a result of the production of more finished products, reducing direct labor cost per unit, primarily in LWA and the addition of LBI with margins of 71.9% for the three months ended June 30, 2022.

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SixMonths Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Net revenues increased 64.3% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This increase is a result of a 94.5% increase in revenue for BLU3, Inc. from the continued expansion of its customer base as well as the addition of NOMAD to its product line, an increase in LWA’s revenues of 52.9% as a result of the expansion of its customer base and the addition of SSI and LBI revenue which did not exist in 2021. These revenue increases were countered by a decrease of 4.5% in revenue for BTL. For the six months ended June 30, 2022, cost of net revenues was 64.8% as compared with the cost of revenues of 65.9% for the six months ended June 30, 2021. Included in cost of net revenues are royalty expenses paid to a third party which increased 71.6% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Gross profit margin was 35.2% for the six months ended June 30, 2022 as compared to gross profit margin of 34.1% for the six months ended June 30, 2021. The slight improvement in gross margin, of 1.1% revenue is a result of a 1.8% margin increase in the BLU3 product line and the addition of LBI with margins of 71.9% for the six months ended June 30, 2022.

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

NetRevenues

	Three Months Ended<br><br> June 30,				% of			Six Months Ended<br><br> June 30,				% of
	2022		2021		Change			2022		2021		Change
	(unaudited)							(unaudited)
Legacy SSA Products	$	797,022	$	976,973		(18.4	)%	$	1,378,131	$	1,443,016		(4.5	)%
High Pressure Gas Systems		270,193		207,565		30.2	%		547,010		357,693		52.9	%
Ultra-Portable Tankless Dive Systems		884,271		528,380		67.4	%		1,678,858		862,978		94.5	%
Redundant Air Tank Systems		399,479		-		100.0	%		721,935		-		100.0	%
Guided Tour Retail		50,274		-		100.0	%		50,274		-		100.0	%
Total net revenues	$	2,401,238	$	1,712,918		37.2	%	$	4,376,207	$	1,955,317		64.3	%

Costof revenues as a percentage of net revenues

	Three Months Ended <br> June 30,						Six Months Ended<br> June 30,
	2022			2021			2022			2021
	(unaudited)						(unaudited)
Legacy SSA Products		70.1	%		68.4	%		74.0	%		71.9	%
High Pressure Gas Systems		51.9	%		54.7	%		55.0	%		54.4	%
Ultra-Portable Tankless Dive Systems		64.5	%		63.2	%		58.8	%		60.6	%
Redundant Air Tank Systems		64.0	%		-			71.4	%		-
Guided Tour Rental		28.1	%		-			28.1	%		-

Grossprofit (loss) margins

	Three Months Ended <br> June 30,						Six Months Ended <br> June 30,
	2022			2021			2022			2021
	(unaudited)						(unaudited)
Legacy SSA Products		31.6	%		31.6	%		26.0	%		28.1	%
High Pressure Gas Systems		45.3	%		45.3	%		45.0	%		45.6	%
Ultra-Portable Tankless Dive Systems		36.8	%		36.8	%		41.2	%		39.4	%
Redundant Air Tank Systems		36.0	%		-			28.7	%		-
Guided Tour Rental		71.9	%		-			71.9	%		-

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SSAProducts segment

Net revenue in this segment decreased 4.1% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The decrease can be primarily attributed to a 5.4% decrease in the dealer segment for the six months ended June 30, 2022 as compared to the same period in 2021. The decrease in dealer orders can be attributed to the 23.2% drop for the three months ended June 30, 2022 as compared the same period in 2021. Many dealers increased purchases to prepare for the summer season during the first quarter of 2022, and held back with restocking orders as we believe there may be some trepidation regarding the economy. Affiliate sales, while down for the three months ending June 30, 2022 as compared to the three months ended June 30, 2021 remain 32.2% over the six month results at June 30, 2022. Direct to consumer sales have also decreased for the six months ending June 30, 2022 as compared to the same period in 2021 we believe due to concerns over the economy.

Our costs of revenues as a percentage of net revenues in this segment increased from 71.9% to 74.0% for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 due to the negative margin for the affiliate sales channel.

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

	Net Revenue							Cost of Sales as a % of<br><br> <br>Net Revenue						Margin
	Three Months Ended<br><br> June 30,<br><br> 2022		Three Months Ended<br><br> June 30,<br><br> 2021		% change			Three Months Ended<br><br> June 30,<br><br> 2022			Three Months Ended<br><br> June 30,<br><br> 2021			Three Months Ended<br><br> June 30,<br><br> 2022			Three Months Ended<br><br> June 30,<br><br> 2021
Dealers	$	510,902	$	664,928		(23.2	)%		73.4	%		77.7	%		26.6	%		22.3	%
Direct to Consumer (website included)		258,899		273,430		(5.3	)%		57.7	%		45.1	%		42.3	%		54.9	%
Affiliates		27,221		38,615		(29.5	)%		156.9	%		74.3	%		(56.9	)%		25.7	%
Total	$	797,022	$	976,973		(18.4	)%		71.1	%		68.4	%		28.9	%		31.6	%
	Net Revenue							Cost of Sales as a % of<br><br> <br>Net Revenue						Margin
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br><br> June 30,<br><br> 2022		Six months ended<br><br> June 30,<br><br> 2021		% change			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021
Dealers	$	868,755	$	918,467		(5.4	)%		78.2	%		78.7	%		21.8	%		21.3	%
Direct to Consumer (website included)		461,534		484,102		(4.7	)%		63.3	%		58.9	%		36.7	%		41.1	%
Affiliates		47,842		40,447		18.3	%		120.8	%		74.5	%		(20.8	)%		25.5	%
Total	$	1,378,131	$	1,443,016		(4.5	)%		74.0	%		71.9	%		26.0	%		28.1	%

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HighPressure Gas Systems segment

Sales of high-pressure breathing air compressors increased 52.9% in the six months ended June 30, 2022 compared with the six months ended June 30, 2021 as LWA was able to continue to supply its customers with their needs despite industry supply chain issues. The reseller segment while decreasing 9.4% for the three months ended June 30, 2022 as compared to the same period in the prior year, showed an overall increase of 25.9% for the six months ended June 30, 2022 with increased orders through distribution customers in the US, South America, and the Caribbean. The Original Equipment Manufacturer segment continued to show growth with an increase of 205% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due to several orders shipped internationally to boat manufacturers. The direct to consumer segment, which includes yacht owners and direct to dive stores, increased 199.0% for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 and increased 49.2% for the six months ended June 30, 2022 as compared to June 30, 2021.

Costs of revenues as a percentage of net revenues in this segment showed a slight increase to 55.0% for the six months ended June 30, 2022 as compared to 54.4% for the six months ended June 30, 2021. This increase can be attributed to increased cost of transportation from suppliers and to customers during the six months ended June 30, 2022.

	Net Revenue							Cost of Sales<br>as a % of<br><br> <br>Net Revenue						Margin
	Three months ended<br><br> June 30,<br><br> 2022		Three months ended<br><br> June 30,<br><br> 2021		% change			Three months ended<br><br> June 30,<br><br> 2022			Three months ended<br><br> June 30,<br><br> 2021			Three months ended<br><br> June 30,<br><br> 2022			Three months ended<br><br> June 30,<br><br> 2021
Resellers	$	109,767	$	121,118		(9.4	)%		48.6	%		53.0	%		51.4	%		47.0	%
Direct to Consumers		130,816		43,749		199.0	%		57.7	%		68.2	%		42.3	%		31.8	%
Original Equipment Manufacturers		29,610		42,698		30.7	%		38.8	%		45.6	%		61.2	%		54.4	%
Total	$	270,193	$	207,565		30.2	%		51.9	%		54.7	%		48.1	%		45.3	%
	Net Revenue							Cost of Sales as a % of<br><br> <br>Net Revenue						Margin
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br><br> June 30,<br><br> 2022		Six months ended<br><br> June 30,<br><br> 2021		% change			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021
Resellers	$	239,540	$	190,191		25.9	%		51.7	%		57.3	%		48.3	%		42.7	%
Direct to Consumers		195,245		130,819		49.2	%		58.4	%		51.7	%		41.6	%		48.3	%
Original Equipment Manufacturers		112,225		36,683		205.9	%		57.1	%		46.1	%		42.9	%		53.9	%
Total	$	547,010	$	357,693		52.9	%		55.0	%		54.4	%		45.0	%		45.6	%

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UltraPortable Tankless Dive Systems

Net revenue for the six months ended June 30, 2022 in the Ultra Portable Tankless Dive System segment showed growth of 94.5% as compared to the six months ended June 30, 2021. The growth in all segments for the three and six months ended June 30, 2022 can be attributed to the addition of the Nomad product line into those sales channels. The growth of 162.2% in the Dealer channel represents the continued expansion of the international dealer base. The growth in this segment of 156.8% for the three months ended June 30, 2022 represents sales to new dealers and seasonal buy-in as dealers prepared for the summer season.

Cost of revenues from this segment as a percentage of net revenues for the three and six months ended June 30, 2022 showed improvement over both the three and six months ended June 30, 2021, primarily due to the impact of the cost and production efficiencies of the Nomad dive system and the resulting increase in margin as a percentage of revenue for the same periods in 2022 as compared to 2021.

	Net Revenue							Cost of Sales as a % of<br><br> <br>Net Revenue						Margin
	Three months ended<br><br> June 30,<br><br> 2022		Three months ended<br><br> June 30,<br><br> 2021		% change			Three months ended<br><br> June 30,<br><br> 2022			Three months ended<br><br> June 30,<br><br> 2021			Three months ended<br><br> June 30,<br><br> 2022			Three months ended<br><br> June 30,<br><br> 2021
Direct to Consumer		220,950		188,466		17.2	%		67.9	%		53.9	%		32.1	%		46.1	%
Amazon		274,444		188,467		45.6	%		53.0	%		61.90			47.0	%		38.1	%
Dealers		388,877		151,447		156.8	%		70.6	%		76.4	%		29.4	%		23.6	%
Total	$	884,271	$	528,380		67.4	%		52.5	%		63.2	%		47.5	%		36.8	%
	Net Revenue							Cost of Sales as a % of<br><br> <br>Net Revenue						Margin
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br><br> June 30,<br><br> 2022		Six months ended<br><br> June 30,<br><br> 2021		% change			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021			Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021
Direct to Consumer	$	539,955	$	340,665		58.5	%		55.2	%		52.2	%		44.8	%		47.8	%
Amazon		449,120		259,265		73.2	%		54.5	%		61.8	%		45.5	%		38.2	%
Dealers		689,783		263,048		162.2	%		64.4	%		70.1	%		35.6	%		29.9	%
Total	$	1,678,858	$	862,978		94.5	%		58.8	%		60.6	%		41.2	%		39.4	%

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RedundantAir Tank Systems

Net revenue for the six months ended June 30, 2022 in the Redundant Air Tank Systems System segment was $721,935 and $399,479 for the three months ended June 30, 2022. The margins for the three months ended June 30 ,2022 showed improvement at 36.0% as compared to 28.7% for the six months ended June 30, 2022 as the margin for dealer sales improved during the three months ended June 30, 2022 to 31.2% as compared to 22% for the six months ended June 30, 2022. Outside of the margin for repairs, dealer margins continue to be the lowest margin segment as SSI must price goods in order for dealers to also generate profits. SSI has a worldwide customer base that includes (1) commercial accounts with aircraft requiring redundant air systems for their pilots and passengers, such as helicopters flying to oil rigs located in bodies of water (2) government accounts that are typically domestic and international military customers with egress systems (3) dealer accounts that are resellers including, international distributors to the military, commercial account or dive shops, and domestic and international dive shops that carry a spare air product (4) direct to consumer sales which are online sales and sales via trade shows direct to consumer and (5) Company provided repairs and warranty repairs to all segments.

	Net Revenue						Cost of Sales as a % of<br><br> <br>Net Revenue					Margin
	Three months ended<br><br> June 30,<br><br> 2022		Three months ended <br><br>June 30,<br><br> 2021		% change		Three months ended<br><br> June 30,<br><br> 2022			Three months ended <br><br>June 30,<br><br> 2021		Three months ended<br><br> June 30,<br><br> 2022			Three months ended<br><br> June 30,<br><br> 2021
Commercial	$	46,550		-		N/A		43.8	%		-		56.2	%		-
Dealers		250,223		-		N/A		68.8	%		-		31.2	%		-
Government		38,711		-		N/A		37.5	%		-		62.5	%		-
Repairs		11,047		-		N/A		221.6	%		-		(121.6	)%
Direct to Consumers (Website)		52,948		-		N/A		45.8	%		-		54.2	%		-
Total	$	399,479		-		N/A		64.0	%		-		36.0	%		-
	Net Revenue						Cost of Sales as a % of<br><br> <br>Net Revenue					Margin
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br><br> June 30,<br><br> 2022		Six months ended <br><br>June 30,<br><br> 2021		% change		Six months ended<br><br> June 30,<br><br> 2022			Six months ended <br><br>June 30,<br><br> 2021		Six months ended<br><br> June 30,<br><br> 2022			Six months ended <br><br>June 30,<br><br> 2021
Commercial	$	103,156		-		N/A		43.6	%		-		56.4	%		-
Dealers		462,342		-		N/A		78.0	%		-		22.0	%		-
Government		52,712		-		N/A		36.8	%		-		63.2	%		-
Repairs		18,858		-		N/A		236.1	%				-(136.1	)%
Direct to Consumers (Website)		84,867		-		N/A		53.9	%		-		46.1	%		-
Total	$	721,935		-		N/A		71.3	%		-		28.7	%		-

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GuidedTours and Retail

The guided tour and retail segment is a new segment and is derived from LBI. Revenue in this segment currently primarily includes retail sales, and tours and lessons. Retail sales represent the sales of product at the retail facility, while tours and lessons represent revenue derived from diving excursions and lessons.

	Net Revenue						Cost of Sales as a % of<br><br> <br>Net Revenue					Margin
	Three months ended<br><br> June 30,<br><br> 2022		Three months ended <br><br>June 30,<br><br> 2021		% change		Three months ended<br><br> June 30,<br><br> 2022			Three months ended <br><br>June 30,<br><br> 2021		Three months ended<br><br> June 30,<br><br> 2022			Three months ended <br><br>June 30,<br><br> 2021
Retail Sales	$	34,549		-		N/A		8.9	%		-		91.1	%		-
Tours and Lessons		15,725		-		N/A		70.4	%		-		29.6	%		-
Total	$	50,274		-		N/A		28.1	%		-		71.9	%		-
	Net Revenue						Cost of Sales as a % of<br><br> <br>Net Revenue					Margin
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Six months ended<br><br> June 30,<br><br> 2022		Six months ended <br><br>June 30,<br><br> 2021		% change		Six months ended<br><br> June 30,<br><br> 2022			Six months ended<br><br> June 30,<br><br> 2021		Six months ended<br><br> June 30,<br><br> 2022			Six months ended <br><br>June 30,<br><br> 2021
Retail Sales	$	34,549		-		N/A		8.9	%		-		91.1	%		-
Tours and Lessons		15,725		-		N/A		70.4	%		-		29.6	%		-
Total	$	50,274		-		N/A		28.1	%		-		71.9	%		-

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OperatingExpenses

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 38.3% for the three months ended June 30, 2022 and 42.1% for the six months ended June 30, 2022 as compared to the same periods in the prior year.

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

SG&A increased by 41.4% for the three months ended June 30, 2022 and 45.5% for the six months ending June 30, 2022 as compared to the same periods in the prior year. SG&A expenses were comprised of the following:

Expense Item	Three Months Ended June 30, 2022		Three Months Ended June 30, 2021		% Change			Six Months Ended June 30, 2022		Six Months Ended June 30, 2021		% Change
Payroll, Selling & Administrative	$	544,709	$	236,062		130.7	%	$	940,485	$	461,529		103.8	%
Non-Cash Stock Compensation Expense		290,706		266,370		9.1	%		520,740		498,875		4.4	%
Professional Fees		98,619		116,576		(15.4	)%		225,031		178,015		26.4	%
Advertising		101,129		47,615		112.4	%		257,573		113,841		126.3	%
All Others		142,438		156,984		(9.3	)%		339,511		308,382		10.1	%
Total SG&A	$	1,177,601	$	823,607		43.0	%	$	2,283,340	$	1,560,642		46.3	%

Payroll increases for the three months ended March 31, 2022 can be attributed primarily to the addition of SSI payroll which accounted for 51% of the increase with the remaining 49% attributable to increases in personnel at BLU3 to manage increasing revenue and production, as well as slight increases in wages and staffing in the other divisions.

Non-Cash Stock compensation expenses increased 4.4% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase can be attributed to options granted to employees under the Company’s Equity Incentive Plan, and the vesting of the Company’s Chief Executive Officer’s incentive option. The increase of 9.1% for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is related to the same option vesting.

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Professional fees, including legal and other professional fees which the Company has paid with a combination of cash and common stock increased 26.4% in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase can be attributed to an increase in accounting fees related to the year-end audit. For the three months ended June 30, 2022 professional fees decreased 15.4% as compared to the prior year, as a consultant was added to payroll in 2022.

The increase in advertising expense for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 is attributable to BLU3’s focus on social media, Amazon and trade show advertising.

Research& Development Expenses (R&D Expenses)

R&D expenses for the three months ended June 30, 2022 decreased 79.5% and 80.5% for the six months ended June 30, 2022 as compared to the same periods in the prior year. The decrease can be primarily attributed to the completion of the R&D for BLU3’s NOMAD, as it moved into production in the third quarter of 2021.

OtherIncome/Expense

For the six months ended June 30, 2022, other expenses totaled approximately $19,700 of interest expense as compared to other income of approximately $164,000 for the six months ended June 30, 2021. Other income for the six months ended June 30, 2021 consisted of a gain due to the settlement of debt of $10,000, the forgiveness of a PPP loan less interest expense of approximately $5,600. The increase in interest expense can be attributed to the Navitas loan that was funded in the second quarter of 2021, and the interest on the debt related to the acquisition of SSI.

Liquidityand Capital Resources

We had cash of $574,567 as of June 30, 2022. The following table summarizes total current assets, total current liabilities and working capital at June 30, 2022 as compared to December 31, 2021.

	June 30,		December 31,		%
	2022		2021		change
	(unaudited)
Total current assets	$	3,783,509	$	2,966,432		11.2	%
Total current liabilities	$	1,991,200	$	1,396,197		14.2	%
Working capital	$	1,792,309	$	1,570,235		8.4	%

The increase in our current assets at June 30, 2022 from December 31, 2021 primarily reflects an increase from the assets of SSI as well as the increases in inventory purchases reflected by an increase in inventory and prepaid assets which includes prepayments of inventory, as the Company has experienced revenue growth and ramped up purchasing and production for the summer season. The increase in total current liabilities primarily reflects the additional SSI liabilities as well as a significant increase in customer deposits, particularly customer deposits with LWA.

SummaryCash Flows

	Six Months Ended<br> <br>June 30,
	2022			2021
	(unaudited)
Net cash used by operating activities	$	(275,257	)	$	(396,838	)
Net cash used in investing activities	$	(31,946	)	$	(14,941	)
Net cash provided by financing activities	$	238,627		$	227,904

Net cash used in operating activities for the six months ended June 30, 2022 was due to the net loss of approximately $772,754 which is primarily attributable to non-cash stock compensation expenses of approximately $579,300. The non-cash stock compensation expense for the six months ended June 30, 2022 is attributable to stock options and grants issued to our executive officers and various employees as well as common stock issued to consultants and professionals for services. Net cash used in operating activities is also the result of increases in current assets, including, accounts receivable, inventory, net, and prepaid expenses that utilized approximately $797,000, offset by increases in current liabilities including accounts payable, other liabilities, and customer deposits, which totaled approximately $501,700.

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Net cash used in investing activities for the six months ended June 30, 2022 of approximately $31,946 consists of $30,000 used in an asset acquisition and a small fixed asset purchase of approximately $1,900.

Net cash provided by financing activities for the six months ended June 30, 2022 reflects proceeds from the exercise of warrants of approximately $265,000 less the repayment of debt of approximately $26,400.

GoingConcern

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, 2021 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.

We have a history of losses, and an accumulated deficit of $15,317,359 as of June 30, 2022. Despite a working capital surplus of $1,792,309 at June 30, 2022, the continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue to increase revenues, control expenses, raise capital, and 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.

CriticalAccounting Policies

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

RecentAccounting 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.

OffBalance 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.

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ITEM

4. CONTROLS AND PROCEDURES

Evaluationof 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 the end of the period covered by this report, 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 June 30, 2022 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<br> number and lack of qualified accounting department and administrative personnel and support;
●	Insufficient<br> written policies and procedures to ensure the correct application of accounting and financial reporting with respect to GAAP and<br> SEC disclosure requirements;
●	Insufficient<br> segregation of duties, oversight of work performed and lack of controls in our finance and accounting functions due to limited personnel;
---	---
●	Company’s<br> systems that impact financial information and disclosures have ineffective information technology controls;
●	Inadequate<br> controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements<br> are reflected and properly recorded; and
●	Evaluation<br> 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<br> has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP and SEC compliance requirements.<br> We intend to expand our finance department through the hiring of a certified public accountant to strengthen the segregation of duties,<br> internal controls and enhance our current staff.
●	Segregation<br> of duties is being analyzed and adjusted Company-wide, where possible. The Company is in the process of hiring additional personnel<br> in the accounting department, as well as the documentation of controls and procedures.
●	The<br> 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.

Changesin 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 has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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

Except as set forth below, there were no sales of equity securities during the period covered by this Quarterly 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 May 31, 2022, the Company issued a consultant, 302,953 shares of common stock for consulting services related to the dive industry.

As of June 30, 2022, the Company issued 449,522 shares of common stock to the holders of convertible notes for payment of interest through June 30, 2022.

On June 17, 2022, the Company issued 280,000 shares of common stock to an employee as a retirement gift.

The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe are 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

None.

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<br> XBRL INSTANCE DOCUMENT
101.SCH	Inline<br> XBRL TAXONOMY EXTENSION SCHEMA
101.CAL	Inline<br> XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF	Inline<br> XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB	Inline<br> XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE	Inline<br> XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
104	Cover<br> Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

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

Date:<br> August 22, 2022	BROWNIE’S MARINE GROUP, INC.
	By:	/s/ Christopher H. Constable
		Christopher<br> H. Constable
		Chief<br> Executive Officer
		(Principal<br> Executive Officer)
	By:	/s/ Robert M. Carmichael
		Robert<br> M. Carmichael
		Chief<br> Financial Officer
		(Principal<br> Financial and Accounting Officer)

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EXHIBIT31.1

CERTIFICATEOF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Christopher H. Constable, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, of Brownie’s Marine Group, Inc.;
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary<br> to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to<br> the period covered by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material<br> respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in<br> this report;
4.	I<br> am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and<br> 15d-15 (e)) and internal controls over financial reporting (as defined in Exchange Act Rules 3a-15(f) and 15d-15(f)) for the registrant<br> and have:
(a)	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,<br> to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others<br> within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	Designed<br> such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our<br> supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about<br> the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;<br> and
(d)	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s<br> most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I<br> have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All<br> significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are<br> reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;<br> and
---	---
(b)	Any<br> fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s<br> internal control over financial reporting.
Date:<br> August 22, 2022	/s/ Christopher H. Constable
---	---	---
	Name:	Christopher<br> H. Constable
	Title:	Chief<br> Executive Officer (Principal Executive Officer)

EXHIBIT31.2

CERTIFICATEOF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Robert M. Carmichael, certify that:

1.	I<br> have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, of Brownie’s Marine Group, Inc.;
2.	Based<br> on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary<br> to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to<br> the period covered by this report;
3.	Based<br> on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material<br> respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in<br> this report;
4.	I<br> am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and<br> 15d-15 (e)) and internal controls over financial reporting (as defined in Exchange Act Rules 3a-15(f) and 15d-15(f)) for the registrant<br> and have:
(a)	Designed<br> such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,<br> to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others<br> within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	Designed<br> such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our<br> supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements<br> for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated<br> the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about<br> the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;<br> and
(d)	Disclosed<br> in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s<br> most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	I<br> have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors<br> and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All<br> significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are<br> reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;<br> and
---	---
(b)	Any<br> fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s<br> internal control over financial reporting.
Date:<br> August 22, 2022	/s/ Robert M. Carmichael
---	---	---
	Name:	Robert<br> M. Carmichael
	Title:	Chairman<br> of the Board, President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT32

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350

ASADOPTED PURSUANT TO

SECTION906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Brownie’s Marine Group, Inc. (the “Company”) for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.	The<br> Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The<br> information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of<br> the Company.
	/s/ Christopher H. Constable
---	---	---
Date:<br> August 22, 2022	Name:	Christopher<br> H. Constable
	Title:	Chief<br> Executive Officer (Principal Executive Officer)
	/s/ Robert M. Carmichael
	Name:	Robert<br> M. Carmichael
	Title:	Chief<br> Financial Officer (Principal Financial and Accounting Officer)