BWMG 10-Q
Brownie's Marine Group, Inc (BWMG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For
the quarterly period ended |
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the transition period from to |
Commission
file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code
| Not applicable |
| Former name, former address and former fiscal year, if changed since last report |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | Not applicable | Not applicable |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of June 27, 2025, there were shares of common stock outstanding.
TABLE OF CONTENTS
| Page No. | ||
| PART I – FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS. | 4 |
| PART II – OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS. | 24 |
| ITEM 1A. | RISK FACTORS. | 24 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 24 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. | 24 |
| ITEM 4. | MINE SAFETY DISCLOSURES. | 24 |
| ITEM 5. | OTHER INFORMATION. | 24 |
| ITEM 6. | EXHIBITS. | 25 |
| 2 |
NOTE REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward- looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.
You should read thoroughly this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 9, 2024, which risk factors could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.
| 3 |
PART I
ITEM 1. FINANCIAL STATEMENTS
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable – net of allowances of $ | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, equipment and leasehold improvements, net | ||||||||
| Operating lease assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable - related parties | ||||||||
| Customer deposits and unearned revenue | ||||||||
| Other liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Related party convertible demand note, net | ||||||||
| Convertible notes | ||||||||
| Current maturities long term debt | ||||||||
| Related party notes payable | ||||||||
| Total current liabilities | ||||||||
| Loans payable, net of current portion | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingent liabilities (see note 8) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock; $ par value: shares authorized; issued and outstanding as of March 31, 2024 and December 31, 2023. | ||||||||
| Common stock; $ par value; shares authorized; shares issued and outstanding at March 31, 2025 and shares issued and outstanding at December 31, 2024, respectively. | ||||||||
| Common stock payable shares and shares, respectively as of March 31, 2025 and December 31, 2024. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | $ | $ | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements
| 4 |
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(unaudited)
| 2025 | 2024 | |||||||
| Net revenues | ||||||||
| Net revenues | $ | $ | ||||||
| Net revenues - related parties | ||||||||
| Total net revenues | ||||||||
| Cost of net revenues | ||||||||
| Cost of net revenues | ||||||||
| Cost of net revenues - related parties | ||||||||
| Royalties expense - related parties | ||||||||
| Royalties expense | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling, general and administrative | ||||||||
| Research and development costs | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (income) expense, net | ||||||||
| Other Income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other (income) expense - net | ( | ) | ( | ) | ||||
| Loss income before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average common shares outstanding | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements
| 5 |
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(unaudited)
| Preferred Stock | Common Stock | Common Stock Payable | Additional | Total | ||||||||||||||||||||||||||||||||
| Shares | Shares | Paid-in | Accumulated | Stockholders | ||||||||||||||||||||||||||||||||
| Outstanding | Par | Outstanding | Par | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Shares issued for accrued interest in convertible notes | - | - | ||||||||||||||||||||||||||||||||||
| Stock Option Expense | - | - | - | ( | ) | |||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2025 (unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Common Stock Payable | Additional | Total | ||||||||||||||||||||||||||||||||
| Shares | Shares | Paid-in | Accumulated | Stockholders | ||||||||||||||||||||||||||||||||
| Outstanding | Par | Outstanding | Par | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Shares issued for the purchase of units | - | - | ||||||||||||||||||||||||||||||||||
| Shares issued for accrued interest in convertible notes | - | - | ||||||||||||||||||||||||||||||||||
| Stock Option Expense | - | - | - | |||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 (unaudited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 6 |
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(unaudited)
| 2025 | 2024 | |||||||
| Cash flows provided by operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ) | |||||||
| Amortization of right-of-use asset | ||||||||
| Common Stock Issued for services | ||||||||
| Reserve for Nomad recall | ( | ) | ||||||
| Stock Based Compensation - Options | ||||||||
| Stock based compensation - stock grant | ||||||||
| Shares issued for convertible notes | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Change in accounts receivable, net | ( | ) | ( | ) | ||||
| Change in accounts receivable - related parties | ||||||||
| Change in inventory | ( | ) | ||||||
| Change in prepaid expenses and other current assets | ) | ( | ) | |||||
| Recovery of bad debt | ||||||||
| Change in reserve of slow moving inventory | ||||||||
| Change in other assets | ||||||||
| Change in ROU assets | ||||||||
| Change in accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Change in customer deposits and unearned revenue | ( | ) | ( | |||||
| Change in long term lease liability | ( | ) | ( | ) | ||||
| Change in other liabilities | ||||||||
| Change in accounts payable - related parties | ) | |||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows used in investing activities: | ||||||||
| Purchase of fixed assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of units | ||||||||
| Proceeds of related party demand note | ||||||||
| Proceeds from long term debt | ||||||||
| Repayment of debt | ||||||||
| Net cash provided from in financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning balance | ||||||||
| Cash, end of period | $ | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash Paid for Interest | $ | |||||||
| Cash Paid for Income Taxes | $ | |||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Common Stock issued for payment of convertible note interest | ||||||||
| Equipment obtained through financing | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements
| 7 |
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2024
(UNAUDITED)
Note 1. Company Overview
Brownie’s Marine Group, Inc. (the “Company”) designs, tests, manufactures and distributes recreational hookah diving, scuba and water safety products through its wholly owned subsidiary, Trebor Industries, Inc., a Florida corporation, incorporated in 1981 (“Trebor” or “BTL”), manufactures and sells high pressure air and industrial compressor packages, yacht based scuba air compressor and nitrox generation systems through its wholly owned subsidiary, Brownie’s High Pressure Compressor Services, Inc., a Florida corporation incorporated in 2017 (“BHP”) and doing business as LW Americas (“LWA”) and develops and markets portable battery powered surface supplied air dive systems through its wholly owned subsidiary BLU3, Inc., a Florida corporation (“BLU3”). On September 3, 2021, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Submersible Acquisition, Inc., a Florida corporation and wholly owned subsidiary of the Company (“Acquisition Sub”), Submersible Systems, Inc., a Florida corporation (“Submersible” or “SSI”), and Summit Holdings V, LLC, a Florida limited liability company (“Summit”) and Tierra Vista Group, LLC, a Florida limited liability company (“Tierra Vista” and, together with Summit, the “Sellers”), the owners of all of the capital stock of Submersible, pursuant to which Acquisition Sub merged with and into Submersible (the “Merger”), and Submersible, the surviving corporation, became a wholly owned subsidiary of the Company.
Submersible is a manufacturer of high pressure tanks and redundant air systems for the military and recreational diving industries, based in Huntington Beach, California and sells its products to governments, militaries, private companies and the dive industry throughout the world.
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2024 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for a broader discussion of the Company’s business and the risks inherent in such business. The results of operations for the three months ended March 31, 2025, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending December 31, 2025.
| 8 |
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Trebor, BHP, BLU3, SSI and LBI. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Only highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents. These investments are stated at cost, which approximates market value.
Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Accounts receivable
The Company manufactures and sells its products to a broad range of customers, primarily retail stores. Few customers are provided with payment terms of 30 days. The Company has tracked historical loss information for its trade receivables and compiled historical credit loss percentages for different aging categories (current, 1–30 days past due, 31–60 days past due, 61–90 days past due, and more than 90 days past due).
In
accordance with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), management believes that the historical loss information
it has compiled is a reasonable base on which to determine expected credit losses for trade receivables held at March 31, 2025, because
the composition of the trade receivables at that date is consistent with that used in developing the historical credit-loss percentages
(i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). As a result,
management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly,
the allowance for expected credit losses at March 31, 2025 and December 31, 2025 totaled $
Inventory
Inventory consists of the following:
| March 31, 2025 (unaudited) | December 31, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Rental Equipment | ||||||||
| Allowance reserve | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
| 9 |
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due upon receipt of the invoice and the contracts do not have significant financing components. Product sales occur once control or title is transferred based on the commercial terms. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Product sales are recorded net of variable consideration, such as provisions for returns, discounts and promotional allowances. Such provisions are calculated based on the actual allowances given. Management believes that adequate provision has been made for cash discounts, returns, spoilage and promotional allowances based on the Company’s historical experience.
A breakdown of the total revenue between related party and non-related party revenue is as follows:
| Three months ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Revenues - related parties | ||||||||
| Total Revenues | $ | $ | ||||||
Cost of Sales
Cost of sales consists of the cost of the components of finished goods, the costs of raw materials utilized in the manufacture of products, in-bound and out- bound freight charges, direct manufacturing labor as well as certain internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products, inventory allowance for excess and obsolete products, and royalties paid on licensing agreements. Components account for the largest portion of the cost of sales. Components include plastic molded parts, gas powered engines, aluminum pressure bottles, electronic parts, batteries and packaging materials.
The breakdown of cost of sales to include cost of sales for related party and non-related party as well as the related party and non-related party royalty expense is as follows:
| Three months ended March 31 | ||||||||
| 2025 | 2024 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cost of revenues | $ | $ | ||||||
| Cost of revenues - related parties | ||||||||
| Royalties expense - related parties | ||||||||
| Royalties expense | ||||||||
| Total cost of revenues | $ | $ | ||||||
| 10 |
Lease Accounting
The Company accounts for leases in accordance with ASC 842, Leases.
The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. The Company elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company did not reassess whether any contracts entered into prior to adoption are leases or contain leases.
The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. The Company did not have any finance leases as of March 31, 2024. The Company’s leases generally have terms that range from three years for equipment and five to twenty years for property. The Company elected the accounting policy to include both the lease and non-lease components of its agreements as a single component and account for them as a lease.
Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to the Company. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.
When the Company has the option to extend the lease term, terminate the lease for the contractual expiration date, or purchase the leased asset, and it is reasonably certain that the Company will exercise the option, it considers these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.
For
the three months ended March 31, 2025, and March 31, 2024, cash paid for operating lease liabilities was $
Supplemental balance sheet information related to leases was as follows:
| Operating Leases | March 31, 2025 | |||
| (unaudited) | ||||
| Right-of-use assets | $ | |||
| Current lease liabilities | $ | |||
| Non-current lease liabilities | ||||
| Total lease liabilities | $ | |||
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. ASC 718 requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments, including stock options, based on the grant- date fair value of the award and to recognize it as compensation expense over the period the employee and non-employee are required to provide service in exchange for the award, usually the vesting period.
The Company uses the Black-Scholes valuation model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued on the effective date of the agreement in accordance with generally accepted accounting principles, which includes determination of the fair value of the share-based transaction. The fair value is determined through use of the quoted stock price.
| 11 |
Derivatives
The accounting treatment of derivative financial instruments requires that the Company record certain warrants and embedded conversion options at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into certain note agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy, by earliest issuance date, in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors, as long as the certain variable issuance terms in certain convertible instruments exist. As of March 31, 2025 and December 31, 2024, the Company did not have any derivative liabilities.
Basic loss per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted- average number of outstanding common shares during the applicable period. Diluted loss per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. At March 31, 2025, and March 31, 2024, and shares, respectively, of potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible notes, outstanding warrants, outstanding stock options and the conversion of preferred stock.
Recent accounting pronouncements
ASU 2016-13 Current Expected Credit Loss (ASC326)
In December 2021, the FASB issued an update to ASU No. 2016-13 the Current Expected Credit Losses (CECL) standard (ASC 326), which is designed to provide greater transparency and understanding of credit risk by incorporating estimated, forward-looking data when measuring lifetime Estimated Credit Losses (ECL) and requires enhanced financial statement disclosures. This guidance was adopted on January 1, 2023, with no effect to the financial statements.
ASU 2020-06 Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption or are not applicable.
| 12 |
Note 3. Going Concern
The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates
realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the
date of these consolidated financial statements. For the three months ended March 31, 2025, the Company incurred a net loss of $
Note 4. Related Party Transactions
The
Company sells products to Brownie’s Southport Divers, Brownie’s Yacht Toys and Brownie’s Palm Beach Divers, companies
owned by the brother of Robert Carmichael, the Company’s Chief Executive Officer and Chief Financial Officer. Terms of sale are
no more favorable than those extended to any of the Company’s other customers with similar sales volumes. These entities accounted
for
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 $
The
Company had accounts payable to related parties of $
The
Company has exclusive license agreements with 940 A to license the trademark “Brownie’s Third Lung”, “Tankfill”,
“Brownie’s Public Safety” and various other related trademarks as listed in the agreements. The agreements provide
that the Company pay
On
September 30, 2022, the Company issued a convertible demand
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, a Company director, an aggregate of units, with
each unit consisting of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of
$
On
September 14, 2023, the Company issued a convertible demand promissory note in the principal amount of $
On
November 14, 2023, the Company borrowed funds through the issuance of a promissory note (the Note) in the principal amount of $
On
February 5, 2024, the Company borrowed funds through the issuance of a promissory note (the Note) in the principal amount of $
| 13 |
On
March 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending March 31, 2023. The fair value of these shares was $
On
June 30, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending June 30, 2023. The fair value of these shares was $
On
September 30, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible
demand note for the three months ending September 30, 2023. The fair value of these shares was $
On
December 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending December 31, 2023. The fair value of these shares was $
On
March 31, 2024, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending March 31, 2024. The fair value of these shares was $
On
July 16, 2024, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending June 30, 2024. The fair value of these shares was $
On
August 15, 2024, the Company issued shares to Davis Natan per a consulting agreement. The fair value of these shares was $
On
December 9, 2024, the Company issued shares of common stock to Blake Carmichael as compensation for a reduction in salary.
The fair value of these shares was $
Note 5. Convertible Promissory Notes and Loans Payable
Convertible Promissory Notes
Convertible promissory notes consisted of the following at March 31, 2025:
| Origination Date | Maturity Date | Interest Rate | Origination Principal Balance | Original Discount Balance | Period End Principal Balance | Period End Discount Balance | Period End Balance, Net | Accrued Interest Balance | Reg. | |||||||||||||||||||||||||
| % | ( | ) | $ | $ | ) | $ | (1 | ) | ||||||||||||||||||||||||||
| % | ( | ) | ) | (2 | ) | |||||||||||||||||||||||||||||
| % | ( | ) | ( | ) | (3 | ) | ||||||||||||||||||||||||||||
| | % | (4 | ) | |||||||||||||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||
A breakdown of current and long-term amounts due are as follows for the convertible promissory notes as of March 31, 2025:
| Summit Holdings V, | Tierra Vista Partners, | Robert Carmichael | Robert Carmichael | |||||||||||||||||
| LLC Note | LLC Note | LBI Note | BLU3 Note | Total | ||||||||||||||||
| 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Discount | ) | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total Loan Payments | $ | $ | $ | $ | $ | |||||||||||||||
| Current Portion of Loan Payable | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Non-Current Portion of Loan Payable | $ | $ | $ | $ | $ | |||||||||||||||
| (1) | On
September 3, 2021, the Company issued a three-year |
| Payment Amortization | ||||
| 2025 | ||||
| Total Note Payments | $ | |||
| Current portion of note payable | ( | ) | ||
| Non-Current Portion of Notes Payable | $ | |||
| 14 |
| (2) | On
September 3, 2021, the Company issued a three-year |
| Payment Amortization | ||||
| 2025 | ||||
| Total Note Payments | $ | |||
| Current portion of note payable | ( | ) | ||
| Non-Current Portion of Notes Payable | $ |
| (3) | On
September 30, 2022, the Company issued a convertible demand |
| (4) | On September 14, 2023, the Company issued a convertible demand |
| Demand Notes | |
| On November 14, 2023, the Company issued a promissory note in the principal amount of $ | |
| On February
5, 2024, the Company borrowed funds through the issuance of a promissory note in the principal amount of $ |
Loans Payable
| Mercedes BTL (1) | Navitas 2021 BLU3 (2) | NFS SSI (3) | Navitas 2022 BLU3 (4) | Navitas 2024 BLU3 (5) | Navitas 2024 BTL (6) | Total | |||||||||||||||||||||||
| - | - | - | - | ||||||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||
| 2026 | |||||||||||||||||||||||||||||
| 2027 | |||||||||||||||||||||||||||||
| 2028 | |||||||||||||||||||||||||||||
| Thereafter | |||||||||||||||||||||||||||||
| Total Loan Payments | |||||||||||||||||||||||||||||
| Current Portion of Loan Payable | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
| Non-Current Portion of Loan Payable | |||||||||||||||||||||||||||||
| (1) | |
| (2) | |
| (3) | |
| (4) | |
| (5) |
|
| 15 |
| (6) |
Note 6. Goodwill and Intangible Assets, Net
The following table sets for the changes in the carrying amount of the Company’s Goodwill for the three months ended March 31, 2025.
| 2025 | ||||
| Balance, January 1 | $ | |||
| Addition: | ||||
| Balance, March 31 | $ | |||
The Company performed an evaluation of the value of goodwill at December 31, 2023. Based upon this evaluation it was determined that there should be no adjustment to goodwill. There has been nothing noted during the three months ended March 31, 2025 that would indicate that the value of goodwill should change through that date.
The following table sets for the components of the Company’s intangible assets at March 31, 2025:
| Amortization Period (Years) | Cost | Accumulated Amortization | Net Book Value | |||||||||||||
| Intangible Assets Subject to amortization | ||||||||||||||||
| Trademarks | $ | $ | ( | ) | $ | |||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Non-Compete Agreements | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
The aggregate amortization remaining on the intangible assets as of March 31, 2025 is a follows:
| Intangible Amortization | ||||
| 2025 (9 months remaining) | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
Amortization
expense for amortizable intangible assets for each of the three months ended March 31, 2025 and 2024 was
Note 7. Stockholders’ Equity
Common Stock
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of units, with each unit consisting
of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $
On
March 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending March 31, 2023. The fair value of these shares was $
On
March 31, 2023, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of
interest for the three months ending December 31, 2022. The fair value of these shares was $
| 16 |
On
June 30, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending June 30, 2023. The fair value of these shares was $
On
June 30, 2023, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest
for the three months ending June 30, 2023. The fair value of these shares was $
On
September 30, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible
demand note for the three months ending September 30, 2023. The fair value of these shares was $
On
September 30, 2023, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending September 30, 2023. The fair value of these shares was $
On
December 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending December 31, 2023. The fair value of these shares was $
On
December 31, 2023, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending December 31, 2023. The fair value of these shares was $
On
March 31, 2024, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending December 31, 2023. The fair value of these shares was $
On
March 31, 2024, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of
interest for the three months ending December 31, 2023. The fair value of these shares was $
On
June 30, 2024, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending June 30, 2024. The fair value of these shares was $
On
June 30, 2024, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest
for the three months ending June 30, 2024. The fair value of these shares was $
On
August 15, 2024 the Company issued shares of common stock to the holders of convertible notes for payment of professional services.
The fair market value of these shares was $
On
September 30, 2024, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending September 30, 2024. The fair value of these shares was $
On
December 9, 2024, the Company issued shares to Blake Carmichael as compensation related to a salary reduction. The fair market
value of these shares was $
On December 31, 2024, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest for the three months ending December 31, 2024. The fair value of these
shares
was $
On
March 31,2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest
for the three months ending March 31 2025,. The fair value of these shares was $
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 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 the Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business
Corporation Act. In April 2011, the Board of Directors designated shares 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 $
| 17 |
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. shares are reserved for issuance under the Plan. The term of the Plan is ten years.
The Company also issued options outside of the Plan that were not approved by the security holders. These options may be granted to employees, directors, and consultants in the form of incentive stock options or non-qualified stock options.
| 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 | $ | |||||||||||
| Equity Compensation Plans Not Approved by Security Holders | ||||||||||||
| Total | $ | |||||||||||
Options
For the years ended December 31, 2024 and 2023, the Company has issued no options. Upon exercise, shares of new common stock are issued by the Company.
For the years ended December 31, 2024 and 2023, the Company recognized an expense of approximately $ and $, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black-Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. The Company uses straight-line amortization of compensation expense over the requisite service period for time-based options. For performance-based options the Company evaluates the likelihood of a vesting qualification being met, and will establish the expense based on that evaluation. The maximum contractual term of the Company’s stock options is years. The Company recognizes forfeitures as they occur. There are options to purchase approximately shares that have vested as of December 31, 2024.
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Expected volatility | % - % | % – % | ||||||
| Expected term | – Years | - Years | ||||||
| Risk-free interest rate | % - % | % - % | ||||||
| Forfeiture Rate | % | % | ||||||
The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.
| 18 |
A summary of the status of the Company’s outstanding stock options as of December 31, 2025 and 2024 and changes during the periods ending on that date is as follows
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Expected volatility | % - % | % – % | ||||||
| Expected term | – Years | - Years | ||||||
| Risk-free interest rate | % - % | % - % | ||||||
| Forfeiture Rate | % | % | ||||||
The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | |||||||||||||
| Options | Price | Life in Years | Value | |||||||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled | ||||||||||||||||
| Outstanding – December 31, 2023 | $ | |||||||||||||||
| Exercisable – December 31, 2023 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Cancelled | ||||||||||||||||
| Outstanding – December 31, 2024 | $ | |||||||||||||||
| Exercisable – December 31, 2024 | $ | $ | - | |||||||||||||
| Exercisable – March 31, 2025 | ||||||||||||||||
| Range of Exercise Price | Number outstanding at December 31, 2024 | Weighted average remaining life | Weighted average exercise price | Number exercisable at December 31, 2024 | Weighted average exercise price | Weighted average remaining life | ||||||||||||||||||
| $ - $ | $ | $ | ||||||||||||||||||||||
| $ - $ | $ | $ | ||||||||||||||||||||||
| $ - $ | $ | $ | ||||||||||||||||||||||
| Outstanding options | $ | $ | ||||||||||||||||||||||
As
of December 31, 2024, the Company had approximately $
of unrecognized pre-tax non-cash compensation expense related
to options to performance based options to purchase shares, which the Company expects to recognize, based on a weighted-average period
of
years. The Company uses straight-line amortization of compensation
expense over the requisite service period for time-based options. For performance-based options the Company evaluates the likelihood
of a vesting qualification being met, and will establish the expense based on that evaluation. Stock
option expense recognized during the year ended March 31, 2025 and December 31, 2024 was $
| 19 |
Warrants
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of units, with each unit consisting
of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $
A summary of the Company’s warrants as of December 31, 2024 and 2023, and changes during the years ended December 31, 2024 and 2023 is presented below:
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | |||||||||||||
| Warrants | Price | Life in Years | Value | |||||||||||||
| Outstanding at December 31, 2023 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled | ||||||||||||||||
| Outstanding – December 31, 2024 | $ | |||||||||||||||
| Exercisable – December 31, 2024 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled | ||||||||||||||||
| Outstanding – December 31, 2024 | $ | |||||||||||||||
| Exercisable – December 31, 2024 | $ | $ | - | |||||||||||||
These warrants expired as of February 2025.
Note 14. Income Taxes
The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.
| 20 |
The components of the provision for income tax expense are as follows for the years ended:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Current taxes | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Current taxes | ||||||||
| Change in deferred taxes | ||||||||
| Change in valuation allowance | ( | ) | ( | ) | ||||
| Provision for income tax expense | $ | $ | ||||||
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2024 and 2023:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred tax assets: | ||||||||
| Equity based compensation | $ | $ | ||||||
| Allowance for doubtful accounts | ||||||||
| Deferred Rent | ( | ) | ||||||
| Reserves for slow moving inventory | ||||||||
| Depreciation | ||||||||
| Reserve for recall | ||||||||
| Net operating loss carry forward | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities | ||||||||
| Reserve for recall | ||||||||
| Total deferred tax asset (liability) | ||||||||
| Total deferred tax | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | $ | ||||||
The
effective tax rate used for calculation of the deferred taxes as of December 31, 2024 was
The
effective tax rate used for calculation of the deferred taxes as of December 31, 2023 was
The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| Statutory tax rate | ( | )% | ( | )% | ||||
| State tax, net of Federal benefits | ( | )% | ( | )% | ||||
| Permanent differences | % | % | ||||||
| Temporary differences | ( | )% | % | |||||
| Change in valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
The Company’s income tax returns for 2020 through 2024 remain subject to examination by the Internal Revenue Services and state tax authorities.
| 21 |
Note 15. Commitments and Contingencies
Leases
On
August 14, 2014, the Company entered into a thirty-seven
On
January 4, 2018, the Company entered into a sixty-one month
On
November 11, 2018, the Company entered a sixty-nine month
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 $
On
September 14, 2022, SSI entered into a sixty-month lease renewal for its facility in Huntington Beach, California effective February
1, 2022. Terms included base rent of approximately $
On
September 30, 2022, SSI entered into a sublease of its facility in Huntington Beach, California with Camburg Engineering, Inc.(“Tenant”)
commencing October 1, 2022, The term of the sublease is through December 31, 2023 with a base monthly rent of $
On November 1, 2024, the Brownies Marine Group entered
a
Royalty Agreement
On
June 30, 2020, the Company entered into Amendment No. 2 to its Patent License Agreement with Setaysha Technical Solutions, LLC (“STS”).
The amendment 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 $
Consulting and Employment Agreements
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 $
| 22 |
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 $per share in the following amounts based upon the following performance milestones during the term of the Constable
Employment Agreement: (i) 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 $
On June 24, 2023, Mr. Constable resigned as Chief Executive Officer of the Company effective July 7, 2023 .
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. Blake Carmichael shall serve as Chief Executive Officer of BLU3. In consideration for his services,
Blake Carmichael shall receive (i) an annual base salary of $
In addition, Blake Carmichael shall be entitled to receive a five-year stock option to purchase up to shares of common stock at an exercise price of $per share that will vest upon annual financial metrics based upon a revenue measurement, expediency measurement and an EBITDA measurement.
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 $
In addition, Mrs. Buban shall be entitled to receive a five-year stock option to purchase up to shares of common stock of the Company at an exercise price of $ per share, which vests upon the attainment of certain defined annual financial metrics, as set forth in the Buban Employment Agreement.
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 $
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 $
On
December 22, 2022, the U.S. Consumer Products Safety Commission (the “CPSC”) issued a voluntary recall notice for the Nomad
tankless dive system, which is distributed by BLU3, Inc. As part of the recall procedure, the CPSC approved the Company’s proposed
remedy for the recall and BLU3 began to receive units back from consumers for repair in [provide month and year].. The Company has evaluated
the costs of this recall and has deemed it necessary to set an allowance of $
Legal
There are no outstanding legal issues as of June 27, 2025
Note 16. Subsequent Events
The maturity due date of the convertible notes has been verbally extended by the lender while the Company works through to determines a restructure of the notes.
| 23 |
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEEDINGS
There are no pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
On March 31, 2024, the Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on a convertible demand note.
The above issuance did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe isare exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
During
the quarter ended March 31, 2025, no director, officer or Section 16 officer
| 24 |
ITEM 6. EXHIBITS
| 25 |
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: July 2, 2025 | BROWNIE’S MARINE GROUP, INC. | |
| By: | /s/ Robert M. Carmichael | |
| Robert M. Carmichael | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Robert M. Carmichael | |
| Robert M. Carmichael | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 26 |