What changed in this filing

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Item 9A. Controls and Procedures

2021-03-31 compared with 2020-06-29 · 1374 added, 1238 removed, 684 unchanged (79% of the section changed)

Controls and Procedures.

and Procedures.

of Disclosure Controls and Procedures

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there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

on their evaluation as of the end of the period covered by this report, our Chief Executive Officer who also serves as our principal

financial and accounting 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.

management, including our Chief Executive Officer who also serves as our principal financial and accounting 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 the end of the periods covered by this report.

Based upon the evaluation, our Chief Executive Officer who

also serves as our principal financial and accounting officer have concluded that the disclosure controls and procedures as of

December 31, 2019 were not effective due to the material weaknesses identified below.

on their evaluations as of the end of the period covered by this report, our Chief Executive Officer and our Chief 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.

management, including our Chief Executive Officer and our Chief 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 the end

of the periods covered by this report.

Based upon the evaluation, our Chief Executive Officer who also serves as our principal

financial and accounting officer have concluded that the disclosure controls and procedures as of December 31, 2020 were not effective

due to the material weaknesses identified below.

address these material weaknesses, management performed additional procedures to ensure the financial statements included herein

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statements are reflected and properly recorded;

evaluation of 1) the disclosure controls and procedures and 2) internal control over financial reporting was not sufficiently

comprehensive due to limited personnel.

evaluation of (i) the disclosure controls and procedures, and (ii) our ICFR was not sufficiently comprehensive due to limited

Notwithstanding

the existence of these material weaknesses in our internal control over financial reporting, management believes that the consolidated

financial statements included in this Form 10-K present in all material respects our financial condition, results of operations

and cash flows for the periods presented.

the existence of these material weaknesses in our ICFR, management believes that the consolidated financial statements included

in this Form 10-K present in all material respects our financial condition, results of operations and cash flows for the periods

Control Remediation Efforts .

Management expects to remediate the material weaknesses identified above as follows:

has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP, U.S.

Securities, and Exchange

Commission compliance requirements.

We intend to expand our finance department through the hiring of a certified public accountant

to strengthen the segregation of duties, internal controls and enhance our current staff.

has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP and SEC compliance requirements.

We intend to expand our finance department through the hiring of a certified public accountant to strengthen the segregation

of duties, internal controls and enhance our current staff.

of duties will be analyzed and adjusted Company-wide as part of the internal controls implementation and documentation of

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Company plans on evaluating various accounting systems to enhance our system controls.

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.

will continue to monitor and evaluate the effectiveness of our ICFR 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 ICFR.

in Internal Control over Financial Reporting

have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected,

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

Other Information.

Directors, Executive Officers, and Corporate Governance.

have been no changes in our ICFR during our last fiscal quarter that has materially affected, or is reasonably likely to materially

affect, our internal control over financial reporting.

Executive Officers, and Corporate Governance.

following are our executive officers and directors .

President, Chief Executive Officer and principal financial and accounting officer

President, and Chief Financial Officer

Executive Officer and director

Key Employees

Blake Carmichael

Executive Officer and President of BLU3

Since April 2004, Mr.

Carmichael has served as BWMG’s Chairman, President, and Chief Executive

He also serves as our principal financial and accounting officer.

From March 23, 2004 through April 16, 2004, Mr.

served as the Company’s Executive Vice-President and Chief Operating Officer.

Carmichael has served as president of

Trebor Industries since 1986.

Carmichael is the holder and co-holder of numerous patents, some of which are used by Trebor

Industries and several other major companies in the diving industry.

Carmichael was selected to serve on the board of directors

for his general business management with specific experience in diving industry.

Carmichael has served as our Chairman and President, and from April 2004 until November

2020 he also served as our Chief Executive Officer.

He also serves as our Chief Financial Officer.

Carmichael is the holder

and co-holder of numerous patents, some of which are used by our company and several other major companies in the diving industry.

Carmichael was selected to serve on the board of directors for his general business management with specific experience in

diving industry.

Carmichael is the father of Blake Carmichael.

Since December 2017, Mr.

Carmichael has served as Chief Executive Officer of BLU3.

He joined our company in

May 2017 as an electrical engineer with a primary focus to develop new battery powered hookah diving products.

graduated from Florida Atlantic University in May 2017 with a Bachelor of Science in Electrical Engineering.

During college, he

worked in 2014 and 2015 as a participant in the University of Central Florida / Lockheed Martin College Work Experience Program

as a systems engineer with a focus on testing for infrared imaging systems used in military aircraft.

In the summer of 2016, he

participated in the Naval Surface Warfare Center’s Naval Research Enterprise Intern Program with a focus on integrating

underwater vehicles for survey and recovery at the South Florida Ocean Measurement Facility.

Blake Carmichael is the son of Robert

Constable as served as our Chief Executive Officer and member of our board of directors since November

Prior to joining our company, from August 2020 through the November 2020 Mr.

Constable provided consulting services.

Constable has over 16 years experience as serving as a Chief Financial Officer.

From 2003 through February 2020 he served as Chief

Financial Officer of John Keeler & Co., Inc., d/b/a Blue Star Foods, a privately held Florida corporation, an international

seafood company.

In 2018 John Keeler & Co., Inc.

merged into Blue Star Foods Corp., a Miami, Florida-based sustainable seafood

company (OTC Pink:

Constable served as Chief Financial Officer and a member of Blue Star Foods Corp.’s board

of directors from the closing of the merger through February 2020.

Prior thereto, from 1999 to 2003, Mr.

Constable was a consultant

at Gateway Capital Corp., a business consulting firm, where he analyzed the financial and reporting capabilities of prospective

lending customers with revenues from $10 to $100 million.

Additionally, Mr.

Constable was involved with loan workouts of facilities

that required either liquidation or restructuring to ensure collectability for the financial institutions.

From 1990 to 1999,

Constable was a commercial banker at Mercantile Bankshares in Baltimore, Maryland, Finova Capital Corporation and Capital

Bank, both in south Florida.

During 2020 Mr.

Constable has also provided business and financial consulting services.

Constable received his B.S.

in Finance with an Accounting Minor from the Merrick School of Business at the University of Baltimore.

Constable’s experience with public companies and over 30 year background in finance and accounting led to the decision

to appoint him to the board of directors.

Hyatt was appointed to the Company’s board of directors in March 2019.

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business management experience.

Guzy has served on the Company’s board of directors since January 9, 2020.

Guzy has served as the

executive chairman of the board of directors of CoJax Oil and Gas Corporation, an independent oil and gas company and public company,

since its incorporation in November 2017 and as its president, chief executive officer, and chief financial officer since May

Since February 1, 2013, he has served as the chief executive officer of Central Oil & Gas Corporation of America, a

private oil and gas production company, and since January 27, 2013 he has served on its board of directors.

Guzy also serves

as an outside director of:

Capstone Companies, Inc.

CAPC), a SEC reporting company, and Leatt Corporation (OTCQB:

a SEC reporting company.

Guzy served as an outside director of;

YayYo, Inc., a SEC reporting company, from November 2017 until

November 2018.

He also served, from October 2007 to August 2010, as president of Leatt Corporation.

Guzy has a background

in telecommunications, information systems, investor relations, emerging growth companies and the U.S.

capital markets, and he

has served as an executive manager or consultant for business development, sales, customer service and management in the telecommunications

industry, specifically, with IBM Corp., RCA Corp., Sprint International, Bell Atlantic Video Services, Loral Cyberstar and FaciliCom

International.

Guzy has an MBA in Strategic Planning and Management from The Wharton School of the University of Pennsylvania;

in Systems Engineering from the University of Pennsylvania;

in Electrical Engineering from Penn State University;

and a Certificate in Theology from Georgetown University.

Guzy was selected to serve on the Company’s board of directors

for his experience serving on the board of directors of public companies and background with emerging growth companies.

are no family relationships between any of the executive officers and directors other than as set forth above.

Since December 2017, Mr.

Carmichael has served as Chief Executive Officer of BLU3.

He joined our company in

May 2017 as an electrical engineer with a primary focus to develop new battery powered hookah diving products.

graduated from Florida Atlantic University in May 2017 with a Bachelor of Science in Electrical Engineering.

During college, he

worked in 2014 and 2015 as a participant in the University of Central Florida / Lockheed Martin College Work Experience Program

as a systems engineer with a focus on testing for infrared imaging systems used in military aircraft.

In the summer of 2016, he

participated in the Naval Surface Warfare Center’s Naval Research Enterprise Intern Program with a focus on integrating

underwater vehicles for survey and recovery at the South Florida Ocean Measurement Facility.

Blake Carmichael is the son of Robert

are no family relationships between any of the executive officers, directors and key employees other than as set

director is elected at our annual meeting of stockholders and holds office until the next annual meeting of stockholders, or until

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Leadership Structure and Board’s Role in Risk Oversight

board of directors is comprised of one member of our management, one non-management directo r and one independent director.

Given the size of our company, our Board believes the current leadership structure is appropriate for our company.

As our company

grows, we expect to expand our board of directors through the appointment of independent directors.

Risk is inherent with every

business, and how well a business manages risk can ultimately determine its success.

We face a number of risks, including credit

risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk.

Management is responsible for

the day-to-day management of the risks we face and have responsibility for the oversight of risk management in their dual roles

as directors.

board of directors is comprised of two members of our management and one independent director.

Given the size of our company,

our Board believes the current leadership structure is appropriate for our company.

As our company grows, we expect to expand

our board of directors through the appointment of independent directors.

Risk is inherent with every business, and how well a

business manages risk can ultimately determine its success.

We face a number of risks, including economic risk, liquidity risk,

product liability risk, operational risk, strategic risk and reputation risk.

Management is responsible for the day-to-day

management of the risks we face and have responsibility for the oversight of risk management in their dual roles as directors.

of the Board Of Directors;

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might bring a different viewpoint or experience to our Board.

of our directors is an “audit committee financial expert”

Constable is an “audit committee financial expert”

within the meaning of Item 401(e) of Regulation S-K.

general, an “audit committee financial expert”

is an individual member of the audit committee or board of directors

an “audit committee financial expert”

is an individual member of the audit committee or board of directors who:

generally accepted accounting principles and financial statements;

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board of directors.

July 2019 the Company adopted a director compensation policy whereby it agreed to pay the members of the Company’s board

of directors, including management directors, an annual fee of $18,000 for serving on the Company’s board of directors for

The following table provides information concerning the compensation paid to our independent directors for their services

as members of our board of directors for 2019.

Carmichael’s director compensation is included in the Executive Compensation

table appearing later in this report.

For awards of stock, the aggregate grant date fair value is computed in accordance with

FASB ASC Topic 718.

The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses

which we may have paid:

Fees earned or paid in cash

Option awards

Non-equity incentive plan compensation

Nonqualified deferred compensation earnings

All other compensation

following table provides information concerning the compensation paid to our independent directors for their services as members

of our board of directors during 2020.

Carmichael’s and Mr.

Constable’s director compensation is included in the

Executive Compensation table appearing later in this report.

For awards of stock, the aggregate grant date fair value is computed

in accordance with FASB ASC Topic 718.

The information in the following table excludes any reimbursement of out-of-pocket

travel and lodging expenses which we may have paid:

plan compensation

Mikkel Pitzner (1)

Jeffrey Guzy (2)

Pitzner resigned from our Board of Directors in January 2020.

Guzy resigned from our Board of Directors in November 2020.

with Section 16(a) of the Exchange Act

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will be forwarded, as appropriate.

Executive Compensation

following table summarizes all compensation recorded by us in the past two years for:

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of the notes to our consolidated financial statements appear later in this report.

Information regarding his compensation

is set forth below.

Compensation Table

and principal position

Principal Position

Non-qualified

Executive Officer

December 11, 2018, the Company awarded 20,000,000 common shares to Mr.

Carmichael as a incentive bonus, subject to his continued

employment through January 2, 2020.

Expense for the issuance was recognized over the full vesting period, and accordingly,

we recognized stock compensation expense of $188,144 and $10,576 during 2019 and 2018.

July 29, 2019 the Company issued Mr.

Carmichael five year options to purchase up to 20,761,904 shares of common stock at an

exercise price of $0.018 per share, subject to vesting over a period of six months.

We recognized stock option expense of

$76,423 during 2019.

Christopher H Constable,

Carmichael served as our Chief Executive Officer from 2004 until November 2020 when Mr.

Constable joined our company.

Carmichael continues to serve as Chairman, President and Chief Financial Officer.

awards included $31,904 representing the fair value of 725,087 shares of common stock issued to Mr.

Carmichael for his participation

in the BLU3-VENT project.

On December 11, 2018, the Company awarded 20,000,000 common shares to Mr.

Carmichael as an incentive

bonus, subject to his continued employment through January 2, 2020.

Expense for the issuance was recognized over the full vesting

period, and accordingly, we recognized stock compensation expense of $188,144 during 2019 and stock compensation expenses of $1,280

April 14, 2020 the Company issued Mr.

Carmichael an option to purchase up to 125,000,000 shares of common stock at an exercise price

of $0.045 subject to vesting as discussed in note 11 of the audited financial statements attached to this report.

Company expensed $655,515 of the fair market value of these options in 2020.

On July 29, 2019 the Company issued Mr.

Carmichael five year options to purchase up to 20,761,904 shares of common stock at an exercise price of $0.018 per share, subject

to vesting over a period of six months.

We recognized stock option expense of $10,724 and $76,423 during 2020 and 2019.

Other Compensation for Mr.

Carmichael for 2019 includes (i) $18,000 in director compensation (ii) $21,720 in health insurance,

and (iii) an aggregate of $50,643 in royalties paid to an entity controlled by Mr.

Carmichael under the terms of an Exclusive

License Agreement.

Carmichael for 2020 includes (i) $18,000 in director compensation (ii) $21,720 in health insurance, and

(iii) an aggregate of $67,808 in royalties paid to an entity controlled by Mr.

Carmichael under the terms of an Exclusive License

All Other Compensation for Mr.

Carmichael for 2018 includes (i) $19,499 in accrued director fees which

was paid through the issuance of 999,934 shares of our common stock, (ii) $20,764 in health insurance, and (iii) an aggregate

of $52,221 in royalties paid to an entity controlled by Mr.

Carmichael under the terms of an Exclusive License Agreement.

Carmichael for 2019 includes (i) $18,000 in director compensation (ii) $21,720 in health

insurance, and (iii) an aggregate of $50,642 in royalties paid to an entity controlled by Mr.

Carmichael under the terms of

an Exclusive License Agreement.

Constable has served as our Chief Executive Officer since November 2020.

includes stock issued to Mr.

Constable on behalf of Brandywine, LLC for consulting services prior to his employment.

issued 2,795,000 shares with a fair value of $45,659.

November 5, 2020 the Company entered into an option agreement with Mr.

Constable the details of which are disclosed in Note

11 of the audited financial statements included in this report.

The Company expensed vested options of 5,434,783 shares

with a fair value of $106,890.

Equity Awards at Fiscal Year End

following table provides information concerning unexercised stock options, stock that has not vested and equity incentive plan

awards for each named executive officer outstanding as of December 31, 2019, together with unexercised stock options, stock that

has not vested and equity incentive plan awards for each of our other executive officers outstanding as of December 31, 2019:

of Securities Underlying Unexercised Options

awards for each named executive officer outstanding as of December 31, 2020, together with unexercised stock options, stock

that has not vested and equity incentive plan awards for each of our other executive officers outstanding as of December 31, 2020:

Unexercisable

Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options

Exercise Price

Expiration Date

of Shares or Units of Stock That Have Not Vested

Value of Shares or Units of Stock That Have Not Vested

Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights that Have Not

Incentive Plan Awards:

Market or Payout Value of Unearned Shares, Units or Other Rights

That Have Not Vested

Carmichael is compensated

Christopher H.

of our executive officers

are not a party to an employment agreement with Mr.

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of directors, of which he is a member, and is subject to change from time to time.

His compensation for 2019 and 2018 is set forth

his base compensation has remained unchanged in 2020, in 2020 the board of directors has granted Mr.

Carmichael certain additional

compensation.

In April 2020 the Company entered into a Non-Qualified Stock Option Agreement with Mr.

Carmichael (the “Carmichael

Option Agreement”).

While his base compensation remained unchanged

in 2020 from 2019, in 2020 the board of directors has granted Mr.

Carmichael certain additional compensation.

In April 2020 the

Company entered into a Non-Qualified Stock Option Agreement with Mr.

Carmichael (the “Carmichael Option Agreement”).

Under the terms of the Carmichael Option Agreement, as additional compensation we granted Mr.

an option to purchase up to an aggregate of 125,000,000 shares of our 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 our 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:

Carmichael an option to purchase

up to an aggregate of 125,000,000 shares of our 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 our common stock on The Nasdaq Stock Market, the NYSE American LLC or

the right to purchase 25,000,000 shares of our common stock shall vest at such time as we report cumulative consolidated net revenues,

including revenues from related parties and revenues recognized by our company arising out of any subsequent acquisitions, mergers,

or other business combinations following the closing date of such transaction (the collectively, “Net Revenues”),

or other business combinations following the closing date of such transaction (the collectively, “Carmichael Net Revenues”),

in excess of $3,500,000 in the aggregate over four consecutive fiscal quarters commencing May 1, 2020 and ending on April 30,

2023 (the “Net Revenue Period”);

the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as we report cumulative Net Revenues

in excess of $7,000,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period;

the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as we report cumulative Net Revenues

in excess of $10,500,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

2023 (the “Carmichael Net Revenue Period”);

the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as we report cumulative Carmichael

Net Revenues in excess of $7,000,000 in the aggregate over four consecutive fiscal quarters during the Carmichael Net Revenue

the right to purchase an additional 25,000,000 shares of common stock shall vest at such time as we report cumulative Carmichael

Net Revenues in excess of $10,500,000 in the aggregate over four consecutive quarters during the Carmichael Net Revenue Period.

Carmichael Option Agreement provides that the Option is exercisable by Mr.

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Carmichael for 90 days.

Any portion of the Option which does not vest during the Net Revenue Period

lapses and Mr.

Any portion of the option which does not vest during the Carmichael Net

Revenue Period lapses and Mr.

Carmichael has no further rights thereto.

Blake Carmichael is Compensated

August 1, 2017, the Company entered into a six month employment agreement with Blake Carmichael to serve as the Company’s

products development manager, electrical engineer and marketing team member.

Under the terms of the employment agreement, in addition

to a monthly salary of $3,600, the Company issued Mr.

Carmichael 2,000,000 shares of common stock valued at $25,000.

is also entitled to performance bonuses at the discretion of the board of directors.

On January 31, 2018, Mr.

Blake Carmichael’s

employment agreement expired and was not renewed.

He continues with the Company as a full time employee and CEO of BLU3 and focused

on the operations of the Company’s BLU3 subsidiary .

In April 2018, his salary was adjusted to $75,000 per year.

is currently no written employment agreement between the Company and Blake Carmichael.

Vent Incentive Compensation paid to Mr.

Carmichael and Mr.

Blake Carmichael

May 21, 2020 the Board of Directors agreed to provide incentive compensation to six individuals who are either our employees or

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Carmichael, for additional time spent by these individuals on our BLU3-Vent project.

recognition of the additional time devoted to this project, and to further incentivize these individuals, we agreed to compensate

these individuals, who include Mr.

Carmichael and Mr.

Blake Carmichael, additional amounts.

received a total of $31,904 of incentive compensation which was paid through the issuance of 725,087 shares of our common stock

Blake Carmichael received a total of $37,369 of incentive compensation which was paid through the issuance of 849,305

shares of our common stock.

recognition of the additional time devoted to this project, and to further incentivize him, Mr.

Carmichael received a total of

$31,904 of incentive compensation which was paid through the issuance of 725,087 shares of our common stock.

November 5, 2020 we entered into a three year employment agreement (the “Constable Employment Agreement”) pursuant

Constable serves as our Chief Executive Officer of the Company.

Pursuant to the Constable Employment Agreement, Mr.

Constable also agreed to serve on our Board of Directors and we agreed to nominate him to serve on the Board during the term of

the Constable Employment Agreement.

In consideration for his services, we agreed to (i) pay Mr.

Constable an annual base salary

of $200,000, payable in accordance with the customary payroll practices of the Company, and (ii) issuable upon execution of the

Constable Employment Agreement and on each anniversary of the date of the agreement during the term, issue him a non-qualified

immediately exercisable five-year stock 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 common stock on the date of issuance.

Initially he received

an initial stock option grant to purchase 5,434,783 shares of the Corporation’s common stock at an exercise price of $0.0184

per share pursuant to an option award agreement (the “Option Award Agreement”).

addition, Mr.

Constable is 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 amounts listed below 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 Net Revenues are in excess of $7,500,000, in the aggregate, for four consecutive fiscal quarters;

(iii) 5,000,000 shares - if the 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 on NASDAQ or New York Stock Exchange.

is also entitled to participate in all benefit programs the Company offers to its executives, reimbursement for business expenses

and three weeks of annual paid vacation.

agreement may be terminated for cause, upon his death or disability, or by the Company without cause.

Furthermore, Mr.

may terminate the agreement for “good reason”

as defined in the agreement.

If the Company terminates the agreement

for cause, or if it terminates upon Mr.

Constable’s death or disability, or if he voluntarily terminates the agreement,

Constable nor his estate (as the case may be) is entitled to any severance or other benefits following the date of

If the Company should terminate the agreement without cause or Mr.

Constable terminates for good reason, the Company

is obligated to continue to pay him his base salary for a period of six months.

The agreement also contains customary confidentiality,

non-disclosure and indemnification provisions.

Blake Carmichael is Compensated

is employed with the Company as a full time employee and CEO of BLU3 and focused on the operations of the Company’s BLU3

In September 2020, his salary was adjusted to $78,000 per year.

There is no written employment agreement between

the Company and Blake Carmichael.

Blake Carmichael also received a total of $37,369 of incentive compensation which was paid through the issuance of

849,305 shares of our common stock in for his additional time spent on our BLU3-Vent project.

Authorized for Issuance under Equity Compensation Plans

following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders

as well as any equity compensation plans not approved by our shareholders as of December 31, 2019.

following table sets forth securities authorized for issuance under any equity compensation plans approved by our shareholders as well

as any equity compensation plans not approved by our shareholders as of December 31, 2020.

of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted average exercise price of outstanding options, warrants and rights

average exercise price of outstanding options, warrants and rights

of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column

approved by our shareholders:

not approved by shareholders

Plans approved by our shareholders:

Plans not approved by shareholders

see note 11 of the notes to our audited consolidated financial statements appearing later in this report for more information

on these outstanding options.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

voting securities consist of our common stock and our Series A Convertible Preferred Stock.

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and (4) our directors and executive officers as a group.

percentage ownership in the following table is based on 287,020,899 shares of common stock and 425,000 shares of our Series A

Convertible Preferred Stock outstanding as of June 17, 2020.

Beneficial ownership is determined in accordance with the rules of

In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have

assumed the conversion of the shares of Series A Convertible Preferred Stock and the shares of common stock subject to options

or warrants held by that person that are currently exercisable or exercisable within 60 days of June 17, 2020, are deemed outstanding.

Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

otherwise disclosed the address for each person below is c/o Brownie’s Marine Group, Inc., 3001 NW 25th Avenue, Suite 1,

Pompano Beach, FL 33069.

Name and Address of

Beneficial Owner

Amount and Nature

of Beneficial Ownership

percentage ownership in the following table is based on 337,107,415 shares of common stock and 425,000 shares of our Series

A Convertible Preferred Stock outstanding as of March 31, 2021.

Beneficial ownership is determined in accordance with the

rules of the SEC.

In computing the number of shares beneficially owned by a person and the percentage ownership of that person,

we have assumed the conversion of the shares of Series A Convertible Preferred Stock and the shares of common stock subject to

options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 31, 2021,

are deemed outstanding.

Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership

of any other person.

Unless otherwise disclosed the address for each person below is c/o Brownie’s Marine Group, Inc., 3001

NW 25th Avenue, Suite 1, Pompano Beach, FL 33069.

and Address of Beneficial Owner

and Nature of Beneficial Ownership

Officers and Directors

60,006,034 (1)

102,647,065 (2)

Christopher H.

8,229,783 (2)

112,647,065 (3)

directors and executive officers as a group (4 persons)

All directors and executive officers

as a group (three persons)

180,882,882 (1)(2)(3)

5% Shareholders

50,000,000 (4)

A Convertible Preferred Stock

directors and executive officers as a group (1 person)

less than 1%.

Series A Convertible

Preferred Stock

All directors and executive officers

as a group (one person)

the following:

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Excludes unvested options to purchase 125,000,000 shares of common stock at an exercise price of $0.045 per share.

(i) 2,647,065 shares of outstanding shares held by Mr.

options to purchase an aggregate of 5,434,783 shares of common stock at an exercise price of $0.0184 per share, but excludes

(i) unvested five-year options to purchase shares of common stock vesting on the second and third anniversary of his employment

agreement equal $100,000 of the value of the Company’s common stock at an exercise price equal to the market price of

the common stock on the date of issuance, and (ii) unvested options to purchase 30,000,000 shares of common stock at an exercise

price of $0.0184 per share.

2,647,065 shares of outstanding shares held by Mr.

Hyatt’s minor child over which he has voting and dispositive

and (ii) 27,500,000 shares of common stock underlying warrants exercisable at $0.01 per share.

2,000,000 shares underlying vested options exercisable at $0.0229 per share.

10,380,952 shares underlying vested options exercisable at $0.018 per share.

is 135 Weston Road, Suite 328, Weston, FL 33326.

Certain Relationships and Related Transactions, and Director Independence.

Relationships and Related Transactions, and Director Independence.

sell products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, companies

owned by the brother of Robert M.

owned by the brother of Mr.

Terms of sale are no more favorable than those extended to any of our other customers

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Combined net revenues from these entities for 2020 and 2019, totaled $821,474 and $653,315, respectively.

Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s

Yacht Toys at December 31, 2019, was $28,555, $10,914, and $4,973, respectively.

Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht

Toys at December 31, 2020, was $29,443, $6,643 and $8,237, respectively.

Accounts receivable from Brownie’s SouthPort

Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2018, was $49,443, $7,731,

and $8,646, respectively.

Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys December 31, 2019, was $28,555, $10,914, and $4,973,

respectively.

also sell products to Brownie’s Global Logistics, LLC.

(“BGL”) and 940 Associates, Inc.

(“940 A”),

entities wholly-owned by Robert M.

Terms of sale are more favorable than those extended to our regular customers,

but no more favorable than those extended to our strategic partners.

Terms of sale to BGL approximate cost or include a nominal

These terms are consistent with those extended to our strategic partners.

Strategic partner terms on a per order basis

include promotion of our technologies and “Brownie’s”

brand, offered only on products or services not offered

for resale, and must provide for reciprocal terms or arrangements to us on strategic partners’

(“940 A”), entities

wholly-owned by Robert M.

Terms of sale are more favorable than those extended to our regular customers, but no more favorable

than those extended to our strategic partners.

Terms of sale to BGL approximate cost or include a nominal margin.

These terms are consistent

with those extended to our strategic partners.

Strategic partner terms on a per order basis include promotion of our technologies and

“Brownie’s”

brand, offered only on products or services not offered for resale, and must provide for reciprocal terms

or arrangements to us on strategic partners’

product or services.

is fulfilling the strategic partner terms by providing exposure for our technologies and “Brownie’s”

the yachting and exploration community world-wide through its operations.

Combined net revenues from these three entities for

2019, and 2018, were $9,427 and $10,416, respectively.

In addition, from time to time Mr.

Carmichael purchases products from us

for his personal use.

He either pays the amount at the time of purchase or we provide him a courtesy account which he settles

from time to time.

BGL is fulfilling the strategic partner terms by providing exposure

for our technologies and “Brownie’s”

brand in the yachting and exploration community world-wide through its operations.

Combined net revenues from these three entities for 2020 and 2019 were $16,943 and $9,427, respectively.

In addition, from time to time

Carmichael purchases products from us for his personal use.

He either pays the amount at the time of purchase or we provide him a

courtesy account which he settles from time to time.

Accounts receivable from BGL, 940 A and Mr.

Carmichael totaled $19,314, which is net of credit memo of $14,944

for 940 A, and $12,603 at December 31, 2019, and December 31, 2018, respectively.

owed BGL an accounts payable to related parties of $263,544 and $125,243 at December 31, 2019 and 2018, respectively, which represents

purchase of inventory including batteries for Sea Lion (battery operated unit) and Honda engines for our regular gasoline powered

have 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 agreement.

This Exclusive License Agreement

provides that we will pay 940 A 2.5% of gross revenues per quarter as a royalty.

Total royalty expense for 2019 and 2018, totaled

$50,643 and $52,221, respectively.

Carmichael totaled $23,321 at

December 31, 2020 and $4,320 and $12,603, respectively, at December 31, 2019.

owed BGL an accounts payable to related parties of $102,360 and $263,544 at December 31, 2020 and 2019, respectively, which

represents purchase of inventory including batteries for Sea Lion (battery operated unit) and Honda engines for our regular gasoline

powered units.

are a party to 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.

Total royalty fees paid to 940 A in 2020 and 2019

totaled $67,808 and $50,642, respectively.

Company has one independent director, Mr.

Jeffrey Guzy is considered “independent”

as defined under Rule 5605 of the

Nasdaq Marketplace Rules.

Principal Accounting Fees and Services.

Hyatt, who is considered “independent”

as defined under Rule

5605 of the Nasdaq Marketplace Rules.

Accounting Fees and Services.

following table shows the fees that were billed for the audit and other services provided by Liggett & Webb, PA for 2020 and

Audit Fees for 2018 also includes $16,500 paid to RBSM, LLP, the Company’s former auditor.

Audit-Related

Audit-Related Fees

All Other Fees

This category includes the audit of our annual financial statements, review of financial statements included

22 unchanged sentences

respect to 2019 and 2018 were pre-approved by the entire board of directors.

Exhibits, Financial Statements Schedules

Financial Statements Schedules

(a) (1) Financial

consolidated financial statements and Report of Independent Registered Accounting Firm are listed in the “Index to Financial

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beginning on page F-1.

(2) Financial

statement schedules

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financial statements herein.

(3) Exhibits.

exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index.

Plan of Conversion

Articles of Conversion (Nevada)

Certificate of Conversion (Florida)

Articles of Incorporation (Florida)

Articles of Amendment

Form of Unit Warrant

Form of 2017 Secured Convertible Promissory Note

Merger Agreement,

dated June 18, 2002 by and among United Companies Corporation, Merger Co., Inc.

and Avid Sportswear & Golf Corp.

Articles of Merger

of Avid Sportswear & Golf Corp.

with and into Merger Co., Inc.

of Conversion

of Conversion (Nevada)

of Conversion (Florida)

of Incorporation (Florida)

of 2017 Secured Convertible Promissory Note

Unsecured Convertible Debenture dated May 3, 2011

Warrant dated March 7, 2019

Form of stock option agreement

Stock Option Grant Agreement dated January 9, 2020

Share Exchange Agreement, dated March 23, 2004 by and among the Company, Trebor Industries, Inc.

and Robert M.

Non-Exclusive License Agreement –BC Keel Trademark

Exclusive License Agreement - Brownie’s Third Lung, Brownie’s Public Safety, Tankfill, and Related Trademarks and Copyrights

Exclusive License Agreement –

Brownie’s Third Lung and Related Trademarks and Copyright

Mikkel Pitzner Independent Director Agreement dated August 1, 2017

Advisory Agreement dated August 7, 2017

Lease Agreement Commencing September 1, 2014, as amended

Joe Perez Note Conversion Agreement dated November 15, 2018

Subscription Agreement dated March 7, 2019

Non Management Director Agreement dated April 1, 2019

Exclusive Distribution Agreement with Lenhardt & Wagner GmbH dated August 7, 2017

Lease Agreement dated November 11, 2018

Director Agreement dated January 9, 2020

Non-qualified Stock Option Agreement dated April 14, 2020 by and between Brownie’s Marine Group, Inc.

of Stock Option Grant to Robert M.

Carmichael dated July 29, 2019 +

of Stock Option Grant to Jeffrey Guzy dated January 9, 2020

Exchange Agreement, dated March 23, 2004 by and among the Company, Trebor Industries, Inc.

and Robert M.

Form of Restricted Stock Award Agreement

Note between Brownie’s Marine Group, Inc.

and South Atlantic Bank

Patent License Agreement dated April 6, 2018 by and between Setaysha Technical Solutions, Inc.

and Brownie’s Marine Group, Inc.

Non-Exclusive

License Agreement for the BC Keel trademark effective January 1, 2004 by and between The Carleigh Rae Corporation and Trebor

Industries Inc.

Non-Exclusive

License Agreement for the buoyancy compensator and weight belt dive system effective January 1, 2005 by and between 940 Associates,

and Trebor Industries Inc.

License Agreement for the Brownie’s Third Lung, Brownie’s Public Safety Tankfill, and Related trademarks and copyrights

effective January 1, 2005 by and between 940 Associates, Inc.

and Trebor Industries Inc.

Non-Exclusive

License Agreement for the drop weight dive belt effective January 1, 2005 by and between 940 Associates, Inc.

and Trebor Industries

Non-Exclusive

License Agreement for the garment integrated or garment attachable floatation aid and/or PDF effective January 1, 2004 by

and between The Carleigh Rae Corporation and Trebor Industries Inc.

Non-Exclusive

License Agreement for the inflatable dive marker and collection bag effective January 1, 2005 by and between 940 Associates

and Trebor Industries Inc.

Non-Exclusive

License Agreement for the SHERPA trademark and inflatable flotation aid/signal device technology effective January 1, 2004

by and between The Carleigh Rae Corporation and Trebor Industries Inc.

Non-Exclusive

License Agreement for tank-mounted weight, BC or PDF mounted trim weight or trim weight holding system effective January 1,

2004 by and between The Carleigh Rae Corporation and Trebor Industries, Inc.

Agreement commencing September 1, 2014 by and between Liberty Property Limited Partnership and Trebor Industries, Inc.

Lease Amendment

dated December 1, 2016 by and between Liberty Property Limited Partnership and Trebor Industries, Inc.

Distribution Agreement between Brownie’s Marine Group, Inc.

and Lenhardt & Wagner GmbH dated August 7, 2017

Agreement dated November 11, 2018 by and between Liberty Property Limited Partnership and Brownie’s Marine Group, Inc.

Agreement dated January 9, 2020 by and between Brownie’s Marine Group, Inc.

and Jeffrey Joseph Guzy

of Non-Qualified Stock Option Agreement dated April 14, 2020 by and between Brownie’s Marine Group, Inc.

of Restricted Stock Award Agreement for grants by Brownie’s Marine Group, Inc.

of restricted stock awards to employees

Note in the principal amount of $159,600 issued by Brownie’s Marine Group, Inc.

to South Atlantic Bank

License Agreement dated April 6, 2018 by and between Setaysha Technical Solutions, Inc.

and Brownie’s Marine Group,

1 to Patent License Agreement dated December 31, 2019 by and between Setaysha Technical Solutions, Inc.

and Brownie’s Marine Group, Inc.

Investor Relations Consulting Agreement dated April 9, 2020 by and between HIR Holdings, LLC and Brownie’s Marine Group, Inc.

Corporate Communication Consulting Agreement dated April 9, 2020 by and between Impact IR Inc.

and Brownie’s

Marine Group, Inc.

Relations Consulting Agreement dated April 9, 2020 by and between HIR Holdings, LLC and Brownie’s Marine Group, Inc .

Communication Consulting Agreement dated April 9, 2020 by and between Impact IR Inc.

and Brownie’s Marine Group, Inc .

Note Extension and Amendment Agreement dated May 29, 2020 by and between Curt Martin and Brownie’s Marine Group, Inc.

Note Extension and Amendment Agreement dated June 8, 2020 by and between Joe Steinbron and Brownie’s Marine Group, Inc.

Subsidiaries of the Registrant

Certification

Pursuant to Rule 13a-14(a)/15d-14(a)

Certification

Pursuant to Rule 13a-14(a)/15d-14(a)

Certification

Pursuant to Section 1350

Interactive Data File

Form 10-K Summary

of Note Extension and Amendment Agreement dated May 29, 2020 for the $50,000 principal amount 6% Secured Convertible Promissory

Note by and between Curt Martin and Brownie’s Marine Group, Inc.

of Note Extension and Amendment Agreement dated May 29, 2020 for the $50,000 principal amount 6% Secured Convertible Promissory

Note by and between Joe Steinbron and Brownie’s Marine Group, Inc.

Agreement dated April 1, 2019 by and between Brownie’s Marine Group, Inc.

and Charles F.

of letter agreement for incentive compensation +

2 to Patent License Agreement dated June 30, 2020 by and between Setaysha Technical Solutions, Inc.

and Brownie’s

Marine Group, Inc.

of Employment Agreement dated November 5, 2020 by and between Christopher H.

Constable and Brownie’s Marine Group, Inc.

of Non-Qualified Stock Option Agreement Non-Plan dated November 5, 2020 by and between Brownie’s Marine Group, Inc.

and Christopher H.

Form of Note Extension

and Amendment Agreement dated December 21, 2020 for the $50,000 principal amount 6% Secured Convertible Promissory Note by

and between Joe Steinbron and Brownie’s Marine Group, Inc

Form of Note Extension

and Amendment Agreement dated December 21, 2020 for the $50,000 principal amount 6% Secured Convertible Promissory Note by

and between Curt Martin and Brownie’s Marine Group, Inc.

of the Registrant

Certification Pursuant

to Rule 13a-14(a)/15d-14(a)

Certification Pursuant

to Rule 13a-14(a)/15d-14(a)

Certification Pursuant

to Section 1350

XBRL Interactive Data File

Management Contract

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

June 26, 2020

March 31, 2021

Brownie’s

marine group, Inc.

Chief Executive Officer,

Christopher H.

Executive Officer,

executive officer

Financial Officer,

financial and accounting officer

1 unchanged sentence

of the registrant and in the capacities and on the dates indicated.

Chief Executive Officer, Director

BROWNIE’S

MARINE GROUP, INC.

AND SUBSIDIARIES

OF CONTENTS FOR CONSOLIDATED FINANCIAL STATEMENTS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Of Independent Registered Public Accounting Firm - Liggett & Webb P.A.

Balance Sheets As Of December 31, 2019 And 2018

Statements Of Operations For The Years Ended December 31, 2019 And 2018

Statements Of Stockholders’

Equity For The Years Ended December 31, 2019 And 2018

Statements Of Cash Flows For The Years Ended December 31, 2019 And 2018

To The Consolidated Financial Statements

of the Board, President and Chief Financial Officer

Christopher H.

Executive Officer and Director

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of:

the Stockholders and Board of Directors of:

Brownie’s

Marine Group, Inc.

on the Financial Statements

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Brownie’s Marine Group, Inc.

and Subsidiaries (the “Company”)

as of December 31, 2019 and 2018 and the related consolidated statements of operations, stockholders’

equity (deficit) and

cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as

the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2019 and 2018 and the results of its operations and its cash

flows for the years ended December 31, 2019 and 2018 in conformity with accounting principles generally accepted in the United

States of America.

as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’

equity (deficit)

and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to

as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally

accepted in the United States of America.

Paragraph –

Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has experienced net losses for consecutive periods

and has a large accumulated deficit.

These factors raise substantial doubt about the Company’s ability to continue as a

going concern.

Management’s plans in regard to these matters are described in Note 1.

The consolidated financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying

consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the consolidated financial statements, the Company has experienced net losses and has an accumulated deficit.

factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in

regard to these matters are described in Note 1.

The consolidated financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

consolidated financial statements are the responsibility of the Company’s management.

11 unchanged sentences

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial

statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures including examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also include evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

of Stock Options

described in Note 11 to the consolidated financial statements, the Company measures fair value of stock options at fair value

using level three inputs.

To determine fair value of stock options, the Company determines the appropriate valuation methodology

and assumptions, including unobservable inputs.

Stock options are measured at fair value using a Black-Scholes valuation model

that uses significant assumptions, including the Company’s stock price, volatility, risk-free interest rate, probability

of vesting and probability of exercise occurrence through expiration date.

management’s estimate for the fair value of stock options was highly judgmental as it involved our assessment of the significant

assumptions used by the Company because the fair value calculations were sensitive to changes in assumptions described above,

and certain inputs used in the determination of fair values were based on unobservable data, including, but not limited to, the

volatility, probability of vesting and probability of exercise.

test the fair value of stock options, we performed audit procedures that included, among others, evaluating the methodologies

used in the valuation model and the significant assumptions used by the Company.

Liggett & Webb, P.A.

2 unchanged sentences

Beach, Florida

BROWNIE’S MARINE GROUP, INC.

BROWNIE’S

MARINE GROUP, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

receivable - net

receivable - related parties

expenses and other current assets

BALANCE SHEETS

Current Assets

equipment and leasehold improvements, net

AND STOCKHOLDERS’

Accounts receivable

- related parties

Inventory, net

expenses and other current assets

Total current assets

Property, equipment

and leasehold improvements, net

Operating Lease Assets

Liabilities and stockholders’

equity (deficit)

payable and accrued liabilities

payable - related parties

deposits and unearned revenue

lease liabilities

payable- current

debentures, net

Current liabilities

payable, net of current

Accounts payable

and accrued liabilities

Accounts payable

- related parties

Customer deposits

and unearned revenue

Other liabilities

Operating lease

Current maturities

long term debt

Notes payable

debentures, net

Total current liabilities

Long term debt

operating lease liabilities

and contingencies (Note 12)

Commitments and

contingencies (see note 13)

Stockholders’

equity (deficit)

Preferred stock;

$0.001 par value:

10,000,000 shares authorized;

425,000 issued and outstanding

$0.0001 par value;

425,000 issued and outstanding as of December 31, 2020 and December 31, 2019.

Common stock;

1,000,000,000 shares authorized;

245,540,501 and 225,540,501 issued and outstanding at December

31, 2019 and 181,086,228 and 161,086,228 shares issued and outstanding at December 31, 2018

stock payable 138,941 shares and 138,941 shares, rescpectively as of December 31, 2019 and December 31, 2018

paid-in capital

306,185,206 shares issued and outstanding at December 31, 2020 and 245,540,501

shares issued and 225,540,501 shares outstanding at December 31, 2019, respectively.

Common stock payable 138,941 shares

and 138,941 shares, respectively as of December 31, 2020 and December 31, 2019.

Additional paid-in

(12,956,137 )

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STATEMENTS OF OPERATIONS

Years Ended December 31,

Net revenues - related parties

THE YEARS ENDED DECEMBER 31

revenues - related parties

Total net revenues

Cost of revenues

Cost of net revenues

- related parties

Royalties expense

- related parties

cost of revenues

Cost of revenues - related parties

Royalties expense - related parties

Total cost of revenues

Operating expenses

Selling, general and administrative

Research and development costs

Total operating expenses

Selling, general

and administrative

and development costs

operating expenses

Loss from operations

Other income (expense)

Gain on cencellation of debt

Loss on extinguishment of debt

Interest expense

Total other expense

Loss income before provision for income taxes

Provision for income taxes

Other expense, net

Loss on extinguishment

other expense - net

Loss income before provision for income

Provision for

$ (1,351,619 )

$ (1,421,740 )

Basic and diluted loss per common share

Basic and diluted weighted average common shares outstanding

Basic loss per common

Diluted loss per common share

Basic weighted average common shares

Diluted weighted average common

shares outstanding

accompanying notes are an integral part of these consolidated financial statements.

4 unchanged sentences

EQUITY (DEFICIT)

Stock Payable

FOR THE YEARS ENDED DECEMBER 31, 2020

Stockholders’

December 31, 2017

Balance, December 31, 2018

$ (10,182,778 )

issued for services

issued for licensing fee

of convertible note and related interest

Bonus Shares to CEO

December 31, 2018

Shares issued for services

Unit offering

Stock Option Expense

Incentive Bonus Shares

Modification of debt

Balance, December 31, 2019

(11,604,518 )

issued for services

Option Expense

Bonus Shares to CEO

of debt instruments

December 31, 2019

Shares issued for services

Shares issued for cash

Shares issued

for exercise for warrants

Stock Option Expense

Incentive Bonus Shares

Incentive shares issued

Balance, December

$ (12,956,137 )

2 unchanged sentences

MARINE GROUP, INC.

AND SUBSIDARIES

STATEMENTS OF CASH FLOWS

Years Ended December 31,

Cash flows from operating activities:

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

THE YEARS ENDED DECEMBER 31

Cash flows provided by operating activities:

$ (1,351,619 )

$ (1,421,740 )

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation and amortization

Gain on cencellation of debt

Adjustments to reconcile net loss to

cash used in operating activities:

Depreciation and

Loss on debt extinguishment

Shares issued for services

Stock option expense

Reserve (recovery) for bad debt

Reserve for slow moving inventory

Amortization of right-of-use assets

Amortization of debt discount

Additional shares issued as part of conversion of debt

Shares issued for

Stock Based Compensation-incentive

bonus shares issued to CEO and employees

Reserve (recovery)

Reserve for slow

moving inventory

Stock Based Compensation

Amortization of operating

Changes in operating assets and liabilities

Accounts receivable

Accounts receivable - related parties

Prepaid expenses and other current assets

Deferred tax asset, net

Accounts payable and accrued liabilities

Accounts payable - related parties

Customer deposits and unearned revenue

Other liabilities

Operating lease liabilities

Net cash used in operating activities

Change in accounts

receivable, net

Change in accounts

receivable - related parties

Change in inventory

Change in prepaid

expenses and other current assets

Change in other

Change in accounts

payable and accrued liabilities

Change in customer

deposits and unearned revenue

Change in operating

lease liability

Change in other

in accounts payable - related parties

Net cash used in

operating activities

Cash flows from investing activities:

Purchase of toolings and fixd assets

Net cash used in investing activities

of fixed assets

Net cash used in

investing activities

Cash flows from financing activities:

Proceeds from loans payable

Repayment of loans payable

Proceeds from unit offering

Net cash provided by financing activities

Net decrease in cash

Cash, beginning of year

Proceeds from sale of common stock

Proceeds from unit

Proceeds from exercise

Proceeds of debt

Repayment on notes

Net cash provided

by financing activities

Net change in cash

Cash, beginning of

Cash, end of year

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

Convertible debentures converted to equity

Common stock issued for licensing fee

Supplemental disclosures

of cash flow information:

Cash Paid for

Supplemental disclosure

of non-cash financing activities:

Operating lease obtained

in exchange for liabilities

for purchase of vehicle

accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

TO CONSOLIDATED FINANCIAL STATEMENTS

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and summary of significant account policies

of business –Brownie’s Marine Group, Inc., a Florida corporation (hereinafter referred to as the “Company,”

“our”

or “BWMG”), designs, tests, manufactures and distributes recreational hookah diving, yacht based

scuba air compressor and nitrox generation systems, scuba and water safety products through its wholly owned subsidiary Trebor

Industries, Inc., a Florida corporation organized in 1981 (“Trebor”), and manufactures and sells high pressure air

and industrial compressor packages (“Legacy SSA Products”) through its wholly owned subsidiary Brownie’s High

Pressure Compressor Services, Inc., a Florida corporation organized in 2017 (“BHP”).

In addition, in December 2017,

the Company formed BLU3, Inc., a Florida corporation organized in 2017 (“BLU3”), to develop and market innovation

electric shallow dive systems (“Ultra Dive Systems”).

Beginning in 2020 BLU3 has been engaged in the development of

the BLU3 Vent, a ventilator utilizing the Company’s existing BLU3 technology.

or “BWMG”), designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba

air compressor and nitrox generation systems, scuba and water safety products through its wholly owned subsidiary Trebor Industries,

Inc., a Florida corporation organized in 1981 (“Trebor”), and manufactures and sells high pressure air and industrial compressor

packages (“Legacy SSA Products”) through its wholly owned subsidiary Brownie’s High Pressure Compressor Services, Inc.,

a Florida corporation organized in 2017 (“BHPCS”).

In addition, in December 2017, the Company formed BLU3, Inc., a

Florida corporation organized in 2017 (“BLU3”), to develop and market innovation electric shallow dive systems (“Ultra

Dive Systems”).

When used herein, the “Company”

or “BWMG”

includes Brownie’s Marine Group, Inc., and our wholly-owned subsidiaries Trebor, BHP and BLU3.

includes Brownie’s Marine

Group, Inc., and our wholly-owned subsidiaries Trebor, BHP and BLU3.

of Presentation –

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Actual results could differ from those estimates.

and equivalents –

Only highly liquid investments with original maturities of 90 days or less are classified as cash

and equivalents.

These investments are stated at cost, which approximates market value.

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.

We incurred net losses for the years

ended December 31, 2019 and 2018 of $1,421,740 and $1,302,985, respectively.

The Company had an accumulated deficit as of December

31, 2019 of $11,604,518.

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 issuance of these financial statements.

We incurred net losses for the years ended December 31, 2020 and 2019 of

$1,351,619 and $1,421,740, respectively.

The Company had an accumulated deficit as of December 31, 2020 of $12,956,137.

March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic.

In response to this declaration

and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed

varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread

of the illness.

These measures have begun to have a significant adverse impact upon many sectors of the economy, including retail

response to these measures, the “stay at home”

order issued in April 2020 by the Governor of the State of Florida

where our business is located, and for the protection of our employees and customers, we temporarily reduced non-essential staffing

at our corporate office and altered work schedules at our manufacturing and warehouse facilities.

In addition, some of our senior

management and our office personnel began working remotely and maintaining full capabilities to serve our customers.

in mid-March 2020 we had taken steps to increase production to build up our finished goods inventory as well as purchasing additional

raw material inventory items thereby allowing us to maintain production if supply chain interruptions were to happen.

beginning of the second quarter of fiscal 2020 we experienced an impact on our sales to our brick and mortar customers as many

of the retail dealer stores temporarily closed.

In response, we ramped up our direct to consumer engagement.

On May 4, 2020 the

Florida “stay at home”

order was lifted and the phased reopening of the State of Florida began.

We have resumed all

of our historic operations, and all personnel have returned to full time work at our corporate office and manufacturing and warehouse

In addition, our historic attendance at boat shows and similar marketing events has been an important part of our

marketing and sales strategy.

As we do not expect that those type of events will be held in 2020 as a result of the COVID-19 pandemic,

we have migrated our marketing focus to online marketing in an effort to maintain product visibility.

While our revenues began

returning to comparable 2019 period levels beginning in mid-May 2020, we anticipate the impact of COVID-19 on the quarter ended

June 30, 2020 will be material, although we are not able to quantify an impact at this time.

and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying

degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.

These measures have had a significant adverse impact upon many sectors of the economy, including retail commerce.

we are not able to estimate the ultimate impact of the COVID-19 pandemic on our financial condition and future results of operations,

depending on the prolonged impact of the COVID-19 outbreak, this situation will have a significant adverse effect on our reported

results of operations for the six months ended June 30, 2020 and possibly beyond.

to which the coronavirus impacts our results and financial condition, however, will depend on future developments, which are highly

uncertain and cannot be predicted, including new information that may emerge and the actions to contain and treat its impacts,

among others.

depending on the prolonged impact of the COVID-19 outbreak, this situation has had a significant impact on one of our operating

companies in our reported results of operations for the year ended December 31, 2020.

The extent to which the coronavirus

impacts our results and financial condition, however, will depend on future developments, which are highly uncertain and cannot be predicted,

including new information that may emerge and the actions to contain and treat its impacts, among others.

Company believes that existing operational cash flow may not be sufficient to fund presently anticipated operations, this raises

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do not include any adjustments that may result from the outcome of these uncertainties.

Cash and equivalents –

highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents.

receivable –

Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail

The allowance for doubtful accounts are estimated based on historical customer experience and industry knowledge.

allowances for doubtful accounts totaled $17,784 and $9,200 at December 31, 2019 and 2018, respectively.

Inventory is stated at the lower of cost or net realizable value.

Cost is principally determined by using the average

cost method that approximates the First-In, First-Out (FIFO) method of accounting for inventory.

Inventory consists of raw materials

as well as finished goods held for sale.

The Company’s management monitors the inventory for excess and obsolete items and

makes necessary valuation adjustments when indicated.

Accounts receivable consist of amounts due from the sale of all of our products to wholesale and

retail customers.

The allowance for doubtful accounts are estimates that are developed by using standard quantitative

measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific

customer accounts for risk of loss.

The establishment of reserves requires the use of judgment and assumptions regarding the

potential for losses on receivable balances.

Though the Company considers these balances adequate and proper, changes in

economic conditions in specific markets in which the Company operates and any specific customer collection issues the Company

identifies could have a favorable or unfavorable effect on required reserve balances.

The allowances for doubtful

accounts totaled $16,872 and $17,784 at December 31, 2020 and 2019, respectively.

The Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value.

Management’s judgment is required to determine the reserve for obsolete or excess inventory.

Inventory on hand may exceed future

demand either because the product is outdated or because the amount on hand is more than will be used to meet future needs.

reserves are estimated by the individual operating companies using standard quantitative measures based on criteria established by the

Though the Company considers these reserve balances to be adequate, changes in economic conditions, customer inventory levels

or competitive conditions could have a favorable or unfavorable effect on required reserve balances.

and equipment and leasehold improvements –

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uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

January 1, 2018, we adopted the new accounting standard ASC 606, “

Revenue from Contracts with Customers ”

all the related amendments.

This standards core principal 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.

The new revenue

standard was applied using the modified retrospective method.

As a result of the adoption of this standard, there was no impact

on the financial statements for the years ended December 31, 2019 and 2018.

account for our revenues in accordance with the Accounting Standard Codification topic

606, “Revenue from Contracts with Customers”

and all the related amendments.

This standards core principal 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.

recognize the sale of products under single performance obligations upon shipment of the units as that is when ownership is transferred

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and the units have been shipped.

January 1, 2019, we adopted ASC 842 and all the related amendments using the modified retrospective method.

comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those

lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations.

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.

We did not reassess whether any contracts

entered into prior to adoption are leases or contain leases.

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 December 31, 2020.

Our leases generally have terms that range from three years for equipment and three to six

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.

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.

Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful

life or the lease term.

we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased

asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification

and measurement of the lease.

Costs associated with operating lease assets are recognized on a straight-line basis within operating

expenses over the term of the lease.

balance sheet information related to leases was as follows:

Operating Leases

Classification

December 31, 2020

Right-of-use assets

Operating lease assets

Current lease liabilities

Current operating lease liabilities

Non-current lease liabilities

Long-term operating lease liabilities

Total lease liabilities

term and discount rate were as follows:

December 31, 2020

Weighted average remaining lease term (years)

Weighted average discount rate

components of lease costs were as follows:

December 31, 2020

December 31, 2019

Operating lease cost

Variable lease cost

Total lease costs

disclosures of cash flow information related to leases were as follows:

December 31, 2020

December 31, 2019

Cash paid for operating lease liabilities

Operating right of use assets obtained in exchange for operating lease liabilities

of lease liabilities were as follows as of December 31, 2020:

Present value of lease liabilities

development costs –

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Under the provisions of the Financial Accounting Standards Board (“FASB”) ASC 460, Guarantor’s

Guarantees , the Company accrues a liability for estimated warranty policy costs based on historical information and experience.

Guarantees , the Company accrues a liability for estimated warranty policy costs based on standard quantitative measures based

on criteria established by the Company.

Estimates of costs to service its warranty obligations are based on historical experience, expectation

of future conditions and known product issues.

To the extent the Company experiences increased warranty claim activity or increased costs

associated with servicing those claims, revisions to the estimated warranty reserve would be required.

The Company engages in product

quality programs and processes, including monitoring and evaluating the quality of its suppliers, to help minimize warranty obligations.

The Company provides our customers with an industry standard one year warranty on systems sold and recognizes a warranty reserve

based on gross sales multiplied by the historical warranty expense return rate The warranty reserve at December 31, 2018 was charged

to cost of net revenues and is included in accrued expenses and is deemed sufficient to absorb any material or labor costs that

based on gross sales multiplied by the historical warranty expense return rate.

The warranty reserve

charged to cost of net revenues and is included in accrued expenses and is deemed sufficient to absorb any material or labor costs that

might be incurred on sales recorded during the period.

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$342,890, respectively.

conversion features on convertible debentures –

A beneficial conversion feature arises when the conversion price of

a convertible instrument is below the per share value of the underlying stock into which it is convertible.

The fair value of

the stock upon which to base the beneficial conversion feature (“BCF”) computation has been determined through use

of the quoted stock price.

value of financial instruments –

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per common share –

Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities.

Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period.

Diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares

Basic loss per share excludes any dilutive effects of options, warrants and convertible securities.

Basic loss 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 antidilutive.

At December 31, 2019 and December 31, 2018, 98,498,711 and 17,706,135, respectively, potentially dilutive shares were not recognized

as their inclusion would be anti-dilutive.

These shares reflect shares potentially issuable under convertible note agreements,

outstanding warrants, outstanding stock options and the conversion of preferred stock.

At December 31, 2020 and December 31, 2019, 210,500,305 and 98,498,711, respectively, potentially dilutive shares were

not recognized as their inclusion would be anti-dilutive.

These shares reflect shares potentially issuable under convertible note

agreements, outstanding warrants, outstanding stock options and the conversion of preferred stock.

accounting pronouncements

June 2018, FASB issued ASU 2018-7, “

Compensation –

Stock Compensation ”

(Topic 718) amending the scope

of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

The amendments specify

that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed

in a grantor’s own operations by issuing share-based payment awards.

The amendments specify that nonemployee share-based

payments are measured at grant-date fair value with the grant date being defined when the parties reach a mutual understanding

of the key terms and conditions of the share-based award.

ASU 2018-07 is effective for public entities for fiscal years beginning

after December 15, 2018, including interim periods within that fiscal year.

The adoption of ASU 2018—07 did not have an

impact on our operations, cash flows or financial condition.

February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize

(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted

basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of,

a specified asset for the lease term.

ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors;

however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model.

This standard

will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Company adopted this ASU effective January 1, 2019 (refer to Note 12).

Company has reviewed other ASU’s and has noted that they will have no material impact on its financial statements.

consists of the following as of:

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Finished goods

Total Inventory, net

of December 31, 2019 and 2018, the Company recorded reserves for obsolete or slow moving inventory of approximately $175,957 and

$143,957 respectively.

Total Inventory,

of December 31, 2020 and 2019, the Company recorded reserves for obsolete or slow moving inventory of approximately

$227,657 and $175,957 respectively.

Prepaid Expenses and Other Current Assets

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Prepaid inventory

Prepaid insurance

Prepaid expenses and other current assets

Prepaid expenses

and other current assets

Total prepaid

expenses and other current assets

Property and Equipment, Net

and equipment consists of the following as of:

and equipment consist of the following as of:

Tooling and equipment

Computer equipment and software

Leasehold improvements

accumulated depreciation and amortization

Total property and equipment

depreciation and amortization

Total property and equipment, net

and amortization expense totaled $21,005 and $9,282 for the years ended December 31, 2020 and 2019, respectively.

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Carmichael and three companies owned by Robert M.

as further discussed in note 7 - Related Parties Transactions.

Combined sales to these six entities for the years ended December

31, 2019 and 2018, represented 22.33% and 27.80%, respectively, of total net revenues.

Carmichael as further

discussed in note 7 - Related Parties Transactions.

Combined sales to these six entities for the years ended December 31, 2020 and 2019,

represented 18% and 22%, respectively, of total net revenues.

excess of 90% of our total net revenues are made up of product sales to customers within the state of Florida .

RELATED PARTIES TRANSACTIONS

Company sells products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht

Toys, companies owned by the brother of Robert M.

Terms of sale are no more favorable than those extended to any of

the Company’s other customers with similar sales volumes.

Combined net revenues from these entities for years ended December

31, 2019 and 2018, totaled $653,315 and $696,362, respectively.

Accounts receivable from Brownie’s SouthPort Diver’s,

Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2019, was $28,555, $10,914, and $4,973,

respectively.

Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s

Yacht Toys at December 31, 2018, was $49,443, $7,731, and $8,646, respectively.

Related Party Transactions

Company sells products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys,

companies owned by the brother of Robert M.

Terms of sale are no more favorable than those extended to any of the Company’s

other customers with similar sales volumes.

Combined net revenues from these entities for years ended December 31, 2020 and 2019, totaled

$821,474 and $653,315, respectively.

Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach

Divers, and Brownie’s Yacht Toys at December 31, 2020, was $29,443, $6,643, and $8,237, respectively.

Accounts receivable

from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31,

2019, was $28,555, $10,914, and $4,973, respectively.

Company sells products to Brownie’s Global Logistics, LLC.

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but no more favorable than those extended to Brownie’s strategic partners.

Terms of sale to BGL approximate cost or include

a nominal margin.

Terms of sale to BGL approximate cost or include a nominal

These terms are consistent with those extended to the Company’s strategic partners.

Strategic partner

terms on a per order basis include promotion of BWMG’s technologies and “Brownie’s”

brand, offered only

on products or services not offered for resale, and must provide for reciprocal terms or arrangements to BWMG on strategic partners’

Strategic partner terms on a per order

basis include promotion of BWMG’s technologies and “Brownie’s”

brand, offered only on products or services not

offered for resale, and must provide for reciprocal terms or arrangements to BWMG on strategic partners’

product or services.

BGL is fulfilling the strategic partner terms by providing exposure for BWMG’s technologies and “Brownie’s”

brand in the yachting and exploration community world-wide through its operations.

Combined net revenues from these three entities

for years ended December 31, 2019, and 2018, were $9,427 and $10,416, respectively.

is fulfilling the strategic partner terms by providing exposure for BWMG’s technologies and “Brownie’s”

in the yachting and exploration community world-wide through its operations.

Combined net revenues from these three entities for years

ended December 31, 2020, and 2019, were $16,943 and $9,427, respectively.

In addition, from time to time Mr.

purchases products from us for his personal use.

He either pays the amount at the time of purchase or we provide him a courtesy

account which he settles from time to time.

Carmichael purchases products

from us for his personal use.

He either pays the amount at the time of purchase or we provide him a courtesy account which he settles

from time to time.

Accounts receivable from BGL, 940 A and Mr.

Carmichael totaled $19,314, which is net

of credit memo of $14,944 for 940 A, and $12,603 at December 31, 2019, and December 31, 2018, respectively.

Carmichael totaled $23,321, and $4,230, which is net of

credit memo of $14,944 for 940 A at December 31, 2020, and December 31, 2019, respectively.

Company had accounts payable to related parties of $102,360 and $263,544 at December 31, 2020 and 2019, respectively.

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provides that the Company will pay 940 A 2.5% of gross revenues per quarter as a royalty.

Total royalty expense for the years

ended December 31, 2019 and 2018, totaled $50,643 and $52,221, respectively.

December 2018, Robert M.

Carmichael was issued 999,934 common shares in payment of accrued director fees through December 31,

The shares were valued at $0.0195 per share, totaling $19,499, the fair value on the date of grant.

Total royalty expense for the years ended December

31, 2020 and 2019, totaled $67,808 and $50,642, respectively.

July 29, 2019 the Company agreed to pay the members of the Company’s Board of Directors, including Mr.

Carmichael, a management

director, an annual fee of $18,000 for serving on the Company’s Board of Directors for the year ending December 31, 2019.

As of December 31, 2019, the Company has accrued $49,500 in Board of Directors’

On August 21, 2020 the Company’s

Board of Directors approved the continuation of the 2019 Board compensation policy for the year ending December 31, 2020.

December 31, 2020, the Company had accrued an additional $36,000 in Board of Directors’

August 1, 2017, Mr.

Mikkel Pitzner was appointed to serve on the Company’s Board of Directors, filling a vacancy on the

In December 2018, Mr.

Pitzner was issued 708,287 common shares in payment of accrued director fees through December 31,

The shares were valued at $0.0195 per share, totaling $13,812, the fair value on the date of grant.

The Company agreed to

Mikkel Pitzner was appointed to serve on the Company’s Board of Directors.

The Company agreed

Pitzner an annual fee of $6,000 and issued Mr.

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agreement expiring in January 2019.

During the years ended December 31, 2019 and 2018, the Company issued 3,333,333 and 1,666,667

shares of restricted common stock with a total fair value of $62,500.

During the year ended December 31, 2019, and 2018, the Company

recognized $31,250 and $31,250 of stock compensation pursuant to this agreement, respectively.

Commencing in February 2019, the

Company began paying Mr.

Pitzner, then a member of the Company’s Board of Directors, $9,300 per month, inclusive of a $1,300

auto allowance, for consulting services.

These payments are not covered by a written agreement.

In August, 2019 the agreement

Pitzner was terminated.

During the year ended December 31, 2019 the Company issued 3,333,333 shares of restricted

common stock with a total fair value of $62,500.

During the year ended December 31, 2019, the Company recognized $31,250 of stock

compensation pursuant to this agreement.

Commencing in February 2019, the Company began paying Mr.

Pitzner, then a member of the

Company’s Board of Directors, $9,300 per month, inclusive of a $1,300 auto allowance, for consulting services.

These payments

were not covered by a written agreement.

In August 2019 the agreement with Mr.

Pitzner was terminated, and Mr.

has been paid in full.

August 1, 2017, the Company entered into a six month employment agreement with Blake Carmichael, the son of Robert M.

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written employment agreement between the Company and Mr.

January 2018, the Company issued 2,000,000 shares of common stock to Dana Allan for his services for serving on our Board of Directors.

The grant date fair value of the shares issued was $50,200.

Allan also received 552,742 shares for his services on our Board

of Directors with a grant date fair value of $10,778.

Allen resigned as a director effective March 31, 2019.

December 2018, the Company issued 20,000,000 shares of common stock to Robert M.

Carmichael as an incentive bonus.

As the vesting

of the shares was subject to continued employment by Mr.

Carmichael through January 2, 2020, for the years ended December 31,

2019 and 2018, the Company treated the shares as issued but not as yet outstanding.

Expense for the issuance is being recognized

over the full vesting period, and accordingly, the Company recognized stock compensation expense of $188,314 and $10,576 during

the years ended December 31, 2019 and 2018.

As the vesting of

the shares was subject to continued employment by Mr.

Carmichael through January 2, 2020, for the years ended December 31, 2020, the

Company treated the shares as issued but not as yet outstanding for the twelve months ended December 31, 2019.

Expense for the issuance

is being recognized over the full vesting period, and accordingly, the Company recognized stock compensation expense of $1,280 and $188,144

during the years ended December 31, 2020 and 2019.

March 3, 2009, the Company entered into a Patent Purchase Agreement with Robert M.

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was appointed to the Company’s Board of Directors to fill a vacancy.

July 29, 2019 the Company issued options to purchase up to an aggregate of 22,838,094 shares of common stock to Mr.

Blake Carmichael.

The options were issued pursuant to a stock option grant agreement and are exercisable at $0.018 per share

for a period of five years from the date of issuance, subject to vesting over a period of six months.

The fair value of the options

totaled $95,862 using the Black-Scholes option pricing model with the following assumptions:

i) risk free interest rate of 2.10%,

ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%.

In August, 2019 8,304,761 options belonging

Effective July 29, 2019 the Company issued

options to purchase up to an aggregate of 12,457,142 shares of common stock to Mr.

The options were issued pursuant to

a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from the date of issuance,

subject to vesting over a period of six months.

The fair value of the options totaled $52,280 using the Black-Scholes option pricing

model with the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of

0%, iv) expected volatility of 172%.

In August 2019 8,304,761 options belonging to Mr.

Pitzner were cancelled.

Stock option expense recognized during the year ended December 31, 2019 was $55,641.

July 29, 2019 the Company has agreed to pay the members of the Company’s Board of Directors, including Mr.

a management director, an annual fee of $18,000 for serving on the Company’s Board of Directors for the year ending December

As of December 31, 2019, the Company has accrued $46,500 in Board of Directors’

Stock option expense

recognized during for the year ended December 31, 2019 was $17,429.

Effective July 29, 2019 the Company issued

options to purchase up to an aggregate of 10,380,952 shares of common stock to Blake Carmichael.

The options were issued pursuant

to a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from the date of issuance,

subject to vesting over a period of six months.

The fair value of the options totaled $43,582 using the Black-Scholes option pricing

model with the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of

0%, iv) expected volatility of 172%.

Stock option expense recognized during for the years ended December 31, 2020 and 2019 was

$5,362 and $38,212, respectively.

July 29, 2019 the Company issued Robert M.

Carmichael options to purchase up to 20,761,904 shares of common stock.

were issued pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of

issuance, subject to vesting over a period of six months.

The fair value of the options totaled $87,147 using the Black-Scholes

option pricing model with the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend

yield of 0%, iv) expected volatility of 172%.

Stock option expense of $76,423 was recognized during the year ended December 31,

The options were issued

pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to

vesting over a period of six months.

The fair value of the options totaled $87,147 using the Black-Scholes option pricing model with

the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected

volatility of 172%.

Stock option expense of $10,274 and $76,423 was recognized during the years ended December 31, 2020

and 2019, respectively.

In January 2020 the Company issued 2,647,065 shares

of common stock in exchange for $45,000 to an accredited investor and daughter of Mr.

Hyatt, a member of our Board of Directors.

In February 2020 the Company issued 12,500,000

shares of common stock related to the exercise of common stock purchase warrants at an exercise price of $.01, for a total conversion

price of $125,000.

The shares were issued to Mr.

Hyatt, a member of the Board of Directors.

In April, 2020 the Company issued 10,000,000 shares

of common stock related to the exercise of common stock purchase warrant at an exercise price of $.01 per share.

The Company received

proceeds of $100,000 upon such exercise from Mr.

Also, in April 2020 the Company sold an aggregate

of 20,000,000 shares of its common stock at a purchase price $0.025 per share to Mr.

Hyatt, resulting in proceeds to the Company of $500,000.

On April 14, 2020 the Company entered into a Non-Qualified

Stock Option Agreement with Mr.

Under the terms of the option agreement, as additional compensation the Company granted Mr.

Carmichael an option to purchase up to an aggregate of 125,000,000 shares of the Company’s common stock at an exercise price of

$.045 per share.

This option is further detailed in Note 11.

During the year ended December 31, 2020 the Company expensed $655,515 in

relation to this option agreement.

On May 21, 2020, the Company issued to Mr.

Carmichael a total 725,087 shares with a fair value of $31,904 for

his work on the BLU3-VENT project.

August 31, 2020, September 30, 2020 and October 31, 2020 the Company issued and aggregate of 2,795,000 shares

with a fair market value of $45,292 to Christopher Constable on behalf of Brandywine, LLC in accordance with a consulting

contract dated August 10, 2020.

This consulting agreement was terminated upon the execution of Mr.

Constable’s employment agreement.

On November 5, 2020 the company entered into a

Non-Qualified Stock Option agreement with Christopher Constable as part of his employment agreement.

Under the terms of the option agreement,

the Company granted Mr.

Constable a 5-year option to purchase 5,434,783 shares of the Company’s common stock at an exercise price

of $.0184, the “Compensation Options”.

The Compensation Options were immediately vested.

The fair value of the options on

the date of the grant was $106,199 using the Black-Scholes option pricing model with the following assumptions:

i) risk free interest

rate of .16%, ii) expected life of 2.5 years, iii) dividend yield of 0%, iv) expected volatility of 341%.

Stock option expense recognized

during the year ended December 31, 2020 for this option was $106,890.

Also, on November 5, 2020 the Company entered into a Non-Qualified Option Agreement with Mr.

the terms of this option agreement, as additional compensations, the Company granted 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 $.0184 per share.

This option is

further detailed in Note 11.

During the year ended December 31, 2020, the company did not book any expense related to this option agreement.

Accounts Payable and Accrued Liabilities

payable and accrued liabilities consists of the following as of:

December 31, 2019

December 31, 2018

Accounts payable trade and other

Accounts payable trade

Accrued payroll and fringe benefits

6 unchanged sentences

liabilities consist of the following as of:

December 31, 2019

December 31, 2018

Asset purchase agreement payable

Accrued royalties expense

Asset purchase agreement

Accrued expenses

1 unchanged sentence

Accrued Board of Directors fees

Accrued legal settlement

CONVERTIBLE DEBENTURES, CONVERTIBLE NOTES AND LOANS PAYABLE

Accrued legal

Convertible Debentures, and Loans Payable

debentures consist of the following at December 31, 2020:

debentures consist of the following at December 31, 2019:

On May 3, 2011,

the Company borrowed $300,000 in exchange for a convertible debenture.

The convertible debenture carried an interest rate

of 10% interest per annum.

The lender could at any time convert any portion of the convertible debenture to common shares

at a 30% discount of the “Market Price”

of the stock based on the average of the previous 10 days weighted average

closing prices on the date prior to the notice of conversion.

The Company could prepay the convertible debenture plus accrued

interest at any time before maturity.

In addition, as further inducement for loaning the Company the funds, the Company granted

the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share, respectively.

As a result, the Company allocated

fair market value (“FMV”) to both the BCF and to the warrants, or $206,832, which was recorded as a discount against

the debenture.

The Company accreted the discount to interest expense.

The Company recognized the FMV of the related warrants

as $45,000 using the Black-Scholes valuation model.

On November 15,

2018, the Company entered into a Note Conversion Agreement pursuant to which the Noteholder converted $526,583 of principal

and accrued interest due under the convertible debenture into 50,000,000 shares of the Company’s common stock in full

satisfaction of this obligation.

The Company recorded a loss on this conversion of this debt of $248,417 which was charged

to interest expense.

Company borrowed $10,000 in exchange for a convertible debenture.

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bid prices over the preceding five trading days.

The Company valued the BCF of the convertible debenture at $4,286, which

was accreted to interest expense over the period of the note.

The Company entered

into three new convertible debenture agreements upon sale/assignment of the original lenders.

Because the stated terms of

the new convertible debenture agreement and principal amounts were significantly different from the original convertible debenture,

including analysis of value of the BCF at the assignment/purchase date, the transactions were treated as extinguishment of

the old convertible debentures and recorded as new for accounting purposes.

The conversion price

under the convertible debentures was $0.37125 and the lender could convert at any time until the convertible debenture plus

accrued interest was paid in full.

Various other fees and penalties applied if payments or conversions were not done timely

by the Company.

The lender was limited to maximum conversion of 4.99% of the outstanding common stock of the Company at any

On June 15, 2018,

the Company entered into a Note Satisfaction, Settlement and General Release Agreement with the lender.

Under the terms of

the agreement, the lender released and discharged the Company from any further obligation due the lender with no further consideration.

The Company recognized income of $2,743 in principal and $4,457 in related accrued interest.

1, 2017 the Company entered into a $50,000 principal amount 6% secured convertible promissory note, due December 1, 2018,

The Company valued the beneficial conversion feature of the convertible debenture

at $4,286, which was accreted to interest expense over the period of the note.

As of February 22, 2021 the noteholder

requested conversion and the note was converted into 422,209 shares at a conversion price of $.035 per share.

December 1, 2017 the Company entered into a $50,000 principal amount 6% secured convertible promissory note, due December

1, 2018, subject to extension.

The note is secured with such assets of the Company equal to the principal and accrued interest, and

is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert M.

The conversion price

under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted in year

The note is secured with such assets of the Company equal to the principal and accrued interest,

and is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert M.

conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if

converted in year five.

The lender may convert at any time until the note plus accrued interest is paid in full.

Various other fees and penalties

apply if payments or conversions are not done timely by the Company.

The lender will be limited to maximum conversion of 9.99%

of the outstanding common stock of the Company at any one time.

In 2019, the maturity date of the note was extended for one

Various other

fees and penalties apply if payments or conversions are not done timely by the Company.

The lender will be limited to maximum

conversion of 9.99% of the outstanding common stock of the Company at any one time.

In 2019, the maturity date of the note

was extended for one additional year to December 31, 2019 with a reduction in the conversion price to $0.01 per share.

Company recorded a loss on extinguishment of debt of $32,000 upon the modification of conversion price.

Subsequent to December

31, 2019, the maturity date was further extended to December 1, 2020 and on December 21, 2020, the maturity

date was further extended to December 31, 2021.

December 5, 2017 the Company entered into a $50,000 principal amount 6% secured convertible promissory note, due December

4, 2018, subject to extension.

The note is secured with such assets of the Company equal to the principal and accrued interest,

and is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert M.

conversion price under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if

converted in year five.

The lender may convert at any time until the note plus accrued interest is paid in full.

Various other

fees and penalties apply if payments or conversions are not done timely by the Company.

The lender will be limited to maximum

conversion of 9.99% of the outstanding common stock of the Company at any one time.

In 2019, the note was extended for one

additional year to December 31, 2019 with a reduction in the conversion price to $0.01 per share.

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Subsequent to December 31, 2019, the maturity

date was further extended to December 1, 2020.

On December 5, 2017

the Company entered into a $50,000 principal amount 6% secured convertible promissory note, due December 4, 2018, subject

to extension.

The note is secured with such assets of the Company equal to the principal and accrued interest, and is guaranteed

by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Robert M.

The conversion price

under the note initially ranged from $0.02 per share if converted in the first year to $0.125 per share if converted in year

The lender may convert at any time until the note plus accrued interest is paid in full.

Various other fees and penalties

apply if payments or conversions are not done timely by the Company.

The lender will be limited to maximum conversion of 9.99%

of the outstanding common stock of the Company at any one time.

In 2019, the note was extended for one additional year to

December 31, 2019 with a reduction in the conversion price to $0.01 per share.

The Company recorded a loss on extinguishment

of debt of $99,000 upon the modification of conversion price.

Subsequent to December 31, 2019, the maturity date was further

date was further extended to December 31, 2020 2020 and on December 21, 2020, the maturity date was further

extended to December 31, 2021.

2 unchanged sentences

During the years ended December 31, 2020 and 2019, the Company repaid $60,000 and $16,572 respectively.

The loan balance

was $100,000 and $116,572 as of December 31, 2019 and 2018 respectively.

balance was $40,000 and $100,000 as of December 31, 2020 and 2019 respectively.

Company entered into a non-interest-bearing loan of $10,000 with Hoboken Street Association on October 15, 2016.

1 unchanged sentence

was $10,000 as of December 31, 2020 and 2019 respectively.

On February 22, 2021 the debt on this note was forgiven as part

of the conversion of the convertible note due to Hoboken Street Association as discussed in the convertible note

section above.

September 30, 2019 BLU3 financed the purchase of certain plastic molding equipment through Marlin Capital Solutions (“Marlin

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The loan balance was $60,070 as of December 31, 2020.

components of the provision for income tax expense are as follows for the years ended:

Current taxes

Change in deferred taxes

Change in valuation allowance

Provision for income tax expense

following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31,

2019 and 2018:

Deferred tax assets:

Equity based compensation

Allowance for doubtful accounts

Net operating loss carryforward

Reserves for slow moving inventory

Total deferred tax assets

Valuation allowance

Deferred tax assets net of valuation allowance

Less deferred tax assets –

non-current, net of valuation allowance

Deferred tax assets –

current, net of valuation allowance

effective tax rate used for calculation of the deferred taxes as of December 31, 2019 was 25.35%.

The Company has established

a valuation allowance against deferred tax assets of $1,583,000, due to the uncertainty regarding realization, comprised primarily

of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, 100% reserve

against the reserves for slow moving inventory, and 100% reserve against the deferred tax assets attributable to the equity based

compensation.

The change in valuation allowance was an increase of $239,300.

The Company has approximately $4,758,000 of net loss

carryforward that expire through 2037 and $729,000 that carryforward indefinitely, but is limited to 80% of taxable income in

any one year.

effective tax rate used for calculation of the deferred taxes as of December 31, 2018 was 25.35%.

The Company has established

a valuation allowance against deferred tax assets of $1,343,700 or 99.8%, due to the uncertainty regarding realization, comprised

primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts,

100% reserve against the reserves for slow moving inventory and 100% reserve against the deferred tax assets attributable to the

equity based compensation.

The change in valuation allowance was an increase of $306,500.

significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as

Statutory tax rate

State tax, net of Federal benefits

Permanent differences

Change in valuation allowance

Effective tax rate

COMMITMENTS AND CONTINGENCIES

time to time the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including

matters relating to product liability claims.

Such product liability claims sometimes involving wrongful death or injury have

historically been covered by product liability insurance, which provided coverage for each claim up to $1,000,000.

third quarter of 2014, the Company did not renew its product liability insurance since the renewal policy amount was cost prohibitive.

As of August 15, 2017, the Company has obtained Product Liability Insurance, although prior claims are not covered under the new

The initial term of the policy was through August 14, 2018 and was renewed through August 14, 2020.

The Company, Trebor and other third parties,

are each named as a co-defendants under actions initially filed in March 2015 in the Circuit Court of Broward County under Case

CACE-15-03238 and CACE -16-0000242 by the Estate of Ernesto Rodriguez, claiming wrongful death and products liability resulting

in the decedent’s drowning death while using a Brownie’s Third Lung product.

Plaintiff claimed damages exceeding

The Company has recorded $50,000 of accrued legal settlement as of December 31, 2019.

This amount is included in other

liabilities (See Note 9).

This claim was settled in May 2020.

April 2019, the Company reached a settlement agreement with a customer regarding returned merchandise agreeing to refund $65,000.

The Company determined the returned merchandise had little or no value and the adjustment was charged to cost of revenues at December

In addition, the Company recognized $1,500 in related legal fees in this matter as of December 31, 2018.

As of December

31, 2019, the balance owed is $23,176.

August 14, 2014, the Company entered into a new lease commitment.

Terms of the new lease include a 37-month term commencing on

September 1, 2014;

payment of $5,367 security deposit;

base rent of approximately $4,000 per month over the term of the lease

plus sales tax;

and payment of 10.76% of annual operating expenses (i.e.

common areas maintenance), which is approximately $2,000

per month subject to periodic adjustment.

On December 1, 2016, we entered into an amendment to the initial lease agreement, commencing

on October 1, 2017, extending the term 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.

November 11, 2018, the Company entered a new lease agreement for approximately 8,025 square feet adjoining its existing facility

in Pompano Beach, Florida.

Terms of the new lease include a 69-month term commencing on January 1, 2019, or the date the Company

takes possession of the premises, if earlier;

a $6,527 security deposit;

initial base rent of approximately $4,848 per month escalating

at 3% per year during the term of the lease plus Florida state sales tax and payment of 10.11% of the buildings annual operating

expenses (i.e.

common area maintenance) which is approximately $1,679 per month subject to adjustment as provided in the lease.

Company believes that the facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate

capacity to meet demand for the foreseeable future.

balance sheet information related to leases was as follows:

Operating Leases

Classification

December 31, 2019

Right-of-use assets

Operating right of use assets

Current lease liabilities

Current operating lease liabilities

Non-current lease liabilities

Long-term operating lease liabilities

Total lease liabilities

term and discount rate were as follows:

December 31, 2019

Weighted average remaining lease term (years)

Weighted average discount rate

components of lease costs were as follows:

December 31, 2019

Operating lease cost

Variable lease cost

Total lease costs

disclosures of cash flow information related to leases were as follows:

December 31, 2019

Cash paid for operating lease liabilities

Operating right of use assets obtained in exchange for operating lease liabilities

of lease liabilities were as follows as of December 31, 2019:

Trebor Industries Office Lease

BMG Office Lease

Total lease payments

Total Loan Payments

Current portion

of Loan payable

Non-Current Portion

of Loan Payable

August 21, 2020 the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019

Mercedes Benz Sprinter delivery van.

The installment agreement is for $55,841 with a zero interest rate payable over 60 months

with a monthly payment of $931 and is personally guaranteed by Mr.

The first payment was due on October 5, 2020.

loan balance as of December 31, 2020 was $52,118.

2025 and thereafter

Imputed interest

Present value of lease liabilities

August 7, 2017 the Company entered into an Exclusive Distribution Agreement with Lenhardt & Wagner GmbH (“L&W”),

a German-based company engaged in the development, manufacturing and sales of high pressure air and industrial gas compressor

Under the terms of the Exclusive Distribution Agreement, the Company was appointed the exclusive distributor of L&W’s

complete product line in North America and South America, including the Caribbean (the “Territory”).

Pursuant to an

intercompany assignment, BHP is party to the agreement.

Under the terms of the agreement, the Company was granted a non-exclusive,

non-transferrable and irrevocable right to use certain of L&W’s trademarks in connection with the marketing, use, sale

and service of the products in the Territory.

The agreement is for an initial term of five years, and will automatically renew

for one additional five year term unless terminated by either party upon one year written notice prior to the expiration of the

then current term.

Either party may terminate the agreement without cause upon one year prior written notice to the other party.

In addition, L&W may terminate the agreement for cause upon 120 days prior notice to us, subject to certain cure periods.

May 2018 the Company entered into an agreement with an employee to pay him $28 an hour in cash and $10 per hour in common stock

not to exceed 40 hours a week.

The stock price is determined at the end of each month using the 10-day weighted average of the

During the year ended December 31, 2018, the Company issued 449,550 shares of common stock valued at $8,950 with

an average fair value of $0.02 per share for services.

During the year ended December 31, 2019, the Company issued 1,332,885 shares

of common stock valued at $19,391 an average fair value of $0.0145 per share for services.

On March 29, 2019 the Company reviewed

the agreement with the employee and agreed to increase the hourly rate to $30 per hour in cash and continue to pay $10 per hour

in common stock not to exceed 40 hours a week.

It was also agreed by employee that the stock price will be the closing price of

the stock at end of each month.

As of December 31, 2019, the Company has not issued common stock for the month of December 2019

and has a recorded liability of $1,200.

April 2018 the Company entered into a Patent License Agreement (the “STS Agreement”) with Setaysha Technical Solutions,

LLC (“STS”) pursuant to which the Company licensed certain intellectual property, including patent rights, non-patent

rights and knowhow from STS.

Under the STS Agreement, the Company paid an initial license fee in April 2018 through the issuance

of 759,422 shares of common stock with a fair value of $30,000 which is being amortized on a straight line basis over its five

The STS Agreement further provides for royalties to be paid based on annual net revenues achieved.

Effective December

31, 2019, the Company entered into Addendum No.

1 to the Patent License Agreement (“Addendum No.

1”) to amend the

payment due upon the first commercial sale of NEMO.

In accordance with Addendum No.

1, $8,250 was paid in cash and $8,250 was

accrued as of December 31, 2019.The Company issued 828,221 shares of common stock in satisfaction of $13,500 for the first commercial

sale of NEMO with a fair value of $19,635.

The Company accrued $13,828 as of December 31, 2019 as royalty payments for the fourth

quarter commercial sales of NEMO.

Total note payments

Current portion

of note payable

Non-Current Portion

of notes payable

May 12, 2020, we received an unsecured loan from Bank United in the principal amount of $159,600 (the “SBA Loan”),

under the Paycheck Protection Program (“PPP”), which was established under the recently enacted Coronavirus Aid, Relief,

and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration.

The intent and

purpose of the PPP is to support companies, during the COVID-19 pandemic, by providing funds for certain specified business expenses,

with a focus on payroll.

As a qualifying business as defined by the SBA, we used the proceeds from this loan to primarily help

maintain our payroll and cover our rent and utilities as we navigated our business through the lockdowns associated with the COVID-19

pandemic until our return to normal operations earlier in 2020.

term of the note is two years, though it may be payable sooner in connection with an event of default under the note.

Loan carries a fixed interest rate of one percent per year, and a monthly payment of $8,983, with the first payment due seven

months from the date of initial cash receipt.

Under the CARES Act and the PPP, certain amounts of loans made under the PPP may

be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility

costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels.

the SBA Loan for qualifying expenses and have applied for forgiveness of the SBA Loan in accordance with the terms of the CARES

The loan balance as of December 31, 2020 was $159,600.

Company has applied for forgiveness through its lender, and the application has been processed.

The Company expects the

entire balance of the loan to be forgiven under the parameters of the CARES Act.

The lender has waived any payments on this loan,

until a decision on forgiveness is rendered by the U.S.

Small Business Administration.

Total loan payments

Current portion

of SBA Loan payable

Non-Current Portion

of SBA Loan payable

Shareholders’

Company had 225,540,501 and 161,086,228 common shares outstanding at December31, 2019 and December 31, 2018, respectively.

August 1, 2017, Mr.

Pitzner was appointed to serve on the Company’s Board of Directors, filling a vacancy on the board.

The Company has agreed to pay Mr.

Pitzner an annual fee of $6,000 and issue Mr.

Pitzner 5,000,000 shares of restricted common

stock under a consulting agreement expiring in January 2019.

During the years ended December 31, 2019 and 2018, the Company issued

3,333,333 and 1,666,667 shares of restricted common stock, respectively with a total fair value of $62,500.

In December 2018,

Pitzner was issued 708,287 common shares in payment of accrued director fees through December 31, 2018.

The shares were valued

at $0.0195 per share, totaling $13,812, the fair value on the date of grant.

During the years ended December 31, 2019 and 2018,

the Company recorded $31,250 and $31,250 of stock compensation pursuant to this agreement respectively.

In August 2019 the agreement

was cancelled.

January 2018, the Company issued 2,000,000 shares of common stock to Mr.

Allan for his services for serving on its Board of Directors.

The grant date fair value of the shares issued was $50,200.

Allan also received 552,742 shares for his services on the Company’s

Board of Directors with a grant date fair value of $10,778.

Allen resigned as a director effective March 31, 2019.

January 6, 2018, the Company issued 217,391 units consisting of 869,565 shares of common stock and 217,391 common stock purchase

warrants exercisable at $0.0115 per share for a fair value of $10,000.

The warrants are exercisable at any time for a period of

two years from date of issuance.

February 2, 2018, the Company issued 434,783 units consisting of 1,739,130 shares of common stock and 434,783 common stock purchase

warrants exercisable at $0.0115 per share for a fair value of $20,000.

The warrants are exercisable at any time for a period of

two years from date of issuance.

April 4, 2018, the Company issued 142,857 shares of common stock to an employee of the Company with a value of $0.014 per share

totaling $2,000 which was charged to stock based compensation.

April 6, 2018, the Company entered into the STS Agreement issuing 759,422 shares of common stock with a fair value of $0.0395

per share totaling $30,000.

May 2018, the Company issued 200,000 shares of common stock to two consultants with a value of $0.0425 per share totaling $8,500

which was charged to consulting fees expense.

July 2018, the Company issued an aggregate of 722,160 shares of stock to 16 employees under a one-time employee stock incentive

The shares were fair valued at $0.0209 per share based on market value at the time of the grant, with a total value recognized

November 15, 2018, the Company entered into a Note Conversion Agreement pursuant to which the Noteholder converted $526,583 of

principal and accrued interest due into 50,000,000 shares of the Company’s common stock in full satisfaction of this obligation.

The Company recorded a loss on this conversion of this debt of $248,417 which was charged to interest expense.

December 2018, the Company issued 2,083,197 common shares to a consultant with a fair value of $0.0195 per share totaling $40,622

which was charged to stock based compensation.

Company had 306,185,206 and 225,540,501 common shares outstanding at December 31, 2020 and December 31, 2019,

respectively.

December 2018, the Company issued 20,000,000 shares of common stock to Robert M.

7 unchanged sentences

and 2019 respectively.

December 2018, Robert M.

Carmichael was issued 999,934 common shares in payment of accrued director fees through December 31,

The shares were valued at $0.0195 per share, totaling $19,499, the fair value on the date of grant.

January 2019, the Company entered into an investment banking and corporate advisory agreement.

The term of the agreement was for

one year and provided for compensation of 2,700,000 common shares with a fair value of $29,700 plus related expenses.

were issued in February2019 and March 2019.

The term of the agreement was for one

year and provided for compensation of 2,700,000 common shares with a fair value of $29,700 plus related expenses.

The shares were issued

in February, 2019 and March 2019.

For the year ended December 31, 2019 the Company recorded $29,700 in stock based compensation

January 2019, the Company issued 1,000,000 common shares with a fair value of $12,500 to a consultant for general administrative

advisory services for the period from December 1, 2018 through April 30, 2019, of which $10,000 and $2,500 was expensed during

year ended December 31, 2019 and 2018 respectively.

advisory services for the period from December 1, 2018 through April 30, 2019, of which $10,000 was expensed during year ended

December 31, 2019.

March 2019 the Company issued Mr.

1 unchanged sentence

of common stock and 50,000,000 18 month common stock purchase warrants exercisable at $0.01 per share in consideration of $500,000.

The Company used the proceeds from the sale for product research and development and working capital purposes.

The Company did

not pay any fees or commissions in connection with the sale of the unit.

May 2018 the Company entered into an agreement with an employee to pay him $28 an hour in cash and $10 per hour in common stock

not to exceed 40 hours a week.

The stock price is determined at the end of each month using the 10-day weighted average of the

During the year ended December 31,2018, the Company issued 449,550 shares of common stock valued at $8,950 with an

average fair value of $.02 per share for accrued services.

During the year ended December 31, 2019, the Company issued 1,332,885

shares of common stock valued at $19,391 an average of ($0.0145) per share for services.

On March 29, 2019, the Company reviewed

the agreement with the employee and agreed to increase the hourly rate to $30 per hour in cash and continue to pay $10 per hour

in shares of common stock not to exceed 40 hours a week.

It was also agreed by the employee that the stock price will be the closing

price of the stock at end of each month.

As of December 31, 2019, the Company has not issued common stock for the month of December

2019 and has a recorded liability of $1,200.

The Company did not pay any fees or commissions in connection with the sale of the unit.

the year ended December 31, 2019, the Company issued 1,332,885 shares of common stock valued at $19,391 an average of ($0.0145)

per share for services to an employee related to an employment agreement that provided $10 per hour to be paid in common stock.

May 2019, the Company engaged a consultant to provide certain specified services under the terms of a letter agreement.

1 unchanged sentence

the Company issued 1,000,000 common shares with a fair value of $16,000 to a consultant which was expensed during the year ended

December 31, 2019, and agreed to pay the consultant $1,500 per month.

If the Company acquired or merged with a certain specified

entity, the consultant was entitled to a $10,000 fee payable in common stock.

If the Company acquired merged with another certain

specified entity, the consultant was entitled to a $25,000 fee payable in common stock.

Neither transaction occurred and the agreement

expired on December 31, 2019.

December 31, 2019.

July 17, 2019 the Company sold 2,500,000 shares of common stock for proceeds of $25,000 ($0.01 per share).

2 unchanged sentences

September 2019 the Company issued 1,250,000 shares of common stock valued at $20,375 ($0.016 per share) fair market value, pursuant

to an investor relations agreement, and agreed to pay $2,500 and an additional $2,500 after 45 days for a variety of services,

including investor and public relations assessment, marketing surveys, investor support, and strategic business planning.

agreement is for six months and may renew for an additional six months on the same terms unless either party notifies the other

of non-renewal prior to the renewal date.

to an investor relations agreement.

October 2019, the Company issued 191,087 shares of common stock valued at $4,395, an average of $.023 per share for consulting

2 unchanged sentences

with a fair value of $30,000 which is being amortized on a straight-line basis over its five year term.

The STS Agreement further

provides for royalties to be paid based on annual net revenues achieved.

In December 2019, the Company entered into Addendum No.

1 to amend the payments due upon the first commercial sale of NEMO.

In accordance with Addendum No.

1, $8,250 was paid in cash

and $8,250 was accrued as of December 31, 2019.

The Company issued 828,221 shares of common stock with a fair value of $18,635

in satisfaction of $13,500 for the first commercial sale.

The Company accrued $13,828 in December 2019 as royalty payments for

the fourth quarter commercial sales of NEMO.

The Company issued 828,221

shares of common stock with a fair value of $18,635 in satisfaction of $13,500 for the first commercial sale in October, 2019.

January 2020 the Company issued 2,647,065 shares of common stock in exchange for $45,000 to an accredited investor and daughter

Hyatt, a member of our Board of Directors.

February 2020 the Company issued 12,500,000 shares of common stock related to the exercise of common stock purchase warrants at

an exercise price of $.01, for a total conversion price of $125,000.

The shares were issued to Mr.

Hyatt, a member of the Board

of Directors.

June 9, 2020 the Company issued an aggregate of 330,636 shares of common stock to an employee for services performed in December

2019 and the first five months of 2020.

The fair value of these shares was $9,520.

April 2, 2020 the Company issued 10,000,000 shares of common stock related to the exercise of common stock purchase warrant at

an exercise price of $.01 per share.

The Company received proceeds of $100,000 upon such exercise from Mr.

Hyatt, a member of

our Board of Directors.

April 10, 2020 the Company sold an aggregate of 20,000,000 shares of its common stock at a purchase price $0.025 per share to

two accredited investors, including Mr.

Hyatt, in a private transaction, resulting in proceeds to the Company of $500,000.

April 9, 2020, the Company issued to an investor relations consultant, 3,000,000 shares of common stock, with a fair market value

April 9, 2020, the Company issued, to a corporate communications consultant 2,000,000 shares of its common stock with a fair market

value of $89,000.

April 28, 2020, the Company issued 1,333,333 shares of its common stock as incentives to two employees.

The fair value of the

stock was $64,000.

May 21, 2020, the Company issued 3,658,633 shares of common stock with a fair market value of $160,980 to six individuals for

compensation related to the BLU3-VENT project.

Of the shares issued, Mr.

Carmichael received a total 725,087 shares with a fair

value of $31,904 and Blake Carmichael, CEO of BLU3, Inc.

who is also Mr.

Carmichael’s adult son, received a total of 849,305

shares with a fair value of $37,369.

The balance of the shares were received by employees of the Company and independent contractors.

the third quarter of 2020 the Company issued 280,038 shares of its common stock to an employee for services performed from June

2020 to August 2020.

The fair value of these shares was $5,890.

the third and fourth quarters of 2020 the Company issued 2,795,000 shares of its common stock to Christopher Constable

under the consulting agreement with Brandywine, LLC.

The aggregate fair value of these shares was $45,659.

December 15, 2020, the Company issued 2,100,000 shares of its common stock with a fair value of $40,320 related

to an agreement with Newbridge Securities to provide investment banking and business advisory services.

the second quarter of 2010, the holder of the majority of the Company’s outstanding shares of common stock approved an amendment

12 unchanged sentences

31, 2020 and 2019, the 425,000 shares of Series A Convertible Preferred Stock are owned by Robert M.

Incentive Plan

August 22, 2007, the Company adopted an Equity Incentive Plan (the “Plan”).

The Plan expired on August 22, 2017.

297 options issued under the Plan had expired as of December 31, 2019.

Compensation Plan Information as of December 31, 2018:

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

Compensation Plan Information as of December 31, 2019:

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

July 29, 2019 the Company issued options to purchase up to an aggregate of 12,457,142 shares of common stock to Mr.

Blake Carmichael.

The options were issued pursuant to a stock option grant agreements and are exercisable at $0.018 per share

for a period of five years from the date of issuance, subject to vesting over a period of six months.

The fair value of the options

totaled $95,862 using the Black-Scholes option pricing model with the following assumptions:

i) risk free interest rate of 2.10%,

ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected volatility of 172%.

In August 2019 8,304,761 options belonging

options were issued pursuant to a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from

the date of issuance, subject to vesting over a period of six months.

The fair value of the options totaled $52,280 using the

Black-Scholes option pricing model with the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years,

iii) dividend yield of 0%, iv) expected volatility of 172%.

In August 2019 8,304,761 options belonging to Mr.

Pitzner were cancelled.

Stock option expense recognized during for the year ended December 31, 2019 was $17,429.

July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 shares of common stock to Blake Carmichael.

options were issued pursuant to a stock option grant agreements and are exercisable at $0.018 per share for a period of five years from

the date of issuance, subject to vesting over a period of six months.

The fair value of the options totaled $43,582 using the Black-Scholes

option pricing model with the following assumptions:

i) risk free interest rate of 2.10%, ii) expected life of 5 years, iii) dividend

yield of 0%, iv) expected volatility of 172%.

Stock option expense recognized during for the years ended December 31, 2020 and 2019 was

$5,362 and $38,212, respectively.

July 29, 2019 the Company issued Robert M.

Carmichael options to purchase up to 20,761,904 shares of common stock.

were issued pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of

issuance, subject to vesting over a period of six months.

The fair value of the options totaled $87,147 using the Black-Scholes

The options were issued

pursuant to a Grant Agreement and are exercisable at $0.018 per share for a period of five years from the date of issuance, subject to

vesting over a period of six months.

The fair value of the options totaled $87,147 using the Black-Scholes option pricing model with

the following assumptions:

i) risk free interest rate of 2.01%, ii) expected life of 5 years, iii) dividend yield of 0%, iv) expected

volatility of 172%.

Stock option expense recognized for the years ended December 31, 2020 and 2019 was $10,724 and

$76,423, respectively.

January 6, 2020 the Company issued options to purchase up to 2,000,000 shares of common stock to Mr.

Jeffrey Guzy.

were issued pursuant to a stock option grant agreement and is exercisable at $0.0229 per share for a period of three years from the date

The options were immediately vested.

The fair value of the options on the date of the grant was $40,107 using the Black-Scholes

option pricing model with the following assumptions:

1 unchanged sentence

yield of 0%, iv) expected volatility of 250%.

Stock option expense recognized for the year ended December 31, 2019 was $76,423.

summary of the Company’s stock option as of December 31, 2019, and changes during the year 2019 then ended is presented

Stock option expense recognized during the year ended December 31, 2020 for this option

January 11, 2020 the Company issued options to purchase up to 2,000,000 shares of common stock to BizLaunch Advisors, LLC.

options were issued pursuant to a professional services agreement and are exercisable at $0.0229 per share for a period of three

years from the date of issuance.

The options were immediately vested.

The fair value of the options on the date of the grant was

$40,097 using the Black-Scholes option pricing model with the following assumptions:

i) risk free interest rate of 1.54%, ii)

expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of 250%.

Stock option expense recognized during

the year ended December 31, 2020 for this option was $40,097.

April 14, 2020 the Company entered into a Non-Qualified Stock Option Agreement with Mr.

Carmichael (the “Carmichael Option

Agreement”).

Under the terms of the Carmichael Option Agreement, as additional compensation the Company granted Mr.

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 $.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:

right to purchase 25,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative

consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any

subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively,

“Net Revenues”), in excess of $3,500,000 in the aggregate over four consecutive fiscal quarters commencing May

1, 2020 and ending on April 30, 2023 (the “Net Revenue Period”);

right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative

Net Revenues in excess of $7,000,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period;

right to purchase an additional 25,000,000 shares of common stock shall vest at such time as the Company reports cumulative

Net Revenues in excess of $10,500,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

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.

fair value of the Carmichael Option on the date of the grate was $4,370,109 using the Black-Scholes option pricing model with the following

i) risk free interest rate of .26%, ii) expected life of 1.5 years, iii) dividend yield of 0%, iv) expected volatility of

The Company analyzed the likelihood that the vesting qualifications would be met, and as of September 30, 2020 deemed that there

was a 10% chance that the options would vest.

Therefore, stock option expense recognized during the year ended December 31, 2020 for

this option was $655,515.

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.

Under the terms of the option agreement, the Company granted Mr.

Constable a 5 year option to purchase 5,434,783 shares of the Company’s common stock at an exercise price of $.0184, the

“Compensation Options”.

The Compensation Options were immediately vested.

The fair value of the options on the date

of the grant was $106,199 using the Black-Scholes option pricing model with the following assumptions:

i) risk free interest

rate of .16%, ii) expected life of 2.5 years, iii) dividend yield of 0%, iv) expected volatility of 341%.

option expense recognized during the year ended December 31, 2020 for this option was $106,890.

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 $.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:

right to purchase 2,000,000 shares of the Company’s common stock shall vest at such time as the Company reports cumulative

consolidated net revenues, including revenues from related parties and revenues recognized by the Company arising out of any

subsequent acquisitions, mergers, or other business combinations following the closing date of such transaction (the collectively,

“Net Revenues”), in excess of $5,000,000 in the aggregate over four consecutive fiscal quarters commencing January

1, 2021 and ending on April 30, 2023 (the “Net Revenue Period”);

right to purchase an additional 3,000,000 shares of common stock shall vest at such time as the Company reports cumulative

Net Revenues in excess of $7,500,000 in the aggregate over four consecutive fiscal quarters during the Net Revenue Period;

right to purchase an additional 5,000,000 shares of common stock shall vest at such time as the Company reports cumulative

Net Revenues in excess of $10,000,000 in the aggregate over four consecutive quarters during the Net Revenue Period.

Constable Option Agreement provides that the Compensation Options and Bonus Options are exercisable by Mr.

Constable on a cashless

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.

Constable 4 years.

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%, iv)

expected volatility of 312.2%.

The Company analyzed the likelihood that the vesting qualifications would be met, and as of December 31,

2020 deemed that there was a 0% chance that the options would vest, as the measurement period does not begin until January 1, 2021.

stock option expense recognized during the year ended December 31, 2020 for this option was $0.

summary of the Company’s stock option as of December 31, 2020 and 2019, and changes during the years ended December

31, 2020 and 2019 is presented below:

Exercise Price

Options outstanding at December 31, 2018

Options granted

Options exercised

Options cancelled

Options expired

Options outstanding at December 31, 2019

Options exercisable at December 31, 2019

December 31, 2019 the intrinsic value of the options outstanding is $158,829 and options exercisable is $112,114.

Changes in the

Company’s non-vested options for the year ended December 31, 2019 summarized as follows:

Life in Years

Outstanding at December 31, 2018

Outstanding –

December 31, 2019

Exercise Price

Nonvested options at December 31, 2018

(24,914,285 )

Nonvested options at December 31, 2019

Options Outstanding

Options Exercisable

Exercise Price

Number Outstanding

Remaining Average Contractual Life (In Years)

Weighted Average Exercise Price

Number Exercisable

Weighted Average Exercise Price

March 2019, the Company issued the Hyatt Warrant as part of the unit issued and sold to Mr.

Hyatt, with the unit consisting of

50,000,000 shares of common stock and 50,000,000 18 month common stock purchase warrants exercisable at $0.01 per share in consideration

summary of the Company’s warrants as of December 31, 2019, and changes during the year ended December 31, 2019 are presented

Exercisable –

December 31, 2019

Outstanding at December 31, 2019

Outstanding –

December 31, 2020

Exercisable –

December 31, 2020

summary of the Company’s warrants as of December 31, 2020 and 2019, and changes during the years ended December 31,

2020 and 2019 is presented below:

Exercise Price

Warrants outstanding at December 31, 2018

Warrants granted

Warrants exercised

Warrants cancelled

Warrants expired

Warrants outstanding at December 31, 2019

Warrants exercisable at December 31, 2019

Warrants Outstanding

at December 31, 2019

Warrants Exercisable

at December 31, 2019

Life in Years

Outstanding at December 31, 2018

Outstanding –

December 31, 2019

Exercisable –

December 31, 2019

Exercise Price

Number Outstanding

Remaining Average Contractual Life (In Years)

Weighted Average Exercise Price

Number Exercisable

Weighted Average Exercise Price

Life in Years

Outstanding at December 31, 2019

(22,500,000 )

January 6, 2018, the Company issued 217,391 units consisting of 869,565 shares of common stock and 217,391 common stock purchase

warrants exercisable at $0.0115 per share for a fair value of $10,000.

The warrants are exercisable at any time for a period of

two years from date of issuance.

February 2, 2018, the Company issued 434,783 units consisting of 1,739,130 shares of common stock and 434,783 common stock purchase

warrants exercisable at $0.0115 per share for a fair value of $20,000.

The warrants are exercisable at any time for a period of

two years from date of issuance.

summary of the Company’s warrants as of December 31, 2018, and changes during the year ended December 31, 2018 are presented

Exercise Price

Warrants outstanding at December 31, 2017

Warrants granted

Warrants exercised

Warrants cancelled

Warrants expired

Warrants outstanding at December 31, 2018

Warrants exercisable at December 31, 2018

Warrants Outstanding

at December 31, 2018

Warrants Exercisable

at December 31, 2018

Exercise Price

Number Outstanding

Remaining Average Contractual Life (In Years)

Weighted Average Exercise Price

Number Exercisable

Weighted Average Exercise Price

Based Incentive / Retention Bonuses

November 2, 2012, the Board of Directors consented to grant equity based bonuses to certain key employees and consultants as an

incentive to retain their services.

Stock incentive bonuses were to vest, and be paid out on May 2, 2013, contingent upon continued

employment or service.

The stock bonus price per share was calculated based on last closing price as reported on per the OTC Markets

prior to the grant date for a total of $75,100.

Shares were set aside and reserved for this transaction.

The Company accrued operating

expense ratably from the time of the awards through May 2, 2013, when vested.

Of the 61,852 vested shares, only 5,185 were issued.

On April 29, 2016, the Board of Directors determined it was not in the best interest of either the Company or the recipients to

pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable.

The results of this action, 56,669

shares to be issued are included in a reduction of shares payable as reflected on the equity and balance sheet at December 31,

(30,108,725 )

Outstanding –

December 31, 2020

Exercisable –

December 31, 2020

February 25, 2020, Mr.

Hyatt, a member of the Company’s Board of Directors, partially exercised a warrant for the acquisition

of 12,500,000 shares at $.01 per share for proceeds to the Company of $125,000.

April 2, 2020 Mr.

Hyatt purchased 10,000,000 shares related to the exercise of an outstanding common stock purchase warrant at

an exercise price of $.01 per share.

The Company received proceeds of $100,000 upon such exercise.

On September 7, 2020 the balance

of 27,500,000 in common stock purchase warrant owned by Mr.

Hyatt, expired.

the first quarter of 2020 warrants to purchase 2,608,725 shares of common stock held by two investors expired.

Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized.

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.

components of the provision for income tax expense are as follows for the years ended:

Current taxes

Change in deferred taxes

valuation allowance

for income tax expense

following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31,

2020 and 2019:

Deferred tax assets:

based compensation

Allowance for

doubtful accounts

slow moving inventory

operating loss carryforward

Total deferred tax assets

assets net of valuation allowance

effective tax rate used for calculation of the deferred taxes as of December 31, 2020 was 25.35%.

The Company has established

a 100% valuation allowance against deferred tax assets of $1,544,400, due to the uncertainty regarding realization

reserve against the deferred tax assets.

The change in valuation allowance was an increase of $38,600.

has approximately $3,465,000 of net loss carryforward that expire through 2037 and $1,807,000 that carryforward

indefinitely, but is limited to 80% of taxable income in any one year.

effective tax rate used for calculation of the deferred taxes as of December 31, 2019 was 25.35%.

The Company has established

a 100% valuation allowance against deferred tax assets of $1,583,000 due to the uncertainty regarding

realization reserve against the deferred tax assets.

The change in valuation allowance

was an increase of $239,300.

significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as

Statutory tax rate

State tax, net of Federal benefits

Permanent differences

Change in valuation

Effective tax

Commitments and Contingencies

August 14, 2014, the Company entered into a thirty-seven-month term lease for its initial facilities in Pompano Beach, Florida,

commencing on September 1, 2014.

Terms included payment of $5,367 security deposit;

base rent of approximately $4,000 per month

over the term of the lease plus sales tax;

and payment of 10.76% of annual operating expenses (i.e.

common areas maintenance),

which was approximately $2,000 per month subject to periodic adjustment.

On December 1, 2016, we entered into an amendment to

the initial lease agreement, commencing on October 1, 2017, extending the term 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.

November 11, 2018, the Company entered a new lease agreement for approximately 8,025 square feet adjoining its existing facility

in Pompano Beach, Florida.

Terms of the new lease include a sixty-nine month term commencing on January 1, 2019, or the date the

Company took possession of the premises, if earlier;

a $6,527 security deposit;

initial base rent of approximately $4,848 per

month escalating at 3% per year during the term of the lease plus Florida state sales tax and payment of 10.11% of the buildings

annual operating expenses (i.e.

common area maintenance) which is approximately $1,679 per month subject to adjustment as provided

in the lease.

Company, Trebor and other third parties, were each named as a co-defendants under actions initially filed in March 2015 in the

Circuit Court of Broward County under Case No.

CACE-15-03238 and CACE -16-0000242 by the Estate of Ernesto Rodriguez, claiming

wrongful death and products liability resulting in the decedent’s drowning death while using a Brownie’s Third Lung

This claim was settled in June 2020 for $50,000, and further modified into a lump sum payment of $44,200 (88.4% of the

original settlement amount) which was paid in full on August 25, 2020.

April 2018 the Company entered into a Patent License Agreement (the “STS Agreement”) with Setaysha Technical Solutions,

LLC (“STS”) pursuant to which the Company licensed certain intellectual property, including patent rights, non-patent

rights and know how from STS for use in our Ultra-Portable Tankless Dive system products.

Effective December 31, 2019, the Company entered into Addendum No.

1 to the STS Agreement (“Addendum No.

to amend the payment due upon the first commercial sale of NEMO.

In accordance with Addendum No.

1, $8,250 was paid in cash and

$8,250 was accrued as of December 31, 2019, and paid during the year ended December 31, 2020.

The Company issued 828,221

shares of common stock in satisfaction of $13,500 for the first commercial sale of NEMO with a fair value of $19,635.

June 30, 2020, the Company entered into Addendum No.2 to the Patent License Agreement (“Addendum No.2”) This addendum

is to set limits and expectations of the assistance from STS rated to designing and commercializing NextGen diving products, and

that STS receive deferred consideration for uncompensated services.

2 also states that if the Company terminate the

STS Agreement before December 31, 2024, then the Company will pay STS $180,000 , less cumulative royalties paid in excess of $334,961

for years 2019, 2020, 2021, 2022, 2023 and 2024.

June 30, 2020, the Company entered into Amendment No.

2 to the STS Agreement.

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%

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 should terminate the agreements with STS prior to December 31, 2023,

then the Company is obligated to pay STS $180,000, less cumulative royalties paid in excess of $334,961 for the years 2019 through

Royalty recorded in relation to this agreement totaled $53,929 and $48,963 for the years ended December

31, 2020 and 2019, respectively.

April 9, 2020 the Company entered into an Investor Relations Consulting Agreement with HIR Holdings, LLC pursuant to which the

Company engaged the firm to provide investor relations services.

The term of the agreement is for a minimum guaranteed period

of six months, and thereafter is cancellable by either party upon 30 days’

notice to the other party.

As compensation the

Company issued the consultant 3,000,000 shares of its common stock, valued at $133,500, and is responsible for reimbursement of

certain pre-approved expenses.

April 9, 2020 the Company also entered into a Corporate Communications Consulting Agreement with Impact IR Inc.

pursuant to which

the Company also engaged this firm to provide investor relations services.

The term of the agreement is six months.

As compensation

the Company issued the consultant 2,000,000 shares of its common stock valued at $89,000.

June 9, 2020 the Company entered into an advertising and marketing agreement with Figment Design.

The term of the agreement is

for one year, and thereafter renew or cancel the agreement in writing 60 days before the final date.

The Company will be billed

$5,275 for June and July 2020 and $8,840 from August 2020 to July 2021.

August 1, 2020, BLU3 entered into an advertising and marketing agreement with Figment Design.

The term of the agreement is for

one year beginning August 1, 2020, and thereafter renew or cancel the agreement in writing 60 days before the final date.

Design will bill BLU3 $3,500 per month as retainer and $1,500 to $2,000 for monthly ad spend.

August 1, 2020, BLU3 entered into a marketing agreement with This Way Media PTY, Ltd.

The term of this agreement is for 11 months

and can be cancelled with 30 days notice during the first 90 days of the agreement.

After the first 90 days, the agreement can

be cancelled with 60 days’

notice after the completion of the term of the agreement.

BLU3 will pay This Way Media PTY, LTD

$500 per month, and 5% of each affiliate sale.

August 10, 2020, the Company engaged Brandywine, LLC to provide certain accounting advisory and consulting services to it under

the terms of a letter agreement.

As compensation for the services, we agreed to pay Brandywine, LLC an hourly rate of $125.00

and issue it 10,000 shares of our common stock for each hour billed, which such shares are issuable to a designee of Brandywine,

LLC in its discretion, and reimburse it for pre-approved expenses.

The agreement may be terminated by either party upon 15 days’

notice, and contains customary indemnification provisions.

This agreement was terminated on November 5, 2020 upon entering into

an employment agreement as detailed below, a total number of 2,795,000 shares were issued under this agreement as of December

On November 5, 2020 the Company and Christopher H.

Constable entered into a three year employment agreement (the

“Constable Employment Agreement”) pursuant to which the Mr.

Constable shall serve as Chief Executive Officer of the

Previously, Mr.

Constable had provided advisory services to the Company through the agreement with Brandywine LLC.

consideration for his services, Mr.

Constable shall receive (i) an annual base salary of $200,000, payable in accordance with

the customary payroll practices of the Company, and (ii) issuable upon execution of the Employment Agreement and on each anniversary

of the date of the agreement during the term, a non-qualified immediately exercisable five-year stock option to purchase that

number of shares equal to $100,000 of the value of the Company’s common stock at an exercise price equal to the market price

of the Common Stock on the date of issuance.

Therefore, the Executive shall receive an initial stock option grant to purchase

5,434,783 shares of the Corporation’s common stock at an exercise price of $0.0184 per share pursuant to an option award

agreement (the “Option Award Agreement”).

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 amounts listed below 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 on NASDAQ

or New York Stock Exchange.

Constable is also entitled to participate in all benefit programs the Company offers to its executives, reimbursement for business

expenses and three weeks of annual paid vacation.

agreement may be terminated for cause, upon his death or disability, or by the Company without cause.

Furthermore, Mr.

may terminate the agreement for “good reason”

as defined in the agreement.

If the Company terminates the Constable

Employment Agreement for cause, or if it terminates upon Mr.

Constable’s death or disability, or if he voluntarily terminates

the agreement, neither Mr.

Constable nor his estate (as the case may be) is entitled to any severance or other benefits following

the date of termination.

If the Company should terminate the Constable Employment Agreement without cause or if Mr.

terminates for good reason, the Company is obligated to continue to pay him his base salary for a period of six months.

The Constable

Employment Agreement also contains customary confidentiality, non-disclosure and indemnification provisions.

to the Constable Employment Agreement, Mr.

Constable also agreed to serve on the Company’s Board of Directors and the Company

agreed to nominate him to serve on the Board during the term of the Constable Employment Agreement.

December 15, 2020 the Company engaged Newbridge Securities Corporation to provide Investment Banking and Corporate Advisory services.

The term of this agreement is for twelve months and can be terminated by either party with 14 day written notice.

As compensation

for this agreement the Company issued 2,100,000 shares of common stock with a fair market value of $40,320.

Company has three operating segments as described below:

6 unchanged sentences

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Total net revenues

Ultra Portable

Tankless Dive Systems

Cost of Revenues:

1 unchanged sentence

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Total cost of revenues

Ultra Portable

Tankless Dive Systems

cost of revenues

Gross Profit(loss):

1 unchanged sentence

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Total gross profit(loss)

Ultra Portable

Tankless Dive Systems

gross profit(loss)

Segment Depreciation:

1 unchanged sentence

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Total segment depreciation

Segment income / (loss) from Operations:

Ultra Portable

Tankless Dive Systems

segment depreciation

Segment (loss) from Operations:

Legacy SSA Products

$ (1,063,871 )

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Total segment income/(loss) from operations

Ultra Portable

Tankless Dive Systems

segment (loss) from operations

$ (1,333,060 )

$ (1,283,666 )

December 31, 2019

December 31, 2018

Segment assets:

1 unchanged sentence

High Pressure Gas Systems

Ultra Portable Tankless Dive Systems

Ultra Portable

Tankless Dive Systems

Subsequent Events

January 1, 2020 and June 10, 2020 the Company issued an aggregate of 330,636 shares of common stock to an employee for services

performed in December 2019 and the first five (5) months of 2020.

January 2, 2020 the vesting conditions for the December 2018 issuance of 20,000,000 shares of common stock to Robert M.

as an incentive bonus were satisfied and the shares were then considered outstanding.

See notes 7 and 13.

January 6, 2020, the Company sold an aggregate of 2,647,065 shares of its common stock to Grace Kelly Hyatt, the minor daughter

The Company received proceeds of $45,000 for this transaction.

Hyatt, a member of the Company’s Board

of Directors, has voting and dispositive control over the shares held by Grace Kelly Hyatt.

Pitzner resigned from the Board of Directors on January 6, 2020.

Guzy was appointed to the Board of Directors on January 9, 2020, filling the vacancy created by Mr.

Pitzner’s resignation.

January 9, 2020 the Company entered into a Director Agreement with Mr.

Guzy pursuant to which it agreed to pay him a monthly Board

fee of $1,000 and issue him a three year immediately exercisable stock option to purchase up to 2,000,000 shares of the Company’s

common stock exercisable at $0.0229 per share.

January 11, 2020 the Company entered into a Consulting Agreement with BizLaunch Advisors, LLC to provide the Company with outside

CFO advisory and related services.

As compensation the Company agreed to pay the consultant a monthly retainer of $2,000 and issued

it a three-year option to purchase 2,000,000 shares of common stock at an exercise price of $0.0229 per share.

In May 2020 the

Company terminated the agreement but the option remains outstanding.

February 23, 2020, Mr.

Hyatt exercised a portion of an outstanding Hyatt Warrant representing 12,500,000 shares of common stock.

The Company received proceeds of $125,000 upon such exercise.

March 2020 the Company announced that that its BLU3 subsidiary had submitted a technical proposal in response to the U.S.

of Defense DIY Hack-A-Vent Innovation Challenge and other similar initiatives seeking innovative ways to rapidly produce ventilators

during this time of critical demand due to COVID-19.

The original challenger indicated that the top three submissions would be

selected by a panel of experts and may be offered an opportunity to produce a functioning prototype.

BLU3’s proposal included

utilization of an existing BLU3 technology, Nemo, at the core of the ventilator solution, which the team has named BLU3 Vent.

BLU3 Vent is the product of converting the Company’s existing, software driven, inspiration sensitive, battery powered,

tankless diving system to perform the behaviors of mechanical ventilation.

Management of the Company believes the BLU3 Vent is

unique in its ability to rapidly be converted into a device that meets all of the Hack-a-Vent requirements.

late March, 2020, the Company was notified that the BLU3 Vent design submission was selected as number five out of 172 entries

in the Hack-a-Vent challenge following Northrup Grumman, Coridea, Navsea, and L3 Harris Corp.

April 14, 2020, the Company received a purchase order from a third-party to mature the design into a functional ventilator prototype.

BLU3 Vent emerged as the first in the Hack-a-Vent challenge to pass through preliminary testing at Uniformed Services University

to confirm feasibility to treat an ARDS inflicted patient.

BLU3 Vent has been submitted initial documents for a review with the

FDA at the direction and with the support of the Wright Brothers Institute (WBI) under an additional purchase order issued May

The project is currently on standby as the urgent demand for emergency use ventilators has declined.

The team is working

with WBI to be prepared in case a major demand for ventilators returns.

April 2, 2020 Mr.

Hyatt exercised an additional portion of an outstanding Hyatt Warrant representing 10,000,000 shares of common

The Company received proceeds of $100,000 upon such exercise.

April 10, 2020 the Company sold an aggregate of 20,000,000 shares of its common stock at a purchase price $0.025 per share to

accredited investors, including Mr.

Hyatt, in a private transaction, resulting in proceeds to the Company of $500,000.

April 14, 2020 the Company entered into a Non-Qualified Stock Option Agreement with Robert M.

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 $.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”)