Brownie's Marine Group, Inc 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 333-99393 Brownie’s Marine Group, Inc. (Exact name of registrant as specified in its charter) Florida 90-0226181 State or other jurisdiction of incorporation or organization I.R.S. Employer Identification No. 3001 NW 25 th Avenue , Suite 1 Pompano Beach , Florida 33069 Address of principal executive offices Zip code (954) 462-5570 Registrant’s telephone number, including area code Not applicable Former name, former address and former fiscal year, if changed since last report Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered none n/a n/a Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There were 343,279,052 shares of common stock outstanding at August 16, 2021. TABLE OF CONTENTS Page No. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. 4 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 20 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 27 ITEM 4. CONTROLS AND PROCEDURES. 27 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 28 ITEM 1A. RISK FACTORS. 28 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 28 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 28 ITEM 4. MINE SAFETY DISCLOSURES. 28 ITEM 5. OTHER INFORMATION. 28 ITEM 6. EXHIBITS. 29 2 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION Various statements in this report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived from utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with: ● Financial risks, including: ● our history of losses; ● our ability to continue as a going concern; ● our dependence on revenues from related parties; and ● material risks in our disclosure controls and internal control over financial reporting. ● Business and operational risks, including: ● our dependence on key members of our management; ● our need to hire additional employees; ● our ability to protect our intellectual property rights; ● reliance on third party vendors and manufacturers; ● dependence on consumer discretionary spending; ● the impact of government regulations; ● any failure to protect personal information; ● the impact of bad weather; ● the exposure to potential product liability claims; and ● The continuing impact of COVID-19 on our company. ● Shareholder risks, including: ● dilution to our common shareholders upon the possible conversion of outstanding convertible debt and/or the exercise of outstanding options; ● the limited market for our common stock and the impact of penny stock rules; and ● we are a voluntary filer with the Securities and Exchange Commission. You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission on March 31, 2021 (the “2020 10-K”) and our other filings with the Securities and Exchange Commission in their entirety. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business. OTHER PERTINENT INFORMATION Unless specifically set forth to the contrary, when used in this report the terms “BWMG,” the “Company,” “we,” “our,” “us,” and similar terms refers to Brownie’s Marine Group, Inc., a Florida corporation, and our wholly owned subsidiaries, Trebor Industries, Inc., a Florida corporation (“Trebor”), Brownie’s High Pressure Compressor Services, Inc. (“BHP”), a Florida corporation, and BLU3, Inc., a Florida corporation (“BLU3”). In addition, “ Second Quarter 2021” refers to the three month period ended June 30, 2021, “Second Quarter 2020” refers to the three month period ended June 30, 2020. “First Quarter 2021” refers to the three month period ended March 31, 2021 and “First Quarter 2020” refers to the three months ended March 31, 2020. “2020” refers to the year ended December 31, 2020 and “2021” refers to the year ending December 31, 2021. We maintain a corporate website at www.browniesmarinegroup.com . Unless specifically set forth to the contrary, the information which appears on our websites or our social media platforms is not part of this report. 3 PART I Item 1. Financial Statements BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET June 30, 2021 December 31, 2020 (Unaudited) ASSETS Current Assets Cash $ 161,662 $ 345,187 Accounts receivable, net 232,179 81,251 Accounts receivable - related parties 176,645 67,644 Inventory, net 984,731 863,791 Prepaid expenses and other current assets 399,171 111,164 Total current assets 1,954,388 1,469,037 Property, equipment and leasehold improvements, net 144,608 143,413 Operating Lease Assets 395,400 446,981 Other assets 10,649 13,649 Total assets $ 2,505,045 $ 2,073,080 Liabilities and stockholders’ equity Current liabilities Accounts payable and accrued liabilities $ 589,330 $ 386,977 Accounts payable - related parties 94,573 102,360 Customer deposits and unearned revenue 44,291 20,353 Other liabilities 185,037 100,817 Operating lease liabilities 112,771 107,691 Current maturities long term debt 65,248 151,006 Notes payable 15,000 50,000 Convertible debentures, net 50,000 110,000 Total current liabilities 1,156,250 1,029,204 Long term debt 61,942 120,782 Operating lease liabilities 282,629 339,290 Total liabilities 1,500,821 1,489,276 Commitments and contingencies (see note 7) Stockholders’ equity Preferred stock; $ 0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively. 425 425 Common stock; $ 0.0001 par value; 1,000,000,000 shares authorized; 343,279,052 shares issued and outstanding at June 30, 2021 and 306,185,206 shares issued and outstanding at December 31, 2020, respectively. 34,330 30,620 Common stock payable 138,941 shares and 138,941 shares, respectively as of June 30, 2021 and December 31, 2020, respectively. 14 14 Additional paid-in capital 14,456,378 13,508,882 Accumulated deficit ( 13,486,923 ) ( 12,956,137 ) Total stockholders’ equity $ 1,004,224 $ 583,804 Total liabilities and stockholders’ equity $ 2,505,045 $ 2,073,080 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30 (UNAUDITED) 2021 2020 2021 2020 Three months ended June 30 Six months ended June 30 2021 2020 2021 2020 Net revenues Net revenues $ 1,359,745 $ 1,123,351 $ 2,106,098 $ 1,601,585 Net revenues - related parties 353,173 197,177 557,589 353,732 Total net revenues 1,712,918 1,320,528 2,663,687 1,955,317 Cost of net revenues Cost of net revenues 876,646 685,807 1,385,715 1,117,762 Cost of net revenues - related parties 169,699 106,181 275,130 187,179 Royalties expense - related parties 28,013 17,916 39,606 22,766 Royalties expense 41,251 13,833 54,955 27,926 Total cost of revenues 1,115,609 823,737 1,755,406 1,355,633 Gross profit 597,309 496,791 908,281 599,684 Operating expenses Selling, general and administrative 823,607 864,463 1,560,642 1,242,041 Research and development costs 21,312 39,995 42,419 56,088 Total operating expenses 844,919 904,458 1,603,061 1,298,129 Loss from operations ( 247,610 ) ( 407,667 ) ( 694,780 ) ( 698,445 ) Other income (expense), net Gain on settlement of debt - - 10,000 - Gain on the forgiveness of PPP loan 159,600 - 159,600 - Interest expense ( 1,795 ) ( 6,375 ) ( 5,606 ) ( 12,290 ) Other income (expense), net 157,805 ( 6,375 ) 163,994 ( 12,290 ) Loss before provision for income taxes ( 89,805 ) ( 414,042 ) ( 530,786 ) ( 710,735 ) Provision for income taxes - - - - Net Loss $ ( 89,805 ) $ ( 414,042 ) $ ( 530,786 ) $ ( 710,735 ) Basic and diluted loss per common share $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) $ ( 0.00 ) Basic and diluted weighted average common shares outstanding 337,489,134 296,262,167 314,941,270 274,459,029 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 5 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited) Shares Amount Shares Amount Shares Amount Capital Deficit (DEFICIT) Preferred Stock Common Stock Common Stock Payable Additional Paid-in Accumulated Total Stockholder’s Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance, December 31, 2020 425,000 $ 425 306,185,206 $ 30,620 138,941 $ 14 $ 13,508,882 $ ( 12,956,137 ) $ 583,804 Common stock issued for Cash - - 27,500,000 2,750 - - 272,250 - 275,000 Common stock issued for service - - 3,116,279 312 - - 124,688 - 125,000 Stock option expense - - - - - - 218,505 - 218,505 Common stock issued for conversion of convertible debentures and accrued interest - - 422,209 42 - - 14,735 - 14,777 Common stock issued for exercise of warrants Common stock issued for exercise of warrants, shares Incentive bonus shares to Chairman Incentive bonus shares to Chairman, shares Common stock issued for warrants Common stock issued for warrants,shares Net Loss - - - - - - - ( 440,981 ) ( 440,981 ) Balance, March 31, 2021 (unaudited) 425,000 425 337,223,694 33,724 138,941 14 14,139,060 ( 13,397,118 ) 776,105 Common stock issued for conversion of convertible debentures and accrued interest - - 6,055,358 606 - - 59,948 - 60,554 Stock option expense - - - - 257,370 - 257,370 Net Loss - - - - - - - ( 89,805 ) ( 89,805 ) Balance, June 30, 2021 (unaudited) 425,000 $ 425 343,279,052 $ 34,330 138,941 $ 14 $ 14,456,378 $ ( 13,486,923 ) $ 1,004,224 Preferred Stock Common Stock Common Stock Payable Additional Paid-in Accumulated Total Stockholder’s Equity Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance, December 31, 2019 425,000 $ 425 225,540,501 $ 22,554 138,941 $ 14 $ 11,338,104 $ ( 11,604,518 ) $ ( 243,421 ) Common stock issued for Cash - - 2,647,065 265 - - 44,735 - 45,000 Common stock issued for exercise of warrants - - 12,500,000 1,250 - - 123,750 - 125,000 Stock option expense - - - - - - 96,290 - 96,290 Incentive bonus shares to Chairman - - 20,000,000 2,000 - - ( 720 ) - 1,280 Net Loss - - - - - - - (296,693 ) (296,693 ) Balance, March 31, 2020 (unaudited) 425,000 425 260,687,566 26,069 138,941 14 11,602,159 ( 11,901,211 ) ( 272,544 ) Common stock issued for Cash - - 20,000,000 2,000 - - 498,000 - 500,000 Common stock issued for warrants - - 10,000,000 1,000 - - 99,000 - 100,000 Common stock issued for service - - 5,000,000 500 - - 222,000 - 222,500 Incentive shares issued to Chairman and employees - - 5,322,602 532 - - 233,968 - 234,500 Stock option expense - - - - - - 218,505 - 218,505 Net Loss - - - - - - - ( 414,042 ) ( 414,042 ) Balance, June 30, 2020 (unaudited) 425,000 $ 425 301,010,168 $ 30,101 138,941 $ 14 $ 12,873,632 $ ( 12,315,253 ) $ 588,919 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 (unaudited) 2021 2020 Cash flows from operating activities: Net loss $ ( 530,786 ) $ ( 710,735 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 13,396 10,409 Shares issued for services 125,000 222,500 Incentive bonus shares issued to CEO and employees - 235,780 Reserve (recovery) for bad debt 28,554 ( 2,098 ) Stock Based Compensation - Options 475,875 314,795 Amortization of right-of-use asset 51,581 48,082 Gain on the settlement of debt ( 10,000 ) - Gain on the forgiveness of PPP loan ( 159,600 ) - Changes in operating assets and liabilities Change in accounts receivable, net ( 179,482 ) 8,294 Change in accounts receivable - related parties ( 109,001 ) ( 44,653 ) Change in inventory ( 120,940 ) ( 156,993 ) Change in prepaid expenses and other current assets ( 250,909 ) ( 31,537 ) Change in other assets 3,000 3,500 Change in accounts payable and accrued liabilities 217,684 ( 121,057 ) Change in accounts payable - related parties ( 7,787 ) ( 98,778 ) Change in customer deposits and unearned revenue 23,938 ( 77,543 ) Change in long term lease liability ( 51,581 ) ( 48,082 ) Change in other liabilities 84,220 ( 15,392 ) Net cash used in operating activities ( 396,838 ) ( 463,508 ) Cash flows from investing activities: Purchase of fixed assets ( 14,591 ) - Net cash used in investing activities ( 14,591 ) - Cash flows from financing activities: Proceeds from unit offering 275,000 545,000 Proceeds from exercise of Warrants - 225,000 Proceeds from debt - 159,600 Repayment on notes payable ( 25,000 ) ( 30,000 ) Repayment of debt ( 22,096 ) ( 14,162 ) Net cash provided by financing activities 227,904 885,138 Net change in cash ( 183,525 ) 421,630 Cash, beginning of period 345,187 70,620 Cash, end of period $ 161,662 $ 492,550 Supplemental disclosures of cash flow information: Cash Paid for Interest $ 4,344 $ 5,761 Cash Paid for Income Taxes $ - $ - Supplemental disclosure of non-cash financing activities: Fixed asset purchase down payment through the issuance of debt $ 37,098 $ - Shares issued for the conversion of convertible debentures and accrued interest $ 75,331 $ - The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Company Overview Brownie’s Marine Group, Inc., a Florida corporation (hereinafter referred to as” the “Company,” or “BWMG”), designs, tests, manufactures and distributes recreational hookah diving, 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, yacht based scuba air compressor and nitrox generation systems through its wholly owned subsidiary Brownie’s High Pressure Compressor Services, Inc., a Florida corporation organized in 2017 (“BHP”), doing business as LW Americas (“LWA”). In addition, in December 2017, the Company formed BLU3, Inc., a Florida corporation (“BLU3”), to develop and market portable battery powered surface supplied air dive systems. When used herein, the “Company” or “BWMG” includes Brownie’s Marine Group, Inc., and our wholly-owned subsidiaries Trebor, BHP and BLU3. Note 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2020 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our 2020 10-K for a broader discussion of our business and the risks inherent in such business. 8 Principles of Consolidation The consolidated financial statements include the accounts of BWMG and its wholly owned subsidiaries, Trebor, BHP and BLU3. All significant intercompany transactions and balances have been eliminated in consolidation. Cash and cash equivalents Only highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents. These investments are stated at cost, which approximates market value. Accounts receivable Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge. The allowances for doubtful accounts totaled $ 45,426 and $ 16,872 at June 30, 2021 and December 31, 2020, respectively. Inventory Inventory consists of the raw material, parts that make up the items that we manufacture, and finished goods. For the year ended December 31, 2020, the Company recorded reserves for obsolete or slow-moving inventory of approximately $ 227,657 . No additional reserve for obsolete or slow-moving inventory during the six months ended June 30, 2021. Schedule of Inventory June 30, 2021 (unaudited) December 31, 2020 Raw materials $ 508,094 $ 408,841 Finished goods 476,637 454,950 Inventory, net $ 984,731 $ 863,791 Revenue Recognition We account for revenues in accordance with Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers” and all the related amendments. This standards core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to receive. We recognize the sale of products under single performance obligations upon shipment of the units as that is when ownership is transferred and our performance is completed. Revenues from repair and maintenance activities is recognized when the repairs are completed and the units have been shipped. Lease Accounting We account for leases in accordance with ASC 842, “Leases”. The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of June 30, 2021. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease. Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. 9 When 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. For the three and six months ended June 30, 2021 the lease expenses were approximately $ 32,900 and $ 65,700, respectively, and approximately $ 43,000 and $ 78,000 for the three and six months ended June 30, 2020, respectively. Cash paid for operating liabilities for the six months ended June 30, 2021 was approximately $ 65,400 and approximately $ 64,000 for the six months ended June 30, 2020. Supplemental balance sheet information related to leases was as follows: Schedule of Supplemental Balance Sheet Information Operating Leases June 30, 2021 Right-of-use assets $ 395,400 Current lease liabilities $ 112,771 Non-current lease liabilities 282,629 Total lease liabilities $ 395,400 Stock-Based Compensation We account for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation”. ASC 718 requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee and non-employee are required to provide service in exchange for the award, usually the vesting period. Loss per common share Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. At June 30, 2021 and June 30, 2020, 205,855,020 and 202,389,986 , respectively, of potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible notes, outstanding warrants, outstanding stock options and the conversion of preferred stock. Recent accounting pronouncements The recent accounting standards that have been issued or proposed by the Financial Accounting Standards Board (FASB) or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. Note 3. Going Concern The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements. For the six months ended June 30, 2021, the Company incurred a net loss of $ 530,786 , of which $ 475,875 is non-cash stock related compensation. At June 30, 2021, the Company has an accumulated deficit of $ 13,486,923 . Despite a working capital surplus of approximately $ 798,138 at June 30, 2021, the continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, control expenses, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 10 Note 4. Related Party Transactions The Company sells products to three entities, Brownies Southport Divers, Brownies Yacht Toys and Brownies Palm Beach Divers, owned by the brother of Mr. Robert M. Carmichael, the Company’s President and Chief Financial Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volumes. These entities accounted for 15.1 % and 14.9 % of the net revenues for the three months ended June 30 2021 and 2020, respectively, and 20.9 % and 18.1 % for the six months ended June 30, 2021 and 2020 respectively . Accounts receivable from these entities totaled $ 153,214 and $ 44,323 , respectively, at June 30, 2021 and December 31, 2020. The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”) and 940 Associates, Inc. (“940 A”), entities wholly-owned by Mr. Carmichael. Terms of sale are more favorable than those extended to BWMG’s regular customers, but no more favorable than those extended to Brownie’s strategic partners. Accounts receivable from the combined entities and Mr. Carmichael totaled $ 23,431 and $ 23,321 at June 30, 2021 and December 31, 2020, respectively. The Company had accounts payable to related parties of $ 94,573 and $ 102,360 at June 30, 2021 and December 31, 2020, respectively. The balance payable at June 30, 2021 is comprised of $ 5,000 due to Robert Carmichael, $ 9,639 due to 940 Associates and $ 79,934 due to BGL. At December 31, 2020 this account was comprised of $ 5,000 due to Robert Carmichael, and $ 97,360 due to BGL. The Company has Exclusive License Agreements with 940 A to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. This Exclusive License Agreement provides that the Company will pay 940 A 2.5 % of gross revenues per quarter as a royalty. Total royalty expense for the three months ended June 30, 2021 and 2020 were $ 28,013 and $ 17,916, respectively and $ 39,606 and $ 22,766 for the six months ended June 30, 2021 and 2020, respectively . The accrued royalty for June 30, 2021 is $ 22,510 and it is included in other liabilities. On March 25, 2021, the Company issued 27,500,000 shares of common stock to Mr. Charles F. Hyatt, a member of our Board of Directors in consideration of $ 275,000 . As of June 30, 2021, options to purchase 25,000,000 shares of common stock held by Mr. Carmichael vested in accordance with Carmichael Option agreement as further discussed in Note 6 of these financial statements. Note 5. Convertible Debentures and Notes Payable Convertible Debentures Convertible debentures consisted of the following at June 30, 2021: Schedule of Convertible Debentures Origination Date Maturity Date Interest Rate Origination Principal Balance Original Discount Balance Period End Principal Balance Period End Discount Balance Period End Balance, Net Accrued Interest Balance Reg. 8/31/11 8/31/13 5 % 10,000 ( 4,286 ) - - - - (1 ) 12/01/17 12/31/21 6 % 50,000 ( 12,500 ) - - - - (2 ) 12/05/17 12/31/21 6 % 50,000 ( 12,500 ) 50,000 - 50,000 9,331 (3 ) $ 50,000 $ — $ 50,000 $ 9,331 (1) The Company borrowed $ 10,000 in exchange for a convertible debenture (the “Hoboken Convertible Note”). The holder at its option may convert all or part of the note plus accrued interest into common stock at a price of 30 % discount as determined from the average four highest closing bid prices over the preceding five trading days. 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. On February 22, 2021, this note and accrued interest of $ 4,777 were converted by the holder for 422,209 shares of common stock in accordance with the terms of the note. (2) On December 1, 2017, the Company entered into a $ 50,000 principal amount 6 % secured convertible promissory note, initially due December 1, 2018 , subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr. Carmichael. 11 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 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 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 $ 32,000 upon the modification of conversion price. On June 10, 2021, this note and accrued interest of $ 10,554 were converted by the holder for 6,055,358 shares of common stock in accordance with the terms of the note. (3) On December 5, 2017, the Company entered into a $ 50,000 principal amount 6 % secured convertible promissory note, initially due December 4, 2018 , subject to extension. The note is secured with such assets of the Company equal to the principal and accrued interest, is guaranteed by the Company’s wholly-owned subsidiaries, Trebor and BHP and the personal guarantee of Mr. Carmichael. 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 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. The Company recorded a loss on extinguishment of debt of $ 99,000 upon the modification of conversion price. The maturity date was further extended to December 31, 2021 . Notes Payable Gonzales Note The Company issued an unsecured, non-interest-bearing note of $ 200,000 with Mr. Tom Gonzales on July 1, 2013. The note is payable upon demand. The Company made repayments totaling $ 25,000 during the six months ended June 30, 2021. The note balance was $ 15,000 at June 30, 2021 and $ 40,000 December 31, 2020. Hoboken Note The Company issued an unsecured, non-interest-bearing note of $ 10,000 with Hoboken Street Association on October 15, 2016. The note was forgiven as part of the conversion of the Hoboken Convertible Note on February 22, 2021 as described above. The note balance as of June 30, 2021 and December 31, 2020 was $ 0 and $ 10,000 , respectively. Loan Payable Marlin Note On September 30, 2019 the Company, via its wholly owned subsidiary BLU3, executed an equipment finance agreement for the purchase of certain plastic molding equipment through Marlin Capital Solutions. The initial principal balance was $ 96,725 payable over 36 equal monthly installments of $ 3,144 (the “Marlin Note”). The equipment finance agreement contains customary events of default. The loan balance was $ 44,013 as of June 30, 2021 Schedule of Future Amortization of Loans Payable Payment Amortization 2021 (6 months remaining) 16,918 2022 27,095 2023 2024 2025 and thereafter Total Loan Payments $ 44,013 Current portion of Loan payable ( 34,745 ) Non-Current Portion of Loan Payable $ 9,268 12 Mercedes Benz Note On August 21, 2020, the Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van. The installment agreement was for $ 55,841 with a zero interest rate payable over 60 months with a monthly payment of $ 931 and is personally guaranteed by Mr. Carmichael. The first payment was due on October 5, 2020 . The loan balance as of June 30, 2021 is $ 47,156 . Schedule of Future Amortization of Loans Payable Payment Amortization 2021 (6 months remaining) $ 5,584 2022 $ 11,168 2023 $ 11,168 2024 $ 11,168 2025 and thereafter $ 8,068 Total note payments $ 47,156 Current portion of note payable $ ( 11,168 ) Non-Current Portion of notes payable $ 35,988 Navitas Note On May 19, 2021 the Company, via its wholly owned subsidiary BLU3, executed an equipment finance agreement financed for the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $ 79,309 payable over 60 equal monthly installments of $ 1,611 (the “Navitas Note”). The equipment finance agreement contains customary events of default. The agreement was not fully funded as of June 30, 2021. Navitas has funded $ 37,098 for the down payment of an equipment purchase and the balance of the note is $ 36,021 as of June 30, 2021. Schedule of Future Amortization of Loans Payable Payment Amortization 2021 (6 months remaining) 8,070 2022 17,464 2023 10,487 Total Note Payments $ 36,021 Current portion of Note payable ( 19,335 ) Non-Current Portion of Note Payable $ 16,686 PPP Loan On May 12, 2020, we received an unsecured loan from South Atlantic Bank 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. The term of the note is two years, though it may be payable sooner in connection with an event of default under the note. The SBA 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. We used the SBA Loan for qualifying expenses and have applied for forgiveness of the SBA Loan in accordance with the terms of the CARES Act. On April 28, 2021, the Company was notified by South Atlantic Bank that the SBA Loan was forgiven in full under the terms of the CARES Act. The company recorded the forgiveness as a gain on the forgiveness of the PPP loan on our condensed consolidated income statement. The note balance as of June 30, 2021 and December 31, 2020 was $ 0 and $ 159,600 , respectively. 13 Note 6. Shareholders’ Equity Common Stock On February 22, 2021, the Company issued 422,209 shares of common stock related to the conversion of a convertible debenture and accrued interest of $ 14,777 . On March 1, 2021, the Company issued a consultant 3,000,000 shares of its common stock related to investor relation services at a fair value of $ 120,000 . On March 25, 2021, the Company issued 27,500,000 shares of common stock to Mr. Charles F. Hyatt, a member of our Board of Directors, in consideration of $ 275,000 . On February 25, 2021, the Company issued 116,279 shares of common stock to a consultant with a fair value of $ 5,000 for professional business services. On June 10 2021, the Company issued 6,055,358 shares of common stock related to the conversion of a convertible debenture and accrued interest of $ 60,554. Preferred Stock During the second quarter of 2010, the holder of the majority of the Company’s outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation authorizing the issuance of 10,000,000 shares of blank check preferred stock. The blank check preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by our Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. In April 2011 the Board of Directors designated 425,000 shares of the blank check preferred stock as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into a share of the Company’s common stock at any time at the option of the holder at a conversion price of $ 18.23 per share. Holders of shares of Series A Convertible Preferred Stock are entitled to 250 votes for each share held . The Company’s common stock and Series A Convertible Preferred Stock vote together as on any matters submitted to our shareholders for a vote. As of June 30, 2021, and December 31, 2020, the 425,000 shares of Series A Convertible Preferred Stock are owned by Mr. Carmichael. Equity Incentive Plan On May 26, 2021 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, Stock Options may be granted to Employees, Directors, and Consultants in the form of Incentive Stock Options or Non-statutory Stock Options, Stock Purchase Rights, time vested and/performance invested Restricted Stock, and Stock Appreciation Rights and Unrestricted Shares may also be granted under the Plan. The maximum number of shares that may be issued under the Plan shall be 25,000,000 shares. Common Stock to be issued under the Plan may be either authorized and unissued or shares held in treasury by the Company. The term of the Plan shall be ten years. Equity Compensation Plan Information as of June 30, 2021: Schedule of Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted – average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c) Equity Compensation Plans Approved by Security Holders 1,125,000 $ .036 23,875,000 Equity Compensation Plans Not Approved by Security Holders — — — Total 1,125,000 $ .036 23,875,000 14 Options Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 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 $ 43,575 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 %. These stock options were fully expensed as of December 31, 2020. Effective July 29, 2019, the Company issued Mr. Carmichael options to purchase up to 20,761,904 shares of common stock. 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 %. These stock options were fully expenses during the year ending December 31, 2020. Effective January 6, 2020, the Company issued options to purchase up to 2,000,000 shares of common stock to Mr. Jeffrey Guzy, then a member of the Board of Directors of the Company. The options 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 of issuance. 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: i) risk free interest rate of 1.55 %, ii) expected life of 1.5 years, iii) dividend yield of 0 %, iv) expected volatility of 250 %. These stock options were fully expenses during the year ending December 31, 2020. Effective January 11, 2020, the Company issued options to purchase up to 2,000,000 shares of common stock to BizLaunch Advisors, LLC. The 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 %. These stock options were fully expenses during the year ending December 31, 2020. On 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. 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”) and the right to purchase 50,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows: ● the 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”) ; ● the 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; and ● the 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. 15 The Carmichael Option Agreement provides that the Carmichael Option is exercisable by Mr. Carmichael on a cashless basis. The Carmichael Option is not transferrable by Mr. Carmichael, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Carmichael Option vests, it is exercisable by Mr. Carmichael for 90 days. Any portion of the Carmichael Option which does not vest during the Net Revenue Period lapses and Mr. Carmichael has no further rights thereto. The fair value of the Carmichael Option on the date of the grant was $ 4,370,109 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .26% , ii) expected life of 1.5 years, iii) dividend yield of 0 % , iv) expected volatility of 320 % . The Company analyzed the likelihood that the vesting qualifications would be met. As of June 30, 2021, 25,000,000 of options were vested as the targeted net revenues were reached and fully expensed. The second net revenue target was 25% reached. Therefore, stock option expense recognized during the six months ended June 30, 2021 for this option was $ 437,011 . On November 5, 2020, the Company entered into a Non-Qualified Stock Option agreement with Christopher Constable the “Constable Option Agreement” as part of his employment agreement. 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 %. These stock options were fully expensed as of December 31, 2020. As part of the Constable Option Agreement the Company also granted Mr. Constable an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $ .0184 per share, of which the right to purchase 10,000,000 shares of common stock is subject to vesting upon the achievement of the net revenue milestones set forth below (the “Net Revenue Portion of the Option”) and the right to purchase 20,000,000 shares of common stock is subject to vesting upon official notice of the listing of the Company’s common stock on The Nasdaq Stock Market, the NYSE American LLC or similar stock exchange. The Net Revenue Portion of the Option shall vest as follows: ● the 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”); ● the 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; and ● the 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. The Constable Option Agreement provides that the Compensation Options and Bonus Options are exercisable by Mr. Constable on a cashless basis. The Constable Option is not transferrable by Mr. Constable, and he must remain an employee of the Company as an additional term of vesting. Once a portion of the Constable Option vests, it is exercisable by Mr. Constable for four years . The fair value of the Bonus Options on the date of the grant was $ 578,082 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .14% , ii) expected life of 2.0 years , iii) dividend yield of 0 %, iv) expected volatility of 312.2 %. The Company analyzed the likelihood that the vesting qualifications would be met, and as of June 30, 2021, deemed that there was a 5.8 % chance that the options would vest. Therefore, stock option expense recognized during the six months ended June 30, 2021 for this option was $ 34,067 . 16 Effective June 14, 2021 the Company issued options to purchase up to an aggregate of 1,125,000 shares of common stock to various employees under the Plan. The options were issued pursuant to a stock option grant agreements and are exercisable at $ 0.036 per share for a period of four years from the date of issuance, with 12.5 % of the options vesting each fiscal quarter over a period of two years . The fair value of the options totaled $ 38,369 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .21 %, ii) expected life of 2 years , iii) dividend yield of 0 %, iv) expected volatility of 304.77 %. The stock options expense recognized for the six months ended June 30, 2021 was $ 4,797 . A summary of the Company’s outstanding stock options as of December 31, 2020, and changes during the six months ended June 30, 2021 is presented below: Schedule of Option Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Aggregate Intrinsic Value Outstanding - December 31, 2020 199,730,020 $ 0.0323 2.84 $ 168,892 Granted 1,125,000 0.0360 Forfeited - - Exercised - - Outstanding – June 30, 2021 (unaudited) 200,855,020 $ 0.0351 2.35 Exercisable - June 30, 2021 (unaudited) 69,870,645 $ 0.0280 2.65 $ 909,994 Note 7. Commitments and contingencies On August 14, 2014, the Company entered into a thirty-seven-month term lease for its 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. On 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. On June 30, 2020, the Company entered into Amendment No. 2 to the Patent License Agreement with Setaysha Technical Solutions, LLC (“STS”). The amendment set certain limits and expectations of the assistance from STS related to designing and commercializing certain diving products, and revised the royalty payments due to STS as consideration for uncompensated services. The Company is obligated to pay STS a minimum yearly royalty of $ 60,000 , or $ 15,000 per fiscal quarter, beginning in December 2019 and increasing by 2.15 % per year. The minimum royalty was temporarily increased to $ 60,000 for fiscal years 2022, 2023 and 2024, with a fourth quarter true up against earned royalties. In addition, if the Company 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 2024. Royalty recorded in relation to this agreement totaled $ 41,251 and $ 13,833 for the three months ended June 30, 2021 and 2020, respectively and $ 54,955 and $ 27,926 for the six months ended June 30 , 2021 and 2020, respectively. On 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 continue to be billed $ 8,840 per month through the expiration date of July 2021. The Company terminated the agreement with Figment Design effective July 31, 2021. On 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. This agreement expired on July 1, 2021. BLU3, Inc. is currently in negotiation to renew this agreement. 17 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 Company. Previously, Mr. Constable had provided advisory services to the Company through the agreement with Brandywine LLC. In consideration for his services, Mr. Constable shall receive (i) an annual base salary of $ 200,000 , payable in accordance with the customary payroll practices of the Company, and (ii) 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. In addition, Mr. Constable shall be entitled to receive four-year stock options to purchase shares of common stock at an exercise price equal to $ 0.0184 per share in the 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. On March 1, 2021, the Company entered into an investor relations consulting agreement with BGM Equity Partners, LLC. The term of the agreement is twelve months. As compensation, the Company issued 3,000,000 shares of its common stock valued at $ 120,000 to BGM Partners . Legal The Company is a defendant in that certain lawsuit styled Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019 in the Circuit Court of the 17 th Judicial Circuit in and for Broward County, Florida. The complaint, which relates to consulting services provided to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $ 15,870 .97 in unpaid consulting fees together with interest. In April 2020, the Company filed a Motion to Dismiss, and at a hearing held in May 2021, the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. The parties entered mediation pursuant to the Court’s order. This action was settled for $ 10,000 on July 12, 2021. 18 Note 8. Segment Reporting The Company has three operating segments as described below: 1. Legacy SSA Products, which sells recreational hookah diving systems. 2. High Pressure Gas Systems, which sells high pressure air and industrial gas compressor packages. 3. Ultra Portable Tankless Dive Systems, which sells next generation electric surface supply air diving systems and electric shallow dive system that are battery operated and completely portable to the user. Schedule of Segment Reporting Information Three Months Ended June 30 (unaudited) Legacy SSA Products High Pressure Gas Systems Ultra Portable Tankless Dive Systems Total Company 2021 2020 2021 2020 2021 2020 2021 2020 Net Revenues $ 976,973 $ 626,389 $ 207,565 $ 75,170 $ 528,380 $ 618,969 $ 1,712,918 $ 1,320,528 Cost of Revenue $ ( 668,246 ) ( 310,595 ) ( 113,499 ) ( 35,487 ) ( 333,864 ) ( 477,655 ) ( 1,115,609 ) ( 823,737 ) Gross Profit 308,727 315,794 94,066 39,683 194,516 141,314 597,309 496,791 Depreciation 4,748 2,039 - - 2,418 4,837 7,166 6,876 Income (loss) from Operations $ ( 314,279 ) $ ( 408,031 ) $ 40,224 $ 534 $ 26,445 $ ( 170 ) $ ( 247,610 ) $ ( 407,667 ) Six months ended June 30 (unaudited) Legacy SSA Products High Pressure Gas Systems Ultra Portable Tankless Dive Systems Total Company 2021 2020 2021 2020 2021 2020 2021 2020 Net Revenues $ 1,443,016 $ 920,507 $ 357,693 $ 273,386 $ 862,978 $ 761,424 $ 2,663,687 $ 1,955,317 Cost of Revenue ( 1,038,072 ) ( 538,782 ) ( 194,677 ) ( 185,287 ) ( 522,657 ) ( 631,564 ) ( 1,755,406 ) ( 1,355,633 ) Gross Profit 404,944 381,725 163,016 88,099 340,321 129,860 908,281 599,684 Depreciation 8,560 3,155 - - 4,836 7,254 13,396 10,409 Income (loss) from operations $ ( 758,430 ) $ ( 614,687 ) $ 49,590 $ ( 2,237 ) $ 14,060 $ ( 81,521 ) ( 694,780 ) $ ( 698,445 ) Total Assets $ 1,529,702 $ 1,433,698 $ 302,088 $ 187,371 $ 673,255 $ 632,123 2,505,045 $ 2,253,192 Note 9. Subsequent Events On July 30, 2021, the Company entered into a binding term sheet (the “Term Sheet”) with Submersible Systems, LLC, a Florida limited liability corporation (“Submersible”), and Tierra Vista Group, LLC and Summit Holdings V, LLC (Tierra Vista Group and Summit Holdings V, collectively, the “Sellers”), the owners of all of the membership interests of Submersible (the “Membership Interests”). Pursuant to the terms of the Term Sheet, the Company will acquire all of the Membership Interests from the Sellers for an aggregate purchase price of $ 1,750,000 (the “Purchase Price”), to be paid to the Sellers at closing: (i) by the issuance to the Sellers of three -year convertible promissory notes (each, a “Note”) in the aggregate principal amount of $ 350,000 , at an interest rate of 8 % per annum, with each Seller to receive a Note in the principal amount pro rata with the number of Membership Interests such Seller owns of Submersible, and (ii) by the issuance to the Sellers of an aggregate of $ 1,400,000 shares (the “Shares”) of the Company’s common stock, par value $ 0.0001 per share, such number of Shares to be calculated based on the volume weighted average price of a share of the Company’s Common Stock on the OTC Markets (“VWAP”) for (a) 180 days prior to the date of the Term Sheet, or (b) 180 days prior to the closing date of the transaction, whichever results in a lower VWAP, with each Seller receiving a pro rata portion of the Shares based upon the total number of Membership Interests held by such Seller. The closing and consummation of the transactions contemplated by the Term Sheet are to occur no later than August 31, 2021, and are subject to certain closing conditions and deliveries, including an agreement containing typical representations and warranties by the parties of a transaction of this nature. There are no assurances the transactions will be completed. On July 12, 2021, the Company entered into a settlement agreement related to the lawsuit styled Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019 in the Circuit Court of the 17 th Judicial Circuit in and for Broward County, Florida. (see Note 7) 19 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview BWMG, through its wholly owned subsidiaries, designs, tests, and manufactures tankless dive systems, yacht-based SCUBA air compressor and nitrox generation fill systems and acts as the exclusive distributor for North and South America for Lenhardt & Wagner GmbH (“L&W”) compressors in the high-pressure breathing air and industrial gas markets. Our wholly owned subsidiaries and related product lines are as follows: [ ] Legacy SSA Products This segment represents our surface supplied air (SSA) product line. Trebor began its business making surface supplied air diving systems in the late 1960s. Our Brownie’s Third Lung systems have long been a dominant figure in gasoline powered, high-performance, and now the battery powered surface supplied air diving systems. Taking full advantage of the proprietary compressor system, a complete series of traditional “fixed speed” electric compressors were developed for the built-in-boat market in 2005. After years of inventing, testing and development, in 2010 we introduced our variable-speed battery powered hookah system which provides divers with gasoline-free all day shallow diving experiences. This battery system was updated in 2019 we introduced a lithium-ion battery powered variable speed system that is capable of three dives to thirty feet for three hours on one charge. These systems provide performance and runtimes as great as 300% better than the best devices previously on the market by utilizing a variable speed technology that controls battery consumption based on diver demand. The Legacy SSA segment has experienced a 45.8% growth in units sold in the first six months of 2021 as compared to the first six months of 2020, as we continue to expand our dealer network and the breadth of product that each of the dealers provide. This segment is seeing results from its marketing efforts with both the consumer and our network of dealers. The company continues to add dealers across the country in order to diversify the seasonality as well as the geography risks. Additionally, we continue to pursue more aggressively the boat builder market to offer our Legacy SSA systems as an option on newly built boats, expanding our market beyond the traditional consumer markets for our products. Our Legacy SSA products include: ● Tankless Dive Systems: The Company produces a line of tankless dive products, commonly called hookah or recreational surface supplied air systems. These systems allow one to four divers to enjoy the marine environment up to a depth of up to 45 feet without the bulk and weight of conventional SCUBA gear. The removal of barriers to entry into the sport of diving and the reduction of complicated and bulky SCUBA gear invites a broader range of the general public to participate more actively and enjoyably at their own pace and schedule. The design of our product also reduces the effort required for both its transport and continued use while exploring, cruising or traveling. A line of land-based systems is available for light-duty commercial applications that demand portability and performance. In addition to the gasoline-powered units and the variable speed battery powered units, a series of AC electric powered systems is also available for light to commercial duty. Powered by battery for portability or household current for virtually unlimited dive duration, these units are used primarily by businesses that work in aquatic maintenance and marine environments. ● BIAS (Boat Integrated Air Systems): The Company developed several tankless products and complimentary accessories that it believes makes boat diving even easier. The BIAS battery powered tankless kit allows boat builders, dealers and end users to seamlessly install a pre-packaged kit directly into the boat. The E-Reel advances this idea by adding a level-winding battery powered hose reel system to provide compact storage of up to 150 feet of hose. Boaters can perform their own in-water maintenance and inspections, or just dive for enjoyment. In addition to supplying air to divers, BIAS is useful for supporting air horns, inflating boat fenders/water toys, activating pneumatically operated doors, and more. The Company strategy is to align the easy to install, complete kit packages with boat builders, dealer and end users through a vertically targeted sales and marketing program. High Pressure Gas Systems Through this segment, we design, manufacture, sell and install SCUBA tank fill systems for on-board yacht use under the brand “Yacht-Pro™”. Our systems provide complete diving packages and dive training solutions for yachts, includes Nitrox systems which allow yacht owners to fill tanks with oxygen enriched air on board. The Yacht-Pro™ compressor systems offer a completely marine-prepared, VFD (variable frequency drive)-driven, automated alternative to other compressors on the market. We also design complete dive lockers, mixed gas production and distribution systems, and the unique Nitrox Maker™. Nitrox is oxygen-enriched air, which reduces the effects of nitrogen on divers; it is the industry standard for dive professionals. The Nitrox Maker™ continuously generates the oxygen rich breathing gas directly from low-pressure air; no stored oxygen or other gases are required onboard. Consistent with our goals for 2021, this segment of our business continues to work to expand its customer base beyond that of the diving community. We believe the product lines from L&W, will allow LW Americas to put a high quality, competitive products into the first responder and industrial market that utilize compressed air for many applications. Our goal will be to build a network of jobbers, dealers, installers and high-pressure compressor distributors throughout the territory by leveraging our know-how, brand awareness, complimentary products and creating sustainable distribution and core product OEM integration relationships. [ ] Ultra Portable Tankless Dive Systems In the continued expansion of our business, in December 2017, we formed a wholly-owned subsidiary BLU3, to develop and market a next generation electric surface supplied air diving systems electric shallow dive system that is completely portable to the user. The BLU3 line currently consists of two models targeting specific performance levels and price points – NEMO and NOMAD. The NEMO dive system continues to expand its customer base and become more accepted across the world. Currently, Nemo is sold in 9 countries through Amazon, and also through 25 dealers across the world. Nemo, the worlds smallest dive system is capable of taking one diver to 10 feet for 60 to 90 minutes on one charge of its lithium-ion battery. Nemo is portable, and approved for airline travel. Currently, NOMAD is nearing the end of the design phase and full production will begin in the third quarter of 2021, as the Company continues to ensure that it will deliver a product that will excite the consumer but be safe as well. This product will expand the customers dive capability to up to 33 feet and continue to drive the vertical integration of the diving experience. 20 Second Quarter and Six Months ended June 30, 2021 Highlights Revenue for the Second Quarter 2021 and six months ended June 30, 2021 have continued to increase as compared to the same periods in 2020, The Company is succeeding in its mission to expand our customer base from primarily the southeast US to an international distributor and retail customer base. We believe that we are changing the way that people will approach the next atmosphere, by providing innovative, portable and easy to use surface supplied air products that will allow the users to explore what is below the surface of the water. Highlights: ● Our total revenue increased 29.7% for the Second Quarter and 36.2% for the six months ended June 30, 2021 as compared to the same periods in 2020. ● The Company signed an exclusive US and Caribbean distribution agreement with the manufacturer of Bright Weights. Bright Weights is a unique and fun alternative to the dive ballast systems currently available in the market today. The Company expects to use its Amazon and Dealer sales channels to grow this product line. ● BLU3, Inc. launched pre-orders for September and October shipment of its Nomad Product line. ● BLU3, Inc. has expanded its Amazon footprint to 9 countries, including the US. ● Unit sales for the BLU3 Nemo increased 152% for the six months ended June 30, 2021 as compared to the same period in 2020. ● Gross margins increased from 30.7% to 34.1% for the six months ended June 30, 2021 as compared to the same period in 2020. Results of Operations Net Revenues, Costs of Net Revenues and Gross Profit Overall, our net revenues increased 29.7% and 36.2% for the Second Quarter 2021 and the six months ended June 30, 2021 from the comparable periods in 2020. These increases included an increase of 21.0% and 31.5% in net revenues from sales to third parties, and an increase of 79.1% and 57.6% in net revenues from sales to related parties for the three and six months ended June 30, 2021, respectively, over the comparable prior period. Net revenue for the Second Quarter 2020 and six months ended June 30, 2020 included non-recurring revenue related to the Blu-Vent project of approximately $458,000. Adjusting this non-recurring item from the 2020 revenue the core business revenue increase for the three and six months ended June 30, 2021 would be 99.0% and 78.1%, respectively. Our total cost of net revenues in the Second Quarter 2021 and the six months ended June 30, 2021 were 65.1% and 65.9% of our total net revenues as compared to 62.4% and 69.3% for the same periods in 2020. Included in our total cost of net revenues are royalty expenses we pay to Mr. Carmichael which increased 56.4% and 74.0% for the three and six months ended June 30, 2021 as compared to the same periods in the prior year. The increased royalties are the result of increased sales in the legacy SSA segment. Also included in the total cost of net revenue are royalties paid pursuant to our agreement with STS. These royalties accounted for approximately 2.4% and 2.1% of total net revenue for the three and six months ended June 30, 2021, respectively as compared to 1.1% and 1.4% for the same periods in 2020. We reported an overall gross profit margin of 34.9% and 34.1% for the three and six months ended June 30, 2021 as compared to 37.6% and 30.7% for the three and six months ended June 30, 2020. The Legacy SSA product lines had an increase in distribution sales during the Second Quarter 2021 as compared to the direct to consumer sales of the Second Quarter 2020, since the COVID stay at home orders have been lifted in 2021, customers are returning to their local dive stores, rather than purchasing online. The High Pressure Gas Systems margins have shown a decrease in margin percentage for the Second Quarter, 2021 to 45.3% from 52.8% during the same quarter in 2020. However, with the increased revenue in this segment,margin available to cover operating expenses grew in this segment by 137% in the Second Quarter 2021 as compared to the Second Quarter 2020 as revenue grew 176.1% for the segment. Margins related to the Ultra-Portable Tankless dive segment improved from 22.8% for the Second Quarter 2020 to 36.8% for the Second Quarter, 2021. The margins in this segment in the Second Quarter, 2020 were depressed because of the lower margins yielded from the BluVent project that was billed in that period. The following tables provides net revenues, total costs of net revenues, and gross profit margins for our segments for the periods presented. 21 Net Revenues Three Months Ended June 30 % of Six Months Ended June 30, % of  2021 2020 Change 2021 2020 Change (unaudited) (unaudited) Legacy SSA Products $ 976,973 $ 626,389 56.0 % $ 1,443,016 $ 920,507 56.8 % High Pressure Gas Systems 207,565 75,170 176.1 % 357,693 273,386 30.8 % Ultra-Portable Tankless Dive Systems 528,380 618,969 (14.6 )% 862,978 761,424 13.3 % Total net revenues $ 1,712,918 $ 1,320,528 29.7 % $ 2,663,687 $ 1,955,317 36.2 % Cost of revenues as a percentage of net revenues Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (unaudited) (unaudited) Legacy SSA Products 68.4 % 49.6 % 71.9 % 58.5 % High Pressure Gas Systems 54.7 % 47.2 % 54.4 % 67.8 % Ultra-Portable Tankless Dive Systems 63.2 % 77.2 % 60.6 % 82.9 % Gross profit (loss) margins Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (unaudited) (unaudited) Legacy SSA Products 31.6 % 50.4 % 28.1 % 41.5 % High Pressure Gas Systems 45.3 % 52.8 % 45.6 % 32.2 % Ultra-Portable Tankless Dive Systems 36.8 % 22.8 % 39.4 % 17.1 % Legacy SSA Products segment Revenue in this segment continues to show improvement, increasing 56.0% year over year for the Second Quarter 2021. The increase in net revenues in this segment for the Second Quarter 2021 as compared to the same period in 2020 can be attributed to increases in dealer demand, increasing 114.1%, and demand from affiliates increasing 344.1%. These segments increased in anticipation for the 2021 summer season. Direct to consumer demand decreased for the Second Quarter, 2021 as compared to the same period in 2020, as the re-opening of the economy after COVID allowed consumers to purchase product at retail rather than from our website. For the six months ended June 30, 2021 the Legacy SSA segment continued to show significant increase over the prior year. Increases in all areas of this segment increased netting to a total increase of 56.8% for the six months ended June 30, 2021 as compared to the same period in 2020. Our costs of revenues as a percentage of net revenues in this segment increased from 58.5% to 71.9% for the six months ended June 30, 2020 from the prior year. The increased cost of revenue, and in turn reduction in product margin, can be attributed to increase proportion of dealer sales as compared to the prior year increasing 79.3%. A breakdown of the revenue channels for this segment are below. Direct to Consumer represent items sold via our website, trade shows and walk-ins to our factory store. Dealer revenue represents sales to customers that we have dealer agreements that typically operate with the lowers margin. Affiliates are resellers of our products that are not in a formal dealer arrangement. 22 Three Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Second Quarter 2021 Second Quarter 2020 % change Second Quarter 2021 Second Quarter 2020 Second Quarter 2021 Second Quarter 2020 Dealers $ 664,928 $ 310,499 114.1 % 77.7 % 31.0 % 22.3 % 69.0 % Direct to Consumer (website Included) 273,430 307,195 (11.0 )% 45.1 % 68.3 % 54.9 % 31.7 % Affiliates 38,615 8,695 344.1 % 74.3 % 51.0 % 25.7 % 49.0 % Total $ 976,973 $ 626,389 56.0 % 68.4 % 49.6 % 31.6 % 50.4 % Six Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Six months ended June 30, 2021 Six months ended June 30, 2020 % change Six months ended June 30, 2021 Six months ended June 30, 2020 Six months ended June 30, 2021 Six months ended June 30, 2020 Dealers $ 918,467 $ 512,284 79.3 % 78.7 % 50.1 % 21.3 % 49.9 % Direct to Consumer (website Included) 484,102 387,499 25.0 % 58.9 % 69.5 % 41.1 % 30.5 % Affiliates 40,447 20,724 95.2 % 74.5 % 60.4 % 25.5 % 39.6 % Total $ 1,443,016 $ 920,507 56.8 % 71.9 % 58.5 % 28.1 % 41.5 % High Pressure Gas Systems segment Sales of high-pressure breathing air compressors shown a 176.1% year over year increase during the Second Quarter 2021 as the marketplace began to see an economic recovery during this period. All segments have begun to open up, and demand has begun to show signs of life, with travel returning, and diving operations throughout the US and Caribbean have re-opened and receiving tourists. The majority of our dive resort and dive operator customers’ businesses have begun to conduct a more normalized business, and the recovery of this customer segment can be seen in the increases in revenue in the reseller segment. The Original Equipment Manufacturer segment showed significant growth with an increase of over 300% for the six month ended June 30, 2021 as compared to 2020. The direct to consumer segment, which includes yacht owners and direct to dive stores, showed some life in the Second Quarter 2021 increasing 133%, however this increase wasn’t enough to recover the year over year results for the six months ended June 30, 2021 with a decrease in revenue in the segment of 22.0%. We continue to see acceptance of the L&W brand and we expect sales to continue to increase as we open the product up to new markets outside of the diving and yachting segments. Our costs of revenues as a percentage of net revenues in this segment decreased to 54.4% as compared to 67.8% for the six months ended June 30, 2021 and 2020. This can be attributed to significant improvements of in margin to the reseller and OEM customer segments. This is attributed to improved product mix and improvements in the job-costing process. Three Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Second Quarter 2021 Second Quarter 2020 % change Second Quarter 2021 Second Quarter 2020 Second Quarter 2021 Second Quarter 2020 Resellers $ 121,118 $ 83,945 44.3 % 53.0 % 67.8 % 47.0 % 32.2 % Direct to Consumers 43,749 18,785 132.9 % 68.2 % 18.5 % 31.8 % 81.5 % Original Equipment Manufacturers 42,698 (27,560 ) 254.9 % 45.6 % 90.2 % 54.4 % 9.8 % Total $ 207,565 $ 75,170 176.1 % 54.7 % 47.2 % 45.3 % 52.8 % 23 Six Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Six months ended June 30 2021 Six months ended June 30, 2020 % change Six months ended June 30, 2021 Six months ended June 30, 2020 Six months ended June 30, 2021 Six months ended June 30, 2020 Resellers $ 218,264 $ 141,718 54.0 % 57.3 % 71.9 % 42.7 % 28.1 % Direct to Consumers 93,990 120,558 (22.0 )% 51.7 % 66.1 % 48.3 % 33.9 % Original Equipment Manufacturers 45,439 11,110 309.0 % 46.1 % 33.7 % 53.9 % 66.3 % Total $ 357,693 $ 273,386 30.8 % 54.4 % 67.8 % 45.6 % 32.2 % Ultra Portable Tankless Dive Systems Revenue for the six months ended June 30, 2021 in the Ultra Portable Tankless Dive System segment continues to show significant improvement with growth of 13.3% increase for the first six months of 2021 as compared to the same period in 2020. The increase in revenue is despite the loss of the non-recurring revenue related to the BLU-Vent project that was recognized during the Second Quarter 2020. All of the sales channels for this business segment continue to develop. The largest contributor to the revenue increases for both the three and six months ended June 30, 2021 as compared to the prior year, are the growth in consumer direct sales and sales via the Amazon channel. Through June 30, 2021, BLU3 is selling to Amazon in nine countries as well as a significant presence in the US Amazon Channel. BLU3 continues to expand its dealer base which can be seen by the 334.2% revenue growth for first six months of 2021 as compared to the same period in 2020. The Company’s continued focus on direct to consumer via our website accounted for a 40.2% increase for the six months ended June 30, 2021 as compared to the prior year. Our aggregate cost of revenue from this segment as percentage of net revenues for the three months ended and six months ended June 30, 2021 have shown improvement over the same period in 2020. The cost of revenue and margins through the first six months of 2021 are more representative of the normalized costs and margins, excluding the non reoccurring Ventilator project. BLU3 is consistently working toward greater production efficiency and capacity. Three Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Second Quarter 2021 Second Quarter 2020 % change Second Quarter 2021 Second Quarter 2020 Second Quarter 2021 Second Quarter 2020 Ventilator $ - $ 457,803 (100.0 )% - 89.0 % - 11.0 % Direct to Consumer 188,466 149,589 26.0 % 53.9 % 51.3 % 46.1 % 48.7 % Amazon 188,467 - 100.0 % 61.9 % - 38.1 % 100.0 % Dealers 151,447 11,577 1,208.1 % 76.4 % (57.2 )% 23.6 % 157.2 % Total $ 528,380 $ 618,969 (14.6 )% 63.2 % 77.2 % 36.8 % 22.8 % Six Months Ended June 30, 2021 and June 30, 2020 Net Revenue Cost of Revenue as a % of Net Revenue Margin Six months ended June 30, 2021 Six months ended June 30, 2020 % change Six months ended June 30, 2021 Six months ended June 30, 2020 Six months ended June 30, 2021 Six months ended June 30, 2020 Ventilator $ - $ 457,803 (100.0 )% - 89.0 % - 11.0 % Direct to Consumer 340,665 243,042 40.2 % 52.2 % 71.9 % 47.8 % 28.1 % Amazon 259,265 - 100.0 % 61.8 % - 38.2 % 100.0 % Dealers 263,048 60,579 334.2 % 70.1 % 81.4 % 29.9 % 18.6 % Total $ 862,978 $ 761,424 13.3 % 60.6 % 82.9 % 39.4 % 17.1 % 24 Operating Expenses Operating expenses, consisting of selling, general and administrative (“SG&A”) expenses and research and development costs, and are reported on a consolidated basis for our operating segments. Aggregate operating expenses decreased 6.6% for the Second Quarter 2021 as compared to the Second Quarter 2020. For the six months ended June 30, 2021 aggregate operating expenses increased by 23.5% from the same period in 2020. Selling, General & Administrative Expenses (SG&A Expenses) SG&A decreased by 4.7% and increased by 25.7% for the Second Quarter and six months ended June 30, 2021 as compared to the same periods in 2020. The main drivers of SG&A during those periods are as follows: Expense Item Second Quarter 2021 Second Quarter 2020 % Change Six months Ended June 30, 2021 Six months Ended June 30, 2020 % Change Payroll, Selling & Admin $ 236,062 $ 103,368 128.4 % $ 461,529 $ 247,890 86.2 % Stock Compensation Expense 266,370 296,470 (10.2 )% 498,875 406,040 22.9 % Other Professional Fees 71,500 238,500 (70.0 )% 92,000 241,500 (61.9 )% Advertising 47,615 16,212 193.7 % 113,841 35,068 224.6 % All Others 202,060 209,913 (3.7 )% 394,397 311,543 26.6 % Total SG&A $ 823,607 $ 864,463 (4.7 )% $ 1,560,642 $ 1,242,041 25.7 % Payroll increases for the three and six months ended June 30, 2021 are related to the hiring of the CEO, and other administrative positions to support the growth in each of our divisions. Non-Cash Stock compensation expenses have seen a slight decrease for the Second Quarter, as the 2020 totals included stock options that were fully expensed in 2020, and no further adjustments were necessary in the Second Quarter 2021. The increase for the six months ended June 30, 2021 as compared to the same period in 2020 is related to options to the our CFO and Chairman, that were issued during the Second Quarter 2020 and were fully expensed in the First Quarter 2021. Other professional fees, typically in the form of non-cash stock or stock options decreased 70% and 61.9% for the Second Quarter 2021 and six months ended June 30, 2021, respectively, as compared to the same periods in 2020. This decrease can be attributed to the contracts of both an IR firm and a PR firm in the Second Quarter 2020, that were terminated or their compensation was restructured for 2021. The increase in advertising expense for the three and six months ended June 30, 2021 as compared to the same periods in 2020 is attributable to the agreement with the Company’s provider of marketing and advertising. This contract was executed in the Third Quarter 2020, and was not renewed as of July 31, 2021. Research & Development Expenses (R&D Expenses) R&D expenses for the Second Quarter and six months ended June 30, 2021 decreased 46.7% and 24.4%, respectively as compared to the same periods in the prior year. The decrease can be primarily attributed to the near completion of the R&D for BLU3’s NOMAD, as it moves toward production in the third quarter, 2021. Total Other Income Total other income was approximately $157,800 and $163,900 for the Second Quarter 2021 and six months ended June 30, 2021 as compared to other expense of approximately $6,400 and $12,300 during the same period in 2020. The other income for the Second Quarter 2021 consists of a gain from the forgiveness of the PPP loan of $159,600 offset by interest expense of approximately $1,800. The other expenses for the Second Quarter 2020 consist only of interest expense. The decrease in interest expense can be attributed to the decrease in interest expense on the Marlin Note, the conversion and settlement of debt and a reduction in the note balances due to repayments made. 25 Liquidity and Capital Resources Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. The following table summarized total current assets, total current liabilities and working capital at June 30, 2021 (unaudited) as compared to December 31, 2020. June 30, December 31, % of 2021 2020 change (unaudited) Total current assets $ 1,954,388 $ 1,469,037 33.0 % Total current liabilities $ 1,156,250 $ 1,029,204 12.3 % Working capital $ 798,138 $ 439,833 81.4 % The increase in our current assets at June 30, 2021 from December 31, 2020 principally reflects increases in accounts receivable from related and non-related parties, inventory, net and prepaid expenses and other current assets. The increase in our total current liabilities principally reflect increases in total accounts payable, customer deposits, and other liabilities, offset by decreases in current maturities of long term debt, notes payable and the convertible debentures. Summary Cash Flows Six Months Ended June 30, 2021 2020 (unaudited) Net cash used by operating activities $ (396,838 ) $ (463,508 ) Net cash used by investing activities $ (14,591 ) $ - Net cash provided by financing activities $ 227,904 $ 885,138 Net cash used in operating activities for the six months ended June 30, 2021 was due to the net loss of approximately $530,800 which is primarily attributable to non-cash stock compensation expenses of approximately $600,900. The non-cash stock compensation expense for the six months ended June 30, 2021 is attributable stock options issued to Mr. Carmichael, Mr. Constable, various employees as well as shares issued for services to consultants. The cash used is also the result of increases in current assets, including, accounts receivable, inventory, net, and prepaid expenses that utilized approximately $660,300 offset by increases in current liabilities including accounts payable, other liabilities, and customer deposits, which totaled to approximately $325,900. Net cash used by investing activities relate primarily to an increase in leasehold improvements, as the company expanded its office space for additional personnel, and lighting in the production areas. Net cash provided by financing activities in the six months ended June 30, 2021 reflects proceeds from the sale of common stock, proceeds from a new debt agreement, offset by the repayments of notes payable and Marlin Note. Going Concern and Management’s Liquidity Plans As set forth in Note 3 of the unaudited condensed consolidated financial statements appearing in this report were prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the 12-month period following the date of issuance of these consolidated financial statements. The report of our independent registered public accounting firm on our audited consolidated financial statements for the year ended December 31, 2020 contained a going concern qualification. We have a history of losses, and an accumulated deficit of $13,486,923 as of June 30, 2021. Despite a working capital surplus of $798,138 at June 30, 2021, the continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to continue to increase revenues, control expenses, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. As set forth in Note 5 appearing earlier in this report, we owe third parties approximately $50,000 under the terms of convertible debentures that become due in December 2021. In addition, we have an additional $15,000 in loans which are due on demand. We are continuing to engage in discussions with potential sources for additional capital, however, our ability to raise capital is somewhat limited based upon our revenue levels, net losses and limited market for our common stock. If we fail to raise additional funds when needed, or if we do not have sufficient cash flows from operations, we may be required to scale back or cease certain of our operations. 26 Critical Accounting Policies The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, valuation of inventory, allowance for doubtful accounts, and equity-based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited condensed consolidated financial statements appearing earlier in this report. Recent Accounting Pronouncements The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. These recent accounting pronouncements are described in Note 2 to our notes to unaudited condensed consolidated financial statements appearing earlier in this report. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. The Company’s management, under the supervision and with the participation our Chief Executive Officer and our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2021. Based upon that evaluation our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report as a result of the continuing material weakness in the Company’s internal control over financial reporting as described in Item 9A. of our 2020 10-K. We do not, however, expect that the weaknesses in our disclosure controls will be remediated until such time as we remediate the material weaknesses in our internal control over financial reporting. Changes in Internal Controls over Financial Reporting There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15 under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 27 PART II – OTHER INFORMATION Item 1. Legal Proceedings We are a defendant in that certain lawsuit styled Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., Case number CACE19009879 filed on May 6, 2019 in the Circuit Court of the 17 th Judicial Circuit in and for Broward County, Florida. The complaint, which relates to consulting services provided to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $15,870.97 in unpaid consulting fees together with interest. In April 2020 the Company filed a Motion to Dismiss, and at a hearing held in May 2021 the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. This matter was settled for $10,000 in July 2021. Item 1A. Risk Factors We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2020 10-K. Item 2. Unregistered sales of equity securities and use of proceeds Except as to unregistered sales of securities disclosed under prior reports, during the period covered by this report we sold the securities disclosed below that were not registered under the Securities Act of 1933, as amended. On June 10, 2021, the Company issued 6,055,358 shares of common stock to the holder of an outstanding convertible debenture pursuant to the conversion of the convertible debenture and accrued interest in the amount of $60,554. The shares of restricted common stock were issued pursuant to the exemption from registration provided by Section 3(a)(9) of the Act. The holder has access to information concerning the Company and is an accredited investor. Item 3. Defaults Upon Senior Securities None. Item 4. MINE SAFETY DISCLOSURE None. Item 5. Other Information On July 30, 2021, the Company entered into a binding term sheet (the “Term Sheet”) with Submersible Systems, LLC, a Florida limited liability corporation (“Submersible”), and Tierra Vista Group, LLC and Summit Holdings V, LLC (Tierra Vista Group and Summit Holdings V, collectively, the “Sellers”), the owners of all of the membership interests of Submersible (the “Membership Interests”). Pursuant to the terms of the Term Sheet, the Company will acquire all of the Membership Interests from the Sellers for an aggregate purchase price of $1,750,000 (the “Purchase Price”), to be paid to the Sellers at closing: (i) by the issuance to the Sellers of three-year convertible promissory notes (each, a “Note”) in the aggregate principal amount of $350,000, at an interest rate of 8% per annum, with each Seller to receive a Note in the principal amount pro rata with the number of Membership Interests such Seller owns of Submersible, and (ii) by the issuance to the Sellers of an aggregate of $1,400,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share, such number of Shares to be calculated based on the volume weighted average price of a share of the Company’s Common Stock on the OTC Markets ("VWAP") for (a) 180 days prior to the date of the Term Sheet, or (b) 180 days prior to the closing date of the transaction, whichever results in a lower VWAP, with each Seller receiving a pro rata portion of the Shares based upon the total number of Membership Interests held by such Seller. The closing and consummation of the transactions contemplated by the Term Sheet are to occur no later than August 31, 2021, and are subject to certain closing conditions and deliveries, including an agreement containing typical representations and warranties by the parties of a transaction of this nature. There are no assurances the transactions will be completed. On May 26, 2021 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, Stock Options may be granted to Employees, Directors, and Consultants in the form of Incentive Stock Options or Non-statutory Stock Options, Stock Purchase Rights, time vested and/performance invested Restricted Stock, and Stock Appreciation Rights and Unrestricted Shares may also be granted under the Plan. The maximum number of shares that may be issued under the Plan shall be 25,000,000 shares. Common Stock to be issued under the Plan may be either authorized and unissued or shares held in treasury by the Company. The term of the Plan shall be ten years. 28 Item 6. Exhibits Incorporated by Reference Filed Exhibit or Furnished No. Exhibit Description Form Date Filed Number Herewith 3.1 Articles of Conversion (Nevada) 8-K 10/28/15 3.1 3.2 Certificate of Conversion (Florida) 8-K 10/28/15 3.2 3.3 Articles of Incorporation (Florida) 8-K 10/28/15 3.3 3.4 Articles of Amendment 8-K 12/16/15 3.5 3.5 Bylaws 8-K 10/28/15 3.4 4.1 2021 Equity Incentive Plan Filed 10.1 Binding Term Sheet dated July 30, 2021 8-K 8/3/2021 31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a) Filed 31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a) Filed 32.1 Certification Pursuant to Section 1350 Filed 101 XBRL Interactive Data File Filed 29 SIGNATURES In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: August 16, 2021 Brownie’s marine group, Inc. By: /s/ Christopher H. Constable Christopher H. Constable Chief Executive Officer, principal executive officer By: /s/ Robert M. Carmichael Robert M. Carmichael Chief Financial Officer, principal financial and accounting officer 30