Brownie's Marine Group, Inc 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under Exchange Act. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluations as of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting described below. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. Our management, including our Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the design and operations of our disclosure controls and procedures (defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) as of December 31, 2021 and based upon the such evaluation, have concluded that the disclosure controls and procedures as of December 31, 2021 were not effective due to the material weaknesses identified below. To address these material weaknesses, management performed additional procedures to ensure the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. The framework used by management in making that assessment was the criteria set forth in the documents entitled “2013 Internal Controls – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2021 and that material weaknesses in internal controls over financial reporting described below existed. 24 A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCOAB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses: ● There are an insufficient number and lack of qualified accounting department and administrative personnel and support; ● There are insufficient written policies and procedures to ensure the correct application of accounting and financial reporting with respect to GAAP and SEC disclosure requirements; ● Insufficient segregation of duties, oversight of work performed and lack of controls in our finance and accounting functions due to limited personnel; ● The Company’s systems that impact financial information and disclosures have ineffective information technology controls; ● Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded; and ● Evaluation of disclosure controls and procedures was not sufficiently comprehensive due to limited personnel. Internal Control Remediation Efforts . Subject to sufficient resources, management expects to remediate the material weaknesses identified above as follows: ● Management has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP and SEC compliance requirements. We intend to expand our finance department through the hiring of a certified public accountant to strengthen the segregation of duties, internal controls and enhance our current staff. ● Segregation of duties will be analyzed and adjusted Company-wide as part of the internal controls implementation and documentation of those controls and procedures that is expected to commence in 2021. ● The Company plans on evaluating various accounting systems to enhance our system controls. We will continue to monitor and evaluate the effectiveness of our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added to our accounting and administrative staff allowing improved internal control over financial reporting. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 25 PART III Item 10. Directors, Executive Officers, and Corporate Governance. The following are the names, ages and positions of our current executive officers and directors. Name Age Position Robert M. Carmichael 60 Chairman, President, and Chief Financial Officer and Director Christopher H. Constable 55 Chief Executive Officer and Director Charles F. Hyatt 53 Director Key Employee Blake Carmichael 27 Chief Executive Officer and President of BLU3 Our directors are elected for a term of one year and serve until such director’s successor is duly elected and qualified. Each executive officer serves at the pleasure of the Board. Robert M. Carmichael. Since April 2004, Mr. Carmichael has served as our Chairman and President, and from April 2004 until November 2020 served as our Chief Executive Officer. Mr. Carmichael has served as our Chief Financial Officer since 2017 and a director since 2005. Mr. Carmichael was selected to serve as a director for his general business management experience with specific experience in the diving industry. Christopher H. Constable . Mr. Constable as served as our Chief Executive Officer and a director since November 2020. Mr. Constable also currently sits on the board of directors of Bon Natural Life, Ltd. (NASDAQ: BON), and serves as the Chairman of the audit committee. Prior to joining our company, from August 2020 through the November 2020, Mr. Constable provided business and financial consulting services. From 2003 through February 2020 Mr. Constable served as Chief Financial Officer of John Keeler & Co., Inc., d/b/a Blue Star Foods, a privately held international seafood company which in 2018 merged into Blue Star Foods Corp., a Miami, Florida-based sustainable seafood company (NASDAQ: BSFC). Mr. Constable served as Chief Financial Officer and a director of Blue Star Foods Corp. February 2020. Prior thereto, from 1999 to 2003, Mr. Constable was a consultant at Gateway Capital Corp., a business consulting firm, where he analyzed the financial and reporting capabilities of prospective lending customers with revenues from $10 to $100 million. Additionally, Mr. Constable was involved with loan workouts of facilities that required either liquidation or restructuring to ensure collectability for the financial institutions. From 1990 to 1999, Mr. Constable was a commercial banker at Mercantile Bankshares in Baltimore, Maryland, Finova Capital Corporation and Capital Bank, both in south Florida. Mr. Constable received his B.S. in Finance with an Accounting Minor from the Merrick School of Business at the University of Baltimore in 1989. Mr. Constable was selected to serve as a director for his experience with public companies and over 30 years background in finance and accounting. Charles F. Hyatt . Mr. Hyatt has served as a director since March 2019. Mr. Hyatt is involved in the automotive industry and present owner of several franchise car dealerships in Myrtle Beach, South Carolina, including Myrtle Beach Hyundai (since 1999) and Hyatt Buick & GMC (since 2001). In the past his ownerships also included Myrtle Beach Suzuki (from 2004 until 2012), Sun Coast Mazda and Mitsubishi (from 2001 until 2009), Stone Mountain Chevrolet (from 2001 until 2009. From 1994 to 1997, Mr. Hyatt served as Wholesale Purchase Director with Lamar Ferrel Chevrolet, and from 1991 to 1994 as General Manager of Bob Harris Ford. From 1988 to 1990, Mr. Hyatt was the Demonstration Director of Auto Dialysis, and from 1986 to 1998, the General Manager/Operational Partner of Ken Hyatt Dodge, Chrysler and Plymouth. Since 2013, Mr. Hyatt has owned and operates the Gilligan Island Funland Golf amusement park. Mr. Hyatt sits on the American Cross Heroes committee and is the winner of the Jefferson Award (2017) for his community involvement. Mr. Hyatt was selected to serve on the board of directors for his general business management experience. Key Employee Blake Carmichael . Since December 2017, Mr. Carmichael has served as Chief Executive Officer of BLU3. He joined our company in May 2017 as an electrical engineer with a primary focus to develop new battery powered hookah diving products. Mr. Carmichael graduated from Florida Atlantic University in May 2017 with a Bachelor of Science in Electrical Engineering. During college, he worked in 2014 and 2015 as a participant in the University of Central Florida / Lockheed Martin College Work Experience Program as a systems engineer with a focus on testing for infrared imaging systems used in military aircraft. In the summer of 2016, he participated in the Naval Surface Warfare Center’s Naval Research Enterprise Intern Program with a focus on integrating underwater vehicles for survey and recovery at the South Florida Ocean Measurement Facility. There are no family relationships between any of the executive officers and directors. 26 Committees of the Board of Directors We have not established an Audit Committee, Compensation Committee or a Nominating Committee The entire Board participates in the nomination and audit oversight processes and considers executive and director compensation. Given the size of the Company, the entire Board is involved in such decision-making processes. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors. We are not a “listed company” under SEC rules and are therefore not required to have an audit committee comprised of independent directors. Christopher Constable is an “financial expert” within the meaning of the rules and regulations of the SEC. Compensation of Directors The following table provides information concerning the compensation paid to our independent director for services in such capacity during the year ended December 31, 2021. No other director received compensation for serving in such capacity in 2021. Name Fees earned or paid in cash ($) Stock awards ($) Option awards ($) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Charles Hyatt 18,000 - - - - - 18,000 Delinquent Section 16(a) Reports Not applicable. Code of Ethics The Company has not as yet adopted a code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required by the Sarbanes-Oxley Act of 2002 due to our small size and limited resources and because management’s attention has been focused on matters pertaining to business operations. Shareholder Communications Although we do not have a formal policy regarding communications with our Board, shareholders may communicate with the Board by writing to us at Brownie’s Marine Group, Inc., 3001 NW 25th Avenue, Suite 1, Pompano Beach, Florida 33069, Attention: Mr. Christopher H. Constable. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate. 27 Item 11. Executive Compensation The following table provides certain information regarding compensation awarded to, earned by or paid to our Chief Executive Officer and the other executive officer with compensation exceeding $100,000 during fiscal 2021 (each a “Named Executive Officer”). Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($)(1) Option Awards ($) (1) No equity incentive plan compensation ($) Non-qualified deferred compensation earnings ($) All other compensation ($) Total ($) Robert Carmichael 2021 120,000 - 874,022 (4) - - 105,474 (5) 1,099,496 Chairmen, President and CFO (2) 2020 120,000 - 33,184 (3) 666,239 (4) - - 107,528 (6) 926,951 Christopher Constable, 2021 199,474 - 181,710 (9) - - 2,661 (10) 302,134 CEO (7) 2020 26,923 - 45,659 (8) 106,890 (9) - - - 755,561 (1) Represents the aggregate grant date fair value of the shares of our common stock, computed in accordance with ASC Topic 718. The assumptions made in the valuations of the stock awards are included in Note 13 of the notes to our consolidated financial statements (2) Mr. Carmichael served as our Chief Executive Officer from 2004 until November 2020 when Mr. Constable joined our company. Mr. Carmichael continues to serve as Chairman, President and Chief Financial Officer. (3) Represents the award of 725,087 shares of common stock issued to Mr. Carmichael for his participation in the BLU3-VENT project. (4) On April 14, 2020 the Company issued Mr. Carmichael an option to purchase up to 125,000,000 shares of common stock at an exercise price of $0.045 subject to vesting as discussed in note 13 of the audited financial statements attached to this report. The Company expensed $874,022and $655,515 of the fair market value of these options in 2021 and 2020, respectively. On July 29, 2019 the Company issued Mr. Carmichael five year options to purchase up to 20,761,904 shares of common stock at an exercise price of $0.018 per share, subject to vesting over a period of six months. We recognized stock option expense of $10,724 in 2020. (5) Represents (i) $18,000 in director compensation (ii) $12,313 in health insurance, and (iii) an aggregate of $75,161 in royalties paid to an entity controlled by Mr. Carmichael under the terms of a license agreement with the Company. (6) Represents (i) $18,000 in director compensation (ii) $21,720 in health insurance, and (iii) an aggregate of $67,808 in royalties paid to an entity controlled by Mr. Carmichael under the terms of a license agreement with the Company. (7) Mr. Constable has served as our Chief Executive Officer since November 2020. (8) Represents the grant date fair value of 2,795,000 shares of common stock issued to Mr. Constable on behalf of Brandywine, LLC for consulting services provided to the Company prior to his employment. (9) On November 5, 2020 the Company entered into an option agreement with Mr. Constable the details of which are disclosed in Note 14 of the audited financial statements included in this report. The Company expensed vested options of 5,434,783 shares with a fair value of $106,890 in 2020 and the Company expensed 2,000,000 with a fair market value of $82,734 in 2021. On November 5, 2021 the Company entered an option agreement with Mr. Constable the details of which are disclosed in Note 13 of the audited financial statements included in this report. The Company expensed vested options of 2,403,846 shares with a fair value of $98,976 which was fully expensed in 2021. (10) Represents health insurance premiums paid by the Company on behalf of Mr. Constable. Equity Plan On May 26, 2021, the Company adopted the Company’s Equity Compensation Plan (the “Plan”). The Plan provides for the award of stock options (incentive and non-qualified), stock awards and stock appreciation rights to officers, directors, employees and consultants who provide services to the Company. The terms of awards under the Plan are made by the Administrator of the Plan appointed by the Company’s Board of Directors, or in the absence of an Administrator, by the Board. The Company has reserved 25,000,000 for issuance under the Plan. The term of the Plan is ten years. 28 Outstanding Equity Awards at December 31, 2021 The table below reflects all outstanding equity awards made to each Named Executive Officer that were outstanding at December 31, 2021. OPTION AWARDS Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Robert Carmichael 20,761,904 (1) .018 7/29/2024 25,000,000 (2) 100,000,000 - .045 4/30/2023 Christopher Constable 5,434,783 (3) - - .0184 11/5/2025 2,000,000 (4) 28,000,000 - .0184 11/5/2024 2,403,846 (5) - - .0401 11/5/2026 (1) Options fully vested in January 2020 (2) Options vest based upon certain corporate milestones as discussed in Note 13 of the financial statements included in this Annual Report. (3) Options fully vested in November 2020 (4) Options vest based upon certain corporate milestones as discussed in Note 13 of the financial statements included in this Annual Report. (5) Options fully vested in November 2021 Christopher Constable Employment Agreement On November 5, 2020, we entered into a three-year employment agreement (the “Constable Employment Agreement”), which agreement will automatically renew for one-year successive terms unless either party notifies the other of its desire to terminate the agreement at least 60 days prior to the then current term. Pursuant to the Agreement, Mr. Constable will serve as our Chief Executive Officer and a director. In consideration for his services, Mr. Constable is entitled to an annual base salary of $200,000, payable in accordance with the customary payroll practices of the Company, and upon execution of the Constable Employment Agreement and on each anniversary thereof, 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. Pursuant to the Agreement, on November 5, 2020, we issued Mr. Constable an option to purchase 5,434,783 shares of common stock at an exercise price of $0.0184 per share pursuant to an option award agreement and upon the first anniversary we issued Mr. Constable an option to purchase 2,403,846 shares of common stock at an exercise price of $0.0401. In addition, Mr. Constable is entitled to receive four-year stock options to purchase shares of common stock at an exercise price equal to $0.0184 per share in the amounts listed below based upon the following performance milestones during the term of the Constable Employment Agreement: (i) 2,000,000 shares - if the Company’s total net revenues, as reported in its statement of operations in its financial statements in its filings with the SEC, including as a result of a stock or asset acquisition of a third party (“Net Revenues”) are in excess of $5,000,000, in the aggregate, for four consecutive fiscal quarters; (ii) 3,000,000 shares - if the Net Revenues are in excess of $7,500,000, in the aggregate, for four consecutive fiscal quarters; (iii) 5,000,000 shares - if the Net Revenues are in excess of $10,000,000, in the aggregate, for four consecutive fiscal quarters; and (iv) 20,000,000 shares - if the Company’s common stock is listed on the on NASDAQ or New York Stock Exchange. Mr. Constable is also entitled to participate in all benefit programs the Company offers to its executives, reimbursement for business expenses and three weeks of annual paid vacation. The agreement may be terminated for “cause” (as defined in the Agreement), upon his death or disability, or by the Company without cause. Furthermore, Mr. Constable may terminate the Agreement for “good reason” (as defined in the agreement). If the Company terminates the agreement for cause, or if it terminates upon Mr. Constable’s death or disability, or if he voluntarily terminates the Agreement, neither Mr. Constable nor his estate (as the case may be) is entitled to any severance or other benefits following the date of termination. If the Company terminates the Agreement without cause or Mr. Constable terminates the Agreement for good reason, the Company is obligated to continue to pay Mr. Constable’s base salary for a period of six months. The Agreement also contains customary confidentiality, non-disclosure and indemnification provisions. 29 Blake Carmichael Employment Agreement On August 1, 2021, we entered into a three-year employment agreement with Blake Carmichael (the “Blake Carmichael Employment Agreement”) pursuant to which Mr. Carmichael will continue to serve as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael will receive (i) an annual base salary of $120,000, payable in accordance with the customary payroll practices of the Company, and (ii) a cash bonus equal to 5% of the net income of BLU3 payable quarterly, beginning with the first full calendar quarter after the execution of the agreement, and (iii) a non-qualified five-year stock option to purchase 3,759,400 shares of common stock at an exercise price $0.0399, 33.3% of which stock subject to the option vested immediately upon grant, 33.3% vests on the second anniversary and 33.3% vests on the third anniversary of the agreement. In addition, Blake Carmichael was granted a five-year stock option to purchase up to 18,000,000 shares of common stock at an exercise price of $0.0399 per share which vests upon the achievement of certain annual financial metrics as set forth in the Agreement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Our voting securities consist of our common stock and preferred stock, par value $0.001 per share, designated Series A Convertible Preferred Stock (the “Series A Stock”). Each share of Series A Stock is convertible into a share of our common stock at any time at the option of the holder at a conversion price of $18.23 per share. Holders of our common stock are entitled to one vote for each share held, and holders of our Series A Stock are entitled to 250 votes for each share held. Our common stock and Series A Stock vote together as on any matters submitted to our shareholders for a vote. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as of April 19, 2022, the number of shares of common stock and Series A Stock beneficially owned by (i) each person, entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each of our Named Executive Officers and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary interest. Except as noted below, each person has sole voting and investment power with respect to the shares beneficially owned and each stockholder’s address is c/o Brownie’s Marine Group, Inc., 3001 NW 25th Avenue, Suite 1, Pompano Beach, Florida 33069. The percentages below are calculated based on 404,656,793 issued and outstanding shares of common stock and 425,000 shares of Series A Stock outstanding as of April 19, 2022. 30 Title of Class Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class Executive Officers and Directors Common Robert M. Carmichael 85,006,034 (1) 18.8 % Common Christopher H. Constable 9,838,629 (2) 2.4 % Common Charles F. Hyatt 133,847,065 (3) 32.9 % Common All directors and executive officers as a group (three persons) 228,781,648 (1)(2)(3) 49.5 % 5% Shareholder Common Joseph Perez 135 Weston Road, Suite 328, Weston, Florida 33326 50,000,000 12.3 % Common Summit Holdings V, LLC 3427 Bannerman Road, Suite D208 Tallahassee, Florida 32312 27,032,388 6.6 % Series A Convertible Preferred Stock Robert M. Carmichael 425,000 100 % Series A Convertible Preferred Stock All directors and executive officers as a group (one person) 425,000 100 % (1) Includes: (i) 14,587,190 shares held by 940A Associates, Inc., a corporation over which Mr. Carmichael is the sole owner and has voting and dispositive power; (ii) an aggregate of 23,320 shares issuable upon conversion of 425,000 shares of Series A Stock and (iii) options to purchase an aggregate of 20,761,904 shares of common stock at an exercise price of $0.018 per share. (iv) options to purchase an aggregate of 25,000,000 shares of common stock at an exercise price of $0.045. Does not include the voting power over 106,250,000 shares by virtue of Mr. Carmichael beneficial ownership of 425,000 shares of Series A Stock. (2) Includes (i) options to purchase an aggregate of 7,434,783 shares of common stock at an exercise price of $0.0184 per share, and (ii) options to purchase 2,403,846 shares of common stock at an exercise price of $0.0401 per share. (3) Includes 3,847,065 shares of common stock held by Mr. Hyatt’s daughter. Item 13. Certain Relationships and Related Transactions, and Director Independence. We sell products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, companies owned by the brother of Robert Carmichael. Combined net revenues from these entities for the years December 31, 2021 and 2020, totaled $1,116,085 and $821,474, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2021, were $50,818, $7,195 and $17,779, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys December 31, 2020, was $29,443, $6,643, and $8,237, respectively. We also sell products to Brownie’s Global Logistics, LLC (“BGL”) and 940 Associates, Inc. (“940 A”), entities wholly-owned by Robert Carmichael. Combined net revenues from these three entities for the years ended December 31, 2021 and 2020 were $245 and $16,943, respectively. In addition, from time to time Mr. Carmichael purchases products from us for his personal use. Accounts receivable from BGL, 940 A and Mr. Carmichael totaled $897 at December 31, 2021 and $23,321, respectively, at December 31, 2020. We owed BGL $32,267 and $102,360 at December 31, 2021 and 2020, respectively, which represents purchase of inventory including batteries for Sea Lion (battery operated unit) and Honda engines for our regular gasoline powered units. As of December 31, 2021, the Company also had an amount due of $5,000 to Mr. Carmichael for an advance to BLU3,Inc. We are a party to an exclusive license agreement, dated February 22, 2005, with 940 A to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. The agreement provides for a royalty to be paid equal to the greater of 2.5% on all sales of Trebor or $15,000 per quarter. Total royalty fees paid to 940 A in the years ended December 31, 2021 and 2020 totaled $75,161 and $67,808, respectively. The Company had accrued royalties of $7,735 and $4,280 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 Christopher Constable had an open accounts receivable balance of $428. On April 1, 2019, the Company entered into a director agreement with Charles Hyatt pursuant to which Mr. Hyatt is paid $1,500 per quarter for serving as a director. 31 On January 9, 2020, the Company entered into a director agreement with Jeffrey Guzy pursuant to which Mr. Guzy is paid $1,000 per month for serving as a director and received an immediately exercisable three-year option to purchase 2,000,000 shares of common stock at an exercise price of $.0229 per share. On January 6, 2020, the Company issued 2,647,065 shares of common stock to Grace Hyatt, the daughter of Charles Hyatt, a director, in a private offering for proceeds of $45,000. On February 23, 2020, the Company issued 12,500,000 shares of common stock upon the exercise of a warrant at an exercise price of $0.01 per share to Charles Hyatt, a director, for proceeds of $125,000. On April 2, 2020, the Company issued 10,000,000 shares of common stock upon the exercise of a warrant at an exercise price of $0.01 per share, to Charles Hyatt, a director, for proceeds of $100,000. On April 6, 2020, the Company issued 10,000,000 shares of common stock at a purchase price of $0.025 per share to Charles Hyatt, a director, for proceeds of $250,000. On August 10, 2020, the Company engaged Brandywine, LLC (“Brandywine”) to provide accounting advisory and consulting services pursuant to a letter agreement. As compensation for such services, Brandywine was paid an hourly rate of $125.00 and was issued a total number of 2,795,000 shares of common stock (10,000 shares for each hour billed) in August 2020. Christopher Constable, our Chief Executive Officer is the owner of Brandywine. This agreement terminated upon the execution of the Constable Employment Agreement. On November 5, 2020, we entered into the Constable Employment Agreement with Christopher Constable, our Chief Executive Officer. On March 25, 2021, the Company issued 27,500,000 shares of common stock to Charles Hyatt, a director, in a private offering for proceeds of $275,000. On August 1, 2021, we entered into the Blake Carmichael Employment Agreement with Blake Carmichael, Chief Executive Officer of BLU3, and son of Robert Carmichael, the Company’s Chairman, President and a director. On September 1, 2021, the Company issued 10,000,000 units, each unit (“Unit”) consists of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $0.025 per share to Charles Hyatt a director, in a private offering for proceeds of $250,000. On September 1, 2021, the Company issued 600,000 Units to Grace Hyatt, the adult child of Charles Hyatt, in a private offering for proceeds of $15,000. On March 14, 2022, the Company issued 10,000,000 shares of common stock to Charles Hyatt, a director, upon exercise of a warrant at an exercise price of $0.04 per share for proceeds of $250,000. On March 14, 2022, the Company issued 600,000 shares of common stock to Grace Hyatt, the adult daughter of Charles Hyatt, a director, upon exercise of a warrant at an exercise price of $0.04 per share for proceeds of $15,000. Blake Carmichael, the Chief Executive Officer of BLU3 is the son of Robert Carmichael, the Company’s Chairman, President and a director. Director Independence The Company has one independent director, Charles Hyatt, who is considered “independent” as defined under Rule 5605 of the Nasdaq Marketplace Rules. Item 14. Principal Accounting Fees and Services. The following table shows the fees that were billed for the audit and other services provided by Liggett & Webb, PA for 2021 and 2020. 2021 2020 Audit Fees $ 72,900 $ 63,580 Audit-Related Fees - Tax Fees 2,200 2,000 Other 37,500 - Total $ 112,600 $ 65,580 32 Audit Fees Audit fees consist of fees for professional services rendered for the audit of the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K and the review of financial statements included in the Company’s Quarterly Reports on Form 10-Q. The other fees of $37,500 consist of expenses associated with the audit of the Company’s acquisition in September, 2021. Additionally we incurred tax related fees of $2,000 for each of the years ended December 31, 2021 and 2020. Administration of the Engagement; Pre-Approval of Audit and Permissible Non-Audit Services We have not yet established an audit committee. Until then, there are no formal pre-approval policies and procedures. The audit and tax fees paid to the auditors with respect to 2021 and 2020 were pre-approved by the entire board of directors. The percentage of hours expended on Liggett & Webb, PA’s respective engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%. PART IV Item 15. Exhibits, Financial Statements Schedules Incorporated by Reference No. Exhibit Description Form Date Filed Exhibit Number 2.2 Merger Agreement, dated June 18, 2002 by and among United Companies Corporation, Merger Co., Inc. and Avid Sportswear & Golf Corp. S-4 6/24/02 2.02 2.3 Articles of Merger of Avid Sportswear & Golf Corp. with and into Merger Co., Inc. S-4 6/24/02 2.03 2.4 Agreement and Plan of Merger and Reorganization, dated September 3, 2021, among the Company, Submersible Acquisition, Inc., Submersible Systems, Inc. and the Shareholders of Submersible Systems, Inc. 8-K 9/9/21 10.1 2.4 Plan of Conversion 8-K 10/28/15 2.1 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 3.5 Articles of Amendment 8-K 12/16/15 3.5 3.6 Bylaws 8-K 10/28/15 3.4 4.1 2021 Equity Compensation Plan 10-Q 8/16/21 4.1 4.2 Form of 2017 Secured Convertible Promissory Note 10-K 4/17/18 4.2 4.3 10% Unsecured Convertible Debenture dated May 3, 2011 8-K 11/20/18 4.3 4.5 Form of Stock Option Grant to Robert Carmichael dated July 29, 2019 + 8-K 8/1/19 4.5 4.6 Form of Stock Option Grant to Jeffrey Guzy dated January 9, 2020 8-K 1/10/20 4.1 10.1 Share Exchange Agreement, dated March 23, 2004 by and among the Company, Trebor Industries, Inc. and Robert M. Carmichael 8-K 4/9/04 16.1 33 Incorporated by Reference No. Exhibit Description Form Date Filed Exhibit Number 10.3 Exclusive License Agreement, effective January 1, 2005, between 940 Associates, Inc. and Trebor Industries Inc. 10-QSB 8/15/05 10.20 10.4 Lease Agreement, dated September 1, 2014, between Liberty Property Limited Partnership and Trebor Industries, Inc. 10-K 4/17/18 10.11 10.5* Lease Amendment, dated December 1, 2016, between Liberty Property Limited Partnership and Trebor Industries, Inc. 10.6 Exclusive Distribution Agreement, dated August 7, 2017, between and Lenhardt & Wagner GmbH 10-K 6/7/19 10.15 10.7 Lease Agreement, dated November 11, 2018, between Liberty Property Limited Partnership and the Company 10-K 6/7/19 10.16 10.8 Director Agreement, dated January 9, 2020, between the Company and Jeffrey Guzy 8-K 1/10/20 10.1 10.9 Non-Qualified Stock Option Agreement, dated April 14, 2020, between the Company and Robert Carmichael + 8-K 4/17/20 10.1 10.10 Form of Restricted Stock Award Agreement 8-K 4/30/20 10.1 10.11 Promissory Note, dated May 12, 2020, in the principal amount of $159,600 issued to South Atlantic Bank 8-K 5/13/20 10.1 10.12 Patent License Agreement, dated April 6, 2018 between Setaysha Technical Solutions, Inc. and the Company 10-K 6/29/20 10.17 10.13 Addendum No. 1 to Patent License Agreement dated December 31, 2019, between Setaysha Technical Solutions, Inc. and the Company 10-K 6/29/20 10.18 10.14 Investor Relations Consulting Agreement, dated April 9, 2020, between HIR Holdings, LLC and the Company. 10-K 6/29/20 10.19 10.15 Corporate Communication Consulting Agreement dated April 9, 2020, between Impact IR Inc. and the Company. 10-K 6/29/20 10.20 10.16 Note Extension and Amendment Agreement, dated May 29, 2020, for the $50,000 principal amount 6% Secured Convertible Promissory Note between Curt Martin and the Company 10-K 6/29/20 10.21 10.17 Note Extension and Amendment Agreement, dated May 29, 2020, for the $50,000 principal amount 6% Secured Convertible Promissory Note by and between Joe Steinbron and the Company 10-K 6/29/20 10.22 10.18 Employment Agreement Dated August 1, 2021, between the Company and Blake Carmichael 10-Q 11/22/21 10.22 10.19 Director Agreement, dated April 1, 2019, between the Company and Charles Hyatt 8-K 4/4/19 10.1 10.20 Employment Agreement dated September 3, 2021, between the Company and Christeen Buban 8-K 11/22/21 10.23 10.21 Form of letter agreement for incentive compensation + 8-K 6/1/20 10.1 10.22 Addendum No. 2 to Patent License Agreement, dated June 30, 2020, between Setaysha Technical Solutions, Inc. and the Company 10-Q 8/26/20 10.1 10.23 Employment Agreement, dated November 5, 2020, between Christopher Constable and the Company. + 8-K 11/12/20 10.2 10.24 Non-Qualified Stock Option Agreement Non-Plan, dated November 5, 2020, between the Company and Christopher Constable + 8-K 11/12/20 10.1 10.25 Note Extension and Amendment Agreement, dated December 21, 2020, for the $50,000 principal amount 6% Secured Convertible Promissory Note between Joe Steinbron and the Company 10.26 Note Extension and Amendment Agreement, dated December 21, 2020, for the $50,000 principal amount 6% Secured Convertible Promissory Note between Curt Martin and the Company 10.27* First Amendment to Lease Agreement, dated December 1, 2016 between Trebor Industries, Inc. and Liberty Property Limited Partnership 10.28 8% Convertible Promissory Note, dated September 3, 2021 8-K 9/9/21 4.1 10.29 Confidentiality, Non-Competition And Non-Solicitation Agreement, dated September 3, 2021, between the Company and Richard S. Kearney 8-K 9/9/21 10.2 10.30 Investment Banking Engagement Agreement, dated August 6, 2021, between the Company and Newbridge Securities Corporation 10-Q 11/22/21 10.21 21 Subsidiaries 31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a) 31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a) 32.1 Certification Pursuant to Section 1350 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith + Management Contract Item 16. Form 10-K Summary None. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 22, 2022 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 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Robert M. Carmichael Robert M. Carmichael Chairman of the Board, President and Chief Financial Officer (Principal Executive Officer) Date: April 22, 2022 /s/ Christopher H. Constable Christopher H. Constable Chief Executive Officer and Director (Principal Executive Officer) Date: April 22, 2022 /s/ Charles F. Hyatt Charles F. Hyatt Director Date: April 22, 2022 35 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of: Brownie’s Marine Group, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Brownie’s Marine Group, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced net losses and has an accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures including examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also include evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Stock Options As described in Note 13 to the consolidated financial statements, the Company measures fair value of stock options at fair value using level three inputs. To determine fair value of stock options, the Company determines the appropriate valuation methodology and assumptions, including unobservable inputs. Stock options are measured at fair value using a Black-Scholes valuation model that uses significant assumptions, including the Company’s stock price, volatility, risk-free interest rate, probability of vesting and probability of exercise occurrence through expiration date. Auditing management’s estimate for the fair value of stock options was highly judgmental as it involved our assessment of the significant assumptions used by the Company because the fair value calculations were sensitive to changes in assumptions described above, and certain inputs used in the determination of fair values were based on unobservable data, including, but not limited to, the volatility, probability of vesting and probability of exercise. To test the fair value of stock options, we performed audit procedures that included, among others, evaluating the methodologies used in the valuation model and the significant assumptions used by the Company. Merger with Submersible Systems, Inc. As described in Note 11 to the consolidated financial statements, on September 3, 2021, the Company completed its merger with Submersible Systems, Inc. The Company recognizes separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values under ASC 805, Business Combinations. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the assets acquired and the liabilities assumed. The Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and actual results may differ from expectations. The Company may record measurement period adjustments during the measurement period (one year from the acquisition date) that result from obtaining additional information about the facts and circumstances that existed as of the acquisition date. If this additional information had been known, it would have affected the accounting for the business combination as of the acquisition date. Auditing management’s estimate for the fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill was highly judgmental as it involved our assessment of the significant assumptions used by the Company regarding certain future expected cash flows and the valuation methodologies used by the valuation specialist engaged by the Company in determining the fair values of these assets. To test the fair value of consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill, we performed audit procedures that included, among others, evaluating the methodologies used in the valuation model and the significant assumptions used by the Company and the valuation specialist. /s/ Liggett & Webb , P.A. We have served as the Company’s auditor since 2018 Boynton Beach, Florida April 22, 2022 PCAOB No.: 287 F- 1 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2021 December 31, 2020 ASSETS Current Assets Cash $ 643,143 $ 345,187 Accounts receivable - net 123,270 81,251 Accounts receivable - related parties 77,301 67,644 Inventory, net 1,895,260 863,791 Prepaid expenses and other current assets 227,458 111,164 Total current assets 2,966,432 1,469,037 Property, equipment and leasehold improvements, net 270,065 143,413 Operating Lease Assets 454,475 446,981 Intangible Assets, Net 718,905 - Goodwill 249,986 - Other assets 14,098 13,649 Total assets $ 4,673,961 $ 2,073,080 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities $ 744,383 $ 386,977 Accounts payable - related parties 37,267 102,360 Customer deposits and unearned revenue 143,938 20,353 Other liabilities 187,924 100,817 Operating lease liabilities 232,283 107,691 Current maturities long term debt 50,402 151,006 Notes payable - 50,000 Convertible debentures, net - 110,000 Total current liabilities 1,396,197 1,029,204 Long term debt, net of current 87,956 120,782 Long term convertible debentures, net 339,254 - Operating lease liabilities, net of current 222,899 339,290 Total liabilities 2,046,306 1,489,276 Commitments and contingencies (see note 15) - Stockholders’ equity Preferred stock; $ 0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of December 31, 2021 and December 31, 2020. 425 425 Common stock; $ 0.0001 par value; 1,000,000,000 shares authorized; 393,850,475 shares issued and outstanding at December 31, 2021 and 306,185,206 shares issued and outstanding at December 31, 2020, respectively. 39,386 30,620 Common stock payable 138,941 shares and 138,941 shares, respectively as of December 31, 2021 and December 31, 2020. 14 14 Additional paid-in capital 17,132,434 13,508,882 Accumulated deficit ( 14,544,604 ) ( 12,956,137 ) Total stockholders’ equity $ 2,627,655 $ 583,804 Total liabilities and stockholders’ equity $ 4,673,961 $ 2,073,080 The accompanying notes are an integral part of these consolidated financial statements. F- 2 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31 2021 2020 Net revenues Net revenues $ 5,111,049 $ 3,717,556 Net revenues - related parties 1,116,330 838,417 Total net revenues 6,227,379 4,555,973 Cost of revenues Cost of revenues 3,569,894 2,537,922 Cost of revenues - related parties 534,910 431,925 Royalties expense - related parties 75,161 67,808 Royalties expense 157,855 53,929 Total cost of revenues 4,337,820 3,091,584 Gross profit 1,889,559 1,464,389 Operating expenses Selling, general and administrative 3,666,823 2,682,293 Research and development costs 75,439 115,156 Total operating expenses 3,742,262 2,797,449 Loss from operations ( 1,852,703 ) ( 1,333,060 ) Other income (expense), net Gain on settlement of debt 10,000 - Gain on the forgiveness of PPP loan 275,760 - Interest expense ( 21,524 ) ( 18,559 ) Total other (income) expense - net 264,236 ( 18,559 ) Loss income before provision for income taxes ( 1,588,467 ) ( 1,351,619 ) Provision for income taxes - - Net loss $ ( 1,588,467 ) $ ( 1,351,619 ) Basic loss per common share $ ( 0.00 ) $ ( 0.00 ) Diluted loss per common share $ ( 0.00 ) $ ( 0.00 ) Basic weighted average common shares outstanding 349,597,953 288,295,422 Diluted weighted average common shares outstanding 349,597,953 288,295,422 The accompanying notes are an integral part of these consolidated financial statements. F- 3 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 Shares Outstanding Par Shares Outstanding Par Shares Amount Paid-in Capital Accumulated Deficit Stockholders Equity Preferred Stock Common Stock Common Stock Payable Additional Total Stockholders’ Shares Outstanding Par Shares Outstanding Par Shares Amount Paid-in Capital Accumulated Deficit Equity (Deficit) Balance, December 31, 2019 425,000 $ 425 225,540,501 $ 22,554 138,941 $ 14 $ 11,338,104 $ ( 11,604,518 ) $ ( 243,421 ) Shares issued for cash - - 22,647,065 2,265 - - 542,735 - 545,000 Shares issued for exercise of warrants - - 22,500,000 2,250 - - 222,750 - 225,000 Shares issued for services 9,895,000 990 307,489 - 308,479 Stock Option Expense - - - - - - 858,695 - 858,695 Incentive bonus shares to CEO - - 20,725,087 2,073 - - 31,111 - 33,184 Incentive shares issued to employee - - 4,877,553 488 - - 207,998 - 208,486 Net Loss - - - - - - - $ ( 1,351,619 ) ( 1,351,619 ) Balance, December 31, 2020 425,000 $ 425 306,185,206 $ 30,620 138,941 $ 14 $ 13,508,882 $ ( 12,956,137 ) $ 583,804 Units issued for cash - - 14,600,000 1,460 - - 363,540 - 365,000 Shares issued for cash 27,500,000 2,750 - - 272,250 275,000 Shares issued for Acquisition 27,305,442 2,731 - - 1,447,188 1,449,919 Debt Discount Sellers Note - - - - - - 12,480 - 12,480 Shares issued for services - - 4,903,761 490 - - 201,462 - 201,952 Stock Option Expense - - - - - - 1,154,801 - 1,154,801 Debentures and accrued interest - - 12,592,083 1,259 - - 135,217 - 136,476 Shares issuance for exclusivity 763,983 76 - - 36,614 - 36,690 Net loss - - - - - - - ( 1,588,467 ) ( 1,588,467 ) Balance, December 31, 2021 425,000 425 393,850,475 $ 39,386 138,941 $ 14 $ 17,132,434 $ ( 14,544,604 ) 2,627,655 The accompanying notes are an integral part of these consolidated financial statements. F- 4 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 2021 2020 Cash flows from operating activities: Net loss $ ( 1,588,467 ) $ ( 1,351,619 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 56,472 21,005 Amortization of debt discount 1,734 - Amortization of right-of-use asset 152,688 98,054 Shares issued for services 201,952 308,479 Incentive bonus shares issued to CEO and employees - 241,670 Reserve (recovery) for bad debt 32,079 ( 618 ) Reserve for slow moving inventory 54,301 51,700 Shares issued for exclusivity 36,690 - Stock Based Compensation - Options 1,154,801 858,695 Gain on settlement of debt ( 10,000 ) - Gain on the forgiveness of the PPP loans ( 275,760 ) - Changes in operating assets and liabilities Change in accounts receivable, net ( 32,443 ) 30,658 Change in accounts receivable - related parties ( 9,657 ) ( 18,882 ) Change in inventory ( 649,414 ) ( 196,383 ) Change in prepaid expenses and other current assets ( 109,612 ) ( 62,641 ) Change in other assets 21,555 6,500 Change in accounts payable and accrued liabilities 216,703 ( 131,701 ) Change in customer deposits and unearned revenue 118,210 ( 100,855 ) Change in long term lease liability ( 151,981 ) ( 98,054 ) Change in other liabilities 75,775 ( 50,932 ) Change in accounts payable - related parties ( 65,093 ) ( 161,184 ) Net cash used in operating activities ( 769,467 ) ( 556,108 ) Cash flows from investing activities: Cash acquired from acquisition 541,378 - Purchase of fixed assets ( 23,677 ) ( 5,500 ) Net cash provided (used in) by investing activities 517,701 ( 5,500 ) Cash flows from financing activities: Proceeds from issuance of common stock 275,000 545,000 Proceeds from issuance of units 365,000 - Proceeds from exercise of Warrants - 225,000 Proceeds of debt - 159,600 Repayment on notes payable ( 40,000 ) ( 60,000 ) Repayment of debt ( 50,278 ) ( 33,425 ) Net cash provided by financing activities 549,722 836,175 Net change in cash 297,956 274,567 Cash, beginning of year 345,187 70,620 Cash, end of year $ 643,143 $ 345,187 Supplemental disclosures of cash flow information: Cash Paid for Interest $ 9,141 $ 10,024 Cash Paid for Income Taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Loan payable for purchase of vehicle $ - $ 55,841 Shares issued for acquisition $ 1,449,919 $ - Convertible note issued for acquisition $ 350,000 $ - Beneficial conversion feature on the convertible notes issued for acquisition $ 12,480 $ - Operating lease obtained for operating lease liability $ 160,182 $ - Equipment obtained through financing $ 76,448 $ - Shares issued for the conversion of convertible debentures and accrued interest $ 136,476 $ - The accompanying notes are an integral part of these consolidated financial statements. F- 5 BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of business and summary of significant account policies Description of business – Brownie’s Marine Group, Inc., a Florida corporation (hereinafter referred to as” the “Company,” or “BWMG”), (1) 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” or “BTL”), (2) 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”)and (3) develops and markets portable battery powered surface supplied air dive systems through its wholly owned subsidiary BLU3, Inc., a Florida corporation (“BLU3”). On September 3, 2021, the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Submersible Acquisition, Inc., a Florida corporation and wholly owned subsidiary of the Company (“Acquisition Sub”), Submersible Systems, Inc., a Florida corporation (“Submersible” or “SSI”), and Summit Holdings V, LLC, a Florida limited liability company (“Summit”) and Tierra Vista Group, LLC, a Florida limited liability company (“Tierra Vista” and, together with Summit, the “Sellers”), the owners of all of the capital stock of Submersible organized in 2017, pursuant to which Acquisition Sub merged with and into Submersible (the “Merger”), and Submersible, the surviving corporation, became a wholly owned subsidiary of the Company. Submersible is a manufacturer of high pressure tanks and redundant air systems for the military and recreational diving industries, based in Huntington Beach, California and sells its products to governments, militaries, private companies and the dive industry throughout the world. Basis of Presentation – The consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). Definition of fiscal year – The Company’s fiscal year end is December 31. Principles of Consolidation -The consolidated financial statements include the accounts of BWMG and its wholly owned subsidiaries, Trebor, BHP, BLU3 and SSI. All significant intercompany transactions and balances have been eliminated in consolidation. Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Going Concern – The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these financial statements. We incurred net losses for the years ended December 31, 2021 and 2020 of $ 1,588,467 and $ 1,351,619 , respectively. The Company had an accumulated deficit as of December 31, 2021 of $ 14,544,604 . On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. While we are not able to estimate the ultimate impact of the COVID-19 pandemic on our financial condition and future results of operations. The extent to which the coronavirus impacts our results and financial condition, however, will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge and the actions to contain and treat its impacts, among others. The Company believes that existing operational cash flow may not be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability to continue as a going concern. Therefore, the Company will seek to continue to raise additional funds as needed and is currently exploring alternative sources of financing including commercial banks and other lending institutions. The Company has issued common stock and has historically issued convertible notes to finance working capital needs and may continue to seek to raise additional capital through sale of restricted common stock or other securities or obtaining short term loans. The Company has no firm commitment for any additional capital and there are no assurances it will be successful in obtaining additional funds. F- 6 If BWMG fails to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back or cease operations, liquidate assets and possibly seek bankruptcy protection. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties. Cash and equivalents – Only highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per EIN. At December 31, 2021 and 2020, the Company had approximately $ 205,500 and $ 0 in excess of the FDIC insured limit. 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 are estimates that are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Though the Company considers these balances adequate and proper, changes in economic conditions in specific markets in which the Company operates and any specific customer collection issues the Company identifies could have a favorable or unfavorable effect on required reserve balances. The allowances for doubtful accounts totaled $ 46,555 and $ 16,872 at December 31, 2021 and 2020, respectively. Inventory – The Company values inventory at the lower of cost (determined using the first-in first-out method) or net realizable value. Management’s judgment is required to determine the reserve for obsolete or excess inventory. Inventory on hand may exceed future demand either because the product is outdated or because the amount on hand is more than will be used to meet future needs. Inventory reserves are estimated by the individual operating companies using standard quantitative measures based on criteria established by the Company. Though the Company considers these reserve balances to be adequate, changes in economic conditions, customer inventory levels or competitive conditions could have a favorable or unfavorable effect on required reserve balances. Property and equipment and leasehold improvements – Property and equipment and leasehold improvement is stated at cost less accumulated depreciation or amortization. Depreciation and amortization is provided principally on the straight-line method over the estimated useful lives of the assets or term of the lease, which are primarily 3 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense). The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. Revenue Recognition We account for our revenues in accordance with the Accounting Standard Codification topic 606, “Revenue from Contracts with Customers” and all the related amendments. This standards core principal is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to receive. 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. F- 7 The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases. 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 December 31, 2021 and 2020. Our leases generally have terms that range from three years for equipment and three to six years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease. Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. 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. Supplemental balance sheet information related to leases was as follows: Schedule of Supplemental Balance Sheet Information Operating Leases Classification December 31, 2021 December 31, 2020 Right-of-use assets Operating lease assets $ 454,475 $ 446,981 Current lease liabilities Current operating lease liabilities $ 232,283 $ 107,691 Non-current lease liabilities Long-term operating lease liabilities 222,899 339,290 Total lease liabilities $ 455,182 $ 446,981 Lease term and discount rate were as follows: Schedule of Operating Lease Liabilities December 31, 2021 December 31, 2020 Weighted average remaining lease term (years) 2.34 3.69 Weighted average discount rate 6.11 % 5.91 % The components of lease costs were as follows: Schedule of Lease Cost December 31, 2021 December 31, 2020 Operating lease cost $ 171,292 $ 127,650 Variable lease cost 2,125 5,729 Total lease costs $ 173,417 $ 133,379 Supplemental disclosures of cash flow information related to leases were as follows: Schedule of Cash Flow Information Related to Leases December 31, 2021 December 31, 2020 Cash paid for operating lease liabilities $ 171,272 $ 127,654 Operating right of use assets obtained in exchange for operating lease liabilities $ 160,182 $ - F- 8 Maturities of lease liabilities were as follows as of December 31, 2021: Schedule of Maturities of Operating Lease Liabilities Trebor Industries Office Lease BMG Office Lease Submersible Systems Lease Copier Total lease payments 2022 62,953 63,576 122,935 2,796 252,260 2023 64,842 65,484 10,265 422 141,013 2024 49,717 50,586 - - 100,303 2025 - - - - - Total 177,512 179,646 133,200 3,218 493,576 Less: Imputed interest ( 14,213 ) ( 14,384 ) ( 9,342 ) ( 455 ) ( 38,394 ) Present value of lease liabilities $ 163,299 $ 165,262 123,858 $ 2,763 $ 455,182 Product development costs – Product development expenditures are charged to expenses as incurred. Advertising and marketing costs – The Company expenses the costs of producing advertisements and marketing material at the time production occurs, and expenses the costs of communicating advertisements and participating in trade shows in the period in which they occur. Advertising and trade show expense incurred for the years ended December 31, 2021 and 2020, totaled $ 343,232 and $ 154,642 respectively. Research and development costs – The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. During the years ended December 31, 2021 and 2020, the Company incurred research and development costs of $ 75,439 and $ 115,156 , respectively. Customer deposits and unearned revenue and returns policy – The Company typically takes a minimum 50 % deposit against custom and large tankfill systems prior to ordering and/or building the systems. The remaining balance due is payable upon delivery, shipment, or installation of the system. There is no provision for cancellation of custom orders once the deposit is accepted, nor return of the custom ordered product. Additionally, returns of all other merchandise are subject to a 15 % restocking fee as stated on each sales invoice. Customer deposits and unearned revenue totaled $ 143,938 and $ 20,353 at December 31, 2021 and 2020, respectively. Warranty policy – Under the provisions of the Financial Accounting Standards Board (“FASB”) ASC 460, Guarantor’s Guarantees , the Company accrues a liability for estimated warranty policy costs based on standard quantitative measures based on criteria established by the Company. Estimates of costs to service its warranty obligations are based on historical experience, expectation of future conditions and known product issues. To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, revisions to the estimated warranty reserve would be required. The Company engages in product quality programs and processes, including monitoring and evaluating the quality of its suppliers, to help minimize warranty obligations. The Company provides our customers with an industry standard one year warranty on systems sold and recognizes a warranty reserve based on gross sales multiplied by the historical warranty expense return rate. The warranty reserve charged to cost of net revenues and is included in accrued expenses and is deemed sufficient to absorb any material or labor costs that might be incurred on sales recorded during the period. The Company recorded a reserve for warranty work of $ 13,680 and $ 13,680 at December 31, 2021 and 2020 respectively. Income taxes – The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes. F- 9 The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Stock-based compensation – The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes valuation model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued on the effective date of the agreement in accordance with generally accepted accounting principles, which includes determination of the fair value of the share-based transaction. The fair value is determined through use of the quoted stock price. During the years ended December 31, 2021 and 2020, the Company recognized share based compensation with a fair value of $ 201,952 and $ 550,149 , respectively. Fair value of financial instruments – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company’s perceived risk of that investment. At December 31, 2021, and 2020, the carrying amount of cash, accounts receivable, accounts receivable – related parties, accounts payable and accrued liabilities, accounts payable-related parties, customer deposits and unearned revenue, other liabilities, loans payable and convertible debentures, approximate fair value because of the short maturity of these instruments. Loss per common share – Basic loss per share excludes any dilutive effects of options, warrants and convertible securities. Basic loss per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted loss per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. At December 31, 2021 and December 31, 2020, 254,577,924 and 210,500,305 , respectively, potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible note agreements, outstanding warrants, outstanding stock options and the conversion of preferred stock. F- 10 New accounting pronouncements ASU 2019-12 Income Taxes (Topic 740) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company determined that the standard has no impact on its consolidated financial statements and related disclosures. Note 2. Inventory Inventory consists of the following as of: Schedule of Inventory 2021 2020 December 31, 2021 2020 In-Transit Inventory 130,000 - Raw materials 1,144,190 408,841 Work In Process 99,858 - Finished goods 521,212 454,950 Total Inventory, net $ 1,895,260 $ 863,791 As of December 31, 2021 and 2020, the Company recorded reserves for obsolete or slow moving inventory of approximately $ 308,133 and $ 227,657 respectively. Note 3. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: Schedule of Prepaid Expenses and Other Current Assets 2021 2020 December 31, 2021 2020 Prepaid inventory $ 166,951 $ 85,028 Prepaid expenses and other current assets 60,507 26,136 Total prepaid expenses and other current assets $ 227,458 $ 111,164 Note 4. Property and Equipment, Net Property and equipment consist of the following as of: Schedule of Property and Equipment 2021 2020 December 31, 2021 2020 Tooling and equipment $ 427,044 $ 233,839 Computer equipment and software 54,056 27,469 Vehicles 79,557 79,557 Leasehold improvements 68,560 43,779 Total property and equipment 629,217 384,644 Less: accumulated depreciation and amortization ( 359,152 ) ( 241,231 ) Total property and equipment, net $ 270,065 $ 143,413 Depreciation and amortization expense totaled $ 32,377 and $ 21,005 for the years ended December 31, 2021 and 2020, respectively. Included in the depreciation and amortization expense for the year ending December 31, 2021 is $ 24,095 for amortization of intangible assets. Note 5. Other Assets Other assets at December 31, 2021 of $ 14,098 consisted of refundable deposits of $ 14,098 . Other assets at December 31, 2020 of $ 13,649 consisted of refundable deposits of $ 6,649 and an unamortized license fee of $ 7,000 . F- 11 Note 6. Customer Credit and Vendor Concentrations The Company sells to three entities owned by the brother of Robert M. Carmichael and three companies owned by Robert M. Carmichael as further discussed in note 7 - Related Parties Transactions. Combined sales to these six entities for the years ended December 31, 2021 and 2020, represented 17.9 % and 18.4 %, respectively, of total net revenues. Brownie’s Southport Divers, Inc. represented concentration in outstanding accounts receivable of 25.3 % of total outstanding accounts receivable as of December 31, 2021 and 19.8 % as of December 31, 2020. Brownie's Global Logistics, LLC represented concentration in outstanding accounts receivable of less than 10% of total outstanding accounts receivable as of December 31, 2021 and 12.8% as of December 31, 2020. Additionally, the Company has a non-related party customer A that represented 10.6 % of total outstanding accounts receivable as of December 31, 2021. The Company has a non-related party customers B that represented 10.6 % of total outstanding accounts receivable as of December 31, 2020. The company had no customers that consisted of more than 10% of total revenue for the years ended December 31, 2021 and 2020. In excess of 90 % of our total net revenues are made up of product sales to customers within the state of Florida. The Company has no vendor concentrations beyond 10% of total purchases as of December 31, 2021 and 2020. Note 7. Related Party Transactions We sell products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, companies owned by the brother of Robert Carmichael. Combined net revenues from these entities for the years December 31, 2021 and 2020, totaled $ 1,116,085 and $ 821,474 , respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2021, were $ 50,818 , $ 7,195 and $ 17,779 , respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys December 31, 2020, was $ 29,443 , $ 6,643 , and $ 8,237 , respectively. We also sell products to Brownie’s Global Logistics, LLC (“BGL”) and 940 Associates, Inc. (“940 A”), entities wholly-owned by Robert Carmichael. Combined net revenues from these three entities for the years ended December 31, 2021 and 2020 were $ 245 and $ 16,943 , respectively. In addition, from time to time Mr. Carmichael purchases products from us for his personal use. Accounts receivable from BGL, 940 A and Mr. Carmichael totaled $ 897 at December 31, 2021 and $ 23,321 , respectively, at December 31, 2020. We owed BGL $ 32,267 and $ 102,360 at December 31, 2021 and 2020, respectively, which represents purchase of inventory including batteries for Sea Lion (battery operated unit) and Honda engines for our regular gasoline powered units. As of December 31, 2021, the Company also had an amount due of $ 5,000 to Mr. Carmichael for an advance to BLU3,Inc. We are a party to an exclusive license agreement, dated February 22, 2005, with 940 A to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. The agreement provides for a royalty to be paid equal to the greater of 2.5 % on all sales of Trebor or $ 15,000 per quarter. Total royalty fees paid to 940 A in the years ended December 31, 2021 and 2020 totaled $ 75,161 and $ 67,808 , respectively. The Company had accrued royalties of $ 7,735 and $ 4,280 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 Christopher Constable had an open accounts receivable balance of $ 428 . As of December 31, 2021, two employees had open accounts receivable balances totaling $ 184 . Effective July 29, 2019 the Company agreed to pay the members of the Company’s Board of Directors, including Mr. Carmichael, a management director, an annual fee of $ 18,000 for serving on the Company’s Board of Directors for the year ending December 31, 2019. As of December 31, 2020, the Company has accrued $ 85,500 in Board of Directors’ fees. On August 21, 2020 the Company’s Board of Directors approved the continuation of the 2019 Board compensation policy for the year ending December 31, 2020. As of December 31, 2021, the Company accrued an additional $ 36,000 in Board of Directors’ fees for a total of $ 121,500 in accrued fees. In December 2018, the Company issued 20,000,000 shares of common stock to Robert M. Carmichael as an incentive bonus. As the vesting of the shares was subject to continued employment by Mr. Carmichael through January 2, 2020, for the years ended December 31, 2020, the Company treated the shares as issued but not as yet outstanding for the year ended December 31, 2019. Expense for the issuance is being recognized over the full vesting period, and accordingly, the Company recognized stock compensation expense of $ 1,280 during the year ended December 31, 2020 and was fully expensed. See note 13. Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 shares of common stock to Blake Carmichael. The options were issued pursuant to a stock option grant agreements and are exercisable at $ 0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $ 43,582 using the Black-Scholes option pricing model with the following assumptions: (i) risk free interest rate of 2.10 %, (ii) expected life of 5 years , (iii) dividend yield of 0 %, (iv) expected volatility of 172 %. Stock option expense recognized for the year ended December 31, 2020 was $ 5,362 and was fully expensed. See Note 13. F- 12 Effective July 29, 2019 the Company issued Robert M. 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 2.10 %, (ii) expected life of 5 years , (iii) dividend yield of 0 %, (iv) expected volatility of 172 %. Stock option expense of $ 10,274 was recognized for the year ended December 31, 2020 and was fully expensed. See Note 13 In January 2020 the Company issued 2,647,065 shares of common stock in exchange for $ 45,000 to an accredited investor and daughter of Mr. Charles F. Hyatt, a member of our Board of Directors. In February 2020 the Company issued 12,500,000 shares of common stock related to the exercise of common stock purchase warrants at an exercise price of $ .01 , for a total conversion price of $ 125,000 . The shares were issued to Mr. Hyatt, a member of the Board of Directors. In April, 2020 the Company issued 10,000,000 shares of common stock related to the exercise of common stock purchase warrant at an exercise price of $ .01 per share. The Company received proceeds of $ 100,000 upon such exercise from Mr. Hyatt. Also, in April 2020 the Company sold an aggregate of 10,000,000 shares of its common stock at a purchase price $ 0.025 per share to Mr. Hyatt, resulting in proceeds to the Company of $ 250,000 . On April 14, 2020 the Company entered into a Non-Qualified Stock Option Agreement with Mr. Carmichael. Under the terms of the option agreement, as additional compensation the Company granted Mr. Carmichael an option to purchase up to an aggregate of 125,000,000 shares of the Company’s common stock at an exercise price of $ .045 per share. This option is further detailed in Note 11. During the years ended December 31, 2021 and December 31, 2020 the Company expensed $ 874,021 and $ 655,515 in relation to this option agreement, respectively. See Note 13 On May 21, 2020, the Company issued to Mr. Carmichael a total 725,087 shares with a fair value of $ 31,904 for his work on the BLU3-VENT project. See Note 13 On August 31, 2020, September 30, 2020 and October 31, 2020 the Company issued and aggregate of 2,795,000 shares with a fair market value of $ 45,292 to Christopher Constable on behalf of Brandywine, LLC in accordance with a consulting contract dated August 10, 2020. This consulting agreement was terminated upon the execution of Mr. Constable’s employment agreement. See Note 13 On November 5, 2020 the Company entered into a Non-Qualified Stock Option agreement with Christopher Constable as part of his employment agreement as the Company’s Chief Executive Officer. Under the terms of the option agreement, the Company granted Mr. Constable a 5-year option to purchase 5,434,783 shares of the Company’s common stock at an exercise price of $ .0184 , the “Compensation Options”. The Compensation Options were immediately vested. The fair value of the options on the date of the grant was $ 106,199 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .16 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 341 %. Stock option expense recognized during the year ended December 31, 2020 for this option was $ 106,890 . See Note 13. Also, on November 5, 2020 the Company entered into a Non-Qualified Option Agreement with Mr. Constable. Under the terms of this option agreement, as additional compensations, the Company granted an option (the “Bonus Option”) to purchase up to an aggregate of 30,000,000 shares of the Company’s common stock at an exercise price of $ .0184 per share. This option is further detailed in Note 13. During the year ended December 31, 2021, the company expensed $ 82,734 and $ 0 , respectively. On March 25, 2021, the Company issued 27,500,000 shares of common stock to Charles. Hyatt, a member of our Board of Directors in consideration of $ 275,000 . As of December 31, 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 13 of these financial statements. F- 13 On August 1, 2021 as part of the Blake Carmichael Agreement (see Note 14) the Company entered into a Non-Qualified Stock Option agreement with Blake Carmichael. Under the terms of the Blake Carmichael agreement, Blake Carmichael is entitled to (i) a five-year option to purchase 3,759,400 shares of the Company’s common stock at an exercise price of $ 0.0399 (the “BC Compensation Options”), 33.3% of the shares subject to the Option vest upon the execution of the agreement, 33% at the first anniversary date and 33% upon the second anniversary date and (ii)(ii) a 5 -year option to purchase up to 18,000,000 shares to vest annually on a contract year basis, based upon the achievement of certain financial metrics tied to revenue and EBITDA. For the year ended December 31, 2021 the company expensed a total of $ 21,810 . On September 1, 2021, the Company issued Charles Hyatt, a member of our Board of Directors, 10,000,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 250,000 . On September 1, 2021, the Company issued Grace Hyatt, the adult child of a member of our Board of Directors, 600,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 15,000 . Note 8. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consists of the following as of: Schedule of Accounts Payable and Accrued Liabilities December 31, 2020 December 31, 2020 Accounts payable trade and other $ 516,957 $ 244,626 Accrued payroll and fringe benefits 165,969 96,241 Accrued warranty expense 13,680 13,680 Accrued payroll taxes and withholding 9,106 9,268 Accrued Sales Tax 29,339 - Accrued interest 9,332 23,162 Total $ 744,383 $ 386,977 Balances due certain vendors are in arrears to varying degrees. The Company is handling all delinquent accounts on a case-by-case basis. Note 9. Other Liabilities Other liabilities consist of the following as of: Schedule of Other Liabilities December 31, 2021 December 31, 2020 Asset purchase agreement payable $ - $ 12,857 Accrued expenses 66,424 2,460 Accrued Board of Directors fees 121,500 85,500 Total $ 187,924 $ 100,817 Note 10. Convertible Debentures, and Loans Payable Convertible Debentures Convertible debentures consist of the following at December 31, 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 ) - (3 ) 9/03/21 9/03/24 8 % 346,500 ( 12,355 ) 346,500 ( 10,639 ) 335,861 9,240 (4 ) 9/03/21 9/03/24 8 % 3,500 ( 125 ) 3,500 ( 107 ) 3,393 92 (5 ) $ 350,000 $ ( 10,746 ) $ 339,254 $ 9,332 F- 14 Convertible debentures consist of the following at December 31, 2020: 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. 8/31/2011 8/31/2013 5 % 10,000 ( 4,286 ) 10,000 — 10,000 4,694 (1 ) 12/01/17 12/31/20 6 % 50,000 ( 12,500 ) 50,000 — 50,000 9,250 (2 ) 12/05/17 12/31/20 6 % 50,000 ( 12,500 ) 50,000 — 50,000 9,218 (3 ) $ 110,000 $ — $ 110,000 $ 23,162 (1) The Company borrowed $ 10,000 in exchange for a convertible note (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 issued 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. 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 issued 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. On August 18, 2021, this note and accrued interest of $ 11,145 were converted by the holder for 6,114,516 shares of common stock in accordance with the terms of the note. (4) On September 3, 2021, the Company issued a $ 346,500 note payable to Summit Holding V, LLC as part of the acquisition of SSI. The note carries 8 % unsecured convertible promissory note, due September 3, 2024. Payments on the note are to be equivalent to 50 % of the adjusted net profit of Submersible Systems, Inc., payable calendar quarterly commencing on December 31, 2021. Interest is payable in company stock at the conversion price of $ .051272 and shall be paid quarterly. The note holder may convert any outstanding principal and unpaid interest at a conversion rate of $ .051272 at any time up to the maturity date of the note. The Company recorded $ 12,355 for the beneficial conversion feature. (5) On September 3, 2021, the Company issued a three-year 8 % unsecured convertible promissory note for $ 3,500 to Tierra Vista Partners, LLC as part of the acquisition of SSI. Payments on the note are to be equivalent to 50 % of the adjusted net profit of SSI, payable calendar quarterly commencing on December 31, 2021. Interest is payable quarterly in common stock of the Company at the conversion price of $ .051272 per share. The note holder may convert any outstanding principal and unpaid interest at a conversion rate of $ .051272 at any time up to the maturity date of the note. The Company recorded $ 125 for the beneficial conversion feature. F- 15 Loans Payable Gonzales Note The Company entered into a non-interest-bearing loan agreement of $ 200,000 with Tom Gonzales on July 1, 2013.The loan is payable upon demand. During the years ended December 31, 2020 and 2020, the Company repaid $ 40,000 and $ 60,000 respectively. The loan balance was $0 and $40,000 as of December 31, 2021 and 2020, respectively. 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 Company recorded a gain on settlement of debt of $ 10,000 . The note balance as of December 31, 2021 and December 31, 2020 was $ 0 and $ 10,000 , respectively Marlin Note On September 30, 2019, BLU3 financed the purchase of certain plastic molding equipment through Marlin Capital Solutions (“Marlin Capital”). The loan amount at inception was $ 96,725 . The Company entered into an Equipment Finance Agreement with Marlin Capital pursuant to which it agreed to make 36 equal monthly installments of $ 3,143.80 . The Equipment Finance Agreement contains customary events of default. The loan balance was $ 25,079 as of December 31, 2021 and $ 60,070 as of December 31, 2020. Schedule of Future Amortization of Loans Payable Payment Amortization 2022 25,079 2023 2024 2025 2025 and thereafter Balance Total Loan Payments $ 25,079 Current portion of Loan payable ( 25,079 ) Non-Current Portion of Loan Payable $ - 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 is for $ 55,841 with a zero interest rate payable over 60 months with a monthly payment of $ 931 and is personally guaranteed by Mr. Carmichael. The loan balance as of December 31, 2021 was $ 43,122 and $ 52,118 as of December 31, 2020. Schedule of Future Amortization of Loans Payable Payment Amortization 2022 11,168 2023 11,168 2024 11,168 2025 and thereafter 9,618 Total note payments $ 43,122 Current portion of note payable ( 11,168 ) Non-Current Portion of notes payable $ 31,954 F- 16 Navitas Note On May 19, 2021, the Company, through its wholly owned subsidiary BLU3, executed an equipment finance agreement to finance the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $ 75,764 payable over 60 equal monthly installments of $ 1,611 (the “Navitas Note”). The equipment finance agreement contains customary events of default. The agreement was fully funded as of December 31, 2021. Schedule of Future Amortization of Loans Payable Payment Amortization 2022 14,155 2023 15,342 2024 16,629 2025 18,024 Balance 6,007 Total Note Payments $ 70,157 Current portion of Note payable ( 14,155 ) Non-Current Portion of Note Payable $ 56,002 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 of $ 159,600 on our consolidated income statement. The note balance as of December 31, 2021 and December 31, 2020 was $ 0 and $ 159,600 , respectively. PPP Loan – Submersible Systems, Inc. On May 12, 2020, SSI received an unsecured loan from City National Bank in the principal amount of $ 116,160 (the “Submersible SBA Loan”), under the CARES Act. 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 Submersible SBA Loan carries a fixed interest rate of one percent per year , and a monthly payment of $ 6,925 , with the first payment due seven months from the date of initial cash receipt. As part of the forgiveness application and directly related to the acquisition of SSI by the Company, SSI was required to place $ 121,953 in an escrow account until forgiveness is determined and City National Bank has been paid in full by the SBA. On October 15, 2021, the Company was notified by City National Bank that the Submersible SBA Loan was forgiven in full under the terms of the CARES Act. The restricted cash in escrow was released in full by the bank as a result of this forgiveness on November 8, 2021. The note balance as of December 31, 2021 and December 31, 2020 was $ 0 and $ 116,160 respectively. F- 17 Note 11. Merger with Submersible Systems, Inc. On September 3, 2021, the Company completed its merger with Submersible Systems, Inc. Under the terms of the Merger Agreement, the Company paid $ 1.79 million in consideration consisting of the issuance of 27,305,442 shares of its common stock (valued at $ 1.4 million), the issuance of $ 350,000 in 8 % unsecured convertible promissory notes in exchange for all of the equity of Submersible. The 27,305,442 shares of the Company’s common stock issued for the $ 1.44 million in consideration are subject to leak out agreements whereby the shareholders are unable to sell or transfer based upon the following: Summary of Holding Period and Shares Eligible to be Sold Holding Period from Closing Date Percentage of shares eligible to be sold or transferred 6 months Up to 12.5 % 9 months Up to 25.0 % 24 months Up to 75.0 % 36 months Up to 100.0 % The Leak-Out provision may be waived by the Company, upon written request by the holder of the common stock, if the Company is trading on either the NYSE American or Nasdaq, and has a rolling 30-day average trading volume of 50,000 shares per day; provided, however , that (i) only up to 5% of the previous days total volume can be sold in one day by a holder; and (ii) the holder can only sell through executing trades “On the Offer.” The transaction costs associated with the Merger were $ 65,000 in legal fees paid $ 40,000 in cash, and 1,190,476 shares of the Company’s common stock with a fair value of $ 55,952 . Fair Value of Consideration Transferred and Recording of Assets Acquired The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed including an amount for goodwill: Schedule of Recognized Identified Assets Acquired and Liabilities Assumed $ 1,449,919 Common stock, 27,305,442 shares at fair market value $ 1,449,919 8% Unsecured, Convertible promissory note payable to seller 350,000 Total purchase price $ 1,799,919 Tangible assets acquired $ 1,101,604 Liabilities assumed ( 294,671 ) Net tangible assets acquired 806,933 Identified Intangible Assets Customer Relationships $ 600,000 Trademarks 121,000 Non-compete agreements 22,000 Total Intangible Assets 743,000 Goodwill $ 249,986 Total purchase price $ 1,799,919 In determining the number of shares of the common stock issued, the Company considered the value of the stock as defined the Merger Agreement to be the calculated based on the volume weighted average price of a share of the Company’s common stock on the OTC Markets (“VWAP”) for (i) 180 days prior to the date of the parties’ execution and delivery of the binding term sheet for the Merger or (ii) 180 days prior to the closing date of the Merger, whichever results in a lower VWAP. Based on this calculation, the Company utilized calculation (i) resulting in a conversion price of $ .051271831 . This conversion price resulted in the issuance of 27,305,442 shares of common stock with a fair value of $ 1,449,919 on the closing date. Inventory was assessed at the time of closing as to its fair value, and it was determined that a step-up analysis was necessary in order to evaluate the fair value of the inventory at the time of closing. The step up represents the net profit that would be attained when the inventory is sold. The key assumptions used in this analysis is a gross margin of 38.3% and selling costs of 5.0%, The analysis resulted in a necessary step up of $31,000 at the time of closing . F- 18 Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the acquisition is attributable to the value of the potential expanded market opportunity with new customers. The goodwill is not expected to be deductible for tax purposes. As December 31, 2021, the Company has recorded an estimated fair value of the intangible assets and goodwill of $ 992,986 based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined Pro Forma Information The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2021. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs. Schedule of Business Acquisition, Pro Forma Information Year ended December 31, 2021 Revenue $ 7,259,384 Net Loss $ ( 1,560,900 ) Basic and Diluted Loss per Share $ ( 0.00 ) Basic and Diluted Weighted Average Common Shares Outstanding 368,144,534 The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. The pro forma amounts above for basic and diluted weighted average shares outstanding have been adjusted to include the stock issued in connection with the acquisition of SSI. Note 12. Goodwill and Intangible Assets, Net The following table sets for the changes in the carrying amount of the Company’ Goodwill for the year ended December 31, 2021 Summary of Changes in Goodwill 2021 Balance, January 1 $ - Acquisitions of Submersible Systems, Inc. 249,986 Balance, December 31 $ 249,986 The following table sets for the components of the Company’s intangible assets at December 31, 2021: Summary of Intangible Assets Amortization Period (Years) Cost Accumulated Amortization Net Book Value Intangible Assets Subject to amortization Trademarks 15 $ 121,000 $ ( 2,628 ) $ 118,372 Customer Relationships 10 600,000 ( 20,000 ) 580,000 Non-Compete Agreements 5 22,000 ( 1,467 ) 20,533 Total $ 743,000 $ ( 24,095 ) $ 718,905 F- 19 The aggregate amortization remaining on the intangible assets as of December 31, 2021 is a follows: Schedule of Estimated Intangible Assets Amortization Expenses Intangible Amortization 2022 72,467 2023 72,467 2024 72,467 2025 72,467 Thereafter 429,037 Total $ 718,905 Note 13. Shareholders’ Equity Common Stock The Company had 393,850,475 and 306,185,206 common shares outstanding at December 31, 2021 and December 31, 2020, respectively. In December 2018, the Company issued 20,000,000 shares of common stock to Robert M. Carmichael as an incentive bonus with a fair value of $ 200,000 . As the shares are subject to continued employment by Mr. Carmichael through January 2, 2020. Expense for the issuance was recognized over the full vesting period, and accordingly, the Company recognized stock compensation expense of $ 1,280 year ended December 31, 2020 and was fully expensed. In January 2020 the Company issued 2,647,065 shares of common stock in exchange for $ 45,000 to an accredited investor and daughter of Mr. Charles F. Hyatt, a member of our Board of Directors. In February 2020 the Company issued 12,500,000 shares of common stock related to the exercise of common stock purchase warrants at an exercise price of $.01, for a total conversion price of $ 125,000 . The shares were issued to Mr. Hyatt, a member of the Board of Directors. On June 9, 2020 the Company issued an aggregate of 330,636 shares of common stock to an employee for services performed in December 2019 and the first five months of 2020. The fair value of these shares was $ 9,520 . On April 2, 2020 the Company issued 10,000,000 shares of common stock related to the exercise of common stock purchase warrant at an exercise price of $ .01 per share. The Company received proceeds of $ 100,000 upon such exercise from Mr. Hyatt, a member of our Board of Directors. On April 10, 2020 the Company sold an aggregate of 20,000,000 shares of its common stock at a purchase price $ 0.025 per share to two accredited investors, including Mr. Hyatt, in a private transaction, resulting in proceeds to the Company of $ 500,000 . On April 9, 2020, the Company issued to an investor relations consultant, 3,000,000 shares of common stock, with a fair market value of $ 133,500 . On April 9, 2020, the Company issued, to a corporate communications consultant 2,000,000 shares of its common stock with a fair market value of $ 89,000 . On April 28, 2020, the Company issued 1,333,333 shares of its common stock as incentives to two employees. The fair value of the stock was $ 64,000 . On May 21, 2020, the Company issued 3,658,633 shares of common stock with a fair market value of $ 160,980 to six individuals for compensation related to the BLU3-VENT project. Of the shares issued, Mr. Carmichael received a total 725,087 shares with a fair value of $ 31,904 and Blake Carmichael, CEO of BLU3, Inc. who is also Mr. Carmichael’s adult son, received a total of 849,305 shares with a fair value of $ 37,369 . The balance of the shares were received by employees of the Company and independent contractors. In the third quarter of 2020 the Company issued 280,038 shares of its common stock to an employee for services performed from June 2020 to August 2020. The fair value of these shares was $ 5,890 . In the third and fourth quarters of 2020 the Company issued 2,795,000 shares of its common stock to Christopher Constable under the consulting agreement with Brandywine, LLC. The aggregate fair value of these shares was $ 45,659 . F- 20 On December 15, 2020, the Company issued 2,100,000 shares of its common stock with a fair value of $ 40,320 related to an agreement with Newbridge Securities to provide investment banking and business advisory services. 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 28, 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 . On August 18, 2021, the Company issued 6,114,516 shares of common stock related to the conversion of a convertible debenture and accrued interest of $ 61,145 . On September 1, 2021, the Company issued Mr. Charles F. Hyatt, a member of our Board of Directors, 10,000,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 250,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. On September 1, 2021, the Company issued Ms. Grace Hyatt, the adult child of a member of our Board of Directors, 600,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 15,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. In September, 2021, the Company issued 4,000,000 units of the securities of the Company to three accredited investors, with the unit consisting of 1 share of common stock and 1 24 month common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 100,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. On September 3, 2021, the Company issued 273,054 shares of common stock to Tierra Vesta Group as part of the purchase agreement of Submersible Systems, Inc. with a fair value of $ 14,499 . On September 3, 2021, the Company issued 27,032,388 shares of common stock to Summit Holdings V, LLC. as part of the purchase agreement of Submersible Systems, Inc. with a fair value of $ 1,435,420 . On September 22, 2021, the Company issued a law firm 1,190,476 shares of common stock with a fair value of $ 55,952 as partial consideration for its legal services related to acquisition of SSI. In November and December, 2021 the Company issued 597,006 shares of its common stock with a fair value of $ 21,000 to a consultant for services related to the dive retail industry. On December 31, 2021 the Company issued 763,983 shares of its common stock with a fair market value of $ 36,690 to a vendor related to exclusive distribution of its product line in the US and Caribbean. 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 and December 31, 2021 and 2020, the 425,000 shares of Series A Convertible Preferred Stock are owned by Robert Carmichael. F- 21 Equity Compensation Plan On May 26, 2021 the Company adopted an Equity Compensation 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 December 31, 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 2,125,000 $ .0434 22,875,000 Equity Compensation Plans Not Approved by Security Holders — — — Total 2,125,000 $ .0434 22,875,000 Options Effective July 29, 2019 the Company issued options to purchase up to an aggregate of 10,380,952 shares of common stock to Blake Carmichael. The options were issued pursuant to a stock option grant agreements and are exercisable at $ 0.018 per share for a period of five years from the date of issuance, subject to vesting over a period of six months. The fair value of the options totaled $ 43,582 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of 2.10 %, ii) expected life of 5 years, iii) dividend yield of 0 %, iv) expected volatility of 172 %. Stock option expense recognized during the year ended December 31, 2020 $ 5,362 , fully expensing this option agreement. Effective July 29, 2019 the Company issued Robert M. 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 2.10 %, ii) expected life of 5 years , iii) dividend yield of 0 %, iv) expected volatility of 172 %. Stock option expense recognized for the year ended December 31, 2020 was $ 10,724 , fully expensing this option agreement. Effective January 6, 2020 the Company issued options to purchase up to 2,000,000 shares of common stock to Mr. Jeffrey Guzy. 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 %. Stock option expense recognized during the year ended December 31, 2020 for this option was $ 40,107 and was fully expensed at grant date. F- 22 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 %. Stock option expense recognized during the year ended December 31, 2020 for this option was $ 40,097 and was fully expensed at grant date. 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. 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 grate 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, and as of December 31, 2021 deemed that there was a 35% chance that the options would vest. Therefore, stock option expense recognized during the years ended December 31, 2021 and December 31, 2020 was $ 874,022 and $ 655,515 respectively. On November 5, 2020 the company entered into a Non-Qualified Stock Option agreement with Christopher Constable the “Constable Option Agreement” as part of his employment agreement. Under the terms of the option agreement, the Company granted Mr. Constable a 5 year option to purchase 5,434,783 shares of the Company’s common stock at an exercise price of $ .0184 , the “Compensation Options”. The Compensation Options were immediately vested. The fair value of the options on the date of the grant was $ 106,199 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .16 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 341 %. Stock option expense recognized during the year ended December 31, 2020 for this option was $ 106,890 and was fully expensed on grant date. F- 23 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 Carmichael 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 4 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 December 31, 2021 deemed that there was a 14% chance that the options would vest, as the measurement period does not begin until January 1, 2021. Therefore, stock option expense recognized during the years ended December 31, 2021 and December 31, 2020 was $ 82,734 and $ 0 , respectively. 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 Year ended December 31, 2021 was $ 13,843 . On August 1, 2021 as part of the Blake Carmichael Employment Agreement (as defined below), the Company entered into a Non-Qualified Stock Option agreement with Blake Carmichael. Under the terms of the Blake Carmichael Employment agreement, the Company will enter into an option contract that will grant Blake Carmichael a 5 year option to purchase 3,759,400 shares of the Company’s common stock at an exercise price of $ .0399 , (the “BC Compensation Options”). The BC Compensation Options vest 33.3% upon the execution of the agreement, 33% at the first anniversary date and 33% upon the second anniversary date. The fair value of the options on the date of the grant was $ 149,076 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .25 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 346.36 %. The Company expensed $ 49,692 as of December 31, 2021. As part of the Blake Carmichael Agreement the company entered into a Non-Qualified Stock option agreement (the “BC Bonus Options”) that will grant Blake Carmichael a 5-year option to purchase up to 18,000,000 shares to be vested annually on a contract year basis, based upon the achievement of certain financial metrics tied to Revenue and EBITA. The fair value of the BC Bonus Options was $ 713,777 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .25 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 346.36 %, v) exercise price of .0399 per share. The measurement period for these options began in August, 2021. As of December 31, 2021 the Company deemed that there was an opportunity for 3% of the total option to vest and an option expense of $ 21,810 was expensed for the year ended December 31, 2021. F- 24 During the Third Quarter, 2021 the Company issued options to purchase up to an aggregate of 175,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $ .044 to $ .049 per share for a periods ranging from three to four years of from the date of issuance, with quarterly vesting periods over one to two years. The fair value of the options totaled $ 7,149 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate from .155 % to .20 %, ii) expected life of 1.5 to 2 years, iii) dividend yield of 0 % , iv) expected volatility of 249.38 % to 287.12 %. The stock options expense recognized for the year ended December 31, 2021 was $ 2,989 . Effective September 3, 2021 the Company issued options to purchase up to an aggregate of 300,000 shares of common stock to Christeen Buban, President of SSI under the Plan. The options were issued pursuant to the Buban Agreement and a stock option grant agreement and is exercisable at $ 0.053 per share for a period of five years from the date of issuance, with 12.5 % of the options vesting each fiscal quarter over a period of two years. The fair value of the options totaled $ 15,814 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .315 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 339.21 %. The stock options expense recognized for the year ended December 31, 2021 was $ 3,953 . As part of the Buban Agreement the company is also obligated to enter into a Non-Qualified Stock option agreement (the “Buban Bonus Options”) that will grant Mrs. Buban a 5 -year option to purchase up to 7,110,000 shares to be vested annually on a contract year basis, based upon the achievement of certain financial metrics tied to Revenue and EBITA. The fair value of the Buban Bonus Options was $ 374,786 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .3150 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 339.21 %, v) exercise price of .0531 per share. The measurement period for these options began on September 3, 2021. The company deemed that there was no option expense to be recognized for the year ended December 31, 2021. Effective September 3, 2021 the Company issued options to purchase up to an aggregate of 500,000 shares of common stock to various employees of SSI under the Plan. The options were issued pursuant to a stock option grant agreement and is exercisable at $ 0.0531 per share for a period of four years from the date of issuance, with 12.5 % of the options vesting each fiscal quarter over a period of two years . The fair value of the options totaled $ 25,201 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .21 %, ii) expected life of 2 years, iii) dividend yield of 0 %, iv) expected volatility of 276.1 %. The stock options expense recognized for the year ended December 31, 2021 was $ 6,300 . During the Fourth Quarter, 2021 the Company issued options to purchase up to an aggregate of 100,000 shares of common stock to two employees under the Plan. The options were issued pursuant to stock option grant agreements and are exercisable at a range of $ .040 to $ .0419 per share for a period of four years of from the date of issuance, with quarterly vesting periods over two years. The fair value of the options totaled $ 3,863 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .204 % ii) expected life of 2 years, iii) dividend yield of 0 %, iv) expected volatility of 249.38 % to 287.12 %. The stock options expense recognized for the year ended December 30, 2021 was $ 482 . On November 5, 2021 the company entered into a Non-Qualified Stock Option agreement with Christopher Constable the “Constable Option Agreement” as part of his employment agreement. Under the terms of the option agreement, the Company granted Mr. Constable a 5 year option to purchase 2,403,846 shares of the Company’s common stock at an exercise price of $ .041 , the “Compensation Options”. The Compensation Options were immediately vested. The fair value of the options on the date of the grant was $ 98,976 using the Black-Scholes option pricing model with the following assumptions: i) risk free interest rate of .53 %, ii) expected life of 2.5 years, iii) dividend yield of 0 %, iv) expected volatility of 269.12 %. Stock option expense recognized during the year ended December 31, 2021 for these options were $ 98,976 . F- 25 A summary of the Company’s stock option as of December 31, 2021 and 2020, and changes during the years ended December 31, 2021 and 2020 is presented below: Schedule of Option Activity Weighted Weighted Average Average Remaining Aggregate Number of Options Exercise Price Contractual Life in Years Intrinsic Value Outstanding at December 31, 2019 35,295,237 $ 0.018 4.58 Granted 164,434,783 0.0354 Forfeited - - Exercised - - Cancelled - - Outstanding – December 31, 2020 199,730,020 $ 0.0323 2.84 Exercisable – December 31, 2020 44,730,020 $ 0.0185 3.59 $ 168,892 Weighted Weighted Average Average Remaining Aggregate Number of Options Exercise Price Contractual Life in Years Intrinsic Value Outstanding at December 31, 2020 199,730,020 $ 0.0323 2.84 Granted 33,473,246 0.0430 Forfeited ( 75,000 ) 0.0360 Exercised - - Cancelled - - Outstanding – December 31, 2021 233,128,266 $ 0.0362 2.23 Exercisable – December 31, 2021 76,068,249 $ 0.0284 2.30 $ 795,201 Warrants On February 25, 2020, Mr. Hyatt, a member of the Company’s Board of Directors, partially exercised a warrant for the acquisition of 12,500,000 shares at $ .01 per share for proceeds to the Company of $ 125,000 . On April 2, 2020 Mr. Hyatt purchased 10,000,000 shares related to the exercise of an outstanding common stock purchase warrant at an exercise price of $ .01 per share. The Company received proceeds of $ 100,000 upon such exercise. On September 7, 2020 the balance of 27,500,000 in common stock purchase warrant owned by Mr. Hyatt, expired. In the first quarter of 2020 warrants to purchase 2,608,725 shares of common stock held by two investors expired. On September 1, 2021, the Company issued Mr. Charles F. Hyatt, a member of our Board of Directors, 10,000,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 250,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. On September 1, 2021, the Company issued Ms. Grace Hyatt, the adult child of a member of our Board of Directors, 600,000 units of the securities of the Company, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 15,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. In September, 2021, the Company issued 4,000,000 units of the securities of the Company to three accredited investors, with the unit consisting of 1 share of common stock and 1 two year common stock purchase warrants exercisable at $ 0.025 per share in consideration of $ 100,000 . The Company did not pay any fees or commissions in connection with the sale of the unit. F- 26 A summary of the Company’s warrants as of December 31, 2021 and 2020, and changes during the years ended December 31, 2021 and 2020 is presented below: Schedule of Warrants Activity Weighted Weighted Average Average Remaining Number of Warrants Exercise Price Contractual Life in Years Aggregate Intrinsic Value Outstanding at December 31, 2019 52,608,725 $ 0.01 4.58 Granted - - Forfeited - - Exercised ( 22,500,000 ) 0.01 Cancelled ( 30,108,725 ) 0.0115 Outstanding – December 31, 2020 - $ - - Exercisable – December 31, 2020 - $ - - $ - Weighted Weighted Average Average Remaining Number of Warrants Exercise Price Contractual Life in Years Aggregate Intrinsic Value Outstanding at December 31, 2020 - $ - - Granted 14,600,000 0.0250 Forfeited - - Exercised - - Cancelled - Outstanding – December 31, 2021 14,600,000 $ 0.0250 1.67 Exercisable – December 31, 2021 14,600,000 $ 0,0250 1.67 $ 153,300 Note 14. Income Taxes The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. The components of the provision for income tax expense are as follows for the years ended: Schedule of Provision for Income Tax Expense 2020 2019 December 31, 2021 2020 Current taxes Federal $ — $ — State — — Current taxes — — Change in deferred taxes 40,100 38,600 Change in valuation allowance ( 40,100 ) ( 38,600 ) Provision for income tax expense $ — $ — F- 27 The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2021 and 2020: Summary of Significant Components of Deferred Tax Assets and Liabilities 2020 2019 December 31, 2021 2020 Deferred tax assets: Equity based compensation $ 154,400 $ 154,400 Allowance for doubtful accounts 11,700 4,300 Reserves for slow moving inventory 46,600 46,500 Amortization 4,100 - Depreciation 1,900 2,900 Net operating loss carryforward 1,285,500 1,336,300 Total deferred tax assets 1,504,200 1,544,400 Valuation allowance ( 1,504,200 ) ( 1,544,400 ) Deferred tax assets, net of valuation allowance $ - $ - The effective tax rate used for calculation of the deferred taxes as of December 31, 2021 was 25.35 %. The Company has established a 100 % valuation allowance against deferred tax assets of $ 1,504,200 , due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was an increase of $ 40,100 . The Company has approximately $ 3,465,000 of net loss carryforward that expire through 2037 and $ 1,607,000 that carryforward indefinitely, but is limited to 80% of taxable income in any one year . The effective tax rate used for calculation of the deferred taxes as of December 31, 2020 was 25.35 %. The Company has established a 100 % valuation allowance against deferred tax assets of $ 1,544,400 due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was an increase of $ 38,100 . The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows: Schedule of Differences Between Statutory Tax Rate and Effective Tax Rate 2020 2019 December 31, 2021 2020 Statutory tax rate ( 21.00 )% ( 21.00 )% State tax, net of Federal benefits ( 4.35 )% ( 4.35 )% Permanent differences 27.96 % 28.21 % Change in valuation allowance ( 2.61 )% ( 2.86 )% Effective tax rate — % — % The Company’s income tax returns for 2017 through 2021 remain subject to examination by the Internal Revenue Services and state tax authorities. Note 15. Commitments and Contingencies On August 14, 2014, the Company entered into a thirty-seven-month term lease for its initial facilities in Pompano Beach, Florida, commencing on September 1, 2014. Terms included payment of $ 5,367 security deposit; base rent of approximately $ 4,000 per month over the term of the lease plus sales tax; and payment of 10.76 % of annual operating expenses (i.e. common areas maintenance), which was approximately $ 2,000 per month subject to periodic adjustment. On December 1, 2016, we entered into an amendment to the initial lease agreement, commencing on October 1, 2017, extending the term for an additional eighty-four months, expiring September 30, 2024 . The base rent was increased to $ 4,626 per month with a 3 % annual escalation throughout the amended term. On January 4, 2018, the Company entered into a sixty-one month lease renewal for its facility in Huntington Beach, CA, commencing on February 1, 2018. Terms included base rent of approximately $ 9,300 Gross per month for the first 12 months and increasing 2.5 % annual escalation throughout the amended term. The Company paid a security deposit of $ 8,450 with the initial lease that ended with the renewal. 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. The Company, Trebor and other third parties, were each named as a co-defendants under actions initially filed in March 2015 in the Circuit Court of Broward County under Case No. CACE-15-03238 and CACE -16-0000242 by the Estate of Ernesto Rodriguez, claiming wrongful death and products liability resulting in the decedent’s drowning death while using a Brownie’s Third Lung product. This claim was settled in June 2020 for $ 50,000 , and further modified into a lump sum payment of $ 44,200 ( 88.4 % of the original settlement amount) which was paid in full on August 25, 2020. F- 28 In April 2018 the Company entered into a Patent License Agreement (the “STS Agreement”) with Setaysha Technical Solutions, LLC (“STS”) pursuant to which the Company licensed certain intellectual property, including patent rights, non-patent rights and know how from STS for use in our Ultra-Portable Tankless Dive system products. Effective December 31, 2019, the Company entered into Addendum No. 1 to the STS Agreement (“Addendum No. 1”) to amend the payment due upon the first commercial sale of NEMO. In accordance with Addendum No. 1, $ 8,250 was paid in cash and $ 8,250 was accrued as of December 31, 2019, and paid during the year ended December 31, 2020. The Company issued 828,221 shares of common stock in satisfaction of $ 13,500 for the first commercial sale of NEMO with a fair value of $ 19,635 . Effective June 30, 2020, the Company entered into Addendum No.2 to the Patent License Agreement (“Addendum No.2”) This addendum is to set limits and expectations of the assistance from STS rated to designing and commercializing NextGen diving products, and that STS receive deferred consideration for uncompensated services. Addendum No. 2 also states that if the Company terminate the STS Agreement before December 31, 2024 , then the Company will pay STS $ 180,000 , less cumulative royalties paid in excess of $ 334,961 for years 2020, 2021, 2022, 2023 and 2024. On June 30, 2020, the Company entered into Amendment No. 2 to the STS Agreement. The amendment set certain limits and expectations of the assistance from STS related to designing and commercializing certain diving products, and revised the royalty payments due to STS as consideration for uncompensated services. The Company is obligated to pay STS a minimum yearly royalty of $ 60,000 , or $ 15,000 per fiscal quarter, beginning in December 2019 and increasing by 2.15 % 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 2020 through 2024. Royalty recorded in relation to this agreement totaled $ 157,855 and $ 53,929 for the years ended December 31, 2021 and 2020, respectively. In accordance with the amendment the Company will pay additional minimum royalties of $ 60,000 per year or $ 15,000 per quarter for the years 2022 through 2024. On April 9, 2020 the Company entered into an Investor Relations Consulting Agreement with HIR Holdings, LLC pursuant to which the Company engaged the firm to provide investor relations services. The term of the agreement is for a minimum guaranteed period of six months, and thereafter is cancellable by either party upon 30 days’ notice to the other party. As compensation the Company issued the consultant 3,000,000 shares of its common stock, valued at $ 133,500 , and is responsible for reimbursement of certain pre-approved expenses. On April 9, 2020 the Company also entered into a Corporate Communications Consulting Agreement with Impact IR Inc. pursuant to which the Company also engaged this firm to provide investor relations services. The term of the agreement is six months. As compensation the Company issued the consultant 2,000,000 shares of its common stock valued at $ 89,000 . 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 be billed $ 5,275 for June and July 2020 and $ 8,840 from August 2020 to July 2021. This contract was not renewed at the expiration date. On August 1, 2020, BLU3 entered into an advertising and marketing agreement with Figment Design. The term of the agreement is for one year beginning August 1, 2020, and thereafter renew or cancel the agreement in writing 60 days before the final date. Figment Design will bill BLU3 $ 3,500 per month as retainer and $ 1,500 to $ 2,000 for monthly ad spend. This agreement was terminated with 30 day notice prior to its expiration. 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, but continues to pay the originally agreed upon amount and receive content from the vendor On August 10, 2020, the Company engaged Brandywine, LLC to provide certain accounting advisory and consulting services to it under the terms of a letter agreement. As compensation for the services, we agreed to pay Brandywine, LLC an hourly rate of $ 125.00 and issue it 10,000 shares of our common stock for each hour billed, which such shares are issuable to a designee of Brandywine, LLC in its discretion, and reimburse it for pre-approved expenses. The agreement may be terminated by either party upon 15 days’ notice, and contains customary indemnification provisions. This agreement was terminated on November 5, 2020 upon entering into an employment agreement as detailed below, a total number of 2,795,000 shares were issued under this agreement as of December 31, 2020 This agreement was terminate upon the execution of the Constable Employment Agreement. F- 29 On November 5, 2020 the Company and Christopher 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 (the “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. Mr. Constable is also entitled to participate in all benefit programs the Company offers to its executives, reimbursement for business expenses and three weeks of annual paid vacation. The agreement may be terminated for cause, upon his death or disability, or by the Company without cause. Furthermore, Mr. Constable may terminate the agreement for “good reason” as defined in the agreement. If the Company terminates the Constable Employment Agreement for cause, or if it terminates upon Mr. Constable’s death or disability, or if he voluntarily terminates the agreement, neither Mr. Constable nor his estate (as the case may be) is entitled to any severance or other benefits following the date of termination. If the Company should terminate the Constable Employment Agreement without cause or if Mr. Constable terminates for good reason, the Company is obligated to continue to pay him his base salary for a period of six months. The Constable Employment Agreement also contains customary confidentiality, non-disclosure and indemnification provisions. Pursuant to the Constable Employment Agreement, Mr. Constable also agreed to serve on the Company’s Board of Directors and the Company agreed to nominate him to serve on the Board during the term of the Constable Employment Agreement. On December 15, 2020 the Company engaged Newbridge Securities Corporation to provide Investment Banking and Corporate Advisory services. The term of this agreement is for twelve months and can be terminated by either party with 14 day written notice. As compensation for this agreement the Company issued 2,100,000 shares of common stock with a fair market value of $ 40,320 . On March 1, 2021, the Company entered into an investor relations consulting agreement with BGM Equity Partners, LLC. The term of the agreement is twelve months. As compensation, the Company issued 3,000,000 shares of its common stock valued at $ 120,000 to BGM EQUITY Partners. On May 20, 2021, the Company entered into an exclusive distribution agreement with Chrysalis Trading CC doing business as Bright Weights for exclusive distribution of the Bright Weights diving products in the United States and Caribbean. The term of the agreement is 2 years and will renew at the two-year anniversary date for an additional two-year term. There are no minimum purchase commitments in this agreement. The company paid to the sole shareholder of Chrysalis Trading CC 500,000 shares of its common stock at a fair market value of $ 36,690 for this exclusivity. On August 1, 2021, the Company and Blake Carmichael entered into a three year employment agreement (the “Blake Carmichael Employment Agreement”) pursuant to which Mr. Carmichael shall continue to serve as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael shall receive (i) an annual base salary of $ 120,000 , payable in accordance with the customary payroll practices of the Company, and (ii) a cash bonus equal to 5% of the net income of BLU3 payable quarterly, beginning with the first full calendar quarter after the execution of the agreement. (iii) Issuable upon execution of the Employment Agreement, a non-qualified five -year stock option to purchase 3,759,400 shares at $ .0399 . 33.3% of the stock option vests immediately, 33.3% vests on the second anniversary of the contract and 33.3% on the third anniversary of the agreement . F- 30 In addition, Blake Carmichael shall be entitled to receive a five -year stock options to purchase up to 18,000,000 shares of common stock at an exercise price equal to $ 0.0399 per share that will vest upon defined financial metrics that are measured on a contract year basis. The metrics defined in the agreement escalate the shares available to vest based upon a revenue measurement, expediency measurement and an EBITDA measurement. On August 6, 2021 the Company entered into a six-month, non-exclusive mergers and acquisitions services agreement with Newbridge Securities Corporation. The merger agreement shall pay seven percent commission for the first two million dollars paid in aggregate consideration and six percent on the aggregate consideration above two million dollars . The fee shall be paid in the common stock of the Company. The equity received is subject to a holding period of six months from the closing date of the transaction. No payment has been issued in relation to this agreement. On September 3, 2021, SSI and Christeen Buban entered into a three-year employment agreement (the “Buban Employment Agreement”) pursuant to which Mrs. Buban shall serve as the President of SSI. In consideration for his services, Mrs. Buban shall receive (i) an annual base salary of $ 110,000 , payable in accordance with the customary payroll practices of the Company, (ii) a car allowance and cell phone allowance totaling $ 10,800 per year, (iii) a five -year stock option issued under the Plan to purchase 300,000 shares at $ .0531 . The options vest quarterly over the next eight calendar quarters. In addition, Mrs. Buban shall be entitled to receive a five -year stock options to purchase up to 7,110,000 shares of common stock at an exercise price equal to $ 0.0531 that will vest upon defined financial metrics that are measured on a contract year basis. The metrics defined in the agreement escalate the shares available to vest based upon a revenue measurement, expediency measurement and an EBITDA measurement. Legal The Company was 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. The company has a balance of $ 5,000 remaining on this obligation as of December 31, 2021. Note 16. Segments The Company has four operating segments as described below: 1. Legacy SSA Products, which sells recreational multi-diver surface supplied air 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. 4. Redundant Air Tank Systems, which manufactures and distributes a line of high pressure tanks, redundant and rescue air systems for the military and recreational diving industries Schedule of Segment Reporting Information Years ended December 31 Legacy SSA Products High Pressure Gas Systems Ultra Portable Tankless Dive Systems Redundant Air Tank Systems Total Company 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Net Revenues $ 2,897,210 $ 2,721,753 $ 616,039 $ 489,590 $ 2,241,359 $ 1,344,630 $ 472,771 $ - $ 6,227,379 $ 4,555,973 Cost of Revenue ( 2,161,396 ) ( 1,783,857 ) ( 386,517 ) ( 310,527 ) ( 1,437,512 ) ( 997,200 ) ( 352,755 ) - ( 4,337,820 ) ( 3,091,584 ) Gross Profit 735,814 937,896 229,812 179,063 803,847 347,430 120,016 - 1,889,559 1,464,389 Depreciation 17,447 8,916 - - 14,479 12,089 24,546 - 56,472 21,005 Income (Loss) from operations $ ( 1,778,463 ) $ ( 1,063,871 ) $ 17,980 $ ( 30,876 ) $ 32,995 $ ( 238,313 ) $ ( 125,215 ) $ - ( 1,852,703 ) $ ( 1,333,060 ) Total Assets $ 1,346,096 $ 1,327,465 $ 346,499 $ 245,572 $ 903,718 $ 500,043 $ 2,077,648 $ - $ 4,673,961 $ 2,073,080 Note 17. Subsequent Events In February 2022 the Company issued 10,000,000 shares of common stock to Charles Hyatt, a director, upon the exercise of a common stock purchase warrant at an exercise price of $ 0.025 for $ 250,000 . In February, 2022 the Company issued 600,000 shares of common stock related to Grace Hyatt, the adult daughter of a director upon the exercise of a common stock purchase warrant at an exercise price of $ 0.025 for $ 15,000 . On January 31, 2022 and February 28, 2022 the Company issued an aggregate of 206,318 shares of its common stock with a fair value of $ 21,000 to a consultant for services related to the dive retail industry. On January 19, 2022, SSI entered into a capital lease with Alliance Funding Group to secure a new piece of essential equipment for its operation. The lease has a 36 month term with a monthly payment of $ 3,522 . At the end of the lease SSI has the option to purchase the equipment for $3,522 plus applicable taxes. The total purchase price of machine was $108,675. On February 13, 2022 the Company filed with the Florida Department of State, the articles of incorporation for a new wholly owned subsidiary, Live Blue, Inc. F- 31