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Item 1A. Risk Factors

2023-03-30 compared with 2022-04-22 · 107 added, 38 removed, 193 unchanged (43% of the section changed)

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The occurrence of any of the following risks might cause you to lose all

or a part of your investment, and certain of these risks may be further exacerbated by the continuing impact of the COVID-19 pandemic

on the Company and our industry.

or a part of your investment.

Some statements in this report, including statements in the following risk factors, constitute forward-looking

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incurred net losses of $1,892,891 and $1,588,467, respectively, for the year ended December 31, 2022 and 2021.

At December 31,

2021 we had an accumulated deficit of $14,544,604.

While our revenues increased 36.7% for the year ended December 31, 2021 from

2020, our gross profit margin decreased from 32.1% in 2020 to 30.3% in 2021, our gross profit is not sufficient to cover

our operating expenses in the year ended December 31, 2021 and 2020 of $3,742,262 and $2,797,449, respectively, which includes

non-cash stock compensation expenses of $1,154,801 and $858,695 for the years ending December 31, 2021 and 2020,

respectively.

In the year ended December 31, 2021, our selling, general and administrative expenses, increased 33.8% from 2020.

There are no assurances that we will be able to increase our revenues to a level which supports profitable operations and provides sufficient

capital to pay our operating expenses and other obligations as they become due.

On December 31, 2022 we

had an accumulated deficit of $16,437,495.

While our revenues increased 37.7% for the year ended December 31, 2022 from 2021, and our

gross profit margin increased from 30.3% in 2021 to 32.6% in 2022, our gross profit is not sufficient to cover our operating expenses

of $4,644,596 and $3,742,262 for the twelve months ending December 31, 2022 and 2021, respectively.

Operating expenses include non-cash

stock compensation expenses of $962,474 and $1,154,801 for the years ending December 31, 2022 and 2021, respectively.

In the year ended

December 31, 2022, our selling, general and administrative expenses, increased 19.8% from 2021.

There are no assurances that we will

be able to increase our revenues to a level which supports profitable operations and provide sufficient capital to pay our operating

expenses and other obligations as they become due.

auditors have raised substantial doubts as to our ability to continue as a going concern .

independent registered public accounting firm has included an explanatory paragraph expressing substantial doubt relating to our ability

to continue as a going concern in its report on our audited consolidated financial statements for the year ended December 31, 2021 We

have sustained recurring losses from operations and have used approximately $769,500 in net cash in our operation in the year

ended December 31, 2021 as compared to approximately $556,000 in 2020.

These factors, among others, raise substantial doubt about

our ability to continue as a going concern.

Our consolidated financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

Our principal sources of liquidity are sales of equity and debt securities.

We do not have any firm

commitments to raise additional working capital.

As we are a small company who stock is quoted on the OTC Markets, we expect to encounter

difficulty in raising working capital upon terms and conditions satisfactory to us, if at all.

If we are unable to obtain sufficient

funding or generate sufficient revenues, our business and results of operations will be adversely affected and we may be unable to continue

as a going concern.

independent registered public accounting firm has included an explanatory paragraph expressing substantial doubt relating to our

ability to continue as a going concern in its report on our audited consolidated financial statements for the year ended December

We have recurring losses from operations and had a net loss of approximately $1,732,000 and have used approximately

$678,400 in net cash in our operations in the year ended December 31, 2022 as well as an accumulated deficit of approximately

These factors, among others, raise substantial doubt about our ability to continue as a going concern.

Our consolidated

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

Our principal sources of

liquidity are sales of equity and debt securities.

We do not have any firm commitments to raise additional working capital.

are a small company who stock is quoted on the OTC Markets, we expect to encounter difficulty in raising working capital upon terms

and conditions satisfactory to us, if at all.

If we are unable to obtain sufficient funding or generate sufficient revenues, our

business and results of operations will be adversely affected, and we may be unable to continue as a going concern.

rely on revenues from related parties.

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and financial condition in future periods.

depend on licenses with Robert Carmichael, our Chief Executive Officer’s ownership interests in much of our intellectual property.

Company either owns or has licensed from entities in which Robert Carmichael, our Chairman, has an ownership interest, the following

registered and unregistered trade names, trademarks and service marks:

Brownie’s Third Lung™, browniedive.com, Brownie’s,

Brownie’s Third Lung oval symbol, browniedive, YachtPro.

depend on licenses with Robert Carmichael, our Chairman, who owns much of our intellectual property.

The Company has licensed from entities in which Robert

Carmichael, our Chairman, has an ownership interest, the following registered and unregistered trade names, trademarks and service marks:

Brownie’s Third Lung™, browniedive.com, Brownie’s, Brownie’s Third Lung oval symbol, browniedive, YachtPro.

to maintain such licenses with Mr.

Carmichael would have a material adverse effect on the Company’s financial condition.

we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial

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which could have an adverse effect on our stock price and potentially subject us to litigation.

Consumer Products Safety Commission

(“CPSC”) has issued a voluntary recall for one of our products.

22, 2022, the CPSC issued a voluntary recall notice for the Nomad tankless dive system, which is distributed by BLU3, Inc.

As part of the

recall procedure, the CPSC has approved the Company’s proposed remedy for the recall and BLU3 will begin to receive units back from

consumers to repair affected Nomad units.

The Company has evaluated the costs of this recall and has deemed it necessary to set a reserve

for those costs related to the recall of $160,500.

However, the Company is unable to currently calculate the full financial impact

to the Company over the long term, and whether it may have a material adverse impact on the financial condition of the Company in future

AND OPERATIONAL RISKS

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Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future.

intellectual property rights are valuable, and any inability to adequately protect, or uncertainty regarding validity, enforceability

or scope of them could undermine our competitive position and reduce the value of our products and brand, and litigation to protect our

intellectual property rights may be costly.

attempt to strengthen and differentiate our product portfolio by developing new and innovative products and product improvements.

a result, our patents, trademarks, trade secrets, copyrights and other intellectual property rights are important assets to us.

events outside of our control pose a threat to our intellectual property rights as well as to our products and services.

effective intellectual property protection may not be available in countries in which our products are sold.

Also, although we have registered

our trademark in various jurisdictions, our efforts to protect our proprietary rights may not be sufficient or effective.

Any significant

impairment of our intellectual property rights could harm our business or our ability to compete.

Litigation might be necessary to protect

our intellectual property rights and any such litigation may be costly and may divert our management’s attention from our core

An adverse determination in any lawsuit involving our intellectual property is likely to jeopardize our business prospects

and reputation.

Although we are not aware of any of such litigation, we have no insurance coverage against litigation costs, and we would

be forced to bear all litigation costs if we cannot recover them from other parties.

All foregoing factors could harm our business, financial

condition, and results of operations.

Any unauthorized use of our intellectual property could harm our operating results.

may be exposed to infringement or misappropriation claims by third parties, which, if determined against us, could adversely affect our

business and subject us to significant liability to third parties.

success mainly depends on our ability to use and develop our technology and product designs without infringing upon the intellectual

property rights of third parties.

We may be subject to litigation involving claims of patent infringement or violations of other intellectual

property rights of third parties.

Holders of patents and other intellectual property rights potentially relevant to our product offerings

may be unknown to us, which may make it difficult for us to acquire a license on commercially acceptable terms.

There may also be technologies

licensed to us and that we rely upon that are subject to infringement or other corresponding allegations or claims by third parties which

may damage our ability to rely on such technologies.

In addition, although we endeavor to ensure that companies that work with us possess

appropriate intellectual property rights or licenses, we cannot fully avoid the risks of intellectual property rights infringement created

by suppliers of components used in our products or by companies we work with in cooperative research and development activities.

current or potential competitors may obtain patents that will prevent, limit or interfere with our ability to make, use or sell our products.

The defense of intellectual property claims, including patent infringement suits, and related legal and administrative proceedings can

be both costly and time consuming, and may significantly divert the efforts and resources of our technical personnel and management.

These factors could effectively prevent us from pursuing some or all of our business operations and result in our customers or potential

customers deferring, canceling or limiting their purchase or use of our products, which may have a material adverse effect on our business,

financial condition and results of operations.

may not be able to enforce our intellectual property rights throughout the world.

laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

This could make it difficult for us to stop the infringement or the misappropriation of our intellectual property rights.

countries have compulsory licensing laws under which a patent owner must grant licenses to third parties.

In addition, many countries

limit the enforceability of patents against third parties, including government agencies or government contractors.

In these countries,

patents may provide limited or no benefit.

Patent protection must ultimately be sought on a country-by-country basis, which is an expensive

and time-consuming process with uncertain outcomes.

Accordingly, we may choose not to seek patent protection in certain countries, and

we will not have the benefit of patent protection in such countries.

to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts from other aspects of

our business.

Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.

changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate

protection for our technology and the enforcement of intellectual property.

rely on third party vendors and manufacturers.

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manufactured in China.

Our senior management will continue to monitor our situation on a daily basis, however, we expect that these factors

Our senior management will continue to monitor our situation on a daily basis;

however, we expect that these factors

and others we have yet to experience may materially adversely impact our company, its business and operations for the foreseeable future.

dependent on consumer discretionary spending.

are dependent on consumer discretionary spending.

success of our business depends largely upon a number of factors related to consumer spending, including current and future economic

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result in the issuance of an additional 266,722,242 shares of our common stock.

The issuance of shares upon exercise of options

will result in dilution to the interests of other shareholders.

The issuance of shares upon exercise of options will

result in dilution to the interests of other shareholders.

common stock may be affected by limited trading volume and may fluctuate significantly.

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information available to them about the company.

we are voluntarily file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

we voluntarily file reports with the SEC under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), we do not have a class of securities registered under Section 12(g) of the Exchange Act.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors