Item 1. Business
Item
1.
Business.
Unless
specifically set forth to the contrary, when used in this report references to the “Company,” “we,” “our,”
“us,” and similar terms refers to Brownie’s Marine Group, Inc., a Florida corporation, and its wholly owned subsidiaries,
Trebor Industries, Inc., a Florida corporation (“Trebor”) doing business as Brownie’s Third Lung, Brownie’s High
Pressure Compressor Services, Inc. a Florida corporation (“BHP”) doing business as LW Americas (“LWA”), BLU3,
Inc., a Florida corporation (“BLU3”), Submersible Systems, Inc., a Florida corporation (“SSI”), doing business
as Spare Air and Live Blue, Inc. (“LBI”), a Florida corporation.
Overview
The
Company, through its wholly owned subsidiaries, designs, tests, manufactures and distributes tankless dive systems, rescue air systems
and yacht-based self-contained underwater breathing apparatus (“SCUBA”) air compressor and nitrox generation fill systems
and acts as the exclusive distributor in North and South America for Lenhardt & Wagner GmbH (“L&W”) compressors in
the high-pressure breathing air and industrial gas markets. The Company is also the exclusive United States and Caribbean distributor
for Chrysalis Trading CC, a South African manufacturer of fitness and dive equipment, which is doing business as Bright Weights (“Bright
Weights”), of a dive ballast system produced in South Africa.
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 incorporated in 2017, and wholly owned subsidiary of the Company (“Acquisition
Sub”), Submersible Systems, Inc., a Florida corporation (“Submersible” or “SSI”), and Summit Holdings V,
LLC, a Florida limited liability company (“Summit”) and Tierra Vista Group, LLC, a Florida limited liability company (“Tierra
Vista” and, together with Summit, the “Sellers”), the owners of all of the capital stock of Submersible, pursuant to
which Acquisition Sub merged with and into Submersible (the “Merger”), and Submersible, the surviving corporation, became
a wholly owned subsidiary of the Company.
Submersible
is a manufacturer of high-pressure tanks and redundant air systems for aviation, manned submersibles, swift water rescue, 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.
3
On
February 13, 2022 the Company formed LBI, which is being developed as a full retail, guided tour and training model utilizing the technology
developed by BLU3 to provide new users and interested divers with guided tour experience, training, and the ability to purchase all of
their diving and watersports needs.
On
May 2, 2022, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Gold Coast Scuba,
LLC, a Florida limited liability company (“Gold Coast Scuba”), Steven M. Gagas and William Frenier, the sole members of Gold
Coast Scuba (together, the “LLC Members”) and LBI. Pursuant to the terms of the Asset Purchase Agreement, LBI acquired substantially
all of Gold Coast Scuba’s assets and assumed certain non-material liabilities of the business associated with these assets. In
addition, LBI assumed the lease for the premises for Gold Coast Scuba.
On
or about the 4 th of October, 2024 LBI sold the Gold Coast Scuba tradename and other IP rights and certain related inventory
to Adventure Seeker Company.
The
Company has five wholly owned subsidiaries focused on various sub-sectors of our industry as described below:
●
Brownie’s
Third Lung | Surface Supplied Air (“SSA”)
●
BLU3,
Inc. | Ultra-Portable Tankless Dive Systems
●
LW
Americas | High Pressure Gas Systems
●
Submersible
Systems, Inc. | Redundant Air Tank Systems
●
Live
Blue, Inc. | Guided Tours
Our
wholly owned subsidiaries do business under their respective trade names on both a wholesale and retail basis from our headquarters and
manufacturing facility in Pompano Beach, Florida, and a manufacturing facility in Huntington Beach, California.
Surface
Supplied Air Products
Our
Third Lung systems have been the market leader in gasoline powered, high-performance and more recently in battery powered surface supplied
air (THIRD LUNG) diving systems. Taking full advantage of our proprietary compressor system, a series of traditional “fixed speed”
electric compressors were developed for the built-in-boat market in 2005. In 2010, we introduced our variable-speed battery powered THIRD
LUNG system which provides divers with gasoline-free all day shallow diving experiences. These systems provide performance and runtimes
for up to 3 hours by utilizing a diver-sensitive variable speed technology that controls battery consumption based on diver demand.
The
Company continues to pursue distributors and dealers in and outside of the United States in order to diversify the seasonality as well
as geography risks. Additionally, we continue to pursue more aggressively the boat builder market to offer our variable speed, battery
powered THIRD LUNG systems as an option on newly built boats of all sizes, expanding our market beyond the traditional consumer markets
for our products.
Our
SSA products include:
●
Tankless Dive Systems: The Company produces a line of tankless dive products, commonly called hookah or recreational SSA
systems. These systems allow one to four divers to enjoy the marine environment up to a depth of 45 feet without the bulk and weight
of conventional SCUBA gear. We believe that the removal of barriers to entry into the sport of diving and the reduction of complicated
and bulky SCUBA gear invites a broader range of the general public to participate more actively and enjoyably at their own pace and schedule.
Our product is designed to reduce the effort required for its transport and use while exploring, cruising or traveling.
A
line of land-based systems is available for light-duty commercial applications that demand portability and performance. In addition to
the gasoline-powered units and the variable speed battery powered units, a series of AC electric powered systems is also available for
light to commercial use. Powered by battery for portability or household current for unlimited dive duration, these units are used primarily
by businesses that work in aquatic maintenance and marine environments.
4
●
BIAS (Boat Integrated Air Systems): The Company developed several tankless products and complimentary accessories that
it believes makes boat diving easier. The BIAS battery powered tankless kit allows boat builders, dealers and end users to seamlessly
install a pre-packaged kit directly into the boat and our E-Reel, a level-winding battery powered hose reel system, provides compact
storage of up to 150 feet of hose. Boaters can perform their own in-water maintenance and inspections or just dive for enjoyment. In
addition to supplying air to divers, BIAS may be used for supporting air horns, inflating boat fenders/water toys and activating pneumatically
operated doors.
Ultra-Portable
Tankless Dive Systems
Through
our wholly owned subsidiary BLU3, we develop and market portable battery-powered dive systems. The BLU3 line currently consists of two
models, Nomad and Nomad Mini, targeting specific performance levels and price points. The original product of BLU3, called Nemo, has
been phased out and replaced by Nomad Mini.
NOMAD
dive system (“NOMAD”) began shipping in the third quarter of 2021. NOMAD MINI dive system (“NOMAD MINI”) began
shipping in the third quarter of 2023. Both products are currently sold to consumers via our website, Amazon and through our network
of dealers worldwide. The NOMAD is highly portable and has a maximum depth of 30 feet. NOMAD MINI has a maximum depth of 15 feet and
is more portable than NOMAD and at a lower price point. NOMAD and NOMAD MINI have been marketed through BLU3’s internet presence
and marketing campaigns as well as at industry and other trade shows across the country.
BLU3
products are sought after by consumers for a variety of applications that include boat maintenance, shore diving, traveling, underwater
metal detecting and fossil hunting, pool leak detection and service, and more.
As
of January 2024, BLU3 is the exclusive distributor for North and South America of the SeaNXT Elite sea scooter, made in France. The SeaNXT
Elite sea scooter is a luxury water toy that is most popular in the yachting industry. BLU3 markets the SeaNXT Elite product to end-users
as well as resellers throughout North and South America.
High
Pressure Gas Systems
Through
our wholly-owned subsidiary LW Americas, we design, manufacture, sell and install SCUBA tank fill systems for on-board yacht use under
the brand “Yacht- Pro™”. Our systems provide complete diving solutions for yachts, including nitrox systems which allow
yacht owners to fill tanks with oxygen enriched air on board. The Yacht-Pro™ compressor systems offer a completely marine-prepared,
variable frequency drive (“VFD”) driven, automated alternative to other compressors on the market. We also design complete
dive lockers, mixed gas production and distribution systems, and the Nitrox Maker™. Nitrox is oxygen-enriched air, which reduces
the effects of nitrogen on divers and is the industry standard for dive professionals. The Nitrox Maker™ continuously generates
oxygen rich breathing gas directly from low-pressure air with no stored oxygen or other gases required onboard. Our light duty compressor,
the new Yacht Pro Essential is specifically designed as a turn-key kit for the boat builders and is optimized to integrate to onboard
power systems and withstand the marine environment with all components and hardware impervious to spray from the elements. The Yacht
Pro™ series contains models for both medium-duty applications, such as recreational divers and small groups, and heavy-duty use
as found on research vessels, commercial operations and live-aboard dive boats. All Yacht Pro™ models come with the variable speed
frequency drive reducing the initial start-up power demand typically associated with high pressure compressor systems.
5
August
2017, we entered into a five-year exclusive distribution agreement with L&W, which agreement automatically renews for successive
five-year terms unless terminated as provided for in the agreement. Under the terms of the Exclusive Distribution Agreement, we were
appointed the exclusive distributor of L&W’s complete product line in North America and South America, including the Caribbean.
We are conducting this business direct to end-users and establishing sales, distribution and service centers for high pressure air and
industrial gas systems in the dive, fire, CNG, military, scientific, recreational and aerospace industries under the brand name “L&W
Americas/LWA”.
We
are exclusively developing a sales, distribution and service capability to assist L&W with completing a worldwide network of L&W’s
agencies and service centers.
In
addition to breathing air compressors and related peripheral equipment, L&W also offers compressors, storage and purification systems
to meet the high-pressure requirements for natural gas filling stations, and high-pressure inert gases such as argon, helium and nitrogen
for industrial applications including welding and laser cutting, and for general laboratory use.
We
believe the product lines from L&W, will allow LW Americas to offer high quality, competitive products into the first responder and
industrial market that utilize compressed air. Our goal will be to build a network of jobbers, dealers, installers and high-pressure
compressor distributors by leveraging our know-how, brand awareness, complimentary products and creating sustainable distribution and
core product original equipment manufacturer (“OEM”) integration relationships.
Redundant
Air Tank Systems
In
September 2021, the Company acquired SSI to further expand its product offerings and manufacturing capabilities. SSI has been manufacturing
redundant air systems for recreational divers, private companies and militaries throughout the world for more than 40 years. Their state-of-the-art
manufacturing facility in Huntington Beach, California is equipped to add to the machining and product development capabilities of the
Company.
The
SSI acquisition gives the Company access to a world-wide base of in excess of 400 dealers and distributors, GSA contracting capability,
as well as the direct source for the redundant air needs for our Brownie’s Third Lung and BLU3 diving equipment and expands warehousing
capabilities, reducing freight costs for both sets of customers.
SSI
continues to innovate their technologies to meet changing military and commercial needs and is in development of the next generation
of their Helicopter Emergency Egress Device (“HEED”) product line, specifically designed for aircraft and military vehicle
use. Additionally, SSI has found use for their products in the medical field and continues to develop customer relationships in that
area to grow revenue and diversify its product and customer portfolio.
6
In
February 2022, the Company incorporated LBI to begin its expansion into the retail, training and guided tour market. The Company’s
vision for LBI is to become a fully integrated retail experience where the Company’s unique products can be show-cased, training
can be offered, and a tourist model created. LBI will provide experienced based activities for the consumer in the various watersport
activities it sells. In addition, LBI aims to provide training in those activities with the goal of having the consumer purchase the
equipment, particularly the unique technologies provided by BLU3, from its retail stores. LBI looks to provide the full Live Blue experience
for those consumers ready to enjoy all things watersports.
In
May 2022, LBI acquired the assets of Gold Coast Scuba, a dive retail and training facility based in Lauderdale-By-The-Sea, Florida. This
retail location is the base in which the Live Blue brand was initially developed.
In October, 2024 LBI sold the Gold Coast Scuba tradename and other IP rights and certain related inventory
to Adventure Seeker Company. Adventure Seeker Company doing business as Gold Coast Scuba continues to operate certain aspects of the Live Blue model
including demonstrations, training, and selling of all BMG products in the original Gold Coast Scuba location under a new lease arrangement
with the property owner. GCS maintains full access to the support teas and products lines at all divisions of BMG as a Live Blue affiliate.
Diving
and Snorkeling Industry
The
scuba diving equipment market size has grown steadily in recent years. It was valued at $2.1 billion in 2023 and is projected to grow
at a compounded annual growth rate (CAGR) of over 4% between 2024 and 2032. We believe the growth in the historic period can be attributed
to post-pandemic recovery, rescue and safety equipment development, accessibility of diving courses, e-commerce penetration, the growing
coastal tourism and a rise in disposable income.
The
Company has entered the tourist market via a guided tour program within LBI that is currently intended to act as an incubator for a scalable
franchise model. The Company believes that the guided tour model is an important building block in introducing its battery powered diving
products to the consumer market. Additionally, this model will not only give consumers the opportunity to “try before you buy”,
but also provide experiential training for the consumer to increase the enjoyment and safety of our diving products.
Yachting
Industry
The
global luxury yacht market was valued at $7.67 billion in 2023. The market is projected to grow from $8.75 billion in 2024 to $17.33
billion by 2023, exhibiting a CAGR of 8.9% during the forecast period according to Fortune Business Insights report published
in February 2025.. The Company’s BIAS systems have been designed with this industry in mind. The Company markets directly to the
yachting industry by leveraging its relationships with large yacht servicing companies, yacht builders and yacht brokerages.
The
recreational sailing and boating market and yachting industries also continue to grow. The recreational boating market was valued at
$38.2 billion in 2024 and is projected to reach $65.9 billion by 2034, with a CAGR of 5.6% according to Market .us.
High
Pressure Compressor Line
According
to Allied Market Research report published in February 2018, the North American high pressure compressor market is $880 million growing
at an estimated CAGR of 3%.
7
The
Company expects to continue to distribute L&W compressors through its YachtPro, and BIAS systems, while continuing to focus on the
expansion of its distribution into non-marine related distribution channels that the Company believes should positively impact its market
reach.
Intellectual
Property
Trade
Names
The
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, NitroxMaker™, BLU3, diveBLU3.com, BLU3 Nemo, BLU3-Vent, Submersible
Systems, Spare Air, HEED 3, Snorkelator, easy dive, spareair.com, HELO, RES, Gold Coast Scuba, fast float rescue harness, tankfill.com,
browniestankfill, browniestankfill.com, browniespublicsafety.com, browniespublicsafety, Peleton Hose System, Twin-Trim, and Kayak Diving
Hose Kit.
The
Company owns the following patents:
Patent
number
Description
Issued
Date
Expiration
Date
Owned
by
10,758,246
Abdominal
Aortic Tourniquet
9/1/2020
3/17/2034
Trebor
Industries, Inc.
9,782,182
Abdominal
Aortic Tourniquet
10/10/2021
10/26/2033
Trebor
Industries, Inc.
9,351,737
Abdominal
Aortic Tourniquet
5/31/2016
3/2/2034
Trebor
Industries, Inc.
11,265,625
Automated
Self-Contained Hooka system with unobtrusive aquatic data recording
3/1/2022
10/30/2039
BLU3,
Inc.
11,077,924
System
for adjusting pressure limits based on depth of diver(s)
8/3/2021
3/20/2039
Brownie’s
Marine Group, Inc.
11,767,089
System
for adjusting pressure limits based on depth of diver(s)
9/26/2023
4/10/2041
Brownie’s
Marine Group, Inc.
Application
number
Description
Filed
Date
Owned
by
17/683,502
Automated
Self-Contained Hooka system with unobtrusive aquatic data recording
3/1/2022
BLU3,
Inc.
License
Agreements
On
April 6, 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. Under the STS Agreement, the Company paid an initial
license fee in April 2018 through the issuance of 759,422 shares of common stock with a fair value of $30,000. The STS Agreement further
provides for royalties based on annual net revenues. On December 31, 2019, the Company entered into Addendum No. 1 to the STS Agreement
(“Addendum No. 1”) which amended the payments due upon the first commercial sale of Nemo. Upon entering into Addendum No.
1, $8,250 was paid to STS in cash and $8,250 was paid on January 10, 2020. On February 6, 2020, the Company issued 828,221 shares of
common stock with a fair value of $18,635 in satisfaction of $13,500 for the first commercial sale of the Nemo dive system. On June 30,
2020, the Company entered into Addendum No. 2 to the STS Agreement concerning STS’s assistance related to designing and commercializing
certain diving products. Addendum No. 2 provides for a minimum yearly royalty of $60,000, or $15,000 per fiscal quarter, beginning in
December 2019 and increasing by 2.15% per year. With the introduction of the NOMAD in the last quarter of 2021, the Company is obligated
to pay an additional annual minimum royalty of $60,000 per year for the years 2022, 2023 and 2024, which increased the quarterly minimum
royalty by $15,000 per quarter. On January 24, 2024, the Company entered into Addendum No. 3 to the STS Agreement. Addendum No. 3 delays
the additional minimum yearly royalty of $60,000, or $15,000 per fiscal quarter from 2024 to 2025. Therefore, no additional minimum royalty
was required during 2024, but will be required beginning the fiscal first quarter of 2025. 2025 will be the final year of the additional
minimum royalty under the STS agreement. Royalty recorded under the Amended agreement was $125,159.32 and $138,643 for the years ended
December 31, 2024 and 2023, respectively.
8
Marketing
Print
Literature, Public Relations, and Advertising
We
have in-house graphic design capability to create and maintain product support literature, catalogs, mailings, web-based advertising,
newsletters, editorials, advertorials, and press releases. We also, from time-to-time, target specific markets by selectively advertising
in journals and magazines that we believe reach our potential customers. In addition, we strive to issue press releases, newsletters,
and social media postings periodically to keep the public informed of our latest products and related endeavors.
Tradeshows
In
2024, the Company was represented at The Palm Beach Boat Show, The Annapolis Motor and Sailing Shows, The Fort Lauderdale Boat show,
Diving Equipment, Manufacturing show, The Seattle Boat Show, The Dubai Boat Show, Boot Dusseldorf and the HAI Heli-Expo, along with various
other trade and industry shows.
Websites
We
sell our products online through our and our subsidiaries websites and many of our products are marketed on some of our customers’
websites. In addition to these websites, numerous other websites have quick links to the Company’s website. Our products are available
both domestically and internationally. Internet sales and inquiries are also supported by the Company.
Product
Research and Development
Research
and development costs for the year ended December 31, 2024 and December 31, 2023 and were $9,992 and $13,393, respectively, none of which
cost is borne directly by customers.
Government
Regulation
The
SCUBA industry is self-regulating; therefore, the Company is not subject to government industry specific regulation. However, SSI, our
tank manufacturing company is subject to Department of Transportation (“DOT”) regulation and testing of each of their tanks.
The Company strives to promote safe diving practices within the industry and believes it is at the forefront of self-regulation through
responsible diving practices. The Company is subject to all regulations applicable to “for profit” companies as well as all
trade and general commerce governmental regulation. All required federal and state permits, licenses, and bonds to operate its facility
have been obtained.
Distribution/Customers
The
Company has historically been predominantly a wholesale distributor to retail dive stores, marine stores, boat dealers, builders, and
the US and international militaries. Currently, the Company generates a significant amount of direct-to-consumer sales via its websites
and its relationship with Amazon via BLU3, BTL and SSI. Retail sales customers include boat owners, recreational divers, commercial divers
and pilots. The Company sells products to three entities owned by the brother of Robert Carmichael, the Company’s Chairman, and
two companies owned by Mr. Carmichael. Combined sales to these six entities for 2023 and 2022, represented 10.6% and 11.4%, respectively,
of total net revenues.
The
majority of L&W high pressure compressors and NitroxMaker™ systems have been sold to commercial dive stores, dive operators
(resorts and liveaboard dive boats), yacht builders, yacht owners, and high-pressure compressor distributors.
Sales
of YachtPro™ compressor systems have been split between retail sales directly to consumers and wholesale sales to OEM boat builders/resellers/brokers.
9
Suppliers/Raw
Materials
Principal
raw materials for our business include machined parts such as rods, pistons, bearings, hoses, regulators, compressors, engines, high-pressure
valves and fittings, sewn goods, and various plastic parts including pans, covers, intake staffs, and quick release connections which
are typically purchased on a per order basis. Most materials are readily available from multiple vendors. Some materials require greater
lead times than other materials. Accordingly, we strive to avoid out of stock situations through careful monitoring of these inventory
lead times, and through avoiding single source vendors whenever possible. Principle suppliers include Lenhardt & Wagner GmbH, Xometry,
Inc., Burgess Manufacturing Corp, Bix International, Inc., Carrol Stream Motor Company, Zhejiang Xiangyang Gear Electormechan, Co, Tian
Li He Technology Co, Ltd, Xiamen Feipeng Insdustry Co. Ltd. and Catalina Cylinders, Inc.
Competition
We
consider the most significant competitive factors in our business to be innovation, lifestyle, fair prices, shopping convenience, variety
of available products, knowledgeable and prompt customer service and rapid and accurate order fulfillment. We currently have one significant
competitor within the BTL business model, Airline by JSink, Inc. There are a variety of competitors, including Aqua Lung America, Coltri
America and Bauer Compressors, Inc. in our redundant air tank systems and high-pressure compressor systems sales. In 2022 and 2023 competition
has surfaced in the BLU3 business segment from companies such as AirBuddy, and a few other very low-cost Chinese manufactured competitors.
Overall,
we are operating in a moderately competitive environment. The price structure for all the products we distribute compares favorably with
the majority of our competitors based on quality and available features. We believe that our key competitive advantage is our ability
to create new products and, in some cases, new markets.
Employees
As
of June, 2025, we have thirty five full-time employees, and two part-time employees.
Seasonality
Our
product lines have historically been seasonal in nature in the United States. The peak season for the diving related products, BTL, BLU3,
SSI and LBI is the second and third quarters of the year. The peak season for LWA high pressure products is typically the fourth and
first quarters of the year. The Company continues to address the seasonality of the business by expanding its reach beyond the traditional
markets in the U.S. to other areas of the world that may somewhat offset the seasonality.