false --12-31 Q3 0001166708 P4Y P5Y P5Y P5Y P5Y 0001166708 2023-01-01 2023-09-30 0001166708 2023-11-14 0001166708 2023-09-30 0001166708 2022-12-31 0001166708 us-gaap:NonrelatedPartyMember 2023-09-30 0001166708 us-gaap:NonrelatedPartyMember 2022-12-31 0001166708 us-gaap:RelatedPartyMember 2023-09-30 0001166708 us-gaap:RelatedPartyMember 2022-12-31 0001166708 2023-07-01 2023-09-30 0001166708 2022-07-01 2022-09-30 0001166708 2022-01-01 2022-09-30 0001166708 us-gaap:NonrelatedPartyMember 2023-07-01 2023-09-30 0001166708 us-gaap:NonrelatedPartyMember 2022-07-01 2022-09-30 0001166708 us-gaap:NonrelatedPartyMember 2023-01-01 2023-09-30 0001166708 us-gaap:NonrelatedPartyMember 2022-01-01 2022-09-30 0001166708 us-gaap:RelatedPartyMember 2023-07-01 2023-09-30 0001166708 us-gaap:RelatedPartyMember 2022-07-01 2022-09-30 0001166708 us-gaap:RelatedPartyMember 2023-01-01 2023-09-30 0001166708 us-gaap:RelatedPartyMember 2022-01-01 2022-09-30 0001166708 us-gaap:PreferredStockMember 2022-12-31 0001166708 us-gaap:CommonStockMember 2022-12-31 0001166708 BWMG:CommonStockPayableMember 2022-12-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-12-31 0001166708 us-gaap:RetainedEarningsMember 2022-12-31 0001166708 us-gaap:PreferredStockMember 2023-03-31 0001166708 us-gaap:CommonStockMember 2023-03-31 0001166708 BWMG:CommonStockPayableMember 2023-03-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-03-31 0001166708 us-gaap:RetainedEarningsMember 2023-03-31 0001166708 2023-03-31 0001166708 us-gaap:PreferredStockMember 2023-06-30 0001166708 us-gaap:CommonStockMember 2023-06-30 0001166708 BWMG:CommonStockPayableMember 2023-06-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-06-30 0001166708 us-gaap:RetainedEarningsMember 2023-06-30 0001166708 2023-06-30 0001166708 us-gaap:PreferredStockMember 2021-12-31 0001166708 us-gaap:CommonStockMember 2021-12-31 0001166708 BWMG:CommonStockPayableMember 2021-12-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0001166708 us-gaap:RetainedEarningsMember 2021-12-31 0001166708 2021-12-31 0001166708 us-gaap:PreferredStockMember 2022-03-31 0001166708 us-gaap:CommonStockMember 2022-03-31 0001166708 BWMG:CommonStockPayableMember 2022-03-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-03-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-31 0001166708 us-gaap:RetainedEarningsMember 2022-03-31 0001166708 2022-03-31 0001166708 us-gaap:PreferredStockMember 2022-06-30 0001166708 us-gaap:CommonStockMember 2022-06-30 0001166708 BWMG:CommonStockPayableMember 2022-06-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-06-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-06-30 0001166708 us-gaap:RetainedEarningsMember 2022-06-30 0001166708 2022-06-30 0001166708 us-gaap:PreferredStockMember 2023-01-01 2023-03-31 0001166708 us-gaap:CommonStockMember 2023-01-01 2023-03-31 0001166708 BWMG:CommonStockPayableMember 2023-01-01 2023-03-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-03-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-01-01 2023-03-31 0001166708 us-gaap:RetainedEarningsMember 2023-01-01 2023-03-31 0001166708 2023-01-01 2023-03-31 0001166708 us-gaap:PreferredStockMember 2023-04-01 2023-06-30 0001166708 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0001166708 BWMG:CommonStockPayableMember 2023-04-01 2023-06-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-04-01 2023-06-30 0001166708 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0001166708 2023-04-01 2023-06-30 0001166708 us-gaap:PreferredStockMember 2023-07-01 2023-09-30 0001166708 us-gaap:CommonStockMember 2023-07-01 2023-09-30 0001166708 BWMG:CommonStockPayableMember 2023-07-01 2023-09-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-07-01 2023-09-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-07-01 2023-09-30 0001166708 us-gaap:RetainedEarningsMember 2023-07-01 2023-09-30 0001166708 us-gaap:PreferredStockMember 2022-01-01 2022-03-31 0001166708 us-gaap:CommonStockMember 2022-01-01 2022-03-31 0001166708 BWMG:CommonStockPayableMember 2022-01-01 2022-03-31 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-01-01 2022-03-31 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-01-01 2022-03-31 0001166708 us-gaap:RetainedEarningsMember 2022-01-01 2022-03-31 0001166708 2022-01-01 2022-03-31 0001166708 us-gaap:PreferredStockMember 2022-04-01 2022-06-30 0001166708 us-gaap:CommonStockMember 2022-04-01 2022-06-30 0001166708 BWMG:CommonStockPayableMember 2022-04-01 2022-06-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-04-01 2022-06-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-04-01 2022-06-30 0001166708 us-gaap:RetainedEarningsMember 2022-04-01 2022-06-30 0001166708 2022-04-01 2022-06-30 0001166708 us-gaap:PreferredStockMember 2022-07-01 2022-09-30 0001166708 us-gaap:CommonStockMember 2022-07-01 2022-09-30 0001166708 BWMG:CommonStockPayableMember 2022-07-01 2022-09-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-07-01 2022-09-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-07-01 2022-09-30 0001166708 us-gaap:RetainedEarningsMember 2022-07-01 2022-09-30 0001166708 us-gaap:PreferredStockMember 2023-09-30 0001166708 us-gaap:CommonStockMember 2023-09-30 0001166708 BWMG:CommonStockPayableMember 2023-09-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2023-09-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2023-09-30 0001166708 us-gaap:RetainedEarningsMember 2023-09-30 0001166708 us-gaap:PreferredStockMember 2022-09-30 0001166708 us-gaap:CommonStockMember 2022-09-30 0001166708 BWMG:CommonStockPayableMember 2022-09-30 0001166708 us-gaap:AdditionalPaidInCapitalMember 2022-09-30 0001166708 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-09-30 0001166708 us-gaap:RetainedEarningsMember 2022-09-30 0001166708 2022-09-30 0001166708 srt:MaximumMember 2023-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-07-01 2023-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-07-01 2022-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2023-01-01 2023-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:SalesRevenueNetMember us-gaap:ProductConcentrationRiskMember 2022-01-01 2022-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:RelatedPartyMember 2023-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:RelatedPartyMember 2022-12-31 0001166708 BWMG:RobertCarmichaelMember us-gaap:RelatedPartyMember 2023-09-30 0001166708 BWMG:RobertCarmichaelMember us-gaap:RelatedPartyMember 2022-12-31 0001166708 BWMG:LLC940Member us-gaap:RelatedPartyMember 2023-09-30 0001166708 BWMG:BlakeCarmichaelMember us-gaap:RelatedPartyMember 2023-09-30 0001166708 BWMG:LLC940Member us-gaap:RelatedPartyMember 2022-12-31 0001166708 BWMG:BrowniesGlobalLogisticsLLCMember us-gaap:RelatedPartyMember 2022-12-31 0001166708 BWMG:RobertCarmichaelMember BWMG:LiveBlueIncMember 2022-09-30 0001166708 BWMG:RobertCarmichaelMember BWMG:LiveBlueIncMember 2022-09-29 2022-09-30 0001166708 BWMG:RobertCarmichaelMember BWMG:LiveBlueIncMember 2023-01-01 2023-09-30 0001166708 BWMG:RobertCarmichaelMember BWMG:LiveBlueIncMember 2023-09-30 0001166708 BWMG:CharlesHyattMember us-gaap:WarrantMember 2023-01-17 2023-01-18 0001166708 BWMG:CharlesHyattMember us-gaap:WarrantMember 2023-02-17 2023-02-18 0001166708 BWMG:CharlesHyattMember us-gaap:WarrantMember 2023-01-18 0001166708 BWMG:CharlesHyattMember us-gaap:WarrantMember 2023-02-18 0001166708 BWMG:RobertCarmichaelMember BWMG:BLU3IncMember 2023-09-14 0001166708 BWMG:RobertCarmichaelMember BWMG:BLU3IncMember 2023-09-14 2023-09-14 0001166708 BWMG:RobertCarmichaelMember BWMG:BLU3IncMember 2023-09-30 0001166708 BWMG:RobertCarmichaelMember 2023-03-31 2023-03-31 0001166708 BWMG:RobertCarmichaelMember 2023-06-29 2023-06-30 0001166708 BWMG:RobertCarmichaelMember 2023-09-29 2023-09-30 0001166708 BWMG:ConvertibleDebentureMember BWMG:SummitHoldingVLLCMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureMember BWMG:TierraVistaPartnersLLCMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureOneMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureOneMember 2023-09-30 0001166708 BWMG:ConvertibleDebentureTwoMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureTwoMember 2023-09-30 0001166708 BWMG:ConvertibleDebentureThreeMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureThreeMember 2023-09-30 0001166708 BWMG:ConvertibleDebentureFourMember 2023-01-01 2023-09-30 0001166708 BWMG:ConvertibleDebentureFourMember 2023-09-30 0001166708 BWMG:SummitHoldingsVLLCNoteMember us-gaap:ConvertibleDebtSecuritiesMember 2023-09-30 0001166708 BWMG:TierraVistaPartnersLLCNoteMember us-gaap:ConvertibleDebtSecuritiesMember 2023-09-30 0001166708 BWMG:RobertCarmichaelNoteMember us-gaap:ConvertibleDebtSecuritiesMember 2023-09-30 0001166708 BWMG:RobertCarmichaelNoteOneMember us-gaap:ConvertibleDebtSecuritiesMember 2023-09-30 0001166708 us-gaap:ConvertibleDebtSecuritiesMember 2023-09-30 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:SummitHoldingVLLCMember 2021-09-03 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:SummitHoldingVLLCMember 2021-09-02 2021-09-03 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:TierraVistaPartnersLLCMember 2021-09-03 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:TierraVistaPartnersLLCMember 2021-09-02 2021-09-03 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:RobertCarmichaelMember 2022-09-30 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:RobertCarmichaelMember 2022-09-29 2022-09-30 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:RobertCarmichaelMember 2023-09-14 0001166708 us-gaap:ConvertibleNotesPayableMember BWMG:RobertCarmichaelMember 2023-09-13 2023-09-14 0001166708 BWMG:ConvertibleDebentureMember BWMG:SummitHoldingVLLCMember 2021-09-03 0001166708 BWMG:ConvertibleDebentureMember BWMG:TierraVistaPartnersLLCMember 2021-09-03 0001166708 BWMG:MercedesBenzMember 2023-09-30 0001166708 BWMG:NavitasBLU3Member 2023-09-30 0001166708 BWMG:NFSSSIMember 2023-09-30 0001166708 BWMG:NavitasBLU3OneMember 2023-09-30 0001166708 BWMG:MercedesBenzMember BWMG:InstallmentAgreementMember 2020-08-21 0001166708 BWMG:MercedesBenzMember BWMG:InstallmentAgreementMember 2020-08-20 2020-08-21 0001166708 BWMG:MercedesBenzMember BWMG:InstallmentAgreementMember 2023-09-30 0001166708 BWMG:MercedesBenzMember BWMG:InstallmentAgreementMember 2022-12-31 0001166708 BWMG:NavitasCreditCorpMember BWMG:InstallmentAgreementMember 2021-05-19 0001166708 BWMG:NavitasCreditCorpMember BWMG:InstallmentAgreementMember 2021-05-18 2021-05-19 0001166708 BWMG:NavitasCreditCorpMember BWMG:InstallmentAgreementMember 2023-09-30 0001166708 BWMG:NavitasCreditCorpMember BWMG:InstallmentAgreementMember 2022-12-31 0001166708 BWMG:SSIMember 2022-06-29 0001166708 BWMG:SSIMember 2022-06-28 2022-06-29 0001166708 BWMG:SSIMember 2023-09-30 0001166708 BWMG:SSIMember 2022-12-31 0001166708 BWMG:NavitasCreditCorpMember 2022-12-12 0001166708 BWMG:NavitasCreditCorpMember 2022-12-10 2022-12-12 0001166708 BWMG:NavitasCreditCorpMember 2023-09-30 0001166708 BWMG:NavitasCreditCorpMember 2022-12-31 0001166708 BWMG:GoldCoastScubaLLCMember 2022-05-01 2022-05-02 0001166708 BWMG:GoldCoastScubaLLCMember 2022-05-02 0001166708 BWMG:GoldCoastScubaLLCMember 2023-01-01 2023-09-30 0001166708 BWMG:SixMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-01 2022-05-02 0001166708 BWMG:SixMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-02 0001166708 BWMG:NineMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-01 2022-05-02 0001166708 BWMG:NineMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-02 0001166708 BWMG:TwelveMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-01 2022-05-02 0001166708 BWMG:TwelveMonthsMember BWMG:GoldCoastScubaLLCMember 2022-05-02 0001166708 BWMG:RentalInventoryMember 2023-01-01 2023-09-30 0001166708 BWMG:FixedAssetsMember 2023-01-01 2023-09-30 0001166708 BWMG:RetailInventoryMember 2023-01-01 2023-09-30 0001166708 BWMG:RightOfUseAssetMember 2023-01-01 2023-09-30 0001166708 BWMG:LeaseLiabilityMember 2023-01-01 2023-09-30 0001166708 us-gaap:TrademarksMember 2023-09-30 0001166708 us-gaap:CustomerRelationshipsMember 2023-09-30 0001166708 us-gaap:NoncompeteAgreementsMember 2023-09-30 0001166708 BWMG:MrCharlesFHyattMember 2023-01-17 2023-01-18 0001166708 BWMG:MrCharlesFHyattMember 2023-02-17 2023-02-18 0001166708 BWMG:MrCharlesFHyattMember 2023-01-18 0001166708 BWMG:MrCharlesFHyattMember 2023-02-18 0001166708 BWMG:ConvertibleNotesHolderMember 2023-03-31 2023-03-31 0001166708 BWMG:ConvertibleNotesHolderMember 2023-06-29 2023-06-30 0001166708 BWMG:ConvertibleNotesHolderMember 2023-09-29 2023-09-30 0001166708 2010-06-30 0001166708 BWMG:SeriesConvertiblePreferredStockMember 2011-04-30 0001166708 BWMG:SeriesConvertiblePreferredStockMember 2011-04-01 2011-04-30 0001166708 BWMG:SeriesConvertiblePreferredStockMember BWMG:RobertCarmichaelMember 2023-09-30 0001166708 BWMG:SeriesConvertiblePreferredStockMember BWMG:RobertCarmichaelMember 2022-12-31 0001166708 BWMG:EquityIncentivePlanMember 2021-05-26 0001166708 us-gaap:EmployeeStockOptionMember 2023-09-30 0001166708 us-gaap:EmployeeStockOptionMember 2023-01-01 2023-09-30 0001166708 us-gaap:EmployeeStockOptionMember 2023-07-01 2023-09-30 0001166708 us-gaap:GeneralAndAdministrativeExpenseMember 2023-07-01 2023-09-30 0001166708 us-gaap:GeneralAndAdministrativeExpenseMember 2022-07-01 2022-09-30 0001166708 us-gaap:GeneralAndAdministrativeExpenseMember 2023-01-01 2023-09-30 0001166708 us-gaap:GeneralAndAdministrativeExpenseMember 2022-01-01 2022-09-30 0001166708 us-gaap:OptionMember 2023-09-30 0001166708 srt:WeightedAverageMember 2023-09-30 0001166708 srt:WeightedAverageMember 2023-01-01 2023-09-30 0001166708 BWMG:EquityCompensationApprovedPlanMember BWMG:SecurityHoldersMember 2023-09-30 0001166708 BWMG:EquityCompensationNotApprovedPlanMember BWMG:SecurityHoldersMember 2023-09-30 0001166708 srt:MinimumMember 2023-01-01 2023-09-30 0001166708 srt:MaximumMember 2023-01-01 2023-09-30 0001166708 srt:MinimumMember 2022-01-01 2022-09-30 0001166708 srt:MaximumMember 2022-01-01 2022-09-30 0001166708 2021-01-01 2021-12-31 0001166708 2022-01-01 2022-12-31 0001166708 BWMG:ExercisePriceRangeOneMember 2023-01-01 2023-09-30 0001166708 BWMG:ExercisePriceRangeOneMember 2023-09-30 0001166708 BWMG:ExercisePriceRangeTwoMember 2023-01-01 2023-09-30 0001166708 BWMG:ExercisePriceRangeTwoMember 2023-09-30 0001166708 BWMG:ExercisePriceRangeThreeMember 2023-01-01 2023-09-30 0001166708 BWMG:ExercisePriceRangeThreeMember 2023-09-30 0001166708 BWMG:ExercisePriceRangeFourMember 2023-01-01 2023-09-30 0001166708 BWMG:ExercisePriceRangeFourMember 2023-09-30 0001166708 us-gaap:WarrantMember 2022-12-31 0001166708 us-gaap:WarrantMember 2022-01-01 2022-12-31 0001166708 us-gaap:WarrantMember 2023-01-01 2023-09-30 0001166708 us-gaap:WarrantMember 2023-09-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember 2020-06-28 2020-06-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember BWMG:DecemberThirtyOneTwoThousandAndTwentyThreeMember 2020-06-28 2020-06-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember BWMG:YearsTwoThousandAndNineteenThroughTwoThousandAndTwentyFourMember 2020-06-28 2020-06-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember 2023-07-01 2023-09-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember 2022-07-01 2022-09-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember 2023-01-01 2023-09-30 0001166708 BWMG:PatentLicenseAgreementMember BWMG:SetayshaTechnicalSolutionsLLCMember 2022-01-01 2022-09-30 0001166708 BWMG:ConstableEmploymentAgreementMember 2020-11-04 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember 2021-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember 2022-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourYearStockOptionMember 2020-11-04 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourYearStockOptionMember 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourConsecutiveFiscalQuartersOneMember 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourConsecutiveFiscalQuartersOneMember 2020-11-04 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourConsecutiveFiscalQuartersTwoMember 2020-11-05 0001166708 BWMG:ConstableEmploymentAgreementMember BWMG:FourConsecutiveFiscalQuartersTwoMember 2020-11-04 2020-11-05 0001166708 BWMG:BlakeCarmichaelAgreementMember 2021-08-01 2021-08-01 0001166708 BWMG:BlakeCarmichaelAgreementMember 2021-08-01 0001166708 BWMG:BlakeCarmichaelAgreementOneMember 2021-08-01 2021-08-01 0001166708 BWMG:BlakeCarmichaelAgreementOneMember srt:MaximumMember 2021-08-01 0001166708 BWMG:BlakeCarmichaelAgreementOneMember 2021-08-01 0001166708 BWMG:BubanAgreementMember 2021-08-30 2021-09-03 0001166708 BWMG:BubanAgreementMember 2021-09-03 0001166708 BWMG:BubanAgreementMember srt:MaximumMember 2021-09-03 0001166708 BWMG:BubanAgreementMember BWMG:FiveYearStockOptionMember 2021-09-03 0001166708 BWMG:CroneLawGroupMember 2022-01-16 2022-01-17 0001166708 BWMG:GagasEmploymentAgreementMember 2022-05-01 2022-05-02 0001166708 2022-05-01 2022-05-02 0001166708 2022-09-13 2022-09-14 0001166708 2022-09-14 0001166708 2022-09-29 2022-09-30 0001166708 2022-12-20 2022-12-22 0001166708 BWMG:LegacySSAProductsMember 2023-07-01 2023-09-30 0001166708 BWMG:LegacySSAProductsMember 2022-07-01 2022-09-30 0001166708 BWMG:HighPressureGasSystemsMember 2023-07-01 2023-09-30 0001166708 BWMG:HighPressureGasSystemsMember 2022-07-01 2022-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember 2023-07-01 2023-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember 2022-07-01 2022-09-30 0001166708 BWMG:RedundantAirTankSystemsMember 2023-07-01 2023-09-30 0001166708 BWMG:RedundantAirTankSystemsMember 2022-07-01 2022-09-30 0001166708 BWMG:GuidedTourRetailMember 2023-07-01 2023-09-30 0001166708 BWMG:GuidedTourRetailMember 2022-07-01 2022-09-30 0001166708 BWMG:LegacySSAProductsMember 2023-01-01 2023-09-30 0001166708 BWMG:LegacySSAProductsMember 2022-01-01 2022-09-30 0001166708 BWMG:HighPressureGasSystemsMember 2023-01-01 2023-09-30 0001166708 BWMG:HighPressureGasSystemsMember 2022-01-01 2022-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember 2023-01-01 2023-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember 2022-01-01 2022-09-30 0001166708 BWMG:RedundantAirTankSystemsMember 2023-01-01 2023-09-30 0001166708 BWMG:RedundantAirTankSystemsMember 2022-01-01 2022-09-30 0001166708 BWMG:GuidedTourRetailMember 2023-01-01 2023-09-30 0001166708 BWMG:GuidedTourRetailMember 2022-01-01 2022-09-30 0001166708 BWMG:LegacySSAProductsMember us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 BWMG:LegacySSAProductsMember us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 BWMG:HighPressureGasSystemsMember us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 BWMG:HighPressureGasSystemsMember us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 BWMG:UltraPortableTanklessDiveSystemsMember us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 BWMG:RedundantAirTankSystemsMember us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 BWMG:RedundantAirTankSystemsMember us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 BWMG:GuidedTourRetailMember us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 BWMG:GuidedTourRetailMember us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 us-gaap:OperatingSegmentsMember 2023-09-30 0001166708 us-gaap:OperatingSegmentsMember 2022-09-30 0001166708 BWMG:PromissoryNoteMember us-gaap:SubsequentEventMember 2023-11-14 0001166708 BWMG:PromissoryNoteMember us-gaap:SubsequentEventMember 2023-11-13 2023-11-14 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure utr:sqft BWMG:Integer

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     
    For the quarterly period ended September 30, 2023

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from ___________to _________

 

Commission file number 333-99393

 

BROWNIE’S MARINE GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Florida   90-0226181

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3001 NW 25th Avenue, Suite 1    
Pompano Beach, Florida   33069
(Address of principal executive offices)   (Zip code)

 

(954) 462-5570

Registrant’s telephone number, including area code

 

Not applicable

Former name, former address and former fiscal year, if changed since last report

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None   Not applicable   Not applicable

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

As of November 14, 2023, there were 439,211,134 shares of common stock outstanding.

 

 

 

 
 

 

TABLE OF CONTENTS

 

   

Page

No.

  PART I – FINANCIAL INFORMATION  
     
ITEM 1. FINANCIAL STATEMENTS. 4
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 24
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 35
     
ITEM 4. CONTROLS AND PROCEDURES. 35
     
  PART II – OTHER INFORMATION  
     
ITEM 1. LEGAL PROCEEDINGS. 37
     
ITEM 1A. RISK FACTORS. 37
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 37
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 37
     
ITEM 4. MINE SAFETY DISCLOSURES. 37
     
ITEM 5. OTHER INFORMATION. 37
     
ITEM 6. EXHIBITS. 38

 

2
 

 

NOTE REGARDING FORWARD-LOOKING INFORMATION

 

This Quarterly Report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.

 

You should read thoroughly this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023, which risk factors could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.

 

3
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   September 30, 2023   December 31, 2022 
   (Unaudited)     
ASSETS          
Current Assets          
Cash  $287,868   $484,427 
Accounts receivable – net   240,041    111,844 
Accounts receivable – related parties   47,741    55,428 
Inventory, net   2,046,071    2,421,885 
Prepaid expenses and other current assets   230,243    192,130 
Total current assets   2,851,964    3,265,714 
           
Property, equipment and leasehold improvements, net   364,914    339,546 
Operating lease assets, net   941,714    1,133,092 
Intangible assets, net   592,072    646,422 
Goodwill   249,986    249,986 
Other assets   30,725    30,724 
           
Total assets  $5,031,375   $5,665,484 
           
Liabilities and stockholders’ equity          
Current liabilities          
Accounts payable and accrued liabilities  $591,197   $829,456 
Accounts payable – related parties   37,210    37,539 
Customer deposits and unearned revenue   344,989    167,534 
Other liabilities   346,636    372,943 
Operating lease liabilities   287,555    269,046 
Related party convertible demand note, net   100,880    49,147 
Current portion of convertible notes   

345,949

    

-

 
Current maturities long term debt   72,787    66,486 
Total current liabilities   2,127,203    1,792,151 
           
Loans payable, net of current portion   90,446    143,960 
Convertible notes, net of current portion   

-

    342,943 
Operating lease liabilities   658,597    864,057 
Total liabilities   2,876,246    3,143,111 
           
Commitments and contingent liabilities (see Note 9)   -    - 
           
Stockholders’ equity          
Preferred stock; $0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding as of September 30, 2023 and December 31, 2022.   425    425 
Common stock; $0.0001 par value; 1,000,000,000 shares authorized; 437,543,846 shares issued and outstanding at September 30, 2023 and 425,520,662 shares issued and outstanding at December 31, 2022, respectively.   43,755    42,553 
Common stock payable 138,941 shares and 138,941 shares, respectively as of September 30, 2023 and December 31, 2022.   14    14 
Additional paid-in capital   19,164,745    18,916,876 
Accumulated deficit   (17,053,810)   (16,437,495)
Total stockholders’ equity  $2,155,129   $2,522,373 
           
Total liabilities and stockholders’ equity  $5,031,375   $5,665,484 

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements

 

4
 

 

BROWNIES MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THREE AND NINE MONTHS ENDED SEPTEMBER 30

(Unaudited)

 

                     
   Three months ended September 30   Nine months ended September 30 
   2023   2022   2023   2022 
Revenues                    
Revenues  $2,027,592   $2,591,383   $5,321,577   $6,403,522 
Revenues - related parties   254,414    217,421    671,194    781,489 
Total Revenues   2,282,006    2,808,804    5,992,771    7,185,011 
                     
Cost of revenues                    
Cost of revenues   1,372,755    1,667,586    3,734,350    4,121,071 
Cost of revenues - related parties   116,976    106,693    325,037    365,892 
Royalties expense - related parties   23,569    22,961    49,264    53,574 
Royalties expense   31,335    54,708    107,308    149,024 
Total cost of revenues (exclusive of depreciation and amortization shown separately below)   1,544,635    1,851,948    4,215,959    4,689,561 
                     
Gross profit   737,371    956,856    1,776,812    2,495,450 
Operating expenses                    
Selling, general and administrative   765,683    1,194,178    2,205,047    3,410,717 
Depreciation and amortization   

42,106

    

30,540

    

121,343

    

97,342

 
Research and development costs   7,355    4,778    10,778    13,070 
                     
Total operating expenses   815,144    1,229,496    2,337,168    3,521,129 
                     
Loss from operations   (77,773)   (272,640)   (560,356)   (1,025,679)
                     
Other (income) expense, net                    
                     
Interest expense   (20,776)   (11,549)   (55,959)   (31,265)
                     
Income (Loss) income before provision for income taxes   (98,549)   (284,189)   (616,315)   (1,056,944)
                     
Provision for income taxes   -    -    -    - 
                     
Net Income (Loss)   (98,549)   (284,189)   (616,315)   (1,056,944)
                     
Loss on foreign currency contract   -    8,633    -    - 
                     
Comprehensive loss  $(98,549)  $(275,556)  $(616,315)  $(1,056,944)
                     
Basic income (loss) per common share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
Basic weighted average common shares outstanding   437,196,851    411,816,671    433,169,015    407,202,475 
Diluted income (loss) per common share  $(0.00)  $(0.00)  $(0.00)  $(0.00)
Diluted weighted average common shares outstanding   437,196,851    411,816,671    433,169,015    407,202,475 

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements

 

5
 

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER, 2023 AND 2022

(Unaudited)

 

                                                   
    Preferred Stock    Common Stock    

Common

Stock Payable

    Additional
Paid-in

    Accumulated
Other

Comprehensive Income
    Accumulated    Total
Stockholder’s
Equity
 
    Shares     Amount    Shares     Amount     Shares     Amount    

Capital

    

(Loss)

    

Deficit

    

(DEFICIT)

 
December 31, 2022   425,000   $   425    425,520,662   $   42,553    138,941   $14   $18,916,876    $-   $(16,437,495)  $2,522,373 
Shares issued for the purchase of units   -    -    11,428,570    1,143    -    -    198,857    -    -    200,000 
Shares issued for accrued interest on convertible notes   -    -    198,204    20    -    -    8,316    -    -    8,336 
Stock Option Expense   -    -    -    -    -    -    11,034    -    -    11,034 
Net Loss   -    -    -    -    -    -    -    -    (327,922)   (327,922)
March 31, 2023 (unaudited)   425,000   $

425

    

437,147,436

   $

43,716

    

138,941

   $

14

   $

19,135,083

   $

-

   $

(16,765,417

)   

2,413,821

 
Shares issued for accrued interest on convertible notes   -    -    198,205    20    -    -    8,306    -    -    8,326 
Stock option expense   -    -    -    -    -    -    7,188    -    -    7,188 
Net loss   -    -    -    -    -    -    -    -    (189,844)   (189,844)
June 30, 2023 (unaudited)   425,000   $425    437,345,641   $43,736    138,941   $14   $19,150,577   $-   $(16,955,261)  $2,239,491 
Common stock Issued for Accrued Interest on Convertible Notes   -    -    198,205    19    -    -    6,983    -    -    6,983 
Stock option expense                                 

7,185

              

7,185

 
Net Income   -    -    -    -    -    -    -    -    (98,549)   (98,549)
September 30, 2023 (unaudited)   

 

425,000

    $425    437,543,846   $43,755    138,941   $14   $19,164,745   $-   $(17,053,810)  $2,155,129 

 

                                                     
   Preferred Stock   Common Stock   Common Stock Payable   Additional
Paid-in

   Accumulated
Other
Comprehensive Income
     Accumulated   Total
Stockholder’s
Equity
 
   Shares    Amount   Shares    Amount   Shares   Amount  

Capital

  

(Loss)

    

Deficit
  

(DEFICIT)

 
December 31, 2021   425,000   $    425    393,850,475   $    39,386    138,941   $14   $17,132,434   $           -     $(14,544,604)  $2,627,655 
Shares issued for the exercise of warrants   -    -     10,600,000    1,060    -    -    263,940    -       -    265,000 
Shares issued for service   -    -    1,206,318    120    -    -    35,380    -      -    35,500 
Stock option expense   -    -    -    -    -    -    230,034    -      -    230,034 
Net loss   -    -    -    -    -    -    -    -      (444,092)   (444,092)
Other comprehensive income   -    -    -    -    -    -    -    1,587      -    1,587 
March 31, 2022 (unaudited)   425,000   $425    405,656,793   $40,566    138,941   $14   $17,661,788   $1,587     $(14,988,696)  $2,715,684 
Shares issued for service   -    -    302,953    30    -    -    11,970    -      -    12,000 
Shares issued for asset purchase   -    -    3,084,831    308    -    -    119,692    -      -    120,000 
Shares issued for accrued interest on convertible notes   -    -    449,522    45    -    -    23,003    -      -    23,048 
Shares issued for employee bonus   -    -    280,000    28    -    -    11,032    -      -    11,060 
Stock option expense   -    -    -    -    -    -    290,707    -      -    290,707 
Net loss                                             (328,663)   (328,663)
Other comprehensive income   -    -    -    -    -    -    -    (10,220)     -    (10,220)
June 30, 2022 (unaudited)   425,000   $425    409,774,099   $40,977    138,941   $14   $18,118,192   $(8,633)    $(15,317,359)  $2,833,616 
Common Stock issued for the purchase of units   -     -     8,541,666    854              204,146                205,000 
Stock Issued for Accrued Interest on Convertible Notes   -    -    136,527    14    -    -    6,986    -      -    7,000 
Beneficial Conversion Feature   -    -    -    -    -    -    19,250    -      -    19,250 
Stock option expense   -    -    -    -    -    -    315,152    -      -    315,152 
Net Income   -    -    -    -    -    -    -    -      (284,189)   (284,189)
Other Comprehensive Loss   -    -    -    -    -    -    -    8,633      -    8,633 
September 30, 2022 (unaudited)   425,000    $425    418,452,292   $41,845    138,941   $14   $18,663,726   $-     $(15,601,548)  $3,104,462 

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements

 

6
 

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

(Unaudited)

 

   2023   2022 
Cash flows provided by operating activities:          
Net loss  $(616,315)  $(1,056,944)
Adjustments to reconcile net loss to cash used in operating activities:          
Depreciation and amortization   121,343    97,342 
Amortization of debt discount   7,786    2,767 
Amortization of right-of-use asset   191,378    177,258 
Shares issued for accrued interest in convertible notes   

23,668

    

-

 
Common stock issued for services   -    47,500 
Reserve for debt   -    2,978 
Reserve for slow moving inventory   -    (82,446)
Reserve for Nomad recall   (93,161)   - 
Stock based compensation - Options   25,404    835,893 
Stock based compensation - stock grant   -    11,060 
Changes in operating assets and liabilities          
Change in accounts receivable, net   (128,197)   (48,579)
Change in accounts receivable - related parties   7,687    21,959 
Change in inventory   375,814    (371,514)
Change in prepaid expenses and other current assets   (101,804)   (87,851)
Change in other assets   -    (5,900)
Change in accounts payable and accrued liabilities   (238,260)   140,713 
Change in customer deposits and unearned revenue   177,455    (18,894)
Change in long term lease liability   (186,951)   (177,732)
Change in other liabilities   66,854    31,450 
Change in accounts payable - related parties   (329)   (18,772)
Net cash used in operating activities   (367,628)   (499,712)
           
Cash flows acquired (used) in investing activities:          
Cash used in asset acquisition   -    (30,000)
Purchase of fixed assets   (28,671)   (30,290)
Net cash used in investing activities   (28,671)   (60,290)
           
Cash flows from financing activities:          
Proceeds from issuance of units   200,000    205,000 
Proceeds from exercise of Warrants   -    265,000 
Proceeds of debt - related party   50,000    66,793 
Repayment of debt   (50,260)   (42,858)
Net cash acquired in financing activities   199,740    493,935 
           
Net change in cash   (196,559)   (66,067)
           
Cash, beginning balance   484,427    643,143 
Cash, end of period  $287,868   $577,076 
           
Supplemental disclosures of cash flow information:          
Cash Paid for Interest  $32,289   $10,549 
           
Supplemental disclosure of non-cash financing activities:          
Operating lease obtained for operating lease liability  $-   $920,615 
Common Stock issued for asset acquisition  $-   $120,000 
Beneficial conversion feature on convertible note, related party  $-   $19,250 
Common Stock issued for payment of convertible note interest  $23,667   $30,048 
Fixed asset purchase through the issuance of debt  $63,689   $63,375 

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements

 

7
 

 

BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2023

(UNAUDITED)

 

Note 1. Company Overview

 

Brownie’s Marine Group, Inc. (the “Company”) designs, tests, manufactures and distributes recreational hookah diving, scuba and water safety products through its wholly owned subsidiary, Trebor Industries, Inc., a Florida corporation, incorporated in 1981 (“Trebor” or “BTL”), 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 incorporated in 2017 (“BHP”) and doing business as LW Americas (“LWA”) and 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, 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.

 

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. (“LBI”). LBI utilizes technology developed by BLU3 to provide new users and interested divers a guided tour experience. 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 as part of this asset acquisition.

 

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2022 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a broader discussion of the Company’s business and the risks inherent in such business. The results of operations for the nine months ended September 30, 2023, and are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending December 31, 2023.

 

8
 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Trebor, BHP, BLU3, SSI and LBI. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Use of estimates

 

The preparation of financial statements in conformity with GAAP 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.

 

Cash and cash equivalents

 

Only highly liquid investments with original maturities of 90 days or less are classified as cash and equivalents. These investments are stated at cost, which approximates market value.

 

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 September 30, 2023 and December 31, 2022, the Company had no amount in excess of the FDIC insured limit.

 

Accounts receivable

 

The Company manufactures and sells its products to a broad range of customers, primarily retail stores. Few customers are provided with payment terms of 30 days. The Company has tracked historical loss information for its trade receivables and compiled historical credit loss percentages for different aging categories (current, 1–30 days past due, 31–60 days past due, 61–90 days past due, and more than 90 days past due).

 

In accordance with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), management believes that the historical loss information it has compiled is a reasonable base on which to determine expected credit losses for trade receivables held at September 30, 2023, because the composition of the trade receivables at that date is consistent with that used in developing the historical credit-loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time). As a result, management applied the applicable credit loss rates to determine the expected credit loss estimate for each aging category. Accordingly, the allowance for expected credit losses at September 30, 2023 totaled $28,558.

 

Inventory

 

Inventory consists of the following:

 

Schedule of Inventory

   September 30, 2023
(unaudited)
   December 31,
2022
 
         
Raw materials  $1,052,975   $1,207,957 
Work in process   60,006    80,727 
Finished goods   1,045,156    1,302,995 
Rental Equipment   55,893    55,893 
Allowance reserve   

(167,959

)   

(225,687

)
Inventory, net  $2,046,071   $2,421,885 

 

As of September 30, 2023 and December 31, 2022, the Company recorded allowances for obsolete or slow-moving inventory of $166,698 and $166,432, respectively.

 

9
 

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606 Revenue from Contracts with Customers. The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied. The Company typically satisfies its performance obligations in contracts with customers upon shipment of the goods. Generally, payment is due upon receipt of the invoice and the contracts do not have significant financing components. Product sales occur once control or title is transferred based on the commercial terms. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Product sales are recorded net of variable consideration, such as provisions for returns, discounts and promotional allowances. Such provisions are calculated based on the actual allowances given. Management believes that adequate provision has been made for cash discounts, returns, spoilage and promotional allowances based on the Company’s historical experience.

 

A breakdown of the total revenue between related party and non-related party revenue is as follows:

 

Schedule of Related Party and Non-Related Party Revenue

   2023   2022   2023   2022 
   Three months ended September 30   Nine months ended September 30 
   2023   2022   2023   2022 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
Revenues  $2,027,592   $2,591,383   $5,321,577   $6,403,522 
Revenues - related parties   254,414    217,421    671,194    781,489 
Total Revenues  $2,282,006   $2,808,804   $5,992,771   $7,185,011 

 

See further disaggregate revenue disclosures by segment and product type in Note 10.

 

Cost of Sales

 

Cost of sales consists of the cost of the components of finished goods, the costs of raw materials utilized in the manufacture of products, in-bound and out-bound freight charges, direct manufacturing labor as well as certain internal transfer costs, warehouse expenses incurred prior to the manufacture of the Company’s finished products, inventory allowance for excess and obsolete products, and royalties paid on licensing agreements. Components account for the largest portion of the cost of sales. Components include plastic molded parts, gas powered engines, aluminum pressure bottles, electronic parts, batteries and packaging materials.

 

The breakdown of cost of sales to include cost of sales for related party and non-related party as well as the related party and non-related party royalty expense is as follows:

 

Schedule of Related Party and Non-Related Party Cost of Revenue

   2023   2022   2023   2022 
   Three months ended September 30   Nine months ended September 30 
   2023   2022   2023   2022 
   (unaudited)   (unaudited)   (unaudited)   (unaudited) 
Cost of revenues  $1,372,755   $1,667,586   $3,734,350   $4,121,071 
Cost of revenues - related parties   116,976    106,693    325,037    365,892 
Royalties expense - related parties   23,569    22,961    49,264    53,574 
Royalties expense   31,335    54,708    107,308    149,024 
Total cost of revenues  $1,544,635   $1,851,948   $4,215,959   $4,689,561 

 

10
 

 

Lease Accounting

 

The Company accounts for leases in accordance with ASC 842, Leases.

 

The lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. The Company 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. The Company did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

 

The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company 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. The Company did not have any finance leases as of September 30, 2023. The Company’s leases generally have terms that range from three years for equipment and five to twenty years for property. The Company elected the accounting policy to include both the lease and non-lease components of its 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 the Company. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

When the Company has the option to extend the lease term, terminate the lease for the contractual expiration date, or purchase the leased asset, and it is reasonably certain that the Company we will exercise the option, it considers these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

For the three and nine months ended September 30, 2023, lease expenses were approximately $110,700 and approximately $327,900, respectively. For the three and nine months ended September 30, 2022, lease expenses were approximately $76,300 and approximately $205,000, respectively. Cash paid for operating liabilities for the three and nine months ended September 30, 2023 was approximately $84,000 and approximately $245,000, respectively. For the nine months ended September 30, 2022 cash paid for operating liabilities was approximately $204,500.

 

Supplemental balance sheet information related to leases was as follows:

 

Schedule of Supplemental Balance Sheet Information

Operating Leases  September 30, 2023 
    (unaudited) 
Right-of-use assets  $941,714 
Current lease liabilities  $287,555 
Non-current lease liabilities   658,597 
Total lease liabilities  $946,152 

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. ASC 718 requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee and non-employee are required to provide service in exchange for the award, usually the vesting period.

 

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.

 

11
 

 

Derivatives

 

The accounting treatment of derivative financial instruments requires that the Company record certain warrants and embedded conversion options at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into certain note agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy, by earliest issuance date, in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors, as long as the certain variable issuance terms in certain convertible instruments exist. As of September 30, 2023, the Company did not have any derivative liabilities.

 

Loss per share of common stock

 

Basic loss per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted 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 September 30, 2023 and September 30, 2022, 149,612,199 and 249,177,870 shares, respectively, of potentially dilutive shares were not recognized as their inclusion would be anti-dilutive. These shares reflect shares potentially issuable under convertible notes, outstanding warrants, outstanding stock options and the conversion of preferred stock.

 

Recent accounting pronouncements

 

ASU 2016-13 Current Expected Credit Loss (ASC326)

 

In December 2021, the FASB issued an update to ASU No. 2016-13 the Current Expected Credit Losses (CECL) standard (ASC 326), which is designed to provide greater transparency and understanding of credit risk by incorporating estimated, forward-looking data when measuring lifetime Estimated Credit Losses (ECL) and requires enhanced financial statement disclosures. This guidance was adopted on January 1, 2023, with no effect to the financial statements.

 

ASU 2020-06 Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity.

 

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption or are not applicable.

 

12
 

 

Note 3. 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 these consolidated financial statements. For the nine months ended September 30, 2023, the Company incurred a net loss of $616,315. At September 30, 2023, the Company had an accumulated deficit of $17,053,810. Despite a working capital surplus of approximately $724,961 at September 30, 2023, the continued losses and cash used in operations raise substantial doubt as to the Company’s ability to continue as a going concern for the twelve months after the date the financial statements were issued. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, control expenses, raise capital and sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

 

Note 4. Related Party Transactions

 

The Company sells products to Brownie’s Southport Divers, Brownie’s Yacht Toys and Brownie’s Palm Beach Divers, companies owned by the brother of Robert Carmichael, the Company’s Chief Executive Officer and Chief Financial Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volumes. These entities accounted for 9.9% and 12.1% of the net revenues for the three months ended September 30, 2023 and September 30, 2022, respectively, and 11.2% and 12.9% for the nine months ending September 30 2023 and 2022, respectively. Accounts receivable from these entities totaled $39,477 and $53,079, at September 30, 2023 and December 31, 2022, respectively.

 

The Company sells products to BGL and 940 A, entities wholly-owned by Robert Carmichael. Terms of sale are more favorable than those extended to the Company’s regular customers, but no more favorable than those extended to the Company’s strategic partners. Accounts receivable from these entities totaled $8,264 and $2,349 at September 30, 2023 and December 31, 2022, respectively.

 

The Company had accounts payable to related parties of $37,210 and $37,539 at September 30, 2023 and December 31, 2022, respectively. The balance payable at September 30, 2023 was comprised of $23,713 due to 940 A, $8,497 due to Robert Carmichael and $5,000 due to Blake Carmichael. At December 31, 2022, the balance payable was comprised of $29,559 due to 940 A, $2,980 due to BGL and $5,000 due to Robert Carmichael.

 

The Company has exclusive license agreements with 940 A to license the trademark “Brownie’s Third Lung”, “Tankfill”, “Brownie’s Public Safety” and various other related trademarks as listed in the agreements. The agreements provide that the Company pay 2.5% of gross revenues per quarter as a royalty to 940A. Total royalty expense for the three months ended September 30, 2023 and September 30, 2022 was $54,904 and $77,669, respectively. For the nine months ended September 30, 2023 and September 30, 2022 the royalty expense totaled $156,572 and $202,598, respectively. The accrued royalty for September 30, 2023 was $7,513 and is included in other liabilities.

 

On September 30, 2022, the Company issued a convertible demand 8% promissory note in the principal amount of $66,793 to Robert Carmichael for funds to meet the working capital needs of LBI. There is no amortization schedule for the note, and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day value weighted average price (“VWAP”) of the Company’s stock prior to the quarterly interest payment date. The note holder may demand payment or convert the outstanding principal at a conversion rate of $0.021 per share at any time. The conversion rate was calculated at a 35% discount to the 90 day VWAP of the Company’s stock as of the date of the note. The Company recorded $19,250 for the beneficial conversion feature. As this conversion rate is a fixed rate, the embedded conversion feature is not a derivative liability. There were payments totaling $3,047 made with products in kind during the nine months ended September 30, 2023. The outstanding balance on this note was $63,746 as of September 30, 2023.

 

On January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, a Company director, an aggregate of 11,428,570 units, with each unit consisting of one share of common stock and a two-year common stock purchase warrant to purchase one share of common stock at an exercise price of $0.0175 per share in consideration of $200,000.

 

On September 14, 2023, the Company issued a convertible demand 8% promissory note in the principal amount of $50,000 to Robert Carmichael for funds to meet the working capital needs of BLU3. There is no amortization schedule for the note, and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day value weighted average price (“VWAP”) of the Company’s stock prior to the quarterly interest payment date. The note holder may demand payment or convert the outstanding principal at a conversion rate of $0.01351 per share at any time. The conversion rate was calculated at a 35% discount to the 90 day VWAP of the Company’s stock as of the date of the note. The Company recorded $-0- for the beneficial conversion feature. As this conversion rate is a fixed rate, the embedded conversion feature is not a derivative liability. The outstanding balance on this note was $50,000 as of September 30, 2023.

 

13
 

 

On March 31, 2023, the Company issued 61,204 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending March 31, 2023. The fair value of these shares was $1,336.

 

On June 30, 2023, the Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending June 30, 2023. The fair value of these shares was $1,287.

 

On September 30, 2023, the Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending September 30, 2023. The fair value of these shares was $1,287.

 

Note 5. Convertible Promissory Notes and Loans Payable

 

Convertible Promissory Notes

 

Convertible promissory notes consisted of the following at September 30, 2023:

 

 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.
9/03/21  9/03/24   8%   346,500    (12,355)  $346,500   $(4,010)  $342,490          -  (1)
9/03/21  9/03/24   8%   3,500    (125)   3,500    (42)   3,458    -  (2)
9/30/22  Demand   8%   66,793    (19,245)   63,746    (12,865)   50,881    -  (3)
9/14/23  Demand   8%   50,000    -    50,000    -    50,000    -  (4)
                     $463,746   $(16,917)  $446,829   $-   

 

A breakdown of current and long-term amounts due are as follows for the convertible promissory notes as of September 30, 2023:

 

Schedule Convertible Promissory Notes

   Summit Holdings V,   Tierra Vista Partners,   Robert Carmichael    Robert Carmichael       
   LLC Note   LLC Note   Note    Note     Total 
2023  $-   $-   $63,746    $ 50,000     $113,746 
2024   346,500    3,500    -      -      350,000 
Discount   (4,010)   (42)   (12,865)     -      (16,917)
Total Loan Payments  $342,490   $3,458   $50,881    $ 50,000     $446,829 
Current Portion of Loan Payable  $(342,490)  $(3,458)  $(50,881)   $ (50,000 )   $(446,829)
Non-Current Portion of Loan Payable  $-   $-   $-    $ -     $- 

 

(1)On September 3, 2021, the Company issued a three-year 8% convertible promissory note in the principal amount of $346,500 to Summit Holding V, LLC as part of the acquisition of SSI. The Company is required to make quarterly payments under the note in an amount equal to 50% of the adjusted net profit of SSI. Interest is payable quarterly in shares of common stock of the Company at a conversion price of $0.051272 per share. The note holder may convert outstanding principal and interest into shares of common stock at a conversion price of $0.051272 per share at any time during the term of the note. The Company recorded $12,355 for the beneficial conversion feature. This note is classified as a current liability for this period.

 

   Payment
Amortization
 
2023 (9 months)  $- 
2024   346,500 
Total Note Payments  $346,500 
Current portion of note payable   (346,500)
Non-Current Portion of Notes Payable  $- 

 

(2)On September 3, 2021, the Company issued a three-year 8% promissory note in the principal amount of $3,500 to Tierra Vista Partners, LLC as part of the acquisition of SSI. The Company is required to make quarterly payments under the note in an amount equal to 50% of the adjusted net profit of SSI. Interest is payable quarterly in common stock of the Company at a conversion price of $0.051272 per share. The note holder may convert outstanding principal and interest into shares of common stock at a conversion price of $0.051272 at any time up to the maturity date of the note. The Company recorded $125 for the beneficial conversion feature. This note is classified as a current liability for this period.

 

   Payment
Amortization
 
2023 (9 months)  $- 
2024   3,500 
Total Note Payments  $3,500 
Current portion of note payable   (3,500)
Non-Current Portion of Notes Payable  $- 

 

14
 

 

(3)On September 30, 2022, the Company issued a convertible demand 8% promissory note in the principal amount of $66,793 to Robert Carmichael for funds to meet the working capital needs of LBI. There is no amortization schedule for the note and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day VWAP of the Company’s stock prior to the quarterly interest payment date. This note is classified as a current liability as the note holder may demand payment or convert the outstanding principal at a conversion rate of $0.021 per share at any time. The Company recorded $19,250 for the beneficial conversion feature.

 

(4)On September 14, 2023, the Company issued a convertible demand 8% promissory note in the principal amount of $50,000 to Robert Carmichael for funds to meet the working capital needs of LBI. There is no amortization schedule for the note and interest is payable in shares of common stock of the Company at a conversion price equal to the 90 day VWAP of the Company’s stock prior to the quarterly interest payment date. This note is classified as a current liability as the note holder may demand payment or convert the outstanding principal at a conversion rate of $0.01351 per share at any time. The Company recorded $-0- for the beneficial conversion feature.

 

(5)

 

Loans Payable

 

   Mercedes   Navitas   NFS   Navitas 2022     
   BMG (1)   BLU3 (2)   SSI (3)   BLU3 (4)   Total 
2023 (9 months)  $2,792   $3,365   $8,379   $4,738   $19,274 
2024   11,168    16,629    26,279    21,228    75,304 
2025   8,686    18,024    12,328    23,610    62,648 
2026   -    6,007    -    -    6,007 
Total Loan Payments  $22,646   $44,025   $46,986   $49,576   $163,233 
Current Portion of Loan Payable  $(10,626)  $(16,297)  $(25,193)  $(20,671)  $(72,787)
Non-Current Portion of Loan Payable  $12,020   $27,728   $21,793   $28,905   $90,446 

 

(1) 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 September 30, 2023 was $22,646 and $31,023 as of December 31, 2022.

 

(2)On May 19, 2021, BLU3 executed an equipment finance agreement with Navitas Credit Corp. (“Navitas”) to finance the purchase of certain plastic molding equipment. The amount financed is $75,764 payable over 60 equal monthly installments of $1,611 (the “Navitas 1”). The equipment finance agreement contains customary events of default. The loan balance as of September 30, 2023 was $44,025 and $54,930 as of December 31, 2022.

 

(3)On June 29, 2022, SSI executed an equipment financing agreement with NFS Leasing (“NFS Leasing”) to secure replacement production molds. The total purchase price of the molds was $84,500 of which $63,375 was financed by NFS Leasing on August 15, 2022. The financing agreement has a 33 month term beginning in August 2022 with a monthly payment of $2,571. The financing agreement contains customary events of default, is guaranteed by the Company and NFS Leasing has a lien on all of the assets of SSI. The loan balance as of September 30, 2023 and December 31, 2022 was $46,986 and $60,804, respectively.

 

(4)On December 12, 2022, BLU3 executed an equipment finance agreement to finance the purchase of certain plastic molding equipment through Navitas Credit Corp. (“Navitas”). The amount financed is $63,689 payable over 36 equal monthly installments of $2,083 (“Navitas 2”). The equipment finance agreement contains customary events of default. The loan balance as of September 30, 2023 was $49,576 and $63,689 as of December 31, 2022.

 

Note 6. Business Combination

 

Asset acquisition Gold Coast Scuba, LLC

 

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 Live Blue, Inc. Pursuant to the terms of the Asset Purchase Agreement, Live Blue 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 as part of this asset acquisition.

 

15
 

 

In consideration for the assets purchased, the Company paid $150,000 to the LLC Members. The purchase price was paid by (a) the issuance to the LLC Members of an aggregate of 3,084,831 shares of the Company’s common stock (the “Consideration Shares”) with a fair market value of $120,000; and (b) a cash payment of $30,000.

 

The Consideration Shares are subject to leak out agreements whereby the shareholders are unable to sell or transfer shares based upon the following:

 

Summary of Holding Period and Shares Eligible to Sold

Holding Period from Closing Date 

Percentage of shares

eligible to be sold or transferred

6 months  Up to 25.0%
9 months  Up to 50.0%
12 months  Up to 100.0%

 

The leak-out restriction may be waived by the Company, upon written request by a LLC Member, if the Company’s common stock is trading on 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 and (ii) only through executing trades “On the Offer.”

 

The transaction costs associated with the acquisition were $10,000 in legal fees paid in cash, and are included in the purchase price allocation in the table below.

 

While the agreement was structured as an asset purchase agreement, we also assumed the operations of Gulf Coast Scuba resulting in the recognition of a business combination. During 2022, we recognized revenue of $212,876 and net loss of $75,579 associated with this business. The business combination was not material for the purpose of disclosing pro forma financial information. In connection with this transaction, we recognized the following assets and liabilities:

 

   Fair Value 
Rental Inventory  $48,602 
Fixed Assets   50,579 
Retail Inventory   60,819 
Right of use asset   29,916 
Lease liability   (29,916)
Net Assets Acquired  $160,000 

 

Note 7. Goodwill and Intangible Assets, Net

 

The following table sets for the changes in the carrying amount of the Company’s Goodwill for the nine months ended September 30, 2023.

 

Summary of Changes in Goodwill

   2023 
Balance, January 1  $249,986 
Addition:   - 
Balance, September 30  $249,986 

 

The Company performed an evaluation of the value of goodwill at December 31, 2022. Based upon this evaluation it was determined that there should be no adjustment to goodwill. There has been nothing noted during the nine months ended September 30, 2023 that would indicate that the value of goodwill should change through that date.

 

16
 

 

The following table sets for the components of the Company’s intangible assets at September 30, 2023:

 

Summary of Intangible Assets

  

Amortization

Period (Years)

   Cost  

Accumulated

Amortization

   Net Book Value 
                 
Intangible Assets Subject to amortization                    
Trademarks   15   $121,000   $(16,761)  $104,239 
Customer Relationships   10    600,000    (125,000)   475,000 
Non-Compete Agreements   5    22,000    (9,167)   12,833 
Total       $743,000   $(150,928)  $592,072 

 

The aggregate amortization remaining on the intangible assets as of September 30, 2023 is a follows:

 

Schedule of Estimated Intangible Assets Amortization Expense

   Intangible
Amortization
 
2023 (3 months remaining)   18,162 
2024   72,466 
2025   72,467 
2026   71,367 
2027   68,066 
Thereafter   289,544 
Total  $592,072 

 

Amortization expense for amortizable intangible assets for both the three months ended September 30, 2023 and 2022 was 18,117, respectively. Amortization expense for both the nine months ended September 30, 2023 and 2022 was 54,350, respectively.

 

Note 8. Stockholders’ Equity

 

Common Stock

 

On January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of 11,428,570 units, with each unit consisting of one share of common stock and a two-year common stock purchase warrant to purchase one share of common stock at an exercise price of $0.0175 per share in consideration of $200,000.

 

On March 31, 2023, the Company issued 61,204 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending March 31, 2023. The fair value of these shares was $1,336.

 

On March 31, 2023, the Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest for the three months ending December 31, 2022. The fair value of these shares was $7,000.

 

On June 30, 2023, the Company issued 61,205 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending June 30, 2023. The fair value of these shares was $1,326.

 

On June 30, 2023, the Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest for the three months ending June 30, 2023. The fair value of these shares was $7,000.

 

On September 30, 2023, the Company issued 61,205 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending September 30, 2023. The fair value of these shares was $1,326.

 

On September 30, 2023, the Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest for the three months ending September 30, 2023. The fair value of these shares was $7,000.

 

Preferred Stock

 

During the second quarter of 2010, the holders 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 the 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 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 on any matters submitted to our shareholders. As of September 30, 2023, and December 31, 2022, the 425,000 shares of Series A Convertible Preferred Stock are owned by Robert Carmichael.

 

17
 

 

Equity Incentive Plan

 

On May 26, 2021 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, stock options may be granted to employees, directors, and consultants in the form of incentive stock options or non-qualified 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. 25,000,000 shares are reserved for issuance under the Plan. The term of the Plan is ten years.

 

The Company also issued options outside of the Plan that were not approved by the security holders. These options may be granted to employees, directors, and consultants in the form of incentive stock options or non-qualified stock options.

 

Equity Compensation Plan Information as of September 30, 2023:

 

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   3,319,118   $0.0401    21,680,882 
Equity Compensation Plans Not Approved by Security Holders   105,971,520    0.0258     
Total   109,290,638   $0.0262    21,680,882 

 

Options

 

The Company has issued options to purchase approximately 105,971,520 shares of its common stock at an average exercise price of $0.0262 with a fair value of approximately $37,000. For the three and nine months ended September 30, 2023, the Company issued no options to purchase shares.

 

For the three months ended September 30, 2023 and 2022, the Company recognized an expense of approximately $7,200 and $315,000, respectively and for the nine months ended September 30, 2023 and 2022, the Company recognized an expense of approximately $25,000 and $847,000, respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black-Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of September 30, 2023, the Company had approximately $1,504,700 of unrecognized pre-tax non-cash compensation expense related to performance based options to purchase shares, which the Company expects to recognize, based on a weighted-average period of 2.7 years. The Company uses straight-line amortization of compensation expense over the requisite service period for time-based options. For performance-based options the Company evaluates the likelihood of a vesting qualification being met, and will establish the expense based on that evaluation. The maximum contractual term of the Company’s stock options is 5 years. The Company recognizes forfeitures and expirations as they occur. Options to purchase approximately 57,877,500 shares have vested as of September 30, 2023.

 

18
 

 

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black-Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

 

Schedule of Valuation Assumptions of Options

   Nine Months ended September 30, 
   2023   2022 
Expected volatility   172.0% - 346.4%   172.0346.4%
Expected term   1.505.0 Years    1.55.0 Years 
Risk-free interest rate   0.16% - 4.64%   0.16% - 2.10%
Forfeiture rate   0.17%   0.03%

 

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

 

A summary of the status of the Company’s outstanding stock options as of September 30, 2023 and December 31, 2022 and changes during the periods ending on such dates is as follows:

 

Schedule of Outstanding Stock Option Activity

   Number of  

Weighted

Average

Exercise

  

Weighted

Average

Remaining

Contractual

  

Aggregate

Intrinsic