UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For
the quarterly period ended |
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:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code
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.
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).
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 ☐ |
| 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 4, 2026, there were 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. | 23 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 26 |
| ITEM 4. | CONTROLS AND PROCEDURES. | 26 |
| PART II – OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS. | 28 |
| ITEM 1A. | RISK FACTORS. | 28 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 28 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. | 28 |
| ITEM 4. | MINE SAFETY DISCLOSURES. | 28 |
| ITEM 5. | OTHER INFORMATION. | 28 |
| ITEM 6. | EXHIBITS. | 29 |
| 2 |
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 April 10, 2026, 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, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable – net of allowances of $ at September 30, 2026 and $ at December 31, 2025 | ||||||||
| Accounts receivable - related parties | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, equipment and leasehold improvements, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable - related parties | ||||||||
| Customer deposits and unearned revenue | ||||||||
| Other liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Related party convertible demand note, net | ||||||||
| Convertible notes | ||||||||
| Current maturities long term debt | ||||||||
| Related party notes payable | ||||||||
| Total current liabilities | $ | $ | ||||||
| Loans payable, net of current portion | ||||||||
| Operating lease liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingent liabilities (see note 8) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock; $ par value: shares authorized; issued and outstanding as of September 30, 2026 and December 31, 2025. | ||||||||
| Common stock; $ par value; shares authorized; shares issued and shares outstanding at September 30, 2026 and shares issued and outstanding at December 31, 2025. | ||||||||
| Common stock payable shares as of September 30, 2026 and December 31, 2025. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | $ | $ | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements
| 4 |
BROWNIE’S MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Revenues - related parties | ||||||||||||||||
| Total Revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Cost of revenues - related parties | ||||||||||||||||
| Royalties expense - related parties | ||||||||||||||||
| Royalties expense | ||||||||||||||||
| Total cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Other income / gain on settlement of debt | ||||||||||||||||
| Interest expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income (Loss) before provision for income taxes | ||||||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net Income (Loss) | $ | $ | $ | $ | ||||||||||||
| Basic income (loss) per common share | $ | $ | $ | $ | ||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Diluted income (loss) per common share | $ | $ | $ | $ | ||||||||||||
| Diluted weighted average common shares outstanding | ||||||||||||||||
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 STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
(unaudited)
Nine Months Ended September 30, 2025 (Comparative Period)
| Preferred Stock | Common Stock | Common Stock Payable | Additional Paid-in | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Par | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Shares issued for accrued interest on convertible notes | $ | $ | $ | - | $ | $ | $ | |||||||||||||||||||||||||||||
| Shares issued for professional services | $ | $ | - | $ | $ | |||||||||||||||||||||||||||||||
| Shares issued for salary reduction | $ | $ | ||||||||||||||||||||||||||||||||||
| Stock option expense | $ | |||||||||||||||||||||||||||||||||||
| Shares issued for BOD compensation | $ | $ | ||||||||||||||||||||||||||||||||||
| Shares issued for signing bonus / other employee compensation | ||||||||||||||||||||||||||||||||||||
| Other equity transaction | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 (unaudited) | ( | ) | ||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2026 (Current Period)
| Preferred Stock | Common Stock | Common Stock Payable | Additional Paid-in | Accumulated | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Par | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Shares issued for accrued interest on convertible notes | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Shares issued for professional services | $ | |||||||||||||||||||||||||||||||||||
| Shares issued for salary reduction | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Stock option expense | $ | |||||||||||||||||||||||||||||||||||
| Shares issued for BOD compensation | $ | |||||||||||||||||||||||||||||||||||
| Shares issued for signing bonus / other employee compensation | ||||||||||||||||||||||||||||||||||||
| Sunrise Paddleboards acquisition | ||||||||||||||||||||||||||||||||||||
| Prior-period accounting adjustments | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income (loss) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2026 (unaudited) | ( | ) | ||||||||||||||||||||||||||||||||||
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)
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ||||||
| Prior-period accounting adjustments | ( | ) | ||||||
| Depreciation and amortization — property and equipment | ||||||||
| Amortization — intangible assets | ||||||||
| Noncash interest and debt discount adjustments | ( | ) | ||||||
| Amortization of right-of-use asset | ||||||||
| Stock-based compensation — options | ||||||||
| Stock/share compensation and services | ||||||||
| Shares issued for accrued convertible-note interest | ||||||||
| Gain on lease termination / noncash lease derecognition | ( | ) | ||||||
| Gain on debt extinguishment / forgiveness | ( | ) | ||||||
| Bad-debt reserve / recovery | ||||||||
| Inventory reserve / recall adjustment | ||||||||
| Other noncash operating adjustments | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Change in accounts receivable, net | ( | ) | ( | ) | ||||
| Change in accounts receivable - related parties | ( | ) | ( | ) | ||||
| Change in inventory | ( | ) | ( | ) | ||||
| Change in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Change in other assets | ( | ) | ||||||
| Change in accounts payable and accrued liabilities | $ | $ | ( | ) | ||||
| Change in customer deposits and unearned revenue | ( | ) | ||||||
| Change in operating lease assets and liabilities | ( | ) | ( | ) | ||||
| Change in other liabilities | ( | ) | ||||||
| Change in accounts payable - related parties | ||||||||
| Net cash provided by operating activities | ||||||||
| Cash flows from investing activities: | ||||||||
| Business/asset acquisition, net cash acquired | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds of debt | $ | |||||||
| Repayment of related party convertible demand note | ( | ) | ||||||
| Repayment of loans and notes payable | $ | ( | ) | $ | ||||
| Repayment of related party notes payable | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Net increase (decrease) in cash | $ | $ | ||||||
| Cash, beginning balance | ||||||||
| Cash, end of period | ||||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for operating lease liabilities | $ | |||||||
| Cash paid for income taxes | ||||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Operating lease right-of-use assets and liabilities established | ||||||||
| Equipment obtained through financing | ||||||||
| Shares issued for services and compensation | ||||||||
| Shares issued for convertible note interest | $ | $ | ||||||
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, 2026
(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.
On July 1, 2026, the Company executed and consummated the transactions contemplated by an asset purchase agreement (the “Sunrise Paddleboards Asset Purchase Agreement”) by and among Sunrise Paddleboards LLC, a Florida limited liability company (“Sunrise Paddleboards”), Brian Galton, the sole member of Sunrise Paddleboards (the “LLC Member”), the Company and Live Blue, Inc. (“LBI”). Pursuant to the terms of the Asset Purchase Agreement, LBI acquired substantially all of Sunrise Paddleboards’ assets and assumed certain liabilities of the business associated with these assets. Sunrise Paddleboards is in the business of providing paddleboarding and kayaking experiences, including paddleboard rental, tour, retail and training. In consideration for the assets purchased, the Company issued shares of its common stock to the LLC Member and, in connection with the acquisition, shares to an employee of Sunrise Paddleboards, each at a price of $ per share, based upon the closing price of the Company’s common stock on the OTC Markets on June 30, 2026.
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, 2025 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, 2025 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, 2026, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending December 31, 2026.
During the nine months ended September 30, 2026, the Company identified and corrected accounting errors related to the correction of certain prior-period accounting matters. These adjustments affected various balance sheet and income statement accounts and were reflected in the underlying account balances presented in the financial statements. The corresponding amount included within the statement of cash flows represents the impact of these prior-period adjustments and related reclassifications.
For purposes of clarity and ease of presentation, all dollar amounts in these financial statements have been rounded to the nearest whole number. However, the underlying data used in the calculations is not rounded, and the totals presented may differ by a small amount due to rounding. These differences are considered immaterial and do not affect the overall financial position or results of operations.
| 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 $
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 although, the Company had historical loss information, the Company is showing improvements in cash sales and collections of accounts receivable. Although 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). Accordingly, the allowance for expected credit losses at September 30, 2026, and December 31, 2025, totaled $ and $, respectively. The allowance for doubtful accounts increased due to an increase in trade accounts receivable.
Inventory
Inventory consists of the following:
September 30, 2026 | December 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Rental equipment | ||||||||
| Allowance excess and obsolete inventory | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
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.
| 9 |
A breakdown of the total revenue between related party and non-related party revenue is as follows:
| Nine months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Revenues - related parties | ||||||||
| Total Revenues | $ | $ | ||||||
| Three months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Revenues - related parties | ||||||||
| Total Revenues | $ | $ | ||||||
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 inventory, 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:
| Nine months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cost of revenues | $ | $ | ||||||
| Cost of revenues - related parties | ||||||||
| Royalties expense - related parties | ||||||||
| Royalties expense | ||||||||
| Total cost of revenues | $ | $ | ||||||
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. All other leases are categorized as operating leases. The Company did not have any finance leases as of September 30, 2026. 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.
Operating 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. Operating lease right-of-use (“ROU”) 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. Operating lease ROU 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.
| 10 |
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 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 nine months ended September 30, 2026 and September 30, 2025, cash paid for operating lease liabilities was $
Supplemental balance sheet information related to leases was as follows:
| Operating Leases | September 30, 2026 | |||
| (unaudited) | ||||
| Right-of-use assets | $ | |||
| Current lease liabilities | $ | |||
| Non-current lease liabilities | ||||
| Total lease liabilities | $ | |||
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.
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, 2026, and December 31, 2025, the Company did not have any derivative liabilities.
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 earnings per share is computed using the
weighted average number of common and dilutive common stock equivalent shares outstanding during the period. For the three months ended
September 30, 2026, net income was $
| 11 |
| Period | Net Income | WASO | EPS | |||||||||
| Three months ended September 30, 2026 | $ | $ | ||||||||||
| Three months ended September 30, 2025 | $ | $ | ||||||||||
| Nine months ended September 30, 2026 | $ | $ | ||||||||||
| Nine months ended September 30, 2025 | $ | $ | ||||||||||
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.
Note 3. Going Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis. Although the Company reported net income
of $
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. Related-party revenues
accounted for
| 12 |
The
Company sells products to Brownies Global Logistics (“BGL”) and 940 Associates (“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 BGL and 940 A totaled $
The
Company had accounts payable to related parties of $
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
On
September 30, 2022, the Company issued a convertible demand
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, a Company director, an aggregate of units, with
each unit consisting of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of
$
On
September 14, 2023, the Company issued a convertible demand promissory note in the principal amount of $
On
November 14, 2023, the Company borrowed funds through the issuance of a promissory note in the principal amount of $
The
note bears interest at a rate of
On
December 23, 2023, the Company issued a demand promissory note in the principal amount of $
On
February 5, 2025, the Company borrowed funds through the issuance of a promissory note (the Note) in the principal amount of $
The
note bears interest at a rate of
| 13 |
On
June 8, 2026, the Company recorded $
On
March 31, 2023, the Company issued 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 $
On
June 30, 2023, the Company issued 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 $
On
September 30, 2023, the Company issued 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 $
On
December 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending December 31, 2023. The fair value of these shares was $
On
March 31, 2025, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending March 31, 2025. The fair value of these shares was $
On
July 16, 2025, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending June 30, 2025. The fair value of these shares was $
On
December 9, 2025, the Company issued shares of common stock to Blake Carmichael, the chief executive officer of BLU3, as compensation
for a reduction in salary. The fair value of these shares was $
Note 5. Convertible Promissory Notes and Loans Payable
Convertible Promissory Notes
Convertible promissory notes consisted of the following at September 30, 2026:
| Origination Date | Maturity Date | Interest Rate | Origination Principal Balance | Original Discount Balance | Period End Principal Balance | Period End Discount Balance | Payments | Period End Balance Note | ||||||||||||||||||||||
| % | ( | ) | $ | $ | $ | (1) | ||||||||||||||||||||||||
| % | ( | ) | (2) | |||||||||||||||||||||||||||
| % | ( | ) | (3) | |||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||||||
Current and long-term amounts due are as follows for the convertible promissory notes as of September 30, 2026:
| Summit Holdings V, LLC Note | Tierra Vista Partners, LLC Note | Robert Carmichael Note | Total | |||||||||||||
| (1) | (2) | (3) | ||||||||||||||
| 2026 | $ | $ | $ | $ | ||||||||||||
| Discount and payments | | $ | ||||||||||||||
| Total Loan Payments | $ | $ | $ | $ | ||||||||||||
| Current Portion of Loan Payable | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Non-Current Portion of Loan Payable | $ | $ | $ | $ | ||||||||||||
| (1) |
| 14 |
| Payment Amortization | ||||
| 2026 | ||||
| Total Note Payments | $ | |||
| Current portion of note payable | ( | ) | ||
| Non-Current Portion of Notes Payable | $ | |||
| (2) | On
September 3, 2021, the Company issued a three-year |
| The stated maturity date of the note was September 3, 2024. The Company is working with the lender to finalize an extension of the maturity date and restructure the note. |
| Payment Amortization | ||||
| 2026 | ||||
| Total Note Payments | $ | |||
| Current portion of note payable | ( | ) | ||
| Non-Current Portion of Notes Payable | $ | |||
| (3) | On
September 30, 2022, the Company issued a convertible demand |
Loans Payable
| Navitas
2024 BLU3 (4) | Navitas 2026 BLU3 (5) | Navitas
2026 BTL (6) | Bank
United 2026 BLU3 (7) | Total | ||||||||||||||||
| 2026 | $ | $ | $ | |||||||||||||||||
| 2027 | $ | $ | ||||||||||||||||||
| 2028 | $ | $ | ||||||||||||||||||
| Thereafter | $ | $ | ||||||||||||||||||
| Total Loan Payments | $ | $ | $ | $ | $ | |||||||||||||||
| Current Portion of Loan Payable | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Non-Current Portion of Loan Payable | $ | $ | $ | $ | $ | |||||||||||||||
| (4) |
| 15 |
| (5) | |
| (6) | |
| (7) |
Note 6. 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, 2026
| 2026 | ||||
| Balance, January 1 | $ | |||
| Addition: | ||||
| Balance, September 30, 2026 | $ | |||
The Company performed an evaluation of the value of goodwill at December 31, 2025. 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, 2026 that would indicate that the value of goodwill should change through that date.
The following table sets forth the components of the Company’s intangible assets at September 30, 2026:
| Amortization Period (Years) | Cost | Accumulated Amortization | Net Book Value | |||||||||||||
| Intangible Assets Subject to Amortization | ||||||||||||||||
| Patents | - | ( | ) | |||||||||||||
| Trademarks | ( | ) | ||||||||||||||
| Customer Relationships | ( | ) | ||||||||||||||
| Non-Compete Agreements | ( | ) | ||||||||||||||
| Total | ( | ) | ||||||||||||||
The aggregate amortization remaining on the intangible assets as of September 30, 2026 is as follows:
| Intangible Assets Amortization | ||||
| 2026 (3 months remaining) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Thereafter | ||||
| Total | $ | |||
Amortization
expense for amortizable intangible assets for the nine months ended September 30, 2026 and September 30, 2025 was $
| 16 |
Note 7. Stockholders’ Equity
Common Stock
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of units, with each unit consisting
of one share of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $
On
March 31, 2023, the Company issued 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 $
On
March 31, 2023, the Company issued an aggregate of 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 $
On
June 30, 2023, the Company issued 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 $
On
June 30, 2023, the Company issued an aggregate of 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 $
On
September 30, 2023, the Company issued 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 $
On
September 30, 2023, the Company issued an aggregate of 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 $
On
December 31, 2023, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending December 31, 2023. The fair value of these shares was $
On
December 31, 2023, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending December 31, 2023. The fair value of these shares was $
On
March 31, 2025, the Company issued shares of common stock to Robert Carmichael for payment of interest on the convertible demand
note for the three months ending March 31, 2025. The fair value of these shares was $
On
March 31, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of
interest for the three months ending March 31, 2025. The fair value of these shares was $
On
June 30, 2025, the Company issued
shares of common stock to Robert Carmichael for payment of
interest on the convertible demand note for the three months ending June 30, 2025. The fair value of these shares was $
On
June 30, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest
for the three months ending June 30, 2025. The fair value of these shares was $
On
August 15, 2025 the Company issued shares of common stock to the holders of convertible notes for payment of professional services.
The fair market value of these shares was $
On
March 31, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of
interest for the three months ending March 31, 2025. The fair value of these shares was $
On
December 9, 2025, the Company issued shares to Blake Carmichael as compensation related to a salary reduction. The fair market
value of these shares was $
On
December 31, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending December 31, 2025. The fair value of these shares was $
On
March 31, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of
interest for the three months ending March 31 2025. The fair value of these shares was $
On
June 30, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment of interest
for the three months ending June 30, 2025. The fair value of these shares was $
On
August 31, 2025, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
| 17 |
On
September 30, 2025, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
September 30, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending September 30, 2025. The fair value of these shares was $
On
December 31, 2025, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ending December 31, 2025. The fair value of these shares was $
On
December 31, 2025, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
January 31, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
February 28, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
March 31, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
March 31, 2026, the Company issued an aggregate of shares of common stock to the holder of convertible note for payment of interest
for the three months ending March 31, 2026. The fair value of these shares was $
On
April 30, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
May 1, 2026, the Company issued an aggregate of shares of common stock to an employee as a signing bonus. The fair value of
these shares was $
On
May 31, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
June 10, 2026, the Company issued an aggregate of shares of common stock to Robert Carmichael for compensation for board of directors’
fees for December 2025. The fair value of these shares was $
On
June 10, 2026, the Company issued an aggregate of shares of common stock to Chrles F. Hyatt for compensation for board of directors’
fees for December 2025. The fair value of these shares was $
On
June 10, 2026, the Company issued an aggregate of shares of common stock to Robert Carmichael for compensation for board of
directors’ fees for the first quarter ended March 31, 2026. The fair value of these shares was $
On
June 10, 2026, the Company issued an aggregate of shares of common stock to Charles F. Hyatt for compensation for board of
directors’ fees for the quarter ended March 31, 2026. The fair value of these shares was $
On
June 30, 2026, the Company issued an aggregate of shares of common stock to Charles F. Hyatt for compensation for board of
directors’ fees for quarter June 30, 2026. The fair value of these shares was $
On
June 30, 2026, the Company issued an aggregate of shares of common stock to Robert Carmichael for compensation for board of
directors’ fees for quarter ended March 31, 2026. The fair value of these shares was $
On
June 30, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was $
On
June 30, 2026, the Company issued an aggregate of shares of common stock to the holder of a convertible note for payment of interest
for the three months ended June 30, 2026. The fair value of these shares was $
On
July 1, 2026, in connection with the Sunrise Paddleboards asset acquisition, the Company issued shares of common stock to
the sole member and owner of Sunrise Paddleboards and shares of common stock to an employee of Sunrise Paddleboards. The fair
value of these shares was $
| 18 |
On
July 31, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was approximately $
On
August 31, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was approximately $
On
September 30, 2026, the Company issued an aggregate of shares of common stock to Blake Carmichael as compensation for cash reduction
in his salary. The fair value of these shares was approximately $
On
September 30, 2026, the Company issued an aggregate of shares of common stock to Robert Carmichael, shares to Charles
F. Hyatt and shares to Mikkel Pitzner as compensation for board of directors’ fees for the quarter ended September 30,
2026. The fair value of each issuance was $
On
September 30, 2026, the Company issued an aggregate of shares of common stock to the holders of convertible notes for payment
of interest for the three months ended September 30, 2026. The fair value of these shares was $
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 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 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 $
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. 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.
Number of securities to be issued upon | Weighted – average outstanding options, | Number of securities for future issuances under equity reflected in column | ||||||||||
| Equity Compensation Plans Approved by Security Holders | ||||||||||||
| Equity Compensation Plans Not Approved by Security Holders | ||||||||||||
| Total | ||||||||||||
| 19 |
Options
As of September 30, 2026, the Company had no stock options outstanding. For the nine months ended September 30, 2026, and the year ended December 31, 2025, the Company issued no options to purchase shares.
For the three and nine months ended September 30, 2026, the Company recognized $ of non-cash stock compensation expense related to options. As of September 30, 2026, the Company had no unrecognized pre-tax non-cash compensation expense related to outstanding stock options.
| Nine Months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Expected volatility | % - | % | – | % | ||||
| Expected term | –. Years | – Years | ||||||
| Risk-free interest rate | % - | % | % - | % | ||||
| Forfeiture rate | % | % | ||||||
The expected volatility was determined with reference to the historical volatility of the Company’s common 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.
| Number of | Weighted Average Exercise | Weighted Average Remaining Contractual | Aggregate Intrinsic | |||||||||||||
| Options | Price | Life in Years | Value | |||||||||||||
| Outstanding at December 31, 2025 | $ | - | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Exercised | - | - | ||||||||||||||
| Cancelled | - | - | ||||||||||||||
| Outstanding – December 31, 2025 | $ | - | ||||||||||||||
| Exercisable – December 31, 2025 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Exercised | - | - | ||||||||||||||
| Expired | ( | ) | - | - | - | |||||||||||
| Cancelled | - | - | ||||||||||||||
| Outstanding – June 30, 2026 | $ | - | ||||||||||||||
| Expired – September 30, 2026 | ( | ) | $ | - | $ | |||||||||||
| Outstanding – September 30, 2026 | ||||||||||||||||
| Exercisable – September 30, 2026 | ||||||||||||||||
At September 30, 2026, there were outstanding stock options and related unrecognized stock option expense.
| 20 |
Warrants
On
January 18, 2023 and February 18, 2023, the Company issued to Charles Hyatt, an aggregate of 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 $
A summary of the Company’s warrants as of December 31, 2025 and changes during the nine months ended September 30, 2026 is presented below:
| Number of | Weighted Average Exercise | Weighted Average Remaining Contractual | Aggregate Intrinsic | |||||||||||||
| Warrants | Price | Life in Years | Value | |||||||||||||
| Outstanding – December 31, 2025 | $ | $ | ||||||||||||||
| Granted | - | - | - | |||||||||||||
| Exercised | ||||||||||||||||
| Forfeited or Expired | ||||||||||||||||
| Outstanding – September 30, 2026 | $ | |||||||||||||||
| Exercisable – September 30, 2026 | $ | $ | ||||||||||||||
Note 8. Commitments and contingencies
Royalty Agreement
On
April 6, 2018, the Company entered into a Patent License Agreement with Setaysha Technical Solutions, LLC (“STS”). The agreement
required the Company to pay earned royalties based on sales of licensed products and established a minimum annual royalty obligation.
On June 30, 2020, the Company entered into Addendum No. 2 to the Patent License Agreement. Addendum No. 2 established certain limitations
and expectations regarding assistance to be provided by STS in connection with the design and commercialization of certain diving products
and revised the minimum royalty provisions as consideration for previously uncompensated development services. Under Addendum No. 2,
the Company is required to pay STS a minimum annual royalty that commenced at $
On
January 24, 2024, the Company entered into Addendum No. 3, which would have deferred the additional $
Addendum
No. 2 also provided that, if the Company terminated the Patent License Agreement before December 31, 2024, the Company would have been
required to pay STS $
The
original Patent License Agreement required the Company to issue shares of its common stock having a fair value of $
| 21 |
Consulting and Employment Agreements
On
August 1, 2021, the Company and Blake Carmichael entered into a three-year employment agreement (the “Blake Carmichael Employment
Agreement”) pursuant to which Mr. Carmichael served as Chief Executive Officer of BLU3. In consideration for his services, Blake
Carmichael received (i) an annual base salary of $
On
September 3, 2021, SSI and Christeen Buban entered into a three-year employment agreement (the “Buban Employment Agreement”)
pursuant to which Ms. Buban shall serve as the President of SSI. In consideration for her services, Mrs. Buban shall receive (i) an annual
base salary of $
In addition, Mrs. Buban is entitled to receive a five-year stock option to purchase up to shares of common stock of the Company at an exercise price of $ per share, which vests upon the attainment of certain defined annual financial metrics, as set forth in the Buban Employment Agreement. A measurement was made for the nine months ended September 30, 2026 and no expense was recorded based upon the vesting criteria not being met.
On
January 17, 2022, the Company entered into an agreement with The Crone Law Group, PC (“CLG”) for the provision of legal services.
In consideration therefore, the Company will pay CLG a monthly flat fee of $
On
May 2, 2022, the Company entered into a two-year employment agreement with Steven Gagas (the “Gagas Employment Agreement”)
pursuant to which Mr. Gagas shall serve as the General Manager of the dive shop currently operating within LBI. In consideration for
his services Mr. Gagas shall receive an annual salary of $
On
May 2, 2022, LBI, entered into a lease assignment agreement with Gold Coast Scuba, LLC and Vicnsons Realty Group, LLC whereby LBI is
the assignee of a three year lease for the property located at 259 Commercial Blvd., Suites 2 and 3 in Lauderdale-By-The Sea, Florida
for $
On
September 14, 2022, SSI entered into a sixty-month lease renewal for its facility in Huntington Beach, California commencing on February
1, 2022 with base rent of approximately $
On
September 30, 2022, SSI entered into a sublease of its facility in Huntington Beach, California with Camburg Engineering, Inc. (“Tenant”)
commencing October 1, 2022, The term of the sublease is through December 31, 2023, with a base monthly rent of $
On
December 22, 2022, the U.S. Consumer Products Safety Commission (the “CPSC”) issued a voluntary recall notice for the Nomad
tankless dive system, which is distributed by BLU3, Inc. As part of the recall procedure, the CPSC has approved the Company’s proposed
remedy for the recall and BLU3 received units back from consumers to repair affected Nomad units. The Company has evaluated the costs
of this recall and has deemed it necessary to set an allowance of $
Legal
There were no outstanding legal issues as of September 30, 2026.
Note 9. Subsequent Events
Except as set forth below, management evaluated subsequent events occurring after September 30, 2026 through the date the financial statements were issued and determined that there were no subsequent events requiring adjustment to or disclosure in the consolidated financial statements.
Blake Carmichael, the chief executive officer and president of BLU3, was appointed President and Chief Operating Officer of the Company, effective as of November 4, 2026. Upon Blake Carmichael’s appointment, Robert Carmichael resigned as President of the Company.
| 22 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report. Actual future results may be materially different from what we expect. 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.
The management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Overview
The Company owns and operates a portfolio of companies with a concentration in the industrial and recreational diving industry. The Company, through its subsidiaries, designs, tests, manufactures, and distributes recreational hookah diving, yacht-based scuba air compressors and nitrox generation systems and scuba and water safety products in the United States and internationally.
The Company has five subsidiaries focused on various sub-sectors:
| ● | 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 and Retail |
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, a manufacturing facility in Huntington Beach, California, and a retail facility in Fort Lauderdale, Florida.
The Company, through its wholly owned subsidiaries, designs, tests, and manufactures tankless dive systems, rescue air systems and yacht-based self- contained underwater breathing apparatus (“SCUBA”) air compressor and nitrox generation fill systems. In addition, the Company is the exclusive distributor for North and South America for Lenhardt & Wagner GmbH (“L&W”) compressors in the high-pressure breathing air and industrial gas markets. The Company is also building a guided tour operation that includes dive retail. Lastly, The Company is the exclusive United States and Caribbean distributor for Chrysalis Trading CC, a South African manufacturer of fitness and dive equipment, doing business as Bright Weights (“Bright Weights”), of a dive ballast system produced in South Africa.
Results of Operations
Net Revenues, Costs of Net Revenues and Gross Profit
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
Net revenues increased 27.6% for the three months ended September 30, 2026 compared with the three months ended September 30, 2025. The increase in net revenues was broad-based, with higher revenues at BTL, BLU3, SSI and LWA, and reflects higher advertising and marketing expenditures, particularly online and social media advertising, which supported increased sales activity during the three months ended September 30, 2026. LBI also contributed revenue during the three months ended September 30, 2026 following the acquisition of Sunrise Paddleboards LLC (“Sunrise Paddleboards”) on July 1, 2026.
For the three months ended September 30, 2026, cost of net revenues was 48.4% of revenues compared with 53.6% for the three months ended September 30, 2025. The decrease in cost of net revenues as a percentage of revenues reflects revenue growth that outpaced the increase in production costs during the period. Related-party royalty expense increased 32.0% for the three months ended September 30, 2026 compared with the corresponding period in 2025. The increase in related-party royalty expense was primarily attributable to higher sales subject to the Company’s existing royalty arrangements.
Gross profit margin was 51.6% for the three months ended September 30, 2026 compared with 46.4% for the three months ended September 30, 2025. The increase in gross profit margin was primarily attributable to revenue growth outpacing the increase in cost of net revenues, resulting in cost of net revenues decreasing to 48.4% of revenues from 53.6% in the corresponding period in 2025.
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Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
Net revenues increased 16.6% for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. The increase in net revenues was primarily attributable to higher revenues at BTL, BLU3 and SSI, with LWA’s revenues also modestly higher for nine months ended September 30, 2026. The increase at BTL reflects improved dealer terms and product modifications, the increase at BLU3 reflects an improved product mix and increased online and social media marketing, and the increase at SSI reflects sales to a broader customer base and continued demand for its product lines. LBI also contributed revenue during the third quarter of 2026 following the acquisition of Sunrise Paddleboards.
For the nine months ended September 30, 2026, cost of net revenues was 50.0% of revenues compared with 61.6% for the nine months ended September 30, 2025. Related-party royalty expense increased 47.3% for the nine months ended September 30, 2026 compared with the nine months ended September 30, 2025. The decrease in cost of net revenues as a percentage of revenues was primarily attributable to increased sales combined with lower material costs relative to revenues and improved purchasing practices. The increase in related-party royalty expense was primarily attributable to higher sales subject to the Company’s existing royalty arrangements.
Gross profit margin was 50.0% for the nine months ended September 30, 2026 compared with 38.4% for the nine months ended September 30, 2025. The increase in gross profit margin was primarily attributable to increased revenues and a reduction in cost of net revenues as a percentage of revenues, including lower material costs relative to sales and improved purchasing practices.
Operating Expenses
Operating expenses consist of selling, general and administrative (“SG&A”) expenses and research and development costs and are reported on a consolidated basis for our operating segments. Total operating expenses increased 27.0% and 53.6% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025. R&D expenses increased 5,198.4% and 719.1% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025.
Selling, General & Administrative Expenses
SG&A increased 25.1% and 52.7% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025. The increase in SG&A expense was primarily attributable to higher payroll, professional fees and advertising expense. For the nine-month period, the increase also reflects higher rent and occupancy costs and other operating expenses. SG&A expenses were comprised of the following:
| Expense Item | Three Months Ended September 30, 2026 | Three Months Ended September 30, 2025 | % Change | Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | % Change | ||||||||||||||||||
| Payroll, Selling & Administrative | $ | 358,493 | $ | 292,950 | 22.4 | % | $ | 934,549 | $ | 843,888 | 10.7 | % | ||||||||||||
| Stock Compensation Expense | 16,500 | 9,000 | 83.3 | % | 34,500 | 27,000 | 27.8 | % | ||||||||||||||||
| Professional Fees | 56,268 | (18,417 | ) | 405.5 | % | 361,300 | 211,196 | 71.1 | % | |||||||||||||||
| Advertising | 137,890 | 72,859 | 89.3 | % | 355,361 | 257,841 | 37.8 | % | ||||||||||||||||
| All Other | 467,396 | 472,199 | (1.0 | )% | 1,568,312 | 790,782 | 98.3 | % | ||||||||||||||||
| Total SG&A | $ | 1,036,547 | $ | 828,591 | 25.1 | % | $ | 3,254,022 | $ | 2,130,707 | 52.7 | % | ||||||||||||
Payroll, selling and administrative expense increased 22.4% and 10.7% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025. The increase in payroll expense reflects additional personnel hired during 2026 and higher staffing costs associated with increased operating activity.
Non-cash stock compensation expense increased 83.3% and 27.8% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025. The increase in non-cash stock compensation expense reflects additional equity compensation recognized for directors and employees during 2026.
Professional fees increased 405.5% and 71.1% for the three and nine months ended September 30, 2026 compared with the corresponding periods in 2025. The increase in professional fees was primarily attributable to higher audit, legal, consulting and other professional fees. The three-month increase was also affected by a net credit to professional fees recorded in the three months ended September 30, 2025.
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Advertising expense increased 89.3% and 37.8% for the three and nine months ended September 30, 2026, respectively, compared with the corresponding periods in 2025. The increase in advertising expense was primarily attributable to increased online and social media advertising, particularly for BLU3, together with increased marketing activity across the Company.
All other SG&A expenses decreased 1.0% for the three months ended September 30, 2026 and increased 98.3% for the nine months ended September 30, 2026, compared with the corresponding periods in 2025. All other SG&A expenses were substantially unchanged for the three-month period as increases in rent and occupancy and other operating costs were offset by decreases in other miscellaneous expenses. For the nine-month period, the increase was primarily attributable to higher rent and occupancy costs, insurance, payroll-related taxes and benefits, and other operating expenses. Rent expense during the three months ended September 30, 2026 also reflects costs associated with the Company’s new Davie facility beginning in August 2026.
Research & Development Expenses (R&D Expenses)
R&D expenses for the three and nine months ended September 30, 2026 increased 5,198.4% and 719.1%, respectively, compared with the corresponding periods in 2025. The increase in research and development expense was primarily attributable to a more deliberate allocation of engineering labor and other development costs to research and development activities. The increase was primarily related to engineering labor at LWA associated with the redesign of certain systems and related technical re-certification efforts, as well as other product development activities across the Company.
Other Income/Expense
For the three and nine months ended September 30, 2026, other income was $377,576 and $1,228,604, respectively, compared with $114,315 for each of the corresponding periods in 2025. Interest expense was $28,606 and $146,228 for the three and nine months ended September 30, 2026, respectively, compared with $55,587 and $53,804 for the corresponding periods in 2025. The increase in other income was primarily attributable to the Internal Revenue Service’s Employee Retention Credit related income, the write-off and settlement of certain historical liabilities, prior-period accounting corrections and other adjustments identified through the Company’s ongoing reconciliation and financial reporting processes, as well as other refunds and non-operating items. Other income during the third quarter also included gains associated with the disposition of certain assets and additional adjustments resulting from the reconciliation of historical account balances. Several of these items are non-recurring and we believe are not indicative of the Company’s ongoing operating performance.
Liquidity and Capital Resources
We had cash of $790,026 as of September 30, 2026. The following table summarizes total current assets, total current liabilities and working capital at September 30, 2026, as compared to December 31, 2025.
| September 30, 2026 | December 31, 2025 | % change | ||||||||||
| (unaudited) | ||||||||||||
| Total current assets | $ | 4,552,209 | $ | 3,040,113 | 49.7 | % | ||||||
| Total current liabilities | $ | 2,690,775 | $ | 2,461,040 | 9.3 | % | ||||||
| Working capital | $ | 1,861,433 | $ | 579,073 | 221.5 | % | ||||||
Total current assets increased to $4,552,209 at September 30, 2026 from $3,040,113 at December 31, 2025, while total current liabilities increased to $2,690,775 from $2,461,040. Working capital increased to $1,861,433 from $579,073. The increase in current assets was primarily attributable to increases in cash, inventory, accounts receivable, and prepaid expenses and other current assets. The increase in current liabilities was primarily attributable to higher accounts payable and accrued liabilities and operating lease liabilities, partially offset by reductions in current debt balances. As a result, working capital increased significantly from December 31, 2025.
Summary Cash Flows
| Nine months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| (unaudited) | ||||||||
| Net cash provided by operating activities | $ | 711,316 | $ | 61,865 | ||||
| Net cash used in investing activities | $ | 29,022 | $ | - | ||||
| Net cash used in financing activities | $ | 200,153 | $ | - | ||||
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Net cash provided by operating activities for the nine months ended September 30, 2026 was $711,316. Net cash provided by operating activities primarily reflects net income for the period, adjusted for non-cash items and changes in operating assets and liabilities. Cash generated from earnings and increases in accounts payable and accrued liabilities was partially offset by increased investment in inventory, higher accounts receivable and prepaid expenses, and cash payments associated with operating leases.
Net cash used in investing activities for the nine months ended September 30, 2026 was $29,022. Net cash used in investing activities was primarily attributable to purchases of property and equipment. The acquisition of Sunrise Paddleboards was principally a non-cash transaction and therefore did not materially affect investing cash flows during the period.
Net cash used in financing activities for the nine months ended September 30, 2026 was $200,153. Net cash used in financing activities was primarily attributable to repayments of loans and notes payable, including related-party debt, partially offset by proceeds from new equipment financing during the period.
Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis. Although the Company reported net income of $1,371,382 for the nine months ended September 30, 2026 and had a working capital surplus of approximately $1.9 million, the Company continues to have an accumulated deficit of approximately $16.9 million and a history of operating losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. Management’s plans to alleviate this substantial doubt include increasing revenues, controlling operating expenses, and obtaining additional capital as needed. However, there can be no assurance that these plans will be successful. Accordingly, substantial doubt about the Company’s ability to continue as a going concern remains. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, valuation of inventory, allowance for doubtful accounts, and equity-based transactions. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company’s operations, financial position or cash flows.
These recent accounting pronouncements are described in Note 2 to our unaudited consolidated financial statements contained in this Quarterly Report.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company and is not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under Exchange Act. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluations as of September 30, 2026, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in our internal control over financial reporting described below. A material weakness is a deficiency, or combination of deficiencies, that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected.
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Our management, including our Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the design and operations of our disclosure controls and procedures (defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) as of September 30, 2026 and based upon the such evaluation, have concluded that the disclosure controls and procedures were not effective as of such date due to the material weaknesses set forth below.
| ● | Insufficient number and lack of qualified accounting department and administrative personnel and support; | |
| ● | Insufficient written policies and procedures to ensure the correct application of accounting and financial reporting with respect to GAAP and SEC disclosure requirements; | |
| ● | Insufficient segregation of duties, oversight of work performed and lack of controls in our finance and accounting functions due to limited personnel; | |
| ● | Company’s systems that impact financial information and disclosures have ineffective information technology controls; | |
| ● | Inadequate controls surrounding revenue recognition, to ensure that all material transactions and developments impacting the financial statements are reflected and properly recorded; and | |
| ● | Evaluation of disclosure controls and procedures was not sufficiently comprehensive due to limited personnel. |
Subject to sufficient resources, management expects to remediate the material weaknesses identified above as follows:
| ● | Management has leveraged and will continue to leverage experienced consultants to assist with ongoing GAAP and SEC compliance requirements. We intend to expand our finance department through the hiring of a certified public accountant to strengthen the segregation of duties, internal controls and enhance our current staff. | |
| ● | Segregation of duties is being analyzed and adjusted Company-wide, where possible. The Company intends to hire additional personnel in the accounting department, as well as the documentation of controls and procedures. | |
| ● | The Company plans on evaluating various accounting systems to enhance its system controls. |
We will continue to monitor and evaluate the effectiveness of our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediate until such time as we have added to our accounting and administrative staff allowing improved internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting except as set forth below.
We believe that weaknesses in our financial reporting review and verification processes contributed to the errors requiring the restatement of our financial statements reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. Accordingly, management, under the oversight of our board of directors, has commenced additional remediation measures intended to strengthen our financial reporting and disclosure controls. These measures include:
| ● | Enhancing management and Board-level review of quarterly and annual financial statements and SEC filings; | |
| ● | Strengthening period-end close, reconciliation and verification procedures, including procedures specifically designed to confirm that financial information corresponds to the correct reporting period and fiscal year; | |
| ● | Establishing additional review checkpoints intended to compare reported financial results with underlying accounting records and management’s understanding of actual operating performance; | |
| ● | Implementing technology-assisted financial review procedures, including AI-enabled analytical testing, as a supplemental control designed to identify period inconsistencies, mathematical discrepancies, unusual variances, internal inconsistencies and other potential reporting anomalies for further human review; | |
| ● | Requiring that exceptions or inconsistencies identified through these procedures be investigated and resolved prior to authorization of applicable SEC filings; | |
| ● | Evaluating our accounting and financial-reporting organizational structure, including the qualifications, responsibilities and resources necessary to support our SEC reporting obligations; and | |
| ● | Implementing personnel and responsibility changes within our financial reporting function designed to strengthen technical accounting capability, accountability, review and segregation of responsibilities and to address identified sources of the reporting errors. |
The Company expects these remediation efforts to continue as management and the Board evaluate the Company’s financial reporting personnel, processes, systems and controls. There can be no assurance that the measures implemented to date will fully remediate the Company’s material weaknesses or prevent future misstatements, and the Company may implement additional measures as its evaluation continues.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company and is not required to provide this information.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the Company, except as noted below.
On July 1, 2026, in connection with the Sunrise Paddleboards asset acquisition, the Company issued 42,000,000 shares of common stock to the sole member and owner of Sunrise Paddleboards and 1,000,000 shares of common stock to an employee of Sunrise Paddleboards.
On July 31, 2026, the Company issued an aggregate of 635,101 shares of common stock to Blake Carmichael as compensation for cash reduction in his salary.
On August 31, 2026, the Company issued an aggregate of 711,577 shares of common stock to Blake Carmichael as compensation for cash reduction in his salary.
On September 30, 2026, the Company issued an aggregate of 870,664 shares of common stock to Blake Carmichael as compensation for cash reduction in his salary.
On September 30, 2026, the Company issued an aggregate of 1,125,000 shares of common stock to Robert Carmichael for board of directors’ compensation for the quarter ended September 30, 2026.
On September 30, 2026, the Company issued an aggregate of 1,125,000 shares of common stock to Charles F. Hyatt for board of directors’ compensation for the quarter ended September 30, 2026.
On September 30, 2026, the Company issued an aggregate of 1,125,000 shares of common stock to Mikkel Pitzner for board of directors’ compensation for the quarter ended September 30, 2026.
On September 30, 2026, the Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest for the three months ended September 30, 2026.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
None.
ITEM 5. OTHER INFORMATION
Appointment of Blake Carmichael as President and Chief Operating Officer
Blake Carmichael, age 31, the chief executive officer and president of BLU3 since December 2017, was appointed President and Chief Operating Officer of the Company, effective as of November 4, 2026. Since December 2017, Mr. Carmichael has served as Chief Executive Officer of BLU3 where his primary focus was the development of battery powered hookah diving products. Mr. Carmichael graduated from Florida Atlantic University in May 2017 as an electrical engineer with a Bachelor of Science in Electrical Engineering.
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Upon Blake Carmichael’s appointment, Robert Carmichael resigned as President but remains Chairman, Chief Executive Officer and a director of the Company.
The appointment of Blake Carmichael was not pursuant to any arrangement or understanding between him and any other person.
Blake Carmichael is the son of Robert Carmichael.
Blake Carmichael has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K, except as described elsewhere in this Quarterly Report, including in the footnotes to the financial statements and in Part II, Item 2 above.
The Company has not entered into any material plan, contract or arrangement with Blake Carmichael, and no grant or award has been made to Blake Carmichael in connection with his appointment as President and Chief Operating Officer except that he will be entitled to a $25,000 increase in his annual base salary to be paid in accordance with the regular payroll practices of the Company.
Rule 10b5-1 trading arrangements
During
the quarter ended September 30, 2026, no director, officer or Section 16 officer
ITEM 6. EXHIBITS
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SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 4, 2026 | BROWNIE’S MARINE GROUP, INC. | |
| By: | /s/ Robert M. Carmichael | |
| Robert M. Carmichael | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Robert M. Carmichael | |
| Robert M. Carmichael | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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