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Brownie's Marine Group, Inc - Quarter Report: 2008 June (Form 10-Q)

 
 
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(MARK ONE)

þ Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2008
 
o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from _______ to _______.
 
Commission File No. 000-28321

BROWNIE’S MARINE GROUP, INC.
(Name of Small Business Issuer in Its Charter)

Nevada
  
90-0226181
(State or Other Jurisdiction of Incorporation or Organization)
  
(I.R.S. Employer Identification No.)
     
940 N.W. 1st Street, Fort Lauderdale, Florida
  
33311
(Address of Principal Executive Offices)
  
(Zip Code)
 
(954) 462-5570
(Issuer’s Telephone Number, Including Area Code)
 
(Former Name, if Changed Since Last Report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 x No o 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o  Accelerated filer o
 
Non-accelerated filer o (Do not check if a smaller reporting company)      Smaller reporting company x 
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x
 
There were 1,658,357 shares of common stock outstanding as of July 30, 2008.
 
 
 
PART I
 
ITEM 1. FINANCIAL STATEMENTS
 
Financial Information 
 
BROWNIE'S MARINE GROUP, INC.
CONSOLIDATED STATEMENTS OF BALANCE SHEETS
 
   
June 30,
2008
  
December 31,
2007
  
   
(Unaudited)
   
ASSETS
         
           
Current assets
          
Cash
  
$
148,461
  
$
142,516
  
Accounts receivable, net of $20,000 allowance for doubtful accounts
    
143,901
   
38,512
 
Inventory
    
649,982
   
656,303
 
Prepaid expenses and other current assets
    
120,227
   
81,879
 
Deferred tax asset, net - current
    
43,436
   
32,328
 
Total current assets
    
1,106,007
   
951,538
 
               
Property, plant and equipment, net
    
1,214,422
   
1,229,898
 
               
Deferred tax asset, net - non-current
    
—
    
52,363
 
Other assets
    
6,968
   
6,968
 
               
Total assets
  
$
2,327,397
  
$
2,240,767
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
             
               
Current liabilities
              
Accounts payable and accrued liabilities
  
$
262,795
  
$
397,292
  
Customer deposits
    
161,994
   
286,220
 
Royalties payable - related parties
    
53,713
   
15,263
 
Other liabilities - related parties
    
10,000
   
117,601
 
Income taxes payable
    
150,401
   
—
  
Other liabilities
    
7,204
   
9,477
 
Notes payable - current portion
    
45,434
   
46,031
 
Notes payable - related parties - current portion
    
70,109
   
70,924
 
Total current liabilities
    
761,650
   
942,808
 
               
Long-term liabilities
              
Deferred tax liability, net - non-current
    
6,279
   
—
  
Notes payable - long-term portion
    
903,174
   
925,399
 
Notes payable - related parties - long-term portion
    
573,276
   
609,857
 
               
Total liabilities
    
2,244,379
   
2,478,064
 
               
Commitments and contingencies
              
               
Stockholders' equity (deficit)
              
Common stock; $0.001 par value; 250,000,000 shares authorized
              
1,685,538 shares issued and outstanding
    
1,685
   
1,685
 
Additional paid-in capital
    
839,666
   
839,666
 
Accumulated deficit
    
(758,333
)
  
(1,078,648
)
Total stockholders' equity (deficit)
    
83,018
   
(237,297
)
               
Total liabilities and stockholders' equity (deficit)
  
$
2,327,397
  
$
2,240,767
  
 
See Accompanying Notes to Consolidated Financial Statements
 
2
 
BROWNIE'S MARINE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
   
Three Months Ended June 30,  
  
Six Months Ended June 30,  
  
   
2008
  
2007
  
2008
  
2007
  
Net revenues
  
$
1,729,073
  
$
923,309
  
$
2,923,874
  
$
1,802,566
  
                           
Cost of net revenues
    
934,137
   
576,423
   
1,763,789
   
1,162,273
 
                           
Gross profit
    
794,936
   
346,886
   
1,160,085
   
640,293
 
                           
Operating expenses
                          
Research and development costs
    
993
   
1,497
   
1,122
   
1,822
 
Selling, general and administrative
    
328,375
   
253,353
   
561,067
   
504,599
 
 Total operating expenses
    
329,368
   
254,850
   
562,189
   
506,421
 
                           
Income from operations
    
465,568
   
92,036
   
597,896
   
133,872
 
                           
Other expense (income), net
                         
Other (income) expense
    
7,466
   
(50,963
)
  
4,240
   
(61,729
)
Interest expense
    
32,610
   
34,618
   
65,491
   
56,840
 
 Total other expense (income), net
    
40,076
   
(16,345
)
  
69,731
   
(4,889
)
                   
Net income before provision for income taxes
    
425,492
   
108,381
   
528,165
   
138,761
 
                           
Provision for income tax (expense) benefit
    
(202,254
)
  
37,295
   
(207,850
)
  
29,938
 
                           
Net income
 
$
223,238
  
$
145,676
  
$
320,315
  
$
168,699
  
                           
Basic income per common share
  
$
0.13
  
$
0.09
  
$
0.19
  
$
0.11
  
Diluted income per common share
  
$
0.13
  
$
0.08
  
$
0.19
  
$
0.10
  
                           
Basic weighted average common
                         
shares outstanding
    
1,685,538
   
1,602,568
   
1,685,538
   
1,588,933
 
Diluted weighted average common
                         
shares outstanding
    
1,685,538
   
1,780,235
   
1,685,538
   
1,756,540
 
 
 
See Accompanying Notes to Consolidated Financial Statements
 
3
 
BROWNIE'S MARINE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 
       
 
        
Total
 
   
Common Stock
 
Additional
Paid-in
 
Accumulated
 
Stockholders'
Equity 
  
   
Shares
 
Amount
 
Capital
 
Deficit
  
 (Deficit)
  
                       
Balance, December 31, 2007
   
1,685,538
 
$
1,685
  
$
839,666
  
$
(1,078,648
)
$
(237,297
)
                                 
Net income
   
—
    
—
    
—
    
97,077
   
97,077
 
                                 
Balance, March 31, 2008 (Unaudited)
   
1,685,538
   
1,685
   
839,666
   
(981,571
)
  
(140,220
)
                                 
Net income
   
—
    
—
    
—
    
223,238
   
223,238
 
                                 
Balance, June 30, 2008 (Unaudited)
   
1,685,538
 
$
1,685
  
$
839,666
  
$
(758,333
)
$
83,018
  
 
See Accompanying Notes to Consolidated Financial Statements
 
4
 
BROWNIE'S MARINE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
   
Six Months Ended June 30,
 
   
2008
  
2007
  
           
Cash flows from operating activities:
          
Net income
  
$
320,315
  
$
168,699
  
Adjustments to reconcile net income to net
              
cash provided by (used in) operating activities:
              
Depreciation and amortization
    
19,686
   
18,911
 
Change in deferred tax asset
    
41,255
   
(34,061
)
Change in deferred tax liability
   
6,279
   
—
  
Changes in operating assets and liabilities:
              
Change in accounts receivable, net
    
(105,389
)
  
(111,773
)
Change in inventory
    
6,321
   
(21,476
)
Change in costs and estimated earnings in excess of billings
    
—
    
—
  
Change in prepaid expenses and other current assets
    
(38,348
)
  
(12,582
)
Change in accounts payable and accrued liabilities
    
(134,497
)
  
(3,905
)
Change in customer deposits
    
(124,226
)
  
(68,870
)
Change in other liabilities
    
(2,273
)
  
(38,483
)
Change in income taxes payable
    
150,401
   
(2,114
)
Change in other liabilities - related parties
    
(107,601
)
  
—
  
Change in royalties payable - related parties
    
38,450
   
17,031
 
 Net cash provided by (used in) operating activities
    
70,373
   
(88,623
)
               
Cash flows from investing activities:
              
Purchase of fixed assets
    
(4,210
)
  
(1,118,363
)
 Net cash used in investing activities
   
(4,210
)
  
(1,118,363
)
               
Cash flows from financing activities:
              
Proceeds from borrowings on notes payable - related parties
    
—
    
100,000
 
Proceeds from borrowings on notes payable
   
—
    
1,000,000
 
Principal payments on notes payable - related parties
    
(37,396
)
  
(27,335
)
Principal payments on notes payable
   
(22,822
)
  
(18,169
)
 Net cash (used in) provided by financing activities
   
(60,218
)
  
1,054,496
 
               
Net change in cash
    
5,945
   
(152,490
)
               
Cash, beginning of period
    
142,516
   
208,187
 
               
Cash, end of period
  
$
148,461
  
$
55,697
  
               
Supplemental disclosure of cash flow information:
              
Cash paid for interest
  
$
65,383
  
$
56,840
  
               
Cash paid for income taxes
  
$
5,072
  
$
6,237
  
               
Supplemental disclosure of non-cash investing activities
              
Common stock issued toward real property purchase on
             
February 21, 2007
  
$
—
  
$
100,000
  
               
Supplemental disclosure of non-cash financing activities
              
Redemption of warrant for common stock pursuant to
             
warrant dated January 1, 2005.
  
$
—
  
$
5,689
  
 
See Accompanying Notes to Consolidated Financial Statements
 
5

BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.

Description of business - Brownie’s Marine Group, Inc. (hereinafter referred to as the “Company” or “BWMG”) designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba air compressor and Nitrox Generation Systems, and scuba and water safety products through its wholly owned subsidiary Trebor Industries, Inc. The Company sells its products both on a wholesale and retail basis, and does so from its headquarters and manufacturing facility in Fort Lauderdale, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor Industries, Inc.

Prior to August 22, 2007 the Company was known as United Companies Corporation (hereinafter referred to as “UCC”). The Company changed its name to Brownie’s Marine Group, Inc. during the third quarter of 2007 since it believes “Brownie’s Marine Group” more closely reflects its line of business, and it also brings brand recognition to the Company as a result of its existing products.

History -The Company was incorporated under the laws of Nevada on November 26, 2001, with authorized common stock of 250,000,000 shares with a par value of $0.001. On August 22, 2007, the Company effectuated a 1-for-100 reverse stock split of the Common Stock whereby every one hundred shares of Common Stock outstanding was combined and reduced to one share of Common Stock. Fractional shares were rounded up and this resulted in an additional 146 shares issued. All footnotes and financial statement amounts that relate to common share data have been retrospectively adjusted to reflect the reverse stock split.

On March 23, 2004, UCC consummated an agreement to acquire all of the outstanding capital stock of Trebor Industries, Inc., dba Brownies Third Lung, in exchange for 950,000 shares of the Company’s common stock (“the UCC Transaction”). Prior to the UCC Transaction, UCC was a non-operating public shell company with no operations, nominal assets, accrued liabilities totaling $224,323 and 144,837 shares of common stock issued and outstanding; and Trebor Industries, Inc., dba Brownies Third Lung, was a manufacturer and distributor of hookah diving, and yacht based scuba air compressor and Nitrox Generation Systems from its factory in Ft. Lauderdale, Florida. The UCC Transaction is considered to be a capital transaction in substance, rather than a business combination. Inasmuch, the UCC Transaction is equivalent to the issuance of stock by Trebor Industries, Inc., for the net monetary assets of a non-operational public shell company, accompanied by a recapitalization. UCC issued 950,000 shares of its common stock for all of the issued and outstanding common stock of Trebor Industries, Inc. The accounting for the UCC Transaction is identical to that resulting from a reverse acquisition, except goodwill or other intangible assets will not be recorded. Accordingly, these financial statements are the historical financial statements of Trebor Industries, Inc. Trebor Industries, Inc. was incorporated in September 17, 1981. Therefore, these financial statements reflect activities from September 17, 1981 (Date of Inception for Trebor Industries, Inc.) and forward.

Definition of fiscal year - The Company’s fiscal year end is December 31.

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications - Certain reclassifications have been made to the 2007 financial statement amounts to conform to the 2008 financial statement presentation.

6

BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)
 
Cash and 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.

Inventory - Inventory is stated at the lower of cost or market. Cost is principally determined by using the average cost method that approximates the First-In, First-Out (FIFO) method of accounting for inventory. Inventory consists of raw materials as well as finished goods held for sale. The Company’s management monitors the inventory for excess and obsolete items and makes necessary valuation adjustments when required.

Fixed assets - Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which is primarily 3 to 5 years except for the building that is being depreciated over a life of 39 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
 
Revenue recognition - Revenues from product sales are recognized when the Company’s products are shipped or when service is rendered. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost of each contract. This method is used because management considers the percentage of cost incurred to date to estimated total cost to be the best available measure of progress on the contracts.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Change in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Revenue and costs incurred for time and material projects are recognized as the work is performed.
 
Product development costs - Product development expenditures are charged to expenses as incurred.

Advertising and marketing costs - The Company recognizes advertising expenses in accordance with Statement of Position 93-7 “Reporting on Advertising Costs.” Accordingly, the Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of communicating advertisements in the period in which the advertising space or airtime is used. Advertising and trade show expense incurred for the three months ended June 30, 2008 and 2007, was $9,235 and $6,085, respectively. Advertising and trade show expense incurred for the six months ended June 30, 2008 and 2007, was $17,758 and $16,882, respectively.
 
Customer deposits and return policy - The Company takes a minimum 50% deposit against custom and large tankfill systems prior to ordering and/or building the systems. The remaining balance due is payable upon delivery, shipment, or installation of the system. There is no provision for cancellation of custom orders once the deposit has been accepted, nor return of the custom ordered product. Additionally, returns of all other merchandise are subject to a 15% restocking fee as stated on each sales invoice.
 
7
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)
 
Income taxes - The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards No. 109, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, (“FIN 48”) which clarifies the accounting for uncertainty in tax positions. FIN 48 requires the recognition of a tax position when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The Company adopted FIN 48 in the first quarter of 2007 without significant financial impact.

Comprehensive income (loss) - The Company has no components of other comprehensive income. Accordingly, net income (loss) equals comprehensive income (loss) for all periods.
 
Stock-based compensation - The Company accounts for stock based compensation in accordance with Statement of Financial Accounting Standards No. 123 revised that requires that the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period the employee is required to provide service in exchange for the award.
 
The Company did not issue any stock, warrants or options to employees for compensation for the six months ended June 30, 2008.

Fair value of financial instruments - The carrying amounts and estimated fair values of the Company’s financial instruments approximate their fair value due to the short-term nature.

Earnings (loss) per common share - Basic earnings 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 common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. All common stock equivalent shares were excluded in the computation at June 30, 2008 since their effect was antidilutive.
 
New accounting pronouncements - In May 2008, the Accounting Standards Board (“FASB”) issued Financial Accounting Statement (“SFAS”) No. 162, “The Hierarchy of Generally Accepted Accounting Principles (“GAAP”). The GAAP hierarchy is currently set forth in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69, the Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. Auditing Standards No. 69 is (1) directed to the auditor, (2) is complex, and (3) ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as the FASB Statements of Financial Accounting Statements, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should reside in the accounting literature established by the FASB and instead of being directed to the auditor, should be directed to entities since they are responsible for selecting accounting principles for financial statements that are presented in accordance with GAAP. This statement is to become effective 60 days following the SEC’s approval of the Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect any significant financial impact upon adoption of SFAS No. 162.
 
8
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)

New accounting pronouncements (continued) - In May 2008, the FASB issued STAFF POSITION (FSP) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement”. This FSP applies to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. FSP No. 14-1 clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. Additionally, this FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost recognized in subsequent periods. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not currently have any debt instruments for which this FSP would apply and does not expect to have any significant financial impact upon adoption in January 2009. Early adoption is not permitted.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133.” This statement is intended to enhance the current disclosure framework in SFAS No. 133. Under SFAS No. 161, entities will have to provide disclosures about (a) how and why and entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c), how derivative instruments and related hedged items effect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for all financial statements issued for fiscal and interim periods beginning after November 15, 2008. Since the Company does not currently have any derivative instruments, nor does it engage in hedging activities, the Company expects to have no significant financial impact as a result of adoption of SFAS No. 161.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for the Company with respect to business combinations for which the acquisition date is on or after January 1, 2009. The Company does not currently anticipate a significant financial impact upon adoption of SFAS No. 141.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of noncontrolling owners. SFAS 160 is effective for the Company as of January 1, 2009. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 160 on the consolidated financial position, results of operations, and disclosures.

9
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)

New accounting pronouncements (continued) - In December 2007, the Security and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 110 (“SAB 110”). SAB 110 relates to the use of the “simplified” method, as discussed in SAB No.107 (“SAB 107”), in developing an estimate of expected term of “plain vanilla” share option in accordance with SFAS No. 123 (revised 2004), Share-Based Payment. The Staff’s view in SAB 107 was that it did not expect companies to use the simplified method for share option grants after December 31, 2007 since it believed that more detailed external information about employee exercise behavior would be available to companies by this date. Since this is not true in all cases, SAB 110 states that under certain circumstances, the Staff will continue to accept the use of the simplified method beyond December 31, 2007. The Company is currently evaluating this guidance and does not anticipate it will have significant financial impact
 
2.
INVENTORY

Inventory consists of the following as of:

   
June 30, 2008
  
December 31, 2007
  
Raw materials
  
$
406,035
  
$
418,123
  
Work in process
    
—
    
—
  
Finished Goods
    
243,947
    
238,180
  
   
$
649,982
  
$
656,303
  
 
3.
PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets totaling $120,227 at June 30, 2008, consists of $93,538 of prepaid inventory, $18,771 of prepaid insurance, and $7,918 of other prepaid expenses.

Prepaid expenses and other current assets totaling $81,879 at December 31, 2007, consists of $47,287 of prepayments for inventory, $16,168 of prepaid insurance, $17,822 of federal and state income taxes receivable due for estimated taxes paid and net operating loss carry back, and $602 of other prepaid expenses.

10
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
4.
PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment consists of the following as of:
 
   
June 30, 2008
 
December 31, 2007
  
Building and land
  
$
1,218,362
  
$
1,218,362
  
Furniture, fixtures, vehicles and equipment
    
246,945
    
242,735
  
     
1,465,307
    
1,461,097
  
Less: accumulated depreciation and amortization
    
250,885
    
231,199
  
   
$
1,214,422
  
$
1,229,898
  
 
For the three months ended June 30, 2008 and 2007, depreciation expense was $9,883 and $9,932, respectively.
For the six months ended June 30, 2008 and 2007, depreciation expense was $19,686 and 18,210.
 
On February 21, 2007 the Company purchased the corporate headquarters, factory and distribution center of the Company located at 936/940 NW 1st Street, Ft. Lauderdale, FL 33311 from GKR Associates, LLC, an entity in which the Chief Executive Officer has an ownership interest. The purchase price was $1,200,000, and is secured by a first mortgage payable to the bank of $1,000,000, and $100,000 secured by a second mortgage payable to the seller, GKR Associates, Inc. The balance of $100,000 was paid by 44,400 shares of the Company’s common stock based on market price of the stock on the purchase date. In addition, $18,362 of closing expenses were capitalized to the building.
 
5.
CUSTOMER CREDIT CONCENTRATIONS

Sales to Brownie’s Southport Diver’s, Inc. for the three months ended June 30, 2008 and 2007 represented 8.53% and 14.17%, respectively, of total net revenues for the period. Sales to Brownie’s Southport Diver’s, Inc. for the six months ended June 30, 2008 and 2007 represented 11.69% and 24.23%, respectively, of total net revenues for the period. Sales to Shadow Marine, and Al Masaood Marine and Engineering Division for the three months ended June 30, 2008 represented 16.36%, and 20.50%, respectively, of total net revenues for the period. Sales to Shadow Marine, and Al Masaood Marine and Engineering Division for the six months ended June 30, 2008 represented 18.00%, and 16.92%, respectively, of total net revenues for the period. Sales to no other customer represented greater than 10% of net revenues for the three and six months ended June 30, 2008 and 2007.

The brother of Robert Carmichael, the Company’s Chief Executive Officer, as further discussed in Note 6 - RELATED PARTY TRANSACTIONS, owns Brownie’s Southport Diver’s Inc. 

11
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6.
RELATED PARTY TRANSACTIONS

Notes payable - related parties - Notes payable - related parties consist of the following as of June 30, 2008:

Promissory note payable to the Chief Executive Officer of the Company, secured by Company assets, bearing interest at 10% per annum, due in monthly principal and interest payments of $6,047, maturing on January 15, 2016.
  
$
384,795
  
         
Promissory note payable to an entity owned by the Company’s Chief Executive Officer, 940 Associates, Inc., secured by Company assets, bearing interest at 10% per annum, due in monthly principal and interest payments of $2,861, maturing on January 1, 2016.
    
181,904
  
         
Promissory note payable due an entity in which the Company’s Chief Executive Officer has a financial interest, GKR Associates, LLC., secured by second mortgage on real property, bearing 6.99% interest per annum, due in monthly principal and interest payments of $2,292, maturing on February 22, 2012.
    
76,686
  
         
     
643,385
  
         
Less amounts due within one year
    
70,109
  
         
Long-term portion of notes payable - related parties
  
$
573,276
  

As of June 30, 2008, principal payments on the notes payable - related parties are as follows:

2008
  
$
33,569
  
2009
    
74,794
  
2010
    
81,986
  
2011
    
89,885
  
2012
    
78,281
  
Thereafter
   
284,870
  
         
   
$
643,385
  
 
12

BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
6.
RELATED PARTY TRANSACTIONS (continued)

Notes payable - related parties - Notes payable - related parties consist of the following as of December 31, 2007:

Promissory note payable to the Chief Executive Officer of the Company, secured by Company assets, bearing interest at 10% per annum, due in monthly principal and interest payments of $6,047, maturing on January 15, 2016.
  
$
404,183
  
         
Promissory note payable to an entity owned by the Company’s Chief Executive Officer, 940 Associates, Inc., secured by Company assets, bearing interest at 10% per annum, due in monthly principal and interest payments of $2,861, maturing on January 1, 2016.
    
190,941
  
         
Promissory note payable due an entity in which the Company’s Chief Executive Officer has a financial interest, GKR Associates, LLC., secured by second mortgage on real property, bearing 6.99% interest per annum, due in monthly principal and interest payments of $2,292, maturing on February 22, 2012.
    
85,657
  
         
     
680,781
  
         
Less amounts due within one year
    
70,924
  
         
Long-term portion of notes payable - related parties
  
$
609,857
  

Revenues - The Company sells products to three entities owned by the brother of the Company’s Chief Executive Officer, Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys. Terms of sale are no more favorable than those extended to any of the Company’s other customers. Combined net revenues from these entities for the three months ended June 30, 2008 and 2007, was $216,361 and $166,528, respectively. Combined net revenues from these entities for the six months ended June 30, 2008 and 2007, was $474,261 and $518,588, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at June 30, 2008, was $6,607, $2,947, and $8,504, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2007, was $2,597, $1,038, and $0, respectively.

Royalties - The Company has Non-Exclusive License Agreements with the Carleigh Rae Corporation (herein referred to as “CRC”), an entity that the Company’s Chief Executive Officer has an ownership interest, to license product patents it owns. Based on the license agreements with CRC, the Company pays royalties ranging from $1.00 to $50.00 per licensed products sold, with rates increasing 5% annually. Also with CRC, the Company has a Non-Exclusive License Agreement to license a trademark of products owned by CRC. Based on the agreement, the Company will pay the entity $0.25 per licensed product sold, with rates increasing $0.05 annually.

13

BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6.
RELATED PARTY TRANSACTIONS (continued)

The Company has Non-Exclusive License Agreements with 940 Associates, Inc. (herein referred to as “940AI”), an entity owned by the Company’s Chief Executive Officer, to license product patents it owns. Under the terms of the license agreements effective January 1, 2005, the Company pays 940AI $2.00 per licensed product sold, rates increasing 5% annually. Also with 940AI, the Company has an Exclusive License Agreement to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. Based on this license agreement, the Company pays 940AI 2.5% of gross revenues per quarter.

Total royalty expense for the above agreements for the three months ended June 30, 2008 and 2007, was $53,747 and $25,519, respectively. Total royalty expense for the above agreements for the six months ended June 30, 2008 and 2007, was $77,367 and $48,957, respectively.
 
Jeff Morris, a greater than 10% beneficial owner of common stock of the Company, provides management and strategic consulting services for BWMG. For these services, Mr. Morris earned $30,000, and $30,000, from the Company for the three months ended June 30, 2008, and 2007, respectively. For the six months ended June 30, 2008, and 2007, Mr. Morris earned $60,000, and $60,000, respectively.

Other liabilities - related parties

At June 30, 2008, Other liabilities - related parties was $10,000 that consisted of one month of consulting revenue due Mr. Morris that was subsequently paid in July 2008.

At December 31, 2007, Other liabilities - related parties consists of the balance due related parties for full settlement of a loan payable due a customer as referred to in Note 8 - LOAN PAYABLE, and an amount outstanding due to a shareholder of the Company for consulting services rendered as follows:

Due to Brownies Southport Diver’s, Inc.
  
$
16,820
  
Due to Robert M. Carmichael
    
37,500
  
Due to 940 Associates, Inc.
   
43,281
  
Loan payable to related parties for settlement of customer loan payable
    
97,601
  
         
Management and strategic consulting service due Jeff Morris
    
20,000
  
         
Other liabilities - related parties
  
$
117,601
  
 
14
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities of $262,795 at June 30, 2008 consists of $102,974 accounts payable trade, $60,574 balance of legal expenses that were a Company expense prior to the reverse merger with Trebor Industries, Inc., $80,869 of accrued payroll and related fringe benefits, $5,066 of accrued interest, and $13,312 of other liabilities and accruals.

Accounts payable and accrued liabilities of $397,292 at December 31, 2007 consists of $258,923 accounts payable trade, $60,574 balance of legal expenses that were a UCC expense prior to the reverse merger with Trebor Industries, Inc., $66,593 of accrued payroll and related fringe benefits, and $11,202 of other liabilities and accruals.

8.
OTHER LIABILITIES - RELATED PARTIES

In June 2006, the Company borrowed $266,000 from a customer. The proceeds of the loan were used to satisfy the outstanding principal balance, redemption fees, and accrued interest totaling $266,777 due under the secured convertible debentures held by a third party lender. In July 2007, the Company settled the obligation due the customer through a series of transactions that resulted in cancellation of amounts due to and from the customer and related parties of the customer and the Company. The settlement resulted in cancellation of $156,426 of trade accounts receivable due the Company from the customer and its related parties, assumption of $110,351 of liabilities incurred by the customer due to related parties of the Company, and settlement loss of $777. As of June 30, 2008 all liabilities due the aforementioned related parties as a result of this transaction had been settled in full.

9.
OTHER LIABILITIES
 
Other liabilities of $7,204 at June 30, 2008 consists of $5,065 of on-line training liability, and $2,139 of deferred tooling expense. Other liabilities of $9,477 at December 31, 2007 consists of $6,538 of on-line training liability, and $2,939 of deferred tooling expense.

Effective July 1, 2005, the Company began including on-line training certificates with all hookah units sold. The training certificates entitle the holder to an on-line interactive course at no additional charge to the holder. The number of on-line training certificates issued per unit is the same as the number of divers the unit as sold is designed to accommodate (i.e., a three diver unit configuration comes with three on-line training certificates). The certificates have an eighteen-month redemption life after which time they expire. The eighteen-month life of the certificates begins at the time the customer purchases the unit. The Company owes the on-line training vendor the agreed upon negotiated rate for all on-line certificates redeemed payable at the time of redemption. For certificates that expire without redemption, no amount is due the on-line training vendor. The Company had no historical data with regard to the percentage of certificates that would be redeemed versus those that would expire. Therefore, until the Company accumulated historical data related to the certificate redemption ratio, it assumed that 100% of certificates issued with unit sales would be redeemed. Accordingly, at the time a unit was sold, the related on-line training liability was recorded. The same liability was reduced as certificates are redeemed and the related payments are made to the on-line training vendor.

In July 2007, the Company had accumulated 24 months of historical data regarding redemption rates so the liability estimate was adjusted accordingly to reflect the actual redemption history. On a go forward basis the Company is maintaining a reserve for certificate redemption of 10% that approximates the historical redemption rate.
 
15
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

10.
NOTES PAYABLE

Notes payable consists of the following as of June 30, 2008:

Promissory note payable secured by a vehicle of the Company having a carrying value of $1,570 at June 30, 2008, bearing no interest, due in monthly principal and interest payments of $349, maturing on November 14, 2008.
  
$
1,745
  
         
Revolving Line of Credit secured by a third mortgage on the real property of the Company with a carrying value $1,182,458 at June 30, 2008, bearing interest at the lender’s base rate plus 1.00% per annum. Interest payments are due monthly on the outstanding principal balance and the Line of Credit matures on March 5, 2009.
    
—
  
         
Promissory note payable secured by a first mortgage on the real property of the Company having a carrying value of $1,182,458 at June 30, 2008, bearing interest at 6.99% per annum, due in monthly principal and interest payments of $9,038, maturing on January 22, 2022.
    
946,863
  
         
     
948,608
  
Less amounts due within one year:
    
45,434
  
         
Long-term portion of notes payable
  
$
903,174
  

As of June 30, 2008, principal payments on the notes payable are as follows:

2008
  
$
23,209
  
2009
    
45,239
  
2010
    
48,504
  
2011
    
52,006
  
2012
    
55,760
  
Thereafter
    
723,890
  
         
   
$
948,608
  

Notes payable consists of the following as of December 31, 2007:

Promissory note payable secured by a vehicle of the Company having a carrying value of $3,664 at December 31, 2007, bearing no interest, due in monthly principal and interest payments of $349, maturing on November 14, 2008.
  
$
3,839
  
         
Promissory note payable secured by real property of the Company having a carrying value of $1,195,514 at December 31, 2007, bearing interest at 6.99% per annum, due in monthly principal and interest payments of $9,038, maturing on January 22, 2022.
    
967,592
  
         
     
971,431
  
         
Less amounts due within one year:
    
46,032
  
         
Long-term portion of notes payable
  
$
925,399
  
 
16
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

11.
REVERSE STOCK SPLIT

On August 22, 2007, the Company effectuated a 1-for-100 reverse stock split of the Common Stock whereby every one hundred shares of Common Stock outstanding was combined and reduced to one share of Common Stock. Fractional shares were rounded up and this resulted in an additional 146 shares issued.

12.
STOCK WARRANTS

As of March 31, 2007, all the rights to exercise 285,714 warrants had vested pursuant to a Warrant agreement dated January 1, 2005. The exercise price of the warrants is $.7 per share, which equaled the bid/ask price of the Company’s common stock on January 1, 2005, the effective date of the expired consulting agreement. The warrants expire twenty-four months after the vesting date of each of tranche of 71,429 at June 30, 2007, December 31, 2007, June 30, 2008, and December 31, 2008, respectively. Further, the warrants have “piggy-back” registration rights and provide for either a cash or cashless exercise. The cashless exercise provision provides for a discount in the amount of shares provided at exercise based on a formula that takes into account as one of its factors the average of the closing sale price on the common stock for five trading days immediately prior to but not including the date of exercise.

On June 29, 2007 a warrant tranche of 71,429 related to the above agreement was exercised. The cashless exercise was elected, and accordingly, 56,894 shares of common stock were issued. On December 28, 2007, an additional warrant tranche of 71,429 related to the above agreement was exercised. The cashless exercise was elected, and accordingly, 27,181 shares of common stock were issued. The Company recognized compensation expense for the stock warrants ratably over the term of the consulting agreement, January 1, 2005 to December 31, 2006, based on the fair value of the stock warrants using the Black-Scholes model. As a result, issuance of the stock in June and December 2007 were equity only transactions. On June 30, 2008, a warrant tranche of 71,429 expired without being exercised.

On the date of the reverse stock split, the outstanding warrants underwent a 1-for-100 split, and amounts in the footnote pre-split have been adjusted to reflect the share amounts post split.

13.
EQUITY INCENTIVE PLAN

On August 22, 2007 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 Nonstatutory Stock Options. Stock Purchase Rights, time vested and/performance invested Restricted Stock, and Stock Appreciation Rights and Unrestricted Shares may also be granted under the Plan. The initial maximum number of shares that may be issued under the Plan shall be 400,000 shares, and no more than 100,000 Shares of Common Stock may be granted to any one Participant with respect to Options, Stock Purchase Rights and Stock Appreciation Rights during any one calendar year period. Common Stock to be issued under the Plan may be either authorized and unissued or shares held in treasury by the Company. The term of the Plan shall be ten years. The Board of Directors may amend, alter, suspend, or terminate the Plan at any time. No Options, Stock Purchase Rights or Stock Appreciation Rights were granted under the Plan for the six months ended June 30, 2008.

17
 
BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
14.
INCOME TAXES

The components of the provision for income taxes are as follows:

   
Three months ended June 30, 2008
  
Six months ended
June 30, 2008
  
Current taxes:
          
Federal
  
$
(133,306
)
$
(133,306
)
State
    
(21,938
)
  
(27,010
)
Current taxes
   
(155,244
)
  
(160,316
)
Change in deferred taxes
    
(51,678
)
  
(52,376
)
Change in valuation allowance
    
4,668
    
4,842
  
Provision for income tax expense
  
$
(202,254
)
$
(207,850
)
 
The current tax federal statutory and state tax rate for the three and six months ended June 30, 2008 was 34% and 15%, respectively. The effective tax rate used for calculation of the deferred taxes as of June 30, 2008 was 34%.
 
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at June 30, 2008:

Deferred tax assets:
      
Stock warrants
  
$
16,885
  
Allowance for doubtful accounts
    
8,000
 
Net loss carry forward
   
41,179
  
On-line training certificate reserve
    
760
  
Total deferred tax assets
    
66,824
  
Valuation allowance
    
(23,388
)
         
Deferred tax assets net of valuation allowance
    
43,436
  
         
Less: deferred tax asset - non-current
    
—
  
         
Deferred tax asset - current
  
$
43,436
  
         
         
Deferred tax liability:
        
Depreciation and amortization timing differences
  
$
6,279
  
         
Less: deferred liability - non-current
    
6,279
  
         
Deferred tax liability - current
  
$
—
  

As of June 30, 2008, the Company has available a net operating loss carry forward that will expire in 2026. The Company has established a valuation allowance for 34% of the tax benefit due to the uncertainty regarding realization.

18

BROWNIE’S MARINE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

14.
INCOME TAXES (continued)

The components of the provision for income taxes for the year ended December 31, 2007 are as follows:

Current Taxes:
      
Federal
  
$
12,196
  
State
    
5,626
  
Current Taxes
    
17,822
  
Change in deferred taxes
    
39,030
  
Change in valuation allowance
    
771
 
Provision for income tax benefit
  
$
57,623
  
 
The current tax federal statutory and state tax rate for the year ended December 31, 2007 was 0% and 0%, respectively. The effective tax rate used for calculation of the deferred taxes as of December 31, 2007 was 34%.
 
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2007:

Deferred tax assets:
      
Stock warrants
  
$
33,769
  
Allowance for doubtful accounts
    
3,060
  
Depreciation and amortization timing differences
    
22,174
  
Net loss carry forward
   
52,936
  
On-line training certificate reserve
    
981
  
Total deferred tax assets
    
112,920
  
Valuation allowance
    
(28,229
)
         
Deferred tax assets net of valuation allowance
    
84,691
  
Less: deferred tax asset - non-current
    
(52,363
)
         
Deferred tax asset - current
  
$
32,328
  

As of December 31, 2007, the Company has available a net operating loss carry forward that will expire in 2026. The Company established a valuation allowance for 25% of the tax benefit due to the uncertainty regarding realization.

15.
SUBSEQUENT EVENTS

Effective July 31, 2008, as disclosed in a Form 8K filed on August 1, 2008, the Company entered into an Asset Purchase Agreement with Robert Carmichael, the Company’s Chief Executive Officer and largest shareholder, pursuant to which the Company acquired a granted European and pending U.S. Patent relating to active control releasable ballast systems for diving equipment ( the “Intellectual Property”) and certain contracts related the Intellectual Property (the “Contracts”). The Contracts include a non-exclusive licensing agreement with a third party for a fee of $228,000. The Intellectual Property and Contracts are collectively referred to as the “Assets”. Per the stated terms of the Asset Purchase Agreement, the purchase price for the Assets was $297,000, consisting of issuance of 100,000 of restricted shares of the Company’s common stock and $15,000. The number of shares was determined based on the average closing price of the common stock as reported on the “OTCBB” for the 12 month period ending three days prior to the Effective Date, ($2.82 per share). For financial reporting purposes, the value of the Assets will consist of the cash consideration delivered at closing under current Contracts and Mr. Carmichael’s historical cost for the Assets.  

The fee received in July 2008 under the non-exclusive license fee referenced above was used to reduce certain Company liabilities, such as the related party note payable due to 940 Associates, Inc. of approximately$181,000 was retired, and the Company paid down the related party note payable to Robert M. Carmichael by approximately $35,000.
 
On August 11, 2008, the related party note due Robert M. Carmichael was restructured. The $350,000 restructured note bearing 7.50% interest per annum, will be due in monthly principal and interest payments of $7,050, and will mature on August 1, 2013 with a final principal and interest payment due of $4,360. The restructure represents a reduction in the annual interest rate from 10% to 7.5%, an acceleration of the maturity date from January 15, 2016 to August 1, 2013, and an increase in the monthly note payment from $6,047 to $7,050. Additionally, the restructured note is uncollateralized and eliminated the late payment penalty clause.
 
 
19
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Introductory Statements
 
Information included or incorporated by reference in this filing may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.
 
This filing contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our Company’s growth strategies, (c) our Company’s future financing plans and (d) our Company’s anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this filing generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
 
Overview
 
Brownie’s Marine Group, Inc., a Nevada corporation (referred to herein as “BWMG” or “the Company”), does business through its wholly owned subsidiary, Trebor Industries, Inc., d/b/a Brownie’s Third Lung, a Florida corporation. The Company designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba air compressor and Nitrox Generation Systems, and scuba and water safety products. BWMG sells its products both on a wholesale and retail basis, and does so from its headquarters and manufacturing facility in Fort Lauderdale, Florida.
 
Since April 16, 2004, Mr. Carmichael has served as President, Acting Principal Accounting Officer and Acting Chief Financial Officer of the Company. From March 23, 2004 to April 26, 2004, Mr. Carmichael served as the Company’s Executive Vice-President and Chief Operating Officer. Mr. Carmichael has operated Trebor as its President since 1986. He is the holder or co-holder of numerous patents that are used by Trebor and several other original equipment manufacturers in the diving industry.
 
Results of Operations for the Three Months Ended June 30, 2008, As Compared To the Three Months Ended June 30, 2007
 
Net revenues. For the three months ended June 30, 2008, we had net revenues of $1,729,073 as compared to net revenues of $923,309 for the three months ended June 30, 2007, an increase of $805,764, or 87.27%. The increase is primarily a result of an approximate $525,000 increase in high pressure tankfill sales and an approximate $280,000 increase in low pressure hookah system sales. The tankfill sales increase is primarily attributable to three large custom tankfill projects completed during the quarter ended June 30, 2008 that resulted in an approximate $530,000 increase in revenue coupled with a slight decline in non custom high pressure sales during the period compared to the same period in 2007. The increase in low pressure hookah system sales and related during the second quarter of 2008 was primarily attributable to an approximate $180,000 increase in recreational hookah system sales, an increase of approximately $110,000 in hose reel and built-in low pressure system sales, with the remaining approximately $10,000 reduction comprised of a net change in other low pressure sales compared to the same period in 2007.
 
Cost of net revenues. For the three months ended June 30, 2008, we had cost of net revenues of $934,137 as compared with cost of net revenues of $576,423 for the three months ended June 30, 2007, an increase of $357,714, or 62.06%. The increase was primarily to support the increase in sales volume for the three months ended June 30, 2008 as compared to same period in 2007. As a percentage of net revenues, cost of net revenues was down by approximately 8% in the second quarter of 2008 as compared to the second quarter of 2008. This decline was primarily attributable to the sales mix that included the three large custom tankfill sales that were completed in the second quarter of 2008 without comparable sales contributing to the mix in the second quarter of 2007.
 
20
 
Gross profit. For the three months ended June 30, 2008, we had a gross profit of $794,936 as compared to gross profit of $346,886 for the three months ended June 30, 2007, an increase of $448,050, or 129.16%. This increase is primarily attributable to the increase in net revenues for the three months ended June 30, 2008 as compared to the same period in 2007.
 
Operating expenses. For the three months ended June 30, 2008, we had total operating expenses of $329,368 as compared to total operating expenses of $254,850 for the three months ended June 30, 2007, an increase of $74,518, or 29.24%. The increase is not primarily attributable to a few significant items but rather is representative of an across the board increase in most all operating expenses, some to support the increase in sales (e.g. telephone, travel, advertising, and bank card charges), and others as a function of the increase in the overall cost of supplies and services (e.g. office supplies, auto expense, utilities, repairs and maintenance, and insurance).
 
Other (income) expense, net. For the three months ended June 30, 2008, we had other expense of $40,056 as compared to other income of $16,345 for the three months ended June 30, 2007, an increase in other expense of $56,401, or 345.07%. This account is comprised of other (income) expense and interest expense. Interest expense was fairly consistent between the three months ended June 30, 20008 and the three months ended June 30, 2007 with a decrease of $2,008 attributable to the amortization of debt. Other income declined from the second quarter of 2007 to the second quarter of 2008 by $58,409. This decline is primarily attributable to recognition of approximately $55,000 worth of other income in second quarter of 2007 for online training certificates expiring unused, and the training liability estimate being adjusted downward to reflect the accumulated historical redemption rate. There was no comparable recognition of other income in second quarter of 2008.
 
Provision for income tax expense. For the three months ended June 30, 2008, we had a provision for income tax expense of $202,254, as compared to a provision of income tax benefit of $37,295 for the three months ended June 30, 2007, an increase in provision for income tax expense of $239,549, or 642.31%. This increase is primarily attributable the increase in net income before provision for income taxes for the three months ended June 30, 2008 as compared to the three months ended June 30, 2007.
 
Net income. For the three months ended June 30, 2008, we had net income of $223,258, as compared to net income of $145,676 for the three months ended June 30, 2007, an increase of $77,582, or 53.26%. The increase is attributable to the increase in gross profit of $448,050, net the increases in operating expenses of $74,518, other expenses of $56,401, and the provision for income tax expense of $239,549.
 
Results of Operations for the Six months Ended June 30, 2008, As Compared To the Six months Ended June 30, 2007
 
Net revenues. For the six months ended June 30, 2008, we had net revenues of $2,923,874 as compared to net revenues of $1,802,566 for the six months ended June 30, 2007, an increase of $1,121,308, or 62.21%. The increase is primarily a result of three large custom tankfill projects in process at June 30, 2008 that contributed approximately $970,000 to revenue for the period. The balance of the increase was primarily attributable to a net of an increase in low pressure hookah system sales and related of approximately $260,000 and a decrease of non-custom tankfill sales of approximately $100,000. The increase in hookah system sales and related of $260,000 was comprised primarily of increased sales of recreational hookah systems, built in low pressure systems, and hose reels systems
 
Cost of net revenues. For the six months ended June 30, 2008, we had cost of net revenues of $1,763,789 as compared with cost of net revenues of $1,162,273 for the six months ended June 30, 2007, an increase of $601,516, or 51.75%. The increase was primarily to support the increase in sales volume for the six months ended June 30, 2008 as compared to same period in 2007. As a percentage of net revenues, cost of net revenues was down approximately 4%, and this was primarily attributable to the sales mix that included the large custom tankfill sales in progress and completed during the six months ended June 30, 2008 without comparable sales contributing to the mix for the same period of 2007.
 
Gross profit. For the six months ended June 30, 2008, we had a gross profit of $1,160,085 as compared to gross profit of $640,293 for the six months ended June 30, 2007, an increase of $519,792, or 81.18%. This increase is primarily attributable to the increase in net revenues for the six months ended June 30, 2008 as compared to the same period in 2007.
 
Operating expenses. For the six months ended June 30, 2008, we had total operating expenses of $562,189 as compared to total operating expenses of $506,421 for the six months ended June 30, 2007, an increase of $55,768, or 11.01%. No individual significant items made up this variance, but rather numerous net changes. The increase is not primarily attributable to a few significant items, but rather is representative of an across the board increase in most all operating expenses, some to support the increase in sales (e.g. telephone, travel, advertising, and bank card charges), and others as a function of the increase in the overall cost of supplies and services (e.g. office supplies, auto expense, utilities, repairs and maintenance, and insurance).
 
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Other (income) expenses, net. For the six months ended June 30, 2008, we had other expense of $69,731 as compared to other income of $4,889 for the six months ended June 30, 2007, an increase in other expense of $74,620, or 1,526.28%. The largest components of the increase in other expense are an increase in interest expense of $8,651 resulting from six months of interest during the first quarter of 2008 on mortgages on the real estate acquired in late February 2007 compared to approximately four months of interest on the mortgages during the same period in 2007, and other income declined from the second quarter of 2007 to the second quarter of 2008 by $65,969. The $65,969 decline is primarily attributable to recognition of approximately $55,000 worth of other income in second quarter of 2007 for online training certificates expiring unused, and the training liability estimate being adjusted downward to reflect the accumulated historical redemption rate. There was no comparable recognition of other income for the six months ended June 30, 2007.
 
Provision for income tax expense. For the six months ended June 30, 2008, we had a provision for income tax expense of $207,850, as compared to a provision for income tax benefit of $29,938 for the six months ended June 30, 2007, an increase of $237,788, or 794.27%. This increase is primarily attributable the increase in net income before provision for income taxes for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007.
 
Net income. For the six months ended June 30, 2008, we had net income of $320,315 as compared to net income of $168,699 for the six months ended June 30, 2007, an increase of $151,616, or 89.87%. The increase is attributable to the increase in gross profit of $519,792, net the increases in operating expenses of $55,768, other expenses of $74,620, and the provision for income tax expense of $237,788.
 
Liquidity and Capital Resources
 
As of June 30, 2008, we had cash and other current assets of $1,106,007 and current liabilities of $761,650, or a current ratio of 1.45%.
 
The Company anticipates that cash generated from operations should be sufficient to satisfy the Company’s contemplated requirements for its current operations for at least the next twelve months. The Company does not anticipate any significant purchases of equipment during fiscal year 2008. The number and level of employees at June 30, 2008 is deemed adequate to maintain the Company's operations for at least the next 12 months.
 
Certain Business Risks
 
The Company is subject to various risks, which may materially harm its business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase the Company’s common stock. These are not the only risks and uncertainties that the Company faces. If any of these risks or uncertainties actually occurs, the Company’s business, financial condition or operating results could be materially harmed. In that case, the trading price of the Company’s common stock could decline and you could lose all or part of your investment.
 
Our Common Stock May Be Affected By Limited Trading Volume and May Fluctuate Significantly
 
Our common stock is traded on the Over-the-Counter Bulletin Board. There is a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders’ ability to sell our common stock in short time periods, or possibly at all. Thinly traded common stock can be more volatile than common stock traded in an active public market. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.
 
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Our Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For Investors to Sell Their Shares Due To Suitability Requirements
 
Our common stock is deemed to be “penny stock” as that term is defined under the Securities Exchange Act of 1934. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our common stock is covered by an SEC rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, which are generally institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse.
 
Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.
 
We Depend On the Services of Our Chief Executive Officer
 
Our success largely depends on the efforts and abilities of Robert M. Carmichael, our President and Chief Executive Officer. Mr. Carmichael has been instrumental in securing our existing financing arrangements. Mr. Carmichael is primarily responsible for the development of our technology and the design of our products. The loss of the services of Mr. Carmichael could materially harm our business because of the cost and time necessary to recruit and train a replacement. Such a loss would also divert management attention away from operational issues. We do not presently maintain a key-man life insurance policy on Mr. Carmichael.
 
We Require Additional Personnel and Could Fail To Attract or Retain Key Personnel
 
Our continued growth depends on our ability to attract and retain a Chief Financial Officer, a Chief Operations Officer, and additional skilled associates. We are currently utilizing the services of two professional consultants in the absence of a Chief Financial Officer and Chief Operations Officer. The loss of the services of these consultants prior to our ability to attract and retain a Chief Financial Officer or Chief Operations Officer may have a material adverse effect upon us. Also, there can be no assurance that we will be able to retain our existing personnel or attract additional qualified associates in the future.
 
Our Failure to Obtain Intellectual Property and Enforce Protection Would Have a Material Adverse Effect on Our Business
 
Our success depends in part on our ability, and the ability of our patent and trademark licensors, entities owned and controlled by Robert M. Carmichael, our President and Chief Executive Officer, to obtain and defend our intellectual property, including patent protection for our products and processes, preserve our trade secrets, defend and enforce our rights against infringement and operate without infringing the proprietary rights of third parties, both in the United States and in other countries. Despite our efforts to protect our intellectual proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection.
 
Our industry is characterized by frequent intellectual property litigation based on allegations of infringement of intellectual property rights. Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future.
 
We May Be Unable To Manage Growth
 
Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.
 
Reliance on Vendors and Manufacturers
 
We deal with suppliers on an order-by order basis and have no long-term purchase contracts or other contractual assurances of continued supply or pricing. In addition, we have no long-term contracts with our manufacturing sources and compete with other companies for production facility capacity. Historically, we have purchased enough inventory of products or their substitutes to satisfy demand. However, unanticipated failure of any manufacturer or supplier to meet our requirements or our inability to build or obtain substitutes could force us to curtail or cease operations.
 
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Dependence on Consumer Spending
 
The success of the products in the Brownie’s Third Lung and Brownie’s Tank Fill lines depend largely upon a number of factors related to consumer spending, including future economic conditions affecting disposable consumer income such as employment, business conditions, tax rates, and interest rates. In addition our opportunities are highly dependent upon the level of consumer spending on recreational marine accessories and dive gear, discretionary spending items. There can be no assurance that consumer spending in general will not decline, thereby adversely affecting our growth, net sales and profitability or that our business will not be adversely affected by future downturns in the economy, boating industry, or dive industry. If consumer spending on recreational marine accessories and dive gear declines, we could be forced to curtail or cease operations.
 
Government Regulations May Impact Us
 
The SCUBA industry is self-regulating; therefore, Brownie’s is not subject to government industry specific regulation. Nevertheless, Brownie’s strives to be a leader in promoting safe diving practices within the industry and is at the forefront of self-regulation through responsible diving practices. Brownie’s is subject to all regulations applicable to “for profit” companies as well as all trade and general commerce governmental regulation. All required federal and state permits, licenses, and bonds to operate its facility have been obtained. There can be no assurance that our operations will not be subject to more restrictive regulations in the future, which could force us to curtail or cease operations.
 
Bad Weather Conditions Could Have an Adverse Effect on Operating Results
 
Our business is significantly impacted by weather patterns. Unseasonably cool weather, extraordinary amounts of rainfall, or unseasonably rough surf, may decrease boat use and diving, thereby decreasing sales. Accordingly, our results of operations for any prior period may not be indicative of results of any future period.
 
Investors Should Not Rely On an Investment in Our Stock for the Payment of Cash Dividends
 
We have not paid any cash dividends on our capital stock and we do not anticipate paying cash dividends in the future. Investors should not make an investment in our common stock if they require dividend income. Any return on an investment in our common stock will be as a result of any appreciation, if any, in our stock price.
 
The Manufacture and Distribution of Recreational Diving Equipment Could Result In Product Liability Claims
 
We, like any other retailer, distributor and manufacturer of products that are designed for recreational sporting purposes, face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Such claims may include, among other things, that our products are designed and/or manufactured improperly or fail to include adequate instructions as to proper use and/or side effects, if any. We do not anticipate obtaining contractual indemnification from parties-supplying raw materials, manufacturing our products or marketing our products. In any event, any such indemnification if obtained will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
Market risk generally represents the risk of loss that may be expected to result from the potential change in value of a financial instrument as a result of fluctuations in credit ratings of the issuer, equity prices, interest rates or foreign currency exchange rates. We do not use derivative financial instruments for any purpose.
 
We are also subject to interest rate risk on the balance of our revolving credit facility that matures on March 5, 2009 with Colonial Bank. Interest on the credit facility is variable based on the lender’s base rate plus 1%. Our balance at June 30, 2008 under the facility was $0. We do not believe there would be a large enough increase or decrease in the lender’s base through March 5, 2009 that would have a material effect on our future results of operations.
 
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ITEM 4T. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Principal Executive Officer/Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company’s disclosure control objectives. The Company’s Principal Executive Officer/Principal Accounting Officer has concluded that the Company’s disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the end of period covered by this report.
 
Changes in Internal Controls
 
There were no changes in our internal controls or in other factors during the period covered by this report that have materially affected or are likely to materially affect the Company’s internal controls over financial reporting.
 
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PART II – OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
None. 

ITEM 1A. RISK FACTORS
 
Not Applicable to Smaller Reporting Company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
 
None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.

ITEM 5. OTHER INFORMATION
 
Not Applicable.
 
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ITEM 6. EXHIBITS
 
Exhibit No.
  
Description
  
Location
2.2
  
Merger Agreement, dated June 18, 2002 by and among United Companies Corporation, Merger Co., Inc. and Avid Sportswear & Golf Corp.
  
Incorporated by reference to Exhibit 2.02 Amendment No. 1 to Form S-4 filed June 24, 2002
         
2.3
  
Articles of Merger of Avid Sportswear & Golf Corp. with and into Merger Co., Inc.
  
Incorporated by reference to Exhibit 2.03 Amendment No. 1 to Form S-4 filed June 24, 2002
         
3.1
  
Articles of Incorporation
  
Incorporated by reference to Exhibit 3.05 Amendment No. 1 to Form S-4 filed June 24, 2002
         
3.2
  
Articles of Amendment
  
Incorporated by reference to the appendix to the Company's Definitive Information Statement on Schedule 14C filed July 31, 2007
         
3.2
  
Bylaws
  
Incorporated by reference to Exhibit 3.04 to the Registration Statement on Form 10-SB
         
5.1
  
2007 Stock Option Plan
  
Incorporated by reference to the appendix to the Company's Definitive Information Statement on Schedule 14C filed July 31, 2007
         
10.1
  
Share Exchange Agreement, dated March 23, 2004 by and among the Company, Trebor Industries, Inc. and Robert Carmichael
  
Incorporated by reference to Exhibit 16.1 to Current Report on Form 8-K filed April 9, 2004
         
10.2
  
Two Year Consulting Agreement with Jeff Morris effective January 1, 2005 for Manage-ment and Strategic Services and Warrants issued in conjunction with the same.
 
Incorporated by reference to Exhibit 10.14 to Current Report on Form 8-K filed on March 11, 2005.
         
10.3
  
Non-Exclusive License Agreement - BC Keel Trademark
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.4
  
Non-Exclusive License Agreement - Buoyancy Compensator (and Dive Belt) Weight System
  
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.5
  
Exclusive License Agreement - Brownie's Third Lung, Brownie's Public Safety, Tankfill, and Related Trademarks and Copyrights
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.6
  
Non-Exclusive License Agreement - Drop Weight Dive Belt
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.7
  
Non-Exclusive License Agreement - Garment Integrated or Garment Attachable
Flotation Aid and/or PFD
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
 
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Exhibit No.
  
Description
  
Location
10.8
  
Non-Exclusive License Agreement - Inflatable Dive Market and Collection Bag
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.9
  
Non-Exclusive License Agreement - SHERPA Trademark and Inflatable Flotation Aid/Signal Device Technology
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.10
  
Non-Exclusive License Agreement - Tank- Mounted Weight, BC or PFD-Mounted Trim Weight or Trim Weight Holding System
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.11
 
  
Exclusive License Agreement - Brownie’s Third Lung and Related Trademarks and Copyright
  
Incorporated by reference to Exhibit 10.26 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.12   Redemption Agreement - Cornell Capital Partner’s, LP Secured Convertible Debentures   Incorporated by reference to Form 8K filed on June 2, 2006
         
10.13   Agreement for Purchase and Sale of Property Between Trebor Industries, Inc. and GKR Associates, Inc. dated February 21, 2007   Incorporated by reference to Exhibit 10.28 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.14   First Mortgage dated February 22, 2007 between Trebor Industries, Inc. and
Colonial Bank
  
Incorporated by reference to Exhibit 10.29 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.15  
Note dated February 22, 2007 payable to GKR Associates, Inc.
  
Incorporated by reference to Exhibit 10.30 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.16  
Second Mortgage dated February 22, 2007 between Trebor Industries, Inc. and GKR Associates, LLC
  
Incorporated by reference to Exhibit 10.31 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.17  
Promissory Note dated January 1, 2007 payable to Robert M. Carmichael
  
Incorporated by reference to Exhibit 10.32 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.18  
Promissory Note dated January 1, 2007 payable to 940 Associates, Inc.
  
Incorporated by reference to Exhibit 10.33 to United Companies Corporation’s 10KSB for the year ended December 31, 2006.
         
10.19  
Purchase and Sale Agreement with GKR Associates, LLC
  
Incorporated by reference to Form 8K filed on March 23, 2007.
         
10.20
  
Asset Purchase Agreement between Trebor Industries, Inc. and Robert Carmichael
  
Incorporated by reference to Form 8K filed on August 1, 2008.
         
10.21
  
Restructured Promissory Note dated August 11, 2008 payable to Robert M. Carmichael
   Provided herewith
         
31.1
  
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
  
Provided herewith
 
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Exhibit No.
  
Description
  
Location
31.2
  
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
  
Provided herewith
         
32.1
  
Certification Pursuant to Section 1350
  
Provided herewith
         
32.2
  
Certification Pursuant to Section 1350
  
Provided herewith

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SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
     
 
BROWNIE’S MARINE GROUP, INC.
 
 		  
 		  
 
Date: August 13, 2008 By:   /s/ Robert M. Carmichael
 
Robert M. Carmichael
 
President, Chief Executive Officer,
Chief Financial Officer/
Principal Accounting Officer
 
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