10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(mark one)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

[  ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______.

Commission File No. 333-99393

Brownie’s Marine Group, Inc.

(Name of Small Business Issuer in Its Charter)

Florida	90-0226181
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
3001 NW 25th Avenue, Suite 1, Pompano Beach, Florida	33069
(Address of Principal Executive Offices)	(Zip Code)

(954) 462-5570

(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 [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate Website, in any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

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 [  ]	Accelerated filer [  ]
Non-accelerated filer [  ] (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 [  ] No [X]

There were 58,906,212 shares of common stock outstanding as of November 9, 2016.

PART I

Item 1. Financial Statements

Financial Information

BROWNIE’S MARINE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30, 2016			December 31, 2015
ASSETS
Current assets
Cash	$	304,612		$	141,822
Accounts receivable, net of $16,000 and $11,000 allowance for doubtful accounts, respectively		9,969			59,474
Accounts receivable - related parties		55,272			41,270
Inventory		612,220			654,213
Prepaid expenses and other current assets		97,171			58,012
Other current assets - related parties		—			3,020
Deferred tax asset, net – current		—			190
Total current assets		1,079,244			958,001
Property, equipment, and leasehold improvements, net		66,142			85,712
Deferred tax asset, net - non-current		2,520			2,330
Other assets		6,649			6,649
Total assets	$	1,154,555		$	1,052,692
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued liabilities	$	270,204		$	349,946
Customer deposits and unearned revenue		27,917			25,238
Royalties payable - related parties		152,868			152,546
Other liabilities		209,421			231,551
Other liabilities and accrued interest - related parties		—			84,500
Convertible debentures, net		312,743			371,965
Notes payable		5,675			6,099
Notes payable - related parties		—			11,098
Total current liabilities		978,828			1,232,943
Long-term liabilities
Notes payable - long-term portion		1,482			6,133
Total liabilities		980,310			1,239,076
Commitments and contingencies
Stockholders’ equity (deficit)
Preferred stock; $0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding		425			425
Common stock; $0.0001 par value; 1,000,000,000 shares authorized; and 58,906,212 and 86,825,138 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively		5,890			8,681
Common stock payable; $0.0001 par value; 138,941 and 195,610 shares, respectively		14			20
Additional paid-in capital		8,704,928			8,665,565
Accumulated deficit		(8,537,012	)		(8,861,075	)
Total stockholders’ equity (deficit)		174,245			(186,384	)
Total liabilities and stockholders’ equity (deficit)	$	1,154,555		$	1,052,692

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2

BROWNIE’S MARINE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Net revenues
Net revenues	$	597,882		$	823,868		$	1,300,414		$	1,585,863
Net revenues - related parties		240,102			282,047			574,862			695,773
Total net revenues		837,984			1,105,915			1,875,276			2,281,636
Cost of net revenues
Cost of net revenues		517,123			632,896			1,278,806			1,438,669
Royalties expense - related parties		20,714			27,718			46,332			56,138
Total cost of net revenues		537,837			660,614			1,325,138			1,494,807
Gross profit		300,147			445,301			550,138			786,829
Operating expenses
Selling, general and administrative		161,929			193,608			474,944			531,982
Research and development costs		10			931			1,425			1,897
Total operating expenses		161,939			194,539			476,369			533,879
Income from operations		138,208			250,762			73,769			252,950
Other (income) expense, net
Debt settlement					—			(233,825	)		—
Other (income) expense, net		(3,173	)		(6,494	)		(40,292	)		(4,264	)
Interest expense		7,734			9,269			23,251			27,800
Interest expense - related parties		499			489			572			693
Total other (income) expense, net		5,060			3,264			(250,294	)		24,229
Net income before provision for income taxes		133,148			247,498			324,063			228,721
Provision for income tax expense		—			—			—			43
Net income	$	133,148		$	247,498		$	324,063		$	228,678
Basic income per common share	$	0.00		$	0.00		$	0.00		$	0.00
Diluted income per common share	$	0.00		$	0.00		$	0.00		$	0.00
Basic weighted average common shares outstanding		58,773,434			78,368,659			69,481,418			73,003,680
Diluted weighted average common shares outstanding		63,618,438			127,334,088			74,326,422			120,329,067

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3

BROWNIE’S MARINE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

	Preferred stock				Common stock						Common stock payable						Additional paid-in		Accumulated			Total stockholders Equity’
	Shares		Amount		Shares			Amount			Shares			Amount			capital		deficit			(deficit)
Balance, January 1, 2016		425,000	$	425		86,825,138		$	8,681			195,610		$	20		$	8,665,565	$	(8,861,075	)	$	(186,384	)
Payment of related party interest to stock		—		—		124,326			13			—			—			559		—			572
Return of prior employee compensation		__		__		(28,403,252	)		(2,840	)		(56,669	)		(6	)		2,840		—			(6	)
Conversion of employee compensation payable to stock		__		__		360,000			36			—			—			35,964		—			36,000
Net Income		—		—		—			—			—			—			—		324,063			324,063
Balance, September 30, 2016		425,000	$	425		58,906,212		$	5,890			138,941		$	14		$	8,704,928	$	(8,537,012	)	$	174,245

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4

BROWNIE’S MARINE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2016			2015
Cash flows provided by operating activities:
Net income	$	324,063		$	228,678
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation		16,212			16,200
Amortization of leasehold improvements		10,945			9,819
Gain on cancellation of debt		(233,825	)		—
Shares issued for interest expenses		572			—
Shares issued for payroll compensation		36,000			—
Change in deferred tax asset, net		—			43
Changes in operating assets and liabilities:
Change in accounts receivable, net		49,506			(72,855	)
Change in accounts receivable - related parties		(14,002	)		19,824
Change in inventory		41,993			7,288
Change in prepaid expenses and other current assets		(40,014	)		(75,125	)
Change in other current assets - related parties		3,020			(2,109	)
Change in other assets		—			(339	)
Change in accounts payable and accrued liabilities		11,693			(55,016	)
Change in customer deposits and unearned revenue		2,679			5,443
Change in other liabilities		(22,135	)		(956	)
Change in other liabilities and accrued interest - related parties		—			38,188
Change in royalties payable - related parties		323			27,175
Net cash provided by operating activities		187,030			146,258
Cash flows from investing activities:
Purchase of fixed assets		(7,586	)		(12,205	)
Net cash used in investing activities		(7,586	)		(12,205	)
Cash flows from financing activities:
Principal reduction on convertible debentures		(472	)		—
Principal payments on loan payable		(5,084	)		(805	)
Principal payments on notes payable		—			(7,744	)
Proceeds from notes payable – related parties		—			27,000
Principal payments on note payable – related parties		(11,098	)		(23,319	)
Net cash (used in) provided by financing activities		(16,654	)		(4,868	)
Net change in cash		162,790			129,185
Cash, beginning of period		141,822			19,188
Cash, end of period	$	304,612		$	148,373

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

BROWNIE’S MARINE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended September 30,
	2016		2015
Supplemental disclosures of cash flow information:
Cash paid for interest	$	954	$	3,020
Cash paid for income taxes	$	—	$	—
Supplemental disclosures of non-cash investing activities and future operating activities:
Conversion of convertible debentures to stock	$	—	$	4,680
Conversion of accrued payroll to stock - related party	$	—	$	40,500
Conversion of accrued payroll to stock	$	36,000	$	—
Conversion of accrued interest on note payable - related party to stock	$	572	$	692
Conversion of accrued interest and fees on convertible debentures to stock	$	—	$	6,280
Gain on debt cancellation	$	234,678	$	—

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies

Description of business –Brownie’s Marine Group, Inc., (hereinafter referred to as the “Company”, “we” 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 Pompano Beach, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor Industries, Inc. The Company’s common stock is quoted on the OTC Markets (Pink) under the symbol “BWMG”.

Basis of Presentation – The financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included.

The condensed consolidated financial statements as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2016, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015, the statement of stockholders’ equity for the nine months ended September 30, 2016 and the statements of cash flows for the nine month periods ended September 30, 2016 and 2015. The condensed consolidated results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet as of December 31, 2015 has been derived from the Company’s audited financial statements for the year ended December 31, 2015. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with our audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K which was filed on March 29, 2016.

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 may have been made to the 2015 financial statement amounts and disclosures to conform to the 2016 financial statement presentation.

Going Concern – The accompanying condensed unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. Although profitable for the years ended December 31, 2015 and 2014, we have frequently incurred losses since 2009.

The Company is behind on payments due for matured convertible debentures, related parties notes payable, accrued liabilities and interest – related parties, and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about BWMG’s ability to continue as a going concern within one year from date the financial statements are issued. Therefore, the Company may need to raise additional funds and is currently exploring alternative sources of financing. BWMG has issued a number of convertible debentures in the past as an interim measure to finance working capital needs and may continue to raise additional capital through sale of restricted common stock or other securities, and obtaining some short term loans. The Company has previously paid for some legal and consulting services with restricted stock to maximize working capital and intends to continue this practice when possible. In addition, the Company implemented some cost saving measures and will continue to explore more to reduce operating expenses.

7

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If BWMG fails to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back or cease operations, liquidate assets and possibly seek bankruptcy protection. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

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.

Accounts receivable – Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge.

Inventory – Inventory is stated at the lower of cost or net realizable value. 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 indicated.

Property and, Equipment and Leasehold Improvements – Property and, Equipment and Leasehold Improvements are stated at cost less accumulated depreciation and/or amortization. Depreciation and amortization is provided principally on the straight-line method over the estimated useful lives of the assets or the lease, which are primarily 3 to 5 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 expenses the costs of producing advertisements and marketing material at the time production occurs, and expenses the costs of communicating advertisements and participating in trade shows in the period in which occur. Advertising and trade show expense incurred for the three months ended September 30, 2016 and 2015, was $313 and $138 respectively. Advertising and trade show expense incurred for the nine months ended September 30, 2016 and 2015, was $3,550 and $2,842, respectively.

Customer deposits and returns 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 is 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.

8

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Income taxes – The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Comprehensive income – The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods presented.

Stock-based compensation – The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is 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.

Beneficial conversion features on convertible debentures – The fair value of the stock upon which beneficial conversion feature (BCF) computations, as applicable, was determined through use of the quoted stock price.

Fair value of financial instruments – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

9

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company’s perceived risk of that investment.

At September 30, 2016, and December 31, 2015, the carrying amount of cash, accounts receivable, accounts receivable – related parties, customer deposits and unearned revenue, royalties payable – related parties, other liabilities, other liabilities and accrued interest – related parties, notes payable, notes payable – related parties, and accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

Earnings per common share – Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per share are 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 and common stock equivalent shares, if any, outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Potentially dilutive shares included in dilutive earnings per share totaled 4,845,004 shares for the three months and nine months ended September 30, 2016. Potentially dilutive shares included in dilutive earnings per share totaled 48,965,429 shares and 47,325,387 shares for the three months and nine months ended September 30, 2015, respectively.

New accounting pronouncements – The Company believes there was no new accounting guidance adopted, but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of BWMG’s financial statements.

2. INVENTORY

Inventory consists of the following as of:

	September 30, 2016		December 31, 2015
Raw materials	$	383,152	$	422,115
Work in process		—		—
Finished goods		229,068		232,098
	$	612,220	$	654,213

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

	September 30, 2016		December 31, 2015
Prepaid inventory	$	37,939	$	42,076
Prepaid insurance		9,442		8,819
Prepaid fixed assets		8,600		—
Prepaid legal		35,000		—
Prepaid other		6,190		7,117
	$	97,171	$	58,012

10

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following as of:
	September 30, 2016			December 31, 2015
Factory and office equipment	$	62,633		$	62,633
Tooling		59,149			59,149
Computer equipment and software		31,519			23,932
Vehicles		44,160			44,160
Leasehold improvements		43,779			43,779
		241,240			233,653
Less: accumulated depreciation and amortization		(175,098	)		(147,941	)
	$	66,142		$	85,712

Depreciation and amortization expense totaled $9,197 and $27,157for the three and nine month periods ending September 30, 2016 and $8,754 and $26,019 for the three and nine month periods ending September 30, 2015, respectively.

5. OTHER ASSETS

Other assets of $6,649 at September 30, 2016 and December 31, 2015, respectively, consisted solely of refundable deposits.

6. CUSTOMER CREDIT CONCENTRATIONS

The Company sells to three (3) entities owned by the brother of Robert Carmichael, the Company’s Chief Executive Officer, and three (3) companies owned or controlled by the Chief Executive Officer as further discussed in Note 7. RELATED PARTIES TRANSACTIONS. Combined sales to these six (6) entities for the three months ended September 30, 2016 and 2015, represented 28.64%and 25.50% respectively, of total net revenues. Combined sales to these six (6) entities for the nine months ended September 30, 2016 and 2015, represented 30.65% and 30.49% respectively, of total net revenues.

7. RELATED PARTIES TRANSACTIONS

Notes payable – related parties

Notes payable – related parties consists of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning September 15, 2015, with interest at 10% per annum with payments monthly in shares of stock based on the monthly weighted average price of the stock, maturing May 15, 2016.	$	—	$	11,098
Less amounts due within one year		—		(11,098	)
Long-term portion of notes payable – related parties	$	—	$	—
Current portion of notes payable – related parties	$	—	$	11,098

11

BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Effective April 22, 2015, the Company issued Mr. Carmichael, Chief Executive Officer of the Company, an unsecured promissory note in consideration for a $27,000 advance. For the three months ended September 30, 2016 the Company converted 108,274 shares of accrued interest on the note payable. For the nine months ended September 30, 2016 the Company converted $572 of accrued interest on the note payable – related party into 124,326 shares of restricted stock.

Net revenues and accounts receivable – related parties – The Company sells products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, owned by the brother of the Company’s Chief Executive Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volume. Combined net revenues from these entities for three months ended September 30, 2016 and 2015, was $234,367 and $280,786, respectively. Combined net revenues from these entities for nine months ended September 30, 2016 and 2015, was $566,607 and $652,124 respectively. Accounts receivable from these three entities at September 30, 2016, was $53,126 Accounts receivable from the three entities at December 31, 2015, was $32,880.

The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”), 3D Buoy and 940 Associates, Inc., affiliated with the Company’s Chief Executive Officer. Terms of sale are more favorable than those extended to BWMG’s regular customers, but no more favorable than those extended to Brownie’s strategic partners. Terms of sale to BGL approximate cost or include a nominal margin. These terms are consistent with those extended to Brownie’s strategic partners. Strategic partner terms on a per order basis include promotion of BWMG’s technologies and “Brownie’s” brand, offered only on product or services not offered for resale, and must provide for reciprocal terms or arrangements to BWMG on strategic partners’ product or services. BGL is fulfilling the strategic partner terms by providing exposure for BWMG’s technologies and “Brownie’s” brand in the yachting and exploration community world-wide through its operations. Combined net revenues from these entities for three months ended September 30, 2016, and 2015, were $5,647 and $1,261, respectively. Combined net revenues from these entities for nine months ended September 30, 2016, and 2015, were $8,255 and $43,649 respectively. Accounts receivable from these three entities at September 30, 2016 was $2,146 Accounts receivable from these three entities at December 31, 2015 was $8,391.

Royalties expense – related parties – The Company has an Exclusive License Agreement with 940 Associates, Inc. (hereinafter referred to as “940A”), an entity owned by the Company’s Chief Executive Officer, to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. This license agreement calls for the Company to pay 940A 2.5% of gross revenues per quarter. Total royalty expense for the above agreements for the three months and nine months ended September 30, 2016 and 2015, is disclosed on the face of the Company’s Condensed Consolidated Statements of Operations. As of September 30, 2016, the Company was approximately 30 months in arrears on royalty payments due. No default notice has been received and the Company plans to make payments as able.

Equity based compensation to employee –The Company had an employment compensation agreement with Alexander F. Purdon to pay his salary in restricted shares of the Company’s common stock in lieu of cash. This arrangement went into effect in April of 2016, was retroactive to January 1, 2016, and terminated August 31, 2016. For the nine months ended September 30, 2016, stock based compensation to Mr. Purdon was $36,000.

Other liabilities and accrued interest– related parties

Other liabilities and accrued interest– related parties consist of the following at:

	September 30, 2016		December 31, 2015
Year-end 2012 bonus payable to Chief Executive Officer	$	—	$	67,000
Year-end 2012 bonus payable to employee		—		17,500
	$	—	$	84,500

On April 29, 2016 the Board of Directors determined that is was not in the best interest of either the Company or the recipients to pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable. The results of this action are included in a reduction of shares payable as reflected on the Statement of Stockholders’ Deficit and the Balance Sheet.

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BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consists of the following as of:

	September 30, 2016		December 31, 2015
Accounts payable trade	$	53,972	$	59,916
Accrued payroll & fringe benefits		28,918		27,245
Accrued year-end bonuses		—		45,000
Accrued payroll taxes & withholding		18,267		36,520
Accrued interest		169,047		181,265
	$	270,204	$	349,946

Balances due certain vendors are in arrears to varying degrees. The Company is handling all delinquent accounts on a case-by-case basis.

9. OTHER LIABILITIES

Other liabilities consist of the following as of:

	September 30, 2016		December 31, 2015
Short-term loans	$	190,787	$	215,782
Asset purchase agreement payable		12,857		12,857
On-line training liability		5,777		2,912
	$	209,421	$	231,551

The short-term loans are comprised of two (2) loans due on demand from unrelated parties. The loans have no other stated terms except one for $200,000 indicated it was for settlement of debenture debt. Therefore, the Company used the proceeds from that loan toward settlement of convertible debentures.

On-line training certificates are provided 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 eighteen-month redemption from the time customer purchases the unit before expiration. The Company owes the on-line training vendor an agreed upon negotiated rate for on-line certificates redeemed prior to expiration, and payment is due upon redemption. The Company estimates the on-line training liability based on a historical redemption rate of approximately 10%. The Company continues to monitor and maintain a reserve for certificate redemption that approximates the historical redemption rate.

10. NOTES PAYABLE

Notes payable consists of the following as of September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Promissory note payable, secured by vehicle underlying loan having carrying value of $11,385 and $14,117 at September 30, 2016 and December 31, 2015, respectively, bearing interest at 1.9% per annum, due in monthly principal and interest payments of $523, maturing on December 5, 2017	$	7,157		$	12,232
Less amounts due within one year		(5,675	)		(6,099	)
Long-term portion of notes payable	$	1,482		$	6,133

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BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2016, principal payments on the notes payable are as follows:

2016	$	1,025
2017		6,132
2018		—
2019		—
2020		—
Thereafter		—
	$	7,157

11. CONVERTIBLE DEBENTURES

Convertible debentures consist of the following at September 30, 2016 and December 31, 2015:

Origination Date	Maturity Date	Interest Rate			Origination Principal		Origination Discount			September 30, 2016 Debenture Balance		September 30, 2016 Accrued Interest		December 31, 2015 Debenture Balance		December 31, 2015 Accrued Interest		Ref.
11/27/2010	5/27/2011		10	%		125,000		(53,517	)	$	—	$	—	$	58,750	$	34,709		(1	)
5/3/2011	5/5/2012		10	%		300,000		(206,832	)		300,000		162,500		300,000		140,000		(2	)
8/31/2011	8/31/2013		5	%		10,000		(4,286	)		10,000		2,561		10,000		2,183		(3	)
2/10/2012	2/10/2014		10	%		5,500		—			—		—		472		216		(4	)
2/10/2012	2/10/2014		10	%		39,724		—			2,743		3,986		2,743		4,157		(4	)
										$	312,743	$	169,047	$	371,965	$	181,265

Reference numbers in right hand column of table entitled Ref. refer to paragraphs with corresponding numbers that immediately follow this paragraph.

(1) The Company purchased in exchange for convertible debenture exclusive rights for license of certain intellectual property from an unrelated party. The parties agreed to a royalty of 2.5% of net revenues generated from the sale, sub-license or use of the technology or a reasonable negotiated rate based on similar invention. The debenture was convertible to common shares of the Company at May 27, 2011, along with accrued interest at the option of the lender. Conversion price per share is 30% discount as determined from the weighted average of the preceding 12 trading days’ closing market price. The Company valued the BCF of the convertible debenture at $53,517, its intrinsic value. The Company accreted the discount to the convertible debenture and will recognize interest expense through repayment in full or conversion. Because there was no assurance of success and the invention was still in design and pre-prototype phase, the Company recorded the initial net value of the debenture, $71,483, as research and development expense during the year ended 2010. Both parties agreed to confidentiality regarding the invention during the pre-prototype stage. In addition, the Company agreed to provide the licensor with design services, as well as assist in completing the prototype and initial production at the Company’s prevailing wholesale rate for comparable services.

On February 10, 2012, the holder of this debenture entered into an agreement with a third party to sell/assign the $125,000 principal balance, plus accrued interest. The purchase was to be in installments with transfer/assignment of the debenture upon payment, referred to as “Closings”. The first Closing was on or about February 15, 2012 for $7,500, with that amount assigned/transferred. The second Closing, occurred 90 days after the first closing for $11,750 paid/assigned. All subsequent Closings were to be for $11,750 and occur in 30 day increments after the second closing. This was to continue until the full principal balance of $125,000, plus accrued interest is purchased or assigned. The holder of the convertible note has voluntarily dissolved and ceased operation. In February 2016 both parties agreed to cancel the agreement and all remaining principal and interest balances.

(2) On May 3, 2011, the Company borrowed $300,000 in exchange for a convertible debenture. The Debenture bears 10% interest per annum. The lender may at any time convert any portion of the debenture to common shares at a 30% discount of the “Market Price” of the stock based on the average of the previous ten (10) days weighted average closing prices on the date prior to the notice of conversion. The Company may prepay the debenture plus accrued interest at any time before maturity. In addition, as further inducement for loaning the Company the funds, the Company granted the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share (after restatement for 1 for -1,350- reverse stock split), respectively. As a result, the Company allocated fair market value (“FMV”) to both the BCF and to the warrants, or $206,832, which was recorded as a discount against the debenture. The Company accreted the discount to the convertible debenture through maturity and will accrue interest expense until paid in full or converted. Before discount, the Company determined the FMV of the warrants as $45,000 using the Black-Scholes valuation model.

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BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(3) The Company borrowed $10,000 in exchange for a convertible debenture. The lender at their option may convert all or part of the note plus accrued interest into common stock at a price of thirty percent (30%) discount as determined from the average four (4) highest closing bid prices over the preceding five (5) trading days. The Company valued the BCF of the convertible debenture at $4,286, which was accreted to interest expense.

(4) The Company entered into three new debenture agreements upon sale or assignment by the original lender. Because the stated terms of the new debenture agreement and principal amounts were significantly different from the original debenture, including analysis of the value of the beneficial conversion feature at the assignment or purchase date, the transactions are treated as extinguishment of the old debentures and recorded as new for accounting purposes.

12. AUTHORIZATION OF PREFERRED STOCK

During the second quarter of 2010, the holder of the majority of the Company’s outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation authorizing the issuance of 10,000,000 shares of preferred stock. The preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by our Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. Before modification, the existing Articles of Incorporation did not authorize the issuance of shares of preferred stock. The Company authorized the preferred stock for the purpose of added flexibility in seeking capital and potential acquisition targets. The amendment authorizing the issuance of shares of preferred stock grants the Board authority, without further action by our stockholders, to designate and issue preferred stock in one or more series and to designate certain rights, preferences and restrictions of each series, any or all of which may be greater than the rights of the common stock. As of September 30, 2016, and December 31, 2015, the 425,000 shares of preferred stock are owned by the Company’s Chief Executive Officer. The preferred shares have 250 to 1 voting rights over the common stock, and are convertible into 31,481 shares of common stock. The preferred stock votes with the Company’s common stock, except as otherwise required under Florida law. Accordingly, Mr. Carmichael will have approximately 55% of the combined voting power of the Common Stock and Series A Convertible Preferred Stock, voting as a single class and will control the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control.

13. COMMITMENTS AND CONTINGENCIES

From time to time the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including matters relating to product liability claims. Such product liability claims sometimes involving wrongful death or injury have historically been covered by product liability insurance, which provided coverage for each claim up to $1,000,000. During the third quarter of 2014, the Company did not renew its product liability insurance since the renewal policy amount was cost prohibitive. The Company is currently seeking a new insurance carrier or alternative means to satisfy this potential liability exposure, as well as to fulfil the sales terms of some of our customers, which require the insurance coverage. The Company was a co-defendant under an action filed by an individual in June 2013 in the Circuit Court of Broward County claiming personal injury resulting from use of a Brownie’s Third Lung. Plaintiff claimed damages in excess of $1,000,000. This matter was settled during the three months ended September 30, 2016 by the Company’s insurance carrier.

As previously disclosed, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. This claim falls outside the Company’s period of insurance coverage. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. The Company has obtained different legal representation in this matter and is now attempting to have the default set aside. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action. See “Foot Note 17. Subsequent Events.”

On August 14, 2014, the Company entered into a new lease commitment. Terms of the new lease include thirty-seven month term commencing on September 1, 2014; payment of $5,367 security deposit; base rent of approximately $4,000 per month over the term of the lease plus sales tax; and payment of 10.76% of annual operating expenses (i.e. common areas maintenance), which is approximately $2,000 per month subject to periodic adjustment.

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BROWNIE’S MARINE GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Base rent expense attributable to the Company’s headquarters facility totaled approximately $12,000 and $12,000 for the three-month periods ending September 30, 2016 and 2015 and $36,000 and $36,000 for the nine-month periods ending September 30, 2016 and 2015, respectively.

Future minimum rental payments required under our operating lease agreement are as follows:

Year 1	$	48,000
Year 2		—
Year 3		—
Year 4		—
Year 5		—
	$	48,000

14. 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 297 shares, and no more than 75 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. All 297 options were issued under the plan prior to January 1, 2010, and to-date all remain outstanding.

15. EQUITY BASED INCENTIVE/RETENTION BONUSES

On November 2, 2012, the Board of Directors consented to grant equity based bonuses to certain key employees and consultants as an incentive to retain their services. Stock incentive bonuses were to vest, and be paid out on May 2, 2013, contingent upon continued employment or service. The stock bonus price per share was calculated based on last closing price as reported on per the OTCBB prior to the grant date for a total of $75,100. Shares were set aside and reserved for this transaction. The Company accrued operating expense ratably from the time of the awards through May 2, 2013, when vested. Of the 61,852 vested shares, only 5,185 have been issued to-date. On April 29, 2016 the Board of Directors determined that is was not in the best interest of either the Company or the recipients to pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable. The results of this action are included in a reduction of shares payable as reflected on the statement of stockholders’ deficit and the balance sheet.

16. INTEREST EXPENSE NON-RELATED PARTIES AND OTHER EXPENSE (INCOME), NET

For the three months ended September 30, 2016, non-related parties interest expense of $7,734 is comprised of $7.695 interest on convertible debentures and $39 interest on notes payable and other interest. For the three months ended September 30, 2015, non-related parties interest expense of $9,269 is comprised of $9,177 interest on convertible debentures and $77 interest on notes payable and other interest.

For the nine months ended September 30, 2016, non-related parties interest expense of $23,251 is comprised of $23,093 interest on convertible debentures and $158 interest on notes payable and other interest. For the nine months ended September 30, 2015, non-related parties interest expense of $27,800 is comprised of $27,531 interest on convertible debentures and $269 interest on notes payable and other interest.

For the three months ended September 30, 2016, $3,173 other income, net is comprised primarily of $2,273 from the expiration of online training liability certificates and no other individually significant items. For the three months ended September 30, 2015, $6,494 other income, net is comprised of $7,200 legal settlement receivable and no other individually significant items.

For the nine months ended September 30, 2016, $233,825 was recognized in debt settlement and was comprised primarily of $93,459 cancelation of a convertible debenture and its interest, $140,366 cancelation of an employee bonus payable, other income of $40,292 consisted primarily of $14,970 royalty income, $13,605 from the expiration of online training liability certificates, $2,009 insurance premium refund, $6,617 reconciliation adjustments and no other individually significant items. For the nine months ended September 30, 2015, $4,264 other income, net is comprised primarily of $7,200 legal settlement, $3,471 royalty income on licensed patents, $1,800 sales of fixed assets, $2,930 other income, net of individually insignificant items and is partially offset by $11,137 insurance expense audit adjustments.

17. SUBSEQUENT EVENTS

As discussed under Footnote 13 “Commitments and Contingencies”, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. The Company has obtained different legal representation in this matter and attempted to have the default set aside. On November 2, 2016, the court granted plaintiff’s motion for sanctions against our company for frivolous litigation relating to our attempt to have the matter dismissed and granted the plaintiff’s motion to strike our motion for summary judgment due to our initial default. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action.

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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. 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.

Overview

Brownie’s Marine Group, Inc., a Florida corporation (referred to herein as “BWMG”, “the Company”, “we” or “Brownie’s”), 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 Pompano Beach, Florida. The Company’s common stock is quoted on the OTC Markets (Pink) under the symbol “BWMG”. The Company’s website is www.browniesmarinegroup.com. Information contained on the website is not part of this report.

Mr. Robert Carmichael, our Chief Executive Officer, has operated Trebor as its President since 1986. 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 16, 2004, Mr. Carmichael served as the Company’s Executive Vice-President and Chief Operating Officer. The company was organized under the laws of the State of Nevada and effective October 22, 2015, the Company reincorporated to the State of Florida pursuant to a plan of conversion, effective October 22, 2015.

The Company’s diving and marine based products are generally marketed under the Brownie’s Third Lung, Brownie’s Tankfill, and Brownie’s Public Safety trade names.

Results of Operations for the Three Months Ended September 30, 2016, as Compared to the Three Months Ended September 30, 2015

Net revenues. For the three months ended September 30, 2016, we had net revenues of $837,984 as compared to net revenues of $1,105,915 for the three months ended September 30, 2015, a decrease of $267,931 or 24% The decrease is primarily attributable to a decline in high pressure sales. Overall sales of hookah systems and related products were up approximately $21,000 for the third quarter of 2016, compared to the third quarter of 2015. Sales in tankfill systems and related products were down by approximately $298,000 for the three months ended September 30, 2016 as compared to same period in 2015. The decline in tankfill sales is primarily attributable to a single large tankfill sale in 2015 not repeated in 2016.

Cost of net revenues. For the three months ended September 30, 2016, we had cost of net revenues of $537,837 as compared with cost of net revenues of $660,614 for the three months ended September 30, 2015, a decrease of $122,777 or 19%. The decrease during the third quarter ended September 30, 2016 compared to third quarter ended September 30, 2015, is primarily attributable to a decrease in net revenues as discussed above coupled with the decrease in royalties expense.

Gross profit. For the three months ended September 30, 2016, we had a gross profit of $300,147 as compared to gross profit of $445,301 for the three months ended September 30, 2015, a decrease of $145,154 or 33%. The decrease in gross profit is primarily attributable to the decline in total net revenues for the three months ended September 30, 2016, as compared to same period in 2015.

Operating expenses. For the three months ended September 30, 2016, we had operating expenses of $161,929 as compared to operating expenses of $194,539 for the three months ended September 30, 2015, a decrease of $32,600 or 17%. The decrease is predominantly a result of a reduction of the workforce and associated taxes, insurances and benefits between the third quarter of 2016 and the third quarter 2015.

17

Other (income) expense, net. For the three months ended September 30, 2016, we had other expense, net of $5,060 as compared to other expense, net of $3,264 for the three months ended September 30, 2015, an increase of $1,796. This account is comprised of other (income) expense, net; and interest expense. Other (income) expense, net, is comprised of transactions that are generally of a non-recurring nature. The $1,796 overall difference between periods is primarily comprised of no individually significant items in the third quarter of 2016. Other income of $3,264 in the third quarter of 2015 was comprised of no individually significant items. Interest expense decreased by $1,535 reflecting a decline in notes payable between the periods.

Net Income. For the three months ended September 30, 2016, we had net income of $133,148 as compared to net income of $247,498 for the three months ended September 30, 2015, a decrease in net income of $114,350 or 46%. The decrease in net income is primarily attributable to the decrease in net revenues as discussed above.

Results of Operations for the Nine months ended September 30, 2016, as Compared to the Nine months ended September 30, 2015

Net revenues. For the nine months ended September 30, 2016, we had net revenues of $1,875,276 as compared to net revenues of $2,281,636 for the nine months ended September 30, 2015, a decrease of $406,360 or 18%. While sales of hookah systems were relatively flat for the period, the decrease is primarily attributable to a single large tankfill sale in 2015. There was no similar tankfill transaction in 2016. Overall sales of hookah systems and related products were up approximately $8,700 for the first three quarters of 2016, compared to the first three quarters of 2015. Sales in tankfill systems and related products were down by approximately $403,000 for the nine months ended September 30, 2016 as compared to same period in 2015 primarily due to a single large tankfill sale in 2015 not repeated in 2016.

Cost of net revenues. For the nine months ended September 30, 2016, we had cost of net revenues of $1,325,138 as compared with cost of net revenues of $1,494,807 for the nine months ended September 30, 2015, a decrease of $169,669 or 11%. The decrease during the first three quarters ended September 30, 2016 compared to first three quarters ended September 30, 2015, is primarily attributable to a decrease in material costs of approximately $159,863 due to the decrease in net revenues and a sales related reduction in royalty expense.

Gross profit. For the nine months ended September 30, 2016, we had a gross profit of $550,138 as compared to gross profit of $786,829 for the nine months ended September 30, 2015, a decrease of $236,691 or 30%. The decrease in gross profit is primarily attributable to the decline in total net revenues for the nine months ended September 30, 2016, as compared to same period in 2015.

Operating expenses. For the nine months ended September 30, 2016, we had operating expenses of $476,369 as compared to operating expenses of $533,879 for the nine months ended September 30, 2015, a decrease of $57,510 or 11%. The decrease is predominantly a result of a reduction of the workforce and associated taxes, insurances and benefits between the first three quarters of 2016 and the first three quarters of 2015.

Other (income) expense, net. For the nine months ended September 30, 2016, we had other income, net of $250,294 as compared to other expense, net of $24,229 for the nine months ended September 30, 2015, an increase of $274,523. This account is comprised of other (income) expense, net; and interest expense. Other (income) expense, net, is comprised of transactions that are generally of a non-recurring nature. The $274,523 overall difference between periods is primarily comprised of the $93,459 debt settlement of a convertible debenture and its associated interest and the $140,366 from the cancelation of incentive bonuses payable in the second quarter of 2016. Other (income) expense of $24,229 for the nine months ended September 30, 2015, was comprised of no individually significant items. Interest expense decreased by $4,670 reflecting a decline in notes payable between the periods.

Net Income. For the nine months ended September 30, 2016, we had net income of $324,063 as compared to net income of $228,678 for the nine months ended September 30, 2015, an increase in net income of $95,385. The increase in net income is primarily attributable to the $93,459 in other income recognized in the write-off of a convertible debenture and $140,366 cancelation of incentive bonuses as described above.

18

Liquidity and Capital Resources

Changes in the Company’s working capital at September 30, 2016 from December 31, 2015 are predominately due to the cancelation of debt from convertible debentures and incentive retention bonuses. As of September 30, 2016, the Company had cash and current assets (primarily consisting of inventory) of $1,079,244 and current liabilities of $978,828 or a current ratio of 1.1 to 1. This represents a working capital surplus of $100,416. This compares to a working capital deficit of $274,942 at December 31, 2015.

The condensed unaudited consolidated financial statements included herein have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. Although we had net income for the years ended December 31, 2014 and 2015 and for the three and nine-month periods ending September 30, 2016, we have otherwise incurred annual losses since 2009, and expect we may have more losses in future periods.

The Company is behind on payments due for matured convertible debentures; related party notes payable; accrued liabilities and interest – related parties; and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

The Company does not expect that existing cash flow will be sufficient to fund presently anticipated operations. This raises substantial doubt as to our ability to continue as a going concern during the twelve- month period following the date of the financial statements included herein. The Company will need to raise additional funds and is currently exploring alternative sources of financing. We have issued a number of convertible debentures as an interim measure to finance our working capital needs. We have historically paid for some legal and consulting services with restricted stock to maximize working capital and intend to continue this practice in the future when possible. We have implemented some cost saving measures and will continue to explore more to reduce operating expenses.

If we fail to raise additional funds when needed, or do not have sufficient cash flows from sales, we may be required to scale back or cease operations, liquidate our assets and possibly seek bankruptcy protection. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

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 report 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 ability to continue as a going concern is in substantial doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.

Although we had net income of $324,063 (inclusive of $250,294 in non-recurring other income) and $229,610 for the nine months ended September 30, 2016 and year ended December 31, 2015, respectively, we anticipate that losses may occur in the foreseeable future. Additionally, the Company has negative cash flows from operations, is behind on payments due for matured convertible debentures, related party notes payable, accrued liabilities and interest –related parties, and certain vendor payables. The Company is working out all matters of delinquency on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue. This raises a substantial doubt about our ability to continue as a going concern. Our continued existence is dependent upon generating working capital and obtaining adequate new debt or equity financing. Because of our historical operational losses, we may not have working capital to permit us to remain in business during the twelve- month period following the date of the financial statements included herein, without improvements in our cash flow from operations or new financing. Working capital limitations continue to impinge on our day-to-day operations, thus contributing to continued operating losses.

19

The optional conversion features of a series of convertible debentures issued by the Company could require the Company to issue a substantial number of shares of common stock, which will cause dilution to the Company’s stockholders and a potentially negative effect on our stock price.

Since October 4, 2010 the Company has issued convertible debentures to several lenders and other third parties. At September 30, 2016, the outstanding principal balance of these debentures was $312,743. The debentures convert under various conversion formulas, many of which may be at a significant discount to market price of our common stock. The conversion of any of the debentures will result in the issuance of a significant number of shares of our common stock, which will cause dilution to our existing shareholders. Furthermore, the conversion at a significant discount to the market price of our common stock may have a negative effect on our stock price.

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

Our common stock is traded on the Over-the-Counter Markets. 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.

Our company is a voluntary filer with the Securities and Exchange Commission and in the event that we cease reporting under the Exchange Act, investors would have limited information available to them about the company.

While we are subject to Section 15(d) of the Exchange Act, we do not have a class of securities registered under Section 12(g) of the Exchange Act. To the extent that our duty to file Exchange Act reports has automatically suspended under Section 15(d) of the Exchange Act, as a voluntary filer, we may elect to cease reporting under the Exchange Act at such time, which would limit the information available to investors and shareholders about the company.

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.

20

We require additional personnel and could fail to attract or retain key personnel

We are currently utilizing the services of 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 inventories 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.

Dependence on consumer spending

The success of the our business depends largely upon a number of factors related to consumer spending, including current and future economic conditions affecting disposable consumer income such as employment, business conditions, tax rates, and interest rates. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affect demand for our products. Any significant deterioration in overall economic conditions that diminishes consumer confidence or discretionary income can reduce our sales and adversely affect our financial results. The impact of weakening consumer credit markets; layoffs; corporate restructurings; higher fuel prices; declines in the value of investments and residential real estate; and increases in federal and state taxation can all negatively affect our results. There can be no assurance that in this type of environment consumer spending will not decline beyond current levels, thereby adversely affecting our growth, net sales and profitability or that our business will not be adversely affected by continuing or future downturns in the economy, boating industry, or dive industry. If declines in consumer spending on recreational marine accessories and dive gear are other than temporary, we could be forced to curtail 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.

21

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 and we currently lack product liability insurance

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 credit worthiness of the indemnifying party. We currently do not have any product liability insurance. 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. As previously disclosed, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. This claim falls outside the Company’s period of insurance coverage.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable to Smaller Reporting Company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. The Company’s management, under the supervision and with the participation of Robert Carmichael, the Company’s Chief Executive Officer and Chief Financial (and principal accounting) Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2016. Based upon that evaluation and the identification of the material weakness in the Company’s internal control over financial reporting as described below under “Management’s Report on Internal Control over Financial Reporting,” the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of September 30, 2016, based on the criteria established in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles because of the Company’s limited resources and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

22

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls 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. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note 13 - Commitments and Contingencies to the financial statements included in this report for a discussion of outstanding litigation proceedings.

As disclosed under Note 13, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. We have attempted to have the default set aside. On November 2, 2016, the court granted plaintiff’s motion for sanctions against our company for frivolous litigation relating to our attempt to have the matter dismissed and granted the plaintiff’s motion to strike our motion for summary judgment due to our initial default. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action.

Item 1a. Risk Factors

Not Applicable to Smaller Reporting Company.

Item 2. Unregistered sales of equity securities and use of proceeds

During the period covered by this report, the Company sold securities without registration under the Securities Act of 1933 (the “Securities Act”) in reliance upon the exemption provided in Section 3(a)(9) or Section 4(a)(2) as described below or as otherwise previously disclosed on Form 8-K. The securities issued with a legend restricting their transferability absent registration of applicable exemption.

During the period covered by this report, $572 related party interest payable to Robert Carmichael, our Chief Executive Officer, was converted to 124,326 shares of restricted stock.

Effective April 15, 2016 Trebor entered into an employment agreement with a former employee of Trebor and affiliate of the Company. Under the terms of the agreement the employee agreed to provide business and sales services to the Company through August 31, 2016. Wages due to the employee are payable at the sole discretion of the Company in shares of its restricted common stock. During the period covered by this report the Company issued the employee 360,000 shares of restricted stock in satisfaction of services valued at $1,761.

23

Item 3. Defaults Upon Senior Securities

None.

Item 4. MINE SAFETY DISCLOSURE

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description	Location
31.1	Certification Pursuant to Rule 13a-14(a)/15d-14(a)	Provided herewith.
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.
101	XBRL Interactive Data File *

* Attached as Exhibit 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity (Deficit) (iv) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements tagged as blocks of text.

24

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 14, 2016	Brownie’s Marine Group, Inc.
	By:	/s/ Robert M. Carmichael
		Robert M. Carmichael
		President, Chief Executive Officer,
		Chief Financial Officer/
		Principal Accounting Officer

25

EX-31.1

EXHIBIT 31.1

OFFICER’S CERTIFICATE
PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Robert Carmichael, Chief Executive Officer, certify that:

1. I have reviewed this Form 10-Q for the quarter ended September 30, 2016, of Brownie’s Marine Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 14, 2016	By:	/s/ Robert M. Carmichael
	Name:	Robert M. Carmichael
	Title:	Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

OFFICER’S CERTIFICATE
PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Robert Carmichael, Chief Financial Officer, certify that:

1. I have reviewed this Form 10-Q for the quarter ended September 30, 2016, of Brownie’s Marine Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 14, 2016	By:	/s/ Robert M. Carmichael
	Name:	Robert M. Carmichael
	Title:	Chief Financial Officer
		(Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Brownie’s Marine Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2016 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: November 14, 2016	By:	/s/ Robert M. Carmichael
	Name:	Robert M. Carmichael
	Title:	Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Brownie’s Marine Group, Inc. and will be retained by Brownie’s Marine Group, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Brownie’s Marine Group, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2016 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: November 14, 2016	By:	/s/ Robert M. Carmichael
	Name:	Robert M. Carmichael
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Brownie’s Marine Group, Inc. and will be retained by Brownie’s Marine Group, Inc. and furnished to the United States Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 09, 2016
Document And Entity Information
Entity Registrant Name	Brownie's Marine Group, Inc
Entity Central Index Key	0001166708
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		58,906,212
Trading Symbol	BWMG
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2016

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Current assets
Cash	$ 304,612	$ 141,822
Accounts receivable, net of $16,000 and $11,000 allowance for doubtful accounts, respectively	9,969	59,474
Accounts receivable - related parties	55,272	41,270
Inventory	612,220	654,213
Prepaid expenses and other current assets	97,171	58,012
Other current assets - related parties		3,020
Deferred tax asset, net – current		190
Total current assets	1,079,244	958,001
Property, equipment, and leasehold improvements, net	66,142	85,712
Deferred tax asset, net - non-current	2,520	2,330
Other assets	6,649	6,649
Total assets	1,154,555	1,052,692
Current liabilities
Accounts payable and accrued liabilities	270,204	349,946
Customer deposits and unearned revenue	27,917	25,238
Royalties payable - related parties	152,868	152,546
Other liabilities	209,421	231,551
Other liabilities and accrued interest - related parties		84,500
Convertible debentures, net	312,743	371,965
Notes payable	5,675	6,099
Notes payable - related parties		11,098
Total current liabilities	978,828	1,232,943
Long-term liabilities
Notes payable - long-term portion	1,482	6,133
Total liabilities	980,310	1,239,076
Commitments and contingencies
Stockholders’ equity (deficit)
Preferred stock; $0.001 par value: 10,000,000 shares authorized; 425,000 issued and outstanding	425	425
Common stock; $0.0001 par value; 1,000,000,000 shares authorized; and 58,906,212 and 86,825,138 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively	5,890	8,681
Common stock payable; $0.0001 par value; 138,941 and 195,610 shares, respectively	14	20
Additional paid-in capital	8,704,928	8,665,565
Accumulated deficit	(8,537,012)	(8,861,075)
Total stockholders’ equity (deficit)	174,245	(186,384)
Total liabilities and stockholders’ equity (deficit)	$ 1,154,555	$ 1,052,692

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 16,000	$ 11,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, share issued	425,000	425,000
Preferred stock, share outstanding	425,000	425,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock,shares issued	58,906,212	86,825,138
Common stock, share outstanding	58,906,212	86,825,138
Common stock payable, par value	$ 0.0001	$ 0.0001
Common stock payable, shares outstanding	138,941	195,610

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net revenues
Net revenues	$ 597,882	$ 823,868	$ 1,300,414	$ 1,585,863
Net revenues - related parties	240,102	282,047	574,862	695,773
Total net revenues	837,984	1,105,915	1,875,276	2,281,636
Cost of net revenues
Cost of net revenues	517,123	632,896	1,278,806	1,438,669
Royalties expense - related parties	20,714	27,718	46,332	56,138
Total cost of net revenues	537,837	660,614	1,325,138	1,494,807
Gross profit	300,147	445,301	550,138	786,829
Operating expenses
Selling, general and administrative	161,929	193,608	474,944	531,982
Research and development costs	10	931	1,425	1,897
Total operating expenses	161,939	194,539	476,369	533,879
Income from operations	138,208	250,762	737,769	252,950
Other (income) expense, net
Debt settlement			(233,825)
Other (income) expense, net	(3,173)	(6,494)	(40,292)	(4,264)
Interest expense	7,734	9,269	23,251	27,800
Interest expense - related parties	499	489	572	693
Total other (income) expense, net	5,060	3,264	(250,294)	24,229
Net income before provision for income taxes	133,148	247,498	324,063	228,721
Provision for income tax expense				43
Net income	$ 133,148	$ 247,498	$ 324,063	$ 228,678
Basic income per common share	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Diluted income per common share	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Basic weighted average common shares outstanding	58,773,434	78,368,659	69,481,418	73,003,680
Diluted weighted average common shares outstanding	63,618,438	127,334,088	74,326,422	120,329,067

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Condensed Consolidated Statement of Stockholders' Equity (deficit) (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Common Stock Payable [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2015	$ 425	$ 8,681	$ 20	$ 8,665,565	$ (8,861,075)	$ (186,384)
Balance, shares at Dec. 31, 2015	425,000	86,825,138	195,610
Payment of Related Party Interest to Stock		$ 13		559		572
Payment of Related Party Interest to Stock, shares		124,326
Return of Prior Employee Compensation		$ (2,840)	$ (6)	2,840		(6)
Return of Prior Employee Compensation, shares		(28,403,252)	(56,669)
Conversion of Employee Compensation Payable to Stock		$ 36		35,964		36,000
Conversion of Employee Compensation Payable to Stock, shares		360,000
Net Income					324,063	324,063
Balance at Sep. 30, 2016	$ 425	$ 5,890	$ 14	$ 8,704,928	$ (8,537,012)	$ 174,245
Balance, shares at Sep. 30, 2016	425,000	58,906,212	138,941

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows provided by operating activities:
Net income	$ 324,063	$ 228,678
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation	16,212	16,200
Amortization of leasehold improvements	10,945	9,819
Gain on cancellation of debt	(233,825)
Shares issued for interest expenses	572
Shares issued for payroll compensation	36,000
Change in deferred tax asset, net		43
Changes in operating assets and liabilities:
Change in accounts receivable, net	49,506	(72,855)
Change in accounts receivable - related parties	(14,002)	19,824
Change in inventory	41,993	7,288
Change in prepaid expenses and other current assets	(40,014)	(75,125)
Change in other current assets - related parties	3,020	(2,109)
Change in other assets		(339)
Change in accounts payable and accrued liabilities	11,693	(55,016)
Change in customer deposits and unearned revenue	2,679	5,443
Change in other liabilities	(22,135)	(956)
Change in other liabilities and accrued interest - related parties		38,188
Change in royalties payable - related parties	323	27,175
Net cash provided by operating activities	187,030	146,258
Cash flows from investing activities:
Purchase of fixed assets	(7,586)	(12,205)
Net cash used in investing activities	(7,586)	(12,205)
Cash flows from financing activities:
Principal reduction on convertible debentures	(472)
Principal payments on loan payable	(5,084)	(805)
Principal payments on notes payable		(7,744)
Proceeds from notes payable – related parties		27,000
Principal payments on note payable – related parties	(11,098)	(23,319)
Net cash (used in) provided by financing activities	(16,654)	(4,868)
Net change in cash	162,790	129,185
Cash, beginning of period	141,822	19,188
Cash, end of period	304,612	148,373
Supplemental disclosures of cash flow information:
Cash paid for interest	954	3,020
Cash paid for income taxes
Supplemental disclosures of non-cash investing activities and future operating activities:
Conversion of convertible debentures to stock		4,680
Conversion of accrued payroll to stock - related party		40,500
Conversion of accrued payroll to stock	36,000
Conversion of accrued interest on note payable - related party to stock	572	692
Conversion of accrued interest and fees on convertible debentures to stock		6,280
Gain on debt cancellation	$ 234,678

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Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

1. Description of business and summary of significant accounting policies

Description of business –Brownie’s Marine Group, Inc., (hereinafter referred to as the “Company”, “we” 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 Pompano Beach, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor Industries, Inc. The Company’s common stock is quoted on the OTC Markets (Pink) under the symbol “BWMG”.

Basis of Presentation – The financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included.

The condensed consolidated financial statements as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2016, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015, the statement of stockholders’ equity for the nine months ended September 30, 2016 and the statements of cash flows for the nine month periods ended September 30, 2016 and 2015. The condensed consolidated results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet as of December 31, 2015 has been derived from the Company’s audited financial statements for the year ended December 31, 2015. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with our audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K which was filed on March 29, 2016.

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 may have been made to the 2015 financial statement amounts and disclosures to conform to the 2016 financial statement presentation.

Going Concern – The accompanying condensed unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. Although profitable for the years ended December 31, 2015 and 2014, we have frequently incurred losses since 2009.

The Company is behind on payments due for matured convertible debentures, related parties notes payable, accrued liabilities and interest – related parties, and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about BWMG’s ability to continue as a going concern within one year from date the financial statements are issued. Therefore, the Company may need to raise additional funds and is currently exploring alternative sources of financing. BWMG has issued a number of convertible debentures in the past as an interim measure to finance working capital needs and may continue to raise additional capital through sale of restricted common stock or other securities, and obtaining some short term loans. The Company has previously paid for some legal and consulting services with restricted stock to maximize working capital and intends to continue this practice when possible. In addition, the Company implemented some cost saving measures and will continue to explore more to reduce operating expenses.

If BWMG fails to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back or cease operations, liquidate assets and possibly seek bankruptcy protection. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

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.

Accounts receivable – Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge.

Inventory – Inventory is stated at the lower of cost or net realizable value. 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 indicated.

Property and, Equipment and Leasehold Improvements – Property and, Equipment and Leasehold Improvements are stated at cost less accumulated depreciation and/or amortization. Depreciation and amortization is provided principally on the straight-line method over the estimated useful lives of the assets or the lease, which are primarily 3 to 5 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 expenses the costs of producing advertisements and marketing material at the time production occurs, and expenses the costs of communicating advertisements and participating in trade shows in the period in which occur. Advertising and trade show expense incurred for the three months ended September 30, 2016 and 2015, was $313 and $138 respectively. Advertising and trade show expense incurred for the nine months ended September 30, 2016 and 2015, was $3,550 and $2,842, respectively.

Customer deposits and returns 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 is 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.

Income taxes – The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Comprehensive income – The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods presented.

Stock-based compensation – The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is 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.

Beneficial conversion features on convertible debentures – The fair value of the stock upon which beneficial conversion feature (BCF) computations, as applicable, was determined through use of the quoted stock price.

Fair value of financial instruments – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company’s perceived risk of that investment.

At September 30, 2016, and December 31, 2015, the carrying amount of cash, accounts receivable, accounts receivable – related parties, customer deposits and unearned revenue, royalties payable – related parties, other liabilities, other liabilities and accrued interest – related parties, notes payable, notes payable – related parties, and accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

Earnings per common share – Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per share are 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 and common stock equivalent shares, if any, outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Potentially dilutive shares included in dilutive earnings per share totaled 4,845,004 shares for the three months and nine months ended September 30, 2016. Potentially dilutive shares included in dilutive earnings per share totaled 48,965,429 shares and 47,325,387 shares for the three months and nine months ended September 30, 2015, respectively.

New accounting pronouncements – The Company believes there was no new accounting guidance adopted, but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of BWMG’s financial statements.

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Inventory

9 Months Ended

Sep. 30, 2016

Inventory Disclosure [Abstract]

Inventory

2. INVENTORY

Inventory consists of the following as of:

	September 30, 2016		December 31, 2015
Raw materials	$	383,152	$	422,115
Work in process		—		—
Finished goods		229,068		232,098
	$	612,220	$	654,213

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Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2016

Prepaid Expenses And Other Current Assets

Prepaid Expenses and Other Current Assets

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

	September 30, 2016		December 31, 2015
Prepaid inventory	$	37,939	$	42,076
Prepaid insurance		9,442		8,819
Prepaid fixed assets		8,600		—
Prepaid legal		35,000		—
Prepaid other		6,190		7,117
	$	97,171	$	58,012

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Property and Equipment, Net

9 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

4. PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following as of:
	September 30, 2016			December 31, 2015
Factory and office equipment	$	62,633		$	62,633
Tooling		59,149			59,149
Computer equipment and software		31,519			23,932
Vehicles		44,160			44,160
Leasehold improvements		43,779			43,779
		241,240			233,653
Less: accumulated depreciation and amortization		(175,098	)		(147,941	)
	$	66,142		$	85,712

Depreciation and amortization expense totaled $9,197 and $27,157 for the three and nine month periods ending September 30, 2016 and $8,754 and $26,019 for the three and nine month periods ending September 30, 2015, respectively.

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Other Assets

9 Months Ended

Sep. 30, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Assets

5. OTHER ASSETS

Other assets of $6,649 at September 30, 2016 and December 31, 2015, respectively, consisted solely of refundable deposits.

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Customer Credit Concentrations

9 Months Ended

Sep. 30, 2016

Risks and Uncertainties [Abstract]

Customer Credit Concentrations

6. CUSTOMER CREDIT CONCENTRATIONS

The Company sells to three (3) entities owned by the brother of Robert Carmichael, the Company’s Chief Executive Officer, and three (3) companies owned or controlled by the Chief Executive Officer as further discussed in Note 7. RELATED PARTIES TRANSACTIONS. Combined sales to these six (6) entities for the three months ended September 30, 2016 and 2015, represented 28.64% and 25.50% respectively, of total net revenues. Combined sales to these six (6) entities for the nine months ended September 30, 2016 and 2015, represented 30.65% and 30.49% respectively, of total net revenues.

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Related Parties Transactions

9 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Related Parties Transactions

7. RELATED PARTIES TRANSACTIONS

Notes payable – related parties

Notes payable – related parties consists of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning September 15, 2015, with interest at 10% per annum with payments monthly in shares of stock based on the monthly weighted average price of the stock, maturing May 15, 2016.	$	—	$	11,098
Less amounts due within one year		—		(11,098	)
Long-term portion of notes payable – related parties	$	—	$	—
Current portion of notes payable – related parties	$	—	$	11,098

Effective April 22, 2015, the Company issued Mr. Carmichael, Chief Executive Officer of the Company, an unsecured promissory note in consideration for a $27,000 advance. For the three months ended September 30, 2016 the Company converted 108,274 shares of accrued interest on the note payable. For the nine months ended September 30, 2016 the Company converted $572 of accrued interest on the note payable – related party into 124,326 shares of restricted stock.

Net revenues and accounts receivable – related parties – The Company sells products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, owned by the brother of the Company’s Chief Executive Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volume. Combined net revenues from these entities for three months ended September 30, 2016 and 2015, was $234,367 and $280,786, respectively. Combined net revenues from these entities for nine months ended September 30, 2016 and 2015, was $566,607 and $652,124 respectively. Accounts receivable from these three entities at September 30, 2016, was $53,126 Accounts receivable from the three entities at December 31, 2015, was $32,880.

The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”), 3D Buoy and 940 Associates, Inc., affiliated with the Company’s Chief Executive Officer. Terms of sale are more favorable than those extended to BWMG’s regular customers, but no more favorable than those extended to Brownie’s strategic partners. Terms of sale to BGL approximate cost or include a nominal margin. These terms are consistent with those extended to Brownie’s strategic partners. Strategic partner terms on a per order basis include promotion of BWMG’s technologies and “Brownie’s” brand, offered only on product or services not offered for resale, and must provide for reciprocal terms or arrangements to BWMG on strategic partners’ product or services. BGL is fulfilling the strategic partner terms by providing exposure for BWMG’s technologies and “Brownie’s” brand in the yachting and exploration community world-wide through its operations. Combined net revenues from these entities for three months ended September 30, 2016, and 2015, were $5,647 and $1,261, respectively. Combined net revenues from these entities for nine months ended September 30, 2016, and 2015, were $8,255 and $43,649 respectively. Accounts receivable from these three entities at September 30, 2016 was $2,146 Accounts receivable from these three entities at December 31, 2015 was $8,391.

Royalties expense – related parties – The Company has an Exclusive License Agreement with 940 Associates, Inc. (hereinafter referred to as “940A”), an entity owned by the Company’s Chief Executive Officer, to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. This license agreement calls for the Company to pay 940A 2.5% of gross revenues per quarter. Total royalty expense for the above agreements for the three months and nine months ended September 30, 2016 and 2015, is disclosed on the face of the Company’s Condensed Consolidated Statements of Operations. As of September 30, 2016, the Company was approximately 30 months in arrears on royalty payments due. No default notice has been received and the Company plans to make payments as able.

Equity based compensation to employee –The Company had an employment compensation agreement with Alexander F. Purdon to pay his salary in restricted shares of the Company’s common stock in lieu of cash. This arrangement went into effect in April of 2016, was retroactive to January 1, 2016, and terminated August 31, 2016. For the nine months ended September 30, 2016, stock based compensation to Mr. Purdon was $36,000.

Other liabilities and accrued interest– related parties

Other liabilities and accrued interest– related parties consist of the following at:

	September 30, 2016		December 31, 2015
Year-end 2012 bonus payable to Chief Executive Officer	$	—	$	67,000
Year-end 2012 bonus payable to employee		—		17,500
	$	—	$	84,500

On April 29, 2016 the Board of Directors determined that is was not in the best interest of either the Company or the recipients to pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable. The results of this action are included in a reduction of shares payable as reflected on the Statement of Stockholders’ Deficit and the Balance Sheet.

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Accounts Payable and Accrued Liabilities

9 Months Ended

Sep. 30, 2016

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consists of the following as of:

	September 30, 2016		December 31, 2015
Accounts payable trade	$	53,972	$	59,916
Accrued payroll & fringe benefits		28,918		27,245
Accrued year-end bonuses		—		45,000
Accrued payroll taxes & withholding		18,267		36,520
Accrued interest		169,047		181,265
	$	270,204	$	349,946

Balances due certain vendors are in arrears to varying degrees. The Company is handling all delinquent accounts on a case-by-case basis.

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Other Liabilities

9 Months Ended

Sep. 30, 2016

Other Liabilities Disclosure [Abstract]

Other Liabilities

9. OTHER LIABILITIES

Other liabilities consist of the following as of:

	September 30, 2016		December 31, 2015
Short-term loans	$	190,787	$	215,782
Asset purchase agreement payable		12,857		12,857
On-line training liability		5,777		2,912
	$	209,421	$	231,551

The short-term loans are comprised of two (2) loans due on demand from unrelated parties. The loans have no other stated terms except one for $200,000 indicated it was for settlement of debenture debt. Therefore, the Company used the proceeds from that loan toward settlement of convertible debentures.

On-line training certificates are provided 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 eighteen-month redemption from the time customer purchases the unit before expiration. The Company owes the on-line training vendor an agreed upon negotiated rate for on-line certificates redeemed prior to expiration, and payment is due upon redemption. The Company estimates the on-line training liability based on a historical redemption rate of approximately 10%. The Company continues to monitor and maintain a reserve for certificate redemption that approximates the historical redemption rate.

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Notes Payable

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Notes Payable

10. NOTES PAYABLE

Notes payable consists of the following as of September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Promissory note payable, secured by vehicle underlying loan having carrying value of $11,385 and $14,117 at September 30, 2016 and December 31, 2015, respectively, bearing interest at 1.9% per annum, due in monthly principal and interest payments of $523, maturing on December 5, 2017	$	7,157		$	12,232
Less amounts due within one year		(5,675	)		(6,099	)
Long-term portion of notes payable	$	1,482		$	6,133

As of September 30, 2016, principal payments on the notes payable are as follows:

2016	$	1,025
2017		6,132
2018		—
2019		—
2020		—
Thereafter		—
	$	7,157

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Convertible Debentures

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Convertible Debentures

11. CONVERTIBLE DEBENTURES

Convertible debentures consist of the following at September 30, 2016 and December 31, 2015:

Origination Date	Maturity Date	Interest Rate			Origination Principal		Origination Discount			September 30, 2016 Debenture Balance		September 30, 2016 Accrued Interest		December 31, 2015 Debenture Balance		December 31, 2015 Accrued Interest		Ref.
11/27/2010	5/27/2011		10	%		125,000		(53,517	)	$	—	$	—	$	58,750	$	34,709		(1	)
5/3/2011	5/5/2012		10	%		300,000		(206,832	)		300,000		162,500		300,000		140,000		(2	)
8/31/2011	8/31/2013		5	%		10,000		(4,286	)		10,000		2,561		10,000		2,183		(3	)
2/10/2012	2/10/2014		10	%		5,500		—			—		—		472		216		(4	)
2/10/2012	2/10/2014		10	%		39,724		—			2,743		3,986		2,743		4,157		(4	)
										$	312,743	$	169,047	$	371,965	$	181,265

Reference numbers in right hand column of table entitled Ref. refer to paragraphs with corresponding numbers that immediately follow this paragraph.

(1) The Company purchased in exchange for convertible debenture exclusive rights for license of certain intellectual property from an unrelated party. The parties agreed to a royalty of 2.5% of net revenues generated from the sale, sub-license or use of the technology or a reasonable negotiated rate based on similar invention. The debenture was convertible to common shares of the Company at May 27, 2011, along with accrued interest at the option of the lender. Conversion price per share is 30% discount as determined from the weighted average of the preceding 12 trading days’ closing market price. The Company valued the BCF of the convertible debenture at $53,517, its intrinsic value. The Company accreted the discount to the convertible debenture and will recognize interest expense through repayment in full or conversion. Because there was no assurance of success and the invention was still in design and pre-prototype phase, the Company recorded the initial net value of the debenture, $71,483, as research and development expense during the year ended 2010. Both parties agreed to confidentiality regarding the invention during the pre-prototype stage. In addition, the Company agreed to provide the licensor with design services, as well as assist in completing the prototype and initial production at the Company’s prevailing wholesale rate for comparable services.

On February 10, 2012, the holder of this debenture entered into an agreement with a third party to sell/assign the $125,000 principal balance, plus accrued interest. The purchase was to be in installments with transfer/assignment of the debenture upon payment, referred to as “Closings”. The first Closing was on or about February 15, 2012 for $7,500, with that amount assigned/transferred. The second Closing, occurred 90 days after the first closing for $11,750 paid/assigned. All subsequent Closings were to be for $11,750 and occur in 30 day increments after the second closing. This was to continue until the full principal balance of $125,000, plus accrued interest is purchased or assigned. The holder of the convertible note has voluntarily dissolved and ceased operation. In February 2016 both parties agreed to cancel the agreement and all remaining principal and interest balances.

(2) On May 3, 2011, the Company borrowed $300,000 in exchange for a convertible debenture. The Debenture bears 10% interest per annum. The lender may at any time convert any portion of the debenture to common shares at a 30% discount of the “Market Price” of the stock based on the average of the previous ten (10) days weighted average closing prices on the date prior to the notice of conversion. The Company may prepay the debenture plus accrued interest at any time before maturity. In addition, as further inducement for loaning the Company the funds, the Company granted the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share (after restatement for 1 for -1,350- reverse stock split), respectively. As a result, the Company allocated fair market value (“FMV”) to both the BCF and to the warrants, or $206,832, which was recorded as a discount against the debenture. The Company accreted the discount to the convertible debenture through maturity and will accrue interest expense until paid in full or converted. Before discount, the Company determined the FMV of the warrants as $45,000 using the Black-Scholes valuation model.

(3) The Company borrowed $10,000 in exchange for a convertible debenture. The lender at their option may convert all or part of the note plus accrued interest into common stock at a price of thirty percent (30%) discount as determined from the average four (4) highest closing bid prices over the preceding five (5) trading days. The Company valued the BCF of the convertible debenture at $4,286, which was accreted to interest expense.

(4) The Company entered into three new debenture agreements upon sale or assignment by the original lender. Because the stated terms of the new debenture agreement and principal amounts were significantly different from the original debenture, including analysis of the value of the beneficial conversion feature at the assignment or purchase date, the transactions are treated as extinguishment of the old debentures and recorded as new for accounting purposes.

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Authorization of Preferred Stock

9 Months Ended

Sep. 30, 2016

Equity [Abstract]

Authorization of Preferred Stock

12. AUTHORIZATION OF PREFERRED STOCK

During the second quarter of 2010, the holder of the majority of the Company’s outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation authorizing the issuance of 10,000,000 shares of preferred stock. The preferred stock as authorized has such voting powers, designations, preferences, limitations, restrictions and relative rights as may be determined by our Board of Directors of the Company from time to time in accordance with the provisions of the Florida Business Corporation Act. Before modification, the existing Articles of Incorporation did not authorize the issuance of shares of preferred stock. The Company authorized the preferred stock for the purpose of added flexibility in seeking capital and potential acquisition targets. The amendment authorizing the issuance of shares of preferred stock grants the Board authority, without further action by our stockholders, to designate and issue preferred stock in one or more series and to designate certain rights, preferences and restrictions of each series, any or all of which may be greater than the rights of the common stock. As of September 30, 2016, and December 31, 2015, the 425,000 shares of preferred stock are owned by the Company’s Chief Executive Officer. The preferred shares have 250 to 1 voting rights over the common stock, and are convertible into 31,481 shares of common stock. The preferred stock votes with the Company’s common stock, except as otherwise required under Florida law. Accordingly, Mr. Carmichael will have approximately 55% of the combined voting power of the Common Stock and Series A Convertible Preferred Stock, voting as a single class and will control the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

From time to time the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including matters relating to product liability claims. Such product liability claims sometimes involving wrongful death or injury have historically been covered by product liability insurance, which provided coverage for each claim up to $1,000,000. During the third quarter of 2014, the Company did not renew its product liability insurance since the renewal policy amount was cost prohibitive. The Company is currently seeking a new insurance carrier or alternative means to satisfy this potential liability exposure, as well as to fulfil the sales terms of some of our customers, which require the insurance coverage. The Company was a co-defendant under an action filed by an individual in June 2013 in the Circuit Court of Broward County claiming personal injury resulting from use of a Brownie’s Third Lung. Plaintiff claimed damages in excess of $1,000,000. This matter was settled during the three months ended September 30, 2016 by the Company’s insurance carrier.

As previously disclosed, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. This claim falls outside the Company’s period of insurance coverage. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. The Company has obtained different legal representation in this matter and is now attempting to have the default set aside. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action. See “Foot Note 17. Subsequent Events.”

On August 14, 2014, the Company entered into a new lease commitment. Terms of the new lease include thirty-seven month term commencing on September 1, 2014; payment of $5,367 security deposit; base rent of approximately $4,000 per month over the term of the lease plus sales tax; and payment of 10.76% of annual operating expenses (i.e. common areas maintenance), which is approximately $2,000 per month subject to periodic adjustment.

Base rent expense attributable to the Company’s headquarters facility totaled approximately $12,000 and $12,000 for the three-month periods ending September 30, 2016 and 2015 and $36,000 and $36,000 for the nine-month periods ending September 30, 2016 and 2015, respectively.

Future minimum rental payments required under our operating lease agreement are as follows:

Year 1	$	48,000
Year 2		—
Year 3		—
Year 4		—
Year 5		—
	$	48,000

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Equity Incentive Plan

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity Incentive Plan

14. 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 297 shares, and no more than 75 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. All 297 options were issued under the plan prior to January 1, 2010, and to-date all remain outstanding.

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Equity Based Incentive/Retention Bonuses

9 Months Ended

Sep. 30, 2016

Compensation and Retirement Disclosure [Abstract]

Equity Based Incentive/Retention Bonuses

15. EQUITY BASED INCENTIVE/RETENTION BONUSES

On November 2, 2012, the Board of Directors consented to grant equity based bonuses to certain key employees and consultants as an incentive to retain their services. Stock incentive bonuses were to vest, and be paid out on May 2, 2013, contingent upon continued employment or service. The stock bonus price per share was calculated based on last closing price as reported on per the OTCBB prior to the grant date for a total of $75,100. Shares were set aside and reserved for this transaction. The Company accrued operating expense ratably from the time of the awards through May 2, 2013, when vested. Of the 61,852 vested shares, only 5,185 have been issued to-date. On April 29, 2016 the Board of Directors determined that is was not in the best interest of either the Company or the recipients to pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable. The results of this action are included in a reduction of shares payable as reflected on the statement of stockholders’ deficit and the balance sheet.

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Interest Expense Non-Related Parties and Other Expense (Income), Net

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Interest Expense Non-Related Parties and Other Expense (Income), Net

16. INTEREST EXPENSE NON-RELATED PARTIES AND OTHER EXPENSE (INCOME), NET

For the three months ended September 30, 2016, non-related parties interest expense of $7,734 is comprised of $7.695 interest on convertible debentures and $39 interest on notes payable and other interest. For the three months ended September 30, 2015, non-related parties interest expense of $9,269 is comprised of $9,177 interest on convertible debentures and $77 interest on notes payable and other interest.

For the nine months ended September 30, 2016, non-related parties interest expense of $23,251 is comprised of $23,093 interest on convertible debentures and $158 interest on notes payable and other interest. For the nine months ended September 30, 2015, non-related parties interest expense of $27,800 is comprised of $27,531 interest on convertible debentures and $269 interest on notes payable and other interest.

For the three months ended September 30, 2016, $3,173 other income, net is comprised primarily of $2,273 from the expiration of online training liability certificates and no other individually significant items. For the three months ended September 30, 2015, $6,494 other income, net is comprised of $7,200 legal settlement receivable and no other individually significant items.

For the nine months ended September 30, 2016, $233,825 was recognized in debt settlement and was comprised primarily of $93,459 cancelation of a convertible debenture and its interest, $140,366 cancelation of an employee bonus payable, other income of $40,292 consisted primarily of $14,970 royalty income, $13,605 from the expiration of online training liability certificates, $2,009 insurance premium refund, $6,617 reconciliation adjustments and no other individually significant items. For the nine months ended September 30, 2015, $4,264 other income, net is comprised primarily of $7,200 legal settlement, $3,471 royalty income on licensed patents, $1,800 sales of fixed assets, $2,930 other income, net of individually insignificant items and is partially offset by $11,137 insurance expense audit adjustments.

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Subsequent Events

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent Events

17. SUBSEQUENT EVENTS

As discussed under Footnote 13 “Commitments and Contingencies”, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. The Company has obtained different legal representation in this matter and attempted to have the default set aside. On November 2, 2016, the court granted plaintiff’s motion for sanctions against our company for frivolous litigation relating to our attempt to have the matter dismissed and granted the plaintiff’s motion to strike our motion for summary judgment due to our initial default. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action.

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Description of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Description of Business

Description of business –Brownie’s Marine Group, Inc., (hereinafter referred to as the “Company”, “we” 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 Pompano Beach, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor Industries, Inc. The Company’s common stock is quoted on the OTC Markets (Pink) under the symbol “BWMG”.

Basis of Presentation

Basis of Presentation – The financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included.

The condensed consolidated financial statements as of September 30, 2016 and for the three and nine month periods ended September 30, 2016 and 2015 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2016, and the results of operations for the three and nine month periods ended September 30, 2016 and 2015, the statement of stockholders’ equity for the nine months ended September 30, 2016 and the statements of cash flows for the nine month periods ended September 30, 2016 and 2015. The condensed consolidated results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the entire year. The condensed consolidated balance sheet as of December 31, 2015 has been derived from the Company’s audited financial statements for the year ended December 31, 2015. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these condensed consolidated financial statements should be read in conjunction with our audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2015 as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K which was filed on March 29, 2016.

Definition of Fiscal Year

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

Use of Estimates

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

Reclassifications – Certain reclassifications may have been made to the 2015 financial statement amounts and disclosures to conform to the 2016 financial statement presentation.

Going Concern

Going Concern – The accompanying condensed unaudited consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. Although profitable for the years ended December 31, 2015 and 2014, we have frequently incurred losses since 2009.

The Company is behind on payments due for matured convertible debentures, related parties notes payable, accrued liabilities and interest – related parties, and certain vendor payables. The Company is handling delinquencies on a case by case basis. However, there can be no assurance that cooperation the Company has received thus far will continue.

Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about BWMG’s ability to continue as a going concern within one year from date the financial statements are issued. Therefore, the Company may need to raise additional funds and is currently exploring alternative sources of financing. BWMG has issued a number of convertible debentures in the past as an interim measure to finance working capital needs and may continue to raise additional capital through sale of restricted common stock or other securities, and obtaining some short term loans. The Company has previously paid for some legal and consulting services with restricted stock to maximize working capital and intends to continue this practice when possible. In addition, the Company implemented some cost saving measures and will continue to explore more to reduce operating expenses.

If BWMG fails to raise additional funds when needed, or does not have sufficient cash flows from sales, it may be required to scale back or cease operations, liquidate assets and possibly seek bankruptcy protection. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Cash and Equivalents

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.

Accounts Receivable

Accounts receivable – Accounts receivable consist of amounts due from the sale of all of our products to wholesale and retail customers. The allowance for doubtful accounts is estimated based on historical customer experience and industry knowledge.

Inventory

Inventory – Inventory is stated at the lower of cost or net realizable value. 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 indicated.

Property and, Equipment and Leasehold Improvements

Property and, Equipment and Leasehold Improvements – Property and, Equipment and Leasehold Improvements are stated at cost less accumulated depreciation and/or amortization. Depreciation and amortization is provided principally on the straight-line method over the estimated useful lives of the assets or the lease, which are primarily 3 to 5 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

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 costs – Product development expenditures are charged to expenses as incurred.

Advertising and Marketing Costs

Advertising and marketing costs – The Company expenses the costs of producing advertisements and marketing material at the time production occurs, and expenses the costs of communicating advertisements and participating in trade shows in the period in which occur. Advertising and trade show expense incurred for the three months ended September 30, 2016 and 2015, was $313 and $138 respectively. Advertising and trade show expense incurred for the nine months ended September 30, 2016 and 2015, was $3,550 and $2,842, respectively.

Customer Deposits and Returns Policy

Customer deposits and returns 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 is 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.

Income Taxes

Income taxes – The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Comprehensive Income

Comprehensive income – The Company has no components of other comprehensive income. Accordingly, net income equals comprehensive income for all periods presented.

Stock-based Compensation

Stock-based compensation – The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is 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.

Beneficial Conversion Features on Convertible Debentures

Beneficial conversion features on convertible debentures – The fair value of the stock upon which beneficial conversion feature (BCF) computations, as applicable, was determined through use of the quoted stock price.

Fair Value of Financial Instruments

Fair value of financial instruments – Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company. Management considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, provided by multiple, independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company’s perceived risk of that investment.

At September 30, 2016, and December 31, 2015, the carrying amount of cash, accounts receivable, accounts receivable – related parties, customer deposits and unearned revenue, royalties payable – related parties, other liabilities, other liabilities and accrued interest – related parties, notes payable, notes payable – related parties, and accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

Earnings Per Common Share

Earnings per common share – Basic earnings per share exclude any dilutive effects of options, warrants and convertible securities. Basic earnings per share are 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 and common stock equivalent shares, if any, outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Potentially dilutive shares included in dilutive earnings per share totaled 4,845,004 shares for the three months and nine months ended September 30, 2016. Potentially dilutive shares included in dilutive earnings per share totaled 48,965,429 shares and 47,325,387 shares for the three months and nine months ended September 30, 2015, respectively.

New Accounting Pronouncements

New accounting pronouncements – The Company believes there was no new accounting guidance adopted, but not yet effective that either has not already been disclosed in prior reporting periods or is relevant to the readers of BWMG’s financial statements.

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Inventory (Tables)

9 Months Ended

Sep. 30, 2016

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consists of the following as of:

	September 30, 2016		December 31, 2015
Raw materials	$	383,152	$	422,115
Work in process		—		—
Finished goods		229,068		232,098
	$	612,220	$	654,213

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Prepaid Expenses and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2016

Prepaid Expenses And Other Current Assets

Schedule of Prepaid Expenses and Other Current Assets

	September 30, 2016		December 31, 2015
Prepaid inventory	$	37,939	$	42,076
Prepaid insurance		9,442		8,819
Prepaid fixed assets		8,600		—
Prepaid legal		35,000		—
Prepaid other		6,190		7,117
	$	97,171	$	58,012

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment, Net

Property and equipment consists of the following as of:
	September 30, 2016			December 31, 2015
Factory and office equipment	$	62,633		$	62,633
Tooling		59,149			59,149
Computer equipment and software		31,519			23,932
Vehicles		44,160			44,160
Leasehold improvements		43,779			43,779
		241,240			233,653
Less: accumulated depreciation and amortization		(175,098	)		(147,941	)
	$	66,142		$	85,712

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Related Parties Transactions (Tables)

9 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Schedule of Related Parties Notes Payable

Notes payable – related parties consists of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning September 15, 2015, with interest at 10% per annum with payments monthly in shares of stock based on the monthly weighted average price of the stock, maturing May 15, 2016.	$	—	$	11,098
Less amounts due within one year		—		(11,098	)
Long-term portion of notes payable – related parties	$	—	$	—
Current portion of notes payable – related parties	$	—	$	11,098

Schedule of Other Liabilities and Accrued Interest Related Party

Other liabilities and accrued interest– related parties consist of the following at:

	September 30, 2016		December 31, 2015
Year-end 2012 bonus payable to Chief Executive Officer	$	—	$	67,000
Year-end 2012 bonus payable to employee		—		17,500
	$	—	$	84,500

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Accounts Payable and Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2016

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consists of the following as of:

	September 30, 2016		December 31, 2015
Accounts payable trade	$	53,972	$	59,916
Accrued payroll & fringe benefits		28,918		27,245
Accrued year-end bonuses		—		45,000
Accrued payroll taxes & withholding		18,267		36,520
Accrued interest		169,047		181,265
	$	270,204	$	349,946

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Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2016

Other Liabilities Disclosure [Abstract]

Schedule of Other Liabilities

Other liabilities consist of the following as of:

	September 30, 2016		December 31, 2015
Short-term loans	$	190,787	$	215,782
Asset purchase agreement payable		12,857		12,857
On-line training liability		5,777		2,912
	$	209,421	$	231,551

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Notes Payable

Notes payable consists of the following as of September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Promissory note payable, secured by vehicle underlying loan having carrying value of $11,385 and $14,117 at September 30, 2016 and December 31, 2015, respectively, bearing interest at 1.9% per annum, due in monthly principal and interest payments of $523, maturing on December 5, 2017	$	7,157		$	12,232
Less amounts due within one year		(5,675	)		(6,099	)
Long-term portion of notes payable	$	1,482		$	6,133

Schedule of Debt Principal Payments on Notes Payable

As of September 30, 2016, principal payments on the notes payable are as follows:

2016	$	1,025
2017		6,132
2018		—
2019		—
2020		—
Thereafter		—
	$	7,157

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Convertible Debentures (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Convertible Debentures

Convertible debentures consist of the following at September 30, 2016 and December 31, 2015:

Origination Date	Maturity Date	Interest Rate			Origination Principal		Origination Discount			September 30, 2016 Debenture Balance		September 30, 2016 Accrued Interest		December 31, 2015 Debenture Balance		December 31, 2015 Accrued Interest		Ref.
11/27/2010	5/27/2011		10	%		125,000		(53,517	)	$	—	$	—	$	58,750	$	34,709		(1	)
5/3/2011	5/5/2012		10	%		300,000		(206,832	)		300,000		162,500		300,000		140,000		(2	)
8/31/2011	8/31/2013		5	%		10,000		(4,286	)		10,000		2,561		10,000		2,183		(3	)
2/10/2012	2/10/2014		10	%		5,500		—			—		—		472		216		(4	)
2/10/2012	2/10/2014		10	%		39,724		—			2,743		3,986		2,743		4,157		(4	)
										$	312,743	$	169,047	$	371,965	$	181,265

Reference numbers in right hand column of table entitled Ref. refer to paragraphs with corresponding numbers that immediately follow this paragraph.

(1) The Company purchased in exchange for convertible debenture exclusive rights for license of certain intellectual property from an unrelated party. The parties agreed to a royalty of 2.5% of net revenues generated from the sale, sub-license or use of the technology or a reasonable negotiated rate based on similar invention. The debenture was convertible to common shares of the Company at May 27, 2011, along with accrued interest at the option of the lender. Conversion price per share is 30% discount as determined from the weighted average of the preceding 12 trading days’ closing market price. The Company valued the BCF of the convertible debenture at $53,517, its intrinsic value. The Company accreted the discount to the convertible debenture and will recognize interest expense through repayment in full or conversion. Because there was no assurance of success and the invention was still in design and pre-prototype phase, the Company recorded the initial net value of the debenture, $71,483, as research and development expense during the year ended 2010. Both parties agreed to confidentiality regarding the invention during the pre-prototype stage. In addition, the Company agreed to provide the licensor with design services, as well as assist in completing the prototype and initial production at the Company’s prevailing wholesale rate for comparable services.

On February 10, 2012, the holder of this debenture entered into an agreement with a third party to sell/assign the $125,000 principal balance, plus accrued interest. The purchase was to be in installments with transfer/assignment of the debenture upon payment, referred to as “Closings”. The first Closing was on or about February 15, 2012 for $7,500, with that amount assigned/transferred. The second Closing, occurred 90 days after the first closing for $11,750 paid/assigned. All subsequent Closings were to be for $11,750 and occur in 30 day increments after the second closing. This was to continue until the full principal balance of $125,000, plus accrued interest is purchased or assigned. The holder of the convertible note has voluntarily dissolved and ceased operation. In February 2016 both parties agreed to cancel the agreement and all remaining principal and interest balances.

(2) On May 3, 2011, the Company borrowed $300,000 in exchange for a convertible debenture. The Debenture bears 10% interest per annum. The lender may at any time convert any portion of the debenture to common shares at a 30% discount of the “Market Price” of the stock based on the average of the previous ten (10) days weighted average closing prices on the date prior to the notice of conversion. The Company may prepay the debenture plus accrued interest at any time before maturity. In addition, as further inducement for loaning the Company the funds, the Company granted the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share (after restatement for 1 for -1,350- reverse stock split), respectively. As a result, the Company allocated fair market value (“FMV”) to both the BCF and to the warrants, or $206,832, which was recorded as a discount against the debenture. The Company accreted the discount to the convertible debenture through maturity and will accrue interest expense until paid in full or converted. Before discount, the Company determined the FMV of the warrants as $45,000 using the Black-Scholes valuation model.

(3) The Company borrowed $10,000 in exchange for a convertible debenture. The lender at their option may convert all or part of the note plus accrued interest into common stock at a price of thirty percent (30%) discount as determined from the average four (4) highest closing bid prices over the preceding five (5) trading days. The Company valued the BCF of the convertible debenture at $4,286, which was accreted to interest expense.

(4) The Company entered into three new debenture agreements upon sale or assignment by the original lender. Because the stated terms of the new debenture agreement and principal amounts were significantly different from the original debenture, including analysis of the value of the beneficial conversion feature at the assignment or purchase date, the transactions are treated as extinguishment of the old debentures and recorded as new for accounting purposes.

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments Under Operating Lease

Future minimum rental payments required under our operating lease agreement are as follows:

Year 1	$	48,000
Year 2		—
Year 3		—
Year 4		—
Year 5		—
	$	48,000

XML

Description of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Advertising and trade show expense	$ 313	$ 138	$ 3,550	$ 2,842
Percentage of minimum deposit for custom and large tank fill systems			50.00%
Percentage of restocking fees			15.00%
Potentially dilutive shares included in dilutive earnings per share	4,845,004	48,965,429	4,845,004	47,325,387
Furniture, Fixtures, Equipment and Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life			3 years
Furniture, Fixtures, Equipment and Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life			5 years

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Inventory - Schedule of Inventory (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 383,152	$ 422,115
Work in process
Finished goods	229,068	232,098
Inventory	$ 612,220	$ 654,213

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Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Prepaid Expenses And Other Current Assets
Prepaid inventory	$ 37,939	$ 42,076
Prepaid insurance	9,442	8,819
Prepaid fixed assets	8,600
Prepaid legal	35,000
Prepaid other	6,190	7,117
Prepaid expense and other assets, current	$ 97,171	$ 58,012

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Property and Equipment Net (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 9,197	$ 8,754	$ 27,157	$ 26,019

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Property and Equipment Net - Schedule of Property and Equipment, Net (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment, Gross	$ 241,240	$ 233,653
Less: accumulated depreciation and amortization	(175,098)	(147,941)
Property Plant and Equipment, Net	66,142	85,712
Factory and Office Equipment [Member]
Property, Plant and Equipment, Gross	62,633	62,633
Tooling [Member]
Property, Plant and Equipment, Gross	59,149	59,149
Computer Equipment and Software [Member]
Property, Plant and Equipment, Gross	31,519	23,932
Vehicles [Member]
Property, Plant and Equipment, Gross	44,160	44,160
Leasehold Improvements [Member]
Property, Plant and Equipment, Gross	$ 43,779	$ 43,779

XML

Other Assets (Details Narrative) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Other Assets [Abstract]
Other assets	$ 6,649	$ 6,649

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Customer Credit Concentrations (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Related Party [Member] | Sales Revenue [Member]
Concentration credits risk	28.64%	25.50%	30.65%	30.49%

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Related Parties Transactions (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Apr. 22, 2015
Due to employees					$ (11,098)
Debt converted into shares value			$ 572
Debt converted into shares	108,274		124,326
Net revenus from related parties	$ 240,102	$ 282,047	$ 574,862	$ 695,773
Percentage of gross revenues per quarter	2.50%		2.50%
Share based compensation			$ 36,000
Mr.Carmichael [Member]
Due to employees						$ 27,000
Chief Executive Officer [Member] | Brownie's Southport Divers, Inc., Brownie's Palm Beach Divers, and Brownie's Yacht Toys [Member]
Net revenus from related parties	$ 234,367	280,786	566,607	652,124
Accounts receivable from related parties	53,126		53,126		32,880
Chief Executive Officer [Member] | Brownie's Global Logistics, LLC. ("BGL"), 3D Buoy and 940 Associates, Inc [Member]
Net revenus from related parties	5,647	$ 1,261	8,255	$ 43,649
Accounts receivable from related parties	$ 2,146		2,146		$ 8,391
Alexander F. Purdon [Member]
Share based compensation			$ 36,000

XML

Related Parties Transactions - Schedule of Related Parties Notes Payable (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Related Party Transactions [Abstract]
Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning September 15, 2015, with interest at 10% per annum with payments monthly in shares of stock based on the monthly weighted average price of the stock, maturing May 15, 2016.		$ 11,098
Less amounts due within one year		(11,098)
Long-term portion of notes payable – related parties
Current portion of notes payable – related parties		$ 11,098

XML

Related Parties Transactions - Schedule of Related Parties Notes Payable (Details) (Parenthetical) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Debt instruments maturity date	May 27, 2011
Promissory Note Payable [Member]
Debt instruments monthly principal payments		$ 2,250
Debt instruments interest rate		10.00%
Debt instruments maturity date		May 15, 2016

XML

Related Parties Transactions - Schedule of Other Liabilities and Accrued Interest Related Party (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Other liabilities and accrued interest - related parties		$ 84,500
Year-End 2012 Bonus Payable to Chief Executive Officer [Member]
Other liabilities and accrued interest - related parties		67,000
Year-End 2012 Bonus Payable to Employee [Member]
Other liabilities and accrued interest - related parties		$ 17,500

XML

Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Payables and Accruals [Abstract]
Accounts payable trade	$ 53,972	$ 59,916
Accrued payroll & fringe benefits	28,918	27,245
Accrued year-end bonuses		45,000
Accrued payroll taxes & withholding	18,267	36,520
Accrued interest	169,047	181,265
Accounts Payable and Accrued Liabilities, Total	$ 270,204	$ 349,946

XML

Other Liabilities (Details Narrative)	9 Months Ended
	Sep. 30, 2016 USD ($)
Other Liabilities Disclosure [Abstract]
Proceeds towards settlement of convertible debentures	$ 2,000,000
Online training liability historical redemption rate	10.00%

XML

Other Liabilities - Schedule of Other Liabilities (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Other Liabilities Disclosure [Abstract]
Short-term loans	$ 190,787	$ 215,782
Asset purchase agreement payable	12,857	12,857
On-line training liability	5,777	2,912
Other Liabilities, Current	$ 209,421	$ 231,551

XML

Notes Payable - Schedule of Notes Payable (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
Notes Payable	$ 7,157	$ 12,232
Less amounts due within one year	(5,675)	(6,099)
Long-term portion of notes payable	$ 1,482	$ 6,133

XML

Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Debt instruments maturity date	May 27, 2011
Promissory Note Payable [Member]
Debt instruments maturity date		May 15, 2016
Promissory Note Payable [Member] | Vehicle [Member]
Secured long-term debt	$ 11,385	$ 14,117
Percenatge of debt instrument interest rate	1.90%	1.90%
Debt instrument, periodic payment	$ 523	$ 523
Debt instruments maturity date	Dec. 05, 2017	Dec. 05, 2017

XML

Notes Payable - Schedule of Debt Principal Payments on Notes Payable (Details)	Sep. 30, 2016 USD ($)
Debt Disclosure [Abstract]
2016	$ 1,025
2017	6,132
2018
2019
2020
Thereafter
Notes Payable	$ 7,157

XML

Convertible Debentures (Details Narrative) - USD ($)				3 Months Ended			9 Months Ended
		Feb. 10, 2012	May 03, 2011	Sep. 30, 2016		Sep. 30, 2015	Sep. 30, 2016		Sep. 30, 2015
Percentage of royalty revenue							2.50%
Percentage of discount on conversion price							30.00%
Debt instrument maturity date							May 27, 2011
Research and development costs				$ 10		$ 931	$ 1,425		$ 1,897
Debt indstrument principal balance				$ 125,000			$ 125,000
Convertible Debenture One [Member]
Debt instrument maturity date	[1]						May 27, 2011
Debt instrument, convertible, beneficial conversion feature							$ 53,517
Research and development costs							$ 71,483
Debt indstrument principal balance		$ 125,000
Long-term debt, gross		7,500
Debt instrument transfer or assignment in second closing		11,750
Debt instrument transfer or assignment in subsequent closing		$ 11,750
Debt instrument interest percentage	[1]			10.00%			10.00%
Convertible Debenture Two [Member]
Percentage of discount on conversion price			30.00%
Debt instrument maturity date	[2]						May 05, 2012
Borrowing convertible debenture			$ 300,000
Debt instrument interest percentage			10.00%	10.00%	[2]		10.00%	[2]
Reverse stock split			1 for -1,350
Debt discount			$ 206,832
Fair market value of warrants			$ 45,000
Convertible Debenture Two [Member] | Warrant One [Member]
Number of warrants granted			300,000
Warrants exercise price per share			$ 337.50
Convertible Debenture Two [Member] | Warrant Two [Member]
Number of warrants granted			600,000
Warrants exercise price per share			$ 472.50
Convertible Debenture Three [Member]
Percentage of discount on conversion price							30.00%
Debt instrument maturity date	[3]						Aug. 31, 2013
Borrowing convertible debenture				$ 10,000			$ 10,000
Debt instrument interest percentage	[3]			5.00%			5.00%
Accreted interest expense							$ 4,286

[1] (1) The Company purchased in exchange for convertible debenture exclusive rights for license of certain intellectual property from an unrelated party. The parties agreed to a royalty of 2.5% of net revenues generated from the sale, sub-license or use of the technology or a reasonable negotiated rate based on similar invention. The debenture was convertible to common shares of the Company at May 27, 2011, along with accrued interest at the option of the lender. Conversion price per share is 30% discount as determined from the weighted average of the preceding 12 trading days' closing market price. The Company valued the BCF of the convertible debenture at $53,517, its intrinsic value. The Company accreted the discount to the convertible debenture and will recognize interest expense through repayment in full or conversion. Because there was no assurance of success and the invention was still in design and pre-prototype phase, the Company recorded the initial net value of the debenture, $71,483, as research and development expense during the year ended 2010. Both parties agreed to confidentiality regarding the invention during the pre-prototype stage. In addition, the Company agreed to provide the licensor with design services, as well as assist in completing the prototype and initial production at the Company's prevailing wholesale rate for comparable services. on February 10, 2012, the holder of this debenture entered into an agreement with a third party to sell/assign the $125,000 principal balance, plus accrued interest. The purchase was to be in installments with transfer/assignment of the debenture upon payment, referred to as ;Closings”. The first Closing was on or about February 15, 2012 for $7,500, with that amount assigned/transferred. The second Closing, occurred 90 days after the first closing for $11,750 paid/assigned. All subsequent Closings were to be for $11,750 and occur in 30 day increments after the second Closing. This was to continue until the full principal balance of $125,000, plus accrued interest is purchased or assigned. The holder of the convertible note has voluntarily dissolved and ceased operation. In February 2016 both parties agreed to cancel the agreement and all remaining principal and interest balances.

[2] (2) On May 3, 2011, the Company borrowed $300,000 in exchange for a convertible debenture. The Debenture bears 10% interest per annum. The lender may at any time convert any portion of the debenture to common shares at a 30% discount of the "Market Price" of the stock based on the average of the previous ten (10) days weighted average closing prices on the date prior to the notice of conversion. The Company may prepay the debenture plus accrued interest at any time before maturity. In addition, as further inducement for loaning the Company the funds, the Company granted the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share (after restatement for 1 for -1,350- reverse stock split), respectively. As a result, the Company allocated fair market value ("FMV") to both the BCF and to the warrants, or $206,832, which was recorded as a discount against the debenture. The Company accreted the discount to the convertible debenture through maturity and will accrue interest expense until paid in full or converted. Before discount, the Company determined the FMV of the warrants as $45,000 using the Black-Scholes valuation model.

[3] (3) The Company borrowed $10,000 in exchange for a convertible debenture. The lender at their option may convert all or part of the note plus accrued interest into common stock at a price of thirty percent (30%) discount as determined from the average four (4) highest closing bid prices over the preceding five (5) trading days. The Company valued the BCF of the convertible debenture at $4,286, which was accreted to interest expense.

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Convertible Debentures - Schedule of Convertible Debentures (Details) - USD ($)		9 Months Ended		12 Months Ended
		Sep. 30, 2016		Dec. 31, 2015	May 03, 2011
Maturity Date		May 27, 2011
Period End Debenture, Net Balance		$ 312,743		$ 371,965
Debt Instrument, Increase, Accrued Interest		$ 169,047		371,965
Convertible Debenture One [Member]
Origination Date	[1]	Nov. 27, 2010
Maturity Date	[1]	May 27, 2011
Interest Rate	[1]	10.00%
Origination Principal Balance	[1]	$ 125,000
Origination Discount Balance	[1]	(53,517)
Period End Debenture, Net Balance	[1]			58,750
Debt Instrument, Increase, Accrued Interest	[1]			34,709
Convertible Debenture Two [Member]
Origination Date	[2]	May 03, 2011
Maturity Date	[2]	May 05, 2012
Interest Rate		10.00%	[2]		10.00%
Origination Principal Balance	[2]	$ 300,000
Origination Discount Balance	[2]	(206,832)
Period End Debenture, Net Balance	[2]	300,000		300,000
Debt Instrument, Increase, Accrued Interest	[2]	$ 162,500		140,000
Convertible Debenture Three [Member]
Origination Date	[3]	Aug. 31, 2011
Maturity Date	[3]	Aug. 31, 2013
Interest Rate	[3]	5.00%
Origination Principal Balance	[3]	$ 10,000
Origination Discount Balance	[3]	(4,286)
Period End Debenture, Net Balance	[3]	10,000		10,000
Debt Instrument, Increase, Accrued Interest	[3]	$ 2,561		2,183
Convertible Debenture Four [Member]
Origination Date	[4]	Feb. 10, 2012
Maturity Date	[4]	Feb. 10, 2014
Interest Rate	[4]	10.00%
Origination Principal Balance	[4]	$ 5,500
Origination Discount Balance	[4]
Period End Debenture, Net Balance	[4]			472
Debt Instrument, Increase, Accrued Interest	[4]			216
Convertible Debenture Five [Member]
Origination Date	[4]	Feb. 10, 2012
Maturity Date	[4]	Feb. 10, 2014
Interest Rate	[4]	10.00%
Origination Principal Balance	[4]	$ 39,724
Origination Discount Balance	[4]
Period End Debenture, Net Balance	[4]	2,743		2,743
Debt Instrument, Increase, Accrued Interest	[4]	$ 3,986		$ 4,157

[1] (1) The Company purchased in exchange for convertible debenture exclusive rights for license of certain intellectual property from an unrelated party. The parties agreed to a royalty of 2.5% of net revenues generated from the sale, sub-license or use of the technology or a reasonable negotiated rate based on similar invention. The debenture was convertible to common shares of the Company at May 27, 2011, along with accrued interest at the option of the lender. Conversion price per share is 30% discount as determined from the weighted average of the preceding 12 trading days' closing market price. The Company valued the BCF of the convertible debenture at $53,517, its intrinsic value. The Company accreted the discount to the convertible debenture and will recognize interest expense through repayment in full or conversion. Because there was no assurance of success and the invention was still in design and pre-prototype phase, the Company recorded the initial net value of the debenture, $71,483, as research and development expense during the year ended 2010. Both parties agreed to confidentiality regarding the invention during the pre-prototype stage. In addition, the Company agreed to provide the licensor with design services, as well as assist in completing the prototype and initial production at the Company's prevailing wholesale rate for comparable services. on February 10, 2012, the holder of this debenture entered into an agreement with a third party to sell/assign the $125,000 principal balance, plus accrued interest. The purchase was to be in installments with transfer/assignment of the debenture upon payment, referred to as ;Closings”. The first Closing was on or about February 15, 2012 for $7,500, with that amount assigned/transferred. The second Closing, occurred 90 days after the first closing for $11,750 paid/assigned. All subsequent Closings were to be for $11,750 and occur in 30 day increments after the second Closing. This was to continue until the full principal balance of $125,000, plus accrued interest is purchased or assigned. The holder of the convertible note has voluntarily dissolved and ceased operation. In February 2016 both parties agreed to cancel the agreement and all remaining principal and interest balances.

[2] (2) On May 3, 2011, the Company borrowed $300,000 in exchange for a convertible debenture. The Debenture bears 10% interest per annum. The lender may at any time convert any portion of the debenture to common shares at a 30% discount of the "Market Price" of the stock based on the average of the previous ten (10) days weighted average closing prices on the date prior to the notice of conversion. The Company may prepay the debenture plus accrued interest at any time before maturity. In addition, as further inducement for loaning the Company the funds, the Company granted the lender 300,000 and 600,000 warrants at $337.50 and $472.50 per share (after restatement for 1 for -1,350- reverse stock split), respectively. As a result, the Company allocated fair market value ("FMV") to both the BCF and to the warrants, or $206,832, which was recorded as a discount against the debenture. The Company accreted the discount to the convertible debenture through maturity and will accrue interest expense until paid in full or converted. Before discount, the Company determined the FMV of the warrants as $45,000 using the Black-Scholes valuation model.

[3] (3) The Company borrowed $10,000 in exchange for a convertible debenture. The lender at their option may convert all or part of the note plus accrued interest into common stock at a price of thirty percent (30%) discount as determined from the average four (4) highest closing bid prices over the preceding five (5) trading days. The Company valued the BCF of the convertible debenture at $4,286, which was accreted to interest expense.

[4] (4)The Company entered into three new debenture agreements upon sale or assignment by the original lender. Because the stated terms of the new debenture agreement and principal amounts were significantly different from the original debenture, including analysis of the value of the beneficial conversion feature at the assignment or purchase date, the transactions are treated as extinguishment of the old debentures and recorded as new for accounting purposes.

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Authorization of Preferred Stock (Details Narrative) - shares	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	425,000	425,000
Preferred stock, voting rights	250 to 1
Percentage of voting rights	55.00%
Series A Convertible Preferred Stock [Member]
Convertible preferred stock, shares issued upon conversion	31,481

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Commitments and Contingencies (Details Narrative) - USD ($)		3 Months Ended		9 Months Ended
	Aug. 14, 2014	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Security deposit	$ 5,367
Operating leases, rent expense, minimum rentals	$ 4,000
Percentage of annual operating expenses	10.76%
Operating leases, rent expense	$ 2,000
Operating leases, rent expense, net, total		$ 12,000	$ 12,000	$ 36,000	$ 36,000
Maximum [Member]
Loss contingency, damages paid, value				$ 1,000,000

XML

Commitments and Contingencies - Schedule of Future Minimum Rental Payments Under Operating Lease (Details)	Sep. 30, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Year 1	$ 48,000
Year 2
Year 3
Year 4
Year 5
Operating Leases, Future Minimum Payments Due, Total	$ 48,000

XML

Equity Incentive Plan (Details Narrative) - shares		1 Months Ended
	Nov. 02, 2012	Aug. 22, 2007
Equity Incentive Plan [Line Items]
Share-based compensation arrangement by share-based payment award, options, grants in period, gross	5,185
Equity Incentive Plan [Member]
Equity Incentive Plan [Line Items]
Share-based compensation arrangement by share-based payment award, shares issued in period		297
Share-based compensation arrangement by share-based payment award, options, grants in period, gross		75
Share-based compensation arrangement by share-based payment award, options, outstanding, number		297

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Equity Based Incentive/Retention Bonuses (Details Narrative)	Nov. 02, 2012 USD ($) shares
Compensation and Retirement Disclosure [Abstract]
Stock incentive bonus | $	$ 75,100
Share-based compensation arrangement by share-based payment award, options, vested, number of shares	61,852
Share-based compensation arrangement by share-based payment award, options, grants in period, gross	5,185

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Interest Expense Non-Related Parties and Other Expense (Income), Net (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Interest expense, non related party	$ 7,734	$ 9,269	$ 23,251	$ 27,800
Interest expense, debt				11,137
Other income	3,173	6,494	40,292	4,264
Proceeds from legal settlement receivable		7,200		7,200
Extinguishment of debt settlement			233,825
Cancelation of employee bonus payable			140,366
Insurance premium refund			2,009
Other income from expiration of online training liability certificates	2,273		13,605
Other expense, net of individually insignificant items			6,617
Induced conversion of convertible debt expense			93,459
Royalty income, nonoperating			14,970
Product royalty income				3,471
Sale of property, plant and equipment				1,800
Other operating income (expense), net				2,930
Convertible Debentures [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Interest expense, debt	7,695	9,177	23,093	27,531
Notes Payable [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Interest expense, debt	$ 39	$ 77	$ 158	$ 269