10-Q: Brownies Marine Group Reports Reduced Q1 Loss Amidst Revenue Decline and Going Concern Warning

Sentiment:

Quarterly Report 2 July 2025 5:14 PM

📋All filings for Brownie's Marine Group, INC

Brownies Marine Group, Inc. reported a significantly reduced net loss of $54,468 for Q1 2025 compared to the prior year, despite a decrease in total net revenues, while acknowledging substantial doubt about its ability to continue as a going concern.

Delay expectedThe maturity date of the $346,500 convertible promissory note to Summit Holding V, LLC has been verbally extended from September 3, 2024, while the company works through a restructure.The maturity date of the $280,000 promissory note to Charles Hyatt was extended to May 5, 2025.Addendum No. 3 to the STS Agreement delays the additional minimum yearly royalty of $60,000 from 2024 to 2025.

Capital raiseThe company's ability to continue as a going concern is dependent upon its ability to 'raise capital' to finance its operations.

Worse than expectedThe company continues to report a net loss of $54,468 for Q1 2025, indicating ongoing unprofitability.Total net revenues decreased by 4.9% compared to the prior year's quarter.The company explicitly states 'substantial doubt as to the Company’s ability to continue as a going concern' due to continued losses and cash used in operations.The accumulated deficit increased to $17,980,677, reflecting persistent historical losses.

Summary

Brownies Marine Group, Inc. (BWMG) reported a net loss of $54,468 for the three months ended March 31, 2025, a substantial improvement from the $335,716 net loss in the same period of 2024.
Total net revenues decreased to $1,529,202 in Q1 2025 from $1,607,522 in Q1 2024, primarily due to a decline in non-related party revenues.
Non-related party net revenues were $1,320,004 in Q1 2025, down from $1,492,299 in Q1 2024.
Related party net revenues increased to $209,198 in Q1 2025 from $115,223 in Q1 2024, now accounting for 15.8% of total net revenues.
Gross profit declined to $504,030 in Q1 2025 from $587,435 in Q1 2024.
Selling, general and administrative expenses significantly decreased to $548,126 in Q1 2025 from $899,821 in Q1 2024.
Cash balance at March 31, 2025, was $341,038, a decrease from $417,678 at December 31, 2024.
The company had an accumulated deficit of $17,980,677 as of March 31, 2025.
Net cash used in operating activities improved to $115,729 in Q1 2025 from $466,364 in Q1 2024.
The maturity date for a $346,500 convertible promissory note to Summit Holding V, LLC was verbally extended from September 3, 2024, pending restructure.
A $280,000 promissory note to director Charles Hyatt had its due date extended to May 5, 2025.
The Nomad tankless dive system recall was finalized in 2024, adjusting the reserve to zero.

Sentiment

Score: 3

Explanation: While the net loss significantly decreased and SG&A costs were cut, the company still operates at a loss, faces a 'going concern' warning, and relies on related party financing and debt extensions, indicating significant financial instability and uncertainty.

Positives

Net loss significantly reduced to $54,468 in Q1 2025 from $335,716 in Q1 2024, indicating improved operational efficiency or cost control.
Selling, general and administrative expenses decreased substantially by approximately 39% from $899,821 in Q1 2024 to $548,126 in Q1 2025.
Net cash used in operating activities improved significantly, decreasing from $466,364 in Q1 2024 to $115,729 in Q1 2025.
Related party net revenues increased by 81.5% to $209,198 in Q1 2025 from $115,223 in Q1 2024, showing stronger engagement with affiliated entities.
The Nomad tankless dive system recall was finalized in 2024, resolving a prior operational contingency.

Negatives

Total net revenues decreased by 4.9% to $1,529,202 in Q1 2025 from $1,607,522 in Q1 2024.
Non-related party net revenues, the primary revenue source, declined by 11.5% to $1,320,004 in Q1 2025 from $1,492,299 in Q1 2024.
Gross profit decreased by 14.3% to $504,030 in Q1 2025 from $587,435 in Q1 2024.
Cash balance decreased to $341,038 at March 31, 2025, from $417,678 at December 31, 2024.
The company continues to operate at a net loss and has an accumulated deficit of $17,980,677 as of March 31, 2025.
Interest expense increased to $28,080 in Q1 2025 from $19,952 in Q1 2024.
Related party notes payable increased to $544,088 at March 31, 2025, from $505,000 at December 31, 2024.

Risks

The company's continued net losses and cash used in operations raise substantial doubt about its ability to continue as a going concern for the next twelve months.
The company's ability to continue as a going concern is dependent on increasing revenues, controlling expenses, raising capital, and sustaining adequate working capital.
The maturity date of a significant convertible note ($346,500 to Summit Holding V, LLC) has been verbally extended, indicating ongoing financial restructuring needs and potential uncertainty.
The company relies on related party transactions for a notable portion of its revenue (15.8% in Q1 2025) and has significant related party debt, which could pose governance and conflict of interest risks.
The company had approximately $0 in excess of the FDIC insured limit for cash deposits at March 31, 2025, indicating potential exposure to uninsured cash balances.

Future Outlook

The company's ability to continue as a going concern is dependent on its future success in increasing revenues, controlling expenses, raising capital, and sustaining adequate working capital. The maturity dates of certain convertible notes have been verbally extended, indicating ongoing efforts to restructure debt obligations. The additional minimum yearly royalty to STS will be required in 2025, which is the final year for this obligation.

Industry Context

Brownies Marine Group operates in the recreational and military diving and water safety industries, encompassing products like hookah diving systems, scuba equipment, high-pressure air compressors, and portable battery-powered dive systems. The industry is characterized by specialized equipment needs for both consumer and professional/military applications. The company's focus on both recreational and industrial/military segments suggests a diversified approach within the niche market.

Comparison to Industry Standards

The document does not provide specific comparable companies, projects, or results to assess performance against global benchmarks or industry standards.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer	Christopher Constable	N/A	2023-07-07	Resignation
General Manager (LBI dive shop)	Steven Gagas	N/A	2024-01-01	Retirement

Legal Proceedings

There are no outstanding legal issues as of June 27, 2025.

Related Party Transactions

Sales of products to Brownies Southport Divers, Brownies Yacht Toys, and Brownies Palm Beach Divers (companies owned by Robert Carmichael's brother) accounted for 15.8% of net revenues in Q1 2025 ($209,198) and 7.2% in Q1 2024 ($115,223).
Accounts receivable from these entities totaled $19,853.38 at March 31, 2025.
Sales of products to BGL and 940 A (entities wholly-owned by Robert Carmichael) with accounts receivable of $2,389.22 at March 31, 2025. Terms are more favorable than regular customers but no more favorable than strategic partners.
Accounts payable to related parties totaled $29,365 at March 31, 2025, including $18,889 due to Robert Carmichael and $10,476 due to Blake Carmichael.
Exclusive license agreements with 940 A (owned by Robert Carmichael) for trademarks, requiring a royalty of 2.5% of gross revenues per quarter. Royalty fees paid were $3,992 in Q1 2025 and $9,061 in Q1 2024.
A convertible demand 8% promissory note in the principal amount of $66,793 was issued to Robert Carmichael on September 30, 2022, for LBI's working capital needs, with interest payable in common stock. Outstanding balance was $39,088 at March 31, 2025.
A convertible demand promissory note in the principal amount of $50,000 was issued to Robert Carmichael on September 14, 2023, for BLU3's working capital needs, with interest waived by Mr. Carmichael since that date. Outstanding balance was $50,000 at March 31, 2025.
Promissory notes totaling $430,000 ($150,000 on November 14, 2023, and $280,000 on February 5, 2024) were issued to Charles Hyatt, a Company director, for working capital, bearing 9.9% interest (18% default interest). The $280,000 note's maturity was extended to May 5, 2025.
Common stock shares were issued to Robert Carmichael for payment of interest on convertible demand notes on various dates, including 136,527 shares with a fair value of $7,000 on March 31, 2025.
8,241,759 shares of common stock with a fair value of $60,000 were issued to Blake Carmichael on December 9, 2024, as compensation for a salary reduction.
425,000 shares of Series A Convertible Preferred Stock are issued and outstanding and owned by Robert Carmichael, entitling him to 250 votes per share.

Stakeholder Impact

Shareholders face dilution risk from common stock issuances for convertible note interest and compensation, as well as uncertainty due to the 'going concern' warning and potential future capital raises.
Creditors, particularly holders of convertible notes and promissory notes, are impacted by extensions of maturity dates and the company's ongoing financial challenges.
Employees may face uncertainty given the company's financial position and management changes (CEO resignation, General Manager retirement).

Next Steps

Restructure the convertible promissory note with Summit Holding V, LLC.
Increase revenues and control expenses to improve profitability and cash flows.
Raise capital to address going concern issues and finance operations.
Continue to pay additional minimum royalty of $15,000 per fiscal quarter to Setaysha Technical Solutions, LLC (STS) in 2025, which is the final year for this additional royalty.

Key Dates

Date	Description
2010-06-30	Holders of majority common stock approved an amendment to the Articles of Incorporation authorizing 10,000,000 shares of blank check preferred stock.
2011-04-30	Board of Directors designated 425,000 shares as Series A Convertible Preferred Stock.
2014-08-14	Company entered into a 37-month lease for its facilities in Pompano Beach, Florida.
2016-12-01	Company entered into an amendment to the initial Pompano Beach lease agreement, extending the term for an additional 84 months.
2018-01-04	Company entered into a 61-month lease renewal for its facility in Huntington Beach, California.
2018-11-11	Company entered a 69-month lease for approximately 8,025 square feet adjoining its existing facility in Pompano Beach, Florida.
2019-12-01	Minimum yearly royalty of $60,000 to Setaysha Technical Solutions, LLC (STS) began.
2020-06-30	Company entered into Amendment No. 2 to its Patent License Agreement with Setaysha Technical Solutions, LLC (STS).
2020-08-21	Company executed an installment sales contract with Mercedes Benz Coconut Creek for the purchase of a 2019 Mercedes Benz Sprinter delivery van.
2020-11-05	Company entered into a three-year employment agreement with Christopher Constable as Chief Executive Officer.
2021-05-19	BLU3 executed an equipment finance agreement with Navitas Credit Corp. to finance the purchase of certain plastic molding equipment.
2021-05-26	Company adopted an Equity Incentive Plan.
2021-08-01	Company and Blake Carmichael entered into a three-year employment agreement for him to serve as Chief Executive Officer of BLU3.
2021-09-03	Company entered into an Agreement and Plan of Merger and Reorganization with Submersible Acquisition, Inc., Submersible Systems, Inc., Summit Holdings V, LLC, and Tierra Vista Group, LLC, leading to the merger with Submersible Systems, Inc. (SSI). SSI and Christeen Buban entered into a three-year employment agreement for her to serve as President of SSI. Company issued a three-year 8% convertible promissory note in the principal amount of $346,500 to Summit Holding V, LLC as part of the acquisition of SSI. Company issued a three-year 8% promissory note in the principal amount of $3,500 to Tierra Vista Partners, LLC as part of the acquisition of SSI.
2022-01-17	Company entered into an agreement with The Crone Law Group, PC (CLG) for the provision of legal services.
2022-05-02	LBI entered into a lease assignment agreement with Gold Coast Scuba, LLC and Vicnsons Realty Group, LLC. Company entered into a two-year employment agreement with Steven Gagas as General Manager of the dive shop within LBI.
2022-06-29	SSI executed an equipment financing agreement with NFS Leasing to secure replacement production molds.
2022-09-14	SSI entered into a sixty-month lease renewal for its facility in Huntington Beach, California.
2022-09-30	Company issued a convertible demand 8% promissory note in the principal amount of $66,793 to Robert Carmichael for working capital needs of LBI. SSI entered into a sublease of its facility in Huntington Beach, California with Camburg Engineering, Inc.
2022-11-01	Company issued 1,155,881 shares of common stock to the designees of STS with a fair value of $30,000.
2022-12-12	BLU3 executed an equipment finance agreement to finance the purchase of certain plastic molding equipment through Navitas.
2022-12-22	U.S. Consumer Products Safety Commission (CPSC) issued a voluntary recall notice for the Nomad tankless dive system.
2023-01-18	Company issued 11,428,570 units to Charles Hyatt, each consisting of one common stock share and a two-year warrant.
2023-02-18	Company issued additional units to Charles Hyatt, totaling 11,428,570 units with the January 18, 2023 issuance.
2023-03-31	Company issued 61,204 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest.
2023-06-24	Christopher Constable resigned as Chief Executive Officer of the Company, effective July 7, 2023.
2023-06-30	Company issued 61,205 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest.
2023-09-14	Company issued a convertible demand promissory note in the principal amount of $50,000 to Robert Carmichael for working capital needs of BLU3. Mr. Carmichael waived interest payments on this note effective this date.
2023-09-30	Company issued 61,205 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 137,000 shares of common stock to the holders of convertible notes for payment of interest.
2023-11-14	Company borrowed $150,000 through the issuance of a promissory note to Charles Hyatt for working capital requirements.
2023-12-31	Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2024-01-24	Company entered into Addendum No. 3 to the STS Agreement, delaying the additional minimum yearly royalty of $60,000 from 2024 to 2025.
2024-02-05	Company borrowed $280,000 through the issuance of a promissory note to Charles Hyatt for working capital requirements.
2024-02-12	BLU3 executed an inventory finance agreement to finance the purchase of certain equipment stock through Navitas.
2024-03-31	Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2024-05-09	Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC).
2024-06-30	Company issued 123,354 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note. Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2024-07-16	Company issued 61,677 shares of common stock to Robert Carmichael for payment of interest on the convertible demand note for the three months ending June 30, 2024.
2024-08-15	Company issued 850,000 shares to Davis Natan per a consulting agreement.
2024-09-04	BLU3 executed an inventory finance agreement to finance the purchase of certain equipment stock through Navitas.
2024-09-30	Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2024-11-01	Brownies Marine Group entered a 45-month sublease agreement with Inovar Packaging, LLC.
2024-11-13	Amendment dated for extension of Charles Hyatt's $280,000 promissory note to May 5, 2025.
2024-12-09	Company issued 8,241,759 shares of common stock to Blake Carmichael as compensation for a reduction in salary.
2024-12-31	Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2025-03-31	End of the current reporting period. Company issued an aggregate of 136,527 shares of common stock to the holders of convertible notes for payment of interest.
2025-05-05	Extended maturity date for Charles Hyatt's $280,000 promissory note.
2025-06-27	Date as of which 439,805,747 shares of common stock were outstanding.
2025-07-02	Date of signing of the Quarterly Report on Form 10-Q.
2028-07-31	Termination date of the sublease agreement with Inovar Packaging, LLC.

Recommendation

strong sell

Keywords

Marine Group, Diving Equipment, Scuba, Hookah Diving, Water Safety, Compressor Systems, SEC Filing, 10-Q, Financial Results, Net Loss, Revenue, Going Concern, Related Party Transactions, Convertible Notes, Quarterly Report

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