Overview

The Company owns and operates a portfolio of companies with a concentration in the industrial and recreational diving industry. The Company, through its subsidiaries, designs, tests, manufactures, and distributes recreational hookah diving, yacht-based scuba air compressors and nitrox generation systems and scuba and water safety products in the United States and internationally.

The Company has five subsidiaries focused on various sub-sectors:

• Brownie’s Third Lung - Surface Supplied Air (“SSA”)
• BLU3 Inc. - Ultra-Portable Tankless Dive Systems
• LW Americas - High Pressure Gas Systems
• Submersible Systems Inc. - Redundant Air Tank Systems
• Live Blue Inc. – Guided Tours and Retail

The Company’s wholly owned subsidiaries do business under their respective trade names on both a wholesale and retail basis from their headquarters and manufacturing facility in Pompano Beach, Florida, a manufacturing facility in Huntington Beach, California, and a retail facility in Lauderdale-By-The-Sea, Florida.

Results of Operations

Net Revenues, Costs of Net Revenues and Gross Profit

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Net revenues increased 15.3% for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due to an increase in revenues in BLU3 and SSI. This was offset by decreased revenues in BTL, LWA, and LBI.

For the three months ended June 30, 2024, cost of net revenues was 61.1% compared to 69.8% for the three months ended June 30, 2023. The decrease in cost as a percentage of revenue can be attributed to the cost of direct labor.

Gross profit margin was 38.9% for the three months ended June 30, 2024 compared to 30.2% for the three months ended June 30, 2023. The increase is directly attributable to an increase in SSI’s margin.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Net revenues increased 7.7% for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 due to an increase in revenues in BLU3 and SSI. This was offset by decreased revenues in BTL, LWA, and LBI.

For the six months ended June 30, 2024, cost of net revenues was 62.0% compared to 72.0% for the six months ended June 30, 2023. The decrease in cost as a percentage of revenue can be attributed to the cost of direct labor.

Gross profit margin was 38.0% for the six months ended June 30, 2024 compared to 28.0% for the six months ended June 30, 2023. The increase is directly attributable to increased margins for SSI, LWA and LBI.

Operating Expenses

Operating expenses consist of selling, general and administrative (“SG&A”) expenses and research and development costs. Operating expenses increased 3.9% and 13.4%, respectively, for the three and six months ended June 30, 2024 as compared to the same periods in the prior year.

Selling, General & Administrative Expenses (SG&A Expenses)

SG&A increased by 4.3% for the three months ended June 30, 2024 and 13.9% for the six months ended June 30, 2024 when compared to the same periods in the prior year. The increase was primarily due to higher payroll, professional fees, and other expenses.

Research & Development Expenses (R&D Expenses)

R&D expenses for the three and six months ended June 30, 2024 increased 132.3% and 196.6%, compared to the three months and six months ended June 30, 2023, respectively, as a result of a slight increase in new product development activity.

Other Income/Expense

For the three and six months ended June 30, 2024 and 2023, other income/expense consisted solely of interest expense, which increased slightly due to new loans.

Liquidity and Capital Resources

The Company had cash of $653,036 as of June 30, 2024. Total current assets increased 29.9% and total current liabilities increased 36.0% from December 31, 2023, resulting in a 36.0% decrease in working capital.

Summary Cash Flows

For the six months ended June 30, 2024, the Company used $51,771 in operating activities, used $12,492 in investing activities, and provided $286,187 in financing activities.

Going Concern

The Company has a history of losses and an accumulated deficit of $17,941,491 as of June 30, 2024. Despite a working capital surplus, the continued losses and cash used in operations raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to increase revenues, control expenses, raise capital, and sustain adequate working capital.

Critical Accounting Policies

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts, including revenue recognition, valuation of inventory, allowance for doubtful accounts, and equity-based transactions.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to have a material effect on the Company’s operations, financial position or cash flows.

Off Balance Sheet Arrangements

The Company currently has no off-balance sheet arrangements.