**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      DC 20549**




**FORM
      10-Q**




(MARK
      ONE)





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




For
      the
      quarterly period ended **June
      30, 2008**




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




For
      the
      transition period from _______ to _______.




**Commission
      File No. 000-28321**


**BROWNIE’S
        MARINE GROUP, INC.**


(Name
      of
      Small Business Issuer in Its Charter)





**Nevada**
            
            **90-0226181**(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)**940
                N.W. 1****st****Street, Fort Lauderdale, Florida**
            
            **33311**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)




(954)
        462-5570
 (Issuer’s
          Telephone Number, Including Area Code)
  (Former
            Name, if Changed Since Last Report)




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer o   Accelerated
      filer o




Non-accelerated
      filer o (Do
      not
      check if a smaller reporting company)  Smaller
      reporting company x




Indicate
      by check mark whether the registrant is a shell company (as defined by Rule
      12b-2 of the Exchange Act).  Yes
o No
x




There
      were 1,658,357 shares of common stock outstanding as of July 30,
      2008.
















**PART
      I**




**ITEM
        1.**  **FINANCIAL
        STATEMENTS**




**Financial
      Information**


BROWNIE'S
        MARINE GROUP, INC.
 CONSOLIDATED STATEMENTS OF BALANCE SHEETS
  June
                      30,
                    2008
                
                December
                      31,
                    2007(Unaudited)ASSETSCurrent
                    assetsCash
                
                $
                148,461
                
                $
                142,516Accounts
                    receivable, net of $20,000 allowance for doubtful accounts
                
                
                143,901
                
                
                38,512Inventory
                
                
                649,982
                
                
                656,303Prepaid
                    expenses and other current assets
                
                
                120,227
                
                
                81,879Deferred
                    tax asset, net - current
                
                
                43,436
                
                
                32,328Total
                    current assets
                
                
                1,106,007
                
                
                951,538Property,
                    plant and equipment, net
                
                
                1,214,422
                
                
                1,229,898Deferred
                    tax asset, net - non-current
                
                
                —
                
                
                52,363Other
                    assets
                
                
                6,968
                
                
                6,968Total
                    assets
                
                $
                2,327,397
                
                $
                2,240,767LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                    liabilitiesAccounts
                    payable and accrued liabilities
                
                $
                262,795
                
                $
                397,292Customer
                    deposits
                
                
                161,994
                
                
                286,220Royalties
                    payable - related parties
                
                
                53,713
                
                
                15,263Other
                    liabilities - related parties
                
                
                10,000
                
                
                117,601Income
                    taxes payable
                
                
                150,401
                
                
                —Other
                    liabilities
                
                
                7,204
                
                
                9,477Notes
                    payable - current portion
                
                
                45,434
                
                
                46,031Notes
                    payable - related parties - current portion
                
                
                70,109
                
                
                70,924Total
                    current liabilities
                
                
                761,650
                
                
                942,808Long-term
                    liabilitiesDeferred
                    tax liability, net - non-current
                
                
                6,279
                
                
                —Notes
                    payable - long-term portion
                
                
                903,174
                
                
                925,399Notes
                    payable - related parties - long-term portion
                
                
                573,276
                
                
                609,857Total
                    liabilities
                
                
                2,244,379
                
                
                2,478,064Commitments
                    and contingenciesStockholders'
                    equity (deficit)Common
                    stock; $0.001 par value; 250,000,000 shares authorized1,685,538
                    shares issued and outstanding
                
                
                1,685
                
                
                1,685Additional
                    paid-in capital
                
                
                839,666
                
                
                839,666Accumulated
                    deficit
                
                
                (758,333
                )
                
                (1,078,648
                )Total
                    stockholders' equity (deficit)
                
                
                83,018
                
                
                (237,297
                )Total
                    liabilities and stockholders' equity (deficit)
                
                $
                2,327,397
                
                $
                2,240,767


See
        Accompanying Notes to Consolidated Financial Statements




2


BROWNIE'S
          MARINE GROUP, INC.
 CONSOLIDATED
          STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Three
                    Months Ended June 30,
                
                Six
                    Months Ended June 30,2008
                
                2007
                
                2008
                
                2007Net
                    revenues
                
                $
                1,729,073
                
                $
                923,309
                
                $
                2,923,874
                
                $
                1,802,566Cost
                    of net revenues
                
                
                934,137
                
                
                576,423
                
                
                1,763,789
                
                
                1,162,273Gross
                    profit
                
                
                794,936
                
                
                346,886
                
                
                1,160,085
                
                
                640,293Operating
                    expensesResearch
                    and development costs
                
                
                993
                
                
                1,497
                
                
                1,122
                
                
                1,822Selling,
                    general and administrative
                
                
                328,375
                
                
                253,353
                
                
                561,067
                
                
                504,599Total
                    operating expenses
                
                
                329,368
                
                
                254,850
                
                
                562,189
                
                
                506,421Income
                    from operations
                
                
                465,568
                
                
                92,036
                
                
                597,896
                
                
                133,872Other
                    expense (income), netOther
                    (income) expense
                
                
                7,466
                
                
                (50,963
                )
                
                4,240
                
                
                (61,729
                )Interest
                    expense
                
                
                32,610
                
                
                34,618
                
                
                65,491
                
                
                56,840Total
                    other expense (income), net
                
                
                40,076
                
                
                (16,345
                )
                
                69,731
                
                
                (4,889
                )Net
                    income before provision for income taxes
                
                
                425,492
                
                
                108,381
                
                
                528,165
                
                
                138,761Provision
                    for income tax (expense) benefit
                
                
                (202,254
                )
                
                37,295
                
                
                (207,850
                )
                
                29,938Net
                    income
                
                $
                223,238
                
                $
                145,676
                
                $
                320,315
                
                $
                168,699Basic
                    income per common share
                
                $
                0.13
                
                $
                0.09
                
                $
                0.19
                
                $
                0.11Diluted
                    income per common share
                
                $
                0.13
                
                $
                0.08
                
                $
                0.19
                
                $
                0.10Basic
                    weighted average commonshares
                    outstanding
                
                
                1,685,538
                
                
                1,602,568
                
                
                1,685,538
                
                
                1,588,933Diluted
                    weighted average commonshares
                    outstanding
                
                
                1,685,538
                
                
                1,780,235
                
                
                1,685,538
                
                
                1,756,540
   See
          Accompanying Notes to Consolidated Financial Statements


3




BROWNIE'S
        MARINE GROUP, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)


TotalCommon
                Stock
            
            AdditionalPaid-in
            
            Accumulated
            
            Stockholders'
              EquityShares
            
            Amount
            
            Capital
            
            Deficit
            
            (Deficit)Balance,
                December 31, 2007
            
            
            1,685,538
            
            $
            1,685
            
            $
            839,666
            
            $
            (1,078,648
            )
            $
            (237,297
            )Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            97,077
            
            
            97,077Balance,
                March 31, 2008 (Unaudited)
            
            
            1,685,538
            
            
            1,685
            
            
            839,666
            
            
            (981,571
            )
            
            (140,220
            )Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            223,238
            
            
            223,238Balance,
                June 30, 2008 (Unaudited)
            
            
            1,685,538
            
            $
            1,685
            
            $
            839,666
            
            $
            (758,333
            )
            $
            83,018




See
        Accompanying Notes to Consolidated Financial Statements
  4




BROWNIE'S
        MARINE GROUP, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 (UNAUDITED)


Six
                Months Ended June 30,2008
            
            2007Cash
                flows from operating activities:Net
                income
            
            $
            320,315
            
            $
            168,699Adjustments
                to reconcile net income to netcash
                provided by (used in) operating activities:Depreciation
                and amortization
            
            
            19,686
            
            
            18,911Change
                in deferred tax asset
            
            
            41,255
            
            
            (34,061
            )Change
                in deferred tax liability
            
            
            6,279
            
            
            —Changes
                in operating assets and liabilities:Change
                in accounts receivable, net
            
            
            (105,389
            )
            
            (111,773
            )Change
                in inventory
            
            
            6,321
            
            
            (21,476
            )Change
                in costs and estimated earnings in excess of billings
            
            
            —
            
            
            —Change
                in prepaid expenses and other current assets
            
            
            (38,348
            )
            
            (12,582
            )Change
                in accounts payable and accrued liabilities
            
            
            (134,497
            )
            
            (3,905
            )Change
                in customer deposits
            
            
            (124,226
            )
            
            (68,870
            )Change
                in other liabilities
            
            
            (2,273
            )
            
            (38,483
            )Change
                in income taxes payable
            
            
            150,401
            
            
            (2,114
            )Change
                in other liabilities - related parties
            
            
            (107,601
            )
            
            —Change
                in royalties payable - related parties
            
            
            38,450
            
            
            17,031Net
                cash provided by (used in) operating activities
            
            
            70,373
            
            
            (88,623
            )Cash
                flows from investing activities:Purchase
                of fixed assets
            
            
            (4,210
            )
            
            (1,118,363
            )Net
                cash used in investing activities
            
            
            (4,210
            )
            
            (1,118,363
            )Cash
                flows from financing activities:Proceeds
                from borrowings on notes payable - related parties
            
            
            —
            
            
            100,000Proceeds
                from borrowings on notes payable
            
            
            —
            
            
            1,000,000Principal
                payments on notes payable - related parties
            
            
            (37,396
            )
            
            (27,335
            )Principal
                payments on notes payable
            
            
            (22,822
            )
            
            (18,169
            )Net
                cash (used in) provided by financing activities
            
            
            (60,218
            )
            
            1,054,496Net
                change in cash
            
            
            5,945
            
            
            (152,490
            )Cash,
                beginning of period
            
            
            142,516
            
            
            208,187Cash,
                end of period
            
            $
            148,461
            
            $
            55,697Supplemental
                disclosure of cash flow information:Cash
                paid for interest
            
            $
            65,383
            
            $
            56,840Cash
                paid for income taxes
            
            $
            5,072
            
            $
            6,237Supplemental
                disclosure of non-cash investing activitiesCommon
                stock issued toward real property purchase onFebruary
                21, 2007
            
            $
            —
            
            $
            100,000Supplemental
                disclosure of non-cash financing activitiesRedemption
                of warrant for common stock pursuant towarrant
                dated January 1, 2005.
            
            $
            —
            
            $
            5,689




See
        Accompanying Notes to Consolidated Financial Statements
  5


BROWNIE’S
      MARINE GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




1.
            DESCRIPTION
                OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
                POLICIES





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





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





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





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





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





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





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





6





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




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




Cash
      and
      equivalents - Only highly liquid investments with original maturities of 90
      days
      or less are classified as cash and equivalents. These investments are stated
      at
      cost, which approximates market value.





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





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





The
      Company periodically evaluates whether events and circumstances have occurred
      that may warrant revision of the estimated useful lives of fixed assets or
      whether the remaining balance of fixed assets should be evaluated for possible
      impairment. The Company uses an estimate of the related undiscounted cash flows
      over the remaining life of the fixed assets in measuring their
      recoverability.




Revenue
      recognition -
      Revenues from product sales are recognized when the Company’s products are
      shipped or when service is rendered. Revenues from fixed-price contracts are
      recognized on the percentage-of-completion method, measured by the percentage
      of
      cost incurred to date to estimated total cost of each contract. This method
      is
      used because management considers the percentage of cost incurred to date to
      estimated total cost to be the best available measure of progress on the
      contracts.





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





Revenue
      and costs incurred for time and material projects are recognized as the work
      is
      performed.




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





Advertising
      and marketing costs - The
      Company recognizes advertising expenses in accordance with Statement of Position
      93-7 “Reporting on Advertising Costs.” Accordingly, the Company expenses the
      costs of producing advertisements at the time production occurs, and expenses
      the costs of communicating advertisements in the period in which the advertising
      space or airtime is used. Advertising and trade show expense incurred for the
      three months ended June 30, 2008 and 2007, was $9,235 and $6,085, respectively.
      Advertising and trade show expense incurred for the six months ended June 30,
      2008 and 2007, was $17,758 and $16,882, respectively.




Customer
      deposits and return policy -
      The
      Company takes a minimum 50% deposit against custom and large tankfill systems
      prior to ordering and/or building the systems. The remaining balance due is
      payable upon delivery, shipment, or installation of the system. There is no
      provision for cancellation of custom orders once the deposit has been accepted,
      nor return of the custom ordered product. Additionally, returns of all other
      merchandise are subject to a 15% restocking fee as stated on each sales invoice.




7


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




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




Income
      taxes - The
      Company accounts for its income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, which requires recognition of deferred tax assets
      and liabilities for future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax bases and tax credit carry forwards. Deferred tax assets
      and liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in income in the period that includes the
      enactment date.





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





Comprehensive
      income (loss) - The
      Company has no components of other comprehensive income. Accordingly, net income
      (loss) equals comprehensive income (loss) for all periods.




Stock-based
      compensation - The
      Company accounts for stock based compensation in accordance with Statement
      of
      Financial Accounting Standards No. 123 revised that requires that the Company
      measures the cost of employee services received in exchange for an award of
      equity instruments based on the grant-date fair value of the award. That cost
      is
      recognized over the period the employee is required to provide service in
      exchange for the award.




The
      Company did not issue any stock, warrants or options to employees for
      compensation for the six months ended June 30, 2008.





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





Earnings
      (loss) per common share - Basic
      earnings per share excludes any dilutive effects of options, warrants and
      convertible securities. Basic earnings per share is computed using the
      weighted-average number of outstanding common shares during the applicable
      period. Diluted earnings per share is computed using the weighted average number
      of common and common stock equivalent shares outstanding during the period.
      Common stock equivalent shares are excluded from the computation if their effect
      is antidilutive. All common stock equivalent shares were excluded in the
      computation at June 30, 2008 since their effect was antidilutive.




New
      accounting pronouncements - In May
      2008, the Accounting Standards Board (“FASB”) issued Financial Accounting
      Statement (“SFAS”) No. 162, “The Hierarchy of Generally Accepted Accounting
      Principles (“GAAP”). The GAAP hierarchy is currently set forth in the American
      Institute of Certified Public Accountants (AICPA) Statement on Auditing
      Standards No. 69, the Meaning of Present Fairly in Conformity with Generally
      Accepted Accounting Principles. Auditing Standards No. 69 is (1) directed to
      the
      auditor, (2) is complex, and (3) ranks FASB Statements of Financial Accounting
      Concepts, which are subject to the same level of due process as the FASB
      Statements of Financial Accounting Statements, below industry practices that
      are
      widely recognized as generally accepted but that are not subject to due process.
      The Board believes the GAAP hierarchy should reside in the accounting literature
      established by the FASB and instead of being directed to the auditor, should
      be
      directed to entities since they are responsible for selecting accounting
      principles for financial statements that are presented in accordance with GAAP.
      This statement is to become effective 60 days following the SEC’s approval of
      the Accounting Oversight Board amendments to AU Section 411, The Meaning of
      Present Fairly in Conformity with Generally Accepted Accounting Principles.
      The
      Company does not expect any significant financial impact upon adoption of SFAS
      No. 162.




8


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


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





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





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





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





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





9




BROWNIE’S
      MARINE GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





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





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




2.
            INVENTORY





Inventory
      consists of the following as of:





June
                30, 2008
            
            December
                31, 2007Raw
                materials
            
            $
            406,035
            
            $
            418,123Work
                in process
            
            
            —
            
            
            —Finished
                Goods
            
            
            243,947
            
            
            238,180$
            649,982
            
            $
            656,303




3.
            PREPAID
                EXPENSES AND OTHER CURRENT
                ASSETS





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





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





10


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


4.
            PROPERTY,
                PLANT AND EQUIPMENT




Property,
      plant and equipment consists of the following as of:




June
                30, 2008
            
            December
                31, 2007Building
                and land
            
            $
            1,218,362
            
            $
            1,218,362Furniture,
                fixtures, vehicles and equipment
            
            
            246,945
            
            
            242,7351,465,307
            
            
            1,461,097Less:
                accumulated depreciation and amortization
            
            
            250,885
            
            
            231,199$
            1,214,422
            
            $
            1,229,898




For
      the
      three months ended June 30, 2008 and 2007, depreciation expense was $9,883
      and
      $9,932, respectively.


For
      the
      six months ended June 30, 2008 and 2007, depreciation expense was $19,686 and
      18,210.




On
      February 21, 2007 the Company purchased the corporate headquarters, factory
      and
      distribution center of the Company located at 936/940 NW 1st Street, Ft.
      Lauderdale, FL 33311 from GKR Associates, LLC, an entity in which the Chief
      Executive Officer has an ownership interest. The purchase price was $1,200,000,
      and is secured by a first mortgage payable to the bank of $1,000,000, and
      $100,000 secured by a second mortgage payable to the seller, GKR Associates,
      Inc. The balance of $100,000 was paid by 44,400 shares of the Company’s common
      stock based on market price of the stock on the purchase date. In addition,
      $18,362 of closing expenses were capitalized to the building.




5.
            CUSTOMER
                CREDIT CONCENTRATIONS





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





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





11




BROWNIE’S
      MARINE GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





6.
            RELATED
                PARTY TRANSACTIONS





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


Promissory
                  note payable to the Chief Executive Officer of the Company, secured
                  by
                  Company assets, bearing interest at 10% per annum, due in monthly
                  principal and interest payments of $6,047, maturing on January
                  15,
                  2016.
              
              $
              384,795Promissory
                  note payable to an entity owned by the Company’s Chief Executive Officer,
                  940 Associates, Inc., secured by Company assets, bearing interest
                  at 10%
                  per annum, due in monthly principal and interest payments of $2,861,
                  maturing on January 1, 2016.
              
              
              181,904Promissory
                  note payable due an entity in which the Company’s Chief Executive Officer
                  has a financial interest, GKR Associates, LLC., secured by second
                  mortgage
                  on real property, bearing 6.99% interest per annum, due in monthly
                  principal and interest payments of $2,292, maturing on February
                  22,
                  2012.
              
              
              76,686643,385Less
                  amounts due within one year
              
              
              70,109Long-term
                  portion of notes payable - related parties
              
              $
              573,276





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


2008
              
              $
              33,5692009
              
              
              74,7942010
              
              
              81,9862011
              
              
              89,8852012
              
              
              78,281Thereafter
              
              
              284,870$
              643,385
  12


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


6.
            RELATED
                PARTY TRANSACTIONS(continued)





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


Promissory
                  note payable to the Chief Executive Officer of the Company, secured
                  by
                  Company assets, bearing interest at 10% per annum, due in monthly
                  principal and interest payments of $6,047, maturing on January
                  15,
                  2016.
              
              $
              404,183Promissory
                  note payable to an entity owned by the Company’s Chief Executive Officer,
                  940 Associates, Inc., secured by Company assets, bearing interest
                  at 10%
                  per annum, due in monthly principal and interest payments of $2,861,
                  maturing on January 1, 2016.
              
              
              190,941Promissory
                  note payable due an entity in which the Company’s Chief Executive Officer
                  has a financial interest, GKR Associates, LLC., secured by second
                  mortgage
                  on real property, bearing 6.99% interest per annum, due in monthly
                  principal and interest payments of $2,292, maturing on February
                  22,
                  2012.
              
              
              85,657680,781Less
                  amounts due within one year
              
              
              70,924Long-term
                  portion of notes payable - related parties
              
              $
              609,857





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





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





13


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


6.
            RELATED
                PARTY TRANSACTIONS(continued)





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





Total
      royalty expense for the above agreements for the three months ended June 30,
      2008 and 2007, was $53,747 and $25,519, respectively. Total royalty expense
      for
      the above agreements for the six months ended June 30, 2008 and 2007, was
      $77,367 and $48,957, respectively.




Jeff
      Morris, a greater than 10% beneficial owner of common stock of the Company,
      provides management and strategic consulting services for BWMG. For these
      services, Mr. Morris earned $30,000, and $30,000, from the Company for the
      three
      months ended June 30, 2008, and 2007, respectively. For the six months ended
      June 30, 2008, and 2007, Mr. Morris earned $60,000, and $60,000, respectively.





Other
      liabilities - related parties





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





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


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





7.
            ACCOUNTS
                PAYABLE AND ACCRUED LIABILITIES





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





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





8.
            OTHER
                LIABILITIES - RELATED PARTIES





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





9.
            OTHER
                LIABILITIES




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





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





In
      July
      2007, the Company had accumulated 24 months of historical data regarding
      redemption rates so the liability estimate was adjusted accordingly to reflect
      the actual redemption history. On a go forward basis the Company is maintaining
      a reserve for certificate redemption of 10% that approximates the historical
      redemption rate.




15




BROWNIE’S
      MARINE GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)


10.
            NOTES
                PAYABLE





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


Promissory
                  note payable secured by a vehicle of the Company having a carrying
                  value
                  of $1,570 at June 30, 2008, bearing no interest, due in monthly
                  principal
                  and interest payments of $349, maturing on November 14,
                  2008.
              
              $
              1,745Revolving
                  Line of Credit secured by a third mortgage on the real property
                  of the
                  Company with a carrying value $1,182,458 at June 30, 2008, bearing
                  interest at the lender’s base rate plus 1.00% per annum. Interest payments
                  are due monthly on the outstanding principal balance and the Line
                  of
                  Credit matures on March 5, 2009.
              
              
              —Promissory
                  note payable secured by a first mortgage on the real property of
                  the
                  Company having a carrying value of $1,182,458 at June 30, 2008,
                  bearing
                  interest at 6.99% per annum, due in monthly principal and interest
                  payments of $9,038, maturing on January 22, 2022.
              
              
              946,863948,608Less
                  amounts due within one year:
              
              
              45,434Long-term
                  portion of notes payable
              
              $
              903,174
  As
        of
        June 30, 2008, principal payments on the notes payable are as
        follows:
  2008
              
              $
              23,2092009
              
              
              45,2392010
              
              
              48,5042011
              
              
              52,0062012
              
              
              55,760Thereafter
              
              
              723,890$
              948,608
  Notes
        payable consists of the following as of December 31, 2007:
  Promissory
                  note payable secured by a vehicle of the Company having a carrying
                  value
                  of $3,664 at December 31, 2007, bearing no interest, due in monthly
                  principal and interest payments of $349, maturing on November 14,
                  2008.
              
              $
              3,839Promissory
                  note payable secured by real property of the Company having a carrying
                  value of $1,195,514 at December 31, 2007, bearing interest at 6.99%
                  per
                  annum, due in monthly principal and interest payments of $9,038,
                  maturing
                  on January 22, 2022.
              
              
              967,592971,431Less
                  amounts due within one year:
              
              
              46,032Long-term
                  portion of notes payable
              
              $
              925,399
  16


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





11.
            REVERSE
                STOCK SPLIT





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





12.
            STOCK
                WARRANTS





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





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





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





13.
            EQUITY
                INCENTIVE PLAN





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





17




BROWNIE’S
      MARINE GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




14.
            INCOME
                TAXES





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





Three
                months endedJune
                30, 2008
            
            Six
                months ended
              June
                30, 2008Current
                taxes:Federal
            
            $
            (133,306
            )
            $
            (133,306
            )State
            
            
            (21,938
            )
            
            (27,010
            )Current
                taxes
            
            
            (155,244
            )
            
            (160,316
            )Change
                in deferred taxes
            
            
            (51,678
            )
            
            (52,376
            )Change
                in valuation allowance
            
            
            4,668
            
            
            4,842Provision
                for income tax expense
            
            $
            (202,254
            )
            $
            (207,850
            )




The
      current tax federal statutory and state tax rate for the three and six months
      ended June 30, 2008 was 34% and 15%, respectively. The effective tax rate used
      for calculation of the deferred taxes as of June 30, 2008 was 34%.




The
      following is a summary of the significant components of the Company’s deferred
      tax assets and liabilities at June 30, 2008:


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





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





18


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


14.
            INCOME
                TAXES(continued)





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


Current
                  Taxes:Federal
              
              $
              12,196State
              
              
              5,626Current
                  Taxes
              
              
              17,822Change
                  in deferred taxes
              
              
              39,030Change
                  in valuation allowance
              
              
              771Provision
                  for income tax benefit
              
              $
              57,623




The
      current tax federal statutory and state tax rate for the year ended December
      31,
      2007 was 0% and 0%, respectively. The effective tax rate used for calculation
      of
      the deferred taxes as of December 31, 2007 was 34%.




The
      following is a summary of the significant components of the Company’s deferred
      tax assets and liabilities at December 31, 2007:


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


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





15.
            SUBSEQUENT
                EVENTS





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





The
      fee
      received in July 2008 under the non-exclusive license fee referenced above
      was
      used to reduce certain Company liabilities, such as the related party note
      payable due to 940 Associates, Inc. of approximately$181,000 was retired, and
      the Company paid down the related party note payable to Robert M. Carmichael
      by
      approximately $35,000.




On
      August
      11, 2008, the related party note due Robert M. Carmichael was restructured.
      The
      $350,000 restructured note bearing 7.50% interest per annum, will be due in
      monthly principal and interest payments of $7,050, and will mature on August
      1,
      2013 with a final principal and interest payment due of $4,360. The restructure
      represents a reduction in the annual interest rate from 10% to 7.5%, an
      acceleration of the maturity date from January 15, 2016 to August 1, 2013,
      and
      an increase in the monthly note payment from $6,047 to $7,050. Additionally,
      the
      restructured note is uncollateralized and eliminated the late payment penalty
      clause.






19


**ITEM
          2.**  **MANAGEMENT’S
          DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
          OPERATIONS.**
  **Introductory
        Statements**
  Information
        included or incorporated by reference in this filing may contain forward-looking
        statements within the meaning of Section 27A of the Securities Act and
        Section 21E of the Exchange Act. This information may involve known and
        unknown risks, uncertainties and other factors which may cause our actual
        results, performance or achievements to be materially different from the
        future
        results, performance or achievements expressed or implied by any forward-looking
        statements. Forward-looking statements, which involve assumptions and describe
        our future plans, strategies and expectations, are generally identifiable
        by use
        of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,”
“believe,” “intend” or “project” or the negative of these words or other
        variations on these words or comparable terminology.
  This
        filing contains forward-looking statements, including statements regarding,
        among other things, (a) our projected sales and profitability, (b) our
        Company’s growth strategies, (c) our Company’s future financing plans and
        (d) our Company’s anticipated needs for working capital. These statements
        may be found under “Management’s Discussion and Analysis of Financial Condition
        and Results of Operations” and “Business,” as well as in this prospectus
        generally. Actual events or results may differ materially from those discussed
        in forward-looking statements as a result of various factors, including,
        without
        limitation, the risks outlined under “Risk Factors” and matters described in
        this filing generally. In light of these risks and uncertainties, there can
        be
        no assurance that the forward-looking statements contained in this filing
        will
        in fact occur.
  **Overview**
  Brownie’s
        Marine Group, Inc., a Nevada corporation (referred to herein as “BWMG” or “the
        Company”), does business through its wholly owned subsidiary, Trebor Industries,
        Inc., d/b/a Brownie’s Third Lung, a Florida corporation. The Company designs,
        tests, manufactures and distributes recreational hookah diving, yacht based
        scuba air compressor and Nitrox Generation Systems, and scuba and water safety
        products. BWMG sells its products both on a wholesale and retail basis, and
        does
        so from its headquarters and manufacturing facility in Fort Lauderdale, Florida.
  Since
        April 16, 2004, Mr. Carmichael has served as President, Acting Principal
        Accounting Officer and Acting Chief Financial Officer of the Company. From
        March
        23, 2004 to April 26, 2004, Mr. Carmichael served as the Company’s Executive
        Vice-President and Chief Operating Officer. Mr. Carmichael has operated Trebor
        as its President since 1986. He is the holder or co-holder of numerous patents
        that are used by Trebor and several other original equipment manufacturers
        in
        the diving industry.
  **Results
        of Operations for the Three Months Ended June 30, 2008, As Compared To the
        Three
        Months Ended June 30, 2007**
  **Net
        revenues** .
        For the
        three months ended June 30, 2008, we had net revenues of $1,729,073 as compared
        to net revenues of $923,309 for the three months ended June 30, 2007, an
        increase of $805,764, or 87.27%. The increase is primarily a result of an
        approximate $525,000 increase in high pressure tankfill sales and an approximate
        $280,000 increase in low pressure hookah system sales. The tankfill sales
        increase is primarily attributable to three large custom tankfill projects
        completed during the quarter ended June 30, 2008 that resulted in an approximate
        $530,000 increase in revenue coupled with a slight decline in non custom
        high
        pressure sales during the period compared to the same period in 2007. The
        increase in low pressure hookah system sales and related during the second
        quarter of 2008 was primarily attributable to an approximate $180,000 increase
        in recreational hookah system sales, an increase of approximately $110,000
        in
        hose reel and built-in low pressure system sales, with the remaining
        approximately $10,000 reduction comprised of a net change in other low pressure
        sales compared to the same period in 2007.
  **Cost
        of net revenues** .
        For the
        three months ended June 30, 2008, we had cost of net revenues of $934,137
        as
        compared with cost of net revenues of $576,423 for the three months ended
        June
        30, 2007, an increase of $357,714, or 62.06%. The increase was primarily
        to
        support the increase in sales volume for the three months ended June 30,
        2008 as
        compared to same period in 2007. As a percentage of net revenues, cost of
        net
        revenues was down by approximately 8% in the second quarter of 2008 as compared
        to the second quarter of 2008. This decline was primarily attributable to
        the
        sales mix that included the three large custom tankfill sales that were
        completed in the second quarter of 2008 without comparable sales contributing
        to
        the mix in the second quarter of 2007.
  20
  **Gross
        profit.** For the
        three months ended June 30, 2008, we had a gross profit of $794,936 as compared
        to gross profit of $346,886 for the three months ended June 30, 2007, an
        increase of $448,050, or 129.16%. This increase is primarily attributable
        to the
        increase in net revenues for the three months ended June 30, 2008 as compared
        to
        the same period in 2007.
  **Operating
        expenses** .
        For the
        three months ended June 30, 2008, we had total operating expenses of $329,368
        as
        compared to total operating expenses of $254,850 for the three months ended
        June
        30, 2007, an increase of $74,518, or 29.24%. The increase is not primarily
        attributable to a few significant items but rather is representative of an
        across the board increase in most all operating expenses, some to support
        the
        increase in sales (e.g. telephone, travel, advertising, and bank card charges),
        and others as a function of the increase in the overall cost of supplies
        and
        services (e.g. office supplies, auto expense, utilities, repairs and
        maintenance, and insurance).
  **Other
        (income) expense, net** .
        For the
        three months ended June 30, 2008, we had other expense of $40,056 as compared
        to
        other income of $16,345 for the three months ended June 30, 2007, an increase
        in
        other expense of $56,401, or 345.07%. This account is comprised of other
        (income) expense and interest expense. Interest expense was fairly consistent
        between the three months ended June 30, 20008 and the three months ended June
        30, 2007 with a decrease of $2,008 attributable to the amortization of debt.
        Other income declined from the second quarter of 2007 to the second quarter
        of
        2008 by $58,409. This decline is primarily attributable to recognition of
        approximately $55,000 worth of other income in second quarter of 2007 for
        online
        training certificates expiring unused, and the training liability estimate
        being
        adjusted downward to reflect the accumulated historical redemption rate.
        There
        was no comparable recognition of other income in second quarter of 2008.
  **Provision
        for income tax expense** .
        For the
        three months ended June 30, 2008, we had a provision for income tax expense
        of
        $202,254, as compared to a provision of income tax benefit of $37,295 for
        the
        three months ended June 30, 2007, an increase in provision for income tax
        expense of $239,549, or 642.31%. This increase is primarily attributable
        the
        increase in net income before provision for income taxes for the three months
        ended June 30, 2008 as compared to the three months ended June 30, 2007.
  **Net
        income.** For
        the
        three months ended June 30, 2008, we had net income of $223,258, as compared
        to
        net income of $145,676 for the three months ended June 30, 2007, an increase
        of
        $77,582, or 53.26%. The increase is attributable to the increase in gross
        profit
        of $448,050, net the increases in operating expenses of $74,518, other expenses
        of $56,401, and the provision for income tax expense of $239,549.
  **Results
        of Operations for the Six months Ended June 30, 2008, As Compared To the
        Six
        months Ended June 30, 2007**
  **Net
        revenues** .
        For the
        six months ended June 30, 2008, we had net revenues of $2,923,874 as compared
        to
        net revenues of $1,802,566 for the six months ended June 30, 2007, an increase
        of $1,121,308, or 62.21%. The increase is primarily a result of three large
        custom tankfill projects in process at June 30, 2008 that contributed
        approximately $970,000 to revenue for the period. The balance of the increase
        was primarily attributable to a net of an increase in low pressure hookah
        system
        sales and related of approximately $260,000 and a decrease of non-custom
        tankfill sales of approximately $100,000. The increase in hookah system sales
        and related of $260,000 was comprised primarily of increased sales of
        recreational hookah systems, built in low pressure systems, and hose reels
        systems
  **Cost
        of net revenues** .
        For the
        six months ended June 30, 2008, we had cost of net revenues of $1,763,789
        as
        compared with cost of net revenues of $1,162,273 for the six months ended
        June
        30, 2007, an increase of $601,516, or 51.75%. The increase was primarily
        to
        support the increase in sales volume for the six months ended June 30, 2008
        as
        compared to same period in 2007. As a percentage of net revenues, cost of
        net
        revenues was down approximately 4%, and this was primarily attributable to
        the
        sales mix that included the large custom tankfill sales in progress and
        completed during the six months ended June 30, 2008 without comparable sales
        contributing to the mix for the same period of 2007.
  **Gross
        profit.** For the
        six months ended June 30, 2008, we had a gross profit of $1,160,085 as compared
        to gross profit of $640,293 for the six months ended June 30, 2007, an increase
        of $519,792, or 81.18%. This increase is primarily attributable to the increase
        in net revenues for the six months ended June 30, 2008 as compared to the
        same
        period in 2007.
  **Operating
        expenses** .
        For the
        six months ended June 30, 2008, we had total operating expenses of $562,189
        as
        compared to total operating expenses of $506,421 for the six months ended
        June
        30, 2007, an increase of $55,768, or 11.01%. No individual significant items
        made up this variance, but rather numerous net changes. The increase is not
        primarily attributable to a few significant items, but rather is representative
        of an across the board increase in most all operating expenses, some to support
        the increase in sales (e.g. telephone, travel, advertising, and bank card
        charges), and others as a function of the increase in the overall cost of
        supplies and services (e.g. office supplies, auto expense, utilities, repairs
        and maintenance, and insurance).
  21
  **Other
        (income) expenses, net** .
        For the
        six months ended June 30, 2008, we had other expense of $69,731 as compared
        to
        other income of $4,889 for the six months ended June 30, 2007, an increase
        in
        other expense of $74,620, or 1,526.28%. The largest components of the increase
        in other expense are an increase in interest expense of $8,651 resulting
        from
        six months of interest during the first quarter of 2008 on mortgages on the
        real
        estate acquired in late February 2007 compared to approximately four months
        of
        interest on the mortgages during the same period in 2007, and other income
        declined from the second quarter of 2007 to the second quarter of 2008 by
        $65,969. The $65,969 decline is primarily attributable to recognition of
        approximately $55,000 worth of other income in second quarter of 2007 for
        online
        training certificates expiring unused, and the training liability estimate
        being
        adjusted downward to reflect the accumulated historical redemption rate.
        There
        was no comparable recognition of other income for the six months ended June
        30,
        2007.
  **Provision
        for income tax expense** .
        For the
        six months ended June 30, 2008, we had a provision for income tax expense
        of
        $207,850, as compared to a provision for income tax benefit of $29,938 for
        the
        six months ended June 30, 2007, an increase of $237,788, or 794.27%. This
        increase is primarily attributable the increase in net income before provision
        for income taxes for the six months ended June 30, 2008 as compared to the
        six
        months ended June 30, 2007.
  **Net
        income.** For
        the
        six months ended June 30, 2008, we had net income of $320,315 as compared
        to net
        income of $168,699 for the six months ended June 30, 2007, an increase of
        $151,616, or 89.87%. The increase is attributable to the increase in gross
        profit of $519,792, net the increases in operating expenses of $55,768, other
        expenses of $74,620, and the provision for income tax expense of $237,788.
  **Liquidity
        and Capital Resources**
  As
        of
        June 30, 2008, we had cash and other current assets of $1,106,007 and current
        liabilities of $761,650, or a current ratio of 1.45%.
  The
        Company anticipates that cash generated from operations should be sufficient
        to
        satisfy the Company’s contemplated requirements for its current operations for
        at least the next twelve months. The Company does not anticipate any significant
        purchases of equipment during fiscal year 2008. The number and level of
        employees at June 30, 2008 is deemed adequate to maintain the Company's
        operations for at least the next 12 months.
  **Certain
        Business Risks**
  *The
        Company is subject to various risks, which may materially harm its business,
        financial condition and results of operations. You should carefully consider
        the
        risks and uncertainties described below and the other information in this
        filing
        before deciding to purchase the Company’s common stock. These are not the only
        risks and uncertainties that the Company faces. If any of these risks or
        uncertainties actually occurs, the Company’s business, financial condition or
        operating results could be materially harmed. In that case, the trading price
        of
        the Company’s common stock could decline and you could lose all or part of your
        investment.*
  ***Our
        Common Stock May Be Affected By Limited Trading Volume and May Fluctuate
        Significantly***
  Our
        common stock is traded on the Over-the-Counter Bulletin Board. There is a
        limited public market for our common stock and there can be no assurance
        that an
        active trading market for our common stock will develop. As a result, this
        could
        adversely affect our shareholders’ ability to sell our common stock in short
        time periods, or possibly at all. Thinly traded common stock can be more
        volatile than common stock traded in an active public market. Our common
        stock
        has experienced, and is likely to experience in the future, significant price
        and volume fluctuations, which could adversely affect the market price of
        our
        common stock without regard to our operating performance. In addition, we
        believe that factors such as quarterly fluctuations in our financial results
        and
        changes in the overall economy or the condition of the financial markets
        could
        cause the price of our common stock to fluctuate substantially.
  22
  ***Our
        Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For
        Investors to Sell Their Shares Due To Suitability
        Requirements***
  Our
        common stock is deemed to be “penny stock” as that term is defined under the
        Securities Exchange Act of 1934. Penny stocks generally are equity securities
        with a price of less than $5.00 (other than securities registered on certain
        national securities exchanges or quoted on the NASDAQ system, provided that
        current price and volume information with respect to transactions in such
        securities is provided by the exchange or system). Our common stock is covered
        by an SEC rule that imposes additional sales practice requirements on
        broker-dealers who sell such securities to persons other than established
        customers and accredited investors, which are generally institutions with
        assets
        in excess of $5,000,000, or individuals with net worth in excess of $1,000,000
        or annual income exceeding $200,000 or $300,000 jointly with their
        spouse.
  Broker/dealers
        dealing in penny stocks are required to provide potential investors with
        a
        document disclosing the risks of penny stocks. Moreover, broker/dealers are
        required to determine whether an investment in a penny stock is a suitable
        investment for a prospective investor. These requirements may reduce the
        potential market for our common stock by reducing the number of potential
        investors. This may make it more difficult for investors in our common stock
        to
        sell shares to third parties or to otherwise dispose of them. This could
        cause
        our stock price to decline.
  ***We
        Depend On the Services of Our Chief Executive Officer***
  Our
        success largely depends on the efforts and abilities of Robert M. Carmichael,
        our President and Chief Executive Officer. Mr. Carmichael has been instrumental
        in securing our existing financing arrangements. Mr. Carmichael is primarily
        responsible for the development of our technology and the design of our
        products. The loss of the services of Mr. Carmichael could materially harm
        our
        business because of the cost and time necessary to recruit and train a
        replacement. Such a loss would also divert management attention away from
        operational issues. We do not presently maintain a key-man life insurance
        policy
        on Mr. Carmichael.
  ***We
        Require Additional Personnel and Could Fail To Attract or Retain Key
        Personnel***
  Our
        continued growth depends on our ability to attract and retain a Chief Financial
        Officer, a Chief Operations Officer, and additional skilled associates. We
        are
        currently utilizing the services of two professional consultants in the absence
        of a Chief Financial Officer and Chief Operations Officer. The loss of the
        services of these consultants prior to our ability to attract and retain
        a Chief
        Financial Officer or Chief Operations Officer may have a material adverse
        effect
        upon us. Also, there can be no assurance that we will be able to retain our
        existing personnel or attract additional qualified associates in the future.
  ***Our
        Failure to Obtain Intellectual Property and Enforce Protection Would Have
        a
        Material Adverse Effect on Our Business***
  Our
        success depends in part on our ability, and the ability of our patent and
        trademark licensors, entities owned and controlled by Robert M. Carmichael,
        our
        President and Chief Executive Officer, to obtain and defend our intellectual
        property, including patent protection for our products and processes, preserve
        our trade secrets, defend and enforce our rights against infringement and
        operate without infringing the proprietary rights of third parties, both
        in the
        United States and in other countries. Despite our efforts to protect our
        intellectual proprietary rights, existing copyright, trademark and trade
        secret
        laws afford only limited protection.
  Our
        industry is characterized by frequent intellectual property litigation based
        on
        allegations of infringement of intellectual property rights. Although we
        are not
        aware of any intellectual property claims against us, we may be a party to
        litigation in the future.
  ***We
        May Be Unable To Manage Growth***
  Successful
        implementation of our business strategy requires us to manage our growth.
        Growth
        could place an increasing strain on our management and financial resources.
        If
        we fail to manage our growth effectively, our business, financial condition
        or
        operating results could be materially harmed, and our stock price may
        decline.
  ***Reliance
        on Vendors and Manufacturers***
  We
        deal
        with suppliers on an order-by order basis and have no long-term purchase
        contracts or other contractual assurances of continued supply or pricing.
        In
        addition, we have no long-term contracts with our manufacturing sources and
        compete with other companies for production facility capacity. Historically,
        we
        have purchased enough inventory of products or their substitutes to satisfy
        demand. However, unanticipated failure of any manufacturer or supplier to
        meet
        our requirements or our inability to build or obtain substitutes could force
        us
        to curtail or cease operations.
  23
  ***Dependence
        on Consumer Spending***
  The
        success of the products in the Brownie’s Third Lung and Brownie’s Tank Fill
        lines depend largely upon a number of factors related to consumer spending,
        including future economic conditions affecting disposable consumer income
        such
        as employment, business conditions, tax rates, and interest rates. In addition
        our opportunities are highly dependent upon the level of consumer spending
        on
        recreational marine accessories and dive gear, discretionary spending items.
        There can be no assurance that consumer spending in general will not decline,
        thereby adversely affecting our growth, net sales and profitability or that
        our
        business will not be adversely affected by future downturns in the economy,
        boating industry, or dive industry. If consumer spending on recreational
        marine
        accessories and dive gear declines, we could be forced to curtail or cease
        operations.
  ***Government
        Regulations May Impact Us***
  The
        SCUBA
        industry is self-regulating; therefore, Brownie’s is not subject to government
        industry specific regulation. Nevertheless, Brownie’s strives to be a leader in
        promoting safe diving practices within the industry and is at the forefront
        of
        self-regulation through responsible diving practices. Brownie’s is subject to
        all regulations applicable to “for profit” companies as well as all trade and
        general commerce governmental regulation. All required federal and state
        permits, licenses, and bonds to operate its facility have been obtained.
        There
        can be no assurance that our operations will not be subject to more restrictive
        regulations in the future, which could force us to curtail or cease operations.
  ***Bad
        Weather Conditions Could Have an Adverse Effect on Operating
        Results***
  Our
        business is significantly impacted by weather patterns. Unseasonably cool
        weather, extraordinary amounts of rainfall, or unseasonably rough surf, may
        decrease boat use and diving, thereby decreasing sales. Accordingly, our
        results
        of operations for any prior period may not be indicative of results of any
        future period.
  ***Investors
        Should Not Rely On an Investment in Our Stock for the Payment of Cash
        Dividends***
  We
        have
        not paid any cash dividends on our capital stock and we do not anticipate
        paying
        cash dividends in the future. Investors should not make an investment in
        our
        common stock if they require dividend income. Any return on an investment
        in our
        common stock will be as a result of any appreciation, if any, in our stock
        price.
  ***The
        Manufacture and Distribution of Recreational Diving Equipment Could Result
        In
        Product Liability Claims***
  We,
        like
        any other retailer, distributor and manufacturer of products that are designed
        for recreational sporting purposes, face an inherent risk of exposure to
        product
        liability claims in the event that the use of our products results in injury.
        Such claims may include, among other things, that our products are designed
        and/or manufactured improperly or fail to include adequate instructions as
        to
        proper use and/or side effects, if any. We do not anticipate obtaining
        contractual indemnification from parties **-** supplying
        raw materials **,** manufacturing
        our products or marketing our products. In any event, any such indemnification
        if obtained will be limited by our terms and, as a practical matter, to the
        creditworthiness of the indemnifying party. In the event that we do not have
        adequate insurance or contractual indemnification, product liabilities relating
        to defective products could have a material adverse effect on our operations
        and
        financial conditions, which could force us to curtail or cease our business
        operations.
 **ITEM
          3.**  **QUANTITATIVE
          AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**
 Market
        risk generally represents the risk of loss that may be expected to result
        from
        the potential change in value of a financial instrument as a result of
        fluctuations in credit ratings of the issuer, equity prices, interest rates
        or
        foreign currency exchange rates. We do not use derivative financial instruments
        for any purpose.
  We
        are
        also subject to interest rate risk on the balance of our revolving credit
        facility that matures on March 5, 2009 with Colonial Bank. Interest on the
        credit facility is variable based on the lender’s base rate plus 1%. Our balance
        at June 30, 2008 under the facility was $0. We do not believe there would
        be a
        large enough increase or decrease in the lender’s base through March 5, 2009
        that would have a material effect on our future results of operations.
  24
  **ITEM
          4T. CONTROLS AND PROCEDURES**
  **Evaluation
        of Disclosure Controls and Procedures**
  As
        of the
        end of the period covered by this report, the Company carried out an evaluation,
        under the supervision and with the participation of the Company’s Principal
        Executive Officer/Principal Financial Officer, of the effectiveness of the
        design and operation of the Company’s disclosure controls and procedures. The
        Company’s disclosure controls and procedures are designed to provide a
        reasonable level of assurance of achieving the Company’s disclosure control
        objectives. The Company’s Principal Executive Officer/Principal Accounting
        Officer has concluded that the Company’s disclosure controls and procedures are,
        in fact, effective at this reasonable assurance level as of the end of period
        covered by this report.
  **Changes
        in Internal Controls**
  There
        were no changes in our internal controls or in other factors during the period
        covered by this report that have materially affected or are likely to materially
        affect the Company’s internal controls over financial reporting.
  25
  **PART
        II –
        OTHER INFORMATION**
  **ITEM
          1.**  **LEGAL
          PROCEEDINGS**
  None.
 **ITEM
          1A. RISK FACTORS**
 Not
        Applicable to Smaller Reporting Company.
 **ITEM
          2.**  **UNREGISTERED
          SALES OF EQUITY SECURITIES**
  None.
 **ITEM
          3.**  **DEFAULTS
          UPON SENIOR SECURITIES**
  None.
 **ITEM
          4.**  **SUBMISSION
          OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 None.
 **ITEM
          5.**  **OTHER
          INFORMATION**
 Not
        Applicable.
  26
  **ITEM
          6. EXHIBITS**
  **Exhibit
                  No.**
              
              **Description**
              
              **Location**2.2
              
              Merger
                  Agreement, dated June 18, 2002 by and among United Companies Corporation,
                  Merger Co., Inc. and Avid Sportswear & Golf Corp.
              
              Incorporated
                  by reference to Exhibit 2.02 Amendment No. 1 to Form S-4 filed
                  June 24,
                  20022.3
              
              Articles
                  of Merger of Avid Sportswear & Golf Corp. with and into Merger Co.,
                  Inc.
              
              Incorporated
                  by reference to Exhibit 2.03 Amendment No. 1 to Form S-4 filed
                  June 24,
                  20023.1
              
              Articles
                  of Incorporation
              
              Incorporated
                  by reference to Exhibit 3.05 Amendment No. 1 to Form S-4 filed
                  June 24,
                  20023.2
              
              Articles
                  of Amendment
              
              Incorporated
                  by reference to the appendix to the Company's Definitive Information
                  Statement on Schedule 14C filed July 31, 20073.2
              
              Bylaws
              
              Incorporated
                  by reference to Exhibit 3.04 to the Registration Statement on Form
                  10-SB5.1
              
              2007
                  Stock Option Plan
              
              Incorporated
                  by reference to the appendix to the Company's Definitive Information
                  Statement on Schedule 14C filed July 31, 200710.1
              
              Share
                  Exchange Agreement, dated March 23, 2004 by and among the Company,
                  Trebor
                  Industries, Inc. and Robert Carmichael
              
              Incorporated
                  by reference to Exhibit 16.1 to Current Report on Form 8-K filed
                  April 9,
                  200410.2
              
              Two
                  Year Consulting Agreement with Jeff Morris effective January 1,
                  2005 for
                  Manage-ment and Strategic Services and Warrants issued in conjunction
                  with
                  the same.
              
              Incorporated
                  by reference to Exhibit 10.14 to Current Report on Form 8-K filed
                  on March
                  11, 2005.10.3
              
              Non-Exclusive
                  License Agreement -BC
                  Keel Trademark
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.4
              
              Non-Exclusive
                  License Agreement - BuoyancyCompensator
                  (and Dive Belt) Weight System
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.5
              
              Exclusive
                  License Agreement - Brownie's Third Lung, Brownie's Public Safety,
                  Tankfill, and Related Trademarks and Copyrights
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.6
              
              Non-Exclusive
                  License Agreement -Drop
                  Weight Dive Belt
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.7
              
              Non-Exclusive
                  License Agreement -Garment
                  Integrated or Garment Attachable
                Flotation
                  Aid and/or PFD
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15,
                  2005.
  27
  **Exhibit
                  No.**
              
              **Description**
              
              **Location**
 10.8
              
              Non-Exclusive
                  License Agreement -Inflatable
                  Dive Market and Collection Bag
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.9
              
              Non-Exclusive
                  License Agreement - SHERPATrademark
                  and Inflatable Flotation Aid/SignalDevice
                  Technology
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.10
              
              Non-Exclusive
                  License Agreement - Tank-Mounted
                  Weight, BC or PFD-Mounted Trim Weight or Trim Weight Holding System
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended June 30, 2005 filed August 15, 2005.10.11
              
              Exclusive
                  License Agreement - Brownie’s Third Lung and Related Trademarks and
                  Copyright
              
              Incorporated
                  by reference to Exhibit 10.26 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.12
              
              Redemption
                Agreement - Cornell CapitalPartner’s,
                LP Secured Convertible Debentures
              
              Incorporated
                by reference to Form 8K filed on June 2, 200610.13
              
              Agreement
                for Purchase and Sale of PropertyBetween
                Trebor Industries, Inc. and GKRAssociates,
                Inc. dated February 21, 2007
              
              Incorporated
                by reference to Exhibit 10.28 to United Companies Corporation’s 10KSB for
                the year ended December 31, 2006.10.14
              
              First
                Mortgage dated February 22, 2007between
                Trebor Industries, Inc. and
                Colonial
                  Bank
              
              Incorporated
                  by reference to Exhibit 10.29 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.15
              
              Note
                  dated February 22, 2007 payableto
                  GKR Associates, Inc.
              
              Incorporated
                  by reference to Exhibit 10.30 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.16
              
              Second
                  Mortgage dated February 22, 2007between
                  Trebor Industries, Inc. and GKRAssociates,
                  LLC
              
              Incorporated
                  by reference to Exhibit 10.31 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.17
              
              Promissory
                  Note dated January 1, 2007payable
                  to Robert M. Carmichael
              
              Incorporated
                  by reference to Exhibit 10.32 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.18
              
              Promissory
                  Note dated January 1, 2007 payable
                  to 940 Associates, Inc.
              
              Incorporated
                  by reference to Exhibit 10.33 to United Companies Corporation’s 10KSB for
                  the year ended December 31, 2006.10.19
              
              Purchase
                  and Sale Agreement with GKRAssociates,
                  LLC
              
              Incorporated
                  by reference to Form 8K filed on March 23, 2007.10.20
              
              Asset
                  Purchase Agreement between TreborIndustries,
                  Inc. and Robert Carmichael
              
              Incorporated
                  by reference to Form 8K filed on August 1, 2008.10.21
              
              Restructured
                  Promissory Note dated August 11, 2008 payable to Robert M.
                  Carmichael
              
              Provided
                herewith31.1
              
              Certification
                  Pursuant to Rule 13a-14(a)/15d-14(a)
              
              Provided
                  herewith
  28
 **Exhibit
                  No.**
              
              **Description**
              
              **Location**
 31.2
              
              Certification
                  Pursuant to Rule 13a-14(a)/15d-14(a)
              
              Provided
                  herewith32.1
              
              Certification
                  Pursuant to Section 1350
              
              Provided
                  herewith32.2
              
              Certification
                  Pursuant to Section 1350
              
              Provided
                  herewith
 
 29
  **SIGNATURES**
  In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 **BROWNIE’S
                  MARINE GROUP, INC.**Date: August
                13, 2008
              By:
              */s/*Robert
                M. CarmichaelRobert
                M. CarmichaelPresident,
                  Chief Executive Officer,
                Chief
                  Financial Officer/
                Principal
                  Accounting
                  Officer
 30