**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 **September
      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 filero
                Accelerated
                    filer oNon-accelerated
                    filero
                (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 1,785,538 shares of common stock outstanding as of November 1, 2008.







**PART
      I**




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




**Financial
      Information**




BROWNIE’S
        MARINE GROUP, INC.
 CONSOLIDATED
        BALANCE SHEETS




September
                  30,2008
              
              December
                  31,(Unaudited)
              
              2007ASSETSCurrent
                  assetsCash
              
              $
              75,212
              
              $
              142,516Accounts
                  receivable, net of $16,000 and $9,000, respectively,
                  allowancefor
                  doubtful accounts
              
              
              48,842
              
              
              38,512Inventory
              
              
              819,231
              
              
              656,303Prepaid
                  expenses and other current assets
              
              
              125,004
              
              
              81,879Deferred
                  tax asset, net - current
              
              
              41,600
              
              
              32,328Total
                  current assets
              
              
              1,109,889
              
              
              951,538Property,
                  plant and equipment, net
              
              
              1,208,629
              
              
              1,229,898Deferred
                  tax asset, net - non-current
              
              
              --
              
              
              52,363Other
                  assets
              
              
              6,968
              
              
              6,968Total
                  assets
              
              $
              2,325,486
              
              $
              2,240,767LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              347,917
              
              $
              397,292Customer
                  deposits
              
              
              258,533
              
              
              286,220Royalties
                  payable - related parties
              
              
              22,868
              
              
              15,263Other
                  liabilities - related parties
              
              
              --
              
              
              117,601Income
                  taxes payable
              
              
              31,160
              
              
              --Other
                  liabilities
              
              
              3,351
              
              
              9,477Notes
                  payable - current portion
              
              
              115,155
              
              
              46,031Notes
                  payable - related parties - current portion
              
              
              80,168
              
              
              70,924Total
                  current liabilities
              
              
              859,152
              
              
              942,808Long-term
                  liabilitiesDeferred
                  tax liability, net - non-current
              
              
              6,279
              
              
              --Notes
                  payable - long-term portion
              
              
              891,188
              
              
              925,399Notes
                  payable - related parties - long-term portion
              
              
              336,204
              
              
              609,857Total
                  liabilities
              
              
              2,092,823
              
              
              2,478,064Commitments
                  and contingenciesStockholders'
                  equity (deficit)Common
                  stock; $0.001 par value; 250,000,000 shares authorized1,785,538
                  shares issued and outstanding
              
              
              1,785
              
              
              1,685Additional
                  paid-in capital
              
              
              1,052,566
              
              
              839,666Accumulated
                  deficit
              
              
              (821,688
              )
              
              (1,078,648
              )Total
                  stockholders' equity (deficit)
              
              
              232,663
              
              
              (237,297
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              2,325,486
              
              $
              2,240,767
  See
        Accompanying Notes to Consolidated Financial Statements 1
  BROWNIE’S
          MARINE GROUP, INC.
 COSOLIDATED
          STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Three
                  Months Ended September 30,
              
              Nine
                  Months Ended September 30,2008
              
              2007
              
              2008
              
              2007Net
                  revenues
              
              $
              762,945
              
              $
              850,471
              
              $
              3,686,819
              
              $
              2,653,037Cost
                  of net revenues
              
              
              559,335
              
              
              563,934
              
              
              2,323,124
              
              
              1,726,165Gross
                  profit
              
              
              203,610
              
              
              286,537
              
              
              1,363,695
              
              
              926,872Operating
                  expensesResearch
                  and development costs
              
              
              3,081
              
              
              1,476
              
              
              4,203
              
              
              3,298Selling,
                  general and administrative
              
              
              275,591
              
              
              255,440
              
              
              836,658
              
              
              760,039Total
                  operating expenses
              
              
              278,672
              
              
              256,916
              
              
              840,861
              
              
              763,337(Loss)
                  income from operations
              
              
              (75,062
              )
              
              29,621
              
              
              522,834
              
              
              163,535Other
                  expense, netOther
                  (income) expense
              
              
              (602
              )
              
              3,980
              
              
              3,638
              
              
              (57,706
              )Interest
                  expense
              
              
              18,790
              
              
              34,279
              
              
              84,281
              
              
              91,118Total
                  other expense, net
              
              
              18,188
              
              
              38,259
              
              
              87,919
              
              
              33,412Net
                  (loss) income before provision for income taxes
              
              
              (93,250
              )
              
              (8,638
              )
              
              434,915
              
              
              130,123Provision
                  for income tax (benefit) expense
              
              
              (29,895
              )
              
              39,874
              
              
              177,955
              
              
              9,936Net
                  (loss) income
              
              $
              (63,355
              )
              $
              (48,512
              )
              $
              256,960
              
              $
              120,187Basic
                  (loss) income per common share
              
              $
              (0.04
              )
              $
              (0.03
              )
              $
              0.15
              
              $
              0.07Diluted
                  (loss) income per common share
              
              $
              (0.04
              )
              $
              (0.03
              )
              $
              0.15
              
              $
              0.07Basic
                  weighted average commonshares
                  outstanding
              
              
              1,751,842
              
              
              1,658,357
              
              
              1,707,801
              
              
              1,612,425Diluted
                  weighted average commonshares
                  outstanding
              
              
              1,751,842
              
              
              1,658,357
              
              
              1,712,805
              
              
              1,812,667
  See
        Accompanying Notes to Consolidated Financial
        Statements  2
  BROWNIE’S
            MARINE GROUP, INC.
 COSOLIDATED
            STATEMENT OF STOCKHOLDERS’ EQUITY
            (DEFICIT)
  Additional
              
              
              
              Total
                    Stockholders'Common
                  Stock
              
              Paid-in
              
              Accumulated
              
              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
              )
              
              83,018Purchase
                  of Asset and Patents on July 31, 2008
              
              
              100,000
              
              
              100
              
              
              212,900
              
              
              --
              
              
              213,000Net
                  loss
              
              
              --
              
              
              --
              
              
              --
              
              
              (63,355
              )
              
              (63,355
              )Balance,
                  September 30, 2008 (Unaudited)
              
              
              1,785,538
              
              $
              1,785
              
              $
              1,052,566
              
              $
              (821,688
              )
              $
              232,663
  See
        Accompanying Notes to Consolidated Financial
        Statements  3
  BROWNIE’S
            MARINE GROUP, INC.
 COSOLIDATED
            STATEMENT OF CASH FLOWS
 (UNAUDITED)
  Nine
                  Months Ended September 30,2008
              
              2007Cash
                  flows from operating activities:Net
                  income
              
              $
              256,960
              
              $
              120,187Adjustments
                  to reconcile net income to netcash
                  used in operating activities:Depreciation
                  and amortization
              
              
              30,321
              
              
              27,679Change
                  in deferred tax asset
              
              
              43,091
              
              
              679Change
                  in deferred tax liability
              
              
              6,279Loan
                  payable settlement loss
              
              
              --
              
              
              777Changes
                  in operating assets and liabilities:Change
                  in accounts receivable, net
              
              
              (10,330
              )
              
              (152,455
              )Change
                  in inventory
              
              
              (162,928
              )
              
              (48,094
              )Change
                  in prepaid expenses and other current assets
              
              
              (43,125
              )
              
              3,538Change
                  in accounts payable and accrued liabilities
              
              
              (49,375
              )
              
              85,118Change
                  in customer deposits
              
              
              (27,687
              )
              
              (52,214
              )Change
                  in other liabilities
              
              
              (6,126
              )
              
              (41,308
              )Change
                  in income taxes payable
              
              
              31,160
              
              
              (11,029
              )Change
                  in other liabilities - related parties
              
              
              (117,601
              )
              
              --Change
                  in royalties payable - related parties
              
              
              7,605
              
              
              14,849Net
                  cash used in operating activities
              
              
              (41,756
              )
              
              (52,273
              )Cash
                  flows from investing activities:Proceeds
                  from receivable purchased through issuance of commonstock
                  in conjunction with asset/patent acquisition
              
              
              228,000
              
              
              --Purchase
                  of fixed assets
              
              
              (24,052
              )
              
              (1,118,363
              )Net
                  cash provided by (used in) investing activities
              
              
              203,948
              
              
              (1,118,363
              )Cash
                  flows from financing activities:Proceeds
                  from borrowings on notes payable - related parties
              
              
              --
              
              
              100,000Proceeds
                  from borrowings on notes payable
              
              
              70,000
              
              
              1,000,000Principal
                  payments on notes payable - related parties
              
              
              (264,409
              )
              
              (40,593
              )Principal
                  payments on notes payable
              
              
              (35,087
              )
              
              (30,566
              )Net
                  cash (used in) provided by financing activities
              
              
              (229,496
              )
              
              1,028,841Net
                  change in cash
              
              
              (67,304
              )
              
              (141,795
              )Cash,
                  beginning of period
              
              
              142,516
              
              
              208,187Cash,
                  end of period
              
              $
              75,212
              
              $
              66,392Supplemental
                  disclosure of cash flow information:Cash
                  paid for interest
              
              $
              90,691
              
              $
              82,580Cash
                  paid for income taxes
              
              $
              87,510
              
              $
              9,915
  See
        Accompanying Notes to Consolidated Financial
        Statements  4
  BROWNIE’S
            MARINE GROUP, INC.
 COSOLIDATED
            STATEMENT OF CASH FLOWS
 (UNAUDITED)
  Supplemental
                  disclosure of non-cash investing activities:Common
                  stock and additional paid in capital issued towardpatent/asset
                  purchase on July 31, 2008
              
              $
              213,900
              
              $
              --Common
                  stock and additional paid in capital issued towardreal
                  property purchase on February 21, 2007
              
              $
              --
              
              $
              100,000Supplemental
                  disclosure of non-cash financing activities:Redemption
                  of warrant for common stock pursuant towarrant
                  dated January 1, 2005
              
              $
              --
              
              $
              5,689Assumption
                  of other liabilites - related partiesLoan
                  payable
              
              
              --
              
              
              (266,000
              )Accounts
                  receivable
              
              
              --
              
              
              156,246Loan
                  payable settlement loss
              
              
              --
              
              
              (777
              )$
              --
              
              $
              (110,531
              )
  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 September 30, 2008 and 2007, was $7,102 and $4,243,
          respectively. Advertising and trade show expense incurred for the nine
          months
          ended September 30, 2008 and 2007, was $24,861 and $12,597, 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 Financial Accounting Standards Board (“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 nine months ended September 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 included in the
          computation for the nine months ended September 30, 2008 and 2007respectively,
          since their effect was dilutive. All common stock equivalent shares were
          excluded in the computation for the three months ended September 30, 2008
          and
          2007, respectively, since their effect was antidilutive.
 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 - In May
          2008, 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 Security and Exchange Commission’s
          (“SEC”) 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.
 
 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.
  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 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.
 
 In
          December 2007, the 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:
 
 September 30, 2008
                
                December 31, 2007Raw
                    materials
                
                $
                414,085
                
                $
                418,123Work
                    in process
                
                
                --
                
                
                --Finished
                    Goods
                
                
                405,146
                
                
                238,180$
                819,231
                
                $
                656,303
  3.
                PREPAID
                    EXPENSES AND OTHER CURRENT
                    ASSETS
 
 Prepaid
          expenses and other current assets totaling $125,004 at September 30, 2008,
          consists of $93,153 of prepaid inventory, $24,159 of prepaid insurance,
          $3,172
          of prepaid advertising, $2,416 of prepaid software maintenance, and $2,104
          of
          other prepaid expenses and current assets.
 
 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:
  September 30, 2008
                
                December 31,2007Building
                    and land
                
                $
                1,221,362
                
                $
                1,218,362Furniture,
                    fixtures, vehicles and equipment
                
                
                248,787
                
                
                242,7351,470,149
                
                
                1,461,097Less:
                    accumulated depreciation and amortization
                
                
                261,520
                
                
                231,199$
                1,208,629
                
                $
                1,229,898
  For
          the
          three months ended September 30, 2008 and 2007, depreciation expense was
          $10,635
          and $8,418, respectively. For the nine months ended September 30, 2008
          and 2007,
          depreciation expense was $30,321 and $26,629.
 
 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 September 30, 2008
          and 2007 represented 7% and 15.67%, respectively, of total net revenues
          for the
          period. Sales to Brownie’s Southport Diver’s, Inc. for the nine months ended
          September 30, 2008 and 2007 represented 10.72% and 21.49%, respectively,
          of
          total net revenues for the period. Sales to Al Masaood Marine and Engineering
          Division for the three months ended September 30, 2008 represented 13.26%
          of
          total net revenues for the period. Sales to Shadow Marine, and Al Masaood
          Marine
          and Engineering Division for the nine months ended September 30, 2008
          represented 14.28%, and 16.16%, respectively, of total net revenues for
          the
          period. Sales to no other customer represented greater than 10% of net
          revenues
          for the three and nine months ended September 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 September 30, 2008:Promissory
                      note payable to the Chief Executive Officer of the Company,unsecured,
                      bearing interest at 7.5% per annum, due in monthly principal
                      and interest
                      payments of $7,050, maturing on August 1, 2013.
                  
                  $
                  344,368Promissory
                      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 $1,980, maturing on February
                      22,
                      2012.
                  
                  
                  72,004416,372Less
                      amounts due within one year
                  
                  
                  80,168Long-term
                      portion of notes payable - related parties
                  
                  $
                  336,204
 As
          of
          September 30, 2008, principal payments on the notes payable - related parties
          are as follows:
 
 2008
                
                $
                19,4932009
                
                
                81,6552010
                
                
                87,8872011
                
                
                94,5952012
                
                
                81,480Thereafter
                
                
                51,262$
                416,372
 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,
                    with final principal and interest payment of $4,360.
                
                $
                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 $1,980, 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 September 30, 2008 and 2007,
          was
          $106,572 and $176,722, respectively. Combined net revenues from these entities
          for the nine months ended September 30, 2008 and 2007, was $580,833 and
          $695,310, respectively. Sales to Robert Carmichael, the Chief Executive
          Officer
          of the Company, for the three and nine months ended September 30, 2008,
          were
          $3,504 and $3,895, respectively. Accounts receivable from Brownie’s SouthPort
          Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at
          September 30, 2008, was $94, $0, and $4,300, 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. Accounts receivable from Robert Carmichael was $4,128 at
          September
          30, 2008.
 
 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 September
          30, 2008 and 2007, was $23,675 and $23,337, respectively. Total royalty
          expense
          for the above agreements for the nine months ended September 30, 2008 and
          2007,
          was $101,816 and $72,295, 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 September 30, 2008, and 2007, respectively. For the nine months
          ended September 30, 2008, and 2007, Mr. Morris earned $90,000, and $90,000,
          respectively.
 
 Effective
          July 31, 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 to the
          Intellectual Property (the “Contracts”). The Contracts included 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 consists
          of
          the cash consideration delivered at closing under current Contracts and
          Mr.
          Carmichael’s historical cost for the Assets if the stock price on the date of
          the transaction supports valuation in excess of the cash exchange value.
          Since
          the average price of the stock exchanged on the transaction day was less
          than
          the cash exchange value, the Contract fee receivable was valued at $213,000,
          the
          cash exchange value ($228,000 received under contract, less the $15,000
          paid),
          thereby resulting in zero value attributed to the acquired Intellectual
          Property.
 
 The
          fee
          received in July 2008 under the non-exclusive license fee referenced above
          was
          used to reduce certain Company debt, 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 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.
 14
 BROWNIE’S
                MARINE GROUP, INC.
 NOTES
                TO
                CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  6.
                RELATED
                    PARTY TRANSACTIONS(continued)
 
 Other
          liabilities - related parties
 
 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
  7.
                ACCOUNTS
                    PAYABLE AND ACCRUED LIABILITIES
 
 Accounts
          payable and accrued liabilities of $347,917 at September 30, 2008 consists
          of
          $172,334 accounts payable trade, $60,574 balance of legal expenses that
          were a
          Company expense prior to the reverse merger with Trebor Industries, Inc.,
          $87,733 of accrued payroll and related fringe benefits, $18,000 of accrued
          property taxes, $3,586 of accrued interest, and $5,690 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.
 15
 
 BROWNIE’S
              MARINE GROUP, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  9.
                OTHER
                    LIABILITIES
  Other
          liabilities of $3,351 at September 30, 2008 consist of on-line training
          liability. Other liabilities of $9,477 at December 31, 2007 consist 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.
 
 10.
                NOTES
                    PAYABLE
 
 Notes
                    payable consists of the following as of September 30,
                    2008:Promissory
                    note payable secured by a vehicle of the Company having a carrying
                    value
                    of $523 at September 30, 2008, bearing no interest, due inmonthly
                    principal and interest payments of $349, maturing on November
                    14,
                    2008.
                
                $
                698Revolving
                    Line of Credit secured by a third mortgage on the real property
                    of the
                    Company with a carrying value $1,178,905 at September 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.
                
                
                70,000Promissory
                    note payable secured by a first mortgage on the real property
                    of the
                    Company having a carrying value of $1,178,905 at September 30,
                    2008,
                    interest at 6.99% per annum, due in monthly principal and interest
                    bearing
                    payments of $9,038, maturing on January 22, 2022.
                
                
                935,6451,006,343Less
                    amounts due within one year:
                
                
                115,155Long-term
                    portion of notes payable
                
                $
                891,188
 16
 
 BROWNIE’S
              MARINE GROUP, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  10.
                NOTES
                    PAYABLE(continued)
 
 As
                    of September 30, 2008, principal payments on the notes payable
                    are as
                    follows:2008
                
                $
                11,5242009
                
                
                115,2392010
                
                
                48,5042011
                
                
                52,0062012
                
                
                55,760Thereafter
                
                
                723,310$
                1,006,343
 
 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
  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.
 17
 
 BROWNIE’S
              MARINE GROUP, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  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.
  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 nine months ended September 30, 2008.
 18
 
 BROWNIE’S
              MARINE GROUP, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  14.
                INCOME
                    TAXES
 
 The
          components of the provision for income tax (benefit) expense are as
          follows:
 
 Three months ended
                  September 30, 2008
                
                Nine months ended
                  September 30, 2008Current
                    taxes:Federal
                
                $
                (30,381
                )
                $
                102,925State
                
                
                (1,350
                )
                
                25,660Current
                    taxes
                
                
                (31,731
                )
                
                128,585Change
                    in deferred taxes
                
                
                2,824
                
                
                55,200Change
                    in valuation allowance
                
                
                (988
                )
                
                (5,830
                )Provision
                    for income tax (benefit) expense
                
                $
                (29,895
                )
                $
                177,955
 
 The
          current tax federal statutory and state tax rate for the three and nine
          months
          ended September 30, 2008 was 34% and 15%, respectively. The effective tax
          rate
          used for calculation of the deferred taxes as of September 30, 2008 was
          34%. The
          adjustment to the provision resulting in a tax benefit in the third quarter
          of
          2008 is attributable to the net loss for the period.
  The
          following is a summary of the significant components of the Company’s deferred
          tax assets and liabilities at September 30, 2008:
 
 Deferred
                    tax assets:Stock
                    warrants
                
                $
                16,885Allowance
                    for doubtful accounts
                
                
                5,440Net
                    loss carry forward
                
                
                41,179On-line
                    training certificate reserve
                
                
                496Total
                    deferred tax assets
                
                
                64,000Valuation
                    allowance
                
                
                (22,400
                )Deferred
                    tax assets net of valuation allowance
                
                
                41,600Less:
                    deferred tax asset - non-current
                
                
                --Deferred
                    tax asset - current
                
                $
                41,600Deferred
                    tax liability:Depreciation
                    and amortization timing differences
                
                $
                6,279Less:
                    deferred liability - non-current
                
                
                6,279Deferred
                    tax liability - current
                
                $
                --
  As
          of
          September 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
          35% of the tax benefit due to the uncertainty regarding
          realization.
 19
 
 BROWNIE’S
              MARINE GROUP, INC.
 NOTES
              TO
              CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  14.
                INCOME
                    TAXES(continued)
 
 The
          components of the provision for income tax benefit for the year ended December
          31, 2007 are as follows:
 
 Current
                    Taxes:Federal
                
                $
                (12,196
                )State
                
                
                (5,626
                )Current
                    Taxes
                
                
                (17,822
                )Change
                    in deferred taxes
                
                
                (39,030
                )Change
                    in valuation allowance
                
                
                (771
                )Provision
                    for income tax benefit
                
                $
                (57,623
                )
 
 The
          current tax federal statutory and state tax rate for the year ended December
          31,
          2007 was 0% and 0%, respectively. The effective tax rate used for calculation
          of
          the deferred taxes as of December 31, 2007 was 34%.
  The
          following is a summary of the significant components of the Company’s deferred
          tax assets and liabilities at December 31, 2007:
 
 Deferred
                    tax assets:Stock
                    warrants
                
                $
                33,769Allowance
                    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.
                PRODUCT
                    RECALL
 
 In
          September 2008, the Company issued a voluntary product recall as a result
          of an
          internal engineering audit. Some inconsistencies were discovered with some
          components used in the direct drive low-pressure (hookah) compressors.
          These
          inconsistencies may result in premature wear of the compressor components
          and
          possible cessation of air flow and affected certain units manufactured
          since
          July 2007. Further details regarding the product recall are available on
          the
          Company’s website, browniedive.com, Technical Bulletin 080909. As a result,
          shipments were temporarily suspended during part of the third quarter of
          2008 to
          address the recall. Recall costs were included as part of fixed labor costs
          since the majority of products that were the subject of the recall passed
          inspection without any replacement of components necessary.
 
 20
 
 **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 September 30, 2008, As Compared To
      the
      Three Months Ended September 30, 2007**




**Net
      revenues** .
      For the
      three months ended September 30, 2008, we had net revenues of $762,945 as
      compared to net revenues of $850,471 for the three months ended September 30,
      2007, a decrease of $87,526, or 10.29%. The decrease is primarily attributable
      to a decrease in low pressure hookah system sales resulting from an engineering
      product recall in September 2008. This recall resulted in a significant decline
      in hookah sales during September 2008 while the problem was being resolved.
      During this time period, recalled units were given priority status, inspected
      and corrections made if necessary, resulting in the delay of new product
      shipments during September 2008. Subsequent to the recall, new products
      manufactured contained an engineering modification that corrected the problem
      going forward. Shipments of previously affected products resumed as normal
      toward the later part of September 2008. For more information on the product
      recall refer to the Notes to the Financial Statements and Technical Bulletin
      080909 posted on the Company’s website, www.browniedive.com




**Cost
      of net revenues** .
      For the
      three months ended September 30, 2008, we had cost of net revenues of $559,335
      as compared to cost of net revenues of $563,934 for the three months ended
      September 30, 2007, a decrease of $4,599, or .82%. Cost of net revenues was
      fairly consistent between the two periods despite the fact that material cost
      usually fluctuates in direct relationship to net revenues. However, this did
      not
      occur in the third quarter of 2008 with material cost as percentage of net
      revenues increasing approximately 2.5% over the same period in 2007. This
      increase was primarily due to material cost increases without corresponding
      sales price increases during the period. The Company plans to reevaluate sales
      prices on products after year end and adjust them as warranted. Recall costs
      were included as part of fixed labor costs since the majority of products that
      were the subject of the recall passed inspection without any replacement of
      components necessary.




21




**Gross
      profit.** For the
      three months ended September 30, 2008, we had a gross profit of $203,610 as
      compared to gross profit of $286,537 for the three months ended September 30,
      2007, a decrease of $82,927, or 28.94%. This decrease is primarily attributable
      to the decrease in net revenues for the three months ended September 30, 2008
      as
      compared to the same period in 2007.




**Operating
      expenses** .
      For the
      three months ended September 30, 2008, we had total operating expenses of
      $278,672 as compared to total operating expenses of $256,916 for the three
      months ended September 30, 2007, an increase of $21,756, or 8.47%. The increase
      is not primarily attributable to any significant items but rather is
      representative of an across the board increase in most all operating expenses,
      some to support sales (including but not limited to telephone, travel,
      advertising, and credit card charges), and others as a function of the increase
      in the overall cost of supplies and services (including by not limited to office
      supplies, auto expense, utilities, repairs and maintenance , and insurance
      expense).




**Other
      expense, net** .
      For the
      three months ended September 30, 2008, we had other expense, net of $18,188
      as
      compared to other expense, net of $38,259 for the three months ended September
      30, 2007, a decrease of $20,071, or 52.46%. This account is comprised of other
      (income) expense and interest expense. Interest expense for the period decreased
      $15,489 primarily as a result of pay down and retirement of some related party
      debt at the beginning of August 2008. Other net expense (income) declined for
      the period by $4,582 primarily as a result of an insurance premium adjustment
      of
      approximately $6,000 assessed in the third quarter of 2007 without a comparable
      assessment for the same period in 2008.




**Provision
      for income tax (benefit) expense** .
      For the
      three months ended September 30, 2008, we had a provision for income tax benefit
      of $29,895, as compared to a provision of income tax expense of $39,874 for
      the
      three months ended September 30, 2007, an increase in provision for income
      tax
      benefit of $69,769, or 174.97%. This increase is primarily attributable to
      the
      increase in net loss before provision for income taxes for the three months
      ended September 30, 2008 as compared to the three months ended September 30,
      2007, as well as a deferred tax asset adjustment in the third quarter of 2007
      without comparable adjustment during the same period in 2008.




**Net
      (loss) income.** For
      the
      three months ended September 30, 2008, we had net loss of $63,355 as compared
      to
      net loss of $48,512 for the three months ended September 30, 2007, an increase
      in net loss of $14,843, or 30.60%. The increase is attributable to a decrease
      in
      gross profit of $82,927, an increase in operating expenses of $21,756, a
      decrease in other expenses of $20,071, and an increase in the provision for
      income tax benefit of $69,769.




**Results
      of Operations for the Nine Months Ended September 30, 2008, As Compared To
      the
      Nine Months Ended September 30, 2007**




**Net
      revenues** .
      For the
      nine months ended September 30, 2008, we had net revenues of $3,686,819 as
      compared to net revenues of $2,653,037 for the nine months ended September
      30,
      2007, an increase of $1,033,782, or 38.97%. The increase was primarily
      attributable to an increase in low pressure hookah system sales and related
      products of approximately $200,000 and an increase in high pressure tankfill
      system sales of approximately $825,000. The increase in hookah system sales
      and
      related products of $200,000 was comprised primarily of increased sales of
      recreational and electric hookah systems, built in low pressure systems, and
      hose reels systems.  The increase in tankfill system sales was primarily
      attributable to three large custom tankfill projects completed during the nine
      months ended September 30, 2008 that contributed approximately $970,000 to
      revenue for the period, whereas in the same period in 2007 custom tank fill
      projects contributed approximately $210,000 to revenue, a $760,000 increase
      in
      the current period. With regard to non-custom tankfill systems, there was an
      approximate increase of $65,000 for the nine months ended September 30, 2008
      compared to the same period in 2007.




**Cost
      of net revenues** .
      For the
      nine months ended September 30, 2008, we had cost of net revenues of $2,323,124
      as compared with cost of net revenues of $1,726,165 for the nine months ended
      September 30, 2007, an increase of $596,959, or 34.58%. The increase was
      primarily to support the increase in sales volume for the nine months ended
      September 30, 2008 as compared to same period in 2007. As a percentage of net
      revenues, cost of net revenues was down approximately 2%. This net decrease
      was
      primarily attributable to a decrease in costs attributable to the sales mix
      that
      included the large custom tankfill sales completed during the nine months ended
      September 30, 2008 without comparable sales contributing to the mix for the
      same
      period of 2007, and an increase in an overall material costs.




**Gross
      profit.** For the
      nine months ended September 30, 2008, we had gross profit of $1,363,695 as
      compared to gross profit of $926,872 for the nine months ended September 30,
      2007, an increase of $436,823, or 47.13%. This increase is primarily
      attributable to the increase in net revenues coupled with the decrease in cost
      of net revenues (as a percentage of net revenues) for the nine months ended
      September 30, 2008 as compared to the same period in 2007.




22




**Operating
      expenses** .
      For the
      nine months ended September 30, 2008, we had total operating expenses of
      $840,861 as compared to total operating expenses of $763,377 for the nine months
      ended September 30, 2007, an increase of $77,524, or 10.16%.  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 (including but not limited to telephone,
      travel, advertising, and credit card charges), and others as a function of
      the
      increase in the overall cost of supplies and services (including but not limited
      to office supplies, auto expense, utilities, repairs and maintenance, and
      insurance expense).




**Other
      expense, net** .
      For the
      nine months ended September 30, 2008, we had other expense, net of $87,919
      as
      compared to other expense, net of $33,412 for the nine months ended September
      30, 2007, an increase of $54,507, or 163.14%. The increase is primarily
      attributable to recognition of approximately $55,000 worth of other income
      in
      the 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 nine months ended September 30, 2008.




**Provision
      for income tax (benefit) expense** .
      For the
      nine months ended September 30, 2008, we had provision for income tax
      expense of $177,955, as compared to provision for income tax expense of
      $9,936 for the nine months ended September 30, 2007, an increase of $168,019,
      or
      1,691.01%. This increase is primarily attributable to the increase in net income
      before provision for income taxes for the nine months ended September 30, 2008
      as compared to the nine months ended September 30, 2007.




**Net
      (loss) income.** For
      the
      nine months ended September 30, 2008, we had net income of $256,960 as compared
      to net income of $120,187 for the nine months ended September 30, 2007, an
      increase of $136,773, or 113.8%. The increase is attributable to the increase
      in
      gross profit of $436,823, offset by the increases in operating expenses of
      $77,524, other expenses of $54,507, and the provision for income tax expense
      of
      $168,019.




**Liquidity
      and Capital Resources**




As
      of
      September 30, 2008, we had cash and other current assets of $1,109,889 and
      current liabilities of $859,152, or a current ratio of 1.29%.




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 September 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.




23




***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.




24




***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.




***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 current 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.




25




**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 September 30, 2008 under the facility was $70,000. 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.




**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.




26




**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**




As
      disclosed on Form 8K filed on August 1, 2008, effective July 31, 2008, $100,000
      shares of restricted common stock were issued to Robert Carmichael, the Chief
      Executive Officer of the Company, in conjunction with the Asset Purchase
      Agreement between him and Trebor Industries, Inc. The shares were issued under
      the exemption from registration provided by Section 4(2) of the Securities
      Act
      of 1933, as amended.




**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.




27




**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 September 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 September 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 September 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 September 30, 2005 filed August 15,
                  2005.10.7
              
              Non-Exclusive
                  License Agreement -Garment
                  Integrated or Garment AttachableFlotation
                  Aid and/or PFD
              
              Incorporated
                  by reference to Exhibit 10.18 to United Companies Corporation's
                  10QSB for
                  the quarter ended September 30, 2005 filed August 15,
                  2005.
  28
  **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 September 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 September 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 September 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. andColonial
                  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, 2007Payable
                  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, 2008.31.1
              
              Certification
                  Pursuant to Rule 13a-14(a)/15d-14(a)
              
              Provided
                  herewith
  29
  **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
 30


**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.




Date:November
                11, 2008
            **BROWNIE’S
                MARINE GROUP, INC.**By:
            */s/
                Robert
                M. Carmichael*Robert
                M. CarmichaelPresident,
                Chief Executive Officer,Chief
                Financial Officer/Principal
                Accounting Officer




31