Unassociated Document

	PAGE(S)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2007		F-2

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006		F-3

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE
YEARS ENDED DECEMBER 31, 2007 AND DECEMBER 31, 2006 `		F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2007 AND 2006		F-5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS		F-6 TO F-16

/s/ L.L. Bradford & Company, LLC

March 10, 2008

Las Vegas, Nevada

F-1

BROWNIE'S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 2007

ASSETS

Current assets
Cash	$	142,516
Accounts receivable, net of $9,000 allowance for doubtful accounts		38,512
Inventory		656,303
Prepaid expenses and other current assets		81,879
Deferred tax asset, net - current		32,328
Total current assets		951,538

Property, plant and equipment, net		1,229,898

Deferred tax asset, net - non-current		52,363
Other assets		6,968

Total assets	$	2,240,767

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accounts payable and accrued liabilities	$	397,292
Customer deposits		286,220
Royalties payable - related parties		15,263
Other liabilities - related parties		117,601
Other liabilities		9,477
Notes payable - current portion		46,031
Notes payable - related parties - current portion		70,924
Total current liabilities		942,808

Long-term liabilities
Notes payable - long-term portion		925,399
Notes payable - related parties - long-term portion		609,857

Total liabilities		2,478,064

Commitments and contingencies

Stockholders' deficit
Common stock; $0.001 par value; 250,000,000 shares authorized
1,685,538 shares issued and outstanding		1,685
Additional paid-in capital		839,666
Accumulated deficit		(1,078,648	)
Total stockholders' deficit		(237,297	)

Total liabilities and stockholders' deficit	$	2,240,767

See Accompanying Notes to Consolidated Financial Statements

F-2

BROWNIE'S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2007			2006

Net revenues	$	3,204,395		$	4,203,025

Cost of net revenues		2,148,843			2,711,984

Gross profit		1,055,552			1,491,041

Operating expenses
Research and development costs		3,780			7,140
Selling, general and administrative		953,483			1,007,308
Total operating expenses		957,263			1,014,448

Income from operations		98,289			476,593

Other expenses (income)
Other expense (income), net		(28,075	)		(150,933	)
Interest expense		121,527			71,388
Total other expense (income)		93,452			(79,545	)

Net income before provision for income taxes		4,837			556,138

Provision for income tax benefit		(57,623	)		(9,655	)

Net income	$	62,460		$	565,793

Basic income per common share	$	0.04		$	0.37
Diluted income per common share	$	0.04		$	0.34

Basic weighted average common
shares outstanding		1,658,357			1,513,952
Diluted weighted average common
shares outstanding		1,612,425			1,663,124

See Accompanying Notes to Consolidated Financial Statements

F-3

BROWNIE'S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

								Commitment Fees
								Related to
					Additional			Standby Equity						Total
	Common Stock				Paid-in			Distribution			Accumulated			Stockholders'
	Shares		Amount		Capital			Agreement			Deficit			Deficit

Balance, December 31, 2005		1,364,707	$	1,365	$	751,595		$	(86,205	)	$	(1,706,901	)	$	(1,040,146	)

Conversion of Secured Convertible Debenture to common stock pursuant to the Securities Purchase Agreement dated April 4, 2004		192,170		192		88,918			--			--			89,110

Amortization of commitment fees related to Standby Equity Distribution Agreement		--		--		(86,205	)		86,205			--			--

Consulting expense recognized for stock warrants issued in conjunction with theconsulting agreement effective January, 2005		--		--		95,003			--			--			95,003

Extinguishment of Secured Convertible Debenture on June 2, 2006		--		--		(109,517	)		--			--			(109,517	)

Net income		--		--		--			--			565,793			565,793

Balance, December 31, 2006		1,556,877		1,557		739,794			--			(1,141,108	)		(399,757	)

Issuance of common stock as part of February 21, 2007 purchase of real property		44,440		44		99,956			--			--			100,000

Redemption of warrant tranches for common stock pursuant to warrant dated January 1, 2005		84,075		84		(84	)		--			--			0

Issuance of common stock to roundup fractional shares as part of the reverse stock split effectuated on August 22, 2007		146		--		--			--			--			--

Net income		--		--		--			--			62,460			62,460

Balance, December 31, 2007		1,685,538	$	1,685	$	839,666		$	-		$	(1,078,648	)	$	(237,297	)

See Accompanying Notes to Consolidated Financial Statements

F-4

BROWNIE'S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2007			2006

Cash flows from operating activities:
Net income	$	62,460		$	565,793
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		40,051			26,542
Stock based compensation		--			95,003
Change in deferred tax asset		(39,801	)		(20,684	)
Loan payable settlement loss		777			--
Gain on extinguishment of secured convertible debentures		--			(109,517	)
Changes in operating assets and liabilities:
Change in accounts receivable, net		(132,181	)		(10,139	)
Change in inventory		(74,874	)		(152,746	)
Change in prepaid expenses and other current assets		(20,439	)		(42,270	)
Change in accounts payable and accrued liabilities		64,193			(113,758	)
Change in lease payable - related party		--			(18,950	)
Change in customer deposits		202,779			(45,690	)
Change in other liabilities		(33,683	)		10,500
Change in income taxes payable		(11,029	)		11,029
Change in other liabilities - related parties		7,250			--
Change in royalties payable - related parties		6,812			(9,114	)
Net cash provided by operating activities		72,315			185,999

Cash flows from investing activities:
Purchase of fixed assets		(1,139,563	)		(9,210	)
Net cash used in investing activities		(1,139,563	)		(9,210	)

Cash flows from financing activities:
Proceeds from borrowings on notes payable - related parties		100,000			--
Proceeds from borrowings on loan payable		--			266,000
Proceeds from borrowings on notes payable		1,000,000			--
Principal payments on notes payable - related parties		(56,548	)		(44,475	)
Principal payments on notes payable		(41,875	)		(9,972	)
Principal payments on secured convertible debentures		--			(210,500	)
Net cash provided by financing activities		1,001,577			1,053

Net change in cash		(65,671	)		177,842

Cash, beginning of period		208,187			30,345

Cash, end of period	$	142,516		$	208,187

Supplemental disclosure of cash flow information:
Cash paid for interest	$	119,889		$	100,400

Cash paid for income taxes	$	18,211		$	--

Supplemental disclosure of non-cash investing activities
Common stock issued toward real property purchase on February 21, 2007	$	100,000		$	--

Supplemental disclosure of non-cash financing activities
Conversion of Convertible Debenture into Stock as provided in Stock Purchase Agreement	$	--		$	89,110

Redemption of warrant for common stock pursuant to warrant dated January 1, 2005	$	8,422		$	--

Amortization of loan fees related to Standby Equity Distribution Agreement	$	--		$	86,205

Settlement of loan payable	$	266,777		$	--

See Accompanying Notes to Consolidated Financial Statements

F-5

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business – Brownie’s Marine Group, Inc. (formerly United Companies Corporation) (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 BWMG 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., dba Brownies Third Lung, 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., dba Brownies Third Lung. 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., dba Brownies Third Lung. Trebor Industries, Inc., dba Brownies Third Lung, was incorporated in September 17, 1981. Therefore, these financial statements reflect activities from September 17, 1981 (Date of Inception for Trebor Industries, Inc., dba Brownies Third Lung) 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 2006 financial statement amounts to conform to the 2007 financial statement presentation.

F-6

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 year ended December 31, 2007 and 2006, was $25,590 and $47,402, 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.

F-7

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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

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

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

The Company did not issue any stock, warrants or options to employees for compensation for year ended December 31, 2007.

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 at December 31, 2007 since their effect was dilutive.

New accounting pronouncements – In December 2007, the Accounting Standards Board (“FASB”) issued Financial Accounting Statement (“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 is currently evaluating the potential impact, if any, of the adoption of SFAS 141R on the consolidated financial position, results of operations, and disclosures.

F-8

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for the first fiscal period beginning after November 15, 2007. The Company shall apply SFAS 159 in the calendar year beginning January 1, 2008 and does not anticipate significant financial impact as a result of adoption.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”). SAB 108 relates to the Staff’s view regarding the process of quantifying financial statement misstatements. As it relates to the Company, financial misstatements as described in SAB 108 prior to the year ended December 31, 2007 would not require restatement but rather the cumulative effect presented as an adjustment to retained earnings at the beginning of the period. For the year ended December 31, 2007, the same type of misstatements will require restatement of the financial statements for the period. The Company adopted the guidance contained within this bulletin during the year ended December 31, 2007 without significant financial impact.

In September 2006, FASB issued FAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this SFAS 157 shall be applied prospectively as of the date of adoption with a limited form of retrospective application to certain financial instruments that will result in cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is required to adopt FAS 157 on January 1, 2008 and does not expect significant financial impact as a result of adoption.

F-9

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVENTORY

Inventory consists of the following as of December 31, 2007:

Raw materials	$	418,123
Work in process		--
Finished goods		238,180

	$	656,303

3.	PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets totaling $81,879 at December 31, 2007, consists of $16,770 of prepaid insurance, advertising and software maintenance expenses, $17,822 of federal and state income taxes receivable due for estimated taxes paid and net operating loss carryback, and $47,287 of prepayments for inventory.

4.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following as of December 31, 2007:

Building and land	$	1,218,362
Furniture, fixtures, vehicles and equipment		242,735
		1,461,097
Less: accumulated depreciation and amortization		(231,199	)

	$	1,229,898

For the year ended December 31, 2007 and 2006, depreciation expense was $36,376 and $16,664, respectively.

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 year ended December 31, 2007 and 2006 represented 22.44% and 16.39%, respectively, of total net revenues for the period. Sales to Enpro International, Inc. for the year ended December 31, 2006 represented 17.87% of total Company net revenues. Sales to no other customer represented greater than 10% of net revenues for the year ended December 31, 2007 and 2006.

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.

F-10

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.	RELATED PARTY TRANSACTIONS

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

Promissory note payable to the Chief Executive Officer of the Company,secured by Company assets, bearing interest at 10% per annum, due in monthly principal and interest payments of $6,047, maturing on January 15, 2016.	$	404,183

Promissory 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.		190,941

Promissory note payable due an entity in which the Company’s Chief Executive Officer has a financial interest, GKR Associates, LLC., secured by second mortgage on real property, bearing 6.99% interest per annum, due in monthly principal and interest payments of $2,292, maturing on February 22, 2012.
		85,657

		680,781

Less amounts due within one year		70,924

Long-term portion of notes payable – related parties	$	609,857

As of December 31, 2007, principal payments on the notes payable – related parties are as follows:

2008	$	70,924
2009		74,794
2010		81,986
2011		89,885
2012		78,238
Thereafter		284,954

	$	680,781

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 year ended December 31, 2007 and 2006, was $886,092 and $795,320, 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.

F-11

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.	RELATED PARTY TRANSACTIONS (continued)

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.

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 year ended December 31, 2007 and 2006, was $87,595 and $45,770, respectively.

Jeffrey 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 $120,000, and $72,000 from the Company for the years ended December 31, 2007, and 2006, respectively.

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.	$	16,820
Due to Robert M. Carmichael		37,500
Due to 940 Associates, Inc.		43,281
Loan payable to related parties for settlement of customer loan payable		97,601

Management and strategic consulting service due Jeff Morris		20,000

Other liabilities – related parties	$	117,601

7.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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.

F-12

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. See Note 6. – RELATED PARTIES for the balance due each related party at December 31, 2007 under the settlement agreement.

9.	OTHER LIABILITIES

Other liabilities of $9,477 at December 31, 2007 consists of $6,538 of on-line training liability, and $2,939 of deferred tooling expense.

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

For the year ended December 31, 2007, 1,895 certificates with a liability balance of $33,162 expired unused. Accordingly, the related liability was reversed and the amount recognized as other income during the year ended December 31, 2007. In addition, the Company further reduced the liability during the year ended December 31, 2007 by $27,175 based on the historical certificate redemption rate the Company had compiled over the past 24 months. Accordingly, the amount related to 2007, $16,000, was reversed from the expense account it was recorded to in 2007, and the amount related to prior to 2007, $11,175 was recognized as other income during the year ended December 31, 2007. On a go forward basis the Company is maintaining a reserve for certificate redemption of 10% that approximates the historical redemption rate.

F-13

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.	NOTES PAYABLE

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.	$	3,839

Promissory 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.		967,592

		971,431

Less amounts due within one year:		46,032

Long-term portion of notes payable	$	925,399

As of December 31, 2007, principal payments on the notes payable are as follows:

2008	$	46,032
2009		45,239
2010		48,504
2011		52,006
2012		55,760
Thereafter		723,890

	$	971,431

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.

F-14

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

13.	EQUITY INCENTIVE PLAN

On August 22, 2007 the Company adopted an Equity Incentive Plan (the “Plan”). Under the Plan, Stock Options may be granted to Employees, Directors, and Consultants in the form of Incentive Stock Options or Nonstatutory Stock Options. Stock Purchase Rights, time vested and/performance invested Restricted Stock, and Stock Appreciation Rights and Unrestricted Shares may also be granted under the Plan. The initial maximum number of shares that may be issued under the Plan shall be 400,000 shares, and no more than 100,000 Shares of Common Stock may be granted to any one Participant with respect to Options, Stock Purchase Rights and Stock Appreciation Rights during any one calendar year period. Common Stock to be issued under the Plan may be either authorized and unissued or shares held in treasury by the Company. The term of the Plan shall be ten years. The Board of Directors may amend, alter, suspend, or terminate the Plan at any time. No Options, Stock Purchase Rights or Stock Appreciation Rights were granted under the Plan for the year ended December 31, 2007.

F-15

BROWNIE’S MARINE GROUP, INC.

(FORMERLY UNITED COMPANIES CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.	INCOME TAXES

The components of the provision for income taxes 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	$	33,769
Allowance for doubtful accounts		3,060
Depreciation and amortization timing differences		22,174
Net loss carryforward		52,936
On-line training certificate reserve		981
Total deferred tax assets		112,920
Valuation allowance		(28,229	)

Deferred tax assets net of valuation allowance		84,691
Less: 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 carryforward that will expire in 2026. The Company has established a valuation allowance for 25% of the tax benefit due to the uncertainty regarding realization.

15.	SUBSEQUENT EVENT

On March 5, 2008, the Company secured a $100,000 variable rate revolving line of credit. The line of credit is evidenced by a third mortgage on the real property. The interest rate is the lender’s base rate (currently 6.00%), plus 1.00%, resulting an initial rate of 7.00%. The line of credit is secured by the Company’s assets and the real property up to the value of the outstanding balance due under the line of credit. Monthly interest payments are due on the outstanding principal balance beginning on April 05, 2008, and the line of credit matures on March 5, 2009.

F-16

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)

Title of each class	Name of each exchange on which registered

None	None

	Calendar Year 2007
	High Bid		Low Bid
First Quarter	$	5.10	$	1.60
Second Quarter	$	6.70	$	3.10
Third Quarter	$	3.50	$	1.15
Fourth Quarter	$	2.50	$	1.10

	Calendar Year 2006
	High Bid		Low Bid
First Quarter	$	2.60	$	0.20
Second Quarter	$	2.20	$	0.90
Third Quarter	$	2.60	$	1.40
Fourth Quarter	$	2.20	$	1.40

Name:	Age:	Position:

Robert M. Carmichael	45	President, Chief Executive Officer, Principal Financial Officer and Director

Name and Principal Position(s)	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Award(s) (#)		Non Equity Incentive Plan Compensation ($)		Non Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)

Robert M. Carmichael,		2007	$	97,305.00	$	--	$	--		--	$	--	$	--	$	--
President, Chief Executive Officer, and Principal
Financial Officer		2006	$	78,037.50	$	--	$	--		--	$	--	$	--	$	--

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Common	Robert M Carmichael C/O Brownie’s Marine Group, Inc. 940 NW 1^st Street Fort Lauderdale, FL 33311	958,314	52.41%
Common	Jeffrey William Morris C/O Brownie’s Marine Group, Inc. 940 NW 1^st Street Fort Lauderdale, FL 33311	230,533	12.61%
Common	All officers and directors as a Group (1 person)	958,314	52.41%

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted - average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity Compensation Plans Approved by Security Holders	0	0	400,000
Equity Compensation Plans Not Approved by Security Holders	0	0	0
Total	0	0	400,000

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, 2002.

2.3	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, 2002.

3.1	Articles of Incorporation	Incorporated by reference to Exhibit 3.05 Amendment No. 1 to Form S-4 filed June 24, 2002.

3.2	Articles of Amendment	Incorporated by reference to the appendix to the Company's Definitive Information Statement on Schedule 14C filed July 31, 2007.

3.2	Bylaws	Incorporated by reference to Exhibit 3.04 to the Registration Statement on Form 10-SB.

5.1	2007 Stock Option Plan	Incorporated by reference to the appendix to the Company's Definitive Information Statement on Schedule 14C filed July 31, 2007.

10.1	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, 2004.

10.2	Two Year Consulting Agreement with Jeff Morris effective January 1, 2005 for Management and Strategic Services and Warrants issued in conjunction with the same.	Incorporated by reference to Exhibit 10.14 to Current Report on Form 8-K filed on March 11, 2005.

10.3	Non-Exclusive License Agreement – BC Keel Trademark	Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.

10.4	Non-Exclusive License Agreement – Buoyancy Compensator (and Dive Belt) Weight System	Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.


Date: March 28, 2008	BROWNIE’S MARINE GROUP, INC.

	By:	/s/ Robert M. Carmichael
		Robert M. Carmichael
		President, Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer