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| 8-K - Brownie's Marine Group, Inc | v172021_8k.htm |
Exhibit
99.1
Letter to
Shareholders
January
22, 2010
Dear
Fellow Shareholders:
I want to
use this letter to provide the shareholders of Brownie’s Marine Group, Inc.
(OTCBB: BWMG) with a review of the Company's recent progress through 2009 and
our plans as we move forward in 2010 and beyond.
Overview
For the
Company, 2009 was a very intensive year of product development and produced
milestone achievements in the advancement of core technologies. During 2010
Brownie’s intends to introduce two new novel and long-awaited hookah derivatives
after years in development: (1) a series of battery powered
high-performance floating hookah systems and (2) the TOOKA resort/eco tourism
dive system. The battery powered hookah will expand Brownie’s hookah
opportunities to a much broader and accepting market place; in sync with the
current socio-economic view to “go-green”. The TOOKA is a scuba-tank supported
surface air supply system in a uniquely identifiable mini-inflatable boat
designed to perfect the resort dive application. TOOKA will be the first Brownie
device designed and built for daily introductory dive-excursions as a “step-up”
from simple snorkeling trips. The business model should place Brownie’s TOOKA
brand in front of many first time divers, essentially cultivating a new consumer
base. We believe that the emergence of these devices as a new and formidable
niche in the sport of diving can be on the same magnitude as what has developed
from the snowboard in the snow ski industry and the wakeboard in the water ski
market.
Brownie’s
Third Lung hookah systems have long been the dominant figure in gasoline
powered, high-performance, and feature rich hookah systems. Years of inventing
and testing will now allow Brownie’s to introduce multiple battery powered
models that provide performance and runtimes as great as 300% better than the
next best device on the market at the end of 2009. Our battery powered hookah
system will provide divers with gasoline-free all day shallow diving
experiences. We believe the multiple inventions incorporated into the
development of these products will produce multiple patents over the next few
years. The Company has begun the patent application
process.
Brownie’s
Tankfill became the product category net revenue leader in 2008, through the
design, installation and maintenance of yacht-based high-pressure and
low-pressure compressors for diving on air and mixed gases. The
Company has established a number of relationships with yacht builders to allow
shipyards to market and sell the Brownie’s Tankfill systems. We
believe that every large vessel currently in service, being re-fitted, or being
built is a potential customer. Through OEM relationships we expand
our market to reach these customers. We have grown our number of OEM
relationships and continue to pursue more through direct contact with yacht
builders. This early phase of OEM relationship development has produced a set of
marketing, drawing and other support resources necessary to complete and sustain
boat builder alliances. With the continued trend of younger yacht owners, the
parallel interest in eco-travel, and the recognition that an integrated dive
system also makes the very best ship’s air supply (horns/doors/toys/etc.), we
believe that it is now time to capitalize on the market for the product. A
dedicated plan and small team will be assigned to market Brownie’s
Tankfill.
Brownie’s
Tankfill designs, manufactures, sells and installs Scuba tank fill systems for
on-board yacht use under the brand “Yacht-Pro”. The Yacht-Pro compressor systems
offer a completely marine-prepared, VFD (variable frequency drive)-driven,
automated alternative to other non-specific compressors on the
market. Brownie’s Tankfill also designs complete dive lockers, mixed
gas production and distribution systems, and the unique Nitrox
Maker. We believe a parallel product analogy to this device is the
fresh water-maker that swept through the yachting industry over the last
two-decades. While less yacht owners may opt for diving systems then
fresh water-makers, there is a broad market potential for yacht owners that will
want to have an uninterrupted supply of the premium breathing gas.
Technology
improvements and smart packaging methods developed for our proprietary Nitrox
Maker systems for yacht-diving applications have now been adapted to provide
significant benefits to the dive store and live-aboard dive boat operator tank
fill station markets. The first of our Nitrox Maker “Commercial Series” units
(NM-CS) were built and sold in the last quarter of 2009. Literature,
drawing/application engineering packages, pricing and a dealer/operator program
are being introduced during the first quarter of 2010. The NM-CS group of
products are the only Nitrox systems compatible with Bauer compressors sold in
the America’s. Bauer is the preferred commercial grade high-pressure compressor
by the vast majority of dive operators. Bauer has not offered a Nitrox solution
due to the lack of compatible technology and a patent/licensing conflict in the
America’s. Brownie’s and Bauer have recently formed a working relationship to
now capture this captive audience. We believe the potential market is great and
sustainable.
The
Brownie’s Public Safety product category provides integrated and stand-alone
flotation and emergency/rescue equipment for use by fire departments and other
government agencies in their on-water/near-water activities. “Rescue, not
Recovery” is the marketing slogan for this product category, and the driving
force behind development. We believe municipalities and government agencies can
increase their own safety while responding more quickly in emergencies through
the use of our products. We continue to pursue product
distributorship opportunities, OEM integration concepts, and other development
and investment alternatives to capitalize on this significant, but long term
investment.
Brownie’s
PublicSafety designs, manufactures, distributes, and sells the RES (Rapid Entry
System)/ HELO™ system, a complete mini SCUBA system designed for quick water
rescues. The HELO™ system can be donned in less than 60 seconds and
stored in a briefcase-size padded bag. Brownie's Public Safety
recently introduced the GI-PFD™ (Garment Integrated Personal Flotation Device™)
System for body armor flotation. This system can reliably support the distressed
or unconscious wearer in a true life-saving position. This patented
device addresses a heretofore unaddressed need - law-enforcement, coast guard
and military personnel are beginning to wear heavy (life-threatening in the
water) body armor during waterborne patrol, inspection, and surveillance
missions. The system helps the personnel float in heavy armor,
hopefully saving their lives. Multiple avenues of revenue generation are being
explored for this unique product group in an effort to maximize value to the
Company.
Where
We Intend to Go
We
believe the release of the new products will clearly establish Brownie’s as a
leader in the diving industry. Currently, we believe that no company
in the dive industry offers a complete line of products and services to
encompass all divers’ needs. The dive equipment manufacturing
industry is highly fragmented with multiple manufacturers producing very similar
products. The top-ten volume leaders in the dive manufacturing
industry provide the same product mix: Scuba BC’s (buoyancy compensators),
regulators, gauges, masks, fins, snorkels, wetsuits, and a few of the necessary
accessories. These mature companies offer the product selection to
the “diving” market as defined during their original growth phase of the last
2-3 decades.
New
markets and classes of divers have developed during this period. The
sport sector of Third Lung and Kayak diving have emerged as a result of snorkel
divers that wanted to sustain depth or Scuba divers that wanted more time in
shallow waters with enhanced efficiency. SNUBA, a licensing company
with a scuba tank in raft dive system offered purely as a luxury
destination/resort dive experience reports that they have now exceeded the
5-million diver introduction mark (http://www.snuba.com/ did_you_know.asp). We
believe our TOOKA device is an improvement over the SNUBA and we intend to use
our TOOKA to enter the introductory diver market on a broad
scale. Alternatively, more aggressive and affluent Scuba divers have
created the leading or extreme edge of the sport and now use exotic mixed gas
rebreathers, Nitrox/Trimix production devices for home and boat use,
long-duration underwater lights and propulsion vehicles. There are reportedly
some 10-15,000 divers entering the high-tech end of the sport each year. With
millions of snokelers and Snuba type divers giving the sport a try in
shallow-water each year while some 10,000 or so venture in the depths, our plan
is to focus on the entry level consumer, introducing more potential customers to
diving and exposing them to our brand first.
The dive
training, travel, and retail sector is highly fragmented, dominated by many mom
and pop shops. These shops are typically operated, more as a hobby by
a “lover of diving” than by retail professionals. A traditional dive
store offers a similar selection to a dive shop of 2-3 decades ago while
marginally representing the product lines of multiple manufacturers. The result
is generally disappointing for both the consumer and the manufacturer. We
believe that consumers prefer shopping for the whole dive experience in one
place beginning with a full array of products and services. The addition of an
audio-visual program throughout the retail facility will help excite the
consumer, educate them about travel and equipment use applications, and keep
them interested in diving. We intend to deliver a retail experience that offers
the full spectrum of education, travel planning, destination outfitting, and
product options to service all types of divers.
Brownie’s
management (independent from the Company) have purchased and operated dive shops
in north and south Florida with above standard results. Based on
management experience, the Company believes that a unique retail strategy can be
employed to increase profitability in many existing retail locations, some that
are existing dealers, and to co-locate and partner in existing outdoor retail
establishments and to expand to new locations as time and conditions
permit.
The
Company has also formed a key test market relationship with West Marine in
several Florida locations. West Marine has 375 stores in 38 states, Puerto Rico
and Canada. Brownie’s unique product line plan is optimized to become
the boater’s first choice in diving. By co-locating in the West
Marine stores, costs are minimized and exposure is maximized. A sales training
program, a selection of conventional dive accessories, and improved display
systems will be introduced in to this important channel as part of this new
growth plan. We intend to negotiate and enter into similar relationships with
additional retail companies, including, but not limited to, REI, Bass Pro Shops,
and Gander Mountain.
Brownie’s
Future Vision
Brownie’s
wants to introduce diving to a broader and deeper market and intends to become
the premier manufacturer, distributor and retailer of high quality dive
equipment throughout the United States and the world. Today,
Brownie’s is the industry standard for Yacht based dive systems; Brownie’s has
the opportunity to become the industry standard for the entire dive
experience. With over 30 years of experience, Brownie’s is already
recognized as the world’s best manufacturer for hookah and yacht-based dive
systems.
To
implement the vision of becoming the world’s premier dive company, Brownie’s
intends to (i) expand the product line to be the first manufacturer to offer a
full complement of equipment and accessories for the dive professional and (ii)
develop a retail strategy - “Brownie’s Adventure Centers” - to market and
enhance the reach of its products and brand.
Completing
the Product Line
In order
to become the world standard for the dive industry, Brownie’s intends to broaden
and deepen its product line. Brownie’s can grow organically, acquire
existing companies that offer strengths that Brownie’s does not now possess or
form strategic alliances with companies with similar outlooks and
ethics. To complete the product line, Brownie’s management believes
that the most efficient and effective method of growth will be to acquire
existing companies and form strategic alliances.
Developing
and Expanding Retail Reach
Brownie’s
plans to become the dominant retail outlet for SCUBA gear worldwide. Planning
for the initial retail expansion would begin immediately and run concurrently
with implementation of the product line build-out. Part of the
planning objective is to identify the optimum store configuration to select and
build in multiple key retail locations in the world. These would be
the Brownie’s marquee locations and places that we believe have a high
likelihood for success, but would also be our billboards to the yachting and
diving communities. Opportunities range from stores that we take over
and/or partner with existing owners to re-brand and configure as Brownie’s
stores or they could be new stores at new locations. The current dive retail
industry has placed a high majority of stores in warehouse districts off the
beaten path. Taking advantage of the down-turn in prime retail space occupancy
will enhance the efficiency of placing a Brownie Adventure Center in
high-traffic locations. During the initial phase of growth, we
will test our retail strategies to better define the expansion on a much broader
scale. During this same phase, Brownie’s will also test market an expanded sales
kiosk (featuring improved A/V point of sale, entertainment and a complete diving
product line) geared toward stores such as West Marine REI, Dicks Sporting
Goods, Bass Outdoors Sports and others. We will continue to broaden
the special relationship with West Marine as we create a product-line and sales
method aimed directly at family-boaters. We intend to create a complete product
line and purchasing experience based on the Diving Made Easy
concept.
The
Industry-Diving and Ecotourism Growth Strategy
The
diving, boating and ecotourism markets are key to the expansion of the Brownie’s
brand. Each of these industries has experienced growth over the past several
decades, but we believe each industry also has significant
weaknesses. The dive industry has focused on the initial
certification of divers for revenue. According to industry data,
follow up has been poor, causing many to divers quit diving after their first
experience. The Company intends to implement a follow-up program, facilitate
proper selection of equipment for divers, and institute mentoring programs. We
believe an even broader base of consumers will initially be cultivated at the
resort level with the new TOOKA and battery Brownie systems. Starting
new divers in an easier to master dive objective, such as moving from snorkeling
to hookah, should attract and maintain a greater population of proficient
divers, as “comfortable” divers keep diving.
The
boating industry has been hit hard by the economic downturn coupled with the
recent increase in fuel prices. We will work with boaters to enhance
their on-water experience by exploiting the diving activities that they can
easily add as an accessory to their investment in boating. Brownie’s OEM BIAS
program will improve the overall value at the manufacturing level and consumer
experience by elimination of waste during the design/build phase. They can blow
their horns, open air-powered doors and dive directly from a BIAS
package.
Finally,
we will work with authentic ecotourism promoters and providers to help protect
our natural resources world while carefully exploring them. These markets offer
tremendous potential to Brownie’s future growth. The following points
indicate the inherent attractiveness to the Brownie’s brand and
market:
Divers
Studies
indicate that there are between 1.6 and 2.4 million active divers in the United
States, with a 25% increase between 1997 and 2006. (source:
PADI/DEMA)
There are
over 500,000 new divers certified each year worldwide by PADI and PADI certifies
fewer than 50% of divers internationally. PADI certifies
approximately 56% of US divers. (PADI)
In 2006,
PADI provided continuing education certifications for 386,437 divers worldwide,
this is an increase of 77,607 diver continuing education certifications from
2000 when it provided continuing education to 308,830 divers. This is
an increase of 25%.
Boaters
Use
increased in outboard, inboard and sterndrive boats from
1997-2006. The number of boats in use increased from 16.23 million in
1997 to 17.73 million in 2006, an increase of 1.5 million boats in
use. (source: USCG/NMMA)
Almost 73
million adults went boating in the US in 2006; this represents 32.1 % of the
adult population. (source: NSGA/NMMA)
Tourism: “Travel undertaken for
pleasure” (source: International Ecotourism Society)
As the
largest business sector in the world economy, the travel & tourism industry
is responsible for over 230 million jobs and over 10% of the gross domestic
product worldwide. In over 150 countries, tourism is one of five top
export earners. In 60 countries, tourism is the number one export.
Global
Growth of Tourism:
1950: 25
million tourist arrivals.
1990’s:
Tourism grew globally at 7% per year.
2004: 760
million tourism arrivals corresponded to a 10% global growth.
2005: The
number of international tourist arrivals recorded worldwide grew by 5.5% and
exceeded 800 million for the first time ever.
2020:
Global tourism is forecast to reach 1.56 billion international
arrivals.
Ecotourists
(source: www.ecotourism.org)
Size of
Global Ecotourism:
Beginning
in 1990s, ecotourism has been growing 20% - 34% per year
In 2004,
ecotourism/nature tourism was growing globally 3 times faster than the tourism
industry as a whole.
Nature
tourism is growing at 10%-12% per annum in the international
market.
Sun-and-sand
resort tourism has now “matured as a market” and its growth is projected to
remain flat. In contrast, “experiential” tourism—which encompasses ecotourism,
nature, heritage, cultural, and soft adventure tourism, as well as sub-sectors
such as rural and community tourism—is among the sectors expected to grow most
quickly over the next two decades.
United
Nations Environment Program (UNEP) and Conservation International have indicated
that most of tourism’s expansion is occurring in and around the world’s
remaining natural areas.
Sustainable
tourism could grow to 25% of the world’s travel market within six years, taking
the value of the sector to US$473.6 billion a year.
Analysts
predict a growth in eco-resorts and hotels, and a boom in nature tourism — a
sector already growing at 20% a year — and suggest early converts to sustainable
tourism will make market gains.
Brownie’s
is closely monitoring the momentum being produced by ecotourism and modeling our
business practices and products to assist in the development of a new class of
divers - shallow-water, low-impact and trendy-Diving Made Easy.
Financial
and Business Advisory Services
In connection with the Company’s growth
plan, the Company has retained the investment banking firm Forge Financial
Group, Inc., to assist the Company in evaluating and assessing various financial
and strategic alternatives and to provide general business and financial
advisory services, as the Company executes its current business plans. There can
be no assurance that the Company will be successful in identifying or effecting,
on favorable terms or at all, any financial or strategic alternatives. Forge
Financial Group, Inc. is an investment banking firm founded in 1999, with
offices in Florida and New York.
Robert
Carmichael, President
This
disclosure contains statements about future results that may constitute
"forward-looking statements" within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Readers are cautioned that
these statements are not guarantees of future performance. There are a variety
of factors, many of which are beyond the Company’s control, which affect the
operations, performance, business strategy and results and could cause its
actual results to differ materially from the expectations and objectives
expressed in any forward-looking statements. Accordingly, readers are cautioned
not to place undue reliance on forward-looking statements which speak only as of
the date they are made. The Company does not undertake to update forward-looking
statements to reflect the impact of circumstances or events that arise after the
date the forward-looking statements are made. The reader should, however,
consult any further disclosures the Company may make in its future filings of
its reports on Form 10-K, Form 10-Q and Form 8-K.