16.

COMMITMENTS AND CONTINGENCIES

On August 16, 2012, the Company’s real estate foreclosed upon by Branch Banking and Trust (“BBT”) was sold through a court ordered auction. At the foreclosure sale, BBT was highest bidder with a bid of $1,300. On July 17, 2012, the Court entered a Final Judgment of Foreclosure against the Company for $1,123,269, plus post-judgment interest. On December 14, 2012, BBT served the Company with Notice of Final Judgment of Foreclosure. During November 2013, the Company settled the Final Judgment with BBT for $85,000. Accordingly, BWMG recorded $18,026 to other income for the period, which was the excess of the estimated settlement amount less the actual settlement. The 17th Judicial Circuit of the Circuit Court of Broward County recorded Satisfaction of Final Judgment on November 20, 2013.

On November 1, 2012, the Company entered into a one year lease on the foreclosed real estate, which the Company continues to occupy as it manufacturing facility and headquarters. The terms of the lease were base rent of $3,750 plus sales tax. Either party could cancel the lease with 90 days written notice. Effective on the date of expiration, the lease was renewed with the same terms and conditions.

On June 28, 2013 the Company received notice of claim for damages in excess of $15,000 claiming personal injury due to product defect. The Company believes the case is without merit and will aggressively defend. The claim is being handled by the Company’s product liability insurance carrier. In the less than probable chance that any liability will be assigned the Company, insurance coverage is deemed adequate to address.

On January 12, 2013, the Company received notice of claim for damages in excess of $15,000 claiming personal injury due to product defect. The Company believes the case is without merit and will aggressively defend. The claim is being handled by the Company’s product liability insurance carrier. In the less than probable chance that any liability is assigned Company, insurance coverage is deemed adequate to address.

On December 18, 2012, Undersea Breathing Systems, Inc. (“UBS”) filed an amended complaint against the Company compelling purchase of Medal Model No. 4241 membranes or equivalent pursuant to pricing agreement in 2011. UBS is the holder of the convertible debenture referenced in Note 12. CONVERTIBLE DEBENTURES Ref (3). Under the complaint, UBS asserts the Company was to purchase no less than 24 membranes from the company per year for $2,000 and $1,000, cash and Company stock, respectively, per membrane. The Company took delivery, paid cash, and issued stock for 14 Medal Model No 4241 membranes pursuant to the stated pricing in 2011, plus issued an additional $24,000 stock toward future purchases of 24 membranes. However, the Company has not purchased or taken delivery of additional membranes. At the same time the stock was issued the Company granted UBS a convertible debenture of $76,000 and reduced its balance to $48,000 when the Company paid $28,000 cash and took delivery of the 14 membranes. Therefore, UBS currently has $24,000 worth of stock and a $48,000 convertible debenture for which the Company took no membrane deliveries. See Note 23. SUBSEQUENT EVENTS for settlement of this case, and as a result of knowledge of settlement amount, the Company recorded a $14,850 settlement loss reflected as a component of accounts payable and accrued liabilities as of June 30, 2014.

On or about May 3, 2012, the Company received notice of filing of an action for breach of contract, conspiracy to commit securities fraud and injunctive relief against the Company and the first party named in Note 12. CONVERTIBLE DEBENTURES Ref (1). The Plaintiff, Eventus Capital, Inc., is the second party referenced in Note 12. CONVERTIBLE DEBENTURES, Ref (1) who purchased the original debenture from the first party. The net book value, excluding interest, on the debenture as of December 31, 2012 was approximately $12,700. The amount named in the original lawsuit was “damages in excess of $15,000”, plus other fees. On July 16, 2012, the Palm Beach County Court issued an Order on the Company’s Motion to dismiss this complaint. The motion was granted without prejudice to allow the plaintiff 15 days to file an amended complaint with substantiating documentation. The plaintiff amended its complaint as required, asserted it incurred a loss of $735,616 in damages. The other Defendant in the action has asserted counter and third party claims against the plaintiff. On June 23, 2014, this case was dismissed with prejudice as to all claims, counterclaims, and third party claims with all parties to bear their own respective attorneys’ fees and costs.