Related Parties Transactions

9 Months Ended

Sep. 30, 2016

Related Party Transactions [Abstract]

Related Parties Transactions

7. RELATED PARTIES TRANSACTIONS

Notes payable – related parties

Notes payable – related parties consists of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016		December 31, 2015
Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning September 15, 2015, with interest at 10% per annum with payments monthly in shares of stock based on the monthly weighted average price of the stock, maturing May 15, 2016.	$	—	$	11,098
Less amounts due within one year		—		(11,098	)
Long-term portion of notes payable – related parties	$	—	$	—
Current portion of notes payable – related parties	$	—	$	11,098

Effective April 22, 2015, the Company issued Mr. Carmichael, Chief Executive Officer of the Company, an unsecured promissory note in consideration for a $27,000 advance. For the three months ended September 30, 2016 the Company converted 108,274 shares of accrued interest on the note payable. For the nine months ended September 30, 2016 the Company converted $572 of accrued interest on the note payable – related party into 124,326 shares of restricted stock.

Net revenues and accounts receivable – related parties – The Company sells products to Brownie’s Southport Divers, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys, owned by the brother of the Company’s Chief Executive Officer. Terms of sale are no more favorable than those extended to any of the Company’s other customers with similar sales volume. Combined net revenues from these entities for three months ended September 30, 2016 and 2015, was $234,367 and $280,786, respectively. Combined net revenues from these entities for nine months ended September 30, 2016 and 2015, was $566,607 and $652,124 respectively. Accounts receivable from these three entities at September 30, 2016, was $53,126 Accounts receivable from the three entities at December 31, 2015, was $32,880.

The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”), 3D Buoy and 940 Associates, Inc., affiliated with the Company’s Chief Executive Officer. Terms of sale are more favorable than those extended to BWMG’s regular customers, but no more favorable than those extended to Brownie’s strategic partners. Terms of sale to BGL approximate cost or include a nominal margin. These terms are consistent with those extended to Brownie’s strategic partners. Strategic partner terms on a per order basis include promotion of BWMG’s technologies and “Brownie’s” brand, offered only on product or services not offered for resale, and must provide for reciprocal terms or arrangements to BWMG on strategic partners’ product or services. BGL is fulfilling the strategic partner terms by providing exposure for BWMG’s technologies and “Brownie’s” brand in the yachting and exploration community world-wide through its operations. Combined net revenues from these entities for three months ended September 30, 2016, and 2015, were $5,647 and $1,261, respectively. Combined net revenues from these entities for nine months ended September 30, 2016, and 2015, were $8,255 and $43,649 respectively. Accounts receivable from these three entities at September 30, 2016 was $2,146 Accounts receivable from these three entities at December 31, 2015 was $8,391.

Royalties expense – related parties – The Company has an Exclusive License Agreement with 940 Associates, Inc. (hereinafter referred to as “940A”), an entity owned by the Company’s Chief Executive Officer, to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. This license agreement calls for the Company to pay 940A 2.5% of gross revenues per quarter. Total royalty expense for the above agreements for the three months and nine months ended September 30, 2016 and 2015, is disclosed on the face of the Company’s Condensed Consolidated Statements of Operations. As of September 30, 2016, the Company was approximately 30 months in arrears on royalty payments due. No default notice has been received and the Company plans to make payments as able.

Equity based compensation to employee –The Company had an employment compensation agreement with Alexander F. Purdon to pay his salary in restricted shares of the Company’s common stock in lieu of cash. This arrangement went into effect in April of 2016, was retroactive to January 1, 2016, and terminated August 31, 2016. For the nine months ended September 30, 2016, stock based compensation to Mr. Purdon was $36,000.

Other liabilities and accrued interest– related parties

Other liabilities and accrued interest– related parties consist of the following at:

	September 30, 2016		December 31, 2015
Year-end 2012 bonus payable to Chief Executive Officer	$	—	$	67,000
Year-end 2012 bonus payable to employee		—		17,500
	$	—	$	84,500

On April 29, 2016 the Board of Directors determined that is was not in the best interest of either the Company or the recipients to pay bonuses based on the current and foreseeable share price and cancelled the bonuses payable. The results of this action are included in a reduction of shares payable as reflected on the Statement of Stockholders’ Deficit and the Balance Sheet.