XML 24 R13.htm IDEA: XBRL DOCUMENT

Related Parties Transactions

12 Months Ended

Dec. 31, 2016

7. RELATED PARTIES TRANSACTIONS

Notes payable – related parties

	December 31,
	2016		2015

Promissory note payable to Chief Executive Officer, unsecured, payable in twelve monthly principal payments of $2,250 beginning June 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	$	—	$	—

Effective April 22, 2015, the Company issued Mr. Carmichael, Chief Executive Officer of the Company, an unsecured promissory note presented in the table above in consideration for a $27,000 advance. For purposes of calculating the interest due monthly on the note, the weighted average price per share during the monthly period from the historical data as quoted on www.quotemedia.com for BWMG was used. Interest was calculated as the unpaid principal balance times the daily rate for the number of the days in the period times the average weighted price per share for the monthly period. The Company borrowed and is using the proceeds for tooling and inventory of new product. For the years ended December 31, 2016 and 2015, the Company converted $570 and $1,015 accrued interest on the note payable – related party into 124,326 and 396,891 shares of restricted stock respectively.

On October 30, 2013, the Company signed a secured promissory note, with Mikkel Pitzner, a non-employee member of Board of Directors at the date the note was issued for $85,000. As further inducement to make the loan, Mr. Pitzner was granted an option to purchase 1,802,565 shares of the Company’s common stock for $.01 per share. The option expired October 31, 2015 without being exercised, in whole or in part. During the third quarter ended September 30, 2015, the Company paid off the remaining balance due under the note payable – related party.

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 volumes. Combined net revenues from these entities for years ended December 31, 2016 and 2015, totaled $750,338 and $825,491, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2016, was $40,012, $5,809, and $18,410, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc., Brownie’s Palm Beach Divers, and Brownie’s Yacht Toys at December 31, 2015, was $12,980, $4,678, and $15,221, respectively.

The Company sells products to Brownie’s Global Logistics, LLC. (“BGL”), 940 Associates, Inc. and 3D Buoy,LLC fully owned by 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 three entities for years ended December 31, 2016, and 2015, were $9,130 and $50,697, respectively. Accounts receivable from BGL at December 31, 2016, and December 31, 2015 was $0 and $6,443, respectively. Accounts receivable from 3D Buoy was $3,074 and $1,948 at December 31, 2016 and 2015, respectively. In addition, the Company has made sales directly to our Chief Executive Officer totaling $888 and $0 in 2016 and 2015, respectively with an accounts receivable balance of $936 at December 31, 2016.

Royalties expense – related parties – The Company has Exclusive License Agreements 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. Based on this license agreement, the Company pays 940A 2.5% of gross revenues per quarter. Total royalty expense for the above agreements for the years ended December 31, 2016 and 2015, as disclosed on the face of the Company’s Consolidated Statements of Operations totaled $56,054 and $67,849, respectively. As of December 31, 2015, the Company was approximately 27 months in arrears on royalty payments due. In November 2016, the Company entered into a conversion agreement under which the Company issued 10,000,000 shares of restricted common stock in satisfaction of $88,850 past due and payable to 940A. As of the date of the conversion agreement, the Company was more than 31 months in arrears on its royalty payments totaling approximately $151,000. In addition, 940A has agreed to forebear on any default under the License Agreement due to the Company’s remaining past due amount for a period of three months from the effective date of the conversion agreement. The shares issued were valued at $0.008885 per share, the closing price of the stock on the effective date of the conversion agreement. No default notice had been received and prior to the conversion agreement.

Equity based compensation – During November 2013, Alexander F. Purdon, then an employee of the Company, exceeded 10% ownership whereby he was reclassified to related party. The Company paid Mr. Purdon’s employment compensation in restricted shares of stock in lieu of cash. The number of shares paid is based on the weighted average price per share during the months the services were rendered. For the years ended December 31, 2016 and 2015, stock based compensation shares issued to Mr. Purdon totaled 360,000 shares and 19,419,712 shares with a fair value of $36,000 and $54,000, respectively. In addition, of the $129,500 employee bonuses declared payable for 2012 year end, which is payable in stock or cash to be determined by the Board of Directors, Mr. Purdon was due $17,500 at December 31, 2015. The agreement with Mr. Purdon terminated August 31, 2016.

In April 2016, the board of directors determined it was not in the best interest of either the Company or the recipients to pay bonuses based on current or foreseeable share prices and cancelled bonuses payable. The result of this action is reflected in a reduction of shares payable on the State of Stockholders’ Equity (Deficit) and Balance Sheet.

Other liabilities – related parties

Other liabilities – related parties consists of the following at:

	December 31,
	2016		2015

Year-end 2012 bonus payable to Chief Executive Officer	$	—	$	67,000
Year-end 2012 bonus payable to employee		—		17,500
Total	$	—	$	84,500

Cancellation of accrued bonuses – In April 2016, the Company determined it was not in the best interest of the Company or the recipients to pay bonuses based on current or foreseeable share prices and cancelled bonuses payable totaling $140,336.

Stock options outstanding from patent purchase – Effective March 3, 2009, the Company entered into a Patent Purchase Agreement with Robert M. Carmichael, the Chief Executive Officer of the Company. The Company purchased several patents it had previously been paying royalties on and several related unissued patents. In exchange for the Intellectual Property (“IP), the Company issued Mr. Carmichael 234 stock options at a $1,350 exercise price expiring ten years from the effective date of grant, or March 2, 2019. None of the options have been exercised to-date.