Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. COMMITMENTS AND CONTINGENCIES

From time to time the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including matters relating to product liability claims. Such product liability claims sometimes involving wrongful death or injury have historically been covered by product liability insurance, which provided coverage for each claim up to $1,000,000. During the third quarter of 2014, the Company did not renew its product liability insurance since the renewal policy amount was cost prohibitive. The Company is currently seeking a new insurance carrier or alternative means to satisfy this potential liability exposure, as well as to fulfil the sales terms of some of our customers, which require the insurance coverage. The Company was a co-defendant under an action filed by an individual in June 2013 in the Circuit Court of Broward County claiming personal injury resulting from use of a Brownie’s Third Lung. Plaintiff claimed damages in excess of $1,000,000. This matter was settled during the three months ended September 30, 2016 by the Company’s insurance carrier.

As previously disclosed, we are co-defendants under an action filed March 2015, in the Circuit Court of Broward County claiming personal injury resulting from the use of a Brownie’s Third Lung product. This claim falls outside the Company’s period of insurance coverage. As a result of a miscommunication with legal counsel a default has been entered against the Company in this action for failing to file a timely response. The Company has obtained different legal representation in this matter and is now attempting to have the default set aside. The Company still believes the claim to be a Workers Compensation claim relating exclusively against another defendant and without merit, and plans to aggressively defend this action. See “Foot Note 17. Subsequent Events.”

On August 14, 2014, the Company entered into a new lease commitment. Terms of the new lease include thirty-seven month term commencing on September 1, 2014; payment of $5,367 security deposit; base rent of approximately $4,000 per month over the term of the lease plus sales tax; and payment of 10.76% of annual operating expenses (i.e. common areas maintenance), which is approximately $2,000 per month subject to periodic adjustment.

Base rent expense attributable to the Company’s headquarters facility totaled approximately $12,000 and $12,000 for the three-month periods ending September 30, 2016 and 2015 and $36,000 and $36,000 for the nine-month periods ending September 30, 2016 and 2015, respectively.

Future minimum rental payments required under our operating lease agreement are as follows:

Year 1	$	48,000
Year 2		—
Year 3		—
Year 4		—
Year 5		—
	$	48,000