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Commitments and Contingencies
12 Months Ended
Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 15. Commitments and Contingencies

 

On August 14, 2014, the Company entered into a thirty-seven-month term lease for its initial facilities in Pompano Beach, Florida, commencing on September 1, 2014. Terms included 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 was approximately $2,000 per month subject to periodic adjustment. On December 1, 2016, we entered into an amendment to the initial lease agreement, commencing on October 1, 2017, extending the term for an additional eighty-four months, expiring September 30, 2024. The base rent was increased to $4,626 per month with a 3% annual escalation throughout the amended term.

 

On January 4, 2018, the Company entered into a sixty-one month lease renewal for its facility in Huntington Beach, CA, commencing on February 1, 2018. Terms included base rent of approximately $9,300 Gross per month for the first 12 months and increasing 2.5% annual escalation throughout the amended term. The Company paid a security deposit of $8,450 with the initial lease that ended with the renewal.

 

On November 11, 2018, the Company entered a new lease agreement for approximately 8,025 square feet adjoining its existing facility in Pompano Beach, Florida. Terms of the new lease include a sixty-nine month term commencing on January 1, 2019, or the date the Company took possession of the premises, if earlier; a $6,527 security deposit; initial base rent of approximately $4,848 per month escalating at 3% per year during the term of the lease plus Florida state sales tax and payment of 10.11% of the buildings annual operating expenses (i.e. common area maintenance) which is approximately $1,679 per month subject to adjustment as provided in the lease.

 

The Company, Trebor and other third parties, were each named as a co-defendants under actions initially filed in March 2015 in the Circuit Court of Broward County under Case No. CACE-15-03238 and CACE -16-0000242 by the Estate of Ernesto Rodriguez, claiming wrongful death and products liability resulting in the decedent’s drowning death while using a Brownie’s Third Lung product. This claim was settled in June 2020 for $50,000, and further modified into a lump sum payment of $44,200 (88.4% of the original settlement amount) which was paid in full on August 25, 2020.

 

 

In April 2018 the Company entered into a Patent License Agreement (the “STS Agreement”) with Setaysha Technical Solutions, LLC (“STS”) pursuant to which the Company licensed certain intellectual property, including patent rights, non-patent rights and know how from STS for use in our Ultra-Portable Tankless Dive system products. Effective December 31, 2019, the Company entered into Addendum No. 1 to the STS Agreement (“Addendum No. 1”) to amend the payment due upon the first commercial sale of NEMO. In accordance with Addendum No. 1, $8,250 was paid in cash and $8,250 was accrued as of December 31, 2019, and paid during the year ended December 31, 2020. The Company issued 828,221 shares of common stock in satisfaction of $13,500 for the first commercial sale of NEMO with a fair value of $19,635. Effective June 30, 2020, the Company entered into Addendum No.2 to the Patent License Agreement (“Addendum No.2”) This addendum is to set limits and expectations of the assistance from STS rated to designing and commercializing NextGen diving products, and that STS receive deferred consideration for uncompensated services. Addendum No. 2 also states that if the Company terminate the STS Agreement before December 31, 2024, then the Company will pay STS $180,000, less cumulative royalties paid in excess of $334,961 for years 2020, 2021, 2022, 2023 and 2024.

 

On June 30, 2020, the Company entered into Amendment No. 2 to the STS Agreement. The amendment set certain limits and expectations of the assistance from STS related to designing and commercializing certain diving products, and revised the royalty payments due to STS as consideration for uncompensated services. The Company is obligated to pay STS a minimum yearly royalty of $60,000, or $15,000 per fiscal quarter, beginning in December 2019 and increasing by 2.15% per year. The minimum royalty was temporarily increased to $60,000 for fiscal years 2022, 2023 and 2024, with a fourth quarter true up against earned royalties. In addition, if the Company should terminate the agreements with STS prior to December 31, 2023, then the Company is obligated to pay STS $180,000, less cumulative royalties paid in excess of $334,961 for the years 2020 through 2024. Royalty recorded in relation to this agreement totaled $157,855 and $53,929 for the years ended December 31, 2021 and 2020, respectively. In accordance with the amendment the Company will pay additional minimum royalties of $60,000 per year or $15,000 per quarter for the years 2022 through 2024.

 

On April 9, 2020 the Company entered into an Investor Relations Consulting Agreement with HIR Holdings, LLC pursuant to which the Company engaged the firm to provide investor relations services. The term of the agreement is for a minimum guaranteed period of six months, and thereafter is cancellable by either party upon 30 days’ notice to the other party. As compensation the Company issued the consultant 3,000,000 shares of its common stock, valued at $133,500, and is responsible for reimbursement of certain pre-approved expenses.

 

On April 9, 2020 the Company also entered into a Corporate Communications Consulting Agreement with Impact IR Inc. pursuant to which the Company also engaged this firm to provide investor relations services. The term of the agreement is six months. As compensation the Company issued the consultant 2,000,000 shares of its common stock valued at $89,000.

 

On June 9, 2020 the Company entered into an advertising and marketing agreement with Figment Design. The term of the agreement is for one year, and thereafter renew or cancel the agreement in writing 60 days before the final date. The Company will be billed $5,275 for June and July 2020 and $8,840 from August 2020 to July 2021. This contract was not renewed at the expiration date.

 

On August 1, 2020, BLU3 entered into an advertising and marketing agreement with Figment Design. The term of the agreement is for one year beginning August 1, 2020, and thereafter renew or cancel the agreement in writing 60 days before the final date. Figment Design will bill BLU3 $3,500 per month as retainer and $1,500 to $2,000 for monthly ad spend. This agreement was terminated with 30 day notice prior to its expiration.

 

On August 1, 2020, BLU3 entered into a marketing agreement with This Way Media PTY, Ltd. The term of this agreement is for 11 months and can be cancelled with 30 days notice during the first 90 days of the agreement. After the first 90 days, the agreement can be cancelled with 60 days’ notice after the completion of the term of the agreement. BLU3 will pay This Way Media PTY, LTD $500 per month, and 5% of each affiliate sale. This agreement expired on July 1, 2021. BLU3, Inc. is currently in negotiation to renew this agreement, but continues to pay the originally agreed upon amount and receive content from the vendor

 

On August 10, 2020, the Company engaged Brandywine, LLC to provide certain accounting advisory and consulting services to it under the terms of a letter agreement. As compensation for the services, we agreed to pay Brandywine, LLC an hourly rate of $125.00 and issue it 10,000 shares of our common stock for each hour billed, which such shares are issuable to a designee of Brandywine, LLC in its discretion, and reimburse it for pre-approved expenses. The agreement may be terminated by either party upon 15 days’ notice, and contains customary indemnification provisions. This agreement was terminated on November 5, 2020 upon entering into an employment agreement as detailed below, a total number of 2,795,000 shares were issued under this agreement as of December 31, 2020 This agreement was terminate upon the execution of the Constable Employment Agreement.

 

 

On November 5, 2020 the Company and Christopher Constable entered into a three year employment agreement (the “Constable Employment Agreement”) pursuant to which the Mr. Constable shall serve as Chief Executive Officer of the Company. Previously, Mr. Constable had provided advisory services to the Company through the agreement with Brandywine LLC. In consideration for his services, Mr. Constable shall receive (i) an annual base salary of $200,000, payable in accordance with the customary payroll practices of the Company, and (ii) issuable upon execution of the Employment Agreement and on each anniversary of the date of the agreement during the term, a non-qualified immediately exercisable five-year stock option to purchase that number of shares equal to $100,000 of the value of the Company’s common stock at an exercise price equal to the market price of the Common Stock on the date of issuance. Therefore, the Executive shall receive an initial stock option grant to purchase 5,434,783 shares of the Corporation’s common stock at an exercise price of $0.0184 per share pursuant to an option award agreement (the “Option Award Agreement”).

 

In addition, Mr. Constable shall be entitled to receive four-year stock options to purchase shares of common stock at an exercise price equal to $0.0184 per share in the amounts listed below based upon the following performance milestones during the term of the Constable Employment Agreement: (i) 2,000,000 shares - if the Company’s total net revenues, as reported in its statement of operations in its financial statements in its filings with the SEC, including as a result of a stock or asset acquisition of a third party (“Net Revenues”) are in excess of $5,000,000, in the aggregate, for four consecutive fiscal quarters; (ii) 3,000,000 shares - if the Company’s Net Revenues are in excess of $7,500,000, in the aggregate, for four consecutive fiscal quarters; (iii) 5,000,000 shares - if the Company’s Net Revenues are in excess of $10,000,000, in the aggregate, for four consecutive fiscal quarters; and (iv) 20,000,000 shares - if the Company’s common stock is listed on the on NASDAQ or New York Stock Exchange.

 

Mr. Constable is also entitled to participate in all benefit programs the Company offers to its executives, reimbursement for business expenses and three weeks of annual paid vacation.

 

The agreement may be terminated for cause, upon his death or disability, or by the Company without cause. Furthermore, Mr. Constable may terminate the agreement for “good reason” as defined in the agreement. If the Company terminates the Constable Employment Agreement for cause, or if it terminates upon Mr. Constable’s death or disability, or if he voluntarily terminates the agreement, neither Mr. Constable nor his estate (as the case may be) is entitled to any severance or other benefits following the date of termination. If the Company should terminate the Constable Employment Agreement without cause or if Mr. Constable terminates for good reason, the Company is obligated to continue to pay him his base salary for a period of six months. The Constable Employment Agreement also contains customary confidentiality, non-disclosure and indemnification provisions.

 

Pursuant to the Constable Employment Agreement, Mr. Constable also agreed to serve on the Company’s Board of Directors and the Company agreed to nominate him to serve on the Board during the term of the Constable Employment Agreement.

 

On December 15, 2020 the Company engaged Newbridge Securities Corporation to provide Investment Banking and Corporate Advisory services. The term of this agreement is for twelve months and can be terminated by either party with 14 day written notice. As compensation for this agreement the Company issued 2,100,000 shares of common stock with a fair market value of $40,320.

 

On March 1, 2021, the Company entered into an investor relations consulting agreement with BGM Equity Partners, LLC. The term of the agreement is twelve months. As compensation, the Company issued 3,000,000 shares of its common stock valued at $120,000 to BGM EQUITY Partners.

 

On May 20, 2021, the Company entered into an exclusive distribution agreement with Chrysalis Trading CC doing business as Bright Weights for exclusive distribution of the Bright Weights diving products in the United States and Caribbean. The term of the agreement is 2 years and will renew at the two-year anniversary date for an additional two-year term. There are no minimum purchase commitments in this agreement. The company paid to the sole shareholder of Chrysalis Trading CC 500,000 shares of its common stock at a fair market value of $36,690 for this exclusivity.

 

On August 1, 2021, the Company and Blake Carmichael entered into a three year employment agreement (the “Blake Carmichael Employment Agreement”) pursuant to which Mr. Carmichael shall continue to serve as Chief Executive Officer of BLU3. In consideration for his services, Blake Carmichael shall receive (i) an annual base salary of $120,000, payable in accordance with the customary payroll practices of the Company, and (ii) a cash bonus equal to 5% of the net income of BLU3 payable quarterly, beginning with the first full calendar quarter after the execution of the agreement. (iii) Issuable upon execution of the Employment Agreement, a non-qualified five-year stock option to purchase 3,759,400 shares at $.0399. 33.3% of the stock option vests immediately, 33.3% vests on the second anniversary of the contract and 33.3% on the third anniversary of the agreement.

 

 

In addition, Blake Carmichael shall be entitled to receive a five-year stock options to purchase up to 18,000,000 shares of common stock at an exercise price equal to $0.0399 per share that will vest upon defined financial metrics that are measured on a contract year basis. The metrics defined in the agreement escalate the shares available to vest based upon a revenue measurement, expediency measurement and an EBITDA measurement.

 

On August 6, 2021 the Company entered into a six-month, non-exclusive mergers and acquisitions services agreement with Newbridge Securities Corporation. The merger agreement shall pay seven percent commission for the first two million dollars paid in aggregate consideration and six percent on the aggregate consideration above two million dollars. The fee shall be paid in the common stock of the Company. The equity received is subject to a holding period of six months from the closing date of the transaction. No payment has been issued in relation to this agreement.

 

On September 3, 2021, SSI and Christeen Buban entered into a three-year employment agreement (the “Buban Employment Agreement”) pursuant to which Mrs. Buban shall serve as the President of SSI. In consideration for his services, Mrs. Buban shall receive (i) an annual base salary of $110,000, payable in accordance with the customary payroll practices of the Company, (ii) a car allowance and cell phone allowance totaling $10,800 per year, (iii) a five-year stock option issued under the Plan to purchase 300,000 shares at $.0531. The options vest quarterly over the next eight calendar quarters.

 

In addition, Mrs. Buban shall be entitled to receive a five-year stock options to purchase up to 7,110,000 shares of common stock at an exercise price equal to $0.0531 that will vest upon defined financial metrics that are measured on a contract year basis. The metrics defined in the agreement escalate the shares available to vest based upon a revenue measurement, expediency measurement and an EBITDA measurement.

 

Legal

 

The Company was a defendant in that certain lawsuit styled Basil Vann, as Personal Representative of the Estate of Jeffrey William Morris v. Brownie’s Marine Group, Inc., filed on May 6, 2019 in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida. The complaint, which relates to consulting services provided to the Company by the deceased between 2005 and 2017, alleges breach of contract and quantum meruit and is seeking $15,870.97 in unpaid consulting fees together with interest. In April 2020, the Company filed a Motion to Dismiss, and at a hearing held in May 2021, the Court struck certain allegations contained in the complaint, the parties agreed that the quantum meruit allegation is deemed to be an alternative to the breach of contract allegation, but permitted certain other allegations to stand. The parties entered mediation pursuant to the Court’s order. This action was settled for $10,000 on July 12, 2021. The company has a balance of $5,000 remaining on this obligation as of December 31, 2021.