OTHER LIABILITIES

9 Months Ended

Sep. 30, 2011

Other Liabilities Disclosure [Abstract]

Other Liabilities Disclosure [Text Block]

8.  OTHER LIABILITIES

Other liabilities of $12,147 at September 30, 2011, consists of $10,000 loan payable, and $2,147 on-line training liability.  The $10,000 short-term loan, unsecured loan is from one of the Board of Directors and is without stated terms.

Other liabilities of  $13,346 at December 31, 2010, consists of $2,681 of on-line training liability, and $10,665 accrued legal fees and costs associated with default under the Company’s first and second mortgages.   See Note 9.  NOTES PAYABLE for discussion related to consolidation and restatement of promissory note.

Effective July 1, 2005, the Company began including on-line training certificates with all hookah units sold.  The training certificates entitle the holder to an on-line interactive course at no additional charge to the holder.  The number of on-line training certificates issued per unit is the same as the number of divers the unit as sold is designed to accommodate (i.e., a three diver unit configuration comes with three on-line training certificates).  The certificates have an eighteen-month redemption life after which time they expire.  The eighteen-month life of the certificates begins at the time the customer purchases the unit.  The Company owes the on-line training vendor the agreed upon negotiated rate for all on-line certificates redeemed payable at the time of redemption.  For certificates that expire without redemption, no amount is due the on-line training vendor.

The Company estimates the on-line training liability based on the historical redemption rate of approximately 10%.  The Company continues to monitor and maintain a reserve for certificate redemption that approximates the historical redemption rate.