OTHER LIABILITIES

6 Months Ended

Jun. 30, 2012

Other Liabilities Disclosure [Abstract]

Other Liabilities Disclosure [Text Block]

9. OTHER LIABILITIES

Other liabilities of $67,003 at June 30, 2012, consists of $33,786 short-term loans, $22,500 payable for assets purchased pursuant to Asset Purchase Agreement (Note 7. ASSET PURCHASE), $7,500 non-employee BOD fee, and $3,217 on-line training liability. The $33,786 short-term loans is comprised of three loans due on demand from unrelated parties.

Other liabilities of $13,320 at December 31, 2011, consists of $10,000 short-term loan, and $3,320 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.

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.