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Note 4 - Contingencies
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3 Months Ended | ||
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Mar. 31, 2013
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| Commitments and Contingencies Disclosure [Text Block] |
Consumer
Indemnity
As
required by the Door-to-Door Sales Act in South Korea,
the Company maintains insurance for consumer indemnity
claims with a mutual aid cooperative by possessing a
mutual aid contract with Mutual Aid Cooperative &
Consumer (the “Cooperative”). The
contract secures payment to distributors in the event
that the Company is unable to provide refunds to
distributors. Typically, requests for refunds
are paid directly by the Company according to the
Company’s normal Korean refund policy, which
requires that refund requests be submitted within three
months. Accordingly, the Company estimates and
accrues a reserve for product returns based on this
policy and its historical
experience. Depending on the sales volume, the
Company may be required to increase or decrease the
amount of the contract. The maximum potential
amount of future payments the Company could be required
to make to address actual distributor claims under the
contract is equivalent to three months of rolling
sales. At March 31, 2013, non-current other
assets include KRW 100 million (USD $91,000) underlying
the contract, which can be utilized by the Cooperative to
fund any outstanding distributor claims. The
Company believes that the likelihood of utilizing these
funds to provide for distributors claims is
remote.
Registration
Payment Arrangements
Pursuant
to the agreement with the investors in the
Company’s October 2007 financing of variable
rate convertible debentures having an aggregate face
amount of $4,250,000, seven-year warrants to purchase
1,495,952 shares of the Company’s common stock, and
one-year warrants to purchase 1,495,952 shares of the
Company’s common stock, the Company was obligated
to (i) file a registration statement covering the
resale of the maximum number of Registrable Securities
(as defined) that is permitted by SEC Guidance (as
defined) prior to November 18, 2007, (ii) cause
the registration statement to be declared effective
within certain specified periods of time and (iii)
maintain the effectiveness of the registration statement
until all Registrable Securities have been sold, or may
be sold without volume restrictions pursuant to Rule
144(k) under the Securities Act. The Company timely
filed that registration statement covering the shares of
common stock underlying the debentures, which have been
redeemed, and the one-year warrants, which have
expired. At the time, the 1,495,952 shares of
common stock underlying the seven-year warrants were not
deemed Registrable Securities and were not included in
the Registration Statement. If they are
subsequently deemed Registrable Securities and we fail to
file a new registration statement covering them, then the
warrants may be exercised by means of a cashless
exercise. The maximum number of shares that could be
required to be issued upon exercise of the warrants
(whether on a cashless basis or otherwise) is limited to
the number of shares indicated on the face of the
warrants. As of March 31, 2013, no contingent
obligations have been recognized under registration
payment arrangements.
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